Exhibit 10.2
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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) 445-2212
Facsimile No.: (518) 447-6305
Re: Warrants
Ref. No.: NY-21552
The purpose of this letter agreement is to confirm the terms and
conditions of the Warrants issued by Albany International Corp., a Delaware
corporation (the "Company"), to Bank of America, N.A. ("BofA"), 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. This
Transaction shall be deemed to be a Share Option Transaction within the meaning
set forth in the Equity Definitions.
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 Company 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 Company 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
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Warrants: Equity call warrants, each giving the
holder the right to purchase one Share
at the Strike Price, subject to the
Settlement Terms set forth below. For
the purposes of the Equity Definitions,
each reference to a Warrant herein shall
be deemed to be a reference to a Call
Option.
Warrant Style: American
Buyer: BofA
Seller: Company
Shares: The Class A common stock of the Company,
par value USD 0.001 per Share (Exchange
symbol "AIN")
Number of Warrants: 1,374,662, subject to adjustment as
provided herein
Daily Number of Warrants: Subject to "Expiration Dates" below, for
any day, the Number of Warrants that
have not expired or been exercised as of
such day, divided by the remaining
number of Expiration Dates (including
such day) and rounded down to the
nearest whole number to account for any
fractional Daily Number of Warrants.
Warrant Entitlement: One Share per Warrant
Multiple Exercise: Applicable
Minimum Number of Warrants: 1
Maximum Number of Warrants: 1,374,662
Strike Price: USD 52.25
Premium: USD 11,079,541.64
Premium Payment Date: March 13, 2006
Exchange: The New York Stock Exchange
Related Exchange(s): The principal exchange(s) for options
contracts or futures contracts, if any,
with respect to the Shares.
Exercise and Valuation:
Expiration Time: The Valuation Time
Expiration Dates: Each Exchange Business Day during the
period beginning on and including the
First Expiration Date and ending on and
including the 59th Exchange Business Day
following the First Expiration Date
shall be an "Expiration Date" for a
number of Warrants equal to the Daily
Number of Warrants on such day.
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Notwithstanding the foregoing and
anything to the contrary in the Equity
Definitions, if a Market Disruption
Event occurs on any Expiration Date
(including the First Expiration Date),
the Calculation Agent shall make
adjustments to the Daily Number of
Warrants for which such day shall be an
Expiration Date and shall designate a
scheduled Exchange Business Day or a
number of scheduled Exchange Business
Days as the Expiration Date(s) for the
remaining Daily Number of Warrants or a
portion thereof for the originally
scheduled Expiration Date, with such
adjustments based on, among other
factors, the duration of any Market
Disruption Event and the volume,
historical trading patterns and price of
the Shares; provided that if such
Expiration Date has not occurred
pursuant to this sentence as of the
eighth (8th) Exchange Business Day
following the last scheduled Expiration
Date under this Transaction, such eighth
(8th) Exchange Business Day shall be the
final Expiration Date and the
Calculation Agent shall determine its
good faith estimate of the fair market
value for the Shares as of the Valuation
Time on that eighth Exchange Business
Day.
First Expiration Date: June 15, 2013 (or, if such day is not an
Exchange Business Day, the next
following Exchange Business Day),
subject to Market Disruption Event
below.
Automatic Exercise: Applicable; and means that a number of
Warrants for each Expiration Date equal
to the Daily Number of Warrants (as
adjusted pursuant to the terms hereof)
for such Expiration Date will be deemed
to be automatically exercised.
Market Disruption Event: Section 4.3(a)(ii) is hereby amended by
adding after the words "or Share Basket
Transaction" in the first line thereof
the phrase "a failure by the Exchange or
Related Exchange to open for trading
during its regular trading session or"
and replacing the phrase "during the
one-half hour period that ends at the
relevant Valuation Time" with the phrase
"at any time during the regular trading
session on the Exchange or any Related
Exchange, without regard to after hours
or any other trading outside of the
regular trading session hours".
Valuation applicable to each Warrant:
Valuation Time: At the close of trading of the regular
trading session on the Exchange.
Valuation Date: Each Exercise Date.
Settlement Terms applicable to the Transaction:
Method of Settlement: Net Share Settlement; provided that,
with respect to all Warrants to be
exercised on the Expiration Dates, Cash
Settlement shall
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apply if the Company validly elects Cash
Settlement pursuant to the provisions of
"Cash Settlement Election" below.
Net Share Settlement: On each Settlement Date, the Company
shall deliver to BofA, the Share
Delivery Quantity for such Settlement
Date to the account specified herein
free of payment through the Clearance
System.
Share Delivery Quantity: For each Settlement Date, (i) a number
of Shares (rounded down to the nearest
whole Share), as calculated by the
Calculation Agent, equal to the sum of,
for each Valuation Date that occurred in
the calendar week immediately preceding
such Settlement Date, the Settlement
Amount for such Valuation Date divided
by the Settlement Price on such
Valuation Date, and (ii) cash in lieu of
any fractional Share (based on the
Settlement Price on the last Valuation
Date during such week).
Settlement Amount: For each Valuation Date, an amount equal
to the product of (i) the number of
Warrants exercised or deemed exercised
on the relevant Exercise Date, (ii) the
Strike Price Differential for such
Valuation Date and (iii) the Warrant
Entitlement.
Strike Price Differential: (a) If the Settlement Price for any
Valuation Date is greater than the
Strike Price, an amount equal to the
excess of such Settlement Price over the
Strike Price; or
(b) If such Settlement Price is less
than or equal to the Strike Price, zero.
Settlement Price: For any Valuation Date, the per Share
volume-weighted average price 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 Valuation
Date (or if such volume-weighted average
price is unavailable, the market value
of one Share on such Valuation Date, as
determined by the Calculation Agent
using a volume-weighted method).
Settlement Date: The first Exchange Business Day of each
calendar week shall be the Settlement
Date in respect of each Valuation Date
that occurred during the prior calendar
week.
Cash Settlement Election: Notwithstanding "Method of Settlement"
above, with respect to all Warrants to
be exercised on the Expiration Dates,
the Company can elect Cash Settlement by
delivering a written notice to BofA (the
"Cash Settlement Notice") on or prior to
the fifteenth (15th) scheduled Exchange
Business Day immediately preceding the
First Expiration Date, which Cash
Settlement Notice shall contain:
(i) a representation that (x) on the
date of such Cash Settlement Notice, the
Company is not in possession of any
material non-
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public information with respect to the
Company or its Shares, (y) the Company
is electing Cash Settlement in good
faith and not as part of a plan or
scheme to evade the prohibitions of Rule
10b-5 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")
and (z) the Company has not entered into
or altered any hedging transaction
relating to the Shares corresponding to
or offsetting the Transaction;
(ii) a representation that the Company
is not, on the date of such Cash
Settlement Notice, and will not be, on
any day during the period commencing on
such day and ending on the second
Exchange Business Day following the last
Settlement Date hereunder (the
"Settlement Period"), engaged in a
distribution, as such term is used in
Regulation M under the Exchange Act,
other than a distribution meeting the
requirements of the exception set forth
in Rules 101(b)(10) and 102(b)(7) of
Regulation M;
(iii) a representation that the Company
is not electing Cash Settlement 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);
(iv) an acknowledgment by the Company
that (A) any transaction in Shares by
BofA following the Company's election of
Cash Settlement shall be made at BofA's
sole discretion and for BofA's own
account and (B) the Company does not
have, and shall not attempt to exercise,
any influence over how, when, whether or
at what price to effect such
transactions, or whether such
transactions are made on any securities
exchange or privately; and
(v) an agreement by the Company that,
during the Settlement Period, without
the prior written consent of BofA, the
Company shall not, and shall cause its
affiliated purchasers (each as defined
in Rule 10b-18 under the Exchange Act)
not to, directly or indirectly
(including, without limitation, by means
of a derivative instrument), purchase,
offer to purchase, place any bid or
limit order that would effect a purchase
of, or commence any tender offer
relating to, any Shares or any security
convertible into or exchangeable for the
Shares in the public markets.
Cash Settlement: If Cash Settlement is applicable, on
each Settlement Date, the Company shall
deliver to BofA (to an account specified
by BofA) the sum of the Settlement
Amounts for each Valuation Date that
occurred in the calendar week
immediately preceding such Settlement
Date.
The Company agrees that it shall not
have the right to elect Cash Settlement
if BofA notifies the Company that, it
has determined
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that in the good faith reasonable
judgment of BofA, based upon advice of
counsel and as a result of events
occurring after the Trade Date, the
election of Cash Settlement or any
purchases of Shares that BofA (or its
affiliates) might make in connection
therewith would raise material risks
under applicable securities laws.
Failure to Deliver: Inapplicable
Other Applicable Provisions: If Net Share Settlement applies, 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
Warrant means that Net Share Settlement
is applicable to that Warrant.
3. Additional Terms applicable to the Transaction:
Adjustments applicable to the Warrants:
Method of Adjustment: Calculation Agent Adjustment. For
avoidance of doubt, in making any
adjustments under the Equity
Definitions, the Calculation Agent may
adjust the Strike Price, the Number of
Warrants, the Daily Number of Warrants
and the Warrant Entitlement.
Notwithstanding the foregoing, any cash
dividends or distributions, whether or
not extraordinary, shall be governed by
Section 9(l) of this Confirmation and
not by Section 9.1(c) of the Equity
Definitions.
