Exhibit 10.1
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Bank of America [LOGO]
EQUITY FINANCIAL PRODUCTS GROUP
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Bank of America, N.A.
c/o Banc of America Securities LLC
9 West 57th Street, 40th Floor
New York, NY 10019
March 7, 2006
To: Albany International Corp.
1373 Broadway
Albany, New York 12204
Attention: Christopher J. Connally, Corporate Treasurer
Telephone No.: (518) 445-2235
Facsimile No.: (518) 447-6305
Re: Call Option Transaction
Ref. No.: NY-21551
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between Bank of America, N.A.
("BofA"), and Albany International Corp., a Delaware corporation (the
"Counterparty"), on the Trade Date specified below (the "Transaction"). This
letter agreement constitutes a "Confirmation" as referred to in the ISDA Master
Agreement specified below. This Confirmation shall replace any previous
agreements and serve as the final documentation for this Transaction.
The definitions and provisions contained in the 1996 ISDA Equity
Derivatives Definitions (the "Equity Definitions"), as published by the
International Swaps and Derivatives Association, Inc., are incorporated into
this Confirmation. In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation shall govern. Certain
defined terms used herein have the meanings assigned to them in the Offering
Memorandum dated March 7, 2006 (the "Offering Memorandum") relating to the USD
150,000,000 principal amount of 2.25% Convertible Senior Notes due 2026, (the
"Convertible Notes" and each USD 1,000 principal amount of Convertible Notes, a
"Convertible Note") issued by the Counterparty pursuant to an Indenture to be
dated on or about March 13, 2006 between the Counterparty and JPMorgan Chase
Bank, N.A., as trustee (the "Indenture"). In the event of any inconsistency
between the terms defined in the Offering Memorandum and this Confirmation, this
Confirmation shall govern.
Each party is hereby advised, and each such party acknowledges, that the
other party has engaged in, or refrained from engaging in, substantial financial
transactions and has taken other material actions in reliance upon the parties'
entry into the Transaction to which this Confirmation relates on the terms and
conditions set forth below.
1. This Confirmation evidences a complete and binding agreement between BofA and
the Counterparty 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 BofA and the Counterparty had executed an agreement in such form (but without
any Schedule except for the election of the laws of the State of New York as the
governing law) on the Trade Date. 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.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
General Terms:
Trade Date: March 7, 2006
Option Style: "Modified American", as described under
"Exercise and Valuation" below
Option Type: Call
Buyer: Counterparty
Seller: BofA
Shares: The Class A common stock of the
Counterparty, par value USD 0.001 per
Share (Exchange symbol "AIN")
Number of Options: 60,000
Option Entitlement: As of any date, a number equal to the
Conversion Rate as of such date (as
defined in the Indenture, but without
regard to any adjustments to the
Conversion Rate pursuant to Section
15.04(i), Section 15.03(a) or Section
15.03(d) of the Indenture), for each
Convertible Note.
Strike Price: USD 44.52
Premium: USD 15,939,541.64
Premium Payment Date: March 13, 2006
Exchange: The New York Stock Exchange
Related Exchange(s): None
Exercise and Valuation:
Exercise Period(s): Notwithstanding the Equity Definitions,
in respect of Exercisable Options
relating to Convertible Notes with a
particular Conversion Date (each as
defined below), the Exercise Period shall
be the period commencing on and including
the Conversion Date for the Convertible
Notes corresponding to such Exercisable
Options and ending at 7:30 a.m. New York
City time on the first day of the
relevant Cash Settlement Averaging
Period; provided that if the Counterparty
has validly designated March 15, 2013 as
a redemption date for the Convertible
Notes pursuant to the terms of the
Indenture, there shall be a single
Exercise Period for Exercisable Options
relating to the Convertible
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Notes with a Conversion Date following
the day on which the Counterparty gives
notice of such redemption and that
Exercise Period shall terminate at 7:30
a.m. New York City time on the redemption
date; provided further that if the
Counterparty has not validly designated
March 15, 2013 as a redemption date for
the Convertible Notes pursuant to the
terms of the Indenture, Conversion Dates
occurring after the date that is
twenty-seven (27) Scheduled Trading Days
prior to March 15, 2013 shall not result
in the commencement of an Exercise Period
and no Exercisable Options will be
exercised or deemed exercised in respect
thereof.
"Scheduled Trading Day" means any day on
which the Exchange is scheduled to be
open for trading for its regular trading
session.
Exercisable Options: In respect of any date on which a holder
of Convertible Notes properly surrenders,
or is deemed to surrender, to the
Counterparty a Convertible Note for
conversion (a "Conversion Date"), a
number of Options equal to 40% of the
number of Convertible Notes properly
surrendered, or deemed surrendered, for
conversion on such Conversion Date
(which, for the avoidance of doubt, may
be rounded up or down by the Company to
account for any conversions which may
result in fractional Exercisable Options
and may not exceed the Number of
Options).
Expiration Date: For any Exercisable Option, the earlier
of (i) the final day of the Exercise
Period for such Exercisable Option, and
(ii) the Final Expiration Date.
Final Expiration Date: March 15, 2013
Multiple Exercise: Applicable, as described under
Exercisable Options above.
Automatic Exercise: Applicable, subject to the provisions of
"Notice of Exercise" below.
Notice of Exercise: Notwithstanding anything to the contrary
in the Equity Definitions, in order to
exercise any Exercisable Option, the
Counterparty must notify BofA, which
notification shall be irrevocable after
7:30 a.m. New York City time on the first
day of the relevant Cash Settlement
Averaging Period and shall not be subject
to subsequent amendments, in writing or
orally (and, if such Notice of Exercise
is delivered by the Counterparty after
the close of business in New York City on
the Scheduled Trading Day immediately
preceding the Expiration Date, via e-mail
to: dg.efp_doc_group@bofasecurities.com),
by 7:30 a.m. New York City time on the
first day of the
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relevant Cash Settlement Averaging Period
for such Exercisable Option of (i) the
number of Convertible Notes properly
submitted for conversion on the relevant
Conversion Date and the number of
Exercisable Options corresponding to such
Convertible Notes, (ii) the first day of
the applicable Cash Settlement Averaging
Period and (iii) the scheduled Settlement
Date; provided that if the Counterparty
has validly designated March 15, 2013 as
a redemption date for the Convertible
Notes pursuant to the terms of the
Indenture, such notice may be given on or
prior to the Expiration Date for such
Exercisable Options and need only specify
the number of Convertible Notes submitted
for conversion during the final Exercise
Period and the number of Exercisable
Options corresponding to such Convertible
Notes.
Exchange Business Day: Section 1.20 of the Equity Definitions is
hereby replaced in its entirety by the
following:
"'Exchange Business Day' means a day
during which (i) trading in the Shares
generally occurs and (ii) there is no
Market Disruption Event and (iii) the
Last Reported Sale Price (as defined in
the Indenture) for the Shares is
available for such day."
Market Disruption Event: Section 4.3(a) of the Equity Definitions
is hereby replaced in its entirety by the
following:
"'Market Disruption Event' means, in
respect of the Shares, (i) a failure by
the Exchange to open for trading during
its regular trading session or (ii) the
occurrence or existence prior to 1:00
p.m. New York City time on any Exchange
Business Day for the Shares for an
aggregate one half-hour period of any
suspension or limitation imposed on
trading (by reason of movements in price
exceeding limits permitted by the
Exchange or otherwise) in the Shares or
in any options, contracts or future
contracts relating to the Shares."
Settlement Terms:
Settlement Method: Net Share Settlement
Net Share Settlement: For each Exercisable
Option that is exercised or deemed
exercised, BofA will deliver to the
Counterparty, on the related Settlement
Date, a number of Shares equal to the Net
Shares in respect of such Exercisable
Option. In no event will the Net Shares
be less than zero.
Net Shares: In respect of each Exercisable Option
exercised or deemed exercised, a number
of Shares equal to (i) the
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Option Entitlement multiplied by (ii) the
sum, for each Exchange Business Day
during the relevant Cash Settlement
Averaging Period, of (A) the Relevant
Price on such Exchange Business Day, less
the Strike Price, divided by (B) the
Relevant Price on such Exchange Business
Day, divided by (iii) twenty-five (25);
provided, however, that if the
calculation contained in clause (A) above
results in a negative number, such number
shall be replaced with the number "zero".
BofA will deliver cash in lieu of any
fractional Share with respect to any Net
Shares to be delivered with respect to
all Exercisable Options having the same
Settlement Date based on the Last
Reported Sale Price (as defined in the
Indenture) for the Shares on the final
Exchange Business Day of the relevant
Cash Settlement Averaging Period.
Relevant Price: For each Exchange Business Day during a
Cash Settlement Averaging Period, the per
Share volume-weighted average price for
such day as displayed under the heading
"Bloomberg VWAP" on Bloomberg page AIN
[equity] AQR (or any successor thereto)
in respect of the period from 9:30 a.m.
to 4:00 p.m. (New York City time) on such
Exchange Business Day (or if such
volume-weighted average price is
unavailable, the market value of one
Share on such Exchange Business Day, as
determined by the Calculation Agent,
using a volume-weighted method).
Cash Settlement For each Exercisable Option, the
Averaging Period: twenty-five (25) consecutive Exchange
Business Days commencing on and including
the second Exchange Business Day
following the Conversion Date for the
Convertible Note relating to such
Exercisable Option; provided that if the
Counterparty has validly designated March
15, 2013 as a redemption date for the
Convertible Notes pursuant to the terms
of the Indenture, the Cash Settlement
Averaging Period for any Exercisable
Options relating to the Convertible Notes
with a Conversion Date following the date
on which the Counterparty gives notice of
such redemption, the twenty-five (25)
consecutive Exchange Business Days
commencing on and including the
twenty-eighth (28th) Scheduled Trading
Day preceding such redemption date.
Settlement Date: For each Exercisable Option, the
settlement date for Shares to be
delivered with respect to the related
Convertible Notes under the terms of the
Indenture.
Other Applicable Provisions: The provisions of Sections 6.6, 6.7, 6.8,
6.9 and 6.10 of the Equity Definitions
will be applicable, except that all
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references in such provisions to
"Physically-Settled" shall be read as
references to "Net Share Settled". "Net
Share Settled" in relation to any Option
means that Net Share Settlement is
applicable to that Option.
Failure to Deliver: Applicable
3. Additional Terms applicable to the Transaction:
Adjustments applicable to the Transaction:
Potential Adjustment Events: Notwithstanding Section 9.1(e) of the
Equity Definitions, a "Potential
Adjustment Event" means any occurrence of
any event or condition, as set forth in
Section 15.04 of the Indenture resulting
in an adjustment to the Conversion Rate
of the Convertible Notes, excluding
adjustments or conditions that result
from an adjustment to the Conversion Rate
pursuant to Section 15.04(i) or Section
15.03(a) of the Indenture.
