Exhibit 4.1
EXECUTION VERSION
AAR CORP.
(a Delaware corporation)
1.625% Convertible Senior Notes due 2014
2.25% Convertible Senior Notes due 2016
PURCHASE AGREEMENT
Dated: February 5, 2008
AAR CORP.
(a Delaware corporation)
$225,000,000
1.625% Convertible Senior Notes due 2014
2.25% Convertible Senior Notes due 2016
PURCHASE AGREEMENT
February 5, 2008
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
as Representative of the several Initial Purchasers
4 World Financial Center
New York, New York 10080
Ladies and Gentlemen:
AAR CORP., a Delaware corporation (the “Company”),
confirms its agreement with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) and the other
Initial Purchaser named in Schedule A hereto (collectively, the “Initial
Purchasers,” which term shall also include any initial purchaser substituted as
hereinafter provided in Section 11 hereof), for whom Merrill Lynch is
acting as representative (in such capacity, the “Representative”), with respect
to the issue and sale by the Company and the purchase by the Initial
Purchasers, acting severally and not jointly, of the respective principal
amounts set forth in said Schedule A of $125,000,000 aggregate principal amount
of the Company’s 1.625% Convertible Senior Notes due 2014 (the “2014 Notes”)
and $100,000,000 aggregate principal amount of the Company’s 2.25% Convertible
Senior Notes due 2016 (the “2016 Notes,” and together with the 2014 Notes, the “Initial
Securities”), and with respect to the grant by the Company to the Initial
Purchasers of the option described in Section 2(b) hereof to purchase
all or any part of an additional $12,500,000 aggregate principal amount of the
2014 Notes and an additional $12,500,000 aggregate principal amount of the 2016
Notes (collectively, the “Option Securities” and together with the Initial
Securities, the “Securities”). The
Securities are to be issued pursuant to separate indentures, each to be dated
as of February 11, 2008 (each an “Indenture” and collectively, the “Indentures”)
between the Company and U.S. Bank National Association, as trustee (the “Trustee”).
The Securities are convertible, subject to certain
conditions as described in the Final Offering Memorandum (as defined below),
prior to maturity (unless previously redeemed or otherwise purchased) into cash
or a combination of cash and shares of common stock, par value $1.00 per share,
of the Company (the “Common Stock”) in accordance with the terms of the
Securities and the Indentures, as described in Schedule B hereto. Securities issued in book-entry form will be
issued to Cede & Co. as nominee of The Depository Trust Company (“DTC”)
pursuant to a letter
agreement, to be dated as of the Initial Closing Time (as defined in Section 2(c)),
among the Company, the Trustee and DTC.
The Company understands that the Initial Purchasers
propose to make an offering of the Securities on the terms and in the manner
set forth herein and agrees that the Initial Purchasers may resell, subject to
the conditions set forth herein, all or a portion of the Securities to
purchasers (“Subsequent Purchasers”) at any time after this Agreement has been
executed and delivered. The Securities
are to be sold to the Initial Purchasers and resold by the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the “1933
Act”), in reliance upon exemptions therefrom.
Pursuant to the terms of the Securities and the Indentures, investors
that acquire Securities may only resell or otherwise transfer such Securities
if such Securities are hereafter registered under the 1933 Act or if an
exemption from the registration requirements of the 1933 Act is available
(including the exemption afforded by Rule 144A (“Rule 144A”) of the rules and
regulations promulgated under the 1933 Act by the Securities and Exchange
Commission (the “Commission”)). On or
prior to the Initial Closing Time, the Company will enter into separate
agreements with the Initial Purchasers with respect to each series of
Securities (the “Registration Rights Agreements”), pursuant to which, subject
to the conditions set forth therein, the Company will be required to file and
use its reasonable best efforts to have declared effective a registration
statement (the “Registration Statement”) under the 1933 Act to register resales
of each series of Securities and the shares of Common Stock issuable upon
conversion thereof.
Section 1.
Representations
and Warranties by the Company
.
(a)
Representations and Warranties
. The Company represents and warrants to the
Initial Purchasers as of the date hereof and as of the Closing Time referred to
in Section 2(c) hereof, and agrees with the Initial Purchasers, as
follows:
(i)
The
Company has prepared and delivered to each Initial Purchaser copies of a
preliminary offering memorandum dated February 4, 2008 (the “Preliminary
Offering Memorandum”) and has prepared and will deliver to each Initial
Purchaser, the next succeeding day, copies of a final offering memorandum dated
February 5, 2008 (the “Final Offering Memorandum”), each for use by each
Initial Purchaser in connection with its solicitation of purchases of, or
offering of, the Securities. “Offering
Memorandum” means, with respect to any date or time referred to in this
Agreement, the most recent offering memorandum (whether the Preliminary
Offering Memorandum or the Final Offering Memorandum, or any amendment or
supplement to either such document), including exhibits thereto and any
documents incorporated therein by reference, which has been prepared and
delivered by the Company to the Initial Purchasers in connection with their
solicitation of purchases of, or offering of, the Securities. All references in this Agreement to financial
statements and schedules and other information which is “contained,” “included”
or “stated” in the Offering Memorandum (or other references of like import)
shall be deemed to mean and include all such financial statements and schedules
and other information which are incorporated by reference in the Offering
Memorandum; and all references in this Agreement to amendments or supplements
to the Offering Memorandum shall be deemed to mean and
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include the filing of any
document under the Securities Exchange Act of 1934 (the “1934 Act”) which is
incorporated by reference in the Offering Memorandum.
As of the Applicable Time (as defined below), neither (x) the
Offering Memorandum as of the Applicable Time as supplemented by the final
pricing term sheet, in the form attached hereto as Schedule B (the “Pricing
Supplement”), that has been prepared and delivered by the Company to the
Initial Purchasers in connection with their solicitation of offers to purchase
Securities, all considered together (collectively, the “Disclosure Package”),
nor (y) any individual Supplemental Offering Materials (as defined below),
when read together with the Disclosure Package, included any untrue statement
of a material fact or omitted to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
“Applicable Time” means
8:00 a.m. (Eastern time) on February 6,
2008 or such other time as agreed by the Company and the Representative.
“Supplemental Offering Materials” means any “written
communication” (within the meaning of the rules and regulations under the
1933 Act) prepared by or on behalf of the Company, or used or referred to by
the Company, that constitutes an offer to sell or a solicitation of an offer to
buy the Securities other than the Offering Memorandum or amendments or
supplements thereto (including the Pricing Supplement), including, without
limitation, any road show relating to the Securities that constitutes such a
written communication.
As of its issue date and as of the Closing Time, the
Final Offering Memorandum will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The documents incorporated
by reference in the Offering Memorandum at the time they were or hereafter are
filed with the Commission complied and will comply in all material respects
with the requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the “1934 Act Regulations”), and, when read together
with the other information in the Offering Memorandum, at the time the Offering
Memorandum was issued and at the Closing Time, did not and will not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading. The representations and
warranties in this subsection shall not apply to statements in or omissions
from the Disclosure Package or the Final Offering Memorandum made in reliance
upon and in conformity with written information furnished to the Company by any
Initial Purchaser through the Representative expressly for use therein.
(ii)
Neither
the Company nor any of its subsidiaries has sustained since the date of the
latest audited financial statements included in the Disclosure Package and the
Final Offering Memorandum, any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth
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or contemplated in the
Disclosure Package and the Final Offering Memorandum; and, since the respective
dates as of which information is given in the Disclosure Package and the Final
Offering Memorandum, there has not been (A) any change in the capital stock or long term debt of the Company or any of
its subsidiaries (other than stock option transactions, normal debt payments
and other such transactions in the normal course of business), (B) any
material adverse change, or any development that would reasonably be expected
to involve a prospective material adverse change, in or affecting the general
affairs, management, financial position, stockholders’ equity or results of
operations of the Company and its subsidiaries (a “material adverse change”), (C) any
transactions entered into by the Company or any of its subsidiaries, other than
those in the ordinary course of business, which are material with respect to
the Company and its subsidiaries considered as one enterprise, or (D) any
dividend or distribution of any kind declared, paid or made by the Company on
any class of its capital stock, otherwise than as set forth or contemplated in
the Disclosure Package and the Final Offering Memorandum.
(iii)
The
financial statements, together with the related schedules and notes, included
in the Disclosure Package and the Final Offering Memorandum present fairly the
financial position of the Company and its consolidated subsidiaries at the
dates indicated and the statement of operations, stockholders’ equity and cash
flows of the Company and its consolidated subsidiaries for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles (“GAAP”) applied on a consistent basis
throughout the periods involved. The
supporting schedules, if any, included in the Disclosure Package and the Final
Offering Memorandum present fairly in accordance with GAAP the information
required to be stated therein. The
selected financial data and the summary financial information included in the
Disclosure Package and the Final Offering Memorandum present fairly the
information shown therein and have been compiled on a basis consistent with
that of the audited financial statements included in the Disclosure Package and
the Final Offering Memorandum.
(iv)
The
Company and its significant subsidiaries (within the meaning of Section 1-02(w) of
Regulation S-X under the 1933 Act) (each such significant subsidiary, a “Significant
Subsidiary”), have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them, in each
case free and clear of all liens, encumbrances and defects except such as are
described in the Disclosure Package and the Final Offering Memorandum or such
as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company and
its Significant Subsidiaries; and any real property and buildings held under
lease by the Company and its Significant Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its Significant Subsidiaries.
(v)
The
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Delaware, with power and authority
(corporate and other) to own its properties and through its subsidiaries
conduct its business as described in the Disclosure Package and the Final
Offering Memorandum,
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and has been duly qualified as
a foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, or is subject to
no material liability or disability by reason of the failure to be so qualified
in any such jurisdiction.
(vi)
Each
subsidiary of the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation with power and authority (corporate and other) to own its properties,
and has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so as to require
such qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction.
(vii)
The
Company has an authorized capitalization as set forth in the Disclosure Package
and the Final Offering Memorandum, and all of the issued shares of capital
stock of the Company have been duly and validly authorized and issued and are
fully paid and non assessable; the shares of Common Stock initially issuable
upon conversion of the Securities have been duly and validly authorized and
reserved for issuance and, when issued and delivered against payment therefor
in accordance with the provisions of the Securities and the Indentures referred
to below, will be duly and validly issued, fully paid and non assessable and
will conform to the description of the Common Stock contained in the Disclosure
Package and the Final Offering Memorandum; and all of the issued shares of
capital stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non assessable and (except for
directors’ qualifying shares) are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims.
(viii)
The
Securities have been duly authorized and, when issued and delivered pursuant to
this Agreement, will have been duly executed, authenticated, issued and
delivered and will constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the Indentures between the Company
and the Trustee, under which they are to be issued; the Securities will rank
equal in right of payment with all of the Company’s other unsecured and
unsubordinated indebtedness. The
Indentures have been duly authorized and assuming the authorization, execution
and delivery by the Trustee, when executed and delivered by the Company and the
Trustee, each Indenture will constitute a valid and binding instrument,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors’ rights and to general equity principles;
and the Securities and the Indentures will conform to the descriptions thereof
in the Disclosure Package and the Final Offering Memorandum.
(ix)
This
Agreement has been duly authorized, executed and delivered by the Company; and
each Registration Rights Agreement has been duly authorized and, assuming due
authorization, execution and delivery by the Initial Purchasers, when executed
and delivered by the Company, will constitute a valid and binding instrument of
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the Company, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors’ rights and to
general equity principles.
(x)
The confirmations (the “Convertible Note
Hedge Confirmations”) between the Company and Merrill Lynch Financial Markets, Inc.
relating to the OTC convertible note hedge as described in the Disclosure
Package and Final Offering Memorandum and the confirmations (the “Warrant
Transaction Confirmations”) between the Company and Merrill Lynch Financial
Markets, Inc. relating to the OTC warrant transaction described in the
Disclosure Package and Final Offering Memorandum have been duly
authorized and, assuming due authorization, execution and delivery by Merrill Lynch Financial Markets, Inc.,
when executed and delivered by the Company, will constitute valid and binding
instruments of the Company, enforceable in accordance with their terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors’ rights and to
general equity principles.
(xi)
None
of the transactions contemplated by this Agreement (including, without
limitation, the use of the proceeds from the sale of the Securities) will
violate or result in a violation of Section 7 of the 1934 Act, or any
regulation promulgated thereunder, including, without limitation, Regulations
G, T, U, and X of the Board of Governors of the Federal Reserve System.
(xii)
Prior
to the date hereof, neither the Company nor any of its affiliates has taken any
action which is designed to or which has constituted or which might have been
expected to cause or result in stabilization or manipulation of the price of
any security of the Company in connection with the offering of the Securities.
