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exhibit1001-primusshareholde.htm - Generated by SEC Publisher for SEC Filing

Exhibit 10.01

 

 

 

 

 

 

 

                                                                                                                                                

 

PRIMUS GUARANTY, LTD. SHAREHOLDERS AGREEMENT

 

 

 

 

Dated as of December 30, 2010

                                                                                                                                                

 

                

 

 

 

 

 

 

TABLE OF CONTENTS 

 

 

				Page
	Article I	GOVERNANCE.....................................................................................................................................................	1
		Section 1.1         	Composition of the Board of Directors....................................................................................	1
		Section 1.2	Subsequent Composition of the Board of Directors Following the Closing Date......................................................................................................................................	1
	 
		Section 1.3	Objection to an Investor Designee..........................................................................................	3
		Section 1.4	Adjustments for Reduced Board Membership.........................................................................	3
		Section 1.5	Termination of Investor Rights.................................................................................................	3
				
	Article II	TRANSFERS; STANDSTILL PROVISIONS........................................................................................................	4
		Section 2.1	Transfer Restrictions...............................................................................................................	4
		Section 2.2	Standstill Provisions................................................................................................................	5
			 	
	Article III	REPRESENTATIONS AND WARRANTIES.........................................................................................................	7
		Section 3.1	Representations and Warranties of the Investors.......................................................................	7
		Section 3.2	Representations and Warranties of EBF...................................................................................	8
		Section 3.3	Representations and Warranties of the Company......................................................................	8
				
	Article IV	REGISTRATION....................................................................................................................................................	9
		Section 4.1	Piggyback Registrations..........................................................................................................	9
		Section 4.2	Shelf Registration....................................................................................................................	10
		Section 4.3	Demand Registration...............................................................................................................	11
		Section 4.4	NYSE Listing and Registration with the Commission................................................................	12
		Section 4.5	Registration Procedures..........................................................................................................	12
		Section 4.6	Registration Expenses.............................................................................................................	15
		Section 4.7	Participation in Underwritten Registrations...............................................................................	15
		Section 4.8	Suspension of Sales................................................................................................................	15
		Section 4.9	Rule 144; Legended Securities................................................................................................	16
		Section 4.10	Holdback...............................................................................................................................	16
		Section 4.11	Delay of Registration; Furnishing Information...........................................................................	16
				
	Article V	PREEMPTIVE RIGHTS...........................................................................................................................................	16
		Section 5.1	Preemptive Rights....................................................................................................................	16
				
	Article VI	DEFINITIONS.........................................................................................................................................................	17
		Section 6.1	Defined Terms.........................................................................................................................	17
		Section 6.2	Terms Generally.......................................................................................................................	21
				
	Article VII	MISCELLANEOUS.................................................................................................................................................	22
		Section 7.1	Term........................................................................................................................................	22
		Section 7.2	No Inconsistent Agreements.....................................................................................................	22
		Section 7.3	Confidentiality..........................................................................................................................	22

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		Section 7.4        	Investment Opportunities; Conflicts of Interest..........................................................................	22
		Section 7.5	Investor Actions......................................................................................................................	23
		Section 7.6	Amendments and Waivers.......................................................................................................	23
		Section 7.7	Successors and Assigns...........................................................................................................	23
		Section 7.8	Severability.............................................................................................................................	23
		Section 7.9	Counterparts...........................................................................................................................	23
		Section 7.10	Entire Agreement....................................................................................................................	23
		Section 7.11	Governing Law; Jurisdiction.....................................................................................................	24
		Section 7.12	WAIVER OF JURY TRIAL..................................................................................................	24
		Section 7.13	Specific Performance..............................................................................................................	24
		Section 7.14	No Third Party Beneficiaries....................................................................................................	24
		Section 7.15	Notices...................................................................................................................................	24
				
	Annex A  Form of Joinder		
	Annex B  Investor Ownership		
			

 

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SHAREHOLDERS AGREEMENT, dated as of December 30, 2010 (as it may be amended from time to time, this “Agreement”), by and among (i) PRIMUS GUARANTY, LTD., a Bermuda company (the “Company”), (ii) MERCED PARTNERS LIMITED PARTNERSHIP, a Delaware limited partnership (“First MP”), (iii) MERCED PARTNERS III (Cayman), L.P., a Cayman exempted limited partnership (“Second MP” and together with First MP and any Permitted Transferees, the “Investors”) and (iv) EBF & ASSOCIATES, L.P., a Delaware limited partnership (“EBF”).

W I T N E S S E T H:

 

WHEREAS, on December 20, 2010, the total equity capitalization of the Company consisted of 37,958,622 common shares, par value $0.08 each (the “Common Shares”), issued and outstanding;

WHEREAS, on the date hereof, XL Insurance (Bermuda) Ltd, a Bermuda exempted company (“Seller”) and First MP and Second MP have entered into a Share Purchase Agreement (as it may be amended from time to time, the “Purchase Agreement”) pursuant to which First MP and Second MP are acquiring from Seller, subject to the terms and conditions thereof, 11,266,000 Common Shares (the “Acquired Shares”), for an aggregate purchase price of $51,598,280; and

WHEREAS, each of the parties hereto wishes to set forth in this Agreement certain terms and conditions regarding the Investors’ ownership of the Acquired Shares.

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

Article I

GOVERNANCE

Section 1.1            Composition of the Board of Directors. Effective on the Closing, (i) the Company will cause the two Investor Designees to become members of the Board and (ii) the Company will cause the number of directors on the Company’s board of directors (the “Board”) to be increased by two. The initial Investor Directors shall be (i) Vince Vertin, as a Class II Director, and (ii) Mike Sullivan, as a Class III Director. Effective on the Closing, the Company will cause Vince Vertin to be appointed as a member of the Finance, Investment and Risk Committee of the Board (the “Finance Committee”).

Section 1.2            Subsequent Composition of the Board of Directors Following the Closing Date. (a) Following the Closing Date, subject to compliance with Section 1.2(c), at each annual or special general meeting of shareholders of the Company at which directors are to be elected to the Company’s Board, the Company will nominate and use its reasonable best efforts to cause the election to the Company’s Board of a slate of directors that includes, (i) if the Investor Percentage Interest equals or exceeds 50.0% (the “First Threshold”), two Investor Designees, reduced by the number of Investor Directors then in office, if any, who will continue as directors 

 

of the Company following such election because their director class, if then applicable, is not then due for election or (ii) if the Investor Percentage Interest is less than the First Threshold but equals or exceeds 25.0% (the “Second Threshold”), one Investor Designee, reduced by the number of Investor Directors then in office, if any, who will continue as directors of the Company following such election because their director class, if then applicable, is not then due for election.  If the Investor Percentage Interest is less than the Second Threshold, the Company will be under no obligation to nominate or otherwise act to cause the appointment of any Investor Designee. 

 (b)               Until such time as the Investor Percentage Interest is less than the Second Threshold, each Investor agrees to cause each Acquired Share Beneficially Owned by it to be present in person or represented by proxy at all meetings of shareholders of the Company at which directors are to be elected to the Board, so that each such Acquired Share shall be counted as present for determining the presence of a quorum at such meetings and to support and cause each such Acquired Share to be voted in favor of the Investor Designee and those persons (and only those persons) nominated by the Board or the relevant committee thereof. Notwithstanding the foregoing, the Investors shall have no obligation to vote in favor of those persons nominated by the Board or the relevant committee thereof in the event that (i) the election of such person to the Board would cause the Company to be not in compliance with Applicable Law, or (ii) such person has been involved in any of the events enumerated in Item 2(d) or (e) of Schedule 13D or Item 401(f) of Regulation S-K.
 (c)                The Investors shall notify the Company of the identity of the proposed Investor Designees, in writing, together with all information about the proposed Investor Designees as shall be reasonably requested by the Board or the relevant committee thereof no later than ten (10) days after the Board or the relevant committee thereof gives the Investors notice requesting such information for inclusion in a proxy statement for a meeting of shareholders; provided, however, that in the event the Investors fail to provide such notice following the delivery of such notice by the Board or a committee thereof, the persons then serving as the Investor Directors shall be deemed to be the Investor Designees for such meeting. 
 (d)               In the event of the death, disability, resignation or removal of an Investor Director (other than pursuant to Section 1.5), the Board will promptly appoint to the Board a replacement Investor Director designated in writing by the Investors to fill the resulting vacancy, and such individual shall then be deemed an Investor Director for all purposes hereunder; provided that if an Investor Director is removed for cause, the replacement Investor Director will not be the same person who was removed.
 (e)                In the event an Investor Designee fails to be elected to the Board following any annual or special general meeting of the shareholders at which the Investor Designee stood for election but was nevertheless not elected, the Company will promptly, and in any event not later than three (3) days following such meeting of the shareholders, appoint a replacement Investor Director designated in writing by the Investors to the Board either by expanding the size of the Board or causing a non-Investor Director to resign, and such individual shall then be deemed an Investor Director for all purposes hereunder.  Without the prior written consent of the Investors, the Board shall take no action until such time as the replacement Investor Designee is so appointed.
 

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 (f)                The Investors agree that the Investor Directors shall waive all rights to compensation for their service on the Board other than (i) the indemnification rights generally provided to directors of the Company and (ii) reasonable expenses incurred by such directors in connection with their attendance at meetings of the Board and its committees, which expenses shall be reimbursed only in such amounts as are consistent with the Company’s policies with respect to director expense reimbursement.  
 (g)               The Board shall cause the Investor Director as specified by the Investors from time to time to be appointed to and to remain as a member of the Finance Committee.  For as long as any members of the Board are also directors of the Board of Primus Financial Products, LLC (“PFP”), the Company shall cause one Investor Director, as specified by the Investors from time to time, to be appointed to and remain as a member of the Board of PFP. 

              Section 1.3            Objection to an Investor Designee. Notwithstanding the provisions of this Article I, the Investors will not be entitled to designate an Investor Designee to the Board (or any committee thereof), in the event that (i) the election of such Investor Designee to the Board would cause the Company to be not in compliance with Applicable Law, (ii) such Investor Designee has been involved in any of the events enumerated in Item 2(d) or (e) of Schedule 13D or Item 401(f) of Regulation S-K, or (iii) such Investor Designee is not reasonably acceptable to the Board or the relevant committee thereof. In any such case described in clauses (i), (ii) or (iii) of the immediately preceding sentence, the Investors will withdraw the designation of such proposed Investor Designee and designate a replacement therefor (which replacement Investor Designee will also be subject to the requirements of this Section 1.3). The Company will notify the Investors of any objection (together with the basis thereof in reasonable detail) to an Investor Designee sufficiently in advance of the date on which proxy materials are mailed by the Company in connection with such election of directors to enable the Investors to submit a replacement Investor Designee or Investor Designees, as the case may be, in accordance with the terms of this Agreement. The Company agrees that this Section 1.3 shall not be a basis for objecting to the Investor Designees specified in Section 1.1 with respect to their initial service as directors but may apply with any re-election or reappointment of such persons.

 

Section 1.4            Adjustments for Reduced Board Membership. If, at any time, the number of seats on the Board is reduced to six or fewer, then (a) the number of Investor Designees to be nominated by the Company pursuant to clause (i) of Section 1.2(a) will be reduced to one and (b) if at such time there are two Investor Directors on the Board, the Investors cause one Investor Director to promptly resign from the Board such that promptly following such resignation there is one Investor Director on the Board.

Section 1.5            Termination of Investor Rights. If as of the close of any Business Day following the Closing Date, the Investor Percentage Interest has fallen below the First Threshold, the Investors shall promptly notify the Company and, unless otherwise consented to by a majority of the non-Investor Directors on the Board, the Investors shall cause one Investor Director to promptly resign from the Board such that promptly following such resignation there is one Investor Director on the Board. If as of the close of any Business Day following the Closing Date, the Investor Percentage Interest falls below the Second Threshold, the Investors shall promptly notify the Company and, unless otherwise consented to by a majority of the non-Investor Directors on the Board, the Investors shall cause the remaining Investor Director to 

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promptly resign from the Board such that immediately following such resignation no Investor Directors remain on the Board.  Immediately upon the Investor Percentage Interest falling below the Second Threshold and without relieving the Company of any prior breach hereof, the Company shall have no further obligation pursuant to this Article I to nominate or appoint Investor Designees.

 Article II

TRANSFERS; STANDSTILL PROVISIONS

Section 2.1            Transfer Restrictions. (a) No Investor shall Transfer any of the Acquired Shares prior to the six-month anniversary of the Closing Date, other than to a Permitted Transferee. In the event that prior to the six-month anniversary of the Closing Date, any Permitted Transferee ceases to be a Controlled Affiliate of the transferring Investor, then any prior Transfer to such Person pursuant to such exception shall become null and void and ownership and title to any such securities so Transferred shall revert to such transferring Investor. An Investor shall notify the Company prior to any transfer to a Permitted Transferee during such six-month period.

(b)               From and after the six-month anniversary of the Closing Date, the Investors shall not Transfer any Acquired Shares except in compliance with the restrictions on Transfer generally applicable to holders of the Common Shares; provided, however, that Transfer of Acquired Shares following the six-month anniversary of the Closing Date shall not, in and of itself, be deemed to result in an adverse regulatory or legal consequence to the Company under Clause 13.1 of the Company’s bye-laws (the “Bye-laws”).
 (c)                The foregoing restrictions on Transfer may be waived with respect to any specific Transfer by the prior approval of a majority of the members of the Board who are not Investor Directors.
 (d)               Any Transfer or attempted Transfer of Acquired Shares in violation of this Section 2.1 shall, to the fullest extent permitted by law, be null and void ab initio, and the Company shall not, and shall instruct its transfer agent and other third parties not to, record or recognize any such purported transaction on the share register of the Company.
 (e)                Any certificates for Acquired Shares shall bear a legend or legends (and appropriate comparable notations or other arrangements will be made with respect to any uncertificated shares) referencing restrictions on transfer of such Acquired Shares under the Securities Act, which legend shall state in substance:

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ISSUED AND SOLD WITHOUT REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES (A “STATE ACT”) IN RELIANCE UPON CERTAIN EXEMPTIONS FROM REGISTRATION UNDER SAID ACTS.  THE SECURITIES EVIDENCED BY THIS CERTIFICATE CANNOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES UNLESS SUCH SALE, ASSIGNMENT OR OTHER TRANSFER IS (I) MADE PURSUANT TO AN EFFECTIVE REGISTRATION 

STATEMENT UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH EACH APPLICABLE STATE ACT OR (II) EXEMPT FROM, OR NOT SUBJECT TO, THE SECURITIES ACT AND EACH APPLICABLE STATE ACT.

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Notwithstanding the foregoing, the holder of any certificate(s) for Acquired Shares shall be entitled to receive from the Company new certificates for a like number of Acquired Shares not bearing such legend (or the elimination or termination of such notations or arrangements) upon the request of such holder (i) at such time as such restrictions are no longer applicable, and (ii) if required by the Company’s transfer agent, with respect to the restriction on transfer of such shares other than pursuant to a Registration Statement under the Securities Act, upon delivery of an opinion of counsel to such holder, which opinion is reasonably satisfactory in form and substance to such transfer agent, that the securities law restriction referenced in such legend is no longer required in order to ensure compliance with the Securities Act. 

 

(f)                The Company will cause the Acquired Shares to be registered in the name of the Investors as record owners promptly following the Closing.

Section 2.2            Standstill Provisions. During the Standstill Period, the Investors and EBF shall not, and shall not permit any Investment Fund, directly or indirectly, to, without the Company’s prior written consent:

(a)                acquire or agree to acquire any additional Common Shares, or any other securities or assets of the Company;
 (b)               form a Group or deposit the Acquired Shares in a voting trust;
 (c)                grant any proxy to vote any Acquired Shares to any Person or Group, other than the Company or a Person specified by the Company in a proxy card provided to all shareholders of the Company on or on behalf of the Company;
 (d)               propose (A) any merger, consolidation or other business combination with the Company, (B) any purchase of all or substantially all of the assets of the Company or any of its subsidiaries, (C) any recapitalization, restructuring, liquidation, or dissolution of the Company or (D) any other extraordinary transaction with respect to the Company or any of its subsidiaries (each of the foregoing, an “Extraordinary Transaction”);
 (e)                make a tender or exchange offer for any securities of the Company or any of its subsidiaries;
 (f)                participate in any “solicitation” of “proxies” (as such terms are used in the proxy rules of the Commission) to vote, or knowingly seek to advise or influence any Person with respect to the voting of, any voting securities of the Company;
 (g)               call, or seek to call, a meeting of the shareholders of the Company or initiate any shareholder proposal for action by shareholders of the Company, seek Board representation other than as provided for in this Agreement or seek the removal of any member of the Board;
 

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 (h)               otherwise act, alone or in concert with others, to seek to Control or influence the management or the policies of the Company;
 (i)                 publicly disclose any intention, plan or arrangement prohibited by this Section 2.2, other than Nonpublic Communication; 
 (j)                 knowingly advise, assist or encourage any Persons engaged in any of the activities prohibited by this Section 2.2;  
 (k)               request the Company to waive any provision of this Section 2.2, or
 (l)                 take any other action that such Person reasonably believes will require the Company to make a public announcement regarding the possibility of a business combination, merger or other type or transaction described in this Section 2.2.
 (m)             “Standstill Period” shall mean the period from the Closing Date until the earliest of the following:  (i) the fourth anniversary of the Closing Date, (ii) the first date on which the Investors no longer have the right to nominate at least one Investor Designee for election or appointment to the Board pursuant to Article I hereof, (iii) the first date on which the Company or any of its subsidiaries commences or becomes subject to any proceeding of bankruptcy, dissolution or liquidation and (iv) five (5) business days after the Company receives written notice from Investor of a material breach by the Company of its obligations with respect to Section 1.1 or Section 1.2 of this Agreement, which breach is not cured by the Company in such five-day period.
 (n)               The restrictions contained in this Section 2.2 shall not apply to nonpublic communications, including any nonpublic acquisition offer, provided that such communication is (i) not reasonably likely to require the Company to make a public announcement with respect to the subject matter of the communications or regarding the possibility of a business combination, merger or other type or transaction described in this Section 2.2, and (ii) communicated solely (A) among  any of the Investors, the Investor Designees and the Investor Directors or (B) among any of the Investors, the Investor Designees, the Investor Directors and the Company (all such communication, “Nonpublic Communication”); provided, further, that nothing in this Section 2.2 shall prohibit the Investors from communicating solely in the ordinary course of business with their directors, officers, employees, representatives, agents, owners, limited partners or other applicable stakeholders who have been informed of, and agreed to be bound by, the terms of Section 7.3.
 (o)               Nothing in this Section 2.2 shall be interpreted as preventing the Investors from making regulatory filings required by Applicable Law, including, for the avoidance of doubt, filings with the Commission on Schedule 13D and amendments thereto, and on Forms 3, 4, and 5 for the purposes of disclosing acquisitions and dispositions of securities of the Company (“Mandatory Public Filings”); provided, however, that no Mandatory Public Filing may disclose any intention to undertake any activity prohibited by this Section 2.2. Further, nothing in this Section 2.2 shall in any way limit the activities of any Investor Director taken in his or her capacity as a director of the Company.

