278960_13 PROSPECTUS Dated 30 May 2007 UBS AG, Jersey Branch (incorporated in Switzerland with limited liability) €50,000,000 Adjustable Spread Leveraged Notes - eLevate Series 2007-1 linked to the credit of each of a portfolio of Reference Obligations Issue Price 100 per cent Application has been made to the Irish Financial Services Regulatory Authority, as competent authority under Directive 2003/71/EC, for the Prospectus to be approved. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on its regulated market. Arranger UBS Limited
Transcript
278960_13
PROSPECTUS
Dated 30 May 2007
UBS AG, Jersey Branch (incorporated in Switzerland with limited liability)
€50,000,000 Adjustable Spread Leveraged Notes - eLevate Series 2007-1
linked to the credit of each of a portfolio of Reference Obligations
Issue Price 100 per cent Application has been made to the Irish Financial Services Regulatory Authority, as competent authority under Directive 2003/71/EC, for the Prospectus to be approved. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on its regulated market.
Arranger UBS Limited
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This Prospectus comprises a prospectus for the purposes of Article 5 of Directive 2003/71/EC (the “Prospectus Directive”) and for the purpose of giving information with regard to UBS AG, Jersey Branch (the “Issuer”) which is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the Issuer. The Issuer accepts responsibility for the information contained in this Prospectus. To the best of the knowledge of the Issuer (who has taken all reasonable care to ensure that such is the case) the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. This Prospectus is to be read in conjunction with all documents which are deemed to be incorporated herein by reference (see “Documents Incorporated by Reference” below). The Issuer will, at the specified offices of the Irish Paying Agent, provide, free of charge, upon the oral or written request at any time when the Notes are outstanding, a printed paper copy of this Prospectus (and the documents incorporated by reference in this Prospectus). Written or oral requests for such documents should be directed to the specified office of the Irish Paying Agent. The Issuer will not provide any other reports or information concerning the Notes.
TERMS AND CONDITIONS OF THE NOTES ............................................................................................... 9
OTHER INFORMATION................................................................................................................................ 29
SUBSCRIPTION AND SALE ......................................................................................................................... 31
SCHEDULE A - THE REFERENCE ENTITIES ............................................................................................ 32
SCHEDULE B - UBS STANDARD TRANCHED PORTFOLIO CREDIT-LINKED NOTE TERMS DATED 15 APRIL 2004 .................................................................................................................................. 35
SCHEDULE C: FORM OF PORTFOLIO ADDITION NOTICE ................................................................... 64
SCHEDULE D: MOODYS CDOROM™ MODEL TEST 2 INSTRUCTIONS AND DEFINITIONS.......... 65
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SUMMARY This summary should be read as an introduction to this Prospectus and should not be viewed as a substitute for reading the entire Prospectus. No civil liability attaches to the Issuer solely on the basis of this summary unless it is misleading inaccurate or inconsistent when read together with the other parts of the Prospectus, including the documents incorporated by reference. Where a claim relating to the information contained in this Prospectus is brought before a court in a Member State, the Plaintiff may, under the national legislation of the Member State where the claim is brought, be required to bear the costs of translating the Prospectus before the legal proceedings are initiated. Words and expressions defined in the “Terms and Conditions of the Notes” below or elsewhere in this Prospectus have the same meaning when used in this summary.
ESSENTIAL CHARACTERISTICS AND RISKS ASSOCIATED WITH THE ISSUER
UBS AG, a company incorporated with limited liability in Switzerland on February 28 1978 registered at the Commercial Registry Office of the Canton of Zurich and the Commercial Registry Office of the Canton of Basel-City with Identification No: CH-270.3.004.646-4 having its registered offices at Bahnhofstrasse 45, 8001 Zurich and Aeschenvorstadt 1, 4051 Basel, Switzerland. With headquarters in Zurich and Basel, Switzerland, UBS AG operates in over 50 countries and from all major international centres. As of December 31 2006, UBS AG had total invested assets of CHF 2.989 billion, a market capitalisation of CHF 154.2 billion and employed approximately 78,000 people. As at the date of this prospectus, UBS AG has a long-term debt credit rating of “Aaa” from Moody’s, “AA+” from S&P and AA+ from Fitch. UBS AG is publicly owned, and its shares are listed on the SWS Swiss Exchange, New York and Tokyo Stock Exchange. UBS AG is subject to the informational requirements of the Exchange Act, and, in accordance therewith, files reports and other information with the Commission. The reports and other information filed by UBS AG with the Commission may be inspected (and copied at prescribed rates) at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. UBS AG's Common Stock is listed on the NYSE under the symbol "UBS." Reports and other information filed may be inspected at the offices of NYSE at 20 Broad Street, New York, New York 10005 and can also be reviewed by accessing the Commission's Internet site at http://www.sec.gov. The information contained herein with respect to UBS AG relates to and has been obtained from it. The delivery of this prospectus shall not create any implication that there has been no change in the affairs UBSL or UBS AG since the date hereof, or that the information contained or referred to herein is correct as of any time subsequent to its date. The information contained in preceding paragraphs has been provided by UBS AG for use in this prospectus. Except for the foregoing paragraphs, UBS AG and their respective affiliates have not been involved in the preparation of, and do not accept reasonability for, this prospectus as a whole.
ESSENTIAL CHARACTERISTICS AND RISKS ASSOCIATED WITH THE NOTES
The Notes are issued under the Programme and are unsecured obligations of the Issuer, which rank pari passu without any preference amongst themselves or the other issues under the Programme. The Notes are Senior Notes of the Issuer and will be subject to the events of default set out in the General Terms and Conditions of the Notes.
The Notes will bear interest on a quarterly basis. The Notes may be redeemed prior to scheduled maturity due to the application of the terms and conditions of the Notes relating to redemption for tax reasons or following an event of default. The Notes will also be redeemed by the Issuer on the Interest Payment Date falling on or about 25 November 2012 and subsequent Interest Payment
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Dates if certain conditions relating to the valuation of the Portfolio are fulfilled. If such conditions are not fulfilled, the Noteholders will have the option to require the Issuer to redeem the Notes on the same dates.
A Noteholder is exposed to the credit risk of each Reference Entity. The Issuer must pay the stated yield and the principal amount in respect of the Notes provided that no Credit Events have occurred or exist in relation to any Reference Entity. If one or more Credit Events occur with respect to the Reference Entities and certain other conditions specified herein are satisfied, the principal amount of the Notes may be reduced and, upon redemption, an amount less than the original stated principal amount of the Notes may be paid to the Noteholders, subject to a minimum of zero.
The Notes have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “Securities Act”) and are in bearer form that is subject to certain United States tax law requirements. Accordingly, the Notes are being offered and sold only in bearer form outside the United States (as such term is defined in Regulation S under the Securities Act (“Regulation S”)) to non-US persons in reliance on Regulation S.
Application has been made to the Irish Financial Services Regulatory Authority, as competent authority under Directive 2003/71/EC, for the Prospectus to be approved. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on its regulated market. The Notes will be accepted for clearing through the systems operated by Euroclear and Clearstream Banking Luxembourg. Because the Global Note is held on behalf of Euroclear, investors will have to rely on their procedures for transfers, payments and communications with the Issuer.
There is no active trading market for the Notes.
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DOCUMENTS INCORPORATED BY REFERENCE The following documents are also deemed to be incorporated in and form part of this Prospectus: (a) the prospectus for the Euro Note Programme for the Issuer dated 3 July 2006 and any supplement thereto (the “Base Prospectus”); (b) the Issuer's Annual Report on Form 20-F for the year ended 31 December 2005, which the Issuer filed with the United States Securities and Exchange Commission (the “SEC”) on 21 March 2006; and (c) the Issuer's submissions on Forms 6-K, which the Issuer filed with the SEC on 4 May 2006 and 2 June 2006. The documents referred to in points (b) and (c) above have been filed with the Irish Stock Exchange in accordance with Titles IV and V of Directive 2001/34/EC.
Any statement contained in the Base Prospectus or in any document incorporated or deemed incorporated by reference into this Prospectus shall be deemed to be modified or superseded for the purpose of this Prospectus to the extent that a statement contained herein modifies or supersedes such earlier statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus except as modified or superseded.
The Issuer will, at the specified offices of the Irish Paying Agent, provide, free of charge, upon the oral or written request, a copy of this Prospectus (or any document incorporated by reference in this Prospectus). Written or oral requests for such documents should be directed to the specified office of the Irish Paying Agent.
The reports filed with the SEC can be reviewed and copied at the SEC’s office at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of those reports can be obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, reports filed with the SEC can also be accessed at http://www.sec.gov via the internet (the information contained in this website does not form part of this Prospectus). Please note that this website does not form part of this Prospectus.
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RISK FACTORS
General
The risk factors set out in the Base Prospectus apply to this issue of Notes.
Prospective purchasers of the Notes should ensure that they:
(a) Understand the nature of the Notes and the extent of their exposure to risk;
(b) Have sufficient knowledge, experience and access to professional advisers to make their own legal, tax, accounting and financial evaluation of the merits and risks of investment in the Notes; and
(c) Consider the suitability of the Notes as an investment in the light of their own circumstances and financial condition.
Each prospective purchaser of Notes must determine, based on its own independent review and such legal, business and tax advice as it deems appropriate under the circumstances, that its acquisition of the Notes (i) is fully consistent with its financial needs, objectives and condition, (ii) complies and is fully consistent with all investment policies, guidelines, authorisations and restrictions (including as to its capacity) applicable to it, (iii) has been duly approved in accordance with all applicable laws and procedures and (iv) is a fit, proper and suitable investment for it, undertaken for a proper purpose.
Risk Factors Relating to the Notes
Neither the Issuer, nor any of its affiliates, its Nominee, the Programme Arranger, the Dealer or the Calculation Agent has made any representation whatsoever with respect to the Reference Entities (or any related Underlying Obligor) or as to any Reference Obligation of any Reference Entity (or any related Underlying Obligor). The Issuer and its affiliates are not responsible for the public disclosure of information by any Reference Entity (or any related Underlying Obligor).
The Issuer, any of its affiliates, its Nominee, the Programme Arranger, the Dealer and the Calculation Agent may deal in Reference Obligations of any Reference Entity (or any related Underlying Obligor) and may, where permitted, accept deposits from, make loans or otherwise extend credit to, and generally engage in any kind of commercial or investment banking or other business with, each Reference Entity (or any related Underlying Obligor) or any affiliate of a Reference Entity (or Underlying Obligor), or any other person or entity having obligations relating to a Reference Entity (or Underlying Obligor), and may act with respect to such business in the same manner as each of them would if the Notes did not exist, regardless of whether any such action might have an adverse effect on a Reference Entity (or Underlying Obligor) or the position of any Noteholder or otherwise (including, without limitation, any action which might constitute or give rise to a Credit Event hereunder).
The Issuer, any of its affiliates, its Nominee, the Programme Arranger, the Dealer or the Calculation Agent may, whether by virtue of the types of relationships described herein or otherwise, at any time, be in possession of information in relation to a Reference Entity (or any related Underlying Obligor) that is or may be material in the context of the issue of the Notes and that may or may not be publicly available or known to the Noteholder, and the Notes do not create any obligation on the part of any such person to disclose to any Noteholder any such relationship or information (whether or not confidential).
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No Reference Entity is involved in the issuance of the Notes in any way and has no obligation to consider the interests of the Noteholders in taking any corporate actions that might affect the value of the Notes. Each Reference Entity may, and is entitled to, take actions that will adversely affect the value of the Notes. The purchase price paid for the Notes is paid to the Issuer and not to the Reference Entities, and the Notes do not represent a direct investment in any Obligation of any Reference Entity or otherwise give the Noteholders any rights in the debt obligations of any Reference Entity. As an owner of Notes, a Noteholder will not have special voting rights or rights to receive distributions or any other rights that holders of debt obligations of the Reference Entities may have.
There is no guarantee, protection or assurance for purchasers of the Notes in respect of the credit or performance of the Reference Entities or of their Reference Obligations. Neither the Issuer nor any of its affiliates makes any representation as to the future performance of the Notes either in absolute terms of relative to other investments.
This information is communicated by UBS AG and/or its affiliates ("UBS"). UBS may from time to time, as principal or agent, have positions in, or may buy or sell, or make a market in any securities, currencies, financial instruments or other assets underlying the transaction. UBS may provide investment banking and other services to and/or have officers who serve as directors of the companies referred to in this term sheet. UBS may pay or receive brokerage or retrocession fees in connection with this transaction. UBS's hedging activities related to this transaction may have an impact on the price of the underlying asset and may affect the likelihood that any relevant barrier is crossed.
Structured transactions are complex and may involve a high risk of loss. Prior to entering into a transaction you should consult with your own legal, regulatory, tax, financial and accounting advisors to the extent you consider it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of this transaction) based upon your own judgement and advice from those advisers you consider necessary. Save as otherwise expressly agreed, UBS is not acting as your financial adviser or fiduciary in any transaction.
No action has been or will be taken in any jurisdiction that would permit a public offering of the securities described herein, save where explicitly stated in this Prospectus. The securities must be sold in accordance with all applicable selling restrictions in the jurisdictions in which they are sold.
Ratings
A rating is not a recommendation to buy, sell or hold a Note and may be withdrawn, amended or suspended at any time by the assigning rating agency.
Secondary Market
There is no secondary market for the Notes and nor is one likely to develop. Noteholders should have the intent and ability to hold the Notes until their Maturity Date.
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TERMS AND CONDITIONS OF THE NOTES
€50,000,000 Adjustable Spread Leveraged Notes - eLevate Series 2007-1
The terms and conditions of the Notes shall consist of (i) the terms and conditions which appear in the Agency Agreement and are set out in the Base Prospectus (the “General Terms and Conditions”) and (ii) shall incorporate Schedule B entitled the “UBS Standard Tranched Portfolio Credit-Linked Note Terms” dated 15 April 2004 (the “Definitions”), in both cases as amended or supplemented below.
If there is any inconsistency between the terms set out below and the Definitions, the terms set out below shall prevail.
References in the General Terms and Conditions to Final Terms shall be deemed to refer to the terms set out below together with the Definitions, in each case as amended or supplemented below.
Issuer: UBS AG, acting through its Jersey branch
Specified Denominations: €50,000,000
Series No: 4675
Aggregate Nominal Amount: €50,000,000, subject to:
(i) any Reduction of Aggregate Nominal Amount following a Credit Event (which will take effect as of the relevant Credit Event Determination Date (see Part 1 of the Definitions));
(ii) any reduction pursuant to the provisions set forth in Call and Put Options below; and
(iii) any reduction pursuant to the provisions set forth in Aggregate Credit Exposure Amount less than Aggregate Nominal Amount below.
The Aggregate Nominal Amount is subject to a minimum of zero.
Issue Price: 100 per cent.
Issue Date: 25 May 2007
Provisions relating to Interest:
Interest Commencement Date: Issue Date
Interest Basis: 3 month EURIBOR plus Adjustable Spread plus Allocable Reserve Amount.
Manner in which the Rate of Interest is to be determined
Two TARGET Business Days prior to the first day of each Interest Period.
iii) Relevant Screen Page: Telerate 248
iv) Adjustable Spread • From (and including) the Issue Date to (but excluding) the Interest Payment Date falling on or about 25 May 2017, 1.25 per cent. per annum minus the Reserved Amount.
• From (and including) the Interest Payment Date falling on or about 25 May 2017 to (but excluding) the Maturity Date, zero.
The Adjustable Spread may be adjusted as set forth in “Spread Adjustment” below.
Reserved Amount: • On each Interest Payment Date falling on or prior to 25 November 2012, a sum equal to 0.25 per cent. per annum of the Aggregate Nominal Amount of the Notes on such Interest Payment Date.
• On each Interest Payment Date thereafter, zero.
Allocable Reserve Amount: • On each Interest Payment Date falling on or prior to 25 November 2012, zero.
• On each Interest Payment Date falling after 25 November 2012 and on or prior to 25 May 2017, a sum equal to one eighteenth of the Aggregate Allocable Reserve Amount (each such sum, an “Aggregate Allocable Reserve Amount Distribution”) plus
(i) in the case of the Interest Payment Date falling on or about 25 February 2013, zero; or
(ii) in the case of the Interest Payment Date falling on or about 25 May 2013 to and including the Interest Payment Date falling on or about 25 May 2017, a sum equal to the simple interest that would have accrued on the Aggregate Allocable Reserve Amount Distribution at the Reference Rate for the Interest Period ending on (but excluding) such Interest Payment Date.
• On each Interest Payment Date thereafter, zero.
“Aggregate Allocable Reserve Amount” means the aggregate of the Reserve Amounts plus a sum equal to the simple interest that would have accrued on such sum at the Reference Rate from time to time over the period from the Issue Date to the Interest Payment Date falling on or prior to 25 November 2012.