Method of Adjustment: Calculation Agent Adjustment, and means
that, notwithstanding Section 9.1(c) of
the Equity Definitions, upon any
adjustment to the Conversion Rate of the
Convertible Notes pursuant to the
Indenture (other than Section 15.04(i)
and Section 15.03(a) of the Indenture)
and an equivalent adjustment to the
Option Entitlement hereunder, the
Calculation Agent, in order to reflect
the effect of the event or condition
relating to such adjustment on this
Transaction, will make a corresponding
adjustment to any one or more of the
Strike Price, Number of Options and any
other variable relevant to the exercise,
settlement or payment for the
Transaction.
Extraordinary Events applicable to the Transaction:
Merger Events: Notwithstanding Section 9.2(a) of the
Equity Definitions, a "Merger Event"
means the occurrence of any event or
condition set forth in Section 15.06 of
the Indenture.
Consequence of Merger Events: Notwithstanding Section 9.3 of the Equity
Definitions, upon the occurrence of a
Merger Event, the Calculation Agent shall
make a corresponding adjustment in
respect of any adjustment under the
Indenture to any one or more of the
nature of the Shares, Strike Price,
Number of Options, Option Entitlement and
any other variable relevant to the
exercise, settlement or payment for the
Transaction; provided, however, that such
adjustment (i) shall be made without
regard to any adjustment to the
Conversion Rate for the issuance of
additional shares as set forth in Section
15.03(a) of the Indenture, and (ii) shall
assume that, in the case of a "Public
Acquirer Change of Control" (as defined
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in the Indenture), the Counterparty does
not make an election provided in Section
15.03(d) of the Indenture.
Additional Termination Events: If an event of default with respect to
the Counterparty shall occur under the
terms of the Convertible Notes as set
forth in Section 7.01 of the Indenture
and such event of default results in the
declaration of principal and interest
immediately due and payable pursuant to
the terms of the Indenture, such event
shall constitute an Additional
Termination Event applicable to this
Transaction, with respect to which the
Counterparty shall be deemed to be the
sole Affected Party and this Transaction
shall be the sole Affected Transaction;
provided that, notwithstanding Section
6(b)(iv)(1) of the Agreement, BofA will
be required, if the Counterparty makes
itself promptly available upon request,
to consult with the Counterparty and to
reasonably consider whether it is
advisable to designate an Early
Termination Date pursuant to Section 6(b)
of the Agreement.
Whenever the Counterparty is required to
deliver to the Trustee an officer's
certificate with respect to a default or
an event of default pursuant to Section
5.08 of the Indenture, the Counterparty
shall also be required to deliver a copy
of such certificate to BofA hereunder.
4. Calculation Agent: BofA. Whenever the Calculation Agent is
required to act or to exercise judgment
in any way, it will do so in good faith
and in a commercially reasonable manner
to achieve a commercially reasonable
result.
The Calculation Agent shall, not later
than the third Currency Business Day
following receipt of a written request of
the Counterparty, provide the
Counterparty with a written explanation
of the basis of any determination,
adjustment or calculation made hereunder;
provided that if, after reviewing such
written explanation, the Counterparty
objects to such determination, adjustment
or calculation, then the Counterparty,
BofA and the Calculation Agent shall make
reasonable good faith efforts to agree
upon an appropriate determination,
adjustment or calculation.
5. Account Details:
(a) Account for payments from the Counterparty:
JPMorgan, New York
ABA: 021-000-021
Acct: CHASUS33
Acct No.: 910-1010-693
Account for delivery of Shares to the Counterparty:
DTC 50108 (Computershare)
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Note: the shares cannot be sent electronically. They must be
DWACed.
(b) Account for payments to BofA:
Bank of America, N.A.
San Francisco, CA
SWIFT: BOFAUS65
Bank Routing: 121-000-358
Account Name: Bank of America
Account No.: 12333-34172
Account for delivery of Shares from BofA:
DTC 0733
Acct Name: Bank of America NA
Acct #: 116-0077
6. Offices:
The Office of the Counterparty for the Transaction is: Inapplicable, the
Counterparty is not a Multibranch Party.
The Office of BofA for the Transaction is: New York
Bank of America, N.A.
c/o Banc of America Securities LLC
9 West 57th Street, 40th Floor
New York, NY 10019
7. Notices: For purposes of this Confirmation:
(a) Address for notices or communications to the Counterparty:
Albany International Corp. 1373 Broadway
Albany, New York 12204
Attention: Christopher J. Connally
Telephone No.: (518) 445-2235
Facsimile No.: (518) 447-6305
With a copy to:
Albany International Corp.
1373 Broadway
Albany, New York 12204
Attention: Charles J. Silva, Jr.
Telephone No.: (518) 445-2277
Facsimile No.: (518) 447-6575
(b) Address for notices or communications to BofA:
Bank of America, N.A.
c/o Banc of America Securities LLC
Equity Financial Products
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Attention: Legal Department
9 West 57th
Street, 40th Floor
New York, NY 10019
Facsimile No.: (212) 326-8610
8. Representations and Warranties of the Counterparty
The representations and warranties of the Counterparty set forth in Section 4 of
the Purchase Agreement (the "Purchase Agreement") dated as of the Trade Date
between the Counterparty and J.P. Morgan Securities Inc. and Banc of America
Securities LLC, as Initial Purchasers, are true and correct and are hereby
deemed to be repeated to BofA as if set forth herein. The Counterparty hereby
further represents and warrants to BofA that:
(a) The Counterparty has all necessary corporate power and authority to
execute, deliver and perform its obligations in respect of this
Transaction; such execution, delivery and performance have been duly
authorized by all necessary corporate action on the Counterparty's
part; and this Confirmation has been duly and validly executed and
delivered by the Counterparty and constitutes its valid and binding
obligation, enforceable against the Counterparty in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law
or in equity) and except that rights to indemnification and
contribution hereunder may be limited by federal or state securities
laws or public policy relating thereto.
(b) Neither the execution and delivery of this Confirmation nor the
incurrence or performance of obligations of the Counterparty
hereunder will conflict with or result in a breach of the
certificate of incorporation or by-laws (or any equivalent
documents) of the Counterparty, or any applicable law or regulation,
or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to
which the Counterparty or any of its Significant Subsidiaries is a
party or by which the Counterparty or any of its Significant
Subsidiaries is bound or to which the Counterparty or any of its
Significant Subsidiaries is subject, or constitute a default under,
or result in the creation of any lien under, any such agreement or
instrument, or breach or constitute a default under any agreements
and contracts of the Counterparty and its Significant Subsidiaries
filed as exhibits to the Counterparty's Annual Report on Form 10-K
for the year ended December 31, 2004, incorporated by reference in
the Offering Memorandum.
(c) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required in
connection with the execution, delivery or performance by the
Counterparty of this Confirmation, except such as have been obtained
or made and such as may be required under the Securities Act of
1933, as amended (the "Securities Act") or state securities laws.
(d) The Counterparty is an "eligible contract participant" (as such term
is defined in Section 1a(12) of the Commodity Exchange Act, as
amended (the "CEA") because one or more of the following is true:
The Counterparty is a corporation, partnership, proprietorship,
organization, trust or other entity and:
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(A) the Counterparty has total assets in excess of USD 10,000,000;
(B) the obligations of the Counterparty hereunder are guaranteed,
or otherwise supported by a letter of credit or keepwell,
support or other agreement, by an entity of the type described
in Section 1a(12)(A)(i) through (iv), 1a(12)(A)(v)(I),
1a(12)(A)(vii) or 1a(12)(C) of the CEA; or
(C) the Counterparty has a net worth in excess of USD 1,000,000
and has entered into this Agreement in connection with the
conduct of Counterparty's business or to manage the risk
associated with an asset or liability owned or incurred or
reasonably likely to be owned or incurred by the Counterparty
in the conduct of the Counterparty's business.
(e) The Counterparty is not, on the date hereof, in possession of any
material non-public information with respect to the Counterparty.
9. Other Provisions:
(a) Opinions. The Counterparty shall deliver to BofA an opinion of
counsel, dated as of the Trade Date, substantially in the form set
forth in Exhibit A hereto.
(b) Amendment. If the Initial Purchasers party to the Purchase Agreement
exercise their right to purchase additional Convertible Notes as set
forth therein, then, at the discretion of the Counterparty, BofA and
the Counterparty will amend this Confirmation to provide for such
increase in Convertible Notes (but on pricing terms acceptable to
BofA and the Counterparty) (such amendment to provide for the
payment by the Counterparty to BofA of the additional premium
related thereto).
(c) No Reliance, etc. Each party represents that (i) it is entering into
the Transaction evidenced hereby as principal (and not as agent or
in any other capacity); (ii) neither the other party nor any of its
agents are acting as a fiduciary for it; (iii) it is not relying
upon any representations except those expressly set forth in the
Agreement or this Confirmation; (iv) it has not relied on the other
party for any legal, regulatory, tax, business, investment,
financial, and accounting advice, and it has made its own
investment, hedging, and trading decisions based upon its own
judgment and not upon any view expressed by the other party or any
of its agents; and (v) it is entering into this Transaction with a
full understanding of the terms, conditions and risks thereof and it
is capable of and willing to assume those risks.
(d) Share De-listing Event. If at any time during the period from and
including the Trade Date, to and including the Final Expiration
Date, the Shares cease to be listed or quoted on the Exchange for
any reason (other than a Merger Event as a result of which the
shares of common stock underlying the Options are listed or quoted
on The New York Stock Exchange, The American Stock Exchange or the
NASDAQ National Market (or their respective successors) (the
"Successor Exchange")) and are not immediately re-listed or quoted
as of the date of such de-listing on the Successor Exchange (a
"Share De-listing"), then Cancellation and Payment (as defined in
Section 9.6 of the Equity Definitions, treating the "Announcement
Date" as the date of first public announcement that the Share
De-listing, will occur and the "Merger Date" as the date of the
Share De-listing) shall apply, and the date of the de-listing shall
be deemed the date of termination for purposes of calculating any
payment due from one party to the other in connection with the
cancellation of this Transaction. If the Shares are immediately
re-listed on a
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Successor Exchange upon their de-listing from the Exchange, this
Transaction shall continue in full force and effect, provided that
the Successor Exchange shall be deemed to be the Exchange for all
purposes hereunder; provided that the Calculation Agent may make
appropriate adjustments to the terms of this Transaction to reflect
the effect of such re-listing. For the avoidance of doubt, in no
event will a Share De-listing result in an obligation of the
Counterparty under this Confirmation to make a payment to BofA.
