Exhibit 10.6
[BANK]
BAKER HUGHES INCORPORATED
3900 ESSEX LANE SUITE
P.O. BOX 4740
HOUSTON, TX 77210-4740
ATTN: MR. DOUG DOTY
DATE: 30JUL03
RE: Interest Rate Swap Transaction
Dear Sir/Madam,
The purpose of this letter (this "Confirmation") is to confirm the terms and
conditions of the Swap Transaction entered into between us on the Trade Date
specified below.
The definitions and provisions contained in the 2000 ISDA Definitions, as
published by the International Swaps and Derivatives Association, Inc., are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.
Reference to "Party A" and "Party B" are for the purposes of this Confirmation
only.
1. This Confirmation evidences a complete and binding agreement between
("PARTY A")
BAKER HUGHES INCORPORATED ("PARTY B")
as to the terms of the Swap Transaction to which this Confirmation relates.
In addition, you and we agree to use all reasonable efforts promptly to
negotiate, execute and deliver an agreement in the form of the ISDA Master
Agreement (Multicurrency-Cross Border) (the "ISDA Form"), with such
modifications as you and we in good faith agree. Upon the execution by you
and us of such agreement, this Confirmation will supplement, form a part of
and be subject to that agreement. All provisions contained in or
incorporated by reference in that agreement upon its execution will govern
this Confirmation except as expressly modified below. Until we execute and
deliver that agreement, this Confirmation, together with all other
documents referring to the ISDA Form (each a "Confirmation") confirming
transactions (each a "Transaction") entered into between us
(notwithstanding anything to the contrary in a Confirmation), shall
supplement, form a part of, and be subject to an agreement in the form of
the ISDA Form as if we had executed an agreement in such form (but without
any Schedule except for the election of English Law as the governing law
and the US Dollars as the Termination Currency) on the Trade Date of the
first such Transaction between us. In the event of any inconsistency
between the provisions of that agreement and this Confirmation, this
Confirmation will prevail for the purposes of this Swap Transaction.
2. The terms of the particular Swap Transaction to which this Confirmation
relates are as follows:-
Notional Amount : USD 325,000,000.00
Trade Date : 30JUL03
Effective Date : 01AUG03
Termination Date : 15JAN09
SUBJECT TO ADJUSTMENT IN
ACCORDANCE WITH THE
MODIFIED FOLLOWING BUSINESS DAY
CONVENTION
FIXED AMOUNTS
Fixed Rate Payer : PARTY A
Fixed Rate Payer Payment Dates : EACH JANUARY 15, AND JULY 15,
COMMENCING JANUARY 15, 2004 AND
ENDING JANUARY 15, 2009, SUBJECT
TO ADJUSTMENT IN ACCORDANCE
WITH THE MODIFIED FOLLOWING
BUSINESS DAY CONVENTION, WITH
NO ADJUSTMENT TO PERIOD END DATES.
Fixed Rate (% Per Annum) : 6.250000
Fixed Rate Day Count Fraction : 30/360
FLOATING AMOUNTS
Floating Rate Payer : PARTY B
Floating Rate Payer Payment Dates : EACH JANUARY 15, AND JULY 15,
COMMENCING JANUARY 15, 2004 AND
ENDING JANUARY 15, 2009, SUBJECT
TO ADJUSTMENT IN ACCORDANCE WITH
THE MODIFIED FOLLOWING BUSINESS
DAY CONVENTION.
