EXHIBIT 10
Confirmation of Forward Stock Sale
Transaction
September 7, 2004
ML Ref: 0483204
| | |
| To: | | Dominion Resources, Inc. (“Counterparty” or “Party B”) |
| | | 120 Tredegar Street |
| | | Richmond, VA 23219 |
| |
| From: | | Merrill Lynch International (“MLI” or “Party A”) |
| | | Merrill Lynch Financial Centre |
| | | 2 King Edward Street |
| | | London, England EC1A 1HQ |
| |
| From: | | Merrill Lynch, Pierce, Fenner & Smith Incorporated, |
| | | Solely as Agent |
| | | tel: (212) 449-3149 |
| | | fax: (212) 449-2697 |
Dear Sirs,
The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the transaction entered into between us on the Trade Date specified below (the “Transaction”). This Confirmation constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below.
| 1. | The definitions and provisions contained in the 2000 ISDA Definitions (the “2000 Definitions”) and the 2002 ISDA Equity Derivatives Definitions (the “2002 Definitions” and, together with the 2000 Definitions, the “Definitions”), each as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between the 2002 Definitions and the 2000 Definitions, the 2002 Definitions will govern. In the event of any inconsistency between the Definitions and this Confirmation, this Confirmation will govern. |
This Confirmation evidences a complete and binding agreement between Party A and Party B as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall supplement, form a part of, and be subject to an agreement in the form of the 2002 ISDA Master Agreement (the “Agreement”) as if Party A and Party B had executed an agreement in such form with a Schedule thereto with the elections and variables set forth in Parts 4 and 5 of this Confirmation. In the event of any inconsistency
between provisions of that Agreement and this Confirmation, this Confirmation will prevail for the purpose of the Transaction to which this Confirmation relates. The parties hereby agree that no Transaction other than the Transaction to which this Confirmation relates shall be governed by the Agreement.
Party A and Party B each represents to the other that it has entered into this Transaction in reliance upon such tax, accounting, regulatory, legal, and financial advice as it deems necessary and not upon any view expressed by the other.
| 2. | The terms of the particular Transaction to which this Confirmation relates are as follows: |
General Terms:
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| Trade Date: | | September 7, 2004. |
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| Effective Date: | | September 13, 2004 |
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| Base Amount: | | For each tranche, as provided on Annexes A and B. On each Settlement Date, the Base Amount shall be reduced by the number of Settlement Shares for such Settlement Date. |
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| Maturity Date: | | For each tranche, as provided on Annexes A and B (or, if such date is not a Scheduled Trading Day, the next following Scheduled Trading Day);provided that if the Maturity Date is a Disrupted Day, then the Maturity Date shall be the first succeeding Scheduled Trading Day that is not a Disrupted Day. For the avoidance of doubt, if on the Maturity Date the Base Amount is zero, then such date will not constitute a Settlement Date and neither party will have a payment or delivery obligation resulting from the occurrence of the Maturity Date. |
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| Reference Price: | | $65.12. |
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| Maturity Forward Price: | | For each tranche, as provided on Annexes A and B. |
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| Early Settlement | | |
| Forward Price: | | For each tranche, as provided on Annexes A and B. |
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| Shares: | | Common Stock, no par value per share, of Dominion Resources, Inc. (the “Issuer”) (Exchange identifier: “[ D]”). |
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| Exchange: | | New York Stock Exchange |
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| Related Exchange(s): | | All. |
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| Clearance System: | | DTC. |
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| Calculation Agent: | | MLI. |
Settlement Terms:
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| Settlement Date: | | Any Exchange Business Day following the Effective Date and up to and including the Maturity Date, as designated by Party B in a written notice (a “Settlement Notice”) delivered to Party A at least (i) five Exchange Business Days prior to such Settlement Date (Party A shall use reasonable efforts to accommodate a shorter Settlement Notice period), which may be the Maturity Date, if Physical Settlement applies, and (ii) fifteen Exchange Business Days prior to such Settlement Date, which may be the Maturity Date, if Cash Settlement or Net Stock Settlement applies (the period from the giving of any such notice to the Settlement Date being the “Cash/Net Stock Notice Period”);provided that the Maturity Date shall be a Settlement Date if on such date the Base Amount is greater than zero. In the case of settlement before the Maturity Date, the Early Settlement Forward Price shall apply. |
| |
| Settlement Shares: | | With respect to any Settlement Date, a number of Shares, not to exceed the Base Amount, designated as such by Party B in the related Settlement Notice;provided that on the Maturity Date the number of Settlement Shares shall be equal to the Base Amount. |
| |
| Settlement: | | Physical, Cash, or Net Stock, at the election of Party B as set forth in the Settlement Notice;provided that Physical Settlement shall apply (i) if no Settlement Method is selected, (ii) a Suspension Period exists during the Cash/Net Stock Notice Period, but only to the extent that Party A has been unable as a result thereof to purchase Shares in an amount equal to the Settlement Shares prior to the Settlement Date and has provided notice to such effect to Party B, or (iii) a Stock Borrow Event has occurred. |
