SECURITIES AND EXCHANGE COMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D/A
(RULE 13d-101)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 4)*
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO
RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE
13d-2(a)
China Yuchai International Limited
----------------------------------
(Name of Issuer)
Common Stock
------------------------------
(Title of Class of Securities)
G210821050
--------------
(CUSIP Number)
Charles F. Niemeth, Esq.
O'Melveny & Myers LLP
30 Rockefeller Plaza
New York, NY 10112
-------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 23, 2003
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box. [ ]
NOTE: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule
13d-7(b) for other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
CUSIP NO. G210821050 13D PAGE 2 of 15 PAGES
- --------------------------------------------------------------------------------
1. NAMES OF REPORTING PERSONS/I.R.S. IDENTIFICATION
NOS. OF ABOVE PERSONS (ENTITIES ONLY)
COOMBER INVESTMENTS LIMITED
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(SEE INSTRUCTIONS) (b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS (SEE INSTRUCTIONS)
AF
- --------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [X]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
BRITISH VIRGIN ISLANDS
- --------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH:
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
-0-
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER
8,601,550
- --------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
8,601,550
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
8,601,550
- --------------------------------------------------------------------------------
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.3%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
- --------------------------------------------------------------------------------
CUSIP NO. G210821050 13D PAGE 3 of 15 PAGES
- --------------------------------------------------------------------------------
1. NAMES OF REPORTING PERSONS/I.R.S. IDENTIFICATION
NOS. OF ABOVE PERSONS (ENTITIES ONLY)
GOLDMAN INDUSTRIAL LTD.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(SEE INSTRUCTIONS) (b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS (SEE INSTRUCTIONS)
AF
- --------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [X]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
BRITISH VIRGIN ISLANDS
- --------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH:
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
-0-
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER
8,601,550
- --------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
8,601,550
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
8,601,550
- --------------------------------------------------------------------------------
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.3%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
- --------------------------------------------------------------------------------
CUSIP NO. G210821050 13D PAGE 4 of 15 PAGES
- --------------------------------------------------------------------------------
1. NAMES OF REPORTING PERSONS/I.R.S. IDENTIFICATION
NOS. OF ABOVE PERSONS (ENTITIES ONLY)
ZHONG LIN DEVELOPMENT COMPANY LIMITED
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(SEE INSTRUCTIONS) (b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS (SEE INSTRUCTIONS)
AF
- --------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [X]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
HONG KONG
- --------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH:
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
-0-
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER
8,601,550
- --------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
8,601,550
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
8,601,550
- --------------------------------------------------------------------------------
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.3%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
- --------------------------------------------------------------------------------
CUSIP NO. G210821050 13D PAGE 5 of 15 PAGES
- --------------------------------------------------------------------------------
1. NAMES OF REPORTING PERSONS/I.R.S. IDENTIFICATION
NOS. OF ABOVE PERSONS (ENTITIES ONLY)
GUANGXI YUCHAI MACHINERY STATE HOLDING COMPANY
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(SEE INSTRUCTIONS) (b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS (SEE INSTRUCTIONS)
AF
- --------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
CHINA
- --------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH:
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
-0-
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER
8,601,550
- --------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
8,601,550
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
8,601,550
- --------------------------------------------------------------------------------
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.3%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
- --------------------------------------------------------------------------------
CUSIP NO. G210821050 13D PAGE 6 of 15 PAGES
- --------------------------------------------------------------------------------
1. NAMES OF REPORTING PERSONS/I.R.S. IDENTIFICATION
NOS. OF ABOVE PERSONS (ENTITIES ONLY)
QIN XIAOCONG
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(SEE INSTRUCTIONS) (b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS (SEE INSTRUCTIONS)
AF
- --------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
CHINA
- --------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH:
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
-0-
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER
8,601,550
- --------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
8,601,550
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
8,601,550
- --------------------------------------------------------------------------------
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.3%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN
- --------------------------------------------------------------------------------
CUSIP NO. G210821050 13D PAGE 7 of 15 PAGES
- --------------------------------------------------------------------------------
1. NAMES OF REPORTING PERSONS/I.R.S. IDENTIFICATION
NOS. OF ABOVE PERSONS (ENTITIES ONLY)
ZHU GUOXIN
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(SEE INSTRUCTIONS) (b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS (SEE INSTRUCTIONS)
AF
- --------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
CHINA
- --------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH:
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
-0-
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER
8,601,550
- --------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
8,601,550
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
8,601,550
- --------------------------------------------------------------------------------
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.3%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN
- --------------------------------------------------------------------------------
CUSIP NO. G210821050 13D PAGE 8 of 15 PAGES
- --------------------------------------------------------------------------------
1. NAMES OF REPORTING PERSONS/I.R.S. IDENTIFICATION
NOS. OF ABOVE PERSONS (ENTITIES ONLY)
YUAN XUCHENG
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(SEE INSTRUCTIONS) (b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS (SEE INSTRUCTIONS)
AF
- --------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
CHINA
- --------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH:
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
-0-
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER
8,601,550
- --------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
8,601,550
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
8,601,550
- --------------------------------------------------------------------------------
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.3%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN
- --------------------------------------------------------------------------------
The Statement on Schedule 13D dated November 13, 2002 filed by
Goldman Industrial Ltd. ("Goldman") and Coomber Investment Limited ("Coomber")
with the United States Securities and Exchange Commission (the "Commission") on
December 16, 2002, as amended by Schedule 13D (Amendment No. 1) filed with the
Commission on June 23, 2003 by Goldman, Coomber, Zhong Lin Development Company
Limited ("Zhong Lin"), Guangxi Yuchai Machinery State Holding Company ("Guangxi
Holding"), Qin Xiaocong, Zhu Guoxin and Yuan Xucheng (collectively, the
"Reporting Persons"), Schedule 13D (Amendment No. 2) filed with the Commission
by the Reporting Persons on July 9, 2003, and Schedule 13D (Amendment No. 3)
filed with the Commission by the Reporting Persons on August 5, 2003, is hereby
amended with respect to the items set forth below. Capitalized terms used
without definition in this Schedule 13D (Amendment No. 4) have the meanings set
forth in the Reporting Persons' Schedule 13D (Amendment No. 1).
ITEM 2. IDENTITY AND BACKGROUND
The information appearing in this Item is hereby amended by the
addition of the following information:
On November 6, 2003, Mr. Yuan Xucheng was named as a director of
Coomber. For information regarding Mr. Xucheng's address, principal occupation
or employment, the organizations in which his principal occupation or employment
is carried on and certain arrangements pursuant to which he holds shares of
Goldman for the benefit of other Reporting Persons, see Item 2 of Schedule 13D
(Amendment No. 1) filed by the Reporting Persons on June 23, 2003.
ITEM 4. PURPOSE OF TRANSACTION
The information appearing in this Item is hereby amended by the
addition of the following information:
In their Schedule 13D (Amendment No. 1), the Reporting Persons
indicated that they might seek to acquire additional shares of
Common Stock and that, if successful in causing the Special Share in
the Company to be invalidated and in acquiring a majority of the
Company's Common Stock (or such number of shares less than an
absolute majority of the Company's Common Stock that would enable
them to control the Company), the Reporting Persons might engage or
cause the Company to engage in one or more of certain actions or
transactions of the type referred to in paragraphs (a) through (j)
of Item 4 of Schedule 13D. In addition, the Reporting Persons stated
that they
intend continuously to review all aspects of their
investment in CYI, including CYI's business, operations,
financial results and condition and prospects, the
market price of the Common Stock, conditions in the
securities market generally, and general economic and
industry conditions and, based on their continuing
review of these and other relevant factors, the
9
Reporting Persons may engage in such other actions
referred to or contemplated by paragraphs (a) through
(j) of this Item 4 as they deem appropriate.
After a review of the matters described above, including the current
market price for the Company's Common Stock, and in light of the
settlement reached between the Company and GYMCL to settle the
pending disputes between them, as reported in Schedule 13D
(Amendment No. 3), the Reporting Persons have concluded that the
prepaid forward sale transaction described in Item 6 of this
Schedule 13D (Amendment No. 4) would not be inconsistent with their
ultimate intention to cause ownership and control of GYMCL to
conform with Chinese law. As further described in Item 6, on the
settlement date under each forward sale confirmation, the Reporting
Persons will have the option to determine whether to settle the
forward sale by delivery of shares of Common Stock or cash. This
feature of the prepaid forward sale enables the Reporting Persons to
realize a significant monetary amount from their holdings of the
Company's Common Stock while generally retaining voting rights with
respect to the shares of Common Stock subject to the forward sale
arrangements during the three-year term of the forward sale, other
than as described in Item 5. The Reporting Persons will make their
settlement election in light of the circumstances prevailing and all
relevant factors in existence at the time of settlement. The
Reporting Persons may enter into one or more additional forward sale
transactions from time to time on comparable or similar terms, may
cease their dispositions of Common Stock at any time, and may
subsequently determine to acquire or reacquire additional shares of
the Company's Common Stock or other equity securities of the
Company. The amount, timing and conditions of any additional forward
sale transactions or other such possible sales or purchases of the
Common Stock or other equity securities of the Company will depend
on the Reporting Persons' continuing assessment of all relevant
factors including, without limitation, the Company's business and
prospects, the market price of the Company's Common Stock and stock
market conditions generally, economic conditions generally and in
the automotive engine business, and the status of negotiations
regarding implementation of transactions contemplated by the
Agreement between the Company and GYMCL or alternative arrangements
acceptable to the parties.
By letter dated December 1, 2003, the Company notified Coomber that
HL Technology Systems Pte Ltd ("HLT") had exercised its demand
registration rights under the Amended and Restated Registration
Rights Agreement of the Company (the "Registration Agreement") and
requested the Company to register for sale with the U.S. Securities
and Exchange Commission (the "Commission") on a continuous or
delayed basis 7,831,169 shares of Common Stock owned by HLT. In
response to such notice, by letter to the Company dated December 4,
2003, Coomber exercised its demand registration rights under the
Registration Agreement and requested that the Company register with
the Commission 4,000,000 shares of Common Stock owned by Coomber for
10
disposition pursuant to forward sale agreements with Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"). On December
12, 2003, the Company filed the required registration statement (the
"Shelf F-3") with the Commission. In addition, on December 15, 2003,
Coomber filed a Notice of Proposed Sale of Securities on Form 144
with the Commission, covering the sale of 4,000,000 shares of Common
Stock. The shares of Common Stock that Coomber will pledge to
Merrill Lynch in connection with the forward sale transactions, as
described in Item 6 below, will be registered under the Shelf F-3,
will be sold by Merrill Lynch in reliance on the exemption from
registration provided by Rule 144 under the Securities Act of 1933,
as amended, or a combination of both, up to 4,000,000 shares.
In the Shelf F-3, the Company stated that if HLT reduces its Common
Stock ownership below 7,290,000 shares, the Special Share held by
HLT will cease to carry any rights, and HLA may as a result cease to
have control over the Company. The Company also stated that
if HLT sells all of the shares being registered for sale
by HLT in this offering, HLT will cease to own any of
our shares and we have been advised that Coomber is
expected to continue to own beneficially approximately
24.3% of our shares. No other shareholder has reported
current beneficial ownership of 5% or more of our shares
of common stock. As a result, at this time we cannot
determine what control arrangements will arise as a
result of this offering, or assess what effect those
control arrangements may have, if any, on our business,
results of operations, financial condition, prospects or
share price.