Floating Rate for the Initial
Calculation Period : 1.150000 % (EXCLUSIVE OF SPREAD)
Floating Rate Day Count Fraction : ACTUAL/360
Floating Rate Option : USD-LIBOR-BBA
Designated Maturity : 6 MONTHS
Spread (%) : PLUS 2.4425
Reset Dates : THE FIRST DAY OF EACH
CALCULATION PERIOD
Business Days : LONDON, NEW YORK
Calculation Agent : PARTY A, UNLESS OTHERWISE
STATED IN THE MASTER AGREEMENT
3. ACCOUNT DETAILS:
Payments of PARTY A
Correspondent Bank :
Favour : [Bank Information]
A/c :
Ref :
Payments of PARTY B
PLEASE ADVISE UNDER SEPARATE COVER
4. OFFICES
PARTY A : LONDON BRANCH
PARTY B : HOUSTON
5. OTHER PROVISIONS
(A) RELATIONSHIP BETWEEN THE PARTIES
Each party will be deemed to represent to the other party on the date on
which it enters into a Transaction that (absent a written agreement between
the parties that expressly imposes affirmative obligations to the
contrary for that Transaction):
(i) Non-Reliance. It is acting for its own account, and it has made its
own independent decisions to enter into that Transaction and as to
whether that Transaction is appropriate or proper for it based upon
its own judgement and upon advice from such advisers as it has deemed
necessary. It is not relying on any communication (written or oral) of
the other party as investment advice or as a recommendation to enter
into that Transaction; it being understood that information and
explanation related to the terms and conditions of a Transaction shall
not be considered investment advice or a recommendation to enter into
that Transaction. No communication (written or oral) received from the
other party shall be deemed to be an assurance or guarantee as to the
expected results of that Transaction;
(ii) Assessment and Understanding. It is capable of assessing the merits of
and understanding (on its own behalf or through independent
professional advise), and understands and accepts the terms,
conditions and risks of that Transaction. It assumes the risks of that
Transactions;
(iii)Status of Parties. The other party is not acting as a fiduciary or an
adviser to it in respect of that Transaction
(iv) Consultation. Discussions of termination or limitation of risk with
respect to the Transaction and/or provision by a party of indicative
valuations, financial analyses or other statements of valuation and
risk based on market movements (i) are based only on the party's
business and experience as a provider of financial services, (ii) are
subject only to the duty of each party to act in good faith and to no
other duty and (iii) do not constitute guarantees or assurances of
financial results or commitments to terminate or otherwise limit
exposure under the Transaction, it being understood that each party
undertakes duties, liabilities or obligations under the Agreement or
in respect of the Transaction only through written documentation
expressly so undertaking and signed by its duly authorised officer;
and
(v) Awareness. In so far as Party B is not acting as a dealer or a market
professional in the relevant market, the transaction is entered in to
in accordance with its authorised policies for purposes of hedging or
managing its assets, liabilities and/or investments or in connection
with a line of business (and not for speculation).
Please confirm that the foregoing correctly sets forth the terms of our
agreement by a return fax/telex to [Bank] to the attention
of Derivatives Documentation Unit:
Fax Number
Telephone Number [Bank Information]
Yours faithfully,
By: _____________________________ By: __________________________
Name: Name:
Title: Title:
By: /s/ H. Gene Shiels By:
------------------------------------ ------------------------------
BAKER NOGMES INCORPORATION, HOUSTON
Name: H. Gene Shiels Name:
Title: ASSISTANT TREASURER Title:
(ISDA MULTICURRENCY-CROSS BORDER)
SCHEDULE TO THE MASTER AGREEMENT
DATED AS OF JULY 30, 2003
BETWEEN
[BANK] ("BANK")
AND
BAKER HUGHES INCORPORATED ("BHI")
PART 1: TERMINATION PROVISIONS AND CERTAIN OTHER MATTERS
(a) "SPECIFIED ENTITY" means, in relation to Bank, for the purpose
of:
SECTION 5(a)(v), not applicable;
SECTION 5(a)(vi), not applicable;
SECTION 5(a)(vii), not applicable; and
SECTION 5(b)(iv), not applicable;
and, in relation to BHI, for the purpose of:
SECTION 5(a)(v), not applicable;
SECTION 5(a)(vi), not applicable;
SECTION 5(a)(vii), not applicable; and
SECTION 5(b)(iv), not applicable.
(b) "SPECIFIED TRANSACTION" will have the meaning specified in
Section 14.
(c) The "CROSS-DEFAULT" provisions of Section 5(a)(vi) will apply
to Bank and BHI.
If such provisions apply, "SPECIFIED INDEBTEDNESS" means in relation to
Bank and BHI, subject to the Schedule, any obligation (whether present
or future, contingent or otherwise, as principal or surety or
otherwise) (i) in respect of borrowed money, other than an obligation
for which payment is not being made because of an event similar to
illegality or because the obligation to pay is being disputed in good
faith, except that with respect to the Bank, such term will not include
obligations in respect of deposits received in the ordinary course of
its banking business; and (ii) any amount due and payable in respect of
any Specified Transaction (except that, for this purpose only, the
words "and any other entity" shall be substituted for the words "and
the other party to this Agreement (or any Credit Support Provider of
such other party or any applicable Specified Entity of such other
party)" where they appear in the definition of Specified Transaction),
and with respect to BHI shall include, without limitation, and without
regard to the Threshold Amount the obligations of BHI under that
certain Credit Agreement dated as of July 7, 2003 between Baker Hughes
Incorporated as Borrower, and the Lenders identified therein, and Bank
of America, N.A. as Administrative Agent, [Bank, Bank] and [Bank], as
Syndication Agents, [Bank], as Documentation Agent, and [Bank], as
Managing Agent and [Bank], as Sole Lead
1
Arranger and Sole Book Manager as the same may be amended, modified or
supplemented from time to time (the "Credit Agreement").