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| | |
| Physical Settlement: | | On any Settlement Date in respect of which Party B has elected, or is deemed to have elected in whole or in part, Physical Settlement, Party B shall deliver to Party A a number of Shares equal to the Settlement Shares for which Physical Settlement applies on such Settlement Date, and Party A shall deliver to Party B, by wire transfer of immediately available funds to an account designated by Party B, an amount in cash equal to the Physical Settlement Amount for such Settlement Date, on a delivery versus payment basis. |
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| Physical Settlement Amount: | | For any Settlement Date in respect of which Party B has elected, or is deemed to have elected, Physical Settlement, an amount in cash equal to the product of the Maturity Forward Price or the Early Settlement Forward Price on such Settlement Date, as the case may be, and the number of Settlement Shares for which Physical Settlement applies on such Settlement Date. |
| |
| Cash Settlement: | | On any Settlement Date in respect of which Party B has elected Cash Settlement, if the Cash Settlement Amount is a positive number, Party A will pay the Cash Settlement Amount to Party B. If the Cash Settlement Amount is a negative number, Party B will pay the absolute value of the Cash Settlement Amount to Party A. Such amounts shall be paid on the Settlement Date. |
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| Cash Settlement Amount: | | An amount determined by the Calculation Agent equal to: (i)(A) the Maturity Forward Price or the Early Settlement Forward Price on such Settlement Date, as the case may be,minus (B) the average price of the Shares purchased by Party A in order to close-out its trading activities pursuant to this Transaction (the “Close-out Shares”), plus $0.02,multipliedby (ii) the Settlement Shares for which Cash Settlement or Net Stock Settlement applies on such Settlement Date. |
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| | |
| Net Stock Settlement: | | On any Settlement Date in respect of which Party B has elected Net Stock Settlement, if the Cash Settlement Amount is a (i) positive number, Party A shall deliver a number of Shares to Party B equal to the Net Stock Settlement Shares, and (ii) negative number, Party B shall deliver a number of Shares to Party A equal to the Net Stock Settlement Shares. |
| |
| Net Stock Settlement | | |
| Shares: | | With respect to a Settlement Date, the absolute value of the Cash Settlement Amount divided by the fair market value per share of the Shares as determined by the Calculation Agent, with the number of Shares rounded up in the event such calculation results in a fractional number. |
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| Settlement Currency: | | USD |
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| Failure to Deliver: | | Applicable. |
Suspension of Cash or Net Stock Settlement:
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| Suspension Period: | | Any day on which Party A determines based on the advice of counsel that Cash or Net Stock Settlement may violate Rules 10b-5 or 10b-18 of the Exchange Act, any applicable securities laws hereinafter enacted or a change in the interpretation of any existing applicable securities laws. Party A shall notify Party B if it receives such advice from its counsel. Notwithstanding any provision in this Agreement to the contrary, Physical Settlement shall apply if a Suspension Period exists during the Cash/Net Stock Notice Period, but only to the extent that Party A has been unable as a result thereof to purchase Shares in an amount equal to the Settlement Shares prior to the Settlement Date and has provided notice to such effect to Party B. |
Adjustments:
| | |
| Method of Adjustment: | | Calculation Agent Adjustment. For the avoidance of doubt, Regular Quarterly Dividends (as defined below) shall not constitute a Potential Adjustment Event. |
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Extraordinary Events:
(a) Consequences of Merger Events:
| | | | |
| (i) | | Share-for-Share: | | Cancellation and Payment. |
| | |
| (ii) | | Share-for-Other: | | Cancellation and Payment. |
| | |
| (iii) | | Share-for-Combined: | | Cancellation and Payment. |
(b) Nationalization or Insolvency: Cancellation and Payment.
As provided hereinafter under Acceleration Events, for purposes of Extraordinary Events, Party B shall elect whether payment of the Cancellation Amount is to be effected by Physical Settlement, Net Share Settlement or Cash Settlement,provided that if Party B fails to do so, Physical Settlement shall apply.
Account Details:
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| Payments to Party A: | | To be advised under separate cover or telephone confirmed prior to each Payment Date. |
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| Payments to Party B: | | To be advised under separate cover or telephone confirmed prior to each Payment Date. |
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| Delivery of Shares to Party A: | | To be advised. |
Conditions to Effectiveness:
The effectiveness of this Confirmation on the Effective Date shall be subject to (i) the condition that the representations and warranties of Party B contained in the Purchase Agreement dated the date hereof among Party B, Party A and J.P. Morgan Securities Inc. (the “Purchase Agreement”) and any certificate delivered pursuant thereto by Party B be true and correct on the Effective Date as if made as of the Effective Date, (ii) the condition that Party B have performed all of the obligations required to be performed by it under the Purchase Agreement on or prior to the Effective Date and (iii) the satisfaction of all of the conditions set forth in Sections 7 and 8 of the Purchase Agreement.
