Post by gfaroukh on Apr 14, 2009 2:07:52 GMT 4
ISDA
International Swaps and Derivatives Association, Inc.
2009 LYONDELLBASELL INDUSTRIES AF S.C.A.
CDS PROTOCOL
published on April 6, 2009
by the International Swaps and Derivatives Association, Inc.
The International Swaps and Derivatives Association, Inc. ("ISDA") has published this 2009 LyondellBasell
Industries AF S.C.A. CDS Protocol (this "Protocol") to enable parties to Covered Transactions to confirm their
intentions in respect of certain matters arising in relation to certain Credit Derivative Transactions which
reference LyondellBasell Industries AF S.C.A. (formerly Basell AF S.C.A. and prior thereto, Nell AF S.a.r.l.)
("LyondellBasell Industries AF S.C.A.").
Accordingly, a party that has entered and/or anticipates entering into a Covered Transaction may adhere to this
Protocol and be bound by its terms by completing and delivering a letter substantially in the form of Exhibit 1 to
this Protocol (an "Adherence Letter") to ISDA, as agent, as described below.
1. Amendments
By adhering to this Protocol in the manner set forth in Section 2 below, a party (an "Adhering Party") that has
entered and/or anticipates entering into a Covered Transaction agrees, in each case on the terms and subject to
the conditions set forth in this Protocol and the relevant Adherence Letter, that certain amendments will be
deemed to be made to the Documentation governing each Covered Transaction between it and any other
Adhering Party in accordance with the terms of Schedule 1.
2. Adherence and Effectiveness
(a) Adherence to this Protocol will be evidenced by the execution and delivery, in accordance with the first
sentence of Section 4(e) below, to ISDA, as agent, of an Adherence Letter on or before April 9, 2009
(the "Cut-off Date").
(i) Each Adhering Party will deliver two copies of the Adherence Letter, one a manually signed
original and the other a conformed copy containing, in place of each signature, the printed or
typewritten name of each signatory.
(ii) Each Adhering Party agrees that, for evidentiary purposes, a conformed copy of an Adherence
Letter certified by the General Counsel or an appropriate officer of ISDA will be deemed to be
an original.
(b) The agreement to make the amendments contemplated by this Protocol, on the terms and subject to the
conditions set forth in this Protocol, will, as between any two Adhering Parties, be effective on receipt
Copyright © 2009 by International Swaps and Derivatives Association, Inc.
by ISDA, as agent, of an Adherence Letter from the later of the Adhering Parties to adhere. Any such
amendments will apply to each Covered Transaction between the Adhering Parties (whether entered into
before, on or after the Cut-off Date).
(c) This Protocol is intended for use without negotiation, but without prejudice to any amendment,
modification or waiver in respect of a Covered Transaction that the parties may otherwise effect in
accordance with the terms of that Covered Transaction and the Governing Master Agreement.
(i) In adhering to this Protocol, an Adhering Party may not specify additional provisions,
conditions or limitations in its Adherence Letter or otherwise.
(ii) Any purported adherence that ISDA, as agent, determines in good faith is not in compliance
with this Protocol will be void.
(d) The parties acknowledge and agree that adherence to this Protocol is irrevocable.
3. Representations and Agreements
Each Adhering Party represents to each other Adhering Party with which it has or may have a Covered
Transaction, on the date on which the later of them adheres to this Protocol in accordance with Section 2 above
and, if then outstanding, in respect of each Covered Transaction between them, that:
(a) Status. It (i) is, if relevant, duly organised and validly existing under the laws of the jurisdiction of its
organisation or incorporation and, if relevant under such laws, in good standing or, (ii) if it otherwise
represents its status in or pursuant to the Governing Master Agreement, has such status;
(b) Powers. It has the power to execute and deliver the Adherence Letter and to perform its obligations
under the Adherence Letter and each Covered Transaction, in each case as amended by the Adherence
Letter and this Protocol, and has taken all necessary action to authorise such execution, delivery and
performance;
(c) No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any
law applicable to it, any provision of its constitutional documents, any order or judgment of any court or
other agency of government applicable to it or any of its assets or any contractual restriction binding on
or affecting it or any of its assets;
(d) Consents. All governmental and other consents that are required to have been obtained by it with
respect to the Adherence Letter and each Covered Transaction, in each case as amended by the
Adherence Letter and this Protocol, have been obtained and are in full force and effect and all conditions
of any such consents have been complied with;
(e) Obligations Binding. Its obligations under the Adherence Letter and each Covered Transaction, in each
case as amended by the Adherence Letter and this Protocol, constitute its legal, valid and binding
obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy,
reorganisation, insolvency, moratorium or similar laws affecting creditors' rights generally and subject,
as to enforceability, to equitable principles of general application (regardless of whether enforcement is
sought in a proceeding in equity or at law)); and
(f) Credit Support. Its adherence to this Protocol and any amendment contemplated by this Protocol will
not, in and of itself, adversely affect any obligations owed, whether by it or by any third party, under any
Credit Support Document relating to a Covered Transaction.
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Each Adhering Party agrees with each other Adhering Party with which it has or may have a Governing Master
Agreement that:
(a) each of the foregoing representations will be deemed to be a representation for purposes of Section
5(a)(iv) of each such Governing Master Agreement (then or in the future) between them (or, in the case
of a Governing Master Agreement that is not an ISDA Master Agreement, any analogous provision in
such Governing Master Agreement); and
(b) any Credit Support Document between the Adhering Parties and relating to a Covered Transaction will
be deemed to be amended to the extent necessary such that the operation thereof is not affected by the
adherence by the Adhering Parties to this Protocol and any amendments contemplated by this Protocol.
4. Miscellaneous
(a) Entire Agreement; Survival; Amendments.
(i) This Protocol constitutes the entire agreement and understanding of the Adhering Parties with
respect to its subject matter. Each Adhering Party acknowledges that in adhering to this
Protocol it has not relied on any oral or written representation, warranty or other assurance
(except as provided for or referred to elsewhere in this Protocol or in Schedule 1) and waives all
rights and remedies which might otherwise be available to it in respect thereof, except that
nothing in this Protocol will limit or exclude any liability of an Adhering Party for fraud.
(ii) Except for any amendment deemed to be made pursuant to this Protocol in respect of a Covered
Transaction, all terms and conditions of each Covered Transaction will continue in full force
and effect in accordance with its provisions on the effective date of that amendment. As used in
the Documentation governing each Covered Transaction, the terms "Transaction", "this
Transaction", "Confirmation", "this Confirmation" and words of similar import will, unless
the context otherwise requires, mean the Covered Transaction and related Confirmation as
amended pursuant to this Protocol in accordance with the relevant Adherence Letters. This
Protocol will, with respect to its subject matter, survive, and any amendments deemed to be
made pursuant to it will form a part of, each Covered Transaction between the Adhering Parties
notwithstanding Section 9(a) (or in the case of an ISDA Master Agreement that is a 1992 ISDA
Master Agreement (Local Currency – Single Jurisdiction), Section 8(a)) of the Governing
Master Agreement (or in the case of a Governing Master Agreement that is not an ISDA Master
Agreement, any analogous provision in such Governing Master Agreement).
(b) Amendments. An amendment, modification or waiver in respect of the matters contemplated by this
Protocol will only be effective if made in accordance with the terms of the Governing Master Agreement
and then only with effect between the parties to that Governing Master Agreement (and will only be
effective to amend or override the provisions contained in Section 1 of this Protocol and Schedule 1 to
this Protocol if it expressly refers in writing to this Section 4(b) of this Protocol and would otherwise be
effective in accordance with Section 9(b) (or in the case of an ISDA Master Agreement that is a 1992
ISDA Master Agreement (Local Currency – Single Jurisdiction), Section 8(b)) of the Governing Master
Agreement (or in the case of a Governing Master Agreement that is not an ISDA Master Agreement,
any analogous provision in such Governing Master Agreement).
(c) Headings. The headings used in this Protocol and any Adherence Letter are for convenience of
reference only and are not to affect the construction of or to be taken into consideration in interpreting
this Protocol or any Adherence Letter.
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(d) Governing Law. This Protocol and each Adherence Letter will, as between two Adhering Parties, be
governed by and construed in accordance with English law, provided that each Covered Transaction as
amended in accordance with Schedule 1 to this Protocol shall be governed by and construed in
accordance with the law specified to govern that Covered Transaction and otherwise in accordance with
the applicable choice of law doctrine.
(e) Notices. Any Adherence Letter must be in writing and delivered as a locked PDF (portable document
format) attachment to an email to ISDA at LyondellBasellProtocol@isda.org and will be deemed
effectively delivered on the date it is delivered, unless on the date of that delivery the New York ISDA
office is closed or that communication is delivered after 5:00 p.m. New York time, in which case that
communication will be deemed effectively delivered on the next day the New York ISDA office is
open. Each Adhering Party agrees that the determination of the date and time of delivery of any
Adherence Letter shall be determined by ISDA in its sole and absolute discretion.
5. Definitions
As used in this Protocol, (a) "Confirmation", "Credit Support Document" and "Transaction" each has the
respective meaning given to that term in the related Governing Master Agreement and (b) "Credit Derivative
Transaction" has the meaning given to that term in (i) the 2003 ISDA Credit Derivatives Definitions, as
supplemented by the May 2003 Supplement to the 2003 ISDA Credit Derivatives Definitions, each as published
by ISDA (the "2003 Definitions") in respect of a Transaction documented by a Confirmation that incorporates
the 2003 Definitions or (ii) the 1999 ISDA Credit Derivatives Definitions, as published by ISDA (the "1999
Definitions") in respect of a Transaction documented by a Confirmation that incorporates the 1999 Definitions,
as applicable (each of the 2003 Definitions and the 1999 Definitions, "Credit Definitions"). Each capitalised
term used in this Protocol or Schedule 1 but not defined herein or therein has the meaning given that term in the
related Documentation.
References in this Protocol and Schedule 1 to the following terms have the meaning indicated below:
"Affected iTraxx® Index" means each of the iTraxx® indices of International Index Company Limited (or any
predecessor or successor thereto) containing LyondellBasell Industries AF S.C.A., if any.
"Affected Portion" means, in respect of a Covered Transaction, the portion of such Covered Transaction (or, in
respect of a Single Name Swaption or Portfolio Swaption, the portion of the related Underlying CDS)
attributable to LyondellBasell Industries AF S.C.A.
"Auction Date" has the meaning specified in Exhibit 2 hereto.
"Bespoke Portfolio Transaction" means any Bespoke Untranched Portfolio Transaction and any Bespoke
Tranched Portfolio Transaction.
"Bespoke Tranched Portfolio Transaction" means a tranched Credit Derivative Transaction that references
more than one Reference Entity but that is not a Covered Index Transaction and is not any type of Covered Non-
Index Transaction other than a Bespoke Portfolio Transaction.
"Bespoke Untranched Portfolio Transaction" means an untranched Credit Derivative Transaction that
references more than one Reference Entity but that is not a Covered Index Transaction and is not any type of
Covered Non-Index Transaction other than a Bespoke Portfolio Transaction.
"Business Day" means a day which is a TARGET Settlement Day and a day on which commercial banks and
foreign exchange markets are generally open to settle payments in London.
