**EXHIBIT10.02**

FOREIGN EXCHANGEAND OPTIONS

 

MASTER AGREEMENT

(FEOMA)

 

MASTER AGREEMENT dated as of June 11, 2002, by and between **Morgan Stanley                **,a Delaware Corporation and **Millburn Global Macro Trust**, a DelawareBusiness Trust.

 

SECTION1.           DEFINITIONS

 

Unless otherwise required by the context, the following terms shallhave 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 exercisedon any Business Day up to and including the Expiration Time.

 

“Base Currency”, as to a Party, means the Currency agreed to assuch in relation to it in Part VII of the Schedule.

 

“Business Day” means for purposes of: (i) Section 3.2, a daywhich 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 aLocal Banking Day for the applicable Designated Office of the Seller; (iii)clauses (i), (viii) and (xii) of the definition of Event of Default, a daywhich is a Local Banking Day for the Non-Defaulting Party; (iv) solely inrelation to delivery of a Currency, a day which is a Local Banking Day inrelation to that Currency; and (v) any other provision of the Agreement, a daywhich is a Local Banking Day for the applicable Designated Offices of bothParties; provided, however, that neither Saturday nor Sundayshall be considered a Business Day for any purpose.

 

“Buyer” means the owner of an Option.

 

“Call” means an Option entitling, but not obligating (exceptupon exercise), the Buyer to purchase from the Seller at the Strike Price aspecified quantity of the Call Currency.

 

“Call Currency” means the Currency agreed to as such at the timean 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 theprovisions of Section 8.1, the Non-Defaulting Party closes out CurrencyObligations and/or Options or such close-out occurs automatically.

 

“Closing Gain”, as to the Non-Defaulting Party, means thedifference described as such in relation to a particular Value Date under theprovisions of Section 8.1.

 

“Closing Loss”, as to the Non-Defaulting Party, means thedifference described as such in relation to a particular Value Date under theprovisions of Section 8.1.

 

“Confirmation” means a writing (including telex, facsimile orother 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:

 

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(i)            the Parties thereto and theDesignated Offices through which they are respectively acting,

(ii)           the amounts of the Currencies beingbought or sold and by which Party,

(iii)          the Value Date, and

(iv)          any other term generally included insuch a writing in accordance with the practice of the relevant foreign exchangemarket; and

 

(B) in the case of an Option, the following information:

 

(i)            the Parties thereto and theDesignated Offices through which they are respectively acting,

(ii)           whether the Option is a Call or aPut,

(iii)          the Call Currency and the Put Currencythat are the subject of the Option and their respective quantities,

(iv)          which Party is the Seller and which isthe Buyer,

(v)           the Strike Price,

(vi)          the Premium and the Premium PaymentDate,

(vii)         the Expiration Date,

(viii)        the Expiration Time,

(ix)           whether the Option is an AmericanStyle Option or a European Style Option, and

(x)            such other matters, if any, as theParties 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 ordocument, or any other document containing an obligation of a third party(“Credit Support Provider”) or of the first Party in favor of the other Partysupporting any obligations of the first Party under the Agreement.

 

“Credit Support Provider” has the meaning given to it in thedefinition of Credit Support Document.

 

“Currency” means money denominated in the lawful currency of anycountry or the Ecu.

 

“Currency Obligation” means any obligation of a Party to delivera 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, onethat is to be settled at its In-the-Money Amount under Section 5.5).

 

“Currency Pair” means the two Currencies which potentially maybe exchanged in connection with an FX Transaction or upon the exercise of anOption, 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 InsolvencyProceeding.

 

“Defaulting Party” has the meaning given to it in the definitionof Event of Default.

 

“Designated Office(s)”, as to a Party, means the office oroffices 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 ofExercise may be given only on the Option’s Expiration Date up to and includingthe Expiration Time, unless otherwise agreed.

 

“Event of Default” means the occurrence of any of the followingwith 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 dueunder the Agreement (including, but not limited to, a Premium payment) to theNon-Defaulting Party with respect to any Currency Obligation or Option and suchfailure shall continue for two (2) Business Days after the Non-Defaulting Partyhas given the Defaulting Party written

 

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notice of non-payment, or (B) fail to perform or comply with any otherobligation assumed by it under the Agreement and such failure is continuingthirty (30) days after the Non-Defaulting Party has given the Defaulting Partywritten notice thereof;

 

(ii) the Defaulting Party shall commence a voluntary InsolvencyProceeding or shall take any corporate action to authorize any such InsolvencyProceeding;

 

(iii) a governmental authority or self-regulatory organization havingjurisdiction over either the Defaulting Party or its assets in the country ofits organization or principal office (A) shall commence an InsolvencyProceeding with respect to the Defaulting Party or its assets or (B) shall takeany action under any bankruptcy, insolvency or other similar law or anybanking, insurance or similar law or regulation governing the operation of theDefaulting Party which may prevent the Defaulting Party from performing itsobligations under the Agreement as and when due;

 

(iv) an involuntary Insolvency Proceeding shall be commenced withrespect to the Defaulting Party or its assets by a person other than agovernmental authority or self-regulatory organization having jurisdiction overeither the Defaulting Party or its assets in the country of its organization orprincipal office and such Insolvency Proceeding (A) results in the appointmentof a Custodian or a judgment of insolvency or bankruptcy or the entry of anorder for winding-up, liquidation, reorganization or other similar relief, or(B) is not dismissed within five (5) days of its institution or presentation;

 

(v) the Defaulting Party is bankrupt or insolvent, as defined under anybankruptcy or insolvency law applicable to it;

 

(vi) the Defaulting Party fails, or shall otherwise be unable, to payits debts as they become due;

 

(vii) the Defaulting Party or any Custodian acting on behalf of theDefaulting Party shall disaffirm, disclaim or repudiate any Currency Obligationor Option;

 

(viii) any representation or warranty made or given or deemed made orgiven by the Defaulting Party pursuant to the Agreement or any Credit SupportDocument shall prove to have been false or misleading in any material respectas 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 theDefaulting Party written notice thereof;

 

(ix) the Defaulting Party consolidates or amalgamates with or mergesinto or transfers all or substantially all its assets to another entity and (A)the creditworthiness of the resulting, surviving or transferee entity ismaterially weaker than that of the Defaulting Party prior to such action, or(B) at the time of such consolidation, amalgamation, merger or transfer theresulting, surviving or transferee entity fails to assume all the obligationsof the Defaulting Party under the Agreement by operation of law or pursuant toan agreement satisfactory to the Non-Defaulting Party;

 

(x) by reason of any default, or event of default or other similarcondition or event, any Specified Indebtedness (being Specified Indebtedness ofan amount which, when expressed in the Currency of the Threshold Amount, is inaggregate equal to or in excess of the Threshold Amount) of the DefaultingParty or any Credit Support Provider in relation to it: (A) is not paid on thedue date therefor and remains unpaid after any applicable grace period haselapsed, or (B) becomes, or becomes capable at any time of being declared, dueand payable under agreements or instruments evidencing such Specified Indebtednessbefore it would otherwise have been due and payable;

 

(xi) the Defaulting Party is in breach of or default under anySpecified Transaction and any applicable grace period has elapsed, and thereoccurs any liquidation or early termination of, or acceleration of obligationsunder, that Specified Transaction or the Defaulting Party (or any Custodian onits behalf) disaffirms, disclaims or repudiates the whole or any part of aSpecified Transaction;

 

(xii) (A) any Credit Support Provider of the Defaulting Party or theDefaulting Party itself fails to comply with or perform any agreement orobligation to be complied with or performed by it in accordance with theapplicable Credit Support Document and such failure is continuing after anyapplicable grace period has elapsed; (B) any Credit Support Document relatingto the Defaulting Party expires or ceases to be in full force and effect priorto the satisfaction of all

 

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obligations of the Defaulting Party under the Agreement, unlessotherwise agreed in writing by the Non-Defaulting Party; (C) the DefaultingParty or any Credit Support Provider of the Defaulting Party (or, in eithercase, any Custodian acting on its behalf) disaffirms, disclaims or repudiates,in whole or in part, or challenges the validity of, any Credit SupportDocument; (D) any representation or warranty made or given or deemed made orgiven by any Credit Support Provider of the Defaulting Party pursuant to anyCredit Support Document shall prove to have been false or misleading in anymaterial respect as at the time it was made or given or deemed made or givenand one (1) Business Day has elapsed after the Non-Defaulting Party has giventhe 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 Providerof the Defaulting Party; or

 

(xiii) any other condition or event specified in Part IX of theSchedule or in Section 11.14 if made applicable to the Agreement in Part XI ofthe Schedule.

 

“Exercise Date”, in respect of any Option, means the day onwhich a Notice of Exercise received by the applicable Designated Office of theSeller becomes effective pursuant to Section 5.1.

 

“Expiration Date”, in respect of any Option, means the dateagreed to as such at the time the Option is entered into, as evidenced in aConfirmation.

 

“Expiration Time”, in respect of any Option, means the latesttime on the Expiration Date on which the Seller must accept a Notice ofExercise as agreed to at the time the Option is entered into, as evidenced in aConfirmation.

 

“FX Transaction” means any transaction between the Parties forthe purchase by one Party of an agreed amount in one Currency against the saleby it to the other of an agreed amount in another Currency, both such amountseither being deliverable on the same Value Date or, if the Parties have soagreed 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 whichtransaction the Parties have agreed (whether orally, electronically or inwriting): the Currencies involved, the amounts of such Currencies to bepurchased and sold, which Party will purchase which Currency and the ValueDate.

 

“In-the-Money Amount” means (i) in the case of a Call, theexcess of the Spot Price over the Strike Price, multiplied by the aggregateamount of the Call Currency to be purchased under the Call, where both pricesare quoted in terms of the amount of the Put Currency to be paid for one unitof the Call Currency; and (ii) in the case of a Put, the excess of the StrikePrice over the Spot Price, multiplied by the aggregate amount of the PutCurrency to be sold under the Put, where both prices are quoted in terms of theamount of the Call Currency to be paid for one unit of the Put Currency.

 

“Insolvency Proceeding” means a case or proceeding seeking ajudgment of or arrangement for insolvency, bankruptcy, composition,rehabilitation, reorganization, administration, winding-up, liquidation orother similar relief with respect to the Defaulting Party or its debts orassets, 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, insuranceor similar law governing the operation of the Defaulting Party.

 

“LIBOR”, with respect to any Currency and date, means theaverage rate at which deposits in the Currency for the relevant amount and timeperiod are offered by major banks in the London interbank market as of 11:00a.m. (London time) on such date, or, if major banks do not offer deposits insuch Currency in the London interbank market on such date, the average rate atwhich deposits in the Currency for the relevant amount and time period areoffered by major banks in the relevant foreign exchange market at such time onsuch date as may be determined by the Party making the determination.

 

“Local Banking Day” means (i) for any Currency, a day on whichcommercial banks effect deliveries of that Currency in accordance with themarket practice of the relevant foreign exchange market, and (ii) for anyParty, a day in the location of the applicable Designated Office of such Partyon which commercial banks in that location are not authorized or required bylaw to close.

 

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“Master Agreement” means the terms and conditions set forth inthis Master Agreement, including the Schedule.

 

“Matched Pair Novation Netting Office(s)”, in respect of aParty, means the Designated Office(s) specified in Part V of the Schedule.

 

“Non-Defaulting Party” has the meaning given to it in thedefinition of Event of Default.

 

“Notice of Exercise” means telex, telephonic or other electronicnotification (excluding facsimile transmission) providing assurance of receipt,given by the Buyer prior to or at the Expiration Time, of the exercise of anOption, which notification shall be irrevocable.

 

“Novation Netting Office(s)”, in respect of a Party, means theDesignated Office(s) specified in Part V of the Schedule.

 

“Option” means a currency option which is or shall becomesubject to the Agreement.

 

“Parties” means the parties to the Agreement, including theirsuccessors and permitted assigns (but without prejudice to the application ofclause (ix) of the definition of Event of Default); and the term “Party” shallmean whichever of the Parties is appropriate in the context in which suchexpression may be used.

 

“Premium”, in respect of any Option, means the purchase price ofthe Option as agreed upon by the Parties, and payable by the Buyer to theSeller thereof.

 

“Premium Payment Date”, in respect of any Option, means the dateon which the Premium is due and payable, as agreed to at the time the Option isentered into, as evidenced in a Confirmation.

 

“Proceedings” means any suit, action or other proceedingsrelating to the Agreement, any FX Transaction or any Option.

 

“Put” means an Option entitling, but not obligating (except uponexercise), the Buyer to sell to the Seller at the Strike Price a specifiedquantity of the Put Currency.

 

“Put Currency” means the Currency agreed to as such at the timean Option is entered into, as evidenced in a Confirmation.

 

“Schedule” means the Schedule attached to and part of thisMaster Agreement, as it may be amended from time to time by agreement of theParties.

 

“Seller” means the Party granting an Option.

