Document:

Unassociated Document

 

 

	 (Bilateral Form) 	 (ISDA Agreements Subject to New York Law Only)

 

 

ISDA®

 

International Swaps and Derivatives Association, Inc.

 

CREDIT SUPPORT ANNEX

 

to the Schedule to the

MASTER AGREEMENT

 

dated as of

 

December 23, 2011

 

between

 

	
MORGAN STANLEY CAPITAL SERVICES LLC

	
and

	
TILES TRUST NO. 2005-1

	  	  	  
	
(“Party A”)

	  	
(“Party B”)

This Annex supplements, forms part of, and is subject to, the above-referenced Agreement, is part of its Schedule and is a Credit Support Document under this Agreement with respect to each party.

 

Accordingly, the parties agree as follows:

 

1.   Interpretation

 

(a) Definitions and Inconsistency.  Capitalized terms not otherwise defined herein or elsewhere in this Agreement have the meanings specified pursuant to Paragraph 12, and all references in this Annex to Paragraphs are to Paragraphs of this Annex.  In the event of any inconsistency between this Annex and the other provisions of this Schedule, this Annex will prevail, and in the event of any inconsistency between Paragraph 13 and the other provisions of this Annex, Paragraph 13 will prevail.

 

(b) Secured Party and Pledgor.  All references in this Annex to the “Secured Party” will be to either party when acting in that capacity and all corresponding references to the “Pledgor” will be to the other party when acting in that capacity; provided, however, that if Other Posted Support is held by a party to this Annex, all references herein to that party as the Secured Party with respect to that Other Posted Support will be to that party as the beneficiary thereof and will not subject that support or that party as the beneficiary thereof to provisions of law generally relating to security interests and secured parties.

 

2.   Security Interest

 

Each party, as the Pledgor, hereby pledges to the other party, as the Secured Party, as security for its Obligations, and grants to the Secured Party a first priority continuing security interest in, lien on and right of Set-off against all Posted Collateral Transferred to or received by the Secured Party hereunder.  Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the security interest and lien granted hereunder on that Posted Collateral will be released immediately and, to the extent possible, without any further action by either party.

 

Copyright © 1994 by International Swaps and Derivatives Association, Inc.

 

  

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3.   Credit Support Obligations

 

(a) Delivery Amount.  Subject to Paragraphs 4 and 5, upon a demand made by the Secured Party on or promptly following a Valuation Date, if the Delivery Amount for that Valuation Date equals or exceeds the Pledgor’s Minimum Transfer Amount, then the Pledgor will Transfer to the Secured Party Eligible Credit Support having a Value as of the date of Transfer at least equal to the applicable Delivery Amount (rounded pursuant to Paragraph 13).  Unless otherwise specified in Paragraph 13, the “Delivery Amount” applicable to the Pledgor for any Valuation Date will equal the amount by which:

 

(i) the Credit Support Amount

 

exceeds

 

(ii) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party.

 

(b) Return Amount.  Subject to Paragraphs 4 and 5, upon a demand made by the Pledgor on or promptly following a Valuation Date, if the Return Amount for that Valuation Date equals or exceeds the Secured Party’s Minimum Transfer Amount, then the Secured Party will Transfer to the Pledgor Posted Credit Support specified by the Pledgor in that demand having a Value as of the date of Transfer as close as practicable to the applicable Return Amount (rounded pursuant to Paragraph 13).  Unless otherwise specified in Paragraph 13, the “Return Amount” applicable to the Secured Party for any Valuation Date will equal the amount by which:

 

(i) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party

 

exceeds

 

(ii) the Credit Support Amount.

 

“Credit Support Amount” means, unless otherwise specified in Paragraph 13, for any Valuation Date (i) the Secured Party’s Exposure for that Valuation Date plus (ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any, minus (iii) all Independent Amounts applicable to the Secured Party, if any, minus (iv) the Pledgor’s Threshold; provided, however, that the Credit Support Amount will be deemed to be zero whenever the calculation of Credit Support Amount yields a number less than zero.

 

4.   Conditions Precedent, Transfer Timing, Calculations and Substitutions

 

(a) Conditions Precedent.  Each Transfer obligation of the Pledgor under Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii), 5 and 6(d) is subject to the conditions precedent that:

 

(i) no Event of Default, Potential Event of Default or Specified Condition has occurred and is continuing with respect to the other party; and

 

(ii) no Early Termination Date for which any unsatisfied payment obligations exist has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the other party.

 

  

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(b) Transfer Timing.  Subject to Paragraphs 4(a) and 5 and unless otherwise specified, if a demand for the Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time, then the relevant Transfer will be made not later than the close of business on the next Local Business Day; if a demand is made after the Notification Time, then the relevant Transfer will be made not later than the close of business on the second Local Business Day thereafter.

 

(c) Calculations.  All calculations of Value and Exposure for purposes of Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation Time.  The Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) of its calculations not later than the Notification Time on the Local Business Day following the applicable Valuation Date (or in the case of Paragraph 6(d), following the date of calculation).

 

(d) Substitutions.

 

(i) Unless otherwise specified in Paragraph 13, upon notice to the Secured Party specifying the items of Posted Credit Support to be exchanged, the Pledgor may, on any Local Business Day, Transfer to the Secured Party substitute Eligible Credit Support (the “Substitute Credit Support”); and

 

(ii) subject to Paragraph 4(a), the Secured Party will Transfer to the Pledgor the items of Posted Credit Support specified by the Pledgor in its notice not later than the Local Business Day following the date on which the Secured Party receives the Substitute Credit Support, unless otherwise specified in Paragraph 13 (the “Substitution Date”); provided that the Secured Party will only be obligated to Transfer Posted Credit Support with a Value as of the date of Transfer of that Posted Credit Support equal to the Value as of that date of the Substitute Credit Support.