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"Constant Maturity Swap Transaction" means any Portfolio Constant Maturity Swap Transaction and any
Single Name Constant Maturity Swap Transaction.
"Covered Index Transaction" means a Covered iTraxx® Untranched Transaction or a Covered iTraxx®
Tranched Transaction for which:
(a) the Effective Date is on or prior to the Default Date;
(b) the Trade Date is on or prior to the Final Price Determination Date;
(c) the Scheduled Termination Date is on or after the Default Date;
(d) each of the parties to such Credit Derivative Transaction is an Adhering Party; and
(e) the Affected Portion thereof is still outstanding as of the Final Price Determination Date.
"Covered iTraxx® Tranched Transaction" means a tranched Credit Derivative Transaction that references an
Affected iTraxx® Index and is governed by relevant Index Documentation.
"Covered iTraxx® Untranched Transaction" means a Credit Derivative Transaction that is not a Covered
iTraxx® Tranched Transaction but that references an Affected iTraxx® Index and is governed by relevant Index
Documentation.
"Covered Non-Index Transaction" means any Credit Derivative Transaction that (i) is not a Covered Index
Transaction, (ii) is not an Excluded Non-Index Transaction, (iii) is a Single Name CDS Transaction, a Constant
Maturity Swap Transaction, a Principal Only Transaction, an Interest Only Transaction, a First to Default
Transaction, an Nth to Default Transaction, a Recovery Lock Transaction or a Bespoke Portfolio Transaction,
and (iv) for which:
(a) LyondellBasell Industries AF S.C.A. is a Reference Entity;
(i) no Reference Obligation is specified in respect of LyondellBasell Industries AF S.C.A. or (ii) at least
(b)
one Reference Obligation specified in respect of LyondellBasell Industries AF S.C.A. is not
Subordinated to any of the Deliverable Obligations;
(c) the Effective Date is on or prior to the Default Date;
(d) the Trade Date is on or prior to the Final Price Determination Date;
(e) the Scheduled Termination Date is on or after the Default Date;
each of the parties to such Credit Derivative Transaction is an Adhering Party;
(f)
(g) the Deliverable Obligation Category and Deliverable Obligation Characteristics, if any, specified as
being applicable in respect of LyondellBasell Industries AF S.C.A. are the same as those applicable
pursuant to the Credit Derivatives Physical Settlement Matrix; and
(h) as applicable, (i) the Affected Portion thereof is still outstanding as of the Final Price Determination
Date; or (ii) the Termination Date has not occurred as of the Business Day immediately prior to the Final
Price Determination Date.
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A "Covered Non-Index Transaction" shall also include any Covered Single Name Swaptions and any Covered
Portfolio Swaptions.
"Covered Portfolio Swaption" means a Portfolio Swaption for which:
(a) LyondellBasell Industries AF S.C.A. is a Reference Entity for the purposes of the related Underlying
CDS;
(b) the Swaption Trade Date of the Portfolio Swaption is on or prior to the Final Price Determination Date;
(c) the Expiration Date of the Portfolio Swaption is on or after the Final Price Determination Date;
(d) the Deliverable Obligation Category and Deliverable Obligation Characteristics, if any, specified as
being applicable for the purposes of the related Underlying CDS in respect of LyondellBasell Industries
AF S.C.A. are the same as those applicable pursuant to the Credit Derivatives Physical Settlement
Matrix; and
each of the parties to such Portfolio Swaption is an Adhering Party.
(e)
"Covered Single Name Swaption" means a Single Name Swaption for which:
LyondellBasell Industries AF S.C.A. is the Reference Entity for the purposes of the related Underlying
(a)
CDS;
(b) the Swaption Trade Date of the Single Name Swaption is on or prior to the Common Event
Determination Date;
(c) the Expiration Date of the Single Name Swaption is on or after the Default Date;
(d) the Deliverable Obligation Category and Deliverable Obligation Characteristics, if any, specified as
being applicable for the purposes of the related Underlying CDS in respect of LyondellBasell Industries
AF S.C.A. are the same as those applicable pursuant to the Credit Derivatives Physical Settlement
Matrix; and
(e) each of the parties to such Single Name Swaption is an Adhering Party.
"Covered Transaction" means a Covered Index Transaction or a Covered Non-Index Transaction, as
applicable.
"Credit Derivatives Physical Settlement Matrix" means the terms applicable to a European Corporate
pursuant to the Credit Derivatives Physical Settlement Matrix (version 8 – January 20, 2009) published by
ISDA.
"Default Date" means March 19, 2009.
"Documentation" means Index Documentation or Non-Index Documentation, as applicable.
"Excluded Non-Index Transaction" means (a) any Bespoke Portfolio Transaction (i) that references a portfolio
of Reference Entities that is substantially identical to the relevant portfolio of Reference Entities for any series of
credit linked notes, trust certificates or other similar instruments and (ii) the documentation for which expressly
states that the final price is linked to such credit linked notes, trust certificates or other similar instruments, as
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applicable, (b) any Reference Obligation Only Transaction, (c) any Loan Only Transaction, (d) any Preferred
CDS Transaction, (e) any Fixed Recovery Transaction and (f) any Credit Derivative Transaction that (i) by its
terms expressly states that the provisions relating to settlement therein shall not be amended or modified by any
protocol published by ISDA in respect of an auction and (ii) would, but for such express terms, be a Covered
Non-Index Transaction.
"Final Price Determination Date" has the meaning specified in Exhibit 2 hereto.
"First to Default Transaction" means a Credit Derivative Transaction that references more than one Reference
Entity pursuant to which Cash Settlement Amounts or Physical Settlement Amounts, as applicable, will only be
paid to Buyer after the Conditions to Settlement have been satisfied for the first time in respect of any of the
relevant Reference Entities.
"Fixed Recovery Transaction" means a Credit Derivative Transaction in respect of which the Final Price is
pre-determined and specified in the relevant Documentation.
"Governing Master Agreement" means, in respect of a Covered Transaction, the master agreement governing
such Covered Transaction, whether executed by the parties thereto or incorporated by reference in the
Confirmation relating to such Covered Transaction.
"Index Documentation" means the Governing Master Agreement, Standard Terms Supplement (or master
confirmation, general terms confirmation, or any document analogous thereto) and a Confirmation (including a
master confirmation) that is based on the forms published by the International Index Company Limited (or any
predecessor or successor thereto) referencing an iTraxx® index of the International Index Company Limited (or
any predecessor or successor thereto), with such modifications to which the parties thereto have agreed.
"Interest Only Transaction" means a Credit Derivative Transaction that references more than one Reference
Entity under which (a) Seller pays to Buyer either (i) an upfront amount or (ii) a floating interest rate, (b) neither
party pays Cash Settlement Amounts during the term of the Credit Derivative Transaction and (c) Buyer pays
Fixed Amounts to Seller during the term of the Credit Derivative Transaction (which Fixed Amounts are
reduced due to Credit Events).
"ISDA Master Agreement" means any of the following: (a) the 2002 ISDA Master Agreement; (b) the 1992
ISDA Master Agreement (Multicurrency – Cross Border); (c) the 1992 ISDA Master Agreement (Local
Currency – Single Jurisdiction); (d) the 1987 ISDA Interest Rate and Currency Exchange Agreement; and (e) the
1987 ISDA Interest Rate Swap Agreement.
"Loan Only Transaction" means a Credit Derivative Transaction in respect of which "Loan" is specified as the
only Deliverable Obligation Category or a Credit Derivative Transaction pursuant to which the Reference
Obligations (which are required to be Loans) and certain other Loans (or Borrowed Money obligations other
than Bonds) are the only Deliverable Obligations.
"Non-Index Documentation" means the Governing Master Agreement , Standard Terms Supplement (or master
confirmation, general terms confirmation, or any document analogous thereto) and Confirmation relating to a
Covered Non-Index Transaction.
"Nth to Default Transaction" means a Credit Derivative Transaction that references more than one Reference
Entity pursuant to which Cash Settlement Amounts or Physical Settlement Amounts, as applicable, will only be
paid to Buyer after the Conditions to Settlement have been satisfied in respect of any of the relevant Reference
Entities that is the nth Reference Entity in respect of which an Event Determination Date has occurred, where
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"n" is a number specified for such purpose in the Documentation in respect of the relevant Credit Derivative
Transaction.
"Portfolio Constant Maturity Swap Transaction" means a Credit Derivative Transaction that references more
than one Reference Entity in respect of which the Fixed Rate is reset at the end of each Fixed Rate Payer
Calculation Period to the then-current market rate for the relevant Credit Derivative Transaction.
"Portfolio Swaption" means any unexercised option to enter into a Credit Derivative Transaction (other than
another Swaption) that references more than one Reference Entity.
"Preferred CDS Transaction" means a Credit Derivative Transaction that references preferred securities or
similar hybrid securities as Reference Obligations or Deliverable Obligations and which contains specific
provisions pertaining thereto.
"Principal Only Transaction" means a Credit Derivative Transaction that references more than one Reference
Entity under which Seller pays an upfront amount to Buyer, neither party pays any Fixed Amounts or Cash
Settlement Amounts during the term of the Credit Derivative Transaction and, upon termination of the Credit
Derivative Transaction, Buyer pays to Seller the notional amount of the Credit Derivative Transaction, minus
aggregate Cash Settlement Amounts.
"Recovery Lock Transaction" means a Credit Derivative Transaction in respect of which the Reference Price is
specified in the relevant Documentation as a price less than 100 per cent. and for which either Buyer or Seller
can deliver a Notice of Physical Settlement.
"Reference Obligation Only Transaction" means:
(a) a Credit Derivative Transaction in respect of which the applicable Settlement Method is Physical
Settlement and "Reference Obligations Only" is specified as the Deliverable Obligation Category; or
(b) a Credit Derivative Transaction in respect of which the applicable Settlement Method is Cash Settlement
and the relevant Confirmation specifies only one or more specifically identified Reference Obligations.
"Single Name CDS Transaction" means a Credit Derivative Transaction that references not more than one
Reference Entity that is not a Single Name Constant Maturity Swap Transaction.
"Single Name Constant Maturity Swap Transaction" means a Credit Derivative Transaction that references
not more than one Reference Entity for which the Fixed Rate is reset at the end of each Fixed Rate Payer
Calculation Period to the then-current market rate for the relevant Credit Derivative Transaction.
"Single Name Swaption" means any unexercised option to enter into a Credit Derivative Transaction (other
than another Swaption) that references not more than one Reference Entity.
"Standard Terms Supplement" means, in relation to a Covered Transaction, the standard terms supplement
published by ISDA, Markit Group Limited, International Index Company Limited, CDS IndexCo LLC, any
analogous institution or any successor or predecessor thereto and incorporated by reference into the relevant
Confirmation.
"Swaption" means a Single Name Swaption or a Portfolio Swaption.
"TARGET Settlement Day" means any day on which TARGET2 (the Trans-European Automated Real-time
Gross settlement Express Transfer system) is open.
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"Underlying CDS" means, in respect of a Single Name Swaption or Portfolio Swaption, the underlying Credit
Derivative Transaction to which the relevant unexercised option relates.