Coomber believes that it is currently the largest single holder of
Common Stock of the Company. Coomber is presently unable to
determine or assess the potential effects of any sales of Common
Stock by HLT or Coomber's forward sales at this time, including the
effects of such sales on the settlement described in this Schedule
13D (Amendment No. 3) or on the Reporting Persons' ability to engage
or cause the Company to engage in any transactions of the type
described in paragraphs (a) through (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
The information set forth in this Item is hereby amended by the
addition of the following information:
Of the 8,601,550 shares of Common Stock beneficially owned by the
Reporting Persons, Coomber has granted a security interest in
4,000,000 shares to Merrill Lynch in connection with the forward
sale agreements described in Item 6 of this Schedule 13D (Amendment
No. 4). Upon settlement of each such forward sale transaction, the
Reporting Persons may deliver up to a total of such 4,000,000 shares
of Common Stock in satisfaction of Coomber's obligations under the
forward sale agreements. The Reporting Persons will generally
11
continue to have sole voting rights with respect to the pledged
shares during the term of the forward sale. However, Merrill Lynch
may borrow the pledged shares from Coomber in connection with
Merrill Lynch's hedging of its exposure under the forward sale
agreements. Coomber will temporarily cease to have voting rights
with respect to any Common Stock borrowed by Merrill Lynch but will
reacquire such voting rights when Merrill Lynch returns the borrowed
shares to Coomber. If Coomber elects to settle all of its forward
sale transactions by delivery of Common Stock, the Reporting Persons
would beneficially own 4,601,550 shares of Common Stock, or
approximately 13% of the Company's Common Stock.
Each of the Reporting Individuals disclaims any beneficial interest
in the CYI shares reported in this Schedule 13D.
Except for the forward sale transaction described in Item 6 of this
Schedule 13D (Amendment No. 4), none of the Reporting Persons and,
to their knowledge, none of the persons listed in Item 2 of Schedule
13D (Amendment No. 1) has effected any transactions in the Company's
Common Stock in the 60 days preceding the filing of this Schedule
13D (Amendment No. 4).
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIP WITH RESPECT
TO SECURITIES OF THE ISSUER.
The information set forth in this Item is hereby amended by the
addition of the following information:
Pursuant to an ISDA Master Agreement dated as of November 6, 2003
between Coomber and Merrill Lynch (the "Master Agreement") and a
series of confirmations to be entered into between them (each, a
"Confirmation"), Coomber will enter into one or more prepaid forward
sale transactions with Merrill Lynch for up to 4,000,000 shares of
Common Stock. Each Confirmation, together with the Master Agreement,
will constitute a separate forward sale agreement with respect to
the number of shares specified in the Confirmation (the "Number of
Shares"). Pursuant to each Confirmation, Merrill Lynch will pay
Coomber an amount equal to the Number of Shares times either (i)
Merrill Lynch's average execution price for the Common Stock in
trades covered by the Confirmation or (ii) the Bloomberg value
weighted average price for the Common Stock on the trade dates less,
in either case, a negotiated discount (either such undiscounted
price being the "Forward Floor Price" under the relevant
Confirmation). The "Forward Cap Price" in the forward sale
transaction under each Confirmation will be the Forward Floor Price
plus a negotiated (20% to 30%) premium.
Each forward sale will have a maturity date of three years. On the
third anniversary of a forward sale, Coomber will be required to pay
Merrill Lynch an amount that will be determined by reference to the
"Settlement Price" under the applicable Confirmation. The amount
12
payable by Coomber to Merrill Lynch upon maturity of a forward sale
will be equal to the Number of Shares specified in the relevant
Confirmation times one of the following amounts, as the case may be:
(i) if the Settlement Price is less than or equal to the Forward
Floor Price:
the Settlement Price;
(ii) if the Settlement Price is greater than the Forward Floor Price
but less than or equal to the Forward Cap Price:
the Forward Floor Price; or
(iii) if the Settlement Price is greater than the Forward Cap Price:
Forward Floor Price + (Settlement Price - Forward
Cap Price).
At Coomber's option, Coomber may settle a forward sale transaction
in cash or by delivery of Common Stock having a value (determined by
reference to the Settlement Price) equal to the amount due on the
settlement date for such forward sale. If Coomber elects to settle a
forward sale in cash, the Settlement Price will be the average of
the closing prices for the Common Stock on the New York Stock
Exchange during the 10 consecutive trading days prior to the
maturity date of the forward sale. If Coomber elects to settle a
forward sale by delivery of Common Stock, the Settlement Price will
be the closing price of the Common Stock on the maturity date of
such forward sale. Coomber's right to deliver Common Stock in
settlement of the forward sale is subject to certain conditions,
including the absence of any legal or contractual restrictions on
transfer of, or registration or qualification requirements with
respect to, the Common Stock to be delivered. In addition, if
Coomber elects to settle the forward sale by delivery of Common
Stock, Coomber will be required to pay Merrill Lynch a physical
settlement fee equal to the fees, commissions or markdowns that
Merrill Lynch would receive or charge if Coomber were selling the
Common Stock for cash to or through Merrill Lynch.
The terms of each forward sale, including the Number of Shares, the
Forward Floor Price and the Forward Cap Price are subject to
adjustments (to be calculated by Merrill Lynch) or the forward sale
may be cancelled upon occurrence of events specified in the forward
sale documents, including certain dividends and distributions by the
Company and mergers and similar transactions involving the Company.
In addition, Coomber may be obligated to pay Merrill Lynch certain
increases in Merrill Lynch's borrowing and hedging costs during the
term of the forward sale.
The foregoing description of the terms of the forward sales is
qualified in its entirety by reference to the complete provisions of
the Confirmations, a form of which has been filed as an Exhibit to
this Schedule 13D (Amendment No. 4), including the provisions of the
2000 ISDA Definitions and the 2002 ISDA Equity Derivatives
13
Definitions, in each case as published by the International Swaps
and Derivatives Association, Inc., which definitions will be
incorporated into the Confirmations.
ITEM 7 MATERIAL TO BE FILED AS EXHIBITS
Exhibit Document
------- --------
21 ISDA Master Agreement dated as of November 6, 2003
between Coomber Investments Limited and Merrill
Lynch, Pierce, Fenner & Smith, Incorporated.
22 Form of Prepaid Forward Confirmation between
Coomber Investments Limited and Merrill Lynch,
Pierce, Fenner & Smith, Incorporated.
14
SIGNATURES
After reasonable inquiry and to the best of his or her knowledge and
belief, each of the undersigned certifies that the information in this statement
is true, complete and correct.
Dated: December 23, 2003
COOMBER INVESTMENTS LIMITED
By: /s/ QIN XIAOCONG
-----------------------------------------
Name: Qin Xiaocong
Title: Director
GOLDMAN INDUSTRIAL LTD.
By: /s/ QIN XIAOCONG
-----------------------------------------
Name: Qin Xiaocong
Title: Director
ZHONG LIN DEVELOPMENT COMPANY LIMITED
By: /s/ QIN XIAOCONG
------------------------------------------
Name: Qin Xiaocong
Title: Director
GUANGXI YUCHAI MACHINERY STATE HOLDING COMPANY
By: /s/ WANG JIANMING
----------------------------------------------
Name: Wang Jianming
Title: Chairman
/s/ QIN XIAOCONG
----------------------------------------------
Qin Xiaocong
/s/ ZHU GUOXIN
----------------------------------------------
Zhu Guoxin
/s/ YUAN XUCHENG
----------------------------------------------
Yuan Xucheng
15
Exhibit 21
(Multicurrency--Cross Border)
ISDA(R)
International Swaps and Derivatives Association, Inc.
MASTER AGREEMENT
dated as of November 6, 2003
MERRILL LYNCH PIERCE, FENNER & SMITH INCORPORATED and COOMBER
INVESTMENTS LIMITED (the "Counterparty") have entered and/or anticipate entering
into one or more transactions (each a "Transaction") that are or will be
governed by this Master Agreement, which includes the schedule (the "Schedule"),
and the documents and other confirming evidence (each a "Confirmation")
exchanged between the parties confirming those Transactions.
Accordingly, the parties agree as follows:--
1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the Schedule will
have the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions
of the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in
each Confirmation to be made by it, subject to the other provisions of
this Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the
relevant Confirmation or otherwise pursuant to this Agreement, in
freely transferable funds and in the manner customary for payments in
the required currency. Where settlement is by delivery (that is, other
than by payment), such delivery will be made for receipt on the due
date in the manner customary for the relevant obligation unless
otherwise specified in the relevant Confirmation or elsewhere in this
Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject
to (1) the condition precedent that no Event of Default or Potential
Event of Default with respect to the other party has occurred and is
continuing, (2) the condition precedent that no Early Termination Date
in respect of the relevant Transaction has occurred or been effectively
designated and (3) each other applicable condition precedent specified
in this Agreement.
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made
without any deduction or withholding for or on account of any Tax
unless such deduction or withholding is required by any applicable law,
as modified by the practice of any relevant governmental revenue
authority, then in effect. If a party is so required to deduct or
withhold, then that party ("X") will:--
(1) promptly notify the other party ("Y") of such
requirement;
(2) pay to the relevant authorities the full amount
required to be deducted or withheld (including the full amount
required to be deducted or withheld from any additional amount
paid by X to Y under this Section 2(d)) promptly upon the
earlier of determining that such deduction or withholding is
required or receiving notice that such amount has been
assessed against Y;
(3) promptly forward to Y an official receipt (or a
certified copy), or other documentation reasonably acceptable
to Y, evidencing such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in
addition to the payment to which Y is otherwise entitled under
this Agreement, such additional amount as is necessary to
ensure that the net amount actually received by Y (free and
clear of Indemnifiable Taxes, whether assessed against X or Y)
will equal the full amount Y would have received had no such
deduction or withholding been required. However, X will not be
required to pay any additional amount to Y to the extent that
it would not be required to be paid but for:--
(A) the failure by Y to comply with or perform
any agreement contained in Section 4(a)(i), 4(a)(iii)
or 4(d); or
2
(B) the failure of a representation made by Y
pursuant to Section 3(f) to be accurate and true
unless such failure would not have occurred but for
(I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or
after the date on which a Transaction is entered into
(regardless of whether such action is taken or
brought with respect to a party to this Agreement) or
(II) a Change in Tax Law.
(ii) Liability. If:--
(1) X is required by any applicable law, as modified by
the practice of any relevant governmental revenue authority,
to make any deduction or withholding in respect of which X
would not be required to pay an additional amount to Y under
Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed
directly against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount
of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--
(a) Basic Representations.
(i) Status. It is duly organized and validly existing under the
laws of the jurisdiction of its organization 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 authorize 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;
3
(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,
reorganization, 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 or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) Payer Tax Representation. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(e) is accurate and true.
(f) Payee Tax Representations. Each representation specified in the
Schedule as being made by it for the purpose of this Section 3(f) is accurate
and true.