 

5.   Dispute Resolution

 

If a party (a “Disputing Party”) disputes (I) the Valuation Agent’s calculation of a Delivery Amount or a Return Amount or (II) the Value of any Transfer of Eligible Credit Support or Posted Credit Support, then (1) the Disputing Party will notify the other party and the Valuation Agent (if the Valuation Agent is not the other party) not later than the close of business on the Local Business Day following (X) the date that the demand is made under Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of (II) above, (2) subject to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to the other party not later than the close of business on the Local Business Day following (X) the date that the demand is made under Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of (II) above, (3) the parties will consult with each other in an attempt to resolve the dispute and (4) if they fail to resolve the dispute by the Resolution Time, then:

 

(i) In the case of a dispute involving a Delivery Amount or Return Amount, unless otherwise specified in Paragraph 13, the Valuation Agent will recalculate the Exposure and the Value as of the Recalculation Date by:

 

(A) utilizing any calculations of Exposure for the Transactions (or Swap Transactions) that the parties have agreed are not in dispute;

 

(B) calculating the Exposure for the Transactions (or Swap Transactions) in dispute by seeking four actual quotations at mid-market from Reference Market-makers for purposes of calculating Market Quotation, and taking the arithmetic average of those obtained; provided that if four quotations are not available for a particular Transaction (or Swap Transaction), then fewer than four quotations may be used for that Transaction (or Swap Transaction); and if no quotations are available for a particular Transaction (or Swap Transaction), then the Valuation Agent’s original calculations will be used for that Transaction (or Swap Transaction); and

 

  

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(C) utilizing the procedures specified in Paragraph 13 for calculating the Value, if disputed, of Posted Credit Support.

 

(ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or Posted Credit Support, the Valuation Agent will recalculate the Value as of the date of Transfer pursuant to Paragraph 13.

 

Following a recalculation pursuant to this Paragraph, the Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) not later than the Notification Time on the Local Business Day following the Resolution Time.  The appropriate party will, upon demand following that notice by the Valuation Agent or a resolution pursuant to (3) above and subject to Paragraphs 4(a) and 4(b), make the appropriate Transfer.

 

6.   Holding and Using Posted Collateral

 

(a) Care Of Posted Collateral.  Without limiting the Secured Party’s rights under Paragraph 6(c), the Secured Party will exercise reasonable care to assure the safe custody of all Posted Collateral to the extent required by applicable law, and in any event the Secured Party will be deemed to have exercised reasonable care if it exercises at least the same degree of care as it would exercise with respect to its own property.  Except as specified in the preceding sentence, the Secured Party will have no duty with respect to Posted Collateral, including, without limitation, any duty to collect any Distributions, or enforce or preserve any rights pertaining thereto.

 

(b) Eligibility to Hold Posted Collateral; Custodians.

 

(i) General.  Subject to the satisfaction of any conditions specified in Paragraph 13 for holding Posted Collateral, the Secured Party will be entitled to hold Posted Collateral or to appoint an agent (a “Custodian”) to hold Posted Collateral for the Secured Party.  Upon notice by the Secured Party to the Pledgor of the appointment of a Custodian, the Pledgor’s obligations to make any Transfer will be discharged by making the Transfer to that Custodian.  The holding of Posted Collateral by a Custodian will be deemed to be the holding of that Posted Collateral by the Secured Party for which the Custodian is acting.

 

(ii) Failure to Satisfy Conditions.  If the Secured Party or its Custodian fails to satisfy any conditions for holding Posted Collateral, then upon a demand made by the Pledgor, the Secured Party will, not later than five Local Business Days after the demand, Transfer or cause its Custodian to Transfer all Posted Collateral held by it to a Custodian that satisfies those conditions or to the Secured Party if it satisfies those conditions.

 

(iii) Liability.  The Secured Party will be liable for the acts or omissions of its Custodian to the same extent that the Secured Party would be liable hereunder for its own acts or omissions.

 

(c) Use of Posted Collateral.  Unless otherwise specified in Paragraph 13 and without limiting the rights and obligations of the parties under Paragraphs 3, 4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting Party or an Affected Party with respect to a Specified Condition and no Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then the Secured Party will, notwithstanding Section 9-207 of the New York Uniform Commercial Code, have the right to:

 

  

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(i) sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business any Posted Collateral it holds, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor; and

 

(ii) register any Posted Collateral in the name of the Secured Party, its Custodian or a nominee for either.

 

For purposes of the obligation to Transfer Eligible Credit Support or Posted Credit Support pursuant to Paragraphs 3 and 5 and any rights or remedies authorized under this Agreement, the Secured Party will be deemed to continue to hold all Posted Collateral and to receive Distributions made thereon, regardless of whether the Secured Party has exercised any rights with respect to any Posted Collateral pursuant to (i) or (ii) above.

 

(d) Distributions and Interest Amount.

 

(i) Distributions.  Subject to Paragraph 4(a), if the Secured Party receives or is deemed to receive Distributions on a Local Business Day, it will Transfer to the Pledgor not later than the following Local Business Day any Distributions it receives or is deemed to receive to the extent that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose).

 

(ii) Interest Amount.  Unless otherwise specified in Paragraph 13 and subject to Paragraph 4(a), in lieu of any interest, dividends or other amounts paid or deemed to have been paid with respect to Posted Collateral in the form of Cash (all of which may be retained by the Secured Party), the Secured Party will Transfer to the Pledgor at the times specified in Paragraph 13 the Interest Amount to the extent that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose).  The Interest Amount or portion thereof not Transferred pursuant to this Paragraph will constitute Posted Collateral in the form of Cash and will be subject to the security interest granted under Paragraph 2.

