EXHIBIT 10.08
FORM OF
FOREIGN EXCHANGE AND OPTIONS
MASTER AGREEMENT
(FEOMA)
MASTER AGREEMENT dated as of [___________] by and between Xxxxxx Xxxxxxx & Co.
Incorporated, a Delaware corporation, and Xxxxxx Xxxxxxx Charter Xxxxxxxx X.X.,
Delaware Limited Liability Company.
I. DEFINITIONS
Unless otherwise required by the context, the following terms shall have the
following meanings in the Agreement:
"Agreement" has the meaning given to it in Section 2.2.
"American Style Option" means an Option which may be exercised on any Business
Day up to and including the Expiration Time.
"Base Currency", as to a Party, means the Currency agreed to as such in relation
to it in Part VII of the Schedule.
"Business Day" means for purposes of: (i) Section 3.2, a day which is a Local
Banking Day for the applicable Designated Office of the Buyer; (ii) Section 5.1
and the definition of American Style Option, a day which is a Local Banking Day
for the applicable Designated Office of the Seller; (iii) clauses (i), (viii)
and (xii) of the definition of Event of Default, a day which is a Local Banking
Day for the Non-Defaulting Party; (iv) solely in relation to delivery of a
Currency, a day which is a Local Banking Day in relation to that Currency; and
(v) any other provision of the Agreement, a day which is a Local Banking Day for
the applicable Designated Offices of both Parties; provided, however, that
neither Saturday nor Sunday shall be considered a Business Day for any purpose.
"Buyer" means the owner of an Option.
"Call" means an Option entitling, but not obligating (except upon exercise), the
Buyer to purchase from the Seller at the Strike Price a specified quantity of
the Call Currency.
"Call Currency" means the Currency agreed to as such at the time an Option is
entered into, as evidenced in a Confirmation.
"Close-Out Amount" has the meaning given to it in Section 8.1.
"Close-Out Date" means a day on which, pursuant to the provisions of Section
8.1, the Non-Defaulting Party closes out Currency Obligations and/or Options or
such close-out occurs automatically.
"Closing Gain", as to the Non-Defaulting Party, means the difference described
as such in relation to a particular Value Date under the provisions of Section
8.1.
"Closing Loss", as to the Non-Defaulting Party, means the difference described
as such in relation to a particular Value Date under the provisions of Section
8.1.
"Confirmation" means a writing (including telex, facsimile or other electronic
means from which it is possible to produce a hard copy) evidencing an FX
Transaction or an Option, and specifying:
(A) in the case of an FX Transaction, the following information:
(i) the Parties thereto and the Designated Offices through which
they are respectively acting,
(ii) the amounts of the Currencies being bought or sold and by
which Party,
(iii) the Value Date, and
(iv) any other term generally included in such a writing in
accordance with the practice of the relevant foreign exchange market;
and
(B) in the case of an Option, the following information:
(i) the Parties thereto and the Designated Offices through which
they are respectively acting,
(ii) whether the Option is a Call or a Put,
(iii) the Call Currency and the Put Currency that are the
subject of the Option and their respective quantities,
(iv) which Party is the Seller and which is the Buyer,
(v) the Strike Price,
(vi) the Premium and the Premium Payment Date,
(vii) the Expiration Date,
(viii) the Expiration Time,
(ix) whether the Option is an American Style Option or a
European Style Option, and
(x) such other matters, if any, as the Parties may agree.
"Credit Support" has the meaning given to it in Section 8.2.
"Credit Support Document", as to a Party (the "first Party"), means a guaranty,
hypothecation agreement, margin or security agreement or document, or any other
document containing an obligation of a third party ("Credit Support Provider")
or of the first Party in favor of the other Party supporting any obligations of
the first Party under the Agreement.
"Credit Support Provider" has the meaning given to it in the definition of
Credit Support Document.
"Currency" means money denominated in the lawful currency of any country or the
Ecu.
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"Currency Obligation" means any obligation of a Party to deliver a Currency
pursuant to an FX Transaction, the application of Section 6.3(a) or (b), or an
exercised Option (except, for the purposes of Section 8.1 only, one that is to
be settled at its In-the-Money Amount under Section 5.5).
"Currency Pair" means the two Currencies which potentially may be exchanged in
connection with an FX Transaction or upon the exercise of an Option, one of
which shall be the Put Currency and the other the Call Currency.
"Custodian" has the meaning given to it in the definition of Insolvency
Proceeding.
"Defaulting Party" has the meaning given to it in the definition of Event of
Default.
"Designated Office(s)", as to a Party, means the office or offices specified in
Part II of the Schedule.
"Effective Date" means the date of this Master Agreement.
"European Style Option" means an Option for which Notice of Exercise may be
given only on the Option's Expiration Date up to and including the Expiration
Time, unless otherwise agreed.
"Event of Default" means the occurrence of any of the following with respect to
a Party (the "Defaulting Party", the other Party being the "Non-Defaulting
Party"):
(i) the Defaulting Party shall (A) default in any payment when due under
the Agreement (including, but not limited to, a Premium payment) to the
Non-Defaulting Party with respect to any Currency Obligation or Option and such
failure shall continue for two (2) Business Days after the Non-Defaulting Party
has given the Defaulting Party written notice of non-payment, or (B) fail to
perform or comply with any other obligation assumed by it under the Agreement
and such failure is continuing thirty (30) days after the Non-Defaulting Party
has given the Defaulting Party written notice thereof;
(ii) the Defaulting Party shall commence a voluntary Insolvency Proceeding or
shall take any corporate action to authorize any such Insolvency Proceeding;
(iii) a governmental authority or self-regulatory organization having
jurisdiction over either the Defaulting Party or its assets in the country of
its organization or principal office (A) shall commence an Insolvency Proceeding
with respect to the Defaulting Party or its assets or (B) shall take any action
under any bankruptcy, insolvency or other similar law or any banking, insurance
or similar law or regulation governing the operation of the Defaulting Party
which may prevent the Defaulting Party from performing its obligations under the
Agreement as and when due;
(iv) an involuntary Insolvency Proceeding shall be commenced with respect
to the Defaulting Party or its assets by a person other than a governmental
authority or self-regulatory organization having jurisdiction over either the
Defaulting Party or its assets in the country of its organization or principal
office and such Insolvency Proceeding (A) results in the appointment of a
Custodian or a judgment of insolvency or bankruptcy or the entry of an order for
winding-up, liquidation, reorganization or other similar relief, or (B) is not
dismissed within five (5) days of its institution or presentation;
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(v) the Defaulting Party is bankrupt or insolvent, as defined under any
bankruptcy or insolvency law applicable to it;
(vi) the Defaulting Party fails, or shall otherwise be unable, to pay its debts
as they become due;
(vii) the Defaulting Party or any Custodian acting on behalf of the
Defaulting Party shall disaffirm, disclaim or repudiate any Currency Obligation
or Option;
(viii) any representation or warranty made or given or deemed made or given by
the Defaulting Party pursuant to the Agreement or any Credit Support Document
shall prove to have been false or misleading in any material respect as at the
time it was made or given or deemed made or given and one (1) Business Day has
elapsed after the Non-Defaulting Party has given the Defaulting Party written
notice thereof;
(ix) the Defaulting Party consolidates or amalgamates with or merges into
or transfers all or substantially all its assets to another entity and (A) the
creditworthiness of the resulting, surviving or transferee entity is materially
weaker than that of the Defaulting Party prior to such action, or (B) at the
time of such consolidation, amalgamation, merger or transfer the resulting,
surviving or transferee entity fails to assume all the obligations of the
Defaulting Party under the Agreement by operation of law or pursuant to an
agreement satisfactory to the Non-Defaulting Party;
(x) by reason of any default, or event of default or other similar
condition or event, any Specified Indebtedness (being Specified Indebtedness of
an amount which, when expressed in the Currency of the Threshold Amount, is in
aggregate equal to or in excess of the Threshold Amount) of the Defaulting Party
or any Credit Support Provider in relation to it: (A) is not paid on the due
date therefor and remains unpaid after any applicable grace period has elapsed,
or (B) becomes, or becomes capable at any time of being declared, due and
payable under agreements or instruments evidencing such Specified Indebtedness
before it would otherwise have been due and payable;
(xi) the Defaulting Party is in breach of or default under any Specified
Transaction and any applicable grace period has elapsed, and there occurs any
liquidation or early termination of, or acceleration of obligations under, that
Specified Transaction or the Defaulting Party (or any Custodian on its behalf)
disaffirms, disclaims or repudiates the whole or any part of a Specified
Transaction;
(xii) (A) any Credit Support Provider of the Defaulting Party or the
Defaulting Party itself fails to comply with or perform any agreement or
obligation to be complied with or performed by it in accordance with the
applicable Credit Support Document and such failure is continuing after any
applicable grace period has elapsed; (B) any Credit Support Document relating to
the Defaulting Party expires or ceases to be in full force and effect prior to
the satisfaction of all obligations of the Defaulting Party under the Agreement,
unless otherwise agreed in writing by the Non-Defaulting Party; (C) the
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Defaulting Party or any Credit Support Provider of the Defaulting Party (or, in
either case, any Custodian acting on its behalf) disaffirms, disclaims or
repudiates, in whole or in part, or challenges the validity of, any Credit
Support Document; (D) any representation or warranty made or given or deemed
made or given by any Credit Support Provider of the Defaulting Party pursuant to
any Credit Support Document shall prove to have been false or misleading in any
material respect as at the time it was made or given or deemed made or given and
one (1) Business Day has elapsed after the Non-Defaulting Party has given the
Defaulting Party written notice thereof; or (E) any event set out in (ii) to
(vii) or (ix) to (xi) above occurs in respect of any Credit Support Provider of
the Defaulting Party; or
(xiii) any other condition or event specified in Part IX of the Schedule or in
Section 11.14 if made applicable to the Agreement in Part XI of the Schedule.
"Exercise Date", in respect of any Option, means the day on which a Notice of
Exercise received by the applicable Designated Office of the Seller becomes
effective pursuant to Section 5.1.
"Expiration Date", in respect of any Option, means the date agreed to as such at
the time the Option is entered into, as evidenced in a Confirmation.
"Expiration Time", in respect of any Option, means the latest time on the
Expiration Date on which the Seller must accept a Notice of Exercise as agreed
to at the time the Option is entered into, as evidenced in a Confirmation.
"FX Transaction" means any transaction between the Parties for the purchase by
one Party of an agreed amount in one Currency against the sale by it to the
other of an agreed amount in another Currency, both such amounts either being
deliverable on the same Value Date or, if the Parties have so agreed in Part VI
of the Schedule, being cash-settled in a single Currency, which is or shall
become subject to the Agreement and in respect of which transaction the Parties
have agreed (whether orally, electronically or in writing): the Currencies
involved, the amounts of such Currencies to be purchased and sold, which Party
will purchase which Currency and the Value Date.