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Additional Representations, Warranties and Agreements of Party B: Party B hereby represents and warrants to, and agrees with, Party A as of the date hereof that:
| | (a) | Any Shares, when issued and delivered in accordance with the terms of the Transaction, will be duly authorized and validly issued, fully paid and nonassessable, and the issuance thereof will not be subject to any preemptive or similar rights. |
| | (b) | Party B has reserved and will keep available, free from preemptive rights, out of its authorized but unissued Shares, solely for the purpose of issuance upon settlement of the Transaction as herein provided, the full number of Shares as shall then be issuable upon Physical Settlement of the Transaction. All Shares so issuable shall, upon such issuance, be accepted for listing on the Exchange. |
| | (c) | Party B agrees not to repurchase any Shares if, immediately following such repurchase, the Base Amount would be equal to or greater than 8.0% of the number of then-outstanding Shares. |
| | (d) | Party B is not insolvent, nor will Party B be rendered insolvent as a result of this Transaction. |
| | (e) | After giving notice of its intent to elect a Cash Settlement or a Net Stock Settlement, neither Party B nor any of its affiliates shall take any action that would cause any purchases of Shares in connection with any such Cash Settlement or Net Stock Settlement of this Transaction not to comply with Rule 10b-18 under the Exchange Act. |
| | (f) | Party B is an “eligible contract participant” (as such term is defined in Section 1(a)(12) of the Commodity Exchange Act, as amended). |
| | (g) | In addition to any other requirements set forth herein, Party B agrees not to elect Cash Settlement or Net Stock Settlement if such settlement would result in a violation of the U.S. federal securities laws or any other federal or state law or regulation applicable to Party B. |
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Compliance with Securities Laws:
Party A represents and warrants as follows:
| | (a) | in connection with bids and purchases of Shares in connection with this Transaction, Party A shall comply, or cause compliance, with the timing and volume provisions of Rule 10b-18(b)(2) and (4) under the Exchange Act as if such provisions were applicable to such bids and purchases; |
| | (b) | in connection with bids and purchases of Shares in connection with this Transaction, Party A shall use its best efforts to comply, or cause compliance, with the price provisions of Rule 10b-18(b)(3) under the Exchange Act;provided,however, that Party A shall not be obligated to comply with clauses (a) and (b) above in the event and only to the extent that Party A is required to purchase any Shares as a result of an Acceleration Event (as hereinafter defined). |
Covenant of Party B:
The parties acknowledge and agree that any Shares delivered by Party B to Party A on any Settlement Date and returned by Party A to securities lenders from whom Party A borrowed Shares in connection with hedging its exposure to the Transaction will be freely saleable without further registration or other restrictions under the Securities Act of 1933, as amended, in the hands of those securities lenders. Accordingly, Party B agrees that the Settlement Shares that it delivers to Party A on each Settlement Date will not bear a restrictive legend and that such Settlement Shares will be deposited in, and the delivery thereof shall be effected through the facilities of, the Clearance System.
Covenants of Party A:
| | (a) | Party A shall use its best efforts to maintain its hedge of its exposure to the Transaction by borrowing sufficient Shares from lenders. |
| | (b) | Party A shall use any Shares delivered by Party B to Party A on any Settlement Date to return to securities lenders. |
Acceleration Events: An Acceleration Event shall occur if:
| | (a) | Stock Borrow Event. Notwithstanding any other provision hereof, if, in the judgment of the Calculation Agent, Party A is unable to hedge its exposure to the Transaction because (i) of the lack of sufficient Shares being made available for Share borrowing by lenders, or (ii) it is otherwise commercially impracticable, (each of (i) and (ii) a “Stock Borrow Event”) then Party A shall |
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have the right to designate any Exchange Business Day to be a Settlement Date on at least two Exchange Business Days’ notice, and to select the number of Settlement Shares for such Settlement Date;provided that the number of Settlement Shares for any Settlement Date so designated by Party A shall not exceed the number of Shares as to which such inability exists, andprovided furtherthat Physical Settlement shall apply at the Early Settlement Forward Price; or
| | (b) | Stock Price. Notwithstanding any other provision hereof, if the closing sale price per Share on the Exchange for the regular trading session on any Exchange Business Day occurring after the Trade Date is less than or equal to $8.00, Party A shall have the right to designate any Exchange Business Day to be a Settlement Date on at least fifteen Exchange Business Days’ notice, and to select the number of Settlement Shares for such Settlement Date. Upon the designation of such Settlement Date, Party B shall promptly notify Party A of the settlement method,provided that if Party B fails to do so, Physical Settlement shall apply; or |
