Isda 2002 Master Agreement: Understanding The New Isda Documentation Conference

International Swaps and Derivatives Association, Inc.
UNDERSTANDING THE NEW ISDA

DOCUMENTATION CONFERENCE
ISDA 2002 MASTER AGREEMENT

1984 1985 1986 1987 1989 1990 1991
ISDA Code of 1986 Code - Interest Rate Swap Agreement Cap, Collar Option Revised
Formed SWAPS of SWAPS - Interest Rate and Currency and Floor Addendum Definitions
(Standard Exchange Agreement Addendum (1991
Wording, - Interest Rate and Currency Definitions)
Assumptions Exchange Definitions
and Provisions
for Swaps)
1992 1993 1994 1995

- Master Agreement - User’s Guide to 1992 - Credit Support Annex - User’s Guide to
(Multicurrency-Cross Master Agreements (New York law) Credit Support
Border) & (Local - OTC Bond Option - OTC Single Share Annex (New York law)
Currency-Single Confirmation (Long Form) Option (Physical - Credit Support Annex
Jurisdiction) - Commodity Derivatives Settlement) Confirmation (Transfer-English law)
- U.S. Municipal Definitions (Long Form) - Credit Support Deed
Counterparty - Japanese translation of - Equity Option Definitions (Security Interest-English
Definitions 1992 Master Agreement law)
and Schedule - Standard Terms and
- FX and Currency Conditions for Escrow
Option Definitions Float Transactions
- OTC Equity Index - Credit Support Annex
Option Confirmation (Security Interest Subject to
(Long Form) Japanese Law)
ISDA ® 2003
1996 1997 1998 1999
- 1996 Equity Derivatives Definitions - 1997 Government - 1998 FX and - User’s Guide to Credit
- Credit Support Annex Bond Option Currency Option Support Documents
(Japanese law) Definitions Definitions under English Law
- User’s Guide to Credit Support - EMU Continuity - 1998 Supplement to - User’s Guide to 1998
Annex (Japanese law) Provision 1991 Definitions FX and Currency
- Chinese Character Translation - 1997 Bullion - 1998 Euro Option Definitions
(Traditional and Simplified) of User’s Definitions (long form Definitions - 1999 Credit Derivatives
Guide to 1992 Master Agreements and short form) - EMU Protocol Definitions
- 1996 Representation Regarding - OTC Credit Swap - EMU Guidebook - Y2K Review
Relationship between Parties Confirmation - Guidelines for - 1999 Collateral Review
- ISDA/BBAIRS Bridge Collateral
- ISDA/FRABBA Bridge Practitioners
2000 2001
- 2000 Definitions - Restructuring Supplement to 1999 Credit Derivatives Definitions
- Supplement to 1993 - 2001 Margin Provisions
Commodity Derivatives - User’s Guide to 2001 Margin Provisions
Definitions - 2001 Credit Support Protocol
- Revised Annex A to 1998 - 2001 Euro Protocol
FX and Currency Option - Form of Amendment to 1992 Master Agreements
Definitions - U.S. Payee Tax Representations
- EMU Protocol (Greece) - Supplement to 1999 Credit Derivatives Definitions Relating to Convertible, Exchangeable or
Accreting Obligations
- Supplement to 1999 Credit Derivatives Definitions Relating to Successor and Credit Events
- 2001 Cross-Agreement Bridge
- Chinese Character Translation of 1992 Master Agreement
ISDA ® 2003
2002 and 2003
2002
- 2002 Energy Agreement Bridge
- 2002 Equity Derivatives Definitions
- 2002 Master Agreement
2003
- 2003 Credit Derivatives Definitions
ISDA ® 2003
2002 Master Agreement
Published on 9th January, 2003