 

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 Article III

REPRESENTATIONS AND WARRANTIES

Section 3.1            Representations and Warranties of the Investors. Each of First MP and Second MP, solely on behalf of itself and not on behalf of any other Investor, hereby represents and warrants to the Company as follows:

(a)                Immediately following the Closing, such Investor and one or more of its Affiliates will be the Beneficial Owner of the number of Common Shares listed on Annex B opposite such Investor’s name and at that time such Acquired Shares will constitute all of the Common Shares Beneficially Owned by such Investor and such of its Affiliates.  
 (b)               Such Investor has been duly formed, is validly existing and is in good standing under the laws of its state of organization.  Such Investor has all requisite limited partnership power and authority to execute and deliver this Agreement, to perform its obligations under this Agreement and to consummate the transactions contemplated hereby.
 (c)                The execution and delivery by such Investor of this Agreement, the performance by such Investor of its obligations under this Agreement and the consummation by such Investor of the transactions contemplated hereby do not and will not conflict with, violate any provision of, or require the consent or approval of any Person which has not been obtained under, Applicable Law, the organizational documents of such Investor or any contract or agreement to which such Investor is a party.
 (d)       The execution, delivery and performance of this Agreement by such Investor have been duly authorized by all necessary limited partnership action on the part of such Investor.  This Agreement has been duly executed and delivered by such Investor and, assuming the due authorization, execution and delivery by each of the other parties hereto, constitutes a legal, valid and binding obligation of such Investor, enforceable against such Investor in accordance with its terms, subject to bankruptcy, insolvency and other laws of general applicability relating to or affecting creditors’ rights and subject to general principles of equity.
 (e)                Such Investor:  (i) is acquiring the Acquired Shares for its own account, solely for investment and not with a view toward, or for sale in connection with, any distribution thereof in violation of any federal or state securities or “blue sky” laws, or with any present intention of distributing or selling such Acquired Shares in violation of any such laws, (ii) has such knowledge and experience in financial and business matters and in investments of this type that it is capable of evaluating the merits and risks of its investment in the Acquired Shares and of making an informed investment decision and (iii) is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act.  Such Investor has requested, received, reviewed and considered all information that such Investor deems relevant in making an informed decision to invest in the Shares and has had an opportunity to discuss the Company’s business, management and financial affairs with its management and also had an opportunity to ask questions of officers of the Company that were answered to such Investor’s satisfaction.  Such Investor understands that the Company is relying on the statements contained herein to establish an exemption from registration under the Securities Act and under state securities laws and acknowledges that the Acquired Shares are not registered under the Securities Act or any 

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other Applicable Law and that such shares may not be Transferred except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom.

Section 3.2            Representations and Warranties of EBF. EBF hereby represents and warrants to the Company as follows:

(a)                As of the date hereof, EBF does not Beneficially Own, directly or indirectly, any Common Shares or other securities of the Company.
 (b)               EBF has been duly formed, is validly existing and is in good standing under the laws of its state of organization.  EBF has all requisite limited partnership power and authority to execute and deliver this Agreement, to perform its obligations under this Agreement and to consummate the transactions contemplated hereby.
 (c)                The execution and delivery by EBF of this Agreement, the performance by EBF of its obligations under this Agreement and the consummation by EBF of the transactions contemplated hereby do not and will not conflict with, violate any provision of, or require any consent or approval of any Person which has not been obtained under, Applicable Law, the organizational documents of EBF or any contract or agreement to which EBF is a party.
 (d)               The execution, delivery and performance of this Agreement by EBF have been duly authorized by all necessary limited partnership  action on the part of EBF.  This Agreement has been duly executed and delivered by EBF and, assuming the due authorization, execution and delivery by each of the other parties hereto, constitutes a legal, valid and binding obligation of EBF, enforceable against EBF in accordance with its terms, subject to bankruptcy, insolvency and other laws of general applicability relating to or affecting creditors’ rights and subject to general principles of equity.

Section 3.3            Representations and Warranties of the Company. The Company hereby represents and warrants to the Investors and EBF as follows:

(a)                The Company is a company duly incorporated, validly existing and in good standing under the laws of Bermuda.  The Company has all requisite power and authority to execute and deliver this Agreement, to perform its obligations under this Agreement and to consummate the transactions contemplated hereby.
 (b)               The execution and delivery by the Company of this Agreement, the performance of the obligations of the Company under this Agreement and the consummation by the Company of the transactions contemplated hereby do not and will not conflict with, violate any provision of, or require any consent or approval of any Person under, Applicable Law, the organizational documents of the Company or any contract or agreement to which the Company is a party.
 (c)                The execution, delivery and performance of this Agreement by the Company have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by each of the other parties hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its 

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terms, subject to bankruptcy, insolvency and other laws of general applicability relating to or affecting creditors’ rights and subject to general principles of equity.  

 (d)               The Board has approved the Purchase Agreement and the acquisition of the Acquired Shares by the Investors and none of the Investors will be deemed an Interested Person under the Bye-Laws.  Such approval will remain in effect and will not be amended, qualified or rescinded in any respect.
 (e)                The Company has taken all necessary action to exempt the acquisition of the Acquired Shares by the Investors and their Affiliates and Associates (as defined in the Rights Agreement) from the provisions of the Rights Agreement and has delivered to First MP and Second MP a true and complete copy of the amendment to the Rights Agreement giving effect to such exemption.  Such exemption will remain in effect and will not be amended, qualified or rescinded in any respect.  
 (f)                The authorized capital stock of the Company consists of 62,500,000 Common Shares and, as of December 20, 2010:  (i) 37,958,622 Common Shares were issued and outstanding, (ii) 877,689 Common Shares were unissued and reserved for issuance pursuant to options issued to employees of the Company and its subsidiaries, (iii) 990,674 Common Shares were unissued and reserved for issuance pursuant to restricted share units and (iv) 267,850 Common Shares were unissued and reserved for issuance pursuant to performance share units issued to employees of the Company and its subsidiaries.  
 (g)               True and complete copies of the (i) Company’s Memorandum of Association and all amendments thereto, (ii) Bye-laws, as amended to date, and (iii) the Rights Agreement and the amendment thereto have been delivered to First MP and Second MP.  None of such instruments shall be amended prior to the Closing Date.
 (h)               Except as listed on Schedule 3.3(h), the Company is not a party to any agreement granting any other person registration rights. 
 Article IV

REGISTRATION

Section 4.1            Piggyback Registrations.

 (a)                Right to Piggyback.  Whenever the Company proposes to register any Common Shares in connection with a Public Offering solely for cash, other than pursuant to a Special Registration, and the registration form to be filed may be used for the registration or qualification for distribution of Registrable Securities, the Company will give prompt written notice to all holders of Registrable Securities of its intention to effect such a registration and, subject to Section 4.1(c), will include in such registration all Registrable Securities that are permitted to be Transferred pursuant to Section 2.1 with respect to which the Company has received written requests for inclusion therein within five (5) Business Days after the date of the Company’s notice (a “Piggyback Registration”).  Any holder of Registrable Securities that has made such a written request may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter(s), if any, on or before the fifth Business Day prior to the planned effective date of such Piggyback Registration.  The 

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Company may, in its sole discretion, terminate or withdraw any registration under this Section 4.1 prior to the effectiveness of such registration, whether or not any holder of Registrable Securities has elected to include Registrable Securities in such registration and the Company will have no liability to any holder of Registrable Securities in connection with such termination or withdrawal.

 (b)               Underwritten Registration.  If the registration referred to in Section 4.1(a) is proposed to be underwritten, the Company will so advise the holders of Registrable Securities.  In such event, the right of any holder of Registrable Securities to registration pursuant to this Section 4.1 will be conditioned upon such holder’s participation in such underwriting and the inclusion of such holder’s Registrable Securities in the underwriting, and upon each such holder of Registrable Securities’ compliance with Section 4.7 of this Agreement.   
 (c)                Priority on Primary Registrations.  If a Piggyback Registration relates to an underwritten primary offering on behalf of the Company, and the managing underwriter(s) advise the Company that, in their opinion, the number of securities requested to be included in such registration exceeds the number that can be sold without adversely affecting the marketability of such offering within a per share price range acceptable to the Company, the Company will include in such registration or prospectus only such number of securities that in, the opinion of such underwriters, can be sold without adversely affecting the marketability of the offering within the per share price range acceptable to the Company, which securities will be so included in the following order of priority:  (i) first, the number of securities the Company proposes to sell, (ii) second, the number of Registrable Securities of any holders of Registrable Securities who have requested registration of Registrable Securities pursuant to Section 4.1(a), pro rata on the basis of the aggregate number of such securities owned by each such holder of Registrable Securities and (iii) third, any securities requested to be included pursuant to the exercise of other contractual registration rights granted by the Company, pro rata among such holders (if applicable) on the basis of the aggregate number of securities requested to be included by such holders.
 
Section 4.2            Shelf Registration.
 (a)                Subject to Sections 4.2(b) and 4.4, from and after the six-month anniversary of the Closing Date, Investor shall be entitled to request in writing that the Company file with the Commission a Shelf Registration Statement relating to the offer and sale of all of the Registrable Securities (the “Shelf Registration”) and, upon the receipt of such a written request, the Company will use its reasonable best efforts to cause such a Shelf Registration to be filed and to be declared effective under the Securities Act as soon as possible after filing.  The Company shall amend or supplement such Shelf Registration Statement to include additional Registrable Securities at such time as the Transfer of such Registrable Securities is permitted pursuant to Section 2.1(a).  The Company shall use its reasonable best efforts to cause the Shelf Registration Statement to remain effective, including by filing a replacement Shelf Registration Statement upon the expiration of the original Shelf Registration Statement, until such time as there are no remaining Registrable Securities.  During such time, the Company shall use its reasonable best efforts to amend the Shelf Registration Statement from time to time as requested by the holders of Registrable Securities, in their reasonable discretion, to permit disposition of Registrable 

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Securities pursuant thereto in accordance with the preferred method of distribution of Common Shares under the Shelf Registration Statement of such holders.

 (b)               The Company may suspend the effectiveness of any Shelf Registration (or decline to file or request effectiveness of a Shelf Registration) for a period not to exceed thirty (30) days in any ninety (90) day period or an aggregate of ninety (90) days in any twelve (12) month period if the Board of the Company shall have determined in good faith that because of valid business reasons (not including avoidance of the Company’s obligations hereunder), including without limitation the acquisition or divestiture of assets, pending corporate developments and similar events, it is in the best interests of the Company to suspend such effectiveness, and prior to such suspension, the Company provides the Investors with written notice of such suspension, which notice need not specify the nature of the event giving rise to such suspension.

Section 4.3            Demand Registration.

(a)                Requests for Registration. Subject to Section 4.3(b), at any time following the six-month anniversary of the Closing Date if a Shelf Registration Statement is not effective, Investor may request in writing that the Company effect the underwritten registration of all or any part of the Registrable Securities held by such Investor or Investors (a “Registration Request”) (which Registration Request shall specify the number of Registrable Securities intended to be registered).  Promptly after its receipt of any Registration Request, the Company will give written notice of such request to all other holders of Registrable Securities (which notice shall be given in any event within five (5) Business Days of the date on which the Company received the applicable Registration Request) and will use its reasonable best efforts to register, as soon as practicable (and in any event within ninety (90) days of the date of such Registration Request) in accordance with the provisions of this Agreement, all Registrable Securities that have been requested to be registered in the Registration Request or by any other holders of Registrable Securities by written notice to the Company given within ten (10) Business Days after the date the Company has given such holders of Registrable Securities notice of the Registration Request. Any registration requested by an Investor or Investors pursuant to this Section 4.3(a) is referred to in this Agreement as a “Demand Registration.” 
 (b)               Limitation on Demand Registrations.
 (i)                 The Company shall not be required to (A) effect more than three (3) Demand Registrations, or (B) effect more than one (1) Demand Registration within any twelve (12) month period. No Demand Registration will count for the purposes of the limitations in this Section 4.3(b) unless the registration has been declared or ordered effective by the Commission and remains continuously effective until the earlier of (x) the date on which all Registrable Securities covered thereby have been sold pursuant to such registration (or if earlier, the first date on which no Registrable Securities remain outstanding) and (y) the close of business on the 180th day after such registration has been declared or ordered effective by the Commission.
 (ii)               The Company also shall not be required to effect any Demand Registration if the Company has notified the Investor or Investors making the Registration Request that, in the good faith judgment of the Company, it would be 

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 materially detrimental to the Company for such registration to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than forty-five (45) days after receipt of the request of the Investor or Investors; provided that such right to delay a request pursuant to this Section 4.3(b)(ii) shall be exercised by the Company not more than three times in any twelve (12) month period and not more than ninety (90) days in the aggregate in such twelve (12) month period. If the Company postpones the filing of a prospectus or the effectiveness of a Registration Statement pursuant to this Section 4.3(b)(ii), an Investor or Investors will be entitled to withdraw its or their Registration Request and, if such request is withdrawn, such registration request will not count for the purposes of the limitation set forth in this Section 4.3(b).
 (c)                Selection of Underwriters.
 (i)                 The lead underwriter to administer the offering in connection with any Demand Registration will be chosen by the Investors subject to the prior written consent, not to be unreasonably denied, withheld, conditioned or delayed, of the Company.
 (ii)               The right of any holders of Registrable Securities to registration pursuant to this Section 4.3 will be conditioned upon such holders of Registrable Securities complying with Section 4.7 of this Agreement.

(d)               Priority on Demand Registrations. The Company will not include in any Demand Registration pursuant to this Section 4.3 any shares of Common Shares that are not Registrable Securities, without the prior written consent of the Investor who delivered the Registration Request. If the managing underwriter advises the Company that in its reasonable opinion the number of Registrable Securities (and, if permitted hereunder, other shares of Common Shares requested to be included in such offering) exceeds the number of securities that can be sold in such offering without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), the Company will include in such offering only such number of securities that in the reasonable opinion of such underwriters can be sold without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), which securities will be so included in the following order of priority: (i) first, Registrable Securities of the Investors, (ii) second, any shares of Common Shares to be sold by the Company and (iii) third, any shares of Common Shares requested to be included pursuant to the exercise of other contractual registration rights granted by the Company pro rata among such holders (if applicable) on the basis of the aggregate number of securities requested to be included by such holders.

Section 4.4            NYSE Listing and Registration with the Commission. Nothing in this Article IV shall require the Company to (i) maintain the listing of its Common Shares on the NYSE or (ii) maintain the registration of its Common Shares with the Commission, and the Company’s obligations under this Article IV shall be limited to the extent that the Company’s Common Shares are not listed on the NYSE or registered with the Commission. 

Section 4.5            Registration Procedures. Subject to Section 4.3(b), whenever the holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to 

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Sections 4.1, 4.2 or 4.3 of this Agreement, the Company will use its reasonable best efforts to effect the registration and sale of such Registrable Securities as soon as reasonably practicable in accordance with the intended method of disposition thereof, and pursuant thereto the Company shall use its reasonable best efforts to as expeditiously as reasonably practicable:

 (a)                With respect to a Demand Registration or a Piggyback Registration, prepare and file with the Commission a Registration Statement with respect to such Registrable Securities (which, for the avoidance of doubt, may be a Shelf Registration) and use its reasonable best efforts to cause such Registration Statement to become effective, or prepare and file with the Commission a prospectus supplement with respect to such Registrable Securities pursuant to an effective Registration Statement;
 (b)               Prepare and file with the Commission such amendments and supplements to the applicable Registration Statement and the prospectus or prospectus supplement used in connection with such Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement;
 (c)                Furnish to the holders of Registrable Securities such number of copies of the applicable Registration Statement and each such amendment and supplement thereto (including in each case all exhibits) and of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them;
 (d)               Use its reasonable best efforts to register and qualify the securities covered by such Registration Statement under such other securities, “blue sky” or other laws of such jurisdictions as shall be reasonably requested by the holders of Registrable Securities, to keep such registration or qualification in effect for so long as such Registration Statement remains in effect, and to take any other action that may be reasonably necessary to enable such seller to consummate the disposition in such jurisdictions of the securities owned by such holder of Registrable Securities; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;  
 (e)                Enter into customary agreements (including, if permitted hereunder, if the method of distribution is by means of an underwriting, an underwriting agreement in customary form with the managing underwriter(s) of such offering) and take such other actions (including participating in and making documents available for the due diligence review of underwriters if the method of distribution is by means of an underwriting) as are reasonably required in order to facilitate the disposition of such Registrable Securities.  Each holder of Registrable Securities participating in such underwriting shall also enter into and perform its obligations under such underwriting agreement;
 (f)                With respect to a Demand Registration, at the reasonable request of the Investor who delivered the Registration Request, cause its senior executives to participate, at the Company’s expense, in customary investor presentations and “road shows” (to be scheduled in a 

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collaborative manner so as not to unreasonably interfere with the conduct of the business of the Company);

 (g)               Notify each holder of Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the applicable prospectus, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing (any such defect, a “Material Defect”), promptly upon the executive officers of the Company obtaining actual knowledge of such Material Defect;  
 (h)               Use its commercially reasonable efforts to furnish to the managing underwriter, if any, (i) an opinion of outside legal counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten Public Offering, addressed to the underwriters, and (ii) a “comfort letter” from the independent registered public accountants of the Company addressed to underwriters, if any, in form and substance as is customarily given by independent registered public accountants to underwriters in an underwritten Public Offering;
 (i)                 Give written notice to the holders of Registrable Securities, promptly upon the executive officers of the Company obtaining actual knowledge:
 (i)                 that any Registration Statement relating to such registrations or any amendment thereto has been filed with the Commission and that such Registration Statement or any post-effective amendment thereto has become effective;
 (ii)       of any request by the Commission for amendments or supplements to any Registration Statement filed in connection therewith or the prospectus included therein or for additional information;

(iii)      of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement filed in connection therewith or the initiation of any proceedings for that purpose;

 

(iv)             of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Common Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and
 (v)               of the happening of any event that requires the Company to make changes in any effective Registration Statement filed in connection therewith or the prospectus related to the Registration Statement in order to make the statements therein not misleading (which notice shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made.)
 (j)                 Use commercially reasonable efforts to prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of any Registration Statement referred to in Section 4.5(i)(iii) at the earliest practicable time;
 

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 (k)               Upon the executive officers of the Company obtaining actual knowledge of the occurrence of any event contemplated by Section 4.5(i)(v), promptly prepare a post-effective amendment to such Registration Statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to the holders of Registrable Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  If the Company notifies the holders of Registrable Securities in accordance with Section 4.5(i)(v) to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the holders of Registrable Securities shall suspend the use of such prospectus and use their commercially reasonable efforts to return to the Company all hard copies of such prospectus (at the Company’s expense) other than permanent file copies then in such holder’s possession, and the period of effectiveness of such Registration Statement provided for above shall be extended by the number of days from and including the date of the giving of such notice to the date holders of Registrable Securities shall have received such amended or supplemented prospectus pursuant to this Section 4.5(k); and
 (l)                 Use commercially reasonable efforts to procure the cooperation of the Company’s transfer agent in settling any offering or sale of Registrable Securities, including with respect to the transfer of physical stock certificates into book-entry form in accordance with any procedures reasonably requested by the holders of Registrable Securities or the underwriters.

Section 4.6            Registration Expenses. Except as specifically provided herein, all Registration Expenses incurred in connection with any registration, qualification or compliance hereunder shall be borne by the holders of the Acquired Shares proposed to be registered, pro rata on the basis of the aggregate offering or sale price of the Acquired Shares proposed to be registered. 

Section 4.7            Participation in Underwritten Registrations. No holder of Registrable Securities may participate in any registration hereunder that is underwritten (whether in connection with a Piggyback Registration, Shelf Registration or Demand Registration) unless such holder (i) agrees to sell its Registrable Securities on the basis provided in any underwriting arrangements reasonably approved by the Company, (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and (iii) cooperates with the Company’s reasonable requests in connection with such registration or qualification (it being understood that the Company’s failure to perform its obligations hereunder, which failure is caused by such holder’s failure to so cooperate, will not constitute a breach by the Company of this Agreement). 

Section 4.8            Suspension of Sales. Upon receipt of written notice from the Company that a Registration Statement, prospectus or prospectus supplement contains or may contain an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, each holder of Registrable Securities shall forthwith discontinue disposition of Registrable Securities until the holder of Registrable Securities has received copies of a supplemented or amended prospectus or prospectus supplement, or until such holder is advised in writing by the Company that the use of the prospectus and, if applicable, prospectus supplement may be resumed, and, if so directed by the 

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Company, such holder shall deliver to the Company (at the Company’s expense) all hard copies, other than permanent file copies then in such holder’s possession, of the prospectus and, if applicable, prospectus supplement covering such Registrable Securities current at the time of receipt of such notice.  The total number of days that any such suspension pursuant to this Section 4.8 may be in effect in any 12-month period shall not exceed ninety (90).