| | (c) | Dividends and Other Distributions. Notwithstanding any other provision hereof, if on any day occurring after the Trade Date Party B declares a distribution, issue or dividend to existing holders of the Shares of (i) an extraordinary cash dividend, (ii) a regular quarterly dividend in an amount greater than $0.665 for 2004 and $0.670 in 2005 per Share per quarter (quarterly dividends in such amounts for 2004 and 2005, “Regular Quarterly Dividends”), or (iii) securities or share capital of another issuer acquired or owned (directly or indirectly) by Party B as a result of a spin-off or other similar transaction or (iv) any other type of securities (other than Shares, which may constitute a Potential Adjustment Event), rights or warrants or other assets, in any case for payment (cash or other consideration) at less than the prevailing market price as determined by Party A, then Party A shall have the right to designate any Scheduled Trading Day to be a Settlement Date for the entire Transaction on at least three Scheduled Trading Days’ notice. Upon the designation of such Settlement Date, Party B shall promptly notify Party A of the settlement method,provided that if Party B fails to do so, Physical Settlement shall apply; or |
| | (d) | Board Approval of Merger. Notwithstanding any other provision hereof, if on any day occurring after the Trade Date the board of directors of Party B votes to approve any action that, if consummated, would constitute a Merger Event (as defined in the 2002 Definitions), then Party A shall have the right to designate any Scheduled Trading Day to be a Settlement Date for the entire Transaction on at least three Scheduled Trading Days’ notice. Party B shall notify Party A of any such vote within one Scheduled Trading Day and upon the designation of such Settlement Date, Party B shall promptly notify Party A of the settlement method,provided that if Party B fails to do so, Physical Settlement shall apply; or |
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| | (e) | Agreement Early Termination Date. Notwithstanding anything to the contrary herein, in the Agreement or in the Definitions, if either Party A or Party B has the right to designate an Early Termination Date pursuant to Section 6 of the Agreement, such party shall have the right to designate any Scheduled Trading Day to be a Settlement Date for the entire Transaction on at least three Scheduled Trading Days’ notice. Upon the designation of such Settlement Date, Party B shall promptly notify Party A of the settlement method,provided that if Party B fails to do so, Physical Settlement shall apply; or |
| | (f) | Other Events. Notwithstanding anything to the contrary herein, in the Agreement or in the Definitions, if a Nationalization, Insolvency, Insolvency Filing, Delisting or Change in Law occurs, Party A shall have the right to designate any Scheduled Trading Day to be a Settlement Date for the entire Transaction on at least three Scheduled Trading Days’ notice, and Party A shall be the Determining Party. Upon the designation of such Settlement Date, Party B shall promptly notify Party A of the settlement method,provided that if Party B fails to do so, Physical Settlement shall apply. |
Assignment:
Party A may assign or transfer any of its rights or duties hereunder to any affiliate of Party A or any entity organized or sponsored by Party A without the prior written consent of Party B; provided, however, that such assignee’s obligations shall be guaranteed by Merrill Lynch & Co., Inc. by execution of a guaranty in the form of Exhibit A; andprovided further, that no such assignment may result in a Change in Law.
Matters relating to Agent:
| | (a) | As a broker-dealer registered with the U.S. Securities and Exchange Commission, Merrill Lynch, Pierce, Fenner & Smith Incorporated, in its capacity as Agent (“MLPFS”), will be responsible for (i) effecting the Transaction, (ii) issuing all required confirmations and statements to Party A and Party B and (iii) maintaining books and records relating to the Transaction. |
| | (b) | MLPFS shall act as “agent” for Party A and Party B within the meaning of Rule 15a-6 under the Securities Exchange Act of 1934 in connection with the Transaction. |
| | (c) | The Agent, in its capacity as such, shall have no responsibility or liability (including, without limitation, by way of guarantee, endorsement or otherwise) to Party A or Party B or otherwise in respect of the Transaction, including, |
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without limitation, in respect of the failure of Party A or Party B to pay or perform under this Confirmation, except for its gross negligence or willful misconduct in performing its duties as Agent hereunder.
| | (d) | Each of Party A and Party B agree to proceed solely against the other to collect or recover any securities or monies owing to Party A or Party B, as the case may be, in connection with or as a result of the Transaction. |
| | (e) | The Agent will be Party A’s agent for service of process for the purpose of Section 13(c) of the Agreement. |
Maximum Share Delivery:
Notwithstanding any other provision of this Confirmation, in no event will Party B be required to deliver on any Settlement Date, whether pursuant to Physical Settlement, Net Stock Settlement or Cash Settlement, more than the Base Amount of Shares to Party A.
Limit on Beneficial Ownership:
Notwithstanding any other provisions hereof, Party A shall not be entitled to receive Shares hereunder (whether in connection with the purchase of Shares on any Settlement Date or otherwise) to the extent (but only to the extent) that such receipt would result in Merrill Lynch & Co., Inc. directly or indirectly beneficially owning (as such term is defined for purposes of Section 13(d) of the Exchange Act) at any time in excess of 9.5% of the outstanding Shares. Any purported delivery hereunder shall be void and have no effect to the extent (but only to the extent) that such delivery would result in Merrill Lynch & Co., Inc. directly or indirectly so beneficially owning in excess of 9.5% of the outstanding Shares. If any delivery owed to Party A hereunder is not made, in whole or in part, as a result of this provision, Party B’s obligation to make such delivery shall not be extinguished and Party B shall make such delivery as promptly as practicable after, but in no event later than one Exchange Business Day after, Party A gives notice to Party B that such delivery would not result in Merrill Lynch & Co., Inc. directly or indirectly so beneficially owning in excess of 9.5% of the outstanding Shares.
