On July 6,
2005, Wright Express Corporation (the “Company”)
purchased put option contracts and sold call option contracts,
designed to be a costless collar, on the price of gasoline and
diesel fuel with J. Aron & Company (collectively, the
“Contracts”). The Contracts have an aggregate notional
amount of approximately 24 million gallons of gasoline and
diesel fuel and will expire on a monthly basis during the first
three quarters of 2007. The settlement of the Contracts is based
upon the U.S. Department of Energy’s weekly retail on-highway
national US average diesel price and the New York Mercantile
Exchange nearby unleaded gasoline contracts for the month. The
Contracts lock in a weighted average floor price of approximately
$2.29 per gallon and a weighted average ceiling price of
approximately $2.36 per gallon.
Following is
the form of confirmation evidencing the purchase and sale by the
Company of put and call option contracts from and to J. Aron &
Company, respectively, on the price of Nymex Unleaded Regular
Gasoline. The form of confirmation for the diesel collar is filed
as Exhibit 10.19 to this Form 10-Q.
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To: WRIGHT EXPRESS CORPORATION
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CC: SALES DEPARTMENT
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From: J. Aron & Company
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We are pleased to confirm the following
Transaction with you .
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Asian
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Cash Settled in USD
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Automatic
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___Monthly Period(s) commencing with the
Effective Date and
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ending on the Termination Date
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As displayed below.
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5 New York Business Day(s) after each
Determination Period via
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wire transfer of Federal Funds
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WRIGHT EXPRESS CORPORATION
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J. Aron & Company
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Nymex Unleaded Regular Gasoline
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USD 0.00 per U.S. Gallon
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Effective
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Termination
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Quantity
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Strike
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Expiration
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Option
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Date
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Date
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(U.S.
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Date
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Type
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Gallon(s))
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For each Determination Period, the average of
the closing settlement prices on the New York Mercantile Exchange
for the nearby Unleaded gasoline contract (referenced below)
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Payment Calculation (Put):
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If for a Determination Period the Strike Price
exceeds the Floating Price, the Seller shall pay the Buyer an
amount equal to the product of:
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I) The difference between the Strike Price and
the Floating Price,
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II) The Quantity for a Determination
Period.
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If the Strike Price is equal to or less than
the Floating Price, no payment shall be made.
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J. Aron & Company
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WRIGHT EXPRESS CORPORATION
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Nymex Unleaded Regular Gasoline
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USD 0.00 per U.S. Gallon
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U.S. Gallon(s)
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Effective
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Termination
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Quantity
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Strike
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Expiration
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Option
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Date
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Date
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(U.S.
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Date
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Type
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Gallon(s))
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For each Determination Period, the average of
the closing settlement prices on the New York Mercantile Exchange
for the nearby Unleaded gasoline contract (referenced below)
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Payment Calculation (Call):
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If for a Determination Period the Floating
Price exceeds the Strike Price, the Seller shall pay the Buyer an
amount equal to the product of:
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I) The difference between the Floating Price
and the Strike Price,
and
II) The Quantity for a Determination Period.
If the Floating Price is equal to or less than
the Strike Price, no payment shall be made.
If, as of any business day, J. Aron &
Company’s net mark-to-market position with respect to this
Transaction and any other Transactions entered into with
Counterparty, as determined by J. Aron & Company in a
commercially reasonable manner (such amount being referred to as J.
Aron & Company’s “Net Exposure”) exceeds USD
(the excess of J. Aron & Company’s Net Exposure over USD
being referred to hereinafter as the “Excess Amount”),
then Counterparty shall provide Margin (defined below) to J. Aron
& Company in an amount equal to or greater than the Excess
Amount. If, as of any business day, the amount of Margin then held
by J. Aron & Company is less than the Excess Amount,
Counterparty shall provide J. Aron & Company with Margin in an
amount that, when added to the Margin then held by J. Aron &
Company, is equal to or exceeds the Excess Amount. If, as of any
business day, the aggregate amount of Margin held by J. Aron &
Company exceeds the Excess Amount by an amount equal to or greater
than USD0, J. Aron & Company shall, at the request of
Counterparty, return Margin to Counterparty in an amount such that,
after giving effect to any such return J. Aron & Company holds
Margin in an amount at least equal to the Excess Amount, provided
that if such Net Exposure is less than USD
, J. Aron & Company shall return all Margin then held to
Counterparty should Counterparty request such return. Margin shall
be provided or returned by the close of business on the day of the
receiving party’s request if such request is made by 12:00
noon New York time on a New York business day; otherwise Margin
shall be provided or returned on the next New York business day.
All deposits of Margin shall be rounded up to the nearest integral
multiple of USD500,000.00 and all returns of Margin shall be
rounded down to the nearest integral multiple of USD500,000.00.
Margin shall mean (i) cash, (ii) a
Letter of Credit from a bank acceptable to J. Aron & Company
and in a form acceptable to J. Aron & Company. Margin shall
include any payments or other distributions received with respect
to the f
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