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EXHIBIT 1
to 2009 LyondellBasell Industries AF S.C.A. CDS Protocol
Form of Adherence Letter
[Letterhead of Adhering Party]
[Date]
International Swaps and Derivatives Association, Inc.
Send to: LyondellBasellProtocol@isda.org
Dear Sirs,
2009 LyondellBasell Industries AF S.C.A. CDS Protocol - Adherence
The purpose of this letter is to confirm our adherence to the 2009 LyondellBasell Industries AF S.C.A. CDS
Protocol, as published by the International Swaps and Derivatives Association, Inc. on April 6, 2009 (the
"Protocol"). This letter constitutes an "Adherence Letter" as referred to in the Protocol.
The definitions and provisions contained in the Protocol are incorporated into this Adherence Letter, which will
supplement and form part of each Covered Transaction (now or in the future) between us and each other
Adhering Party, respectively.
1. Specified Terms
The amendments in Section 1 and Schedule 1 of this Protocol shall apply to Covered Transactions to
which we are a party.
2. Appointment as Agent and Release
We hereby appoint ISDA as our agent for the limited purposes of the Protocol and accordingly we
waive, and hereby release ISDA from, any rights, claims, actions or causes of action whatsoever
(whether in contract, tort or otherwise) arising out of, or in any way relating to, this Adherence Letter or
our adherence to the Protocol or any actions contemplated as being required by ISDA.
3. DTCC Account Number
For purposes of electronic matching and counterparty recognition, our DTCC Account Number is as
follows, but you understand and agree that our failure to provide any such details pursuant to this letter
will not affect the legal validity and binding nature of the Protocol with respect to us:
DTCC Account Number: []
4. Contact Details
Our contact details for purposes of this Adherence Letter are:
Name: []
Address: []
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Telephone: []
Fax: []
E-mail: []
We consent to the publication of the conformed copy of this letter by ISDA and to the disclosure by ISDA of the
contents of this letter.
Yours faithfully,
[ADHERING PARTY] 1
By:
Name:
Title:
Signature:
1
Specify legal name of Adhering Party. If you are an investment or asset manager and act on behalf of multiple funds, you may indicate in the
signature block, "Investment/Asset Manager, acting on behalf of each of the funds and accounts listed in the relevant Master Agreement (or
other agreement which deems a Master Agreement to have been created) between it and another Adhering Party" (or such other language that
indicates the funds to which this letter is applicable). A separate Adherence Letter for each fund does not need to be submitted to ISDA.
Further, no specific names of clients of the investment or asset manager will be publicly disclosed on the ISDA website in connection with the
Protocol (unless such names are contained in the Adherence Letter or any attached appendix). However, in order for each Participating Bidder
to calculate its Market Position, each such investment or asset manager is required to provide a list of all funds and accounts that it acts on
behalf of to each Participating Bidder that has (or whose affiliate has) entered into an ISDA Master Agreement with any of those funds. As
provided in Section (1) of Exhibit 2 of the Protocol, on the Business Day prior to the Auction Date, the Administrators will publish a list of the
Participating Bidders.
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EXHIBIT 2
to 2009 LyondellBasell Industries AF S.C.A. CDS Protocol
Auction Methodology
For the purposes of the Protocol of which this Exhibit forms a part, the following auction procedure (including
any vote regarding the occurrence of a Materiality Event) will be conducted on the Auction Date on the
following terms (the "Auction"):
1 On or before the Business Day prior to the Auction Date, the Administrators will publish a list of the
Participating Bidders.
2 Any customer that wishes to submit a Customer Physical Settlement Request to a Participating Bidder
must submit a valid Customer Physical Settlement Request Letter to the relevant Participating Bidder no
later than 5:00 p.m. London time on the Business Day prior to the Final Price Determination Date. Each
Customer Physical Settlement Request submitted to a Participating Bidder must be, to the best of the
relevant customer's knowledge and belief, in the same direction as and (when aggregated with all other
Customer Physical Settlement Requests, if any, submitted by such customer to one or more other
Participating Bidders) not in excess of, its Market Position. Each Participating Bidder must accept
Customer Physical Settlement Requests from any customer with whom it has a trading relationship,
provided that such Customer Physical Settlement Request is no larger than, and is in the same direction
as, such customer's Dealer-Specific Market Position with respect to that Participating Bidder and/or its
affiliates (in aggregate). A Participating Bidder may, but is not required to, accept a Customer Physical
Settlement Request larger than the relevant customer's Dealer-Specific Market Position in respect of
such Participating Bidder and/or its affiliates.
3 During the Initial Bidding Period, each Participating Bidder shall submit to the Administrators a Valid
Inside Market Submission and may submit a Physical Settlement Request (which Physical Settlement
Request will equal the aggregate of the relevant Participating Bidder's Dealer Physical Settlement
Request and all valid Customer Physical Settlement Requests, if any, that the relevant Participating
Bidder receives and accepts from its customers pursuant to Section 2 of this Exhibit 2). Each Dealer
Physical Settlement Request must be, to the best of the relevant Participating Bidder's knowledge and
belief, in the same direction as, and not in excess of, its Market Position.
4 If the Administrators receive at least 8 Valid Inside Market Submissions, the Administrators will
determine the "Inside Market Midpoint" as follows:
(a) The Administrators will sort the Inside Market Bids and Inside Market Offers in the Valid
Inside Market Submissions separately, with the Inside Market Bids sorted in descending order
and the Inside Market Offers sorted in ascending order. Each Inside Market Bid will then be
matched with the corresponding Inside Market Offer (i.e., the highest Inside Market Bid being
matched with the lowest Inside Market Offer, the second highest Inside Market Bid with the
second lowest Inside Market Offer, etc.) (each such Inside Market Bid/Inside Market Offer pair
constituting a "Matched Market"). For purposes of sorting the Inside Market Bids and Inside
Market Offers, where two Inside Market Bids are equal, the one submitted first to the
Administrators will be considered to be the lower of the two, and where two Inside Market
Offers are equal, the one submitted first to the Administrators will be considered to be the
higher of the two.
(b) The Administrators will then calculate the mean of the Inside Market Bids and Inside Market
Offers included in the Best Half of the Matched Markets that are Non-Tradeable Markets. To
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identify the Best Half, the Administrators will sort all Non-Tradeable Markets in order of the
spread between the Inside Market Bid and Inside Market Offer within each Matched Market,
from smallest spread to largest. The Best Half of the Matched Markets are those in the first half
of such list. In the event that the number of Non-Tradeable Markets is an odd number, the
Administrators will round up the number of Matched Markets to include in the Best Half. The
Administrators will then calculate the Inside Market Midpoint by finding the mean of all the
Inside Market Bids and Inside Market Offers included in the Matched Markets that fall within
the Best Half (with the results rounded to the nearest one-eighth of one percentage point).
(c) The steps described in (a) and (b) above are illustrated in the following example (which is not
intended to reflect indicative prices for the Deliverable Obligations):
Step 1 – Sort Bids from highest to lowest and Offers from lowest to highest.
Contributed Sorted
IM Bids IM Offers IM Bids IM Offers
39.500% 41.000% 45.000% 34.000%
Tradeable
40.000% 42.000% 41.000% 39.500% Markets
41.000% 43.000% 41.000% 40.000%
Matched
45.000% 47.000% 40.000% 41.000%
Markets Best Half
32.000% 34.000% 39.500% 42.000%
38.750% 40.000% 38.750% 42.750%
38.000% 39.500% 38.000% 43.000%
41.000% 42.750% 32.000% 47.000%
Step 2 – Ignore all Tradeable Markets.
Step 3 – The Inside Market Midpoint is the mean of the Best Half of the remaining Matched
Markets. If there is an odd number of remaining Matched Markets, round up to determine the
number of Matched Markets in the Best Half.
Best Half
IM Bids IM Offers
40.000% 41.000%
39.500% 42.000% Inside Market Midpoint = Average (40, 41, 39.5, 42, 38.75, 42.75) =
38.750% 42.750% 40.667%, rounded to the nearest one–eighth of one percentage point: 40.625%
5 For each Tradeable Market, one of the Participating Bidders whose Inside Market Bid or Inside Market
Offer forms part of such Tradeable Market will make a payment to ISDA (the "Adjustment Amount")
on the third Business Day after the Final Price Determination Date, such payment to be calculated by the
Administrators as follows:
(a) The "Adjustment Amount" in respect of a Tradeable Market will be an amount equal to (i) the
Inside Market Quotation Amount multiplied by (ii) either (A) if the Open Interest is an offer to
sell Deliverable Obligations, the greater of (I) zero and (II) the Inside Market Bid forming part
of such Tradeable Market minus the Inside Market Midpoint or (B) if the Open Interest is a bid
to purchase Deliverable Obligations, the greater of (I) zero and (II) the Inside Market Midpoint
minus the Inside Market Offer forming part of such Tradeable Market. Each Participating
Bidder agrees that (1) if the Open Interest is an offer to sell Deliverable Obligations, the
Participating Bidder whose Inside Market Bid formed part of such Tradeable Market will pay
the Adjustment Amount to ISDA and (2) if the Open Interest is a bid to purchase Deliverable
Obligations, the Participating Bidder whose Inside Market Offer formed part of such Tradeable
Market will pay the Adjustment Amount to ISDA. Any payments of Adjustment Amounts shall
be used by ISDA to defray any costs related to any auction that ISDA has coordinated
(including the Auction), or that ISDA will in the future coordinate, for purposes of settlement of
Credit Derivative Transactions. To the extent that ISDA determines at any time that the
13
aggregate of all such payments received by ISDA (and not previously applied by ISDA to
defray auction-related costs) up to and including such time exceeds the costs (including future
costs as determined by ISDA) of such auctions, ISDA may in its sole discretion distribute any
such excess among all entities that have previously acted as participating bidders in any prior
auction proportionately, based upon participation as a participating bidder in such prior auctions.
Payments of Adjustment Amounts will not be conducted or effected by, or through, any
Administrator.
(b) The steps described in (a) above are illustrated in the following example (which is not intended
to reflect indicative prices for the Deliverable Obligations):
Step 1 – Consider only Tradeable Markets.
Tradeable Markets
IM Bids IM Offers
45.000% 34.000%
41.000% 39.500%
41.000% 40.000 %
Step 2 – Calculate the Adjustment Amount for each Tradeable Market by (i)(A) if the Open
Interest is an offer to sell Deliverable Obligations, determining the greater of (I) zero and (II) the
Inside Market Bid forming part of such Tradeable Market minus the Inside Market Midpoint or
(B) if the Open Interest is a bid to purchase Deliverable Obligations, determining the greater of
(I) zero and (II) the Inside Market Midpoint minus the Inside Market Offer forming part of such
Tradeable Market and (ii) multiplying the resulting amount by the Inside Market Quotation
Amount.
Example calculation of Adjustment Amount if the Open Interest is an offer to sell Deliverable
Obligations:
Adjustment Amount
IM Bids IMM (as a percentage of the Inside Market Quotation Amount)
45.000% 4.375%
40.625%
41.000% 0.375%
40.625%
41.000% 0.375%
40.625%
Example calculation of Adjustment Amount if the Open Interest is a bid to purchase Deliverable
Obligations:
Adjustment Amount
IMM IM Offers (as a percentage of the Inside Market Quotation Amount)
34.000 % 6.625%
40.625%
39.500% 1.125%
40.625%
40.000% 0.625%
40.625%
6 If an Inside Market Midpoint has been determined pursuant to Section Error! Reference source not
found. of this Exhibit 2, the Administrators will match all Physical Settlement Requests with one
another in order to determine the Open Interest.
