-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KcDwvLekFWFsJBYS9Uq4SfFBqNSFtKmEK0abwXprmgbHOBlnX6Ec/oLO2790Qntt SVuBRq5hSazmhPuDLRuGrw== 0000072741-96-000113.txt : 19960807 0000072741-96-000113.hdr.sgml : 19960807 ACCESSION NUMBER: 0000072741-96-000113 CONFORMED SUBMISSION TYPE: U-1 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19960806 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHEAST UTILITIES CENTRAL INDEX KEY: 0000072741 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 042147929 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1 SEC ACT: 1935 Act SEC FILE NUMBER: 070-08895 FILM NUMBER: 96604259 BUSINESS ADDRESS: STREET 1: 174 BRUSH HILL AVE CITY: WEST SPRINGFIELD STATE: MA ZIP: 01090-0010 BUSINESS PHONE: 2036655000 MAIL ADDRESS: STREET 1: 107 SELDON ST CITY: BERLIN STATE: CT ZIP: 06037-1616 U-1 1 FORM U-1 FILE No. 70- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM U-1 APPLICATION/DECLARATION WITH RESPECT TO INTEREST RATE MANAGEMENT INSTRUMENTS Under THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 NORTHEAST UTILITIES HOLYOKE WATER POWER COMPANY 174 Brush Hill Avenue 1 Canal Street West Springfield, MA 01090-0010 Holyoke, MA 01040 THE CONNECTICUT LIGHT AND PUBLIC SERVICE COMPANY POWER COMPANY OF NEW HAMPSHIRE 107 Selden Street 1000 Elm Street Berlin, CT 06037 Manchester, NH 03101 WESTERN MASSACHUSETTS NORTH ATLANTIC ELECTRIC COMPANY ENERGY CORPORATION 174 Brush Hill Avenue 1000 Elm Street West Springfield, MA 01090-0010 Manchester, NH 03101 (Names of companies filing this application and addresses of principal offices) NORTHEAST UTILITIES (Name of top registered holding company) Jeffrey C. Miller Assistant General Counsel Northeast Utilities Service Company 107 Selden Street Berlin, CT 06037 (Name and address of agent for service) The Commission is requested to mail signed copies of all orders, notices and communications to: Jane P. Seidl David R. McHale Senior Counsel Assistant Treasurer Northeast Utilities Service Northeast Utilities Service Company Company 107 Selden Street 107 Selden Street Berlin, CT 06037 Berlin, CT 06037 I. DESCRIPTION OF PROPOSED TRANSACTIONS (a). Description of Proposed Transactions 1. Northeast Utilities ("NU"), a registered holding company, and certain of its subsidiaries, The Connecticut Light and Power Company ("CL&P"), Western Massachusetts Electric Company ("WMECO"), Public Service Company of New Hampshire ("PSNH"), North Atlantic Energy Corporation ("NAEC") and Holyoke Water Power Company ("HWP") (collectively NU, CL&P, WMECO, PSNH, NAEC and HWP are referred to herein as "System Companies"), hereby request approval, if and to the extent required under the Public Utility Holding Company Act of 1935 (the "Act"), to enter into, perform, purchase and sell financial instruments intended to manage the volatility of interest rates, including but not limited to interest rate swaps, caps, floors, collars and forward rate agreements or any other similar agreements ("Interest Rate Management Instruments") to the extent any such transactions are jurisdictional under the Act, for the period ending December 31, 2001, in a total notional principal amount not to exceed 25% of the total outstanding debt at any one time for each System Company individually (with the exception of NAEC, for which the maximum would be 65%). 2. The System Companies propose to employ various types of Interest Rate Management Instruments as a means of (i) prudently managing their portfolios of outstanding long-term and short-term debt, such that they can achieve some degree of control over the impact on earnings and customer rates resulting from movements in interest rates, and (ii) prudently managing the risk associated with the issuance of new long-term and short-term debt. 3. The System Companies have used Interest Rate Management Instruments in the past primarily to manage floating interest rate exposure through the use of interest rate swaps and interest rate caps. Exhibit G lists the System Companies' use of Interest Rate Management Instruments since 1990, including both outstanding and matured positions. 4. With the objectives of optimizing the variable-to-outstanding debt ratio and mitigating the exposure of customer rates and earnings to changes in interest rates, the System Companies will manage the debt portfolio in accordance with prudent financial management practices and make an assessment of the projected impact on the companies' rate tariffs (for those System Companies serving customers pursuant to rate tariffs) and earnings per share. Such management includes but is not limited to an analysis of (i) current and projected level of interest rates, (ii) the current level of each System Company's debt, (iii) future debt maturities, and (iv) future financing requirements. 