International Swaps and Derivatives Association Inc DRAFT 2001

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International Swaps and Derivatives Association, Inc. DRAFT 2001 ISDA Cross-Agreement Bridge 22 nd May,

International Swaps and Derivatives Association, Inc. DRAFT 2001 ISDA Cross-Agreement Bridge 22 nd May, 2001 John Berry ISDA

ISDA Cross-Agreement Bridge Variety of agreements in parties’ trading relationship: ISDA Master Agreement Global

ISDA Cross-Agreement Bridge Variety of agreements in parties’ trading relationship: ISDA Master Agreement Global Master Repurchase Agreement FOA Master Netting Agreement Master Securities Loan Agreement ISDA Overseas Securities Lender’s Agreement International Foreign Exchange Master Agreement International Currency Options Market Master Agreement European Master Agreement EFET - General Agreement Nordic Association Financial Energy Master Agreement EFAA - Grid Trade Master Agreement

ISDA Cross-Agreement Bridge Using a “Master” Cross. Product Master Agreement ISDA GMRA OSLA MRA

ISDA Cross-Agreement Bridge Using a “Master” Cross. Product Master Agreement ISDA GMRA OSLA MRA

ISDA Cross-Agreement Bridge Using the ISDA Master Agreement as a “Master” ISDA Master Agreement

ISDA Cross-Agreement Bridge Using the ISDA Master Agreement as a “Master” ISDA Master Agreement plus Bridge GMRA ISDA OSLA MRA

ISDA Cross-Agreement Bridge Scenario 1 1. Parties X and Y have entered into the

ISDA Cross-Agreement Bridge Scenario 1 1. Parties X and Y have entered into the following agreements: ISDA Master Agreement GMRA 2. ISDA Master Agreement includes Bridge 3. GMRA specified as Bridged Agreement 4. Standard Bridging Events apply (i. e. all Events of Default under the ISDA Master Agreement) 5. Event occurs that constitutes, with respect to Party X, an Event of Default under the ISDA Master Agreement and an event of default under the Bridged Agreement (GMRA) ISDA

ISDA Cross-Agreement Bridge Party Y may close out transactions outstanding under the ISDA, and:

ISDA Cross-Agreement Bridge Party Y may close out transactions outstanding under the ISDA, and: (a) rely on the provisions of the Bridge, which: (i) deem the event to constitute an Event of Default under the GMRA; (ii) provide for transactions under the GMRA to be closed out and valued in accordance with the GMRA; and (iii) provide for the net close-out amount due in respect of those transactions to be included in the Section 6 close-out mechanics of the ISDA as Unpaid Amounts; or (b) ISDA promptly notify Party X that the Bridge will not apply and close out (or not) transactions outstanding under the GMRA pursuant to the provisions of the GMRA itself

ISDA Cross-Agreement Bridge If Party Y chooses option (a), it may achieve a form

ISDA Cross-Agreement Bridge If Party Y chooses option (a), it may achieve a form of cross-product netting. Only the Settlement Amount due under the ISDA (taking into account the net close-out amount due in respect of transactions under the GMRA) will be payable to, or by, Party Y: Repo transactions GMRA net close-out amount (USD 10 m due to Party X) ISDA Derivative transactions ISDA Section 6 close-out mechanics (USD 15 m due to Party Y in respect of derivative transactions) ISDA Settlement Amount: USD 5 m due to Party Y

ISDA Cross-Agreement Bridge If Party Y chooses option (b), and closes out transactions under

ISDA Cross-Agreement Bridge If Party Y chooses option (b), and closes out transactions under both the GMRA and the ISDA, it will not achieve a net close-out position. Two different amounts will be due, at least one of which might be due to Party X, which could be insolvent: Repo transactions GMRA net close-out amount: USD 10 m due to Party X Derivative transactions ISDA Settlement Amount: USD 15 m due to Party Y RESULT: Party Y may have to pay USD 10 m to Party X’s insolvency estate, and claim in the insolvency for USD 15 m ISDA

ISDA Cross-Agreement Bridge Scenario 2 1. Parties X and Y have entered into the

ISDA Cross-Agreement Bridge Scenario 2 1. Parties X and Y have entered into the following agreements: ISDA Master Agreement GMRA 2. ISDA Master Agreement includes Bridge 3. GMRA specified as Bridged Agreement 4. Standard Bridging Events apply (i. e. all Events of Default under the ISDA Master Agreement) 5. Event occurs that constitutes, with respect to Party X, an Event of Default under the ISDA Master Agreement, but NOT an event of default under the Bridged Agreement (GMRA) ISDA

ISDA Cross-Agreement Bridge Party Y may close out transactions outstanding under the ISDA, and:

ISDA Cross-Agreement Bridge Party Y may close out transactions outstanding under the ISDA, and: (a) rely on the provisions of the Bridge, which: (i) deem the event to constitute an Event of Default under the GMRA; (ii) provide for transactions under the GMRA to be closed out and valued in accordance with the GMRA; and (iii) provide for the net close-out amount due in respect of those transactions to be included in the Section 6 close-out mechanics of the ISDA as Unpaid Amounts; or (b) ISDA promptly notify Party X that the Bridge will not apply, in which case it will be unable to close out transactions outstanding under the GMRA