Extraordinary Events applicable to the Transaction:
Consequence of Merger Events
(a) Share-for-Share: Alternative Obligation; provided that
the Calculation Agent will determine if
the Merger Event affects the theoretical
value of the Transaction and, if so, the
Calculation Agent shall make adjustments
to the Strike Price, the Number of
Warrants, the Daily Number of Warrants
and the Warrant Entitlement and any
other term necessary to reflect the
characteristics (including volatility,
dividend practice, borrow cost, policy
and liquidity) of the New Shares.
Notwithstanding the foregoing,
Cancellation and Payment shall apply in
the event the New Shares are not
publicly traded on a United States
national securities exchange or quoted
on the NASDAQ National Market (or any
successor thereto).
(b) Share-for-Other: Cancellation and Payment
(c) Share-for-Combined: Alternative Obligation in respect of the
portion of the consideration for the
relevant Shares that consists of New
Shares and subject to any adjustment
described in the proviso contained in
Share-for-Share above, and Cancellation
and
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Payment in respect of the portion of the
consideration for the relevant Shares
that consists of Other Consideration.
Notwithstanding the foregoing,
Cancellation and Payment shall apply in
the event the New Shares are not
publicly traded on a United States
national securities exchange or quoted
on the NASDAQ National Market (or any
successor thereto).
Nationalization or Insolvency: Cancellation and Payment
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 Company, provide the Company with
a written explanation of the basis of
any determination, adjustment or
calculation made hereunder; provided
that if, after reviewing such written
explanation, the Company objects to such
determination, adjustment or
calculation, then the Company, 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 to the Company:
JPMorgan, New York
ABA: 021-000-021
Acct: CHASUS33
Acct No.: 910-1010-693
Account for delivery of Shares from the Company:
DTC 50108 (Computershare)
Note: the shares cannot be sent electronically.
They must be DWACed.
(b) Account for payments from/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 to BofA:
DTC 0733
Acct Name: Bank of America NA
Acct #: 116-0077
6. Offices:
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The Office of the Company for the Transaction is: Inapplicable, the Company 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 Company:
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
Attention: Legal Department
9 West 57th Street, 40th Floor
New York, NY 10019
Facsimile No.: (212) 326-8610
8. Representations and Warranties of the Company
The representations and warranties of the Company set forth in Section 4 of the
Purchase Agreement (the "Purchase Agreement") dated as of the Trade Date and
relating to the issuance of USD 150,000,000 principal amount of 2.25%
Convertible Senior Notes due 2026, (the "Convertible Notes") between the Company
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 Company hereby further represents and warrants to BofA
that:
(a) The Company 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 Company's part;
and this Confirmation has been duly and validly executed and
delivered by the Company and constitutes its valid and binding
obligation, enforceable against the Company in accordance with its
terms, subject to
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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 Company hereunder
will conflict with or result in a breach of the certificate of
incorporation or by-laws (or any equivalent documents) of the
Company, 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 Company or any
of its Significant Subsidiaries is a party or by which the Company
or any of its Significant Subsidiaries is bound or to which the
Company 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 Company and its
Significant Subsidiaries filed as exhibits to the Company's Annual
Report on Form 10-K for the year ended December 31, 2004, as updated
by any subsequent filings.
(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
Company 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 Shares of the Company initially issuable upon exercise of the
Warrant by the net share settlement method (the "Warrant Shares")
have been reserved for issuance by all required corporate action of
the Company. The Warrant Shares have been duly authorized and, when
delivered against payment therefor (which may include Net Share
Settlement in lieu of cash) and otherwise as contemplated by the
terms of the Warrant following the exercise of the Warrant in
accordance with the terms and conditions of the Warrant, will be
validly issued, fully-paid and non-assessable, and the issuance of
the Warrant Shares will not be subject to any preemptive or similar
rights.
(e) The Company 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 Company is a corporation, partnership, proprietorship,
organization, trust or other entity and:
(A) the Company has total assets in excess of USD 10,000,000;
(B) the obligations of the Company 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 Company has a net worth in excess of USD 1,000,000 and has
entered into this Agreement in connection with the conduct of
the Company'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 Company in the conduct of the
Company's business.
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(f) The Company is not, on the date hereof, in possession of any
material non-public information with respect to the Company.
9. Other Provisions:
(a) Opinions. The Company 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 Company, BofA and the
Company will amend this Confirmation to provide for such increase in
Convertible Notes (but on pricing terms acceptable to BofA and the
Company) (such amendment to provide for the payment by BofA to the
Company 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 Warrants 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 BofA under this Confirmation to make a payment to the
Company.
(e) Repurchase Notices. The Company shall, on any day on which the
Company 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 Company
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
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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 Company'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 Company in writing, and the Company, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to
the Indemnified Person to represent the Indemnified Person and any
others the Company may designate in such proceeding and shall pay
the fees and expenses of such counsel related to such proceeding.
The Company 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
Company agrees to indemnify any Indemnified Person from and against
any loss or liability by reason of such settlement or judgment. The
Company 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 Company 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 Company 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 Exchange Act, of any securities of the
Company, 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 Company shall not, until the second Exchange Business Day
immediately following the Trade Date, engage in any such
distribution.
(g) No Manipulation. The Company 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) Board Authorization. The Company represents that it is entering into
the Transaction, solely for the purposes stated in the board
resolution authorizing this Transaction and in its public
disclosure. The Company further represents that there is no internal
policy, whether written or oral, of the Company that would prohibit
the Company from entering into any aspect of this Transaction,
including, but not limited to, the issuance of Shares pursuant
hereto.
(i) Transfer or Assignment. (i) The Company may not transfer any of its
rights or obligations under this Transaction without the prior
written consent of BofA. BofA may transfer or assign all or any
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portion of its rights or obligations under this Transaction in
compliance with applicable laws without consent of the Company. In
addition, if BofA's "beneficial ownership" (within the meaning of
Section 16 of the Exchange Act and rules promulgated thereunder)
exceeds 8% of the Company's outstanding shares, or the product of
the Number of Warrants and the Warrant Entitlement divided by the
total number of the Company's outstanding Shares (the "Warrant
Equity Percentage") exceeds 15% 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 alternative
hedging transactions which would enable it to reduce its "beneficial
ownership" or the Warrants Equity Percentage other than by transfer,
assignment or termination, and BofA reasonably determines that it is
unable after making 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 Warrant Equity Percentage to 14.5%,
respectively, 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
but less than 7.5% or the Warrant Equity Percentage approximately
equal to 14.5%, as applicable.
(ii) If BofA so designates an Early Termination Date with respect to
a portion of this Transaction, (i) a payment shall be made pursuant
to Section 6 of the Agreement as if an Early Termination Date
occurred in respect of a Transaction having terms identical to this
Transaction and a Number of Warrants equal to the Terminated
Portion, (ii) the Company shall be the sole Affected Party with
respect to such partial termination and (iii) such Transaction shall
be the only Terminated Transaction. For the avoidance of doubt, if
BofA assigns or terminates any Warrants hereunder, each Daily Number
of Warrants not previously settled hereunder shall be reduced
proportionately, as calculated by the Calculation Agent.
(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 Company,
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 Company only to the extent of any such
performance.
(j) 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.
(k) 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 Company 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 Company of any
representation of or any undertaking by the Company contained in the
Purchase Agreement, the Company shall purchase from 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
12
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 Company
of such amount, including, upon the Company's request, an
explanation of the basis of determination of such amount, and the
Company shall pay such amount in immediately available funds on the
Early Unwind Date. BofA and the Company 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.
(l) Dividends. If at any time during the period from and including the
Trade Date, to but excluding the Expiration Date, an ex-dividend
date for a cash dividend occurs with respect to the Shares (an
"Ex-Dividend Date"), and that dividend is different from the Regular
Dividend on a per Share basis then the Calculation Agent will, in
its reasonable discretion, adjust the Strike Price, the Number of
Warrants, the Daily Number of Warrants and the Warrant Entitlement
to preserve the fair value of the Warrant to BofA after taking into
account such dividend. "Regular Dividend" shall mean USD 0.09 per
Share per quarter.
(m) 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.
(n) 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) by the parties in respect of the relevant Transaction
that would have been required after that date but for the occurrence
of the Merger Event, Nationalization, Insolvency or Share De-listing
as the case may be."
(ii) Sections 12.8 and 12.9 of the 2002 ISDA Equity Derivatives
Definitions shall apply to this Transaction and, for the purposes of
such sections, "Hedging Disruption", "Increased Cost of Hedging" and
"Loss of Stock Borrow" shall be "Applicable" and, in each case, BofA
shall be the Hedging Party and the Determining Party. With respect
to the Loss of Stock Borrow, the "Maximum Stock Loan Rate" shall
mean the Federal Funds Rate, as determined by the Calculation Agent,
minus 50 basis points.
"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.
(o) No Collateral or Setoff. Notwithstanding any provision of the
Agreement or any other agreement between the parties to the
contrary, the obligations of the Company hereunder are not secured
by any collateral. Obligations under this Transaction shall not be
set off by the Company (including,
13
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. Any provision in the Agreement with respect to the
satisfaction of the Company's payment obligations to the extent of
BofA's payment obligations to the Company in the same currency and
in the same Transaction (including, without limitation Section 2(c)
thereof) shall not apply to the Company and, for the avoidance of
doubt, the Company shall fully satisfy such payment obligations
notwithstanding any payment obligation to the Company by BofA in the
same currency and in the same Transaction. 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 such 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 the Share Termination Alternative.