 

7.   Events of Default

 

For purposes of Section 5(a)(iii)(1) of this Agreement, an Event of Default will exist with respect to a party if:

 

(i) that party fails (or fails to cause its Custodian) to make, when due, any Transfer of Eligible Collateral, Posted Collateral or the Interest Amount, as applicable, required to be made by it and that failure continues for two Local Business Days after notice of that failure is given to that party;

 

(ii) that party fails to comply with any restriction or prohibition specified in this Annex with respect to any of the rights specified in Paragraph 6(c) and that failure continues for five Local Business Days after notice of that failure is given to that party; or

 

(iii) that party fails to comply with or perform any agreement or obligation other than those specified in Paragraphs 7(i) and 7(ii) and that failure continues for 30 days after notice of that failure is given to that party.

 

  

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8.   Certain Rights and Remedies

 

(a) Secured Party’s Rights and Remedies.  If at any time (1) an Event of Default or Specified Condition with respect to the Pledgor has occurred and is continuing or (2) an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Pledgor, then, unless the Pledgor has paid in full all of its Obligations that are then due, the Secured Party may exercise one or more of the following rights and remedies:

 

(i) all rights and remedies available to a secured party under applicable law with respect to Posted Collateral held by the Secured Party;

 

(ii) any other rights and remedies available to the Secured Party under the terms of Other Posted Support, if any;

 

(iii) the right to Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and

 

(iv) the right to liquidate any Posted Collateral held by the Secured Party through one or more public or private sales or other dispositions with such notice, if any, as may be required under applicable law, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor (with the Secured Party having the right to purchase any or all of the Posted Collateral to be sold) and to apply the proceeds (or the Cash equivalent thereof) from the liquidation of the Posted Collateral to any amounts payable by the Pledgor with respect to any Obligations in that order as the Secured Party may elect.

 

Each party acknowledges and agrees that Posted Collateral in the form of securities may decline speedily in value and is of a type customarily sold on a recognized market, and, accordingly, the Pledgor is not entitled to prior notice of any sale of that Posted Collateral by the Secured Party, except any notice that is required under applicable law and cannot be waived.

 

(b) Pledgor’s Rights and Remedies.  If at any time an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then (except in the case of an Early Termination Date relating to less than all Transactions (or Swap Transactions) where the Secured Party has paid in full all of its obligations that are then due under Section 6(e) of this Agreement):

 

(i) the Pledgor may exercise all rights and remedies available to a pledgor under applicable law with respect to Posted Collateral held by the Secured Party,

 

(ii) the Pledgor may exercise any other rights and remedies available to the Pledgor under the terms of Other Posted Support, if any;

 

(iii) the Secured Party will be obligated immediately to Transfer all Posted Collateral and the Interest Amount to the Pledgor; and

 

(iv) to the extent that Posted Collateral or the Interest Amount is not so Transferred pursuant to (iii) above, the Pledgor may:

 

(A) Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and

 

  

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(B) to the extent that the Pledgor does not Set-off under (iv)(A) above, withhold payment of any remaining amounts payable by the Pledgor with respect to any Obligations, up to the Value of any remaining Posted Collateral held by the Secured Party, until that Posted Collateral is Transferred to the Pledgor.

 

(c) Deficiencies and Excess Proceeds.  The Secured Party will Transfer to the Pledgor any proceeds and Posted Credit Support remaining after liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in full of all amounts payable by the Pledgor with respect to any Obligations; the Pledgor in all events will remain liable for any amounts remaining unpaid after any liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b).

 

(d) Final Returns.  When no amounts are or thereafter may become payable by the Pledgor with respect to any Obligations (except for any potential liability under Section 2(d) of this Agreement), the Secured Party will Transfer to the Pledgor all Posted Credit Support and the Interest Amount, if any.

 

9.   Representations

 

Each party represents to the other party (which representations will be deemed to be repeated as of each date on which it, as the Pledgor, Transfers Eligible Collateral) that:

 

(i) it has the power to grant a security interest in and lien on any Eligible Collateral it Transfers as the Pledgor and has taken all necessary actions to authorize the granting of that security interest and lien;

 

(ii) it is the sole owner of or otherwise has the right to Transfer all Eligible Collateral it Transfers to the Secured Party hereunder, free and clear of any security interest, lien, encumbrance or other restrictions other than the security interest and lien granted under Paragraph 2;

 

(iii) upon the Transfer of any Eligible Collateral to the Secured Party under the terms of this Annex, the Secured Party will have a valid and perfected first priority security interest therein (assuming that any central clearing corporation or any third-party financial intermediary or other entity not within the control of the Pledgor involved in the Transfer of that Eligible Collateral gives the notices and takes the action required of it under applicable law for perfection of that interest); and

 

(iv) the performance by it of its obligations under this Annex will not result in the creation of any security interest, lien or other encumbrance on any Posted Collateral other than the security interest and lien granted under Paragraph 2.

 

10.   Expenses

 

(a) General.  Except as otherwise provided in Paragraphs 10(b) and 10(c), each party will pay its own costs and expenses in connection with performing its obligations under this Annex and neither party will be liable for any costs and expenses incurred by the other party in connection herewith.

 

(b) Posted Credit Support.  The Pledgor will promptly pay when due all taxes, assessments or charges of any nature that are imposed with respect to Posted Credit Support held by the Secured Party upon becoming aware of the same, regardless of whether any portion of that Posted Credit Support is subsequently disposed of under Paragraph 6(c), except for those taxes, assessments and charges that result from the exercise of the Secured Party’s rights under Paragraph 6(c).