Incorporates and refines some of the standard
amendments published in October 2001 as a result
of ISDA’s Strategic Documentation Review
Additional changes reflect developments in
market practice, legislation and litigation
Structure and fundamental protections unchanged
ISDA Agreement Structure (2003)
Credit Support Documents: Confirmations (long form)
offering protection against
credit risk
2001 ISDA Margin Supplement
(incorporating 2001 ISDA Margin
Provisions) 2002 Master Agreement
1995 Credit Support Annex Governs legal and credit relationship
(Transfer-English law) Definitions: for use in documenting
between the parties
Transactions
1994 Credit Support Annex (New Includes representations, events of
York law) 2003 Credit Derivatives Definitions
default/termination events, covenants
2002 Equity Derivatives Definitions
Incorporates Confirmations
1995 Credit Support Deed 2000 Definitions (plus annex)
(Security Interest-English law) Schedule makes elections and
1999 Credit Derivatives Definitions
changes to standard provisions
(plus supplements)
1995 Credit Support Annex 1998 Euro Definitions
(Japanese law)
1998 FX and Currency Option
Definitions (plus revised Annex A)
Confirmations (short form) 1997 Bullion Definitions
Bridges
Incorporate Definitions 1997 Government Bond Option
2002 Energy Agreement Bridge Definitions
Specify economic terms of each
2001 Cross-Agreement Bridge Transaction 1993 Commodity Derivatives
1996 FRABBA Bridge Include Transaction-specific Definitions (as amended by 2000
1996 BBAIRS Bridge modifications Supplement)
ISDA ® 2003
Master Agreements
Master Agreement
Confirmation Confirmation Confirmation

(e.g. interest rate swap) (e.g. credit default swap) (e.g. equity option)
ISDA ® 2003
Basic ISDA Agreement Structure
2002 Master Agreement

plus Schedule
Credit Support Documents
Governs legal and credit relationship of parties
Offering protection against
Includes representations, events of default and covenants credit risk
Incorporates Confirmations
Schedule makes elections and changes to standard provisions
Short Form Confirmations

Incorporate Definitions
Specify economic terms of each Transaction Long Form Confirmations
Include Transaction-specific modifications Specify economic terms of each Transaction
Include Transaction-specific modifications
Definitions
Contain standard terms and definitions for
documenting particular types of Transactions
Preserved:
A sunny side: Sections 1 to 4

A dark side: Sections 5 and 6
A back side: Sections 7 to 13
A far side
Preserved:
3 PILLARS OF THE ISDA MASTER AGREEMENT:
SINGLE AGREEMENT FLAWED ASSET/ CLOSE-OUT NETTING

CONDITIONALITY
Summary of Principal Changes
Events of Default tightened

Close-out Amount in; Market Quotation, Loss, First Method out
Set-off clause introduced
Amendments to Termination Events (including amendments to
Illegality and introduction of Force Majeure Event)
Section 10(a) clarified
Jurisdiction clause updated
Interest and compensation provisions consolidated and refined
Preamble
“dated as of”
“Transactions”
“Confirmations”
Section 1 - Interpretation
Definitions
Inconsistency
Single Agreement
Conditions Precedent
Section 2(a)(iii) - conditions precedent

Standard conditions precedent unchanged
In 2002 Agreement, any additional condition
precedent needs to be “specified in this Agreement to
be a condition precedent for the purpose of this
Section 2(a)(iii)”
Section 2(c) Payment Netting
Gross: $100
Party Party
A Net: $75 B
Gross: $25
Note: payment netting applies to payments...

on the same date
in the same currency
in respect of the same Transaction UNLESS parties elect “Multiple

Transaction Payment Netting” to apply (Part 4(i) of Schedule)
Section 3 - Representations
Basic Representations
Absence of Certain Events
Absence of Litigation (Specified Entities replace Affiliates)
Accuracy of Specified Information
Tax Representations
No Agency (elective)
Additional Representations (specified in Schedule/
Confirmation). See Schedule for “Relationship Between
Parties” representation
Section 4 - Agreements
Furnish Specified Information