(p) Alternative Calculations and Payment on Early Termination and on
Certain Extraordinary Events. If, in respect of this Transaction, an
amount is payable by the Company to BofA, (i) pursuant to Section
9.7 of the Equity Definitions (except in the event of a
Nationalization or Insolvency or a Merger Event, in each case, 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
Company is the Defaulting Party or a Termination Event in which the
Company 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 this Confirmation in each case resulting from an
event or events outside the Company's control) (a "Payment
Obligation"), the Company may, in its sole discretion, satisfy any
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 local time on the Merger Date, the date of the
occurrence of the Nationalization or Insolvency, the date of the
Share De-listing or the Early Termination Date, as applicable. 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) any other Transactions
under the Agreement, 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 Company's Share Termination Alternative
right hereunder.
Share Termination Alternative: If applicable, the Company shall
deliver to BofA the Share
Termination Delivery Property on
the date when the Payment
Obligation would otherwise be due,
subject to Section 9(q) below,
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 BofA
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
14
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 by
the Calculation Agent to the
Company at the time of notification
of the Payment Obligation. In the
case of a Private Placement
Settlement of Share Termination
Delivery Units that are Restricted
Shares (as defined below) as set
forth in paragraph (q)(i) below,
the Share Termination Unit Price
shall be determined by the
discounted price applicable to such
Share Termination Delivery Units.
In the case of a Registered
Settlement of Share Termination
Delivery Units that are Restricted
Shares (as defined below) as set
forth in paragraph (q)(ii) below,
the Share Termination Unit Price
shall be the Settlement Price on
the Merger Date, the date of the
occurrence of the Nationalization
or Insolvency, the date of the
Share De-listing or the Early
Termination Date, as applicable.
Share Termination Delivery Unit: In the case of a Share De-listing,
Termination Event or Event of
Default, one Share or, in the case
of Nationalization or Insolvency or
a Merger Event, 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 Nationalization
or Insolvency or such Merger Event.
If such Merger Event involves a
choice of consideration to be
received by holders, such holder
shall be deemed to have elected to
receive the maximum possible amount
of cash.
Failure to Deliver: Inapplicable
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
15
Termination Settled" in relation to
this Transaction means that the
Share Termination Alternative is
applicable to this Transaction.
(q) Registration/Private Placement Procedures. If, in the reasonable
opinion of BofA, based on the advice of counsel, following any
delivery of Shares or Share Termination Delivery Property to BofA
hereunder, such Shares or Share Termination Delivery Property would
be in the hands of BofA subject to any applicable restrictions with
respect to any registration or qualification requirement or
prospectus delivery requirement for such Shares or Share Termination
Delivery Property pursuant to any applicable federal or state
securities law (including, without limitation, any such requirement
arising under Section 5 of the Securities Act as a result of such
Shares or Share Termination Delivery Property being "restricted
securities", as such term is defined in Rule 144 under the
Securities Act, or as a result of the sale of such Shares or Share
Termination Delivery Property being subject to paragraph (c) of Rule
145 under the Securities Act) (such Shares or Share Termination
Delivery Property, "Restricted Shares"), then delivery of such
Restricted Shares shall be effected pursuant to either clause (i) or
(ii) below at the election of the Company, unless waived by BofA.
Notwithstanding the foregoing, solely in respect of any Warrants
exercised or deemed exercised on any Expiration Date, (x) BofA shall
use reasonable efforts to give notice to the Company no later than
twenty (20) Exchange Business Days prior to the First Expiration
Date if it believes at such time that this Section 9(q) would be
applicable to Shares or Share Termination Delivery Property to be
delivered in connection with any Expiration Date and (y) to the
extent Net Share Settlement applies, the Company shall elect, prior
to the first Settlement Date for the first Expiration Date, a
Private Placement Settlement or Registered Settlement for all
deliveries of Restricted Shares for all such Expiration Dates which
election shall be applicable to all Settlement Dates for such Daily
Number of Warrants and the procedures in clause (i) or clause (ii)
below shall apply for all such delivered Restricted Shares on an
aggregate basis commencing after the final Settlement Date for such
Daily Number of Warrants. The Calculation Agent shall make
reasonable adjustments to settlement terms and provisions under this
Confirmation to reflect a single Private Placement Settlement or
Registered Settlement for such aggregate Restricted Shares delivered
hereunder.
(i) If the Company elects to settle the Transaction pursuant to
this clause (i) (a "Private Placement Settlement"), then
delivery of Restricted Shares by the Company shall be effected
in customary private placement procedures with respect to such
Restricted Shares reasonably acceptable to BofA; provided that
the Company may not elect a Private Placement Settlement if,
on the date of its election, it has taken, or caused to be
taken, any action that would make unavailable either the
exemption pursuant to Section 4(2) of the Securities Act for
the sale by the Company to BofA (or any affiliate designated
by BofA) of the Restricted Shares or the exemption pursuant to
Section 4(1) or Section 4(3) of the Securities Act for resales
of the Restricted Shares by BofA (or any such affiliate of
BofA). The Private Placement Settlement of such Restricted
Shares shall include customary representations, covenants,
blue sky and other governmental filings and/or registrations,
indemnities to BofA, due diligence rights (for BofA or any
designated buyer of the Restricted Shares by BofA), opinions
and certificates, and such other documentation as is customary
for private placement agreements, all reasonably acceptable to
BofA. In the case of a Private Placement Settlement, BofA
shall determine the appropriate discount to the Share
Termination Unit Price (in the case of settlement of Share
Termination Delivery Units pursuant to paragraph (p) above) or
any Settlement Price (in the case of settlement of Shares
pursuant to Section 2 above) applicable to such Restricted
Shares in a commercially reasonable manner and appropriately
adjust the amount of such Restricted Shares to be delivered to
BofA hereunder; provided that in no event shall such number be
greater than 5,498,648 (the "Maximum Amount").
16
Notwithstanding the Agreement or this Confirmation, the date
of delivery of such Restricted Shares (the "Due Date") shall
be the Exchange Business Day following notice by BofA to the
Company, of such applicable discount and the number of
Restricted Shares to be delivered pursuant to this clause (i).
For the avoidance of doubt, delivery of Restricted Shares
shall be due as set forth in the previous sentence and not be
due on the Share Termination Payment Date (in the case of
settlement of Share Termination Delivery Units pursuant to
paragraph (p) above) or on the Settlement Date for such
Restricted Shares (in the case of settlement of Shares
pursuant to Section 2 above).
In the event the Company shall not have delivered the full
number of Restricted Shares otherwise applicable as a result
of the proviso above relating to the Maximum Amount (such
deficit, the "Deficit Restricted Shares"), the Company shall
be continually obligated to deliver, from time to time until
the full number of Deficit Restricted Shares have been
delivered pursuant to this paragraph, Restricted Shares when,
and to the extent, that (i) Shares are repurchased, acquired
or otherwise received by the Company or any of its
subsidiaries after the Trade Date (whether or not in exchange
for cash, fair value or any other consideration), (ii)
authorized and unissued Shares reserved for issuance in
respect of other transactions prior to such date which prior
to the relevant date become no longer so reserved and (iii)
the Company additionally authorizes and unissued Shares that
are not reserved for other transactions. The Company shall
immediately notify BofA of the occurrence of any of the
foregoing events (including the number of Shares subject to
clause (i), (ii) or (iii) and the corresponding number of
Restricted Shares to be delivered) and promptly deliver such
Restricted Shares thereafter.
In the event of a Private Placement, the Net Share Settlement
Amount or the Payment Obligation, respectively, shall be
deemed to be the Net Share Settlement Amount or the Payment
Obligation, respectively, plus an additional amount
(determined from time to time by the Calculation Agent in its
commercially reasonable judgment) attributable to interest
that would be earned on such Net Share Settlement Amount or
the Payment Obligation, respectively, (increased on a daily
basis to reflect the accrual of such interest and reduced from
time to time by the amount of net proceeds received by BofA as
provided herein) at a rate equal to the open Federal Funds
Rate plus the Spread for the period from, and including, such
Settlement Date or the date on which the Payment Obligation is
due, respectively, to, but excluding, the Due Date, calculated
on an Actual/360 basis. The foregoing provision shall be
without prejudice to BofA's rights under the Agreement
(including, without limitation, Sections 5 and 6 thereof).
As used in this Section 9(p)(i), "Spread" means, with respect
to any Net Share Settlement Amount or Payment Obligation,
respectively, the credit spread over the applicable overnight
rate that would be imposed if BofA were to extend credit to
the Company in an amount equal to such Net Share Settlement
Amount, all as determined by the Calculation Agent using its
commercially reasonable judgment as of the related Settlement
Date or Due Date, respectively. Commercial reasonableness
shall take into consideration all factors deemed relevant by
the Calculation Agent, which are expected to include, among
other things, the credit quality of the Company (and any
relevant affiliates) in the then-prevailing market and the
credit spread of similar companies in the relevant industry
and other companies having a substantially similar credit
quality.