 

  

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(c) Liquidation/Application of Posted Credit Support.  All reasonable costs and expenses incurred by or on behalf of the Secured Party or the Pledger in connection with the liquidation and/or application of any Posted Credit Support under Paragraph 8 will be payable, on demand and pursuant to the Expenses Section of this Agreement, by the Defaulting Party or, if there is no Defaulting Party, equally by the parties.

 

11.   Miscellaneous

 

(a) Default Interest.  A Secured Party that fails to make, when due, any Transfer of Posted Collateral or the Interest Amount will be obligated to pay the Pledgor (to the extent permitted under applicable law) an amount equal to interest at the Default Rate multiplied by the Value of the items of property that were required to be Transferred, from (and including) the date that Posted Collateral or Interest Amount was required to be Transferred to (but excluding) the date of Transfer of that Posted Collateral or Interest Amount.  This interest will be calculated on the basis of daily compounding and the actual number of days elapsed.

 

(b) Further Assurances.  Promptly following a demand made by a party, the other party will execute, deliver, file and record any financing statement, specific assignment or other document and take any other action that may be necessary or desirable and reasonably requested by that party to create, preserve, perfect or validate any security interest or lien granted under Paragraph 2, to enable that party to exercise or enforce its rights under this Annex with respect to Posted Credit Support or an Interest Amount or to effect or document a release of a security interest on Posted Collateral or an Interest Amount.

 

(c) Further Protection.  The Pledgor will promptly give notice to the Secured Party of, and defend against, any suit, action, proceeding or lien that involves Posted Credit Support Transferred by the Pledgor or that could adversely affect the security interest and lien granted by it under Paragraph 2, unless that suit, action, proceeding or lien results from the exercise of the Secured Party’s rights under Paragraph 6(c).

 

(d) Good Faith and Commercially Reasonable Manner.  Performance of all obligations under this Annex, including, but not limited to, all calculations, valuations and determinations made by either party, will be made in good faith and in a commercially reasonable manner.

 

(e) Demands and Notices.  All demands and notices made by a party under this Annex will be made as specified in the Notices Section of this Agreement, except as otherwise provided in Paragraph 13.

 

(f) Specifications of Certain Matters.  Anything referred to in this Annex as being specified in Paragraph 13 also may be specified in one or more Confirmations or other documents and this Annex will be construed accordingly.

 

12.   Definitions as Used in this Annex:

 

As used in this Annex:

 

“Cash” means the lawful currency of the United States of America.

 

“Credit Support Amount” has the meaning specified in Paragraph 13.

 

“Custodian” has the meaning specified in Paragraphs 6(b)(i) and 13.

 

“Delivery Amount” has the meaning specified in Paragraph 3(a).

 

  

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“Disputing Party” has the meaning specified in Paragraph 5.

 

“Distributions” means with respect to Posted Collateral other than Cash, all principal, interest and other payments and distributions of cash or other property with respect thereto, regardless of whether the Secured Party has disposed of that Posted Collateral under Paragraph 6(c).  Distributions will not include any item of property acquired by the Secured Party upon any disposition or liquidation of Posted Collateral or, with respect to any Posted Collateral in the form of Cash, any distributions on that collateral, unless otherwise specified herein.

 

“Eligible Collateral” means, with respect to a party, the items, if any, specified as such for that party in Paragraph 13.

 

“Eligible Credit Support” means Eligible Collateral and Other Eligible Support.

 

“Exposure” means for any Valuation Date or other date for which Exposure is calculated and subject to Paragraph 5 in the case of a dispute, the amount, if any, that would be payable to a party that is the Secured Party by the other party (expressed as a positive number) or by a party that is the Secured Party to the other party (expressed as a negative number) pursuant to Section 6(e)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions) were being terminated as of the relevant Valuation Time; provided that Market Quotation will be determined by the Valuation Agent using its estimates at mid-market of the amounts that would be paid for Replacement Transactions (as that term is defined in the definition of “Market Quotation”).

 

“Independent Amount” means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero.

 

“Interest Amount” means, with respect to an Interest Period, the aggregate sum of the amounts of interest calculated for each day in that Interest Period on the principal amount of Posted Collateral in the form of Cash held by the Secured Party on that day, determined by the Secured Party for each such day as follows:

 

(x)  the amount of that Cash on that day; multiplied by

 

(y)  the Interest Rate in effect for that day; divided by

 

(z)  360.

 

“Interest Period” means the period from (and including) the last Local Business Day on which an Interest Amount was Transferred (or, if no Interest Amount has yet been Transferred, the Local Business Day on which Posted Collateral in the form of Cash was Transferred to or received by the Secured Party) to (but excluding) the Local Business Day on which the current interest Amount is to be Transferred.

 

“Interest Rate” means the rate specified in Paragraph 13.

 

“Local Business Day,” unless otherwise specified in Paragraph 13, has the meaning specified in the Definitions Section of this Agreement, except that references to a payment in clause (b) thereof will be deemed to include a Transfer under this Annex.

 

“Minimum Transfer Amount” means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero.

 

“Notification Time” has the meaning specified in Paragraph 13.

 

“Obligations” means, with respect to a party, all present and future obligations of that party under this Agreement and any additional obligations specified for that party in Paragraph 13.

 

“Other Eligible Support” means, with respect to a party, the items, if any, specified as such for that party in Paragraph 13.

 

“Other Posted Support” means all Other Eligible Support Transferred to the Secured Party that remains in effect for the benefit of that Secured Party.