Section 4.9            Rule 144; Legended Securities. Subject to Section 4.4, the Company will use its reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder, with a view to enabling such holder of Registrable Securities to sell shares of Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act. Upon the request of any holder of Registrable Securities, the Company will deliver to such holder a written statement as to whether it has complied with such information requirements.

Section 4.10        Holdback. In consideration for the Company agreeing to its obligations under this Agreement, each holder of Registrable Securities agrees that if requested by the underwriter(s) managing any underwritten offering by the Company of Common Shares or any securities convertible into or exchangeable or exercisable for Common Shares, such holder shall (whether or not such holder is participating in such offering) agree not to (other than pursuant to such underwritten offering) Transfer any Common Shares, any other equity securities of the Company or any securities convertible into or exchangeable or exercisable for any equity securities of the Company without the prior written consent of the Company or such underwriters during the period specified by the managing underwriter(s) which period shall not exceed ten (10) days prior or ninety (90) days following any registered offering of such securities by the Company.

Section 4.11        Delay of Registration; Furnishing Information.

(a)                No holder of Registrable Securities shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration as the result of any controversy that might arise with respect to the interpretation or implementation of Section 4.1.
 (b)               No holder of Registrable Securities shall use any free writing prospectus (as defined in Rule 405 under the Securities Act) in connection with the sale of Registrable Securities without the prior written consent of the Company.
 Article V

PREEMPTIVE RIGHTS

Section 5.1            Preemptive Rights.

(a)                From the Closing Date and until the first date upon which no Investor Designee is entitled hereunder to serve on the Board, in the event the Company proposes to issue Common Shares or any securities exercisable, convertible or exchangeable for shares of its capital stock (collectively, the “Preemptive Securities”), other than (w) pursuant to any employee stock option plan of the Company, (x) pursuant to any merger, share exchange or acquisition, (y) pro rata 

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distributions to all holders of Common Shares (including without limitation stock dividends and stock splits) and (z) the issuance of employee stock options and exercise thereof, the Company shall:  

 

(i)                 deliver to the Investors written notice setting forth in reasonable detail (A) the terms and provisions of the Preemptive Securities proposed to be issued (the “Proposed Securities”), (B) the price and other terms of the proposed sale of such securities, (C) the amount of such securities proposed to be issued, (D) the proposed closing date and (E) such other information as the Investors may reasonably request in order to evaluate the proposed issuance; and

 

(ii)               offer to issue to each Investor a portion of the Proposed Securities equivalent to a percentage determined by dividing (x) the number of Acquired Shares Beneficially Owned by such Investor prior to such issuance by (y) the number of Common Shares issued and outstanding at such time.

(b)               The Investors must give notice to the Company of their election to exercise the purchase rights hereunder within ten (10) Business Days after receipt of such notice from the Company.  

(c)                Upon the expiration of the offering period described in Section 5.1(b), or if any Investor shall default in paying for or purchasing the Proposed Securities on the terms offered by the Company, the Company shall thereafter be free to sell such Proposed Securities that such Investor has not elected to purchase during the one hundred eighty (180) days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to the Investors.  Any Proposed Securities offered or sold by the Company after such 180-day period must be reoffered to the Investors pursuant to this Section 5.1, subject to the terms hereof.

(d)               The election by the Investors not to exercise preemptive rights under this Section 5.1 in any one instance shall not affect their rights (other than in respect of a reduction in their percentage holdings) as to any subsequent proposed issuance.  Any sale of such securities by the Company without first giving the Investors the rights described in this Section 5.1 shall be void and of no force and effect, and the Company shall not register such sale or issuance on the books and records of the Company. 

 

Article VI

DEFINITIONS

Section 6.1            Defined Terms. Capitalized terms when used in this Agreement have the following meanings:

“Acquired Shares” shall have the meaning set forth in the recitals and shall also be deemed to refer to any securities issued in respect of Common Shares received by the Investors pursuant to the Purchase Agreement, or in substitution therefor, in connection with any stock split, dividend or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization.

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“Affiliate” means, with respect to any Person, any Person who directly or indirectly Controls, is Controlled by, or is under common Control with the specified Person.   

“Agreement” has the meaning set forth in the preamble.

“Applicable Law” means all applicable provisions of (i) constitutions, statutes, laws, rules, regulations, ordinances, codes or orders of any Governmental Entity and (ii) any orders, decisions, injunctions, judgments, awards, decrees of or agreements with any Governmental Entity.

“Beneficially Own” with respect to any securities shall mean having “beneficial ownership” of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act without giving effect to the 60-day limitation on determining beneficial ownership contained in Rule 13d-3(d)), including pursuant to any agreement, arrangement or understanding, whether or not in writing.

“Board” has the meaning set forth in Section 1.1.

“Business” has the meaning set forth in Section 7.4.

“Business Day” means any day other than a day on which banks are required or authorized to be closed in the City of New York or the country of Bermuda.

“Business Opportunities” has the meaning set forth in Section 7.4.

“Bye-laws” has the meaning set forth in Section 2.1(b).

“Closing” means the closing of the purchase and sale of the Acquired Shares pursuant to the Purchase Agreement.

“Closing Date” means the date on which the Acquired Shares are purchased by the Investors.

“Commission” means the Securities and Exchange Commission or any other federal agency administering the Securities Act or any successor act.

“Common Shares” has the meaning set forth in the recitals.

“Company” has the meaning set forth in the preamble.

“Confidentiality Agreement” means that certain confidentiality agreement, dated as of November 17, 2010, between EBF and the Company.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Controlled Affiliate” means any Affiliate of the specified Person that is, directly or indirectly, Controlled by the specified Person.  

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“Demand Registration” has the meaning set forth in Section  4.3(a).

“EBF” has the meaning specified in the preamble.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Extraordinary Transaction” has the meaning set forth in Section 2.2(d).

“Finance Committee” has the meaning set forth in Section 1.1. 

“First MP” has the meaning set forth in the preamble.

“First Threshold” has the meaning set forth in Section 1.2(a).

“Governmental Entity” means any foreign, federal or state government, or regulatory or enforcement authority of any such government, or any court, administrative agency or commission or other authority or instrumentality of any such government or any SRO.

“Group” has the meaning assigned to such term in Section 13(d)(3) of the Exchange Act.

“Investment Fund” means any investment fund or separate investment account that is managed by the Investors or any of their respective Affiliates. 

“Investor” and “Investors” have the meanings set forth in the preamble.

“Investor Designees” means individuals designated in writing to the Company by the Investors for election or appointment to the Board.   

“Investor Director” means an Investor Designee who has been elected or appointed to the Board.

“Investor Percentage Interest” means the percentage calculated by dividing (x) the number of Common Shares that are as of the date of such calculation Beneficially Owned by the Investors, in the aggregate, by (y) the number of Acquired Shares purchased pursuant to the Purchase Agreement.  

“Mandatory Public Filings” has the meaning set forth in Section 2.2(o).

“Material Defect” has the meaning set forth in Section 4.5(g).

“Nonpublic Communication” has the meaning set forth in Section 2.2(n).

“Permitted Transferee”  means a Controlled Affiliate of an Investor that remains a Controlled Affiliate of Investor and agrees to be bound by the provisions of this Agreement as if it were an Investor hereunder by the execution of a Joinder, in substantially the form attached hereto as Annex A.

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“Person” means an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization or a government or department or agency thereof.

“PFP” has the meaning set forth in Section 1.2(g).

“Piggyback Registration” has the meaning set forth in Section 4.1(a).

“Preemptive Securities” has the meaning set forth in Section 5.1(a).

“Proposed Securities” has the meaning set forth in Section 5.1(a)(i).

“Public Offering” means a public offering of equity securities of the Company pursuant to an effective Registration Statement under the Securities Act (other than a Special Registration).

“Purchase Agreement” has the meaning set forth in the recitals.

“Register,” “registered” and “registration” shall refer to a registration effected by preparing and filing a Registration Statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of effectiveness of such Registration Statement or (ii) filing a prospectus and/or prospectus supplement in respect of an appropriate effective Registration Statement on Form S-3.

“Registrable Securities” means the Acquired Shares held by the Investors provided that the Acquired Shares shall cease to be Registrable Securities when (i) they are sold pursuant to an effective Registration Statement under the Securities Act, (ii) they are sold pursuant to Rule 144 under the Securities Act (or any similar rule then in force), or (iii) they have ceased to be outstanding.  

“Registration Request” has the meaning set forth in Section 4.3(a).

“Registration Expenses” means all (i) reasonable expenses incurred by the Company in effecting any registration pursuant to this Agreement, including, all registration and filing fees, Financial Industry Regulatory Authority, Inc. fees, printing expenses, fees and disbursements of counsel for the Company, “blue sky” fees and expenses and expenses of the Company’s independent accountants in connection with any regular or special reviews or audits incident to or required by any such registration and (iii) Selling Expenses.

“Registration Statement” means the prospectus and other documents filed with the Commission to effect a registration under the Securities Act.

“Rights Agreement” means that certain Rights Agreement dated as of May 29, 2009 between the Company and Mellon Investor Services LLC.

“Second MP” has the meaning set forth in the preamble.

“Second Threshold” has the meaning set forth in Section 1.2(a).

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“Securities Act” has the meaning set forth in Section 2.1(e).

“Seller” has the meaning set forth in the recitals.

“Selling Expenses” means all underwriting discounts, selling commissions and transfer taxes applicable to the sale of Registrable Securities hereunder, fees and disbursements of counsel for any holders of any Registration Expenses required by Applicable Law to be paid by a selling shareholder.

“Shelf Registration” has the meaning set forth in Section 4.2(a).

“Shelf Registration Statement” means a Registration Statement on Form S-3 (or any successor or similar provision) or any similar short-form or other appropriate Registration Statement that may be available at such time, in each case for an offering to be made on a continuous or delayed basis pursuant to Rule 415 (or any successor or similar provision) under the Securities Act covering Registrable Securities.  To the extent  that the Company is a “well-known seasoned issuer” (as such term is defined in Rule 405 (or any successor or similar rule) of the Securities Act), a “Shelf Registration Statement” shall be deemed to refer to an “automatic shelf Registration Statement,” as such term is defined in Rule 405 (or any successor or similar rule) of the Securities Act.

“Special Registration” means the registration of (i) equity securities and/or options or other rights in respect thereof solely registered on Form S-4 or Form S-8 (or any successor or similar forms) or (ii) shares of equity securities and/or options or other rights in respect thereof to be offered to directors, members of management, employees, consultants or sales agents, distributors or similar representatives of the Company or its direct or indirect subsidiaries or in connection with dividend reinvestment plans.

“Specified Persons” has the meaning set forth in Section 7.4.

“SRO” means (i) any “self regulatory organization” as defined in Section 3(a)(26) of the Exchange Act, or (ii) any other United States or foreign securities exchange, futures exchange, commodities exchange or contract market and (iii) any other securities exchange.

“Standstill Period” has the meaning set forth in Section 2.2(m).

“State Act” has the meaning set forth in Section 2.1(e).

“Transfer” means (i) any direct or indirect sale, assignment, disposition or other transfer, either voluntary or involuntary, of any capital stock or interest in any capital stock or (ii) in respect of any capital stock or interest in any capital stock, to enter into any swap or any other agreement, transaction or series of transactions that hedges or transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of such capital stock or interest in capital stock, whether any such transaction, swap or series of transactions is to be settled by delivery of securities, in cash or otherwise.

Section 6.2            Terms Generally. The words “hereby,” “herein,” “hereof,” “hereunder” and words of similar import refer to this Agreement as a whole and not merely to the specific 

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section, paragraph or clause in which such word appears.  All references herein to Articles and Sections shall be deemed references to Articles and Sections of this Agreement unless the context shall otherwise require.  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  References to “$” or “dollars” mean United States dollars.  The definitions given for terms in this Article VI and elsewhere in this Agreement shall apply equally to both the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  References herein to any agreement (including the Purchase Agreement) shall be deemed references to such agreement as it may be amended, restated or otherwise revised from time to time.

 Article VII

MISCELLANEOUS

Section 7.1            Term. This Agreement will be effective as of the date hereof and, except as otherwise set forth herein, will continue in effect thereafter until the earlier of (i) termination of this Agreement by the consent of First MP and Second MP and the Company or their respective successors in interest or (ii) termination of the Purchase Agreement prior to the Closing.

Section 7.2            No Inconsistent Agreements. The Company will not hereafter enter into any agreement with respect to its securities that violates the rights granted to the holders of Registrable Securities in this Agreement.

Section 7.3            Confidentiality. The Investors and EBF agree (i) to keep confidential all non-public information regarding the Company and its Affiliates received through any Investor Director, and not to disclose or reveal any such information to any Person other than its directors, officers, managers, employees, agents, attorneys, consultants, shareholders, members and owners who need to know such information, and (ii) not to use such non-public information for any purpose other than evaluating or monitoring the investment by the Investors in the Company, and (iii) not to use such non-public information in a manner that is competitive against or otherwise harmful to the Company; provided that nothing herein shall prevent the Investors from disclosing any such information that (A) is or hereafter becomes part of the public domain without any violation of this Agreement on the part of an Investor; (B) was within an Investor’s possession prior to its being furnished to the Investor by the Investor Director; (C) was or is hereafter received by an Investor or an Investor Director from a third party not known by Investor to be under any obligation of confidentiality to the Company, or (D) is required to be disclosed by Applicable Law (provided that prior to such disclosure, the Investor shall promptly notify the Company of any such disclosure to the extent legally permitted).

Section 7.4            Investment Opportunities; Conflicts of Interest. The Company expressly acknowledges and agrees that (a) the Investors and their respective Affiliates (but excluding the Company and its subsidiaries from the definition of Affiliates for purposes of this Section 7.4) and their respective managers, directors, officers, shareholders, partners, members, employees, representatives, and agents (including the Investor Directors) (collectively, the “Specified Persons”) are permitted (i) to have and develop, and may presently or in the future have and develop, investments, transactions, business ventures, contractual, strategic or other business 

22

 

relationships, prospective economic advantages or other opportunities (the “Business Opportunities”) in the lines of business conducted by the Company or its subsidiaries (the “Business”) or in businesses that are and may be competitive or complementary with the Business, for their own account or for the account of any Person other than the Company or any of its subsidiaries, and (ii) to direct any such Business Opportunities to any other Person, (b) none of the Specified Persons will be prohibited by virtue of their investments in the Company or his or her service as a Investor Director or otherwise from pursuing and engaging in any such activities, (c) none of the Specified Persons will be obligated to inform or present the Company or any of its subsidiaries or the Board or the board of directors of any of the Company’s subsidiaries of or with any such Business Opportunity, (d) neither the Company or any of its subsidiaries will have or acquire or be entitled to any interest or expectancy or participation (such right to any interest, expectancy or participation, if any, being hereby renounced and waived) in any Business Opportunity as a result of the involvement therein of any of the Specified Persons, and (e) the involvement of any of the Specified Persons in any Business Opportunity will not constitute a conflict of interest, breach of fiduciary duty, or breach of this Agreement by such Persons with respect to the Company or any of its subsidiaries.  

Section 7.5            Investor Actions. Any action taken by the Investors pursuant to this Agreement shall be by the act of the holders of a majority of the Acquired Shares held by all Investors.

Section 7.6            Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may be amended or waived only upon the prior written consent of the Company and the Investors. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Applicable Law.

Section 7.7            Successors and Assigns. Except for any assignment by any Investor to any Permitted Transferee, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto, in whole or in part (whether by operation of law or otherwise), without the prior written consent of the Company and the Investors. This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective permitted successors and assigns. Any attempted assignment in violation of this Section 7.7 shall be void. 

Section 7.8            Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any Applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or the effectiveness or validity of any provision in any other jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

Section 7.9            Counterparts. This Agreement may be executed in two or more counterparts (including by facsimile or electronic scanned image), all of which shall be 

23

 

considered originals and one and the same agreement, and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that each party need not sign the same counterpart.

Section 7.10        Entire Agreement. This Agreement (including the documents and the instruments referred to in this Agreement) constitutes the entire agreement and supersedes all prior term sheets, communications, correspondence, discussions, agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement, including the Confidentiality Agreement.

Section 7.11        Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to contracts made and wholly performed within such state, without regard to any applicable conflicts of law principles. The parties hereto agree that any suit, action or proceeding brought by any party to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought exclusively in any federal or state court located in the State of New York. Each of the parties hereto submits to the exclusive jurisdiction of any such court in any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the transactions contemplated hereby and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such action or proceeding. Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

Section 7.12        WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 7.13        Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to seek injunction or injunctions or other equitable relief to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in any court set forth in Section 7.11, in addition to any other remedy to which they are entitled at law or in equity.

Section 7.14        No Third Party Beneficiaries. Nothing in this Agreement shall confer any rights upon any Person other than the parties hereto and each such party’s respective heirs, successors and permitted assigns, all of whom shall be third party beneficiaries of this Agreement; provided that any Permitted Transferee shall be an intended third party beneficiary hereof.

Section 7.15        Notices. All notices and other communications in connection with this Agreement shall be in writing and shall be deemed given if delivered personally, sent via facsimile (with confirmation), mailed by registered or certified mail (return receipt requested) or 

24

 

delivered by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

If to the Company, to:

 

Primus Guaranty, Ltd. 

Clarendon House

2 Church Street

Hamilton HM 11 Bermuda

Attention:  Secretary

with a copy to:

 

Primus Asset Management, Inc.  

360 Madison Avenue

New York, NY 10017

Attention:  General Counsel 

Facsimile:  (212) 697-3731 

 

with a copy (which shall not constitute notice) to:

 

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, NY  10019

Attention:  David E. Shapiro

Facsimile:  (212) 403-2000

 

If to any Investor or EBF, to it:

 

c/o EBF & Associates, L.P. 

601 Carlson Parkway

Suite 200

Minnetonka, MN 55305

Attention:  Vince Vertin

Facsimile:  (952) 476-7201

 

with a copy (which shall not constitute notice) to:

 

EBF & Associates, L.P.

601 Carlson Parkway, Suite 200

Minnetonka, MN  55305

Attention: Mike Sullivan

Facsimile: (952) 476-7201

 

The remainder of this page intentionally left blank.

 

25

 

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement by their authorized representatives as of the date first above written.

 

PRIMUS GUARANTY, LTD.

 

 

 

By: /s/ Richard Claiden                                             

Name:  Richard Claiden 

Title:    Chief Executive Officer

 

 

MERCED PARTNERS LIMITED PARTNERSHIP

By: /s/ Thomas G. Rock                                                 

     Its Authorized Representative

 

MERCED PARTNERS III (CAYMAN), L.P.

By:  /s/ Thomas G. Rock                                                

     Its Authorized Representative

 

EBF & ASSOCIATES, L.P.

By:  /s/ Thomas G. Rock                                                

     Its Authorized Representative

 

 

 

 

[Signature Page to Shareholders Agreement]

 

 

 

Annex A – Form of Joinder

 

By execution of this Joinder, the undersigned agrees to become a party to that certain Shareholders Agreement, dated as of December 30, 2010 (the “Agreement”), among Primus Guaranty, Ltd., the Investors and EBF, as defined therein.  By execution of this Joinder, effective as of the date below, the undersigned shall have all the rights, and shall observe all the obligations, of an Investor.

 

Investor:          ______________________    (print)

 

Address for notices:                                                    With copies to:

                                                                                    

                                                                                                                                               

                                                                                                                                               

                                                                                                                                               

                                                                                                                                               

                                                                                                                                                                                                                                                                                                                                    

                                                                                                                                                                                                                                                                                                                                                

                                                                                                                                                                                                                                                                                                                                                

 

 

 

By:      _______________________________

Name:  

Title:

Date:   

 

 

Accepted and Agreed:

 

PRIMUS GUARANTY, LTD.

 

 

By:      _______________________________

Name:

Title:

 

 

[Joinder to Shareholders Agreement]

 

 

Annex B – Investor Ownership

 

	
Investor

	
Number of Shares

	
Merced Partners Limited Partnership

	
3,678,071

	
Merced Partners III (Cayman), L.P.