Maintain Authorisations
Comply With Laws
Tax Agreement
Payment of Stamp Tax
Section 5(a) - Events of Default
Failure to Pay or Deliver (Section 5(a)(i))

z applies to each party
z Event of Default will occur if:
− a party has failed to pay/deliver
− the other party gives notice of such failure
− such failure is not remedied within one Local Business
Day/Local Delivery Day after notice
z Local Delivery Day
Breach of Agreement; Repudiation of Agreement

(Section 5(a)(ii))
z new coverage for repudiation of the Agreement, a
Confirmation or a Transaction
z 30 day grace period (after notice) applies to Breach of
Agreement
Credit Support Default (Section 5(a)(iii))

z applies to each party and any Credit Support Provider(s)
z new coverage for failure of security interest
Misrepresentation (Section 5(a)(iv))
Default Under Specified Transaction (Section 5(a)(v))

z applies to each party, any Credit Support Provider(s) and any
Specified Entities
z “Specified Transaction” definition includes variety of
transactions under other agreements between:
− each party
− a party and the other party’s Credit Support Provider or
Specified Entity
− one party’s Credit Support Provider or Specified Entity
and the other party’s Credit Support Provider or Specified
Entity
Specified Entities
In Part 1(a) of the Schedule, the parties may elect whether

any entities will be Specified Entities for the purposes of:
Section 5(a)(v) (Default Under Specified Transaction)
Section 5(a)(vi) (Cross-Default)
Section 5(a)(vii) (Bankruptcy)
Section 5(b)(v) (Credit Event Upon Merger)

Default Under Specified Transaction (Section 5(a)(v)) - CONT’D
z definition updated and expanded in 2002 Agreement

z only triggered by delivery failure if such failure results in
acceleration of all transactions outstanding under the
documentation applicable to the Specified Transaction
Cross-Default (Section 5(a)(vi))

z parties elect in Part 1(c) of Schedule whether Section
5(a)(vi) will apply to a party and any Credit Support
Provider(s) and Specified Entities
z “Specified Indebtedness” is defined in Section 14 as “any
obligation …in respect of borrowed money”. Parties can
amend definition in Part 1(c) of Schedule
z Threshold Amount to be specified in Part 1(c) of Schedule
z Clauses (1) and (2) are now aggregated
Think through amendments to Section 5(a)(vi) carefully:

Section 5(a)(vi) will probably continue commonly to be
amended
Section 5(a)(vi) gives the best default event protection a
creditor can obtain vis à vis other creditors
But it is a double-edged sword
Bankruptcy (Section 5(a)(vii))

z applies to each party, any Credit Support Provider(s)
and any Specified Entities
z shortened grace periods
z no grace period where proceedings instituted, or
petition presented by the regulator with primary
jurisdiction over the party
Merger Without Assumption (Section 5(a)(viii))

z applies to each party and any Credit Support
Provider(s)
z now covers broader range of merger events
Section 5(b) - Termination Events
Illegality (Section 5(b)(i))

Force Majeure Event (Section 5(b)(ii))
Tax Event (Section 5(b)(iii))
Section 5(b) - Termination Events
Tax Event Upon Merger (Section 5(b)(iv))
z now covers broader range of merger events
Credit Event Upon Merger (Section 5(b)(v))
z parties elect in Part 1(d) of the Schedule whether Section 5(b)(v)
will apply to a party, any Credit Support Provider(s) and any
Specified Entities
z now covers broader range of merger events and has lower
thresholds
Additional Termination Events (Section 5(b)(vi))
Illegality and Force Majeure Event
How has Illegality changed?