 

“Settlement Date” means, in respect of: (i) an American StyleOption, 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 theExpiration Date of such Option; and, where market practice in the relevantforeign exchange market in relation to the two Currencies involved provides fordelivery of one Currency on one date which is a Local Banking Day in relationto that Currency but not to the other Currency and for delivery of the otherCurrency 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 theDesignated Office(s) specified in Part V of the Schedule.

 

“Specified Indebtedness” means any obligation (whether presentor future, contingent or otherwise, as principal or surety or otherwise) inrespect of borrowed money, other than in respect of deposits received.

 

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“Specified Transaction” means any transaction (including anagreement with respect thereto) between one Party to the Agreement (or anyCredit Support Provider of such Party) and the other Party to the Agreement (orany Credit Support Provider of such Party) which is a rate swap transaction,basis swap, forward rate transaction, commodity swap, commodity option, equityor equity linked swap, equity or equity index option, bond option, interestrate option, foreign exchange transaction, cap transaction, floor transaction,collar transaction, currency swap transaction, cross-currency rate swaptransaction, currency option or any other similar transaction (including anyoption with respect to any of these transactions) or any combination of any ofthe foregoing.

 

“Spot Date” means the spot delivery day for the relevantCurrency Pair as generally used by the relevant foreign exchange market.

 

“Spot Price” means the rate of exchange at the time at whichsuch price is to be determined for foreign exchange transactions in therelevant 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-DefaultingParty, for purposes of Section 8.

 

“Strike Price”, in respect of any Option, means the price atwhich the Currency Pair may be exchanged, as agreed to at the time the Optionis entered into, as evidenced in a Confirmation.

 

“Threshold Amount” means the amount specified as such for eachParty in Part VIII of the Schedule.

 

“Value Date” means, with respect to any FX Transaction, theBusiness Day (or where market practice in the relevant foreign exchange marketin relation to the two Currencies involved provides for delivery of oneCurrency on one date which is a Local Banking Day in relation to that Currencybut not to the other Currency and for delivery of the other Currency on thenext Local Banking Day in relation to that other Currency (“Split Settlement”)the two (2) Local Banking Days in accordance with that market practice) agreedby the Parties for delivery of the Currencies to be purchased and sold pursuantto such FX Transaction, and, with respect to any Currency Obligation, theBusiness Day (or, in the case of Split Settlement, Local Banking Day) uponwhich the obligation to deliver Currency pursuant to such Currency Obligationis to be performed.

 

SECTION2.           FX TRANSACTIONS ANDOPTIONS

 

2.1           Scope of theAgreement.  The Parties (throughtheir respective Designated Offices) may enter into (i) FX Transactions, forsuch quantities of such Currencies, as may be agreed subject to the terms ofthe 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 suchCurrencies, as may be agreed subject to the terms of the Agreement; providedthat neither Party shall be required to enter into any FX Transaction or Optionwith the other Party (other than in connection with an exercised Option).  Unless otherwise agreed in writing by theParties, each FX Transaction and Option entered into between Designated Officesof the Parties on or after the Effective Date shall be governed by theAgreement.  Each FX Transaction andOption between any two Designated Offices of the Parties outstanding on theEffective Date which is identified in Part I of the Schedule shall also begoverned by the Agreement.

 

2.2           Single Agreement.  This Master Agreement, the terms agreedbetween the Parties with respect to each FX Transaction and Option (and, to theextent recorded in a Confirmation, each such Confirmation), and all amendmentsto any of such items shall together form the agreement between the Parties (the“Agreement”) and shall together constitute a single agreement between theParties. The Parties acknowledge that all FX Transactions and Options areentered into in reliance upon such fact, it being understood that the Partieswould not otherwise enter into any FX Transaction or Option.

 

2.3           Confirmations.  FX Transactions and Options shall bepromptly confirmed by the Parties by Confirmations exchanged by mail, telex,facsimile or other electronic means from which it is possible to produce a hardcopy.  The failure by a Party to issue aConfirmation shall not prejudice or invalidate the terms of any FX Transactionor Option.

 

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2.4           Inconsistencies.  In the event of any inconsistency betweenthe provisions of the Schedule and the other provisions of the Agreement, theSchedule will prevail.  In the event ofany inconsistency between the terms of a Confirmation and the other provisionsof the Agreement, (i) in the case of an FX Transaction, the other provisions ofthe Agreement shall prevail, and the Confirmation shall not modify the otherterms of the Agreement and (ii) in the case of an Option, the terms of theConfirmation shall prevail, and the other terms of the Agreement shall bedeemed modified with respect to such Option, except for the manner ofconfirmation under Section 2.3 and, if applicable, discharge of Options underSection 4.

 

SECTION3.           OPTION PREMIUM

 

3.1           Payment ofPremium.  Unless otherwise agreed inwriting by the Parties, the Buyer shall be obligated to pay the Premium relatedto an Option no later than its Premium Payment Date.

 

3.2           Late Payment orNon-Payment of Premium.  If anyPremium is not received on or before the Premium Payment Date, the Seller mayelect: (i) to accept a late payment of such Premium; (ii) to give writtennotice of such non-payment and, if such payment shall not be received withintwo (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 notbe received within two (2) Business Days of such notice, treat such non-paymentas an Event of Default under clause (i) of the definition of Event ofDefault.  If the Seller elects to actunder either clause (i) or (ii) of the preceding sentence, the Buyer shall payall out-of-pocket costs and actual damages incurred in connection with suchunpaid or late Premium or void Option, including, without limitation, intereston such Premium from and including the Premium Payment Date to but excludingthe late payment date in the same Currency as such Premium at overnight LIBORand any other losses, costs or expenses incurred by the Seller in connectionwith such terminated Option, for the loss of its bargain, its cost of funding,or the loss incurred as a result of terminating, liquidating, obtaining orre-establishing a delta hedge or related trading position with respect to suchOption.

 

SECTION4.           DISCHARGE AND TERMINATIONOF OPTIONS; NETTING OF OPTION PREMIUMS

 

4.1           Discharge andTermination.  If agreed in Part V ofthe Schedule, any Call or any Put written by a Party will automatically bedischarged and terminated, in whole or in part, as applicable, against a Callor a Put, respectively, written by the other Party, such discharge andtermination to occur automatically upon the payment in full of the last Premiumpayable in respect of such Options; provided that such discharge andtermination may only occur in respect of Options:

 

(i)            each being withrespect to the same Put Currency and the same Call Currency;

(ii)           each having thesame Expiration Date and Expiration Time;

(iii)          each being of thesame style, i.e. either both being American Style Options or both beingEuropean Style Options;

(iv)          each having the sameStrike Price;

(v)           each beingtransacted by the same pair of Designated Offices of Buyer and Seller; and

(vi)          neither of whichshall have been exercised by delivery of a Notice of Exercise;

 

and,upon the occurrence of such discharge and termination, neither Party shall haveany further obligation to the other Party in respect of the relevant Optionsor, as the case may be, parts thereof so discharged and terminated.  Such discharge and termination shall beeffective notwithstanding that either Party may fail to record such dischargeand termination in its books.  In thecase of a partial discharge and termination (i.e., where the relevant Optionsare for different amounts of the Currency Pair), the remaining portion of theOption which is partially discharged and terminated shall continue to be anOption for all purposes of the Agreement, including this Section 4.1.

 

4.2           Netting of OptionPremiums.  If agreed in Part V ofthe Schedule and if, on any date, Premiums would otherwise be payable under theAgreement in the same Currency between the same respective Designated Officesof the Parties, then, on such date, each Party’s obligation to make payment ofany such Premium will be automatically satisfied and discharged and, if theaggregate Premium(s) that would otherwise have been payable by such Designated

 

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Officeof one Party exceeds the aggregate Premium(s) that would otherwise have beenpayable by such Designated Office of the other Party, replaced by an obligationupon the Party by whom the larger aggregate Premium(s) would have been payableto pay the other Party the excess of the larger aggregate Premium(s) over thesmaller aggregate Premium(s) and, if the aggregate Premiums are equal, nopayment shall be made.

 

SECTION5.           EXERCISE AND SETTLEMENT OFOPTIONS

 

5.1           Exercise ofOptions.  The Buyer may exercise anOption by delivery to the Seller of a Notice of Exercise.  Subject to Section 5.3, if a Notice ofExercise with respect to an Option has not been received by the Seller prior toor at the Expiration Time, the Option shall expire and become void and of noeffect.  Any Notice of Exercise shall(unless otherwise agreed):

 

(i) in respect of an American Style Option, (A) if received at or priorto 3:00 p.m. on a Business Day, be effective upon receipt thereof by theSeller, and (B) if received after 3:00 p.m. on a Business Day, be effectiveonly as of the opening of business of the Seller on the first Business Daysubsequent to its receipt; and

 

(ii) in respect of a European Style Option, if received on or, if theparties have so agreed, before the Expiration Date, prior to or at theExpiration Time, be effective upon receipt thereof by the Seller.

 

5.2           No PartialExercise.  Unless otherwise agreedby the Parties, an Option may be exercised only in whole.

 

5.3           AutomaticExercise.  Unless otherwise agreedin Part VI of the Schedule or unless the Seller is otherwise instructed by theBuyer, if an Option has an In-the-Money Amount at its Expiration Time thatequals or exceeds the product of (x) 1% of the Strike Price (or such otherpercentage or amount as may have been agreed by the Parties) and (y) the amountof the Call Currency or Put Currency, as appropriate, then the Option shall bedeemed automatically exercised.  In suchcase, the Seller may elect to settle such Option either in accordance withSection 5.4 or by payment to the Buyer on the Settlement Date for such Optionof the In-the-Money Amount, as determined at the Expiration Time or as soonthereafter as practicable.  In thelatter case, the sole obligations of the Parties with respect to settlement ofsuch Option shall be to deliver or receive the In-the-Money Amount of suchOption on the Settlement Date.  TheSeller shall notify the Buyer of its election of the method of settlement of anautomatically exercised Option as soon as practicable after the ExpirationTime.

 

5.4           Settlement ofExercised Options.  An exercisedOption shall settle on its Settlement Date. Subject to Section 5.3 and 5.5, on the Settlement Date, the Buyer shallpay the Put Currency to the Seller for value on the Settlement Date and theSeller shall pay the Call Currency to the Buyer for value on the SettlementDate.  An exercised Option shall betreated as an FX Transaction and a Currency Obligation (except, for thepurposes of Section 8.1 only, if it is to be settled at its In-the-MoneyAmount), and for this purpose the relevant Settlement Date shall be treated asthe Value Date of the FX Transaction.

 

5.5           Settlement atIn-the-Money Amount.  An Optionshall be settled at its In-the-Money Amount if so agreed by the Parties at thetime such Option is entered into.  Insuch case, the In-the-Money Amount shall be determined based upon the SpotPrice at the time of exercise or as soon thereafter as practicable.  The sole obligations of the Parties withrespect to settlement of such Option shall be to deliver or receive the In-the-MoneyAmount of such Option on the Settlement Date.

 

SECTION6.           SETTLEMENT AND NETTING OFFX TRANSACTIONS

 

6.1           Settlement of FXTransactions.  Subject to Sections6.2 and 6.3, each Party shall deliver to the other Party the amount of theCurrency to be delivered by it under each Currency Obligation on the Value Datefor such Currency Obligation.

 

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6.2           SettlementNetting.  If, on any date, more thanone delivery of a particular Currency under Currency Obligations is to be madebetween a pair of Settlement Netting Offices, then each Party shall aggregatethe amounts of such Currency deliverable by it and only the difference betweenthese aggregate amounts shall be delivered by the Party owing the larger aggregateamount to the other Party, and, if the aggregate amounts are equal, no deliveryof the Currency shall be made.

 

6.3           Novation Netting.  (a)  ByCurrency.  If the Parties enter intoan FX Transaction through a pair of Novation Netting Offices giving rise to aCurrency Obligation for the same Value Date and in the same Currency as a thenexisting Currency Obligation between the same pair of Novation Netting Offices,then immediately upon entering into such FX Transaction, each such CurrencyObligation shall automatically and without further action be individuallycanceled and simultaneously replaced by a new Currency Obligation for suchValue Date determined as follows:  theamounts of such Currency that would otherwise have been deliverable by eachParty on such Value Date shall be aggregated and the Party with the largeraggregate amount shall have a new Currency Obligation to deliver to the otherParty the amount of such Currency by which its aggregate amount exceeds theother Party’s aggregate amount, provided that if the aggregate amountsare equal, no new Currency Obligation shall arise. This Section 6.3 shall notaffect any other Currency Obligation of a Party to deliver any differentCurrency on the same Value Date.

 

(b)           By Matched Pair.  If the Parties enter into an FX Transactionbetween a pair of Matched Pair Novation Netting Offices then the provisions ofSection 6.3(a) shall apply only in respect of Currency Obligations arising byvirtue of FX Transactions entered into between such pair of Matched PairNovation Netting Offices and involving the same pair of Currencies and the sameValue Date.

