Here is some really neat language from the Telecom Master Services Agreement they were trying to push on the market. The net net of this is, unless the conterparties are really really forgiving and don't want their money back in the event of bankruptcy, someone is going to have to pay someone else some money.
ARTICLE 5. EVENTS OF DEFAULT; REMEDIES
5.1 Events of Default. An Event of Default shall be deemed to have occurred with respect to a Party upon the occurrence of any of the following:
(i) the failure to make or apply, when due, any payment (other than any payment required pursuant to the Credit Support Annex) or Credit required pursuant to this Agreement, if such failure is not remedied within five (5) days after written notice thereof;
(ii) any representation or warranty made by such Party under this Agreement is false or misleading in any material respect when made or when deemed made or repeated;
(iii) the failure to perform any material covenant or obligation set forth in this Agreement (other than an Event of Default under this Section 5.1, any default for which the exclusive remedy is provided in Section 2.7, Article 3, or Article 4), if such failure is not remedied within ten (10) days after written notice thereof;
(iv) such Party becomes Bankrupt;
(v) such Party merges with or into, or reorganizes, amalgamates, consolidates or enters into any other transaction in which substantially all of its assets are transferable to, another Person who either (a) fails to assume all of such Party's obligations under this Agreement, or (b) assumes such Party's obligation under this Agreement, but whose creditworthiness is materially weaker than that of such Party immediately prior to such merger, reorganization, amalgamation, consolidation or other transaction hereunder;
(vi) if "Cross Default" is designated as applicable to a Party on the Cover Sheet, the occurrence and continuation of (a) a default, event of default or other similar condition or event in respect of such Party or any other Person specified on the Cover Sheet as applicable in respect of such Party, under one or more agreements or instruments, individually or collectively, relating to indebtedness for borrowed money, in an aggregate amount of not less than the applicable Cross Default Amount, which results in such indebtedness becoming, or becoming capable at such time of being declared, due and payable, or (b) a default by such Party or any other Person specified on the Cover Sheet as applicable in respect of such Party in making one or more payments when due in respect of indebtedness equal to or greater than the Cross Default Amount; or
(vii) any event of default under the Credit Support Annex.
5.2 Effect of Event of Default. If an Event of Default with respect to a Defaulting Party shall have occurred and be continuing, the Non-Defaulting Party shall have the right to designate an Early Termination Date and to liquidate and terminate all, but not less than all, Transactions.
5.3 Effect of Product Termination Event. If a Product Termination Event shall have occurred and be continuing, the Buyer or the non-Claiming Party, as applicable, shall have the right to designate an Early Termination Date with respect to any Product affected by such Product Termination Event and to liquidate and terminate obligations in respect of such Product. In the event the Buyer or the non-Claiming Party, as applicable, elects to declare an Early Termination Date pursuant to this Section 5.3, this Agreement shall remain in effect without prejudice to such Party’s rights under this Section 5.3 to declare an Early Termination Date as to the remaining Product(s) upon a subsequent Product Termination Event. For purposes of Section 5.4, 5.5 and 5.6, the Buyer or the non-Claiming Party, as applicable, shall be deemed to be the “Non-Defaulting Party” and the other Party shall be deemed to be the “Defaulting Party”.
5.4 Calculation of Termination Payment.
(i) If an Early Termination Date is designated with respect to any Product, the “Settlement Amount” for such Terminated Product shall be the difference between the Replacement Value and the Contract Value of such Terminated Product, as calculated by the Non-Defaulting Party as follows:
(a) If the Non-Defaulting Party in respect of a Terminated Product is Seller and the Replacement Value is greater than the Contract Value, then the Settlement Amount shall be the amount of such excess plus the pro rata portion of the Contract Value attributable to any Contract Price actually paid by Buyer and shall be payable by the Non-Defaulting Party to the Defaulting Party;
(b) If the Non-Defaulting Party in respect of a Terminated Product is Seller and the Replacement Value is less than the Contract Value, then the Settlement Amount shall be the amount of such difference less the pro rata portion of the Contract Value attributable to any Contract Price actually paid by Buyer and shall be payable by the Defaulting Party to the Non-Defaulting Party;
(c) If the Non-Defaulting Party in respect of a Terminated Product is Buyer and the Replacement Value is greater that the Contract Value, then the Settlement Amount shall be the amount of such difference plus the pro rata portion of the Contract Value attributable to any Contract Price actually paid by Buyer and shall be payable by the Defaulting Party to the Non-Defaulting Party; and
(d) If the Non-Defaulting Party in respect of a Terminated Product is Buyer and the Replacement Value is less than the Contract Value, then the Settlement Amount shall be the amount of such difference less the pro rata portion of the Contract Value attributable to any Contract Price actually paid by Buyer and shall be payable by the Non-Defaulting Party to the Defaulting Party.
(ii) If the sum of the Settlement Amounts payable by the Defaulting Party is greater than the sum of Settlement Amounts payable by the Non-Defaulting Party, then a single payment in the amount of such excess will be payable to the Non-Defaulting Party by the Defaulting Party on the date specified in Section 5.5. If the sum of the Settlement Amounts payable by the Non-Defaulting Party is greater than the sum of the Settlement Amounts payable by the Defaulting Party, then a single payment in the amount of such excess Settlement Amounts will be payable by the Non-Defaulting Party to the Defaulting Party on the date specified in Section 5.5.