 

  

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“Pledgor” means either party, when that party (i) receives a demand for or is required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has Transferred Eligible Credit Support under Paragraph 3(a).

 

“Posted Collateral” means all Eligible Collateral, other property, Distributions, and all proceeds thereof that have been Transferred to or received by the Secured Party under this Annex and not Transferred to the Pledgor pursuant to Paragraph 3(b), 4(d)(ii) or 6(d)(i) or released by the Secured Party under Paragraph 8.  Any Interest Amount or portion thereof not Transferred pursuant to Paragraph 6(d)(ii) will constitute Posted Collateral in the form of Cash.

 

“Posted Credit Support” means Posted Collateral and Other Posted Support.

 

“Recalculation Date” means the Valuation Date that gives rise to the dispute under Paragraph 5; provided, however, that if a subsequent Valuation Date occurs under Paragraph 3 prior to the resolution of the dispute, then the “Recalculation Date” means the most recent Valuation Date under Paragraph 3.

 

“Resolution Time” has the meaning specified in Paragraph 13.

 

“Return Amount” has the meaning specified in Paragraph 3(b).

 

“Secured Party” means either party, when that party (i) makes a demand for or is entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds or is deemed to hold Posted Credit Support.

 

“Specified Condition” means, with respect to a party, any event specified as such for that party in Paragraph 13.

 

“Substitute Credit Support” has the meaning specified in Paragraph 4(d)(i).

 

“Substitution Date” has the meaning specified in Paragraph 4(d)(ii).

 

“Threshold” means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero.

 

“Transfer” means, with respect to any Eligible Credit Support, Posted Credit Support or Interest Amount, and in accordance with the instructions of the Secured Party, Pledgor or Custodian, as applicable:

 

(i)  in the case of Cash, payment or delivery by wire transfer into one or more bank accounts specified by the recipient;

 

(ii)  in the case of certificated securities that cannot be paid or delivered by book-entry, payment or delivery in appropriate physical form to the recipient or its account accompanied by any duly executed instruments of transfer, assignments in blank, transfer tax stamps and any other documents necessary to constitute a legally valid transfer to the recipient;

 

(iii)  in the case of securities that can be paid or delivered by book-entry, the giving of written instructions to the relevant depository institution or other entity specified by the recipient, together with a written copy thereof to the recipient, sufficient if complied with to result in a legally effective transfer of the relevant interest to the recipient; and

 

(iv)  in the case of Other Eligible Support or Other Posted Support, as specified in Paragraph 13.

 

“Valuation Agent” has the meaning specified in Paragraph 13.

 

  

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“Valuation Date” means each date specified in or otherwise determined pursuant to Paragraph 13.

 

“Valuation Percentage” means, for any item of Eligible Collateral, the percentage specified in Paragraph 13.

 

“Valuation Time” has the meaning specified in Paragraph 13.

 

“Value” means for any Valuation Date or other date for which Value is calculated and subject to Paragraph 5 in the case of a dispute, with respect to:

 

(i) Eligible Collateral or Posted Collateral that is:

 

(A)  Cash, the amount thereof, and

 

(B)  A security, the bid price obtained by the Valuation Agent multiplied by the applicable Valuation Percentage, if any;

 

(ii) Posted Collateral that consists of items that are not specified as Eligible Collateral, zero; and

 

(iii) Other Eligible Support and Other Posted Support, as specified in Paragraph 13.

 

Paragraph 13. Elections and Variables

 

(a)           Security Interest for “Obligations”.  The term “Obligations” as used in this Annex includes no additional obligations with respect to either party.

 

(b)           Credit Support Obligations.

 

(i)           Delivery Amount, Return Amount and Credit Support Amount.

 

	
  

	
(A)

	
“Delivery Amount” shall mean the amount by which the S&P Credit Support Amount exceeds the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party.

 

The words in paragraph 3(a) “upon a demand made by the Secured Party on or promptly following a Valuation Date” shall be deleted and replaced by the words “on each Valuation Date”.

 

	
  

	
(B)

	
“Return Amount” shall mean the amount by which the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party exceeds the S&P Credit Support Amount.

 

(C)           “Credit Support Amount”:  not applicable.

 

	
  

	
(ii)

	
Eligible Collateral.

 

	
  

	
Any asset of the type listed in Exhibit I.

 

	
  

	
Any asset that is not identified herein as being Eligible Collateral will have a Valuation Percentage of zero.

 

	
  

	
(iii)

	
Other Eligible Support.  There shall be no “Other Eligible Support” for purposes of this Annex, unless agreed in writing between the parties.

 

	
  

	
(iv)

	
Thresholds.

 

  

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(A)

	
“Independent Amount” shall mean: not applicable.

 

	
  

	
(B)

	
“S&P Threshold” means with respect to Party A:  Infinity; provided, however, that the S&P Threshold with respect to Party A shall be zero if an S&P Trigger Event has occurred and is continuing; and, provided, further, that the S&P Threshold shall be infinity at any time that Party A has performed any obligation or taken any action permitted or required by the Agreement (other than pledging Posted Collateral pursuant to this Annex) that would prevent such S&P Trigger Event from becoming an Event of Default or a Termination Event.

 

	
  

	
(C)

	
“Minimum Transfer Amount”, with respect to a party on any Valuation Date, means U.S. $100,000; provided that if Party A's S&P Threshold is infinity, for the Party B Return Amount, the Minimum Transfer Amount is zero.

 

	
  

	
(D)

	
Rounding.  The Delivery Amount, rounded up, and with respect to the Return Amount, rounded down, to the nearest integral multiple of $1,000 respectively.