Spread Adjustment: If at any time on or after the end of the Ramp-up Period the Aggregate Credit Exposure Amount is reduced as a result of the occurrence of any of the following events at any time on or prior to the Interest Payment Date falling on or about 25 May 2017:
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(i) any Reference Obligation that is a Qualifying CMBS Reference Obligation is redeemed in whole or in part and is not replaced in the Portfolio due to a failure of a simple majority of the Noteholders to approve for inclusion in the Portfolio any Substitute Asset proposed by the Issuer and designated in a Portfolio Addition Notice;
(ii) any other Reference Obligations are redeemed in whole or in part (provided that any such redemption above an aggregate amount of €50,000,000 in any rolling period of 12 months shall be ignored for the purpose of this provision) and are not replaced in the Portfolio due to a failure of a simple majority of the Noteholders to approve to approve for inclusion in the Portfolio any Substitute Assets proposed by the Issuer and designated in Portfolio Addition Notice(s);
(iii) the Aggregate Credit Exposure Amount of the Portfolio at the end of the Ramp-up Period is less than €2,223,000,000 as a result of a failure of a simple majority of the Noteholders to approve or be deemed to approve to approve for inclusion in the Portfolio Eligible Reference Obligations proposed by the Issuer and designated in Portfolio Addition Notice(s) (provided that the Issuer shall during the Ramp-up Period have proposed for inclusion in the Portfolio Eligible Reference Obligations with an Aggregate Credit Exposure Amount not less than €2,223,000,000);
(iv) some but not all of the Reference Obligations then constituting the Portfolio are removed from the Portfolio following a Call Valuation Date, as specified in Adjustments and Put Option below,
(any of the foregoing, a “Spread Adjustment Event”), the Adjustable Spread shall with effect from the date of the occurrence of the Spread Adjustment Event (the “Spread Adjustment Event Date”) be deemed to be the product of the Adjustable Spread immediately prior to the occurrence of the Spread Adjustment Event and the Spread Adjustment Factor, provided that no such adjustment shall take place under sub-paragraphs (i), (ii) or (iii) above to the extent that any relevant Substitute Asset or Eligible Reference Obligation not approved or deemed approved by a simple majority of the Noteholders was on the relevant Portfolio Addition Date trading at a firm bid price equal to or lower than 99.9% of its nominal amount, for which purpose the Noteholders may at any time require the Auction Agent to obtain a Valuation in accordance with the process described in Call and Put Options below (and, for the avoidance of doubt, such Valuation shall be required to remain open for 60 minutes, during which time UBS shall have the right, but not the obligation, to execute on such Valuation in an amount up to the relevant Credit Exposure Amount).
For the avoidance of doubt, a Spread Adjustment Event does not constitute an event of default for the purposes of these Notes.
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“Spread Adjustment Factor” means:
(A) (i) the weighted average credit spread of the all Reference Obligations in the Portfolio Pool prior to the redemption or removal from the Portfolio of the Relevant Reference Obligation(s) minus (ii) (a) the credit spread on the Relevant Reference Obligation(s) times (b) the notional amount of the Relevant Reference Obligation(s) divided by (c) the Aggregate Credit Exposure Amount prior to the redemption or removal from the Portfolio of the Relevant Reference Obligation(s); divided by
(B) the weighted average credit spread of all Reference Obligations in the Portfolio prior to the redemption or removal from the Portfolio Pool of the Relevant Reference Obligation(s).
The credit spread of each Reference Obligation and the Spread Adjustment Factor shall be determined by the Calculation Agent. The Calculation Agent shall notify any change in the Adjustable Spread to the Paying Agents in accordance with Condition 6(c) Notification of Rates of Interest, Interest Amounts and Interest Payments Dates.
“Relevant Reference Obligations” means the Reference Obligation(s) that are (a) redeemed and not replaced (in the cases of sub-paragraphs (i) and (ii) of Spread Adjustment above), (b) not added to the Portfolio as a result of a failure of a simple majority of the Noteholders to approve or be deemed to approve to approve their inclusion (in the case of sub-paragraph (iii) of Spread Adjustment above) or (c) removed from the Portfolio (in the case of sub-paragraph (iv) of Spread Adjustment above).
“Qualifying CMBS Reference Obligation” means either: (i) a CMBS Reference Obligation with respect to which at least €10,000,000 principal amount has been redeemed or (ii) a CMBS Reference Obligation with respect to which at least €5,000,000 but less than €10,000,000 has been redeemed (up to a maximum of three Reference Obligations or €30,000,000 per annum).
v) Minimum Rate of Interest: Not Applicable
vi) Maximum Rate of Interest: Not Applicable
Party Responsible for calculating Rate of Interest and Interest Amounts:
Calculation Agent
Business Day Convention: Following Business Day
Interest Payment Dates: 25 August, 25 November, 25 February and 25 May in each year, commencing with 25 August 2007 and ending with and including the Maturity Date.
Day Count Fraction: Actual/360
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Calculation of Interest Amount:
Interest shall be determined for each Interest Period by the Calculation Agent as the product of the Aggregate Nominal Amount as of the last day of such Interest Period, the Interest Basis and the Day Count Fraction.
If one or more Spread Adjustment Event Date(s) falls during an Interest Period (other than on an Interest Payment Date), the Adjustable Spread for that Interest Period shall be the weighted average of each different Adjustable Spread in force during such Interest Period.
Credit Related Provisions
Reference Entities: Each of the entities listed in Schedule A and the obligors in respect of any Eligible Reference Obligations to the Portfolio at any time and, in each case, their respective Successors:
The consent of Noteholders will not be required for any amendment required as a result of the identification of more than one Successor (see part 3 of the Definitions).
Portfolio: Together, the Reference Entities and Reference Obligations from time to time.
Aggregate Credit Exposure Amount:
At any time, the aggregate of the Credit Exposure Amounts of the Reference Entities then constituting the Portfolio, as determined by the Calculation Agent. As of the Issue Date, the Aggregate Credit Exposure Amount is €1,982,445,285.00.
Ramp-up of the Portfolio: During the period from the Issue Date to the Interest Payment Date falling on or about 25 June 2007 (the “Ramp-up Period”), Eligible Reference Obligations will be added to the Portfolio in accordance with the provisions set forth herein until the Aggregate Credit Exposure Amount is equal to €2,223,000,000.
Substitute Assets: If at any time after the Ramp-up Period and on or prior to the Interest Payment Date falling on or about 25 November 2012, the Aggregate Credit Exposure Amount is less than €2,000,000,000 (other than by reason of the occurrence of a Credit Event Determination Date and the consequent removal of the affected Reference Obligation from the Portfolio), additional Eligible Reference Obligations (“Substitute Assets”) will be added to the Portfolio in accordance with the provisions set forth herein to reinstate the Aggregate Credit Exposure Amount to €2,223,000,000.
Noteholders’ right of refusal: No Eligible Reference Obligation nor Substitute Asset may be added to the Portfolio unless a simple majority by value of the holders of the Notes has given its consent thereto in accordance with the following provisions:
(i) the Issuer shall give the Noteholders notice of, during the Ramp-up Period, 15 Business Days or, after the Ramp-up Period, 10 Business Days of the proposed addition of any Eligible Reference Obligation or Substitute Asset to the
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Portfolio. Such notice (a “Portfolio Addition Notice”) shall be in substantially the form set forth in Schedule C or such other form as the Issuer may from time to time determine and shall:
(a) specify the name of the proposed Reference Entit(ies);
(b) describe the proposed Eligible Reference Obligation(s) or Substitute Asset(s);
(c) specify the proposed Credit Exposure Amount(s);
(d) specify the date (the “Portfolio Addition Date”) on which the proposed Eligible Reference Obligation(s) or Substitute Asset(s) are to be added to the Portfolio; and
(e) confirm that the proposed addition(s) to the Portfolio will not cause any breach of the Portfolio Guidelines;
provided that (x) a Portfolio Addition Notice given during the Ramp-up Period shall not specify fewer than 20 Eligible Reference Obligations, and (y) the Credit Exposure Amount of any Substitute Asset shall not be less than €10,000,000 nor more than €34,200,000 (or the equivalent in other currencies, as determined by the Calculation Agent).
(ii) if within 10 Business Days of the delivery of a Portfolio Addition Notice a simple majority by value of the Noteholders notify the Issuer in the manner specified in the Portfolio Addition Notice that they consent to the addition of the proposed Eligible Reference Obligation(s) or Substitute Asset(s) to the Portfolio, such Eligible Reference Obligation(s) or Substitute Asset(s) shall be deemed to be added to the Portfolio with effect from the Portfolio Addition Date. For such purpose, a failure by any Noteholder to respond to a Portfolio Addition Notice within 10 Business Days of delivery shall be deemed to constitute a refusal on the part of such Noteholder to consent to the proposed addition to the Portfolio. If such consent is not given, the proposed Eligible Reference Obligation(s) or Substitute Asset(s) shall be deemed not to be added to the Portfolio.
Noteholders’ right to remove sub-par Eligible Reference Obligations from the Portfolio:
All (but not some only) of the Noteholders acting together may require, by not less than 2 Business Days notice in writing to the Issuer, the Calculation Agent and the Auction Agent, that any Eligible Reference Obligation(s) with a Valuation less than its nominal amount be removed from the Portfolio, for which purpose such Noteholders may, at any time prior to such Noteholder notification, require the Auction Agent to obtain and notify to all Noteholders the following information:
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(a) a Valuation of any Eligible Reference Obligation(s) proposed to be removed, in accordance with the process described in Call and Put Options below (and, for the avoidance of doubt, such Valuation shall be required to remain open for 60 minutes, during which time UBS shall have the right, but not the obligation, to execute on such Valuation in an amount up to the relevant Credit Exposure Amount); and
(b) the expected Principal Reduction Amount (expressed both as an absolute amount and as a percentage of the Aggregate Nominal Amount of the Notes) which would result from any proposed removal of such Eligible Reference Obligation(s), calculated in accordance with the Principal Reduction Terms specified in Part 1 of the Definitions; and
(c) the results of the Moody’s Model Test, run on both the existing Portfolio and the expected Portfolio assuming the removal of such Eligible Reference Obligation(s).
In the event of a removal of any Eligible Reference Obligation(s) from the Portfolio:
(i) a Credit Event Determination Date shall be deemed to have occurred in respect of the relevant Reference Entity, the Final Price shall be deemed to be the relevant Valuation, the Principal Reduction Date shall be deemed to be the date on which the relevant Eligible Reference Obligation is removed from the Portfolio and the Principal Reduction Terms specified in Part 1 of the Definitions shall apply;
(ii) the Issuer shall notify Moody’s of any such removal of Eligible Reference Obligation(s); and
(iii) the Issuer shall if necessary propose Substitute Assets to be added to the Portfolio in accordance with the provisions set forth under Substitute Assets above.
Portfolio Guidelines:
Reference Obligation types: Unless otherwise agreed in writing by the Issuer and all (but not some only) of the Noteholders acting together, the restrictions set forth in this paragraph Reference Obligation Types and in Concentration Limits and Granularity Criteria (the “Portfolio Guidelines”) shall apply to Reference Entities and Obligations eligible for inclusion in the Portfolio. No Obligation may be added to the Portfolio unless it is an “Eligible Reference Obligation”, which shall mean that it:
• is an ABS which is an RMBS, a CMBS, an SME ABS, a Consumer Loans ABS or a Government ABS
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• is a floating rate note that pays a rate of interest which may be periodically re-set by reference to some index or benchmark
• (x) has a public rating no lower than Aaa by Moody’s Investors Service Limited (“Moody’s”) or if the Obligation is not rated by Moody’s has a rating of no lower than AAA by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies Inc. (“S&P”) or AAA by Fitch Ratings Ltd (“Fitch”), (y) such rating is the same or higher than that in effect as of the issuance of the Obligation, and (z) is not on credit watch by any of S&P, Moody’s or Fitch on the date on which it is added to the Portfolio
• is backed by assets originated by an entity or entities (each an “Originator”) domiciled in a European jurisdiction
• has an Expected Maturity date no later than May 2017
• would on the relevant Portfolio Addition Date have a firm bid price which in the opinion of the Calculation Agent is for credit reasons equal to or higher than 99.9% of its nominal amount
“ABS” means any obligation that is either (a) a security or any other obligation that is evidenced by a certificate (in global, definitive or other form) and either (i) is primarily serviced by the cashflows of a pool of receivables (whether present or future) or other assets (including, without limitation, bonds or loans), either fixed or revolving or (ii) the performance of which is linked (whether through a derivative transaction or otherwise) to a portfolio of corporate or other reference entity names or reference assets (including without limitation, ABS falling within sub-paragraphs (a)(i), (a)(iii) and (b) of this definition) or (iii) is partly serviced by the cashflows of a pool of receivables (whether present or future) or other assets (including, without limitation, bonds or loans), either fixed or revolving and the performance of which is partly linked to a portfolio of corporate or other reference entity names, in each case, whether or not together with any rights or other assets designed to assure the servicing or timely distribution of proceeds to the holders thereof or (b) an "asset-backed security" as such term may be defined from time to time in the "General Instructions to Form S-3 Registration Statement" promulgated under the U.S. Securities Act of 1933 as amended.
“CMBS” means any ABS that (i) relates to underlying assets which consist of European commercial mortgages, multi-family leases or credit tenant leases and (ii) was not a securitisation of non-performing assets.
“Consumer Loan ABS” means any ABS that relates to underlying assets which consists of consumer loans, consumer leases or auto leases.
“Expected Maturity” means with respect to a Security, the date on which such Security is expected to be redeemed (assuming no losses,
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and estimated on the basis of several assumptions, including the possible exercise of any issuer call options). The Expected Maturity will be influenced by, among other things, the actual rate of redemption of the underlying Security collateral which may be in the form of scheduled amortisation, prepayments, enforcement proceeds, other principal redemptions, exercise of issuer call options. The Expected Maturity cannot be determined with certainty, as the actual rate at which the Security collateral will be repaid and a number of other relevant factors are unknown. However, the Expected Maturity can be estimated by the Security issuer, lead manager or trustee under certain assumptions. If the Security issuer, lead manager or trustee does not provide an estimate of the Expected Maturity, the Calculation Agent will calculate this number by using data from any publicly available information held by it and, if needed, make any required assumptions estimated in good faith.
“Government ABS” means an ABS originated by a government or a political subdivision or authority thereof;
“Master Trust” means a transaction whereby one or more issuers issues ABS, the proceeds of which are applied (directly or indirectly) to acquire an undivided interest in a portfolio of assets which are held on trust by a trustee for one or more beneficiaries. A transferor assigns assets from time to time to the trustee which holds them on trust for the beneficiaries (one of whom may be the transferor). Revenues or other sums arising in relation to the trust assets are distributed to the beneficiaries according to a formula. Each issuer meets its obligations in relation to the ABS issued by it from its undivided interest (direct or indirect) in the trust assets.
“RMBS” means any ABS that (i) relates to underlying assets which consist of European mortgages or European subprime mortgages and (ii) was not a securitisation of non-performing assets.
“SME ABS” means ABS that entitle the holders thereof to receive payments that depend on the cash flow from a portfolio of leases to Italian small and medium-sized enterprises.
Concentration limits: The Portfolio shall be subject to the following concentration limits:
Reference Obligation characteristic Maximum aggregate Credit Exposure Amount**
RMBS €1,400,000,000CMBS €1,000,000,000Consumer Loan ABS and SME ABS €300,000,000Government ABS €50,000,000ABS issued by a single Master Trust €200,000,000A single Reference Obligation (or tranche thereof, if applicable)
€34,200,000
Originator domiciled in: Germany €333,450,000
Italy €333,450,000Spain €222,300,000
Greece €222,300,000
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All other European jurisdictions (excluding the United Kingdom and
The Netherlands)
€111,500,000
** All concentration limits shall be tested at the time when any Reference Obligation is added to the Portfolio
Rating criteria: Not less than 80% by Credit Exposure Amount of the Reference Obligations constituting the Portfolio shall have a public rating or credit estimate by Moody’s.
Moody’s Model Test: No Reference Obligation may be proposed for addition to the Portfolio unless the Portfolio including such Reference Obligation would satisfy the Moody’s Model Test, which shall be run each time by both the Issuer and the Auction Agent.
“Moody’s Model Test” means the Moody’s CDOROM Test 2 set forth in Schedule D.
Granularity criteria: At any time after the Ramp-up Period and prior to the Interest Payment Date falling on or about 25 November 2012 the Portfolio shall comprise no more than 100 and no fewer than 65 Reference Obligations.
Reference Obligations: In respect of each Reference Entity which is part of the Portfolio on the Issue Date, the Reference Obligation specified opposite its name in Schedule A or, in respect of each Reference Entity subsequently added to the Portfolio, the Eligible Reference Obligation specified in the applicable Portfolio Addition Notice.