What is Force Majeure Event?
Anticipatory nature
Objectives
Deferral of obligations (Section 5(d))
Hierarchy of Events (Section 5(c))
Limitations:
z only available after giving effect to other
provisions
z must try to overcome force majeure
Tax
No change, except:
z Tax Event Upon Merger broadened
z standard US payee tax representations included
in Schedule
Early Termination - How
Reason Who may terminate

Events of Default
Bankruptcy Non-defaulting Party or Automatic*
Other Non-defaulting Party
Termination Event
Illegality typically either party
Force Majeure Event typically either party
Tax Event Upon Merger Burdened Party
Tax Event Affected Party
Credit Event Upon Merger Non-affected Party
Additional Termination Event Non-affected Party or either party (if
there are two Affected Parties)
2002 Master Agreement Reference: *only applies if elected in Schedule

Sections 6(a) & 6(b)
Early Termination - Effect
Event of Default all Transactions terminated

Credit Event Upon Merger all Transactions terminated
Illegality/Force Majeure Event selective termination of
Affected Transactions
Additional Termination Event all Transactions terminated
(presumption)
Other Termination Events all Affected Transactions
terminated
2002 Master Agreement Reference:

Sections 6(a) & 6(b)
Section 6(a) - Right to Terminate
Following Event of Default
Parties elect in Part 1(e) of the Schedule whether

Automatic Early Termination will apply to a party
Effect of Automatic Early Termination
When should it apply?

Early Termination -
Rights of termination typically granted to either party
Rights of termination typically only exercisable after

expiration of a Waiting Period
Right to terminate less than all Affected Transactions
Transfer to avoid Termination Event no longer applies

to Illegality; does not apply to Force Majeure Event
Section 6(e) -
Payments on Early Termination
Early Termination Amount:
Events of Default:
z sum of the Close-out Amount or Close-out Amounts
determined by the Non-defaulting Party
z plus Unpaid Amounts owed to the Non-defaulting Party on
or before the Early Termination Date
z less Unpaid Amounts owed to the Defaulting Party on or
before the Early Termination Date
Close-out Amount
Single valuation measure

Replaces choice between Market Quotation and Loss
Designed to:
z overcome perceived difficulties associated with
precise procedures of Market Quotation in certain
market conditions; and
z provide more guidance and objectivity than Loss
Close-out Amount
Involves a calculation by a Determining Party of how much

it would cost it (or how much it would be paid) to replace, or
provide the economic equivalent of (a) the material terms of
the Terminated Transaction(s), including the payments and
deliveries by the parties under Section 2(a)(i) that would, but
for the occurrence of the Early Termination Date, have been
required after that date (assuming satisfaction of the
conditions precedent in Section 2(a)(iii)) and (b) the option
rights of the parties in respect of the Terminated
Transaction(s)
Close-out Amount
Determining Party must:

z act in good faith
z use commercially reasonable procedures
z in order to obtain a commercially reasonable result
Close-out Amount
May be determined for an individual Terminated

Transaction or a group of Terminated Transactions (so
long as, in aggregate, a Close-out Amount or Close-out
Amounts is/are determined for all Terminated
Transactions)
Determined as of the Early Termination Date or, if that
would not be commercially reasonable, as of such later
date or dates as would be commercially reasonable
Close-out Amount
Definition includes non-exhaustive list of information that may

be taken into account, including:
z quotations (firm or indicative) from one or more third parties
(need not be “leading dealers”) that may take into account the
Determining Party’s creditworthiness and the terms of
relevant documentation between it and the third party
z other external market data - rates, prices, yields, yield curves,
volatilities, spreads, correlations, etc.
z in certain circumstances, information of the same types
available from internal sources
Close-out Amount
But, Determining Party will consider quotations or other external

market data unless it reasonably believes in good faith that
quotations or relevant market data are not readily available or
would produce a result that would not satisfy the standards set
forth in the definition
Hedging costs: losses or costs incurred in (or gain resulting from)
terminating or re-establishing a hedge may be considered by the
Determining Party so long as there is no duplication of amounts
otherwise calculated pursuant to the definition, and so long as it
is commercially reasonable to do so
Close-out Amount
Commercially reasonable procedures may include:

z subject to certain qualifications, application to certain types
of information (not third party quotations) of internal pricing
or valuation models
z application of different valuation methods to different
Terminated Transactions or groups of Terminated
Transactions depending on their type, complexity, size or
number
Section 6(e) -
Termination Events - One Affected Party:
z as for Events of Default, but references to Non-defaulting
Party read as references to Non-affected Party
Section 6(e) -
Termination Events - Two Affected Parties:
z one-half of difference between sum of Close-out Amount or
Close-out Amounts determined by each Affected Party
z plus Unpaid Amounts owed to the party determining the
higher amount
z less Unpaid Amounts owed to the party determining the
lower amount
Section 6(e) -
Termination Events - Mid-Market Events:
z Illegality/Force Majeure Event
z Early Termination Amount determined as above
(depending on whether there is one Affected Party or two
Affected Parties), but, for the purpose of determining a
Close-out Amount or Close-out Amounts, mid-market
quotations/values used
Section 6(e) -
Party that is out-of-the-money on a net basis has to pay

other party, even if other party is a Defaulting Party
No longer an election of “payment method”
The “Second Method” or “full two-way payments”
approach always applies
Early Termination Amount
Section 6(e)(iv):
z failure to pay Early Termination Amount due to
Illegality or Force Majeure Event does not
constitute an Event of Default under Section
5(a)(i) or 5(a)(iii)(1)
z if all outstanding Transactions subsequently
terminated, treated as an Unpaid Amount
Section 6(f) - Set-Off
Early Termination Amount subject to Section 6(f)

Section 6(f) introduces a contractual set-off clause into
the 2002 Agreement:
z based on “Basic Set-off Provision” contained in the
User’s Guide to the 1992 ISDA Master Agreements
z not cross-affiliate
z enforceability of clause not considered in ISDA
netting opinions
The Backside
Section 7 - Transfer
Section 8 - Contractual Currency
Section 9 - Miscellaneous
Section 10 - Offices; Multibranch Parties
Section 11 - Expenses
Section 12 - Notices
Section 13 - Governing Law and Jurisdiction
Section 9(h) - Interest and Compensation
Prior to Early Termination

z Defaulted Payments
z Defaulted Deliveries
z Deferred Payments
z Deferred Deliveries
Following Early Termination
z Unpaid Amounts
z Early Termination Amounts
Interest and Compensation - Examples
The following examples illustrate how, on early

termination, interest is to be taken into account in the
determination of an Unpaid Amount
Section 9(h)(ii)(1) applies for the purpose of determining
an Unpaid Amount:
z interest accrues from (and including) the date the
relevant obligation was (or would have been but for
Section 2(a)(iii) or 5(d)) required to have been
performed to (but excluding) the relevant Early
Termination Date, at the Applicable Close-out Rate
Example 1
Monday Tuesday Friday Monday Monday

February 3 February 4 February 7 February 10 February 17
Swap Party A gives Party B’s Party A Early

Payment Date: notice of failure to pay designates Termination
Party B failure to on Feb. 3 Feb. 17 Date.
owes $150,000 Party B. becomes as the Early
and fails to Event of Termination
to pay. Default. Date.
Under Section 9(h)(ii)(1), interest accrues from (and

including) February 3 to (but excluding) February 17 at
Applicable Close-out Rate
Clause (a)(i) of Applicable Close-out Rate definition:
“in respect of obligations payable or deliverable…by a
Defaulting Party, the Default Rate”
Example 2
Monday Wednesday Thursday Monday Thursday

February 3 February 5 February 13 February 17 February 20
Force Majeure Swap Last day of Party A Early

Event occurs. Payment Date: applicable designates Termination
Party B owes Waiting Period Feb. 20 Date.
$150,000 (Force Majeure as the Early
and does not Event continues). Termination
pay due to Date.
Force Majeure
Event.
Under Section 9(h)(ii)(1), interest accrues from (and including)