(xiii)
The
issue and sale of the Securities and the compliance by the Company with all of
the provisions of the Securities, the Indentures, the Registration Rights
Agreements, the Convertible Note Hedge Confirmations, the Warrant Transaction
Confirmations, and this Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default or
Repayment Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such action result in
any violation of the provisions of the Certificate of Incorporation or By-laws
of the Company or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Company or
any of its subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such court
or governmental agency or body is required for the issue and sale of the
Securities or the consummation by the Company of the transactions contemplated
by this Agreement, the Registration Rights Agreements, the Indentures, the
Convertible Note Hedge
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Confirmations or the Warrant Transaction
Confirmations, except such consents, approvals, authorizations, registrations
or qualifications as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Securities by the Initial
Purchasers. As used herein, a “Repayment
Event” means any event or condition which gives the holder of any note,
debenture or other evidence of indebtedness (or any person acting on such
holder’s behalf) the right to require the repurchase, redemption or repayment
of all or a portion of such indebtedness by the Company or any of its
subsidiaries.
(xiv)
Neither
the Company nor any of its subsidiaries is in violation of its Certificate of
Incorporation or By-laws or in default in the performance or observance of any
material obligation, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be bound
(collectively, the “Agreements and Instruments”), except, in the case of the
Agreements and Instruments, where such violation or default would not, singly
or in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(xv)
The
statements set forth in the Offering Memorandum under the captions “Description
of the Notes” and “Description of Capital Stock”, insofar as they purport to
constitute a summary of the terms of the Securities and the Common Stock, under
the captions “Material United States Federal Income Tax Consequences”, “Purchase
of Convertible Note Hedge and Sale of Warrant” and “Plan of Distribution”,
insofar as they purport to describe the provisions of the laws and documents
referred to therein, accurately summarize or describe in all material respects
the matters referred to therein.
(xvi)
Other
than as set forth in the Disclosure Package and the Final Offering Memorandum,
there are no legal or governmental proceedings pending to which the Company or
any of its Significant Subsidiaries is a party or of which any property of the
Company or any of its Significant Subsidiaries is the subject which, if
determined adversely to the Company or any of its Significant Subsidiaries,
would individually or in the aggregate have a material adverse effect on the
current or future financial position, stockholders’ equity or results of
operations of the Company and its subsidiaries or on the power or ability of
the Company to perform its obligations under this Agreement, the Indentures,
the Registration Rights Agreements, the Securities, Convertible Note Hedge
Confirmations or the Warrant Transaction Confirmations or to consummate the
transactions contemplated herein and therein; and, to the best of the Company’s
knowledge, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others.
(xvii)
The
Company and its Significant Subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental
Laws”), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and
7
conditions of any such permit,
license or approval, except as described in the Disclosure Package and the
Final Offering Memorandum and except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(xviii)
There
are no costs or liabilities associated with Environmental Laws (including,
without limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws or any
permit, license or approval, any related constraints on operating activities
and any potential liabilities to third parties) which are not described in the
Disclosure Package and Final Offering Memorandum and which would, singly or in
the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(xix)
When
the Securities are issued and delivered pursuant to this Agreement, the
Securities will not be of the same class (within the meaning of Rule 144A
under the 1933 Act) as securities which are listed on a national securities
exchange registered under Section 6 of the 1934 Act or quoted in a U.S.
automated inter-dealer quotation system.
(xx)
The
Company is subject to Section 13 or 15(d) of the 1934 Act.
(xxi)
The
Company is not and, after giving effect to the offering and sale of the
Securities, will not be an “investment company”, as such term is defined in the
United States Investment Company Act of 1940, as amended (the “Investment
Company Act”).
(xxii)
Neither
the Company nor any person acting on its behalf (other than the Initial
Purchasers, as to whom the Company makes no representation) has offered or sold
the Securities by means of any general solicitation or general advertising
within the meaning of Rule 502(c) under the 1933 Act.
(xxiii)
Within
the preceding six months, neither the Company nor any other person acting on
behalf of the Company has offered or sold to any person any Securities, or any
securities of the same or a similar class as the Securities, other than
Securities offered or sold to the Initial Purchasers hereunder. The Company will take reasonable precautions
designed to provide assurance that any offer or sale, direct or indirect, in
the United States or to any U.S. person (as defined in Rule 902 under the
1933 Act) of any Securities or any substantially similar security issued by the
Company, within six months subsequent to the date on which the distribution of
the Securities has been completed (as notified to the Company by the
Representative), is made under restrictions and other circumstances reasonably
designed not to affect the status of the offer and sale of the Securities in
the United States and to U.S. persons contemplated by this Agreement as
transactions exempt from the registration provisions of the 1933 Act.
(xxiv)
To
the Company’s knowledge, KPMG LLP who have certified certain financial
statements of the Company and its subsidiaries, is an independent registered
8
public accounting firm as
required by the 1933 Act and the rules and regulations of the Commission
thereunder.
(xxv)
It
is not necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers in the manner contemplated by this
Agreement to register the Securities under the 1933 Act or to qualify the
Indentures under the Trust Indenture Act of 1939, as amended.
(xxvi)
The
Company and each of its subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (A) transactions
are executed in accordance with management’s general or specific
authorizations; (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (C) access to
assets is permitted only in accordance with management’s general or specific
authorization; and (D) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
Except as described in the Disclosure Package and the Final Offering
Memorandum, since the end of the Company’s most recent audited fiscal year,
there has been (1) no material weakness in the Company’s internal control
over financial reporting (whether or not remediated) and (2) no change in
the Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
The Company and its consolidated subsidiaries employ disclosure
controls and procedures that are designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits under
the 1934 Act is recorded, processed, summarized and reported, within the time
periods specified in the Commission’s rules and forms, and is accumulated
and communicated to the Company’s management, including its principal executive
officer or officers and principal financial officer or officers, as
appropriate, to allow timely decisions regarding disclosure.
(xxvii)
The
Company and its subsidiaries possess such permits, licenses, approvals,
consents and other authorizations (collectively, “Governmental Licenses”)
issued by the appropriate federal, state, local or foreign regulatory agencies
or bodies necessary to conduct the business now operated by them, except where
the failure so to possess would not, singly or in the aggregate, result in a
material adverse change; the Company and its subsidiaries are in compliance
with the terms and conditions of all such Governmental Licenses, except where
the failure so to comply would not, singly or in the aggregate, result in a
material adverse change; all of the Governmental Licenses are valid and in full
force and effect, except where the invalidity of such Governmental Licenses or
the failure of such Governmental Licenses to be in full force and effect would
not, singly or in the aggregate, result in a material adverse change; and neither
the Company nor any of its subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such Governmental Licenses
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a material adverse change.
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(xxviii)
There is
and has been no failure on the part of the Company or, to the knowledge of the
Company, any of the Company’s directors or officers, in their capacities as
such, to comply in all material respects with any provision of the
Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in
connection therewith (the “Sarbanes-Oxley Act”), including Section 402
related to loans and Sections 302 and 906 related to certifications.
(xxix)
To
the knowledge of the directors and officers of the Company, neither the Company
nor any director, officer, agent, employee, affiliate or other person acting on
behalf of the Company or any of its subsidiaries has taken any action, directly
or indirectly, that would result in a violation of the Foreign Corrupt
Practices Act of 1977, as amended, and the rules and regulations
thereunder (the “FCPA”), including, without limitation, making use of the mails
or any means or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay or authorization of the payment of any
money, or other property, gift, promise to give, or authorization of the giving
of anything of value to any “foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any candidate for
foreign political office, in contravention of the FCPA and the Company and, to
the knowledge of the Company, its affiliates have conducted their businesses in
compliance with the FCPA and have instituted and maintain policies and
procedures designed to ensure, and which are reasonably expected to continue to
ensure, continued compliance therewith.
(xxx)
The
operations of the Company are and have been conducted at all times in
compliance in all material respects with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act
of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and
regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency
(collectively, the “Money Laundering Laws”) and no action, suit or proceeding
by or before any court or governmental agency, authority or body or any
arbitrator involving the Company with respect to the Money Laundering Laws is
pending or, to the best knowledge of the Company, threatened.
(b)
Officer’s Certificates
. Any certificate signed by any officer of the
Company or any of its subsidiaries delivered to the Representative or to
counsel for the Initial Purchasers in connection with the transactions
contemplated by this Agreement shall be deemed a representation and warranty by
the Company to each Initial Purchaser as to the matters covered thereby.
Section 2.
Sale
and Delivery to Initial Purchasers; Closing
.
(a)
Initial Securities
. On the basis of the representations,
warranties and agreements herein contained and subject to the terms and
conditions herein set forth, the Company agrees to sell to each Initial
Purchaser, severally and not jointly, and each Initial Purchaser, severally and
not jointly, agrees to purchase from the Company, the principal amount of 2014
Notes set forth opposite the name of such Initial Purchaser in Schedule A
hereto at a purchase price of 97.75% of the aggregate principal amount thereof
and the principal amount of 2016 Notes set forth opposite the name of such
Initial Purchaser in Schedule A hereto at the purchase price of 97.75%
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of the aggregate principal
amount thereof, plus in each case any additional principal amount of Securities
which such Initial Purchaser may become obligated to purchase pursuant to the
provisions of Section 11 hereof.
(b)
Option Securities
. In addition, on the basis of the
representations, warranties and agreements herein contained and subject to the
terms and conditions herein set forth, the Company hereby grants an option to
the Initial Purchasers, severally and not jointly, to purchase up to an
additional $12,500,000 aggregate principal amount of 2014 Notes at a purchase
price of 97.75% of the principal amount thereof, plus accrued and unpaid
interest from the Initial Closing Time to, but excluding, the Option Closing
Time and an additional $12,500,000 aggregate principal amount of 2016 Notes at
a purchase price of 97.75% of the principal amount thereof, plus accrued and
unpaid interest from the Initial Closing Time to, but excluding, the Option
Closing Time. The option hereby granted
will expire 30 days after the date hereof and may be exercised at any time (but
not more than once) upon notice by the Representative to the Company setting
forth the principal amount of Option Securities as to which each Initial
Purchaser is then exercising the option and the time and date of payment and
delivery for such Option Securities. Any
such time and date of delivery (the “Option Closing Time”) shall be determined
by the Representative but shall not be later than seven full business days
after the exercise of said option, nor in any event prior to the Initial
Closing Time, as hereinafter defined.
(c)
Payment
.
Payment of the purchase price for, and delivery of certificates for, the
Initial Securities shall be made at the office of Shearman & Sterling
LLP, 599 Lexington Avenue, New York, New York 10022, or at such other place as
shall be agreed upon by the Representative and the Company, at 9:00 A.M.
(Eastern time) on the fourth business day after the date hereof (unless
postponed in accordance with the provisions of Section 11), or such other
time not later than ten business days after such date as shall be agreed upon
by the Representative and the Company (such time and date of payment and
delivery being herein called the “Initial Closing Time” and the Initial Closing
Time and the Option Closing Time, each being the applicable “Closing Time”).
In addition, in the event that the Initial Purchasers
have exercised their option to purchase all or any of the Option Securities,
payment of the purchase price for, and delivery of one or more global
certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representative
and the Company, on the Option Closing Time as specified in the notice from the
Representative to the Company.
Payment shall be made to the Company by wire transfer
of immediately available funds to a bank account designated by the Company,
against delivery to the Representative for the respective accounts of the
Initial Purchasers of certificates for the Securities to be purchased by
them. It is understood that each Initial
Purchaser has authorized the Representative, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Securities which it has agreed to purchase.
Merrill Lynch, individually and not as representative of the Initial
Purchasers, may (but shall not be obligated to) make payment of the purchase
price for the Securities to be purchased by any Initial Purchaser whose funds
have not been received by Closing Time, but such payment shall not relieve such
Initial Purchaser from its obligations hereunder.
11
(d)
Denominations; Registration
. Global certificates for the Initial
Securities and the Option Securities, if any, shall be registered in the name
of Cede & Co., as nominee of DTC, and shall be in such denominations
($1,000 or integral multiples of $1,000 in excess thereof) as the
Representative may request in writing at least one full business day before the
Initial Closing Time or the Option Closing Time, as the case may be. The global certificates representing the
Initial Securities and the Option Securities, if any, shall be made available
for examination and packaging by the Initial Purchasers in The City of New York
not later than 10:00 A.M. on the last business day prior to the Initial
Closing Time or the Option Closing Time, as the case may be.
Section 3.