Credit Exposure Amount: In respect of each Reference Entity and Reference Obligation which is part of the Portfolio on the Issue Date, the amount specified opposite its name in Schedule A or, in respect of each Reference Entity and Reference Obligation subsequently added to the Portfolio, the amount specified in the applicable Portfolio Notice, subject in all cases to adjustment following the occurrence of a Succession Event, provided that:
(i) if any such amount is denominated in a currency other than euro (a “Non-euro Credit Exposure Amount”) it shall be converted into euro for the purpose of determining the applicable Credit Exposure Amount on or about the date on which the relevant Reference Entity and Reference Obligation are added to the Portfolio at such spot rate of exchange for the purchase of such currency with euro as the Calculation Agent shall determine (in each case, the “Credit Exposure Amount Exchange Rate”); and
(ii) if any Reference Obligation is amortised in accordance with its terms, the Credit Exposure Amount for that Reference Obligation shall be reduced pro rata..
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Credit Events: The following Credit Events shall apply to this Transaction:
• Failure to Pay Grace Period Extension: Applicable Payment Requirement: €50,000
• Loss Event
• Bankruptcy
• Rating Downgrade
“Bankruptcy” means:
(i) a Reference Entity (a) is dissolved (other than pursuant to a consolidation, amalgamation or merger or subsequent to the substitution of the Issuer as principal obligor); (b) institutes or has instituted against it a proceeding seeking a judgment of insolvency of 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 thirty calendar days of the institution or presentation thereof; (c) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation amalgamation or merger); (d) seeks or becomes subject to the appointment of a bankruptcy administrator, provisional liquidator, conservator, receiver for its or for all or substantially all its assets (excluding, for the avoidance of doubt, the appointment by the Reference Entity of a trustee, custodian, fiscal agent or similar representative solely for the purposes of an issue of securities by the Reference Entity) or (e) 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 (a) to (d) (inclusive); and
(ii) the occurrence of any of the events described in the above clauses (a) to (e) (inclusive) has given rise to an event of default (howsoever described) under the terms of the Reference Obligation.
The definition of “Bankruptcy” in the Definitions shall not apply.
“Failure to Pay” means, after the expiration of any applicable Grace Period (after the satisfaction of any conditions precedent to the commencement of such Grace Period), the failure by a Reference Entity to make, when and where due (and payable), any payments in
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an aggregate amount of not less than the Payment Requirement under one or more Obligations, in accordance with the terms of such Obligations at the time of such failure provided that an event which would otherwise constitute a Failure to Pay Credit Event shall cease to be a Credit Event if the failure to make the relevant payment is cured within 3 months of the relevant Credit Event Determination Date.
The definition of “Failure to Pay” in the Definitions shall not apply.
“Loss Event” means:
(i) the occurrence of a Principal Reduction pursuant to the terms of the Reference Obligation; and
(ii) the satisfaction of one or more of the following conditions:
(a) the terms of the Reference Obligation do not provide for the reinstatement or reimbursement of the Principal Reduction;
(b) the terms of the Reference Obligation do not provide for interest to be paid at any time, at the Scheduled Interest Rate, on the Principal Reduction, from the day of the Principal Reduction until the day on which such Principal Reduction is reinstated or reimbursed in full; or
(c) the terms of the Reference Obligation do not provide for interest to be paid, at a rate at least equal to the Scheduled Interest Rate, on the interest which would have accrued on the Principal Reduction, from the day of the Principal Reduction until the day on which such Principal Reduction is reinstated or reimbursed in full.
“Principal Reduction” means a reduction in the principal amount of the Reference Obligation other than in connection with a scheduled or non-scheduled payment of principal.
The definition of “Publicly Available Information” in the Definitions shall be amended by deleting paragraphs (i) – (v) thereof and replacing them with the following:
“(i) is information received from or published by a trustee, fiscal agent, administrative agent, clearing agent, paying agent, manager, arranger or servicer for the Reference Obligation; or
(ii) is information contained in a notice or on a website published by an internationally recognized rating agency that has at any time rated the Reference Obligation”.
A “Rating Downgrade” shall be deemed to have occurred if a Reference Obligation (i) has a rating of "Ca" or lower from Moody's (if the Reference Obligation is rated by Moody's at such time) or is no longer rated by Moody's (provided that withdrawal of a rating higher than “Ca” shall not constitute a Rating Downgrade) or (ii) if the
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Reference Obligation has not been rated by Moody’s at any time, has a rating of "CC" or lower from S&P (if the Reference Obligation is rated by S&P at such time) or is no longer rated by S&P (provided that withdrawal of a rating higher than “CC” shall not constitute a Rating Downgrade) and has a rating of "CC" or lower by Fitch (if the Reference Obligation is rated by Fitch at such time) or is no longer rated by Fitch (provided that withdrawal of a rating higher than “CC” shall not constitute a Rating Downgrade).
Obligations: Obligation Category: Reference Obligation Only
Affected Reference Entity: A Reference Entity in respect of which a Credit Event Determination Date has occurred. An Affected Reference Entity and the related Reference Obligation will be deemed to be removed from the Portfolio.
Valuation Portfolio: Reference Obligations of the Affected Reference Entity with an aggregate outstanding principal balance (excluding accrued but unpaid interest) equal to or less than the Credit Exposure Amount of the Affected Reference Entity.
Valuation Date: The Valuation Date shall be the second anniversary of the Credit Event Determination Date or any earlier date on which the final cash proceeds of the relevant Reference Obligation are distributed, in which event, notwithstanding any other provision hereof, the Final Price shall be such final cash proceeds, expressed as a percentage.
Valuation Time: 12 noon in the principal trading market for the relevant Valuation Obligation, as determined by the Auction Agent in its sole discretion.
Minimum Quotation Amount: USD 1,000,000 (or its equivalent in the relevant currency converted by the Auction Agent in a commercially reasonable manner by reference to exchange rates in effect at the time that the relevant Quotation is being obtained) with respect to each Valuation Obligation or, if less, the applicable Credit Exposure Amount.
Auction Agent: Allied Irish Banks plc
Selection of Dealers: The Auction Agent shall select five Dealers, one of which shall be UBS (together the “Selected Dealers”), and notify the Selected Dealers to the Calculation Agent.
Valuation Process: The valuation process described in the paragraph headed “Quotation” in the Definitions shall not apply. “Partial Quotation” shall mean a firm bid quotation for a principal amount of any Reference Obligation that is less than the Quotation Amount and references to “Quotation” shall include any Partial Quotation.
The Auction Agent shall attempt to obtain Full and/or Partial Quotations from the Selected Dealers at its discretion on the Valuation Date. If no Full or Partial Quotations are received on the Valuation Date, or UBS are the only Dealer providing a Quotation, then the Auction Agent shall attempt to obtain Full and/or Partial Quotations on each fifth Business Day thereafter until the earlier of (i) the first day on which at least one Full or Partial Quotation is received (other than from UBS), (ii) five unsuccessful attempts by the Calculation Agent
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to obtain a Full Quotation from a Dealer other than UBS, and (iii) the day falling after 25 Business Days after the Valuation Date (the “Last Valuation Date”).
If one or more Full Quotations are received, then the Auction Agent shall use the highest bid to determine the Final Price. If no Full Quotation is obtained, but Partial Quotations are received then the Final Price shall be the applicable Weighted Average Quotation. On the Last Valuation Date, if no Full Quotation or Partial Quotation has been obtained, then Final Price shall be deemed to be zero.
For the purposes of the above paragraph, if UBS is the only Dealer providing a Quotation, then it will be deemed that no Quotation has been received by the Auction Agent.
The Auction Agent may also provide Full or Partial Quotations on any Reference Obligation included in the Valuation Portfolio.
All Full or Partial Quotations will be disclosed by the Auction Agent to the Calculation Agent promptly upon receipt and will be required to remain open for 60 minutes. UBS will have the right, but not the obligation, to execute on any Quotation in an amount up to the Credit Exposure Amount in respect of the relevant Reference Obligation.
If an Affected Reference Entity has a Non-euro Credit Exposure Amount, all Quotations obtained in the relevant currency shall be converted into euro for the purpose of determining the Final Price at the applicable Credit Exposure Amount Exchange Rate.
May 2003 Supplement: Applicable
All Guarantees: Not applicable
Reduction of Principal following a Credit Event:
If the Calculation Agent determines that a Credit Event has occurred, then the Issuer may elect to trigger the Principal Reduction Terms by delivering a Credit Event Notice along with Publicly Available Information relating to the Credit Event, all as more fully set out in Part 1 of the Definitions. Following delivery of a Credit Event Notice, the Issuer or its Nominee shall give to the Calculation Agent and the Noteholders a detailed description of the Valuation Obligations that will comprise the Valuation Portfolio together with their estimated outstanding principal balance and the Valuation Date on which the determination of the Credit Loss Amount in respect of that Credit Event Determination Date will commence, each of which may be amended as more fully specified in the Definitions. On the Valuation Date, the Calculation Agent shall commence determination of the Principal Reduction Amount using the Valuation Obligations specified in the final Notice of Valuation Obligations.
Principal Reduction Amount: The “Principal Reduction Amount” with respect to any Credit Event and Affected Reference Entity shall be equal to the product of: (a) the Credit Exposure Amount for such Affected Reference Entity and (b) the Credit Loss Percentage for the Affected Reference Entity; provided that the Principal Reduction Amount is subject to a maximum amount
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equal to the Credit Exposure Amount of the Affected Reference Entity and a minimum amount equal to zero.
Credit Loss Percentage: 100 per cent. minus Final Price.
Solicitation of Valuations from Noteholders:
Applicable – see Part 1 of the Definitions.
Provisions relating to Redemption
Maturity Date: 25 May 2057 (the “Scheduled Maturity Date”), provided that:
(i) if one or more Principal Reduction Amounts following any Credit Event Determination Dates occurring on or prior to the Scheduled Maturity Date have not been determined three Business Days prior to the Scheduled Maturity Date, then the Notes shall be redeemed on the date three Business Days after all Principal Reduction Amounts have been determined and notwithstanding anything herein to the contrary the Interest Basis for the period from the Scheduled Maturity Date to the date on which the Notes are actually redeemed will be Floating and the Rate of Interest accruing on the Aggregate Nominal Amount will be the prevailing overnight rate as calculated by the European Central Bank and appearing on Telerate Page 247 (“EONIA”) compounded daily from the Scheduled Maturity Date to the date on which the Notes are actually redeemed, as determined by the Calculation Agent acting in good faith; and
(ii) if the Aggregate Nominal Amount has been reduced to zero, the third Business Day following the reduction of the Aggregate Nominal Amount to zero shall be the Maturity Date.
Noteholders’ attention is drawn to the fact that due to the operation of the terms relating to Principal Reduction there may be a considerable period of time following a Credit Event Determination Date before the Credit Loss Amount for the Affected Reference Entity is determined.
Redemption Amount: The Aggregate Nominal Amount.
Aggregate Credit Exposure Amount less than Aggregate Nominal Amount:
If on any date on or after the Interest Payment Date falling on or about 25 November 2012 the Aggregate Credit Exposure Amount is less than the Aggregate Nominal Amount, the Issuer shall not later than 5 Business Days thereafter repay the Notes in an amount equal to the shortfall.
Call and Put Options: On and if necessary following the 15th Business Day prior to the Interest Payment Date falling on or about 25 November 2012 and each subsequent Interest Payment Date for so long as the Notes are outstanding (each, a “Call Valuation Date”), the Auction Agent shall obtain a Final Price for each Reference Obligation in the Portfolio in respect of which a Credit Event Determination Date has not occurred
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by obtaining Full Quotations from Selected Dealers over the period of 10 Business Days commencing on the Call Valuation Date. The Final Price shall be deemed to be the highest Full Quotation so obtained, provided that:
(i) if any Affected Reference Entity has a Non-euro Credit Exposure Amount, all Quotations obtained in the relevant currency shall be converted into euro for the purpose of determining the Final Price at the applicable Credit Exposure Amount Exchange Rate.
(ii) all Final Prices will be disclosed by the Auction Agent to the Calculation Agent promptly upon receipt and will be required to remain open for 60 minutes. UBS will have the right, but not the obligation, to execute on any Quotation at such Final Price in an amount up to the Credit Exposure Amount in respect of the relevant Reference Obligation.
The product of each such Final Price and the relevant Credit Exposure Amount is referred to herein as the “Valuation” of the relevant Reference Obligation. The Auction Agent shall notify the Issuer, the Calculation Agent and the Noteholders of such Valuations as soon as reasonably practicable after they have been obtained.
Call Option: If the aggregate of the Valuations so obtained on and after any Call Valuation Date is equal to or greater than the aggregate nominal amount of the Reference Obligations then comprising the Portfolio, the Issuer shall by notice to the Noteholders and the Paying Agents redeem the Notes on the following Interest Payment Date (the “Call Option Redemption Date”) at an amount equal to the Aggregate Nominal Amount plus any Interest Amount accrued on such date of redemption plus the aggregate of all Reserved Amounts deducted from payments of interest on the Notes on Interest Payment Dates on or before the date of such redemption together with interest each such Reserved Amount at EURIBOR flat in respect of the period beginning on (and including) the Interest Payment Date on which it was deducted from a payment of interest on the Notes to (but excluding) the Call Option Redemption Date (the “Accrued Reserved Amount”), provided that if one or more Principal Reduction Amounts following any Credit Event Determination Dates occurring on or prior to the Call Option Redemption Date have not been determined three Business Days prior to the Call Option Redemption Date (the aggregate of the Credit Exposure Amounts of the Affected Reference Entit(ies) being referred to herein as the “Unvalued Exposure”), then:
(i) on the Call Option Redemption Date, (a) the Issuer shall (x) redeem a principal amount of the Notes equal to the Aggregate Nominal Amount minus the Unvalued Exposure and (y) pay to the Noteholders an amount equal to the Accrued Reserved Amount and (b) the Aggregate Nominal Amount shall be deemed to be equal to the Unvalued Exposure;
(ii) upon the determination of each Principal Reduction Amount, the Aggregate Nominal Amount shall be reduced by the
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applicable Credit Loss Amount and the Issuer shall redeem the Notes in an amount equal to the product of the applicable Credit Exposure Amount and the applicable Final Price, together with interest on such amount in respect of the period from (and including) the Call Option Redemption Date to (but excluding) the date of such redemption calculated on a Floating Interest Basis and a Rate of Interest of EONIA compounded daily and determined by the Calculation Agent acting in good faith.
Adjustments and Put Option:
If the aggregate of the Valuations so obtained on and after any Call Valuation Date is less than the aggregate nominal amount of the Reference Obligations then comprising the Portfolio:
(i) each Reference Obligation with a Valuation equal to or greater than its nominal amount shall be deemed to be removed from the Portfolio as of the applicable Call Valuation Date;
(ii) the Adjustable Spread shall be adjusted in accordance with the provisions set out under Spread Adjustment above; and
Condition 7(e) shall apply and all (but not some only) of the Noteholders shall have the option to require the Issuer to redeem the Notes on the following Interest Payment Date (the “Put Option Redemption Date”) at an aggregate amount (the “Put Option Redemption Amount”) equal to the Aggregate Nominal Amount less the sum of the amounts by which the Valuation of each Reference Obligation remaining in the Portfolio after the operation specified in sub-paragraph (i) has been effected is less than its nominal amount, provided that if one or more Principal Reduction Amounts following any Credit Event Determination Dates occurring on or prior to the Put Option Redemption Date have not been determined three Business Days prior to the Put Option Redemption Date, then:
(i) on the Put Option Redemption Date, (a) the Issuer shall pay to the Noteholders an amount equal to (x) the Aggregate Nominal Amount less (y) the sum of the amounts by which the Valuation of each Reference Obligation remaining in the Portfolio after the operation specified in sub-paragraph (i) has been effected (other than those which have been the subject of an Event Determination Date) is less than its nominal amount less (z) the Unvalued Exposure and (b) the Aggregate Nominal Amount shall be deemed to be equal to the Unvalued Exposure;
(iii) upon the determination of each Principal Reduction Amount, the Aggregate Nominal Amount shall be reduced by the applicable Credit Loss Amount and the Issuer shall redeem the Notes in an amount equal to the product of the applicable Credit Exposure Amount and the applicable Final Price, together with interest in respect of the period from (and including) the Put Option Redemption Date to (but excluding) the date of such redemption calculated on the basis of a Floating Interest Basis and a Rate of Interest of EONIA
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compounded daily and determined by the Calculation Agent acting in good faith.
Termination following Breach of Selling Restrictions:
Applicable – see Part 8 of the Definitions.
Tax Redemption: Applicable – see Part 8 of the Definitions.
General Provisions Applicable to the Notes:
Status of the Notes: Senior
Listing: Application will be made for the Notes to be admitted to trading on the regulated market of the Irish Stock Exchange.
Rating: A1 by Moody’s.
A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by Moody’s at its discretion.
Form of Notes: Reg S; TEFRA D; Bearer Notes Temporary Global Note exchangeable for a Permanent Global Note which is exchangeable for definitive Notes in the limited circumstances specified in the Permanent Global Note.
Business Days: For the purpose of any payment due from the Issuer: London and TARGET
For all other purposes, London, Dublin and TARGET
“TARGET” Business Day means a day on which the day upon which the TARGET System is operating.
Clearing System: Euroclear Bank S.A./N/V. and Clearstream Banking Société Anonyme.