(ii) If the Company elects to settle the Transaction pursuant to
this clause (ii) (a "Registration Settlement"), then the
Company shall promptly (but in any event no later than the
beginning of the Resale Period) file and use its reasonable
best efforts to make effective under the Securities Act a
registration statement or supplement or amend an
17
outstanding registration statement in form and substance
reasonably satisfactory to BofA, to cover the resale of such
Restricted Shares in accordance with customary resale
registration procedures, including covenants, conditions,
representations, underwriting discounts (if applicable),
commissions (if applicable), indemnities due diligence rights,
opinions and certificates, and such other documentation as is
customary for equity resale underwriting agreements, all
reasonably acceptable to BofA. If BofA, in its reasonable
discretion, is not satisfied with such procedures and
documentation, Private Placement Settlement shall apply. If
BofA is satisfied with such procedures and documentation, it
shall sell the Restricted Shares pursuant to such registration
statement during a period (the "Resale Period") commencing on
(x) the Share Termination Payment Date in case of settlement
of Share Termination Delivery Units pursuant to paragraph (p)
above or (y) the Settlement Date in respect of the final
Expiration Date for all Daily Number of Warrants and ending on
the earliest of (i) the Exchange Business Day on which BofA
completes the sale of all Restricted Shares or a sufficient
number of Restricted Shares so that the realized net proceeds
of such sales exceed the Payment Obligation (as defined
above), (ii) the date upon which all Restricted Shares have
been sold or transferred pursuant to Rule 144 (or similar
provisions then in force) or Rule 145(d)(1) or (2) (or any
similar provision then in force) under the Securities Act and
(iii) the date upon which all Restricted Shares may be sold or
transferred by a non-affiliate pursuant to Rule 144(k) (or any
similar provision then in force) or Rule 145(d)(3) (or any
similar provision then in force) under the Securities Act. If
the Payment Obligation exceeds the realized net proceeds from
such resale, the Company shall transfer to BofA by the open of
the regular trading session on the Exchange on the Exchange
Trading Day immediately following the last day of the Resale
Period the amount of such excess (the "Additional Amount") in
cash or in a number of Restricted Shares ("Make-whole Shares")
in an amount that, based on the Settlement Price on the last
day of the Resale Period (as if such day was the "Valuation
Date" for purposes of computing such Settlement Price), has a
dollar value equal to the Additional Amount. The Resale Period
shall continue to enable the sale of the Make-whole Shares. If
the Company elects to pay the Additional Amount in Restricted
Shares, the requirements and provisions for Registration
Settlement shall apply. This provision shall be applied
successively until the Additional Amount is equal to zero. In
no event shall the Company deliver a number of Restricted
Shares greater than the Maximum Amount. Once the realized net
proceeds of such sales exceed the Payment Obligation, BofA
shall return to the Company any excess proceeds or remaining
Restricted Shares.
(iii) Without limiting the generality of the foregoing, but subject
to the last sentence of Section 9(s) below, the Company agrees
that any Restricted Shares delivered to BofA, as purchaser of
such Restricted Shares, (i) may be transferred by and among
BofA and its affiliates in compliance with applicable law and
the Company shall effect such transfer without any further
action by BofA and (ii) after the minimum "holding period"
within the meaning of Rule 144(d) under the Securities Act has
elapsed after any Settlement Date for such Restricted Shares,
the Company shall promptly remove, or cause the transfer agent
for such Restricted Shares to remove, any legends referring to
any such restrictions or requirements from such Restricted
Shares upon delivery by BofA (or such affiliate of BofA) to
the Company or such transfer agent of seller's and broker's
representation letters customarily delivered by BofA in
connection with resales of restricted securities pursuant to
Rule 144 under the Securities Act, without any further
requirement for the delivery of any certificate, consent,
agreement, opinion of counsel, notice or any other document,
any transfer tax stamps or payment of any other amount or any
other action by BofA (or such affiliate of BofA).
18
If the Private Placement Settlement or the Registration
Settlement shall not be effected as set forth in clauses (i)
or (ii), as applicable, then failure to effect such Private
Placement Settlement or such Registration Settlement shall
constitute an Event of Default with respect to which the
Company shall be the Defaulting Party.
(r) Limit on Beneficial Ownership. Notwithstanding any other provisions
hereof, BofA may not exercise any Warrant hereunder or receive any
Shares as a result of such exercise, and Automatic Exercise shall
not apply with respect thereto, to the extent (but only to the
extent) that such exercise or receipt would result in BofA directly
or indirectly beneficially owning (as such term is defined for
purposes of Section 13(d) of the Exchange Act) at any time in excess
of 9.0% of the outstanding Shares. Any purported delivery hereunder
shall be void and have no effect to the extent (but only to the
extent) that such delivery would result in BofA directly or
indirectly so beneficially owning in excess of 9.0% of the
outstanding Shares. If any delivery owed to BofA hereunder is not
made, in whole or in part, as a result of this provision, the
Company's obligation to make such delivery shall not be extinguished
and the Company shall make such delivery as promptly as practicable
after, but in no event later than one Exchange Business Day after,
BofA gives notice to the Company that such delivery would not result
in BofA directly or indirectly so beneficially owning in excess of
9.0% of the outstanding Shares.
(s) Share Deliveries. The Company acknowledges and agrees that, to the
extent the holder of this Warrant is not then an affiliate and has
not been an affiliate for 90 days (it being understood that BofA
will not be considered an affiliate under this Section 9(s) solely
by reason of its receipt of Shares pursuant to this Transaction),
and otherwise satisfies all holding period and other requirements of
Rule 144 of the Securities Act applicable to it, any delivery of
Shares or Share Termination Delivery Property hereunder at any time
after two years from the Premium Payment Date shall be eligible for
resale under Rule 144(k) of the Securities Act and the Company
agrees to promptly remove, or cause the transfer agent for such
Shares or Share Termination Delivery Property, to remove, any
legends referring to any restrictions on resale under the Securities
Act from the Shares or Share Termination Delivery Property. The
Company further agrees, for any delivery of Shares or Share
Termination Delivery Property hereunder at any time after one year
from the Premium Payment Date but within two years of the Premium
Payment Date, to the extent the holder of this Warrant then
satisfies the holding period and other requirements of Rule 144 of
the Securities Act, to promptly remove, or cause the transfer agent
for such Shares or Share Termination Delivery Property to remove,
any legends referring to any such restrictions or requirements from
such Shares or Share Termination Delivery Property. Such Shares or
Share Termination Delivery Property will be de-legended upon
delivery by BofA (or such affiliate of BofA) to the Company or such
transfer agent of customary seller's and broker's representation
letters in connection with resales of restricted securities pursuant
to Rule 144 of the Securities Act, without any further requirement
for the delivery of any certificate, consent, agreement, opinion of
counsel, notice or any other document, any transfer tax stamps or
payment of any other amount or any other action by BofA (or such
affiliate of BofA). The Company further agrees that any delivery of
Shares or Share Termination Delivery Property prior to the date that
is one year from the Premium Payment Date, may be transferred by and
among BofA and its affiliates in compliance with applicable law and
the Company shall effect such transfer without any further action by
BofA. Notwithstanding anything to the contrary herein, to the extent
the provisions of Rule 144 of the Securities Act or any successor
rule are amended, or the applicable interpretation thereof by the
Securities and Exchange Commission or any court change after the
Trade Date, the agreements of the Company herein shall be deemed
modified to the extent necessary, in the opinion of counsel of the
Company, to comply with Rule 144 of the Securities Act, including
Rule 144(k) as in effect at the time of delivery of the relevant
Shares or Share Termination Delivery Property.
19
(t) Additional Termination Event. If within the period commencing on the
Trade Date and ending on the second anniversary of the Trade Date,
an event shall occur, as a result of which, based on the advice of
counsel, BofA reasonably determines that it is advisable to
terminate a portion of this Transaction to comply with applicable
securities laws, rules or regulations, the occurrence of such event
shall constitute an Additional Termination Event under the Agreement
permitting BofA to terminate a portion of this Transaction in
respect of which (1) the Company shall be the sole Affected Party
and (2) this Transaction shall be the sole Affected Transaction;
provided, however, that BofA shall have the right to effect such
termination only to the extent reasonably necessary to comply with
such laws, rules or regulations.
(u) Right to Extend. BofA may delay any Settlement Date or any other
date of delivery by BofA, with respect to some or all of the
Warrants hereunder, if BofA reasonably determines, in its
discretion, that such extension is reasonably necessary to enable
BofA to effect purchases of Shares in connection with its hedging
activity hereunder in a manner that would be in compliance with
applicable legal and regulatory requirements.
(v) Governing Law. New York law (without reference to choice of law
doctrine).
(w) 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.
(x) Maximum Share Delivery. Notwithstanding any other provision of this
Confirmation or the Agreement, in no event will the Company be
required to deliver more than the Maximum Amount of Shares in the
aggregate to BofA in connection with this Transaction, subject to
the provisions regarding Deficit Restricted Shares.
(y) Status of Claims in Bankruptcy. BofA acknowledges and agrees that
this confirmation is not intended to convey to BofA rights with
respect to the transactions contemplated hereby that are senior to
the claims of common stockholders in any U.S. bankruptcy proceedings
of the Company; provided, however, that nothing herein shall limit
or shall be deemed to limit BofA's right to pursue remedies in the
event of a breach by the Company of its obligations and agreements
with respect to this Confirmation and the Agreement; and provided,
further, that nothing herein shall limit or shall be deemed to limit
BofA's rights in respect of any transaction other than the
Transaction.
(z) 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.
20
- --------------------------------------------------------------------------------
Bank of America [LOGO]
EQUITY FINANCIAL PRODUCTS GROUP
- --------------------------------------------------------------------------------
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
21
Annex A
Form of Legal Opinion
22
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: Warrants
The purpose of this letter agreement is to confirm the terms and
conditions of the Warrants issued by Albany International Corp., a Delaware
corporation (the "Company"), to JPMorgan Chase Bank, National Association,
London Branch ("JPMorgan"), 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. This
Transaction shall be deemed to be a Share Option Transaction within the meaning
set forth in the Equity Definitions.