(a) If the sum of all Quotation Amounts stated in each Physical Settlement Sell Request is less than
the sum of all Quotation Amounts stated in each Physical Settlement Buy Request, all Physical
Settlement Sell Requests will be matched with Physical Settlement Buy Requests, subject to the
Rounding Convention, or if the sum of all Quotation Amounts stated in each Physical
Settlement Buy Request is less than the sum of all Quotation Amounts stated in each Physical
Settlement Sell Request, all Physical Settlement Buy Requests will be matched with Physical
Settlement Sell Requests, subject to the Rounding Convention (each such match, a "Market
14
Position Trade"), and each such pair will form a trade at the Final Price as described in Section
9 of this Exhibit 2.
(b) By 10:30 a.m. London time on any day on which the Initial Bidding Period has successfully
concluded, the Administrators will publish the following information on their respective
websites:
(i) the size and direction of the Open Interest;
(ii) the Inside Market Midpoint; and
(iii) the details of any Adjustment Amounts.
If (A) for any reason, the Initial Bidding Period lasts longer, or occurs later, than the Originally
Scheduled Initial Bidding Period or (B) as of the time on the relevant day at which the
Administrators would otherwise publish the above information, (I) a Materiality Event has been
declared pursuant to Section 10(a) of this Exhibit 2 or (II) an event has occurred or exists that is
considered by any two or more Participating Bidders to be a Potential Materiality Event and it
remains to be determined whether such Potential Materiality Event will result in the declaration
of a Materiality Event, the Administrators may delay the Subsequent Bidding Period and publish
the above information on their respective websites at such time as they determine (in their sole
and absolute discretion) in order to preserve the integrity of the Auction (except that, in the case
of clause (B)(I), the Administrators shall refrain from publishing the above information).
7 Any Customer Limit Order Submission must be submitted to the relevant Participating Bidder at any
time after the publication of the information set out above in accordance with Section 6(b) of this
Exhibit 2 until the end of the Subsequent Bidding Period (determined for these purposes only, without
regard to any extension that may be made by the Administrator). Each Customer Limit Order
Submission submitted to a Participating Bidder must be in the opposite direction of the Open Interest
and, to the best of the customer's knowledge and belief, (when aggregated with all other Customer Limit
Order Submissions, if any, submitted by such customer to one or more Participating Bidders) not in
excess of the size of the Open Interest. The Participating Bidder may, but is not obliged to, take into
account in its Limit Order Submissions any Customer Limit Order Submission submitted to it in
accordance with this Section 7 of this Exhibit 2, provided that if a Participating Bidder, for any reason,
decides not to accept a Customer Limit Order Submission from a customer, such Participating Bidder
shall promptly notify such customer of its decision not to accept such customer's Customer Limit Order
Submission.
During the Subsequent Bidding Period, each Participating Bidder will submit Limit Order Submissions. 8
All Inside Market Bids (if the Open Interest is an offer to sell Deliverable Obligations) or Inside Market
Offers (if the Open Interest is a bid to purchase Deliverable Obligations), as applicable, submitted
during the Initial Bidding Period (regardless of whether or not they form part of a Tradeable Market)
will, together with all Limit Bids (if the Open Interest is an offer to sell Deliverable Obligations) or
Limit Offers (if the Open Interest is a bid to purchase Deliverable Obligations), as applicable, be
considered "Unmatched Limit Orders", however any Inside Market Bid or Inside Market Offer, as
applicable, that forms part of a Tradeable Market will be deemed to be equal to the Inside Market
Midpoint for purposes of serving as an Unmatched Limit Order. The excess, if any, of (a) the aggregate
Quotation Amount of a Participating Bidder's Limit Order Submissions over (b) the portion of such
aggregate Quotation Amount attributable to any Customer Limit Order Submissions received by such
Participating Bidder that are taken into account in the Limit Order Submissions received by the
Administrators from such Participating Bidder during the Subsequent Bidding Period must be, to the
15
best of such Participating Bidder's knowledge and belief, not in excess of the size of the Open Interest.
If the Open Interest is an offer to sell Deliverable Obligations, then any Limit Bid that would otherwise
be at a price above the Inside Market Midpoint plus the Cap Amount shall be deemed to be at a price
equal to the Inside Market Midpoint plus the Cap Amount. If the Open Interest is a bid to purchase
Deliverable Obligations, then any Limit Offer that would otherwise be at a price below the Inside
Market Midpoint minus the Cap Amount shall be deemed to be at a price equal to the Inside Market
Midpoint minus the Cap Amount.
9 The Administrators will then match the Open Interest against the corresponding Unmatched Limit
Orders.
(a) If the Open Interest is a bid to purchase Deliverable Obligations, it will be matched against the
Unmatched Limit Orders that are Offers. If the Open Interest is an offer to sell Deliverable
Obligations, it will be matched against the Unmatched Limit Orders that are Bids.
(b) The Open Interest will be matched against each applicable Unmatched Limit Order, beginning
with the Unmatched Limit Order that is the lowest Offer or the highest Bid, as the case may be,
and moving to the next remaining lowest (in the case of Offers) or next remaining highest (in
the case of Bids) until:
the full amount of the Open Interest has been matched against Unmatched Limit Orders
(i)
totalling the same size as the Open Interest; or
(ii) all of the Unmatched Limit Orders of the relevant direction (i.e., Offers, if the Open
Interest is a bid to purchase Deliverable Obligations or Bids, if the Open Interest is an
offer to sell Deliverable Obligations) have been matched to the Open Interest.
Each Unmatched Limit Order that is matched to the Open Interest under Section 9(b)(i) or (ii) of
this Exhibit 2 is a "Matched Limit Order", and each such match between a Matched Limit
Order and a Physical Settlement Request is a "Matched Limit Order Trade". If, in the case of
Section 9(b)(i) of this Exhibit 2, there are multiple Unmatched Limit Orders stating the same
price and each could be the final Unmatched Limit Order to be matched to the Open Interest,
then such final Unmatched Limit Orders will be filled Pro Rata against the remaining Open
Interest, subject to the Rounding Convention.
(c) If the final matching of the Open Interest against the applicable Unmatched Limit Orders occurs
pursuant to Section 9(b)(i) of this Exhibit 2, the Final Price will be the price associated with the
Matched Limit Order that is the highest Offer or the lowest Bid, as the case may be, provided
that (A) if the Open Interest is an offer to sell Deliverable Obligations and the price associated
with the lowest Matched Limit Order exceeds the Inside Market Midpoint by more than the Cap
Amount, then the Final Price will be the Inside Market Midpoint plus the Cap Amount and
(B) if the Open Interest is a bid to purchase Deliverable Obligations and the Inside Market
Midpoint exceeds the price associated with the highest Matched Limit Order by more than the
Cap Amount, then the Final Price will be the Inside Market Midpoint minus the Cap Amount. If
the Open Interest is zero, the Final Price will be the Inside Market Midpoint.
(d) If the final matching of the Open Interest against the applicable Unmatched Limit Orders occurs
pursuant to Section 9(b)(ii) of this Exhibit 2, the Final Price shall be (A) if the Open Interest is a
bid to purchase Deliverable Obligations, the greater of (i) 100% and (ii) the highest Limit Offer
or Inside Market Offer received or (B) if the Open Interest is an offer to sell Deliverable
Obligations, zero. In such case, notwithstanding Sections 6(a) or 9(b) of this Exhibit 2, all
16
Physical Settlement Requests of the same direction as the Open Interest (e.g., bids to purchase
or offers to sell) will be matched Pro Rata, subject to the Rounding Convention, against the
Limit Order Submissions and Physical Settlement Requests on the opposite side of the market to
form Market Position Trades or Matched Limit Order Trades, as applicable.
(e) In all cases, if the Final Price determined pursuant to this Exhibit 2 is greater than 100%, then
for the purposes of settling the Covered Transactions only, the Final Price shall be deemed to be
100%.
(f) Each Participating Bidder whose Physical Settlement Request or Matched Limit Order, as the
case may be, forms part of either a Market Position Trade or a Matched Limit Order Trade will
be deemed to have entered into a bilateral agreement on terms equivalent to the Representative
Auction-Settled Transaction for which (i) the Floating Rate Payer Calculation Amount is equal
to the Quotation Amount in respect of the relevant Market Position Trade or Matched Limit
Order Trade, as the case may be, and (ii) (A) the Seller is the Participating Bidder whose
Physical Settlement Buy Request forms part of such Market Position Trade or whose Physical
Settlement Buy Request, Limit Bid or Inside Market Bid, as the case may be, forms part of such
Matched Limit Order Trade and (B) the Buyer is the Participating Bidder whose Physical
Settlement Sell Request forms part of such Market Position Trade or whose Physical Settlement
Sell Request, Limit Offer or Inside Market Offer, as the case may be, forms part of such
Matched Limit Order Trade; provided that, (i) in the case of the Matched Limit Order Trades
containing the highest Offer or the lowest Bid, as the case may be, the Quotation Amount will, if
necessary, be reduced to reflect the size of the remaining Open Interest, and (ii) in the event that
there are multiple Matched Limit Orders stating the highest Offer or lowest Bid, as the case may
be, then such Matched Limit Orders will be filled Pro Rata against the remaining Open Interest,
subject to the Rounding Convention. Participating Bidders whose Physical Settlement Request
or Matched Limit Order, as the case may be, forms part of a Market Position Trade or Matched
Limit Order Trade will be matched with one another by the Administrators in their sole and
absolute discretion and to the extent reasonably practicable so as to minimize the number of
Representative Auction-Settled Transactions to be entered into and further to minimize the
number of Representative Auction-Settled Transactions for which the Floating Rate Payer
Calculation Amount will be smaller than EUR50,000 or which is not an integral multiple of
EUR1,000 thereabove; provided that, prior to such matching, the Quotation Amounts in respect
of Matched Limit Orders or Physical Settlement Requests, as the case may be, submitted by the
same Participating Bidder will be matched with each other, to the extent possible. Transactions
entered into by and between Participating Bidders pursuant to Market Position Trades or
Matched Limit Order Trades will not be conducted or effected by, or through, any
Administrator.
10 A Delayed Auction Date or a Materiality Event Delayed Auction Date may occur under the following
circumstances:
(a) If at any time before the determination of the Final Price, an event occurs or exists (i) prior to
the commencement of an Initial Bidding Period or (ii) prior to the commencement of the related
Subsequent Bidding Period, that is considered by any two or more Participating Bidders to be a
Potential Materiality Event, then such Participating Bidders shall have a right to require the
Administrators to call a vote of the Auction Settlement Committee to determine whether such
event is a Materiality Event, which vote will take place in the case of (i) above, before the end
of such Initial Bidding Period or, in the case of (ii) above, before the end of such Subsequent
Bidding Period. If a simple majority of the Auction Settlement Committee votes that such event
is a Materiality Event, then such Initial Bidding Period and, if applicable, such Subsequent
International Swaps and Derivatives Association, Inc.