Covenants
of the Company
. The Company
covenants with each Initial Purchaser as follows:
(a)
Offering Memorandum
. The Company, as promptly as possible, will
furnish to each Initial Purchaser, without charge, such number of copies of the
Offering Memorandum and any amendments and supplements thereto and documents
incorporated by reference therein as such Initial Purchaser may reasonably
request.
(b)
Notice and Effect of Material Events
. The Company will immediately notify each
Initial Purchaser, and confirm such notice in writing, of (x) any filing
made by the Company of information relating to the offering of the Securities
with any securities exchange or any other regulatory body in the United States
or any other jurisdiction, and (y) prior to the completion of the
placement of the Securities by the Initial Purchasers as evidenced by a notice
in writing from the Initial Purchasers to the Company, any material changes in
or affecting the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company and its subsidiaries considered as
one enterprise which (i) make any statement in the Disclosure Package, any
Offering Memorandum or any Supplemental Offering Materials false or misleading
or (ii) are not disclosed in the Disclosure Package or the Offering
Memorandum. In such event or if during
such time any event shall occur as a result of which it is necessary, in the
reasonable opinion of any of the Company, its counsel, the Initial Purchasers
or counsel for the Initial Purchasers, to amend or supplement the Offering
Memorandum in order that the Offering Memorandum not include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances then existing, the Company will forthwith amend or supplement the
Offering Memorandum by preparing and furnishing to each Initial Purchaser an
amendment or amendments of, or a supplement or supplements to, the Offering
Memorandum (in form and substance satisfactory in the reasonable opinion of
counsel for the Initial Purchasers) so that, as so amended or supplemented, the
Offering Memorandum will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is delivered
to a Subsequent Purchaser, not misleading.
(c)
Amendment and Supplements to the Offering Memorandum;
Preparation of Pricing Supplement; Supplemental Offering Materials
. The Company will advise each Initial
Purchaser promptly of any proposal to amend or supplement the Offering
Memorandum and will not effect such amendment or supplement without the consent
of the Initial Purchasers. Neither the
consent of the Initial Purchasers, nor the Initial Purchasers’ delivery of any
such amendment or supplement, shall constitute a waiver of any of the
conditions set forth in Section 5 hereof.
The
12
Company will prepare the
Pricing Supplement, in form and substance satisfactory to the Representative,
and shall furnish prior to the Applicable Time to each Initial Purchaser,
without charge, as many copies of the Pricing Supplement as such Initial
Purchaser may reasonably request. The
Company represents and agrees that, unless it obtains the prior consent of the
Representative, it has not made and will not make any offer relating to the
Securities by means of any Supplemental Offering Materials.
(d)
Qualification of Securities for Offer and Sale
. Promptly from time to time the Company will
take such action as the Initial Purchasers may reasonably request, consistent
with Section 6 hereof, to qualify the Securities and the shares of Common
Stock issuable upon conversion thereof for offering and sale under the
applicable securities laws of such states and other jurisdictions as the
Initial Purchasers may designate and to maintain such qualifications in effect
as long as required for the sale of the Securities; provided that in connection
therewith the Company shall not be required to qualify as a foreign corporation
in any jurisdiction in which it is not so qualified or to file any general
consent to service of process in any jurisdiction.
(e)
DTC
.
The Company will cooperate with the Initial Purchasers and use its
reasonable best efforts to permit the Securities to be eligible for clearance
and settlement through the facilities of DTC.
(f)
Use of Proceeds
. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified in the
Disclosure Package and the Final Offering Memorandum under the caption “Use of
Proceeds.”
(g)
Restriction on Sale of Securities
. During a period of 60 days from the date of
the Final Offering Memorandum, the Company will not, without the prior written
consent of Merrill Lynch, directly or indirectly, (i) issue, sell, offer
or agree to sell, grant any option for the sale of, or otherwise dispose of,
any other debt securities of the Company or securities of the Company that are
convertible into, or exchangeable for, the offered Securities or such other
debt securities, (ii) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of, lend or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock, or file any
registration statement under the 1933 Act with respect to any of the foregoing
or (iii) enter into any swap or other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, any of the economic consequence
of ownership of the Common Stock, or any securities convertible into or
exchangeable or exercisable for Common Stock, whether any such swap or
transaction described in clause (ii) or (iii) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall
not apply to
(A) the
purchase of call options and the sale of warrants described in the Disclosure
Package and the Final Offering Memorandum, and any transactions in the Company’s
securities contemplated thereby; (B) the Securities to be sold
hereunder or the Common Stock to be delivered upon conversion thereof, (C) the
resale registration statement to be filed by the Company pursuant to the
Registration Rights Agreements relating to the resale of the Securities and the
shares of Common Stock or any other registration statement filed pursuant to
registration rights described in the Disclosure Package and the Final Offering
Memorandum and (D) shares of Common Stock to be issued pursuant to the
Company’s existing employee stock option plans (including reload options)
13
existing on, or upon the
conversion or exchange of convertible or exchangeable securities outstanding as
of, the date hereof.
(h)
PORTAL Designation
. The Company will use its reasonable best
efforts to permit the Securities to be designated PORTAL securities in
accordance with NASDAQ’s rules and regulations relating to trading in the
PORTAL Market.
(i)
Listing on Securities Exchange
. The Company will use its reasonable best
efforts to cause all shares of Common Stock issuable upon conversion of the Securities
to be listed on the New York Stock Exchange or on a “national securities
exchange” registered under Section 6 of the 1934 Act.
(j)
Reporting Requirements
. Until the offering of the Securities is
complete, the Company will file all documents required to be filed with the
Commission pursuant to the 1934 Act within the time periods required by the
1934 Act and the 1934 Act Regulations.
Section 4.
Payment
of Expenses.
(a)
Expenses
.
The Company will pay all expenses incident to the performance of its
obligations under this Agreement, including:
(i) the fees, disbursements and expenses of the Company’s counsel
and accountants in connection with the issue of the Securities and the shares
of Common Stock issuable upon conversion of the Securities and all other
expenses in connection with the preparation, printing and any filing of the
Disclosure Package and any Offering Memorandum and any amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Initial Purchasers and dealers; (ii) the cost of printing or producing
this Agreement, the Indentures, the Registration Rights Agreements, the
Convertible Note Hedge Confirmations, the Warrant Transaction Confirmations,
the Blue Sky and Legal Investment Memoranda, closing documents (including any
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Securities; (iii) all expenses in
connection with the qualification of the Securities and the shares of Common
Stock issuable upon conversion of the Securities for offering and sale under
state securities laws as provided in Section 3(d) hereof, including
the fees and disbursements of counsel for the Initial Purchasers in connection
with such qualification and in connection with the Blue Sky and legal
investment surveys; (iv) any fees charged by securities rating services
for rating the Securities; (v) the cost of preparing the Securities; (vi) the
fees and expenses of the Trustee and any agent of the Trustee and the fees and
disbursements of counsel for the Trustee in connection with the Indentures and
the Securities; (vii) any cost incurred in connection with the designation
of the Securities for trading in PORTAL and the listing of the shares of Common
Stock issuable upon conversion of the Securities and (viii) all other
costs and expenses incident to the performance of its obligations hereunder
which are not otherwise specifically provided for in this Section. It is
understood, however, that, except as provided in this Section and Sections
7 and 8 hereof, the Initial Purchasers will pay all of their own costs and
expenses, including the fees of their counsel.
(b)
Termination of Agreement
. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5 or Section 10(a)(i) hereof,
the Company shall reimburse the Initial Purchasers for their reasonable
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Initial Purchasers.
14
Section 5.
Conditions
of Initial Purchasers’ Obligations
.
The obligations of the several Initial Purchasers hereunder are subject
to the accuracy of the representations and warranties of the Company contained
in Section 1 hereof or in certificates of any officer of the Company or
any of its subsidiaries delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder,
and to the following further conditions:
(a)
Opinion of Counsel for Company
. At the applicable Closing Time, the Initial
Purchasers shall have received (1) the favorable opinion, dated as of such
Closing Time, of Schiff Hardin LLP, counsel for the Company, in form and
substance satisfactory to counsel for the Initial Purchasers, to the effect set
forth in Exhibit A(1) hereto and to such further effect as counsel to
the Initial Purchasers may reasonably request and (2) the favorable
opinion, dated as of such Closing Time, of Howard A. Pulsifer, Esq., General
Counsel for the Company, in form and substance satisfactory to counsel for the
Initial Purchasers, to the effect set forth in Exhibit A(2) hereto
and to such further effect as counsel to the Initial Purchasers may reasonably
request. Such counsel may also state
that, insofar as such opinion involves factual matters, they have relied, to
the extent they deem proper, upon certificates of officers of the Company and
its subsidiaries and certificates of public officials.
(b)
Opinion of Counsel for Initial Purchasers
. At the applicable Closing Time, the Initial
Purchasers shall have received the favorable opinion, dated as of Closing Time,
of Shearman & Sterling LLP, counsel for the Initial Purchasers in form
and substance satisfactory to Merrill Lynch.
In giving such opinion such counsel may rely, as to all matters governed
by the laws of jurisdictions other than the law of the State of New York, the
federal law of the United States and the General Corporation Law of the State
of Delaware, upon the opinions of counsel satisfactory to the
Representative. Such counsel may also
state that, insofar as such opinion involves factual matters, they have relied,
to the extent they deem proper, upon certificates of officers of the Company
and its subsidiaries and certificates of public officials.
(c)
Officers’ Certificate
. At the applicable Closing Time, there shall
not have been, since the date hereof or since the date as of which information
is given in the Final Offering Memorandum (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement), any material
adverse change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course of
business, and the Representative shall have received a certificate of the
President or a Vice President of the Company and of the chief financial or
chief accounting officer of the Company, dated as of such Closing Time, to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1 hereof are true and correct
with the same force and effect as though expressly made at and as of such
Closing Time, and (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior
to such Closing Time.
(d)
Accountants’ Comfort Letter
. At the time of the execution of this
Agreement, the Representative shall have received from KPMG LLP a letter dated
such date, in form and substance satisfactory to the Representative, together
with signed or reproduced copies of such letter for the other Initial
Purchaser, containing statements and information of the type ordinarily
15
included in accountants’ “comfort letters” to
Initial Purchasers with respect to the financial statements and certain
financial information contained in the Offering Memorandum.
(e)
Bring-down Comfort Letter
. At the applicable Closing Time, the
Representative shall have received from KPMG LLP a letter, dated as of such
Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (d) of this Section, except that
the specified date referred to shall be a date not more than three business
days prior to such Closing Time.
(f)
Credit Ratings
. On or after the date hereof (i) no
downgrading shall have occurred in the rating accorded the Company’s debt
securities by any “nationally recognized statistical rating organization,” as
that term is defined by the Commission for purposes of Rule 436(g)(2) under
the 1933 Act, and (ii) no such organization shall have publicly announced
that it has under surveillance or review, with possible negative implications,
its rating of any of the Company’s debt securities.
(g)
PORTAL
.
At the Initial Closing Time, the Securities shall have been designated
for trading on PORTAL.
(h)
Lock-up Agreements
. On the date of this Agreement, the
Representative shall have received “lock-up letters,” in form and substance
satisfactory to it, from named executive officers and directors of the Company,
and such letters shall be in full force and effect at the Closing Time.
(i)
Indentures and Registration Rights Agreements
. At or prior to the Initial Closing Time, the
Company and the Trustee shall have executed and delivered each Indenture, and
the Company and the Representative, on behalf of the Initial Purchasers, shall
have executed and delivered each Registration Rights Agreement, each in a form
satisfactory to the Representative.
(j)
Approval of Listing
. At the Initial Closing Time, the shares of
Common Stock issuable upon conversion of the Securities shall have been
approved for listing on the New York Stock Exchange, subject only to official
notice of issuance.
(k)
Execution and Delivery of Certain Transaction
Documents
. At or prior to the Initial Closing Time, the Company
shall have executed and delivered the Convertible Note Hedge Confirmations and
the Warrant Transaction Confirmations, each in a form satisfactory to the
Representative.
(l)
Additional Documents
. At the applicable Closing Time, counsel for
the Initial Purchasers shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance to the
Representative and counsel for the Initial Purchasers.
(m)
Termination of Agreement
. If any condition specified in this Section shall
not have been fulfilled when and as required to be fulfilled, this Agreement
may be terminated by the
16
Representative by notice to the Company at
any time at or prior to the applicable Closing Time, and such termination shall
be without liability of any party to any other party except as provided in Section 4
and except that Sections 1, 7, 8 and 9 shall survive any such termination
and remain in full force and effect.
Section 6.
Subsequent
Offers and Resales of the Securities
.