Miscellaneous
| | |
| Non-Reliance: | | Applicable |
| |
| Additional Acknowledgements: | | Applicable |
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4. The Agreement is further supplemented by the following provisions:
Share Settlement upon Certain Events:
Notwithstanding anything to the contrary herein, in the Agreement or in the Definitions, if at any time (i) an Early Termination Date occurs and Party B would be required to make a payment pursuant to Sections 6(d) and 6(e) of the Agreement, or (ii) a Merger Event occurs and Party B would be required to make a payment pursuant to Sections 12.2 and 12.7 of the 2002 Definitions, then in lieu of any such payment, Party B at its election, may deliver to Party A, at the time such payment would have been due and in the manner provided under “Physical Settlement” in the 2002 Definitions, a number of Shares (or, in the case of a Merger Event, common equity securities of the surviving entity) equal to the quotient obtained by dividing (A) the amount that would have been so payable by (B) the fair market value per Share (or per unit of such common equity security) of the Shares (or units) so delivered at the time of such delivery, as determined by the Calculation Agent (which fair market value shall take into account whether the Shares so delivered are freely tradeable). Upon Party B’s election to deliver Shares, the Transaction will not be considered for purposes of determining any Early Termination Amount under Section 6(e) of the Agreement.
Agreement Regarding Set-off:
The last sentence of the first paragraph of Section 6(e) of the Agreement shall not apply with respect to the Transaction to the extent that any of the events described in Section 5(a)(vii) of the Agreement occurs with respect to Party B.
Bankruptcy Rights:
In the event of Party B’s bankruptcy, Party A acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to this Transaction that are senior to the claims of common stockholders. For the avoidance of doubt, the parties acknowledge and agree that Party A’s rights with respect to any other claim arising from this Transaction prior to Party B’s bankruptcy shall remain in full force and effect and shall not be otherwise abridged or modified in connection herewith.
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Miscellaneous:
| | (a) | Addresses for Notices. For the purpose of Section 12(a): |
Address for notices or communications to Party A:
| | |
| Address: | | c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated |
| | | Four World Financial Center |
| | | North Tower, 5th Floor |
| | | New York, NY 10080 |
| Attention: | | Equity-Linked Capital Markets |
| Telephone No.: | | (212) 449-6763 |
| Facsimile No.: | | (212) 738-1069 |
Additionally, a copy of all notices pursuant to Sections 5, 6 and 7 as well as any changes to Party B’s address, telephone number or facsimile number should be sent to:
| | |
| Address: | | GMI Counsel |
| | | Merrill Lynch World Headquarters |
| | | Four World Financial Center |
| | | New York, NY 10080 |
| Attention: | | Global Equity Derivatives |
| Telephone No.: | | (212) 449-6352 |
| Facsimile No.: | | (212) 449-6993 |
Address for notices or communications to Party B:
| | |
| Address: | | Dominion Resources, Inc. |
| | | 120 Tredegar Street |
| | | Richmond, Virginia 23219 USA |
| Attention: | | Treasurer |
| Facsimile No.: | | 804-819-2211 |
| | (b) | Waiver of Right to Trial by Jury. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating to this Confirmation or any Credit Support Document. Each party (i) certifies that no representative, agent or attorney of the other party has represented, expressly or otherwise, that such other party would not, in the event of such a suit action or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter into this Confirmation by, among other things, the mutual waivers and certifications in this Section. |
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5. ISDA Master Agreement
With respect to the Agreement, Party A and Party B each agree as follows:
Specified Entities:
(i) in relation to Party A, for the purposes of:
| | |
| Section 5(a)(v): | | not applicable |
| Section 5(a)(vi): | | not applicable |
| Section 5(a)(vii): | | not applicable |
| Section 5(b)(iv): | | not applicable |
and (ii) in relation to Party B, for the purposes of:
| | |
| Section 5(a)(v): | | not applicable |
| Section 5(a)(vi): | | not applicable |
| Section 5(a)(vii): | | not applicable |
| Section 5(b)(iv): | | not applicable |
“Specified Transaction” will have the meaning specified inSection 14 of the Agreement.
The “Cross Default” provisions ofSection 5(a)(vi) of the Agreement will apply to Party A and to Party B.
“Specified Indebtedness” will have the meaning specified in Section 14 of the Agreement.
“Threshold Amount”with respect to Party A means USD 100,000,000 (or the U.S. dollar equivalent in any other currency or currencies) and with respect to Party B means USD 25,000,000
The “Credit Event Upon Merger” provisions ofSection 5(b)(v) of the Agreement will apply to Party A and to Party B.
The“Automatic Early Termination” provision ofSection 6(a) of the Agreement will not apply to Party A and to Party B.
“Termination Currency” means USD.