Section 5(a)(vi) is amended by the insertion of the following words
after the words "due and payable" on line 8:
"or, in the case of Specified Indebtedness in respect of any
Specified Transaction which has resulted in such Specified
Indebtedness becoming due and payable as a result of the early
termination of the relevant Specified Transaction".
"THRESHOLD AMOUNT" means for Bank and BHI three percent (3%) of
shareholder's equity, determined in accordance with generally accepted
accounting principles in such party's country of incorporation or
organization, consistently applied, as at the end of such party" most
recently completed fiscal year. For purposes of this definition, any
Specified Indebtedness denominated in a currency other than the
currency in which the financial statements of such party are
denominated shall be converted into USD.
(d) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv)
shall be deleted in its entirety and replaced with the following language set
forth in this clause (d) of this Schedule.
"(1) (A) such party ("A"), any Credit Support
Provider of A or any applicable Specified Entity of A
consolidates, amalgamates or mergers with or into, or
transfers all or substantially all of its assets to
another entity;
(B) any person or entity acquires directly
or indirectly the beneficial ownership of equity
securities having the power to elect a majority of
the board of directors of A or otherwise acquires
directly or indirectly the power to control the
policy making decisions of A; or
(C) A enters into any agreement providing
for the transactions described in Sections
5(b)(iv)(1)(A) or 5(b)(iv)(1)(B) of this Agreement;
(2) such action does not constitute an event
described in Section 5(a)(viii) of this Agreement; and
(3) Standard and Poor's Corporation or Moody's
Investor Services, Inc. (or any successors to such entities)
rates the creditworthiness of A (in the case of a transaction
by a Specified Entity of A that is not a Credit Support
Provider of A), or of the resulting, surviving or transferee
entity of A or the Credit Support Provider of A, as the case
may be (in the case of a transaction by A or the Credit
Support Provider of A, as the case may be), below BBB- or
Baa3, respectively; or"
(e) The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a)
will not apply to Bank or BHI.
(f) PAYMENTS ON EARLY TERMINATION. For the purpose of Section
6(e):
(i) (a) Market Quotation will apply with respect to
Transactions other than FX Transactions and Currency
Option Transactions; and (b) Loss will apply with
respect to FX Transactions and Currency Option
Transactions.
(ii) The Second Method will apply to all Transactions.
2
(g) "TERMINATION CURRENCY" means U. S. Dollar.
(h) ADDITIONAL TERMINATION EVENT. (i) The following shall
constitute an Additional Termination Event (with any event specified in
the following constituting an "IMPOSSIBILITY"):
Due to the occurrence of a natural or man-made disaster, armed
conflict, act of terrorism, riot, labor disruption, act of State, or
any other similar circumstance beyond its control after the date on
which a Transaction is entered into, it becomes impossible (other than
as a result of its own misconduct) for a party (which will be the
Affected Party):
(1) to perform any absolute or contingent
obligation, to make a payment or delivery or to receive a
payment or delivery in respect of a Transaction or to comply
with any other material provision of this Agreement relating
to such Transaction; or
(2) to perform, or for any Credit Support
Provider of such party to perform, any contingent or other
obligation which the party or such Credit Support Provider has
under any Credit Support Document relating to a Transaction.
(ii) The definition of "Affected Transactions" in Section
14 of this Agreement is amended by adding the word "Impossibility"
immediately before the word "Illegality" in the first line thereof.
(iii) If an event or circumstance that would otherwise
constitute or give rise to an Event of Default also constitutes an
Impossibility, it will be treated as a Termination Event and will not
constitute an Event of Default.
PART 2: TAX REPRESENTATIONS
(a) REPRESENTATIONS OF BANK.
(1) Payer Tax Representation. For the purpose of Section
3(e), Bank hereby makes the following representation.