ISDA Cross-Agreement Bridge If Party Y chooses option (a), it may achieve a form

ISDA Cross-Agreement Bridge If Party Y chooses option (a), it may achieve a form of cross-product netting. Only the Settlement Amount due under the ISDA (taking into account the net close-out amount due in respect of transactions under the GMRA) will be payable to, or by, Party Y: Repo transactions GMRA net close-out amount (USD 10 m due to Party X) ISDA Derivative transactions ISDA Section 6 close-out mechanics (USD 15 m due to Party Y in respect of derivative transactions) ISDA Settlement Amount: USD 5 m due to Party Y

ISDA Cross-Agreement Bridge If Party Y chooses option (b), it will not be able

ISDA Cross-Agreement Bridge If Party Y chooses option (b), it will not be able to close out transactions outstanding under the GMRA. It may, of course, close out transactions outstanding under the ISDA: Repo transactions GMRA Derivative transactions ISDA Settlement Amount: USD 15 m due to Party Y ISDA

ISDA Cross-Agreement Bridge Scenario 3 1. Parties X and Y have entered into the

ISDA Cross-Agreement Bridge Scenario 3 1. Parties X and Y have entered into the following agreements: ISDA Master Agreement GMRA 2. ISDA Master Agreement includes Bridge 3. GMRA specified as Bridged Agreement 4. Standard Bridging Events apply (i. e. all Events of Default under the ISDA Master Agreement) 5. Event occurs that constitutes, with respect to Party X, an event of default under the Bridged Agreement (GMRA), but NOT an Event of Default under the ISDA Master Agreement ISDA

ISDA Cross-Agreement Bridge Party Y may close out transactions outstanding under the GMRA, in

ISDA Cross-Agreement Bridge Party Y may close out transactions outstanding under the GMRA, in accordance with the provisions of the GMRA, but: (a) the Bridge will not apply (a Bridging Event has not occurred); and (b) it may not close out transactions outstanding under the ISDA

ISDA Cross-Agreement Bridge If Party Y chooses to close-out transactions under the GMRA: Repo

ISDA Cross-Agreement Bridge If Party Y chooses to close-out transactions under the GMRA: Repo transactions GMRA net close-out amount: USD 10 m due to Party X ISDA Derivative transactions ISDA

ISDA Cross-Agreement Bridge Scenario 4 1. Parties X and Y have entered into the

ISDA Cross-Agreement Bridge Scenario 4 1. Parties X and Y have entered into the following agreements: ISDA Master Agreement GMRA 2. ISDA Master Agreement includes Bridge 3. GMRA specified as Bridged Agreement 4. Only Bridging Event is Bankruptcy Event of Default under Section 5(a)(vii) of the ISDA Master Agreement 5. Event occurs that constitutes, with respect to Party X, an Event of Default under the ISDA Master Agreement (but NOT a Bridging Event), and an event of default under the Bridged Agreement (GMRA) ISDA

ISDA Cross-Agreement Bridge The Bridge will not apply. Party Y may: (a) close out

ISDA Cross-Agreement Bridge The Bridge will not apply. Party Y may: (a) close out transactions outstanding under the ISDA; and/or (b) close out transactions outstanding under the GMRA, in accordance with the provisions of the GMRA ISDA

ISDA Cross-Agreement Bridge Although Party Y may close out transactions under either or both

ISDA Cross-Agreement Bridge Although Party Y may close out transactions under either or both the GMRA and the ISDA, if it does close out transactions under both agreements, it will not achieve a net close-out position. Two different amounts will be due, although this time (c. f. Scenario 1, option (b)), Party X is not insolvent: Repo transactions GMRA Derivative transactions ISDA GMRA net close-out amount: USD 10 m due to Party X ISDA Settlement Amount: USD 15 m due to Party Y ISDA

ISDA Cross-Agreement Bridge Scenario 5 1. Parties X and Y have entered into the

ISDA Cross-Agreement Bridge Scenario 5 1. Parties X and Y have entered into the following agreements: ISDA Master Agreement GMRA 2. ISDA Master Agreement does NOT include Bridge 3. “Specified Transaction” includes repo transactions between the parties 4. A default (not insolvency), with respect to Party X, under a repo transaction occurs, constituting a Default under Specified Transaction under Section 5(a)(v) of the ISDA Master Agreement, and, of course, an Event of Default under the GMRA ISDA

ISDA Cross-Agreement Bridge The Bridge will not apply. Party Y may: (a) close out

ISDA Cross-Agreement Bridge The Bridge will not apply. Party Y may: (a) close out transactions outstanding under the ISDA; and/or (b) close out transactions outstanding under the GMRA, in accordance with the provisions of the GMRA ISDA

ISDA Cross-Agreement Bridge Although Party Y may close out transactions under either or both

ISDA Cross-Agreement Bridge Although Party Y may close out transactions under either or both the GMRA and the ISDA, if it does close out transactions under both agreements, it will not achieve a net close-out position. Two different amounts will be due, although this time (c. f. Scenario 1, option (b)), Party X is not insolvent: Repo transactions GMRA Derivative transactions ISDA GMRA net close-out amount: USD 10 m due to Party X ISDA Settlement Amount: USD 15 m due to Party Y ISDA

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