	
7,587,929

 

 

 

Schedule 3.3(h)

 

Registration Rights Agreement, dated as of October 5, 2004, among Primus Guaranty, Ltd. and the Holders (as defined therein) as amended by First Amendment to Registration Rights Agreement, dated as of January 2006, among Primus Guaranty, Ltd. and the Holders (as defined therein).Unassociated Document

 

Exhibit 4.1

Execution Version

 

TRUST AGREEMENT

 

TRUST AGREEMENT, between MS Structured Asset Corp. (the “Depositor”) and The Bank of New York Mellon (the “Trustee”), made as of the date set forth in Schedule I attached hereto, which Schedule together with Schedules II and III attached hereto, are made a part hereof and are hereinafter referred to collectively as the “Terms Schedule”.  The terms of the Standard Terms for Trust Agreements, dated July 15, 2010 (the “Standard Terms”) are, except to the extent otherwise expressly stated herein, hereby incorporated by reference herein in their entirety with the same force and effect as though set forth herein.  Capitalized terms used herein and not defined shall have the meanings defined in the Standard Terms. References to “herein”, “hereunder”, “this Trust Agreement” and the like shall include the Terms Schedule attached hereto and the Standard Terms so incorporated by reference.

 

WHEREAS, the Depositor and the Trustee desire to establish the Trust identified in Schedule I attached hereto (the “Trust”) for the primary purposes of (i) holding the Underlying Securities, (ii) entering into a swap transaction in the form of an ISDA Master Agreement and schedule with the Swap Counterparty (the “Swap Agreement”) attached as Schedule III and (iii) issuing the Units;

 

WHEREAS, the Depositor desires that the respective beneficial interests in the Trust be divided into transferable fractional shares, such shares to be represented by the Units;

 

WHEREAS, the Depositor desires to appoint the Trustee as trustee of the Trust and the Trustee desires to accept such appointment;

 

WHEREAS, the Depositor shall transfer, convey and assign to the Trust without recourse, and the Trust shall acquire, all of the Depositor’s right, title and interest in and under the Underlying Securities and other property identified in Schedule II to the Trust Agreement;

 

WHEREAS, the Trust agrees to acquire the Trust Property specified herein in exchange for Units having an initial Unit Principal Balance and an initial Notional Amount, as applicable, identified in Schedule I attached hereto, subject to the terms and conditions specified in this Trust Agreement; and

 

WHEREAS, the Depositor and the Trust agree that the Trust should enter into the Swap Agreement with the Swap Counterparty identified in Schedule I attached hereto on the terms and conditions specified on Schedule III;

 

  

  

  

NOW THEREFORE, the Depositor hereby appoints the Trustee as trustee hereunder and hereby requests the Trustee to receive the Underlying Securities from the Depositor, to enter into the Swap Agreement and to issue in accordance with the instructions of the Depositor Units having the terms specified in Schedule I attached hereto, and the Trustee accepts such appointment and, for itself and its successors and assigns, hereby declares that it shall hold all the estate, right, title and interest in any property contributed to the trust account established hereunder (except property to be applied to the payment or reimbursement of or by the Trustee for any fees or expenses which under the terms hereof is to be so applied) in trust for the benefit of all present and future Holders of the fractional shares of beneficial interest issued hereunder, namely, the Unitholders, and subject to the terms and provisions hereof.

 

IN WITNESS WHEREOF, each of the undersigned has executed this Trust Agreement as of the date set forth in the Schedule I attached hereto.

 

 

	 	THE BANK OF NEW YORK MELLON
	 	 	
as Trustee on behalf of the Trust identified in Schedule I hereto, 

and not in its individual capacity

	 	 	
 

 

	 	By:	/s/ Maryann Joseph
	 	 	

Name:     Maryann Joseph

Title:       Vice President

	 	 	 
	 	 	 
	 	MS STRUCTURED ASSET CORP.
	 	 	
 

 

	 	By:	/s/ In-Young chase
	 	 	
Name:      In-Young Chase

Title:        Authorized Signatory

 

 

 

 

Attachments: Schedules I, II and III

 

  

  

  

Schedule I

(Terms of Trust and Units)

 

	
Trust:

	
Step Up Callable Trust Units Series 2010-05 (GS)

 

	
Date of Trust Agreement:

	
December 30, 2010

 

	
Trustee:

	
The Bank of New York Mellon

 

	
Units:

	
The Trust will issue one class of Units

 

Initial Unit Principal Balance

	
of the Units:

	
$5,074,000

 

	
Issue Price of Units:

	
100%

 

	
Number of Units:

	
5,074 (Unit Principal Balance of $1,000 each)

 

	
Minimum Denomination:

	
$1,000 and $1,000 increments in excess thereof.  Each $1,000 of Unit Principal Balance is a Unit.

 

	
Call Option / Call Rights:

	
The call option under the Swap Agreement.

 

	
 

	
Exercise of the Call Option under the Swap Agreement on the date on which the Call Option is settled (the “Call Option Settlement Date”) in accordance with the terms of the Swap Agreement will be a Trust Wind-Up Event.

 

	
Callable Series:

	
The Units may be called for redemption as a result of exercise of the Call Option by the Swap Counterparty on the Call Option Settlement Date.  The Call Option may be exercised only in whole and not in part.

 

	
  

	
Under the Swap Agreement, the Swap Counterparty must provide at least 18 days notice to the Trustee that it will exercise the Call Option.  The Trustee will provide notice to the Unitholders of the redemption of the Units as a result of the exercise of the Call Option no later than 16 days prior to the Call Option Settlement Date.

 

	
  

	
On the Call Option Settlement Date, the Trustee shall distribute the Underlying Securities to the Counterparty and distribute the proceeds of the exercise of the Call Option to the Unitholders; and upon such distribution such Units shall be canceled and the Trust will terminate.

 

	
Cut-off Date:

	
Closing Date

 

  

  

  

	
Closing Date:

	
December 30, 2010

 

	
Specified Currency:

	
United States dollars

 

	
Business Day:

	
A day on which the New York Stock Exchange, commercial banks and foreign exchange markets are generally open to settle payments in New York, New York.

 

	
Interest Rate:

	
3.625% per annum, from and including the original issue date to but excluding June 15, 2014; 4.500% per annum, from and including June 15, 2014 to but excluding June 15, 2017; and 7.500% per annum, from and including June 15, 2017 to but excluding the maturity date.

 

	
Interest Reset Period:

	
Not Applicable

 

	
Rating:

	
One or more rating agencies is expected to assign a rating to the Units; and any such rating will depend on the ratings of the Underlying Security Issuer and the Swap Counterparty.

 

	
Rating Agency:

	
Standard & Poor’s (S&P)

 

Scheduled Final 

	

Prepayment/Redemption:

	

June 15, 2020. The Units will have the same final maturity as the Underlying Securities.

 

	 	
The Underlying Securities are subject to redemption in whole, but not in part, in accordance with the terms of the Underlying Securities and as described in Schedule II.  Any redemption of the Underlying Securities will cause a redemption of the Units.

 

The Units are subject to early redemption at par upon exercise of the Call Option by the Swap Counterparty on or after December 15, 2011.

 

	
Swap Agreement:

	
The ISDA Master Agreement between the Trust and the Swap Counterparty, dated December 30, 2010, including the schedule and the confirmation thereto and attached as Schedule III.

 

	
Swap Counterparty:

	
Morgan Stanley & Co. International plc (“MSIP”), which is the Buyer in the Swap Agreement attached as Schedule, or any assignee permitted thereunder.

 

	
Swap Guaranty:

	
Not applicable

 

	
Swap Notional Amount:

	
$5,074,000

 

  

I-2

  

	
Swap Payment Dates:

	
The Swap Counterparty will make payments on the Business Day prior to each June 15 and December 15, beginning on the Business Day prior to June 15, 2017.

 

The Trust will make payments on each June 15 and December 15, beginning June 15, 2011 and ending on the earlier of June 15, 2017 and any Call Option Settlement Date.

 

	
Swap Payments:

	
The Trust will make to the swap counterparty semiannual payments equal to the notional amount times (i) 2.375% per annum on each payment date, up to but excluding June 15, 2014 and (ii) 1.5% per annum on each payment date from and including June 15, 2014 to but excluding June 15, 2017.

 

Commencing the Business Day before June 15, 2017, until the earlier of maturity and the Call Option Settlement Date, the swap counterparty will make to the Trust semiannual payments equal to 1.5% per annum times the notional amount.

 

	
Distribution Dates:

	
Each June 15 and December 15, or the next succeeding Business Day if such day is not a Business Day, commencing June 15, 2011, and any other date upon which funds are available (including without limitation funds available due to the exercise of the Call Option or any other Trust Wind-Up Event) for distribution in accordance with the terms hereof.

 

	
  

	
If any payment with respect to the Swap Agreement or the Underlying Securities is not received by the Trustee by 10 a.m. (New York City time) on a Distribution Date, the corresponding distribution on the Units will not occur until the next Business Day that the Trust is in receipt of proceeds of such payment prior to 10 a.m., with no adjustment to the amount distributed or the Record Date.

 

	
Distribution Date Priority:

	
On any Distribution Date as to which only payments of interest on the Underlying Securities have been received, the Trustee shall apply amounts available:

 

	
 

	

FIRST, to the payment of the net amount (if any) payable by the Trust under the Swap Agreement, and

 

	
  

	
SECOND, to the payment of any accrued and unpaid interest on the Units.

 

  

I-3

  

	
  

	
This Distribution Date Priority supersedes the definition of “Available Funds” in the Standard Terms.

 

	
Other Payment Priorities:

	
I.

	
On any Distribution Date occurring in connection with a Trust Wind-Up Event solely because of a Covenant Breach Acceleration Event, the Trustee shall apply the amounts available:

 

FIRST, to the payment of the claims of the Units equal to the Unit Principal Balance plus accrued and unpaid interest in full satisfaction of the claims of the Units, and

 

SECOND, to the payment of all amounts payable by the Trust under the Swap Agreement.

 

If a Covenant Breach Acceleration Event occurs and prior to final payment on the Units another Underlying Security event of default, such as a failure to pay the accelerated amounts due on the underlying securities, has occurred, then the termination payment to the Swap Counterparty will not be subordinated in the payment priorities and will be paid prior to any payments on the Units.

 

II.           On any Distribution Date occurring in connection with a Trust Wind-Up Event (other than as a result of the exercise of the Call Option or a Covenant Breach Acceleration Event), the Trustee shall apply the amounts available:

 

FIRST, to the payment of all amounts payable by the Trust under the Swap Agreement, and

 

SECOND, to the claims of the Units equal to the Unit Principal Balance plus accrued and unpaid interest in full satisfaction of the claims of the Units.

 

III.           On any Distribution Date occurring as a result of the exercise of the Call Option, the Trustee shall apply the amounts available:

 

FIRST, to the payment of all accrued and unpaid interest amounts on the Units, and

 

SECOND, to the payment of the Principal Balance of the Units.

 

These Other Payment Priorities supersede the definition of “Available Funds” in the Standard Terms.

 

  

I-4

  

	
Early Termination Date:

	
Upon receiving notice of any Event of Default by the Swap Counterparty or other circumstances giving rise to the right of the Trust to designate an Early Termination Date in respect of the swap transaction under the Swap Agreement, the Trustee is required to designate an Early Termination Date in respect of the Swap Agreement.

 

	
Record Date:

	
The Record Date for each Distribution Date will be the preceding Business Day.

 

	
Form:

	
Book-Entry

 

	
Depositary:

	
DTC

 

	
Trustee Fees and Expenses:

	
The Trustee will receive compensation for and reimbursement of trust expenses related to its services under the Trust Agreement from the depositor in accordance with the terms of a fee agreement between the depositor and the trustee.  The Trustee will receive an annual Trustee fee of $5,000.

 

	
Trustee’s Corporate Trust Office:

	
The Bank of New York Mellon

	
  

	
Corporate Trust Department

	
  

	
101 Barclay Street, 7W

	
  

	
New York, NY 10286

 

	
Listing:

	
The Depositor has applied to list the Units on the New York Stock Exchange.

 

	
ERISA Restrictions:

	
Not Applicable.

 

	
QIB Restriction:

	
Not Applicable.

 

	
Tender Offers:

	
The Trust will not participate in any tender offer for the Underlying Securities and the Trustee will not accept any instructions to the contrary from the Unitholders.

 

	
Depositor Optional Exchange:

	
Depositor Optional Exchange applies to this Series of Units.

 

	
  

	
For the avoidance of doubt and in accordance with Section 5.12(c) of the Standard Terms, any termination payment for termination of the portion of the Swap Agreement corresponding to the portion of Underlying Securities to be exchanged shall be the obligation of the Depositor as exchanging Unitholder.

 

  

I-5

  

	
Terms of Retained Interest:

	
Notwithstanding any other provision herein or in the Standard Terms to the contrary, the Depositor retains the right to receive any and all interest that accrues on the Underlying Securities prior to the Closing Date.  The Depositor will receive such accrued interest on the first Distribution Date (or redemption date if earlier) for the Units and such amount shall be paid from the interest payment made with respect to the Underlying Securities on the first Distribution Date.

 

	
  

	
The amount of the Retained Interest is $12,685.

 

	
  

	
If an Underlying Security Default occurs on or prior to the first Distribution Date and the Depositor does not receive such Retained Interest amount in connection with such Distribution Date, the Depositor will have a claim for such Retained Interest, and will share pro rata with holders of the Units to the extent of such claim in the proceeds from the recovery on the Underlying Securities.

 

	
Selling Agent:

	
Morgan Stanley & Co. Incorporated.

 

	
Trustee Lien:

	
Notwithstanding Sections 10.05(b) and 10.05(d) of the Standard Terms or any other section of the Trust Agreement, the Trustee shall not have a lien on, or any recourse to, the Trust Property.

 

	

Additional Terms:

	
 

 

	
  

	

Covenant Breach

Acceleration Event

	
Section 1.01 of the Standard terms is amended by the adding the definition of “Covenant Breach Acceleration Event” as follows:

 

	
  

	
 

	

““Covenant Breach Acceleration Event”:  An acceleration of the Underlying Securities based solely upon an Underlying Security event of default relating to a covenant breach.”

 

	
  

	
Permitted Investments:

	
The definition of “Permitted Investments” in the Standard Terms is amended by replacing in clause (ii), the reference to the S&P rating of “A-1” to “A-1+”.

 

Clause (v) of the definition of “Permitted Investments” in the Standard Terms is deleted in entirety and replaced with the following:

 

  

I-6

  

“(v)           Units of the Dreyfus Cash Management Fund Investor Shares or any other money market funds selected by the Depositor which has a rating of “AAAm” or “AAAm-G” if S&P is the Rating Agency and are rated in the highest applicable rating category by each other Rating Agency (or such lower rating if the Rating Agency Condition is satisfied).”

 

	
  

	
Rating Agency Condition:

	
The definition of “Rating Agency Condition” in the Standard Terms shall be deleted in its entirety and replaced with the following:

 

	
  

	
“With respect to any specified action or determination, (for so long as the Units are outstanding and rated by S&P) means providing notice to S&P of such action or determination or, in the case of an amendment to this Agreement, receipt of written confirmation by S&P, that such specified action or determination will not result in the reduction or withdrawal of their then-current ratings on the Units.  Such satisfaction of the Rating Agency Condition may relate either to a specified transaction or may be a confirmation with respect to any future transactions which comply with generally applicable conditions published by S&P.  If S&P makes a public announcement or informs the Depositor or the Trustee that its practice is to not give such confirmations, the requirement for satisfaction of the Rating Agency Condition will not apply.”

 

	
  

	
Trigger Amount:

	
For purposes of this Agreement, the definition of Trigger Amount in the Standard Terms shall not apply.

 

	
  

	
Underlying Security

	
  

	
Default:

	
The definition of “Underlying Security Default” in the Standard Terms is amended by replacing clause (i) thereof with the following:

 

“(i) the acceleration of the outstanding Underlying Securities under the terms of the Underlying Securities and/or the applicable Underlying Security Issuance Agreement;”

 

	
  

	
Integration:

	
Section 3.02 of the Standard Terms shall be amended by inserting a new subsection (h) after Section 3.02(g), as follows:

 

	
  

	
“(h) On the Closing Date, the Trustee shall create and retain a record that  identifies (i) the Underlying Securities and the Swap Agreement as an integrated transaction, (ii) the date the Underlying Securities were acquired and (iii) the date the Swap Agreement was entered into.”

 

  

I-7

  

	
  

Disposition

	
 

	
  

	
of Trust Property

	
Section 9.05(b) is amended by adding the phrase “(other than as a result of the exercise of the Call Option)” in the first sentence after the phrase “Trust Wind-Up Event”.

 

	
  

	
Section 9.05(b) is further amended by inserting the following phrase in the second sentence before the period:

 

	
  

	
“; and provided further, however, that if the Trust Wind-Up Event is due solely to a Covenant Breach Acceleration Event, the Selling Agent shall not undertake to sell the Underlying Securities until at least three Business Days following such notice.”

 

	
  

	
Notice of Proceedings;

	
  

	
Failure to Pay Units:

	
Section 10.01 of the Standard Terms is amended by adding a new subsection (e) as follows:

 

“The Trustee will provide notice to each Rating Agency and the Depositor if it receives written notice that a Proceeding against the Trust has commenced or if a scheduled payment on the Units has not be made when due and payable and such nonpayment continues for five days.”

 

	
  

	
Successor Trustee:

	
Section 10.08(a) of the Standard Terms is amended by inserting the following after the phrase “accepting such appointment under the Trust Agreement”:

 

	
  

	
“(including such successor trustee’s contact information)”

 

	
  

	
Amendment of Trust

	
  

	
Agreement:

	
Section 12.01(a) of the Standard Terms is amended by replacing the phrase “or (vii)” with the following:

 

	
  

	
“, (vii) to add procedures in the event that the Depositary is no longer willing or able to act as a depositary with respect to the Units or (viii)”

 

	
  

	
Notice Address:

	
Section 12.05 of the Standard Terms is amended by inserting a new paragraph as follows:

 

	
  

	
“Notices from the Trustee shall be sent to S&P in writing to: Standard & Poor’s Ratings Services, 55 Water Street, 41st Fl., New York, NY 10041-0003, Attn: RRS/Synthetics Surveillance Team, and by email to surv_syntheticsexpos@standardandpoors.com.”

 

  

I-8

  

	
Notice to Rating Agencies:

	
Section 12.07 of the Standard Terms is amended by adding a new subsection (d) as follows:

 

	
 

	

The Trustee shall provide to each Rating Agency such additional information as that Rating Agency may from time to time reasonably request that is readily available to the Trustee and that the Trustee determines may be provided without unreasonable expense or burden.

 

	
  

	
Significance Percentage:

	
Article III of the Standard Terms shall be amended to include a new Section 3.13 as follows:

 

	
  

	
 

	

“SECTION 3.13.  Significance Percentage. On or about the date that is 45 days prior to each Distribution Date, the Swap Counterparty will calculate its “significance percentage” as determined in accordance with Item 1115 of Regulation AB under the Securities Act. The Swap Counterparty will promptly notify the Trust (a “Reporting Threshold Notice”) if the significance percentage of the Swap Counterparty is, or is reasonably likely to become, equal to or greater than 10% and the Swap Counterparty would fall within the definition of Disqualified Swap Counterparty.  Following such Reporting Threshold Notice, the Depositor shall either seek to withdraw the Units from listing on the New York Stock Exchange and terminate its reporting obligations in relation to the Units under the Exchange Act, or the Depositor shall direct the Swap Counterparty to transfer its rights and obligations under the Swap Agreement to a Replacement Swap Counterparty (as defined in the Swap Agreement) (which may be an affiliate of the Swap Counterparty) that would not be a Disqualified Swap Counterparty, such transfer to be effected prior to the next Distribution Date.  Any Replacement Swap Counterparty must assume all such rights and obligations (including with respect to acting as calculation agent under the Swap Agreement) and must have an S&P rating no lower than the higher of the S&P rating of the Swap Counterparty or its guarantor.  In addition, any Replacement Swap Counterparty must be a person who regularly offers to enter into, assume, offset, assign, or otherwise terminate positions in swap agreements with customers in the ordinary course of a trade or business.”