4. Agreements
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) Furnish Specified Information. It will deliver to the other party or,
in certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation
specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any
Confirmation; and
(iii) upon reasonable demand by such other party, any form or
document that may be required or reasonably requested in writing in
order to allow such other party or its Credit Support Provider to make
a payment under this Agreement or any applicable Credit Support
Document without any deduction or withholding for or on account of any
Tax or with such deduction or withholding at a reduced rate (so long as
the completion, execution or submission of such form or document would
not materially prejudice the legal or commercial position of the party
in receipt of such demand), with any such form or document to be
accurate and completed in a manner reasonably satisfactory to such
other party and to be executed and to be delivered with any reasonably
required certification,
4
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 Authorizations. 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, organized, managed and
controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make, when
due, any payment under this Agreement or delivery under Section 2(a)(i)
or 2(e) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is
given to the party;
(ii) Breach of Agreement. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to make
any payment under this Agreement or delivery under Section 2(a)(i) or
2(e) or to give notice of a Termination Event or any agreement or
obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied
with or performed by the party in accordance with this Agreement if
such failure is not remedied on or before the thirtieth day after
notice of such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider
of such party to comply with or perform any agreement or
obligation to be complied with or performed by it in
accordance with any Credit Support Document if such failure is
continuing after any applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of
this Agreement (in either case other than in accordance with
its terms) prior to the satisfaction of all obligations of
such party under each Transaction to which such Credit Support
Document relates without the written consent of the other
party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
5
(iv) Misrepresentation. A representation (other than a
representation under Section 3(e) or (f)) made or repeated or deemed to
have been made or repeated by the party or any Credit Support Provider
of such party in this Agreement or any Credit Support Document proves
to have been incorrect or misleading in any material respect when made
or repeated or deemed to have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit
Support Provider of such party or any applicable Specified Entity of
such party (1) defaults under a Specified Transaction and, after giving
effect to any applicable notice requirement or grace period, there
occurs a liquidation of, an acceleration of obligations under, or an
early termination of, that Specified Transaction, (2) defaults, after
giving effect to any applicable notice requirement or grace period, in
making any payment or delivery due on the last payment, delivery or
exchange date of, or any payment on early termination of, a Specified
Transaction (or such default continues for at least three Local
Business Days if there is no applicable notice requirement or grace
period) or (3) disaffirms, disclaims, repudiates or rejects, in whole
or in part, a Specified Transaction (or such action is taken by any
person or entity appointed or empowered to operate it or act on its
behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule
as applying to the party, the occurrence or existence of (1) a default,
event of default or other similar condition or event (however
described) in respect of such party, any Credit Support Provider of
such party or any applicable Specified Entity of such party under one
or more agreements or instruments relating to Specified Indebtedness of
any of them (individually or collectively) in an aggregate amount of
not less than the applicable Threshold Amount (as specified in the
Schedule) which has resulted in such Specified Indebtedness becoming,
or becoming capable at such time of being declared, due and payable
under such agreements or instruments, before it would otherwise have
been due and payable or (2) a default by such party, such Credit
Support Provider or such Specified Entity (individually or
collectively) in making one or more payments on the due date thereof in
an aggregate amount of not less than the applicable Threshold Amount
under such agreements or instruments (after giving effect to any
applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such
party or any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has instituted
against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors'
rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or
petition instituted or presented against it, such proceeding
or petition (A) results in a judgment of insolvency or
bankruptcy or the entry of an order for relief or the making
of an order for its winding-up or liquidation or (B) is not
dismissed, discharged, stayed or restrained in each case
within 30 days of the institution or presentation thereof; (5)
has a resolution passed for its winding-up, official
management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or becomes
subject to the appointment of an administrator, provisional
liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its
assets; (7) has a secured party take possession of all or
substantially all its assets or has a distress, execution,
attachment, sequestration or other legal process levied,
enforced or sued on or against all or substantially all its
assets and such secured party maintains possession, or any
such process is not dismissed, discharged, stayed or
restrained, in each case within 30 days thereafter; (8) causes
or is subject to any event with respect to it which, under the
applicable laws of any jurisdiction, has an analogous effect
to any of the events specified in clauses (1) to (7)
(inclusive); or (9) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in,
any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer:--
6
(1) the resulting, surviving or transferee entity fails
to assume all the obligations of such party or such Credit
Support Provider under this Agreement or any Credit Support
Document to which it or its predecessor was a party by
operation of law or pursuant to an agreement reasonably
satisfactory to the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to
extend (without the consent of the other party) to the
performance by such resulting, surviving or transferee entity
of its obligations under this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
the event is specified in (i) below, a Tax Event if the event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified in (iii) below,
and, if specified to be applicable, a Credit Event Upon Merger if the event is
specified pursuant to (iv) below or an Additional Termination Event if the event
is specified pursuant to (v) below:--
(i) Illegality. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into,
or due to the promulgation of, or any change in, the interpretation by
any court, tribunal or regulatory authority with competent jurisdiction
of any applicable law after such date, it becomes unlawful (other than
as a result of a breach by the party of Section 4(b)) for such party
(which will be the Affected Party):--
(1) to perform any absolute or contingent obligation to
make a payment or delivery or to receive a payment or delivery
in respect of such Transaction or to comply with any other
material provision of this Agreement relating to such
Transaction; or
(2) to perform, or for any Credit Support Provider of
such party to perform, any contingent or other obligation
which the party (or such Credit Support Provider) has under
any Credit Support Document relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority,
or brought in a court of competent jurisdiction, on or after the date
on which a Transaction is entered into (regardless of whether such
action is taken or brought with respect to a party to this Agreement)
or (y) a Change in Tax Law, the party (which will be the Affected
Party) will, or there is a substantial likelihood that it will, on the
next succeeding Scheduled Payment Date (1) be required to pay to the
other party an additional amount in respect of an Indemnifiable Tax
under Section 2(d)(i)(4) (except in respect of interest under Section
2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount
is required to be deducted or withheld for or on account of a Tax
(except in respect of interest under Section 2(e), 6(d)(ii) or 6(e))
and no additional amount is required to be paid in respect of such Tax
under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A)
or (B));
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be required to
pay an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has
been deducted or withheld for or on account of any Indemnifiable Tax in
respect of which the other party is not required to pay an additional
amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in
either case as a result of a party consolidating or amalgamating with,
or merging with or into, or transferring all or substantially all its
assets to, another entity (which will be the Affected Party) where such
action does not constitute an event described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity of
X consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and
such action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting, surviving or
transferee entity is materially weaker than that of X, such Credit
Support Provider or such Specified Entity, as the case may be,
immediately prior to such action (and, in such event, X or its
successor or transferee, as appropriate, will be the Affected Party);
or
7
(v) Additional Termination Event. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as applying,
the occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also constitutes
an Illegality, it will be treated as an Illegality and will not constitute an
Event of Default.
6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event
of Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as
the other party may reasonably require.
(ii) Transfer to Avoid Termination Event. If either an Illegality
under Section 5(b)(i)(1) or a Tax Event occurs and there is only one
Affected Party, or if a Tax Event Upon Merger occurs and the Burdened
Party is the Affected Party, the Affected Party will, as a condition to
its right to designate an Early Termination Date under Section
6(b)(iv), use all reasonable efforts (which will not require such party
to incur a loss, excluding immaterial, incidental expenses) to transfer
within 20 days after it gives notice under Section 6(b)(i) all its
rights and obligations under this Agreement in respect of the Affected
Transactions to another of its Offices or Affiliates so that such
Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days
after the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be
subject to and conditional upon the prior written consent of the other
party, which consent will not be withheld if such other party's
policies in effect at such time would permit it to enter into
transactions with the transferee on the terms proposed.
(iii) Two Affected Parties. If an Illegality under Section
5(b)(i)(1) or a Tax Event occurs and there are two Affected Parties,
each party will use all reasonable efforts to reach agreement within 30
days after notice thereof is given under Section 6(b)(i) on action to
avoid that Termination Event.
(iv) Right to Terminate. If:--
(1) a transfer under Section 6(b)(ii) or an agreement
under Section 6(b)(iii), as the case may be, has not been
effected with respect to all Affected Transactions within 30
days after an Affected Party gives notice under Section
6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit
Event Upon Merger or an Additional Termination Event occurs,
or a Tax Event Upon Merger occurs and the Burdened Party is
not the Affected Party,
8
either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a
Tax Event or an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the
case of a Credit Event Upon Merger or an Additional Termination Event
if there is only one Affected Party may, by not more than 20 days
notice to the other party and provided that the relevant Termination
Event is then continuing, designate a day not earlier than the day such
notice is effective as an Early Termination Date in respect of all
Affected Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following
the occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving
details of the relevant account to which any amount payable to it is to
be paid. In the absence of written confirmation from the source of a
quotation obtained in determining a Market Quotation, the records of
the party obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation.
(ii) Payment Date. An amount calculated as being due in respect of
any Early Termination Date under Section 6(e) will be payable on the
day that notice of the amount payable is effective (in the case of an
Early Termination Date which is designated or occurs as a result of an
Event of Default) and on the day which is two Local Business Days after
the day on which notice of the amount payable is effective (in the case
of an Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well
as after judgment) in the Termination Currency, from (and including)
the relevant Early Termination Date to (but excluding) the date such
amount is paid, at the Applicable Rate. Such interest will be
calculated on the basis of daily compounding and the actual number of
days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss," and a payment method,
either the "First Method" or the "Second Method." If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method," as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from
an Event of Default:--
(1) First Method and Market Quotation. If the First
Method and Market Quotation apply, the Defaulting Party will
pay to the Non-defaulting Party the excess, if a positive
number, of (A) the sum of the Settlement Amount (determined by
the Non-defaulting Party) in respect of the Terminated
Transactions and the Termination Currency Equivalent of the
Unpaid Amounts owing to the Non-defaulting Party over (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to
the Defaulting Party.
9
(2) First Method and Loss. If the First Method and Loss
apply, the Defaulting Party will pay to the Non-defaulting
Party, if a positive number, the Non-defaulting Party's Loss
in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second
Method and Market Quotation apply, an amount will be payable
equal to (A) the sum of the Settlement Amount (determined by
the Non-defaulting Party) in respect of the Terminated
Transactions and the Termination Currency Equivalent of the
Unpaid Amounts owing to the Non-defaulting Party less (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to
the Defaulting Party. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if
it is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss
apply, an amount will be payable equal to the Non-defaulting
Party's Loss in respect of this Agreement. If that amount is a
positive number, the Defaulting Party will pay it to the
Non-defaulting Party; if it is a negative number, the
Non-defaulting Party will pay the absolute value of that
amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from
a Termination Event:--
(1) One Affected Party. If there is one Affected Party,
the amount payable will be determined in accordance with
Section 6(e)(i)(3), if Market Quotation applies, or Section
6(e)(i)(4), if Loss applies, except that, in either case,
references to the Defaulting Party and to the Non-defaulting
Party will be deemed to be references to the Affected Party
and the party which is not the Affected Party, respectively,
and, if Loss applies and fewer than all the Transactions are
being terminated, Loss shall be calculated in respect of all
Terminated Transactions.
(2) Two Affected Parties. If there are two Affected
Parties:--
(A) if Market Quotation applies, each party will
determine a Settlement Amount in respect of the
Terminated Transactions, and an amount will be
payable equal to (I) the sum of (a) one-half of the
difference between the Settlement Amount of the party
with the higher Settlement Amount ("X") and the
Settlement Amount of the party with the lower
Settlement Amount ("Y") and (b) the Termination
Currency Equivalent of the Unpaid Amounts owing to X
less (II) the Termination Currency Equivalent of the
Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine
its Loss in respect of this Agreement (or, if fewer
than all the Transactions are being terminated, in
respect of all Terminated Transactions) and an amount
will be payable equal to one-half of the difference
between the Loss of the party with the higher Loss
("X") and the Loss of the party with the lower Loss
("Y").
If the amount payable is a positive number, Y will pay it to
X; if it is a negative number, X will pay the absolute value
of that amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies
in respect of a party, the amount determined under this Section 6(e)
will be subject to such adjustments as are appropriate and permitted by
law to reflect any payments or deliveries made by one party to the
other under this Agreement (and retained by such other party) during
the period from the relevant Early Termination Date to the date for
payment determined under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation
applies an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the
loss of bargain and the loss of protection against future risks and
except as otherwise provided in this Agreement neither party will be
entitled to recover any additional damages as a consequence of such
losses.
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7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable law,
any obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
(b) Judgments. To the extent permitted by applicable law, if any judgment
or order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
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9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of
each Transaction from the moment they agree to those terms (whether
orally or otherwise). A Confirmation shall 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 or by an exchange of electronic messages on an electronic
messaging system, which in each case will be sufficient for all
purposes to evidence a binding supplement to this Agreement. The
parties will specify therein or through another effective means that
any such counterpart, telex or electronic message constitutes a
Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power
or privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. Offices; Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying, each party
that enters into a Transaction through an Office other than its head or home
office represents to the other party that, notwithstanding the place of booking
office or jurisdiction of incorporation or organization of such party, the
obligations of such party are the same as if it had entered into the Transaction
through its head or home office. This representation will be deemed to be
repeated by such party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
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11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document to
which the Defaulting Party is a party or by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.
12. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the
date it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that
transmission is received by a responsible employee of the recipient in
legible form (it being agreed that the burden of proving receipt will
be on the sender and will not be met by a transmission report generated
by the sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas)
or the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that
electronic message is received, unless the date of that delivery (or
attempted delivery) or that receipt, as applicable, is not a Local
Business Day or that communication is delivered (or attempted) or
received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given
and effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating
to this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to the
non-exclusive jurisdiction of the courts of the State of New York and
the United States District Court located in the Borough of Manhattan in
New York City, if this Agreement is expressed to be governed by the
laws of the State of New York; and
(ii) waives any objection which it may have at any time to the
laying of venue of any Proceedings brought in any such court, waives
any claim that such Proceedings have been brought in an inconvenient
forum and further waives the right to object, with respect to such
Proceedings, that such court does not have any jurisdiction over such
party.
13
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent
(if any) specified opposite its name in the Schedule to receive, for it and on
its behalf, service of process in any Proceedings. If for any reason any party's
Process Agent is unable to act as such, such party will promptly notify the
other party and within 30 days appoint a substitute process agent acceptable to
the other party. The parties irrevocably consent to service of process given in
the manner provided for notices in Section 12. Nothing in this Agreement will
affect the right of either party to serve process in any other manner permitted
by law.
(d) Waiver of Immunities. Each party irrevocably waives, to the fullest
extent permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the grounds
of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement:--
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:--
(a) in respect of obligations payable or deliverable (or which would have
been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of
either party from and after the date (determined in accordance with Section
6(d)(ii)) on which that amount is payable, the Default Rate;
(c) is respect of all other obligations payable or deliverable (or which
would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-default Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
14
"consent" includes a consent, approval, action, authorization, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organized, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
15
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated organized, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:--
16
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference
to any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the 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 thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
17
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts .
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined by the party obliged to
make the determination under Section 6(e) or, if each party is so obliged, it
shall be the average of the Termination Currency Equivalents of the fair market
values reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By: /s/ KERI PEACOCK
------------------------------------
Name: Keri Peacock
Title:
Date: November 6, 2003
COOMBER INVESTMENTS LIMITED
By: /s/ WANG JIANMING
------------------------------------
Name: Wang Jianming
Title: Authorized Person
Date: November 6, 2003
By: /s/ QIN XIACONG
------------------------------------
Name: Qin Xiacong
Title: Director
Date: November 6, 2003
18
SCHEDULE
to the
ISDA Master Agreement
dated as of
November 6, 2003
between
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
("Party A")
and
COOMBER INVESTMENTS LIMITED
("Party B")
Part 1.
Termination Provisions
In this Agreement:
(a) The "Cross Default" provisions of Section 5(a)(vi) will apply to Party
A and to Party B. "Threshold Amount" means, for Party A, U.S.
$100,000,000, and for Party B, U.S. $500,000.
(b) "Termination Currency" means United States Dollars.
Part 2.
Documents to be delivered are:
- ------------------------------------------------------------------------------------------------------
Party Required Form/Document/ Date by which to be Covered by Section
to deliver Certificate Delivered 3(d) Representation
Document
======================================================================================================
Party B Certificate or other documents Upon the execution of this Yes.
evidencing the authority of the Agreement.
party entering into this
Agreement and any
Confirmation.
- ------------------------------------------------------------------------------------------------------
Party B Letter of Representations in Upon execution of this Yes.
substantially the form of Agreement.
Exhibit A.
- ------------------------------------------------------------------------------------------------------
Part 3.
Miscellaneous
(a) Addresses for Notices: For the purpose of Section 12(a) of this
Agreement:
Address for notices or communications to Party A:
Address:, 4 World Financial Center, North Tower FL 5
New York, NY 10080
Attention: Swap Group Telephone No.: 212 449-6577
Address for notices of communications to Party B: Unless provided below, as
specified in the applicable Confirmation:
Address: COUNTERPARTY NAME
COUNTERPARTY ADDRESS
Attention: ____________________ Telephone No.: ____________________
(b) Process Agent. For the purpose of Section 13(c):
Party A appoints as its Process Agent: Not Applicable.
Party B appoints as its Process Agent: Not Applicable, unless specified.
19
(c) Calculation Agent. The Calculation Agent is Party A.
(d) Credit Support Document. Details of any Credit Support Document:
Party A: Not Applicable
Party B: 1) The Cash Management Account Agreement ("CMA") between Party
A and Party B; and 2) the Credit Support Annex ("CSA") which supplements, forms
part of and is subject to this Agreement, annexed hereto as Exhibit B. In the
event of any inconsistency between the CSA and the CMA, the CSA shall govern.
(e) Governing Law and Jurisdiction. This Agreement will be governed by and
construed in accordance with the laws of the State of New York without reference
to choice of law doctrine.
(f) Arbitration. Each party agrees that all controversies which may arise
under this Agreement, including but not limited to those involving any
Transaction or the construction, performance, or breach of this Agreement shall
be determined by arbitration. Any arbitration under this Agreement shall be
conducted only before The New York Stock Exchange, Inc. ("NYSE"), The American
Stock Exchange, Inc. ("ASE"), or an Arbitration Facility provided by any other
exchange ("Other Exchanges"), or The National Association of Securities Dealers,
Inc. ("NASD"), and in accordance with its arbitration rules then in force. Party
B may elect in the first instance whether arbitration shall be conducted before
the NYSE, the ASE, Other Exchanges, or the NASD, but if Party B fails to make
such election, by registered letter or telegram addressed to Party A before the
expiration of five days after receipt of a written request from Party A to make
such election, then Party A may make such election. Judgment upon the award of
the arbitration may be entered in any court, state or federal, having
jurisdiction. Party A and Party B understand and agree that: (A) arbitration is
final and binding on the parties; (B) each party is waiving its right to seek
remedies in court, including the right to Jury Trial; (C) pre-arbitration
discovery is generally more limited than and different from court proceedings;
(D) the arbitrator's award is not required to include factual findings or legal
reasoning and any Party's right to appeal or to seek modification of rulings by
the arbitrators is strictly limited; and (E) the panel of arbitrators will
typically include a minority of arbitrators who were or are affiliated with the
securities industry.
(g) Payments on Early Termination. For purposes of Section 6(e) of the
Agreement, Market Quotation and the Second Method shall apply.
Part 4.
Other Provisions
(1) Transfer. Notwithstanding the provisions of Section 7, Party A may
assign its rights and delegate its obligations under any Transaction, in whole
or in part, to any affiliate (an "Assignee") of ML & Co., effective (the
"Effective Date") upon delivery to Party B of both (a) an executed acceptance
and assumption by the Assignee (an "Assumption") of the transferred obligations
of Party A under the Transaction(s) (the "Transferred Obligations"); and (b) an
executed guarantee (the "Guarantee") of ML & Co., of the Transferred
Obligations. On the Effective Date, (a) Party A shall be released from all
obligations and liabilities arising under the Transferred Obligations; and (b)
the Transferred Obligations shall cease to be Transaction(s) under this
Agreement and shall be deemed to be Transaction(s) under the Master Agreement
between Assignee and Party B, provided that, if at such time Assignee and Party
B have not entered into a Master Agreement, Assignee and Party B shall be deemed
to have entered into an ISDA form of Master Agreement (Multicurrency-Cross
Border) without any Schedule attached thereto.
(2) Acknowledgment. Party B acknowledges that Party A has a first priority
lien, charge and security interest on all securities and property covered by the
CMA which secures, among other things, Party B's obligations arising under, in
connection with or pursuant to this Agreement or any Transaction contemplated
hereunder.
(3) Applicability of Certain Provisions. If Party B is a natural person,
those provisions relating solely to non natural persons shall not apply to Party
B.
(4) References. Whenever the Agreement refers to a party as "it" or "its",
such reference shall be interpreted to also include Party B.
20
EXHIBIT B
---------
Credit Support Annex
--------------------
ISDA(R)
International Swap Dealers Association, Inc.
CREDIT SUPPORT ANNEX
to the Schedule to the
ISDA MASTER AGREEMENT
dated as of November 6, 2003
between
MERRILL LYNCH, PIERCE, and COOMBER INVESTMENTS LIMITED
FENNER & SMITH INCORPORATED
("Party A") ("Party B")
This Annex supplements, forms part of, and is subject to, the above-referenced
Agreement, is part of its Schedule and is a Credit Support Document under this
Agreement with respect to Party B.
Accordingly, the parties agree as follows:
Paragraph 1. Interpretation
(a) Definitions and Inconsistency. Capitalized terms not otherwise defined
herein or elsewhere in this Agreement have the meanings specified pursuant to
Paragraph 12, and all references in this Annex to Paragraphs are to Paragraphs
of this Annex. In the event of any inconsistency between this Annex and the
other provisions of this Schedule, this Annex will prevail, and in the event of
any inconsistency between Paragraph 13 and the other provisions of this Annex,
Paragraph 13 will prevail.
(b) Secured Party and Pledgor . All references in this Annex to the
"Secured Party" will be to either party when acting in that capacity and all
corresponding references to the Pledgor will be to the other party when acting
in that capacity; provided, however, that if Other Posted Support is held by a
party to this Annex, all references herein to that party as the Secured Party
with respect to that Other Posted Support will be to that party as the
beneficiary thereof and will not subject that support or that party as the
beneficiary thereof to provisions of law generally relating to security
interests and secured parties.
Paragraph 2. Security Interest
Each party, as the Pledgor, hereby pledges to the other party, as the Secured
Party, as security for its Obligations and grants to the Secured Party a first
priority continuing security interest in, lien on and right of Set-off against
all Posted Collateral Transferred to or received by the Secured Party hereunder.
Upon the Transfer by the Secured Party to the Pledgor or Posted Collateral, the
security interest and lien granted hereunder on that Posted Collateral will be
released immediately and, to the extent possible, without any further action by
either party.
B-1
Paragraph 3. Credit Support Obligations
(a) Delivery Amount. Subject to Paragraphs 4 and 5, upon demand made by the
Secured Party on or promptly following a Valuation Date, if the Delivery Amount
for that Valuation Date equals or exceeds the Pledgor's Minimum Transfer Amount,
then the Pledgor will Transfer to the Secured Party Eligible Credit Support
having a Value as of the date of Transfer at least equal to the applicable
Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise specified
in Paragraph 13, the "Delivery Amount" applicable to the Pledgor for any
Valuation Date will equal the amount by which:
(i) the Credit Support Amount
exceeds
(ii) the Value as of that Valuation Date of all Posted Credit
Support held by the Secured Party.
(b) Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by the
Pledgor on or promptly following a Valuation Date, if the Return Amount for that
Valuation Date equals or exceeds Secured Party's Minimum Transfer Amount, then
the Secured Party will Transfer to the Pledgor Posted Credit Support specified
by the Pledgor in that demand having a Value as of the date of Transfer as close
as practicable to the applicable Return Amount (rounded pursuant to Paragraph
13). Unless otherwise specified in Paragraph 13, the "Return Amount" applicable
to the Secured Party for any Valuation Date will equal the amount by which:
(i) the Value as of that Valuation Date of all Posted Credit
Support held by the Secured Party
exceeds
(ii) the Credit Support Amount.
"Credit Support Amount" means, unless otherwise specified in Paragraph 13, for
any Valuation Date (i) the Secured Party's Exposure for that Valuation Date plus
(ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any,
minus (iii) all Independent Amounts applicable to the Secured Party, if any,
minus (iv) the Pledgor's Threshold; provided, however, that the Credit Support
Amount will be deemed to be zero whenever the calculation of Credit Support
Amount yields a number less than zero.