5. Interest Rate Management Instruments are the tools by which the System Companies can achieve such balance by, in effect, synthetically (i) converting variable rate debt to fixed rate debt, (ii) converting fixed rate debt to variable rate debt, (iii) limiting the impact of changes in interest rates resulting from variable rate debt, and (iv) providing an option to enter into Interest Rate Management Instrument transactions in future periods for both existing exposures and planned issuances of debt securities. 6. The notional principal amount of Interest Rate Management Instruments for each System Company individually will not exceed 25% of the total outstanding debt, with the exception of NAEC for which the maximum would be 65%, at any one time. This exception results from an existing interest rate swap associated with a $225 million term note and NAEC's anticipated future total outstanding debt levels when taking into account the $20 million annual sinking fund provision on its 9.05% first mortgage bonds. "Total outstanding debt" is defined as the sum of the outstanding short-term and long-term debt rounded to the nearest million dollars. For each individual company the table below lists the level of total outstanding debt at June 30, 1996, the proposed sub-limits as a percentage of total outstanding debt, and the resulting indicative dollar limit of notional principal based on the levels of total outstanding debt at June 30, 1996. Indicative Dollar Limit - % of Total Out- Outstanding % Hedge Standing Company Debt (6/30/96) Limit Debt The Connecticut Light and Power Company $1,990,000,000 25% $497,500,000 Public Service Company of New Hampshire $736,000,000 25% $184,000,000 Western Massachusetts Electric Company $366,000,000 25% $91,500,000 North Atlantic Energy Corporation $520,000,000 65% $338,000,000 Holyoke Water Power Company $38,000,000 25% $9,500,000 Northeast Utilities (Parent) $244,000,000 25% $61,000,000 Totals $3,894,000,000 30% $1,181,500,000 7. In no case will the notional principal amount of any Interest Rate Management Instrument exceed that of the underlying debt instrument and related interest rate exposure, i.e., no System Company will engage in "leveraged" or "speculative" transactions. In addition, System Companies propose to limit the tenor of Interest Rate Management Instruments to the maximum maturity of the underlying System Company debt, or the maturity of anticipated specific future debt issuances, proportionate to the amount of indebtedness at each maturity level. 8. The underlying interest rate indices of such Interest Rate Management Instruments will closely correspond to the underlying interest rate indices of the System Companies' debt to which such Interest Rate Management Instruments relate. Such indices currently include but are not be limited to (i) floating rate indices such as the London Interbank Offered Rate (LIBOR), prime rate, certificate of deposit rates, commercial paper indices, the Federal funds rate, the J.J. Kenny high grade tax-exempt rate, and the Public Securities Association Index tax-exempt rate, and (ii) fixed rate indices such as United States Treasury note and bond rates and long-term municipal bond rates. 9. The terms and conditions of the proposed Interest Rate Management Instrument transactions will be the same or substantially similar to those of the International Swap Dealers Association, Inc. (ISDA) Master Agreement, the form of which is filed as Exhibit B.1. Each System Company would enter into an individual Master Agreement with each proposed counterparty. A confirmation pursuant to the Master Agreement would identify the nature of each individual transaction, the applicable notional principal amount, effective date, maturity, rates involved and other pertinent terms and conditions. The System Companies will enter into Interest Rate Management Instruments with counterparties whose senior secured debt ratings, as published by Standard & Poor's Corporation, are greater than or equal to "BBB+", or an equivalent rating from Moody's Investor Service, Inc., Fitch Investor Service or Duff & Phelps. Additionally, at all times at least 75% of the outstanding aggregate principal amount of Interest Rate Management Instruments will be held by counterparties possessing Standard & Poor's Corporation credit ratings of "A" rating or higher or equivalent rating. In accordance with the ISDA Master Agreement, it is anticipated that each party to a proposed Interest Rate Management Instrument transaction will have the right to terminate such transactions by making early termination payments. 