 

	
  

	
(v)

	
“Exposure” has the meaning specified in Paragraph 12, except that (1) after the word “Agreement” the words “(disregarding, for this purpose only, any election  made in the Schedule regarding Section 6(e))” shall be inserted, and (2) at the end of the definition of Exposure the words “with terms substantially the same as those of this Agreement; provided that the Exposure will be deemed to be zero whenever the calculation yields a number less than zero”  shall be added.

 

(c)           Valuation and Timing.

 

	
  

	
(i)

	
“Valuation Agent” means Party A.

 

	
  

	
(ii)

	
“Valuation Date” means the first Local Business Day of each week.

 

	
  

	
(iii)

	
“Valuation Time” means the close of business in the city of the Valuation Agent on the Valuation Date or date of calculation, as applicable.

 

	
  

	
(iv)

	
“Notification Time” means 12:00 p.m., New York time, on a Local Business Day.

 

	
  

	
(v)

	
The following shall be added to the end of Paragraph 4(b):  “Notwithstanding the foregoing, each Transfer of a Delivery Amount will be made not later than the close of business on the Local Business Day following a Valuation Date.”

 

(d)           Conditions Precedent.  Not applicable.

 

(e)           Substitution.

 

	
  

	
(i)

	
“Substitution Date” has the meaning specified in Paragraph 4(d)(ii).

 

	
  

	
(ii)

	
Consent.  Inapplicable.

 

(f)           Dispute Resolution.

 

  

-12-

  

	
  

	
(i)

	
“Resolution Time” means 1:00 p.m., New York time, on the Local Business Day following the date on which the notice is given that gives rise to a dispute under Paragraph 5.

 

	
  

	
(ii)

	
Value.  For the purposes of Paragraphs 5(i)(C) and 5(ii), the Value of Posted Credit Support other than Cash will be calculated by the Calculation Agent in accordance with standard market practice, using third party sources as available.

 

	
  

	
(iii)

	
Alternative.  The provisions of Paragraph 5 will apply.

 

(g)           Holding and Using Posted Collateral.

 

	
  

	
(i)

	
Eligibility to Hold Posted Collateral; Custodians.  Party B will be entitled to hold Posted Collateral only through its Custodian in an account that is segregated from all other accounts held by the Custodian.

 

Initially, the Custodian for Party B:  the Trustee under the Trust Agreement which will hold Posted Collateral in a segregated Eligible Account (as defined in the Trust Agreement).

 

	
  

	
(ii)

	
Use of Posted Collateral.  The provisions of Paragraph 6(c) will not apply to Party B, except that Party B will have the right to register Posted Collateral in the name of its Custodian or its Custodian’s nominee.

 

	
  

	
(iii)

	
Investment of Cash Collateral.  Party B will invest Posted Collateral in the form of Cash in eligible investments in accordance with the Trust Agreement.

 

(h)           Distributions and Interest Amount.

 

	
  

	
(i)

	
Interest Rate.  “Interest Rate” will be the annualized rate of return actually achieved on the Posted Collateral in the form of Cash during the related Interest Period.

 

	
  

	
(ii)

	
Transfer of Interest Amount.  The Transfer of the Interest Amount will be made monthly on the second Local Business Day of each calendar month; provided that the Party B shall not be obliged to so transfer any Interest Amount unless and until it has earned and received such interest.

 

	
  

	
(iii)

	
Alternative to Interest Amount.  The provisions of Paragraph 6(d)(ii) will apply.

 

	
  

	
(iv)

	
Posted Collateral.  The definition of “Posted Collateral” in Paragraph 12 is hereby amended by inserting the words “received by Party B and” after the words “Interest Amount or portion thereof”.

 

(i)           Additional Representation(s).  Not Applicable.

 

(j)           Other Eligible Support and Other Posted Support.

 

	
  

	
(i)

	
“Value” with respect to Other Eligible Support and Other Posted Support means: Not Applicable.

 

	
  

	
(ii)

	
“Transfer” with respect to Other Eligible Support and Other Posted Support means: Not Applicable

 

  

-13-

  

(k)           Demands and Notices.

 

All demands, specifications and notices under this Annex will be made pursuant to the Notices Section of this Agreement, unless otherwise specified here:

 

Party B:

 

TILES Trust No. 2005-1

c/o U.S. Bank National Association

190 South LaSalle Street

MK-IL-SL7C

Chicago, IL 60603

Attention: U.S. Bank Structured Finance

Fax No.: As provided to Party A

Party A:

 

Morgan Stanley Capital Services LLC

1585 Broadway

New York, New York  10036-8293

Attention:  CHIEF LEGAL OFFICER

Fax No.:  001 (212) 507-4622

(l)           Addresses for Transfers.

Party B: as set forth in notices to Party A from time to time

 

Party A: as set forth in notices to Party B from time to time

 

	
(m)

	
Party A as Pledgor and Party B as Secured Party.

 

	
  

	
(i)

	
Modification to Paragraph 1:  The following subparagraph (b) is substituted for subparagraph (b) of this Annex:

 

(b) Secured Party and Pledgor.  All references in this Annex to the “Secured Party” will be to Party B and all corresponding references to the “Pledgor” will be to Party A.

 

	
  

	
(ii)

	
Modification to Paragraph 2:  The following Paragraph 2 is substituted for Paragraph 2 of this Annex:

 

Paragraph 2.  Security Interest.  The Pledgor hereby pledges to the Secured Party, as security for its Obligations, and grants to the Secured Party a first priority continuing security interest in, lien on and right of Set-Off against all Posted Collateral Transferred to or received by the Secured Party hereunder.  Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the security interest and lien granted hereunder on that Posted Collateral will be released immediately and, to the extent possible, without any further action by either party.