2009 LYONDELLBASELL INDUSTRIES AF S.C.A.
CDS PROTOCOL
published on April 6, 2009
by the International Swaps and Derivatives Association, Inc.
The International Swaps and Derivatives Association, Inc. ("ISDA") has published this 2009 LyondellBasell
Industries AF S.C.A. CDS Protocol (this "Protocol") to enable parties to Covered Transactions to confirm their
intentions in respect of certain matters arising in relation to certain Credit Derivative Transactions which
reference LyondellBasell Industries AF S.C.A. (formerly Basell AF S.C.A. and prior thereto, Nell AF S.a.r.l.)
("LyondellBasell Industries AF S.C.A.").
Accordingly, a party that has entered and/or anticipates entering into a Covered Transaction may adhere to this
Protocol and be bound by its terms by completing and delivering a letter substantially in the form of Exhibit 1 to
this Protocol (an "Adherence Letter") to ISDA, as agent, as described below.
1. Amendments
By adhering to this Protocol in the manner set forth in Section 2 below, a party (an "Adhering Party") that has
entered and/or anticipates entering into a Covered Transaction agrees, in each case on the terms and subject to
the conditions set forth in this Protocol and the relevant Adherence Letter, that certain amendments will be
deemed to be made to the Documentation governing each Covered Transaction between it and any other
Adhering Party in accordance with the terms of Schedule 1.
2. Adherence and Effectiveness
(a) Adherence to this Protocol will be evidenced by the execution and delivery, in accordance with the first
sentence of Section 4(e) below, to ISDA, as agent, of an Adherence Letter on or before April 9, 2009
(the "Cut-off Date").
(i) Each Adhering Party will deliver two copies of the Adherence Letter, one a manually signed
original and the other a conformed copy containing, in place of each signature, the printed or
typewritten name of each signatory.
(ii) Each Adhering Party agrees that, for evidentiary purposes, a conformed copy of an Adherence
Letter certified by the General Counsel or an appropriate officer of ISDA will be deemed to be
an original.
(b) The agreement to make the amendments contemplated by this Protocol, on the terms and subject to the
conditions set forth in this Protocol, will, as between any two Adhering Parties, be effective on receipt
Copyright © 2009 by International Swaps and Derivatives Association, Inc.
by ISDA, as agent, of an Adherence Letter from the later of the Adhering Parties to adhere. Any such
amendments will apply to each Covered Transaction between the Adhering Parties (whether entered into
before, on or after the Cut-off Date).
(c) This Protocol is intended for use without negotiation, but without prejudice to any amendment,
modification or waiver in respect of a Covered Transaction that the parties may otherwise effect in
accordance with the terms of that Covered Transaction and the Governing Master Agreement.
(i) In adhering to this Protocol, an Adhering Party may not specify additional provisions,
conditions or limitations in its Adherence Letter or otherwise.
(ii) Any purported adherence that ISDA, as agent, determines in good faith is not in compliance
with this Protocol will be void.
(d) The parties acknowledge and agree that adherence to this Protocol is irrevocable.
3. Representations and Agreements
Each Adhering Party represents to each other Adhering Party with which it has or may have a Covered
Transaction, on the date on which the later of them adheres to this Protocol in accordance with Section 2 above
and, if then outstanding, in respect of each Covered Transaction between them, that:
(a) Status. It (i) is, if relevant, duly organised and validly existing under the laws of the jurisdiction of its
organisation or incorporation and, if relevant under such laws, in good standing or, (ii) if it otherwise
represents its status in or pursuant to the Governing Master Agreement, has such status;
(b) Powers. It has the power to execute and deliver the Adherence Letter and to perform its obligations
under the Adherence Letter and each Covered Transaction, in each case as amended by the Adherence
Letter and this Protocol, and has taken all necessary action to authorise such execution, delivery and
performance;
(c) No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any
law applicable to it, any provision of its constitutional documents, any order or judgment of any court or
other agency of government applicable to it or any of its assets or any contractual restriction binding on
or affecting it or any of its assets;
(d) Consents. All governmental and other consents that are required to have been obtained by it with
respect to the Adherence Letter and each Covered Transaction, in each case as amended by the
Adherence Letter and this Protocol, have been obtained and are in full force and effect and all conditions
of any such consents have been complied with;
(e) Obligations Binding. Its obligations under the Adherence Letter and each Covered Transaction, in each
case as amended by the Adherence Letter and this Protocol, constitute its legal, valid and binding
obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy,
reorganisation, insolvency, moratorium or similar laws affecting creditors' rights generally and subject,
as to enforceability, to equitable principles of general application (regardless of whether enforcement is
sought in a proceeding in equity or at law)); and
(f) Credit Support. Its adherence to this Protocol and any amendment contemplated by this Protocol will
not, in and of itself, adversely affect any obligations owed, whether by it or by any third party, under any
Credit Support Document relating to a Covered Transaction.
2
Each Adhering Party agrees with each other Adhering Party with which it has or may have a Governing Master
Agreement that:
(a) each of the foregoing representations will be deemed to be a representation for purposes of Section
5(a)(iv) of each such Governing Master Agreement (then or in the future) between them (or, in the case
of a Governing Master Agreement that is not an ISDA Master Agreement, any analogous provision in
such Governing Master Agreement); and
(b) any Credit Support Document between the Adhering Parties and relating to a Covered Transaction will
be deemed to be amended to the extent necessary such that the operation thereof is not affected by the
adherence by the Adhering Parties to this Protocol and any amendments contemplated by this Protocol.
4. Miscellaneous
(a) Entire Agreement; Survival; Amendments.
(i) This Protocol constitutes the entire agreement and understanding of the Adhering Parties with
respect to its subject matter. Each Adhering Party acknowledges that in adhering to this
Protocol it has not relied on any oral or written representation, warranty or other assurance
(except as provided for or referred to elsewhere in this Protocol or in Schedule 1) and waives all
rights and remedies which might otherwise be available to it in respect thereof, except that
nothing in this Protocol will limit or exclude any liability of an Adhering Party for fraud.
(ii) Except for any amendment deemed to be made pursuant to this Protocol in respect of a Covered
Transaction, all terms and conditions of each Covered Transaction will continue in full force
and effect in accordance with its provisions on the effective date of that amendment. As used in
the Documentation governing each Covered Transaction, the terms "Transaction", "this
Transaction", "Confirmation", "this Confirmation" and words of similar import will, unless
the context otherwise requires, mean the Covered Transaction and related Confirmation as
amended pursuant to this Protocol in accordance with the relevant Adherence Letters. This
Protocol will, with respect to its subject matter, survive, and any amendments deemed to be
made pursuant to it will form a part of, each Covered Transaction between the Adhering Parties
notwithstanding Section 9(a) (or in the case of an ISDA Master Agreement that is a 1992 ISDA
Master Agreement (Local Currency – Single Jurisdiction), Section 8(a)) of the Governing
Master Agreement (or in the case of a Governing Master Agreement that is not an ISDA Master
Agreement, any analogous provision in such Governing Master Agreement).
(b) Amendments. An amendment, modification or waiver in respect of the matters contemplated by this
Protocol will only be effective if made in accordance with the terms of the Governing Master Agreement
and then only with effect between the parties to that Governing Master Agreement (and will only be
effective to amend or override the provisions contained in Section 1 of this Protocol and Schedule 1 to
this Protocol if it expressly refers in writing to this Section 4(b) of this Protocol and would otherwise be
effective in accordance with Section 9(b) (or in the case of an ISDA Master Agreement that is a 1992
ISDA Master Agreement (Local Currency – Single Jurisdiction), Section 8(b)) of the Governing Master
Agreement (or in the case of a Governing Master Agreement that is not an ISDA Master Agreement,
any analogous provision in such Governing Master Agreement).
(c) Headings. The headings used in this Protocol and any Adherence Letter are for convenience of
reference only and are not to affect the construction of or to be taken into consideration in interpreting
this Protocol or any Adherence Letter.
3
(d) Governing Law. This Protocol and each Adherence Letter will, as between two Adhering Parties, be
governed by and construed in accordance with English law, provided that each Covered Transaction as
amended in accordance with Schedule 1 to this Protocol shall be governed by and construed in
accordance with the law specified to govern that Covered Transaction and otherwise in accordance with
the applicable choice of law doctrine.
(e) Notices. Any Adherence Letter must be in writing and delivered as a locked PDF (portable document
format) attachment to an email to ISDA at LyondellBasellProtocol@isda.org and will be deemed
effectively delivered on the date it is delivered, unless on the date of that delivery the New York ISDA
office is closed or that communication is delivered after 5:00 p.m. New York time, in which case that
communication will be deemed effectively delivered on the next day the New York ISDA office is
open. Each Adhering Party agrees that the determination of the date and time of delivery of any
Adherence Letter shall be determined by ISDA in its sole and absolute discretion.
5. Definitions
As used in this Protocol, (a) "Confirmation", "Credit Support Document" and "Transaction" each has the
respective meaning given to that term in the related Governing Master Agreement and (b) "Credit Derivative
Transaction" has the meaning given to that term in (i) the 2003 ISDA Credit Derivatives Definitions, as
supplemented by the May 2003 Supplement to the 2003 ISDA Credit Derivatives Definitions, each as published
by ISDA (the "2003 Definitions") in respect of a Transaction documented by a Confirmation that incorporates
the 2003 Definitions or (ii) the 1999 ISDA Credit Derivatives Definitions, as published by ISDA (the "1999
Definitions") in respect of a Transaction documented by a Confirmation that incorporates the 1999 Definitions,
as applicable (each of the 2003 Definitions and the 1999 Definitions, "Credit Definitions"). Each capitalised
term used in this Protocol or Schedule 1 but not defined herein or therein has the meaning given that term in the
related Documentation.
References in this Protocol and Schedule 1 to the following terms have the meaning indicated below:
"Affected iTraxx® Index" means each of the iTraxx® indices of International Index Company Limited (or any
predecessor or successor thereto) containing LyondellBasell Industries AF S.C.A., if any.
"Affected Portion" means, in respect of a Covered Transaction, the portion of such Covered Transaction (or, in
respect of a Single Name Swaption or Portfolio Swaption, the portion of the related Underlying CDS)
attributable to LyondellBasell Industries AF S.C.A.
"Auction Date" has the meaning specified in Exhibit 2 hereto.
"Bespoke Portfolio Transaction" means any Bespoke Untranched Portfolio Transaction and any Bespoke
Tranched Portfolio Transaction.
"Bespoke Tranched Portfolio Transaction" means a tranched Credit Derivative Transaction that references
more than one Reference Entity but that is not a Covered Index Transaction and is not any type of Covered Non-
Index Transaction other than a Bespoke Portfolio Transaction.
"Bespoke Untranched Portfolio Transaction" means an untranched Credit Derivative Transaction that
references more than one Reference Entity but that is not a Covered Index Transaction and is not any type of
Covered Non-Index Transaction other than a Bespoke Portfolio Transaction.
"Business Day" means a day which is a TARGET Settlement Day and a day on which commercial banks and
foreign exchange markets are generally open to settle payments in London.