10. Interest Rate Management Instruments are subject to numerous variables which will affect their cost, including (i) tenor, (ii) the strike rate, or the rate at which it becomes effective, (iii) volatility of interest rates, (iv) the current and projected level of interest rates, (v) the notional principal amount of the Interest Rate Management Instrument, and (vi) market variables such as the liquidity of the specific Interest Rate Management Instrument. As such, it is difficult for the System Companies to estimate the price they will pay for Interest Rate Management Instruments. However, the System Companies will undertake to limit the transaction costs of Interest Rate Management Instruments. The cost of instruments requiring upfront payments such as interest rate caps will be limited to five percent of the principal amount of the transaction. In the case of a sale of an Interest Rate Management Instrument such as one with an interest rate floor, the company could use such proceeds to lower the purchase price of a corresponding Interest Rate Management Instrument, such as an interest rate cap pertaining to the same debt obligation. For instruments that do not require upfront payments, such as interest rate swaps, the System Companies undertake to limit transaction costs as measured by a "swap spread" (the difference between comparable interest rates; e.g. difference between a 5-year swap fixed rate to the 5-year Treasury) to 1.00% (100 basis points). 11. The System Companies will fully disclose in their financial statements the extent of their Interest Rate Management Instrument transactions in accordance with current and future Commission requirements, generally accepted accounting principles, and Financial Accounting Standards Board ("FASB") practices. Current financial statements disclosures include (i) notional principal amount and (ii) market value of outstanding Interest Rate Management Instruments outstanding. In addition, the System Companies propose to submit an annual informational report to the Commission and to any state commissions with jurisdiction over the transactions in a format specifying, as to each System Company, the specific debt security subject to the Interest Rate Management Instrument, the Interest Rate Management Instrument's type, the notional principal amount, the Interest Rate Management Instrument's features, cost, timing and any other relevant features designed to show compliance with all applicable limits imposed by regulatory authorities. 12. Exhibit H provides a list of all outstanding Interest Rate Management Instruments in a form consistent with the above proposed annual filing to the Commission and to any state commissions with jurisdiction over the transactions. 13. Pro forma financial statements are not included in this filing because the System Companies believe it is difficult to reflect the impact of what could be numerous strategies designed to meet the System Companies' objectives outlined in this Application, namely management of the System Companies' existing and future portfolio of long-term and short-term debt, such that the System Companies achieve a balanced exposure to changes in interest rates as measured by a ratio of total variable rate debt to total debt and the resulting impact of System Companies' earnings, and management of the risks associated with the issuance of new short-term and long-term debt. 14. No associate company or affiliate of the System Companies has any material interest, directly or indirectly, in the proposed transactions. 15. Except in accordance with the Act, neither NU nor any subsidiary thereof (1) has acquired an ownership interest in an exempt wholesale generator ("EWG") or a foreign utility company ("FUCO") as defined in Sections 32 and 33 of the Act, or (2) now is or as a consequence of the transactions proposed herein have a right under, a service, sales or construction contract with an EWG or FUCO. None of the proceeds from the transactions proposed herein will be used by the System Companies to acquire any securities of, or any interest in, an EWG or FUCO. The NU system is in compliance with Rule 53(a), (b) and (c), as demonstrated by the following determinations: (i) NU's aggregate investment in EWGs and FUCOs (e.g. amounts invested in or committed to be invested in EWGs and FUCOs, for which there is recourse to NU) does not exceed 50 percent of NU system's consolidated retained earnings as reported for the four most recent quarterly periods on NU's Form 10-K and 10-Qs. At June 30, 1996, the ratio of such investment ($40 million) to such consolidated retained earnings ($1.0 