Frequently Asked Questions Regarding LSTA Buy-In/Sell-Out (BISO) Provisions for Distressed Trades

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1 Frequently Asked Questions Regarding LSTA Buy-In/Sell-Out (BISO) Provisions for Distressed Trades What Is the BISO Trigger Date? T+50 (the day that is fifty Business Days after the Trade Date) is general rule with exceptions noted immediately below. When Seller Is Drafting Party: If drafts of the Settlement Documents 1 and the Upstreams 2 have been delivered by Seller to Buyer on a date that is after the fortieth (40th) Business Day after the Trade Date ( T+40 ) and on or before T+50, then the BISO Trigger Date shall occur on the tenth (10th) Business Day following the date (and if delivered on different dates, the latest of such dates) on which the Settlement Documents and/or Upstreams were delivered. When Buyer Is Drafting Party: 3 In the case where Seller has delivered Upstreams (which, if delivered on different dates, shall be deemed to have been delivered on the latest of such dates) to Buyer on a date that is on or before T+40 and Buyer has delivered to Seller drafts of the Settlement Documents on a date (the Buyer Delivery Date ) that is after T+40 but on or before T+50, then the BISO Trigger Date shall occur on the date that is the tenth (10th) Business Day following the Buyer Delivery Date. In the case where Seller has delivered Upstreams (which, if delivered on different dates, shall be deemed to have been delivered on the latest of such dates) to Buyer on a date that is after T+40 but on or before T+50 (the Seller Delivery Date ) and (i) if Buyer fails to deliver drafts of the Settlement Documents on or before the date that is the tenth (10th) Business Day following the Seller Delivery Date (the Buyer Scheduled Postponed Delivery Date ), then the BISO Trigger Date shall occur on the Buyer Scheduled Postponed Delivery Date or (ii) if Buyer delivers drafts of the Settlement Documents on or before the Buyer Scheduled Postponed Delivery Date (the date of such delivery, the Buyer Actual Postponed Delivery Date ), then the BISO Trigger Date shall occur on the tenth (10th) Business Day following the Buyer Actual Postponed Delivery Date. In the case where Buyer has delivered to Seller drafts of the Settlement Documents by T+50, but Seller has not delivered the Upstreams to Seller by T+50, then the BISO Trigger Date shall occur on T+50. When Does Buy-In/Sell-Out Provision Apply? Assignment Only election has been made; An election of Assignment is made in the Form of Purchase section of the Confirmation for the Transaction; or No election is made in the Form of Purchase section of the Confirmation for the Transaction and the transfer and eligibility provisions of the Credit Agreement permit an assignment of the Purchase Amount of the Debt to the Buyer. When Does Buy-In/Sell-Out Provision Not Apply? Participation is elected in the Form of Purchase section of the Confirmation; On or before the BISO Trigger Date, (a) either party has given written notice to the other party that it has reasonably determined pursuant to the transfer and/or eligibility provisions of the Credit Agreement that the Transaction cannot settle

2 by assignment but must settle by participation, or (b) the parties have mutually agreed that the Transaction cannot settle by assignment but must settle by participation or (c) prior to expiration of the applicable cure period after receipt of a BISO Notice, the Debt has been reorganized, restructured, converted or otherwise modified such that the Transaction must be settled on Proceeds; Prior to the Cover Trade Date (as defined below), the parties otherwise have settled the Transaction on the basis of a mutually agreeable alternative structure or other arrangement that affords Buyer and Seller the economic equivalent of the agreed-upon trade; If the parties agree in the Confirmation that one party is a Riskless Principal; 4 or If the parties agree to opt out of the BISO provisions in the Other Terms of Trade section of the Confirmation. What Does It Mean To Be a Performing Party for Purposes of the BISO Provision? Performing Party means, subject to any additional Drafting Party Delivery Obligations (as described below), the party performing its Settlement Delivery Obligations by the BISO Trigger Date. What Does It Mean To Be a Non-Performing Party for Purposes of the BISO Provision? Non-Performing Party means (i) the party failing to perform its Settlement Delivery Obligations by the BISO Trigger Date or (ii) the Drafting Party failing to satisfy its Drafting Party Delivery Obligation within ten (10) Business Days after the BISO Trigger Date. What Are the Settlement Delivery Obligations? Buyer Settlement Delivery Obligations means (A) Buyer s obligation to execute and deliver to Seller the Confirmation (whether or not the Confirmation has been countersigned by Seller) 5 ; and (B)(i) if Buyer is the Drafting Party, Buyer s obligation to deliver to the Seller the Settlement Documents in reasonably acceptable form or (ii) if Seller is the Drafting Party and has delivered to Buyer the Settlement Documents and Upstreams (each in reasonably acceptable form), Buyer s obligation to execute and deliver to Seller its signature to the Settlement Documents (with authorization to submit the assignment agreement to the administrative agent). Seller Settlement Delivery Obligations means (A) Seller s obligation to execute and deliver to Buyer the Confirmation (whether or not the Confirmation has been countersigned by Buyer), (B)(i) if Seller is the Drafting Party, Seller s obligation to deliver to the Buyer the Settlement Documents in reasonably acceptable form or (ii) if Buyer is the Drafting Party and has delivered the Settlement Documents to Seller in reasonably acceptable form, Seller s obligation to execute and deliver to Buyer its signatures to the Settlement Documents (with authorization to submit the assignment agreement to the administrative agent) and (C) Seller s obligation to deliver to Buyer executed Upstreams (if any) in reasonably acceptable form. Caveat: Seller shall not be deemed to have satisfied its Seller Settlement Delivery Obligations unless it owns the Purchase Amount of Debt to be sold to Buyer.