  

I-9

  

 

	
Trust Wind-Up Events:

	
For purposes of this Agreement and the Trust Wind-Up provisions of Section 9.02 of the Standard Terms, Section 9.02(ii) is replaced in its entirety with the phrase:

 

“(ii)           the consummation of a redemption of all of the Underlying Securities held by the Trust or exercise of the Call Option under the Swap Agreement”.

 

For purposes of this Agreement and the Trust Wind-Up provisions of Section 9.02 of the Standard Terms, Section 9.02(iii) is amended by adding the phrase “other than pursuant to the appointment of a Replacement Swap Counterparty” after the phrase “Termination Event”.

 

For purposes of this Agreement and the Trust Wind-Up provisions of Section 9.02 of the Standard Terms, Sections 9.02(a)(iv), 9.02(a)(vi) and 9.02(a)(vii) of the Standard Terms shall not apply.

 

	
Fiscal Year:

	
The fiscal year of the Trust shall be the calendar year and end each December 31.

 

 

  

I-10

  

Schedule II

(Terms of Trust Property)

 

	
Underlying Securities:

	
The Goldman Sachs Group, Inc. 6.00% Senior Notes due June 2020

 

	
Underlying Security Issuer:

	
The Goldman Sachs Group, Inc.

 

	
Underlying Security Guarantor:

	
Not applicable

 

	
Principal Amount:

	
$5,074,000

 

	
Underlying Security Rate:

	
6.00% per annum

 

	
Credit Ratings:

	
A1 by Moody’s

 

	
  

	
A by S&P

 

	
  

	
A+ by Fitch

 

	
Listing:

	
Not applicable

 

 

	 
Underlying Security

 
Issuance Agreement:

	 
The Indenture dated as of July 16, 2008, between the Underlying Security Issuer and The Bank of New York Mellon as trustee.

	 	 
	 
Underlying Security

 
Disclosure Documents:

	  
The pricing supplement dated June May 26, 2010, the prospectus supplement describing the underlying securities dated April 6, 2009 and the prospectus dated April 6, 2009.

	 	 
	 
Form:

	Global
	 	 
	 
Currency of

 
Denomination:

	United States dollars
	 	 
	 
Underlying Security

 
Payment Date:

	Each June 15 and December 15
	 	 
	 
Original Issue Date:

	The underlying securities were originally issued in a public offering on or about June 3, 2010 under the Securities Act of 1933.  The underlying securities were registered under the Securities Act.
	 	 
	 
Maturity Date:

	June 15, 2020
	 	 
	 
Sinking Fund Terms:

	Not Applicable

 

 

 

I-11

  

	
Redemption Terms:

	
As described in the Underlying Security Disclosure Documents, the Underlying Securities may be redeemed in whole, but not in part, if at any time the Underlying Security Issuer becomes obligated to pay additional amounts on any notes on the next interest payment date as a result of a change in the laws or regulations of any U.S. taxing authority, or from a change in any official interpretation or application of those laws or regulations, that becomes effective or is announced on or after May 26, 2010 (a “tax event”).  Notice is required to be given at least 30 days, but not more than 60 days prior to the redemption date.

 

The redemption price for the Underlying Securities will be the principal amount of the Underlying Securities being redeemed, plus any accrued interest to the date fixed for redemption.

 

 

	
CUSIP No.:/ISIN No.

	
38141E A66

 

	
  

	
Underlying Security

	
Property Trustee:

	
The Bank of New York Mellon

 

	
Other Trust Property:

	
All of the Trust’s right, title and interest in and to the Swap Agreement dated December 30, 2010, by and between the Trustee (on behalf of the Trust) and the Swap Counterparty.  See Schedule III.

 

	  	
II-2

	
 

  

  

  

Schedule III

(ISDA Master Agreement, Schedule and Confirm)

 

 

 

  

  

  

ISDA©

International Swaps and Derivatives Association, Inc.

 

2002 MASTER AGREEMENT

 

 

dated as of December  30, 2010

 

Morgan Stanley & Co. International plc and Step Up Callable Trust Units Series 2010-05 (GS) have entered and/or anticipate entering into one or more transactions (each a “Transaction”) that are or will be governed by this 2002 Master Agreement, which includes the schedule (the “Schedule”), and the documents and other confirming evidence (each a “Confirmation”) exchanged between the parties or otherwise effective for the purpose of confirming or evidencing those Transactions.  This 2002 Master Agreement and the Schedule are together referred to as this “Master Agreement”.

Accordingly, the parties agree as follows:-

 

1.            Interpretation

 

(a)           Definitions.  The terms defined in Section 14 and elsewhere in this Master Agreement 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, 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.

 

 

Copyright ©  2002 by International Swaps and Derivatives Association, Inc.

  

  

(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 condition specified in this Agreement to be a condition precedent for the purpose of this Section 2(a)(iii).

 

(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 Settlement 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 of Payments.  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 which 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 and payment obligation will be determined in respect of all amounts payable on the same date in the same currency in respect of those Transactions, regardless of whether such amounts are payable in respect of the same Transaction.  The election may be made in the Schedule or any Confirmation by specifying that “Multiple Transaction Payment Netting” applies to the Transactions identified as being subject to the election (in which case clause (ii) above will not apply to such Transactions).  If Multiple Transaction Payment Netting is applicable to Transactions, it will apply to those Transactions with effect from the starting date specified in the Schedule or such Confirmation, or, if a starting date is not specified in the Schedule or such Confirmation, the starting date otherwise agreed by the parties in writing.  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 Indemnnifiable 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: -

 

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(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, after a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law.

 

(ii)           Liability.  If:—

 

(1)           X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect of which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4);

 

(2)           X does not so deduct or withhold; and

 

(3)           a liability resulting from such Tax is assessed directly against X,

 

then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).

 

3.           Representations

 

Each party makes the representations contained in Sections 3(a), 3(b), 3(c), 3(d), 3(e) and 3(f) and, if specified in the Schedule as applying, 3(g) 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).  If any “Additional Representation” is specified in the Schedule or any Confirmation as applying, the party or parties specified for such Additional Representation will make and, if applicable, be deemed to repeat such Additional Representation at the time or times specified for such Additional Representation.

 

(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;

 

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(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)).

 

(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, any of its Credit Support Providers or any of its applicable Specified Entities 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.

 

(g)           No Agency.  It is entering into this Agreement, including each Transaction, as principal and not as agent of any person or entity.

 

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 clause (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,

 

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in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable.

 

(b)           Maintain Authorisations.  It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future.

 

(c)           Comply With Laws.  It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party.

 

(d)           Tax Agreement.  It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure.

 

(e)           Payment of Stamp Tax.  Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated, organised, managed and controlled or considered to have its seat, or where an 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 (subject to Sections 5(c) and 6(e)(iv)) 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 9(h)(i)(2) or (4) required to be made by it if such failure is not remedied on or before the first Local Business Day in the case of any such payment or the first Local Delivery Day in the case of any such delivery after, in each case, notice of such failure is given to the party;

 

(ii)           Breach of Agreement; Repudiation of Agreement.

 

(1)           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 9(h)(i)(2) or (4) 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 within 30 days after notice of such failure is given to the party; or

 

(2)           the party disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, this Master Agreement, any Confirmation executed and delivered by that party or any Transaction evidenced by such a Confirmation (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf);

 

(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;

 

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(2)           the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document, or any security interest granted by such party or such Credit Support Provider to the other party pursuant to any such Credit Support Document, to be in full force and effect for the purpose of this Agreement (in each 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 (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf);

 

(iv)           Misrepresentation.  A representation (other than a representation under Section 3(e) or 3(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 (other than by failing to make a delivery) under a Specified Transaction or any credit support arrangement relating to a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, such default results in 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 due on the last payment or exchange date of, or any payment on early termination of, a Specified Transaction (or, if there is no applicable notice requirement or grace period, such default continues for at least one Local Business Day);

 

(3)           defaults in making any delivery due under (including any delivery due on the last delivery or exchange date of) a Specified Transaction or any credit support arrangement relating to a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, such default results in a liquidation of, an acceleration of obligations under, or an early termination of, all transactions outstanding under the documentation applicable to that Specified Transaction; or

 

(4)           disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, a Specified Transaction or any credit support arrangement relating to a Specified Transaction that is, in either case, confirmed or evidenced by a document or other confirming evidence executed and delivered by that party, Credit Support Provider or Specified Entity (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 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) where the aggregate principal amount of such agreements or instruments, either alone or together with the amount, if any, referred to in clause (2) below, is 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

 

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(2)           a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments under such agreements or instruments on the due date for payment (after giving effect to any applicable notice requirement or grace period) in an aggregate amount, either alone or together with the amount, if any, referred to in clause (1) above, of not less than the applicable Threshold Amount;

 

(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)(A) institutes or has instituted against it, by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organisation or the jurisdiction of its head or home office, 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 by it or such regulator, supervisor or similar official, or (B) 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 such proceeding or petition is instituted or presented by a person or entity not described in clause (A) above and either (I) 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 (II) is not dismissed, discharged, stayed or restrained in each case within 15 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 15 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) above (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, or reorganises, reincorporates or reconstitutes into or as, another entity and, at the time of such consolidation, amalgamation, merger, transfer, reorganisation, reincorporation or reconstitution: —

 

(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; 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 (subject to Section 5(c)) an Illegality if the event is specified in clause (i) below, a Force Majeure Event if the event is specified in clause (ii) below, a Tax Event if the event is specified in clause (iii) below, a Tax Event Upon Merger if the event is specified in clause (iv) below, and, if specified to be applicable, a Credit Event Upon Merger if the event is specified pursuant to clause (v) below or an Additional Termination Event if the event is specified pursuant to clause (vi) below:—

 

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(i)           Illegality.  After giving effect to any applicable provision, disruption fallback or remedy specified in, or pursuant to, the relevant Confirmation or elsewhere in this Agreement, due to an event or circumstance (other than any action taken by a party or, if applicable, any Credit Support Provider of such party) occurring after a Transaction is entered into, it becomes unlawful under any applicable law (including without limitation the laws of any country in which payment, delivery or compliance is required by either party or any Credit Support Provider, as the case may be), on any day, or it would be unlawful if the relevant payment, delivery or compliance were required on that day (in each case, other than as a result of a breach by the party of Section 4(b)):—

 

(1)           for the Office through which such party (which will be the Affected Party) makes and receives payments or deliveries with respect to such Transaction to perform any absolute or contingent obligation to make a payment or delivery in respect of such Transaction, 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)           for such party or any Credit Support Provider of such party (which will be the Affected Party) to perform any absolute or contingent obligation to make a payment or delivery which such party or Credit Support Provider has under any Credit Support Document relating to such Transaction, to receive a payment or delivery under such Credit Support Document or to comply with any other material provision of such Credit Support Document;

 

(ii)           Force Majeure Event.  After giving effect to any applicable provision, disruption fallback or remedy specified in, or pursuant to, the relevant Confirmation or elsewhere in this Agreement, by reason of force majeure or act of state occurring after a Transaction is entered into, on any day: —

 

(1)           the Office through which such party (which will be the Affected Party) makes and receives payments or deliveries with respect to such Transaction is prevented from performing any absolute or contingent obligation to make a payment or delivery in respect of such Transaction, from receiving a payment or delivery in respect of such Transaction or from complying with any other material provision of this Agreement relating to such Transaction (or would be so prevented if such payment, delivery or compliance were required on that day), or it becomes impossible or impracticable for such Office so to perform, receive or comply (or it would be impossible or impracticable for such Office so to perform, receive or comply if such payment, delivery or compliance were required on that day); or

 

(2)           such party or any Credit Support Provider of such party (which will be the Affected Party) is prevented from performing any absolute or contingent obligation to make a payment or delivery which such party or Credit Support Provider has under any Credit Support Document relating to such Transaction, from receiving a payment or delivery under such Credit Support Document or from complying with any other material provision of such Credit Support Document (or would be so prevented if such payment, delivery or compliance were required on that day), or it becomes impossible or impracticable for such party or Credit Support Provider so to perform, receive or comply (or it would be impossible or impracticable for such party or Credit Support Provider so to perform, receive or comply if such payment, delivery or compliance were required on that day),

 

so long as the force majeure or act of state is beyond the control of such Office, such party or such Credit Support Provider, as appropriate, and such Office, party or Credit Support Provider could not, after using all reasonable efforts (which will not require such party or Credit Support Provider to incur a loss, other than immaterial, incidental expenses), overcome such prevention, impossibility or impracticability;

 

(iii)           Tax Event.  Due to (1) any action taken by a taxing authority, or brought in a court of competent jurisdiction, after a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (2) 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 Settlement Date (A) 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 9(h)) or (B) 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 9(h)) 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));

 

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(iv)           Tax Event Upon Merger.  The party (the “Burdened Party”) on the next succeeding Scheduled Settlement 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 9(h)) or (2) receive a payment from which an amount has been deducted or withheld for or on account of any 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 (B3)), 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 (or any substantial part of the assets comprising the business conducted by it as of the date of this Master Agreement) to, or reorganising, reincorporating or reconstituting into or as, another entity (which will be the Affected Party) where such action does not constitute a Merger Without Assumption;

 

(v)           Credit Event Upon Merger.  If “Credit Event Upon Merger” is specified in the Schedule as applying to the party, a Designated Event (as defined below) occurs with respect to such party, any Credit Support Provider of such party or any applicable Specified Entity of such party (in each case, “X”) and such Designated Event does not constitute a Merger Without Assumption, and the creditworthiness of X or, if applicable, the successor, surviving or transferee entity of X, after taking into account any applicable Credit Support Document, is materially weaker immediately after the occurrence of such Designated Event than that of X immediately prior to the occurrence of such Designated Event (and, in any such event, such party or its successor, surviving or transferee entity, as appropriate, will be the Affected Party).  A “Designated Event” ‘with respect to X means that:—

 

(1)           X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets (or any substantial part of the assets comprising the business conducted by X as of the date of this Master Agreement) to, or reorganises, reincorporates or reconstitutes into or as, another entity;

 

(2)           any person, related group of persons or entity acquires directly or indirectly the beneficial ownership of (A) equity securities having the power to elect a majority of the board of directors (or its equivalent) of X or (B) any other ownership interest enabling it to exercise control of X; or

 

(3)           X effects any substantial change in its capital structure by means of the issuance, incurrence or guarantee of debt or the issuance of (A) preferred stock or other securities convertible into or exchangeable for debt or preferred stock or (B) in the case of entities other than corporations, any other form of ownership interest; or

 

(vi)           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 will be as specified for such Additional Termination Event in the Schedule or such Confirmation).

 

(c)           Hierarchy of Events.

 

(i)           An event or circumstance that constitutes or gives rise to an Illegality or a Force Majeure Event will not, for so long as that is the case, also constitute or give rise to an Event of Default under Section 5(a)(i), 5(a)(ii)(1) or 5(a)(iii)(1) insofar as such event or circumstance relates to the failure to make any payment or delivery or a failure to comply with any other material provision of this Agreement or a Credit Support Document, as the case may be.

 

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(ii)           Except in circumstances contemplated by clause (i) above, if an event or circumstance which would otherwise constitute or give rise to an Illegality or a Force Majeure Event also constitutes an Event of Default or any other Termination Event, it will be treated as an Event of Default or such other Termination Event, as the case may be, and will not constitute or give rise to an Illegality or a Force Majeure Event.

 

(iii)           If an event or circumstance which would otherwise constitute or give rise to a Force Majeure Event also constitutes an Illegality, it will be treated as an Illegality, except as described in clause (ii) above, and not a Force Majeure Event.

 

(d)           Deferral of Payments and Deliveries During Waiting Period.  If an Illegality or a Force Majeure Event has occurred and is continuing with respect to a Transaction, each payment or delivery which would otherwise be required to be made under that Transaction will be deferred to, and will not be due until: -

 

(i)           the first Local Business Day or, in the case of a delivery, the first Local Delivery Day (or the first day that would have been a Local Business Day or Local Delivery Day, as appropriate, but for the occurrence of the event or circumstance constituting or giving rise to that Illegality or Force Majeure Event) following the end of any applicable Waiting Period in respect of that Illegality or Force Majeure Event, as the case may be; or

 

(ii)           if earlier, the date on which the event or circumstance constituting or giving rise to that Illegality or Force Majeure Event ceases to exist or, if such date is not a Local Business Day or, in the case of a delivery, a Local Delivery Day, the first following day that is a Local Business Day or Local Delivery Day, as appropriate.

 

(e)           Inability of Head or Home Office to Perform Obligations of Branch.  If (i) an Illegality or a Force Majeure Event occurs under Section 5(b)(i)(1) or 5(b)(ii)(1) and the relevant Office is not the Affected Party’s head or home office, (ii) Section I10(a) applies, (iii) the other party seeks performance of the relevant obligation or compliance with the relevant provision by the Affected Party’s head or home office and (iv) the Affected Party’s head or home office fails so to perform or comply due to the occurrence of an event or circumstance which would, if that head or home office were the Office through which the Affected Party makes and receives payments and deliveries with respect to the relevant Transaction, constitute or give rise to an Illegality or a Force Majeure Event, and such failure would otherwise constitute an Event of Default under Section 5(a)(i) or 5(a)(iii)( 1) with respect to such party, then, for so long as the relevant event or circumstance continues to exist with respect to both the Office referred to in Section 5(b)(i)(1) or 5(b)(ii)(1), as the case may be, and the Affected Party’s head or home office, such failure will not constitute an Event of Default under Section 5(a)(i) or 5(a)(iii)(1).

 

6.           Early Termination; Close-Out Netting

 

(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)(I), (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 other than a Force Majeure 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 the other party such other information about that Termination Event as the other party may reasonably require.  If a Force Majeure Event occurs, each party will, promptly upon becoming aware of it, use all reasonable efforts to notify the other party, specifying the nature of that Force Majeure Event, and will also give the other party such other information about that Force Majeure Event as the other party may reasonably require.

 

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(ii)           Transfer to Avoid Termination Event.  If 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, other than 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 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 of such occurrence is given under Section 6(b)(i) to avoid that Termination Event.

 

(iv)           Right to Terminate.

 

(1)           If:.—

 

(A)           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

 

(B)           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,

 

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 are two Affected Parties, or the Non-affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, if the relevant Termination Event is then continuing, by not more than 20 days notice to the other party, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions.

 

(2)           If at any time an Illegality or a Force Majeure Event has occurred and is then continuing and any applicable Waiting Period has expired: -

 

(A)           Subject to clause (B) below, either party may, by not more than 20 days notice to the other party, designate (I) a day not earlier than the day on which such notice becomes effective as an Early Termination Date in respect of all Affected Transactions or (II) by specifying in that notice the Affected Transactions in respect of which it is designating the relevant day as an Early Termination Date, a day not earlier than two Local Business Days following the day on which such notice becomes effective as an Early Termination Date in respect of less than all Affected Transactions.  Upon receipt of a notice designating an Early Termination Date in respect of less than all Affected Transactions, the other party may, by notice to the designating party, if such notice is effective on or before the day so designated, designate that same day as an Early Termination Date in respect of any or all other Affected Transactions.

 

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(B)           An Affected Party (if the Illegality or Force Majeure Event relates to performance by such party or any Credit Support Provider of such party of an obligation to make any payment or delivery under, or to compliance with any other material provision of, the relevant Credit Support Document) will only have the right to designate an Early Termination Date under Section 6(b)(iv)(2)(A) as a result of an Illegality under Section 5(b)(i)(2) or a Force Majeure Event under Section 5(b)(ii)(2) following the prior designation by the other party of an Early Termination Date, pursuant to Section 6(b)(iv)(2)(A), in respect of less than all Affected Transactions.

 

(c)           Effect of Designation.