"In-the-Money Amount" means (i) in the case of a Call, the excess of the Spot
Price over the Strike Price, multiplied by the aggregate amount of the Call
Currency to be purchased under the Call, where both prices are quoted in terms
of the amount of the Put Currency to be paid for one unit of the Call Currency;
and (ii) in the case of a Put, the excess of the Strike Price over the Spot
Price, multiplied by the aggregate amount of the Put Currency to be sold under
the Put, where both prices are quoted in terms of the amount of the Call
Currency to be paid for one unit of the Put Currency.
"Insolvency Proceeding" means a case or proceeding seeking a judgment of or
arrangement for insolvency, bankruptcy, composition, rehabilitation,
reorganization, administration, winding-up, liquidation or other similar relief
with respect to the Defaulting Party or its debts or assets, or seeking the
appointment of a trustee, receiver, liquidator, conservator, administrator,
custodian or other similar official (each, a "Custodian") of the Defaulting
Party or any substantial part of its assets, under any bankruptcy, insolvency or
other similar law or any banking, insurance or similar law governing the
operation of the Defaulting Party.
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"LIBOR", with respect to any Currency and date, means the average rate at which
deposits in the Currency for the relevant amount and time period are offered by
major banks in the London interbank market as of 11:00 a.m. (London time) on
such date, or, if major banks do not offer deposits in such Currency in the
London interbank market on such date, the average rate at which deposits in the
Currency for the relevant amount and time period are offered by major banks in
the relevant foreign exchange market at such time on such date as may be
determined by the Party making the determination.
"Local Banking Day" means (i) for any Currency, a day on which commercial banks
effect deliveries of that Currency in accordance with the market practice of the
relevant foreign exchange market, and (ii) for any Party, a day in the location
of the applicable Designated Office of such Party on which commercial banks in
that location are not authorized or required by law to close.
"Master Agreement" means the terms and conditions set forth in this Master
Agreement, including the Schedule.
"Matched Pair Novation Netting Office(s)", in respect of a Party, means the
Designated Office(s) specified in Part V of the Schedule.
"Non-Defaulting Party" has the meaning given to it in the definition of Event of
Default.
"Notice of Exercise" means telex, telephonic or other electronic notification
(excluding facsimile transmission) providing assurance of receipt, given by the
Buyer prior to or at the Expiration Time, of the exercise of an Option, which
notification shall be irrevocable.
"Novation Netting Office(s)", in respect of a Party, means the Designated
Office(s) specified in Part V of the Schedule.
"Option" means a currency option which is or shall become subject to the
Agreement.
"Parties" means the parties to the Agreement, including their successors and
permitted assigns (but without prejudice to the application of clause (ix) of
the definition of Event of Default); and the term "Party" shall mean whichever
of the Parties is appropriate in the context in which such expression may be
used.
"Premium", in respect of any Option, means the purchase price of the Option as
agreed upon by the Parties, and payable by the Buyer to the Seller thereof.
"Premium Payment Date", in respect of any Option, means the date on which the
Premium is due and payable, as agreed to at the time the Option is entered into,
as evidenced in a Confirmation.
"Proceedings" means any suit, action or other proceedings relating to the
Agreement, any FX Transaction or any Option.
"Put" means an Option entitling, but not obligating (except upon exercise), the
Buyer to sell to the Seller at the Strike Price a specified quantity of the Put
Currency.
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"Put Currency" means the Currency agreed to as such at the time an Option is
entered into, as evidenced in a Confirmation.
"Schedule" means the Schedule attached to and part of this Master Agreement, as
it may be amended from time to time by agreement of the Parties.
"Seller" means the Party granting an Option.
"Settlement Date" means, in respect of: (i) an American Style Option, the Spot
Date of the Currency Pair on the Exercise Date of such Option, and (ii) a
European Style Option, the Spot Date of the Currency Pair on the Expiration Date
of such Option; and, where market practice in the relevant foreign exchange
market in relation to the two Currencies involved provides for delivery of one
Currency on one date which is a Local Banking Day in relation to that Currency
but not to the other Currency and for delivery of the other Currency on the next
Local Banking Day in relation to that other Currency, "Settlement Date" means
such two (2) Local Banking Days.
"Settlement Netting Office(s)", in respect of a Party, means the Designated
Office(s) specified in Part V of the Schedule.
"Specified Indebtedness" means any obligation (whether present or future,
contingent or otherwise, as principal or surety or otherwise) in respect of
borrowed money, other than in respect of deposits received.
"Specified Transaction" means any transaction (including an agreement with
respect thereto) between one Party to the Agreement (or any Credit Support
Provider of such Party) and the other Party to the Agreement (or any Credit
Support Provider of such Party) which is a rate swap transaction, basis swap,
forward rate transaction, commodity swap, commodity option, equity or equity
linked swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including any option with
respect to any of these transactions) or any combination of any of the
foregoing.
"Spot Date" means the spot delivery day for the relevant Currency Pair as
generally used by the relevant foreign exchange market.
"Spot Price" means the rate of exchange at the time at which such price is to be
determined for foreign exchange transactions in the relevant Currency Pair for
value on the Spot Date, as determined in good faith: (i) by the Seller, for
purposes of Section 5, and (ii) by the Non-Defaulting Party, for purposes of
Section 8.
"Strike Price", in respect of any Option, means the price at which the Currency
Pair may be exchanged, as agreed to at the time the Option is entered into, as
evidenced in a Confirmation.
"Threshold Amount" means the amount specified as such for each Party in Part
VIII of the Schedule.
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"Value Date" means, with respect to any FX Transaction, the Business Day (or
where market practice in the relevant foreign exchange market in relation to the
two Currencies involved provides for delivery of one Currency on one date which
is a Local Banking Day in relation to that Currency but not to the other
Currency and for delivery of the other Currency on the next Local Banking Day in
relation to that other Currency ("Split Settlement") the two (2) Local Banking
Days in accordance with that market practice) agreed by the Parties for delivery
of the Currencies to be purchased and sold pursuant to such FX Transaction, and,
with respect to any Currency Obligation, the Business Day (or, in the case of
Split Settlement, Local Banking Day) upon which the obligation to deliver
Currency pursuant to such Currency Obligation is to be performed.
II. FX TRANSACTIONS AND OPTIONS
A. Scope of the Agreement. The Parties (through their respective
Designated Offices) may enter into (i) FX Transactions, for such
quantities of such Currencies, as may be agreed subject to the
terms of the Agreement, and (ii) Options, for such Premiums, with
such Expiration Dates, at such Strike Prices and for the purchase
or sale of such quantities of such Currencies, as may be agreed
subject to the terms of the Agreement; provided that neither Party
shall be required to enter into any FX Transaction or Option with
the other Party (other than in connection with an exercised
Option). Unless otherwise agreed in writing by the Parties, each
FX Transaction and Option entered into between Designated Offices
of the Parties on or after the Effective Date shall be governed by
the Agreement. Each FX Transaction and Option between any two
Designated Offices of the Parties outstanding on the Effective
Date which is identified in Part I of the Schedule shall also be
governed by the Agreement.
B. Single Agreement. This Master Agreement, the terms agreed between
the Parties with respect to each FX Transaction and Option (and,
to the extent recorded in a Confirmation, each such Confirmation),
and all amendments to any of such items shall together form the
agreement between the Parties (the "Agreement") and shall together
constitute a single agreement between the Parties. The Parties
acknowledge that all FX Transactions and Options are entered into
in reliance upon such fact, it being understood that the Parties
would not otherwise enter into any FX Transaction or Option.
C. Confirmations. FX Transactions and Options shall be promptly
confirmed by the Parties by Confirmations exchanged by mail,
telex, facsimile or other electronic means from which it is
possible to produce a hard copy. The failure by a Party to issue a
Confirmation shall not prejudice or invalidate the terms of any FX
Transaction or Option.
D. Inconsistencies. In the event of any inconsistency between the
provisions of the Schedule and the other provisions of the
Agreement, the Schedule will prevail. In the event of any
inconsistency between the terms of a Confirmation and the other
provisions of the Agreement, (i) in the case of an FX Transaction,
the other provisions of the Agreement shall prevail, and the
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Confirmation shall not modify the other terms of the Agreement and
(ii) in the case of an Option, the terms of the Confirmation shall
prevail, and the other terms of the Agreement shall be deemed
modified with respect to such Option, except for the manner of
confirmation under Section 2.3 and, if applicable, discharge of
Options under Section 4.
III. OPTION PREMIUM
A. Payment of Premium. Unless otherwise agreed in writing by the
Parties, the Buyer shall be obligated to pay the Premium related
to an Option no later than its Premium Payment Date.
Late Payment or Non-Payment of Premium. If any Premium is not received
on or before the Premium Payment Date, the Seller may elect: (i)
to accept a late payment of such Premium; (ii) to give written
notice of such non-payment and, if such payment shall not be
received within two (2) Business Days of such notice, treat the
related Option as void; or (iii) to give written notice of such
non-payment and, if such payment shall not be received within two
(2) Business Days of such notice, treat such non-payment as an
Event of Default under clause (i) of the definition of Event of
Default. If the Seller elects to act under either clause (i) or
(ii) of the preceding sentence, the Buyer shall pay all
out-of-pocket costs and actual damages incurred in connection with
such unpaid or late Premium or void Option, including, without
limitation, interest on such Premium from and including the
Premium Payment Date to but excluding the late payment date in the
same Currency as such Premium at overnight LIBOR and any other
losses, costs or expenses incurred by the Seller in connection
with such terminated Option, for the loss of its bargain, its cost
of funding, or the loss incurred as a result of terminating,
liquidating, obtaining or re-establishing a delta hedge or related
trading position with respect to such Option.
IV. DISCHARGE AND TERMINATION OF OPTIONS; NETTING OF OPTION PREMIUMS
A. Discharge and Termination. If agreed in Part V of the Schedule,
any Call or any Put written by a Party will automatically be
discharged and terminated, in whole or in part, as applicable,
against a Call or a Put, respectively, written by the other Party,
such discharge and termination to occur automatically upon the
payment in full of the last Premium payable in respect of such
Options; provided that such discharge and termination may only
occur in respect of Options:
a. each being with respect to the same Put Currency and the same
Call Currency;
b. each having the same Expiration Date and Expiration Time;
c. each being of the same style, i.e. either both being American
Style Options or both being European Style Options;
d. each having the same Strike Price;
e. each being transacted by the same pair of Designated Offices
of Buyer and Seller; and neither of which shall have been
exercised by delivery of a Notice of Exercise;
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and, upon the occurrence of such discharge and termination, neither Party shall
have any further obligation to the other Party in respect of the relevant
Options or, as the case may be, parts thereof so discharged and terminated. Such
discharge and termination shall be effective notwithstanding that either Party
may fail to record such discharge and termination in its books. In the case of a
partial discharge and termination (i.e., where the relevant Options are for
different amounts of the Currency Pair), the remaining portion of the Option
which is partially discharged and terminated shall continue to be an Option for
all purposes of the Agreement, including this Section 4.1.