(a)
Offer and Sale Procedures
. Each of the Initial Purchasers and the
Company hereby establish and agree to observe the following procedures in
connection with the offer and sale of the Securities:
(i)
Offers
and Sales
. Offers and sales of the
Securities shall only be made to persons whom the offeror or seller reasonably
believes to be qualified institutional buyers, as defined in Rule 144A
under the 1933 Act (“Qualified Institutional Buyers”).
(ii)
No
General Solicitation
. No general
solicitation or general advertising (within the meaning of Rule 502(c) under
the 1933 Act) will be used in the United States in connection with the offering
or sale of the Securities.
(iii)
Purchases
by Non-Bank Fiduciaries
. In the case
of a non-bank Subsequent Purchaser of a Security acting as a fiduciary for one
or more third parties, each third party shall, in the judgment of the Initial
Purchaser, be a Qualified Institutional Buyer.
(iv)
Subsequent
Purchaser Notification
. Each Initial
Purchaser will take reasonable steps to inform, and cause each of its
affiliates, as such term is defined in Rule 501(a) under the 1933 Act
(each, an “Affiliate”), in the United States to take reasonable steps to
inform, persons acquiring Securities from such Initial Purchaser or Affiliate,
as the case may be, in the United States that the Securities (A) have not
been and will not be registered under the 1933 Act, (B) are being sold to
them without registration under the 1933 Act in reliance on Rule 144A or
in accordance with another exemption from registration under the 1933 Act, as
the case may be, and (C) may not be offered, sold or otherwise transferred
except (1) to the Company, (2) outside the United States in
accordance with Regulation S under the 1933 Act, or (3) inside the United
States in accordance with (x) Rule 144A to a person whom the seller
reasonably believes is a Qualified Institutional Buyer that is purchasing such
Securities for its own account or for the account of a Qualified Institutional
Buyer to whom notice is given that the offer, sale or transfer is being made in
reliance on Rule 144A or (y) pursuant to another available exemption
from registration under the 1933 Act.
(v)
Minimum
Principal Amount
. No sale of the
Securities to any one Subsequent Purchaser will be for less than U.S. $1,000
principal amount and no Security will be issued in a smaller principal
amount. If the Subsequent Purchaser is a
non-bank fiduciary acting on behalf of others, each person for whom it is
acting must purchase at least U.S. $1,000 principal amount of the Securities.
(b)
Covenants of the Company
. The Company covenants with each Initial
Purchaser as follows:
17
(i)
Integration
. The Company agrees that it will not and will
cause its Affiliates not to, directly or indirectly, solicit any offer to buy,
sell or make any offer or sale of, or otherwise negotiate in respect of,
securities of the Company of any class if, as a result of the doctrine of “integration”
referred to in Rule 502 under the 1933 Act, such offer or sale would
render invalid (for the purpose of (i) the sale of the Securities by the
Company to the Initial Purchasers, (ii) the resale of the Securities by
the Initial Purchasers to Subsequent Purchasers or (iii) the resale of the
Securities by such Subsequent Purchasers to others) the exemption from the
registration requirements of the 1933 Act provided by Section 4(2) thereof
or by Rule 144A thereunder or otherwise.
(ii)
Rule 144A
Information
. The Company agrees
that, in order to render the offered Securities eligible for resale pursuant to
Rule 144A under the 1933 Act, while any of the offered Securities remain
outstanding, it will make available, upon request, to any holder of offered
Securities or prospective purchasers of Securities the information specified in
Rule 144A(d)(4), unless the Company furnishes information to the Commission
pursuant to Section 13 or 15(d) of the 1934 Act.
(iii)
Restriction
on Repurchases
. Until the expiration
of one year after the original issuance of the offered Securities, the Company
will not, and will cause its Affiliates not to, resell any offered Securities
which are “restricted securities” (as such term is defined under Rule 144(a)(3) under
the 1933 Act), whether as beneficial owner or otherwise (except as agent acting
as a securities broker on behalf of and for the account of customers in the ordinary
course of business in unsolicited broker’s transactions).
(c)
Qualified Institutional Buyer
. Each Initial Purchaser, severally and not
jointly, represents and warrants to, and agrees with, the Company that it is a
Qualified Institutional Buyer and an “accredited investor” within the meaning
of Rule 501(a) under the 1933 Act (an “Accredited Investor”).
Section 7.
Indemnification
.
(a)
Indemnification of Initial Purchasers
. The Company agrees to indemnify and hold
harmless each Initial Purchaser, its Affiliates, its selling agents and each
person, if any, who controls any Initial Purchaser within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act as follows:
(i)
against
any and all loss, liability, claim, damage and expense whatsoever, as incurred,
arising out of any untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Offering Memorandum, the Disclosure Package,
the Final Offering Memorandum (or any amendment or supplement thereto) or any
Supplemental Offering Materials, or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii)
against
any and all loss, liability, claim, damage and expense whatsoever, as incurred,
to the extent of the aggregate amount paid in settlement of any litigation, or
any investigation or proceeding by any governmental agency or body,
18
commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission; provided that (subject to Section 7(d) below)
any such settlement is effected with the written consent of the Company; and
(iii)
against
any and all expense whatsoever, as incurred (including the fees and
disbursements of counsel chosen by Merrill Lynch), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under (i) or (ii) above;
provided
,
however
, that this
indemnity agreement shall not apply to any loss, liability, claim, damage or
expense to the extent arising out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by any Initial Purchaser
through Merrill Lynch expressly for use in any Preliminary Offering Memorandum,
the Disclosure Package, the Final Offering Memorandum (or any amendment or
supplement thereto) or in any Supplemental Offering Materials.
(b)
Indemnification of Company
. Each Initial Purchaser severally agrees to
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in any preliminary offering memorandum,
the Disclosure Package, the Final Offering Memorandum or any Supplemental
Offering Materials in reliance upon and in conformity with written information
furnished to the Company by such Initial Purchaser through Merrill Lynch
expressly for use therein.
(c)
Actions against Parties; Notification
. Each indemnified party shall give notice as
promptly as reasonably practicable to each indemnifying party of any action
commenced against it in respect of which indemnity may be sought hereunder, but
failure to so notify an indemnifying party shall not relieve such indemnifying
party from any liability hereunder to the extent it is not materially
prejudiced as a result thereof and in any event shall not relieve it from any
liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties
indemnified pursuant to Section 7(a) above, counsel to the
indemnified parties shall be selected by Merrill Lynch, and, in the case of
parties indemnified pursuant to Section 7(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may participate at its
own expense in the defense of any such action;
provided
,
however
,
that counsel to the indemnifying party shall not (except with the consent of
the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the
prior
19
written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to
any litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section or Section 8
hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.
(d)
Settlement without Consent if Failure to Reimburse
. If at any time an indemnified party shall
have requested an indemnifying party to reimburse the indemnified party for
fees and expenses of counsel, such indemnifying party agrees that it shall be
liable for any settlement of the nature contemplated by Section 7(a)(ii) effected
without its written consent if (i) such settlement is entered into more
than 45 days after receipt by such indemnifying party of the aforesaid request,
(ii) such indemnifying party shall have received notice of the terms of
such settlement at least 30 days prior to such settlement being entered into
and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
Section 8.
Contribution
. If the indemnification provided for in Section 7
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Initial Purchasers on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided
by clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the
one hand and of the Initial Purchasers on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the
one hand and the Initial Purchasers on the other hand in connection with the
offering of the Securities pursuant to this Agreement shall be deemed to be in
the same respective proportions as the total net proceeds from the offering of
the Securities pursuant to this Agreement (before deducting expenses) received
by the Company and the total underwriting discount received by the Initial
Purchasers, bear to the aggregate initial offering price of the Securities.
The relative fault of the Company on the one hand and
the Initial Purchasers on the other hand shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by the Initial Purchasers and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
20
The Company and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation (even if the Initial Purchasers were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section. The aggregate amount of losses,
liabilities, claims, damages and expenses incurred by an indemnified party and
referred to above in this Section shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission.
Notwithstanding the provisions of this Section, no
Initial Purchaser shall be required to contribute any amount in excess of the
amount by which the total price at which the Securities purchased and sold by
it hereunder exceeds the amount of any damages which such Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
For purposes of this Section, each person, if any, who
controls an Initial Purchaser within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act and each Initial Purchaser’s Affiliates
and selling agents shall have the same rights to contribution as such Initial
Purchaser, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Initial Purchasers’ respective
obligations to contribute pursuant to this Section are several in
proportion to the principal amount of Securities set forth opposite their
respective names in Schedule A hereto and not joint.
Section 9.
Representations,
Warranties and Agreements to Survive
.
All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto shall remain operative and in full force
and effect, regardless of (i) any investigation made by or on behalf of
any Initial Purchaser or its Affiliates or selling agents, any person
controlling any Initial Purchaser, its officers or directors or any person
controlling the Company and (ii) delivery of and payment for the
Securities.
Section 10.
Termination
of Agreement
.
(a)
Termination; General
. The Representative may terminate this
Agreement, by notice to the Company, at any time at or prior to the applicable
Closing Time (i) if there has been, since the time of execution of this
Agreement or since the date as of which information is given in the Preliminary
Offering Memorandum, the Disclosure Package or the Final Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise,
21
whether or not arising in the ordinary course
of business, or (ii) if there has occurred any material adverse change in
the financial markets in the United States or the international financial
markets, any outbreak of hostilities or escalation thereof or other calamity or
crisis or any change or development involving a prospective change in national
or international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Representative,
impracticable or inadvisable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) if trading in any securities of
the Company has been suspended or materially limited by the Commission or the
New York Stock Exchange, or if trading generally on the American Stock
Exchange, the New York Stock Exchange, the NASDAQ Global Selected Market or the
NASDAQ Global Market (or their respective successors) has been suspended or
materially limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or by
order of the Commission, the Financial Institutions Regulatory Authority or any
other governmental authority, or (iv) a material disruption has occurred
in commercial banking or securities settlement or clearance services in the
United States, or (v) if a banking moratorium has been declared by either
Federal or New York authorities.
(b)
Liabilities
. If this Agreement is terminated pursuant to
this Section, such termination shall be without liability of any party to any
other party except as provided in Section 4 hereof, and provided further
that Sections 1, 7, 8 and 9 shall survive such termination and remain in
full force and effect.
Section 11.
Default
by One or More of the Initial Purchasers
.
If one or more of the Initial Purchasers shall fail at the applicable
Closing Time to purchase the Securities which it or they are obligated to
purchase under this Agreement (the “Defaulted Securities”), the Representative
shall have the right, within 24 hours thereafter, to make arrangements for one
or more of the non-defaulting Initial Purchasers, or any other initial
purchasers, to purchase all, but not less than all, of the Defaulted Securities
in such amounts as may be agreed upon and upon the terms herein set forth; if,
however, the Representative shall not have completed such arrangements within
such 24-hour period, then:
(a)
if
the number of Defaulted Securities does not exceed 10% of the aggregate
principal amount of the Securities to be purchased hereunder, each of the
non-defaulting Initial Purchasers shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Initial Purchasers, or
(b)
if
the number of Defaulted Securities exceeds 10% of the aggregate principal
amount of the Securities to be purchased hereunder, this Agreement shall terminate
without liability on the part of any non-defaulting Initial Purchaser.
No action taken pursuant to this Section shall
relieve any defaulting Initial Purchaser from liability in respect of its
default.
In the event of any such default which does not result
in a termination of this Agreement, either the Representative or the Company
shall have the right to postpone the applicable Closing Time for a period not
exceeding seven days in order to effect any required changes in the
22
Offering Memorandum or in any other documents or
arrangements. As used herein, the term “Initial
Purchaser” includes any person substituted for an Initial Purchaser under this
Section.
Section 12.
Tax
Disclosure
. Notwithstanding any
other provision of this Agreement, immediately upon commencement of discussions
with respect to the transactions contemplated hereby, the Company (and each
employee, representative or other agent of the Company) may disclose to any and
all persons, without limitation of any kind, the tax treatment and tax
structure of the transactions contemplated by this Agreement and all materials
of any kind (including opinions or other tax analyses) that are provided to the
Company relating to such tax treatment and tax structure. For purposes of the foregoing, the term “tax
treatment” is the purported or claimed federal income tax treatment of the
transactions contemplated hereby, and the term “tax structure” includes any
fact that may be relevant to understanding the purported or claimed federal
income tax treatment of the transactions contemplated hereby.
Section 13.
Notices
. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the Initial Purchasers shall be
directed to the Representative at 4 World Financial Center, New York, New York
10080, attention of John Fortson, Director, and notices to the Company shall be
directed to it at One AAR Place, 1100 N. Wood Dale Road, Wood Dale, Illinois
60191, attention of Secretary.