 

6.4           General  (a)  Inapplicabilityof Sections 6.2 and 6.3.  Theprovisions of Sections 6.2 and 6.3 shall not apply if a Close-Out Date hasoccurred or a voluntary or involuntary Insolvency Proceeding or action of thekind described in clause (ii), (iii) or (iv) of the definition of Event ofDefault has occurred without being dismissed in relation to either Party.

 

(b)           Failure to Record.  The provisions of Section 6.3  shall apply notwithstanding that eitherParty may fail to record the new Currency Obligation in its books.

 

(c)           Cut-off Date andTime.  The provisions of Section 6.3are subject to any cut-off date and cut-off time agreed between the applicableNovation Netting Offices and Matched Pair Novation Netting Offices of theParties.

 

SECTION7.           REPRESENTATIONS,WARRANTIES AND COVENANTS

 

7.1           Representationsand Warranties.  Each Partyrepresents and warrants to the other Party as of the Effective Date and as ofthe date of each FX Transaction and each Option that:  (i) it has authority to enter into the Agreement (including suchFX Transaction or Option, as the case may be); (ii) the persons entering intothe Agreement (including such FX Transaction or Option, as the case may be) onits behalf have been duly authorized to do so; (iii) the Agreement (includingsuch FX Transaction or Option, as the case may be) is binding upon it andenforceable against it in accordance with its terms (subject to applicablebankruptcy, reorganization, insolvency, moratorium or similar laws affectingcreditors’ rights generally and applicable principles of equity) and does notand 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 withrespect to it; (v) it acts as principal in entering into each FX Transactionand Option and exercising each and every Option; and (vi) if the Parties haveso specified in Part XV of the Schedule, it makes the representations andwarranties set forth in such Part XV.

 

7.2           Covenants.  Each Party covenants to the other Partythat:  (i) it will at all times obtainand comply with the terms of and do all that is necessary to maintain in fullforce and effect all authorizations, approvals, licenses and consents requiredto enable it lawfully to perform its obligations under the Agreement; (ii) itwill promptly notify the other Party of the occurrence of any Event of Defaultwith 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 theSchedule, it makes the covenants set forth in such Part XVI.

 

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SECTION8.           CLOSE-OUT AND LIQUIDATION

 

8.1           Manner ofClose-Out and Liquidation.  (a)  Close-Out.  If an Event of Default has occurred and is continuing, then theNon-Defaulting Party shall have the right to close out all, but not less thanall, outstanding Currency Obligations (including any Currency Obligation whichhas not been performed and in respect of which the Value Date is on or precedesthe Close-Out Date) and Options, except to the extent that in the good faithopinion of the Non-Defaulting Party certain of such Currency Obligations orOptions may not be closed out under applicable law.  Such close-out shall be effective upon receipt by the DefaultingParty of notice that the Non-Defaulting Party is terminating such CurrencyObligations and Options. Notwithstanding the foregoing, unless otherwise agreed by the Parties inPart 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 agreedby the Parties in Part IX of the Schedule, in the case of any other Event ofDefault specified and so agreed in Part IX with respect to a Party, close-outshall be automatic as to all outstanding Currency Obligations and Options, asof the time immediately preceding the institution of the relevant InsolvencyProceeding or action. The Non-Defaulting Party shall have the right toliquidate such closed-out Currency Obligations and Options as provided below.

 

(b)           Liquidation ofCurrency Obligations.  Liquidationof Currency Obligations terminated by close-out shall be effected as follows:

 

(i)            CalculatingClosing Gain or Loss.  TheNon-Defaulting Party shall calculate in good faith, with respect to each suchterminated Currency Obligation, except to the extent that in the good faithopinion of the Non-Defaulting Party certain of such Currency Obligations maynot be liquidated as provided herein under applicable law, as of the Close-OutDate or as soon thereafter as reasonably practicable, the Closing Gain, or, asappropriate, the Closing Loss, as follows:

 

(A)          for each CurrencyObligation calculate a “Close-Out Amount” as follows:

 

(1)       in the case of aCurrency Obligation whose Value Date is the same as or is later than theClose-Out Date, the amount of such Currency Obligation; or

 

(2)       in the case of aCurrency Obligation whose Value Date precedes the Close-Out Date, the amount ofsuch Currency Obligation increased, to the extent permitted by applicable law,by adding interest thereto from and including the Value Date to but excludingthe Close-Out Date at overnight LIBOR; and

 

(3)       for each such amount ina Currency other than the Non-Defaulting Party’s Base Currency, convert suchamount into the Non-Defaulting Party’s Base Currency at the rate of exchange atwhich, at the time of the calculation, the Non-Defaulting Party can buy suchBase Currency with or against the Currency of the relevant Currency Obligationfor delivery (x) if the Value Date of such Currency Obligation is on or after theSpot Date as of such time of calculation for the Base Currency, on the ValueDate of that Currency Obligation or (y) if such Value Date precedes such SpotDate, for delivery on such Spot Date (or, in either case, if such rate ofexchange is not available, conversion shall be accomplished by theNon-Defaulting Party using any commercially reasonable method); and

 

(B)           determine inrelation to each Value Date: (1) the sum of all Close-Out Amounts relating toCurrency Obligations under which the Non-Defaulting Party would otherwise havebeen entitled to receive the relevant amount on that Value Date; and (2) thesum of all Close-Out Amounts relating to Currency Obligations under which theNon-Defaulting Party would otherwise have been obliged to deliver the relevantamount to the Defaulting Party on that Value Date; and

 

(C)           if the sumdetermined under (B)(1) is greater than the sum determined under (B)(2), thedifference shall be the Closing Gain for such Value Date; if the sum determinedunder (B)(1) is less than the sum determined under (B)(2), the difference shallbe the Closing Loss for such Value Date.

 

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(ii)           DeterminingPresent Value.  To the extentpermitted by applicable law, the Non-Defaulting Party shall adjust the ClosingGain or Closing Loss for each Value Date falling after the Close-Out Date topresent value by discounting the Closing Gain or Closing Loss from andincluding the Value Date to but excluding the Close-Out Date, at LIBOR withrespect to the Non-Defaulting Party’s Base Currency as at the Close-Out Date orat such other rate as may be prescribed by applicable law.

 

(iii)          Netting.  The Non-Defaulting Party shall aggregate thefollowing amounts so that all such amounts are netted into a single liquidatedamount payable to or by the Non-Defaulting Party:  (x) the sum of the Closing Gains for all Value Dates (discountedto present value, where appropriate, in accordance with the provisions ofSection 8.1(b)(ii)) (which for the purposes of the aggregation shall be apositive figure); and (y) the sum of the Closing Losses for all Value Dates(discounted to present value, where appropriate, in accordance with theprovisions of Section 8.1(b)(ii)) (which for the purposes of the aggregationshall be a negative figure).

 

(c)           Liquidation ofOptions.  To liquidate unexercisedOptions and exercised Options to be settled at their In-the-Money Amounts thathave been terminated by close-out, the Non-Defaulting Party shall:

 

(i)            CalculatingSettlement Amount.  Calculate ingood faith with respect to each such terminated Option, except to the extentthat in the good faith opinion of the Non-Defaulting Party certain of suchOptions may not be liquidated as provided herein under applicable law, as ofthe Close-Out Date or as soon as reasonably practicable thereafter a settlementamount for each Party equal to the aggregate of:

 

(A)          with respect to eachOption purchased by such Party, and which the other Party has not elected totreat as void pursuant to Section 3.2(ii) for lack of payment of the Premium,the current market premium for such Option;

 

(B)           with respect to eachOption sold by such Party and which such Party has not elected to treat as voidpursuant to Section 3.2(ii) for lack of payment of the Premium, any unpaidPremium, provided that, if the Close-Out Date occurs before the PremiumPayment Date, such amount shall be discounted from and including the PremiumPayment Date to but excluding the Close-Out Date at a rate equal to LIBOR onthe Close-Out Date and, if the Close-Out Date occurs after the Premium PaymentDate, to the extent permitted by applicable law, the settlement amount shallinclude interest on any unpaid Premium from and including the Premium PaymentDate to but excluding the Close-Out Date in the same Currency as such Premiumat overnight LIBOR;

 

(C)           with respect to anyexercised Option to be settled at its In-the-Money Amount (whether or not theClose-Out Date occurs before the Settlement Date for such Option), any unpaidamount due to such Party in settlement of such Option and, if the Close-OutDate occurs after the Settlement Date for such Option, to the extent permittedby applicable law, interest thereon from and including the applicableSettlement Date to but excluding the Close-Out Date at overnight LIBOR; and

 

(D)          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 isreasonably practicable, to be its additional losses, costs and expenses inconnection with such terminated Option, for the loss of its bargain, its costof funding, or the loss incurred as a result of terminating, liquidating,obtaining or re-establishing a delta hedge or related trading position with respectto such Option;

 

(ii)           Converting toBase Currency.  Convert anysettlement amount calculated in accordance with clause (i) above in a Currencyother than the Non-Defaulting Party’s Base Currency into such Base Currency atthe Spot Price at which, at the time of the calculation, the Non-DefaultingParty could enter into a contract in the foreign exchange market to buy theNon-Defaulting Party’s Base Currency in exchange for such Currency (or, if suchSpot Price is not available, conversion shall be accomplished by theNon-Defaulting Party using any commercially reasonable method); and

 

(iii)          Netting.  Net such settlement amounts with respect toeach Party so that all such amounts are netted to a single liquidated amountpayable by one Party to the other Party.

 

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(d)           Final Netting.  The Non-Defaulting Party shall net (or, ifboth are payable by one Party, add) the liquidated amounts payable underSections 8.1(b) and 8.1(c) with respect to each Party so that such amounts arenetted (or added) to a single liquidated amount payable by one Party to theother Party as a settlement payment.

 

8.2           Set-Off AgainstCredit Support.  Where close-out andliquidation occurs in accordance with Section 8.1, the Non-Defaulting Partyshall also be entitled (i) to set off the net payment calculated in accordancewith Section 8.1(d) which the Non-Defaulting Party owes to the DefaultingParty, if any, against any credit support or other collateral (“CreditSupport”) held by the Defaulting Party pursuant to a Credit Support Document orotherwise (including the liquidated value of any non-cash Credit Support) inrespect 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) whichthe Defaulting Party owes to the Non-Defaulting Party, if any, against anyCredit Support held by the Non-Defaulting Party (including the liquidated valueof any non-cash Credit Support) in respect of the Defaulting Party’sobligations under the Agreement; provided that, for purposes of eithersuch set-off, any Credit Support denominated in a Currency other than theNon-Defaulting Party’s Base Currency shall be converted into such Base Currencyat the rate specified in Section 8.1(c)(ii).

 

8.3           Other ForeignExchange Transactions and Currency Options.  Where close-out and liquidation occurs in accordance with Section8.1, the Non-Defaulting Party shall also be entitled to close-out andliquidate, to the extent permitted by applicable law, any other foreignexchange transaction or currency option entered into between the Parties whichis then outstanding in accordance with the provisions of Section 8.1, with eachobligation of a Party to deliver a Currency under such a foreign exchangetransaction being treated as if it were a Currency Obligation (includingexercised options, provided that cash-settled options shall be treatedanalogously to Options to be settled at their In-the-Money Amount) and eachunexercised option being treated as if it were an Option under the Agreement.

 

8.4           Payment and LateInterest.  The net amount payable byone Party to the other Party pursuant to the provisions of Sections 8.1 and 8.3above shall be paid by the close of business on the Business Day following thereceipt by the Defaulting Party of notice of the Non-Defaulting Party’ssettlement calculation, with interest at overnight LIBOR from and including theClose-Out Date to but excluding such Business Day (and converted as required byapplicable 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 interestat overnight LIBOR (or, if conversion is required by applicable law into someother Currency, either overnight LIBOR with respect to such other Currency orsuch other rate as may be prescribed by such applicable law) for each day forwhich such amount remains unpaid.  Anyaddition of interest or discounting required under this Section 8 shall becalculated on the basis of a year of such number of days as is customary fortransactions involving the relevant Currency in the relevant foreign exchangemarket.

 

8.5           Suspension ofObligations.  Without prejudice tothe foregoing, so long as a Party shall be in default in payment or performanceto the other Party under the Agreement and the other Party has not exercisedits rights under this Section 8, or, if “Adequate Assurances” is specified asapplying to the Agreement in Part XI of the Schedule, during the pendency of areasonable request to a Party for adequate assurances of its ability to performits obligations under the Agreement, the other Party may, at its election andwithout penalty, suspend its obligation to perform under the Agreement.

 

8.6           Expenses.  The Defaulting Party shall reimburse theNon-Defaulting Party in respect of all out-of-pocket expenses incurred by theNon-Defaulting Party (including fees and disbursements of counsel, includingattorneys who may be employees of the Non-Defaulting Party) in connection withany reasonable collection or other enforcement proceedings related to thepayments required under the Agreement.

 

8.7           ReasonablePre-Estimate.  The Parties agreethat the amounts recoverable under this Section 8 are a reasonable pre-estimateof loss and not a penalty.  Such amountsare payable for the loss of bargain and the loss of protection against futurerisks and, except as otherwise provided in the Agreement, neither Party will beentitled to recover any additional damages as a consequence of such losses.