B. Netting of Option Premiums. If agreed in Part V of the Schedule
and if, on any date, Premiums would otherwise be payable under the
Agreement in the same Currency between the same respective
Designated Offices of the Parties, then, on such date, each
Party's obligation to make payment of any such Premium will be
automatically satisfied and discharged and, if the aggregate
Premium(s) that would otherwise have been payable by such
Designated Office of one Party exceeds the aggregate Premium(s)
that would otherwise have been payable by such Designated Office
of the other Party, replaced by an obligation upon the Party by
whom the larger aggregate Premium(s) would have been payable to
pay the other Party the excess of the larger aggregate Premium(s)
over the smaller aggregate Premium(s) and, if the aggregate
Premiums are equal, no payment shall be made.
V. EXERCISE AND SETTLEMENT OF OPTIONS
A. Exercise of Options. The Buyer may exercise an Option by delivery
to the Seller of a Notice of Exercise. Subject to Section 5.3, if
a Notice of Exercise with respect to an Option has not been
received by the Seller prior to or at the Expiration Time, the
Option shall expire and become void and of no effect. Any Notice
of Exercise shall (unless otherwise agreed):
a. in respect of an American Style Option, (A) if received at or
prior to 3:00 p.m. on a Business Day, be effective upon
receipt thereof by the Seller, and (B) if received after 3:00
p.m. on a Business Day, be effective only as of the opening of
business of the Seller on the first Business Day subsequent to
its receipt; and
b. in respect of a European Style Option, if received on or, if
the parties have so agreed, before the Expiration Date, prior
to or at the Expiration Time, be effective upon receipt
thereof by the Seller.
B. No Partial Exercise. Unless otherwise agreed by the Parties, an
Option may be exercised only in whole.
C. Automatic Exercise. Unless otherwise agreed in Part VI of the
Schedule or unless the Seller is otherwise instructed by the
Buyer, if an Option has an In-the-Money Amount at its Expiration
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Time that equals or exceeds the product of (x) 1% of the Strike
Price (or such other percentage or amount as may have been agreed
by the Parties) and (y) the amount of the Call Currency or Put
Currency, as appropriate, then the Option shall be deemed
automatically exercised. In such case, the Seller may elect to
settle such Option either in accordance with Section 5.4 or by
payment to the Buyer on the Settlement Date for such Option of the
In-the-Money Amount, as determined at the Expiration Time or as
soon thereafter as practicable. In the latter case, the sole
obligations of the Parties with respect to settlement of such
Option shall be to deliver or receive the In-the-Money Amount of
such Option on the Settlement Date. The Seller shall notify the
Buyer of its election of the method of settlement of an
automatically exercised Option as soon as practicable after the
Expiration Time.
D. Settlement of Exercised Options. An exercised Option shall settle
on its Settlement Date. Subject to Section 5.3 and 5.5, on the
Settlement Date, the Buyer shall pay the Put Currency to the
Seller for value on the Settlement Date and the Seller shall pay
the Call Currency to the Buyer for value on the Settlement Date.
An exercised Option shall be treated as an FX Transaction and a
Currency Obligation (except, for the purposes of Section 8.1 only,
if it is to be settled at its In-the-Money Amount), and for this
purpose the relevant Settlement Date shall be treated as the Value
Date of the FX Transaction.
E. Settlement at In-the-Money Amount. An Option shall be settled at
its In-the-Money Amount if so agreed by the Parties at the time
such Option is entered into. In such case, the In-the-Money Amount
shall be determined based upon the Spot Price at the time of
exercise or as soon thereafter as practicable. The sole
obligations of the Parties with respect to settlement of such
Option shall be to deliver or receive the In-the-Money Amount of
such Option on the Settlement Date.
VI. SETTLEMENT AND NETTING OF FX TRANSACTIONS
A. Settlement of FX Transactions. Subject to Sections 6.2 and 6.3,
each Party shall deliver to the other Party the amount of the
Currency to be delivered by it under each Currency Obligation on
the Value Date for such Currency Obligation.
B. Settlement Netting. If, on any date, more than one delivery of a
particular Currency under Currency Obligations is to be made
between a pair of Settlement Netting Offices, then each Party
shall aggregate the amounts of such Currency deliverable by it and
only the difference between these aggregate amounts shall be
delivered by the Party owing the larger aggregate amount to the
other Party, and, if the aggregate amounts are equal, no delivery
of the Currency shall be made.
C. Novation Netting. 1. By Currency. If the Parties enter into an FX
Transaction through a pair of Novation Netting Offices giving rise
to a Currency Obligation for the same Value Date and in the same
Currency as a then existing Currency Obligation between the same
pair of Novation Netting Offices, then immediately upon entering
into such FX Transaction, each such Currency Obligation shall
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automatically and without further action be individually canceled
and simultaneously replaced by a new Currency Obligation for such
Value Date determined as follows: the amounts of such Currency
that would otherwise have been deliverable by each Party on such
Value Date shall be aggregated and the Party with the larger
aggregate amount shall have a new Currency Obligation to deliver
to the other Party the amount of such Currency by which its
aggregate amount exceeds the other Party's aggregate amount,
provided that if the aggregate amounts are equal, no new Currency
Obligation shall arise. This Section 6.3 shall not affect any
other Currency Obligation of a Party to deliver any different
Currency on the same Value Date.
2. By Matched Pair. If the Parties enter into an
FX Transaction between a pair of Matched Pair
Novation Netting Offices then the provisions of
Section 6.3(a) shall apply only in respect of
Currency Obligations arising by virtue of FX
Transactions entered into between such pair of
Matched Pair Novation Netting Offices and involving
the same pair of Currencies and the same Value Date.
D. General. 1. Inapplicability of Sections 6.2 and 6.3. The
provisions of Sections 6.2 and 6.3 shall not apply if a Close-Out
Date has occurred or a voluntary or involuntary Insolvency
Proceeding or action of the kind described in clause (ii), (iii)
or (iv) of the definition of Event of Default has occurred without
being dismissed in relation to either Party.
2. Failure to Record. The provisions of Section 6.3 shall apply
notwithstanding that either Party may fail to record the new
Currency Obligation in its books.
Cut-off Date and Time. The provisions of Section 6.3 are
subject to any cut-off date and cut-off time agreed
between the applicable Novation Netting Offices and
Matched Pair Novation Netting Offices of the Parties.
VII. REPRESENTATIONS, WARRANTIES AND COVENANTS
A. Representations and Warranties. Each Party represents and warrants
to the other Party as of the Effective Date and as of the date of
each FX Transaction and each Option that: (i) it has authority to
enter into the Agreement (including such FX Transaction or Option,
as the case may be); (ii) the persons entering into the Agreement
(including such FX Transaction or Option, as the case may be) on
its behalf have been duly authorized to do so; (iii) the Agreement
(including such FX Transaction or Option, as the case may be) is
binding upon it and enforceable against it in accordance with its
terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights
generally and applicable principles of equity) and does not and
will not violate the terms of any agreements to which such Party
is bound; (iv) no Event of Default, or event which, with notice or
lapse of time or both, would constitute an Event of Default, has
occurred and is continuing with respect to it; (v) it acts as
12
principal in entering into each FX Transaction and Option and
exercising each and every Option; and (vi) if the Parties have so
specified in Part XV of the Schedule, it makes the representations
and warranties set forth in such Part XV.
Covenants. Each Party covenants to the other Party that: (i) it will at
all times obtain and comply with the terms of and do all that is
necessary to maintain in full force and effect all authorizations,
approvals, licenses and consents required to enable it lawfully to
perform its obligations under the Agreement; (ii) it will promptly
notify the other Party of the occurrence of any Event of Default
with respect to itself or any Credit Support Provider in relation
to it; and (iii) if the Parties have set forth additional
covenants in Part XVI of the Schedule, it makes the covenants set
forth in such Part XVI.
VIII. CLOSE-OUT AND LIQUIDATION
A. Manner of Close-Out and Liquidation. 1. Close-Out. If an Event of
Default has occurred and is continuing, then the Non-Defaulting
Party shall have the right to close out all, but not less than
all, outstanding Currency Obligations (including any Currency
Obligation which has not been performed and in respect of which
the Value Date is on or precedes the Close-Out Date) and Options,
except to the extent that in the good faith opinion of the
Non-Defaulting Party certain of such Currency Obligations or
Options may not be closed out under applicable law. Such close-out
shall be effective upon receipt by the Defaulting Party of notice
that the Non-Defaulting Party is terminating such Currency
Obligations and Options. Notwithstanding the foregoing, unless
otherwise agreed by the Parties in Part X of the Schedule, in the
case of an Event of Default in clause (ii), (iii) or (iv) of the
definition thereof with respect to a Party and, if agreed by the
Parties in Part IX of the Schedule, in the case of any other Event
of Default specified and so agreed in Part IX with respect to a
Party, close-out shall be automatic as to all outstanding Currency
Obligations and Options, as of the time immediately preceding the
institution of the relevant Insolvency Proceeding or action. The
Non-Defaulting Party shall have the right to liquidate such
closed-out Currency Obligations and Options as provided below.