(e) Repurchase Notices. The Counterparty shall, on any day on which the
Counterparty effects any repurchase of Shares, promptly give BofA a
written notice of such repurchase (a "Repurchase Notice") on such
day if following such repurchase, the number of outstanding Shares
on such day, subject to any adjustments provided herein, is (i) less
than 25 million (in the case of the first such notice) or (ii)
thereafter, more than 125,000 less than the number of Shares
included in the immediately preceding Repurchase Notice. The
Counterparty agrees to indemnify and hold harmless BofA and its
affiliates and their respective officers, directors, employees,
affiliates, advisors, agents and controlling persons (each, an
"Indemnified Person") from and against any and all losses (including
losses relating to BofA's reasonable hedging activities as a
consequence of becoming, or of the risk of becoming, a Section 16
"insider", including without limitation, any forbearance from
reasonable hedging activities or cessation of such hedging
activities and any losses in connection therewith with respect to
this Transaction), claims, damages, judgments, liabilities and
expenses (including reasonable attorney's fees), joint or several,
which an Indemnified Person actually may become subject to, as a
result of the Counterparty's failure to provide BofA with a
Repurchase Notice on the day and in the manner specified in this
Section 9(e), and to reimburse, within 30 days, upon written
request, each of such Indemnified Persons for any reasonable legal
or other expenses incurred in connection with investigating,
preparing for, providing testimony or other evidence in connection
with or defending any of the foregoing. If any suit, action,
proceeding (including any governmental or regulatory investigation),
claim or demand shall be brought or asserted against the Indemnified
Person, such Indemnified Person shall promptly notify the
Counterparty in writing, and the Counterparty, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to
the Indemnified Person to represent the Indemnified Person and any
others the Counterparty may designate in such proceeding and shall
pay the fees and expenses of such counsel related to such
proceeding. The Counterparty shall not be liable for any settlement
of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the
plaintiff, the Counterparty agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such
settlement or judgment. The Counterparty shall not, without the
prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of
which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement includes an unconditional release of
such Indemnified Person from all liability on claims that are the
subject matter of such proceeding on terms reasonably satisfactory
to such Indemnified Person. If the indemnification provided for in
this paragraph (e) is unavailable to an Indemnified Person or
insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then the Counterparty under such
paragraph, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages or
liabilities. The remedies provided for in this paragraph (e) are not
exclusive and shall not limit any rights or remedies which may
otherwise be available to any Indemnified Person at law or in
equity. The indemnity and contribution agreements contained in this
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paragraph (e) shall remain operative and in full force and effect
regardless of the termination of this Transaction.
(f) Regulation M. The Counterparty was not on the Trade Date and is not
on the date hereof engaged in a distribution, as such term is used
in Regulation M under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of any securities of the Counterparty,
other than a distribution meeting the requirements of the exception
set forth in Rules 101(b)(10) and 102(b)(7) of Regulation M. The
Counterparty shall not, until the second Exchange Business Day
immediately following the Trade Date, engage in any such
distribution.
(g) No Manipulation. The Counterparty is not entering into this
Transaction to create actual or apparent trading activity in the
Shares (or any security convertible into or exchangeable for the
Shares) or to raise or depress or otherwise manipulate the price of
the Shares (or any security convertible into or exchangeable for the
Shares).
(h) Number of Repurchased Shares. The Counterparty represents that it
could have purchased Shares, in an amount equal to the product of
the Number of Options and the Option Entitlement, on the Exchange or
otherwise, in compliance with applicable law, its organizational
documents and any orders, decrees, contractual agreements binding
upon the Counterparty, on the Trade Date.
(i) Board Authorization. Each of this Transaction and the issuance of
the Convertible Notes was approved by its board of directors and
publicly announced, solely for the purposes stated in such board
resolution and public disclosure and the Counterparty's board of
directors has duly authorized any repurchase of Shares pursuant to
this Transaction. The Counterparty further represents that there is
no internal policy, whether written or oral, of the Counterparty
that would prohibit the Counterparty from entering into any aspect
of this Transaction, including, but not limited to, the purchases of
Shares to be made pursuant hereto.
(j) Transfer or Assignment. (i) The Counterparty shall have the right to
assign its rights and obligations hereunder with respect to any
Options hereunder (such Options, the "Transfer Options"), subject to
BofA's consent, such consent not to be unreasonably withheld or
delayed; provided that such assignment or transfer shall be effected
on terms satisfactory to BofA and shall be subject, but not limited,
to the following conditions:
(A) With respect to any Transfer Options, the Counterparty
shall not be released from its notice and indemnification
obligations pursuant to Section 9(c) or any obligations under
Section 9(s) of this Confirmation;
(B) Any Transfer Options shall only be transferred or assigned
to a third party reasonably acceptable to BofA and on terms,
including any reasonable undertakings by such third party and
execution of any documentation and delivery of legal opinions
with respect to securities laws and other matters by such
third party and the Counterparty, as are requested and
reasonably satisfactory to BofA; and
(C) The Counterparty shall be responsible for all reasonable
costs and expenses, including reasonable counsel fees,
incurred by BofA in connection with such transfer or
assignment.
(ii) BofA may not transfer or assign all or any portion of its
rights or obligations under this Transaction without consent of the
Counterparty; provided, however, that if BofA, in its reasonable
discretion, determines that, (x) its "beneficial ownership" (within
the
12
meaning of Section 16 of the Exchange Act and rules promulgated
thereunder) exceeds 8% or more of the Counterparty's outstanding
Shares or (y) the product of the Number of Options and the Option
Entitlement divided by the total number of the Counterparty's
outstanding Shares (the "Options Equity Percentage") exceeds 15%,
then:
(A) BofA may transfer or assign a number of Options sufficient
to reduce such "beneficial ownership" to 7.5% or such Options
Equity Percentage to 14.5% to any third party with a rating
for its long term, unsecured and unsubordinated indebtedness
of A- or better by Standard & Poor's Ratings Service or its
successor ("S&P"), or A3 or better by Moody's Investors
Service ("Moody's") or, if either S&P or Moody's ceases to
rate such debt, at least an equivalent rating or better by a
substitute rating agency mutually agreed by the Counterparty
and BofA; and
(B) If such "beneficial ownership" exceeds 8% or such Options
Equity Percentage exceeds 15%,
(1) at a time when the number of Counterparty's
outstanding Shares, subject to any adjustments provided
herein, is less than 22 million;
(2) as a result of any breach by the Counterparty of its
notice obligations under Section 9(e); or
(3) and if, in the good faith reasonable judgment of
BofA, based upon advice of counsel and as a result of
events occurring after the Trade Date, BofA reasonably
determines that it would be inadvisable to engage in any
alternative hedging transactions, which would enable it
to reduce its "beneficial" ownership or its Options
Equity Percentage, other than by transfer, assignment or
termination, and in either case BofA reasonably
determines that it is unable after its commercially
reasonable efforts to effect transfer or assignment on
pricing terms and in a time period reasonably acceptable
to BofA that would reduce its "beneficial ownership" to
7.5% or such Options Equity Percentage to 14.5%;
BofA may designate any Exchange Business Day as an Early
Termination Date with respect to a portion (the "Terminated
Portion") of this Transaction, such that its "beneficial
ownership" following such partial termination would be
approximately equal to 7.5% or the Options Equity Percentage
approximately equal to 14.5%, as applicable. If BofA so
designates an Early Termination Date with respect to a portion
of this Transaction, a payment shall be made pursuant to
Section 6 of the Agreement as if an Early Termination Date had
occurred in respect of a Transaction having terms identical to
this Transaction except with a Number of Options equal to the
Terminated Portion, with respect to which the Counterparty
shall be the sole Affected Party and such Transaction shall be
the only Affected Transaction.
(iii) Notwithstanding any other provision in this Confirmation to
the contrary requiring or allowing BofA to purchase, sell, receive
or deliver any Shares or other securities to or from the
Counterparty, BofA may designate any of its affiliates to purchase,
sell, receive or deliver such shares or other securities and
otherwise to perform BofA's obligations in respect of this
Transaction and any such designee may assume such obligations. BofA
shall be discharged of its obligations to the Counterparty only to
the extent of any such performance.
13
(k) Modified Settlement. If, upon advice of counsel, BofA reasonably
determines, with respect to applicable legal and regulatory
requirements, including any requirements relating to BofA's hedging
activities hereunder, or due to a lack of sufficient liquidity in
the borrow market for the Shares, that it would not be practicable
or advisable to deliver, or to acquire to deliver, any or all of the
Shares to be delivered by BofA on the Settlement Date for this
Transaction, BofA may, by notice to the Counterparty on or prior to
any anticipated Settlement Date (a "Nominal Settlement Date"), elect
to deliver the Shares on a different date or two or more dates,
whether immediately preceding or following such Settlement Date
(each, a "Staggered Settlement Date"), as follows:
(i) in such notice, BofA will specify to the Counterparty the
related Staggered Settlement Date or Dates (the last of which
may be no later than the twenty-fifth (25th) Scheduled Trading
Day following the Nominal Settlement Date) and the number of
Shares that it will deliver on each Staggered Settlement Date;
and
(ii) the aggregate number of Shares that BofA will deliver to the
Counterparty hereunder on all such Staggered Settlement Dates
will equal the number of Shares that BofA would otherwise be
required to deliver on such Nominal Settlement Date.
BofA shall effect such delivery as promptly as is practicable and
shall compensate the Counterparty for any delayed delivery by
paying, in addition to delivering any Shares hereunder, an amount,
as determined by the Calculation Agent, equal to the sum for each
day of such delay of the product of (i) the Federal Funds Rate
divided by 360 and (ii) the value of the Shares not delivered as of
such day; provided that if BofA fails to deliver any Shares
hereunder by the twenty-fifth (25th) Scheduled Trading Day
immediately following the Nominal Settlement Date, such event shall
constitute an Additional Termination Event with respect to the
portion of this Transaction corresponding to the number of Shares
not delivered by BofA by such date, with respect to which BofA shall
be the sole Affected Party and this Transaction the sole Affected
Transaction.
"Federal Funds Rate" means, for any day, the rate set forth for such
day opposite the caption "Federal funds", as such rate is displayed
on the page FedsOpen [Index][GO] on the Bloomberg Professional
Service or any successor page; provided that if no rate appears for
any day on such page, the rate for the immediately preceding day for
which a rate does so appear shall be used for such day.
(l) Damages. Neither party shall be liable under Section 6.10 of the
Equity Definitions for special, indirect or consequential damages,
even if informed of the possibility thereof.
(m) Early Unwind. In the event the sale of Convertible Notes is not
consummated with the initial purchasers for any reason by the close
of business in New York on March 13, 2006 (or such later date as
agreed upon by the parties) (March 13, 2006 or such later date as
agreed upon, being the "Early Unwind Date"), this Transaction shall
automatically terminate (the "Early Unwind"), on the Early Unwind
Date and (i) the Transaction and all of the respective rights and
obligations of BofA and the Counterparty under the Transaction shall
be cancelled and terminated and (ii) each party shall be released
and discharged by the other party from and agrees not to make any
claim against the other party with respect to any obligations or
liabilities of the other party arising out of and to be performed in
connection with the Transaction either prior to or after the Early
Unwind Date; provided that, if the failure to consummate the sale of
the Convertible Notes results from a breach by the Counterparty of
any representation of or any undertaking by the Counterparty
contained in the Purchase Agreement, the Counterparty shall purchase
from
14
BofA on the Early Unwind Date any Shares purchased by BofA or one or
more of its affiliates in connection with this Transaction and
reimburse BofA for any costs or expenses (including market losses)
relating to the unwinding of its reasonable hedging activities in
connection with the Transaction (including any losses or costs
incurred as a result of its terminating, liquidating, obtaining or
reestablishing any reasonable hedge or related trading position).