 

8.8           No Limitation ofOther Rights; Set-Off.  TheNon-Defaulting Party’s rights under this Section 8 shall be in addition to, andnot in limitation or exclusion of, any other rights which the Non-DefaultingParty may have (whether by agreement, operation of law or otherwise), and, tothe extent not prohibited by law, the Non-Defaulting

 

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Partyshall have a general right of set-off with respect to all amounts owed by eachParty 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-offshall, if appropriate, be discounted to present value in a commerciallyreasonable manner by the Non-Defaulting Party).  The Non-Defaulting Party’s rights under this Section 8.8 aresubject to Section 8.7.

 

SECTION9.           FORCE MAJEURE, ACT OFSTATE, ILLEGALITY AND IMPOSSIBILITY

 

9.1           Force Majeure,Act of State, Illegality and Impossibility.  If either Party is prevented from or hindered or delayed byreason of force majeure or act of state in the delivery or receipt of anyCurrency in respect of a Currency Obligation or Option or if it becomes or, inthe good faith judgment of one of the Parties, may become unlawful orimpossible for either Party to make or receive any payment in respect of aCurrency Obligation or Option, then the Party for whom such performance hasbeen prevented, hindered or delayed or has become illegal or impossible shallpromptly give notice thereof to the other Party and either Party may, by noticeto the other Party, require the close-out and liquidation of each affectedCurrency Obligation and Option in accordance with the provisions of Section 8.1and, for such purposes, the Party unaffected by such force majeure, act ofstate, illegality or impossibility (or, if both Parties are so affected,whichever Party gave the relevant notice) shall perform the calculationrequired under Section 8.1 as if it were the Non-Defaulting Party.  Nothing in this Section 9.1 shall be takenas indicating that the Party treated as the Defaulting Party for the purpose ofcalculations required by Section 8.1 has committed any breach or default.

 

9.2           Transfer to AvoidForce Majeure, Act of State, Illegality or Impossibility.  If Section 9.1 becomes applicable, unlessprohibited by law, the Party which has been prevented, hindered or delayed fromperforming shall, as a condition to its right to designate a close-out andliquidation of any affected Currency Obligation or Option, use all reasonableefforts (which will not require such Party to incur a loss, excludingimmaterial, incidental expenses) to transfer as soon as practicable, and in anyevent before the earlier to occur of the expiration date of the affectedOptions or twenty (20) days after it gives notice under Section 9.1, all itsrights and obligations under the Agreement in respect of the affected CurrencyObligations and Options to another of its Designated Offices so that such forcemajeure, act of state, illegality or impossibility ceases to exist.  Any such transfer will be subject to theprior written consent of the other Party, which consent will not be withheld ifsuch other Party’s policies in effect at such time would permit it to enterinto transactions with the transferee Designated Office on the terms proposed,unless such transfer would cause the other Party to incur a material tax orother cost.

 

SECTION10.         PARTIES TO RELY ON THEIROWN EXPERTISE

 

Each Party will be deemed to represent to the other Party on the dateon which it enters into an FX Transaction or Option that (absent a writtenagreement between the Parties that expressly imposes affirmative obligations tothe contrary for that FX Transaction or Option): (i)(A) it is acting for itsown account, and it has made its own independent decisions to enter into thatFX Transaction or Option and as to whether that FX Transaction or Option isappropriate or proper for it based upon its own judgment and upon advice fromsuch advisors as it has deemed necessary; (B) it is not relying on anycommunication (written or oral) of the other Party as investment advice or as arecommendation to enter into that FX Transaction or Option, it being understoodthat information and explanations related to the terms and conditions of an FXTransaction or Option shall not be considered investment advice or arecommendation to enter into that FX Transaction or Option; and (C) it has notreceived from the other Party any assurance or guarantee as to the expectedresults of that FX Transaction or Option; (ii) it is capable of evaluating andunderstanding (on its own behalf or through independent professional advice),and understands and accepts, the terms, conditions and risks of that FXTransaction or Option; and (iii) the other Party is not acting as a fiduciaryor an advisor for it in respect of that FX Transaction or Option.

 

SECTION11.         MISCELLANEOUS

 

11.1         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 wasdue, whether pursuant to a judgment of any court or pursuant to Section 8 or 9,shall discharge such obligation only to

 

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the extent that, on the firstday on which the first Party is open for business immediately following suchreceipt or recovery, the first Party shall be able, in accordance with normalbanking practice, to purchase the Currency in which such amount was due withthe Currency received or recovered.  Ifthe amount so purchasable shall be less than the original amount of theCurrency in which such amount was due, the second Party shall, as a separateobligation and notwithstanding any judgment of any court, indemnify the firstParty against any loss sustained by it. The second Party shall in any eventindemnify the first Party against any costs incurred by it in making any suchpurchase of Currency.

 

11.2         Assignment.  Neither Party may assign, transfer or chargeor purport to assign, transfer or charge its rights or obligations under theAgreement to a third party without the prior written consent of the other Partyand any purported assignment, transfer or charge in violation of this Section11.2 shall be void.

 

11.3         Telephonic Recording.  The Parties agree that each mayelectronically record all telephonic conversations between them and that anysuch recordings may be submitted in evidence to any court or in any Proceedingsfor the purpose of establishing any matters pertinent to the Agreement.

 

11.4         Notices.  Unless otherwise agreed, all notices,instructions and other communications to be given to a Party under theAgreement shall be given to the address, telex (if confirmed by the appropriateanswerback), facsimile (confirmed if requested) or telephone number and to theindividual 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 11.4shall be effective upon receipt.

 

11.5         Termination.  Each of the Parties may terminate theAgreement at any time by seven (7) days’ prior written notice to the otherParty delivered as prescribed in Section 11.4, and termination shall beeffective at the end of such seventh day; provided, however, that anysuch termination shall not affect any outstanding Currency Obligations orOptions, and the provisions of the Agreement shall continue to apply until allthe obligations of each Party to the other under the Agreement have been fullyperformed.

 

11.6         Severability.  In the event any one or more of theprovisions contained in the Agreement should be held invalid, illegal orunenforceable in any respect under the law of any jurisdiction, the validity,legality and enforceability of the remaining provisions contained in theAgreement under the law of such jurisdiction, and the validity, legality and enforceabilityof such and any other provisions under the law of any other jurisdiction shallnot in any way be affected or impaired thereby.  The Parties shall endeavor in good faith negotiations to replacethe invalid, illegal or unenforceable provisions with valid provisions theeconomic effect of which comes as close as possible to that of the invalid,illegal or unenforceable provisions.

 

11.7         No Waiver.  No indulgence or concession granted by aParty 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, norshall any single or partial exercise of any such right, power or privilegepreclude any other or further exercise thereof or the exercise of any otherright, power or privilege.

 

11.8         Master Agreement.  Where one of the Parties to the Agreement isdomiciled in the United States, the Parties intend that the Agreement shall bea master agreement, as referred to in 11 U.S.C. Section 101(53B)(C) and 12U.S.C. Section 1821(e)(8)(D)(vii).

 

11.9         Time of Essence, Etc.  Time shall be of the essence in theAgreement.  Unless otherwise agreed, thetimes referred to in the Agreement with respect to Options shall in each caserefer to the local time of the relevant Designated Office of the Seller of therelevant Option.

 

11.10       Headings.  Headings in the Agreement are for ease ofreference only.

 

11.11       Payments Generally.  All payments to be made under the Agreementshall be made in same day (or immediately available) and freely transferablefunds and, unless otherwise specified, shall be delivered to such office ofsuch bank, and in favor of such account as shall be specified by the Partyentitled to receive such payment in Part IV of the Schedule or in a noticegiven in accordance with Section 11.4.

 

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11.12       Amendments.  No amendment, modification or waiver of theAgreement will be effective unless in writing executed by each of the Parties; providedthat the Parties may agree in a Confirmation that complies with Section 2.3 toamend the Agreement solely with respect to the Option that is the subject ofthe Confirmation.

 

11.13       Credit Support.  A Credit Support Document between theParties may apply to obligations governed by the Agreement.  If the Parties have executed a CreditSupport Document, such Credit Support Document shall be subject to the terms ofthe Agreement and is hereby incorporated by reference in the Agreement.  In the event of any conflict between aCredit Support Document and the Agreement, the Agreement shall prevail, exceptfor any provision in such Credit Support Document in respect of governing law.

 

11.14       Adequate Assurances.  If the Parties have so agreed in Part XI ofthe Schedule, the failure by a Party to give adequate assurances of its abilityto perform any of its obligations under the Agreement within two (2) BusinessDays of a written request to do so when the other Party has reasonable groundsfor insecurity shall be an Event of Default under the Agreement.

 

11.15       Correction of Confirmations.  Unless either Party objects to the termscontained in any Confirmation sent by the other Party or sends a correctedConfirmation within three (3) Business Days of receipt of such Confirmation, orsuch shorter time as may be appropriate given the Value Date of an FXTransaction, the terms of such Confirmation shall be deemed correct andaccepted absent manifest error.  If theParty receiving a Confirmation sends a corrected Confirmation within such three(3) Business Days, or shorter period, as appropriate, then the Party receivingsuch corrected Confirmation shall have three (3) Business Days, or shorterperiod, as appropriate, after receipt thereof to object to the terms containedin such corrected Confirmation.

 

SECTION12.         LAW AND JURISDICTION

 

12.1         Governing Law.  The Agreement shall be governed by, andconstrued in accordance with, the laws of the jurisdiction set forth in PartXII of the Schedule without giving effect to conflict of laws principles.

 

12.2         Consent to Jurisdiction.  (a) With respect to any Proceedings, each Party irrevocably (i) submits tothe non-exclusive jurisdiction of the courts of the jurisdiction set forth inPart XIII of the Schedule and (ii) waives any objection which it may have at anytime to the laying of venue of any Proceedings brought in any such court,waives any claim that such Proceedings have been brought in an inconvenientforum 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 eitherParty from bringing Proceedings in any other jurisdiction nor will the bringingof Proceedings in any one or more jurisdictions preclude the bringing ofProceedings in any other jurisdiction.

 

(b)  Each Party irrevocably appoints the agentfor service of process (if any) specified with respect to it in Part XIV of theSchedule.  If for any reason any Party’sprocess agent is unable to act as such, such Party will promptly notify theother Party and within thirty (30) days will appoint a substitute process agentacceptable to the other Party.

 

12.3         Waiver of Jury Trial.  Each Party irrevocably waives any and allright to trial by jury in any Proceedings.

 

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12.4         Waiver of Immunities.  Each Party irrevocably waives, to thefullest extent permitted by applicable law, with respect to itself and itsrevenues and assets (irrespective of their use or intended use), all immunityon the grounds of sovereignty or other similar grounds from (i) suit, (ii)jurisdiction of any court, (iii) relief by way of injunction, order forspecific performance or for recovery of property, (iv) attachment of its assets(whether before or after judgment) and (v) execution or enforcement of anyjudgment to which it or its revenues or assets might otherwise be entitled inany Proceedings in the courts of any jurisdiction and irrevocably agrees, tothe extent permitted by applicable law, that it will not claim any suchimmunity in any Proceedings.

 

 
|   | **MORGAN STANLEY & CO. INCORPORATED** |
|--------|-------------------------------------------|
|   |                                      |   |
|   |                                      |   |
|   | By                                        |   |   |
|   | Name:                                     |   |
|   | Title:                                    |   |
|   |                                      |   |
|   | **MILLBURN GLOBAL MACRO TRUST**           |
|   |                                      |   |
|   |                                      |   |
|   | By                                        |   |   |
|   | Name:                                     | Gregg  Buckbinder |
|   | Title:                                    | Chief  Operating Officer |
|   |                                      | Millburn  Ridgefield Corporaton |
|   |                                      | Managing  Owner |
|        |                                           |  |  |  |

 

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# SCHEDULE

 

Schedule to theInternational Foreign Exchange and Options Master Agreement

dated as of June 11, 2002(the “Agreement”)

between **MorganStanley & Co. Incorporated** (“Party A”)

and  **Millburn Global Macro Trust** (“Party B”).

 

PartI.                                                                 Scope of the Agreement

 

The Agreementshall apply to all FX Transactions outstanding between any two DesignatedOffices of the Parties on the Effective Date.

 

PartII.                                                             Designated Offices

 

Each of the following shall be a Designated Office:

 

Party A:  New York

 

Party B: Greenwich Connecticut

 

Each Party (the“first Party”) that enters into an FX Transaction through a Designated Officeother than its head or home office represents to the other Party (the “secondParty”) that, notwithstanding the place of booking office or jurisdiction ofincorporation or organization of the first Party, the obligations of the firstParty are the same as if it had entered into the FX Transaction through itshead or home office.  Thisrepresentation will be deemed to be repeated by the first Party on each date onwhich it enters into an FX Transaction.