Additional Termination Event. The following shall constitute an Additional Termination Event: None
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Tax Representations:
| | (I) | For the purpose of Section 3(e) of the Agreement, each party represents to the other party that 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(d), 6(d)(ii), or 6(e) of the Agreement) to be made by it to the other party under the Agreement. In making this representation, each party may rely on (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of the Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of the Agreement, and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of the Agreement, and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of the Agreement; provided that it will not be a breach of this representation where reliance is placed on clause (ii) above and the other party does not deliver a form or document under Section 4(a)(iii) of the Agreement by reason of material prejudice to its legal or commercial position. |
| | (II) | For the purpose of Section 3(f) of the Agreement, each party makes the following representations to the other party: |
| | (i) | Party A represents that it is a corporation organized under the laws of England and Wales. |
| | (ii) | Party B represents that it is a corporation incorporated under the laws of the Commonwealth of Virginia. |
Tax Forms: For the purpose ofSections 3(d),4(a)(i) and(ii) of the Agreement, each party agrees to deliver the following documents:
Tax forms, documents or certificates to be delivered are:
Each party agrees to complete (accurately and in a manner reasonably satisfactory to the other party), execute, and deliver to the other party, United States Internal Revenue Service Form W-9 or W-8 BEN, or any successor of such form(s): (i) before the first payment date under this agreement; (ii) promptly upon reasonable demand by the other party; and (iii) promptly upon learning that any such form(s) previously provided by the other party has become obsolete or incorrect.
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Other documents to be delivered:
| | | | | | |
Party Required to Deliver
Document
| | Document Required to be
Delivered
| | When Required
| | Covered by Section 3(d)
Representation
|
| Party A and Party B | | Evidence of the authority and true signatures of each official or representative signing this Confirmation | | Upon or before execution and delivery of this Confirmation | | Yes |
| | | |
| Party B | | Certified copy of the resolution of the Board of Directors or equivalent document authorizing the Transaction | | Upon or before execution and delivery of this Confirmation | | Yes |
| | | |
| Party A | | Guarantee of its Credit Support Provider, substantially in the form of Exhibit A attached hereto, together with evidence of the authority and true signatures of the signatories, if applicable | | Upon or before execution and delivery of this Confirmation | | Yes |
Process Agent: For the purpose of Section 13(c) of the Agreement, Party A appoints as its process agent:
|
Merrill Lynch, Pierce, Fenner & Smith Incorporated |
222 Broadway, 16th Floor |
New York, NY 10038 |
Attention: Litigation Department |
|
Party B does not appoint a Process Agent. |
Multibranch Party. For the purpose ofSection 10(c) of the Agreement: Neither Party A nor Party B is a Multibranch Party.
Credit Support Document.
Party A: Guarantee of Merrill Lynch & Co., Inc. in the form attached hereto as Exhibit A.
Party B: None
Credit Support Provider.
With respect to Party A: Merrill Lynch & Co., Inc. and with respect to Party B, Not Applicable.
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Governing Law. This Confirmation will be governed by, and construed in accordance with, the laws of the State of New York.
Netting of Payments.The provisions of Section 2(c) of the Agreement shall not be applicable to this Transaction;provided,however, that with respect to this Agreement or any other ISDA Master Agreement between the parties, any Share delivery obligations on any day of Party B, on the one hand, and Party A, on the other hand, shall be netted. The resulting Share delivery obligation of a party upon such netting shall be rounded down to the nearest number of whole Common Shares, such that neither party shall be required to deliver any fractional Common Shares.
Accuracy of Specified Information.Section 3(d) of the Agreement is hereby amended by adding in the third line thereof after the word “respect” and before the period the words “or, in the case of audited or unaudited financial statements or balance sheets, a fair presentation of the financial condition of the relevant person.”
Basic Representations.Section 3(a) of the Agreement is hereby amended by the deletion of “and” at the end ofSection 3(a)(iv); the substitution of a semicolon for the period at the end ofSection 3(a)(v) and the addition ofSections 3(a)(vi), as follows:
Eligible Contract Participant; Line of Business.It is an “eligible contract participant” as defined in the Commodity Futures Modernization Act of 2000 and it has entered into this Confirmation and this Transaction in connection with its business or a line of business (including financial intermediation), or the financing of its business.
Amendment of Section 3(a)(iii).Section 3(a)(iii) of the Agreement is modified to read as follows:
No Violation or Conflict. Such execution, delivery and performance do not materially violate or conflict with any law known by it to be applicable to it, any provision of its constitutional documents, any order or judgment of any court or agency of government applicable to it or any of its assets or any material contractual restriction relating to Specified Indebtedness binding on or affecting it or any of its assets.
Amendment ofSection 3(a)(iv).Section 3(a)(iv) of the Agreement is modified by inserting the following at the beginning thereof:
“To such party’s best knowledge,”
Additional Representations:
Party B Representations. Party B (i) has such knowledge and experience in financial and business affairs as to be capable of evaluating the merits and risks of entering into this Transaction; (ii) has consulted with its own legal, financial, accounting and tax advisors in connection with this Transaction; and (iii) is entering into this Transaction for a bona fide business purpose to hedge an existing position.
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Party B is not and has not been the subject of any civil proceeding of a judicial or administrative body of competent jurisdiction that could reasonably be expected to impair materially Party B’s ability to perform its obligations hereunder.
Party B will by the next succeeding Business Day notify Party A upon obtaining knowledge of the occurrence of any event that would constitute an Event of Default or a Potential Adjustment Event.