The amount of any such reimbursement shall be determined by BofA in
its reasonable good faith discretion. BofA shall notify the
Counterparty of such amount, including, upon the Counterparty's
request, an explanation of the basis of determination of such
amount, and the Counterparty shall pay such amount in immediately
available funds on the Early Unwind Date. BofA and the Counterparty
represent and acknowledge to the other that, subject to the proviso
included in this Section, upon an Early Unwind, all obligations with
respect to the Transaction shall be deemed fully and finally
discharged.
(n) Role of Agent. Each party agrees and acknowledges that (i) Banc of
America Securities LLC ("BASL"), has acted solely as agent and not
as principal with respect to this Transaction and (ii) BASL has no
obligation or liability, by way of guaranty, endorsement or
otherwise, in any manner in respect of this Transaction (including,
if applicable, in respect of the settlement thereof). Each party
agrees it will look solely to the other party (or any guarantor in
respect thereof) for performance of such other party's obligations
under this Transaction.
(o) Additional Provisions.
(i) Notwithstanding Section 9.7 of the Equity Definitions,
everything in the first paragraph of Section 9.7(b) of the Equity
Definitions after the words "Calculation Agent" in the third line
through the remainder of such Section 9.7 shall be deleted and
replaced with the following:
"based on an amount representing the Calculation Agent's
determination of the fair value to Buyer of an option with terms
that would preserve for Buyer the economic equivalent of any payment
or delivery (assuming satisfaction of each applicable condition
precedent, including, for the avoidance of doubt, the occurrence of
a Conversion Date with respect to each Option) by the parties in
respect of the relevant Transaction that would have been required
after that date but for the occurrence of the Share De-listing."
(ii) Notwithstanding anything to the contrary in the Agreement, this
Confirmation or the Equity Definitions, (A) in determining any
amount payable in respect of an Early Termination Date or a
Cancellation and Payment, the value of this Transaction shall be
determined as if all Options outstanding at such time would become
Exercisable Options during the Final Exercise Period and, (B) in no
event shall the calculation of the amount under Section 6 of the
Agreement in respect of an Additional Termination Event result in
any amount being payable by the Counterparty.
(p) Alternative Calculations and Payment on Early Termination and on
Certain Extraordinary Events. If, in respect of this Transaction, an
amount is payable by BofA to the Counterparty (i) pursuant to
Section 9.7 of the Equity Definitions or this Confirmation (except
in the event of a Merger Event in which the consideration to be paid
to holders of Shares consists solely of cash) or (ii) pursuant to
Section 6(d)(ii) of the Agreement (except in the event of an Event
of Default in which the Counterparty is the Defaulting Party or a
Termination Event in which the Counterparty is the Affected Party,
other than an Event of Default of the type described in Section
5(a)(iii), (v), (vi), (vii) or
15
(viii) of the Agreement or in this Confirmation or a Termination
Event of the type described in Section 5(b)(i), (ii), (iii), (iv),
(v) or (vi) of the Agreement or in this Confirmation, in each case
resulting from an event or events outside the Counterparty's
control) (a "Payment Obligation"), the Counterparty may, in its sole
-- discretion, request that BofA satisfy such Payment Obligation by
the Share Termination Alternative (as defined below) and shall give
irrevocable telephonic notice to BofA, confirmed in writing within
one Currency Business Day, no later than 12:00 p.m. New York City
time on the Merger Date, the date of the Share De-listing or the
Early Termination Date, as applicable; provided that if the
Counterparty does not validly request that BofA satisfy its Payment
Obligation by the Share Termination Alternative, BofA shall have the
right, in its sole discretion, to satisfy its Payment Obligation by
the Share Termination Alternative, notwithstanding Counterparty's
lack of election or election to the contrary. In calculating any
amounts under Section 6(e) of the Agreement, notwithstanding
anything to the contrary in the Agreement, (1) separate amounts
shall be calculated as set forth in Section 6(e) with respect to (a)
this Transaction and (b) all other Transactions, and (2) such
separate amounts shall be payable pursuant to Section 6(d)(ii) of
the Agreement, subject to, in the case of clause (1)(a), the Share
Termination Alternative right hereunder.
Share Termination Alternative: If applicable, BofA shall
deliver to the Counterparty the
Share Termination Delivery
Property on the date when the
Payment Obligation would
otherwise be due pursuant to
Section 9.7 of the Equity
Definitions, this Confirmation
or Section 6(d)(ii) and 6(e) of
the Agreement, as applicable
(the "Share Termination Payment
Date"), in satisfaction of the
Payment Obligation in the manner
reasonably requested by the
Counterparty free of payment.
Share Termination A number of Share Termination
Delivery Property: Delivery Units, as calculated by
the Calculation Agent, equal to
the Payment Obligation divided
by the Share Termination Unit
Price. The Calculation Agent
shall adjust the Share
Termination Delivery Property by
replacing any fractional portion
of a security therein with an
amount of cash equal to the
value of such fractional
security based on the values
used to calculate the Share
Termination Unit Price.
Share Termination Unit Price: The value to BofA of property
contained in one Share
Termination Delivery Unit on the
date such Share Termination
Delivery Units are to be
delivered as Share Termination
Delivery Property, as determined
by the Calculation Agent in its
discretion by commercially
reasonable means and notified
16
by the Calculation Agent to BofA
at the time of notification of
the Payment Obligation.
Share Termination Delivery Unit: One Share or, if a Merger Event
has occurred and a corresponding
adjustment to this Transaction
has been made, a unit consisting
of the number or amount of each
type of property received by a
holder of one Share (without
consideration of any requirement
to pay cash or other
consideration in lieu of
fractional amounts of any
securities) in such Merger
Event, as determined by the
Calculation Agent.
Failure to Deliver: Applicable
Other applicable provisions: If the Share Termination
Alternative is applicable, the
provisions of Sections 6.6, 6.7,
6.8, 6.9 and 6.10 (as modified
above) of the Equity Definitions
will be applicable, except that
all references in such
provisions to
"Physically-Settled" shall be
read as references to "Share
Termination Settled" and all
references to "Shares" shall be
read as references to "Share
Termination Delivery Units".
"Share Termination Settled" in
relation to this Transaction
means that the Share Termination
Alternative is applicable to
this Transaction.
(q) Governing Law. New York law (without reference to choice of law
doctrine).
(r) Waiver of Jury Trial. 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
Transaction. 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 Transaction, as applicable, by, among other things,
the mutual waivers and certifications provided herein.
(s) Registration. The Counterparty hereby agrees that if, in the good
faith reasonable judgment of BofA, based upon the advice of counsel,
the Shares ("Hedge Shares") acquired by BofA for the purpose of
hedging its obligations pursuant to this Transaction cannot be sold
in the U.S. public market by BofA without registration under the
Securities Act, the Counterparty shall, at its election, either (i)
in order to allow BofA to sell the Hedge Shares in a registered
offering, make available to BofA an effective registration statement
under the Securities Act to cover the resale of such Hedge Shares
and enter into an agreement, in form and substance reasonably
satisfactory to BofA, substantially in the form of an underwriting
agreement for a registered offering; provided, however, that if
BofA, in its reasonable discretion, is not satisfied with access to
due diligence materials, the results of its due diligence
investigation, or the procedures and
17
documentation for the registered offering referred to above, then
clause (ii) or clause (iii) of this Section 9(s) shall apply at the
election of the Counterparty, (ii) in order to allow BofA to sell
the Hedge Shares in a private placement, enter into a private
placement agreement substantially similar to private placement
purchase agreements customary for private placements of equity
securities, in form and substance reasonably satisfactory to BofA
(in which case, the Calculation Agent shall make any adjustments to
the terms of this Transaction that are necessary, in its reasonable
judgment, to compensate BofA for any discount from the public market
price of the Shares incurred on the sale of Hedge Shares in a
private placement), or (iii) purchase the Hedge Shares from BofA at
the Last Reported Sale Price on such Exchange Business Days, and in
the amounts, requested by BofA.
(t) Tax Advice. BofA and its affiliates do not provide tax advice.
Accordingly, any statements contained herein as to tax matters were
neither written nor intended by BofA to be used and cannot be used
by any taxpayer for the purpose of avoiding tax penalties that may
be imposed on such taxpayer. If any person uses or refers to any
such tax statement in promoting, marketing or recommending a
partnership or other entity, investment plan or arrangement to any
taxpayer, then the statement expressed above is being delivered to
support the promotion or marketing of the transaction or matter
addressed and the recipient should seek advice based on its
particular circumstances from an independent tax advisor.
Notwithstanding anything herein to the contrary, the sender and any
intended recipient of this communication (and any of its employees,
representatives and other agents) may disclose to any and all
persons, without limitation of any kind, the tax treatment or tax
structure of this transaction.
(u) No Setoff. Notwithstanding any provision of the Agreement or any
other agreement between the parties to the contrary, obligations
under this Transaction shall not be set off by BofA (including, for
the avoidance of doubt, pursuant to Section 6(f) of the Agreement)
against any other obligations of the parties, whether arising under
the Agreement, this Confirmation, under any other agreement between
the parties hereto, by operation of law or otherwise.
18
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning it in the manner
indicated in the attached cover letter.
Very truly yours,
Bank of America, N.A.
By: /s/ Eric P. Hambleton
-----------------------
Authorized Signatory
Name: Eric P. Hambleton
Accepted and confirmed
as of the Trade Date:
ALBANY INTERNATIONAL CORP.
By: /s/ David C. Michaels
-----------------------
Authorized Signatory
Name: David C. Michaels
19
Annex A
Form of Legal Opinion
20
JPMorgan [LOGO]
JPMorgan Chase Bank, N. A.
P.O. Box 161
60 Victoria Embankment
London EC4Y 0JP
England
March 7, 2006
To: Albany International Corp.
1373 Broadway
Albany, New York 12204
Attention: Christopher J. Connally, Corporate Treasurer
Telephone No.: (518) 445-2235
Facsimile No.: (518) 447-6305
Re: Call Option Transaction
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between JPMorgan Chase Bank, National
Association, London Branch ("JPMorgan"), and Albany International Corp., a
Delaware corporation (the "Counterparty"), on the Trade Date specified below
(the "Transaction"). This letter agreement constitutes a "Confirmation" as
referred to in the ISDA Master Agreement specified below. This Confirmation
shall replace any previous agreements and serve as the final documentation for
this Transaction.