 

Part III.                                                         Notices

 

If sent to Party A:

 

Address:         Morgan Stanley& Co. Incorporated

1585Broadway, 4th floor

New York, New York 10036

 

Telephone Number:             (212)761-2700

Telex Number:                                  6801048    (Answerback: FXMS)

Facsimile Number:                (212)761-0296

SWIFT Number:                              MSNYUS33

Name of Individual or Department

to whom Notices are to be sent: Foreign Exchange Trading Department

 

If sent to Party B

 

Address:         MillburnRidgefield Corporation

411West Putnam Avenue

Greenwich,CT 06830

 

Telephone Number:  203-625-7554

Telex Number:

Facsimile Number:  203-625-8220

SWIFT Number:

Name of Individual or Department to whom Notices are to be sent: Attn,:George E. Crapple

 

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Part IV.                                                         Payment Instructions

 

ý    Nameof Bank and Office, Account Number and Reference with respect to relevantCurrencies:  As specified in therelevant Confirmation or as otherwise advised.

 

 

ý    Withrespect to each Party, as may be set forth in such Standard SettlementInstructions as may be specified by such Party in a notice given in accordancewith Section 11.4.

 

Part V.                                                             Netting

 

A.                                                                                   Discharge of Options

 

Not Applicable

 

B.                                                                                     Netting of Premiums

 

Not Applicable

 

C.                                                                                     Settlement Netting Offices

 

Each of the following shall be aSettlement 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 theAgreement, obligations to make payments pursuant to FX Transactions shall onlybe netted, satisfied and discharged against obligations to make paymentsarising out of the same or other FX Transactions between a pair of SettlementNetting Offices.

 

D.                                                                                    Novation Netting Offices

 

Each of the following shall be a Novation Netting Office:

Not applicable.

 

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 ofFX Transactions

 

A.                                                                                   Automatic Exercise of Options

 

Not Applicable

 

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B.                                                                                     Cash Settlement of FX Transactions

 

The following provision shall apply:

 

The definition of FX Transaction in Section 1 shallinclude foreign exchange transactions for the purchase and sale of one Currencyagainst another but which shall be settled by the delivery of only one Currencybased on the difference between exchange rates as agreed by the Parties asevidenced in a Confirmation.  Section6.1 is modified so that only one Currency shall be delivered for any such FXTransaction in accordance with the formula agreed by the Parties.  Section 8.1(b)(i)(A) is modified so that theClose-Out Amount for any such FX Transaction for which the cash settlementamount has been fixed on or before the Close-Out Date pursuant to the terms ofsuch FX Transaction shall be equal to the Currency Obligation arising therefrom(increased by adding interest in the manner provided in clause (A)(2) if theValue Date precedes the Close-Out Date) and for any such FX Transaction forwhich the cash settlement amount has not yet been fixed on the Close-Out Datepursuant to the terms of such FX Transaction, the Close-Out Amount shall be asreasonably 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 Eventof 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 shallbe modified by deleting the words “, or becomes capable at any time of beingdeclared,” after the words “and remains unpaid after any applicable graceperiod has elapsed, or (B) becomes”.

 

The following provisions which are checked shallconstitute Events of Default:

 

o  (a)     occurrenceof garnishment or provisional garnishment against a claim against theDefaulting Party acquired by the Non-Defaulting Party.  The automatic termination provision ofSection 8.1 shall not apply to either Party that is a Defaulting Party inrespect of this Event of Default.

 

o  (b)     suspensionof payment by the Defaulting Party or any Credit Support Provider in accordancewith the Bankruptcy Law or the Corporate Reorganization Law in Japan.  The automatic termination provision ofSection 8.1 shall not apply to either Party that is a Defaulting Party inrespect of this Event of Default.

 

o  (c)     disqualificationof the Defaulting Party or any Credit Support Provider by any relevant billclearing house located in Japan.  Theautomatic termination provision of Section 8.1 shall not apply to either Partythat is a Defaulting Party in respect of this Event of Default.

 

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Part X.                                                            Automatic Termination

 

The automatic termination provision of Section 8.1shall 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 8.1shall [shall not] apply to Party B as Defaulting Party in respect of clause(ii), (iii) or (iv) of the definition of Event of Default ; provided, howeverwhere the Event of Default specified in clause (ii), (iii), or (iv) is governedby a system of law which does not permit termination to take place upon orafter the occurrence of the relevant Event of Default in accordance with theterms of the Agreement, then the automatic termination provisions of Section8.1 will apply to Party B.

 

Part XI.                                                        Adequate Assurances

 

Adequate Assurances under Section 11.14 shall notapply to the Agreement.

 

Part XII.                                                    Governing Law

 

In accordance with Section 12.1 of the Agreement, theAgreement shall be governed by the laws of the State of New York.

 

Part XIII.                                                Consent to Jurisdiction

 

In accordance with Section 12.2 of the Agreement, eachParty irrevocably submits to the non-exclusive jurisdiction of the courts ofthe State of New York and the United States District Court located in theBorough of Manhattan in New York City.

 

Part XIV.                                                Agent for Service of Process

 

Party A appoints the following as its agent forservice of process in any Proceedings in the State of New York:  Not applicable.

 

Party B appoints the following as its agent forservice of process in any Proceedings in State of New York: Not applicable.

 

Part XV.                                                    Certain Regulatory Representations

 

A.                                                                                   The following FDICIA representation shall apply:

 

1.                           Party Arepresents and warrants that it qualifies as a “financial institution” withinthe meaning of the Federal Deposit Insurance Corporation Improvement Act of1991 (“FDICIA”) by virtue of being a:

 

ý  broker or dealer within the meaning ofFDICIA;

 

o  depository institution within the meaning ofFDICIA;

 

ý  futures commission merchant within themeaning of FDICIA;

 

o  “financial institution” within the meaningof Regulation EE (see below).

 

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2.                           Party Bhereby represents and warrants that it qualifies as a “financial institution”by virtue of being a:

 

o  broker or dealer within the meaning ofFDICIA;

 

o  depository institution within the meaning ofFDICIA;

 

o  futures commission merchant within themeaning of FDICIA;

 

o  “financial institution” within the meaningof Regulation EE (see below).

 

3.                           A Partyrepresenting that it is a “financial institution” as that term is defined in 12C.F.R. Section 231.3 of Regulation EE issued by the Board of Governors of theFederal Reserve System (“Regulation EE”) represents that:

 

(a)                       itis willing to enter into “financial contracts” as a counterparty “on both sidesof one or more financial markets” as those terms are used in Section 231.3 ofRegulation EE; and

 

(b)                      duringthe 15-month period immediately preceding the date it makes or is deemed tomake this representation, it has had on at least one (1) day during suchperiod, with counterparties that are not its affiliates (as defined in Section231.2(b) of Regulation EE) either:

 

(i)                                     one or more financial contracts of a total grossnotional principal amount of $1 billion outstanding; or

 

(ii)                                  total gross mark-to-market positions (aggregatedacross counterparties) of $100 million; and

 

(c)                       agreesthat it will notify the other Party if it no longer meets the requirements forstatus as a financial institution under Regulation EE.

 

4.                           If bothParties are financial institutions in accordance with the above, the Partiesagree 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 theAgreement shall be a covered contractual payment entitlement or coveredcontractual payment obligation, respectively, as defined in FDICIA.

 

B.                                                                                     The following ERISA representation shall apply:

 

Party B continuously represents that it is not (i) anemployee benefit plan (hereinafter an “ERISA Plan”), as defined in Section 3(3)of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),subject to Tittle I of ERISA or Section 4975 of the Internal Revenue Code of1986, as amended, (ii) a person acting on behalf of an ERISA Plan or (iii) aperson the assets of whom constitute assets of an ERISA Plan.  Party B will provide notice to Party A inthe event that Party B is aware that it is in breach of any aspect of thisrepresentation or is aware that with the passing of time, giving of notice orexpiry of any applicable grace period Party B will breach this representation.

 

C.                                                                                     The following Commodity Exchange Actrepresentation shall apply:

 

It is an “eligible contract participant” under, and asdefined in, Section 1(a)(12) of the Commodity Exchange Act, and was not formedsolely for the purposes of constituting an “eligible contract participant.”

 

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Part XVI.                                                Representations and Warranties:

 

In addition to the representations and warranties setforth in Section 7.1  of this Schedule, each Partyhereby represents and warrants to the other Party on the date hereof and on thedate of each FX Transaction, as the case may be, that:  (a) it is a sophisticated investor able toevaluate and assume the risks associated with transactions in currencies ascontemplated by the Agreement; (b) it is not relying upon any representations(whether written or oral) of the other Party other than the representationsexpressly set forth in the Agreement, this Schedule, any Credit SupportDocument or in any Confirmation; (c) its execution and delivery of theAgreement, and its performance of its obligations hereunder, do not and willnot conflict with any law or regulation of the jurisdiction of its organizationor 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 lienor encumbrance on any of its property or assets under any agreement orinstrument to which it is a party or by which its assets are bound; (d) noconsent, authorization or approval (including exchange control approval) orother action by, and no notice to or filing with, any person or entity,including any governmental authority or regulatory body, other than any alreadyobtained, made or filed and remaining in full force and effect, and theconditions of which have been duly complied with, is required in connectionwith the performance of its obligations under the Agreement; and (e) there areno actions, proceedings or claims pending or, to the best of its knowledge,threatened, the adverse determination of which might have a materially adverseeffect on its ability to perform its obligations under, or affect the validityor enforceability of, the Agreement.

 

Part XVII.                                            Agreement Superseding

 

A new Section 11.16 shall be added to the Agreementwhich shall read as follows:  “TheAgreement shall supersede any other agreement between the Parties with respectto the subject matter hereof.”

 

Part XVIII.             1998 FXand Currency Option Definitions.

 

The 1998 FX and Currency Option Definitions aspublished by ISDA, EMTA and The Foreign Exchange Committee (the “Definitions”)shall be applicable to each FX Transaction under the Agreement, including anyFX Transaction outstanding on the date hereof, subject to the following:

 

A.                                                                                   Definitions

 

1.                                       Theterm “Agreement” in Section 2.2 of the Agreement shall include the Agreement asmodified and supplemented by this Part.

 

2.                                       Theterm “FX Transaction” in the Definitions or in a Confirmation shall in allcases be considered references to an “FX Transaction” under the Agreement.

 

3.                                       Allterms in this Part shall have the meanings given them above or in theDefinitions, unless not defined above or in the Definitions, in which case theterm shall have the meaning given in the Agreement.

 

B.                                                                                     Scope

 

1.                                       Notwithstandingthe absence of any reference to the Definitions in a Confirmation, this Partand the Definitions shall be applicable to any FX Transaction covered by theAgreement; provided that the Parties may agree otherwise for any Transaction asevidenced by a Confirmation that complies with Section 2.3 of the Agreement.

 

2.                                       Inthe event of any inconsistency between the Definitions and a Confirmation, theterms of the Confirmation shall govern for the purpose of the relevantTransaction.  In the event of any inconsistencybetween the Definitions and the Agreement, the Definitions shall prevail.

 

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C.                                                                                     Confirmations

 

Notwithstanding Sections 2.4 and 11.12 of theAgreement, in the event of any inconsistency between the terms of aConfirmation for an FX Transaction and the Agreement, the terms of theConfirmation shall prevail.

 

D.                                                                                    DisruptionEvents

 

With respect to any Disruption Event that isapplicable to an FX Transaction pursuant to the Definitions or as otherwise agreedby the Parties as evidenced by a Confirmation, Section 9 of the Agreement shallnot be applicable in respect of such FX Transaction, and the Parties shall besubject to the Disruption Fallbacks (including but not limited to No FaultTermination) specified as applicable pursuant to the Definitions or suchConfirmation.

 

E.                                                                                      Miscellaneous

 

The provisions of Part VI.B of this Schedule relatingto cash settlement of FX Transactions shall apply to Non-Deliverable FXTransactions.

 

Part XIX.                                               ForceMajeure, Act of State, Illegality and Impossibility

 

Section 9 of the Agreement is hereby amended bydeleting it in its entirety and inserting in its place the followingreplacement Section:

 

“9.1 LiquidationRights.  If a Force Majeure Eventoccurs and is still in effect, then (but subject to Section 9.2) either Partymay, by notice to the other Party on any day or days after the Waiting Periodexpires, require the close-out and liquidation of the Currency Obligationsunder any or all of the Affected Transactions in accordance with the provisionsof Section 8.1 and, for such purposes, the Party unaffected by such ForceMajeure Event shall perform the calculation required under Section 8.1 as if itwere the Non-Defaulting Party (or, if both Parties are Affected Parties, butParties shall so calculate in respect of all Affected Transactions which eitherParty determines to liquidate and the average of the amounts so determinedshall be the relevant amount in respect of each Affected Transaction, exceptthat if a Party fails to so determine an amount, the amount determined by theother Party shall govern).  If a Partyelects to so liquidate less than all Affected Transactions, it may liquidateadditional Affected Transactions on a later day or days if the relevant Force MajeureEvent is still in effect.