FDICIA Representation.Party A represents that it is a “financial institution” for purposes of Section 402 of the Federal Deposit Insurance Corporation Improvement Act of 1991, as amended (the “Statute”), and the regulations promulgated pursuant thereto because either (A) it is a broker or dealer, a depository institution or a futures commission merchant (as such terms are defined in the Statute) or (B) it will engage in financial contracts (as so defined) as a counterparty on both sides of one or more financial markets (as so defined) and either (I) had one or more financial contracts of a total gross dollar value of at least $1 billion in notional principal amount outstanding on any day during the previous 15-month period with counterparties that are not its affiliates or (II) had total gross mark-to-market positions of at least $100,000,000 (aggregated across counterparties) in one or more financial contracts on any day during the previous 15-month period with counterparties that are not its affiliates.
Acknowledgements:
(1) The parties acknowledge and agree that there are no other representations, agreements or other undertakings of the parties in relation to this Transaction, except as set forth in this Confirmation.
(2) The parties hereto intend for:
(a) this Transaction to be a “securities contract” as defined in Section 741(7) of Title 11 of the United States Code (the “Bankruptcy Code”), qualifying for the protections under Section 555 of the Bankruptcy Code;
(b) a party’s right to liquidate this Transaction and to exercise any other remedies upon the occurrence of any Event of Default under the Agreement with respect to the other party to constitute a “contractual right” as defined in the Bankruptcy Code;
(c) any cash, securities or other property provided as performance assurance, credit, support or collateral with respect to this Transaction to constitute “margin payments” as defined in the Bankruptcy Code; and
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(d) all payments for, under or in connection with this Transaction, all payments for the Shares and the transfer of such Shares to constitute “settlement payments” as defined in the Bankruptcy Code.
Amendment ofSection 6(d)(ii). Section 6(d)(ii) of the Agreement is modified by deleting the words “on the day” in the second line thereof and substituting therefor “on the day that is three Local Business Days after the day”.Section 6(d)(ii) is further modified by deleting the words “two Local Business Days” in the fourth line thereof and substituting therefor “three Local Business Days.”
Consent to Recording. Each party consents to the recording of the telephone conversations of trading and marketing personnel of the parties and their Affiliates in connection with this Confirmation.
Severability. If any term, provision, covenant or condition of this Confirmation, or the application thereof to any party or circumstance, shall be held to be invalid or unenforceable in whole or in part for any reason, the remaining terms, provisions, covenants, and conditions hereof shall continue in full force and effect as if this Confirmation had been executed with the invalid or unenforceable provision eliminated, so long as this Confirmation as so modified continues to express, without material change, the original intentions of the parties as to the subject matter of this Confirmation and the deletion of such portion of this Confirmation will not substantially impair the respective benefits or expectations of parties to this Agreement;provided,however, that this severability provision shall not be applicable if any provision ofSection 2,5,6 or13 of the Agreement (or any definition or provision inSection 14 to the extent that it relates to, or is used in or in connection with any such Section) shall be so held to be invalid or unenforceable.
Affected Parties. For purposes ofSection 6(e)of the Agreement, each party shall be deemed to be an Affected Party in connection with Illegality and any Tax Event.
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Please confirm that the foregoing correctly sets forth the terms of our agreement by signing and returning this Confirmation.
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Yours faithfully, |
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MERRILL LYNCH INTERNATIONAL |
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By: | | /s/ Brian Carroll
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Name: | | Brian Carroll |
Title: | | Authorized Signatory |
Confirmed as of the date first written above:
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| DOMINION RESOURCES, INC. |
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| By: | | /s/ G. Scott Hetzer
|
| Name: | | G. Scott Hetzer |
| Title: | | Senior Vice President and Treasurer |
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| MERRILL LYNCH, PIERCE, FENNER & SMITH |
| INCORPORATED, as Agent |
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| By: | | /s/ Keri Peacock
|
| Name: | | Keri Peacock |
| Title: | | Vice President |
EXHIBIT A
GUARANTEE OF MERRILL LYNCH & CO., INC.
FOR VALUE RECEIVED, receipt of which is hereby acknowledged, MERRILL LYNCH & CO., INC., a corporation duly organized and existing under the laws of the State of Delaware (“ML & Co.”), hereby unconditionally guarantees to Dominion Resources, Inc. (the ”Company”), the due and punctual payment of any and all amounts payable by Merrill Lynch International, a company organized under the laws of England and Wales (“ML”), under the terms of the Master Agreement between the Company and ML, dated as of September 7, 2004 (the “Agreement”), including, in case of default, interest on any amount due, when and as the same shall become due and payable, whether on the scheduled payment dates, at maturity, upon declaration of termination or otherwise, according to the terms thereof. In case of the failure of ML punctually to make any such payment, ML & Co. hereby agrees to make such payment, or cause such payment to be made, promptly upon demand made by the Company to ML & Co.; provided, however that delay by the Company in giving such demand shall in no event affect ML & Co.’s obligations under this Guarantee. This Guarantee shall remain in full force and effect or shall be reinstated (as the case may be) if at any time any payment guaranteed hereunder, in whole or in part, is rescinded or must otherwise be returned by the Company upon the insolvency, bankruptcy or reorganization of ML or otherwise, all as though such payment had not been made.