billion) was 4.2 percent. (ii) Encoe Partners, Central Termica San Miguel de Tucuman, S.A. Ave Fenix and Plantas Eolicas, S. A. (NU's only EWGs or FUCOs at this time) (collectively, "EWGs/FUCOs") maintain books and records and prepare financial statements in accordance with Rule 53 (a)(2). Furthermore, NU has undertaken to provide the Commission access to such books and records and financial statements, as it may request. (iii) No employees of the NU system's public utility companies have rendered services to the EWGs/FUCOs. (iv) NU has submitted (1) a copy of each Form U-1 and Rule 24 certificates that have been filed with the Commission under Rule 53 and (b) copy of Item 9 of Form U5S and Exhibits G and H thereof to each state regulator having jurisdiction over the retail rates of the NU system public utility companies. (v) Neither NU nor any NU subsidiary has been subject of a bankruptcy or similar proceeding unless a plan of reorganization has been confirmed in such proceeding. In addition, NU's average consolidated retained earnings for the four most recent quarterly periods has not decreased by 10 percent or more from the average for the previous four quarterly periods. (vi) In the previous fiscal year, NU's operating losses attributable to its investment in the EWGs/FUCOs did not exceed 5 percent of NU's consolidated retained earnings. (b). Consideration for Proposed Transactions No consideration is to be given or received in connection with the proposed transactions except for the fees, commissions and expenses set forth in Section II, and amounts payable in accordance with the terms and conditions of Interest Rate Management Instrument's contract documents the same or substantially similar to that of the International Swap Dealers Association, Inc. Master Agreement filed as Exhibit B.1. hereto, and within the ranges specified in the description of Interest Rate Management Instruments set forth in Paragraph 4 above. II. FEES, COMMISSIONS AND EXPENSES 1. Except for the $2,000 fee payable to the Commission and as otherwise described herein, there are no fees, commissions or expenses other than legal fees, out-of-pocket expenses of any counterparty and intermediary and similar expenses to be paid or incurred, directly or indirectly in connection with the proposed transactions. 2. None of such fees, commissions or expenses are to be paid to any associate company except for financial, legal and other services to be performed at cost by Northeast Utilities Service Company, an associate service company of the System Companies, in an amount not expected to exceed $10,000 for each Interest Rate Management Instrument transaction. III. APPLICABLE STATUTORY PROVISIONS 1. Sections 6, 7, 9(a) and 10 of the Act thereunder are or may be applicable to the proposed Interest Rate Management Instrument transactions proposed herein. If and to the extent that the Commission determines that some or all of the proposed transactions are jurisdictional under the Act, the System Companies request approval of any and all such transactions. IV. REGULATORY APPROVALS 1. The System Companies (other than NU) will file applications for waivers of jurisdiction over, or if applicable, approval of the various transactions proposed herein with the Connecticut Department of Public Utility Control ("DPUC") as to CL&P transactions, the Massachusetts Department of Public Utilities ("MDPU") as to WMECO transactions, and the New Hampshire Public Utilities Commission ("NHPUC") as to PSNH and NAEC transactions and the Massachusetts Department of Finance ("MDF") as to HWP transactions. A copy of each such application will be filed by amendment respectively, as Exhibits D.1, D.3 and D.5, D.7 and D.9 hereto. A certified copy of the findings and orders of the various regulatory commissions regarding such applications will be filed by amendment as Exhibits D.2, D.4, D.6, D.8 and D.10 hereto. 2. No other state commission, and no other federal commission (other than the Commission pursuant to the Act) has jurisdiction over the transactions as proposed. V. PROCEDURE 1. The System Companies respectfully request that the Commission's order herein be issued, subject to completion of this Application and receipt of all necessary State approvals, on or before sixty (60) days from the date of filing. 