It is not required by any applicable law, as modified
by the practice of any relevant governmental revenue
authority, of any Relevant Jurisdiction to make any deduction
or withholding for or on account of any Tax from any payment
(other than interest under Section 2(e), 6(d) (ii) or 6(e)) to
be made by it to BHI under this Agreement. In making this
representation, it may rely on:
(a) the accuracy of any representations made
by BHI pursuant to Section 3(f);
(b) the satisfaction of the agreement of BHI
contained in Section 4(a)(i) or 4(a) (iii) and the
accuracy and effectiveness of any document provided
by BHI pursuant to Section 4(a) (i) or 4(a) (iii);
and
(c) the satisfaction of the agreement of BHI
contained in Section 4(d);
3
provided that it shall not be a breach of this
representation where reliance is placed on clause (b)
and BHI does not deliver a form or document under
Section 4(a) (iii) by reason of material prejudice to
its legal or commercial position.
(2) Payee Tax Representations. For the purpose of Section
3(f), Bank makes the representations specified below:
(i) It is a resident of The Netherlands for the purpose
of the application of the existing tax treaties
between The Netherlands and those countries where
offices of Party B are located.
(ii) With respect to its non-U.S. branches, it is fully
eligible for the benefits of the "Business Profits"
or "Industrial and Commercial Profits" provision, as
the case may be, the "Interest" provision or the
"Other Income" provision (if any) of the Specified
Treaty with respect to any payment described in such
provisions and received or to be received by it in
connection with this Agreement and no such payment is
attributable to a trade or business carried on by it
through a permanent establishment in the Specified
Jurisdiction. With respect to Party A, Specified
Treaty means the income tax treaty between the United
States and The Netherlands; Specified Jurisdiction
means the United States.
(iii) With respect to its U.S. branches, each payment
received or to be received by it in connection with
this Agreement will be effectively connected with its
conduct of a trade or business in the United States.
(b) REPRESENTATIONS OF BHI.
(1) Payer Tax Representation. For the purpose of Section
3(e), BHI hereby makes the following representation:
It is not required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, of any
Relevant Jurisdiction to make any deduction or withholding for or on
account of any Tax from any payment (other than interest under Section
2(e), 6(d) (ii) or 6(e)) to be made by it to Bank under this Agreement.
In making this representation, it may rely on:
(a) the accuracy of any representation made by Bank
pursuant to Section 3(f);
(b) the satisfaction of the agreement of Bank
contained in Section 4(a) (i) or 4(a)(iii) and the accuracy
and effectiveness of any document provided by Bank pursuant to
Section 4(a) (i) or 4(a) (iii); and
(c) the satisfaction of the agreement of Bank
contained in Section 4(d);
provided that it shall not be a breach of this representation
where reliance is placed on clause (b) and Bank does not
deliver a form or document under Section 4(a) (iii) by reason
of material prejudice to its legal or commercial position.
(2) Payee Tax Representation. For the purpose of Section
3(f), BHI makes the representation specified below:
4
(i) It is a corporation organized under the laws
of the State of Delaware.
PART 3: AGREEMENT TO DELIVER DOCUMENTS
For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each
party agrees to deliver the following documents:
(a) Tax forms, documents or certificates to be delivered are:
PARTY REQUIRED
TO DELIVER DATE BY WHICH
DOCUMENT FORM / DOCUMENT / CERTIFICATE TO BE DELIVERED
- -------------- ----------------------------- ---------------
Bank and BHI As applicable, Promptly upon the earlier of (i)
IRS Form 1001 reasonable demand by the other
IRS Form 4224 party, or (ii) learning that the
IRS Form W-9 form or document is required
IRS Form W-8
(b) Other documents to be delivered are:
PARTY REQUIRED COVERED BY
TO DELIVER FORM / DOCUMENT / DATE BY WHICH SECTION 3(d)
DOCUMENT CERTIFICATE TO BE DELIVERED REPRESENTATIONS
- -------------- ----------------- --------------- ---------------
Bank and BHI Certified copies of all corporate Upon execution and Yes
authorizations and any other delivery of this
documents with respect to the Agreement, and
execution, delivery and performance thereafter upon
of this Agreement reasonable demand by
the other party
Bank and BHI Certificate of authority and Upon execution and Yes
specimen signatures of individuals delivery of this
executing this Agreement and Agreement, and
Confirmations thereafter upon request
of the other party
Bank and BHI A copy of its most recent Annual Promtly upon request No
Report containing consolidated from the other party
financial statements prepared in
accordance with accounting
principles that are generally
accepted for institutions of its
type in the jurisdiction of its
organization and certified by
independent public accountants
5
Bank and BHI A copy of its most recent unaudited Promptly upon request No
interim consolidated financial from the other party
statements prepared in accordance
with accounting principles that are
generally accepted for institutions
of its type in the jurisdiction of
its organization in each case
consistently applied.