February 5 to (but excluding) February 20 at Applicable Close-
out Rate
Clauses (a)(iii) and (a)(iv) of Applicable Close-out Rate
definition:
“(iii) in respect of obligations deferred pursuant to Section 5(d),
if there is no Defaulting Party and for so long as the deferral
period continues, the Applicable Deferral Rate; and
(iv) in all other cases following the occurrence of a
Termination Event (except where interest accrues pursuant to
clause (iii) above), the Applicable Deferral Rate”
Clause (b) of Applicable Deferral Rate definition applies for so

long as the deferral period continues (February 5 to February 13):
z rate offered to prime banks for overnight deposits in the
applicable currency
Clause (c) of Applicable Deferral Rate definition applies for the
rest of the period up to the Early Termination Date:
z rate equal to the arithmetic mean of (i) the rate offered to the
payer for overnight deposits in the applicable currency and (ii)
the rate equal to the relevant payee’s cost of funds (borrowing
rate)
Multibranch
Party B
Swap 1 (London
Head Office)
Party A
(Frankfurt)
Swap 2 Party B
(Paris Branch)
Section 10 - Offices; Multibranch Parties
Refined in 2002 Agreement:

z more sophisticated treatment of branches
z clarification of Section 10(a) (remains elective)
z Section 5(e) - extension of Illegality/Force
Majeure Event provisions
Section 12 - Notices
Different methods of giving notice or other

communication
Notices under Sections 5 and 6
New technology
Section 13 - Governing Law and Jurisdiction
Submission to jurisdiction of the English courts

now generally non-exclusive
Submission to jurisdiction of New York courts
unchanged
Section 14 - Definitions
Consolidated
Helpful definitions included, e.g.:
z Early Termination Amount
z General Business Day
z Non-affected Party
z Termination Currency
Schedule
US payee tax representations

Relationship Between Parties representation
Recording of Conversations
Signature block
2001 Cross-Agreement Bridge
Effectively turns an ISDA Master Agreement into a “master

master” agreement
Designed for inclusion in the Schedule to a 1992 Agreement,
but easily adapted for use with the 2002 Agreement
If a “Bridging Event” occurs, all transactions under
designated “Bridged Agreements” are closed out
Resulting net close-out amounts under the Bridged
Agreements are incorporated into the close-out calculation
under Section 6(e) of the ISDA Master Agreement
ISDA Netting Opinions 2002
1. Australia 15. Hungary 29. Singapore

2. Austria 16. Indonesia 30. South Africa
3. Bahamas 17. Ireland 31. South Korea
4. Belgium 18. Italy 32. Spain
5. Bermuda 19 Japan 33. Sweden
6. B.V.I. 20. Luxembourg 34. Switzerland
7. Canada 21. Malaysia 35. Taiwan
8. Cayman Islands 22. Mexico 36. Thailand
9. Denmark 23. Netherlands Antilles 37. Turkey
10. England 24. New Zealand 38. The Netherlands
11. Finland 25. Norway 39. United States
12. France 26. Philippines
13. Germany 27. Portugal
14. Hong Kong 28. Scotland

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International Swaps and Derivatives Association, Inc.

UNDERSTANDING THE NEW ISDA

ISDA 2002 MASTER AGREEMENT

1992 1993 1994 1995

 Published on 9th January, 2003

Confirmation Confirmation Confirmation

2002 Master Agreement

Short Form Confirmations

 A sunny side: Sections 1 to 4

SINGLE AGREEMENT FLAWED ASSET/ CLOSE-OUT NETTING

 Events of Default tightened

 Section 2(a)(iii) - conditions precedent

Note: payment netting applies to payments...

 in the same currency

 in respect of the same Transaction UNLESS parties elect “Multiple

 Furnish Specified Information

 Failure to Pay or Deliver (Section 5(a)(i))

 Breach of Agreement; Repudiation of Agreement

 Credit Support Default (Section 5(a)(iii))

 Default Under Specified Transaction (Section 5(a)(v))