2. Liquidation of Currency Obligations. Liquidation of Currency
Obligations terminated by close-out shall be effected as
follows:
a. Calculating Closing Gain or Loss. The Non-Defaulting Party shall calculate
in good faith, with respect to each such terminated Currency Obligation,
except to the extent that in the good faith opinion of the Non-Defaulting
Party certain of such Currency Obligations may not be liquidated as
provided herein under applicable law, as of the Close-Out Date or as soon
thereafter as reasonably practicable, the Closing Gain, or, as appropriate,
the Closing Loss, as follows:
13
i. for each Currency Obligation calculate a "Close-Out Amount" as
follows:
a) in the case of a Currency Obligation whose Value Date is the
same as or is later than the Close-Out Date, the amount of
such Currency Obligation; or
b) in the case of a Currency Obligation whose Value Date
precedes the Close-Out Date, the amount of such Currency
Obligation increased, to the extent permitted by applicable
law, by adding interest thereto from and including the Value
Date to but excluding the Close-Out Date at overnight LIBOR;
and
c) for each such amount in a Currency other than the
Non-Defaulting Party's Base Currency, convert such amount
into the Non-Defaulting Party's Base Currency at the rate of
exchange at which, at the time of the calculation, the
Non-Defaulting Party can buy such Base Currency with or
against the Currency of the relevant Currency Obligation for
delivery (x) if the Value Date of such Currency Obligation
is on or after the Spot Date as of such time of calculation
for the Base Currency, on the Value Date of that Currency
Obligation or (y) if such Value Date precedes such Spot
Date, for delivery on such Spot Date (or, in either case, if
such rate of exchange is not available, conversion shall be
accomplished by the Non-Defaulting Party using any
commercially reasonable method); and
ii. determine in relation to each Value Date: (1) the sum of all
Close-Out Amounts relating to Currency Obligations under which
the Non-Defaulting Party would otherwise have been entitled to
receive the relevant amount on that Value Date; and (2) the sum
of all Close-Out Amounts relating to Currency Obligations under
which the Non-Defaulting Party would otherwise have been obliged
to deliver the relevant amount to the Defaulting Party on that
Value Date; and
iii. if the sum determined under (B)(1) is greater than the sum
determined under (B)(2), the difference shall be the Closing Gain
for such Value Date; if the sum determined under (B)(1) is less
than the sum determined under (B)(2), the difference shall be the
Closing Loss for such Value Date.
14
Determining Present Value. To the extent permitted by applicable law,
the Non-Defaulting Party shall adjust the Closing Gain or Closing
Loss for each Value Date falling after the Close-Out Date to
present value by discounting the Closing Gain or Closing Loss
from and including the Value Date to but excluding the Close-Out
Date, at LIBOR with respect to the Non-Defaulting Party's Base
Currency as at the Close-Out Date or at such other rate as may be
prescribed by applicable law.
Netting. The Non-Defaulting Party shall aggregate the following amounts
so that all such amounts are netted into a single liquidated
amount payable to or by the Non-Defaulting Party: (x) the sum of
the Closing Gains for all Value Dates (discounted to present
value, where appropriate, in accordance with the provisions of
Section 8.1(b)(ii)) (which for the purposes of the aggregation
shall be a positive figure); and (y) the sum of the Closing
Losses for all Value Dates (discounted to present value, where
appropriate, in accordance with the provisions of Section
8.1(b)(ii)) (which for the purposes of the aggregation shall be a
negative figure).
3. Liquidation of Options. To liquidate unexercised Options and
exercised Options to be settled at their In-the-Money Amounts
that have been terminated by close-out, the Non-Defaulting Party
shall:
Calculating Settlement Amount. Calculate in good faith with respect to
each such terminated Option, except to the extent that in the
good faith opinion of the Non-Defaulting Party certain of such
Options may not be liquidated as provided herein under applicable
law, as of the Close-Out Date or as soon as reasonably
practicable thereafter a settlement amount for each Party equal
to the aggregate of:
i. with respect to each Option purchased by such Party, and which
the other Party has not elected to treat as void pursuant to
Section 3.2(ii) for lack of payment of the Premium, the current
market premium for such Option;
ii. with respect to each Option sold by such Party and which such
Party has not elected to treat as void pursuant to Section
3.2(ii) for lack of payment of the Premium, any unpaid Premium,
provided that, if the Close-Out Date occurs before the Premium
Payment Date, such amount shall be discounted from and including
the Premium Payment Date to but excluding the Close-Out Date at a
rate equal to LIBOR on the Close-Out Date and, if the Close-Out
Date occurs after the Premium Payment Date, to the extent
15
permitted by applicable law, the settlement amount shall include
interest on any unpaid Premium from and including the Premium
Payment Date to but excluding the Close-Out Date in the same
Currency as such Premium at overnight LIBOR;
iii. with respect to any exercised Option to be settled at its
In-the-Money Amount (whether or not the Close-Out Date occurs
before the Settlement Date for such Option), any unpaid amount
due to such Party in settlement of such Option and, if the
Close-Out Date occurs after the Settlement Date for such Option,
to the extent permitted by applicable law, interest thereon from
and including the applicable Settlement Date to but excluding the
Close-Out Date at overnight LIBOR; and
without duplication, the amount that the Non-Defaulting Party
reasonably determines in good faith, as of the Close-Out Date or
as of the earliest date thereafter that is reasonably
practicable, to be its additional losses, costs and expenses in
connection with such terminated Option, for the loss of its
bargain, its cost of funding, or the loss incurred as a result of
terminating, liquidating, obtaining or re-establishing a delta
hedge or related trading position with respect to such Option;
b. Converting to Base Currency. Convert any settlement amount calculated in
accordance with clause (i) above in a Currency other than the
Non-Defaulting Party's Base Currency into such Base Currency at the Spot
Price at which, at the time of the calculation, the Non-Defaulting Party
could enter into a contract in the foreign exchange market to buy the
Non-Defaulting Party's Base Currency in exchange for such Currency (or, if
such Spot Price is not available, conversion shall be accomplished by the
Non-Defaulting Party using any commercially reasonable method); and
c. Netting. Net such settlement amounts with respect to each Party so that all
such amounts are netted to a single liquidated amount payable by one Party
to the other Party.
4. Final Netting. The Non-Defaulting Party shall net (or, if
both are payable by one Party, add) the liquidated amounts
payable under Sections 8.1(b) and 8.1(c) with respect to
each Party so that such amounts are netted (or added) to a
single liquidated amount payable by one Party to the other
Party as a settlement payment.
B. Set-Off Against Credit Support. Where close-out and liquidation
occurs in accordance with Section 8.1, the Non-Defaulting Party
shall also be entitled (i) to set off the net payment calculated
in accordance with Section 8.1(d) which the Non-Defaulting Party
owes to the Defaulting Party, if any, against any credit support
16
or other collateral ("Credit Support") held by the Defaulting
Party pursuant to a Credit Support Document or otherwise
(including the liquidated value of any non-cash Credit Support)
in respect of the Non-Defaulting Party's obligations under the
Agreement or (ii) to set off the net payment calculated in
accordance with Section 8.1(d) which the Defaulting Party owes to
the Non-Defaulting Party, if any, against any Credit Support held
by the Non-Defaulting Party (including the liquidated value of
any non-cash Credit Support) in respect of the Defaulting Party's
obligations under the Agreement; provided that, for purposes of
either such set-off, any Credit Support denominated in a Currency
other than the Non-Defaulting Party's Base Currency shall be
converted into such Base Currency at the rate specified in
Section 8.1(c)(ii).
C. Other Foreign Exchange Transactions and Currency Options. Where
close-out and liquidation occurs in accordance with Section 8.1,
the Non-Defaulting Party shall also be entitled to close-out and
liquidate, to the extent permitted by applicable law, any other
foreign exchange transaction or currency option entered into
between the Parties which is then outstanding in accordance with
the provisions of Section 8.1, with each obligation of a Party to
deliver a Currency under such a foreign exchange transaction
being treated as if it were a Currency Obligation (including
exercised options, provided that cash-settled options shall be
treated analogously to Options to be settled at their
In-the-Money Amount) and each unexercised option being treated as
if it were an Option under the Agreement.
D. Payment and Late Interest. The net amount payable by one Party to
the other Party pursuant to the provisions of Sections 8.1 and
8.3 above shall be paid by the close of business on the Business
Day following the receipt by the Defaulting Party of notice of
the Non-Defaulting Party's settlement calculation, with interest
at overnight LIBOR from and including the Close-Out Date to but
excluding such Business Day (and converted as required by
applicable law into any other Currency, any costs of conversion
to be borne by, and deducted from any payment to, the Defaulting
Party). To the extent permitted by applicable law, any amounts
owed but not paid when due under this Section 8 shall bear
interest at overnight LIBOR (or, if conversion is required by
applicable law into some other Currency, either overnight LIBOR
with respect to such other Currency or such other rate as may be
prescribed by such applicable law) for each day for which such
amount remains unpaid. Any addition of interest or discounting
required under this Section 8 shall be calculated on the basis of
a year of such number of days as is customary for transactions
involving the relevant Currency in the relevant foreign exchange
market.
E. Suspension of Obligations. Without prejudice to the foregoing, so
long as a Party shall be in default in payment or performance to
the other Party under the Agreement and the other Party has not
exercised its rights under this Section 8, or, if "Adequate
Assurances" is specified as applying to the Agreement in Part XI
of the Schedule, during the pendency of a reasonable request to a
Party for adequate assurances of its ability to perform its
17
obligations under the Agreement, the other Party may, at its
election and without penalty, suspend its obligation to perform
under the Agreement.
F. Expenses. The Defaulting Party shall reimburse the Non-Defaulting
Party in respect of all out-of-pocket expenses incurred by the
Non-Defaulting Party (including fees and disbursements of
counsel, including attorneys who may be employees of the
Non-Defaulting Party) in connection with any reasonable
collection or other enforcement proceedings related to the
payments required under the Agreement.
G. Reasonable Pre-Estimate. The Parties agree that the amounts
recoverable under this Section 8 are a reasonable pre-estimate of
loss and not a penalty. Such amounts are payable for the loss of
bargain and the loss of protection against future risks and,
except as otherwise provided in the Agreement, neither Party will
be entitled to recover any additional damages as a consequence of
such losses.
H. No Limitation of Other Rights; Set-Off. The Non-Defaulting
Party's rights under this Section 8 shall be in addition to, and
not in limitation or exclusion of, any other rights which the
Non-Defaulting Party may have (whether by agreement, operation of
law or otherwise), and, to the extent not prohibited by law, the
Non-Defaulting Party shall have a general right of set-off with
respect to all amounts owed by each Party to the other Party,
whether due and payable or not due and payable (provided that any
amount not due and payable at the time of such set-off shall, if
appropriate, be discounted to present value in a commercially
reasonable manner by the Non-Defaulting Party). The
Non-Defaulting Party's rights under this Section 8.8 are subject
to Section 8.7.
IX. FORCE MAJEURE, ACT OF STATE, ILLEGALITY AND IMPOSSIBILITY
A. Force Majeure, Act of State, Illegality and Impossibility. If
either Party is prevented from or hindered or delayed by reason
of force majeure or act of state in the delivery or receipt of
any Currency in respect of a Currency Obligation or Option or if
it becomes or, in the good faith judgment of one of the Parties,
may become unlawful or impossible for either Party to make or
receive any payment in respect of a Currency Obligation or
Option, then the Party for whom such performance has been
prevented, hindered or delayed or has become illegal or
impossible shall promptly give notice thereof to the other Party
and either Party may, by notice to the other Party, require the
close-out and liquidation of each affected Currency Obligation
and Option in accordance with the provisions of Section 8.1 and,
for such purposes, the Party unaffected by such force majeure,
act of state, illegality or impossibility (or, if both Parties
are so affected, whichever Party gave the relevant notice) shall
perform the calculation required under Section 8.1 as if it were
the Non-Defaulting Party. Nothing in this Section 9.1 shall be
taken as indicating that the Party treated as the Defaulting
Party for the purpose of calculations required by Section 8.1 has
committed any breach or default.