 

9.2  Waiting Period.  If the Value Date of an FX Transaction whichis an Affected Transaction, under Section 9.1 falls during the Waiting Periodof the relevant Force Majeure Event, then such Value Date will be deferred tothe first Business Day (or the first day which, but for such event, would havebeen a Business Day) after the end of that Waiting Period (or, in the case ofSplit Settlement, the first Local Banking Day or the first day which, but forsuch event, would have been a Local Banking Day, after the end of the WaitingPeriod).  Compensation for this deferralshall be at then current market rates as determined in a commerciallyreasonable manner by the calculating Party or Parties under Section 9.

 

9.3  Notice by Affected Party.  If a Force Majeure Event has occurred, anAffected Party shall promptly give notice thereof to the other Party.

 

9.4  Force Majeure Event and Event of Default.  Nothing in this Section 9 shall be taken asindicating that the Party treated as the Defaulting Party for the purpose ofcalculations required by Section 8.1 has committed any breach or default.  If an event occurs that would otherwiseconstitute both a Force Majeure Event and an Event of Default, that event willbe treated as a Force Majeure Event and will not constitute an Event ofDefault.”

 

In addition, the following definitions shall be addedto Section 1 of the Agreement:

 

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““Force Majeure Event”,on any day determined as if such day were a Value Date of an FX Transaction(even if it is not), means (i) either Party, by reason of force majeure or actof state, is prevented from or hindered or delayed in delivering or receiving,or it is impossible to deliver or receive, any Currency in respect of aCurrency Obligation, and which event is beyond the control of such Party andwhich such Party, with reasonable diligence, cannot overcome, or (ii) it isunlawful for either Party to deliver or receive a payment of any Currency inrespect of a Currency Obligation.  AParty whose delivery or receipt of Currency has been or would be so prevented,hindered or delayed or made unlawful or impossible is an “Affected Party”, andan FX Transaction under which performance has been or would be so prevented,hindered or delayed or made unlawful or impossible is an “AffectedTransaction”, unless the Parties have expressly agreed in an Agreement, anotherwriting or in regard to a particular FX Transaction that other disruptionevents or disruption fallbacks will apply to that FX Transaction; in suchevent, that FX Transaction will be subject to such disruption events ordisruption fallbacks as the Parties have otherwise agreed.

 

“Waiting Period”,in respect of a Force Majeure Event, means that first three days after suchevent occurs which are Business Days or which, but for such event, would havebeen Business Days.”“

 

Part XX.                                                   Margin and Security

 

A.                                                                                   PartyB shall at all times maintain with Party A cash and securities acceptable toParty A (together, the “Margin”) in order to secure the obligations of Party Bunder all open FX Transactions entered into under the Agreement.  The amount of Margin which Party B shallmaintain with Party A shall be determined by Party A in its reasonable judgment(which determination shall be conclusive in the absence of manifest error), ona risk adjusted basis, taking into account historical volatility, imputedvolatility and/or such other factors as Party A reasonably deems relevant tothis determination (the “Aggregate Margin Requirement”).  On or prior to the date of the Agreement,Party B shall have established a pledge account with Party A (the “Account”)for the purpose of holding custody of the Margin in accordance with the provisionsof the Agreement. Party B’s failure to deposit Margin or to establish theAccount as required herein shall be an Event of Default for all purposes underthe Agreement (it being understood that there shall be no grace period withrespect to obligations of Party B pursuant to this Part XX.  Party A shall settle all FX Transactionswith Party B on a secured basis only, such that Party A’s payment obligationsto Party B shall be made (a) prior to receipt of Party B’s counterpaymentthereunder, only to the extent that the amount by which Margin in the Accountexceeds the Aggregate Margin Requirement is greater than such counterpayment orthe U.S. Dollar equivalent thereof, or (b) after Party A has confirmed receiptof Party B’s counterpayment thereunder.

 

B.                                                                                     Wheneversuch Aggregate Margin Requirement shall exceed the market value of Margin ondeposit with Party A in the Account as determined by Party A at such time inits reasonable judgment and which determination shall be conclusive in theabsence of manifest error (the “Margin Balance”, and the difference betweensuch 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.                                                                                     Infurtherance of the foregoing, as security for the prompt and complete paymentwhen due and the performance by Party B of all of its obligations to Party Aunder the Agreement, Party B hereby grants to Party A a continuing firstpriority security interest in and to all of Party B’s right, title and interestin and to the Margin, the Account, all financial assets, investment propertyand other property and assets which are deposited from time to time in, orcredited from time to time to, the Account, all security entitlements inrespect thereof, all income and profits thereon, all interest, dividends andother payments and distributions with respect thereto, and all proceeds of anyof the foregoing (the “Margin Collateral”). In addition, Party B hereby grants to Party A and its affiliates a firstpriority security interest in and to any property of Party B at any time heldby Party A or any affiliate of Party A for any purpose, including, withoutlimitation, any property of Party B held in any account with Party A or any affiliateof Party A, any financial assets,

 

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investmentproperty and other property and assets which are deposited from time to timein, or credited from time to time to, any such account, all security entitlementsin respect thereof, all income and profits thereon, all interest, dividends andother payments and distributions with respect thereto, and all proceeds of anyof the foregoing (the “Collateral”), to secure all obligations of Party B toParty A.  If Collateral was delivered inconnection with a particular agreement between Party B and Party A or any ofits affiliates, then such Collateral shall secure first the obligations ofParty B with respect to such agreement and second all other obligations of PartyB to Party A or any of its affiliates (in such order as Party A shall determinein its sole discretion).  Party A andits affiliates and Party B hereby each acknowledge and agree that each of PartyA and its affiliates which holds Collateral holds such Collateral for itselfand also as agent and bailee for all other of Party A and its affiliates whichare secured parties hereunder or under any agreement between Party B and PartyA or any of its affiliates.  If an Eventof Default hereunder shall occur, then each of Party A and its affiliates shallbe entitled to retain or sell all Collateral as security for Party B’sobligations, even if otherwise required pursuant to the terms of an agreementor otherwise to deliver any Collateral to Party B or Party B’s order. Theparties agree that Party A and its affiliates shall have the rights andremedies of a secured creditor under the New York Uniform Commercial Code (the“UCC”) and under any other applicable law or agreement to exercise any rightwith respect to the Margin Collateral and the Collateral subject to thesecurity interest granted under the Agreement. Each of Party A or any of its affiliates shall have free andunrestricted use of any Margin Collateral and/or Collateral which it holdshereunder, including, without limitation, the right, from time to time andwithout notice to Party B, to sell, pledge, repledge, hypothecate,rehypothecate, assign, invest, use, commingle or otherwise dispose of, orotherwise use in its business any Margin Collateral and/or Collateralseparately 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 sumon terms which may otherwise impair the right of Party B to redeem such MarginCollateral and/or Collateral, and free from any other right of claim of anynature whatsoever of Party B, and without retaining possession and control fordelivery a like amount of similar securities, commodities, or other property.

 

D.                                                                                    PartyB represents and warrants that it owns the Margin Collateral and the Collateralto be pledged and assigned to each of Party A and its affiliates hereunder andunder 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 respectto, any of the Margin Collateral or the Collateral, nor will it create, incuror permit to exist any lien on or with respect to any of the Margin Collateralor the Collateral, any interest therein, or any proceeds thereof, except forthe security interests created under this Agreement or otherwise under anyagreement 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 Collateralby Party B that is not permitted under the foregoing sentence shall be null andvoid and shall constitute an Event of Default hereunder and under any agreementbetween Party B and Party A or any of its affiliates immediately prior to thetaking of any such action,  if Party Aso deems (it being understood that there shall be no grace period with respectto obligations of Party B pursuant to this Part XX.

 

E.                                                                                      PartyB shall, in its sole expense and as Party A in its sole discretion may deemnecessary or advisable from time to time, (i) to create, preserve, protect andperfect the security interests granted under the Agreement and (ii) to enableParty A to exercise and enforce its rights with respect to such securityinterests, do all acts and things and execute and deliver all documents and instrumentsin such manner and form as Party A may require, including without limitationUCC financing statements and continuation statements.  Party B hereby appoints Party A as its true and lawfulattorney-in-fact, including without limitation, to sign and file such documentsand instruments on Party B’s behalf and without Party B’s signature; suchappointment, being coupled with an interest, shall be irrevocable.  Without limitation on the foregoing, Party Bagrees to take such action as Party A in its sole discretion may deem necessaryor advisable in the event of any change in applicable law, including, withoutlimitation, Articles 8 and 9 of the UCC and the Regulations of the Departmentof the Treasury and other governmental bodies governing transfers of interestsin U.S. marketable treasury securities in book-entry form.

 

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F.                                                                                      Theparties hereto agree that each of the Account and any account in which anyCollateral is held or to which any Collateral is credited (a “CollateralAccount”) is a “securities account” within the meaning of Article 8 of the UCCand that all property and assets (including, without limitation, cash) held inor credited to (i) the Account or (ii) any Collateral Account shall be treatedas a “financial asset” for purposes of Article 8 of the UCC.

 

Part XXI.                                               Miscellaneous

 

Trading Authorization forFX Transactions and Options

 

Party B herebymakes the following additional representations and warranties, which shallcontinue during the term of any FX Transaction and Option:

 

(i)                                     PartyB has duly authorized Millburn Global Macro Trust (the “Agent”) to enterinto FX Transactions and Options on its behalf and to take all requisite actionon behalf of Party B contemplated by and in connection with the Agreement.  Party B has designated the Agent as itsagent for performance of its obligations to Party A and for receipt ofperformance by Party A of its obligations to Party B in connection with any FXTransactions and Options under the Agreement (including, among other things, asagent for Party B in connection with transfers of cash or other property and asagent for giving and receiving of all notices under the Agreement).  Party B hereby agrees that it shall have inconnection with any FX Transaction and Option entered into by the Agent on itsbehalf, the rights, responsibilities, privileges and obligations of a “Party”directly entering into such FX Transactions with Party A under the Agreement.

 

(ii)                                  PartyB shall indemnify Party A against any damages incurred by Party A as aconsequence of the failure of the above representations made by Party B to betrue at any time made or deemed to be made, or for Agent’s failure to act ascontemplated by the Agreement.

 

(iii)                               Thisauthorization shall continue in full force and effect, and may be relied uponby Party A, unless terminated by Party B by giving two (2) Business Day’swritten notice (by telex or facsimile) of such termination to Party A. Party Bwill remain fully responsible for any transactions effected by Party A forParty B prior to the valid termination of this authority.

 

 
| **MORGAN  STANLEY& CO. INCORPORATED**, as Party A |   |                             |
|-------------------------------------------------------|--------|----------------------------------|
|                                                  |   |                             |
|                                                  |   |                             |
| By                                                    |   |                             |   |
|                                                  | Name:  |                             |
|                                                  | Title: |                             |
|                                                  |   |                             |
|                                                  |   |                             |
| **MILLBURN GLOBAL MACRO TRUST**, as Party B           |   |                             |
|                                                  |   |                             |
|                                                  |   |                             |
| By                                                    |   |                             |   |
|                                                  | Name:  | Gregg Buckbinder                 |
|                                                  | Title: | Chief Operating Officer          |
|                                                  |   | Millburn Ridgefield  Corporation |
|                                                  |   | Managing Owner                   |
|                                                       |        |                                  |  |  |  |  |

 

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SCHEDULE

 

Schedule to theInternational Foreign Exchange and Options Master Agreement

dated as of June 11, 2002(the “Agreement”)

between **MorganStanley Capital Group Inc**. (“Party A”)

and  **Millburn Global Macro Trust** (“Party B”).

 

Part I.                                                                 Scope of the Agreement

 

The Agreement shall apply to all FX Transactionsoutstanding between any two Designated Offices of the Parties on the EffectiveDate.

 

The Agreement shall apply to all Options outstandingbetween any two Designated Offices of theParties on the Effective Date.

 

PartII.                                                             Designated Offices

 

Each of the following shall be a Designated Office:

 

Party A: New York

 

Party B:

 

Each Party (the “first Party”) that enters into an FXTransaction or Option through a Designated Office other than its head or homeoffice represents to the other Party (the “second Party”) that, notwithstandingthe place of booking office or jurisdiction of incorporation or organization ofthe first Party, the obligations of the first Party are the same as if it hadentered into the FX Transaction or Option through its head or home office.  This representation will be deemed to berepeated by the first Party on each date on which it enters into an FXTransaction or Option.

 

PartIII.                                                         Notices

 

If sent to Party A:

 

Address:                Morgan Stanley Capital GroupInc.

1585 Broadway, 4th floor

New York, New York 10036

 

Telephone Number:             (212)761-2700

Telex Number:                                       6801048    (Answerback:    FXMS)

Facsimile Number:                (212)761-0296

SWIFT Number:                                   MSCGUS33,

Name of Individual or Department

to whom Notices are to be sent:  Foreign Exchange Trading Department

 

If sent to Party B:

 

Address:                Millburn Ridgefield Corporation

411 West Punam Avenue

Greenwich, CT 06830

 

Telephone Number:             203-625-7554

 

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Telex Number:

Facsimile Number:                203-625-8220

SWIFT Number:

Name of Individual or Department to whom Notices are to be sent:

Attn: George E. Crapple

 

PartIV.                                                         Payment Instructions

 

ý    Nameof Bank and Office, Account Number and Reference with respect to relevantCurrencies:  As specified in therelevant Confirmation or as otherwise advised.