 

(i)           If notice designating an Early Termination Date is given under Section 6(a) or 6(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 9(h)(i) 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 will be determined pursuant to Sections 6(e) and 9(h)(ii).

 

(d)           Calculations; Payment Date.

 

(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 (I) showing, in reasonable detail, such calculations (including any quotations, market data or information from internal sources used in making such calculations), (2) specifying (except where there are two Affected Parties) any Early Termination Amount payable and (3) 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 or market data obtained in determining a Close-out Amount, the records of the party obtaining such quotation or market data will be conclusive evidence of the existence and accuracy of such quotation or market data.

 

(ii)           Payment Date.  An Early Termination Amount due in respect of any Early Termination Date will, together with any amount of interest payable pursuant to Section 9(h)(ii)(2), be payable (1) on the day on which 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 (2) on the day which is two Local Business Days after the day on which notice of the amount payable is effective (or, if there are two Affected Parties, after the day on which the statement provided pursuant to clause (i) above by the second party to provide such a statement is effective) in the case of an Early Termination Date which is designated as a result of a Termination Event.

 

(e)           Payments on Early Termination.  If an Early Termination Date occurs, the amount, if any, payable in respect of that Early Termination Date (the “Early Termination Amount”) will be determined pursuant to this Section 6(e) and will be subject to Section 6(f).

 

(i)           Events of Default.  If the Early Termination Date results from an Event of Default, the Early Termination Amount will be an amount equal to (1) the sum of (A) the Termination Currency Equivalent of the Close-out Amount or Close-out Amounts (whether positive or negative) determined by the Non-defaulting Party for each Terminated Transaction or group of Terminated Transactions, as the case may be, and (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (2) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party.  If the Early Termination 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 the Early Termination Amount to the Defaulting Party.

 

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(ii)           Termination Events.  If the Early Termination Date results from a Termination Event:—

 

(1)           One Affected Party.  Subject to clause (3) below, if there is one Affected Party, the Early Termination Amount will be determined in accordance with Section 6(e)(i), except that references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and to the Non-affected Party, respectively.

 

(2)           Two Affected Parties.  Subject to clause (3) below, if there are two Affected Parties, each party will determine an amount equal to the Termination Currency Equivalent of the sum of the Close-out Amount or Close-out Amounts (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions, as the case may be, and the Early Termination Amount will be an amount equal to (A) the sum of (I) one-half of the difference between the higher amount so determined (by party “X”) and the lower amount so determined (by party “Y”) and (II) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to Y.  If the Early Termination Amount is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of the Early Termination Amount to Y.

 

(3)           Mid-Market Events.  If that Termination Event is an Illegality or a Force Majeure Event, then the Early Termination Amount will be determined in accordance with clause (1) or (2) above, as appropriate, except that, for the purpose of determining a Close-out Amount or Close-out Amounts, the Determining Party will:-

 

(A)           if obtaining quotations from one or more third parties (or from any of the Determining Party’s Affiliates), ask each third party or Affiliate (I) not to take account of the current creditworthiness of the Determining Party or any existing Credit Support Document and (II) to provide mid-market quotations; and

 

(B)           in any other case, use mid-market values without regard to the creditworthiness of the Determining Party.

 

(iii)           Adjustment for Bankruptcy.  In circumstances where an Early Termination Date occurs because Automatic Early Termination applies in respect of a party, the Early Termination Amount will be subject to such adjustments as are appropriate and permitted by applicable 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)           Adjustment for Illegality or Force Majeure Event.  The failure by a party or any Credit Support Provider of such party to pay, when due, any Early Termination Amount will not constitute an Event of Default under Section 5(a)(i) or 5(a)(iii)(l) if such failure is due to the occurrence of an event or circumstance which would, if it occurred with respect to payment, delivery or compliance related to a Transaction, constitute or give rise to an Illegality or a Force Majeure Event.  Such amount will (1) accrue interest and otherwise be treated as an Unpaid Amount owing to the other party if subsequently an Early Termination Date results from an Event of Default, a Credit Event Upon Merger or an Additional Termination Event in respect of which all outstanding Transactions are Affected Transactions and (2) otherwise accrue interest in accordance with Section 9(h)(ii)(2).

 

(v)           Pre-Estimate.  The parties agree that 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 the termination of the Terminated Transactions.

 

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(f)           Set-Off. Any Early Termination Amount payable to one party (the “Payee”) by the other party (the “Payer”), in circumstances where there is a Defaulting Party or where there is one Affected Party in the case where either a Credit Event Upon Merger has occurred or any other Termination Event in respect of which all outstanding Transactions are Affected Transactions has occurred, will, at the option of the Non-defaulting Party or the Non-affected Party, as the case may be (“X”) (and without prior notice to the Defaulting Party or the Affected Party, as the case may be), be reduced by its set-off against any other amounts (“Other Amounts”) payable by the Payee to the Payer (whether or not arising under this Agreement, matured or contingent and irrespective of the currency, place of payment or place of booking of the obligation).  To the extent that any Other Amounts are so set off, those Other Amounts will be discharged promptly and in all respects.  X will give notice to the other party of any set-off effected under this Section 6(f).

 

For this purpose, either the Early Termination Amount or the Other Amounts (or the relevant portion of such amounts) may be converted by X into the currency in which the other is denominated at the rate of exchange at which such party would be able, in good faith and using commercially reasonable procedures, to purchase the relevant amount of such currency.

 

If an obligation is unascertained, X may in good faith estimate that obligation and set off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained.

 

Nothing in this Section 6(f) will be effective to create a charge or other security interest.  This Section 6(f) will be without prejudice and in addition to any right of set-off, offset, combination of accounts, lien, right of retention or withholding or similar right or requirement to which any party is at any time otherwise entitled or subject (whether by operation of law, contract or otherwise).

 

7.           Transfer

 

Subject to Section 6(b)(ii) and to the extent permitted by applicable law, 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 Early Termination Amount payable to it by a Defaulting Party, together with any amounts payable on or with respect to that interest and any other rights associated with that interest pursuant to Sections 8, 9(h) and 1.

 

Any purported transfer that is not in compliance with this Section 7 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 good faith and using commercially reasonable procedures 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.

 

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(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 clause (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 purpose of such judgment or order and the rate of exchange at which such party is able, acting in good faith and using commercially reasonable procedures 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.

 

(c)           Separate Indemnities.  To the extent permitted by applicable law, the indemnities in this Section 8 constitute separate and independent obligations from the other obligations in this Agreement, will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payment is owed and will not be affected by judgment being obtained or claim or proof being made for any other sums payable in respect of this Agreement.

 

(d)           Evidence of Loss.  For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss had an actual exchange or purchase been made.

 

9.           Miscellaneous

 

(a)           Entire Agreement.  This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter.  Each of the parties acknowledges that in entering into this Agreement it has not relied on any oral or written representation, warranty or other assurance (except as provided for or referred to in this Agreement) and waives all rights and remedies which might otherwise be available to it in respect thereof, except that nothing in this Agreement will limit or exclude any liability of a party for fraud.

 

(b)           Amendments.  An amendment, modification or waiver in respect of this Agreement will only be effective if 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 by an exchange of 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 and by electronic messaging system), 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 will be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes, by an exchange of electronic messages on an electronic messaging system or by an exchange of e-mails, 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, electronic message or e-mail constitutes a Confirmation.

 

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(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.

 

(h)           Interest and Compensation.

 

(i)           Prior to Early Termination.  Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction:—

 

(1)           Interest on Defaulted Payments.  If a party defaults in the performance of any payment obligation, it will, to the extent permitted by applicable law and subject to Section 6(c), pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as the overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment (and excluding any period in respect of which interest or compensation in respect of the overdue amount is due pursuant to clause (3)(B) or (C) below), at the Default Rate.

 

(2)           Compensation for Defaulted Deliveries.  If a party defaults in the performance of any obligation required to be settled by delivery, it will on demand (A) compensate the other party to the extent provided for in the relevant Confirmation or elsewhere in this Agreement and (B) unless otherwise provided in the relevant Confirmation or elsewhere in this Agreement, to the extent permitted by applicable law and subject to Section 6(c), pay to the other party interest (before as well as after judgment) on an amount equal to the fair market value of that which was required to be delivered in the same currency as that amount, for the period from (and including) the originally scheduled date for delivery to (but excluding) the date of actual delivery (and excluding any period in respect of which interest or compensation in respect of that amount is due pursuant to clause (4) below), at the Default Rate.  The fair market value of any obligation referred to above will be determined as of the originally scheduled date for delivery, in good faith and using commercially reasonable procedures, by the party that was entitled to take delivery.

 

(3)           Interest on Deferred Payments.  If:—

 

(A)           a party does not pay any amount that, but for Section 2(a)(iii), would have been payable, it will, to the extent permitted by applicable law and subject to Section 6(c) and clauses (B) and (C) below, pay interest (before as well as after judgment) on that amount to the other party on demand (after such amount becomes payable) in the same currency as that amount, for the period from (and including) the date the amount would, but for Section 2(a)(iii), have been payable to (but excluding) the date the amount actually becomes payable, at the Applicable Deferral Rate;

 

(B)           a payment is deferred pursuant to Section 5(d), the party which would otherwise have been required to make that payment will, to the extent permitted by applicable law, subject to Section 6(c) and for so long as no Event of Default or Potential Event of Default with respect to that party has occurred and is continuing, pay interest (before as well as after judgment) on the amount of the deferred payment to the other party on demand (after such amount becomes payable) in the same currency as the deferred payment, for the period from (and including) the date the amount would, but for Section 5(d), have been payable to (but excluding) the earlier of the date the payment is no longer deferred pursuant to Section 5(d) and the date during the deferral period upon which an Event of Default or Potential Event of Default with respect to that party occurs, at the Applicable Deferral Rate; or

 

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(C)           a party fails to make any payment due to the occurrence of an Illegality or a Force Majeure Event (after giving effect to any deferral period contemplated by clause (B) above), it will, to the extent permitted by applicable law, subject to Section 6(c) and for so long as the event or circumstance giving rise to that Illegality or Force Majeure Event continues and no Event of Default or Potential Event of Default with respect to that party has occurred and is continuing, pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as the overdue amount, for the period from (and including) the date the party fails to make the payment due to the occurrence of the relevant Illegality or Force Majeure Event (or, if later, the date the payment is no longer deferred pursuant to Section 5(d)) to (but excluding) the earlier of the date the event or circumstance giving rise to that Illegality or Force Majeure Event ceases to exist and the date during the period upon which an Event of Default or Potential Event of Default with respect to that party occurs (and excluding any period in respect of which interest or compensation in respect of the overdue amount is due pursuant to clause (B) above), at the Applicable Deferral Rate.

 

(4)           Compensation for Deferred Deliveries.  If:—

 

(A)           a party does not perform any obligation that, but for Section 2(a)(iii), would have been required to be settled by delivery;

 

(B)           a delivery is deferred pursuant to Section 5(d); or

 

(C)           a party fails to make a delivery due to the occurrence of an Illegality or a Force Majeure Event at a time when any applicable Waiting Period has expired,

 

the party required (or that would otherwise have been required) to make the delivery will, to the extent permitted by applicable law and subject to Section 6(c), compensate and pay interest to the other party on demand (after, in the case of clauses (A) and (B) above, such delivery is required) if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement.

 

(ii)           Early Termination.  Upon the occurrence or effective designation of an Early Termination Date in respect of a Transaction:-

 

(1)           Unpaid Amounts.  For the purpose of determining an Unpaid Amount in respect of the relevant Transaction, and to the extent permitted by applicable law, interest will accrue on the amount of any payment obligation or the amount equal to the fair market value of any obligation required to be settled by delivery included in such determination in the same currency as that amount, for the period from (and including) the date the relevant obligation was (or would have been but for Section 2(a)(iii) or 5(d)) required to have been performed to (but excluding) the relevant Early Termination Date, at the Applicable Close-out Rate.

 

(2)           Interest on Early Termination Amounts.  If an Early Termination Amount is due in respect of such Early Termination Date, that amount will, to the extent permitted by applicable law, be paid together with interest (before as well as after judgment) on that amount in the Termination Currency, for the period from (and including) such Early Termination Date to (but excluding) the date the amount is paid, at the Applicable Close-out Rate.

 

(iii)           Interest Calculation.  Any interest pursuant to this Section 9(h) will be calculated on the basis of daily compounding and the actual number of days elapsed.

 

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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 and agrees with the other party that, notwithstanding the place of booking or its jurisdiction of incorporation or organisation, its obligations are the same in terms of recourse against it as if it had entered into the Transaction through its head or home office, except that a party will not have recourse to the head or home office of the other party in respect of any payment or delivery deferred pursuant to Section 5(d) for so long as the payment or delivery is so deferred.  This representation and agreement will be deemed to be repeated by each party on each date on which the parties enter into a Transaction.

 

(b)           If a party is specified as a Multibranch Party in the Schedule, such party may, subject to clause (c) below, enter into a Transaction through, book a Transaction in and make and receive payments and deliveries with respect to a Transaction through any Office listed in respect of that party in the Schedule (but not any other Office unless otherwise agreed by the parties in writing).

 

(c)           The Office through which a party enters into a Transaction will be the Office specified for that party in the relevant Confirmation or as otherwise agreed by the parties in writing, and, if an Office for that party is not specified in the Confirmation or otherwise agreed by the parties in writing, its head or home office.  Unless the parties otherwise agree in writing, the Office through which a party enters into a Transaction will also be the Office in which it books the Transaction and the Office through which it makes and receives payments and deliveries with respect to the Transaction.  Subject to Section 6(b)(ii), neither party may change the Office in which it books the Transaction or the Office through which it makes and receives payments or deliveries with respect to a Transaction without the prior written consent of the other party.

 

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, execution fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection.

 

12.           Notices

 

(a)           Effectiveness.  Any notice or other communication in respect of this Agreement may be given in any manner described below (except that a notice or other communication under Section 5 or 6 may not be given by electronic messaging system or e-mail) to the address or number or in accordance with the electronic messaging system or e-mail 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 it 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 it is delivered or its delivery is attempted;

 

(v)            if sent by electronic messaging system, on the date it is received; or

 

(vi)           if sent by e-mail, on the date it is delivered,

 

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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 will be deemed given and effective on the first following day that is a Local Business Day.

 

(b)           Change of Details.  Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system or e-mail 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 any dispute arising out of or in connection with this Agreement (“Proceedings”), each party irrevocably: —

 

(i)           submits:—

 

(1)           if this Agreement is expressed to be governed by English law, to (A) the non-exclusive jurisdiction of the English courts if the Proceedings do not involve a Convention Court and (B) the exclusive jurisdiction of the English courts if the Proceedings do involve a Convention Court; or

 

(2)           if this Agreement is expressed to be governed by the laws of the State of New York, 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;

 

(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; and

 

(iii)           agrees, to the extent permitted by applicable law, that the bringing of Proceedings in any one or more jurisdictions will not preclude the bringing of Proceedings in any other jurisdiction.

 

(c)           Service of Process.  Each party irrevocably appoints the Process Agent, if any, specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings.  If for any reason any party’s Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party.  The parties irrevocably consent to service of process given in the manner provided for notices in Section 1 2(a)(i), 1 2(a)(iii) or 1 2(a)(iv).  Nothing in this Agreement will affect the right of either party to serve process in any other manner permitted by applicable law.

 

(d)           Waiver of Immunities.  Each party irrevocably waives, to the 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 or order for specific performance or 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 Representation” has the meaning specified in Section 3.

 

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“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, Force Majeure Event, Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event (which, in the case of an Illegality under Section 5(b)(i)(2) or a Force Majeure Event under Section 5(b)(ii)(2), means all Transactions unless the relevant Credit Support Document references only certain Transactions, in which case those Transactions and, if the relevant Credit Support Document constitutes a Confirmation for a Transaction, that Transaction) 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.

 

“A greemnent” has the meaning specified in Section 1 (c).

 

“Applicable Close-out Rate” means:—

 

(a)           in respect of the determination of an Unpaid Amount:—

 

(i)           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;

 

(ii)           in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate;

 

(iii)           in respect of obligations deferred pursuant to Section 5(d), if there is no Defaulting Party and for so long as the deferral period continues, the Applicable Deferral Rate; and

 

(iv)           in all other cases following the occurrence of a Termination Event (except where interest accrues pursuant to clause (iii) above), the Applicable Deferral Rate; and

 

(b)           in respect of an Early Termination Amount:—

 

(i)           for the period from (and including) the relevant Early Termination Date to (but excluding) the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable: —

 

(1)           if the Early Termination Amount is payable by a Defaulting Party, the Default Rate;

 

(2)           if the Early Termination Amount is payable by a Non-defaulting Party, the Non-default Rate; and

 

(3)           in all other cases, the Applicable Deferral Rate; and

 

(ii)           for the period from (and including) the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable to (but excluding) the date of actual payment:—

 

(1)           if a party fails to pay the Early Termination Amount due to the occurrence of an event or circumstance which would, if it occurred with respect to a payment or delivery under a Transaction, constitute or give rise to an Illegality or a Force Majeure Event, and for so long as the Early Termination Amount remains unpaid due to the continuing existence of such event or circumstance, the Applicable Deferral Rate;

 

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(2)           if the Early Termination Amount is payable by a Defaulting Party (but excluding any period in respect of which clause (1) above applies), the Default Rate;

 

(3)           if the Early Termination Amount is payable by a Non-defaulting Party (but excluding any period in respect of which clause (1) above applies), the Non-default Rate; and

 

(4)           in all other cases, the Termination Rate.

 

“Applicable Deferral Rate” means:—

 

(a)           for the purpose of Section 9(h)(i)(3)(A), the rate certified by the relevant payer to be a rate offered to the payer by a major bank in a relevant interbank market for overnight deposits in the applicable currency, such bank to be selected in good faith by the payer for the purpose of obtaining a representative rate that will reasonably reflect conditions prevailing at the time in that relevant market;

 

(b)           for purposes of Section 9(h)(i)(3)(B) and clause (a)(iii) of the definition of Applicable Close-out Rate, the rate certified by the relevant payer to be a rate offered to prime banks by a major bank in a relevant interbank market for overnight deposits in the applicable currency, such bank to be selected in good faith by the payer after consultation with the other party, if practicable, for the purpose of obtaining a representative rate that will reasonably reflect conditions prevailing at the time in that relevant market; and

 

(c)           for purposes of Section 9(h)(i)(3)(C) and clauses (a)(iv), (b)(i)(3) and (b)(ii)(1) of the definition of Applicable Close-out Rate, a rate equal to the arithmetic mean of the rate determined pursuant to clause (a) above and 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.

 

“Automatic Early Termination” has the meaning specified in Section 6(a).

 

“Burdened Party” has the meaning specified in Section 5(b)(iv).

 

“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 after the parties enter into the relevant Transaction.

 

“Close-out Amount” means, with respect to each Terminated Transaction or each group of Terminated Transactions and a Determining Party, the amount of the losses or costs of the Determining Party that are or would be incurred under then prevailing circumstances (expressed as a positive number) or gains of the Determining Party that are or would be realised under then prevailing circumstances (expressed as a negative number) in replacing, or in providing for the Determining Party the economic equivalent of, (a) the material terms of that Terminated Transaction or group of Terminated Transactions, including the payments and deliveries by the parties under Section 2(a)(i) in respect of that Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date (assuming satisfaction of the conditions precedent in Section 2(a)(iii)) and (b) the option rights of the parties in respect of that Terminated Transaction or group of Terminated Transactions.

 

Any Close-out Amount will be determined by the Deter-mining Party (or its agent), which will act in good faith and use commercially reasonable procedures in order to produce a commercially reasonable result.  The Determnining Party may determine a Close-out Amount for any group of Terminated Transactions or any individual Terminated Transaction but, in the aggregate, for not less than all Terminated Transactions.  Each Close-out Amount will be determined as of the Early Termination Date or, if that would not be commercially reasonable, as of the date or dates following the Early Termination Date as would be commercially reasonable.

 

Unpaid Amounts in respect of a Terminated Transaction or group of Terminated Transactions and legal fees and out-of-pocket expenses referred to in Section I 1 are to be excluded in all determinations of Close-out Amounts.