18
B. Transfer to Avoid Force Majeure, Act of State, Illegality or
Impossibility. If Section 9.1 becomes applicable, unless
prohibited by law, the Party which has been prevented, hindered
or delayed from performing shall, as a condition to its right to
designate a close-out and liquidation of any affected Currency
Obligation or Option, use all reasonable efforts (which will not
require such Party to incur a loss, excluding immaterial,
incidental expenses) to transfer as soon as practicable, and in
any event before the earlier to occur of the expiration date of
the affected Options or twenty (20) days after it gives notice
under Section 9.1, all its rights and obligations under the
Agreement in respect of the affected Currency Obligations and
Options to another of its Designated Offices so that such force
majeure, act of state, illegality or impossibility ceases to
exist. Any such transfer will be subject to the prior written
consent of the other Party, which consent will not be withheld if
such other Party's policies in effect at such time would permit
it to enter into transactions with the transferee Designated
Office on the terms proposed, unless such transfer would cause
the other Party to incur a material tax or other cost.
X. PARTIES TO RELY ON THEIR OWN EXPERTISE
Each Party will be deemed to represent to the other Party on the date on which
it enters into an FX Transaction or Option that (absent a written agreement
between the Parties that expressly imposes affirmative obligations to the
contrary for that FX Transaction or Option): (i)(A) it is acting for its own
account, and it has made its own independent decisions to enter into that FX
Transaction or Option and as to whether that FX Transaction or Option is
appropriate or proper for it based upon its own judgment and upon advice from
such advisors as it has deemed necessary; (B) it is not relying on any
communication (written or oral) of the other Party as investment advice or as a
recommendation to enter into that FX Transaction or Option, it being understood
that information and explanations related to the terms and conditions of an FX
Transaction or Option shall not be considered investment advice or a
recommendation to enter into that FX Transaction or Option; and (C) it has not
received from the other Party any assurance or guarantee as to the expected
results of that FX Transaction or Option; (ii) it is capable of evaluating and
understanding (on its own behalf or through independent professional advice),
and understands and accepts, the terms, conditions and risks of that FX
Transaction or Option; and (iii) the other Party is not acting as a fiduciary or
an advisor for it in respect of that FX Transaction or Option.
XI. MISCELLANEOUS
A. Currency Indemnity. The receipt or recovery by either Party (the
"first Party") of any amount in respect of an obligation of the
other Party (the "second Party") in a Currency other than that in
which such amount was due, whether pursuant to a judgment of any
court or pursuant to Section 8 or 9, shall discharge such
obligation only to the extent that, on the first day on which the
first Party is open for business immediately following such
receipt or recovery, the first Party shall be able, in accordance
with normal banking practice, to purchase the Currency in which
such amount was due with the Currency received or recovered. If
the amount so purchasable shall be less than the original amount
19
of the Currency in which such amount was due, the second Party
shall, as a separate obligation and notwithstanding any judgment
of any court, indemnify the first Party against any loss
sustained by it. The second Party shall in any event indemnify
the first Party against any costs incurred by it in making any
such purchase of Currency.
B. Assignment. Neither Party may assign, transfer or charge or
purport to assign, transfer or charge its rights or obligations
under the Agreement to a third party without the prior written
consent of the other Party and any purported assignment, transfer
or charge in violation of this Section 11.2 shall be void.
C. Telephonic Recording. The Parties agree that each may
electronically record all telephonic conversations between them
and that any such recordings may be submitted in evidence to any
court or in any Proceedings for the purpose of establishing any
matters pertinent to the Agreement.
D. Notices. Unless otherwise agreed, all notices, instructions and
other communications to be given to a Party under the Agreement
shall be given to the address, telex (if confirmed by the
appropriate answerback), facsimile (confirmed if requested) or
telephone number and to the individual or department specified by
such Party in Part III of the Schedule. Unless otherwise
specified, any notice, instruction or other communication given
in accordance with this Section 11.4 shall be effective upon
receipt.
E. Termination. Each of the Parties may terminate the Agreement at
any time by seven (7) days' prior written notice to the other
Party delivered as prescribed in Section 11.4, and termination
shall be effective at the end of such seventh day; provided,
however, that any such termination shall not affect any
outstanding Currency Obligations or Options, and the provisions
of the Agreement shall continue to apply until all the
obligations of each Party to the other under the Agreement have
been fully performed.
F. Severability. In the event any one or more of the provisions
contained in the Agreement should be held invalid, illegal or
unenforceable in any respect under the law of any jurisdiction,
the validity, legality and enforceability of the remaining
provisions contained in the Agreement under the law of such
jurisdiction, and the validity, legality and enforceability of
such and any other provisions under the law of any other
jurisdiction shall not in any way be affected or impaired
thereby. The Parties shall endeavor in good faith negotiations to
replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable
provisions.
G. No Waiver. No indulgence or concession granted by a Party and no
omission or delay on the part of a Party in exercising any right,
power or privilege under the Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
right, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
20
H. Master Agreement. Where one of the Parties to the Agreement is
domiciled in the United States, the Parties intend that the
Agreement shall be a master agreement, as referred to in 11
U.S.C. Section 101(53B)(C) and 12 U.S.C. Section
1821(e)(8)(D)(vii).
I. Time of Essence, Etc. Time shall be of the essence in the
Agreement. Unless otherwise agreed, the times referred to in the
Agreement with respect to Options shall in each case refer to the
local time of the relevant Designated Office of the Seller of the
relevant Option.
J. Headings. Headings in the Agreement are for ease of reference
only.
K. Payments Generally. All payments to be made under the Agreement
shall be made in same day (or immediately available) and freely
transferable funds and, unless otherwise specified, shall be
delivered to such office of such bank, and in favor of such
account as shall be specified by the Party entitled to receive
such payment in Part IV of the Schedule or in a notice given in
accordance with Section 11.4.
L. Amendments. No amendment, modification or waiver of the Agreement
will be effective unless in writing executed by each of the
Parties; provided that the Parties may agree in a Confirmation
that complies with Section 2.3 to amend the Agreement solely with
respect to the Option that is the subject of the Confirmation.
M. Credit Support. A Credit Support Document between the Parties may
apply to obligations governed by the Agreement. If the Parties
have executed a Credit Support Document, such Credit Support
Document shall be subject to the terms of the Agreement and is
hereby incorporated by reference in the Agreement. In the event
of any conflict between a Credit Support Document and the
Agreement, the Agreement shall prevail, except for any provision
in such Credit Support Document in respect of governing law.
N. Adequate Assurances. If the Parties have so agreed in Part XI of
the Schedule, the failure by a Party to give adequate assurances
of its ability to perform any of its obligations under the
Agreement within two (2) Business Days of a written request to do
so when the other Party has reasonable grounds for insecurity
shall be an Event of Default under the Agreement.
O. Correction of Confirmations. Unless either Party objects to the
terms contained in any Confirmation sent by the other Party or
sends a corrected Confirmation within three (3) Business Days of
receipt of such Confirmation, or such shorter time as may be
appropriate given the Value Date of an FX Transaction, the terms
of such Confirmation shall be deemed correct and accepted absent
manifest error. If the Party receiving a Confirmation sends a
corrected Confirmation within such three (3) Business Days, or
shorter period, as appropriate, then the Party receiving such
corrected Confirmation shall have three (3) Business Days, or
shorter period, as appropriate, after receipt thereof to object
to the terms contained in such corrected Confirmation.
21
XII. LAW AND JURISDICTION
A. Governing Law. The Agreement shall be governed by, and construed
in accordance with, the laws of the jurisdiction set forth in
Part XII of the Schedule without giving effect to conflict of
laws principles.
B. Consent to Jurisdiction. 1. With respect to any Proceedings, each
Party irrevocably (i) submits to the non-exclusive jurisdiction
of the courts of the jurisdiction set forth in Part XIII of the
Schedule and (ii) waives any objection which it may have at any
time to the laying of venue of any Proceedings brought in any
such court, waives any claim that such Proceedings have been
brought in an inconvenient forum and further waives the right to
object, with respect to such Proceedings, that such court does
not have jurisdiction over such Party. Nothing in the Agreement
precludes either Party from bringing Proceedings in any other
jurisdiction nor will the bringing of Proceedings in any one or
more jurisdictions preclude the bringing of Proceedings in any
other jurisdiction.
2. Each Party irrevocably appoints the agent for service of
process (if any) specified with respect to it in Part XIV of
the Schedule. If for any reason any Party's process agent is
unable to act as such, such Party will promptly notify the
other Party and within thirty (30) days will appoint a
substitute process agent acceptable to the other Party.
C. Waiver of Jury Trial. Each Party irrevocably waives any and all
right to trial by jury in any Proceedings.
D. Waiver of Immunities. Each Party irrevocably waives, to the
fullest extent permitted by applicable law, with respect to
itself and its revenues and assets (irrespective of their use or
intended use), all immunity on the grounds of sovereignty or
other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific
performance or for recovery of property, (iv) attachment of its
assets (whether before or after judgment) and (v) execution or
enforcement of any judgment to which it or its revenues or assets
might otherwise be entitled in any Proceedings in the courts of
any jurisdiction and irrevocably agrees, to the extent permitted
by applicable law, that it will not claim any such immunity in
any Proceedings.
XXXXXX XXXXXXX & CO. INCORPORATED
By: ______________________________
Name:
Title:
22
XXXXXX XXXXXXX CHARTER XXXXXXXX X.X.
By: Demeter Management Corporation
By:________________________________
Name:
Title:
23
FORM OF
SCHEDULE
Schedule to the International Foreign Exchange and Options Master Agreement
dated as of [____________] (the "Agreement")
between XXXXXX XXXXXXX & Co. Incorporated ("Party A")
and
XXXXXX XXXXXXX CHARTER XXXXXXXX X.X.
("Party B").
Part I. Scope of the Agreement
The Agreement shall apply to all FX Transactions outstanding
between any two Designated Offices of the Parties on the Effective Date.
The Agreement shall apply to all Currency Options outstanding
between any two Designated Offices of the Parties on the Effective Date.
Part II. Designated Offices
Each of the following shall be a Designated Office:
Party A: New York
Party A is not a multibranch party.
Party B: New York
Party B is not a multibranch party.