ML & Co. hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Agreement; the absence of any action to enforce the same; any waiver or consent by the Company concerning any provisions thereof; the rendering of any judgment against ML or any action to enforce the same; or any other circumstances that might otherwise constitute a legal or equitable discharge of a guarantor or a defense of a guarantor. ML & Co. covenants that this guarantee will not be discharged except by complete payment of the amounts payable under the Agreement. This Guarantee shall continue to be effective if ML merges or consolidates with or into another entity, loses its separate legal identity or ceases to exist.
ML & Co. hereby waives diligence; presentment; protest; notice of protest, acceleration, and dishonor; filing of claims with a court in the event of insolvency or bankruptcy of ML; all demands whatsoever, except as noted in the first paragraph hereof; and any right to require a proceeding first against ML.
ML & Co. hereby certifies and warrants that this Guarantee constitutes the valid obligation of ML & Co. and complies with all applicable laws.
This Guarantee shall be governed by, and construed in accordance with, the laws of the State of New York.
This Guarantee may be terminated at any time by notice by ML & Co. to the Company given in accordance with the notice provisions of the Agreement, effective upon receipt of such
notice by the Company or such later date as may be specified in such notice; provided, however, that this Guarantee shall continue in full force and effect with respect to any obligation of ML under the Agreement entered into prior to the effectiveness of such notice of termination.
This Guarantee becomes effective concurrent with the effectiveness of the Agreement, according to its terms.
IN WITNESS WHEREOF, ML & Co. has caused this Guarantee to be executed in its corporate name by its duly authorized representative.
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| MERRILL LYNCH & CO., INC. |
| |
| By: | |
|
| Name: | | |
| Title: | | |
| Date: | | |
ANNEX A
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| Base Amount: | | Initially, 2,000,000 Shares, subject to increase up to 2,200,000 Shares if the overallotment option granted in Section 4 of the Purchase Agreement is exercised. |
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| Maturity Date: | | December 20, 2004. |
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| Maturity Forward Price: | | $64.62 |
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| Early Settlement | | |
| Forward Price: | | Party B may choose to exercise the contract early and, if Physical Settlement applies, by delivering some or all of the underlying Shares in exchange for a Forward Price under the schedule below. |
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| | | For the avoidance of doubt, the relevant Settlement Date for the purposes of the schedule below shall be (i) if Physical Settlement applies, the Settlement Date shall be the date upon which Party A is reflected as the record holder of the relevant Settlement Shares on the books of the transfer agent of Party B, and (ii) if Cash or Net Stock Settlement applies, the related Forward Price shall be determined on a weighted average basis by the date(s) Party A is reflected as the record holder of the relevant Close-out Shares on the books of the transfer agent of Party B. |
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| | | |
During Period (Settlement Dates are inclusive):
| | Forward Price:
|
Prior to September 14, 2004 | | $ | 65.12 |
From September 15, 2004 until September 30, 2004 | | $ | 64.94 |
From October 1, 2004 until October 31, 2004 | | $ | 64.98 |
From November 1, 2004 until November 26, 2004 | | $ | 65.08 |
From November 29, 2004 until December 19, 2004 | | $ | 64.54 |
ANNEX B
| | |
| Base Amount: | | Initially, 8,000,000 Shares, subject to increase up to 8,800,000 Shares if the overallotment option granted in Section 4 of the Purchase Agreement is exercised. |
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| Maturity Date: | | May 17, 2005. |
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| Maturity Forward Price: | | $64.34 |
| |
| Early Settlement | | |
| Forward Price: | | Party B may choose to exercise the contract early and, if Physical Settlement applies, by delivering some or all of the underlying Shares in exchange for a Forward Price under the schedule below. |
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| | | For the avoidance of doubt, the relevant Settlement Date for the purposes of the schedule below shall be (i) if Physical Settlement applies, the Settlement Date shall be the date upon which Party A is reflected as the record holder of the relevant Settlement Shares on the books of the transfer agent of Party B, and (ii) if Cash or Net Stock Settlement applies, the related Forward Price shall be determined on a weighted average basis by the date(s) Party A is reflected as the record holder of the relevant Close-out Shares on the books of the transfer agent of Party B. |
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| | | |
During Period (Settlement Dates are inclusive):
| | Forward Price:
|
Prior to September 14, 2004 | | $ | 65.12 |
From September 15, 2004 until September 30, 2004 | | $ | 64.66 |
From October 1, 2004 until October 31, 2004 | | $ | 64.69 |
From November 1, 2004 until November 26, 2004 | | $ | 64.76 |
From November 29, 2004 until December 31, 2004 | | $ | 64.24 |
From January 1, 2005 until January 31, 2005 | | $ | 64.34 |
From February 1, 2005 until February 25, 2005 | | $ | 64.46 |
From February 28, 2005 until March 31, 2005 | | $ | 63.91 |
From April 1, 2005 until April 30, 2005 | | $ | 64.07 |
From May 1, 2005 until May 16, 2005 | | $ | 64.25 |