PART 4: MISCELLANEOUS
(a) ADDRESS FOR NOTICES. For the purpose of Section 12(a) of this
Agreement:
Any notice relating to a particular Transaction shall be delivered to
the address or facsimile or telex number specified in the Confirmation of such
Transaction. Any notice delivered for purposes of Sections 5 and 6 of this
Agreement shall be delivered to the following address:
Address for notice or communications to Bank:
(i) For all purposes of this Agreement:
[Bank's Contact Information]
Attention: Fixed Income Derivatives Documentation
(ii) With a copy to the Office through which Party A is acting for
the purposes of the relevant Transaction at the address set out below:
[Bank's Contact Information]
Address for notice or communications to BHI:
Baker Hughes Incorporation
Attention: Gene Shiels, Assistant Treasurer
3900 Essex Lane
Houston, Texas 77027-5177
Facsimile No.: (713) 439-8678
(b) PROCESS AGENT. For the purpose of Section 13(c):
Bank appoints as its Process Agent: Not applicable.
BHI appoints as its Process Agent: Not applicable.
(c) OFFICES. The provisions of Section 10(a) will apply to this
Agreement.
(d) MULTIBRANCH PARTY. For the purpose of Section 10 of this
Agreement:
Bank is a Multibranch Party and may act through the following Offices:
Amsterdam, Chicago, London.
6
BHI is not a Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent is Bank unless
otherwise specified in a Confirmation in relation to the relevant
Transaction.
(f) CREDIT SUPPORT DOCUMENT. Details of any Credit Support
Document: not applicable.
(g) CREDIT SUPPORT PROVIDER. Credit Support Provider means, in
relation to either party: not applicable.
(h) GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of New York (without
reference to the choice of law doctrine).
(i) NETTING OF PAYMENTS. Subparagraph (ii) of Section 2(c) will
not apply to any Transaction.
(j) "AFFILIATE" will have the meaning specified in Section 14 of
this Agreement.
PART 5: OTHER PROVISIONS
(a) SET-OFF. Add the following Section 6(f) to the Master
Agreement:
Any amount (the "EARLY TERMINATION AMOUNT") payable to one
party (the "PAYEE") by the other party (the "PAYER") under Section
6(e), in circumstances where there is a Defaulting Party or one
Affected Party in the case where a Termination Event under Section
5(b)(iv) has occurred, will, at the option of the other party ("PARTY
X") other than the Defaulting Party or the Affected Party (and without
prior notice to the Defaulting Party or the Affected Party), be reduced
by its set-off against any amount(s) (the "OTHER AGREEMENT AMOUNT")
payable (whether at such time or in the future or upon the occurrence
of a contingency) by the Payee to the Payer (irrespective of the
currency, place of payment or booking office of the obligation) under
any other agreement(s) between the Payee and the Payer or instrument(s)
or undertaking(s) issued or executed by one party to, or in favor of,
the other party (and the Other Agreement Amount will be discharged
promptly and in all respects to the extent it is so set-off). Party X
will give notice to the other party of any set-off effected under this
Section 6(f).
For this purpose, either the Early Termination Amount or the
Other Agreement Amount (or the relevant portion of such amounts) may be
converted by Party X into the currency in which the other is
denominated at the rate of exchange at which such party would be able,
acting in a reasonable manner and in good faith, to purchase the
relevant amount of such currency.
If an obligation is unascertained, Party X may in good faith
estimate that obligation and set-off in respect of the estimate,
subject to the relevant party accounting to the other when the
obligation is ascertained.
Nothing in this Section 6(f) shall be effective to create a
charge or other security interest. This Section 6(f) shall be without
prejudice and in addition to any right of set-off, combination of
accounts, lien or other right to which any party is at any time
otherwise entitled (whether by operation of law, contract or
otherwise).