 

	
  

	
(iii)

	
Modification to Paragraph 9:  The following first clause of Paragraph 9 is substituted for the first clause of Paragraph 9 of this Annex:

 

Paragraph 9.  Representations.  The Pledgor represents to the Secured Party (which representations will be deemed to be repeated as of each date on which it Transfers Eligible Collateral) that:

 

  

-14-

  

	
  

	
(iv)

	
Modifications to Paragraph 12:  The following definitions of “Pledgor” and “Secured Party” are substituted for the definitions of those terms contained in Paragraph 12 of this Annex:

 

“Pledgor” means Party A

 

“Secured Party” means Party B

 

(n)           Other Provisions:

 

	
  

	
(i)

	
Collateral Return - Event of Default.  Notwithstanding anything to the contrary in the Agreement, for purposes of Section 5(a)(iii)(1) of the Agreement, an Event of Default will exist with respect to the Secured Party in the event that it fails (or fails to cause its Custodian) to make, when due, any Transfer of Posted Collateral required to be made by it and that failure continues for two Local Business Days after notice of that failure is given to the Secured Party.

 

	
  

	
(ii)

	
Amendment for Relevant Rating Agency.  The parties hereto agree that this Annex may be amended by a written agreement of the parties, subject to the Rating Agency Condition (as defined in the Trust Agreement).

 

	
  

	
(iii)

	
Modification to Paragraph 7: Clause “(iii)” of Paragraph 7 shall be deleted in its entirety.

 

	
  

	
(iv)

	
Modification to Paragraph 10:  Clauses “10(a)” and “10(b)” are amended by adding the following sentence to the end of that paragraph:

 

“Notwithstanding the preceding sentence, the Pledgor shall pay all reasonable costs incurred by the Secured Party in connection with any exchange pursuant to this Credit Support Annex.”

 

	
(o)

	
Definitions.  Paragraph 12 is hereby further amended by adding the following definitions:

 

“Applicable Valuation Percentage” means with respect to a type of security, the Valuation Percentage specified in Exhibit I for such type of security.

 

“Business Days” means the meaning specified in the Trust Agreement.

 

“Cash” means the lawful currency of the United States of America.

 

“Eligible Currency” means US dollars.

 

“Rating Agency” means S&P.

 

“Relevant MS Entity” means, the entity with the highest rating from S&P among Party A, any Credit Support Provider of Party A, or any guarantor of Party A's obligations under the Agreement.

 

“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, or any successor to the rating business of such entity.

 

“S&P Credit Support Amount” for any Valuation Date on which the S&P Threshold with respect to Party A is infinity, zero; and for any Valuation Date on which the S&P Threshold with respect to Party A is zero, an amount then required in accordance with the S&P Criteria applicable on such Valuation Date.

 

  

-15-

  

 

“S&P Trigger Event” shall be deemed to be occurring at any time that, for at least ten consecutive Business Days, the Relevant MS Entity’s long-term credit rating by S&P is lower than the rating set forth under the heading “Required Rating” in the table immediately below in the row opposite the then-current long term rating of the Notes:

 

	
S&P Rating on Units

	
Required Rating

	
AAA

	
A, with an "A-1" short term rating or above; otherwise, "A+"

	
AA+

	
A, with an "A-1" short term rating or above; otherwise, "A+"

	
AA

	
A-

	
AA-

	
A-

	
A+

	
BBB+

	
A

	
BBB+

	
A-

	
BBB

	
BBB+

	
BBB

	
BBB

	
BBB-

	
BBB- and below

	
At least as high as rating on the Notes

 

 

Provided, however, that Party A may extend the ten Business Day period for an additional ten Business Days by providing written plans for collateral posting to S&P.

 

“Trust Agreement” means the Trust Agreement dated as of January 6, 2006 between Party B and U.S. Bank National Association as successor trustee to Bank of America, N.A. which was successor by merger to LaSalle Bank National Association.

 

“Units” means the Units issued under the Trust Agreement.

 

“Value” means for any Valuation Date or other date for which Value is calculated and subject to Paragraph 5 in the case of a dispute, will be calculated as follows:  for cash, the U.S. dollar value thereof, and for each item of Eligible Collateral (except for cash), the amount equal to the product of (i) either (A) the bid price for such security quoted on such day by a principal market-maker for such security selected in good faith by the Valuation Agent or (B) the most recent publicly available bid price for such security as reported by a quotation service or in a medium selected in good faith and in a commercially reasonable manner by the Valuation Agent and (ii) the Applicable Valuation Percentage, unless otherwise expressly provided herein.

 

 

[Remainder of Page Intentionally Blank]

 

  

-16-

  

 

IN WITNESS WHEREOF, the parties have executed this Credit Support Annex by their duly authorized officers as of the date first written above.