Section 14.
No
Advisory or Fiduciary Relationship
.
The Company acknowledges and agrees that (a) the purchase and sale
of the Securities pursuant to this Agreement, including the determination of
the offering price of the Securities and any related discounts and commissions,
is an arm’s-length commercial transaction between the Company, on the one hand,
and several Initial Purchasers on the other hand, (b) in connection with
the offering contemplated hereby and the process leading to such transaction
each Initial Purchaser is and has been acting solely as a principal and is not
the agent or fiduciary of the Company, or its stockholders, creditors, employees
or any other party, (c) no Initial Purchaser has assumed, or will assume,
an advisory or fiduciary responsibility in favor of the Company with respect to
the offering contemplated hereby or the process leading thereto (irrespective
of whether such Initial Purchaser has advised or is currently advising the
Company on other matters) and no Initial Purchaser has any obligation to the
Company with respect to the offering contemplated hereby except the obligations
expressly set forth in this Agreement, (d) the Initial Purchasers and
their respective affiliates may be engaged in a broad range of transactions
that involve interests that differ from those of the Company, and (e) the
Initial Purchasers have not provided any legal, accounting, regulatory or tax
advice with respect to the offering contemplated hereby and the Company has
consulted its own legal, accounting, regulatory and tax advisors to the extent
it deemed appropriate.
Section 15.
Integration
. This Agreement supersedes all prior
agreements and understandings (whether written or oral) between the Company and
the Initial Purchasers, or any of them, with respect to the subject matter
hereof.
Section 16.
Parties
. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchasers and the Company and their respective
successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, firm or
23
corporation, other than the Initial Purchasers and the
Company and their respective successors and the controlling persons and
officers and directors referred to in Sections 7 and 8 and their heirs and
legal representatives, any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provision herein contained. This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
Initial Purchasers and the Company and their respective successors, and said
controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities
from any Initial Purchaser shall be deemed to be a successor by reason merely
of such purchase.
Section 17.
GOVERNING
LAW
. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 18.
TIME. TIME SHALL BE OF THE ESSENCE OF THIS
AGREEMENT. EXCEPT AS OTHERWISE SET FORTH
HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
Section 19.
Xtract
Research LLC
. The Company hereby agrees that the Initial Purchasers may
provide copies of the Preliminary Offering Memorandum and the Final Offering
Memorandum relating to the offering of the Securities and any other agreements
or document relating thereto, including without limitation any registration
rights agreement or trust indentures, but excluding legal opinions and
accountants’ comfort letters, to Xtract Research LLC (“Xtract”) following the completion
of the offering for inclusion in an online research service sponsored by
Xtract, access to which is restricted to “qualified institutional buyers” as
defined in Rule 144A under the 1933 Act.
Section 20.
Counterparts
. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
Section 21.
Effect
of Headings
. The Section headings
herein are for convenience only and shall not affect the construction hereof.
24
If the foregoing is in accordance with your
understanding of our agreement, please sign and return to the Company a
counterpart hereof, whereupon this instrument, along with all counterparts,
will become a binding agreement between the Initial Purchasers and the Company
in accordance with its terms.
|
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Very truly yours,
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AAR CORP.
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By:
|
/s/ Timothy J. Romenesko
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Name: Timothy J. Romenesko
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Title: President and COO
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CONFIRMED AND ACCEPTED,
|
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as of the date first above written:
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MERRILL LYNCH & CO.
|
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MERRILL LYNCH, PIERCE, FENNER & SMITH
|
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INCORPORATED
|
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By:
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/s/ John C. Fortson
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Authorized Signatory
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For itself and as Representative of the other Initial
Purchaser named in Schedule A hereto.
Exhibit A(1)
FORM OF OPINION OF SCHIFF HARDIN LLP
TO BE DELIVERED PURSUANT TO
SECTION 5(a)
(i)
The
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Delaware.
(ii)
The
Company has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Disclosure Package
and the Final Offering Memorandum and to enter into and perform its obligations
under the Purchase Agreement.
(iii)
The authorized capital
stock of the Company is as set forth in the Disclosure Package and the Final
Offering Memorandum;
(iv)
The
Purchase Agreement has been duly authorized, executed and delivered by the
Company.
(v)
Each
Indenture has been duly authorized, executed and delivered by the Company and
(assuming the due authorization, execution and delivery thereof by the Trustee)
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms.
(vi)
Each
Registration Rights Agreement has been authorized by the Company and, when
executed and delivered by the Company and the Representative, will constitute a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms.
(vii)
Each Convertible Note Hedge
Confirmation or Warrant Transaction Confirmation has been authorized by the
Company and, when executed and delivered by the Company and the Representative,
will constitute a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms.
(viii)
The Securities are in the form
contemplated by the respective Indenture, have been duly authorized by the
Company and, when executed by the Company and authenticated by the Trustee in
the manner provided in the respective Indenture (assuming the due
authorization, execution and delivery of the respective Indenture by the
Trustee) and issued and delivered against payment of the purchase price
therefor will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, and will be
entitled to the benefits of the respective Indenture.
(ix)
Upon
issuance and delivery of the Securities in accordance with the Purchase
Agreement and the Indentures, the Securities will be convertible at the option
of the holder thereof into shares of Common Stock, cash or a combination of
cash and shares of Common Stock in accordance with the terms of the Securities
and the Indentures; the shares of Common
Exh A(1) - 1
Stock issuable upon conversion of the Securities have
been duly authorized and reserved for issuance upon such conversion by all
necessary corporate action and such shares, if and when issued upon such
conversion in accordance with the terms of the Securities, will be validly
issued and will be fully paid and non-assessable, and will conform to the
description of the Common Stock contained in the Disclosure Package and the
Final Offering Memorandum; no holder of such shares will be subject to personal
liability by reason of being such a holder; and the issuance of such shares
upon such conversion will not be subject to the preemptive or other similar
rights of any security holder of the Company.
(x)
The
Securities, the Indentures and the Registration Right Agreements conform in all
material respects to the descriptions thereof contained in the Disclosure
Package and the Final Offering Memorandum.
(xi)
The
documents incorporated by reference in the Offering Memorandum (other than the
financial statements and supporting schedules therein, as to which no opinion
need be rendered), when they were filed with the Commission complied as to form
in all material respects with the requirements of the 1934 Act and the rules and
regulations of the Commission thereunder.
(xii)
The information in the
Disclosure Package and in the Final Offering Memorandum under the captions “Description
of the Notes”, “Description of Capital Stock”, “Purchase of Convertible Note
Hedge and Sale of Warrant”, “Material United States Federal Income Tax
Considerations” and “Plan of Distribution” to the extent that it constitutes
matters of law, summaries of legal matters, the Company’s charter and bylaws or
legal proceedings, or legal conclusions, has been reviewed by us and is correct
in all material respects.
(xiii)
No filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or foreign
(other than such as may be required under the applicable securities laws of the
various jurisdictions in which the Securities will be offered or sold, as to
which we need express no opinion) is necessary or required in connection with
the due authorization, execution and delivery of the Purchase Agreement or the
due execution, delivery or performance of the Indentures, the Registration
Rights Agreements, the Convertible Note Hedge Confirmations or the Warrant
Transaction Confirmations by the Company or for the offering, issuance, sale or
delivery of the Securities to the Initial Purchasers or the resale by the
Initial Purchasers in accordance with the terms of the Purchase Agreement,
except, with respect to the Company’s obligations under the Registration Rights
Agreements, the filing of the registration statement with the Commission under
the 1933 Act and the Commission’s declaration of effectiveness of such
registration statement and the qualification of the Indentures under Trust
Indenture Act of 1939, as amended (the “1939 Act”).
(xiv)
It is not necessary in
connection with the offer, sale and delivery of the Securities to the Initial
Purchasers and to each Subsequent Purchaser in the manner contemplated by the
Purchase Agreement, the Disclosure Package and the Final Offering Memorandum to
register the Securities under the 1933 Act or to qualify the Indentures under
the 1939 Act.
Exh A(1) - 2
(xv)
The
execution, delivery and performance of the Purchase Agreement, the Indentures,
the Securities, the Registration Rights Agreements, the Convertible Note Hedge
Confirmations and the Warrant Transaction Confirmations and the consummation of
the transactions contemplated in the Purchase Agreement, the Disclosure Package
and the Final Offering Memorandum (including the use of the proceeds from the
sale of the Securities as described in the Disclosure Package and the Final
Offering Memorandum under the caption “Use of Proceeds” and the issuance of the
shares of Common Stock upon conversion of any Securities) and compliance by the
Company with its obligations under the Purchase Agreement, the Indentures, the
Securities, the Registration Rights Agreements, the Convertible Note Hedge
Confirmations and the Warrant Transaction Confirmations do not and will not,
whether with or without the giving of notice or lapse of time or both, conflict
with or constitute a breach of, or default or Repayment Event under or result
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any subsidiary thereof pursuant to any
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or any other agreement or instrument, filed as an exhibit to the Company’s
Annual Report on Form 10-K for the fiscal year ended May 31, 2007 or
any subsequent 1934 Act filing prior to the date of the Purchase Agreement, to
which the Company or any of its subsidiaries is a party or by which it or any
of them may be bound, or to which any of the property or assets of the Company
or any subsidiary thereof is subject (except for such conflicts, breaches,
defaults or Repayment Events or liens, charges or encumbrances that would not
have a material adverse effect on the Company and its subsidiaries, taken as a
whole), nor will such action result in any violation of the provisions of the
charter or by-laws of the Company, or any applicable law, statute, rule, or regulation,
or any judgment, order, writ or decree, known to us, of any government,
government instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any of its subsidiaries or any of their respective
properties, assets or operations.
(xvi)
The Company is not required,
and upon the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Disclosure
Package and the Final Offering Memorandum will not be required to, register as “investment
company” under the 1940 Act.
Nothing has come to our attention that would lead us
to believe that (1) as of the Applicable Time, the Disclosure Package
(except for the financial statements and schedules and other financial data
included or incorporated by reference therein or omitted therefrom, as to which
we need make no statement) included any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements
therein, in the light of circumstances under which they were made, not
misleading or (2) that the Offering Memorandum or any amendment or
supplement thereto (except for financial statements and schedules and other
financial data included or incorporated by reference therein or omitted
therefrom as to which we need make no statement), at the time the Offering
Memorandum was issued, at the time any such amended or supplemented Offering
Memorandum was issued or at Closing Time, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely, as
to matters of fact (but not as to legal conclusions), to the extent they deem
proper, on certificates of responsible officers of the
Exh A(1) - 3
Company and public officials. Such opinion shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any treatise,
written policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law
(1991).
Exh A(1) - 4
Exhibit A(2)
FORM OF OPINION OF GENERAL COUNSEL
FOR THE COMPANY PURSUANT TO
SECTION 5(a)
(i)
The
Company is duly qualified as a foreign corporation to transact business and is
in good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(ii)
The
shares of issued and outstanding capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; and none
of the outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any security holder of
the Company.
(iii)
Each subsidiary of the
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Disclosure Package and the Final
Offering Memorandum and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a material adverse effect on the
Company and its subsidiaries, taken as a whole; all of the issued and
outstanding capital stock of each subsidiary has been duly authorized and
validly issued, is fully paid and non-assessable and, to the best of my
knowledge and information, is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(iv)
There
is not pending or, to the best of my knowledge, threatened any action, suit,
proceeding, inquiry or investigation, to which the Company or any subsidiary is
a party, or to which the property of the Company or any subsidiary thereof is
subject, before or brought by any court or governmental agency or body, which
would reasonably be expected to result in a material adverse effect on the
Company and its subsidiaries, taken as a whole, or which would reasonably be
expected to materially and adversely affect the properties or assets thereof or
the consummation of the transactions contemplated in the Purchase Agreement or
the performance by the Company of its obligations thereunder or the
transactions contemplated by the Disclosure Package and the Final Offering
Memorandum.
(v)
Neither
the Company nor any of its subsidiaries is in violation of its charter or
by-laws or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which or any of them may be bound, or to which any of the property
or assets of the Company or any of its subsidiaries is subject, except for such
defaults that would not result in a material adverse effect on the Company and
its subsidiaries, taken as a whole.
Exh A(2) - 1
SCHEDULE A
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Name of Initial Purchaser
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Principal
Amount of
2014 Notes
|
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Principal
Amount of
2016 Notes
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Merrill Lynch,
Pierce, Fenner & Smith Incorporated
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$
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118,750,000
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$
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95,000,000
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Stifel,
Nicolaus & Company Incorporated
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6,250,000
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5,000,000
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Total
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$
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125,000,000
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$
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100,000,000
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Sch A-1
SCHEDULE B
Term Sheet
To preliminary offering memorandum dated February 4, 2008
This term sheet relates only to the securities
described below and should be read together with the preliminary offering
memorandum dated February 4, 2008 (including the documents incorporated by
reference in the offering memorandum) relating to these securities.