Each Party (the "first Party") that enters into an FX
Transaction or Option through an agency, branch, or office other than its head
or home office represents to the other Party (the "second Party") that,
notwithstanding the place of booking office or jurisdiction of incorporation or
organization of the first Party, the obligations of the first Party are the same
as if it had entered into the FX Transaction or Option through its head or home
office. This representation will be deemed to be repeated by the first Party on
each date on which it enters into an FX Transaction or Option.
Part III. Notices
If sent to Party A:
Address: Xxxxxx Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx, 0xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone Number: (000) 000-0000
Telex Number: 6801048 (Answerback: FXMS)
Facsimile Number: (000) 000-0000
SWIFT Number: XXXXXX00
Name of Individual or Department to whom Notices are to be
sent: Foreign Exchange Trading Department
24
If sent to Party B:
Address: PARTY B c/o
Morgan Xxxxxxx Xxxx Xxxxxx & Co.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone Number:
Telex Number:
Facsimile Number:
SWIFT Number:
Name of Individual or Department to whom Notices are to be
sent: Managed Futures
Part IV. Payment Instructions
[X] ______ Name of Bank and Office, Account Number and
Reference with respect to relevant Currencies:
In the case of Party A, U.S. dollar payments shall be made to
the following account:
Bank of New York, New York
ABA#: 000000000
For: Xxxxxx Xxxxxxx & Co., New York
Acct. #: 8900010932
Ref: Chips UID 23-65-84
In the case of Party B, U.S. dollar payments shall be made to
the following account:
Citibank N.A.
ABA#: 021-000089
For: Xxxxxx Xxxxxxx XX Inc.
Acct.#: 40611164
For Further Credit to Managed Futures Fund Margin
Transfer 000-000000-0
[X] ______ With respect to each Party, as may be set forth in
such Standard Settlement Instructions as may be specified by such Party in a
notice given in accordance with Section 11.4.
25
Part V. Netting
A. Discharge of Options
Section 4.1 shall apply to Options other than Barrier Options.
B. Netting of Premiums
Section 4.2 shall apply to Premium payments for Options other
than Barrier Options.
C. Settlement Netting Offices
Each of the following shall be a Settlement Netting Office:
Party A: Same as Part II.
Party B: Same as Part II
Party A and Party B agree that, notwithstanding Section 6.2 of
the Agreement, obligations to make payments pursuant to FX Transactions shall
only be netted, satisfied and discharged against obligations to make payments
arising out of the same or other FX Transactions between a pair of Settlement
Netting Offices and obligations to make payments pursuant to Options (including
exercised Options) shall only be netted, satisfied and discharged against
obligations to make payments arising out of the same or other Options (including
exercised Options) between a pair of Settlement Netting Offices.
D. Novation Netting Offices
Each of the following shall be a Novation Netting Office:
Party A: Same as Part II
Party B: Same as Part II
E. Matched Pair Novation Netting Offices
Each of the following shall be a Matched Pair Novation Netting
Office:
Not applicable.
Part VI. Automatic Exercise of Options; Cash Settlement of FX Transactions
A. Automatic Exercise of Options
Automatic Exercise of certain In-the-money Options pursuant to
Section 5.3 shall apply to Party A as Buyer.
Automatic Exercise of certain In-the-money Options pursuant to
Section 5.3 shall apply to Party B as Buyer.
26
B. Cash Settlement of FX Transactions
The following provision shall apply:
The definition of FX Transaction in Section 1 shall include
foreign exchange transactions for the purchase and sale of one Currency against
another but which shall be settled by the delivery of only one Currency based on
the difference between exchange rates as agreed by the Parties as evidenced in a
Confirmation. Section 6.1 is modified so that only one Currency shall be
delivered for any such FX Transaction in accordance with the formula agreed by
the Parties. Section 8.1(b)(i)(A) is modified so that the Close-Out Amount for
any such FX Transaction for which the cash settlement amount has been fixed on
or before the Close-Out Date pursuant to the terms of such FX Transaction shall
be equal to the Currency Obligation arising therefrom (increased by adding
interest in the manner provided in clause (A)(2) if the Value Date precedes the
Close-Out Date) and for any such FX Transaction for which the cash settlement
amount has not yet been fixed on the Close-Out Date pursuant to the terms of
such FX Transaction, the Close-Out Amount shall be as reasonably determined by
Party A in accordance with market practice.
Part VII. Base Currency
Party A's Base Currency is U.S. Dollars.
Party B's Base Currency is U.S. Dollars.
Part VIII. Threshold Amount
For purposes of clause (x) of the definition of Event of Default:
Party A's Threshold Amount is U.S.D. $10,000,000.
Party B's Threshold Amount is U.S.D. $10,000,000.
Part IX. Additional Events of Default
Clause (x) of the definition of Event of Default shall be
modified by deleting the words ", or becomes capable at any time of being
declared," after the words "and remains unpaid after any applicable grace period
has elapsed, or (B) becomes".
The following provisions which are checked shall constitute
Events of Default:
[X] (a) occurrence of garnishment or provisional
garnishment against a claim against the Defaulting Party acquired by the
Non-Defaulting Party. The automatic termination provision of Section 8.1 shall
not apply to either Party that is a Defaulting Party in respect of this Event of
Default.
27
[X] (b) suspension of payment by the Defaulting Party
or any Credit Support Provider in accordance with the Bankruptcy Law or
the Corporate Reorganization Law in Japan. The automatic termination provision
of Section 8.1 shall not apply to either Party that is a Defaulting Party in
respect of this Event of Default.
[X] (c) disqualification of the Defaulting Party or
any Credit Support Provider by any relevant xxxx clearing house located in
Japan. The automatic termination provision of Section 8.1 shall not apply to
either Party that is a Defaulting Party in respect of this Event of Default.
Part X. Automatic Termination
The Automatic Termination provision of Section 8.1 shall not
apply to Party A as Defaulting Party in respect of clause (ii), (iii) or (iv) of
the definition of Event of Default.
The Automatic Termination provision of Section 8.1 shall not
apply to Party B as Defaulting Party in respect of clause (ii), (iii) or (iv) of
the definition of Event of Default.
Part XI. Adequate Assurances
Adequate Assurances under Section 11.14 shall not apply to the
Agreement.
Part XII. Governing Law
In accordance with Section 12.1 of the Agreement, the Agreement
shall be governed by the laws of:
[X] the State of New York.
[ ] England and Wales.
[ ] Japan.
Part XIII. Consent to Jurisdiction
In accordance with Section 12.2 of the Agreement, each Party
irrevocably submits to the non-exclusive jurisdiction of:
[X] the courts of the State of New York and the United
States District Court located in the Borough of Manhattan in New York City.
[ ] the courts of England.
[ ] the Tokyo District Court.
Part XIV. Agent for Service of Process
Party A appoints the following as its agent for service of
process in any Proceedings in the State of New York: Not applicable.
28
Party B appoints the following as its agent for service of
process in any Proceedings in the State of New York: Not applicable.
Part XV. Certain Regulatory Representations
A. The following FDICIA representation shall apply:
1. Party A represents and warrants that it qualifies
as a "financial institution" within the meaning of the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") by virtue of being a:
[X] broker or dealer within the meaning of FDICIA;
[ ] depository institution within the meaning of FDICIA;
[X] futures commission merchant within the meaning of
FDICIA;
[ ] "financial institution" within the meaning of
Regulation EE (see below).
2. Party B hereby represents and warrants that it qualifies as
a "financial institution" by virtue of being a:
[ ] broker or dealer within the meaning of FDICIA;
[ ] depository institution within the meaning of FDICIA;
[ ] futures commission merchant within the meaning of
FDICIA;
[ ] "financial institution" within the meaning of
Regulation EE (see below).
3. A Party representing that it is a "financial
institution" as that term is defined in 12 C.F.R. Section 231.3 of Regulation EE
issued by the Board of Governors of the Federal Reserve System ("Regulation EE")
represents that:
(a) it is willing to enter into "financial contracts"
as a counterparty "on both sides of one or more financial markets" as
those terms are used in Section 231.3 of Regulation EE; and
(b) during the 15-month period immediately preceding
the date it makes or is deemed to make this representation, it has had
on at least one (1) day during such period, with counterparties that
are not its affiliates (as defined in Section 231.2(b) of Regulation
EE) either:
(i) one or more financial contracts of a total gross notional
principal amount of $1 billion outstanding; or
29
(ii) total xxxxx xxxx-to-market positions (aggregated across
counterparties) of $100 million; and
(c) agrees that it will notify the other Party if it no
longer meets the requirements for status as a financial institution
under Regulation EE.
4. If both Parties are financial institutions in
accordance with the above, the Parties agree that the Agreement shall be a
netting contract, as defined in 12 U.S.C. Section 4402(14), and each receipt or
payment or delivery obligation under the Agreement shall be a covered
contractual payment entitlement or covered contractual payment obligation,
respectively, as defined in FDICIA.
B. The following ERISA representation shall apply:
Each Party represents and warrants that it is not (i) a plan
subject to the fiduciary responsibility part of the Employee Retirement Income
Security Act of 1974, as amended, or subject to Section 4975 of the Internal
Revenue Code of 1986, as amended; (ii) a person acting on behalf of any such
plan; or (iii) a person the assets of whom constitute assets of any such plan.
C. The following CFTC trade option representation shall not apply:
Each Party represents and warrants that it is a commercial
user of or a merchant handling the Currencies subject to each Option and was
offered or entered into each Option solely for purposes related to its business
as such.
D. The following CFTC eligible swap participant representation shall
apply:
Each Party represents and warrants that it is an "eligible
swap participant" under, and as defined in, 17 C.F.R. Section 35.1.
Part XVI. Representations and Warranties
In addition to the representations and warranties set forth in
Section 7.1 and Part XV of this Schedule, each Party hereby represents and
warrants to the other Party on the date hereof and on the date of each FX
Transaction or Option, as the case may be, that: (a) it is a sophisticated
investor able to evaluate and assume the risks associated with transactions in
currencies as contemplated by the Agreement; (b) it is not relying upon any
representations (whether written or oral) of the other Party other than the
representations expressly set forth in the Agreement, this Schedule, any Credit
Support Document or in any Confirmation; (c) its execution and delivery of the
Agreement, and its performance of its obligations hereunder, do not and will not
conflict with any law or regulation of the jurisdiction of its organization or
other law or regulation applicable to it, and do not and will not violate,
constitute a default under, or result in the creation or imposition of any lien
or encumbrance on any of its property or assets under any agreement or
instrument to which it is a party or by which its assets are bound; (d) no
consent, authorization or approval (including exchange control approval) or
other action by, and no notice to or filing with, any person or entity,
including any governmental authority or regulatory body, other than any already
obtained, made or filed and remaining in full force and effect, and the
conditions of which have been duly complied with, is required in connection with
30
the performance of its obligations under the Agreement; and (e) there are no
actions, proceedings or claims pending or, to the best of its knowledge,
threatened, the adverse determination of which might have a materially adverse
effect on its ability to perform its obligations under, or affect the validity
or enforceability of, the Agreement.