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 Company 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 Company 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:
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
1
General Terms:
Trade Date: March 7, 2006
Warrants: Equity call warrants, each giving the
holder the right to purchase one Share
at the Strike Price, subject to the
Settlement Terms set forth below. For
the purposes of the Equity Definitions,
each reference to a Warrant herein shall
be deemed to be a reference to a Call
Option.
Warrant Style: American
Buyer: JPMorgan
Seller: Company
Shares: The Class A common stock of the Company,
par value USD 0.001 per Share (Exchange
symbol "AIN")
Number of Warrants: 2,061,993, subject to adjustment as
provided herein
Daily Number of Warrants: Subject to "Expiration Dates" below, for
any day, the Number of Warrants that
have not expired or been exercised as of
such day, divided by the remaining
number of Expiration Dates (including
such day) and rounded down to the
nearest whole number to account for any
fractional Daily Number of Warrants.
Warrant Entitlement: One Share per Warrant
Multiple Exercise: Applicable
Minimum Number of Warrants: 1
Maximum Number of Warrants: 2,061,993
Strike Price: USD 52.25
Premium: USD 16,619,312.47
Premium Payment Date: March 13, 2006
Exchange: The New York Stock Exchange
Related Exchange(s): The principal exchange(s) for options
contracts or futures contracts, if any,
with respect to the Shares.
Exercise and Valuation:
Expiration Time: The Valuation Time
2
Expiration Dates: Each Exchange Business Day during the
period beginning on and including the
First Expiration Date and ending on and
including the 59th Exchange Business Day
following the First Expiration Date
shall be an "Expiration Date" for a
number of Warrants equal to the Daily
Number of Warrants on such day.
Notwithstanding the foregoing and
anything to the contrary in the Equity
Definitions, if a Market Disruption
Event occurs on any Expiration Date
(including the First Expiration Date),
the Calculation Agent shall make
adjustments to the Daily Number of
Warrants for which such day shall be an
Expiration Date and shall designate a
scheduled Exchange Business Day or a
number of scheduled Exchange Business
Days as the Expiration Date(s) for the
remaining Daily Number of Warrants or a
portion thereof for the originally
scheduled Expiration Date, with such
adjustments based on, among other
factors, the duration of any Market
Disruption Event and the volume,
historical trading patterns and price of
the Shares; provided that if such
Expiration Date has not occurred
pursuant to this sentence as of the
eighth (8th) Exchange Business Day
following the last scheduled Expiration
Date under this Transaction, such eighth
(8th) Exchange Business Day shall be the
final Expiration Date and the
Calculation Agent shall determine its
good faith estimate of the fair market
value for the Shares as of the Valuation
Time on that eighth Exchange Business
Day.
First Expiration Date: June 15, 2013 (or, if such day is not an
Exchange Business Day, the next
following Exchange Business Day),
subject to Market Disruption Event
below.
Automatic Exercise: Applicable; and means that a number of
Warrants for each Expiration Date equal
to the Daily Number of Warrants (as
adjusted pursuant to the terms hereof)
for such Expiration Date will be deemed
to be automatically exercised.
Market Disruption Event: Section 4.3(a)(ii) is hereby amended by
adding after the words "or Share Basket
Transaction" in the first line thereof
the phrase "a failure by the Exchange or
Related Exchange to open for trading
during its regular trading session or"
and replacing the phrase "during the
one-half hour period that ends at the
relevant Valuation Time" with the phrase
"at any time during the regular trading
session on the Exchange or any Related
Exchange, without regard to after hours
or any other trading outside of the
regular trading session hours".
Valuation applicable to each Warrant:
Valuation Time: At the close of trading of the regular
trading session on the Exchange.
Valuation Date: Each Exercise Date.
3
Settlement Terms applicable to the Transaction:
Method of Settlement: Net Share Settlement; provided that,
with respect to all Warrants to be
exercised on the Expiration Dates, Cash
Settlement shall apply if the Company
validly elects Cash Settlement pursuant
to the provisions of "Cash Settlement
Election" below.
Net Share Settlement: On each Settlement Date, the Company
shall deliver to JPMorgan, the Share
Delivery Quantity for such Settlement
Date to the account specified herein
free of payment through the Clearance
System.
Share Delivery Quantity: For each Settlement Date, (i) a number
of Shares (rounded down to the nearest
whole Share), as calculated by the
Calculation Agent, equal to the sum of,
for each Valuation Date that occurred in
the calendar week immediately preceding
such Settlement Date, the Settlement
Amount for such Valuation Date divided
by the Settlement Price on such
Valuation Date, and (ii) cash in lieu of
any fractional Share (based on the
Settlement Price on the last Valuation
Date during such week).
Settlement Amount: For each Valuation Date, an amount equal
to the product of (i) the number of
Warrants exercised or deemed exercised
on the relevant Exercise Date, (ii) the
Strike Price Differential for such
Valuation Date and (iii) the Warrant
Entitlement.
Strike Price Differential: (a) If the Settlement Price for any
Valuation Date is greater than the
Strike Price, an amount equal to the
excess of such Settlement Price over the
Strike Price; or
(b) If such Settlement Price is less
than or equal to the Strike Price, zero.
Settlement Price: For any Valuation Date, the per Share
volume-weighted average price 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 Valuation
Date (or if such volume-weighted average
price is unavailable, the market value
of one Share on such Valuation Date, as
determined by the Calculation Agent
using a volume-weighted method).
Settlement Date: The first Exchange Business Day of each
calendar week shall be the Settlement
Date in respect of each Valuation Date
that occurred during the prior calendar
week.
Cash Settlement Election: Notwithstanding "Method of Settlement"
above, with respect to all Warrants to
be exercised on the Expiration Dates,
the Company can elect Cash Settlement by
delivering a written notice to JPMorgan
(the "Cash Settlement Notice") on or
prior to the fifteenth (15th) scheduled
Exchange Business Day immediately
4
preceding the First Expiration Date,
which Cash Settlement Notice shall
contain:
(i) a representation that (x) on the
date of such Cash Settlement Notice, the
Company is not in possession of any
material non-public information with
respect to the Company or its Shares,
(y) the Company is electing Cash
Settlement in good faith and not as part
of a plan or scheme to evade the
prohibitions of Rule 10b-5 under the
Securities Exchange Act of 1934, as
amended (the "Exchange Act") and (z) the
Company has not entered into or altered
any hedging transaction relating to the
Shares corresponding to or offsetting
the Transaction;
(ii) a representation that the Company
is not, on the date of such Cash
Settlement Notice, and will not be, on
any day during the period commencing on
such day and ending on the second
Exchange Business Day following the last
Settlement Date hereunder (the
"Settlement Period"), engaged in a
distribution, as such term is used in
Regulation M under the Exchange Act,
other than a distribution meeting the
requirements of the exception set forth
in Rules 101(b)(10) and 102(b)(7) of
Regulation M;
(iii) a representation that the Company
is not electing Cash Settlement 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);
(iv) an acknowledgment by the Company
that (A) any transaction in Shares by
JPMorgan following the Company's
election of Cash Settlement shall be
made at JPMorgan's sole discretion and
for JPMorgan's own account and (B) the
Company does not have, and shall not
attempt to exercise, any influence over
how, when, whether or at what price to
effect such transactions, or whether
such transactions are made on any
securities exchange or privately; and
(v) an agreement by the Company that,
during the Settlement Period, without
the prior written consent of JPMorgan,
the Company shall not, and shall cause
its affiliated purchasers (each as
defined in Rule 10b-18 under the
Exchange Act) not to, directly or
indirectly (including, without
limitation, by means of a derivative
instrument), purchase, offer to
purchase, place any bid or limit order
that would effect a purchase of, or
commence any tender offer relating to,
any Shares or any security convertible
into or exchangeable for the Shares in
the public markets.
Cash Settlement: If Cash Settlement is applicable, on
each Settlement Date, the Company shall
deliver to JPMorgan (to an account
specified by JPMorgan) the sum of the
Settlement Amounts for each
5
Valuation Date that occurred in the
calendar week immediately preceding such
Settlement Date.
The Company agrees that it shall not
have the right to elect Cash Settlement
if JPMorgan notifies the Company that,
it has determined that in the good faith
reasonable judgment of JPMorgan, based
upon advice of counsel and as a result
of events occurring after the Trade
Date, the election of Cash Settlement or
any purchases of Shares that JPMorgan
(or its affiliates) might make in
connection therewith would raise
material risks under applicable
securities laws.
Failure to Deliver: Inapplicable
Other Applicable Provisions: If Net Share Settlement applies, 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
Warrant means that Net Share Settlement
is applicable to that Warrant.
3. Additional Terms applicable to the Transaction:
Adjustments applicable to the Warrants:
Method of Adjustment: Calculation Agent Adjustment. For
avoidance of doubt, in making any
adjustments under the Equity
Definitions, the Calculation Agent may
adjust the Strike Price, the Number of
Warrants, the Daily Number of Warrants
and the Warrant Entitlement.
Notwithstanding the foregoing, any cash
dividends or distributions, whether or
not extraordinary, shall be governed by
Section 9(l) of this Confirmation and
not by Section 9.1(c) of the Equity
Definitions.
Extraordinary Events applicable to the Transaction:
Consequence of Merger Events
(a) Share-for-Share: Alternative Obligation; provided that
the Calculation Agent will determine if
the Merger Event affects the theoretical
value of the Transaction and, if so, the
Calculation Agent shall make adjustments
to the Strike Price, the Number of
Warrants, the Daily Number of Warrants
and the Warrant Entitlement and any
other term necessary to reflect the
characteristics (including volatility,
dividend practice, borrow cost, policy
and liquidity) of the New Shares.