In Part 1(a) of the Schedule, the parties may elect whether

 Section 5(a)(v) (Default Under Specified Transaction)

 Section 5(a)(vi) (Cross-Default)

 Section 5(a)(vii) (Bankruptcy)

 Section 5(b)(v) (Credit Event Upon Merger)

Default Under Specified Transaction (Section 5(a)(v)) - CONT’D

z definition updated and expanded in 2002 Agreement

 Cross-Default (Section 5(a)(vi))

Think through amendments to Section 5(a)(vi) carefully:

 Bankruptcy (Section 5(a)(vii))

 Merger Without Assumption (Section 5(a)(viii))

 Illegality (Section 5(b)(i))

 How has Illegality changed?

Reason Who may terminate

2002 Master Agreement Reference: *only applies if elected in Schedule

 Event of Default  all Transactions terminated

2002 Master Agreement Reference:

 Parties elect in Part 1(e) of the Schedule whether

 Effect of Automatic Early Termination

 When should it apply?

 Rights of termination typically granted to either party

 Rights of termination typically only exercisable after

 Right to terminate less than all Affected Transactions

 Transfer to avoid Termination Event no longer applies

 Single valuation measure

 Involves a calculation by a Determining Party of how much

 Determining Party must:

 May be determined for an individual Terminated

 Definition includes non-exhaustive list of information that may

 But, Determining Party will consider quotations or other external

 Commercially reasonable procedures may include:

 Party that is out-of-the-money on a net basis has to pay

 Early Termination Amount subject to Section 6(f)

 Prior to Early Termination

 The following examples illustrate how, on early

Monday Tuesday Friday Monday Monday

Swap Party A gives Party B’s Party A Early

 Under Section 9(h)(ii)(1), interest accrues from (and

Monday Wednesday Thursday Monday Thursday

Force Majeure Swap Last day of Party A Early

 Under Section 9(h)(ii)(1), interest accrues from (and including)

 Clause (b) of Applicable Deferral Rate definition applies for so

Published on 9th January, 2003

A sunny side: Sections 1 to 4

Events of Default tightened

Section 2(a)(iii) - conditions precedent

in the same currency

in respect of the same Transaction UNLESS parties elect “Multiple

Furnish Specified Information

Failure to Pay or Deliver (Section 5(a)(i))

Breach of Agreement; Repudiation of Agreement

Credit Support Default (Section 5(a)(iii))

Default Under Specified Transaction (Section 5(a)(v))

Section 5(a)(v) (Default Under Specified Transaction)

Section 5(a)(vi) (Cross-Default)

Section 5(a)(vii) (Bankruptcy)

Section 5(b)(v) (Credit Event Upon Merger)

Cross-Default (Section 5(a)(vi))

Bankruptcy (Section 5(a)(vii))

Merger Without Assumption (Section 5(a)(viii))

Illegality (Section 5(b)(i))

How has Illegality changed?

Event of Default all Transactions terminated

Parties elect in Part 1(e) of the Schedule whether

Effect of Automatic Early Termination

When should it apply?

Rights of termination typically granted to either party

Rights of termination typically only exercisable after

Right to terminate less than all Affected Transactions

Transfer to avoid Termination Event no longer applies

Single valuation measure

Involves a calculation by a Determining Party of how much

Determining Party must:

May be determined for an individual Terminated

Definition includes non-exhaustive list of information that may

But, Determining Party will consider quotations or other external

Commercially reasonable procedures may include:

Party that is out-of-the-money on a net basis has to pay

Early Termination Amount subject to Section 6(f)

Prior to Early Termination

The following examples illustrate how, on early

Under Section 9(h)(ii)(1), interest accrues from (and

Under Section 9(h)(ii)(1), interest accrues from (and including)

Clause (b) of Applicable Deferral Rate definition applies for so

Refined in 2002 Agreement:

Different methods of giving notice or other

Submission to jurisdiction of the English courts

US payee tax representations

Effectively turns an ISDA Master Agreement into a “master