**APPROVED FOR EXTERNAL USE**
**QIBS ONLY**
~ $225mm Dual Tranche 144A Convertible
Senior Notes Pricing ~
AAR CORP.
(AIR/NYSE)
$125,000,000 1.625% Convertible Senior Notes due 2014
$100,000,000 2.25% Convertible Senior Notes due 2016
Overalloment Option for 2014 Notes: $12,500,000
Overalloment Option for 2016 Notes: $12,500,000
Terms Common to Both Tranches:
Issue
Price:
$1,000.00 per note (100%)
Aggregate
Net Proceeds After Discount and Offering Expenses:
(Before
Overallotment Option):
$219.5
million
(If
Overallotment Option Exercised in Full): $243.9 million
Last Sale
(2/5/2008):
$27.90
Conversion
Premium:
27.5%
Conversion Price: $
35.57, subject to adjustment
Conversion Rate:
28.1116, subject to adjustment
Conversion Rate Cap:
35.8422, subject to adjustment
Interest Pay Dates:
March 1 and September 1, beginning September 1,
2008
Conversion
Trigger Price:
$46.24
Registration:
144A with Registration Rights
Dividend Protection:
Full dividend protection via a conversion
rate adjustment
2014 Note Pricing Terms:
Maturity:
March 1, 2014
Interest
Rate:
1.625% per annum
Make-Whole
Premium upon a Make-Whole Event
: If a make-whole event occurs and a holder elects to convert in
connection with such event, the conversion rate will be increased by a number
of shares. The number of additional
shares will be determined by reference to the following table and is based on
the date on which such make-whole event becomes effective and the price paid,
or deemed paid, per share of common stock on the effective date:
|
Stock Price on
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|
Make Whole Premium Upon Fundamental Change (Increase in Applicable Conversion Rate)
|
|
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Effective Date
|
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2/11/2008
|
|
3/1/2009
|
|
3/1/2010
|
|
3/1/2011
|
|
3/1/2012
|
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3/1/2013
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|
3/1/2014
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$
|
27.90
|
|
7.7307
|
|
7.7307
|
|
7.7307
|
|
7.7307
|
|
7.7307
|
|
7.7307
|
|
7.7307
|
|
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$
|
30.00
|
|
6.6444
|
|
6.7099
|
|
6.7361
|
|
6.6563
|
|
6.4026
|
|
5.7772
|
|
5.2217
|
|
|
$
|
32.50
|
|
5.6079
|
|
5.5943
|
|
5.5300
|
|
5.3424
|
|
4.9634
|
|
4.1629
|
|
2.6576
|
|
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$
|
35.00
|
|
4.7812
|
|
4.7116
|
|
4.5827
|
|
4.3284
|
|
3.8740
|
|
2.9892
|
|
0.4598
|
|
|
$
|
40.00
|
|
3.5729
|
|
3.4374
|
|
3.2402
|
|
2.9216
|
|
2.4189
|
|
1.5529
|
|
0.0000
|
|
|
$
|
50.00
|
|
2.1790
|
|
2.0090
|
|
1.7924
|
|
1.4881
|
|
1.0671
|
|
0.4947
|
|
0.0000
|
|
|
$
|
60.00
|
|
1.4527
|
|
1.2957
|
|
1.1096
|
|
0.8672
|
|
0.5686
|
|
0.2341
|
|
0.0000
|
|
|
$
|
80.00
|
|
0.7641
|
|
0.6522
|
|
0.5360
|
|
0.4012
|
|
0.2582
|
|
0.1267
|
|
0.0000
|
|
|
$
|
100.00
|
|
0.4624
|
|
0.3901
|
|
0.3252
|
|
0.2423
|
|
0.1600
|
|
0.0861
|
|
0.0000
|
|
|
$
|
120.00
|
|
0.3034
|
|
0.2539
|
|
0.2122
|
|
0.1591
|
|
0.1069
|
|
0.0600
|
|
0.0000
|
|
(No
adjustment to the applicable conversion rate below $27.90 or above $120.00)
2016 Note Pricing Terms:
Maturity:
March 1, 2016
Interest
Rate:
2.25% per annum
Make-Whole
Premium upon a Make-Whole Event
: If a make-whole event occurs and a holder elects to convert in
connection with such event, the conversion rate will be increased by a number
of shares. The number of additional
shares will be determined by reference to the following table and is based on
the date on which such make-whole event becomes effective and the price paid,
or deemed paid, per share of common stock on the effective date:
|
Stock Price on
|
|
Make Whole Premium Upon Fundamental Change (Increase in Applicable Conversion Rate)
|
|
|
Effective Date
|
|
2/11/2008
|
|
3/1/2009
|
|
3/1/2010
|
|
3/1/2011
|
|
3/1/2012
|
|
3/1/2013
|
|
3/1/2014
|
|
3/1/2015
|
|
3/1/2016
|
|
|
$
|
27.90
|
|
7.7307
|
|
7.7307
|
|
7.7307
|
|
7.7307
|
|
7.7307
|
|
7.7307
|
|
7.7307
|
|
7.7307
|
|
7.7307
|
|
|
$
|
30.00
|
|
6.7852
|
|
6.6398
|
|
6.9674
|
|
6.9026
|
|
6.8056
|
|
6.6148
|
|
6.2798
|
|
5.6274
|
|
5.2217
|
|
|
$
|
32.50
|
|
5.8775
|
|
5.8666
|
|
5.9091
|
|
5.7728
|
|
5.5859
|
|
5.2909
|
|
4.8260
|
|
3.9843
|
|
2.6576
|
|
|
$
|
35.00
|
|
5.1467
|
|
5.0895
|
|
5.0735
|
|
4.8854
|
|
4.6430
|
|
4.2846
|
|
3.7431
|
|
2.8131
|
|
0.4598
|
|
|
$
|
40.00
|
|
4.0597
|
|
3.9470
|
|
3.8613
|
|
3.6214
|
|
3.3246
|
|
2.9137
|
|
2.3351
|
|
1.4348
|
|
0.0000
|
|
|
$
|
50.00
|
|
2.7506
|
|
2.6063
|
|
2.4773
|
|
2.2298
|
|
1.9382
|
|
1.5684
|
|
1.0983
|
|
0.5121
|
|
0.0000
|
|
|
$
|
60.00
|
|
2.0148
|
|
1.8758
|
|
1.7541
|
|
1.5388
|
|
1.2967
|
|
1.0047
|
|
0.6650
|
|
0.3098
|
|
0.0000
|
|
|
$
|
80.00
|
|
1.2367
|
|
1.1324
|
|
1.0487
|
|
0.9008
|
|
0.7534
|
|
0.5740
|
|
0.3860
|
|
0.1999
|
|
0.0000
|
|
|
$
|
100.00
|
|
0.8689
|
|
0.7780
|
|
0.7242
|
|
0.6172
|
|
0.5185
|
|
0.3968
|
|
0.2721
|
|
0.1457
|
|
0.0000
|
|
|
$
|
120.00
|
|
0.6301
|
|
0.5588
|
|
0.5255
|
|
0.4467
|
|
0.3785
|
|
0.2912
|
|
0.2015
|
|
0.1098
|
|
0.0000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(No
adjustment to the applicable conversion rate below $27.90 or above $120.00)
Convertible Note Hedge and
Warrants:
Net Payment for Purchased Note Hedges
Minus Sold Warrants:
$26.6 million
Shares Underlying Convertible Note
Hedges and Warrants:
Approximately 6.3 million
Exercise Price of Sold Warrants
: 75% higher than
closing stock price
Trade Date: 2/5/2008
Settlement Date (T+4):
2/11/2008
144A CUSIP for 2014 Notes:
000361 AJ4
144A CUSIP for 2016 Notes:
000361 AL9
Sole-Bookrunner:
Merrill Lynch & Co.
Co-Manager: Stifel Nicolaus
**QIBS ONLY**
**APPROVED FOR EXTERNAL USE**
This
communication is intended for the sole use of the person to whom it is provided
by us. This offering is being conducted
in the U.S. pursuant to Rule 144A of the Securities Act 1933, as amended,
and may therefore only be offered to QIBs.
A
written offering memorandum may be obtained from your Merrill Lynch sales
representative, from Merrill Lynch, Pierce, Fenner & Smith
Incorporated, 4 World Financial Center, FL 05, New York, NY 10080 or, in Canada,
from Merrill Lynch Canada Inc., 181 Bay Street-Suite 400, Toronto, Ontario
M4T 2A9.
Exhibit
10.1
EXECUTION COPY
|
Confirmation
of OTC Convertible Note Hedge
|
|
|
|
|
|
Date:
|
February 5, 2008
|
|
|
|
|
To:
|
AAR Corp.
(“
Counterparty
”)
|
|
|
1100 N. Wood Dale Road
Wood Dale, Illinios 60191
|
|
|
Attention:
|
Richard J. Poulton, Chief Financial Officer
|
|
|
Facsimile No.:
|
(630) 227-2039
|
|
|
Telephone No.:
|
(630) 227-2075
|
|
|
|
|
|
|
|
|
|
|
From:
|
Merrill Lynch Financial Markets, Inc.
(“Dealer
”
)
|
|
|
|
|
Dealer Reference:
|
|
|
|
|
Dear Sir / Madam:
|
|
|
|
|
The purpose of this
letter agreement (this “
Confirmation
”
)
is to confirm the terms and conditions of
the above-referenced transaction entered into among Counterparty, Dealer and
Merrill Lynch, Pierce, Fenner & Smith Incorporated
,
(the
“
Agent
”
)
on the Trade Date specified below (the “
Transaction
”). This Confirmation
constitutes a “Confirmation” as referred to in the Agreement specified below.
The definitions and
provisions contained in the 2000 ISDA Definitions (the “
Swap Definitions
”) and the 2002 ISDA
Equity Derivatives Definitions (the “
Equity
Definitions
”
and,
together with the Swap Definitions, the “
Definitions
”),
in
each case as published by the International Swaps and Derivatives Association, Inc.
are incorporated into this Confirmation. In the event of any inconsistency
between the Swap Definitions and the Equity Definitions, the Equity Definitions
will govern, and in the event of any inconsistency between the Definitions and
this Confirmation, this Confirmation will govern. References herein to a
“Transaction” shall be deemed to be references to a “Share Option Transaction”
for purposes of the Equity Definitions and a “Swap Transaction” for the
purposes of the Swap Definitions.
This Confirmation
evidences a complete binding agreement between you and us as to the terms of
the
Transaction to which this Confirmation
relates. This Confirmation (notwithstanding anything to the contrary
herein),
shall be subject to, and form part of, an agreement in the 2002 form of the
ISDA Master Agreement (the “
Master
Agreement
” or “
Agreement
”
)
as if we had executed an agreement in
such form (but without any Schedule and with the
elections specified in the “ISDA Master Agreement” Section of this
Confirmation) on the Trade Date. In the event of any inconsistency between the
provisions of that
Agreement
and this Confirmation, this Confirmation will
prevail for the purpose of this Transaction.
The parties hereby agree
that the Transaction evidenced by this
Confirmation shall be the only Transaction subject to and governed by the
Agreement.
The parties acknowledge
that this Confirmation is entered into on the date hereof with the
understanding that the provisions of the Note Indenture (as defined below) that
are referred to herein will conform to the descriptions thereof in the
Offering Memorandum dated February 5,
2008 (the “
Offering Memorandum
”)
relating to the Reference Notes (as defined below). The parties agree that in the event of any
inconsistency between the Note Indenture and the Offering Memorandum, the
parties will amend this Confirmation in good faith to preserve the intent of
the parties.