2. The System Companies hereby waive a recommended decision by a hearing officer or other responsible officer of the Commission and consent that the Division of Investment Management may assist in the preparation of the Commission's finding and/or order and hereby requests that the Commission's order become effective forthwith upon issuance. VI. EXHIBITS AND FINANCIAL STATEMENTS (a). Exhibits A. Not Applicable B.1. International Swap Dealers Association Master Agreement C. Not Applicable *D.1. CL&P Application to DPUC *D.2. Order of DPUC *D.3. WMECO Application to MDPU *D.4. Order of MDPU *D.5. PSNH Application to NHPUC *D.6. Order of NHPUC *D.7. NAEC Application to NHPUC *D.8. Order of NHPUC *D.9. HWP Application to MDF *D.10. Order of MDF E. Not Applicable *F.1. Opinion of Counsel G. Northeast Utilities and Subsidiaries Interest Rate Management Instruments Outstanding and Matured as of June 30, 1996 H. Proposed Form of Quarterly Report of Interest Rate Management Instrument Transactions I. Proposed Form of Notice Under the Public Utility Holding Company Act of 1935 * To be filed by amendment (b). Financial Statements* 1. Northeast Utilities (parent only) 1.1 Balance Sheet, per books, as of June 30, 1996 1.2 Statement of Income, per books, for the twelve months ended June 30, 1996 2. Northeast Utilities and Subsidiaries (consolidated) 2.1 Balance Sheet, per books, as of June 30, 1996 2.2 Statement of Income, per books, for the twelve months ended June 30, 1996 3. The Connecticut Light and Power Company 3.1 Balance Sheet, per books, as of June 30, 1996 3.2 Statement of Income, per books, for the twelve months ended June 30, 1996 4. Western Massachusetts Electric Company 4.1 Balance Sheet, per books, as of June 30, 1996 4.2 Statement of Income, per books, for the twelve months ended June 30, 1996 5. Holyoke Water Power Company 5.1 Balance Sheet, per books, as of June 30, 1996 5.2 Statement of Income, per books, for the twelve months ended June 30, 1996 6. Public Service Company of New Hampshire 6.1 Balance Sheet, per books, as of June 30, 1996 6.2 Statement of Income, per books, for the twelve months ended June 30, 1996 7. North Atlantic Energy Corporation 7.1 Balance Sheet, per books, as of June 30, 1996 7.2 Statement of Income, per books, for the twelve months ended June 30, 1996 * to be filed by amendment when available (anticipated mid-August 1996) VII. INFORMATION AS TO ENVIRONMENTAL EFFECTS 1. The proposed transaction has no environmental effects in terms of the standards set forth in Section 102(2) of the National Environmental Policy Act (42 U.S.C. 4232(2)), as it involves only the execution, delivery and performance of financial instruments. 2. No federal agency has prepared or is preparing an environmental impact statement ("EIS") with respect to the proposed transaction. SIGNATURES Pursuant to the requirements of the Public Utility Holding Company Act of 1935, as amended, the undersigned have duly caused this Application to be signed on behalf of each of them by the undersigned thereunto duly authorized. NORTHEAST UTILITIES THE CONNECTICUT LIGHT AND POWER COMPANY WESTERN MASSACHUSETTS ELECTRIC COMPANY PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE HOLYOKE WATER POWER COMPANY NORTH ATLANTIC ENERGY CORPORATION By: /s/David R. McHale Assistant Treasurer Date: August 6, 1996 EX-10 2 FORM OF MASTER ISDA AGREEMENT EXHIBIT B.1 Local Currency-Single Jurisdiction ISDA International Swap Dealers Association, Inc. MASTER AGREEMENT dated as of: and 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 (e.g., a "Confirmation") exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows: 1. Interpretation (a) Definitions. The terms defined in Section 12 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 branches or offices through which the parties make and receive payment for deliveries. (d) 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, as 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) 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; (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, suite 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. 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 any forms, documents or certificates specified in the Schedule or any Confirmation 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. 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(d) 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(d) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party. (iii) Credit Support Default. (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of such Credit Support Document; (iv) Misrepresentation. A representation 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 Day 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 conditions 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: (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, and, if specified to be applicable, a Credit Event Upon Merger if the event is specified pursuant to (ii) below or an Additional Termination Event if the