3 What Are the Drafting Party Delivery Obligations? Drafting Party is obligated to execute and deliver to the Non-Drafting Party its signatures to the Settlement Documents (with authorization to submit the assignment agreement to the administrative agent) after it has received the Non- Drafting Party s signatures to the Settlement Documents (and authorization to submit the assignment agreement to the administrative agent) in satisfaction of the Non-Drafting Party s obligations in accordance with clause (B)(ii) of the definition of Buyer Settlement Delivery Obligations or Seller Settlement Delivery Obligations (as applicable). When Must the Drafting Party Satisfy Its Drafting Party Delivery Obligations? In the event each party has become a Performing Party by satisfying its Settlement Delivery Obligations as of the BISO Trigger Date but the Drafting Party fails to perform its Drafting Party Delivery Obligations within ten (10) Business Days after the BISO Trigger Date, the Drafting Party shall lose its status as a Performing Party and instead be deemed a Non-Performing Party. Have Both Buyer and Seller Performed Their Settlement Delivery Obligations On or Prior to the BISO Trigger Date? Yes Settlement shall be effected by assignment pursuant to the Credit Agreement [subject to (x) third-party consents being obtained and (y) Drafting Party having satisfied its Drafting Party Delivery Obligations]. In the event a Drafting Party has not satisfied its Drafting Party Delivery Obligations (i.e., delivery of signatures to counterparty after receipt of signatures from such counterparty), then the Non-Drafting Party may send to the Drafting Party a BISO Notice advising of the Non-Drafting Party s intent to terminate its obligations under the Confirmation and to effect a cover transaction, unless within ten (10) Business Days following delivery of such BISO Notice (the Drafting Party Delivery Obligation Cure Period ), the Drafting Party shall have satisfied its Drafting Party Delivery Obligation. No Performing Party may send to the Non-Performing Party, at any time after the BISO Trigger Date, a written notice ( BISO Notice ). 6 What Information Must the BISO Notice Contain? All BISO Notices: Performing Party s intent to terminate its obligations under the Confirmation and to effect a cover transaction in respect of the specified debt, unless within twenty (20) Business days following the delivery of such BISO Notice (the Cure Period ), either the BISO Notice Recipient has performed (a) its Settlement Delivery Obligations and, if BISO Notice Recipient is the Drafting Party, its Drafting Party Delivery Obligations, or (b) its Upstream BISO Obligations, if the BISO Notice Recipient is Seller. If BISO Notice is sent by Seller: BISO Notice shall include a representation that Seller holds the Purchase Amount of the Debt to be sold to Buyer as of the date of delivery of such BISO Notice.