The definitions and provisions contained in the 1996 ISDA Equity
Derivatives Definitions (the "Equity Definitions"), as published by the
International Swaps and Derivatives Association, Inc., are incorporated into
this Confirmation. In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation shall govern. Certain
defined terms used herein have the meanings assigned to them in the Offering
Memorandum dated March 7, 2006 (the "Offering Memorandum") relating to the USD
150,000,000 principal amount of 2.25% Convertible Senior Notes due 2026, (the
"Convertible Notes" and each USD 1,000 principal amount of Convertible Notes, a
"Convertible Note") issued by the Counterparty pursuant to an Indenture to be
dated on or about March 13, 2006 between the Counterparty and JPMorgan Chase
Bank, N.A., as trustee (the "Indenture"). In the event of any inconsistency
between the terms defined in the Offering Memorandum and this Confirmation, this
Confirmation shall govern.
Each party is hereby advised, and each such party acknowledges, that the
other party has engaged in, or refrained from engaging in, substantial financial
transactions and has taken other material actions in reliance upon the parties'
entry into the Transaction to which this Confirmation relates on the terms and
conditions set forth below.
1. This Confirmation evidences a complete and binding agreement between JPMorgan
and the Counterparty 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 JPMorgan and the Counterparty had executed an agreement in
such form (but without any Schedule except for the election of the laws of the
State of New York as the governing law) on the Trade Date. 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.
JPMorgan Chase Bank, National Association
Organised under the laws of the United States as a National Banking Association
Main Office 1111 Polaris Parkway, Columbus, Ohio 43271
Registered as a branch in England & Wales branch No. BR000746
Registered Branch Office 125 London Wall, London EC2Y 5AJ
Authorised and regulated by the Financial Services Authority
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
General Terms:
Trade Date: March 7, 2006
Option Style: "Modified American", as described under
"Exercise and Valuation" below
Option Type: Call
Buyer: Counterparty
Seller: JPMorgan
Shares: The Class A common stock of the
Counterparty, par value USD 0.001 per
Share (Exchange symbol "AIN")
Number of Options: 90,000
Option Entitlement: As of any date, a number equal to the
Conversion Rate as of such date (as
defined in the Indenture, but without
regard to any adjustments to the
Conversion Rate pursuant to Section
15.04(i), Section 15.03(a) or Section
15.03(d) of the Indenture), for each
Convertible Note.
Strike Price: USD 44.52
Premium: USD 23,909,312.47
Premium Payment Date: March 13, 2006
Exchange: The New York Stock Exchange
Related Exchange(s): None
Exercise and Valuation:
Exercise Period(s): Notwithstanding the Equity Definitions,
in respect of Exercisable Options
relating to Convertible Notes with a
particular Conversion Date (each as
defined below), the Exercise Period shall
be the period commencing on and including
the Conversion Date for the Convertible
Notes corresponding to such Exercisable
Options and ending at 7:30 a.m. New York
City time on the first day of the
relevant Cash Settlement Averaging
Period; provided that if the Counterparty
has validly designated March 15, 2013 as
a redemption date for the Convertible
Notes pursuant to the terms of the
Indenture, there shall be a single
Exercise Period for Exercisable Options
relating to the Convertible Notes with a
Conversion Date following the day on
which the Counterparty gives notice of
such redemption and that Exercise Period
shall terminate at 7:30 a.m. New York
City time on the redemption date;
provided further that if the Counterparty
has not validly designated March 15, 2013
as
2
a redemption date for the Convertible
Notes pursuant to the terms of the
Indenture, Conversion Dates occurring
after the date that is twenty-seven (27)
Scheduled Trading Days prior to March 15,
2013 shall not result in the commencement
of an Exercise Period and no Exercisable
Options will be exercised or deemed
exercised in respect thereof.
"Scheduled Trading Day" means any day on
which the Exchange is scheduled to be
open for trading for its regular trading
session.
Exercisable Options: In respect of any date on which a holder
of Convertible Notes properly surrenders,
or is deemed to surrender, to the
Counterparty a Convertible Note for
conversion (a "Conversion Date"), a
number of Options equal to 60% of the
number of Convertible Notes properly
surrendered, or deemed surrendered, for
conversion on such Conversion Date
(which, for the avoidance of doubt, may
be rounded up or down by the Company to
account for any conversions which may
result in fractional Exercisable Options
and may not exceed the Number of
Options).
Expiration Date: For any Exercisable Option, the earlier
of (i) the final day of the Exercise
Period for such Exercisable Option, and
(ii) the Final Expiration Date.
Final Expiration Date: March 15, 2013
Multiple Exercise: Applicable, as described under
Exercisable Options above.
Automatic Exercise: Applicable, subject to the provisions of
"Notice of Exercise" below.
Notice of Exercise: Notwithstanding anything to the contrary
in the Equity Definitions, in order to
exercise any Exercisable Option, the
Counterparty must notify JPMorgan, which
notification shall be irrevocable after
7:30 a.m. New York City time on the first
day of the relevant Cash Settlement
Averaging Period and shall not be subject
to subsequent amendments, in writing or
orally (and, if such Notice of Exercise
is delivered by the Counterparty after
the close of business in New York City on
the Scheduled Trading Day immediately
preceding the Expiration Date, via e-mail
to the address specified by JPMorgan and
delivered to the Counterparty by the
Premium Payment Date), by 7:30 a.m. New
York City time on the first day of the
relevant Cash Settlement Averaging Period
for such Exercisable Option of (i) the
number of Convertible Notes properly
submitted for conversion on the relevant
Conversion Date and the number of
Exercisable Options corresponding to such
Convertible Notes, (ii) the first day of
the applicable Cash Settlement Averaging
Period and (iii) the scheduled Settlement
Date; provided that if the
3
Counterparty has validly designated March
15, 2013 as a redemption date for the
Convertible Notes pursuant to the terms
of the Indenture, such notice may be
given on or prior to the Expiration Date
for such Exercisable Options and need
only specify the number of Convertible
Notes submitted for conversion during the
final Exercise Period and the number of
Exercisable Options corresponding to such
Convertible Notes.
Exchange Business Day: Section 1.20 of the Equity Definitions is
hereby replaced in its entirety by the
following:
"'Exchange Business Day' means a day
during which (i) trading in the Shares
generally occurs and (ii) there is no
Market Disruption Event and (iii) the
Last Reported Sale Price (as defined in
the Indenture) for the Shares is
available for such day."
Market Disruption Event: Section 4.3(a) of the Equity Definitions
is hereby replaced in its entirety by the
following:
"'Market Disruption Event' means, in
respect of the Shares, (i) a failure by
the Exchange to open for trading during
its regular trading session or (ii) the
occurrence or existence prior to 1:00
p.m. New York City time on any Exchange
Business Day for the Shares for an
aggregate one half-hour period of any
suspension or limitation imposed on
trading (by reason of movements in price
exceeding limits permitted by the
Exchange or otherwise) in the Shares or
in any options, contracts or future
contracts relating to the Shares."
Settlement Terms:
Settlement Method: Net Share Settlement
Net Share Settlement: For each Exercisable Option that is
exercised or deemed exercised, JPMorgan
will deliver to the Counterparty, on the
related Settlement Date, a number of
Shares equal to the Net Shares in respect
of such Exercisable Option. In no event
will the Net Shares be less than zero.
Net Shares: In respect of each Exercisable Option
exercised or deemed exercised, a number
of Shares equal to (i) the Option
Entitlement multiplied by (ii) the sum,
for each Exchange Business Day during the
relevant Cash Settlement Averaging
Period, of (A) the Relevant Price on such
Exchange Business Day, less the Strike
Price, divided by (B) the Relevant Price
on such Exchange Business Day, divided by
(iii) twenty-five (25); provided,
however, that if the calculation
contained in clause (A) above results in
a negative number, such number shall be
replaced with the number "zero".
JPMorgan will deliver cash in lieu of any
fractional Share with respect to any Net
Shares to be delivered
4
with respect to all Exercisable Options
having the same Settlement Date based on
the Last Reported Sale Price (as defined
in the Indenture) for the Shares on the
final Exchange Business Day of the
relevant Cash Settlement Averaging
Period.
Relevant Price: For each Exchange Business Day during a
Cash Settlement Averaging Period, the per
Share volume-weighted average price for
such day as displayed under the heading
"Bloomberg VWAP" on Bloomberg page AIN
{equity} AQR (or any successor thereto)
in respect of the period from 9:30 a.m.
to 4:00 p.m. (New York City time) on such
Exchange Business Day (or if such
volume-weighted average price is
unavailable, the market value of one
Share on such Exchange Business Day, as
determined by the Calculation Agent,
using a volume-weighted method).
Cash Settlement For each Exercisable Option, the
Averaging Period: twenty-five (25) consecutive Exchange
Business Days commencing on and including
the second Exchange Business Day
following the Conversion Date for the
Convertible Note relating to such
Exercisable Option; provided that if the
Counterparty has validly designated March
15, 2013 as a redemption date for the
Convertible Notes pursuant to the terms
of the Indenture, the Cash Settlement
Averaging Period for any Exercisable
Options relating to the Convertible Notes
with a Conversion Date following the date
on which the Counterparty gives notice of
such redemption, the twenty-five (25)
consecutive Exchange Business Days
commencing on and including the
twenty-eighth (28th) Scheduled Trading
Day preceding such redemption date.
Settlement Date: For each Exercisable Option, the
settlement date for Shares to be
delivered with respect to the related
Convertible Notes under the terms of the
Indenture.
Other Applicable Provisions: The provisions of Sections 6.6, 6.7, 6.8,
6.9 and 6.10 of the Equity Definitions
will be applicable, except that all
references in such provisions to
"Physically-Settled" shall be read as
references to "Net Share Settled". "Net
Share Settled" in relation to any Option
means that Net Share Settlement is
applicable to that Option.
Failure to Deliver: Applicable
3. Additional Terms applicable to the Transaction:
Adjustments applicable to
the Transaction:
Potential Adjustment Events: Notwithstanding Section 9.1(e) of the
Equity Definitions, a "Potential
Adjustment Event" means any occurrence of
any event or condition, as set forth in
Section 15.04 of the Indenture resulting
in an adjustment to the Conversion
5
Rate of the Convertible Notes, excluding
adjustments or conditions that result
from an adjustment to the Conversion Rate
pursuant to Section 15.04(i) or Section
15.03(a) of the Indenture.
Method of Adjustment: Calculation Agent Adjustment, and means
that, notwithstanding Section 9.1(c) of
the Equity Definitions, upon any
adjustment to the Conversion Rate of the
Convertible Notes pursuant to the
Indenture (other than Section 15.04(i)
and Section 15.03(a) of the Indenture)
and an equivalent adjustment to the
Option Entitlement hereunder, the
Calculation Agent, in order to reflect
the effect of the event or condition
relating to such adjustment on this
Transaction, will make a corresponding
adjustment to any one or more of the
Strike Price, Number of Options and any
other variable relevant to the exercise,
settlement or payment for the
Transaction.