 

 

ý    Withrespect to each Party, as may be set forth in such Standard SettlementInstructions as may be specified by such Party in a notice given in accordancewith Section 11.4.

 

PartV.                                                             Netting

 

A.                                                                                   Discharge of Options

 

Section 4.1 shall apply to Options other than Barrier Options.

 

B.                                                                                     Netting of Premiums

 

Section 4.2 shallapply 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 theAgreement, obligations to make payments pursuant to FX Transactions shall onlybe netted, satisfied and discharged against obligations to make paymentsarising out of the same or other FX Transactions between a pair of SettlementNetting Offices and obligations to make payments pursuant to Options (includingexercised Options) shall only be netted, satisfied and discharged againstobligations 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:

 

Not applicable.

 

E.                                                                                      Matched Pair Novation Netting Offices

 

Each of the following shall be a Matched Pair Novation Netting Office:

 

Not applicable.

 

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PartVI.                                                         Automatic Exercise of Options; Cash Settlement ofFX Transactions

 

A.                                                                                   Automatic Exercise of Options

 

Automatic Exercise of certain In-the-money Optionspursuant to Section 5.3 shall apply to Party A as Buyer.

 

Automatic Exercise of certain In-the-money Optionspursuant to Section 5.3 shall apply to Party B as Buyer.

 

B.                                                                                     Cash Settlement of FX Transactions

 

The following provision shall apply:

 

The definition of FX Transaction in Section 1 shallinclude foreign exchange transactions for the purchase and sale of one Currencyagainst another but which shall be settled by the delivery of only one Currencybased on the difference between exchange rates as agreed by the Parties asevidenced in a Confirmation.  Section6.1 is modified so that only one Currency shall be delivered for any such FXTransaction in accordance with the formula agreed by the Parties.  Section 8.1(b)(i)(A) is modified so that theClose-Out Amount for any such FX Transaction for which the cash settlementamount has been fixed on or before the Close-Out Date pursuant to the terms ofsuch FX Transaction shall be equal to the Currency Obligation arising therefrom(increased by adding interest in the manner provided in clause (A)(2) if theValue Date precedes the Close-Out Date) and for any such FX Transaction forwhich the cash settlement amount has not yet been fixed on the Close-Out Datepursuant to the terms of such FX Transaction, the Close-Out Amount shall be asreasonably determined by Party A in accordance with market practice.

 

PartVII.                                                     Base Currency

 

Party A’s Base Currency is U.S. Dollars.

 

Party B’s Base Currency is U.S. Dollars.

 

PartVIII.                                                 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.

 

PartIX.                                                        Additional Events of Default

 

Clause (x) of the definition of Event of Default shallbe modified by deleting the words “, or becomes capable at any time of beingdeclared,” after the words “and remains unpaid after any applicable graceperiod has elapsed, or (B) becomes”.

 

The following provisions which are checked shall constitute Events ofDefault:

 

o  (a)     occurrenceof garnishment or provisional garnishment against a claim against theDefaulting Party acquired by the Non-Defaulting Party.  The automatic termination provision ofSection 8.1 shall not apply to either Party that is a Defaulting Party inrespect of this Event of Default.

 

o  (b)     suspensionof payment by the Defaulting Party or any Credit Support Provider in accordancewith the Bankruptcy Law or the Corporate Reorganization Law in Japan.  The automatic termination provision ofSection 8.1 shall not apply to either Party that is a Defaulting Party inrespect of this Event of Default.

 

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o  (c)     disqualificationof the Defaulting Party or any Credit Support Provider by any relevant billclearing house located in Japan.  Theautomatic termination provision of Section 8.1 shall not apply to either Partythat is a Defaulting Party in respect of this Event of Default.

 

PartX.                                                            Automatic Termination

 

The automatic termination provision of Section 8.1shall 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 8.1shall [shall not] apply to Party B as Defaulting Party in respect of clause(ii), (iii) or (iv) of the definition of Event of Default ; provided, howeverwhere the Event of Default specified in clause (ii), (iii), or (iv) is governedby a system of law which does not permit termination to take place upon or afterthe occurrence of the relevant Event of Default in accordance with the terms ofthe Agreement, then the automatic termination provisions of Section 8.1 willapply to Party B.

 

PartXI.                                                        Adequate Assurances

 

Adequate Assurances under Section 11.14 shall not apply to theAgreement.

 

PartXII.                                                    Governing Law

 

In accordance with Section 12.1 of the Agreement, the Agreement shallbe governed by the laws of: the State of New York.

 

PartXIII.                                                Consent to Jurisdiction

 

In accordance withSection 12.2 of the Agreement, each Party irrevocably submits to thenon-exclusive jurisdiction of the courts ofthe State of New York and the United States District Court located in theBorough of Manhattan in New York City.

 

PartXIV.                                                Agent for Service of Process

 

Party A appoints the following as its agent forservice of process in any Proceedings in the State of New York:  Not applicable.

 

Party B appoints the following as its agent for service of process inany Proceedings in State of New York: Not applicable.

 

PartXV.                                                    Certain Regulatory Representations

 

A.                                                                                   The following FDICIA representation shall apply:

 

1.                                       PartyA represents and warrants that it qualifies as a “financial institution” withinthe meaning of the Federal Deposit Insurance Corporation Improvement Act of1991 (“FDICIA”) by virtue of being a:

 

o  brokeror dealer within the meaning of FDICIA;

 

o depository institution within the meaning of FDICIA;

 

o  futurescommission merchant within the meaning of FDICIA;

 

ý “financial institution” within the meaning of Regulation EE (see below)

 

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2.                                       PartyB hereby represents and warrants that it qualifies as a “financial institution”by virtue of being a:

 

o  brokeror dealer within the meaning of FDICIA;

 

o depository institution within the meaning of FDICIA;

 

o  futurescommission merchant within the meaning of FDICIA;

 

o “financial institution” within the meaning of Regulation EE (see below).

 

3.                                       AParty representing that it is a “financial institution” as that term is definedin 12 C.F.R. Section 231.3 of Regulation EE issued by the Board of Governors ofthe 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 thoseterms are used in Section 231.3 of Regulation EE; and

 

(b)                                 during the 15-month period immediately precedingthe date it makes or is deemed to make this representation, it has had on atleast one (1) day during such period, with counterparties that are not itsaffiliates (as defined in Section 231.2(b) of Regulation EE) either:

 

(i)                                     one or more financial contracts of a total grossnotional principal amount of $1 billion outstanding; or

 

(ii)                                  total gross mark-to-market positions (aggregatedacross counterparties) of $100 million; and

 

(c)                                  agrees that it will notify the other Party if itno longer meets the requirements for status as a financial institution underRegulation EE.

 

4.                                       Ifboth Parties are financial institutions in accordance with the above, theParties agree that the Agreement shall be a netting contract, as defined in 12U.S.C. Section 4402(14), and each receipt or payment or delivery obligationunder the Agreement shall be a covered contractual payment entitlement orcovered contractual payment obligation, respectively, as defined in FDICIA.

 

D.                                                                                    The following ERISA representation shall apply:

 

Party B continuously represents that it is not (i) anemployee benefit plan (hereinafter an “ERISA Plan”), as defined in Section 3(3)of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),subject to Tittle I of ERISA or Section 4975 of the Internal Revenue Code of1986, as amended, (ii) a person acting on behalf of an ERISA Plan or (iii) aperson the assets of whom constitute assets of an ERISA Plan.  Party B will provide notice to Party A inthe event that Party B is aware that it is in breach of any aspect of thisrepresentation or is aware that with the passing of time, giving of notice orexpiry of any applicable grace period Party B will breach this representation.

 

E.                                                                                      The following Commodity Exchange Actrepresentation shall apply:

 

It is an “eligible contractparticipant” under, and as defined in, Section 1(a)(12) of the CommodityExchange Act, and was not formed solely for the purposes of constituting an“eligible contract participant.”

 

Part XVI.                                                Representationsand Warranties:

 

In addition to the representations and warranties setforth in Section 7.1  of this Schedule, each Partyhereby represents and warrants to the other Party on the date hereof and on thedate of each FX Transaction or

 

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Option, as the case may be, that:  (a) it is a sophisticated investor able toevaluate and assume the risks associated with transactions in currencies ascontemplated by the Agreement; (b) it is not relying upon any representations(whether written or oral) of the other Party other than the representationsexpressly set forth in the Agreement, this Schedule, any Credit SupportDocument or in any Confirmation; (c) its execution and delivery of theAgreement, and its performance of its obligations hereunder, do not and willnot conflict with any law or regulation of the jurisdiction of its organizationor 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 lienor encumbrance on any of its property or assets under any agreement orinstrument to which it is a party or by which its assets are bound; (d) noconsent, authorization or approval (including exchange control approval) orother action by, and no notice to or filing with, any person or entity,including any governmental authority or regulatory body, other than any alreadyobtained, made or filed and remaining in full force and effect, and theconditions of which have been duly complied with, is required in connectionwith the performance of its obligations under the Agreement; and (e) there areno actions, proceedings or claims pending or, to the best of its knowledge,threatened, the adverse determination of which might have a materially adverseeffect on its ability to perform its obligations under, or affect the validityor enforceability of, the Agreement.

 

Part XVII.                                            Agreement Superseding

 

A new Section 11.16 shall be added to the Agreementwhich shall read as follows:  “TheAgreement shall supersede any other agreement between the Parties with respectto the subject matter hereof.”

 

Part XVIII.                                        1998FX and Currency Option Definitions.

 

The 1998 FX and Currency Option Definitions aspublished 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, subjectto the following:

 

A.                                                                                   Definitions

 

1.                                       Theterm “Agreement” in Section 2.2 of the Agreement shall include the Agreement asmodified and supplemented by this Part.

 

2.                                       Theterm “FX Transaction” and “Currency Option Transaction” in the Definitions orin a Confirmation shall in all cases be considered references to an “FXTransaction” and “Option” under the Agreement.

 

3.                                       Allterms in this Part shall have the meanings given them above or in theDefinitions, unless not defined above or in the Definitions, in which case theterm shall have the meaning given in the Agreement.

 

B.                                                                                     Scope

 

1.                                       Notwithstandingthe absence of any reference to the Definitions in a Confirmation, this Partand the Definitions shall be applicable to any FX Transaction or CurrencyOption Transaction covered by the Agreement; provided that the Parties mayagree otherwise for any Transaction as evidenced by a Confirmation thatcomplies with Section 2.3 of the Agreement.

 

2.                                       Inthe event of any inconsistency between the Definitions and a Confirmation, theterms of the Confirmation shall govern for the purpose of the relevantTransaction.  In the event of anyinconsistency between the Definitions and the Agreement, the Definitions shallprevail.

 

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C.                                                                                     Confirmations

 

Notwithstanding Sections2.4 and 11.12 of the Agreement, in the event of any inconsistency between theterms of a Confirmation for an FX Transaction or Currency Option Transactionand the Agreement, the terms of the Confirmation shall prevail.

 

D.                                                                                    DisruptionEvents

 

With respect to anyDisruption Event that is applicable to an FX Transaction or Currency OptionTransaction pursuant to the Definitions or as otherwise agreed by the Partiesas evidenced by a Confirmation, Section 9 of the Agreement shall not beapplicable in respect of such FX Transaction or Currency Option Transaction,and the Parties shall be subject to the Disruption Fallbacks (including but notlimited to No Fault Termination) specified as applicable pursuant to theDefinitions or such Confirmation.

 

E.                                                                                      Miscellaneous

 

The provisions of PartVI.B of this Schedule relating to cash settlement of FX Transactions shallapply to Non-Deliverable FX Transactions.

 

Part XIX.                                               ForceMajeure, Act of State, Illegality and Impossibility

 

Section 9 of theAgreement is hereby amended by deleting it in its entirety and inserting in itsplace the following replacement Section:

 

“9.1 LiquidationRights.  If a Force Majeure Eventoccurs and is still in effect, then (but subject to Section 9.2) either Partymay, by notice to the other Party on any day or days after the Waiting Periodexpires, require the close-out and liquidation of the Currency Obligationsunder any or all of the Affected Transactions in accordance with the provisionsof Section 8.1 and, for such purposes, the Party unaffected by such ForceMajeure Event shall perform the calculation required under Section 8.1 as if itwere the Non-Defaulting Party (or, if both Parties are Affected Parties, butParties shall so calculate in respect of all Affected Transactions which eitherParty determines to liquidate and the average of the amounts so determinedshall be the relevant amount in respect of each Affected Transaction, exceptthat if a Party fails to so determine an amount, the amount determined by theother Party shall govern).  If a Partyelects to so liquidate less than all Affected Transactions, it may liquidateadditional Affected Transactions on a later day or days if the relevant ForceMajeure Event is still in effect.