event is specified pursuant to (iii) 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, if 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) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X"), and 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 (iii) 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),(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) Two Affected Parties. If an Illegality under Section 5(b)(1) 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. (iii) Right to Terminate, If: (1) an agreement under Section 6(b)(ii) 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 other than that referred to in Section 6(b)(ii), a Credit Event Upon Merger or an Additional Termination Event occurs. either party in the case of an Illegality, any Affected Party in the case of 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(d) in respect of the Termination 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 judgement), 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 result 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 Unpaid Amounts owing to the Non-defaulting Party over (B) the Unpaid Amounts owing to the Defaulting Party. (2) First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party's Loss in respect of this Agreement. (3) Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Unpaid Amounts owing to the Non-defaulting Party less (B) 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 Unpaid Amounts owing to X less (II) 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. 7. Transfer 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. 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 Section 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. 9. 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, 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. 10. 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 be 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. 11. 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 nonexclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act of 1982 or any modification, extension or reenactment 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) 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. 12. 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 all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. "Affiliate" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. "Applicable Rate" means: (a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate; (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; (c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and (d) in all other cases, the Termination Rate. "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 percent 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)(iii). "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). "law" includes any treaty, law, rule or regulation 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, (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 Sections 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, 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 9. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations, of relevant rates or prices from one or more leading dealers in the relevant markets. "Market Quotation" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for 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 means 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). "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. "Scheduled Payment Date" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. "Set-off" means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. "Settlement Amount" means, with respect to a party and any Early Termination Date, the sum of: (a) the 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 Transaction 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 principle 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. "Terminated Transaction" 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 Event" means an Illegality 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 bee 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 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. (Name of Party) By: Name: Title: Date: (Name of Party) By: Name: Title: Date: EX-99 3 OTHER EXHIBITS EXHIBIT G The System Companies have previously entered into the following Interest Rate Management Instruments: NORTHEAST UTILITIES AND SUBSIDIARIES INTEREST RATE MANAGEMENT INSTRUMENTS OUTSTANDING AND MATURED AS OF JUNE 30, 1996 Notional Up-Front Security Instrument Amount Instrument Cost Company Managed Type (000s) Features (000s) Term OUTSTANDING