4
"Constant Maturity Swap Transaction" means any Portfolio Constant Maturity Swap Transaction and any
Single Name Constant Maturity Swap Transaction.
"Covered Index Transaction" means a Covered iTraxx® Untranched Transaction or a Covered iTraxx®
Tranched Transaction for which:
(a) the Effective Date is on or prior to the Default Date;
(b) the Trade Date is on or prior to the Final Price Determination Date;
(c) the Scheduled Termination Date is on or after the Default Date;
(d) each of the parties to such Credit Derivative Transaction is an Adhering Party; and
(e) the Affected Portion thereof is still outstanding as of the Final Price Determination Date.
"Covered iTraxx® Tranched Transaction" means a tranched Credit Derivative Transaction that references an
Affected iTraxx® Index and is governed by relevant Index Documentation.
"Covered iTraxx® Untranched Transaction" means a Credit Derivative Transaction that is not a Covered
iTraxx® Tranched Transaction but that references an Affected iTraxx® Index and is governed by relevant Index
Documentation.
"Covered Non-Index Transaction" means any Credit Derivative Transaction that (i) is not a Covered Index
Transaction, (ii) is not an Excluded Non-Index Transaction, (iii) is a Single Name CDS Transaction, a Constant
Maturity Swap Transaction, a Principal Only Transaction, an Interest Only Transaction, a First to Default
Transaction, an Nth to Default Transaction, a Recovery Lock Transaction or a Bespoke Portfolio Transaction,
and (iv) for which:
(a) LyondellBasell Industries AF S.C.A. is a Reference Entity;
(i) no Reference Obligation is specified in respect of LyondellBasell Industries AF S.C.A. or (ii) at least
(b)
one Reference Obligation specified in respect of LyondellBasell Industries AF S.C.A. is not
Subordinated to any of the Deliverable Obligations;
(c) the Effective Date is on or prior to the Default Date;
(d) the Trade Date is on or prior to the Final Price Determination Date;
(e) the Scheduled Termination Date is on or after the Default Date;
each of the parties to such Credit Derivative Transaction is an Adhering Party;
(f)
(g) the Deliverable Obligation Category and Deliverable Obligation Characteristics, if any, specified as
being applicable in respect of LyondellBasell Industries AF S.C.A. are the same as those applicable
pursuant to the Credit Derivatives Physical Settlement Matrix; and
(h) as applicable, (i) the Affected Portion thereof is still outstanding as of the Final Price Determination
Date; or (ii) the Termination Date has not occurred as of the Business Day immediately prior to the Final
Price Determination Date.
5
A "Covered Non-Index Transaction" shall also include any Covered Single Name Swaptions and any Covered
Portfolio Swaptions.
"Covered Portfolio Swaption" means a Portfolio Swaption for which:
(a) LyondellBasell Industries AF S.C.A. is a Reference Entity for the purposes of the related Underlying
CDS;
(b) the Swaption Trade Date of the Portfolio Swaption is on or prior to the Final Price Determination Date;
(c) the Expiration Date of the Portfolio Swaption is on or after the Final Price Determination Date;
(d) the Deliverable Obligation Category and Deliverable Obligation Characteristics, if any, specified as
being applicable for the purposes of the related Underlying CDS in respect of LyondellBasell Industries
AF S.C.A. are the same as those applicable pursuant to the Credit Derivatives Physical Settlement
Matrix; and
each of the parties to such Portfolio Swaption is an Adhering Party.
(e)
"Covered Single Name Swaption" means a Single Name Swaption for which:
LyondellBasell Industries AF S.C.A. is the Reference Entity for the purposes of the related Underlying
(a)
CDS;
(b) the Swaption Trade Date of the Single Name Swaption is on or prior to the Common Event
Determination Date;
(c) the Expiration Date of the Single Name Swaption is on or after the Default Date;
(d) the Deliverable Obligation Category and Deliverable Obligation Characteristics, if any, specified as
being applicable for the purposes of the related Underlying CDS in respect of LyondellBasell Industries
AF S.C.A. are the same as those applicable pursuant to the Credit Derivatives Physical Settlement
Matrix; and
(e) each of the parties to such Single Name Swaption is an Adhering Party.
"Covered Transaction" means a Covered Index Transaction or a Covered Non-Index Transaction, as
applicable.
"Credit Derivatives Physical Settlement Matrix" means the terms applicable to a European Corporate
pursuant to the Credit Derivatives Physical Settlement Matrix (version 8 – January 20, 2009) published by
ISDA.
"Default Date" means March 19, 2009.
"Documentation" means Index Documentation or Non-Index Documentation, as applicable.
"Excluded Non-Index Transaction" means (a) any Bespoke Portfolio Transaction (i) that references a portfolio
of Reference Entities that is substantially identical to the relevant portfolio of Reference Entities for any series of
credit linked notes, trust certificates or other similar instruments and (ii) the documentation for which expressly
states that the final price is linked to such credit linked notes, trust certificates or other similar instruments, as
6
applicable, (b) any Reference Obligation Only Transaction, (c) any Loan Only Transaction, (d) any Preferred
CDS Transaction, (e) any Fixed Recovery Transaction and (f) any Credit Derivative Transaction that (i) by its
terms expressly states that the provisions relating to settlement therein shall not be amended or modified by any
protocol published by ISDA in respect of an auction and (ii) would, but for such express terms, be a Covered
Non-Index Transaction.
"Final Price Determination Date" has the meaning specified in Exhibit 2 hereto.
"First to Default Transaction" means a Credit Derivative Transaction that references more than one Reference
Entity pursuant to which Cash Settlement Amounts or Physical Settlement Amounts, as applicable, will only be
paid to Buyer after the Conditions to Settlement have been satisfied for the first time in respect of any of the
relevant Reference Entities.
"Fixed Recovery Transaction" means a Credit Derivative Transaction in respect of which the Final Price is
pre-determined and specified in the relevant Documentation.
"Governing Master Agreement" means, in respect of a Covered Transaction, the master agreement governing
such Covered Transaction, whether executed by the parties thereto or incorporated by reference in the
Confirmation relating to such Covered Transaction.
"Index Documentation" means the Governing Master Agreement, Standard Terms Supplement (or master
confirmation, general terms confirmation, or any document analogous thereto) and a Confirmation (including a
master confirmation) that is based on the forms published by the International Index Company Limited (or any
predecessor or successor thereto) referencing an iTraxx® index of the International Index Company Limited (or
any predecessor or successor thereto), with such modifications to which the parties thereto have agreed.
"Interest Only Transaction" means a Credit Derivative Transaction that references more than one Reference
Entity under which (a) Seller pays to Buyer either (i) an upfront amount or (ii) a floating interest rate, (b) neither
party pays Cash Settlement Amounts during the term of the Credit Derivative Transaction and (c) Buyer pays
Fixed Amounts to Seller during the term of the Credit Derivative Transaction (which Fixed Amounts are
reduced due to Credit Events).
"ISDA Master Agreement" means any of the following: (a) the 2002 ISDA Master Agreement; (b) the 1992
ISDA Master Agreement (Multicurrency – Cross Border); (c) the 1992 ISDA Master Agreement (Local
Currency – Single Jurisdiction); (d) the 1987 ISDA Interest Rate and Currency Exchange Agreement; and (e) the
1987 ISDA Interest Rate Swap Agreement.
"Loan Only Transaction" means a Credit Derivative Transaction in respect of which "Loan" is specified as the
only Deliverable Obligation Category or a Credit Derivative Transaction pursuant to which the Reference
Obligations (which are required to be Loans) and certain other Loans (or Borrowed Money obligations other
than Bonds) are the only Deliverable Obligations.
"Non-Index Documentation" means the Governing Master Agreement , Standard Terms Supplement (or master
confirmation, general terms confirmation, or any document analogous thereto) and Confirmation relating to a
Covered Non-Index Transaction.
"Nth to Default Transaction" means a Credit Derivative Transaction that references more than one Reference
Entity pursuant to which Cash Settlement Amounts or Physical Settlement Amounts, as applicable, will only be
paid to Buyer after the Conditions to Settlement have been satisfied in respect of any of the relevant Reference
Entities that is the nth Reference Entity in respect of which an Event Determination Date has occurred, where
7
"n" is a number specified for such purpose in the Documentation in respect of the relevant Credit Derivative
Transaction.
"Portfolio Constant Maturity Swap Transaction" means a Credit Derivative Transaction that references more
than one Reference Entity in respect of which the Fixed Rate is reset at the end of each Fixed Rate Payer
Calculation Period to the then-current market rate for the relevant Credit Derivative Transaction.
"Portfolio Swaption" means any unexercised option to enter into a Credit Derivative Transaction (other than
another Swaption) that references more than one Reference Entity.
"Preferred CDS Transaction" means a Credit Derivative Transaction that references preferred securities or
similar hybrid securities as Reference Obligations or Deliverable Obligations and which contains specific
provisions pertaining thereto.
"Principal Only Transaction" means a Credit Derivative Transaction that references more than one Reference
Entity under which Seller pays an upfront amount to Buyer, neither party pays any Fixed Amounts or Cash
Settlement Amounts during the term of the Credit Derivative Transaction and, upon termination of the Credit
Derivative Transaction, Buyer pays to Seller the notional amount of the Credit Derivative Transaction, minus
aggregate Cash Settlement Amounts.
"Recovery Lock Transaction" means a Credit Derivative Transaction in respect of which the Reference Price is
specified in the relevant Documentation as a price less than 100 per cent. and for which either Buyer or Seller
can deliver a Notice of Physical Settlement.
"Reference Obligation Only Transaction" means:
(a) a Credit Derivative Transaction in respect of which the applicable Settlement Method is Physical
Settlement and "Reference Obligations Only" is specified as the Deliverable Obligation Category; or
(b) a Credit Derivative Transaction in respect of which the applicable Settlement Method is Cash Settlement
and the relevant Confirmation specifies only one or more specifically identified Reference Obligations.
"Single Name CDS Transaction" means a Credit Derivative Transaction that references not more than one
Reference Entity that is not a Single Name Constant Maturity Swap Transaction.
"Single Name Constant Maturity Swap Transaction" means a Credit Derivative Transaction that references
not more than one Reference Entity for which the Fixed Rate is reset at the end of each Fixed Rate Payer
Calculation Period to the then-current market rate for the relevant Credit Derivative Transaction.
"Single Name Swaption" means any unexercised option to enter into a Credit Derivative Transaction (other
than another Swaption) that references not more than one Reference Entity.
"Standard Terms Supplement" means, in relation to a Covered Transaction, the standard terms supplement
published by ISDA, Markit Group Limited, International Index Company Limited, CDS IndexCo LLC, any
analogous institution or any successor or predecessor thereto and incorporated by reference into the relevant
Confirmation.
"Swaption" means a Single Name Swaption or a Portfolio Swaption.
"TARGET Settlement Day" means any day on which TARGET2 (the Trans-European Automated Real-time
Gross settlement Express Transfer system) is open.
8
"Underlying CDS" means, in respect of a Single Name Swaption or Portfolio Swaption, the underlying Credit
Derivative Transaction to which the relevant unexercised option relates.