Part XVII. Agreement Superseding
A new Section 11.16 shall be added to the Agreement which
shall read as follows: "The Agreement shall supersede any other agreement
between the Parties with respect to the subject matter hereof."
Part XVIII. Barrier Options
In connection with any Barrier Options between the Parties,
Party B acknowledges that:
a) As part of its business, Party A regularly trades in the
foreign exchange spot, forward, futures and options markets for its own account
and for the accounts of other customers. Such trading may affect spot prices in
the Currency Pair.
b) Party A generally xxxxxx its Barrier Option positions by
buying or selling a quantity of the relevant currency, and may adjust (increase
or decrease) its hedge as market conditions change during the life of the
Options and it believes that it is more or less likely that a Barrier will be
breached. Such hedging and de-hedging activity may affect spot prices and may
thus affect the probability of a Barrier being breached.
Part XIX. 1998 FX and Currency Option Definitions
The 1998 FX and Currency Option Definitions as published by
ISDA, EMTA and the Foreign Exchange Committee (the "Definitions") shall be
applicable to each FX Transaction and Option under the Agreement, including any
FX Transaction or Option outstanding on the date hereof, subject to the
following:
A. Definitions:
1. The term "Agreement" in Section 2.2 of the Agreement shall
include the Agreement as modified and supplemented by this
Part.
2. The term "FX Transaction" and "Currency Option
Transaction" in the Definitions or in a Confirmation shall in
all cases by considered references to an "FX Transaction" and
"Option" under the Agreement.
3. All terms in this Part shall have the meanings
given them above or in the Definitions, unless not defined
above or in the Definitions, in which case the term shall have
the meaning given in the Agreement.
31
B. Scope.
1. Notwithstanding the absence of any reference to the
Definitions in a Confirmation, this Part and the Definitions
shall be applicable to any FX Transaction or Currency Option
Transaction covered by the Agreement; provided that the
Parties may agree otherwise for any Transaction as evidenced
by a Confirmation that complies with Section 2.3 of the
Agreement.
2. In the event of any inconsistency between the
Definitions and a Confirmation, the terms of the Confirmation
shall govern for the purpose of the relevant Transaction. In
the event of any inconsistency between the Definitions and
the Agreement, the Definitions shall prevail.
C. Confirmations.
Notwithstanding Sections 2.4 and 11.12 of the Agreement, in the event of any
inconsistency between the terms of a Confirmation for an FX Transaction or
Currency Option Transaction and the Agreement, the terms of the Confirmation
shall prevail.
D. Disruption Events.
With respect to any Disruption Event that is applicable to an FX Transaction or
Currency Option Transaction pursuant to the Definitions or as otherwise agreed
by the Parties as evidenced by a Confirmation, Section 9 of the Agreement shall
not be applicable in respect of such FX Transaction or Currency Option
Transaction, and the Parties shall be subject to the Disruption Fallbacks
(including but not limited to No Fault Termination) specified as applicable
pursuant to the Definitions or such Confirmation.
E. Miscellaneous.
The provisions of Part VI.B of this Schedule relating to cash settlement of FX
Transactions shall apply to Non-Deliverable FX Transactions.
Part XX. Margin and Security
(a) Party B shall at all times maintain with Xxxxxx
Xxxxxxx XX Inc. (the "Custodian") for and on behalf of Party A cash and
securities acceptable to Party A (together, the "Margin") in order to secure the
obligations of Party B under all open FX Transactions and Options entered into
under the Agreement. The amount of Margin which Party B shall maintain with
Party A shall be determined by Party A in its reasonable judgment (which
determination shall be conclusive in the absence of manifest error), on a risk
adjusted basis, taking into account historical volatility, imputed volatility
and/or such other factors as Party A reasonably deems relevant to this
determination (the "Aggregate Margin Requirement"). On or prior to the date of
the Agreement, Party B shall have established a special pledge account with the
Custodian (the "Account") for the purpose of holding custody of the Margin for
and on behalf of Party A in accordance with the provisions of the Custodian
32
Account Addendum, dated the date hereof, and the Agreement. Party B's failure to
deposit Margin or to establish the Account as required herein shall be an Event
of Default for all purposes under the Agreement (it being understood that there
shall be no grace period with respect to obligations of Party B pursuant to this
Part XX).
(b) Whenever such Aggregate Margin Requirement shall
exceed the market value of Margin on deposit with the Custodian in the Account
as determined by Party A at such time in its reasonable judgment and which
determination shall be conclusive in the absence of manifest error (the "Margin
Balance", and the difference between such Aggregate Margin Requirement and the
Margin Balance being the "Shortfall"), then Party B shall deposit immediately
upon Party A's request, additional Margin in an amount at least equal to such
Shortfall.
(c) In furtherance of the foregoing, as security for
the prompt and complete payment when due and the performance by Party B of all
of its obligations to Party A under the Agreement, Party B hereby grants to
Party A a continuing first priority security interest in and to all of Party B's
right, title and interest in and to the Margin, the Account, all financial
assets, investment property and other property and assets which are deposited
from time to time in, or credited from time to time to, the Account, all
security entitlements in respect thereof, all income and profits thereon, all
interest, dividends and other payments and distributions with respect thereto,
and all proceeds of any of the foregoing (the "Margin Collateral"). As
additional security for the prompt and complete payment when due and the
performance by Party B of all of its obligations to Party A under the Agreement,
Party B hereby grants to Party A and its affiliates a first priority security
interest in and to any property of Party B at any time held by or for the
benefit of Party A or any affiliate of Party A for any purpose, including,
without limitation, any property of Party B held in any account with Party A,
any affiliate of Party A or with the Custodian, any financial assets, investment
property and other property and assets which are deposited from time to time in,
or credited from time to time to, any such account, all security entitlements in
respect thereof, all income and profits thereon, all interest, dividends and
other payments and distributions with respect thereto, and all proceeds of any
of the foregoing (the "Collateral"), to secure all obligations of Party B to
Party A. If Collateral was delivered in connection with a particular agreement
between Party B and Party A or any of its affiliates, then such Collateral shall
secure first the obligations of Party B with respect to such agreement and
second all other obligations of Party B to Party A or any of its affiliates (in
such order as Party A shall determine in its sole discretion). Party A, its
affiliates and the Custodian and Party B hereby each acknowledge and agree that
(a) each of Party A and its affiliates which holds Collateral holds such
Collateral for itself and also as agent and bailee for all other of Party A and
its affiliates which are secured parties hereunder or under any agreement
between Party B and Party A or any of its affiliates and (b) the Custodian which
holds Collateral for and on behalf of Party A holds such Collateral as agent and
bailee for Party A and its affiliates which are secured parties hereunder and
under any agreement between Party B and Party A or any of its affiliates. If an
Event of Default hereunder shall occur, then each of Party A and its affiliates
shall be entitled to retain or sell all Collateral as security for Party B's
obligations, even if otherwise required pursuant to the terms of an agreement or
otherwise to deliver any Collateral to Party B or Party B's order. The parties
agree that Party A and its affiliates shall have the rights and remedies of a
secured creditor under the New York Uniform Commercial Code (the "UCC") and
under any other applicable law or agreement to exercise any right with respect
to the Margin Collateral and the Collateral subject to the security interest
33
granted under the Agreement. Notwithstanding Section 9-207 of the UCC, each of
Party A or any of its affiliates shall have free and unrestricted use of any
Margin Collateral and/or Collateral which it holds hereunder or with the
Custodian, including, without limitation, the right, from time to time and
without notice to Party B, to sell, pledge, repledge, hypothecate,
rehypothecate, assign, invest, use, commingle or otherwise dispose of, or
otherwise use in its business any Margin Collateral and/or Collateral separately
or in common with other securities, commodities or other property, for the sum
due to any of Party A or any of its affiliates or for a greater sum on terms
which may otherwise impair the right of Party B to redeem such Margin Collateral
and/or Collateral, and free from any other right of claim of any nature
whatsoever of Party B, and without retaining possession and control for delivery
a like amount of similar securities, commodities, or other property.
(d) Party B represents and warrants that it owns the
Margin Collateral and the Collateral to be pledged and assigned to each of Party
A and its affiliates hereunder and under any other agreement between Party B and
Party A or any of its affiliates, free and clear of any liens, equities, claims
(including, without limitation, participation interests) and transfer
restrictions. Party B covenants and agrees that it will not sell, assign,
transfer, exchange or otherwise dispose of, or grant any option with respect to,
any of the Margin Collateral or the Collateral, nor will it create, incur or
permit to exist any lien on or with respect to any of the Margin Collateral or
the Collateral, any interest therein, or any proceeds thereof, except for the
security interests created under this Agreement or otherwise under any agreement
between Party B and Party A or any of its affiliates. Any purported sale,
assignment, transfer, exchange, disposition, grant or lien of the Margin
Collateral or the Collateral by Party B that is not permitted under the
foregoing sentence shall be null and void and shall constitute an Event of
Default hereunder and under any agreement between Party B and Party A or any of
its affiliates immediately prior to the taking of any such action, if Party A so
deems (it being understood that there shall be no grace period with respect to
obligations of Party B pursuant to this Part XX).
(e) Party B shall, at its sole expense and as Party A
in its sole discretion may deem necessary or advisable from time to time,
undertake all such action as is necessary, (i) to create, preserve, protect and
perfect the security interests granted under the Agreement, (ii) to enable Party
A to exercise and enforce its rights with respect to such security interests,
and (iii) execute and deliver all documents and instruments in such manner and
form as Party A may require, including without limitation UCC financing
statements and continuation statements. Party B hereby appoints Party A as its
true and lawful attorney-in-fact, including without limitation, to sign and file
such documents and instruments on Party B's behalf and without Party B's
signature; such appointment, being coupled with an interest, shall be
irrevocable. Without limitation on the foregoing, Party B agrees to take such
action as Party A in its sole discretion may deem necessary or advisable in the
event of any change in applicable law, including, without limitation, Article 8
of the UCC and the Regulations of the Department of the Treasury governing
transfers of interests in U.S. marketable treasury securities in book-entry
form.
(f) The parties hereto agree that each of the Account
and any account in which any Collateral is held or to which any Collateral is
credited (a "Collateral Account") is a "securities account" within the meaning
of Article 8 of the UCC and that all property and assets (including, without
limitation, cash) held in or credited to (i) the Account or (ii) any Collateral
Account shall be treated as a "financial asset" for purposes of Article 8 of the
UCC.