Notwithstanding the foregoing,
Cancellation and Payment shall apply in
the event the New Shares are not
publicly traded on a United States
national securities exchange or quoted
on the NASDAQ National Market (or any
successor thereto).
(b) Share-for-Other: Cancellation and Payment
6
(c) Share-for-Combined: Alternative Obligation in respect of the
portion of the consideration for the
relevant Shares that consists of New
Shares and subject to any adjustment
described in the proviso contained in
Share-for-Share above, and Cancellation
and Payment in respect of the portion of
the consideration for the relevant
Shares that consists of Other
Consideration. Notwithstanding the
foregoing, Cancellation and Payment
shall apply in the event the New Shares
are not publicly traded on a United
States national securities exchange or
quoted on the NASDAQ National Market (or
any successor thereto).
Nationalization or Insolvency: Cancellation and Payment
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 Company, provide the Company with
a written explanation of the basis of
any determination, adjustment or
calculation made hereunder; provided
that if, after reviewing such written
explanation, the Company objects to such
determination, adjustment or
calculation, then the Company, 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 to the Company:
JPMorgan, New York
ABA: 021-000-021
Acct: CHASUS33
Acct No.: 910-1010-693
Account for delivery of Shares from the Company:
DTC 50108 (Computershare)
Note: the shares cannot be sent electronically.
They must be DWACed.
(b) Account for payments from/to JPMorgan:
JPMorgan Chase Bank, N.A., New York
ABA: 021 000 021
Favour: JPMorgan Chase Bank N.A., - London
A/C: 0010962009
CHASUS33
7
Account for delivery of Shares to JPMorgan:
DTC 060
6. Offices:
The Office of the Company for the Transaction is: Inapplicable, the Company 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. Notices: For purposes of this Confirmation:
(a) Address for notices or communications to the Company:
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, N. A.
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 Company
The representations and warranties of the Company set forth in Section 4 of the
Purchase Agreement (the "Purchase Agreement") dated as of the Trade Date and
relating to the issuance of USD 150,000,000 principal amount of
8
2.25%
Convertible Senior Notes due 2026, (the "Convertible Notes") between the Company
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 Company hereby further represents and warrants to
JPMorgan that:
(a) The Company 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 Company's part;
and this Confirmation has been duly and validly executed and
delivered by the Company and constitutes its valid and binding
obligation, enforceable against the Company 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 Company hereunder
will conflict with or result in a breach of the certificate of
incorporation or by-laws (or any equivalent documents) of the
Company, 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 Company or any
of its Significant Subsidiaries is a party or by which the Company
or any of its Significant Subsidiaries is bound or to which the
Company 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 Company and its
Significant Subsidiaries filed as exhibits to the Company's Annual
Report on Form 10-K for the year ended December 31, 2004, as updated
by any subsequent filings.
(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
Company 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 Shares of the Company initially issuable upon exercise of the
Warrant by the net share settlement method (the "Warrant Shares")
have been reserved for issuance by all required corporate action of
the Company. The Warrant Shares have been duly authorized and, when
delivered against payment therefor (which may include Net Share
Settlement in lieu of cash) and otherwise as contemplated by the
terms of the Warrant following the exercise of the Warrant in
accordance with the terms and conditions of the Warrant, will be
validly issued, fully-paid and non-assessable, and the issuance of
the Warrant Shares will not be subject to any preemptive or similar
rights.
(e) The Company 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 Company is a corporation, partnership, proprietorship,
organization, trust or other entity and:
(A) the Company has total assets in excess of USD 10,000,000;
9
(B) the obligations of the Company 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 Company has a net worth in excess of USD 1,000,000 and has
entered into this Agreement in connection with the conduct of
the Company'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 Company in the conduct of the
Company's business.
(f) The Company is not, on the date hereof, in possession of any
material non-public information with respect to the Company.
9. Other Provisions:
(a) Opinions. The Company 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 Company, JPMorgan and
the Company will amend this Confirmation to provide for such
increase in Convertible Notes (but on pricing terms acceptable to
JPMorgan and the Company) (such amendment to provide for the payment
by JPMorgan to the Company 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 Warrants 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
10
a Share De-listing result in an obligation of JPMorgan under this
Confirmation to make a payment to the Company.
(e) Repurchase Notices. The Company shall, on any day on which the
Company 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 Company
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 Company'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 Company in
writing, and the Company, upon request of the Indemnified Person,
shall retain counsel reasonably satisfactory to the Indemnified
Person to represent the Indemnified Person and any others the
Company may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. The Company
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 Company agrees to
indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. The Company
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 Company
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 Company 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 Exchange Act, of any securities of the
Company, 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 Company shall not, until the second Exchange Business Day
immediately following the Trade Date, engage in any such
distribution.
11
(g) No Manipulation. The Company 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) Board Authorization. The Company represents that it is entering into
the Transaction, solely for the purposes stated in the board
resolution authorizing this Transaction and in its public
disclosure. The Company further represents that there is no internal
policy, whether written or oral, of the Company that would prohibit
the Company from entering into any aspect of this Transaction,
including, but not limited to, the issuance of Shares pursuant
hereto.
(i) Transfer or Assignment. (i) The Company may not transfer any of its
rights or obligations under this Transaction without the prior
written consent of JPMorgan. JPMorgan may transfer or assign all or
any portion of its rights or obligations under this Transaction in
compliance with applicable laws without consent of the Company. In
addition, if JPMorgan's "beneficial ownership" (within the meaning
of Section 16 of the Exchange Act and rules promulgated thereunder)
exceeds 8% of the Company's outstanding shares, or the product of
the Number of Warrants and the Warrant Entitlement divided by the
total number of the Company's outstanding Shares (the "Warrant
Equity Percentage") exceeds 15% 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
alternative hedging transactions which would enable it to reduce its
"beneficial ownership" or the Warrants Equity Percentage other than
by transfer, assignment or termination, and JPMorgan reasonably
determines that it is unable after making 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 Warrant Equity Percentage to
14.5%, respectively, 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 but less than 7.5% or the Warrant Equity Percentage
approximately equal to 14.5%, as applicable.
(ii) If JPMorgan so designates an Early Termination Date with
respect to a portion of this Transaction, (i) a payment shall be
made pursuant to Section 6 of the Agreement as if an Early
Termination Date occurred in respect of a Transaction having terms
identical to this Transaction and a Number of Warrants equal to the
Terminated Portion, (ii) the Company shall be the sole Affected
Party with respect to such partial termination and (iii) such
Transaction shall be the only Terminated Transaction. For the
avoidance of doubt, if JPMorgan assigns or terminates any Warrants
hereunder, each Daily Number of Warrants not previously settled
hereunder shall be reduced proportionately, as calculated by the
Calculation Agent.
(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
Company, 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 Company only
to the extent of any such performance.
(j) 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.
(k) 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
12
"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 Company 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 Company of any
representation of or any undertaking by the Company contained in the
Purchase Agreement, the Company 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 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
Company of such amount, including, upon the Company's request, an
explanation of the basis of determination of such amount, and the
Company shall pay such amount in immediately available funds on the
Early Unwind Date. JPMorgan and the Company 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.
(l) Dividends. If at any time during the period from and including the
Trade Date, to but excluding the Expiration Date, an ex-dividend
date for a cash dividend occurs with respect to the Shares (an
"Ex-Dividend Date"), and that dividend is different from the Regular
Dividend on a per Share basis then the Calculation Agent will, in
its reasonable discretion, adjust the Strike Price, the Number of
Warrants, the Daily Number of Warrants and the Warrant Entitlement
to preserve the fair value of the Warrant to JPMorgan after taking
into account such dividend. "Regular Dividend" shall mean USD 0.09
per Share per quarter.
(m) 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.
(n) 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) by the parties in respect of the relevant Transaction
that would have been required after that date but for the occurrence
of the Merger Event, Nationalization, Insolvency or Share De-listing
as the case may be."
(ii) Sections 12.8 and 12.9 of the 2002 ISDA Equity Derivatives
Definitions shall apply to this Transaction and, for the purposes of
such sections, "Hedging Disruption", "Increased Cost of Hedging" and
"Loss of Stock Borrow" shall be "Applicable" and, in each case,
JPMorgan shall be the Hedging Party and the Determining Party. With
respect to the Loss of Stock Borrow, the
13
"Maximum Stock Loan Rate" shall mean the Federal Funds Rate, as
determined by the Calculation Agent, minus 50 basis points.
"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.
(o) No Collateral or Setoff. Notwithstanding any provision of the
Agreement or any other agreement between the parties to the
contrary, the obligations of the Company hereunder are not secured
by any collateral. Obligations under this Transaction shall not be
set off by the Company (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. Any provision in the
Agreement with respect to the satisfaction of the Company's payment
obligations to the extent of JPMorgan's payment obligations to the
Company in the same currency and in the same Transaction (including,
without limitation Section 2(c) thereof) shall not apply to the
Company and, for the avoidance of doubt, the Company shall fully
satisfy such payment obligations notwithstanding any payment
obligation to the Company by JPMorgan in the same currency and in
the same Transaction. 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
such 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 the Share
Termination Alternative.