Extraordinary Events applicable to the Transaction:
Merger Events: Notwithstanding Section 9.2(a) of the
Equity Definitions, a "Merger Event"
means the occurrence of any event or
condition set forth in Section 15.06 of
the Indenture.
Consequence of Merger Events: Notwithstanding Section 9.3 of the Equity
Definitions, upon the occurrence of a
Merger Event, the Calculation Agent shall
make a corresponding adjustment in
respect of any adjustment under the
Indenture to any one or more of the
nature of the Shares, Strike Price,
Number of Options, Option Entitlement and
any other variable relevant to the
exercise, settlement or payment for the
Transaction; provided, however, that such
adjustment (i) shall be made without
regard to any adjustment to the
Conversion Rate for the issuance of
additional shares as set forth in Section
15.03(a) of the Indenture, and (ii) shall
assume that, in the case of a "Public
Acquirer Change of Control" (as defined
in the Indenture), the Counterparty does
not make an election provided in Section
15.03(d) of the Indenture.
Additional Termination Events: If an event of default with respect to
the Counterparty shall occur under the
terms of the Convertible Notes as set
forth in Section 7.01 of the Indenture
and such event of default results in the
declaration of principal and interest
immediately due and payable pursuant to
the terms of the Indenture, such event
shall constitute an Additional
Termination Event applicable to this
Transaction, with respect to which the
Counterparty shall be deemed to be the
sole Affected Party and this Transaction
shall be the sole Affected Transaction;
provided that, notwithstanding Section
6(b)(iv)(1) of the Agreement, JPMorgan
will be required, if the Counterparty
makes itself promptly available upon
request, to consult with the Counterparty
and to reasonably consider whether it is
advisable to designate an Early
Termination Date pursuant to Section 6(b)
of the Agreement.
Whenever the Counterparty is required to
deliver to the Trustee an officer's
certificate with respect to a default or
an event of default pursuant to Section
5.08 of the Indenture, the Counterparty
shall also be required to deliver a copy
of such certificate to JPMorgan
hereunder.
6
4. Calculation Agent: JPMorgan. Whenever the Calculation Agent
is required to act or to exercise
judgment in any way, it will do so in
good faith and in a commercially
reasonable manner to achieve a
commercially reasonable result.
The Calculation Agent shall, not later
than the third Currency Business Day
following receipt of a written request of
the Counterparty, provide the
Counterparty with a written explanation
of the basis of any determination,
adjustment or calculation made hereunder;
provided that if, after reviewing such
written explanation, the Counterparty
objects to such determination, adjustment
or calculation, then the Counterparty,
JPMorgan and the Calculation Agent shall
make reasonable good faith efforts to
agree upon an appropriate determination,
adjustment or calculation.
5. Account Details:
(a) Account for payments from the Counterparty:
JPMorgan, New York
ABA: 021-000-021
Acct: CHASUS33
Acct No.: 910-1010-693
Account for delivery of Shares to the Counterparty:
DTC 50108 (Computershare)
Note: the shares cannot be sent electronically. They must be DWACed.
(b) Account for payments to JPMorgan:
JPMorgan Chase Bank, N.A., New York
ABA: 021 000 021
Favour: JPMorgan Chase Bank, N.A. - London
A/C: 0010962009 CHASUS33
Account for delivery of Shares from JPMorgan:
DTC 060
6. Offices:
The Office of the Counterparty for the Transaction is: Inapplicable, the
Counterparty is not a Multibranch Party.
The Office of JPMorgan for the Transaction is: New York
JPMorgan Chase Bank, N.A.
London Branch
P.O. Box 161
60 Victoria Embankment
London EC4Y 0JP
England
7
7. Notices: For purposes of this Confirmation:
(a) Address for notices or communications to the Counterparty:
Albany International Corp. 1373 Broadway
Albany, New York 12204
Attention: Christopher J. Connally
Telephone No.: (518) 445-2235
Facsimile No.: (518) 447-6305
With a copy to:
Albany International Corp.
1373 Broadway
Albany, New York 12204
Attention: Charles J. Silva, Jr.
Telephone No.: (518) 445-2277
Facsimile No.: (518) 447-6575
(b) Address for notices or communications to JPMorgan:
JPMorgan Chase Bank, National Association
277 Park Avenue, 11th Floor
New York, NY 10172
Attention: Nathan Lulek
EDG Corporate Marketing
Telephone No.: (212) 622-2262
Facsimile No.: (212) 622-8091
8. Representations and Warranties of the Counterparty
The representations and warranties of the Counterparty set forth in Section 4 of
the Purchase Agreement (the "Purchase Agreement") dated as of the Trade Date
between the Counterparty and J.P. Morgan Securities Inc. and Banc of America
Securities LLC, as Initial Purchasers, are true and correct and are hereby
deemed to be repeated to JPMorgan as if set forth herein. The Counterparty
hereby further represents and warrants to JPMorgan that:
(a) The Counterparty has all necessary corporate power and authority to
execute, deliver and perform its obligations in respect of this
Transaction; such execution, delivery and performance have been duly
authorized by all necessary corporate action on the Counterparty's
part; and this Confirmation has been duly and validly executed and
delivered by the Counterparty and constitutes its valid and binding
obligation, enforceable against the Counterparty in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law
or in equity) and except that rights to indemnification and
contribution hereunder may be limited by federal or state securities
laws or public policy relating thereto.
(b) Neither the execution and delivery of this Confirmation nor the
incurrence or performance of obligations of the Counterparty
hereunder will conflict with or result in a breach of the
certificate of incorporation or by-laws (or any equivalent
documents) of the Counterparty, or any applicable law or regulation,
or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to
which the Counterparty or any of its Significant Subsidiaries is a
party or by which the Counterparty or any of its Significant
Subsidiaries is bound or to which the Counterparty
8
or any of its Significant Subsidiaries is subject, or constitute a
default under, or result in the creation of any lien under, any such
agreement or instrument, or breach or constitute a default under any
agreements and contracts of the Counterparty and its Significant
Subsidiaries filed as exhibits to the Counterparty's Annual Report
on Form 10-K for the year ended December 31, 2004, incorporated by
reference in the Offering Memorandum.
(c) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required in
connection with the execution, delivery or performance by the
Counterparty of this Confirmation, except such as have been obtained
or made and such as may be required under the Securities Act of
1933, as amended (the "Securities Act") or state securities laws.
(d) The Counterparty is an "eligible contract participant" (as such term
is defined in Section 1a(12) of the Commodity Exchange Act, as
amended (the "CEA") because one or more of the following is true:
The Counterparty is a corporation, partnership, proprietorship,
organization, trust or other entity and:
(A) the Counterparty has total assets in excess of USD 10,000,000;
(B) the obligations of the Counterparty hereunder are guaranteed,
or otherwise supported by a letter of credit or keepwell,
support or other agreement, by an entity of the type described
in Section 1a(12)(A)(i) through (iv), 1a(12)(A)(v)(I),
1a(12)(A)(vii) or 1a(12)(C) of the CEA; or
(C) the Counterparty has a net worth in excess of USD 1,000,000
and has entered into this Agreement in connection with the
conduct of Counterparty's business or to manage the risk
associated with an asset or liability owned or incurred or
reasonably likely to be owned or incurred by the Counterparty
in the conduct of the Counterparty's business.
(e) The Counterparty is not, on the date hereof, in possession of any
material non-public information with respect to the Counterparty.
9. Other Provisions:
(a) Opinions. The Counterparty shall deliver to JPMorgan an opinion of
counsel, dated as of the Trade Date, substantially in the form set
forth in Exhibit A hereto.
(b) Amendment. If the Initial Purchasers party to the Purchase Agreement
exercise their right to purchase additional Convertible Notes as set
forth therein, then, at the discretion of the Counterparty, JPMorgan
and the Counterparty will amend this Confirmation to provide for
such increase in Convertible Notes (but on pricing terms acceptable
to JPMorgan and the Counterparty) (such amendment to provide for the
payment by the Counterparty to JPMorgan of the additional premium
related thereto).
(c) No Reliance, etc. Each party represents that (i) it is entering into
the Transaction evidenced hereby as principal (and not as agent or
in any other capacity); (ii) neither the other party nor any of its
agents are acting as a fiduciary for it; (iii) it is not relying
upon any representations except those expressly set forth in the
Agreement or this Confirmation; (iv) it has not relied on the other
party for any legal, regulatory, tax, business, investment,
financial, and accounting advice, and it has made its own
investment, hedging, and trading decisions based upon its own
judgment and not upon any view expressed by the other party or any
of its agents; and (v) it is entering into this Transaction with a
full understanding of the terms, conditions and risks thereof and it
is capable of and willing to assume those risks.
9
(d) Share De-listing Event. If at any time during the period from and
including the Trade Date, to and including the Final Expiration
Date, the Shares cease to be listed or quoted on the Exchange for
any reason (other than a Merger Event as a result of which the
shares of common stock underlying the Options are listed or quoted
on The New York Stock Exchange, The American Stock Exchange or the
NASDAQ National Market (or their respective successors) (the
"Successor Exchange")) and are not immediately re-listed or quoted
as of the date of such de-listing on the Successor Exchange (a
"Share De-listing"), then Cancellation and Payment (as defined in
Section 9.6 of the Equity Definitions, treating the "Announcement
Date" as the date of first public announcement that the Share
De-listing, will occur and the "Merger Date" as the date of the
Share De-listing) shall apply, and the date of the de-listing shall
be deemed the date of termination for purposes of calculating any
payment due from one party to the other in connection with the
cancellation of this Transaction. If the Shares are immediately
re-listed on a Successor Exchange upon their de-listing from the
Exchange, this Transaction shall continue in full force and effect,
provided that the Successor Exchange shall be deemed to be the
Exchange for all purposes hereunder; provided that the Calculation
Agent may make appropriate adjustments to the terms of this
Transaction to reflect the effect of such re-listing. For the
avoidance of doubt, in no event will a Share De-listing result in an
obligation of the Counterparty under this Confirmation to make a
payment to JPMorgan.