Paragraph 4. Conditions Precedent, Transfer Timing, Calculations and
Substitutions
(a) Conditions Precedent. Each Transfer obligation of the Pledgor under
Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii), 5 and
6(d) is subject to the conditions precedent that:
(i) no Event of Default, Potential Event of Default or Specified
Condition has occurred and is continuing with respect to the other
party; and
(ii) no Early Termination Date for which any unsatisfied payment
obligations exist has occurred or been designated as the result of an
Event of Default or Specified Condition with respect to the other
party.
(b) Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless otherwise
specified, if a demand for the Transfer of Eligible Credit Support or Posted
Credit Support is made by the Notification Time, then the relevant Transfer will
be made not later than the close of business on the next Local Business Day; if
a demand is made after the Notification Time, then the relevant Transfer will be
made not later than the close of business on the second Local Business Day
thereafter.
B-2
(c) Calculations. All calculations of Value and Exposure for purposes of
Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation
Time. The Valuation Agent will notify each party (or the other party, if the
Valuation Agent is a party) of its calculations not later than the Notification
Time on the Local Business Day following the applicable Valuation Date (or in
the case of Paragraph 6(d), following the date of calculation.
(d) Substitutions.
(i) Unless otherwise specified in Paragraph 13, upon notice to the
Second Party specifying the items of Posted Credit Support to be
exchanged, the Pledgor may, on any Local Business Day, Transfer to the
Secured Party substitute Eligible Credit Support (the "Substitute
Credit Support"); and
(ii) subject to Paragraph 4(a), the Secured Party will Transfer to
the Pledgor the items of Posted Credit Support specified by the Pledgor
in its notice not later than the Local Business Day following the date
on which the Secured Party receives the Substitute Credit Support,
unless otherwise specified in Paragraph 13 (the "Substitution Date");
provided that the Secured Party will only be obligated to Transfer
Posted Credit Support with a Value as of the date of Transfer of that
Posted Credit Support equal to the Value as of that date of the
Substitute Credit Support.
Paragraph 5. Dispute Resolution
If a party (a "Disputing Party") disputes (I) the Valuation Agent's calculation
of a Delivery Amount or a Return Amount or (II) the Value of any Transfer of
Eligible Credit Support or Posted Credit Support, then (1) the Disputing Party
will notify the other party and the Valuation Agent (if the Valuation Agent is
not the other party) not later than the close of business on the Local Business
Day following (X) the date that the demand is made under Paragraph 3 in case of
(I) above or (Y) the date that the demand is made under Paragraph 3 in the case
of (I) above or (Y) the date of Transfer in the case of (II) above, (2) subject
to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to
the other party not later than the close of business on the Local Business Day
following (X) the date that the demand is made under Paragraph 3 in the case of
(I) above or (Y) the date of Transfer in the case of (II) above, (3) the parties
will consult with each other in an attempt to resolve the dispute and (4) if
they fail to resolve the dispute by the Resolution Time, then:
(i) In the case of a dispute involving a Delivery Amount or Return
Amount, unless otherwise specified in Paragraph 13, the Valuation Agent
will recalculate the Exposure and the Value as of the Recalculation
Date by:
(A) utilizing any calculations of Exposure for the
Transactions (or Swap Transactions) that the parties have
agreed are not in dispute;
(B) calculating the Exposure for the Transactions (or
Swap Transactions) in dispute by seeking four actual
quotations at mid-market from Reference Market-makers for
purposes of calculating Market Quotation, and taking the
arithmetic average of those obtained; provided that if four
quotations are not available for a particular Transaction (or
Swap Transaction), then fewer than four quotations may be used
for that Transaction (or Swap Transaction); and if no
quotations are available for a particular Transaction (or Swap
Transaction), then the Valuation Agent's original calculations
will be used for that Transaction (or Swap Transaction);
(C) utilizing the procedures specified in Paragraph 13
for calculating the Value, if disputed, of Posted Credit
Support.
(ii) In the case of a dispute involving the Value of any Transfer
of Eligible Credit Support or Posted Credit Support the Valuation Agent
will recalculate the Value as of the date of Transfer pursuant to
Paragraph 13.
B-3
Following a recalculation pursuant to this Paragraph, the Valuation Agent will
notify each party (or the other party, if the Valuation Agent is a party) not
later than the Notification Time on the Local Business Day following the
Resolution Time. The appropriate party will, upon demand following that notice
by the Valuation Agent or a resolution pursuant to (3) above and subject to
Paragraphs 4(a) and 4(b), make the appropriate Transfer.
Paragraph 6. Holding and Using Posted Collateral
(a) Care of Posted Collateral. Without limiting the Secured Party's rights
under Paragraph 6(c), the Secured Party will exercise reasonable care to assure
the safe custody of all Posted Collateral to the extent required by applicable
law, and in any event the Secured Party will be deemed to have exercised
reasonable care if it exercises at least the same degree of care as it would
exercise with respect to its own property. Except as specified in the preceding
sentence, the Secured Party will have no duty with respect to Posted Collateral,
including, without limitation, any duty to collect any Distributions, or enforce
or preserve any rights pertaining thereto.
(b) Eligibility to Hold Posted Collateral; Custodians.
(i) General. Subject to the satisfaction of any conditions
specified in Paragraph 13 for holding Posted Collateral, the Secured
Party will be entitled to hold Posted Collateral or to appoint an agent
(a "Custodian") to hold Posted Collateral for the Secured Party. Upon
notice by the Secured Party to the Pledgor of the appointment of a
Custodian, the Pledgor's obligations to make any Transfer will be
discharged by making the Transfer to that Custodian. The holding of
Posted Collateral by a Custodian will be deemed to be the holding of
that Posted Collateral by the Secured Party for which the Custodian is
acting.
(ii) Failure to Satisfy Conditions. If the Secured Party or its
Custodian fails to satisfy conditions for holding Posted Collateral,
then upon a demand made by the Pledgor, the Secured Party will, not
later than five Local Business Days after the demand, Transfer or cause
its Custodian to Transfer all Posted Collateral held by it to a
Custodian that satisfies those conditions or to the Secured Party if it
satisfies those conditions.
(iii) Liability. The Secured Party will be liable for the acts or
omissions of its Custodian to the same extent that the Secured Party
would be liable hereunder for its own acts or omissions.
(c) Use of Posted Collateral. Unless otherwise specified in Paragraph 13
and without limiting the rights and obligations of the parties under Paragraphs
3, 4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting Party or an
Affected Party with respect to a Specified Condition and no Early Termination
Date has occurred or been designated as the result of an Event of Default or
Specified Condition with respect to the Secured Party, then the Secured Party
will, notwithstanding Section 9-207 of the New York Uniform Commercial Code,
have the right to:
(i) sell, pledge, rehypothecate, assign, invest, use, commingle or
otherwise dispose of, or otherwise use in its business any Posted
Collateral it holds, free from any claim or right of any nature
whatsoever of the Pledgor, including any equity or right of redemption
by the Pledgor; and
(ii) register any Posted Collateral in the name of the Secured
Party, its Custodian or a nominee for either.
For purposes of the obligation to Transfer Eligible Credit Support or Posted
Credit Support pursuant to Paragraphs 3 and 5 and any rights or remedies
authorized under this Agreement, the Secured Party will be deemed to continue to
hold all Posted Collateral and to receive Distributions made thereon, regardless
of whether the Secured Party has exercised any rights with respect to any Posted
Collateral pursuant to (i) or (ii) above.
B-4
(d) Distributions and Interest Amount.
(i) Distributions. Subject to Paragraph 4(a), if the Secured Party
receives or is deemed to receive Distributions on a Local Business Day,
it will Transfer to the Pledgor not later than the following Business
Day any Distributions it receives or is deemed to receive to the extent
that a Delivery Amount would not be created or increased by that
Transfer, as calculated by the Valuation Agent (and the date of
calculation will be deemed to be a Valuation Date for this purpose).
(ii) Interest Amount. Unless otherwise specified in Paragraph 13
and subject to Paragraph 4(a), in lieu of any interest, dividends or
other amounts paid or deemed to have been paid with respect to Posted
Collateral in the form of Cash (all of which may be retained by the
Secured Party), the Secured Party will Transfer to the Pledgor at the
times specified in Paragraph 13 the Interest Amount to the extent that
a Delivery Amount would not be created or increased by that Transfer,
as calculated by the Valuation Agent (and the date of calculation will
be deemed to be a Valuation Date for this purpose). The Interest Amount
or portion thereof not Transferred pursuant to this Paragraph will
constitute Posted Collateral in the form of Cash and will be subject to
the security interest granted under Paragraph 2.
Paragraph 7. Events of Default
For purposes of Section 5(a)(iii)(1) of this Agreement, an Event of Default will
exist with respect to a party if:
(i) that party fails (or fails to cause its Custodian) to make,
when due, any Transfer of Eligible Collateral, Posted Collateral or the
Interest Amount, as applicable, required to be made by it and that
failure continues for two Local Business Days after notice of that
failure is given to that party;
(ii) that party fails to comply with any restriction or prohibition
specified in this Annex with respect to any of the rights specified in
Paragraph 6(c) and that failure continues for five Local Business Days
after notice of that failure is given to that party; or
(iii) that party fails to comply with or perform any agreement or
obligation other than those specified in Paragraphs 7(i) and 7(ii) and
that failure continues for 30 days after notice of that failure is
given to that party.
Paragraph 8. Certain Rights and Remedies
(a) Secured Party's Rights and Remedies. If at any time (1) an Event of
Default or Specified Condition with respect to the Pledgor has occurred and is
continuing or (2) an Early Termination Date has occurred or been designated as
the result of an Event of Default or Specified Condition with respect to the
Pledgor, then, unless the Pledgor has paid in full all of its Obligations that
are then due, the Secured Party may exercise one or more of the following rights
and remedies:
(i) all rights and remedies available to a secured party under
applicable law with respect to Posted Collateral held by the Secured
Party;
(ii) any other rights and remedies available to the Secured Party
under the terms of Other Posted Support, if any;
(iii) the right to Set-off any amounts payable by the Pledgor with
respect to any Obligations against any Posted Collateral or the Cash
equivalent of any Posted Collateral held by the Secured Party (or any
obligation of the Secured Party to Transfer that Posted Collateral);
and
B-5
(iv) the right to liquidate any Posted Collateral held by the
Secured Party through one or more public or private sales or other
dispositions with such notice, if any, as may be required under
applicable law, free from any claim or right of any nature whatsoever
of the Pledgor, including any equity or right of redemption by the
Pledgor (with the Secured Party having the right to purchase any or all
of the Posted Collateral to be sold) and to apply the proceeds (or the
Cash equivalent thereof) from the liquidation of the Posted Collateral
to any amounts payable by the Pledgor with respect to any Obligations
in that order as the Secured Party may elect.
Each party acknowledges and agrees that Posted Collateral in the form of
securities may decline speedily in value and is of a type customarily sold on a
recognized market, and, accordingly, the Pledgor is not entitled to prior notice
of any sale of that Posted Collateral by the Secured Party, except any notice
that is required under applicable law and cannot be waived.