(p) Alternative Calculations and Payment on Early Termination and on
Certain Extraordinary Events. If, in respect of this Transaction, an
amount is payable by the Company to JPMorgan, (i) pursuant to
Section 9.7 of the Equity Definitions (except in the event of a
Nationalization or Insolvency or a Merger Event, in each case, 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
Company is the Defaulting Party or a Termination Event in which the
Company 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 this Confirmation in each case resulting from an
event or events outside the Company's control) (a "Payment
Obligation"), the Company may, in its sole discretion, satisfy any
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 local time on the Merger Date, the
date of the occurrence of the Nationalization or Insolvency, the
date of the Share De-listing or the Early Termination Date, as
applicable. 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) any other
Transactions under the Agreement, 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 Company's Share
Termination Alternative right hereunder.
Share Termination Alternative: If applicable, the Company shall
deliver to JPMorgan the Share
Termination Delivery Property on
the date when the Payment
Obligation would otherwise be due,
subject to Section 9(q) below,
pursuant to
14
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 JPMorgan 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 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 the
Company at the time of notification
of the Payment Obligation. In the
case of a Private Placement
Settlement of Share Termination
Delivery Units that are Restricted
Shares (as defined below) as set
forth in paragraph (q)(i) below,
the Share Termination Unit Price
shall be determined by the
discounted price applicable to such
Share Termination Delivery Units.
In the case of a Registered
Settlement of Share Termination
Delivery Units that are Restricted
Shares (as defined below) as set
forth in paragraph (q)(ii) below,
the Share Termination Unit Price
shall be the Settlement Price on
the Merger Date, the date of the
occurrence of the Nationalization
or Insolvency, the date of the
Share De-listing or the Early
Termination Date, as applicable.
Share Termination Delivery Unit: In the case of a Share De-listing,
Termination Event or Event of
Default, one Share or, in the case
of Nationalization or Insolvency or
a Merger Event, 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 Nationalization
or Insolvency or such Merger Event.
If such Merger Event involves a
choice of consideration to be
received by holders, such holder
shall be deemed to
15
have elected to receive the maximum
possible amount of cash.
Failure to Deliver: Inapplicable
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) Registration/Private Placement Procedures. If, in the reasonable
opinion of JPMorgan, based on the advice of counsel, following any
delivery of Shares or Share Termination Delivery Property to
JPMorgan hereunder, such Shares or Share Termination Delivery
Property would be in the hands of JPMorgan subject to any applicable
restrictions with respect to any registration or qualification
requirement or prospectus delivery requirement for such Shares or
Share Termination Delivery Property pursuant to any applicable
federal or state securities law (including, without limitation, any
such requirement arising under Section 5 of the Securities Act as a
result of such Shares or Share Termination Delivery Property being
"restricted securities", as such term is defined in Rule 144 under
the Securities Act, or as a result of the sale of such Shares or
Share Termination Delivery Property being subject to paragraph (c)
of Rule 145 under the Securities Act) (such Shares or Share
Termination Delivery Property, "Restricted Shares"), then delivery
of such Restricted Shares shall be effected pursuant to either
clause (i) or (ii) below at the election of the Company, unless
waived by JPMorgan. Notwithstanding the foregoing, solely in respect
of any Warrants exercised or deemed exercised on any Expiration
Date, (x) JPMorgan shall use reasonable efforts to give notice to
the Company no later than twenty (20) Exchange Business Days prior
to the First Expiration Date if it believes at such time that this
Section 9(q) would be applicable to Shares or Share Termination
Delivery Property to be delivered in connection with any Expiration
Date and (y) to the extent Net Share Settlement applies, the Company
shall elect, prior to the first Settlement Date for the first
Expiration Date, a Private Placement Settlement or Registered
Settlement for all deliveries of Restricted Shares for all such
Expiration Dates which election shall be applicable to all
Settlement Dates for such Daily Number of Warrants and the
procedures in clause (i) or clause (ii) below shall apply for all
such delivered Restricted Shares on an aggregate basis commencing
after the final Settlement Date for such Daily Number of Warrants.
The Calculation Agent shall make reasonable adjustments to
settlement terms and provisions under this Confirmation to reflect a
single Private Placement Settlement or Registered Settlement for
such aggregate Restricted Shares delivered hereunder.
(i) If the Company elects to settle the Transaction pursuant to
this clause (i) (a "Private Placement Settlement"), then
delivery of Restricted Shares by the Company shall be effected
in customary private placement procedures with respect to such
Restricted Shares reasonably acceptable to JPMorgan; provided
that the Company may not elect a Private Placement Settlement
if, on the date of its election, it has taken, or caused to be
taken, any action that would make unavailable either the
exemption pursuant to Section 4(2) of the Securities Act for
the sale by the Company to JPMorgan (or any affiliate
designated by JPMorgan) of the Restricted Shares or the
exemption pursuant to Section 4(1) or Section
16
4(3) of the Securities Act for resales of the Restricted
Shares by JPMorgan (or any such affiliate of JPMorgan). The
Private Placement Settlement of such Restricted Shares shall
include customary representations, covenants, blue sky and
other governmental filings and/or registrations, indemnities
to JPMorgan, due diligence rights (for JPMorgan or any
designated buyer of the Restricted Shares by JPMorgan),
opinions and certificates, and such other documentation as is
customary for private placement agreements, all reasonably
acceptable to JPMorgan. In the case of a Private Placement
Settlement, JPMorgan shall determine the appropriate discount
to the Share Termination Unit Price (in the case of settlement
of Share Termination Delivery Units pursuant to paragraph (p)
above) or any Settlement Price (in the case of settlement of
Shares pursuant to Section 2 above) applicable to such
Restricted Shares in a commercially reasonable manner and
appropriately adjust the amount of such Restricted Shares to
be delivered to JPMorgan hereunder; provided that in no event
shall such number be greater than 8,247,972 (the "Maximum
Amount"). Notwithstanding the Agreement or this Confirmation,
the date of delivery of such Restricted Shares (the "Due
Date") shall be the Exchange Business Day following notice by
JPMorgan to the Company, of such applicable discount and the
number of Restricted Shares to be delivered pursuant to this
clause (i). For the avoidance of doubt, delivery of Restricted
Shares shall be due as set forth in the previous sentence and
not be due on the Share Termination Payment Date (in the case
of settlement of Share Termination Delivery Units pursuant to
paragraph (p) above) or on the Settlement Date for such
Restricted Shares (in the case of settlement of Shares
pursuant to Section 2 above).
In the event the Company shall not have delivered the full
number of Restricted Shares otherwise applicable as a result
of the proviso above relating to the Maximum Amount (such
deficit, the "Deficit Restricted Shares"), the Company shall
be continually obligated to deliver, from time to time until
the full number of Deficit Restricted Shares have been
delivered pursuant to this paragraph, Restricted Shares when,
and to the extent, that (i) Shares are repurchased, acquired
or otherwise received by the Company or any of its
subsidiaries after the Trade Date (whether or not in exchange
for cash, fair value or any other consideration), (ii)
authorized and unissued Shares reserved for issuance in
respect of other transactions prior to such date which prior
to the relevant date become no longer so reserved and (iii)
the Company additionally authorizes and unissued Shares that
are not reserved for other transactions. The Company shall
immediately notify JPMorgan of the occurrence of any of the
foregoing events (including the number of Shares subject to
clause (i), (ii) or (iii) and the corresponding number of
Restricted Shares to be delivered) and promptly deliver such
Restricted Shares thereafter.
In the event of a Private Placement, the Net Share Settlement
Amount or the Payment Obligation, respectively, shall be
deemed to be the Net Share Settlement Amount or the Payment
Obligation, respectively, plus an additional amount
(determined from time to time by the Calculation Agent in its
commercially reasonable judgment) attributable to interest
that would be earned on such Net Share Settlement Amount or
the Payment Obligation, respectively, (increased on a daily
basis to reflect the accrual of such interest and reduced from
time to time by the amount of net proceeds received by
JPMorgan as provided herein) at a rate equal to the open
Federal Funds Rate plus the Spread for the period from, and
including, such Settlement Date or the date on which the
Payment Obligation is due, respectively, to, but excluding,
the Due Date, calculated on an Actual/360 basis. The foregoing
provision shall be without prejudice to JPMorgan's rights
under the Agreement (including, without limitation, Sections 5
and 6 thereof).
17
As used in this Section 9(p)(i), "Spread" means, with respect
to any Net Share Settlement Amount or Payment Obligation,
respectively, the credit spread over the applicable overnight
rate that would be imposed if JPMorgan were to extend credit
to the Company in an amount equal to such Net Share Settlement
Amount, all as determined by the Calculation Agent using its
commercially reasonable judgment as of the related Settlement
Date or Due Date, respectively. Commercial reasonableness
shall take into consideration all factors deemed relevant by
the Calculation Agent, which are expected to include, among
other things, the credit quality of the Company (and any
relevant affiliates) in the then-prevailing market and the
credit spread of similar companies in the relevant industry
and other companies having a substantially similar credit
quality.
(ii) If the Company elects to settle the Transaction pursuant to
this clause (ii) (a "Registration Settlement"), then the
Company shall promptly (but in any event no later than the
beginning of the Resale Period) file and use its reasonable
best efforts to make effective under the Securities Act a
registration statement or supplement or amend an outstanding
registration statement in form and substance reasonably
satisfactory to JPMorgan, to cover the resale of such
Restricted Shares in accordance with customary resale
registration procedures, including covenants, conditions,
representations, underwriting discounts (if applicable),
commissions (if applicable), indemnities due diligence rights,
opinions and certificates, and such other documentation as is
customary for equity resale underwriting agreements, all
reasonably acceptable to JPMorgan. If JPMorgan, in its
reasonable discretion, is not satisfied with such procedures
and documentation, Private Placement Settlement shall apply.
