EXHIBIT 10.3
On August 31, 2006, ▇▇▇▇▇▇ Express Corporation (the "Company") purchased put
option contracts and sold call option contracts, designed to be a costless
collar, on the retail price of diesel fuel with Bank of America, N.A. and on the
wholesale price of gasoline with ▇. ▇▇▇▇ & Company (collectively, the
"Contracts"). The Contracts have an aggregate notional amount of approximately
11.2 million gallons of gasoline and diesel fuel and will expire on a monthly
basis during the first, second and third quarters of 2008. The settlement of the
Contracts is based upon the New York Mercantile Exchange's New York Harbor
Reformulated Gasoline Blendstock for Oxygen Blending and the U.S. Department of
Energy's weekly retail on-highway national U.S. average diesel price for the
month. The Contracts lock in a weighted average retail floor price of
approximately $2.65 per gallon and a weighted average retail ceiling price of
approximately $2.71 per gallon.
Following is the form of confirmation evidencing the purchase and sale by the
Company of the put and call option contract from and to Bank of America, N.A. on
the diesel fuel. The form of confirmation for the purchase of the gasoline
option is filed as Exhibit 10.18 to the Company's quarterly report on Form 10-Q
filed with the Securities and Exchange Commission on October 27, 2005, File No.
001-32426.
Bank of America, N.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
DATE: SEPTEMBER 1, 2006
TO: ▇▇▇▇▇▇ EXPRESS CORPORATION
ATTN: ____________
FAX NO: ____________
FROM: BANK OF AMERICA, N.A.
ATTN: COMMODITIES
FAX NO: ____________
TEL NO: ____________
TRANSACTION REF. NO.: ____________
Dear Sir/Madam;
The purpose of this letter agreement is to confirm the terms and conditions of
the Transaction entered into between ▇▇▇▇▇▇ Express Corporation (Party "B") and
Bank of America, N.A. (Party "A") (each a "Party" and together "the Parties") on
the Trade Date specified below (the "Transaction"). This letter agreement
constitutes a "Confirmation" as referred to in the ISDA Master Agreement
specified below (the "Agreement").
The definitions and provisions contained in the 2005 ISDA Commodity Definitions,
as published by the International Swaps and Derivatives Association, Inc., (the
"Definitions") are incorporated into this Confirmation. In the event of any
inconsistency between the Definitions and this Confirmation, this Confirmation
will govern.
This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement dated as of April 20, 2005 as amended and supplemented from time to
time between the parties. All provisions contained in the Agreement govern this
Confirmation except as expressly modified below.
The terms of the particular Transaction to which this Confirmation related are
as follows:
Notional Quantity per Calculation See Schedule A
Period:
Total Notional Quantity: ____________Gallons
Commodity: ____________
Trade Date: ____________
Effective Date: ____________
Termination Date: ____________
Put Seller/Call Buyer: Party A
Put Buyer/Call Seller: Party B
Option Style: Asian
Option Type: Collar
Calculation Period: Monthly, from and including ____________ to
and including ____________
Commodity Reference Price: DIESEL FUEL - ON - HIGHWAY - ENERGY
INFORMATION ADMINISTRATION
Specified Price: For each Calculation Period, the Floating
Price shall be calculated as the arithmetic
average of the weekly mean price per gallon
for Retail On - Highway Diesel Fuel, as
published by the Energy Information
Administration (statistical price agency
for the U.S. Department of Energy) under
the column, "National - U.S. AVG."
Pricing Dates: Each Commodity Business Day in the relevant
Calculation Period
Call Strike Price: USD ____________ per Gallon
Put Strike Price: USD ____________ per Gallon
PROCEDURE FOR EXERCISE
Expiration Date(s): In respect of a Calculation Period, the
final Pricing Date of that Calculation
Period
Automatic Exercise: Applicable
Cash Settlement: Applicable
Settlement Date(s): Monthly, Five (5) Business Days following
each Expiration Date
Business Day: New York
Calculation Agent: As per the agreement
ROUNDING:
All amounts resulting from the calculation of the Floating Price(s) shall be
rounded as follows:
(a) If the relevant unit of measure is MMBtus or Gallons, then the Floating
Price shall be rounded to the nearest four decimal places (with 0.00005
being rounded upwards (e.g.0.33334 being rounded down to 0.3333 and
0.33335 being rounded up to 0.3334)).
(b) If the relevant unit of measure is Barrels, Metric Tonnes or MWh then the
Floating Price shall be rounded to the nearest three decimal places (with
0.0005 being rounded upwards (e.g.0.3334 being rounded down to 0.333 and
0.3335 being rounded up to 0.334)).
(c) If the relevant unit of measure is Therms and Cubic Metres, then the
Floating Price shall be rounded to the nearest five decimal places (with
0.000005 being rounded upwards (e.g. 0.333334 being rounded down to
0.33333 and 0.333335 being rounded up to 0.33334)).
(d) If the relevant unit of measure is Hectolitres, then the Floating Price
shall be rounded to the nearest two decimal places (with 0.005 being
rounded upwards (e.g. 0.334 being rounded down to 0.33 and 0.335 being
rounded up to 0.34)).
RECORDING OF CONVERSATIONS:
Each party to this Transaction acknowledges and agrees to the tape recording of
conversations between the parties to this Transaction whether by one or other or
both of the parties or their agents, and that any such tape recordings may be
submitted in evidence in any Proceedings relating to the Agreement and/or this
Transaction.
ACCOUNT DETAILS:
Payments to Party A: Please see invoice for settlement instructions
Payments to Party B: Please see invoice for settlement instructions
Please confirm that the foregoing correctly sets forth the terms and conditions
of our agreement by responding within three (3) Business Days of receipt of this
Confirmation by returning via telecopier an executed copy of this Confirmation
in its entirety to the attention of Global FX and Derivative Operations, fax #:
▇-▇▇▇-▇▇▇-▇▇▇▇.
Failure to respond within such period shall not affect the validity or
enforceability of this Transaction, and shall be deemed to be an affirmation of
the terms and conditions contained herein, absent manifest error.
SCHEDULE A
CACLULATION PERIOD NOTIONAL QUANTITY PER CALCULATION PERIOD (GAL)
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________________ ___________________
________________ ___________________
________________ ___________________
________________ ___________________
YOURS SINCERELY, ACCEPTED AND CONFIRMED AS OF THE DATE FIRST WRITTEN:
BANK OF AMERICA, ▇.▇. ▇▇▇▇▇▇ EXPRESS CORPORATION
/s/ ▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Senior Vice President Title: VP and Controller
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