(e) Repurchase Notices. The Counterparty shall, on any day on which the
Counterparty effects any repurchase of Shares, promptly give
JPMorgan a written notice of such repurchase (a "Repurchase Notice")
on such day if following such repurchase, the number of outstanding
Shares on such day, subject to any adjustments provided herein, is
(i) less than 25 million (in the case of the first such notice) or
(ii) thereafter, more than 125,000 less than the number of Shares
included in the immediately preceding Repurchase Notice. The
Counterparty agrees to indemnify and hold harmless JPMorgan and its
affiliates and their respective officers, directors, employees,
affiliates, advisors, agents and controlling persons (each, an
"Indemnified Person") from and against any and all losses (including
losses relating to JPMorgan's reasonable hedging activities as a
consequence of becoming, or of the risk of becoming, a Section 16
"insider", including without limitation, any forbearance from
reasonable hedging activities or cessation of such hedging
activities and any losses in connection therewith with respect to
this Transaction), claims, damages, judgments, liabilities and
expenses (including reasonable attorney's fees), joint or several,
which an Indemnified Person actually may become subject to, as a
result of the Counterparty's failure to provide JPMorgan with a
Repurchase Notice on the day and in the manner specified in this
Section 9(e), and to reimburse, within 30 days, upon written
request, each of such Indemnified Persons for any reasonable legal
or other expenses incurred in connection with investigating,
preparing for, providing testimony or other evidence in connection
with or defending any of the foregoing. If any suit, action,
proceeding (including any governmental or regulatory investigation),
claim or demand shall be brought or asserted against the Indemnified
Person, such Indemnified Person shall promptly notify the
Counterparty in writing, and the Counterparty, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to
the Indemnified Person to represent the Indemnified Person and any
others the Counterparty may designate in such proceeding and shall
pay the fees and expenses of such counsel related to such
proceeding. The Counterparty shall not be liable for any settlement
of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the
plaintiff, the Counterparty agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such
settlement or judgment. The Counterparty shall not, without the
prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of
which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement includes an unconditional release of
such Indemnified Person from all liability on claims that are the
subject matter of such proceeding on terms reasonably satisfactory
to such Indemnified Person. If the indemnification provided for in
10
this paragraph (e) is unavailable to an Indemnified Person or
insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then the Counterparty under such
paragraph, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages or
liabilities. The remedies provided for in this paragraph (e) are not
exclusive and shall not limit any rights or remedies which may
otherwise be available to any Indemnified Person at law or in
equity. The indemnity and contribution agreements contained in this
paragraph (e) shall remain operative and in full force and effect
regardless of the termination of this Transaction.
(f) Regulation M. The Counterparty was not on the Trade Date and is not
on the date hereof engaged in a distribution, as such term is used
in Regulation M under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of any securities of the Counterparty,
other than a distribution meeting the requirements of the exception
set forth in Rules 101(b)(10) and 102(b)(7) of Regulation M. The
Counterparty shall not, until the second Exchange Business Day
immediately following the Trade Date, engage in any such
distribution.
(g) No Manipulation. The Counterparty is not entering into this
Transaction to create actual or apparent trading activity in the
Shares (or any security convertible into or exchangeable for the
Shares) or to raise or depress or otherwise manipulate the price of
the Shares (or any security convertible into or exchangeable for the
Shares).
(h) Number of Repurchased Shares. The Counterparty represents that it
could have purchased Shares, in an amount equal to the product of
the Number of Options and the Option Entitlement, on the Exchange or
otherwise, in compliance with applicable law, its organizational
documents and any orders, decrees, contractual agreements binding
upon the Counterparty, on the Trade Date.
(i) Board Authorization. Each of this Transaction and the issuance of
the Convertible Notes was approved by its board of directors and
publicly announced, solely for the purposes stated in such board
resolution and public disclosure and the Counterparty's board of
directors has duly authorized any repurchase of Shares pursuant to
this Transaction. The Counterparty further represents that there is
no internal policy, whether written or oral, of the Counterparty
that would prohibit the Counterparty from entering into any aspect
of this Transaction, including, but not limited to, the purchases of
Shares to be made pursuant hereto.
(j) Transfer or Assignment. (i) The Counterparty shall have the right to
assign its rights and obligations hereunder with respect to any
Options hereunder (such Options, the "Transfer Options"), subject to
JPMorgan's consent, such consent not to be unreasonably withheld or
delayed; provided that such assignment or transfer shall be effected
on terms satisfactory to JPMorgan and shall be subject, but not
limited, to the following conditions:
(A) With respect to any Transfer Options, the Counterparty
shall not be released from its notice and indemnification
obligations pursuant to Section 9(c) or any obligations under
Section 9(s) of this Confirmation;
(B) Any Transfer Options shall only be transferred or assigned
to a third party reasonably acceptable to JPMorgan and on
terms, including any reasonable undertakings by such third
party and execution of any documentation and delivery of legal
opinions with respect to securities laws and other matters by
such third party and the Counterparty, as are requested and
reasonably satisfactory to JPMorgan; and
(C) The Counterparty shall be responsible for all reasonable
costs and expenses, including reasonable counsel fees,
incurred by JPMorgan in connection with such transfer or
assignment.
11
(ii) JPMorgan may not transfer or assign all or any portion of its
rights or obligations under this Transaction without consent of the
Counterparty; provided, however, that if JPMorgan, in its reasonable
discretion, determines that, (x) its "beneficial ownership" (within
the meaning of Section 16 of the Exchange Act and rules promulgated
thereunder) exceeds 8% or more of the Counterparty's outstanding
Shares or (y) the product of the Number of Options and the Option
Entitlement divided by the total number of the Counterparty's
outstanding Shares (the "Options Equity Percentage") exceeds 15%,
then:
(A) JPMorgan may transfer or assign a number of Options
sufficient to reduce such "beneficial ownership" to 7.5% or
such Options Equity Percentage to 14.5% to any third party
with a rating for its long term, unsecured and unsubordinated
indebtedness of A- or better by Standard & Poor's Ratings
Service or its successor ("S&P"), or A3 or better by Moody's
Investors Service ("Moody's") or, if either S&P or Moody's
ceases to rate such debt, at least an equivalent rating or
better by a substitute rating agency mutually agreed by the
Counterparty and JPMorgan; and
(B) If such "beneficial ownership" exceeds 8% or such Options
Equity Percentage exceeds 15%,
(1) at a time when the number of Counterparty's
outstanding Shares, subject to any adjustments provided
herein, is less than 22 million;
(2) as a result of any breach by the Counterparty of its
notice obligations under Section 9(e); or
(3) and if, in the good faith reasonable judgment of
JPMorgan, based upon advice of counsel and as a result
of events occurring after the Trade Date, JPMorgan
reasonably determines that it would be inadvisable to
engage in any alternative hedging transactions, which
would enable it to reduce its "beneficial" ownership or
its Options Equity Percentage, other than by transfer,
assignment or termination, and in either case JPMorgan
reasonably determines that it is unable after its
commercially reasonable efforts to effect transfer or
assignment on pricing terms and in a time period
reasonably acceptable to JPMorgan that would reduce its
"beneficial ownership" to 7.5% or such Options Equity
Percentage to 14.5%;
JPMorgan may designate any Exchange Business Day as an Early
Termination Date with respect to a portion (the "Terminated
Portion") of this Transaction, such that its "beneficial
ownership" following such partial termination would be
approximately equal to 7.5% or the Options Equity Percentage
approximately equal to 14.5%, as applicable. If JPMorgan so
designates an Early Termination Date with respect to a portion
of this Transaction, a payment shall be made pursuant to
Section 6 of the Agreement as if an Early Termination Date had
occurred in respect of a Transaction having terms identical to
this Transaction except with a Number of Options equal to the
Terminated Portion, with respect to which the Counterparty
shall be the sole Affected Party and such Transaction shall be
the only Affected Transaction.
(iii) Notwithstanding any other provision in this Confirmation to
the contrary requiring or allowing JPMorgan to purchase, sell,
receive or deliver any Shares or other securities to or from the
Counterparty, JPMorgan may designate any of its affiliates to
purchase, sell, receive or deliver such shares or other securities
and otherwise to perform JPMorgan's obligations in respect of this
Transaction and any such designee may assume such obligations.
JPMorgan shall be discharged of its obligations to the Counterparty
only to the extent of any such performance.
12
(k) Modified Settlement. If, upon advice of counsel, JPMorgan reasonably
determines, with respect to applicable legal and regulatory
requirements, including any requirements relating to JPMorgan's
hedging activities hereunder, or due to a lack of sufficient
liquidity in the borrow market for the Shares, that it would not be
practicable or advisable to deliver, or to acquire to deliver, any
or all of the Shares to be delivered by JPMorgan on the Settlement
Date for this Transaction, JPMorgan may, by notice to the
Counterparty on or prior to any anticipated Settlement Date (a
"Nominal Settlement Date"), elect to deliver the Shares on a
different date or two or more dates, whether immediately preceding
or following such Settlement Date (each, a "Staggered Settlement
Date"), as follows:
(i) in such notice, JPMorgan will specify to the Counterparty the
related Staggered Settlement Date or Dates (the last of which
may be no later than the twenty-fifth (25th) Scheduled Trading
Day following the Nominal Settlement Date) and the number of
Shares that it will deliver on each Staggered Settlement Date;
and
(ii) the aggregate number of Shares that JPMorgan will deliver to
the Counterparty hereunder on all such Staggered Settlement
Dates will equal the number of Shares that JPMorgan would
otherwise be required to deliver on such Nominal Settlement
Date.
JPMorgan shall effect such delivery as promptly as is practicable
and shall compensate the Counterparty for any delayed delivery by
paying, in addition to delivering any Shares hereunder, an amount,
as determined by the Calculation Agent, equal to the sum for each
day of such delay of the product of (i) the Federal Funds Rate
divided by 360 and (ii) the value of the Shares not delivered as of
such day; provided that if JPMorgan fails to deliver any Shares
hereunder by the twenty-fifth (25th) Scheduled Trading Day
immediately following the Nominal Settlement Date, such event shall
constitute an Additional Termination Event with respect to the
portion of this Transaction corresponding to the number of Shares
not delivered by JPMorgan by such date, with respect to which
JPMorgan shall be the sole Affected Party and this Transaction the
sole Affected Transaction.
"Federal Funds Rate" means, for any day, the rate set forth for such
day opposite the caption "Federal funds", as such rate is displayed
on the page FedsOpen {Index}{GO} on the Bloomberg Professional
Service or any successor page; provided that if no rate appears for
any day on such page, the rate for the immediately preceding day for
which a rate does so appear shall be used for such day.
(l) Damages. Neither party shall be liable under Section 6.10 of
the Equity Definitions for special, indirect or consequential
damages, even if informed of the possibility thereof.
