Rather than negotiating terms for each trade, parties sign a master agreement once and then trade repeatedly under it. The schedule contains the negotiated variations, and each trade is documented by a short confirmation referencing the master.
Its most consequential feature is close-out netting. On a default, all trades under the master are terminated and collapsed into a single net amount owed one way, rather than the defaulter's administrator cherry-picking profitable contracts and repudiating the rest.
Key negotiated points include events of default, cross-default thresholds, additional termination events tied to credit ratings or NAV declines, and the collateral terms in the attached credit-support-annex. These clauses decide what happens in exactly the scenario nobody plans for.
Related: netting, credit-support-annex, counterparty-risk, over-the-counter-derivative, collateral, novation