NAEC Term Note Swap $25,000 5.99% Fixed $0 1996-2000 NAEC Term Note Swap 25,000 5.99% Fixed 0 1996-2000 NAEC Term Note Swap 70,000 5.88% Fixed 0 1996-2000 NAEC Term Note Swap 30,000 5.99% Fixed 0 1996-2000 NAEC Term Note Swap 50,000 6.28% Fix,Cncl 0 1996-2000 NAEC Term Note Swap 25,000 6.28% Fix,Cncl 0 1996-2000 MATURED CL&P Term Note Option $340,000 4.50% Cap $2,890 1993-1996 WMECO Term Note Option 52,000 4.50% Cap 442 1993-1996 PSNH Term Note Option 75,000 4.50% Cap 637 1993-1996 PSNH PCRB Option 100,000 5.00% Cap 164 1993-1994 PSNH PCRB Option 50,000 4.50% Cap 33 1993-1994 PSNH PCRB Option 50,000 4.50% Cap 2 1993-1993 PSNH PCRB Option 75,000 8.00% Cap 683 1991-1993 PSNH PCRB Option 75,000 8.00% Cap 244 1991-1992 PSNH PCRB Option 75,000 8.00% Cap 6 1991-1991 PSNH Term Note Option 22,000 8.00% Cap 166 1991-1993 PSNH Term Note Option 132,000 8.00% Cap 653 1991-1993 PSNH Term Note Option 22,000 8.00% Cap 121 1991-1993 PSNH Term Note Option 22,000 8.00% Cap 80 1991-1993 PSNH Term Note Option 22,000 8.00% Cap 44 1991-1992 PSNH Term Note Option 22,000 8.00% Cap 22 1991-1992 PSNH Term Note Option 22,000 8.00% Cap 10 1991-1992 Swapped 3-month LIBOR to fixed. Swapped 3-month LIBOR to fixed plus an NAEC option to cancel after the third year. EX-99 4 OTHER EXHIBITS EXHIBIT H PROPOSED FORM OF QUARTERLY REPORT OF INTEREST RATE MANAGEMENT INSTRUMENTS OUTSTANDING AND MATURED NORTHEAST UTILITIES AND SUBSIDIARIES INTEREST RATE MANAGEMENT INSTRUMENTS OUTSTANDING AS OF JUNE 30, 1996 Notional Up-Front Security Instrument Amount Instrument Cost Company Managed Type (000s) Features (000s) Term NAEC Term Note Swap $25,000 5.99% Fixed $0 1996-2000 NAEC Term Note Swap 25,000 5.99% Fixed 0 1996-2000 NAEC Term Note Swap 70,000 5.88% Fixed 0 1996-2000 NAEC Term Note Swap 30,000 5.99% Fixed 0 1996-2000 NAEC Term Note Swap 50,000 6.28% Fix,Cncl 0 1996-2000 NAEC Term Note Swap 25,000 6.28% Fix,Cncl 0 1996-2000 Swapped 3-month LIBOR to fixed. Swapped 3-month LIBOR to fixed plus an NAEC option to cancel after the third year EX-99 5 FORM OF PROPOSED NOTICE EXHIBIT I SECURITIES AND EXCHANGE COMMISSION (Release No. 35- ) Filings Under the Public Utility Holding Company Act of 1935 ("Act") , 1996 Northeast Utilities, The Connecticut Light and Power Company, Western Massachusetts Electric Company, Public Service Company of New Hampshire, North Atlantic Energy Corporation, and Holyoke Water Power Company Northeast Utilities ("NU"), a registered public utility holding company, and its subsidiaries, The Connecticut Light and Power Company ("CL&P"), Western Massachusetts Electric Company ("WMECO"), Public Service Company of New Hampshire ("PSNH"), North Atlantic Energy Corporation ("NAEC") and Holyoke Water Power Company ("HWP") (collectively NU, CL&P, WMECO, PSNH, NAEC and HWP are referred to herein as "System Companies"), have filed an application / declaration requesting: approval to the extent required to enter into, perform, purchase and sell financial instruments intended to manage the volatility of interest rates, including but not limited to interest rate swaps, caps, floors, collars and forward rate agreements or any other similar agreement ("Interest Rate Management Instruments") to the extent any such transaction is jurisdictional under the Act, in an aggregate amount not exceeding 25% of the total outstanding debt at any time for any NU System Company (with the exception of NAEC, for which the maximum would be 65%), for the period ending December 31, 2001. Managing interest rate risk through Interest Rate Management Instruments will allow the System Companies to prudently manage the risk inherent in their debt positions and thus control the impact on earnings and customer rates resulting from movements in interest rates. Interest Rate Management Instruments are the tools necessary to create and implement an interest rate risk management program. The System Companies (other than NU) will file applications for waivers of jurisdiction over, or if applicable, approval of the various transactions proposed herein with the Connecticut Department of Public Utility Control ("DPUC") as to CL&P transactions, the Massachusetts Department of Public Utilities ("MDPU") as to WMECO transactions, and the New Hampshire Public Utilities Commission ("NHPUC") as to PSNH and NAEC transactions and the Massachusetts Department of Finance ("MDF") as to HWP transactions. No other state commission, and no other federal commission (other than the Commission pursuant to the Act) has jurisdiction over the transactions as proposed. For the Commission, by the Division of Investment Management, pursuant to delegated authority. -----END PRIVACY-ENHANCED MESSAGE-----