7
(b) NETTING. Section 2(c) is hereby amended by inserting in the
fourth line thereof after the word "other" and before the comma "(A) if the
aggregate amount that would otherwise be payable by one party to the other party
equals the aggregate amount that would otherwise be payable to such party by the
other party," and inserting "(B)" in the fifth line thereof after the words
"and," and before the word "if."
(c) EXCHANGE OF CONFIRMATIONS. The parties hereby amend Section
9(e)(ii) by adding the following sentences at the end thereof:
On or promptly following the date on which the parties reach agreement
on the terms of a Transaction as contemplated by the first sentence of
this clause (ii), Bank will send to BHI a Confirmation via facsimile
transmission. BHI will promptly thereafter confirm the accuracy of (in
the manner required by this clause (ii)), or request the correction of,
such Confirmation (in the latter case, indicating how it believes the
terms of such Confirmation should be correctly stated and such other
terms which should be added to or deleted from such Confirmation so
that it correctly reflects the parties agreement with respect to the
Transaction referred to in the Confirmation). If any dispute arises as
to whether an error exists in a Confirmation, the parties shall in good
faith make reasonable efforts to resolve the dispute. If BHI fails to
accept or dispute the Confirmation in the manner set forth above within
three Local Business Days after it was received by BHI (on a business
day), the Confirmation shall be deemed to correctly reflect the
parties' agreement on the terms of the Transaction referred to therein
absent manifest error. The requirement of this clause (ii) and
elsewhere in this Agreement that the parties exchange Confirmations
shall for all purposes be deemed satisfied by a Confirmation sent and
an acknowledgment deemed given as provided herein.
(d) WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY HEREBY WAIVES ITS
RESPECTIVE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(e) DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT IN ANY CONFIRMATION, OR ANY OTHER DOCUMENT IN CONNECTION THEREWITH, IN
NO EVENT SHALL EITHER BANK OR BHI BE LIABLE TO THE OTHER FOR ANY CONSEQUENTIAL,
SPECIAL, PUNITIVE, INDIRECT, OR EXEMPLARY DAMAGES, INCLUDING WITHOUT LIMITATION,
ANY DAMAGES FOR LOSS OF PROFITS, LOSS OF BUSINESS, OR LOSS OF OPPORTUNITY.
(f) RELATIONSHIP BETWEEN PARTIES. The following representations
shall be inserted as a new Section 3(g) of this Agreement.
"(g) RELATIONSHIP BETWEEN PARTIES. Each party will be
deemed to represent to the other party on the date on which it enters
into a Transaction that (absent a written agreement between the parties
that expressly imposes affirmative obligations to the contrary for that
Transaction):
(i) NON-RELIANCE. It is acting for its own
account, and it has made its own independent decisions to
enter into that Transaction and as to whether that Transaction
is appropriate or proper for it based upon its own judgment
and upon advice from such advisers as it has deemed necessary.
It is not relying on any communication (written or oral) of
the other party as investment advice or as a recommendation to
enter into that Transaction; it being understood that
information and explanations related to the terms and
conditions of a transaction shall not be considered investment
advice or a recommendation to enter into that Transaction. No
communication (written or oral) received from the other party
shall be deemed to be an assurance or guarantee as to the
expected results of that Transaction.
8
(ii) ASSESSMENT AND UNDERSTANDING. It is capable
of assessing that merits of and understanding (on its own
behalf or through independent professional advice), and
understands and accepts, the terms, conditions and risks of
that Transaction. It is also capable of assuming, and assumes,
the risks of that Transaction.
(iii) STATUS OF PARTIES. The other party is not
acting as a fiduciary for or an adviser to it in respect of
that Transaction.
(iv) ELIGIBLE CONTRACT PARTICIPANT. it is an
"eligible contract participant" under, and as defined in,
Section 1a of the Commodity Exchange Act (7 USC 1a), amended
from time to time."
(g) NEGATIVE INTEREST RATES. (i) FLOATING AMOUNTS. "SWAP
TRANSACTION" means, for the purposes of this provision concerning
Negative Interest Rates, a rate exchange or swap transaction, including
transactions involving a single currency or two or more currencies.