(m) Early Unwind. In the event the sale of Convertible Notes is
not consummated with the initial purchasers for any reason by
the close of business in New York on March 13, 2006 (or such
later date as agreed upon by the parties) (March 13, 2006 or
such later date as agreed upon, being the "Early Unwind
Date"), this Transaction shall automatically terminate (the
"Early Unwind"), on the Early Unwind Date and (i) the
Transaction and all of the respective rights and obligations
of JPMorgan and the Counterparty under the Transaction shall
be cancelled and terminated and (ii) each party shall be
released and discharged by the other party from and agrees not
to make any claim against the other party with respect to any
obligations or liabilities of the other party arising out of
and to be performed in connection with the Transaction either
prior to or after the Early Unwind Date; provided that, if the
failure to consummate the sale of the Convertible Notes
results from a breach by the Counterparty of any
representation of or any undertaking by the Counterparty
contained in the Purchase Agreement, the Counterparty shall
purchase from JPMorgan on the Early Unwind Date any Shares
purchased by JPMorgan or one or more of its affiliates in
connection with this Transaction and reimburse JPMorgan for
any costs
13
or expenses (including market losses) relating to the
unwinding of its reasonable hedging activities in connection
with the Transaction (including any losses or costs incurred
as a result of its terminating, liquidating, obtaining or
reestablishing any reasonable hedge or related trading
position). The amount of any such reimbursement shall be
determined by JPMorgan in its reasonable good faith
discretion. JPMorgan shall notify the Counterparty of such
amount, including, upon the Counterparty's request, an
explanation of the basis of determination of such amount, and
the Counterparty shall pay such amount in immediately
available funds on the Early Unwind Date. JPMorgan and the
Counterparty represent and acknowledge to the other that,
subject to the proviso included in this Section, upon an Early
Unwind, all obligations with respect to the Transaction shall
be deemed fully and finally discharged.
(n) Role of Agent. Each party agrees and acknowledges that (i)
J.P. Morgan Securities Inc., an affiliate of JPMorgan
("JPMSI"), has acted solely as agent and not as principal with
respect to this Transaction and (ii) JPMSI has no obligation
or liability, by way of guaranty, endorsement or otherwise, in
any manner in respect of this Transaction (including, if
applicable, in respect of the settlement thereof). Each party
agrees it will look solely to the other party (or any
guarantor in respect thereof) for performance of such other
party's obligations under this Transaction.
(o) Additional Provisions.
(i) Notwithstanding Section 9.7 of the Equity Definitions,
everything in the first paragraph of Section 9.7(b) of the
Equity Definitions after the words "Calculation Agent" in the
third line through the remainder of such Section 9.7 shall be
deleted and replaced with the following:
"based on an amount representing the Calculation Agent's
determination of the fair value to Buyer of an option with
terms that would preserve for Buyer the economic equivalent of
any payment or delivery (assuming satisfaction of each
applicable condition precedent, including, for the avoidance
of doubt, the occurrence of a Conversion Date with respect to
each Option) by the parties in respect of the relevant
Transaction that would have been required after that date but
for the occurrence of the Share De-listing."
(ii) Notwithstanding anything to the contrary in the
Agreement, this Confirmation or the Equity Definitions, (A) in
determining any amount payable in respect of an Early
Termination Date or a Cancellation and Payment, the value of
this Transaction shall be determined as if all Options
outstanding at such time would become Exercisable Options
during the Final Exercise Period and, (B) in no event shall
the calculation of the amount under Section 6 of the Agreement
in respect of an Additional Termination Event result in any
amount being payable by the Counterparty.
(p) Alternative Calculations and Payment on Early Termination and
on Certain Extraordinary Events. If, in respect of this
Transaction, an amount is payable by JPMorgan to the
Counterparty (i) pursuant to Section 9.7 of the Equity
Definitions or this Confirmation (except in the event of a
Merger Event in which the consideration to be paid to holders
of Shares consists solely of cash) or (ii) pursuant to Section
6(d)(ii) of the Agreement (except in the event of an Event of
Default in which the Counterparty is the Defaulting Party or a
Termination Event in which the Counterparty is the Affected
Party, other than an Event of Default of the type described in
Section 5(a)(iii), (v), (vi), (vii) or (viii) of the Agreement
or in this Confirmation or a Termination Event of the type
described in Section 5(b)(i), (ii), (iii), (iv), (v) or (vi)
of the Agreement or in this Confirmation, in each case
resulting from an event or events outside the Counterparty's
control) (a "Payment Obligation"), the Counterparty may, in
its sole -- discretion, request that JPMorgan satisfy such
Payment Obligation by the Share Termination Alternative (as
defined below) and shall give irrevocable telephonic notice to
JPMorgan, confirmed in writing within one Currency Business
Day, no later than 12:00 p.m. New York City time
14
on the Merger Date, the date of the Share De-listing or the
Early Termination Date, as applicable; provided that if the
Counterparty does not validly request that JPMorgan satisfy
its Payment Obligation by the Share Termination Alternative,
JPMorgan shall have the right, in its sole discretion, to
satisfy its Payment Obligation by the Share Termination
Alternative, notwithstanding Counterparty's lack of election
or election to the contrary. In calculating any amounts under
Section 6(e) of the Agreement, notwithstanding anything to the
contrary in the Agreement, (1) separate amounts shall be
calculated as set forth in Section 6(e) with respect to (a)
this Transaction and (b) all other Transactions, and (2) such
separate amounts shall be payable pursuant to Section 6(d)(ii)
of the Agreement, subject to, in the case of clause (1)(a),
the Share Termination Alternative right hereunder.
Share Termination Alternative: If applicable, JPMorgan shall
deliver to the Counterparty
the Share Termination Delivery
Property on the date when the
Payment Obligation would
otherwise be due pursuant to
Section 9.7 of the Equity
Definitions, this Confirmation
or Section 6(d)(ii) and 6(e)
of the Agreement, as
applicable (the "Share
Termination Payment Date"), in
satisfaction of the Payment
Obligation in the manner
reasonably requested by the
Counterparty free of payment.
Share Termination Delivery Property: A number of Share Termination
Delivery Units, as calculated
by the Calculation Agent,
equal to the Payment
Obligation divided by the
Share Termination Unit Price.
The Calculation Agent shall
adjust the Share Termination
Delivery Property by replacing
any fractional portion of a
security therein with an
amount of cash equal to the
value of such fractional
security based on the values
used to calculate the Share
Termination Unit Price.
Share Termination Unit Price: The value to JPMorgan of
property contained in one
Share Termination Delivery
Unit on the date such Share
Termination Delivery Units are
to be delivered as Share
Termination Delivery Property,
as determined by the
Calculation Agent in its
discretion by commercially
reasonable means and notified
by the Calculation Agent to
JPMorgan at the time of
notification of the Payment
Obligation.
Share Termination Delivery Unit: One Share or, if a Merger
Event has occurred and a
corresponding adjustment to
this Transaction has been
made, a unit consisting of the
number or amount of each type
of property received by a
holder of one Share (without
consideration of any
requirement to pay cash or
other consideration in lieu of
fractional amounts
15
of any securities) in such
Merger Event, as determined by
the Calculation Agent.
Failure to Deliver: Applicable
Other applicable provisions: If the Share Termination
Alternative is applicable, the
provisions of Sections 6.6,
6.7, 6.8, 6.9 and 6.10 (as
modified above) of the Equity
Definitions will be
applicable, except that all
references in such provisions
to "Physically-Settled" shall
be read as references to
"Share Termination Settled"
and all references to "Shares"
shall be read as references to
"Share Termination Delivery
Units". "Share Termination
Settled" in relation to this
Transaction means that the
Share Termination Alternative
is applicable to this
Transaction.
(q) Governing Law. New York law (without reference to choice of
law doctrine).
(r) Waiver of Jury Trial. 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 Transaction. 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 Transaction, as applicable, by, among other things, the
mutual waivers and certifications provided herein.
(s) Registration. The Counterparty hereby agrees that if, in the
good faith reasonable judgment of JPMorgan, based upon the
advice of counsel, the Shares ("Hedge Shares") acquired by
JPMorgan for the purpose of hedging its obligations pursuant
to this Transaction cannot be sold in the U.S. public market
by JPMorgan without registration under the Securities Act, the
Counterparty shall, at its election, either (i) in order to
allow JPMorgan to sell the Hedge Shares in a registered
offering, make available to JPMorgan an effective registration
statement under the Securities Act to cover the resale of such
Hedge Shares and enter into an agreement, in form and
substance reasonably satisfactory to JPMorgan, substantially
in the form of an underwriting agreement for a registered
offering; provided, however, that if JPMorgan, in its
reasonable discretion, is not satisfied with access to due
diligence materials, the results of its due diligence
investigation, or the procedures and documentation for the
registered offering referred to above, then clause (ii) or
clause (iii) of this Section 9(s) shall apply at the election
of the Counterparty, (ii) in order to allow JPMorgan to sell
the Hedge Shares in a private placement, enter into a private
placement agreement substantially similar to private placement
purchase agreements customary for private placements of equity
securities, in form and substance reasonably satisfactory to
JPMorgan (in which case, the Calculation Agent shall make any
adjustments to the terms of this Transaction that are
necessary, in its reasonable judgment, to compensate JPMorgan
for any discount from the public market price of the Shares
incurred on the sale of Hedge Shares in a private placement),
or (iii) purchase the Hedge Shares from JPMorgan at the Last
Reported Sale Price on such Exchange Business Days, and in the
amounts, requested by JPMorgan.
(t) Tax Advice. JPMorgan and its affiliates do not provide tax
advice. Accordingly, any statements contained herein as to tax
matters were neither written nor intended by JPMorgan to be
used and cannot be used by any taxpayer for the purpose of
avoiding tax
16
penalties that may be imposed on such taxpayer. If any person
uses or refers to any such tax statement in promoting,
marketing or recommending a partnership or other entity,
investment plan or arrangement to any taxpayer, then the
statement expressed above is being delivered to support the
promotion or marketing of the transaction or matter addressed
and the recipient should seek advice based on its particular
circumstances from an independent tax advisor. Notwithstanding
anything herein to the contrary, the sender and any intended
recipient of this communication (and any of its employees,
representatives and other agents) may disclose to any and all
persons, without limitation of any kind, the tax treatment or
tax structure of this transaction.
(u) No Setoff. Notwithstanding any provision of the Agreement or
any other agreement between the parties to the contrary,
obligations under this Transaction shall not be set off by
JPMorgan (including, for the avoidance of doubt, pursuant to
Section 6(f) of the Agreement) against any other obligations
of the parties, whether arising under the Agreement, this
Confirmation, under any other agreement between the parties
hereto, by operation of law or otherwise.
17
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning it in the manner
indicated in the attached cover letter.
Very truly yours,
J.P. Morgan Securities Inc., as agent for
JPMorgan Chase Bank, National
Association
By: /s/ Sudheer Tegulapelle
------------------------------------
Authorized Signatory
Name: Sudheer Tegulapelle
Accepted and confirmed
as of the Trade Date:
ALBANY INTERNATIONAL CORP.
By: /s/ David C. Michaels
-------------------------------
Authorized Signatory
Name: David C. Michaels
JPMorgan Chase Bank, National Association
Organised under the laws of the United States as a National Banking Association
Main Office 1111 Polaris Parkway, Columbus, Ohio 43271
Registered as a branch in England & Wales branch No. BR000746
Registered Branch Office 125 London Wall, London EC2Y 5AJ
Authorised and regulated by the Financial Services Authority
Annex A
Form of Legal Opinion