2.2. Mandatory Contracts

Mandatory Contracts are contracts that are required to be in place between the Actors to ensure maximum protection for the collateral as well as maximum degree of enforceability of the Protocol rules. The execution of these contracts should improve robustness against collusion among malicious Actors.

As with many aspects outlined in the Adopted Guidance, the following set of contracts is intended for scenarios where no robust on-chain equivalent exists. With advancements in tokenization efforts for instruments deemed Eligible Collateral, we anticipate that some of these contracts may become redundant in future updates of the Adopted Guidance.

Given that Governance participants and holders of M are likely not contractual parties to any of the Actors, the Mandatory Contracts are designed to ensure alignment among all Actors involved in the legal and operational framework, ensuring compliance with Protocol rules.

Minter Operating Memorandum: The Minter is an entity with a contractually-limited purpose to hold Notes and mint M. Therefore, it is not allowed to e.g. hire personnel and build operational resources or directly enter into distribution agreements, as well as sale/ purchase agreement, with buyers of M. Notes are defined as pass-through and look-through limited recourse notes issued by the SPV in one or more tranches in accordance with the Terms and Conditions of the Note itself.

The Minter Operating Memorandum should regulate that:

• The BD Minter provides sufficient operational resources to the Minter for its operations, given that the Minter should not have operational staff.

• The BD Minter and Minter should have appropriate liability segregation in order to limit eventual spillovers between general liabilities and those solely related to the Protocol with regards to the requirement to back the Owed M by sufficient Collateral Balance.

Minter-SPV Operator Agreement: The relationship between the Minter and the SPV Operator is of core importance since the intentional split between an entity that mints M and another entity that manages the collateral creates a field of tension between collaboration, control and potential enforcement. The Minter-SPV Operator Agreement should regulate this relationship. It differentiates between two scenarios:

a) Normal Course of Business b) Outside Normal Course of Business

While the Normal Course of Business regulates the obligations of the SPV Operator to maintain the Eligible Collateral balance, the Outside Normal Course of Business ensures that the SPV Operator is allowed to perform actions against the Minter to enforce the Protocol rules in case the Minter is not compliant.

This agreement is crucial for the protection of the collateral.

Minter-Validator Agreement (where required): The Validator requires broad ongoing visibility of the collateral storage.

With Collateral Storage we identify the collection of venues such as Securities and Cash Accounts, as well as digital asset accounts, held by the SPV.

The services provided by a Validator to the Minter (and, indirectly, the ecosystem) need to be well-defined to ensure the smooth operation of the Protocol. Therefore, this agreement, where required, should regulate all transparency, access and confidentiality aspects between the parties, as well as the service of validation in compliance with the Protocol rules.

Terms and Conditions (and Subscription Agreement) of the Note: The Terms and Conditions of the Note (as well as Subscription Agreement) represent the economic link between the collateral and the Minter entity. Their enforceability and protective clauses have an obvious direct impact on the quality and availability of the collateral for the purpose of the Protocol. Additionally, these documents need to reflect the scenarios where the SPV Operator winds down a Minter balance without the Minter’s collaboration. This requires certain rights of a party (the SPV Operator) which is not the noteholder (Minter) that need to be mandatorily reflected in the Terms and Conditions of the Note itself.

SPV Operating Memorandum: Every Actor should practically be replaceable; in particular any operation of the SPV should be highly standardized. This is what an appropriate SPV Operating Memorandum should ensure. As a crucial point this document also regulates the transfer restrictions of funds transferred out of the Collateral Storage.

In case any of the Mandatory Contracts defined here are modified as part of the change process, all parties shall work to amend the respective contracts as soon as practically feasible.

Parties are not expected to perform changes on their Mandatory Contracts (or similar) that are not made in the spirit of the Adopted Guidance. Parties are expected to remedy such misaligned clauses by replacing them as soon as practical and without undue delay.