Bank and BHI agree that, if with respect to a Calculation Period for a
Swap Transaction either party is obligated to pay a Floating Amount
that is a negative number (either due to a quoted negative Floating
Rate or by operation of a Spread that is subtracted from the Floating
Rate), the Floating Amount with respect to that party for that
Calculation Period will be deemed to be zero, and the other party will
pay to that party the absolute value of the negative Floating Amount as
calculated, in addition to any amounts otherwise owed by the other
party for that Calculation Period with respect to that Swap
Transaction, on the Payment Date that the Floating Amount would have
been due if it had been a positive number. Any amounts paid by the
other party with respect to the absolute value of a negative Floating
Amount will be paid to such account as the receiving party may
designate (unless such other party gives timely notice of a reasonable
objection to such designation) in the currency in which that Floating
Amount would have been paid if it had been a positive number (and
without regard to the currency) in which the other party is otherwise
obligated to make payments.
(ii) COMPOUNDING. Bank and BHI agree that, if with respect
to one or more Compounding Periods for a Swap Transaction where
"COMPOUNDING" or "FLAT COMPOUNDING" is specified to be applicable, the
Compounding Period Amount, the Basic Compounding Period Amount or the
Additional Compounding Period Amount is a negative number (either due
to a quoted negative Floating Rate or by operation of a Spread that is
subtracted from the Floating Rate), then the Floating Amount for the
Calculation Period in which that Compounding Period or those
compounding Periods occur will be either the sum of all the Compounding
Period Amounts or the sum of all the Basic Compounding Period amounts
and all the Additional Compounding Period Amounts in that Calculation
Period (whether positive or negative). If such sum is positive, then
the Floating Rate Payer with respect to the Floating Amount so
calculated will pay that Floating Amount to the other party. If such
sum is negative, the Floating Amount with respect to the party that
would be obligated to pay that Floating Amount will be deemed to be
zero, and the other party will pay to that party the absolute value of
the negative Floating Amount as calculated, such payment to be made in
accordance with (i) above.
(h) TERMINATION. If no Transactions (or any present or future
payment obligations, contingent or otherwise, thereunder) are outstanding under
this Agreement, either party may terminate this Agreement upon written notice to
the other party.
(i) ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, any Transaction, any Confirmation, or the breach or
alleged breach of this Agreement shall be settled by
9
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment on the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof. In connection with any
such arbitration, unless the parties hereto otherwise agree, (i) the arbitration
shall be held in The City of New York before three arbitrators, (iii) each
arbitrator shall be unaffiliated with either party and shall be a knowledgeable
and informed participant in interest rate swaps, currency exchanges and
cross-currency interest rate swaps, and (iii) each party shall select one
arbitrator within seven days of the commencement of the arbitration, and the two
arbitrators selected by the parties shall select a third arbitrator within seven
days of the date of the selection of the second arbitrator.
(j) SEVERABILITY. If any provision (or any portion of any
provision) of this Agreement is held invalid or unenforceable, it shall be
modified or construed restrictively, to the extent possible, to comply with
applicable law, rather than voided, to give effect to the intent of the parties,
and if such modification or restrictive construction is not possible, it shall
be severed herefrom. In any event, all of the other provisions of this Agreement
shall be deemed valid and enforceable and shall remain in full force and effect
and shall not be adversely affected by the validity or unenforceability of such
provision (or portion).
(k) ADDITIONAL AGREEMENTS. Each party agrees, upon learning of the
occurrence of any event or commencement of any condition that constitutes (or
that with the giving of notice or passage of time or both would constitute) an
Event of Default or Termination Event with respect to the party, promptly to
give the other notice of such event or condition (or, in lieu of giving notice
of such event or condition in the case of an event or condition that with the
giving of notice or passage of time or both would constitute an Event of Default
or Termination Event with respect to the party, to cause such event or condition
to cease to exist before becoming an Event of Default or Termination Event).
(l) DEFINITIONS. This Agreement, each Confirmation, and each
Transaction are subject to the 2000 ISDA Definitions, 1998 ISDA FX and Currency
Option Definitions (the "FX DEFINITIONS"), as published by the International
Swaps and Derivatives Association, Inc., the Emerging Markets Traders
Association, and The Foreign Exchange Committee, as such definitions may be
hereinafter amended, and any other definitions specified in the relevant
Confirmation for such Transaction, as each of such definitions may be amended,
supplemented replaced, updated or modified from time to time (collectively, the
"DEFINITIONS"), each as published by the International Swaps and Derivatives
Association, Inc. ("ISDA"), and will be governed in all respects by the
Definitions (except that any references to "Swap Transactions" in the
Definitions will be deemed to be references to "Transactions"). The Definitions
are incorporated by reference in, and made part of this Agreement and the each
relevant Confirmation as if set forth in full in this Agreement and such
Confirmation. In the event of any inconsistency between the Definitions and any
other definitions incorporated into a Confirmation, the definitions incorporated
in the Confirmation will prevail for the purpose of the relevant Transaction. In
the event of any inconsistency between the provisions of this Agreement and the
Definitions, this Agreement will prevail. In the event of any inconsistency
between the provisions of any Confirmation, this Agreement and the applicable
Definitions, such Confirmation will prevail for the purpose of the relevant
Transaction.