5.5 Notice of Payment of Termination Payment. As soon as practicable after the calculation of the Termination Payment, the Non-Defaulting Party shall notify the Defaulting Party in writing of the amount of the Termination Payment and whether the Termination Payment is due to or due from the Non-Defaulting Party. The notice shall include a written statement explaining in reasonable detail the calculation of such Termination Payment. If the Termination Payment is due to the Non-Defaulting Party, the Defaulting Party shall pay such Termination Payment within five (5) Business Days after receipt of such notice, together with interest thereon (before as well as after judgment) at the Default Rate, to the extent permitted under applicable law, compounded daily, from (and including) the Early Termination Date to (but excluding) the day such amount is paid; provided, however, that to the extent that the Termination Payment is calculated pursuant to a Product Termination Event, no such interest shall be payable. If the Termination Payment is due from the Non-Defaulting Party, the Non-Defaulting Party shall pay such Termination Payment, without interest, within twenty (20) Business Days after delivery of such notice.
5.6 Disputes With Respect to Termination Payment. If the Defaulting Party disputes the Non-Defaulting Party’s calculation of the Termination Payment, in whole or in part, the Defaulting Party shall, within two (2) Business Days of receipt of Non-Defaulting Party’s explanation of the calculation of the Termination Payment, provide to the Non-Defaulting Party a detailed written explanation of the basis for such dispute; provided, however, that if the Termination Payment is due from the Defaulting Party, the Defaulting Party shall pay any undisputed amount and transfer Performance Assurance, if any, to the Non-Defaulting Party in an amount equal to the disputed amount of the Termination Payment.
5.7 Closeout Setoff. After calculation of a Termination Payment in accordance with Section 5.4 (unless such Termination Payment was calculated as a result of a Product Termination Event), if the Defaulting Party would be owed the Termination Payment, the Non-Defaulting Party shall be entitled, at its option and in its discretion, to set off against such Termination Payment any amounts due and owing by the Defaulting Party to the Non-Defaulting Party under any other agreements, instruments or undertakings between the Defaulting Party and the Non-Defaulting Party. The remedy provided for in this Section shall be without prejudice and in addition to any right of setoff, combination of accounts, lien or other right to which any Party is at any time otherwise entitled (whether by operation of law, contract or otherwise). Notwithstanding the foregoing, the Non-Defaulting Party shall not be required to pay to the Defaulting Party any amount owing by the Non-Defaulting Party under this Agreement until the Non-Defaulting Party receives confirmation satisfactory to it in its reasonable discretion that all obligations of the Defaulting Party to make any payments of any kind whatsoever to the Non-Defaulting Party or any of its Affiliates or otherwise which are due and payable as of the Early Termination Date have been fully and finally paid in cash.
"Bankrupt" means any entity, if such entity (i) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization, debt restructuring, liquidation or similar law, or has any such petition filed or commenced against it, (ii) makes an assignment or any general arrangement for the benefit of creditors, (iii) otherwise becomes bankrupt or insolvent (however evidenced), (iv) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets, or (v) is generally unable to pay its debts as they fall due.
Party A Credit Protection.
(a) If at any time and from time to time during the term of this Agreement (and whether or not an Event of Default has occurred), the Termination Payment that would be owed to Party A exceeds the Party B Collateral Threshold, then Party A, on any Business Day, may request that Party B provide Performance Assurance in an amount equal to the amount by which the Termination Payment exceeds the Party B Collateral Threshold (rounding upwards for any fractional amount to the next Party B Rounding Amount) less any Performance Assurance already posted with Party A. Such Performance Assurance shall be delivered to Party A within two (2) Business Days after the date of such request. On any Business Day (but no more frequently than weekly with respect to Letters of Credit and daily with respect to cash), Party B, at its sole cost, may request that such Performance Assurance be reduced to the extent that the amount of Performance Assurance posted by Party B exceeds the Termination Payment (rounding upwards for any fractional amount to the next Party B Rounding Amount) that would be owed to Party A. In the event that Party B fails to provide Performance Assurance pursuant hereto within two (2) Business Days, an Event of Default will be deemed to have occurred.
(b) If at any time there shall occur a Material Adverse Change in respect of Party B, then Party A may require Party B by notice to provide Performance Assurance in an amount determined by Party A to be commercially reasonable. In the event that Party B shall fail to provide such Performance Assurance or a guaranty or other credit assurance acceptable to Party A within two (2) Business Days after receipt of such notice, then an Event of Default shall be deemed to have occurred.
(c) Party A may hold Performance Assurance or may appoint an agent to hold such Performance Assurance; provided, however, that Party A may not hold such Performance Assurance if it is a Defaulting Party under the Agreement and any agent that Party A appoints may not hold such Performance Assurance unless it is domiciled in the United States and has a Credit Rating of “BBB-” or higher by S&P. If Party A or its agent fails to satisfy the foregoing conditions, then, upon a demand made by Party B, Party A shall, not later than two (2) Business Days after such demand, transfer or cause its agent to transfer all Performance Assurance held by Party A or such agent, as applicable, to a party that satisfies such conditions.
(d) Unless otherwise specified by Party A, interest shall accrue on any Performance Assurance in the form of cash at the Federal Funds Effective Rate. So long as no Event of Default with respect to Party B has occurred and is continuing, and to the extent that an obligation to deliver Performance Assurance would not be created or increased, Party A shall transfer to Party B, any interest, dividends or other amounts paid with respect to the Performance Assurance on the last Business Day of the calendar month in which such interest, dividends or other amounts were received by Party A. On or after the occurrence of an Event of Default with respect to Party B, Party A shall retain any such interest, dividends or other amounts received by Party A in respect of the Performance Assurance until all obligations of Party B under this Agreement have been satisfied. |