 

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In determining a Close-out Amount, the Determining Party may consider any relevant information, including, without limitation, one or more of the following types of information: -

 

(i)            quotations (either firm or indicative) for replacement transactions supplied by one or more third parties that may take into account the creditworthiness of the Determining Party at the time the quotation is provided and the terms of any relevant documentation, including credit support documentation, between the Determining Party and the third party providing the quotation;

 

(ii)            information consisting of relevant market data in the relevant market supplied by one or more third parties including, without limitation, relevant rates, prices, yields, yield curves, volatilities, spreads, correlations or other relevant market data in the relevant market; or

 

(iii)           information of the types described in clause (i) or (ii) above from internal sources (including any of the Determining Party’s Affiliates) if that information is of the same type used by the Determining Party in the regular course of its business for the valuation of similar transactions.

 

The Determining Party will consider, taking into account the standards and procedures described in this definition, quotations pursuant to clause (i) above or relevant market data pursuant to clause (ii) above unless the Deternining Party reasonably believes in good faith that such quotations or relevant market data are not readily available or would produce a result that would not satisfy those standards.  When considering information described in clause (i), (ii) or (iii) above, the Determining Party may include costs of funding, to the extent costs of funding are not and would not be a component of the other information being utilised.  Third parties supplying quotations pursuant to clause (i) above or market data pursuant to clause (ii) above may include, without limitation, dealers in the relevant markets, end-users of the relevant product, information vendors, brokers and other sources of market information.

 

Without duplication of amounts calculated based on information described in clause (i), (ii) or (iii) above, or other relevant information, and when it is commercially reasonable to do so, the Determining Party may in addition consider in calculating a Close-out Amount any loss or cost incurred in connection with its terminating, liquidating or re-establishing any hedge related to a Terminated Transaction or group of Terminated Transactions (or any gain resulting from any of them).

 

Commercially reasonable procedures used in determining a Close-out Amount may include the following: -

 

(1)           application to relevant market data from third parties pursuant to clause (ii) above or information from internal sources pursuant to clause (iii) above of pricing or other valuation models that are, at the time of the determination of the Close-out Amount, used by the Determining Party in the regular course of its business in pricing or valuing transactions between the Determining Party and unrelated third parties that are similar to the Terminated Transaction or group of Terminated Transactions; and

 

(2)           application of different valuation methods to Terminated Transactions or groups of Terminated Transactions depending on the type, complexity, size or number of the Terminated Transactions or group of Terminated Transactions.

 

“Confirmation “ has the meaning specified in the preamble.

 

“consent” includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent.

 

“Contractual Currency” has the meaning specified in Section 8(a).

 

“Convention Court” means any court which is bound to apply to the Proceedings either Article 17 of the 1968 Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters or Article 17 of the 1988 Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters.

 

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“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.

 

“Cross-Default” means the event specified in Section 5(a)(vi).

 

“Default Rate” means a rate per annum.  equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum.

 

“Defaulting Party” has the meaning specified in Section 6(a).

 

“Designated Event” has the meaning specified in Section 5(b)(v).

 

“Determining Party” means the party determining a Close-out Amount.

 

“Early Termination Amount” has the meaning specified in Section 6(e).

 

“Early Termination Date” means the date determined in accordance with Section 6(a) or 6(b)(iv).

 

“electronic messages” does not include e-mails but does include documents expressed in markup languages, and “electronic messaging system” will be construed accordingly.

 

“English law” means the law of England and Wales, and “English” will be construed accordingly.

 

“Event of Default” has the meaning specified in Section 5(a) and, if applicable, in the Schedule.

 

“Force Majeure Event” has the meaning specified in Section 5(b).

 

“General Business Day” means a day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits).

 

“Illegality” has the meaning specified in Section 5(b).

 

“Indemniflable 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 “unlawful” will be construed accordingly.

 

“Local Business Day” means (a) in relation to any obligation under Section 2(a)(i), a General Business Day in the place or places specified in the relevant Confirmation and a day on which a relevant settlement system is open or operating as specified in the relevant Confirmation or, if a place or a settlement system is 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) for the purpose of determining when a Waiting Period expires, a General Business Day in the place where the event or circumstance that constitutes or gives rise to the Illegality or Force Majeure Event, as the case may be, occurs, (c) in relation to any other payment, a General Business Day 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 and, if that currency does not have a single recognised principal financial centre, a day on which the settlement system necessary to accomplish such payment is open, (d) in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), a General Business Day (or a day that would have been a General Business Day but for the occurrence of an event or circumstance which would, if it occurred with respect to payment, delivery or compliance related to a Transaction, constitute or give rise to an Illegality or a Force Majeure Event) in the place 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 (e) in relation to Section 5(a)(v)(2), a General Business Day in the relevant locations for performance with respect to such Specified Transaction.

 

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“Local Delivery Day” means, for purposes of Sections 5(a)(i) and 5(d), a day on which settlement systems necessary to accomplish the relevant delivery are generally open for business so that the delivery is capable of being accomplished in accordance with customary market practice, in the place specified in the relevant Confirmation or, if not so specified, in a location as determined in accordance with customary market practice for the relevant delivery.

 

“Master Agreement” has the meaning specified in the preamble.

 

“Merger Without Assumption “ means the event specified in Section 5(a)(viii).

 

“Multiple Transaction Payment Netting” has the meaning specified in Section 2(c).

 

“Non-affected Party” means, so long as there is only one Affected Party, the other party.

 

“Non-default Rate” means the rate certified by the Non-defaulting Party to be a rate offered to the Non-defaulting Party by a major bank in a relevant interbank market for overnight deposits in the applicable currency, such bank to be selected in good faith by the Non-defaulting Party for the purpose of obtaining a representative rate that will reasonably reflect conditions prevailing at the time in that relevant market.

 

“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.

 

“Other Amounts” has the meaning specified in Section 6(f).

 

“Payee” has the meaning specified in Section 6(f.).

 

“Payer” has the meaning specified in Section 6(f).

 

“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.

 

“Proceedings” has the meaning specified in Section 13(b).

 

“Process Agent” has the meaning specified in the Schedule.

 

“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.

 

“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.

 

“Schedule” has the meaning specified in the preamble.

 

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“Scheduled Settlement Date” means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction.

 

“Specified Entity” has the meaning specified in the Schedule.

 

“Specified Indebtedness” means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money.

 

“Specified Transaction” means, subject to the Schedule, (a) any transaction (including an agreement with respect to any such transaction) 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 not a Transaction under this Agreement but (i) which is a rate swap transaction, swap option, 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, credit protection transaction, credit swap, credit default swap, credit default option, total return swap, credit spread transaction, repurchase transaction, reverse repurchase transaction, buy/sell-back transaction, securities lending transaction, weather index transaction or forward purchase or sale of a security, commodity or other financial instrument or interest (including any option with respect to any of these transactions) or (ii) which is a type of transaction that is similar to any transaction referred to in clause (i) above that is currently, or in the future becomes, recurrently entered into in the financial markets (including terms and conditions incorporated by reference in such agreement) and which is a forward, swap, future, option or other derivative on one or more rates, currencies, commodities, equity securities or other equity instruments, debt securities or other debt instruments, economic indices or measures of economic risk or value, or other benchmarks against which payments or deliveries are to be made, (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.

 

“Stamp Tax Jurisdiction” has the meaning specified in Section 4(e).

 

“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 an Illegality or a Force Majeure Event, all Affected Transactions specified in the notice given pursuant to Section 6(b)(iv), (b) if resulting from any other Termination Event, all Affected Transactions and (c) if resulting from an Event of Default, all Transactions in effect either 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” means (a) if a Termination Currency is specified in the Schedule and that currency is freely available, that currency, and (b) otherwise, euro if this Agreement is expressed to be governed by English law or United States Dollars if this Agreement is expressed to be governed by the laws of the State of New York.

 

“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 Close-out Amount 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 1 1:00 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.

 

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“Termination Event” means an Illegality, a Force Majeure Event, a Tax Event, 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.

 

“Threshold Amount” means the amount, if any, specified as such in the Schedule.

 

“Transaction” has the meaning specified in the preamble.

 

“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) or due but for Section 5(d)) to such party under Section 2(a)(i) or 2(d)(i)(4) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date, (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) or 5(d)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered and (c) if the Early Termination Date results from an Event of Default, a Credit Event Upon Merger or an Additional Termination Event in respect of which all outstanding Transactions are Affected Transactions, any Early Termination Amount due prior to such Early Termination Date and which remains unpaid as of such Early Termination Date, in each case together with any amount of interest accrued or other compensation in respect of that obligation or deferred obligation, as the case may be, pursuant to Section 9(h)(ii)(1) or (2), as appropriate.  The fair market value of any obligation referred to in clause (b) above will be determined as of the originally scheduled date for delivery, in good faith and using commercially reasonable procedures, by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it will be the average of the Termination Currency Equivalents of the fair market values so determined by both parties.

 

“Waiting Period” means:—

 

(a)           in respect of an event or circumstance under Section 5(b)(i), other than in the case of Section 5(b)(i)(2) where the relevant payment, delivery or compliance is actually required on the relevant day (in which case no Waiting Period will apply), a period of three Local Business Days (or days that would have been Local Business Days but for the occurrence of that event or circumstance) following the occurrence of that event or circumstance; and

 

(b)           in respect of an event or circumstance under Section 5(b)(ii), other than in the case of Section 5(b)(ii)(2) where the relevant payment, delivery or compliance is actually required on the relevant day (in which case no Waiting Period will apply), a period of eight Local Business Days (or days that would have been Local Business Days but for the occurrence of that event or circumstance) following the occurrence of that event or circumstance.

 

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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. 

 

	
Morgan Stanley & Co. International plc

	  	
Step Up Callable Trust Units Series 2010-05 (GS)

 

By:  The Bank of New York Mellon,

solely as Trustee and not in its individual capacity.

	
(Name of Party)

	  	
(Name of Party)

	
By:

	
/s/ Ara Tachdjian

	  	
By:

	
/s/ Maryann Joseph

	
Name: Ara Tachdjian

	  	
Name: Maryann Joseph

	
Title:  Authorized Signatory

	  	
Title:  Vice President

	
Date: 12/17/10

	  	
Date: 12/30/10

 

 ISDA© 2002  

27

SCHEDULE

TO THE

MASTER AGREEMENT

dated as of December 30, 2010

between

Morgan Stanley & Co. International plc

(“Party A” or the “Seller”)

and

Step Up Callable Trust Units Series 2010-05 (GS)

(“Party B,” the “Buyer” or the “Trust”)

 

Part 1.        Termination Provisions.

 

	
(a)

	
“Breach of Agreement; Repudiation of Agreement”, “Credit Support Default”, “Misrepresentation”, “Default Under Specified Transaction”, “Cross-Default”:  Section 5(a)(ii), Section 5(a)(iv), Section 5(a)(v) and Section 5(a)(vi) will not apply to Party A or Party B.  Section 5(a)(iii) will not apply where Party B would be the Defaulting Party.

 

	
(b)

	
“Bankruptcy”:  Section 5(a)(vii), where Party B would be the Defaulting Party, is amended as follows:

by deleting clause (2);

by deleting in clause (6) the words “seeks or” and the words “, trustee, custodian”;

by deleting clause (7); and

by deleting clause (9).

 

	
(c)

	
“Bankruptcy”:  Section 5(a)(vii), where Party A would be the Defaulting Party, is amended by inserting the following words at the end of Section 5(a)(vii)(9):

 

	
  

	
“; provided, in respect of each of the events specified in clauses (1) to (9) (inclusive) that such event remains continuing for 30 calendar days after the date such event occurred (commencing, with respect to the events set out in clauses (4)(B) and (7) above, after the expiry of the 30 day period specified therein); provided, further, that if a Bankruptcy has not occurred with respect to the guarantor (if any), of the Party A’s obligations under this Agreement, a Bankruptcy will be deemed not to have occurred with respect to Party A. ”

 

	
(d)

	
“Force Majeure Event”:  Section 5(b)(ii) will not apply to Party B.

 

	
(e)

	
“Potential Bankruptcy” means, where Party A would be the Defaulting Party, an event that, after the lapse of the 30 day grace period, would result in the occurrence of a Bankruptcy Event of Default with respect to Party A.

 

  

19

  

	
(f)

	
“Tax Event”, “Tax Event Upon Merger”, “Credit Event Upon Merger”: Section 5(b)(iii), Section 5(b)(iv) and Section 5(b)(v) will not apply to Party A or Party B.

 

	
(g)

	
The “Automatic Early Termination” provisions of Section 6(a) will not apply to Party A or Party B.

 

	
(h)

	
“Termination Currency” means United States Dollars.

 

	
(i)

	
Additional Termination Event will apply.

 

Any “Trust Wind-Up Event” under the Trust Agreement, of even date herewith (the “Trust Agreement”), other than (viii) of Section 9.02(a) of the Standard Terms for Trust Agreements, dated July 15, 2010 (the “Standard Terms”), between Party B and The Bank of New York Mellon (the “Trustee”), shall constitute an Additional Termination Event.  Party B shall be the sole Affected Party and all Transactions shall be Affected Transactions.

 

If a Trust Wind-Up Event has occurred and Party A has not designated an Early Termination Date in accordance with Section 6(b) of the Master Agreement, as applicable, within three Business Days after receiving written notice from Party B, then Party B shall be entitled to designate an Early Termination Date.

 

Part 2.  Tax Representations.

 

	
(a)

	
Payer Tax Representations.  For the purpose of Section 3(e), Party A and Party B each makes 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(a)(iii), 6(d)(ii) or 6(e)) to be made by it to the other party under this Agreement.  In making this representation, it may rely on:-

 

	
  

	
(i)

	
the accuracy of any representation made by the other party pursuant to Section 3(f);

 

	
  

	
(ii)

	
the satisfaction of the agreement of the other party contained in Section 4(a)(i) or 4(a)(iii) and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii); and

 

	
  

	
(iii)

	
the satisfaction of the agreement of the other party contained in Section 4(d);

 

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 Tax Representations.  For the purposes of Section 3(f), Party A represents that it is a limited company duly organized under the laws of the United Kingdom.

 

  

20

  

Part 3.  Agreement to Deliver Documents.

	
Party required to deliver document

	
Form/Document/

Certificate

	
Date by which to be delivered

	
Covered by Section 3(d) Representation

	
Party A

	
Either (1) a signature booklet containing secretary’s certificate and resolutions (“authorizing resolutions”) authorizing the party to enter into derivatives transactions of the type contemplated by the parties or (2) a secretary’s certificate, authorizing resolutions and incumbency certificate for such party and any Credit Support Provider of such party reasonably satisfactory in form and substance to the other party.

	
The earlier of the fifth Business Day after the Trade Date of the first Transaction or upon execution of this Agreement and as deemed necessary for any further documentation.

	
Yes

	
Party B

	
A copy of the executed Trust Agreement.

	
As soon as practicable after the execution of this Agreement.

	
Yes

	
Party A and Party B

	
Such other documents as the other party may reasonably request

	
Upon request.

	
No

Part 4.                      Miscellaneous.

 

	
(a)

	
Addresses for Notices.  For the purpose of Section 12(a):-

(i)          Address for notice or communications to Party A:-

Morgan Stanley & Co. International plc

c/o Morgan Stanley & Co. Incorporated

1585 Broadway, 2nd Floor

New York, New York 10036

Attention:  In-Young Chase

Facsimile No.: 212-507-1309  Telephone No.: 212-761-2457

Email: In-Young.Chase@morganstanley.com

cc:  spvnotices@morganstanley.com

Facsimile No.: 212-507-6247

(ii)          Address for notice or communications to Party B:-

Step Up Callable Trust Units Series 2010-05 (GS)

 

  

21

  

 

	 	 
c/o The Bank of New York Mellon

101 Barclay Street, 7W

New York, New York 10007

Attn: Dealing & Trading

Facsimile No.: 212-815-2830  Telephone No.: 212-815-2896

Email: maryann.joseph@bnymellon.com, joseph.panepinto@bnymellon.com, audrey.williams@bnymellon.com

	 	 
	 
(b)

	 
Process Agent.  For the purpose of Section 13(c) of this Agreement, Party B irrevocably appoints as its Process Agent:

	 	Same as above address for notices
	 	 
	 
(c)

	 
Offices.  The provisions of Section 10(a) will apply to Party A and to Party B.

	 	 
	 
(d)

	 
Multibranch Party.  For the purpose of Section 10(b):-

Party A is not a Multibranch Party.

Party B is not a Multibranch Party.

	 	 
	 
(e)

	 
“Calculation Agent” means Party A.

	 	 
	 
(f)

	 
Credit Support Documents. Details of Credit Support Documents:

 

 
In relation to Party A:  None

 

 
In relation to Party B:  None

	 	 
	(g)	Credit Support Provider.  Credit Support Provider means: 
 

 
in relation to Party A:  None; and

 

 
in relation to Party B:  None

	 	 
	 
(h)

	 
Governing Law; Jurisdiction.  This Agreement, any Credit Support Document and each Confirmation will be governed by and constructed in accordance with the laws of the State of New York, without reference to its choice of law doctrine.  Section 13(b)(i) is amended by deleting “non-” from the second line of clause (2).

	 	 
	 
(i)

	 
WAIVER OF JURY TRIAL.  EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY CREDIT SUPPORT DOCUMENT.

	 	 
	 
(j)

	 
Netting of Payment.  Clause (ii) of Section 2(c) will not apply.

	 	 
	 
(k)

	 
“Affiliate” has the meaning specified in Section 14, but excludes Morgan Stanley Derivative Products Inc.

	 	 

 

 

 

  

22

  

Part 5.   Other Provisions.

 

	
(a)

	
Trustee Capacity. It is expressly understood and agreed by the parties hereto that insofar as this Agreement is executed on behalf of the Trust (i) this Agreement is executed and delivered by the Trustee, not in its individual capacity but solely as Trustee under the Trust Agreement in the exercise of the powers and authority conferred and vested in it, (ii) each of the representations, undertakings and agreements herein made on the part of the Trust is made and intended not as representations, warranties, covenants, undertakings and agreements by the Trustee in its individual capacity but is made and intended for the purpose of binding only the Trust and (iii) under no circumstances shall the Trustee in its individual capacity be personally liable for the payment of any indebtedness or expenses of the Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trust under this Agreement.

 

	
(b)

	
Additional Representations.  Section 3 is hereby amended by adding at the end thereof the following Subparagraphs:

“(g)  It is an “Eligible Contract Participant” as defined in Section 1a(12) of the Commodity Exchange Act, as amended.

 

(h)  It has entered into this Agreement (including each Transaction evidenced hereby) in conjunction with its line of business (including financial intermediation services) or the financing of its business.

 

(i)  Non-Reliance.  It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon 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.  No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of that Transaction.

 

(j)  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 risks of that Transaction.

 

(k)  Status of Parties.  The other party is not acting as a fiduciary for or adviser to it in respect of that Transaction.  It is entering into this Agreement, any Credit Support Document to which it is a party, each Transaction and any other documentation relating to this Agreement or any Transaction as principal (and not as agent or in any other capacity, fiduciary or otherwise).”

 

  

23

  

	
(c)

	
Confirmations.  Party A will deliver to Party B a Confirmation relating to each Transaction.

 

	
(d)

	
Security.  As collateral security for the prompt and complete payment and performance when due of the obligations of Party B hereunder, Party B hereby grants to Party A a continuing security interest in all of Party B’s right, title and interest in the Trust Property as such term is defined in the Trust Agreement pursuant to which Party B was formed.  Such security interest shall remain in full force and effect until Party A has received amounts due to it hereunder.

 

	
(e)

	
Further Acknowledgments.  Each party agrees and acknowledges that:

 

	
  

	
(i)

	
Each transfer of funds, securities or other property under this Agreement or any Transaction hereunder constitutes a transfer that may not be avoided under Sections 544, 545, 547, 548(a)(2) or 548(b) of Title 11 of the United States Code (the “Bankruptcy Code”).