The
terms of the particular Transaction to which this Confirmation relates are as
follows:
OTC
Convertible Note Hedge (2014)
General Terms:
|
Trade Date:
|
February 5, 2008
|
|
|
|
|
Effective Date:
|
The date of issuance of
the Reference Notes.
|
|
|
|
|
Option Style:
|
Modified American, as
described under “Settlement Terms” below.
|
|
|
|
|
Option Type:
|
Call
|
|
|
|
|
Seller:
|
Dealer
|
|
|
|
|
Buyer:
|
Counterparty
|
|
|
|
|
Shares:
|
The shares of Common
Stock, $1.00 par value, of Counterparty (Security Symbol: “AIR”) or such
other securities or property (including cash) into which the Reference Notes
are convertible on the date of determination.
|
|
|
|
|
Number of Options:
|
The number of Reference
Notes in denominations of USD1,000 principal amount issued by Counterparty on
the closing date for the initial issuance of the Reference Notes;
provided
that the Number of Options shall be automatically increased as of the date of
exercise by Merrill Lynch, Pierce, Fenner & Smith Incorporated of
the Initial Purchasers’ (as such term is defined in the Purchase Agreement)
option to purchase additional Reference Notes pursuant to
Section 2(b) of the Purchase Agreement related to the purchase and
sale of the Reference Notes dated as of February 5, 2008 among
Counterparty and the Initial Purchasers (the “
Purchase Agreement
”) by the number
of Reference Notes in denominations of USD1,000 principal amount issued
pursuant to such exercise (such Reference Notes, the “
Additional Reference Notes
”).
|
|
|
|
|
Number of Shares:
|
The product of the
Number of Options and the Conversion Rate (as defined in the Note Indenture),
but without regard to any adjustment to the Conversion Rate as a result of
the Excluded Provisions.
|
|
|
|
|
Premium:
|
$31,750,000.00;
provided
that if the Number of Options is increased pursuant to the proviso to the
definition of “Number of Options” above, an additional Premium equal to the
product of the number of Options by which the Number of Options is so
increased and $254 shall be paid on the Additional Premium Payment Date.
|
|
|
|
|
Premium Payment Date:
|
The date of issuance of
the Reference Notes.
|
|
|
|
|
Additional Premium
Payment Date:
|
The closing date for
the purchase and sale of the Additional Reference Notes.
|
|
|
|
|
Exchange:
|
New York Stock
Exchange, Chicago Stock Exchange
|
|
|
|
|
Related Exchange(s):
|
All Exchanges
|
|
|
|
|
Reference Notes:
|
1.625% Convertible
Senior Notes due 2014 of Counterparty
|
2
|
Note Indenture:
|
The indenture, dated as
of closing of the issuance of the Reference Notes, between Counterparty and
U.S. Bank National Association, as trustee relating to the Reference Notes,
as the same may be amended, modified or
supplemented from time to time. Certain defined terms used herein have the
meanings assigned to them in the
Note Indenture.
|
|
|
|
|
Procedures for Exercise:
|
|
|
|
|
|
Potential Exercise
Dates:
|
Each Conversion Date.
|
|
|
|
|
Conversion Date:
|
Each “conversion date”
for any Reference Note pursuant to the terms of the Note Indenture occurring
before the Expiration Date.
|
|
|
|
|
Exercise on Conversion
Dates:
|
On each Conversion
Date, a number of Options equal to the number of Reference Notes in
denominations of USD1,000 principal amount validly submitted for conversion
on such Conversion Date in accordance with the terms of the Note Indenture
shall be automatically exercised;
provided
that
if Counterparty makes the direction described in Section 9.6 of the Note
Indenture for the surrender of any Reference Notes for exchange in lieu of
conversion, such Reference Notes shall be deemed not to have been submitted
for conversion and no Conversion Date shall be deemed to have occurred for
such Reference Notes.
|
|
|
|
|
Exercise Period:
|
The period from and
excluding the Effective Date to and including the Expiration Date.
|
|
|
|
|
Expiration Date:
|
The earliest of
(i) the maturity date of the Reference Notes and (ii) the first day
on which none of such Reference Notes remain outstanding, whether by virtue
of conversion, issuer repurchase or otherwise.
|
|
|
|
|
Multiple Exercise:
|
Applicable, as provided
above under “Required Exercise on Conversion Dates”.
|
|
|
|
|
Minimum Number of
Options:
|
Zero
|
|
|
|
|
Maximum Number of
Options:
|
Number of Options
|
|
|
|
|
Automatic Exercise:
|
As provided above under
“Required Exercise on Conversion Dates”.
|
3
|
Exercise Notice:
|
Notwithstanding the
exercise of any Options hereunder, Buyer shall be entitled to receive the
deliveries provided under “Settlement Terms” below only if Buyer shall have
delivered to Seller a written notice (“
Exercise Notice
”)
prior to 5:00 PM, New York City time, on the “Business Day”, as defined in
the Note Indenture, prior to the first Scheduled Trading Day of the
Conversion Reference Period relating to the Reference Notes converted on the
Conversion Date occurring on the relevant Exercise Date (such time, the “
Notice Deadline
”) of (i) the
number of Options being exercised, (ii) the first Scheduled Trading Day
of the Conversion Reference Period, (iii) the scheduled settlement date
under the Note Indenture for the Reference Notes converted on the Conversion
Date occurring on the Exercise Date for such exercise and (iv) the
applicable Cash Percentage (as defined in the Note Indenture), if any;
provided
that with respect to Reference Notes converted
during the period beginning on February 1, 2014 and ending on the
Business Day immediately preceding the Stated Maturity (as defined in the
Note Indenture) of the Reference Notes, the related Exercise Notice need not
contain the information specified in clause (i) of this sentence and, in
order to exercise any Options hereunder, Buyer shall deliver to Seller prior
to 5:00 p.m. New York City time on the Business Day (as defined in the
Note Indenture) prior to such Stated Maturity a written notice (“
Supplemental Exercise Notice
”)
setting forth the number of Reference Notes converted during such period;
provided further
that, notwithstanding
the foregoing, such notice (and the related automatic exercise of Options)
shall be effective if given after the relevant Notice Deadline but prior to
5:00 PM New York City time, on the fifth Scheduled Trading Day following the
Notice Deadline, in which event (A) the Calculation Agent shall adjust
the Delivery Obligation (as defined below) as appropriate to reflect the
additional costs (including, but not limited to, hedging mismatches and
market losses) and reasonable expenses incurred by Seller in connection with
its hedging activities (including the unwinding of any hedge position) as a
result of its not having received such notice prior to the applicable Notice
Deadline and (B) the Cash Percentage shall be deemed to be zero. If
Buyer wishes to designate a Cash Percentage different from zero, then Buyer
shall represent and warrant in the Exercise Notice that, at the time such
election was made, Buyer has publicly disclosed all material information with
respect to itself and the Shares necessary for Buyer to be able to purchase
or sell Shares in compliance with applicable federal securities laws.
|
|
|
Seller’s Telephone Number and
Telex and/or Facsimile Number
and Contact Details for purpose
of Giving Notice:
|
Address:
Attention:
|
Merrill Lynch Financial
Markets, Inc.
4 World Financial Center, 17
th
Floor
New York, New York 10080
Merrill Lynch Financial Centre
Manager of Equity Documentation
|
|
|
|
Facsimile No.:
|
(917) 778-0835
|
|
|
|
Telephone No.:
|
(212) 449-1951
|
|
|
|
|
|
|
|
Settlement
Terms:
|
|
|
|
|
|
Settlement Date:
|
The settlement date
specified in the Note Indenture for the delivery of Shares upon the
conversion of Reference Notes.
|
4
|
Delivery Obligation:
|
In lieu of the
obligations set forth in Sections 8.1 and 9.1 of the Equity Definitions, and
subject to “Exercise Notice” above, in respect of an Exercise Date occurring
on a Conversion Date, Seller will deliver to Buyer on the related Settlement
Date the product of the number of Options exercised on such Exercise Date and
the sum of (x) the number of Shares, if any, and (y) the amount of
cash, if any, in lieu of the “Remaining Shares”, as defined in the Note
Indenture, in each case, that Buyer is obligated to deliver or pay, as the
case may be, to the holder of a Convertible Note (in the principal amount of
USD1,000) converted on such Conversion Date pursuant to
Section 9.18(a) or Section 9.18(b), as applicable, of the Note
Indenture (such Shares and cash, collectively, the “
Convertible Obligation
”);
provided
that the Delivery Obligation shall be determined
by excluding any Shares (and cash in lieu of fractional Shares) that Buyer is
obligated to deliver to holders of the Reference Notes as a direct or
indirect result of any adjustments to the Conversion Rate pursuant to the
Excluded Provisions of the Note Indenture and any interest payment or
distribution that Buyer is obligated to deliver in respect of References
Notes converted on such Conversion Date (including, for the avoidance of doubt,
any distributed property that Buyer is obligated to deliver in lieu of any
adjustment pursuant to Sections 9.8(c), (d) or (e) of the Note
Indenture);
provided further
that, for
purposes of determining the Delivery Obligation, the Cash Percentage shall be
deemed to be zero if Buyer has not made the representation and warranty
specified in the final sentence under “Exercise Notice” above or if the final
proviso to the first sentence under “Exercise Notice” above is applicable.
Any fractional Shares to be delivered with respect to any Delivery Obligation
shall be valued at the Relevant Price for the last Trading Day (as defined in
the Note Indenture) of the Conversion Reference Period, and Dealer shall
deliver cash in lieu thereof.
|
|
|
|
|
Excluded Provisions:
|
Section 9.12 of
the Note Indenture. Notwithstanding anything to the contrary herein or in the
Equity Definitions, in no event shall any adjustments in respect of any
Potential Adjustment Event or Extraordinary Event be made hereunder as a
result of any adjustments to the Conversion Rate pursuant to the Excluded
Provisions of the Note Indenture.
|
|
|
|
|
Conversion Reference
Period:
|
For any Exercise Date,
the “conversion reference period” as defined in the Note Indenture with
respect to the Conversion Date occurring on such Exercise Date.
|
|
|
|
|
Other Applicable
Provisions:
|
To the extent Seller is
obligated to deliver Shares hereunder, the provisions of Sections 9.1(c),
9.8, 9.9, 9.10, 9.11 (except that the Representation and Agreement contained
in Section 9.11 of the Equity Definitions shall be modified by excluding
any representations therein relating to restrictions, obligations,
limitations or requirements under applicable securities laws as a result of
the fact that Buyer is the issuer of the Shares) and 9.12 of the Equity
Definitions will be applicable as if “Physical Settlement” applied to the
Transaction.
|
5
|
Adjustments:
|
|
|
|
|
|
Method of Adjustment:
|
Calculation Agent
Adjustment; provided that the terms of this Transaction shall be adjusted in
a manner consistent with adjustments of the Conversion Rate of the Reference
Notes as provided in the Note Indenture; provided that no adjustment in
respect of any Potential Adjustment Event or Extraordinary Event shall be made
hereunder as a result of any adjustments to the Conversion Rate pursuant to
the Excluded Provisions of the Note Indenture.
|
|
|
|
|
Potential Adjustment
Event:
|
Notwithstanding
Section 11.2(e) of the Equity Definitions, a “Potential Adjustment
Event” means, subject to the preceding paragraph, the occurrence of an event
or condition that would result in an adjustment of the Conversion Rate of the
Reference Notes pursuant to the Note Indenture.
|
|
|
|
|
Extraordinary
Events:
|
|
|
|
|
|
Merger Events:
|
Notwithstanding Section 12.1(b) of
the Equity Definitions, a “Merger Event” means the occurrence of any event or
condition to which Section 9.14 of the Note Indenture applies.
|
|
|
|
|
Consequences for Merger
Events:
|
|
|
|
|
|
Share-for-Share:
|
The Transaction will be
adjusted in a manner corresponding to the adjustments to the Reference Notes
as provided in the Note Indenture.
|
|
|
|
|
Share-for-Other:
|
The Transaction will be
adjusted in a manner corresponding to the adjustments to the Reference Notes
as provided in the Note Indenture.
|
|
|
|
|
Share-for-Combined:
|
The Transaction will be
adjusted in a manner corresponding to the adjustments to the Reference Notes
as provided in the Note Indenture.
|
|
|
|
|
Notice of Merger
Consideration:
|
Upon the occurrence of
a Merger Event that causes the Shares to be converted into the right to
receive more than a single type of consideration (determined based in part
upon any form of stockholder election), Buyer shall reasonably promptly (but
in any event prior to the third Exchange Business Day prior to the effective
date of such Merger Event) notify the Calculation Agent of the weighted
average of the types and amounts of consideration (a) received by the
holders of Shares entitled to receive cash, securities or other property or
assets with respect to or in exchange for such Shares in any Merger Event who
affirmatively make such an election and (b) selected by holders of the
Reference Notes as the form of consideration into which the Reference Notes
shall be convertible from and after the effective date of such Merger Event.
|
|
|
|
|
Tender Offer:
|
Applicable, subject to
“Consequences of Tender Offers” below. Notwithstanding
Section 12.1(d) of the Equity Definitions, “Tender Offer” means the
occurrence of any event or condition set forth in Section 9.8(f) of
the Note Indenture.
|
|
|
|
|
Consequences of Tender
Offers:
|
The Transaction will be
adjusted in a manner corresponding to the adjustments to the Reference Notes
as provided in the Note Indenture.
|
6
|
Nationalization,
Insolvency and Delisting
:
|
Cancellation and
Payment (Calculation Agent Determination);
provided
that Buyer shall determine whether payment shall be settled in cash or
Shares. In addition to the provisions of Section 12.6(a)(iii) of
the Equity Definitions, it will also constitute a Delisting if the Exchange
is located in the United States and the Shares are not immediately re-listed,
re-traded or re-quoted on any of the New York Stock Exchange, the American
Stock Exchange, the NASDAQ Global Market or the NASDAQ Global Select Market
(or their respective successors); if the Shares are immediately re-listed,
re-traded or re-quoted on any such exchange or quotation system, such
exchange or quotation system shall thereafter be deemed to be the Exchange.