Calculation Agent: UBS AG, acting through its London Branch, or any successor thereof. All determinations by the Calculation Agent hereunder will be made in good faith and, in the absence of manifest error, wilful default or bad faith, will be final and conclusive, and the Calculation Agent and the Issuer have no liability to the Noteholders or any third party in relation to such determinations.
Nominee of the Issuer UBS AG, London Branch
Distribution:
Dealer: UBS Limited
Selling Restrictions: The Selling Restrictions set out in the Base Prospectus apply.
Any Notes purchased by any person for resale may not be offered
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in any jurisdiction in circumstances that would result in the Issuer being obliged to register any further prospectus or corresponding document relating to the Notes in that jurisdiction.
Arranger: UBS Limited
Issuing and Paying Agent: HSBC Bank plc
Additional Representations and Disclosures
Additional Noteholder Representations:
Each Noteholder represents that:
(i) it has made its own independent evaluation of the terms of the Notes and investigation of the Reference Entities and is not relying on any advice or recommendations of the Issuer, the Programme Arranger, the Dealer or the Calculation Agent in connection with the purchase of the Notes; and
(ii) it has consulted with legal, regulatory, tax, business, investment, financial and accounting advisers with respect to the Notes and the Reference Entities to the extent that it deems it necessary.
UBS Available Information: UBS AG is subject to the informational requirements of the Exchange Act, and, in accordance therewith, files reports and other information with the Commission. The reports and other information filed by UBS AG with the Commission may be inspected (and copied at prescribed rates) at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. UBS AG's Common Stock is listed on the NYSE under the symbol “UBS.” Reports and other information filed may be inspected at the offices of NYSE at 20 Broad Street, New York, New York 10005 and can also be reviewed b y accessing the Commission's Internet site at http://www.sec.gov.
UBS AG has agreed that if it is no longer subject to the informational requirements of the Exchange Act, it will furnish to Noteholders and to prospective purchasers designated by such Noteholders the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act to permit compliance with Rule 144A in connection with resales of the Notes. Any such request should be directed to General Counsel, Region Americas Legal, UBS AG, Stamford Branch, 677 Washington Boulevard, Stamford CT 06901.
Legal Advisors:
Programme (English law): Clifford Chance Limited Liability Partnership 10 Upper Bank Street London E14 5JJ
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Prospectus: Gide Loyrette Nouel MNP CityPoint 1 Ropemaker Street London EC2Y 9HT
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OTHER INFORMATION
1. LISTING
(i) Listing: Irish Stock Exchange
(ii) Admission to trading: Application has been made to the Irish Financial Services Regulatory Authority, as competent authority under Directive 2003/71/EC, for the Prospectus to be approved. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on its regulated market.
2. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE/OFFER
The initial Purchaser of the Notes will be UBS A.G., London Branch acting thorough its Investment Bank business group.
UBS AG and its affiliates may from time to time, as principal or agent have positions in, underwrite, buy and/or sell, or make a market in the Notes of this Series.
3. REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES
(i) Reasons for the offer: The net proceeds of the of the Notes will be used by the Issuer for its general corporate purposes or towards meeting the general financing requirements of the UBS Group, in each case outside of Switzerland.
(ii) Estimated total expenses:
€ 35,250
(iii) Estimated net proceeds:
€ 49,964,750
4. OPERATIONAL INFORMATION
ISIN: XS0301156518
Common Code: 12479021
Valeron: 3127176
Delivery: Delivery against payment
5. GENERAL INFORMATION
The establishment, update and issue of Notes from the Programme was authorised by resolutions of the Board of Directors of the Issuer passed on 24 June 1998.
Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Issuer in connection with the Notes and is not itself seeking admission of the Notes to the official list of the Irish Stock Exchange or to trading on the Irish Stock Exchange for the
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purposes of the Prospectus Directive.
The Issuer is not, nor has it been, involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware) during the 12 months before the date of this Prospectus which may have, or have had in the recent past, significant effects on the financial position or profitability of the Issuer and its subsidiaries taken as a whole.
Responsibility
The Issuer accepts responsibility for the Information contained in this Prospectus.
Material Adverse Change
There has been no material adverse change in the prospects of the Issuer since the date of its last published audited financial statements.
SCHEDULE B - UBS STANDARD TRANCHED PORTFOLIO CREDIT-LINKED NOTE TERMS DATED 15 APRIL 2004
Part 1: Declaration of Credit Event(s) Declaration of Credit Event: Subject if applicable to Grace Period Extension and/or
Repudiation/Moratorium Extension, if the Calculation Agent determines that a Credit Event has occurred on or prior to the Scheduled Maturity Date, the Calculation Agent shall notify the Issuer. The Issuer or its Nominee may elect to trigger the Principal Reduction Terms by delivering a Credit Event Notice on or prior to the Scheduled Maturity Date, subject if applicable to Grace Period Extension and/or Repudiation/Moratorium Extension.
Credit Event Determination Date: The date on which the Issuer or its Nominee delivers a Credit
Event Notice. Credit Event Notice: A notice given by the Issuer or its Nominee to the Calculation
Agent and the Noteholders in writing of the determination that a Credit Event has occurred on or prior to the Scheduled Maturity Date and of its election to trigger the Principal Reduction Terms. The Credit Event Notice shall describe in reasonable detail the facts relevant to the determination that a Credit Event has occurred and shall confirm the occurrence of a Credit Event with Publicly Available Information. The Credit Event Notice shall contain a copy or a description in reasonable detail of the relevant Publicly Available Information. The Credit Event that is the subject of the Credit Event Notice need not be continuing on the date that the Credit Event Notice is given.
Notice of Valuation Obligations: Following the Credit Event Determination Date in respect of a particular Reference Entity, the Issuer or its Nominee shall give to the Calculation Agent and the Noteholders a notice containing the following information (the “Notice of Valuation Obligations”), such notice to be delivered not later than three (3) Business Days prior to the Valuation Date selected by the Issuer or its Nominee:- A) a detailed description of the Valuation Obligations that
comprise the Valuation Portfolio for such Reference Entity;
B) the estimated aggregate outstanding principal balance of the Valuation Obligations that are intended to be valued and the estimated outstanding principal balance of each such Valuation Obligation; and
C) the date on which the determination of the Credit Loss Amount in respect of such Reference Entity is to commence (the “Valuation Date”), which day will not be earlier than the date falling 45 Business Days after the Credit Event Determination Date and not be later than date
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falling 135 Business Days after the Credit Event Determination Date (the “Final Valuation Date”).
The Issuer or its Nominee may serve subsequent Notices of Valuation Obligations to change the Valuation Date and/or one or more of the Valuation Obligations specified in the Notice of Valuation Obligations and/or the detailed description thereof at any time on or prior to the third (3rd) Business Day before the Final Valuation Date and the last Notice of Valuation Obligations served within this period shall override all previous such notices. The Issuer or its Nominee may correct any errors or inconsistencies in the detailed description of the Valuation Obligations specified in the Notice of Valuation Obligations by notice to the Calculation Agent and the Noteholders prior to or on the applicable Valuation Date.
Grace Period Extension: If the Calculation Agent declares that a Potential Failure to Pay
has occurred on or prior to the Scheduled Maturity Date in relation to a Reference Entity to which Grace Period Extension is specified as applicable but the applicable Grace Period (if any) cannot by its terms expire on or prior to the Scheduled Maturity Date, the Scheduled Maturity Date shall not be the Maturity Date of the Notes and the maturity of the Notes shall be extended in accordance with the following provisions.
If a Credit Event Notice in respect of the Failure to Pay is not served by the Issuer or its Nominee on or before the date which is 14 calendar days following the end of the Grace Period Extension Period then such date will be the Maturity Date (unless the Maturity Date has been extended for other reasons). If a Credit Event Notice in respect of the Failure to Pay is served by the Issuer or its Nominee on or before the date which is 14 calendar days following the end of the Grace Period Extension Period, then the Maturity Date will be the Principal Reduction Date.
Grace Period Extension Period: Means the number of days in the Grace Period after the
Potential Failure to Pay subject to a maximum of 30 calendar days.
Repudiation/Moratorium Extension: If the Calculation Agent determines a Potential
Repudiation/Moratorium has occurred on or prior to the Scheduled Maturity Date in relation to a Reference Entity for which Repudiation/Moratorium Extension is specified as applicable and a Repudiation/Moratorium Extension Notice is delivered on or before the Scheduled Maturity Date, then the Scheduled Maturity Date shall not be the Maturity Date of the Notes and the maturity of the Notes shall be extended in accordance with the following provisions.
If a Credit Event Notice in respect of the Repudiation/Moratorium is not served by the Issuer or its Nominee on or before the date, which is 14 calendar days following the Repudiation/Moratorium Evaluation Date, then
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such date will be the Maturity Date (unless the Maturity Date has been extended for other reasons). If a Credit Event Notice in respect of the Repudiation/Moratorium is served by the Issuer or its Nominee on or before the date, which is 14 calendar days following the Repudiation/Moratorium Evaluation Date, then the Maturity Date shall be the Principal Reduction Date.
Repudiation/Moratorium Evaluation Date: If the Obligations to which a Potential
Repudiation/Moratorium relate include Bonds, the date that is the later of (A) the date that is 60 calendar days after the date of such Potential Repudiation/Moratorium and (B) the first payment date under any such Bond after the date of such Potential Repudiation/Moratorium (or if later the expiry of any applicable Grace Period in respect of such payment date).
If the Obligations to which such Potential Repudiation/Moratorium relates do not include Bonds, the date that is 60 calendar days after the date of such Potential Repudiation/Moratorium.
Repudiation/ Moratorium Extension Notice: A notice given by the Calculation Agent to the Issuer and the
Noteholders in writing of the determination that a Potential Repudiation/Moratorium has occurred on or prior to the Scheduled Maturity Date. The Repudiation/ Moratorium Extension Notice shall describe in reasonable detail the facts relevant to the determination that a Potential Repudiation/Moratorium has occurred and shall confirm the occurrence of a Potential Repudiation/Moratorium with Publicly Available Information. The Repudiation/Moratorium Extension Notice shall contain a copy or a description in reasonable detail of the relevant Publicly Available Information. The Potential Repudiation/Moratorium that is the subject of the Repudiation/Moratorium Extension Notice need not be continuing on the date the Repudiation/Moratorium Extension Notice is given.
Potential Repudiation/Moratorium Means the occurrence of the events described in section (i) of
the definition of “Repudiation/Moratorium”. Principal Reduction Terms: Principal Reduction: Following delivery by the Issuer of a Credit Event Notice, on
the Principal Reduction Date, (a) the Aggregate Nominal Amount of the Notes shall be reduced, effective (for purposes of calculating Interest on the Notes) as of the related Credit Event Determination Date (and notwithstanding the fact that such Principal Reduction Amount will only be determined after such Credit Event Determination Date), by an amount equal to the Principal Reduction Amount, and (b) the Specified Denomination will be reduced by an amount equal to (i) the Principal Reduction Amount divided by (ii) the number of
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Notes outstanding (in each case before giving effect to such reduction). For the avoidance of doubt, a reduction of the Aggregate Nominal Amount and Specified Denomination following the occurrence of a Credit Event with respect to a Reference Entity will not preclude any reduction with respect to another Reference Entity; provided that only one such reduction may occur with respect to any Reference Entity (except in the case of Restructuring, as provided in Part 5(B) below).
Principal Reduction Date: The third Business Day following the calculation of the Credit
Loss Amount with respect to a Reference Entity; for the avoidance of doubt there may be multiple Principal Reduction Dates.
Calculation of Interest following Credit Event Determination Date: For the purposes of calculating Interest on the Notes following
a Credit Event Determination Date, the Aggregate Nominal Amount of the Notes will be deemed to be reduced as of the Credit Event Determination Date; however, if one or more Interest Payment Dates occurs between the Credit Event Determination Date and the related Principal Reduction Date, then for purposes of calculating Interest on the Notes only, the Credit Loss Amount shall be deemed to be equal to the Affected Reference Entity’s Credit Exposure Amount from and including such Credit Event Determination Date to but excluding the Interest Payment Date immediately preceding the Principal Reduction Date, resulting in a deferral of a portion of the interest due on the Notes. For the avoidance of doubt, Interest will continue to be paid on the Interest Payment Dates falling between the Credit Event Determination Date and the Principal Reduction Date, but on the Aggregate Nominal Amount that has been reduced as specified in the previous sentence.
If interest has been deferred pursuant to the preceding
paragraph, then on the Interest Payment Date immediately following the Principal Reduction Date (or, if there is no next succeeding Interest Payment Date, on the Maturity Date) (the “Deferred Interest Payment Date”), the Issuer shall pay additional Interest to the Noteholders in an amount equal to (i) the deferred interest (calculated on an amount equal to the difference between the Aggregate Nominal Amount as reduced using the actual Credit Loss Amount and the Aggregate Nominal Amount reduced using a Credit Loss Amount deemed to be equal to the Credit Exposure Amount) from the Interest Reduction Date to the Interest Payment Date immediately preceding the Principal Reduction Date, using the appropriate Interest Basis, Day Count Fraction and Business Day Convention of the Notes, for each Interest Payment Date during that period plus (ii) interest on the preceding amount determined in (i) , calculated at a rate determined by the Calculation Agent on the basis of the rates at which deposits in the currency of the Notes are bid by leading banks in the relevant inter-bank market for a period as near as practicable
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from the Credit Event Determination Date to the Deferred Interest Payment Date.
Definitions relating to Principal Reduction Amount: “Accumulated Loss” means, at any time, the sum of all Credit
Loss Amounts calculated in respect to all Affected Reference Entities. To the extent that the Credit Loss Amount for an earlier Credit Event Determination Date has not yet been determined, then the determination of the Credit Loss Amount with respect to any subsequent Credit Event shall be postponed until the determination with respect to the earlier Credit Event Determination Date has been completed.
“Credit Loss Amount” means, with respect to an Affected Reference Entity, the greater of (i) the sum of the Valuation Obligation Loss Amounts for all Valuation Obligations in the Valuation Portfolio of the Affected Reference Entity and (ii) zero.
“Valuation Obligation Loss Amount” means, with respect to a Valuation Obligation, the Quotation Amount of such Valuation Obligation multiplied by the difference between 100% and Final Price of such Valuation Obligation.
Final Price: Means with respect to each Valuation Obligation of an
Affected Reference Entity, the highest Quotation obtained by the Calculation Agent on the Valuation Date.
Quotation: Means each Full Quotation or the Weighted Average Quotation
obtained and expressed as a percentage with respect to a Valuation Date in the manner that follows:
The Calculation Agent shall attempt to obtain Full Quotations at the Valuation Time on the Valuation Date from at least five Reference Dealers not affiliated with one another or with the Issuer. If at least two such Full Quotations are not available on the initial Valuation Date, then at the Valuation Time on the 15th Business Day following such Valuation Date the Calculation Agent shall attempt to obtain Full Quotations from at least five Reference Dealers not affiliated with one another or with the Issuer (which shall include at least two Reference Dealers, if any, from which Quotations had not been solicited on the initial Valuation Date) and, if at least two Full Quotations are not available, a Weighted Average Quotation. If the Calculation Agent is unable to obtain at least two Full Quotations or a Weighted Average Quotation on the 15th Business Day following the initial Valuation Date, then the Calculation Agent at the Valuation Time on the next following Business Day (and, if necessary, on each Business Day thereafter until the fifth Business Day following such 15th Business Day) shall attempt to obtain Full Quotations from at least five Reference Dealers not affiliated with one another or with the Issuer and, if at least two Full Quotations are not available, a Weighted Average Quotation. If the Calculation Agent is able to obtain two Full Quotations or a Weighted
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Average Quotation on the same Business Day within an additional five Business Days, the Calculation Agent shall use such two Full Quotations or Weighted Average Quotation to determine the Final Price in accordance with the specified Valuation Method. If the Calculation Agent is unable to obtain two Full Quotations or a Weighted Average Quotation on the same Business Day within an additional five Business Days, the Quotation shall be deemed to be the price of the relevant Valuation Obligation(s), expressed as a percentage, determined by the Calculation Agent in its sole and absolute discretion (which, for the avoidance of doubt, may be zero).
The Quotations shall exclude accrued but unpaid interest. Valuation Time: 11:00am in the principal trading market for the relevant
Valuation Obligation, as determined by the Calculation Agent in its sole discretion.
Quotation Amount: Means, with respect to each Valuation Obligation, an amount
determined by the Issuer or its Nominee in its sole discretion; provided that (a) the aggregate of the Quotation Amount(s) for all the Valuation Obligation(s) relating to a single Reference Entity shall not exceed the Credit Exposure Amount for that Reference Entity and (b) the Quotation Amount for any single Valuation Obligation shall not be less than the Minimum Quotation Amount.