4 Certification in Event Settlement Documents and/or Upstreams Not Delivered to Performing Party by BISO Trigger Date: In the event the BISO Notice is delivered to a Non-Performing Party who has failed to deliver the Settlement Documents and/ or the executed Upstreams, in each case, by the BISO Trigger Date, such Performing Party must certify that it is ready, willing and able to execute and deliver its signatures to the Settlement Documents [subject to the delivery of Settlement Documents and/or Upstreams (if any), in each case, in reasonably acceptable form]. Must the BISO Notice Recipient Respond to the BISO Notice? The recipient of a BISO Notice shall promptly acknowledge receipt of the BISO Notice, provided that any failure by such recipient to acknowledge the receipt of the BISO Notice sent in accordance with the notices section shall in no way diminish the effectiveness thereof. What Action May the BISO Notice Recipient Take after Receipt of the BISO Notice? Do Nothing: BISO Notice Sender may move forward with cover transaction. Cure: Within twenty (20) Business Days following delivery of BISO Notice, BISO Notice Recipient that does one of the following is deemed to have cured: Performs Settlement Delivery Obligations; 7 or if Seller is the Non-Performing Party, performs its Upstream BISO Obligations. Explain Exigent Circumstances (if applicable): See question/answer immediately below. Are There Circumstances That Might Arise That Act as a Defense to Failing to Perform Settlement Delivery Obligations? Yes Failure to Obtain Agent Consent & Credit Freeze: Failure to obtain necessary third-party consents for settlement of any assignment required pursuant to the transfer provisions of the Credit Agreement, or the impossibility of consummating the settlement of any assignment during the pendency of (a) a credit freeze or other period when the administrative agent is not processing the settlement of such assignments or (b) a bankruptcy proceeding involving any of the obligor(s) under the Credit Documents as a result of an order of the court with jurisdiction over such proceedings, shall not constitute a failure by either Party to perform its Settlement Delivery Obligations. Hence in the event Seller is unable to purchase in the debt to sell to its Buyer because of a credit freeze, Seller would not be deemed to be a Non-Performing Party with respect to its failure to perform its Settlement Delivery Obligations of failing to deliver Upstreams by BISO Trigger Date. What Actions Must Seller Take to Perform Its Upstream BISO Obligations? Delivery of Upstream Confirmation: If, as of the date of Seller s receipt from Buyer of the BISO Notice, Seller does not hold the Debt and prior to the expiration of the Cure Period, Seller must deliver to Buyer a copy of the trade confirmation(s) (with the purchase rate redacted) that Seller has entered into to purchase not less than the principal amount of the Debt on terms consistent with the terms set forth in the BISO provisions of either the LSTA par or distressed confirmations and with trade dates not later than five (5) Business Days after the Trade Date (the Upstream Confirmation );

5 Delivery of Draft Settlement Documents & Upstreams (if any): If Seller is the Drafting Party, Seller must deliver to Buyer draft Settlement Documents with all blanks able to be completed filled in. Seller must also deliver to Buyer copies of any applicable Predecessor Transfer Documentation then in its possession; and Seller Certification: Seller must certify in writing to Buyer simultaneously with the deliveries set forth above, the following: To the extent of the Purchase Amount of the Debt, the Upstream Confirmation has not been delivered previously and will not be delivered subsequently to satisfy the obligations under another trade confirmation analogous to the Upstream BISO Obligations under these provisions; Seller is or will be a Performing Party under the Upstream Confirmation; If each counterparty under the Upstream Confirmation is not a Performing Party under the Upstream Confirmation, then Seller has delivered or will deliver to the counterparty or counterparty prior to the expiration of the Cure Period, a BISO Notice under the Upstream Confirmation in order to commence against such counterparty the exercise of Seller s rights as a Performing Party under the analogous BISO provisions set forth in the Upstream Confirmation; Seller will use reasonable commercial efforts to commence the buy-in(s) promptly upon the failure of such counterparty(ies) under the Upstream Confirmation to perform its Seller Settlement Delivery Obligations or Upstream BISO Obligations under the Upstream Confirmation prior to the expiration of the relevant periods thereunder; and Upon Buyer s timely request, Seller will provide further written certification or other evidence that it has performed the foregoing actions and fully enforced its rights as a Performing Party under the Upstream Confirmation. What Is Effect of Seller Performing Upstream BISO Obligations? Buyer shall not be entitled to exercise any further rights as a Performing Party against Seller under the BISO provisions. What Happens When the BISO Notice Recipient Fails to Perform Its Settlement Delivery Obligations (or Its Drafting Party Delivery Obligations or Its Upstream BISO Obligations, Each as Applicable) Prior to the Expiration of the Cure Period? Termination of Confirmation: Subject to the rights and obligations under the trade confirmation being reinstated due to BISO Notice Sender s failure to timely enter into a cover transaction as more specifically described below, the obligations of the parties under the Confirmation shall be terminated. 8 How Much Time Does the BISO Notice Sender Have to Consummate a Cover Transaction? Deadline for Cover Transaction: BISO Notice Sender must identify a third-party substitute counterparty and agree upon cover transaction trade terms within ten (10) Business Days following the expiration of the Cure Period or the Drafting Party Delivery Obligation Cure Period (as applicable).