 

Accepted and Agreed:

 

MORGAN STANLEY CAPITAL SERVICES LLC

 

By: /s/ Joshua Schanzer                      

Name: Joshua Schanzer

Title: Vice President

 

TILES TRUST NO. 2005-1

 

By: U.S. Bank National Association, not in its individual capacity but solely as Trustee

 

By: /s/ Thais Hayum                            

Name: Thais Hayum

Title: Vice President

 

  

 

  

EXHIBIT I

Eligible Collateral and Valuation Percentages

 

	
Asset Type

	
Rating (in respect of Eligible Credit

Support in the form of Securities)

	
Remaining Term to maturity (years)

 

	
Valuation Percentage (AAA Stressed Asset price haircut)

	
Valuation Percentage (AA Stressed Asset Price Haircut)

	
Valuation Percentage (A Stressed Asset Price Haircut)

	
Valuation Percentage (BBB Stressed Asset Price Haircut)

	 Cash (USD only)	

N/A

	

N/A

	

100

	

100

	

100

	

100

	 	  	  	  	  	  	  
	

 

Securities :

	

As agreed in writing by the parties in accordance with applicable S&P criteria at that time.Unassociated Document

	
MORGAN STANLEY

	
1585 BROADWAY

NEW YORK, NY10036-8293

December 22, 2011

To:

TILES TRUST NO. 2005-1

MORGAN STANLEY

NEW YORK, NY  10036

Ladies and Gentlemen:

 

 

In consideration of TILES TRUST NO. 2005-1 (hereinafter “Counterparty”) having entered into or entering into that certain ISDA Master Agreement dated as of January 6, 2006 with Morgan Stanley Capital Services LLC (hereinafter “Obligor”) (such ISDA Master Agreement, together with each Confirmation exchanged between the parties pursuant thereto, hereinafter the “Agreement”), Morgan Stanley, a Delaware corporation (hereinafter “Guarantor”), hereby irrevocably and unconditionally guarantees to Counterparty, with effect from the date of the Agreement, the due and punctual payment of all amounts payable by Obligor under the Agreement when the same shall become due and payable, whether on scheduled payment dates, upon demand, upon declaration of termination or otherwise, in accordance with, and subject to, the terms of the Agreement and giving effect to any applicable grace period.  Upon failure of Obligor punctually to pay any such amounts, and upon written demand by Counterparty to Guarantor at its address set forth in the signature block of this guarantee (the “Guarantee”) (or to such other address as Guarantor may specify in writing), Guarantor agrees to pay or cause to be paid such amounts; provided that delay by Counterparty in giving such demand shall in no event affect Guarantor's obligations under this Guarantee. This Guarantee is a guarantee of payment and not of collection.

Guarantor hereby agrees that its obligations hereunder shall be continuing and unconditional and will not be discharged except by complete payment of the amounts payable under the Agreement, irrespective of (1) any claim as to the Agreement's validity, regularity or enforceability or the lack of authority of Obligor to execute or deliver the Agreement; or (2) any change in or amendment to the Agreement; or (3) any waiver or consent by Counterparty with respect to any provisions thereof; or (4) the absence or existence of any action to enforce the Agreement, or the recovery of any judgment against Obligor or of any action to enforce a judgment against Obligor under the Agreement; or (5) the dissolution, winding up, liquidation or insolvency of Obligor, including any discharge of obligations therefrom; or (6) any similar circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor generally.

Guarantor hereby waives diligence, presentment, demand on Obligor for payment or otherwise (except as provided hereinabove), filing of claims, requirement of a prior proceeding against Obligor and protest or notice, except as provided for in the Agreement with respect to amounts payable by Obligor.  If at any time payment under the Agreement is rescinded or must be otherwise restored or returned by Counterparty upon the insolvency, bankruptcy or reorganization of Obligor or Guarantor or otherwise, Guarantor's obligations hereunder with respect to such payment shall be reinstated upon such restoration or return being made by Counterparty.

  

  

  

Guarantor represents to Counterparty, as of the date hereof, that:

	
1.  

	
it is duly organized and validly existing under the laws of the jurisdiction of its incorporation and has full power and legal right to execute and deliver this Guarantee and to perform the provisions of this Guarantee on its part to be performed;

	
2.  

	
its execution, delivery and performance of this Guarantee have been and remain duly authorized by all necessary corporate action and do not contravene any provision of its certificate of incorporation or by-laws or any law, regulation or contractual restriction binding on it or its assets;

	
3.  

	
all consents, authorizations, approvals and clearances (including, without limitation, any necessary exchange control approval) and notifications, reports and registrations requisite for its due execution, delivery and performance of this Guarantee have been obtained from or, as the case may be, filed with the relevant governmental authorities having jurisdiction and remain in full force and effect and all conditions thereof have been duly complied with and no other action by, and no notice to or filing with, any governmental authority having jurisdiction is required for such execution, delivery or performance; and

	
4.  

	
this Guarantee is its legal, valid and binding obligation enforceable against it in accordance with its terms except as enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights or by general equity principles.

Each of the provisions contained in this Guarantee shall be severable and distinct from one another and if one or more of such provisions are now or hereafter becomes invalid, illegal or unenforceable, the validity, illegality and enforceability of the remaining provisions of this Guarantee shall not in any way be affected, prejudiced or impaired thereby.

By accepting this Guarantee and entering into the Agreement, Counterparty agrees that Guarantor shall be subrogated to all rights of Counterparty against Obligor in respect of any amounts paid by Guarantor pursuant to this Guarantee, provided that Guarantor shall be entitled to enforce or to receive any payment arising out of or based upon such right of subrogation only to the extent that it has paid all amounts payable by Obligor under the Agreement.

This Guarantee shall be governed by and construed in accordance with the laws of the State of New York, without reference to its choice of law doctrine. All capitalized terms not otherwise defined herein shall have the respective meanings assigned to them in the Agreement.

  

  

  

MORGAN STANLEY

By :            /s/ Christine K. Cochet                

Name:         Christine K. Cochet

Title:           Authorized Signatory

Address:   1585 Broadway

                   New York, NY 10036

Attn:          Treasurer

Fax No.:    212-762-0337

Phone:       212-761-4000

 

Signature page to Morgan Stanley Guarantee issued to TILES TRUST NO. 2005-1

and dated December 22, 2011

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