 

	
  

	
(ii)

	
The rights given to each party hereunder upon an Event of Default by the other to cause the liquidation and termination of this Agreement and each Transaction hereunder, and to set off mutual debts and claims in connection therewith, may not be stayed, limited or avoided under the Bankruptcy Code, including, without limitation, Section 362, 365(c) or 105(a) thereof.

 

	
(f)

	
Setoff and Related Matters.  Without prejudice to any netting provisions of Section 2 or Section 6 of the Agreement, the obligations of the Parties under this Agreement will not be subject to rights of setoff.

 

	
(g)

	
Non-Petition.  Prior to the date that is one year and one day after all distributions in respect of the Units issued by the Trust have been made, Party A shall not take any action, institute any proceeding, join in any action or proceeding or otherwise cause any action or proceeding against the Trust under the United States Bankruptcy Code or any other liquidation, insolvency, bankruptcy, moratorium, reorganization or similar law (“Insolvency Law”) applicable to the Trust, now or hereafter in effect, or which would be reasonably likely to cause the Trust to be subject to, or seek the protection of, any such Insolvency Law.

 

(h)           Transfer to Avoid Swap Counterparty Replacement Event.

 

Notwithstanding Section 6 and Section 7 of the Agreement, if a Potential Bankruptcy occurs with respect to Party A but the relevant grace period has not expired (any such event, a "Swap Counterparty Replacement Event"):

 

	
  

	
(i)

	
Party A may, not later than the end of the applicable grace period with respect to such Potential Bankruptcy (the end of such period or, if Party A notifies Party B and the Trustee in writing that it declines to undertake a Counterparty Replacement, the date of such notification being the "Counterparty Replacement Deadline"), transfer all of its rights and obligations under the Agreement to a Replacement Swap Counterparty (such transfer, a "Counterparty Replacement").

 

  

24

  

	
  

	
(ii)

	
In connection with any Counterparty Replacement, Party A and the Replacement Swap Counterparty shall determine the amount to be paid by or to Party A in respect of the transfer of the Agreement and Party A shall have no further claim against Party B with respect to the Agreement.  For the avoidance of doubt, no Swap Breakage Fees or other amount shall be determined or payable by Party B with respect to such transfer.  To the extent that it is necessary to conduct an auction of the Transaction under this Agreement among potential Replacement Swap Counterparties, such auction shall be conducted by the Trustee with the assistance of Party A and shall take into account, in the valuation of the Transactions, any fees or expenses of Party B (whether in respect of the Agreement, the Trust Agreement or any other Transaction Documents) previously paid by Party A with respect to the remaining term of the Units.

 

	
  

	
(iii)

	
Promptly following a demand made by Party A, Party B will execute, deliver, file and record any document and take any other action that may be necessary or desirable and reasonably requested by that party in connection with, or for the purpose of effecting, a Counterparty Replacement permitted under the Agreement.

 

	
  

	
(iv)

	
In the event that an Event of Default or Termination Event (a "Subsequent Event") occurs after a Swap Counterparty Replacement Event but prior to the earlier of (x) the Counterparty Replacement Deadline and (y) the effective date of a Counterparty Replacement, such Subsequent Event shall supersede the Swap Counterparty Replacement Event and each party may exercise any rights with respect to such Subsequent Event (including the designation of an Early Termination Date) in accordance with the Agreement as if the Swap Counterparty Replacement Event had not occurred.

 

	
  

	
(v)

	
If Party A does not replace itself prior to the expiration of the 30 day grace period, then a Bankruptcy will occur.

 

	
(i)

	
Replacement Swap Counterparty.  “Replacement Swap Counterparty” means a counterparty (A)(i) as to which Party A has agreed to transfer all of its rights and obligations under the Swap Agreement (including with respect to acting as Calculation Agent hereunder) and (ii) that has agreed to assume all such rights and obligations (including with respect to acting as Calculation Agent hereunder), and (B) at the time such Replacement Swap Counterparty is selected by Party A in accordance with the terms hereof, either the Replacement Swap Counterparty or its guarantor must have an S&P rating no lower than the higher of the S&P rating of the Party A or its guarantor under this Agreement at that time.  In addition, any Replacement Swap Counterparty must be a person who regularly offers to enter into, assume, offset, assign, or otherwise terminate positions in swap agreements with customers in the ordinary course of a trade or business.

 

  

25

  

	
(j)

	
Transfer. Party A agrees that it will transfer its rights and obligations with respect to Transactions under this Agreement only to a Replacement Counterparty and will provide notice of any such transfer to Standard & Poor's Ratings Services, a division of the McGraw Hill Companies ("S&P"), or any successor to the rating business thereto, within five Business Days of such transfer.  Any cost related to a transfer by Party A will be borne by Party A.

 

	
(k)

	
 
Depositor Optional Exchange.  If the Depositor has exercised its right of Depositor Optional Exchange (as defined in the Trust Agreement) in part, Party A consents to assign to the Depositor a portion of the Swap Agreement proportionate to the portion of the Units being exchanged or, in lieu of such assignment, at the option of the Depositor, to agree to a partial termination of the related Transaction.  The parties agree that any such assignment or termination shall not constitute an “amendment, modification, waiver, or other change of the Swap Agreement” for purposes of Section 7.02(a) of the Trust Agreement.

 

	
(l)

	
Calculation of Significance Percentage.  On or about the date that is 45 days prior to each Distribution Date (as defined in the Trust Agreement), Party A will calculate its “significance percentage” as determined in accordance with Item 1115 of Regulation AB under the Securities Act of 1933.  Party A will promptly notify Party B (a "Reporting Threshold Notice") if the significance percentage of Party A is, or is reasonably expected to become, equal to or greater than 10% and Party A would fall within the definition of Disqualified Swap Counterparty (as defined in the Trust Agreement).  If following such Reporting Threshold Notice, Party A receives notice from the Depositor that the Depositor will not seek to withdraw the Units from listing on the New York Stock Exchange and terminate its reporting obligations in relation to the Units under the Securities Exchange Act of 1934, or has been unable to effect such withdrawal and termination, and following such notice Party A would continue to fall within the definition of Disqualified Swap Counterparty, Party A shall transfer, at its cost, all of its rights and obligations under all Transactions under this Agreement to a Replacement Swap Counterparty (which may be an affiliate of Party A) that would not be a Disqualified Swap Counterparty, such transfer to be effected prior to the next Distribution Date.

 

	
(m)

	
Payments Subject to Trust Agreement Other Payment Priorities.  Party A agrees that all termination payments by Party B to Party A are subject to the Other Payment Priorities set forth in the Trust Agreement.

 

	
(n)

	
Transfers and Assignments.  In addition to any other requirements in the Agreement and the related Confirm, no transfer or assignment of a confirmation may be made to any person or entity unless such person or entity is a qualified institutional buyer as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”).

 

	
(o)

	
Party B Representation.  Party B represents and warrants to Party A, which representation and warranty will be deemed to be repeated by Party B on each date on which a Transaction is entered into (check one):

 

þ  (i)            It is a “U.S. institutional investor” (as defined below); or

 

  

26

  

 

 

 

	 	o	(ii)	It is a “major U.S. institutional investor” (as defined below); or
	 	 	 	 
	 	 	(iii)	It is a Qualified Institutional Buyer as defined in Rule 144A under the United States Securities Act of 1933, as amended (the “1933 Act”).

 

For purposes of this Part 5 (o), the following definitions will apply:

 

“U.S. institutional investor” means (1) an investment company registered with the United States Securities and Exchange Commission (the “Commission”) under Section 8 of the United States Investment Company Act of 1940; (2) a bank, savings and loan association, insurance company, business development company, small business investment company, or employee benefit plan defined in Rule 501(a)(1) of Regulation D under the 1933 Act; (3) a private business development company defined in Rule 501(a)(2) of Regulation D of the 1933 Act; (4) an organization described in Section 501(c)(3) of the United States Internal Revenue Code, as defined in Rule 501(a)(3) of Regulation D of the 1933 Act; or (5) a trust defined in Rule 501(a)(7) of Regulation D of the 1933 Act.

 

“major U.S. institutional investor” means either an investment adviser registered with the Commission under Section 203 of the Investment Advisers Act of 1940 that has total assets under management in excess of $100 million, or a U.S. institutional investor that has, or has under management, total assets in excess of $100 million.

 

	
(p)

	
Procedures for Entering into Transactions.  Party A and Party B agree that any Transactions between Party A and Party B will be effected through Morgan Stanley & Co. Incorporated (“MS&Co.”), as agent for Party A and Party B pursuant to any applicable requirements of Rule 15a-6 under the Securities Exchange Act of 1934.  MS&Co., as agent for Party A and Party B, will be responsible for preparing and delivering to Party A and Party B a Confirmation relating to each Transaction.

 

	
(q)

	
Further Acknowledgments.  Each party agrees and acknowledges that:

 

(i)           Morgan Stanley & Co. Incorporated (“MS&Co.”) will be responsible for the operational aspects of the Transactions, such as record keeping, reporting, and confirming Transactions to Party A and Party B;

(ii)           Unless Party B is a “major U.S. institutional investor,” as defined in Rule 15a-6 of the United States Securities Exchange Act of 1934, neither Party A nor Party B will contact the other without the direct involvement of MS&Co.;

(iii)           MS&Co. has no obligation, by guaranty, endorsement or otherwise, with respect to performance of Party A’s obligations or with respect to the performance of Party B’s obligations; and

(iv)           Subject to Part 5(i) below, MS&Co.’s sole role in the Transactions is as an agent of Party A and Party B on a disclosed basis.

 

	
(r)

	
Parties to Transactions.  The parties acknowledge and agree that, with respect to all over-the-counter securities options Transactions entered into under this Agreement, the parties to such Transactions are Party A and Party B, with MS&Co. as agent for Party A and Party B, and with respect to all other Transactions entered into under this Agreement, the parties to such Transactions are Party A and Party B.

  

27

  

IN WITNESS WHEREOF, the parties have executed this Schedule by their duly authorized officers as of the date of the Master Agreement first written above.

 

 

	 	MORGAN STANLEY & CO. INTERNATIONAL PLC
	 	 
	 	
By: /s/ Ara Tachdjian

 

Name:  Ara Tachdjian      

	 	Title:    Authorized Signatory
	 	 
	 	STEP UP CALLABLE TRUST UNITS SERIES 2010-05 (GS)
	 	 
	 	
By: The Bank of New York Mellon, 

as Trustee

	 	 
	 	By        /s/ Maryann Joseph
	 	Name:   Maryann Joseph
	 	Title:     Vice President

 

MORGAN STANLEY & CO. INCORPORATED hereby agrees to and acknowledges its role as agent for both parties in accordance with Part 5(g) of the Schedule above.

 

	 	MORGAN STANLEY & CO. INCORPORATED
	 	 
	 	By:       /s/In-Young Chase
	 	Name:  In-Young Chase
	 	Title:   Authorized Signatory

 

 

 

  

28

  

 

MORGAN STANLEY

 

Execution Version

	
Date:

	
December 30, 2010

	  	  
	  	  	  	  
	
To:

	
Step Up Callable Trust Units Series 2010-05 (GS)

	
From:

	
Morgan Stanley & Co. International plc

	  	  	  	  
	
Attn:

	
Step Up Callable Trust Units Series 2010-05 (GS)

c/o The Bank of New York Mellon

Barclay Street, 7W

New York, NY 10286

Attn: Dealing & Trading Unit

	
Contact:

	
Morgan Stanley & Co. International plc

c/o Morgan Stanley & Co. Incorporated

1585 Broadway, 2nd Floor

New York, New York 10036

Attention:  In-Young Chase

	  	  	  	  
	
Fax:

	
212-815-2830

	
Fax:

	
212-507-1309

	  	  	  	  
	
Tel:

	
212-815-2896

212-815-5837

	
Tel:

	
212-761-2457

Re: Bond Option Transaction. MS Reference Numbers eqwp5 and eqwp4

 

The purpose of this letter agreement is to confirm the terms and conditions of the Transaction entered into between you and Morgan Stanley & Co. International plc (“MSIP”), with Morgan Stanley & Co. Incorporated (“MS&Co.”), as agent, on the Trade Date specified below (the “Transaction”).  This letter agreement constitutes a “Confirmation” as referred to in the Agreement below.

 

The definitions and provisions contained in the 1997 ISDA Government Bond Option Definitions as published by the International Swaps and Derivatives Association, Inc. (“ISDA”) and if not defined therein, the 2006 ISDA definitions are incorporated into this Confirmation and this transaction shall be deemed a “Government Bond Option Transaction” for purposes of such definitions.  In the event of any inconsistency between those definitions and this Confirmation, this Confirmation will govern.

 

1.           This Confirmation supplements, forms a part of, and is subject to, the 2002 ISDA Master Agreement dated as of the date hereof, as amended and supplemented from time to time (the “Agreement”), between you and us.  All provisions contained in the Agreement govern this Confirmation except as expressly modified below.

 

2.           The terms of the particular Transaction to which this Confirmation relates are as follows:

 

	
I. General Terms

	  
	  	  
	
Trade Date:

	
December 27, 2010

 

	
Effective Date:

	
December 30, 2010

	  	  
	
Option Style:

	
Bermuda

	  	  
	
Option Type:

	
Call

	  	  
	
Buyer:

	
MSIP (“Party A” or the “Buyer”)

	  	  
	
Seller:

	
Step Up Callable Trust Units Series 2010-05 (GS) (“Party B” or the “Seller”)

 

  

1

  

MORGAN STANLEY

 

	  	  
	
Bonds:

	
$5,074,000 principal amount of The Goldman Sachs Group, Inc.,  6.00% Senior Notes due 2020 (CUSIP number 38141E A66)

 

	  	  
	
Premium:

	  
	
Buyer Payment:

	
Commencing the Business Day prior to June 15, 2017 until the earlier of maturity of the Bonds or any Settlement Date, semi-annual payments on each Buyer Payment Date equal to 1.5% per annum times the Notional Amount.

	  	  
	
Seller Payment:

	
Semiannual payments equal to the Notional Amount times (i) 2.375% per annum on each Seller Payment Date up to but excluding June 15, 2014 and (ii) 1.5% per annum on each Seller Payment Date from and including June 15, 2014 to but excluding June 15, 2017.

 

	  	  
	
Notional Amount:

	
$5,074,000.

	  	  
	
Buyer Payment Dates:

	
The Business Day prior to each June 15 and December 15, beginning on the Business Day prior to June 15, 2017.

	  	  
	
Buyer Day Count:

	
30 / 360

	  	  
	
Buyer Business Days:

	
New York, NY

	  	  
	
Seller Payment Dates:

	
Each June 15 and December 15, beginning on the Business Day prior to June 15, 2011 and ending on the earlier of June 15, 2017 and any Settlement Date, subject to adjustment in accordance with the following Business Day Convention.

	  	  
	
Seller Day Count:

	
30 / 360

	  	  
	
Seller Business Days:

	
New York, NY

	  	  
	
Number of Options:

	
5,074

	  	  
	
Option Entitlement:

	
$1,000 of face amount of the Bonds per Option.

	  	  
	
Strike Price:

	
100% of the face amount of the Bonds plus accrued interest.

	  	  
	
Calculation Agent:

	
Party A

	  	  
	
II. Exercise Terms

	  
	  	  
	
Automatic Exercise:

	
Inapplicable

	  	  
	
Exercise Date:

	
December 15, 2011, and the 15th of each March, June, September and December thereafter.

	  	  
	
Multiple Exercise:

	
Not applicable

 

  

2

MORGAN STANLEY

 

  

	  	  
	
Minimum Number of Options:

	
100% of the Number of Options.

	  	  
	
Written Confirmation of Exercise:

	
Applicable. MSIP shall give written exercise notice no later than the Notification Date.

	  	  
	
Notification Date:

	
MSIP may give notice of its intention to exercise the Options on not less than 18 days’ notice.

	  	  
	
Limited Right to Confirm Exercise:

	
Inapplicable

	  	  
	
Expiration Date:

	
March 15, 2020

	  	  
	
Expiration Time:

	
4:00 p.m. New York time

	  	  
	
Exercise Business Days:

	
New York, NY

	  	  
	
III. Settlements:

	  
	  	  
	
Settlement:

	
Physical Settlement.

	  	  
	
Deposit of Bond Payment:

	
Party A must deposit the Bond Payment with the Trustee on the Business Day prior to the Exercise Date.  The Bonds are to be delivered “free” to Party A.

	  	  
	
Settlement Date:

	
The Exercise Date.

	  	  
	
IV. Termination

	  
	  	  
	
Redemption:

	
It will be an Additional Termination Event, with Party B as the sole Affected Party if the Underlying Security Issuer (as defined in the Trust Agreement) effects an early redemption of the Bonds.

For purposes of Section 6(e) of the Agreement, and in lieu of the Early Termination Amount that would otherwise be determined in accordance with the provisions of the Schedule (the “Unmodified Early Termination Amount”), the Early Termination Amount will be equal to the sum of (a) the Unmodified Early Termination Amount and (b) the excess, if any, of the Bond Redemption Price over the sum of the Unit Redemption Price plus the Unmodified Early Termination Amount.

“Unit Redemption Price” means the principal amount of the Units (as defined in the Trust Agreement) plus any accrued and unpaid interest thereon.

“Bond Redemption Price” means the amount received by the Seller from the issuer of the Bonds.

  

3

  

MORGAN STANLEY

 

 

3.           Payments Suspensions.  If any payment with respect to the Underlying Securities is not received by Party B by 10 a.m. (New York City time) on a Party B Payment Date, Party B will not be obligated to pay Party A until the next Business Day that Party B is in receipt of proceeds of such payment prior to 10 a.m. (without interest).  In that circumstance, Party A will have the right to suspend its payments (without interest) until it receives the amounts due to it.  If there is an Underlying Security Default on the Underlying Securities, then all obligations of both parties hereunder shall be reinstated subject to the other provisions of this Agreement.

 

4.           Additional Definitions.  “Trust Agreement” means the trust agreement dated as of the date hereof between MS Structured Asset Corp. and The Bank of New York Mellon.

 

5.           Representations.  Morgan Stanley & Co. Incorporated is acting as agent for both parties but does not guarantee the performance of Party A.

 

6.           Tax Undertaking.  Party A agrees to treat each option hereunder as a call option for United States Federal Income Tax purposes.

 

7.           Account Details.

 

	
Payments to Party A:

	
Citibank, N.A., New York

SWIFT BIC Code: CITIUS33

ABA No.  021 000 089

FAO: Morgan Stanley & Co. International PLC

Account No. 3042-1519

 

	
Operations Contact:

	
Tel  212-761-2457

Fax  212-507-1309

 

	
Payments to Party B:

	
The Bank of New York Mellon

ABA# 021-000-018

GLA# 111-565

F/F/C: TAS# 840603

 

	
Operations Contact:

	
Step Up Callable Trust Units Series 2010-05 (GS)

c/o The Bank of New York Mellon

Barclay Street, 7W

New York, NY 10286

Attn: Dealing & Trading Unit

  

4

  

MORGAN STANLEY

Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Confirmation and returning it to us.

 

	
  

	
Best Regards,

	
  

	
MORGAN STANLEY & CO. INTERNATIONAL plc

	
  

	
BY: /s/Ara Tachdjian

Name: Ara Tachdjian

Title:  Authorized Signatory

 

 

	
  

	
Acknowledged and agreed as of the date first written above:

 

	
  

	
 

Step Up Callable Trust Units Series 2010-05 (GS)

BY:  The Bank of New York Mellon,

solely as Trustee and not in its individual capacity.

 

	
  

	
BY: /s/ Maryann Joseph

Name: Maryann Joseph

Title:   Vice President

 

	
  

	
MORGAN STANLEY & CO. INCORPORATED hereby agrees to and

	
  

	
acknowledges its role as agent for both parties in accordance with

	
  

	
the Schedule to the Agreement.

	
  

	
BY: /s/ In-Young Chase

Name: In-Young Chase

Title: Authorized Signatory

 

 

 

5

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