If a Valuation Obligation is denominated in a currency other
than the currency of the Notes, then the relevant amount of that Valuation Obligation for purposes of determining a Full Quotation or Weighted Average Quotation will be deemed to be the equivalent of the Quotation Amount designated by the Issuer or its Nominee converted by the Calculation Agent to the currency of such Valuation Obligation in a commercially reasonable manner by reference to exchange rates in effect at the time that the relevant Quotation is being obtained.
Minimum Quotation Amount: USD 1,000,000 (or its equivalent in the relevant currency
converted by the Calculation Agent in a commercially reasonable manner by reference to exchange rates in effect at the time that the relevant Quotation is being obtained) with respect to each Valuation Obligation.
Full Quotation: Means each firm bid quotation obtained from a Reference
Dealer at the Valuation Time, to the extent reasonably practicable, for an amount of the relevant Valuation Obligation(s) with an outstanding principal balance equal to or greater than the Quotation Amount applicable to that Valuation Obligation.
Weighted Average Quotation: Means the weighted average of firm bid quotations obtained
from Reference Dealers and calculated by the Calculation Agent at the Valuation Time, to the extent reasonably practicable, each for an amount of the relevant Valuation
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Obligation(s) with an outstanding principal balance of as large a size as available and less than the Quotation Amount for the relevant Valuation Obligation that in the aggregate are equal to or greater than the Credit Exposure Amount for that Valuation Obligation.
Smith Incorporated, Credit Suisse First Boston Inc., Bear Stearns & Co. Inc., Lehman Brothers Inc., Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co. and Salomon Smith Barney Inc (or affiliates of any of them that are dealers in obligations of the type of the Valuation Obligations) and any additional dealer of recognized standing in the market for obligations of the type of the Valuation Obligation(s) of the Affected Reference Entity (other than UBS, the Issuer or any of their respective affiliates) selected by the Calculation Agent.
Solicitation of Valuations: With respect to each Credit Event, if the Noteholders are
Affected Parties (as defined below) and Solicitation of Valuations from Noteholders is indicated as applicable, the Calculation Agent shall notify the Noteholders’ Agent of the Final Price(s) for the Valuation Obligation(s) immediately following the determination by the Calculation Agent of such Final Price(s). If the Calculation Agent, using commercially reasonable efforts, is unable to contact the Noteholders’ Agent within ten minutes of determining the Final Price(s), then the Noteholders will be deemed to have waived their rights under this provision.
If the Noteholders are the only Affected Parties, then, notwithstanding any other provision herein, the Noteholders’ Agent (either on its own behalf or on behalf of another party acceptable to the Issuer in its reasonable judgment, provided that any such acceptance by the Issuer of such other party shall have been obtained by the Noteholders’ Agent prior to the Valuation Date), shall have the right to make a firm bid to purchase from the Issuer any of the relevant Valuation Obligations or an assignment of or participation therein (provided that the credit agreement, if relevant, permits the assignment or participation, as applicable, to the Noteholders’ Agent (or its designee) and the documentation evidencing such assignment or participation conforms to the requirements of the relevant credit agreement, if any) in an aggregate outstanding principal amount (excluding accrued but unpaid interest) equal to the Quotation Amount applicable to such Valuation Obligation, rounded down to comply with any minimum denomination requirement, at a price greater than the Final Price applicable thereto. The Noteholders’ Agent may exercise such right to provide a firm bid for any or all of the Valuation Obligations by providing notice to the Calculation Agent of such exercise (which may be telephonic) within 15 minutes of the Calculation Agent’s notification to the Noteholders’ Agent of the Final Price(s), after which time its right to provide a firm bid will terminate. If the Noteholders’ Agent elects to provide
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a firm bid for all or any of the Valuation Obligations in accordance with the foregoing, then such firm bid(s) will be used as the Final Price(s) for such Valuation Obligation(s).
Further and notwithstanding any other provision set forth herein, if more than one Affected Party provides a firm bid for one or more Reference Obligation(s), then all firm bids will be collected by the Calculation Agent from the Affected Parties as soon as possible following the Valuation Time and the highest of such firm bid(s) will be used as the Final Price(s) for such Valuation Obligation(s).
“Affected Party” means, in connection with any Credit Event hereunder, the Noteholders and any other party that has entered into a transaction with the Issuer (or one of its affiliates) relating to the portfolio of Reference Entities and, in each such case, with respect to which a payment will be required (or, in the case of the Noteholders, the Aggregate Nominal Amount will be reduced) in connection with the Credit Event.
“Noteholders’ Agent”: To be notified by the Noteholders (acting unanimously) to the Calculation Agent.
Reference Transaction: These Notes relates to a notional “Reference Transaction” between the Issuer and one or more counterparties or investors relating to the same portfolio of Reference Entities. For the avoidance of doubt, all references in this document to the notional “Reference Transaction” and terms relating to such transaction are for informational and calculation purposes only and do not imply any responsibility of any holder of these Notes to the parties to such transaction (should any such transaction come to exist) or any similar transaction. The Reference Transaction is described herein for purposes of reference only and the Issuer makes no representation that the terms of the Reference Transaction relate to any actual transaction between UBS AG and investors.
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Part 2: Credit Event Definitions: Credit Event means one or more of the Credit Events specified as applicable. If an occurrence that would otherwise constitute a Credit Event, such occurrence will constitute a Credit Event whether or not such occurrence arises directly or indirectly from, or is subject to a defence based upon: (a) any lack or alleged lack of authority or capacity of a Reference Entity to enter into any Obligation or, as applicable, an Underlying Obligor to enter into any Underlying Obligation, (b) any actual or alleged unenforceability, illegality, impossibility or invalidity with respect to any Obligation, or, as applicable, any Underlying Obligation, howsoever described (c) any applicable law, order, regulation, decree or notice, howsoever described, or the promulgation of, or any change in, the interpretation by any court, tribunal, regulatory authority or similar administrative or judicial body with competent or apparent jurisdiction of any applicable law, order, regulation, decree or notice, howsoever described, or (d) the imposition of, or any change in any exchange controls, capital restrictions or any other similar restrictions imposed by any monetary or other authority, howsoever described. Bankruptcy means a Reference Entity (a) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (b) becomes insolvent or is unable to pay its debts or fails or admits in writing in a judicial, regulatory or administrative proceeding or filing its inability generally to pay its debts as they become due; (c) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (d) institutes or has instituted against it a proceeding seeking a judgement 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 (i) results in a judgement of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (ii) is not dismissed, discharged, stayed or restrained in each case within 30 calendar days of the institution or presentation thereof; (e) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (f) 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; (g) 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 calendar days thereafter; or (h) 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 (a) to (g) (inclusive). Obligation Acceleration means one or more Obligations in an aggregate amount of not less than the Default Requirement have become due and payable before they would otherwise have been due and payable as a result of, or on the basis of, the occurrence of a default, event of default or other similar condition or event (however described), other than a failure to make any required payment, in respect of a Reference Entity under one or more Obligations. Failure to Pay means, after the expiration of any applicable Grace Period (after the satisfaction of any conditions precedent to the commencement of such Grace Period), the failure by a Reference Entity to make, when and where due, any payments in an aggregate amount of not less than the Payment Requirement under one or more Obligations, in accordance with the terms of such Obligations at the time of such failure. Repudiation/Moratorium means the occurrence of both of the following events: (i) an authorised officer of a Reference Entity or a Governmental Authority (a) disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, one or more Obligations in an aggregate amount of not less than the Default Requirement, or (b) declares or imposes a moratorium, standstill,
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roll-over or deferral, whether de facto or de jure, with respect to one or more Obligations in an aggregate amount of not less than the Default Requirement and (ii) a Failure to Pay, determined without regard to the Payment Requirement, or a Restructuring determined without regard to the Default Requirement, with respect to any such Obligation occurs on or prior to the Repudiation/Moratorium Evaluation Date. Restructuring means that, (a) with respect to one or more Obligations and in relation to an aggregate amount of not less than the Default Requirement, any one or more of the following events occurs in a form that binds all holders of such Obligation, is agreed between a Reference Entity or a Governmental Authority and a sufficient number of holders of such Obligation to bind all holders of the Obligation or is announced (or otherwise decreed) by a Reference Entity or a Governmental Authority in a form that binds all holders of such Obligation, and such event is not expressly provided for under the terms of such Obligation in effect as of the later of the Trade Date and the date as of which such Obligation is issued or incurred: (i) a reduction in the rate or amount of interest payable or the amount of scheduled interest accruals; (ii) a reduction in the amount of principal or premium payable at maturity or at scheduled redemption dates; (iii) a postponement or other deferral of a date or dates for either (A) the payment or accrual of interest or (B) the payment of principal or premium; (iv) a change in the ranking in priority of payment of any Obligation, causing the Subordination of such Obligation to any other Obligation; or (v) any change in the currency or composition of any payment of interest or principal to any currency which is not a Permitted Currency. (b) Notwithstanding the provisions of (a) above, none of the following shall constitute a Restructuring: (i) the payment in euros of interest or principal in relation to an Obligation denominated in a currency of a Member State of the European Union that adopts or has adopted the single currency in accordance with the Treaty establishing the European Community, as amended by the Treaty on European Union; (ii) the occurrence of, agreement to or announcement of any of the events described in (a)(i) to (v) above due to an administrative adjustment, accounting adjustment or tax adjustment or other technical adjustment occurring in the ordinary course of business; and (iii) the occurrence of, agreement to or announcement of any of the events described in (a)(i) to (v) above in circumstances where such event does not directly or indirectly result from a deterioration in the creditworthiness or financial condition of the Reference Entity. (c) For the purposes of the definition of Restructuring and the definition of Multiple Holder Obligation the term Obligation shall be deemed to include Underlying Obligations for which the Reference Entity is acting as provider of a Qualifying Affiliate Guarantee or, if All Guarantees are applicable, as provider of any Qualifying Guarantee. In the case of a Qualifying Guarantee and an Underlying Obligation references to the Reference Entity in section (a) above of the definition of Restructuring shall be deemed to refer to the Underlying Obligor and the reference to the Reference Entity in section (b) above of the definition of Restructuring shall continue to refer to the Reference Entity. Related Credit Definitions: Grace Period means the applicable grace period with respect to payments under the relevant Obligation under the terms of such Obligation in effect as of the later of the Trade Date and the date as of which such Obligation is issued or incurred. Any Obligation with no grace period shall be deemed to have a grace period of 3 Business Days, provided that unless Grace Period Extension is applicable, the deemed Grace Period shall expire no later than the Scheduled Maturity Date.
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Potential Failure to Pay means the failure by a Reference Entity to make, when and where due, any payments in an aggregate amount of not less than the Payment Requirement under one or more Obligations without regard to any grace period or any conditions precedent to the commencement of any grace period applicable to such Obligation in accordance with the terms of such obligation at the time of such failure. Publicly Available Information means information that reasonably confirms any of the facts relevant to the determination that the Credit Event or Potential Repudiation/Moratorium described in a Credit Event Notice or Repudiation/Moratorium Extension Notice as applicable has occurred and which: (i) has been published in or on not less than two Public Sources regardless of whether the reader or user
thereof pays a fee to obtain such information; provided that, if the Issuer or its Nominee or an affiliates of the Issuer or its Nominee is cited as the sole source of such information, then such information shall not be deemed to be Publicly Available Information unless the Issuer or , if applicable, its Nominee or an affiliate of the Issuer or its Nominee, as the case may be, is acting in its capacity as trustee, fiscal agent, administrative agent, clearing agent or paying agent for an Obligation;
(ii) is information received from or published by (A) a Reference Entity (or a Sovereign Agency in respect of a Reference Entity which is a Sovereign) or (B) a trustee, fiscal agent, administrative agent, clearing agent or paying agent for an Obligation;
(iii) is information contained in any petition or filing instituting a proceeding described in “Bankruptcy” against or by a Reference Entity; or
(iv) is information contained in any order, decree, notice or filing, however described, of or filed with a court, tribunal, exchange, regulatory authority or similar administrative, regulatory or judicial body.
In relation to any information described above in sections (ii), (iii) and (iv), recipients may assume that such information has been disclosed to them without violating any law, agreement or understanding regarding the confidentiality of such information and that the Issuer has not taken any action or entered into any agreement or understanding with the Reference Entity or any affiliate of the Reference Entity that would be breached by, or would prevent, the disclosure of such information to third parties. Publicly Available Information need not state (i) in relation to Qualifying Affiliate Guarantees the percentage of Voting Shares owned directly or indirectly by the Reference Entity or (ii) that the relevant occurrence (A) has met the Payment or Default Requirement, (B) is the result of exceeding any applicable Grace Period or (C) has met the subjective criteria specified in certain Credit Events. If the Issuer or, if applicable, its Nominee or an affiliate of the Issuer or its Nominee, as the case may be, is (i) the sole source of information in its capacity as trustee, fiscal agent, administrative agent, clearing agent or paying agent for an Obligation and (ii) a holder of the Obligations with respect to which a Credit Event has occurred, the Issuer or its Nominee shall be required to deliver a certificate signed by a Managing Director (or other substantively equivalent title), certifying the occurrence of a Credit Event with respect to a Reference Entity. Public Source means each of Bloomberg Service, Dow Jones Telerate Service, Reuter Monitor Money Rates Services, Dow Jones News Wire, Wall Street Journal, New York Times, Nihon Keizai Shinbun, Asahi Shinbun, Yomiuri Shinbun, Financial Times, La Tribune, Les Echos and Australian Financial Review (and any successor publications), the main source(s) of business news in the country in which the Reference Entity is organized and any other internationally recognized published or electronically displayed news sources.
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Part 3: Successor Provisions: Successor means: (a) in relation to a Reference Entity that is not a Sovereign, the entity or entities, if any, determined as set forth below:
(i) If an entity directly or indirectly succeeds to 75% or more of the Relevant Obligations of the Reference Entity by way of a Succession Event, that entity will be the sole Successor;
(ii) If one entity directly or indirectly succeeds to more than 25% (but less than 75%) of the Relevant Obligations of the Reference Entity by way of a Succession Event, and not more than 25% of the Relevant Obligations of the Reference Entity remains with the Reference Entity, the entity that succeeds to more than 25% of the Relevant Obligations will be the sole Successor;
(iii) If more than one entity each directly or indirectly succeeds to more than 25% of the Relevant Obligations of the Reference Entity by way of a Succession Event, and not more than 25% of the Relevant Obligations of the Reference Entity remains with the Reference Entity, the entities that succeed to more than 25% of the Relevant Obligations of the Reference Entity remains with the Reference Entity, the entities that succeed to more than 25% of the Relevant Obligations will be Successors, and the Notes will be amended as described below;
(iv) If one or more entities each directly or indirectly succeeds to more than 25% of the Relevant Obligations of the Reference Entity by way of a Succession Event, and more than 25% of the Relevant Obligations of the Reference Entity remains with the Reference Entity, each such entity and the Reference Entity will be Successors, and the Notes will be amended as described below;
(v) If one or more entities directly or indirectly succeed to a portion of the Relevant Obligations of the Reference Entity by way of a Succession Event, but no entity succeeds to more than 25% of the Relevant Obligations of the Reference Entity and the Reference Entity continues to exist, there will be no Successor and the Reference Entity and the Notes will not be changed in any way as a result of the Succession Event; and
(vi) If one or more entities directly or indirectly succeed to a portion of the Relevant Obligations of the Reference Entity by way of a Succession Event, but no entity succeeds to more than 25% of the Relevant Obligations of the Reference Entity and the Reference Entity ceases to exist, the entity which succeeds to the greatest percentage of Bonds and Loans (or, if two or more entities succeed to an equal percentage of Bonds and Loans, the entity from among those entities which succeeds to the greatest percentage of obligations) of the Reference Entity will be the sole Successor;
For the purposes of this section, “succeed” means with respect to a Reference Entity and its Relevant Obligations (or as applicable obligations), that a party other than such Reference Entity (i) assumes or becomes liable for such Relevant Obligations (or as applicable obligations) whether by operation of law or pursuant to any agreements or (ii) issues Bonds that are exchanged for such Relevant Obligations (or as applicable obligations), and in either case such Reference Entity is no longer an obligor (primarily or secondarily) or guarantor with respect to the Relevant Obligations (or as applicable obligations). The determinations required pursuant to this section (a) shall be made in the case of an exchange offer, on the basis of the outstanding principal balance of relevant Obligations tendered and accepted in the exchange and not on the basis of the outstanding principal balance of such Bonds for which Relevant Obligations have been exchanged; and (b) in relation to a Sovereign Reference Entity, means any direct or indirect successor to that Reference Entity irrespective of whether such successor assumes any of the obligations of such Reference Entity. The Calculation Agent will be responsible for determining, as soon as reasonably practicable after it becomes aware of the relevant Succession Event (but no earlier than 14 days after the legally effective date of the Succession Event), and with effect from the legally effective date of the Succession Event, whether the relevant thresholds set forth above have been met, or which entity qualifies under sub-section (vi) above, as applicable. In calculating the percentages used to determine whether the relevant thresholds set forth above have been met, or which entity qualifies under sub-section (vi) above, as applicable, the
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Calculation Agent shall use, in respect of each applicable Relevant Obligation included in such calculation, the amount of the liability in respect of such Relevant Obligation listed in the Best Available Information. Where, pursuant to sub-section (iii) or (iv) above, more than one Successor has been identified, the Notes will be amended without the consent of Noteholders to reflect the following terms:
(i) Each Successor will be a Reference Entity and more than one Credit Event may occur during the term of the Notes but subject to the provisions relating to Multiple Credit Event Notices once only in relation to each Successor;
(ii) The Credit Exposure Amount of the original Reference Entity will be divided equally between the number of Successors;
(iii) Each Successor will be designated to have an Entity Type depending on the Entity Type of the original Reference Entity that such Successor replaces;
(iv) If a single entity would be a Reference Entity hereunder more than once, then it will be deemed to be a Reference Entity only once hereunder, and the Credit Exposure Amount for such Reference Entity will be the sum of the Credit Exposure Amounts otherwise applicable to it (and such change shall have no effect on the Aggregate Nominal Amount of the Notes); provided that if the relevant Reference Entity would be deemed to have more than one Entity Type, then, notwithstanding the preceding or anything else to the contrary herein, such Reference Entity will continue to be a Reference Entity more than once hereunder and the terms otherwise provided herein for each such Reference Entity shall continue to apply as if they were unrelated Reference Entities; and
(v) All other terms and conditions of the original Notes will remain unaffected except to the extent that modification is required, as determined by the Calculation Agent, to preserve the economic effects of the original Notes in the amended Notes.