(b) Pledgor's Rights and Remedies. If at any time an Early Termination Date
has occurred or been designated as the result of an Event of Default or
Specified Condition with respect to the Secured Party, then (except in the case
of an Early Termination Date relating to less than all Transactions (or Swap
Transactions) where the Secured Party has paid in full all of its obligations
that are then due under Section 6(e) of this Agreement):
(i) the Pledgor may exercise all rights and remedies available to
a Pledgor under applicable law with respect to Posted Collateral held
by the Secured Party;
(ii) the Pledgor may exercise any other rights and remedies
available to the Pledgor under the terms of Other Posted Support, if
any;
(iii) the Secured Party will be obligated immediately to Transfer
all Posted Collateral and the Interest Amount to the Pledgor; and
(iv) to the extent that Posted Collateral or the Interest Amount is
not so Transferred pursuant to (iii) above, the Pledgor may:
(A) Set-off any amounts payable by the Pledgor with
respect to any Obligations against any Posted Collateral or
the Cash equivalent of any Posted Collateral held by the
Secured Party (or any obligation of the Secured Party to
Transfer that Posted Collateral); and
(B) to the extent that the Pledgor does not Set-off under
(iv)(A) above, withhold payment of any remaining amounts
payable by the Pledgor with respect to any Obligations, up to
the Value of any remaining Posted Collateral held by the
Secured Party, until that Posted Collateral is Transferred to
the Pledgor.
(c) Deficiencies and Excess Proceeds. The Secured Party will Transfer to
the Pledgor any proceeds and Posted Credit Support remaining after liquidation,
Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in
full of all amounts payable by the Pledgor with respect to any Obligations; the
Pledgor in all events will remain liable for any amounts remaining unpaid after
any liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b).
(d) Final Returns. When no amounts are or thereafter may become payable by
the Pledgor with respect to any Obligations (except for any potential liability
under Section 2(d) of this Agreement), the Secured Party will Transfer to the
Pledgor all Posted Credit Support and the Interest Amount, if any.
Paragraph 9. Representations
B-6
Each party represents to the other party (which representation will be deemed to
be repeated as of each date on which it, as the Pledgor, Transfers Eligible
Collateral) that:
(i) it has the power to grant a security interest in and lien on
any Eligible Collateral it Transfers as the Pledgor and has taken all
necessary actions to authorize the granting of that security interest
and lien;
(ii) it is the sole owner of or otherwise has the right to Transfer
all Eligible Collateral it Transfers to the Secured Party hereunder,
free and clear of any security interest, lien, encumbrance or other
restrictions other than the security interest and lien granted under
Paragraph 2;
(iii) upon the Transfer of any Eligible Collateral to the Secured
Party under the terms of this Annex, the Secured Party will have a
valid and perfected first priority security interest therein (assuming
that any central clearing corporation or any third-party financial
intermediary or other entity not within the control of the Pledgor
involved in the Transfer of that Eligible Collateral gives the notices
and takes the action required of it under applicable law for perfection
of that interest); and
(iv) the performance by it of its obligations under this Annex will
not result in the creation of any security interest, lien or other
encumbrance on any Posted Collateral other than the security interest
and lien granted under Paragraph 2.
Paragraph 10. Expenses
(a) General. Except as otherwise provided in Paragraphs 10(b) and 10(c),
each party will pay its own costs and expenses in connection with performing its
obligations under this Annex and neither party will be liable for any costs and
expenses incurred by the other party in connection herewith.
(b) Posted Credit Support. The Pledgor will promptly pay when due all
taxes, assessments or charges of any nature that are imposed with respect to
Posted Credit support held by the Secured Party upon becoming aware of the same,
regardless of whether any portion of that Posted Credit Support is subsequently
disposed of under Paragraph 6(c), except for those taxes, assessments and
charges that result from the exercise of the Secured Party's rights under
Paragraph 6(c).
(c) Liquidation/Application of Posted Credit Support. All reasonable costs
and expenses incurred by or on behalf of the Secured Party or the Pledgor in
connection with the liquidation and/or application of any Posted Credit Support
under Paragraph 8 will be payable, on demand and pursuant to the Expenses
Section of this Agreement, by the Defaulting Party or, if there is no Defaulting
Party, equally by the parties.
Paragraph 11. Miscellaneous
(a) Default Interest. A Secured Party that fails to make, when due, any
Transfer of Posted Collateral or the Interest Amount will be obliged to pay the
Pledgor (to the extent permitted under applicable law) an amount equal to
interest at the Default Rate multiplied by the Value of the items of property
that were required to be Transferred, from (and including) the date that the
Posted Collateral or Interest Amount was required to be Transferred to (but
excluding) the date of Transfer of that Posted Collateral or Interest Amount.
This interest will be calculated on the basis of daily compounding and the
actual number of days elapsed.
(b) Further Assurances. Promptly following a demand made by a party, the
other party will execute, deliver, file and record any financing statement,
specific assignment or other document and take any other action that may be
necessary or desirable and reasonably requested by that party to create,
preserve, perfect or validate any security interest or lien granted under
Paragraph 2, to enable that party to exercise or enforce its rights under this
Annex with
B-7
respect to Posted Credit Support or an Interest Amount or to effect or document
a release of a security interest on Posted Collateral or an Interest Amount.
(c) Further Protection. The Pledgor will promptly give notice to the
Secured Party of, and defend against, any suit, action, proceeding or lien that
involves Posted Credit Support Transferred by the Pledgor or that could
adversely affect the security interest and lien granted by it under Paragraph 2,
unless that suit, action, proceeding or lien results from the exercise of the
Secured Party's rights under Paragraph 6(c).
(d) Good Faith and Commercially Reasonable Manner. Performance of all
obligations under this Annex, including, but not limited to, all calculations,
valuations and determinations made by either party, will be made in good faith
and in a commercially reasonable manner.
(e) Demands and Notices. All demands and notices given by a party under
this Annex will be made as specified in the Notices Section of this Agreement,
except as otherwise provided in Paragraph 13.
(f) Specifications of Certain Matters. Anything referred to in this Annex
as being specified in Paragraph 13 also may be specified in one or more
Confirmations or other documents and this Annex will be construed accordingly.
Paragraph 12. Definitions
As used in this Annex:--
"Cash" means the lawful currency of the United States of America.
"Credit Support Amount" has the meaning specified in Paragraph 3.
"Custodian" has the meaning specified in Paragraphs 6(b)(i) and 13.
"Delivery Amount" has the meaning specified in Paragraph 3(a).
"Disputing Party" has the meaning specified in Paragraph 5.
"Distributions" means, with respect to Posted Collateral other than Cash, all
principal, interest and other payments and distributions of cash or other
property with respect thereto, regardless of whether the Secured Party has
disposed of that Posted Collateral under Paragraph 6(c). Distributions will not
include any item of property acquired by the Secured Party upon any disposition
or liquidation of Posted Collateral or, with respect to any Posted Collateral in
the form of Cash, any distributions on that collateral, unless otherwise
specified herein.
"Eligible Collateral" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.
"Eligible Credit Support" means Eligible Collateral and Other Eligible Support.
"Exposure" means for any Valuation Date or other date for which Exposure is
calculated and subject to Paragraph 5 in the case of a dispute, the amount, if
any, that would be payable to a party that is the Secured Party by the other
party (expressed as a positive number) or by a party that is the Secured Party
to the other party (expressed as a negative number) pursuant to Section
6(e)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions)
were being terminated as of the relevant Valuation Time; provided that Market
Quotation will be determined by the Valuation Agent using its estimates at
mid-market of the amounts that would be paid for Replacement Transactions (as
that term is defined in the definition of "Market Quotation").
B-8
"Independent Amount" means, with respect to party, the amount specified as such
for that party in Paragraph 13; if no amount is specified, zero.
"Interest Amount" means, with respect to an Interest Period, the aggregate sum
of the amounts of interest calculated for each day in that Interest Period on
the principal amount of Posted Collateral in the form of Cash held by the
Secured Party on that day, determined by the Secured Party for each such day as
follows:
(x) the amount of Cash on that da y; multiplied by
(y) the Interest Rate in effect for that day; divided by
(z) 360.
"Interest Period" means the period from (and including) the last Local Business
Day on which an Interest Amount was Transferred (or, if no Interest Amount has
yet been Transferred, the Local Business Day on which Posted Collateral in the
form of Cash was Transferred to or received by the Secured Party) to (but
excluding) the Local Business Day on which the current Interest Amount is to be
Transferred.
"Interest Rate" means the rate specified in Paragraph 13.
"Local Business Day," unless otherwise specified in Paragraph 13, has the
meaning specified in the Definitions Section of this Agreement, except that
references to a payment in clause (b) thereof will be deemed to include a
Transfer under this Annex.
"Minimum Transfer Amount" means, with respect to a party, the amount specified
as such for that party in Paragraph 13; if no amount is specified, zero.
"Notification Time" has the meaning specified in Paragraph 13.
"Obligations" means, with respect to a party, all present and future obligations
of that party under this Agreement and any additional obligations specified for
that party in Paragraph 13.
"Other Eligible Support" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.
"Other Posted Support" means all Other Eligible Support Transferred to the
Secured Party that remains in effect for the benefit of that Secured Party.
"Pledgor" means either party, when that party (i) receives a demand for or is
required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has
Transferred Eligible Credit Support under Paragraph 3(a).
"Posted Collateral" means all Eligible Collateral, other property,
Distributions, and all proceeds thereof that have been Transferred to or
received by the Secured Party under this Annex and not Transferred to the
Pledgor pursuant to Paragraph 3(b), 4(d)(ii) or 6(d)(i) or released by the
Secured Party under Paragraph 8. Any Interest Amount or portion thereof not
Transferred pursuant to Paragraph 6(d)(ii) will constitute Posted Collateral in
the form of Cash.
"Posted Credit Support" means Posted Collateral and Other Posted Support.
"Recalculation Date" means the Valuation Date that gives rise to the dispute
under Paragraph 5; provided, however, that if a subsequent Valuation Date occurs
under Paragraph 3 prior to the resolution of the dispute, then the
"Recalculation Date" means the most recent Valuation Date under Paragraph 3.
B-9
"Resolution Time" has the meaning specified in Paragraph 13.
"Return Amount" has the meaning specified in Paragraph 3(b).
"Secured Party" means either party, when that party (i) makes a demand for or is
entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds
or is deemed to hold Posted Credit Support.
"Specified Condition" means, with respect to a party, any event specified as
such for that party in Paragraph 13.
"Substitute Credit Support" has the meaning specified in Paragraph 4(d)(i).
"Substitution Date" has the meaning specified in Paragraph 4(d)(ii).
"Threshold" means, with respect to a party, the amount specified as such for
that party in Paragraph 13; if no amount is specified, zero.
"Transfer" means, with respect to any Eligible Credit Support, Posted Credit
Support or Interest Amount, and in accordance with the instructions of the
Secured Party, Pledgor or Custodian, as applicable:
(i) in the case of Cash, payment or delivery by wire transfer into
one or more bank accounts specified by the recipient;
(ii) in the case of certificated securities that cannot be paid or
delivered by book-entry, payment or delivery in appropriate physical
form to the recipient or its account accompanied by any duly executed
instruments of transfer, assignments in blank, transfer tax stamps and
any other documents necessary to constitute a legally valid transfer to
the recipient;
(iii) in the case of securities that can be paid or delivered in
book-entry, the giving of written instruments to the relevant
depository institution or other entity specified by the recipient,
together with a written copy thereof to the recipient, sufficient if
complied with to result in a legally effective transfer of the relevant
interest to the recipient; and
(iv) in the case of Other Eligible Support or Other Posted Support,
as specified in Paragraph 13.
"Valuation Agent" has the meaning specified in Paragraph 13.
"Valuation Date" means each date specified in or otherwise determined pursuant
to Paragraph 13.
"Valuation Percentage" means, for any item of Eligible Collateral, the
percentage specified in Paragraph 13.
"Valuation Time" has the meaning specified in Paragraph 13.
"Value" means for any Valuation Date or other date for which Value is
calculated, and subject to Paragraph 5 in the case of a dispute, with respect
to:
(i) Eligible Collateral or Posted Collateral that is:
(A) Cash, the amount thereof; and
(B) a security, the bid price obtained by the Valuation
Agent multiplied by the applicable Valuation Percentage, if
any;
B-10
(ii) Posted Collateral that consists of items that are not
specified as Eligible Collateral, zero; and
(iii) Other Eligible Support and Other Posted Support, as specified
in Paragraph 13.