6 What Happens If BISO Notice Sender Does Not Timely Enter into Cover Transaction? Reinstated Obligations: BISO Notice Sender shall promptly notify BISO Notice Recipient of such failure and the obligations of the parties under the Transaction shall be reinstated and deemed in full force and effect. In such circumstances, the BISO Notice Sender shall not be entitled to send any further BISO Notices or effect any further cover transaction in connection with the Transaction. When Must Notice of Cover Price Be Given to Non-Performing Party? Within one (1) Business Day following Cover Trade Date, 9 notice of the cover price shall be sent to the BISO Notice Recipient. When Must BISO Notice Recipient Dispute the Reasonableness of a Cover Price to the BISO Notice Sender? BISO Notice Recipient must send written notice of such dispute to the BISO Notice Sender within two (2) Business Days following receipt of notice of such cover price. Binding Arbitration: Such price dispute shall be submitted 10 to binding arbitration pursuant to, and shall be governed in all respects by, the Rules Governing Arbitration Between Loan Traders With Regard to Cover Price for Trades that DO Not Settle by BISO Trigger Date in existence as of the Trade Date. 1 Settlement Documents means the assignment agreement, the Purchase and Sale Agreement and the Purchase Price Letter for the Purchase Amount of the Debt and any other instruments of transfer required in accordance therewith, each in reasonably acceptable form (subject to the terms of the Confirmation); provided, however, that the Settlement Documents shall be deemed to be in reasonably acceptable form even though they may contain blanks with respect to any information required to be provided (if, on the date of determination, such information has not been provided) to the Drafting Party by the Non-Drafting Party. Further, for purposes of satisfying a party s Settlement Delivery Obligations, in the absence of an agreed Settlement Date, the Purchase Price Letter shall be in reasonably acceptable form without the calculation of the Purchase Price. 2 Upstreams means the executed predecessor transfer documentation, in reasonably acceptable form, which Seller will be required to deliver to Buyer under the terms of the Purchase and Sale Agreement. 3 New LSTA distressed trade confirmation in effect as of September 9, 2011, now provides a check box in the event Buyer shall be the drafting party. In the event such election is not made, Seller shall be deemed to be the drafting party. 4 When acting as a Riskless Principal, such party s obligations under a Confirmation are contingent upon the successful consummation of the purchase from or sale to a third party of the Debt specified in the Confirmation. 5 The BISO provisions provide a caveat that in the event, for example, Seller delivers to Buyer a Confirmation and Buyer promptly objects to a material term set forth therein (and hence does not elect to execute and return the Confirmation to Seller), the Seller should consider whether it would be appropriate to exercise its rights as a Performing Party (if applicable) under the BISO provisions [after taking into consideration all facts and circumstances relating to the Transaction (including any period provided by applicable law to deliver an objection to any material term of the Confirmation)]. 6 The ability to send a BISO Notice after the BISO Trigger Date is cut off in the event a Non-Performing Party (as of the BISO Trigger Date) subsequently becomes a Performing Party prior to the delivery of a BISO Notice by a Performing Party.

7 7 If the BISO Notice Recipient is the Drafting Party, the Drafting Party shall also be required to perform its Drafting Party Delivery Obligations (to the extent applicable) within cure period. 8 However the rights under the BISO provisions of the trade confirmation and the calculation to determining damages in connection with a cover transaction under the trade confirmation shall survive (i.e., Section 16, Buy In/Sell-Out, Section 17, Buy-in Damages; and Section 18, Sell-Out Damages ). Importantly, the damage calculation is set up to be economically neutral (i.e., in case that Buyer needs to pay more to buy-in the debt on a cover transaction, the Seller will pay the Buyer the difference between the original purchase price and the cover purchase prices, and in the case that Buyer pays less to buy-in the debt on a cover transaction, then Buyer shall pay to Seller the difference between the original purchase price and the cover purchase price). 9 Cover Trade Date means the date set forth as the trade date in the confirmation for the cover transaction. 10 Such written submission (the Arbitration Notice ) shall be substantially in the form most recently published by the LSTA and in existence on the Trade Date. If you have any questions regarding the matters discussed above, please call your regular contact at Andrews Kurth LLP or one of the persons listed below: David J. Hoyt hoytd@akllp.com Kenneth L. Rothenberg rothk@akllp.com If you would like to add a colleague to our mailing list or if you need to change or remove your name from our mailing list, please DebtTrading@akllp.com. AUSTIN BEIJING DALLAS HOUSTON LONDON NEW YORK THE WOODLANDS WASHINGTON, DC Copyright 2011 by Andrews Kurth LLP. Andrews Kurth, the Andrews Kurth logo and Straight Talk Is Good Business are registered service marks of Andrews Kurth LLP. All Rights Reserved. This memorandum is provided by Andrews Kurth LLP for educational and information purposes only and is not intended and should not be construed as legal advice. This information is not intended to create (and receipt of it does not constitute) an attorney-client relationship. Readers should not act on this information without seeking professional counsel. Prior results do not guarantee a similar outcome and depend on the facts of each matter A