Succession Event means an event such as a merger, consolidation, amalgamation, transfer of assets or liabilities, demerger, spin-off or other similar event affecting a Reference Entity, whether by way of operation of law or pursuant to any agreement. Notwithstanding the foregoing, “Succession Event” shall not include an event in which the holders of obligations of the Reference Entity exchange such obligations for the obligations of another entity, unless such exchange occurs in connection with a merger, consolidation, amalgamation, transfer of assets or liabilities, demerger, spin-off or other similar event. Relevant Obligations means the Obligations constituting Bonds and Loans of the Reference Entity outstanding immediately prior to the effective date of the Succession Event, excluding any debt obligations outstanding between the Reference Entity and any of its affiliates, as determined by the Calculation Agent. The Calculation Agent will determine the entity which succeeds to which such Relevant Obligations on the basis of the Best Available Information. If the date on which the Best Available Information becomes available or is filed precedes the legally effective date of the relevant Succession Event, any assumptions as to the allocation of obligations between or among entities contained in the Best Available Information will be deemed to have been fulfilled as of the legally effective date of the Succession Event, whether or not this is in fact the case. Best Available Information means (i) in the case of a Reference Entity which files information with its primary securities regulators or primary stock exchange (including unconsolidated, pro forma financial information which assumes that the relevant Succession Event has occurred) or which provides such information to its shareholders, creditors or other persons whose approval of the Succession Event is required, that unconsolidated, pro forma financial information or, if provided subsequently to the provision of unconsolidated, pro forma financial information but before the Calculation Agent makes its determination for the purposes of these provisions, other relevant information that is contained in any written communication provided by the Reference Entity to its primary securities regulators, primary stock exchange, shareholders, creditors or other persons whose approval of the Succession Event is required; or (ii) in the case of a Reference Entity which does not file with its primary securities regulators or primary stock exchange, and which does not provide to shareholders, creditors or other persons whose approval of the Succession Event is required, the information contemplated in (i) above, the best publicly available information at the disposal of the Calculation Agent to determine Successors. Information which is made
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available more than 14 calendar days after the legally effective date of the Succession Event shall not constitute Best Available Information.
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Part 4: Obligation and Valuation Obligation Categories and Characteristics: Assignable Loan means a Loan that is capable of being assigned or novated to at a minimum, commercial banks or financial institutions (irrespective of their jurisdiction of organisation) that are not then a lender or a member of the relevant lending syndicate, without the consent of the relevant Reference Entity or the guarantor, if any, of such Loan (or the consent of the applicable borrower if a Reference Entity is guaranteeing such Loan) or any agent. Borrowed Money means any obligation (excluding an obligation under a revolving credit arrangement for which there are no outstanding, unpaid drawings in respect of principal) for the payment or repayment of borrowed money (which term shall include; without limitation, deposits and reimbursement obligations arising from drawings pursuant to letters of credit). Bond means any obligation in respect of Borrowed Money that is in the form of, or represented by, a bond, note (other than notes delivered pursuant to Loans), certificated debt security or other debt security. Bond or Loan means any obligation that is either a Bond or a Loan. Consent Required Loan means a Loan that is capable of being assigned or novated with the consent of the relevant Reference Entity or the guarantor, if any, of such Loan (or the consent of the relevant borrower if a Reference Entity is guaranteeing such Loan) or any agent. Domestic Currency means the lawful currency and any successor currency of (a) the relevant Reference Entity, if the Reference Entity is a Sovereign, or (b) the jurisdiction in which the relevant Reference Entity is organised, if the Reference Entity is not a Sovereign. In no event shall Domestic Currency include any successor currency if such successor currency is the lawful currency of any of Canada, Japan, Switzerland, the United Kingdom or the United States of America or the euro (or any successor currency to any such currency). Downstream Affiliate and Voting Shares (a) “Downstream Affiliate” means an entity at the date of the event giving rise to the Credit Event which is the subject of the Credit Event Notice, the date of valuation or the time of identification of a Substitute Reference Obligation (as applicable), whose outstanding Voting Shares are more than 50 percent owned, directly or indirectly, by the Reference Entity. “Voting Shares” shall mean those shares or other interests that have the power to elect the board of directors or similar governing body of an entity. Due and Payable Amount means the amount that is due and payable under (or in accordance with the terms of) a Valuation Obligation on the Valuation Date, whether by reason of acceleration, maturity, termination or otherwise (excluding sums in respect of default interest, indemnities, tax gross-ups and other similar amounts). Governmental Authority means any de facto or de jure government (or any agency, instrumentality, ministry or department thereof), court, tribunal, administrative or other governmental authority or any other entity (private or public) charged with the regulation of the financial markets (including the central bank) of a Reference Entity or of the jurisdiction of organisation of a Reference Entity. Loan means any obligation in respect of Borrowed Money that is documented by a term loan agreement, revolving loan agreement or other similar credit agreement. Maximum Maturity means an obligation that has a remaining maturity from the Valuation Date of not greater than the period specified in the Valuation Obligation Characteristics section. Obligation: means (i) any obligation of the Reference Entity (either directly or as the provider of a Qualifying Affiliate Guarantee, or if All Guarantees are applicable, as provider of a Qualifying
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Guarantee) described by the Obligation Category and having each of the relevant Obligation Characteristics (if any) in each case as of the date of the event which constitutes the Credit Event which is the subject of the Credit Event Notice and (ii) any Reference Obligation. If a Reference Obligation is specified, the Reference Obligation is always an Obligation, regardless of whether it is described by the Obligation Category or has each of the applicable the Obligation Characteristics (if any). Not Bearer means any obligation that is not a bearer instrument unless interests with respect to such bearer instrument are cleared via the Euroclear system, Clearstream International or any other internationally recognised clearing system. Not Contingent means any obligation having as of the Physical Redemption Date or applicable Valuation Date, as the case may be, and at all times thereafter an outstanding principal balance or in the case of such obligations that are not Borrowed Money a Due and Payable Amount that pursuant to the terms of the obligation may not be reduced as a result of the occurrence or non-occurrence of an event or circumstance (other than payment). A Convertible Obligation, an Exchangeable Obligation and an Accreting Obligation shall satisfy the Not Contingent Valuation Obligation Characteristic if such Convertible Obligation, Exchangeable Obligation or Accreting Obligation otherwise meets the requirements of the preceding sentence as long as, in the case of a Convertible Obligation or an Exchangeable Obligation the right (A) to convert or exchange such obligation or (B) to require the issuer to purchase or redeem such obligation (if the issuer has exercised or may exercise the right to pay the purchase or redemption price, in whole or in part, in Equity Securities) has not been exercised (or such exercise has been effectively rescinded) on or before the Physical Redemption Date or applicable Valuation Date, as the case may be. If a Reference Obligation is a Convertible Obligation or an Exchangeable Obligation, then such Reference Obligation may be included as a Valuation Obligation only if the right (A) to convert or exchange such obligation or (B) to require the issuer to purchase or redeem such obligation (if the issuer has exercised or may exercise the right to pay the purchase or redemption price, in whole or in part, in Equity Securities) has not been exercised (or such exercise has been effectively rescinded) on or before the Physical Redemption Date or applicable Valuation Date, as the case may be. Not Domestic Issuance means any obligation other than an obligation that was, at the time the relevant obligation was issued (or reissued, as the case may be) or incurred, intended to be offered for sale primarily in the domestic market of the relevant Reference Entity. Any obligation that is registered or qualifies for sale outside the domestic market of the relevant Reference Entity (regardless of whether it is also registered and qualified for sale within the domestic market of the Reference Entity) shall be deemed to be not intended for sale primarily in the domestic market of the Reference Entity. Not Domestic Currency means is payable in any currency other than the Domestic Currency. Not Domestic Law means is not governed by the laws of (A) the relevant Reference Entity, if such Reference Entity is a Sovereign, or (B) the jurisdiction of organisation of the relevant Reference Entity, if such Reference Entity is not a Sovereign. Not Sovereign Lender means is not primarily owed to a Sovereign or Supranational Organisation, including, without limitation, obligations generally referred to as “Paris Club debt”. Not Subordinated means an obligation of the relevant Reference Entity that is not Subordinated to (i) the most senior Reference Obligation in priority of payment or (ii) if no Reference Obligation is specified any unsubordinated Borrowed Money obligation of the Reference Entity. For the purposes of determining whether an obligation satisfies the Not Subordinated Obligation Characteristic or Valuation Obligation Characteristic the ranking in priority of payment of the Reference Obligation shall be determined as of the later of (i) the Trade Date and (ii) the date on which such Reference Obligation was issued or incurred and shall not reflect any change in ranking in priority of payment after such later date. Subordination means with respect to an obligation (the “Subordinated Obligation”) and another obligation of the Reference Entity to which such obligation is being compared (the “Senior Obligation”) a contractual trust or similar
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arrangement providing that (i) upon the liquidation, dissolution, reorganisation or winding up of the Reference Entity claims of the holders of the Senior Obligation will be satisfied prior to the claims of the Subordinated Obligation or (ii) the holders of the Subordinated Obligation will not be entitled to receive or retain payments in respect of their claims against the Reference Entity at any time that the Reference Entity is in payment arrears or is otherwise in default under the Senior Obligation. “Subordinated” will be construed accordingly. For the purposes of determining whether Subordination exists or whether an obligation is Subordinated with respect to another obligation to which it is being compared, the existence of preferred creditors arising by operation of law or of collateral, credit support or other credit enhancement arrangements shall not be taken into account, except that, notwithstanding the foregoing, priorities arising by operation of law shall be taken into account where the Reference Entity is Sovereign. outstanding principal balance in the context of Valuation Obligation means the principal amount of the Valuation Obligation as of the earlier of (A) the date on which any event occurs that has the effect of fixing the amount of a claim against the issuer of the relevant Valuation Obligation in respect of principal and (B) the Valuation Date; provided that (i) with respect to any Accreting Obligation the outstanding principal balance is the Accreted Amount,
and (ii) with respect to any Exchangeable Obligation that is not an Accreting Obligation, the outstanding
principal balance shall exclude any amount that may be payable under the terms of such obligation in respect of the value of the Equity Securities for which such obligation is exchangeable.
Payment means any obligation (whether present or future, contingent or otherwise) for the payment or repayment of money, including, without limitation, Borrowed Money. Permitted Currency means (i) any of the Standard Specified Currencies; or (ii) the legal tender of any Group of 7 country (or any country that becomes a member of the Group of 7 if such Group of 7 expands its membership) or (iii) the legal tender of any country which, as of the date of such change, is a member of the Organisation for Economic Co-operation and Development and has a local currency long-term debt rating of either AAA or higher assigned to it by Standard & Poor's, a division of The McGraw-Hill Companies Inc. or any successor to the rating business thereof, Aaa or higher assigned to it by Moody's Investor Service, Inc. or any successor to the rating business thereof or AAA or higher assigned to it by Fitch Ratings or any successor to the rating business thereof. Qualifying Guarantee means an arrangement evidenced by a written instrument pursuant to which a Reference Entity irrevocably agrees (by guarantee of payment or equivalent legal arrangement) to pay all amounts due under an obligation (the “Underlying Obligation”) for which another party is the obligor (the “Underlying Obligor”) and that is not at the time of the Credit Event Subordinated to any unsubordinated Borrowed Money obligation of the Underlying Obligor (with references in the definition of Subordination to the Reference Entity deemed to refer to the Underlying Obligor). Qualifying Guarantees shall exclude any arrangement (i) structured as a surety bond, financial guarantee insurance policy, letter of credit or equivalent legal arrangement or (ii) pursuant to the terms of which the payment obligations of the Reference Entity can be discharged, reduced, assigned or otherwise altered as a result of the occurrence or non-occurrence of an event or circumstance (other than payment). The benefit of a Qualifying Guarantee must be capable of being delivered together with the delivery of the Underlying Obligation. (i) For the purposes of applying the Obligation Category and the Valuation Obligation Category the Qualifying Guarantee shall be deemed to satisfy the same category or categories as those that describe the Underlying Obligation. (ii) For the purposes of the application of the Obligation Characteristics or the Valuation Obligation
Characteristics:
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a) both the Qualifying Guarantee and the Underlying Obligation must satisfy on the relevant date Obligation Characteristics or the Valuation Obligation Characteristics from the following list, if applicable:
Specified Currency Not Sovereign Lender Not Domestic Currency Not Domestic Law. For these purposes the lawful currency of Canada, Japan, Switzerland, the United Kingdom and the United States of America or the euro shall not be a Domestic Currency and the laws of England and the laws of the State of New York shall not be a Domestic Law.
b) only the Qualifying Guarantee must satisfy on the relevant date the Obligation Characteristic or
the Valuation Obligation Characteristic of Not Subordinated, if applicable. c) Underlying Obligation must satisfy on the relevant date each of the relevant Obligation
Characteristics or the Valuation Obligation Characteristics from the following list, if applicable:-
Not Contingent Not Domestic Issuance Assignable Loan Consent Required Loan Transferable Maximum Maturity Not Bearer.
(iii) For the purposes of the application of the Obligation Characteristics or the Valuation Obligation
Characteristics to an Underlying Obligation references to the Reference Entity shall be deemed to be references to the Underlying Obligor.
(iv) The terms “outstanding principal balance” and “Due and Payable Amount” when used in
connection with Qualifying Guarantees are to be interpreted to be the “outstanding principal balance” and “Due and Payable Amount”, as applicable, of the Underlying Obligation which is supported by a Qualifying Guarantee.
Qualifying Affiliate Guarantee means a Qualifying Guarantee provided by a Reference Entity in respect of an Underlying Obligation of a Downstream Affiliate of that Reference Entity.
Reference Obligation means the obligation specified. If, in the opinion of the Calculation Agent (i) the Reference Obligation is redeemed in whole or (ii) (A) the aggregate amounts due under any Reference Obligation have been materially reduced by redemption or otherwise (other than due to any scheduled redemption, amortization or prepayments), (B) the Reference Obligation is an obligation guaranteed by a Reference Entity and, other than due to the existence or occurrence of a Credit Event, the guarantee of that Reference Entity is no longer a valid and binding obligation of such Reference Entity enforceable in accordance with its terms, or (C) for any other reason, other than due to the existence or occurrence of a Credit Event (each a “Substitution Event”), any Reference Obligation is no longer an obligation of a Reference Entity, the Calculation Agent shall identify one or more Obligations to replace such Reference Obligation (the “Substitute Reference Obligation”). For the purposes of identification of a Reference Obligation, any change in the Reference Obligation’s CUSIP or ISIN or other similar identifier will not, in and of itself, convert such Obligation into a different Obligation.