Paragraph 13. Elections and Variables
(a) Security Interest for "Obligations". The term "Obligations" as used in
this Annex includes the following additional obligations: None.
(b) Credit Support Obligations.
(i) Delivery Amount, Return Amount and Credit Support Amount.
(A) "Delivery Amount" has the meaning specified in
Paragraph 3(a).
(B) "Return Amount" has the meaning specified in
Paragraph 3(b).
(C) "Credit Support Amount" has the meaning specified in
Paragraph 3(b).
(ii) Eligible Collateral. The following items will qualify as
"Eligible Collateral":
Valuation
Percentage
(A) Cash currency denominated in U.S. Dollars; 100%
(B) negotiable debt obligations issued by the U.S. 98%
Treasury Department having a remaining
maturity at issuance of not more than one year;
(C) negotiable debt obligations issued by the U.S. 98%
Treasury Department having a remaining
maturity at issuance of more than one year but not
more than ten years;
(D) negotiable debt obligations issued by the U.S. 95%
Treasury Department having a remaining
maturity at issuance of more than ten years;
(E) Any other collateral acceptable to Secured Party As determined by the
in its sole discretion. Secured Party.
(iii) Other Eligible Support. There shall be no "Other Eligible
Support" for either Party A or Party B.
(iv) Thresholds.
(A) "Independent Amount" for Party B means, with respect
to each Transaction, any amount specified as such in a
Confirmation governing such Transaction.
(B) "Threshold" for the Pledgor means zero.
(C) "Minimum Transfer Amount" means, with respect to a
party, $100,000; provided, that if an Event of Default has
occurred and is continuing with respect to Party B, the
Minimum Transfer Amount with respect to Party B shall be zero.
B-11
(D) "Rounding". The Delivery Amount and the Return Amount
will be rounded up and down respectively to the nearest
integral multiple of $10,000.
(c) Valuation and Timing.
(i) "Valuation Agent" means the Secured Party.
(ii) "Valuation Date" means (a) the Trade Date of each Transaction,
if either party has an Independent Amount greater than zero for that
Transaction, and (b) each other Local Business Day designated as a
Valuation Date by notice given by one party to the other no later than
the Notification Time on the Local Business Day before the Valuation
Date so designated.
(iii) "Valuation Time" means the close of business in the city of
the Valuation Agent on the Local Business Day preceding the Valuation
Date or date of calculation, as applicable; provided that the
calculations of Value and Exposure will be made as of approximately the
same time on the same date.
(iv) "Notification Time" means by 10:00 a.m., New York time, on a
Local Business Day.
(d) Conditions Precedent and Secured Party's Rights and Remedies. Each of
the following Termination Events will be a "Specified Condition" for the
Pledgor: None.
(e) Substitution.
(i) "Substitution Date" has the meaning specified in Paragraph
4(d)(ii).
(ii) "Consent." The Pledgor must obtain the Secured Party's consent
for any substitution pursuant to Paragraph 4(d).
(f) Dispute Resolution.
(i) "Resolution Time" means 1:00 p.m., New York Time, on the fifth
Local Business Day following the date on which notice is given that
gives rise to a dispute under Paragraph 5.
(ii) "Value." For the purpose of Paragraph 5(i)(C) and 5(ii), the
Value of Eligible Collateral other then Cash will be calculated as
follows:
the sum of (i) (x) the arithmetic mean of the closing bid
prices quoted on the relevant date of three nationally recognized
principal market makers (which may include an affiliate of Party A) for
such security chosen by the Valuation Agent multiplied by the
applicable Valuation Percentage or (y) if no quotations are available
from such principal market makers on the relevant date, the arithmetic
mean of the closing bid prices on the next preceding date multiplied by
the applicable Valuation Percentage plus (ii) the accrued interest, if
any, on such security (except to the extent Transferred to a party
pursuant to any applicable provision of this Agreement or included in
the applicable price referred to in (i) of this clause) as of such
date.
(iii) "Alternative." Not Applicable.
(g) Holding and Using Posted Collateral.
(i) "Eligibility to Hold Posted Collateral; Custodians." Secured
Party and its Custodian will be entitled to hold Posted Collateral
pursuant to Paragraph 6(b), provided that the following conditions are
satisfied:
(1) The Secured Party: The Secured Party is not a
Defaulting Party; and
(2) The Custodian: The Custodian is either: (a) an
affiliate of the Secured Party or (b) a bank or trust company
having total assets of at least US $10,000,000,000.
(ii) "Use of Posted Collateral" The provisions of Paragraph 6(c)
will apply.
(h) Distributions and Interest Amount.
(i) "Interest Rate." The Interest Rate will be the rate per annum
equal to the overnight Federal Funds Rate for each day cash is held by
the Secured Party as reported in Federal Reserve Publication H.15-519.
B-12
(ii) "Transfer of Interest Amount." The Transfer of the Interest
Amount will be made on the last Local Business Day of each calendar
month and on any Local Business Day that Posted Collateral in the form
of Cash is Transferred to the Pledgor pursuant to Paragraph 3(b).
(iii) "Alternative to Interest Amount." Not Applicable.
(i) Additional Representations. Not Applicable.
(j) "Other Eligible Support and Other Posted Support."
(i) "Value" with respect to Other Eligible Support and Other
Posted Support means: Not Applicable.
(ii) "Transfer" with respect to Other Eligible Support and Other
Posted Support means: Not Applicable.
(k) Demands and Notices. All demands, specifications and notices made by a
party to this Annex will be made pursuant to the Notices Section of this
Agreement.
(l) Addresses for Transfers. Not Applicable.
(m) Agreement as to Single Secured Party and Pledgor. Party A and Party B
agree that, notwithstanding anything to the contrary in the recital to this
Annex, Paragraph 1(b) or Paragraph 2 or the definitions in Paragraph 12, (a) the
term "Secured Party" as used in this Annex means only Party A, (b) the term
"Pledgor" as used in this Annex means only Party B, (c) only Party B makes the
pledge and grant in Paragraph 2, the acknowledgment in the final sentence of
Paragraph 8(a) and the representations in Paragraph 9 and (d) only Party B will
be required to make Transfers of Eligible Credit Support hereunder. Party A and
Party B further agree that, notwithstanding anything to the contrary in
Paragraph 7, this Annex will constitute a Credit Support Document only with
respect to Party B, and the Events of Default in Paragraph 7 will apply only to
Party B.
B-13
Exhibit 22
[COMPANY LOGO OMITTED] Merrill Lynch Merrill Lynch, Pierce, Fenner &
Smith Incorporated
4 World Financial Center, 5th Floor
Confirmation of Prepaid Variable Share New York, NY 10080
Forward
Dated: [ ] MLPFS Ref: [ ]
To: Coomber Investments Limited ("Counterparty")
CP_ADDRESS1
CP_CITY, CP_STATE CP_ZIPCODE
cc: CP_CONTACT
E-mail: CP_CEMAIL
From: Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPFS")
Tel: (212) 449-8675
Fax: (646) 805-2780
- --------------------------------------------------------------------------------
Dear Sir/Madam:
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the above referenced transaction entered into between
Counterparty and MLPFS, on the Trade Date specified below (the "Transaction").
This Confirmation constitutes a "Confirmation" as referred to in the Master
Agreement specified below.
The definitions and provisions contained in the 2000 ISDA Definitions (the "Swap
Definitions") and the 2002 ISDA Equity Derivatives Definitions (the "Equity
Definitions" and together with the Swap Definitions, the "Definitions") in each
case as published by the International Swaps and Derivatives Association, Inc.,
are incorporated into this Confirmation and are available to Counterparty upon
request. In the event of any inconsistency between the Swap Definitions and the
Equity Definitions, the Equity Definitions will govern and in the event of any
inconsistency between the Definitions and this Confirmation, this Confirmation
will govern.
This Confirmation supplements, forms part of, and is subject to, the Master
Agreement (including the Schedule thereto and the Credit Support Annex
incorporated therein), dated as of [ ] 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.
The terms of the particular Transaction to which this Confirmation relates are
as follows:
General Terms:
Trade Date: [ ]
Seller: Counterparty
Buyer: MLPFS
Shares: The common stock of China
Yuchai International Limited
(Security symbol: "CYD")
Number of Shares: [ ]
Forward Price: The Settlement Price, subject
to the Forward Floor Price
and the Forward Cap Price.
Prepayment Amount: [ ]
1
Prepayment Date: [ ]
Forward Floor Price: [ ]
Forward Cap Price: [ ]
Exchange: NYSE
Related Exchange: All Exchanges
Valuation:
Valuation Time: The Scheduled Closing Time of
the Exchange.
Valuation Date: [ ]
Settlement Terms:
Settlement Method Election: Applicable
Electing Party: Counterparty
Settlement Method Election Date: On or before the date that is
thirty (30) days prior to the
Valuation Date.
Default Settlement Method: Physical Settlement, if
Conditions to Physical
Settlement are satisfied.
Cash Settlement Provisions:
Settlement Price: The average price per Share
closing prices on the
Exchange on the ten (10)
consecutive Exchange Business
Days ending on the Valuation
Date.
Forward Cash Settlement
Amount: An amount determined by the
Calculation Agent equal to
the product of the Number of
Shares multiplied by one of
the following, as the case
may be:
(i) if the Settlement Price
is less than or equal
to the Forward Floor
Price:
the Settlement Price,
(ii) if the Settlement
Price is greater than
the Forward Floor Price
but less than or equal
to the Forward Cap
Price:
the Forward Floor
Price; or
(iii) if the Settlement Price
is greater than the
Forward Cap Price:
[Forward Floor Price +
(Settlement Price - Forward
Cap Price)]
Cash Settlement
Payment Date: Three (3) Exchange Business
Days following the Valuation
Date.
Settlement Currency: USD
2
Physical Settlement Provisions:
Settlement Date: Three (3) Exchange Business
Days following the Valuation
Date.
Number of Shares
to be Delivered: An amount determined by the
Calculation Agent equal to
the following, as the case
may be:
(i) if the Settlement Price
is less than or equal
to the Forward Floor
Price:
the Number of Shares,
(ii) if the Settlement Price
is greater than the
Forward Floor Price but
less than or equal to
the Forward Cap Price,
the product of (a) the
Number of Shares
multiplied by (b) the
following fraction:
Forward Floor Price
-------------------; or
Settlement Price
(iii) if the Settlement Price
is greater than the
Forward Cap Price the
product of (a) the
Number of Shares
multiplied by (b) the
following fraction:
Forward Floor Price + (Settlement Price - Forward Cap Price)
------------------------------------------------------------
Settlement Price
Conditions to Physical
Settlement: Notwithstanding anything
contained herein to the
contrary, unless all of the
provisions in Section 9.11 of
the Equity Definitions are
satisfied and the Shares to
be delivered are the Pledged
Shares described below, as
determined by the Calculation
Agent, Cash Settlement shall
apply to this Transaction.
Physical Settlement Fee: Counterparty will pay to
MLPFS a Physical Settlement
Fee on the Settlement Date
equal to any fees,
commissions or markdowns that
MLPFS would receive or charge
if Counterparty were selling
the Shares for cash to or
through MLPFS, as determined
by MLPFS.
Dividends:
Notwithstanding anything to the contrary in Article 10 of the Equity
Definitions, Counterparty shall pay to the MLPFS the Dividend Amount on the
Dividend Payment Date.
Dividend Amount: An amount equal to the
product of (i) 100% of the
gross cash dividend per Share
relating to each date the
Shares trade ex-dividend on
the Exchange during the
Dividend Period; multiplied
by (ii) the Number of Shares.
Dividend Period: The period from but excluding
the Trade Date to and
including the Valuation Date.
Dividend Payment Date: Paid when received by a U.S.
shareholder of record.