9
EXHIBIT 1
to 2009 LyondellBasell Industries AF S.C.A. CDS Protocol
Form of Adherence Letter
[Letterhead of Adhering Party]
[Date]
International Swaps and Derivatives Association, Inc.
Send to: LyondellBasellProtocol@isda.org
Dear Sirs,
2009 LyondellBasell Industries AF S.C.A. CDS Protocol - Adherence
The purpose of this letter is to confirm our adherence to the 2009 LyondellBasell Industries AF S.C.A. CDS
Protocol, as published by the International Swaps and Derivatives Association, Inc. on April 6, 2009 (the
"Protocol"). This letter constitutes an "Adherence Letter" as referred to in the Protocol.
The definitions and provisions contained in the Protocol are incorporated into this Adherence Letter, which will
supplement and form part of each Covered Transaction (now or in the future) between us and each other
Adhering Party, respectively.
1. Specified Terms
The amendments in Section 1 and Schedule 1 of this Protocol shall apply to Covered Transactions to
which we are a party.
2. Appointment as Agent and Release
We hereby appoint ISDA as our agent for the limited purposes of the Protocol and accordingly we
waive, and hereby release ISDA from, any rights, claims, actions or causes of action whatsoever
(whether in contract, tort or otherwise) arising out of, or in any way relating to, this Adherence Letter or
our adherence to the Protocol or any actions contemplated as being required by ISDA.
3. DTCC Account Number
For purposes of electronic matching and counterparty recognition, our DTCC Account Number is as
follows, but you understand and agree that our failure to provide any such details pursuant to this letter
will not affect the legal validity and binding nature of the Protocol with respect to us:
DTCC Account Number: []
4. Contact Details
Our contact details for purposes of this Adherence Letter are:
Name: []
Address: []
10
Telephone: []
Fax: []
E-mail: []
We consent to the publication of the conformed copy of this letter by ISDA and to the disclosure by ISDA of the
contents of this letter.
Yours faithfully,
[ADHERING PARTY] 1
By:
Name:
Title:
Signature:
1
Specify legal name of Adhering Party. If you are an investment or asset manager and act on behalf of multiple funds, you may indicate in the
signature block, "Investment/Asset Manager, acting on behalf of each of the funds and accounts listed in the relevant Master Agreement (or
other agreement which deems a Master Agreement to have been created) between it and another Adhering Party" (or such other language that
indicates the funds to which this letter is applicable). A separate Adherence Letter for each fund does not need to be submitted to ISDA.
Further, no specific names of clients of the investment or asset manager will be publicly disclosed on the ISDA website in connection with the
Protocol (unless such names are contained in the Adherence Letter or any attached appendix). However, in order for each Participating Bidder
to calculate its Market Position, each such investment or asset manager is required to provide a list of all funds and accounts that it acts on
behalf of to each Participating Bidder that has (or whose affiliate has) entered into an ISDA Master Agreement with any of those funds. As
provided in Section (1) of Exhibit 2 of the Protocol, on the Business Day prior to the Auction Date, the Administrators will publish a list of the
Participating Bidders.
11
EXHIBIT 2
to 2009 LyondellBasell Industries AF S.C.A. CDS Protocol
Auction Methodology
For the purposes of the Protocol of which this Exhibit forms a part, the following auction procedure (including
any vote regarding the occurrence of a Materiality Event) will be conducted on the Auction Date on the
following terms (the "Auction"):
1 On or before the Business Day prior to the Auction Date, the Administrators will publish a list of the
Participating Bidders.
2 Any customer that wishes to submit a Customer Physical Settlement Request to a Participating Bidder
must submit a valid Customer Physical Settlement Request Letter to the relevant Participating Bidder no
later than 5:00 p.m. London time on the Business Day prior to the Final Price Determination Date. Each
Customer Physical Settlement Request submitted to a Participating Bidder must be, to the best of the
relevant customer's knowledge and belief, in the same direction as and (when aggregated with all other
Customer Physical Settlement Requests, if any, submitted by such customer to one or more other
Participating Bidders) not in excess of, its Market Position. Each Participating Bidder must accept
Customer Physical Settlement Requests from any customer with whom it has a trading relationship,
provided that such Customer Physical Settlement Request is no larger than, and is in the same direction
as, such customer's Dealer-Specific Market Position with respect to that Participating Bidder and/or its
affiliates (in aggregate). A Participating Bidder may, but is not required to, accept a Customer Physical
Settlement Request larger than the relevant customer's Dealer-Specific Market Position in respect of
such Participating Bidder and/or its affiliates.
3 During the Initial Bidding Period, each Participating Bidder shall submit to the Administrators a Valid
Inside Market Submission and may submit a Physical Settlement Request (which Physical Settlement
Request will equal the aggregate of the relevant Participating Bidder's Dealer Physical Settlement
Request and all valid Customer Physical Settlement Requests, if any, that the relevant Participating
Bidder receives and accepts from its customers pursuant to Section 2 of this Exhibit 2). Each Dealer
Physical Settlement Request must be, to the best of the relevant Participating Bidder's knowledge and
belief, in the same direction as, and not in excess of, its Market Position.
4 If the Administrators receive at least 8 Valid Inside Market Submissions, the Administrators will
determine the "Inside Market Midpoint" as follows:
(a) The Administrators will sort the Inside Market Bids and Inside Market Offers in the Valid
Inside Market Submissions separately, with the Inside Market Bids sorted in descending order
and the Inside Market Offers sorted in ascending order. Each Inside Market Bid will then be
matched with the corresponding Inside Market Offer (i.e., the highest Inside Market Bid being
matched with the lowest Inside Market Offer, the second highest Inside Market Bid with the
second lowest Inside Market Offer, etc.) (each such Inside Market Bid/Inside Market Offer pair
constituting a "Matched Market"). For purposes of sorting the Inside Market Bids and Inside
Market Offers, where two Inside Market Bids are equal, the one submitted first to the
Administrators will be considered to be the lower of the two, and where two Inside Market
Offers are equal, the one submitted first to the Administrators will be considered to be the
higher of the two.
(b) The Administrators will then calculate the mean of the Inside Market Bids and Inside Market
Offers included in the Best Half of the Matched Markets that are Non-Tradeable Markets. To
12
identify the Best Half, the Administrators will sort all Non-Tradeable Markets in order of the
spread between the Inside Market Bid and Inside Market Offer within each Matched Market,
from smallest spread to largest. The Best Half of the Matched Markets are those in the first half
of such list. In the event that the number of Non-Tradeable Markets is an odd number, the
Administrators will round up the number of Matched Markets to include in the Best Half. The
Administrators will then calculate the Inside Market Midpoint by finding the mean of all the
Inside Market Bids and Inside Market Offers included in the Matched Markets that fall within
the Best Half (with the results rounded to the nearest one-eighth of one percentage point).
(c) The steps described in (a) and (b) above are illustrated in the following example (which is not
intended to reflect indicative prices for the Deliverable Obligations):
Step 1 – Sort Bids from highest to lowest and Offers from lowest to highest.
Contributed Sorted
IM Bids IM Offers IM Bids IM Offers
39.500% 41.000% 45.000% 34.000%
Tradeable
40.000% 42.000% 41.000% 39.500% Markets
41.000% 43.000% 41.000% 40.000%
Matched
45.000% 47.000% 40.000% 41.000%
Markets Best Half
32.000% 34.000% 39.500% 42.000%
38.750% 40.000% 38.750% 42.750%
38.000% 39.500% 38.000% 43.000%
41.000% 42.750% 32.000% 47.000%
Step 2 – Ignore all Tradeable Markets.
Step 3 – The Inside Market Midpoint is the mean of the Best Half of the remaining Matched
Markets. If there is an odd number of remaining Matched Markets, round up to determine the
number of Matched Markets in the Best Half.
Best Half
IM Bids IM Offers
40.000% 41.000%
39.500% 42.000% Inside Market Midpoint = Average (40, 41, 39.5, 42, 38.75, 42.75) =
38.750% 42.750% 40.667%, rounded to the nearest one–eighth of one percentage point: 40.625%
5 For each Tradeable Market, one of the Participating Bidders whose Inside Market Bid or Inside Market
Offer forms part of such Tradeable Market will make a payment to ISDA (the "Adjustment Amount")
on the third Business Day after the Final Price Determination Date, such payment to be calculated by the
Administrators as follows:
(a) The "Adjustment Amount" in respect of a Tradeable Market will be an amount equal to (i) the
Inside Market Quotation Amount multiplied by (ii) either (A) if the Open Interest is an offer to
sell Deliverable Obligations, the greater of (I) zero and (II) the Inside Market Bid forming part
of such Tradeable Market minus the Inside Market Midpoint or (B) if the Open Interest is a bid
to purchase Deliverable Obligations, the greater of (I) zero and (II) the Inside Market Midpoint
minus the Inside Market Offer forming part of such Tradeable Market. Each Participating
Bidder agrees that (1) if the Open Interest is an offer to sell Deliverable Obligations, the
Participating Bidder whose Inside Market Bid formed part of such Tradeable Market will pay
the Adjustment Amount to ISDA and (2) if the Open Interest is a bid to purchase Deliverable
Obligations, the Participating Bidder whose Inside Market Offer formed part of such Tradeable
Market will pay the Adjustment Amount to ISDA. Any payments of Adjustment Amounts shall
be used by ISDA to defray any costs related to any auction that ISDA has coordinated
(including the Auction), or that ISDA will in the future coordinate, for purposes of settlement of
Credit Derivative Transactions. To the extent that ISDA determines at any time that the
13
aggregate of all such payments received by ISDA (and not previously applied by ISDA to
defray auction-related costs) up to and including such time exceeds the costs (including future
costs as determined by ISDA) of such auctions, ISDA may in its sole discretion distribute any
such excess among all entities that have previously acted as participating bidders in any prior
auction proportionately, based upon participation as a participating bidder in such prior auctions.
Payments of Adjustment Amounts will not be conducted or effected by, or through, any
Administrator.
(b) The steps described in (a) above are illustrated in the following example (which is not intended
to reflect indicative prices for the Deliverable Obligations):
Step 1 – Consider only Tradeable Markets.
Tradeable Markets
IM Bids IM Offers
45.000% 34.000%
41.000% 39.500%
41.000% 40.000 %
Step 2 – Calculate the Adjustment Amount for each Tradeable Market by (i)(A) if the Open
Interest is an offer to sell Deliverable Obligations, determining the greater of (I) zero and (II) the
Inside Market Bid forming part of such Tradeable Market minus the Inside Market Midpoint or
(B) if the Open Interest is a bid to purchase Deliverable Obligations, determining the greater of
(I) zero and (II) the Inside Market Midpoint minus the Inside Market Offer forming part of such
Tradeable Market and (ii) multiplying the resulting amount by the Inside Market Quotation
Amount.
Example calculation of Adjustment Amount if the Open Interest is an offer to sell Deliverable
Obligations:
Adjustment Amount
IM Bids IMM (as a percentage of the Inside Market Quotation Amount)
45.000% 4.375%
40.625%
41.000% 0.375%
40.625%
41.000% 0.375%
40.625%
Example calculation of Adjustment Amount if the Open Interest is a bid to purchase Deliverable
Obligations:
Adjustment Amount
IMM IM Offers (as a percentage of the Inside Market Quotation Amount)
34.000 % 6.625%
40.625%
39.500% 1.125%
40.625%
40.000% 0.625%
40.625%
6 If an Inside Market Midpoint has been determined pursuant to Section Error! Reference source not
found. of this Exhibit 2, the Administrators will match all Physical Settlement Requests with one
another in order to determine the Open Interest.