34
XXXXXX XXXXXXX & CO. INCORPORATED
By ________________________________________
Name:
Title:
XXXXXX XXXXXXX CHARTER XXXXXXXX X.X.
By: Demeter Management Corporation
By: ____________________________________
Name:
Title:
35
FORM OF
CUSTODIAN ACCOUNT ADDENDUM
This Addendum supplements, forms part of, and is subject in all respects to, the
Foreign Exchange and Options Master Agreement (FEOMA) including the Schedule
thereto (the "Schedule") dated as of [_________] by and between Xxxxxx Xxxxxxx &
Co. Incorporated and Demeter Management Corporation on behalf of Xxxxxx Xxxxxxx
Charter Xxxxxxxx X.X. (collectively, the "Agreement"), and is a part of the
Schedule with respect to each party; provided, however, as used herein,
"Pledgor" means Party B and "Secured Party" means Party A (as defined in the
Agreement). Other capitalized terms used herein, unless otherwise defined, have
the meanings specified in the Agreement. With respect to the rights or
obligations of the Secured Party or the Pledgor, in the event of any
inconsistencies between this Addendum and the Agreement, the Agreement will
prevail.
Having appointed Xxxxxx Xxxxxxx XX Inc. (the "Custodian") to hold Margin for and
on behalf of the Secured Party, the Secured Party, the Pledgor and the Custodian
(solely to the extent of the duties it has agreed to undertake and perform
hereunder) agree as follows:
XIII. In all respects, the rights of the Secured Party under the
Schedule with respect to Margin shall not be affected by the
appointment of a Custodian hereunder. The provisions of this Addendum
in no way diminish or otherwise affect the rights of the Secured Party
under the Agreement.
XIV. The Secured Party, by written notice to the Custodian, may
exercise all powers, and exercise any and all rights and remedies
permitted under the Schedule as though the Secured Party was taking
such action directly, and the Custodian will comply with, and be
entitled to rely on, all such instructions (including, without
limitation, entitlement orders) as if such instructions were provided
by the parties jointly.
XV. As used herein, the following terms have the following meaning:
"Advice from the Secured Party" or "Advice" means a written notice sent to the
Pledgor and/or the Custodian or transmitted by a facsimile sending device by any
of those individuals designated by the Secured Party, except that for any of the
following purposes it shall mean notice by telephone to a person designated by
the Pledgor in writing as authorized to receive such advice or, in the event
that no such person is available, to any officer of the Pledgor and confirmed
promptly in writing thereafter: (i) for initial or additional Margin; (ii) that
the Secured Party has issued a Notice of Exercise with respect to an Option ; or
(iii) that the Pledgor has failed to give notice of intent to make payment of
amounts or deliveries as required under Paragraph 5 of this Addendum. With
respect to any covering purchase transaction, the Advice from the Secured Party
shall mean a Confirmation in use by the Secured Party and sent or transmitted to
the Pledgor and/or the Custodian. When used herein the term "Advise" means the
act of sending an Advice from the Secured Party.
XVI. The Custodian shall open an account on its books entitled "Special
Custody Account for Xxxxxx Xxxxxxx & Co. Incorporated as Pledgee of
Xxxxxx Xxxxxxx Charter Xxxxxxxx X.X. (referred to herein as the
"Special Custody Account").
36
The parties hereto agree that all property and assets held in or credited to the
Special Custody Account will be treated as financial assets under Article 8 of
the Uniform Commercial Code as in effect in the State of New York (the "UCC").
The parties hereto further agree that the securities intermediary's
jurisdiction, within the meaning of Section 8-110(e) of the UCC, in respect of
the Special Custody Account and the Margin is the State of New York and agree
that none of them has or will enter into any agreement to the contrary.
Anything in this Addendum notwithstanding, the Custodian hereby agrees to comply
with entitlement orders and other instructions of the Secured Party with respect
to the Special Custody Account and any Margin without further consent of the
Pledgor. The Pledgor hereby consents to such agreement.
The Custodian represents and warrants that it has not, and agrees that it will
not, agree to comply with entitlement orders concerning the Special Custody
Account or any Margin that are originated by any person other than the Secured
Party.
The Pledgor agrees to inform the Custodian in writing that cash and securities
specified by the Pledgor as qualifying as Margin and equal in value to the
Aggregate Margin Requirement are to be identified on the Custodian's books and
records as pledged to the Secured Party. The Custodian will hold the Margin in,
and credit the Margin to, the Special Custody Account, separate and apart from
any other property of the Pledgor that may be held by the Custodian, subject to
the interest therein of the Secured Party as the Pledgee thereof in accordance
with the terms of the Agreement. The Custodian continuously represents that
Margin will not be subject to any other lien, charge, security interest or other
right or claim of the Custodian or any person claiming through the Custodian.
The Custodian will confirm in writing to the Secured Party and the Pledgor all
pledges, releases, substitutions or distributions of Margin permitted under the
Agreement, and will inform the Secured Party upon request of the kind and amount
of Margin pledged to the Secured Party.
XVII. In the event that (i) the Secured Party advises the Pledgor in an
Advice from the Secured Party that the Secured Party has exercised an
Option sold by the Pledgor and the Pledgor does not promptly notify the
Secured Party by telephone of the Pledgor's intention to comply with
the Notice of Exercise by making payment or delivery, as the case may
be, as required under the terms of such Option plus payment of
applicable commissions or other charges; or (ii) the Pledgor, having
received such Notice of Exercise, fails to make such payment or
delivery, or cause such payment or delivery to be made, then the
Secured Party will immediately notify the Pledgor in an Advice from the
Secured Party of such failure to give telephone notice or failure to
make payment or delivery, as applicable, and may, after transmittal of
an Advice from the Secured Party of its intention to do so and only if
the Pledgor does not promptly make payment or delivery to the Secured
Party, direct the Custodian to take any action necessary to fully
satisfy Pledgor's obligations to the Secured Party, including any of
the Secured Party's rights and remedies under Part XX of the Schedule.
XVIII. With respect to any losses or liabilities, the Custodian shall be
protected in acting pursuant to any instructions from the Pledgor or
Advices from the Secured Party believed by the Custodian in good faith
37
to be genuine and authorized. The Pledgor agrees to indemnify the
Custodian for, and hold it harmless against, any loss, liability or
expense incurred by the Custodian, without negligence or bad faith on
the part of the Custodian, arising out of this Addendum.
XIX. The Secured Party shall not be liable for any losses, costs,
damages, liabilities or expenses suffered or incurred by the Pledgor as
a result of any actions taken under this Addendum, or any other action
taken or not taken by the Secured Party hereunder for the Pledgor's
account at the Pledgor's direction or otherwise, except to the extent
that such loss, cost, damage, liability or expense is the result of the
Secured Party's own recklessness, willful misconduct or bad faith.
XX. The Pledgor continuously represents and warrants to the Secured
Party that securities included at any time in the Margin shall be in
good deliverable form (or Custodian shall have the unrestricted power
to put such securities into good deliverable form) in accordance with
the requirements of such exchanges as may be the primary market or
markets for such securities. Each of the Pledgor, the Secured Party and
the Custodian continuously represents and warrants that:
A. it has duly executed and delivered this Addendum, and has all
requisite power, authority and approvals to enter into and
perform its obligations hereunder; and
B. this Addendum is its valid and legally binding obligation,
enforceable against it in accordance with its terms, subject
to the effect of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally and to general equitable
principles.
The Secured Party and the Pledgor hereby acknowledge that the Custodian holds
securities and cash as custodian for its customers through sub-custodians,
depositaries and deposit-taking banks which maintain omnibus accounts on behalf
of customers of the Custodian. Securities held in the Special Custody Account
may be held at the Depository Trust Company or other book-entry depository
systems in the account of the Custodian, save that Margin denominated in
currencies other than US Dollars may be held by a sub-custodian for the
Custodian other than in book-entry form. U.S. Treasury securities shall be held
in a Treasury/Reserve Automated Debt Entry System ("TRADES") Participant's
securities account of the Custodian or of the Custodian's sub-custodian for the
account of the Custodian at the Federal Reserve Bank.
XXI. A monthly statement will be provided by the Custodian to the Secured
Party and the Pledgor listing all Margin held in the Special Custody
Account. The Custodian will also advise the Secured Party upon request,
at any time, of the kind and amount of Margin pledged to the Secured
Party. It is agreed that, notwithstanding any language to the contrary
in Custodian's form of confirmation, the Custodian holds the Margin as
agent of the Secured Party as pledgee hereunder, not as escrow agent.
The Custodian makes no representations as to the existence, perfection
or enforceability of any security interest, charge, lien or other
rights of the Pledgor in or to the Margin.
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XXII. The Pledgor shall pay the Custodian as compensation for its services
pursuant to this Addendum such compensation as may from time to time be
agreed upon in writing between the Pledgor and the Custodian.
XXIII. No amendment to this Addendum shall be effective unless in writing and
signed by an authorized officer of each of the Secured Party, the
Pledgor, and the Custodian.
XXIV. This Addendum may be executed in one or more counterparts, all of which
together shall constitute but one and the same instrument.
XXV. Any of the parties hereto may terminate the custodial relationship by
notice, given at least 10 business days prior to the date of such
intended termination, in writing to the other parties hereto; provided,
however, that should the Custodian or the Pledgor seek to terminate,
then the Pledgor must designate a replacement Custodian, which the
Secured Party has, in the exercise of its sole discretion, approved.
Custodian agrees to remain as the Custodian until such time as a
replacement Custodian has been approved and such replacement Custodian
has agreed to the terms of its service hereunder and under the
Agreement.
39. Written communications hereunder shall be sent in the manner
specified in the Agreement addressed:
A. If to Custodian, to:
Xxxxxx Xxxxxxx XX Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Managed Futures Department
Phone:
Fax:
B. If to the Pledgor, to:
Demeter Management Corporation
Xxxxxx Xxxxxxx Xxxx Xxxxxx & Co.
000 Xxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Managed Futures Department
Phone:
Fax:
39
C. If to the Secured Party, to:
Xxxxxx Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
0xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Foreign Exchange Trading Desk
Phone: (000) 000-0000
Fax: (000) 000-0000
This Addendum will be governed by the laws of the State of New York applicable
to transactions entered into and to be performed wholly within the State of New
York.
DEMETER MANAGEMENT
CORPORATION
on behalf of
Xxxxxx Xxxxxxx Charter Xxxxxxxx X.X.
By: _______________________________________
Name:
Title:
XXXXXX XXXXXXX & CO. INCORPORATED
By: _______________________________________
Name:
Title:
XXXXXX XXXXXXX XX INC. (for purposes of
this Addendum)
By: _______________________________________
Name:
Title:
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