 

9.2  Waiting Period.  If the Value Date of an FX Transaction, orthe Settlement Date of an Option, which is an Affected Transaction, underSection 9.1 falls during the Waiting Period of the relevant Force MajeureEvent, then such Value Date or Settlement Date (as applicable) will be deferredto the first Business Day (or the first day which, but for such event, wouldhave been a Business Day) after the end of that Waiting Period (or, in the caseof Split Settlement, the first Local Banking Day or the first day which, butfor such event, would have been a Local Banking Day, after the end of theWaiting Period).  Compensation for thisdeferral shall be at then current market rates as determined in a commerciallyreasonable manner by the calculating Party or Parties under Section 9.

 

9.3  Notice by Affected Party.  If a Force Majeure Event has occurred, anAffected Party shall promptly give notice thereof to the other Party.

 

9.4  Force Majeure Event and Event of Default.  Nothing in this Section 9 shall be taken asindicating that the Party treated as the Defaulting Party for the purpose ofcalculations required by Section 8.1 has committed any breach or default.  If an event occurs that would otherwiseconstitute both a Force Majeure Event and an Event of Default, that event willbe treated as a Force Majeure Event and will not constitute an Event ofDefault.”

 

In addition, the following definitions shall be addedto Section 1 of the Agreement:

 

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““Force Majeure Event”,on any day determined as if such day were a Value Date of an FX Transaction orthe Settlement Date of an Option (even if it is not), means (i) either Party,by reason of force majeure or act of state, is prevented from or hindered ordelayed in delivering or receiving, or it is impossible to deliver or receive,any Currency in respect of a Currency Obligation or Option, and which event isbeyond the control of such Party and which such Party, with reasonablediligence, cannot overcome, or (ii) it is unlawful for either Party to deliveror receive a payment of any Currency in respect of a Currency Obligation orOption.  A Party whose delivery orreceipt of Currency has been or would be so prevented, hindered or delayed ormade unlawful or impossible is an “Affected Party”, and an FX Transaction orOption under which performance has been or would be so prevented, hindered ordelayed or made unlawful or impossible is an “Affected Transaction”, unless theParties have expressly agreed in an Agreement, another writing or in regard toa particular FX Transaction or Option that other disruption events ordisruption fallbacks will apply to that FX Transaction or Option; in suchevent, that FX Transaction or Option will be subject to such disruption eventsor disruption fallbacks as the Parties have otherwise agreed.

 

“Waiting Period”,in respect of a Force Majeure Event, means that first three days after suchevent occurs which are Business Days or which, but for such event, would havebeen Business Days.”“

 

Part XX.                                                   Margin and Security

 

A.                                                                                   PartyB shall at all times maintain with Party A cash and securities acceptable toParty A (together, the “Margin”) in order to secure the obligations of Party Bunder all open FX Transactions and Options entered into under theAgreement.  The amount of Margin whichParty B shall maintain with Party A shall be determined by Party A in itsreasonable judgment (which determination shall be conclusive in the absence ofmanifest error), on a risk adjusted basis, taking into account historicalvolatility, imputed volatility and/or such other factors as Party A reasonablydeems relevant to this determination (the “Aggregate Margin Requirement”).  On or prior to the date of the Agreement,Party B shall have established a pledge account with Party A (the “Account”)for the purpose of holding custody of the Margin in accordance with theprovisions of the Agreement.  Party B’sfailure to deposit Margin or to establish the Account as required herein shallbe an Event of Default for all purposes under the Agreement (it beingunderstood that there shall be no grace period with respect to obligations ofParty B pursuant to this Part XX.  PartyA shall settle all FX Transactions and Options with Party B on a secured basisonly, such that Party A’s payment obligations to Party B shall be made (a)prior to receipt of Party B’s counterpayment thereunder, only to the extentthat the amount by which Margin in the Account exceeds the Aggregate MarginRequirement is greater than such counterpayment or the U.S. Dollar equivalentthereof, or (b) after Party A has confirmed receipt of Party B’s counterpaymentthereunder.

 

B.                                                                                     Wheneversuch Aggregate Margin Requirement shall exceed the market value of Margin ondeposit with Party A in the Account as determined by Party A at such time inits reasonable judgment and which determination shall be conclusive in theabsence of manifest error (the “Margin Balance”, and the difference betweensuch 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.                                                                                     Infurtherance of the foregoing, as security for the prompt and complete paymentwhen due and the performance by Party B of all of its obligations to Party Aunder the Agreement, Party B hereby grants to Party A a continuing firstpriority security interest in and to all of Party B’s right, title and interestin and to the Margin, the Account, all financial assets, investment propertyand other property and assets which are deposited from time to time in, orcredited from time to time to, the Account, all security entitlements inrespect thereof, all income and profits thereon, all interest, dividends andother payments and distributions with respect thereto, and all proceeds of anyof the foregoing (the “Margin Collateral”). In addition, Party B hereby grants to Party A and its affiliates a firstpriority security interest in and to any property of Party B at any time heldby Party A or any affiliate of Party A for any purpose, including, withoutlimitation, any property of Party B held in any account with Party A or anyaffiliate of Party A, any financial assets, investment property and otherproperty and assets which are deposited from time to time in, or credited

 

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from time to time to, anysuch account, all security entitlements in respect thereof, all income andprofits thereon, all interest, dividends and other payments and distributionswith 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 connectionwith a particular agreement between Party B and Party A or any of itsaffiliates, then such Collateral shall secure first the obligations of Party Bwith respect to such agreement and second all other obligations of Party B toParty A or any of its affiliates (in such order as Party A shall determine inits sole discretion).  Party A and itsaffiliates and Party B hereby each acknowledge and agree that each of Party Aand its affiliates which holds Collateral holds such Collateral for itself andalso as agent and bailee for all other of Party A and its affiliates which aresecured parties hereunder or under any agreement between Party B and Party A orany of its affiliates.  If an Event ofDefault hereunder shall occur, then each of Party A and its affiliates shall beentitled to retain or sell all Collateral as security for Party B’sobligations, even if otherwise required pursuant to the terms of an agreementor otherwise to deliver any Collateral to Party B or Party B’s order. Theparties agree that Party A and its affiliates shall have the rights andremedies of a secured creditor under the New York Uniform Commercial Code (the“UCC”) and under any other applicable law or agreement to exercise any rightwith respect to the Margin Collateral and the Collateral subject to thesecurity interest granted under the Agreement. Each of Party A or any of its affiliates shall have free andunrestricted use of any Margin Collateral and/or Collateral which it holdshereunder, including, without limitation, the right, from time to time andwithout notice to Party B, to sell, pledge, repledge, hypothecate,rehypothecate, assign, invest, use, commingle or otherwise dispose of, orotherwise use in its business any Margin Collateral and/or Collateralseparately 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 sumon terms which may otherwise impair the right of Party B to redeem such MarginCollateral and/or Collateral, and free from any other right of claim of anynature whatsoever of Party B, and without retaining possession and control fordelivery a like amount of similar securities, commodities, or other property.

 

D.                                                                                    PartyB represents and warrants that it owns the Margin Collateral and the Collateralto be pledged and assigned to each of Party A and its affiliates hereunder andunder 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 respectto, any of the Margin Collateral or the Collateral, nor will it create, incuror permit to exist any lien on or with respect to any of the Margin Collateralor the Collateral, any interest therein, or any proceeds thereof, except forthe security interests created under this Agreement or otherwise under anyagreement 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 Collateralby Party B that is not permitted under the foregoing sentence shall be null andvoid and shall constitute an Event of Default hereunder and under any agreementbetween Party B and Party A or any of its affiliates immediately prior to thetaking of any such action,  if Party Aso deems (it being understood that there shall be no grace period with respectto obligations of Party B pursuant to this Part XX.

 

E.                                                                                      PartyB shall, in its sole expense and as Party A in its sole discretion may deemnecessary or advisable from time to time, (i) to create, preserve, protect andperfect the security interests granted under the Agreement and (ii) to enableParty A to exercise and enforce its rights with respect to such securityinterests, do all acts and things and execute and deliver all documents andinstruments in such manner and form as Party A may require, including withoutlimitation UCC financing statements and continuation statements.  Party B hereby appoints Party A as its trueand lawful attorney-in-fact, including without limitation, to sign and filesuch documents and instruments on Party B’s behalf and without Party B’ssignature; such appointment, being coupled with an interest, shall beirrevocable.  Without limitation on theforegoing, Party B agrees to take such action as Party A in its sole discretionmay deem necessary or advisable in the event of any change in applicable law,including, without limitation, Articles 8 and 9 of the UCC and the Regulationsof the Department of the Treasury and other governmental bodies governingtransfers of interests in U.S. marketable treasury securities in book-entryform.

 

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F.                                                                                      Theparties hereto agree that each of the Account and any account in which anyCollateral is held or to which any Collateral is credited (a “CollateralAccount”) is a “securities account” within the meaning of Article 8 of the UCCand that all property and assets (including, without limitation, cash) held inor credited to (i) the Account or (ii) any Collateral Account shall be treatedas a “financial asset” for purposes of Article 8 of the UCC.

 

G.                                                                                     MorganStanley & Co. Incorporated hereby agrees to act as securities intermediarywithin the meaning of the UCC (the “Securities Intermediary”) with respect tothe Account and any Collateral Account and to comply with entitlement ordersand other instructions of Party A with respect to the Account, any CollateralAccount, any Margin Collateral and any Collateral without further consent byParty B.  Party B hereby consents tosuch an agreement. The parties hereto also agree that the SecuritiesIntermediary shall not (i) accept or comply with any entitlement order fromParty B withdrawing or making a free delivery of any Margin Collateral orCollateral from the Account or any Collateral Account, (ii) deliver any MarginCollateral or Collateral held in or credited to the Account or any CollateralAccount to Party B or (iii) pay any free credit balance or other amount owingto Party B with respect to the Account or any Collateral Account without thespecific prior written consent of Party A.

 

H.                                                                                    TheSecurities Intermediary hereby acknowledges the security interest grantedherein to Party A by Party B.

 

I.                                                                                         Theparties hereto agree that the securities intermediary’s jurisdiction, withinthe meaning of Section 8-110(e) of the UCC, in respect of the Account, anyCollateral Account, the Margin Collateral and the Collateral is the State ofNew York and further agree that none of them has entered into or will enterinto any agreement to the contrary.

 

Part XXI.                                               Miscellaneous

 

Trading Authorization forFX Transactions and Options

 

Party B herebymakes the following additional representations and warranties, which shallcontinue during the term of any FX Transaction and Option:

 

(i)                                     PartyB has duly authorized Millburn Ridgefield Corporation (the “Agent”) toenter into FX Transactions and Options on its behalf and to take all requisiteaction on behalf of Party B contemplated by and in connection with theAgreement.  Party B has designated theAgent as its agent for performance of its obligations to Party A and forreceipt of performance by Party A of its obligations to Party B in connectionwith any FX Transactions and Options under the Agreement (including, amongother things, as agent for Party B in connection with transfers of cash orother property and as agent for giving and receiving of all notices under theAgreement).  Party B hereby agrees thatit shall have in connection with any FX Transaction and Option entered into bythe Agent on its behalf, the rights, responsibilities, privileges andobligations of a “Party” directly entering into such FX Transactions with PartyA under the Agreement.

 

(ii)                                  PartyB shall indemnify Party A against any damages incurred by Party A as aconsequence of the failure of the above representations made by Party B to betrue at any time made or deemed to be made, or for Agent’s failure to act ascontemplated by the Agreement.

 

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(iii)                               Thisauthorization shall continue in full force and effect, and may be relied uponby Party A, unless terminated by Party B by giving two (2) Business Day’swritten notice (by telex or facsimile) of such termination to Party A. Party Bwill remain fully responsible for any transactions effected by Party A forParty B prior to the valid termination of this authority.

 

 
| **MORGAN  STANLEY CAPITAL GROUP INC**., as Party A                    |   |                             |
|-----------------------------------------------------------------------|--------|----------------------------------|
|                                                                  |   |                             |
|                                                                  |   |                             |
| By                                                                    |   |                             |
|                                                                  | Name:  |                             |
|                                                                  | Title: |                             |
|                                                                  |   |                             |
|                                                                  |   |                             |
| **MILLBURN GLOBAL MACRO TRUST**, as Party B                           |   |                             |
|                                                                  |   |                             |
|                                                                  |   |                             |
| By                                                                    |   |                             |
|                                                                  | Name:  | Gregg  Buckbinder                |
|                                                                  | Title: | Chief  Operating Officer         |
|                                                                  |   | Millburn  Ridgefield Corporation |
|                                                                  |   | Managing  Owner                  |
|                                                                  |   |                             |
|                                                                  |   |                             |
| **MORGAN STANLEY & CO. INCORPORATED**, as Securities Intermediary |   |                             |
|                                                                  |   |                             |
|                                                                  |   |                             |
| By                                                                    |   |                             |
|                                                                  | Name:  |                             |
|                                                                  | Title: |                             |
|                                                                       |        |                                  |  |  |  |  |  |  |  |  |  |

 

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