(a) If the sum of all Quotation Amounts stated in each Physical Settlement Sell Request is less than
the sum of all Quotation Amounts stated in each Physical Settlement Buy Request, all Physical
Settlement Sell Requests will be matched with Physical Settlement Buy Requests, subject to the
Rounding Convention, or if the sum of all Quotation Amounts stated in each Physical
Settlement Buy Request is less than the sum of all Quotation Amounts stated in each Physical
Settlement Sell Request, all Physical Settlement Buy Requests will be matched with Physical
Settlement Sell Requests, subject to the Rounding Convention (each such match, a "Market
14
Position Trade"), and each such pair will form a trade at the Final Price as described in Section
9 of this Exhibit 2.
(b) By 10:30 a.m. London time on any day on which the Initial Bidding Period has successfully
concluded, the Administrators will publish the following information on their respective
websites:
(i) the size and direction of the Open Interest;
(ii) the Inside Market Midpoint; and
(iii) the details of any Adjustment Amounts.
If (A) for any reason, the Initial Bidding Period lasts longer, or occurs later, than the Originally
Scheduled Initial Bidding Period or (B) as of the time on the relevant day at which the
Administrators would otherwise publish the above information, (I) a Materiality Event has been
declared pursuant to Section 10(a) of this Exhibit 2 or (II) an event has occurred or exists that is
considered by any two or more Participating Bidders to be a Potential Materiality Event and it
remains to be determined whether such Potential Materiality Event will result in the declaration
of a Materiality Event, the Administrators may delay the Subsequent Bidding Period and publish
the above information on their respective websites at such time as they determine (in their sole
and absolute discretion) in order to preserve the integrity of the Auction (except that, in the case
of clause (B)(I), the Administrators shall refrain from publishing the above information).
7 Any Customer Limit Order Submission must be submitted to the relevant Participating Bidder at any
time after the publication of the information set out above in accordance with Section 6(b) of this
Exhibit 2 until the end of the Subsequent Bidding Period (determined for these purposes only, without
regard to any extension that may be made by the Administrator). Each Customer Limit Order
Submission submitted to a Participating Bidder must be in the opposite direction of the Open Interest
and, to the best of the customer's knowledge and belief, (when aggregated with all other Customer Limit
Order Submissions, if any, submitted by such customer to one or more Participating Bidders) not in
excess of the size of the Open Interest. The Participating Bidder may, but is not obliged to, take into
account in its Limit Order Submissions any Customer Limit Order Submission submitted to it in
accordance with this Section 7 of this Exhibit 2, provided that if a Participating Bidder, for any reason,
decides not to accept a Customer Limit Order Submission from a customer, such Participating Bidder
shall promptly notify such customer of its decision not to accept such customer's Customer Limit Order
Submission.
During the Subsequent Bidding Period, each Participating Bidder will submit Limit Order Submissions. 8
All Inside Market Bids (if the Open Interest is an offer to sell Deliverable Obligations) or Inside Market
Offers (if the Open Interest is a bid to purchase Deliverable Obligations), as applicable, submitted
during the Initial Bidding Period (regardless of whether or not they form part of a Tradeable Market)
will, together with all Limit Bids (if the Open Interest is an offer to sell Deliverable Obligations) or
Limit Offers (if the Open Interest is a bid to purchase Deliverable Obligations), as applicable, be
considered "Unmatched Limit Orders", however any Inside Market Bid or Inside Market Offer, as
applicable, that forms part of a Tradeable Market will be deemed to be equal to the Inside Market
Midpoint for purposes of serving as an Unmatched Limit Order. The excess, if any, of (a) the aggregate
Quotation Amount of a Participating Bidder's Limit Order Submissions over (b) the portion of such
aggregate Quotation Amount attributable to any Customer Limit Order Submissions received by such
Participating Bidder that are taken into account in the Limit Order Submissions received by the
Administrators from such Participating Bidder during the Subsequent Bidding Period must be, to the
15
best of such Participating Bidder's knowledge and belief, not in excess of the size of the Open Interest.
If the Open Interest is an offer to sell Deliverable Obligations, then any Limit Bid that would otherwise
be at a price above the Inside Market Midpoint plus the Cap Amount shall be deemed to be at a price
equal to the Inside Market Midpoint plus the Cap Amount. If the Open Interest is a bid to purchase
Deliverable Obligations, then any Limit Offer that would otherwise be at a price below the Inside
Market Midpoint minus the Cap Amount shall be deemed to be at a price equal to the Inside Market
Midpoint minus the Cap Amount.
9 The Administrators will then match the Open Interest against the corresponding Unmatched Limit
Orders.
(a) If the Open Interest is a bid to purchase Deliverable Obligations, it will be matched against the
Unmatched Limit Orders that are Offers. If the Open Interest is an offer to sell Deliverable
Obligations, it will be matched against the Unmatched Limit Orders that are Bids.
(b) The Open Interest will be matched against each applicable Unmatched Limit Order, beginning
with the Unmatched Limit Order that is the lowest Offer or the highest Bid, as the case may be,
and moving to the next remaining lowest (in the case of Offers) or next remaining highest (in
the case of Bids) until:
the full amount of the Open Interest has been matched against Unmatched Limit Orders
(i)
totalling the same size as the Open Interest; or
(ii) all of the Unmatched Limit Orders of the relevant direction (i.e., Offers, if the Open
Interest is a bid to purchase Deliverable Obligations or Bids, if the Open Interest is an
offer to sell Deliverable Obligations) have been matched to the Open Interest.
Each Unmatched Limit Order that is matched to the Open Interest under Section 9(b)(i) or (ii) of
this Exhibit 2 is a "Matched Limit Order", and each such match between a Matched Limit
Order and a Physical Settlement Request is a "Matched Limit Order Trade". If, in the case of
Section 9(b)(i) of this Exhibit 2, there are multiple Unmatched Limit Orders stating the same
price and each could be the final Unmatched Limit Order to be matched to the Open Interest,
then such final Unmatched Limit Orders will be filled Pro Rata against the remaining Open
Interest, subject to the Rounding Convention.
(c) If the final matching of the Open Interest against the applicable Unmatched Limit Orders occurs
pursuant to Section 9(b)(i) of this Exhibit 2, the Final Price will be the price associated with the
Matched Limit Order that is the highest Offer or the lowest Bid, as the case may be, provided
that (A) if the Open Interest is an offer to sell Deliverable Obligations and the price associated
with the lowest Matched Limit Order exceeds the Inside Market Midpoint by more than the Cap
Amount, then the Final Price will be the Inside Market Midpoint plus the Cap Amount and
(B) if the Open Interest is a bid to purchase Deliverable Obligations and the Inside Market
Midpoint exceeds the price associated with the highest Matched Limit Order by more than the
Cap Amount, then the Final Price will be the Inside Market Midpoint minus the Cap Amount. If
the Open Interest is zero, the Final Price will be the Inside Market Midpoint.
(d) If the final matching of the Open Interest against the applicable Unmatched Limit Orders occurs
pursuant to Section 9(b)(ii) of this Exhibit 2, the Final Price shall be (A) if the Open Interest is a
bid to purchase Deliverable Obligations, the greater of (i) 100% and (ii) the highest Limit Offer
or Inside Market Offer received or (B) if the Open Interest is an offer to sell Deliverable
Obligations, zero. In such case, notwithstanding Sections 6(a) or 9(b) of this Exhibit 2, all
16
Physical Settlement Requests of the same direction as the Open Interest (e.g., bids to purchase
or offers to sell) will be matched Pro Rata, subject to the Rounding Convention, against the
Limit Order Submissions and Physical Settlement Requests on the opposite side of the market to
form Market Position Trades or Matched Limit Order Trades, as applicable.
(e) In all cases, if the Final Price determined pursuant to this Exhibit 2 is greater than 100%, then
for the purposes of settling the Covered Transactions only, the Final Price shall be deemed to be
100%.
(f) Each Participating Bidder whose Physical Settlement Request or Matched Limit Order, as the
case may be, forms part of either a Market Position Trade or a Matched Limit Order Trade will
be deemed to have entered into a bilateral agreement on terms equivalent to the Representative
Auction-Settled Transaction for which (i) the Floating Rate Payer Calculation Amount is equal
to the Quotation Amount in respect of the relevant Market Position Trade or Matched Limit
Order Trade, as the case may be, and (ii) (A) the Seller is the Participating Bidder whose
Physical Settlement Buy Request forms part of such Market Position Trade or whose Physical
Settlement Buy Request, Limit Bid or Inside Market Bid, as the case may be, forms part of such
Matched Limit Order Trade and (B) the Buyer is the Participating Bidder whose Physical
Settlement Sell Request forms part of such Market Position Trade or whose Physical Settlement
Sell Request, Limit Offer or Inside Market Offer, as the case may be, forms part of such
Matched Limit Order Trade; provided that, (i) in the case of the Matched Limit Order Trades
containing the highest Offer or the lowest Bid, as the case may be, the Quotation Amount will, if
necessary, be reduced to reflect the size of the remaining Open Interest, and (ii) in the event that
there are multiple Matched Limit Orders stating the highest Offer or lowest Bid, as the case may
be, then such Matched Limit Orders will be filled Pro Rata against the remaining Open Interest,
subject to the Rounding Convention. Participating Bidders whose Physical Settlement Request
or Matched Limit Order, as the case may be, forms part of a Market Position Trade or Matched
Limit Order Trade will be matched with one another by the Administrators in their sole and
absolute discretion and to the extent reasonably practicable so as to minimize the number of
Representative Auction-Settled Transactions to be entered into and further to minimize the
number of Representative Auction-Settled Transactions for which the Floating Rate Payer
Calculation Amount will be smaller than EUR50,000 or which is not an integral multiple of
EUR1,000 thereabove; provided that, prior to such matching, the Quotation Amounts in respect
of Matched Limit Orders or Physical Settlement Requests, as the case may be, submitted by the
same Participating Bidder will be matched with each other, to the extent possible. Transactions
entered into by and between Participating Bidders pursuant to Market Position Trades or
Matched Limit Order Trades will not be conducted or effected by, or through, any
Administrator.
10 A Delayed Auction Date or a Materiality Event Delayed Auction Date may occur under the following
circumstances:
(a) If at any time before the determination of the Final Price, an event occurs or exists (i) prior to
the commencement of an Initial Bidding Period or (ii) prior to the commencement of the related
Subsequent Bidding Period, that is considered by any two or more Participating Bidders to be a
Potential Materiality Event, then such Participating Bidders shall have a right to require the
Administrators to call a vote of the Auction Settlement Committee to determine whether such
event is a Materiality Event, which vote will take place in the case of (i) above, before the end
of such Initial Bidding Period or, in the case of (ii) above, before the end of such Subsequent
Bidding Period. If a simple majority of the Auction Settlement Committee votes that such event
is a Materiality Event, then such Initial Bidding Period and, if applicable, such Subsequent