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The Substitute Reference Obligation shall be an Obligation that (1) ranks pari passu (or, if no such Obligation exists, then, at the option of the Issuer or its Nominee, an Obligation that ranks senior) in priority of payment with such Reference Obligation (with ranking being determined in priority of payment of such Reference Obligation being determined as of the later of (a) the Trade Date and (b) the date on which such Reference Obligation was issued or incurred and not reflecting any change to such ranking in priority of payment after such later date) (2) preserves the economic equivalent, as closely as practicable as determined by the Calculation Agent, of the payment obligations of the Issuer in respect of the Notes and (3) is an obligation of a Reference Entity (either directly or as a provider of a Qualifying Affiliate Guarantee or, if All Guarantees is applicable, as provider of a Qualifying Guarantee). The Substitute Reference Obligation identified by the Calculation Agent shall, without further action, replace such Reference Obligation or Reference Obligations. If a Substitution Event has occurred with respect to the Reference Obligation and the Calculation Agent determines that no Substitute Reference Obligation is available for that Reference Obligation, then the Calculation Agent shall continue to attempt to identify a Substitute Reference Obligation until the Scheduled Maturity Date (subject, if applicable to Grace Period Extension and/or Repudiation/Moratorium Extension). Sovereign means any state, political subdivision or government, or any agency, instrumentality, ministry, department or other authority (including, without limiting the foregoing, the central bank) thereof. Sovereign Agency means any agency, instrumentality, ministry, department or other authority (including, without limiting the foregoing, the central bank) of a Sovereign. Specified Currency means an obligation that is payable in the currency or currencies specified. Standard Specified Currencies means the lawful currencies of any of Canada, Japan, Switzerland, the United Kingdom and the United States of America and the euro (and any successor currency to any of the aforementioned currencies). Supranational Organisation means any entity or organisation established by treaty or other arrangement between two or more Sovereigns or the Sovereign Agencies of two or more Sovereigns and includes, without limiting the foregoing, the International Monetary Fund, European Central Bank, International Bank for Reconstruction and Development and European Bank for Reconstruction and Development. Transferable means an obligation that is transferable to institutional investors without any contractual, statutory or regulatory restriction, provided that none of the following shall be considered contractual, statutory or regulatory restrictions: (A) contractual statutory or regulatory restrictions that provide for eligibility for resale pursuant to Rule 144A or Regulation S promulgated under the United States Securities Act of 1933, as amended (and any contractual, statutory or regulatory restrictions promulgated under the laws of any jurisdiction having a similar effect in relation to the eligibility for resale of an obligation); or (B) restrictions on permitted investments such as statutory or regulatory investment restrictions on insurance companies and pension funds. Valuation Obligation means subject to Part 5 (C) and (D) (a) any one or more obligations of the Affected Reference Entity (either directly or as provider of a Qualifying Affiliate Guarantee, or if All Guarantees are applicable, as the provider of a Qualifying Guarantee) described by the Valuation Obligation Category and having each of the relevant Valuation Obligation Characteristics as of the Valuation Date and that (i) is payable in an amount equal to its outstanding principal balance and (ii) and is not subject to any counterclaim, defence (other than a counterclaim or defense based on the factors set forth in the second sentence of the definition of “Credit Events” set out in Part 2 of this Schedule) or right of set off by or of a Reference Entity or any applicable Underlying Obligor and (iii) in the case of a Qualifying Guarantee other that Qualifying Affiliate Guarantee is capable at the Valuation Date of immediate assertion or demand by or on behalf of the holder(s) against the Reference Entity for an amount at least equal to the outstanding
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principal being valued apart from the giving of any notice of non-payment or similar procedural requirement it being understood that acceleration of the Underlying Obligation shall not be considered a procedural requirement or (b) any Reference Obligation. If a Reference Obligation is specified, the Reference Obligation is always a Valuation Obligation, regardless of whether it is described by the Valuation Obligation Category or has each of the applicable the Valuation Obligation Characteristics but subject always to the last sentence of the definition of Not Contingent below.
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Part 5: Restructuring: A) Multiple Holder If Multiple Holder Obligation is specified as applicable despite anything to the contrary in the provisions of the definition of Restructuring, the occurrence of, agreement to, or announcement of, any of the events described in (a)(i) to (v) of the definition of Restructuring shall not be a Restructuring if the Obligation in respect of any such events is not a Multiple Holder Obligation. Multiple Holder Obligation means an Obligation that (i) at the time the Credit Event Notice is delivered, is held by more than three holders that are not affiliates of each other and (ii) with respect to which a percentage of holders (determined pursuant to the terms of the Obligation as in effect on the date of such event) at least equal to sixty-six-and-two-thirds is required to consent to the event which would otherwise constitute a 'Restructuring' Credit Event. B) Multiple Credit Event Notices If Multiple Credit Event Notices are applicable upon the occurrence of a Restructuring Credit Event on or prior to the Scheduled Maturity Date (subject if applicable to Grace Period Extension and/or Repudiation/Moratorium Extension): - (i) The Issuer or its Nominee may deliver multiple Credit Event Notices in relation to a Reference Entity, each such Credit Event Notice setting forth the portion of the Credit Exposure Amount of the relevant Reference Entity to which such Credit Event Notice applies (the “Exercise Amount”) and for purposes of the calculations in Part I above, references to Credit Exposure Amount shall be deemed to be to the Exercise Amount; (ii) If the Issuer or its Nominee has delivered a Credit Event Notice that specifies an Exercise Amount that is less than the then total Credit Exposure Amount of the relevant Reference Entity, then the conditions shall, with effect from the date such Credit Event Notice is effective, be construed as if the original Reference Entity were two separate Reference Entities, one of which has a Credit Exposure Amount equal to the Exercise Amount and will be subject to the Principal Reduction Terms, as applicable, and the other of which will have a Credit Exposure Amount equal to the original Credit Exposure Amount minus the Exercise Amount and will continue in effect (subject to any adjustments required to preserve the effects of the original Notes as determined by the Calculation Agent); (iii) the Exercise Amount in connection with a Credit Event Notice describing a Credit Event other than a Restructuring must be equal to the Credit Exposure Amount of the relevant Reference Entity (and not a portion thereof); and (iv) the Exercise Amount in connection with a Credit Event Notice describing a Restructuring must be in the amount of 1,000,000 units of the currency (or if Japanese Yen 100,000,000 units) in which the Aggregate Nominal Amount is denominated or an integral multiple thereof. C) Restructuring Maturity Limitation and Fully Transferable Obligation If Restructuring Maturity Limitation and Fully Transferable Obligation are applicable and Restructuring is the only Credit Event specified in the Credit Event Notice, then a Valuation Obligation may only be used as a Valuation Obligation if (i) it is a Fully Transferable Obligation and (ii) it has a final maturity date not later than the Restructuring Maturity Limitation Date. Fully Transferable Obligation means a Valuation Obligation that is either Transferable, in the case of Bonds, or capable of being assigned or novated to all Eligible Transferees without the
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consent of any person being required, in the case of any Valuation Obligation other than Bonds. Any requirement that notification of novation, assignment or transfer of a Valuation Obligation be provided to a trustee, fiscal agent, administrative agent, clearing agent or paying agent for a Valuation Obligation shall not be considered to be a requirement for consent for these purposes. For purposes of determining whether a Valuation Obligation is Transferable or is capable of being assigned or novated to Eligible Transferees, such determination shall be made as of the Physical Redemption Date or Valuation Date, as applicable, taking into account only the terms of the Valuation Obligation and any related transfer or consent documents which have been obtained by the Issuer. Restructuring Maturity Limitation Date means the date that is the earlier of (i) 30 months following the Restructuring Date and (ii) the latest final maturity date of any Restructured Bond or Loan, provided, however, that under no circumstances shall the Restructuring Maturity Limitation Date be earlier than the Scheduled Maturity Date or later than 30 months following the Scheduled Maturity Date and if it is it shall be deemed to be the Scheduled Maturity Date or 30 months following the Scheduled Maturity Date, as the case may be. Restructuring Date means, with respect to a Restructured Bond or Loan, the date on which a Restructuring is legally effective in accordance with the terms of the documentation governing such Restructuring. Restructured Bond or Loan means an Obligation which is a Bond or Loan and in respect of which the Restructuring that is the subject of a Credit Event Notice has occurred. Eligible Transferee means each of the following: (a) (i) any bank or other financial institution; (ii) an insurance or reinsurance company; (iii) a mutual fund, unit trust or similar collective investment vehicle (other than an entity
specified in clause (c)(i) below); and (iv) a registered or licensed broker or dealer (other than a natural person or proprietorship); provided, however, in each case that such entity has total assets of at least U.S.$500,000,000; (b) an affiliate of an entity specified in the preceding clauses (a); (c) each of a corporation, partnership, proprietorship, organisation, trust or other entity (i) that is an investment vehicle (including, without limitation, any hedge fund, issuer of
collateralised debt obligations, commercial paper conduit or other special purpose vehicle) that (1) has total assets of at least U.S.$100,000,000 or (2) is one of a group of investment vehicles under common control or management having, in the aggregate, total assets of at least U.S.$100,000,000; or
(ii) that has total assets of at least U.S.$500,000,000; or (iii) the obligations of which under an agreement, contract, or transaction are guaranteed or
otherwise supported by a letter of credit or keepwell, support, or other agreement by an entity described in clauses (a), (b), (c)(ii) or (d); and
(d)) a Sovereign, Sovereign Agency or Supranational Organisation. All references in this definition to U.S.$ include equivalent amounts in other currencies. D) Modified Restructuring Maturity Limitation Date If Modified Restructuring Maturity Limitation and Conditionally Transferable Obligation are applicable and Restructuring is the only Credit Event specified in the Credit Event Notice, then a Valuation Obligation may only be used as a Valuation Obligation if (i) it is a Conditionally Transferable Obligation and (ii) it has a final maturity date not later than the Modified Restructuring Maturity Limitation Date.
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Conditionally Transferable Obligation means a Valuation Obligation that is either Transferable, in the case of Bonds, or capable of being assigned or novated to all Modified Eligible Transferees without the consent of any person being required, in the case of any Valuation Obligation other than Bonds provided however, that a Valuation Obligation other than Bonds will be a Conditionally Transferable Obligation notwithstanding that consent of the Reference Entity or the guarantor, if any, of a Valuation Obligation other than Bonds (or the consent of the relevant obligor if a Reference Entity is guaranteeing such Valuation Obligation) or any agent is required for such novation, assignment or transfer so long as the terms of such Valuation Obligation provide that such consent cannot be unreasonably withheld or delayed. Any requirement that notification or novation, assignment or transfer of a Valuation Obligation be provided to a trustee, fiscal agent, administrative agent, clearing agent or paying agent for a Valuation Obligation shall not be considered to be a requirement for consent for these purposes. For purposes of determining whether a Valuation Obligation is Transferable or is capable of being assigned or novated to Modified Eligible Transferees, such determination shall be made as of the Physical Redemption Date or Valuation Date, as applicable, taking into account only the terms of the Valuation Obligation and any related transfer or consent documents which have been obtained by the Issuer. Modified Restructuring Maturity Limitation Date means the date that is the later of the Scheduled Maturity Date and 60 months following the Restructuring Date in the case of a Restructured Bond or Loan, or 30 months following the Restructuring Date in the case of all other Valuation Obligations. Restructuring Date means, with respect to a Restructured Bond or Loan, the date on which a Restructuring is legally effective in accordance with the terms of the documentation governing such Restructuring. Restructured Bond or Loan means an Obligation which is a Bond or Loan and in respect of which the Restructuring that is the subject of a Credit Event Notice has occurred. Modified Eligible Transferee means any bank, financial institution or other entity which is regularly engaged in or established for the purpose of making purchasing or investing in loans securities and other financial assets. E) Sovereign Restructured Valuation Obligation Solely in respect of a Restructuring Credit Event applicable to a Sovereign Reference Entity, Valuation Obligation means any Sovereign Restructured Valuation Obligation that is (i) payable in an amount equal to its outstanding principal balance or Due and Payable Amount, as applicable (ii) is not subject to any counterclaim or defence (other than a counterclaim or defense based on the factors set forth in the second sentence of the definition of “Credit Events” set out in Part 2 of above) or right of set off by or of such Sovereign Reference Entity or as applicable an Underlying Obligor and (iii) in the case of a Qualifying Guarantee other than an Qualifying Affiliate Guarantee, capable as of the Physical Redemption Date or the Valuation Date as applicable of immediate assertion or demand by or on behalf of the holder or holders against such Sovereign Reference Entity for an amount at least equal to the outstanding principal balance or Due and Payable Amount being valued apart from the giving of any notice of non-payment or similar procedural requirement it being understood that acceleration of the Underlying Obligation shall not be considered a procedural requirement. Sovereign Restructured Valuation Obligation means an Obligation of a Sovereign Reference Entity (a) in respect of which a Restructuring Credit Event that is the subject of a Credit Event Notice has occurred and (b) described by the Valuation Obligation Category and having the
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Valuation Obligation Characteristics in each case immediately preceding the date on which such Restructuring is legally effective in accordance with the terms of the documentation governing such Restructuring without regard to whether the Obligation would satisfy such Valuation Obligation Category or Valuation Obligation Characteristics after such Restructuring.
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Part 6: Convertible, Exchangeable or Accreting Obligation provisions: Accreting Obligation means any obligation (including, without limitation, a Convertible Obligation or an Exchangeable Obligation), the terms of which expressly provide for an amount payable upon acceleration equal to the original issue price (whether or not equal to the face amount thereof) plus an additional amount or amounts (on account of original issue discount or other accruals of interest or principal not payable on a periodic basis) that will or may accrete, whether or not (a) payment of such additional amounts is subject to a contingency or determined by reference to a formula or index, or (b) periodic cash interest is also payable. Outstanding principal balance with respect to any Accreting Obligation means the Accreted Amount thereof. Accreted Amount means, with respect to an Accreting Obligation, an amount equal to (a) the sum of (i) the original issue price of such obligation and (ii) the portion of the amount payable at maturity that has accreted in accordance with the terms of the obligation (or as otherwise described below), less (b) any cash payments made by the obligor thereunder that, under the terms of such obligation, reduce the amount payable at maturity (unless such cash payments have been accounted for in clause (a)(ii) above), in each case calculated as of the earlier of (A) the date on which any event occurs that has the effect of fixing the amount of a claim in respect of principal and (B) the Valuation Date. Such Accreted Amount shall exclude any accrued and unpaid periodic cash interest payments (as determined by the Calculation Agent). If an Accreting Obligation is expressed to accrete pursuant to a straight-line method or if such obligation’s yield to maturity is not specified in, nor implied from, the terms of such obligation, then, for purposes of (a)(ii) above, the Accreted Amount shall be calculated using a rate equal to the yield to maturity of such obligation. Such yield shall be determined on a semi-annual bond equivalent basis using the original issue price of such obligation and the amount payable at the scheduled maturity of such obligation, and shall be determined as of the earlier of (A) the date on which any event occurs that has the effect of fixing the amount of a claim in respect of principal and (B) the Valuation Date, as the case may be. The Accreted Amount shall exclude, in the case of an Exchangeable Obligation, any amount that may be payable under the terms of such obligation in respect of the value of the Equity Securities for which such obligation is exchangeable. Convertible Obligation means any obligation that is convertible, in whole or in part, into Equity Securities solely at the option of holders of such obligation or a trustee or similar agent acting for the benefit only of holders of such obligation (or the cash equivalent thereof, whether the cash settlement option is that of the issuer or of (or for the benefit of) the holders of such obligation). Exchangeable Obligations means any obligation that is exchangeable, in whole or in part, for Equity Securities solely at the option of holders of such obligation or a trustee or similar agent acting for the benefit only of holders of such obligation (or the cash equivalent thereof, whether the cash settlement option is that of the issuer or of (or for the benefit of) the holders of the obligation). With respect to any Exchangeable Obligation that is not an Accreting Obligation, the outstanding principal balance thereof shall exclude any amount that may be payable under the terms of such obligation in respect of the value of the Equity Securities for which such obligation is exchangeable. Equity Securities means (a) in the case of a Convertible Obligation, equity securities (including options and warrants) of the issuer of such obligation or depositary receipts representing equity securities of the issuer of such obligation together with any other property distributed to or made available to holders of those equity securities from time to time; and (b) in the case of an Exchangeable Obligation, equity securities (including options and warrants) of a person other than the issuer of such obligation or depositary receipts representing those equity securities of a person other than the issuer of such obligation together with any other property distributed to or made available to holders of those equity securities from time to time.
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Part 7: May 2003 Supplement If the May 2003 Supplement is specified as being applicable the following shall apply:- 1. The definition in of “Downstream Affiliate” and “Voting Shares” in Part 4 above shall be deleted and replaced by the following:-
Downstream Affiliate and Voting Shares (a) “Downstream Affiliate” means an entity, whose outstanding Voting Shares were at the date of issuance of the Qualifying Guarantee more than 50 percent owned, directly or indirectly, by the Reference Entity; (b) “Voting Shares” shall mean those shares or other interests that have the power to elect the board of directors or similar governing body of an entity.
2. The definition of Qualifying Guarantee shall be amended by the deletion of the interpretation provisions (ii) (a) and (ii) (b) and their replacement with the following and the relettering of (ii) (c) as (ii) (b):-
(ii) For the purposes of the application of the Obligation Characteristics or the Valuation Obligation Characteristics: - (a) both the Qualifying Guarantee and the Underlying Obligation must satisfy on the relevant date Obligation Characteristics or Valuation Obligation Characteristics from the following list, if applicable:
Not Subordinated Specified Currency Not Sovereign Lender Not Domestic Currency Not Domestic Law. For these purposes the lawful currency of Canada, Japan, Switzerland, the United Kingdom or the United States of America or the euro shall not be a Domestic Currency and the laws of England and the laws of the State of New York shall not be a Domestic Law.