3
Share Adjustments:
Method of Adjustment: Calculation Agent Adjustment
Extraordinary Events:
Consequences of Merger Events:
Share-for-Share: Modified Calculation Agent
Adjustment
Share-for-Other: Cancellation and Payment
Share-for-Combined: Component Adjustment
Determining Party: The Calculation Agent
Tender Offer: Applicable
Consequences of Tender Offers:
Share-for-Share: Modified Calculation Agent
Adjustment
Share-for-Other: Cancellation and Payment
Share-for-Combined: Component Adjustment
Determining Party: The Calculation Agent
Nationalization, Insolvency or Delisting: Cancellation and Payment;
provided that the provisions
of Section 12.6(a)(iii) of
the Equity Definitions are
amended to provide that
"Delisting" means that the
Exchange announces that
pursuant to the rules of such
Excahnge, the Shares cease
(or will cease) to be listed,
traded or publicly quoted on
the Exchange for any reason
(other than a Merger Event or
Tender Offer) and the other
terms of the definition of
"Delisting" contained in
Section 12.6(a)(iii) are not
applicable.
Determining Party: The Calculation Agent
Additional Disruption Events:
Change in Law: Applicable; provided that the
following shall be added to
the definition of Change in
Law in Section 12.9(a)(ii) of
the Equity Definitions after
"under" and before "such" in
the eighth line thereof:
"or in initially hedging,
maintaining a hedge on,
or unwinding a hedge in
respect of"
Failure to Deliver: Applicable
Insolvency Filing: Applicable
Loss of Stock Borrow: Applicable
Maximum Stock
Loan Rate: 3%
Increased Cost of Stock Borrow: Applicable
4
Initial Stock
Loan Rate: 1%; provided that (i) any
Price Adjustment will be made
to reflect the change in the
stock loan rate from the
Trade Date Stock Loan Rate,
not the Initial Stock Loan
Rate, and (ii) paragraph
12.9(b)(v) of the Equity
Definitions shall be amended
by substituting "Trade Date
Stock Loan Rate" for "Initial
Stock Loan Rate" in
subparagraphs (X) and (Y).
Trade Date Stock Loan Rate
means 0%.
Determining Party: The Calculation Agent
For the purposes of Loss of Stock Borrow and Increased Cost of Stock
Borrow, the Stock Loan Rate at any time shall be the amount equal to
the relevant overnight USD-LIBOR-BBA rate, less the interest rate
received by the Hedging Party, or plus the interest rate paid by the
Hedging Party, as the case may be, in respect of cash collateral that
the Hedging Party is required to post in connection with any stock loan
arrangement with a stock lender for this Transaction ("Stock Loan"),
plus the borrow fee, if any, under the Stock Loan.
The Hedging Party in respect of this Transaction shall be MLPFS.
Calculation Agent: MLPFS
Non-Reliance: Applicable
Agreements and Acknowledgments
Regarding Hedging Activities: Applicable
Additional Acknowledgments: Applicable
Governing law: The laws of the State of New
York (without reference to
choice of law doctrine).
Notices: All notices under this
Confirmation will be in
English.
Collateral:
Independent Amount: Independent Amount with respect to
Counterparty and this Transaction under the
Credit Support Annex which forms part of the
Agreement (the "CSA") means Shares in an
amount equal to the Number of Shares (the
"Pledged Shares").
Eligible Collateral: The Pledged Shares will constitute Eligible
Collateral with respect to this Transaction
with a Valuation Percentage of 100%. No
substitution of the Pledged Shares once
deposited is allowed.
Exposure: This Transaction will be disregarded for
purposes of determining the Secured Party's
Exposure under the CSA.
Rehypothecation or
borrowing by MLPFS: MLPFS may rehypothecate, borrow or otherwise
use the Pledged Shares as allowed in
Paragraph 6(c) of the CSA at any time
immediately after the Trade Date ("Use by
MLPFS"). In anticipation of an announced
vote being solicited from holders of the
Shares, Counterparty may deliver written
notice to MLPFS requesting that MLPFS return
any Pledged Shares then subject to Use by
MLPFS. Counterparty shall deliver such
request at least five Scheduled Trading Days
prior to the date that Counterparty requests
that the Use by MLPFS be terminated. MLPFS
shall use commercially reasonable efforts to
locate Shares to borrow in order to allow
for the termination of Use by MLPFS, but
Counterparty acknowledges that MLPFS is
under no obligation to cause such
termination and may not be able to locate
5
alternative Shares to borrow to allow for
such termination. Counterparty further
acknowledges and agrees that any Pledged
Shares delivered to the pledge account as
contemplated herein shall remain Pledged
Shares subject to the CSA and shall be
eligible for Use by MLPFS after the date a
holder of such Pledged Shares is eligible to
vote such Pledged Shares or such vote is
cancelled. To the extent that MLFPS has to
borrow Shares in order to hedge its
exposures under this Transaction when MLPFS
does not have Use by MLPFS of the Shares,
Loss of Stock Borrow and Increased Cost of
Stock Borrow shall be applicable to this
Transaction.
Representations of
Counterparty: In addition to the acknowledgments and
agreements contained in Article 13 of the
Equity Definitions, Counterparty represents
that it:
(a) The Counterparty (i)has such knowledge
and experience in financial and business
affairs as to be capable of evaluating the
merits and risks of entering into the
Transaction; (ii) qualifies as an
"accredited investor" under Regulation D of
the Securities Act of 1933, as amended (the
"Securities Act"); (iii) has consulted with
its own legal, financial, accounting and tax
advisors in connection with the Transaction;
(iv) is entering into the Transaction for a
bona fide business purpose to hedge an
existing position; (v) acknowledges that in
return for downside protection against a
decline in the market price of the Shares
below the Forward Floor Price, Counterparty
is foregoing the upside value of an increase
in the market price of the Shares above the
Forward Cap Price; and (vi) in exchange for
prepayment of the purchase price under the
Transaction, Counterparty agrees to
physically deliver the Shares to MLPFS on
the Settlement Date (unless Counterparty
elects Cash Settlement in the manner
specified herein).
(b) Neither the Counterparty nor any of its
affiliates is in possession of any material
non-public information regarding the Issuer.
(c) Counterparty does not know or have any
reason to believe that the Issuer has not
complied with the reporting requirements
contained in Rule 144(c) under the
Securities Act.
(d) Counterparty shall comply with the
reporting and other requirements of Section
13 and Section 16 of the Securities Exchange
Act of 1934 relating to this Transaction.
(e) Neither the Counterparty nor any person
who would be considered to be the same
"person" (as such term is used in Rule
144(a)(2) under the Securities Act of 1933,
as amended (the "Securities Act")), has sold
any Shares (or security entitlements in
respect thereof) or hedged (through swaps,
options, short sales or otherwise) any long
position in the Shares (or security
entitlements in respect thereof) during the
preceding three (3) months prior to the
Trade Date of this Transaction except as
otherwise disclosed to MLPFS. For the
purposes of this paragraph and paragraphs
(f) and (g), Shares shall be deemed to
include securities convertible into or
exchangeable or exercisable for Shares and
any other security or instrument that would
be subject to aggregation under Rule 144(e)
under the Securities Act.
(f) Counterparty covenants that it will send
to MLPFS via facsimile a copy of each filing
under Section 13 or 16 of the Exchange Act
relating to this Transaction concurrently
with filing or transmission for filing, as
the case may be, of such form to or with the
Securities and Exchange Commission (the
"SEC").
(g) The Pledged Shares are currently
eligible for public resale by the
Counterparty pursuant to Rule 144 under the
Securities Act. The Counterparty
acknowledges and agrees that (i) the
entering into of the Transaction will
6
constitute a sale of the Pledged Shares for
purposes of Rule 144, (ii) the Counterparty
has not taken and will not take any action
that would cause such sale to exceed the
volume limitation of Rule 144(e), (iii) the
Counterparty has not taken and will not take
any action that could cause the sale made
pursuant to this Confirmation to fail to
meet all applicable requirements of Rule 144
and (iv) the Counterparty will transmit a
Form 144 for filing with the SEC. The
Counterparty covenants that it has provided
to MLPFS a copy of each Form 144
concurrently with the filing or transmission
for filing of such form to or with the SEC.
The Counterparty agrees that the Pledged
Shares will be treated as securities that
are neither restricted nor control
securities in transactions for the account
of MLPFS and therefore are available for
resale without registration under the
Securities Act and will cause the issuer of
the Pledged Shares to treat the Pledged
Shares accordingly.
(h) Counterparty will immediately notify
MLPFS upon obtaining knowledge of the
occurrence of any event that would
constitute an Event of Default, a Potential
Event of Default or a Potential Adjustment
Event.
(i) The parties acknowledge and agree that
in the event of an Early Termination Date,
the amount payable under the Agreement will
be a cash amount calculated as described
therein and that the deliveries specified
with respect to the Transaction will no
longer apply. In the event of such an Early
Termination Date, the parties acknowledge
that if the Counterparty cannot satisfy such
cash amount then owing, then MLPFS may
foreclose on the Pledged Shares pursuant to
the terms of the CSA in full satisfaction of
such cash amount then owing.
(j) Counterparty is not as of the Trade
Date, and will not as of the Effective Date
after giving effect to the transactions
contemplated hereby, be insolvent.
(k) Counterparty has no material agreements
and or contracts to which it is a party, by
which it is bound, or by which the Pledged
Shares are bound, that relate to any Pledged
Shares.
(l) Counterparty is not and has not been the
subject of any civil proceeding of a
juridicial or administrative body of
competent jurisdiction that could reasonably
be expected to impair the Counterparty's
ability to perform its obligations under the
Forward Contract.
(m) No director of the Counterparty has a
financial interest in or other relationship
to a party to this Transaction or, if an
interest does exist, appropriate shareholder
approval or ratification has been obtained.
(n) That the documents delivered by
Counterparty to Jun He Law Offices, King and
Wood, Harneys and O'Melveny & Myers LLP in
connection with such firms rendering their
opinions are true and correct copies of the
indicated documents.
(o) Counterparty is not affiliated with any
U.S. company or other U.S. entity having
publicly traded securities.
(p) Counterparty agrees to file as promptly
as possible the documents specified in the
legal opinion provided by Harneys and from
time to time file any other documents and
take any other action requested by MLPFS
that is necessary to preserve or appropriate
for the purpose of preserving the priority
of the secured interests created by the
pledge of the Pledged Shares.
7
(q) The parties hereto intend as follows:
(i) This Transaction to constitute a
"securities contract" as defined in
Section 741(7) of the Bankruptcy Code,
qualifying for the protection under
Section 555 of the Bankruptcy Code.
(ii) A party's right to liquidate the
forward contract as contemplated by the
Transaction and to exercise any other
remedies upon the occurrence of any
Event of Default under the Agreement
with respect to the other party to
constitute a "contractual right" as
defined in the Bankruptcy Code.
(iii) Any cash, securities or other
property provided as performance
assurance, credit, support or collateral
with respect to this Transaction to
constitute "margin payments" as defined
in the Bankruptcy Code.
(iv) All payments for, under or in
connection with this Transaction, all
payments for the Shares and the transfer
of such Shares to constitute "settlement
payments" as defined in the Bankruptcy
Code.
(v) "Bankruptcy Code" means Title 11 of
the United States Bankruptcy Code.
(vi) Upon the execution of this
Confirmation, this Confirmation shall
constitute a "Final Agreement" within
the meaning of the interpretive letter
from the SEC to Goldman, Sachs & Co.
dated December 20, 1999 (the
"Interpretive Letter").
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us by facsimile transmission to telecopier no. 646-805-2780.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By: ________________________________________
Name:
Title:
Accepted and confirmed as of the date first above written,
COOMBER INVESTMENTS LIMITED
By: ________________________________________
Name:
Title:
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