(m) CONSENT TO RECORDING. Each party (i) consents to the recording
of the telephone conversations of trading, marketing and other relevant
personnel of the parties in connection with this Agreement or any potential
Transaction and (ii) agrees that such recording may be submitted in evidence to
any court or in any proceedings with respect to this Agreement or any
Transaction thereunder, provided that once a Confirmation of a Transaction has
been mutually signed by both parties, this clause (ii) shall have no further
effect with respect to such Transaction.
10
PART 6: FOREIGN EXCHANGE TRANSACTIONS
DEFINITIONS AND APPLICATIONS. (i) This Agreement is subject to
the FX Definitions. In the event of any inconsistency between the FX
Definitions and this Agreement, this Agreement will govern. Unless
otherwise agreed in writing by the parties, each FX Transaction and
Currency Option Transaction, whether now existing or hereafter entered
into, between the parties shall be governed by this Agreement, as
modified by this Schedule, notwithstanding Section 1(b) of this
Agreement, the absence of any reference to this Agreement in the
Confirmation in respect of any such FX Transaction or Currency Option
Transaction, or the reference to any other governing terms or law in
such Confirmation.
(ii) Section 3.4 of the FX Definitions is amended by
adding the following:
(c) Non-Payment. If any Premium is not received
on the Premium Payment Date, the Seller may elect either: (i)
to accept a late payment of such Premium; (ii) to give written
notice of such non-payment and, if such payment shall not be
received within three (3) Local Business Days (as defined in
this Agreement) of such notice, treat the related Currency
Option Transaction as void; or (iii) if such payment shall not
be received within three (3) Local Business Days of such
notice, treat such non-payment as an Event of Default under
Section 5(a)(i) of this Agreement. If the Seller elects to act
under either clause (i) or (ii) of the preceding sentence, the
Buyer shall pay all out-of-pocket costs and actual damages
incurred in connection with such unpaid or late Premium or
void Currency Option Transaction, including, without
limitation, interest on such Premium in the same currency as
such Premium at the then prevailing market rate and any other
costs and expenses incurred by the Seller in covering its
obligations (including, without limitation, a delta hedge)
with respect to such Currency Option Transaction.
(d) Discharge and Termination. Unless otherwise
agreed, any Call or any Put written by a party will
automatically be terminated and discharged, in whole or in
part, as applicable, against a Call or a Put, respectively,
written by the other party, such termination and discharge to
occur automatically upon the payment in full of the last
Premium payable in respect of such Currency Option
Transactions; provided that such termination and discharge may
only occur in respect of Currency Option Transactions:
(i) each being with respect to the same
Put Currency and the same Call Currency;
(ii) each having the same Expiration Date
and Expiration Time;
(iii) each being of the same style, i.e.,
either both being American style Currency Option
Transactions or both being European style Currency
Option Transactions;
(iv) each having the same Strike Price;
(v) neither of which shall have been
exercised by delivery of a Notice of Exercise; and
(vi) each having been transacted by the
same pair of offices of the Buyer and the Seller,
11
and upon the occurrence of such termination and discharge,
neither party shall have any further obligation to the other
party in respect of the relevant Currency Option Transactions
or, as the case may be, parts thereof so terminated and
discharged. In the case of a partial termination and discharge
(i.e., where the relevant Currency Option Transactions are for
different amounts of the Currency Pair), the remaining portion
of the Currency Option Transaction which is partially
discharged and terminated shall continue to be a Currency
Option Transaction for all purposes of this Agreement,
including this Section 3.4(d).
Accepted and agreed:
[Bank] BAKER HUGHES INCORPORATED
By: ______________________________ By: /s/Douglas C. Doty
------------------
Name: Name: Douglas C. Doty
Title: Title: Vice President and Treasurer
Date: July 30, 2003
By: ______________________________
Name:
Title:
12