3 The definition of “Qualifying Guarantee” in Part 4 above shall be deleted and replaced with the following:-
“Qualifying Guarantee” means an arrangement evidenced by a written instrument pursuant to which a Reference Entity irrevocably agrees (by guarantee of payment or equivalent legal arrangement) to pay all amounts due under an obligation (the “Underlying Obligation”) for which another party is the obligor (the “Underlying Obligor”). Qualifying Guarantees shall exclude any arrangement (i) structured as a surety bond, financial guarantee insurance policy, letter of credit or equivalent legal arrangement or (ii) pursuant to the terms of which the payment obligations of the Reference Entity can be discharged, reduced, assigned or otherwise altered as a result of the occurrence or non-occurrence of an event or circumstance (other than payment). The benefit of a Qualifying Guarantee must be capable of being delivered together with the delivery of the Underlying Obligation.
4. The definition of “Multiple Holder” in Part 5 above shall be amended by the addition of the following wording at the end of the definition: -
“Any obligation that is a Bond shall be deemed to satisfy the requirement of sub-section (ii) of this definition of Multiple Holder.”
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Part 8 Other provisions Termination following Breach of Selling Restrictions:
If applicable and the Notes are sold to any person in breach of any applicable restrictions on sale of securities, the Issuer may, in its absolute discretion, choose to redeem the Notes sold to that person at the Sale Restriction Redemption Amount at any time upon notice to the Noteholders (the “Sale Restriction Redemption Date”) and no further amounts will be due to Noteholders after payment of the Sale Restriction Redemption Amount. The “Sale Restriction Redemption Amount” is the fair market value of the relevant Notes (including any accrued interest) on the fifth Business Day before the Sale Restriction Redemption Date, less any loss of bargain and cost of funding incurred by the Issuer, all as determined by the Calculation Agent in its absolute discretion
Tax Redemption: -
If applicable and the Issuer is required to pay Additional Amounts, the Issuer may redeem the Notes at the Tax Redemption Amount at any time upon notice to the Noteholders (the “Tax Redemption Date”) and no further amounts will be due to Noteholders after payment of the Tax Redemption Amount. The Tax Redemption Amount is the fair market value of the Notes (including any accrued interest) on the fifth Business Day before the Tax Redemption Date, less any loss of bargain and cost of funding incurred by the Issuer, all as determined by the Calculation Agent in its absolute discretion.
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Part 9 Additional Provisions relating to Monoline Reference Entities
The following additional terms shall apply to any Reference Entity identified as a “Monoline”. (a) Qualifying Policy “Qualifying Policy” means a financial guaranty insurance policy or
similar financial guarantee pursuant to which a Reference Entity irrevocably guarantees or insures all Instrument Payments (as defined below) of an instrument that constitutes Borrowed Money (modified as set forth below) (the “Insured Instrument”) for which another party (including a special purpose entity or trust) is the obligor (the “Insured Obligor”). Qualifying Policies shall exclude any arrangement (i) structured as a surety bond, letter of credit or equivalent legal arrangement or (ii) pursuant to the express contractual terms of which the payment obligations of the Reference Entity can be discharged or reduced as a result of the occurrence or non-occurrence of an event or circumstance (other than the payment of Instrument Payments). The benefit of a Qualifying Policy must be capable of being delivered together with the delivery of the Insured Instrument.
“Instrument Payments” means (A) in the case of any Insured Instrument that is in the form of a pass-through certificate or similar funded beneficial interest, (x) the specified periodic distributions in respect of interest or other return on the Certificate Balance on or prior to the ultimate distribution of the Certificate Balance and (y) the ultimate distribution of the Certificate Balance on or prior to a specified date and (B) in the case of any other Insured Instrument, the scheduled payments of principal and interest, in the case of both (A) and (B) (1) determined without regard to limited recourse or reduction provisions of the type described in paragraph (d) below and (2) excluding sums in respect of default interest, indemnities, tax gross-ups, make-whole amounts, early redemption premiums and other similar amounts (whether or not guaranteed or insured by the Qualifying Policy).
“Certificate Balance” means, in the case of an Insured Instrument that is in the form of a pass-through certificate or similar funded beneficial interest, the unit principal balance, certificate balance or similar measure of unreimbursed principal investment.
(b) Obligation and Valuation Obligation. The definitions of “Obligation” and “Valuation Obligation” in Part 4 are hereby amended by adding “or Qualifying Policy” after “or as provider of a Qualifying Affiliate Guarantee”.
(c) Interpretation of Provisions. In the event that an Obligation or a Valuation Obligation is a Qualifying Policy, the terms of paragraphs (i) to (iv) of the definition of “Qualifying Guarantee” in Part 4 will apply, with references to the Qualifying Guarantee, the Underlying Obligation and the Underlying Obligor deemed to include the Qualifying Policy, the Insured Instrument and the Insured Obligor, respectively, except that:
(i) the terms “Borrowed Money” and “Bond” defined in Part 4 shall be deemed to include distributions payable under an Insured Instrument in the form of a pass-through certificate or similar funded beneficial interest, Bond shall be deemed to include such an Insured Instrument, and the terms “obligation” and “obligor” shall be construed accordingly;
(ii) references in the definitions of “Assignable Loan” and “Consent Required Loan” in Part 4 to the guarantor and guaranteeing shall be deemed to include the insurer and insuring, respectively;
(iii) if “Assignable Loan”, “Consent Required Loan”, or “Transferable” are specified as Valuation Obligation Characteristics applicable to a Reference Entity to which these
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additional terms are applied and if the benefit of the Qualifying Policy is not transferred as part of any transfer of the Insured Instrument, the Qualifying Policy must be transferable at least to the same extent as the Insured Instrument; and
(iv) with respect to an Insured Instrument in the form of a pass-through certificate or similar funded beneficial interest, the term “outstanding principal balance” shall mean the outstanding Certificate Balance and “maturity”, as such term is used in the Maximum Maturity Obligation or Valuation Characteristic, shall mean the specified date by which the Qualifying Policy guarantees or insures, as applicable, that the ultimate distribution of the Certificate Balance will occur.
(d) Not Contingent. An Insured Instrument will not be regarded as failing to satisfy the Not Contingent Obligation or Valuation Characteristic solely because such Insured Instrument is subject to provisions limiting recourse in respect of such Insured Instrument to the proceeds of specified assets (including proceeds subject to a priority of payments) or reducing the amount of any Instrument Payments owing under such Insured Instrument, provided that such provisions are not applicable to the Qualifying Policy by the terms thereof and the Qualifying Policy continues to guarantee or insure, as applicable, the Instrument Payments that would have been required to be made absent any such limitation or reduction. By incorporating this provision in a document, no inference should be made as to the interpretation of the “Not Contingent” Obligation or Valuation Obligation Characteristic in the context of limited recourse or similar terms applicable to Valuation Obligations other than Qualifying Policies.
(e) Deliver. The term “deliver” with respect to an obligation that is a Qualifying Policy means to deliver both the Insured Instrument and the benefit of the Qualifying Policy (or a custodial receipt issued by an internationally recognized custodian representing an interest in such an Insured Instrument and the related Qualifying Policy), and “delivery” and “delivered” will be construed accordingly.
(f) Provisions for Determining a Successor. The definition of “succeed” in Part 3 is hereby amended by adding “or insurer” after “or guarantor”.
(g) Substitute Reference Obligation. The definition of Reference Obligation in Part 4 is hereby amended by adding “or Qualifying Policy” after “or as provider of a Qualifying Affiliate Guarantee” in the definition of Substitute Reference Obligation and paragraph following that definition. References in the definition of Substitute Reference Obligation to the Qualifying Guarantee and the Underlying Obligation shall be deemed to include the Qualifying Policy and the Insured Instrument, respectively.
(h) Other Provisions. For purposes of paragraph (ii) of the definition of “Valuation
(i) Obligation” in Part 4, the definition of “Credit Event” in Part 2 and the Additional Disclosures specified in the applicable termsheet or Final Terms, as the case may be, references to the Underlying Obligation and the Underlying Obligor shall be deemed to include Insured Instruments and the Insured Obligor, respectively.
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SCHEDULE C: FORM OF PORTFOLIO ADDITION NOTICE To: the Holders of €50,000,000 Adjustable Spread Leveraged Notes - eLevate Series 2007-1 We hereby notify you that we propose the additions to the Portfolio set forth in the Schedule to this notice, to take effect on the indicated Portfolio Addition Date(s). In our opinion, such additions will not cause any breach of the Portfolio Guidelines. You should confirm your consent to such additions to us at the address specified below, no later than 10 Business Days after the date of this notice. Date: [ ] UBS AG, Jersey Branch c/o UBS AG, London Branch 100 Liverpool Street London EC2M 2RH Attention:
SCHEDULE
Proposed Reference Entity1
Proposed Eligible Reference Obligation or Substitute Asset
Credit Exposure Amount2
Portfolio Addition Date
ISIN
1. A Portfolio Addition Notice given during the Ramp-up Period shall not specify fewer than 20 Eligible Reference Obligations 2. The Credit Exposure Amount of any Substitute Asset shall not be less than €10,000,000 nor more than €34,200,000 (or the
equivalent in other currencies, as determined by the Calculation Agent).
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SCHEDULE D: MOODYS CDOROM™ MODEL TEST 2 INSTRUCTIONS AND DEFINITIONS
Capitalised terms used in this Schedule but not defined herein have the meanings given to them in the User Guide and the Moody’s Model (each as defined below). Where there is a conflict between the User Guide, this Agreement and the Moody’s Model, the Moody’s Model shall prevail.
PROCEDURE
The Moody’s Model Test will be effected and satisfied with respect to any addition of any Reference Entity (each, an “Additional Reference Entity”) to the Portfolio (either during the Ramp-up Period or by way of the addition of Substitute Assets thereafter) (each, an “Addition”) only in accordance with the following procedure and inputs:
“X” = zero
“Y” = zero
1. Yes - Test 2 must be selected for the purposes of Input No. 2.
2. For the purposes of Input No. 22, the initial Moody’s rating assigned to the Notes.
3. Run Moody’s Model with:
(a) the Portfolio as it was prior to the addition of the Additional Reference Entity/Entities to the Portfolio; and
(b) the Credit Enhancement as it was prior to the addition of the Additional Reference Entity/Entities to the Portfolio
4. Record Current MM obtained from the Pre-Trade MM field after Running the Model.
5. Amend the Portfolio in the Moody’s Model to give effect to all proposed Addition(s) and new proposed Credit Enhancement and Run Moody’s Model.
6. If the Pre-Trade MM is less than or equal to the Hurdle MM + Y and
If Post-Trade MM is less than or equal to:
(a) Hurdle MM + X; or
(b) Pre-Trade MM,
Then the MOODY’S CDOROM TEST 2 is passed and the Addition(s) may be made, and the Credit Enhancement adjusted in accordance with this Schedule.
Else, then the MOODY’S CDOROM TEST 2 is failed and the proposed Addition (s) cannot be made and the Credit Enhancement must not be adjusted.
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Moody’s CDOROMTM Inputs 2 Tick "Yes-Test 2" 3 Specify "CDO^1" 4 Tick 6 Specify "Random / Fixed per entity". 7 N/A - Leave Unticked 8 Tick 9 N/A - Leave Unticked 10 Specify "Per Entity" 11 N/A - Leave Unticked 12 Tick 13 5 Million 14 Current EUR – EURIBOR - TELERATE 16 N/A - Leave Unticked 17 Specify "No Stats/No Textfile" 18 N/A - Do not Modify 19 N/A - Do not Modify 20 Outstanding Notional Amount for each class Divided by the Reference Portfolio Principal
Amount, provided however that reductions of the Outstanding Notional Amount due to allocation of Loss Amounts and/or Recovery Amounts will be made as of the relevant Cash Settlement Date (and not the Event Determination Date).
21 Enter 0% (“Zero”) 22 Initial Moody's Rating 23 Leave Blank 24 Adjustable Spread times the Spread Adjustment Factor. 25 As calculated by Output N°8 once Input N°1 has been run 26 N/A - Do not modify 29 Leave Blank 30 Enter Name of the SPV issuing the Reference Obligations (=Reference Entity) 31 Leave Blank 32 Reference Obligation Principal Amount for each Reference Obligation.
For Reference Obligations that have been the subject of a Credit Event Notice, keep them in the Reference Portfolio at their outstanding Reference Obligation Principal Amount until the final valuation date, with a rating of Ca. At the final valuation date, remove this defaulted obligation from the Reference Portfolio"
33 Reference Obligation Moody's Rating. If the Reference Obligation is wrapped or insured,
enter the Moody's Rating of the Wrapper or Guarantor 34 Leave Blank 35 ABS Industry Code of the Reference Obligation 36 Reference Obligation Country. If the Reference Obligation is wrapped or insured, enter the
domicile of the Wrapper or Guarantor 38 Reference Entity full legal name 39 Issuance Date of the Reference Obligation (format DD/MM/YY) 40 Name of any guarantor or Monoline Insurer guaranteeing such Reference Obligation 41 Key Agent of the Reference Obligation (Please refer to the “RefData” sheet for information
on the Key Agent for each ABS type 42 Enter a percentage equal to the principal amount of the Reference Obligation at the date of
issuance, plus the principal amount of any other tranche issued by the same Reference Entity ranking pari-passu for interest and principal payment with the relevant Reference Obligation, divided by the aggregate of principal amounts of all tranches issued by the Reference Entity relating to the same Transaction as the Reference Obligation relates.
43 Moody's Rating assigned to the Reference Obligation at the date of issuance. 44 Reference Obligation Weighted Average Life. 45 FALSE unless Input 33 applies 46 Click on "Calculate Moody's Theory ABS RR" button on top of this sheet. 47 Leave Blank 48 0% for Liquid Assets and 5% for Illiquid Assets (i.e. SME ABS)
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ADDITIONAL DEFINITIONS
“Moody’s Metric” or “MM”
The MM is a numerical equivalent of an alpha-numeric rating deduced from the tranche Expected Loss and tranche Weighted Average Life. The MM measure is time independent. All MMs are output by the model where necessary.
“Credit Enhancement”
Input No. 21 if the figure is specified as a percentage, or Input No. 21b if the figure is specified as a nominal amount (currency) in the same units as the portfolio exposures. If Input No. 21 is to be used, click "Enter amounts as percentages" in Input 100. Otherwise to use Input No. 22 click "Enter amounts in currency" in Input No. 100. Note this definition is dependent on credit event treatment described below; therefore, the credit enhancement level should not be reduced by losses since the effects of the default of a particular entity are already captured as the Affected Reference Entity remains in the Portfolio.
“Current MM”
The Moody’s Metric obtained when Running Moody’s Model. (Output No. 7).
“Hurdle MM”
5, being the initial assigned rating hurdle for this transaction expressed as a Moody’s Metric (Output No 11).
“Post-Trade MM”
The Moody’s Metric obtained post trade (Output No. 12).
“Pre-Trade MM”
The pre-trade Moody’s Metric input obtained in step (4) of the test (Input No. 58).
"Moody’s Model"
The licensed Moody’s CDOROM™ model in the form provided by Moody’s. The Model may be updated by Moody’s from time to time and in such cases the Calculation Agent and the Auction Agent will be notified.
“Run[ning] Moody’s Model”
Entering model parameters according to those specified in Moody’s Inputs and the User Guide and clicking on Input No. 1 “Run Simulation”
"Moody’s Inputs”
Inputs as described on the "Inputs Description" sheet of the Moody’s Model. "Input No. {x}" refers to a Moody’s Input as described on the "Inputs Description" sheet of the Moody’s Model.
“Output No. {x}"
A Moody’s Output as described on the "Outputs Description" sheet of the Moody’s Model.
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"Test 2"
Application of Moody’s CDOROM Test 2 via Input No. 2.
“User Guide”
The CDOROM User Guide dated 28 June 2005 (as it may be amended or substituted from time to time by Moody’s and the Calculation Agent will be notified).
CREDIT EVENT TREATMENT
Upon the occurrence of a Credit Event Determination Date but before the determination of the Final Price:
• The Affected Reference Entity should be assigned a Moody’s rating of “Ca”.
• A fixed recovery rate of zero should be applied in the absence of dealer quotes. Where quotes have been obtained, the lowest of these and the expected Moody’s recovery rate can be applied.
• Once the Final Price is known the fixed recovery rate is set to this level, the subordination level is not adjusted by this loss.
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REGISTERED OFFICES OF UBS AG
Aeschenvorstadt 1 4002 Basel Switzerland
Bahnhofstrasse 45 8098 Zurich Switzerland
ISSUING AND PAYING AGENT
HSBC Bank plc 8 Canada Square London E14 5HQ
IRISH PAYING AGENT IRISH LISTING AGENT
HSBC Global Investor Services (Ireland) Limited
Europa House Harcourt Centre Harcourt Street
Dublin 2 Ireland
Arthur Cox Listing Services Limited Earlsfort Centre Earlsfort Terrace
Dublin 2 Ireland
AUDITORS To UBS AG
Ernst & Young Ltd Aeschengraben 9 P.O. Box 2149 CH-4002 Basel
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