If JPMorgan is satisfied with such procedures and
documentation, it shall sell the Restricted Shares pursuant to
such registration statement during a period (the "Resale
Period") commencing on (x) the Share Termination Payment Date
in case of settlement of Share Termination Delivery Units
pursuant to paragraph (p) above or (y) the Settlement Date in
respect of the final Expiration Date for all Daily Number of
Warrants and ending on the earliest of (i) the Exchange
Business Day on which JPMorgan completes the sale of all
Restricted Shares or a sufficient number of Restricted Shares
so that the realized net proceeds of such sales exceed the
Payment Obligation (as defined above), (ii) the date upon
which all Restricted Shares have been sold or transferred
pursuant to Rule 144 (or similar provisions then in force) or
Rule 145(d)(1) or (2) (or any similar provision then in force)
under the Securities Act and (iii) the date upon which all
Restricted Shares may be sold or transferred by a
non-affiliate pursuant to Rule 144(k) (or any similar
provision then in force) or Rule 145(d)(3) (or any similar
provision then in force) under the Securities Act. If the
Payment Obligation exceeds the realized net proceeds from such
resale, the Company shall transfer to JPMorgan by the open of
the regular trading session on the Exchange on the Exchange
Trading Day immediately following the last day of the Resale
Period the amount of such excess (the "Additional Amount") in
cash or in a number of Restricted Shares ("Make-whole Shares")
in an amount that, based on the Settlement Price on the last
day of the Resale Period (as if such day was the "Valuation
Date" for purposes of computing such Settlement Price), has a
dollar value equal to the Additional Amount. The Resale Period
shall continue to enable the sale of the Make-whole Shares. If
the Company elects to pay the Additional Amount in Restricted
Shares, the requirements and provisions for Registration
Settlement shall apply. This provision shall be applied
successively until the Additional Amount is equal to zero. In
no event shall the Company deliver a number of Restricted
Shares greater than the Maximum Amount. Once the realized net
proceeds of such sales exceed the Payment Obligation, JPMorgan
shall return to the Company any excess proceeds or remaining
Restricted Shares.
18
(iii) Without limiting the generality of the foregoing, but subject
to the last sentence of Section 9(s) below, the Company agrees
that any Restricted Shares delivered to JPMorgan, as purchaser
of such Restricted Shares, (i) may be transferred by and among
JPMorgan and its affiliates in compliance with applicable law
and the Company shall effect such transfer without any further
action by JPMorgan and (ii) after the minimum "holding period"
within the meaning of Rule 144(d) under the Securities Act has
elapsed after any Settlement Date for such Restricted Shares,
the Company shall promptly remove, or cause the transfer agent
for such Restricted Shares to remove, any legends referring to
any such restrictions or requirements from such Restricted
Shares upon delivery by JPMorgan (or such affiliate of
JPMorgan) to the Company or such transfer agent of seller's
and broker's representation letters customarily delivered by
JPMorgan in connection with resales of restricted securities
pursuant to Rule 144 under the Securities Act, without any
further requirement for the delivery of any certificate,
consent, agreement, opinion of counsel, notice or any other
document, any transfer tax stamps or payment of any other
amount or any other action by JPMorgan (or such affiliate of
JPMorgan).
If the Private Placement Settlement or the Registration Settlement
shall not be effected as set forth in clauses (i) or (ii), as
applicable, then failure to effect such Private Placement Settlement
or such Registration Settlement shall constitute an Event of Default
with respect to which the Company shall be the Defaulting Party.
(r) Limit on Beneficial Ownership. Notwithstanding any other provisions
hereof, JPMorgan may not exercise any Warrant hereunder or receive
any Shares as a result of such exercise, and Automatic Exercise
shall not apply with respect thereto, to the extent (but only to the
extent) that such exercise or receipt would result in JPMorgan
directly or indirectly beneficially owning (as such term is defined
for purposes of Section 13(d) of the Exchange Act) at any time in
excess of 9.0% of the outstanding Shares. Any purported delivery
hereunder shall be void and have no effect to the extent (but only
to the extent) that such delivery would result in JPMorgan directly
or indirectly so beneficially owning in excess of 9.0% of the
outstanding Shares. If any delivery owed to JPMorgan hereunder is
not made, in whole or in part, as a result of this provision, the
Company's obligation to make such delivery shall not be extinguished
and the Company shall make such delivery as promptly as practicable
after, but in no event later than one Exchange Business Day after,
JPMorgan gives notice to the Company that such delivery would not
result in JPMorgan directly or indirectly so beneficially owning in
excess of 9.0% of the outstanding Shares.
(s) Share Deliveries. The Company acknowledges and agrees that, to the
extent the holder of this Warrant is not then an affiliate and has
not been an affiliate for 90 days (it being understood that JPMorgan
will not be considered an affiliate under this Section 9(s) solely
by reason of its receipt of Shares pursuant to this Transaction),
and otherwise satisfies all holding period and other requirements of
Rule 144 of the Securities Act applicable to it, any delivery of
Shares or Share Termination Delivery Property hereunder at any time
after two years from the Premium Payment Date shall be eligible for
resale under Rule 144(k) of the Securities Act and the Company
agrees to promptly remove, or cause the transfer agent for such
Shares or Share Termination Delivery Property, to remove, any
legends referring to any restrictions on resale under the Securities
Act from the Shares or Share Termination Delivery Property. The
Company further agrees, for any delivery of Shares or Share
Termination Delivery Property hereunder at any time after one year
from the Premium Payment Date but within two years of the Premium
Payment Date, to the extent the holder of this Warrant then
satisfies the holding period and other requirements of Rule 144 of
the Securities Act, to promptly remove, or cause the transfer agent
for such Shares or Share Termination Delivery Property to remove,
any legends referring to any such restrictions or
19
requirements from such Shares or Share Termination Delivery
Property. Such Shares or Share Termination Delivery Property will be
de-legended upon delivery by JPMorgan (or such affiliate of
JPMorgan) to the Company or such transfer agent of customary
seller's and broker's representation letters in connection with
resales of restricted securities pursuant to Rule 144 of the
Securities Act, without any further requirement for the delivery of
any certificate, consent, agreement, opinion of counsel, notice or
any other document, any transfer tax stamps or payment of any other
amount or any other action by JPMorgan (or such affiliate of
JPMorgan). The Company further agrees that any delivery of Shares or
Share Termination Delivery Property prior to the date that is one
year from the Premium Payment Date, may be transferred by and among
JPMorgan and its affiliates in compliance with applicable law and
the Company shall effect such transfer without any further action by
JPMorgan. Notwithstanding anything to the contrary herein, to the
extent the provisions of Rule 144 of the Securities Act or any
successor rule are amended, or the applicable interpretation thereof
by the Securities and Exchange Commission or any court change after
the Trade Date, the agreements of the Company herein shall be deemed
modified to the extent necessary, in the opinion of counsel of the
Company, to comply with Rule 144 of the Securities Act, including
Rule 144(k) as in effect at the time of delivery of the relevant
Shares or Share Termination Delivery Property.
(t) Additional Termination Event. If within the period commencing on the
Trade Date and ending on the second anniversary of the Trade Date,
an event shall occur, as a result of which, based on the advice of
counsel, JPMorgan reasonably determines that it is advisable to
terminate a portion of this Transaction to comply with applicable
securities laws, rules or regulations, the occurrence of such event
shall constitute an Additional Termination Event under the Agreement
permitting JPMorgan to terminate a portion of this Transaction in
respect of which (1) the Company shall be the sole Affected Party
and (2) this Transaction shall be the sole Affected Transaction;
provided, however, that JPMorgan shall have the right to effect such
termination only to the extent reasonably necessary to comply with
such laws, rules or regulations.
(u) Right to Extend. JPMorgan may delay any Settlement Date or any other
date of delivery by JPMorgan, with respect to some or all of the
Warrants hereunder, if JPMorgan reasonably determines, in its
discretion, that such extension is reasonably necessary to enable
JPMorgan to effect purchases of Shares in connection with its
hedging activity hereunder in a manner that would be in compliance
with applicable legal and regulatory requirements.
(v) Governing Law. New York law (without reference to choice of law
doctrine).
(w) 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.
(x) Maximum Share Delivery. Notwithstanding any other provision of this
Confirmation or the Agreement, in no event will the Company be
required to deliver more than the Maximum Amount of Shares in the
aggregate to JPMorgan in connection with this Transaction, subject
to the provisions regarding Deficit Restricted Shares.
(y) Status of Claims in Bankruptcy. JPMorgan acknowledges and agrees
that this confirmation is not intended to convey to JPMorgan rights
with respect to the transactions contemplated hereby that are senior
to the claims of common stockholders in any U.S. bankruptcy
proceedings of the Company; provided, however, that nothing herein
shall limit or shall be deemed to limit
20
JPMorgan's right to pursue remedies in the event of a breach by the
Company of its obligations and agreements with respect to this
Confirmation and the Agreement; and provided, further, that nothing
herein shall limit or shall be deemed to limit JPMorgan's rights in
respect of any transaction other than the Transaction.
(z) 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 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.
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JPMorgan [LOGO]
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 Tegulapalle
-------------------------------------
Authorized Signatory
Name: Sudheer Tegulapalle
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
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Annex A
Form of Legal Opinion
23