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Additional Disruption
Events:
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Change
in Law:
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Applicable
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Failure
to Deliver:
|
Applicable.
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Insolvency
Filing:
|
Applicable
|
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|
Hedging
Disruption Event:
|
Applicable
|
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|
Increased
Cost of Hedging:
|
Not Applicable
|
|
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|
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Loss
of Stock Borrow:
|
Not Applicable
|
|
|
|
|
Increased Cost
of Stock Borrow:
|
Not Applicable
|
|
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Hedging
Party:
|
Seller
|
|
|
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|
Determining
Party:
|
Seller
|
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|
Non-Reliance:
|
Applicable
|
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|
Agreements and
Acknowledgments Regarding Hedging Activities:
|
Applicable
|
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|
Additional
Acknowledgments:
|
Applicable
|
Additional
Agreements, Representations and Covenants of Buyer, Etc.:
1
.
Buyer
hereby represents and warrants to Seller, on each day from the Trade Date to
and including the earlier of (i) March 5, 2008 and (ii) the date
by which Seller is able to initially complete a hedge of its position relating
to this Transaction, that:
a
.
it
will effect (and cause any “affiliated purchaser” (as defined in Rule 10b-18
promulgated under the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”))
to effect) any
purchases, direct or indirect (including by means of any cash-settled or other
derivative instrument), of Shares
7
or any security convertible into or exchangeable or exercisable for
Shares solely through Agent in a manner that would not cause any purchases by
Seller of its hedge in connection with this
Transaction not to
comply applicable securities laws;
b
.
it
will not engage in, or be engaged in, any “distribution,” as such term is
defined in Regulation M promulgated under the Exchange Act, other than a
distribution meeting the requirements of the
exceptions
set forth in sections 101(b)(10) and
102
(b)(7) of Regulation M (it being understood
that Buyer makes no representation pursuant to this
clause in respect of any action or inaction
taken by Seller or any
initial purchaser of the Reference Notes); and
c.
Buyer
has publicly disclosed all material information necessary for Buyer to be able
to purchase or
sell Shares in compliance
with applicable federal securities laws
.
2
.
If
Buyer would be obligated to pay cash (other than payment of the Premium and
except in the case of an Event of Default in which Buyer is the Defaulting
Party or a Termination Event in which Buyer is the Affected Party, other than
an (x) Event of Default of the type described in Section 5(a)(iii),
(v), (vi) or (vii) of the Master Agreement or (y) a Termination
Event of the type described in Section 5(b)(i), (ii), (iii), (iv), or
(v) of the Master Agreement that in the case of either (x) or
(y) resulted from an event or events outside Buyer’s control) to, or
receive cash from, Seller pursuant to the terms of this Agreement for any
reason without having had the right (other than pursuant to this paragraph (2),
but including (x) the right to deliver Shares under the Note Indenture
upon conversion of the Reference Notes or (y) the right to deliver or
receive Shares in any other document or agreement that would result, directly
or indirectly, in a cash payment hereunder) to elect to deliver or receive Shares
in satisfaction of such payment obligation, then Buyer may elect (by giving
notice to Seller no later than 8 a.m. New York time on the Exchange
Business Day immediately following the date of occurrence of the ezvent giving
rise to such payment obligation) that such payment obligation shall be
satisfied by the delivery of a number of Shares (or, if the Shares have been
converted into other securities or property in connection with an Extraordinary
Event, a number or amount of such other securities or property as a holder of
Shares would be entitled to receive upon the consummation or closing of such
Extraordinary Event) having a cash value equal to the amount of such payment
obligation. Such number of Shares or amount of other securities or property to
be delivered shall be determined by the Calculation Agent to be the number of
Shares or amount of such other securities or property that could be purchased
or sold, as applicable, over a reasonable period of time with the cash
equivalent of or producing the cash equivalent of such payment obligation).
Settlement relating to any delivery of Shares or other securities or property
pursuant to this paragraph (2) shall occur within a reasonable period of
time. Notwithstanding anything herein or
in the Agreement to the contrary, the aggregate number of Shares that
Counterparty may be required to deliver to Dealer under this Transaction shall
not exceed the product of (a) 1.5 and (b) the Number of Shares, as
adjusted by the Calculation Agent to account for any subdivision, stock-split,
stock combination, reclassification or similar dilutive or anti-dilutive event
with respect to the Shares.
3
.
Counterparty
is not, and after giving effect to the Transaction contemplated hereby, will
not be, an “investment company” as such term is defined in the Investment
Company Act of 1940, as amended.
4
.
As
of the Trade Date and each date on which a payment or delivery is made by
Counterparty hereunder, (i) the assets of Counterparty at their fair
valuation exceed the liabilities of Counterparty, including contingent
liabilities; (ii) the capital of Counterparty is adequate to conduct its
business; and (iii) Counterparty has the ability to pay its debts and
other obligations as such obligations mature and does not intend to, or believe
that it will, incur debt or other obligations beyond its ability to pay as such
obligations mature.
5.
The
representations and warranties set forth in Section 1 of the Purchase
Agreement (as defined herein) are hereby deemed to be repeated to Dealer as if
set forth herein.
8
Additional
Termination Events:
The occurrence of an
Amendment Event or a Repayment Event shall be an Additional Termination Event
with respect to which the Transaction is the sole Affected Transaction,
Counterparty is the sole Affected Party and Dealer is the sole party entitled
to designate an Early Termination Date;
provided
that
in the case of a Repayment Event, the Transaction shall be subject to
termination only in respect of the number of Reference Notes that cease to be
outstanding in connection with or as a result of such Repayment Event:
1
.
“
Amendment
Event
” means that the Counterparty, without Dealer’s consent,
amends, modifies, supplements or obtains a waiver of (a) any term of the
Note Indenture (as in effect prior to such amendment, modification, supplement
or waiver) or the Reference Notes relating to the principal amount,
coupon, maturity,
repurchase
obligation of the Counterparty or redemption
right of the Counterparty, (b) any material term relating to conversion of
the Reference Notes, including, without limitation, any changes to the
conversion price,
conversion
settlement dates or conversion conditions or (c) any term that would
require consent of the
holders of 100% of the principal amount of the
Reference Notes to amend.
2
.
“
Repayment Event
” means that (a) any
Reference Notes are repurchased (whether in connection with or as a result of a
fundamental change or change of control, howsoever defined, or for any other
reason) by the Counterparty, (b) any Reference Notes are delivered to the
Counterparty in exchange for delivery of any property or assets of the
Counterparty or any of its subsidiaries (howsoever
described), other than as a result of and in connection
with a Conversion Date, (c) any principal of
any of the Reference Notes is repaid prior to the Stated Maturity (as defined
in the Note Indenture) (whether following acceleration of the Reference Notes
or
otherwise), provided that no
payments of cash made in respect of the conversion of a Reference Note shall
be deemed a payment of principal under this clause
(c), (d) any Reference
Notes
are
exchanged by or for the benefit of the holders thereof for any other securities
of the Counterparty or any of its Affiliates (or any other property, or any
combination thereof) pursuant to any exchange offer or similar transaction or
(e) any of the Reference Notes is surrendered by Counterparty to the
trustee for cancellation, other than registration
of a transfer of such
Reference Notes or as a result of and in connection with a Conversion Date.
3
.
Initial Purchase Event.
If an Initial
Purchase Event (as defined below) occurs, this Transaction shall
terminate automatically in its entirety and,
notwithstanding anything to the contrary herein, only the
payments
specified below shall be required hereunder in connection with such Initial
Purchase Event.
“
Initial Purchase
Event
” means that the transactions contemplated by the Purchase
Agreement shall fail to close for any reason by the closing date for the
offering of the Reference Notes as specified in the Purchase Agreement.
If an Initial Purchase Event occurs for any reason
other than due to a breach of the Purchase Agreement by the Initial Purchasers,
then all payments previously made hereunder shall be returned to the person
making such
payment, including the Premium,
less an amount equal to the product of (a)
the Number of Shares
, (b) 0.50 and
(c) an amount equal to the excess, if any, of the closing price of
the Shares on the Trade Date over the
closing price of the Shares on the
date of the Termination Event (the “
Break
Expense
”); provided that any negative amount shall be replaced
by zero and provided further that to the extent the Premium has not been
paid, Buyer shall promptly pay Seller the Break
Expense. Seller and Buyer agree that actual damages would be difficult to
ascertain under these circumstances and that the amount of liquidated damages
resulting
from the determination in the preceding sentence is a good faith estimate of
such damages and not a penalty.
If an Initial Purchase
Event occurs due to a breach of the Purchase Agreement by the Initial
Purchasers, then all payments previously made hereunder, including the Premium,
promptly shall be returned to the
9
person
making such payment and no payments shall be
required hereunder in connection with such Initial
Purchase Event.
Staggered
Settlement:
If Seller determines
reasonably and in good faith that the number of Shares required to be delivered
to Buyer hereunder on any Settlement Date would exceed 8.0% of all outstanding
Shares, then Seller may, by notice to Buyer
on
or prior to such Settlement Date (a “
Nominal
Settlement Date
”
),
elect
to deliver the Shares comprising the
related
Delivery Obligation on two or more dates (each, a “
Staggered Settlement Date
”
)
or at two or
more times on the
Nominal Settlement Date as follows:
1
.
in such notice, Seller will specify to Buyer the
related Staggered Settlement Dates
(each
of which will be such Nominal Settlement Date and the last of which will be no
later than twenty (20) Trading Days following such Nominal Settlement Date) or
delivery times and how it will allocate the Shares it is required to deliver
hereunder among the Staggered Settlement Dates or delivery times;
2
.
the
aggregate number of Shares that Seller will deliver to
Buyer
hereunder on all such Staggered Settlement Dates or
delivery times will equal the number of Shares that Seller would otherwise be required
to deliver on such Nominal Settlement Date; and
3.
the
procedures set forth above under the heading “
Settlement
Terms” will apply on each Staggered Settlement Date, except that the Shares
comprising the Delivery Obligation will be allocated among such Staggered
Settlement Dates or delivery times as specified by Seller in the notice
referred to in clause (1) above.
Notwithstanding anything
herein to the contrary, solely in connection with a Staggered Settlement Date,
Seller shall be entitled to deliver Shares to Buyer from time to time prior to
the date on which Seller would be obligated to deliver them to Buyer pursuant
to the Delivery Obligation terms set forth above, and Buyer agrees to credit
all such early deliveries against Seller’s obligations hereunder in the direct
order in which such obligations arise. No such early delivery of Shares will
accelerate or otherwise affect any of Buyer’s obligations to Seller hereunder.
Disposition
of Hedge Shares:
Counterparty
hereby agrees that if, in the reasonable judgment of Seller based on advice of
counsel, the
Shares acquired by Seller for the purpose of hedging its obligations
pursuant to the Transaction (the “
Hedge
Shares
”) cannot be sold in the
U.S. public market by Seller without registration under the Securities Act,
Counterparty shall, at its election: (i) in order to allow Seller to sell
the Hedge Shares in a registered
offering, make available to Seller an
effective registration statement under the Securities Act to cover the resale
of such Hedge Shares and (a) enter into an agreement, in form and
substance satisfactory to Seller, substantially in the form of an underwriting
agreement for a registered offering, (b) provide accountant’s “comfort”
letters in customary form for registered offerings of equity securities, (c) provide
disclosure opinions of nationally recognized outside
counsel to Counterparty reasonably acceptable to Seller, (d) provide
other customary opinions, certificates and closing documents customary in form
for registered offerings of equity securities and (e) afford Seller a
reasonable opportunity to conduct a “due diligence” investigation with respect
to Counterparty customary in scope for underwritten offerings of equity
securities;
provided, however,
that
if Seller, in its sole reasonable discretion, is not satisfied with access to
due diligence materials, the results of its due diligence investigation, or the
procedures and
documentation for the registered offering referred to
above, then clause (ii) or clause (iii) of this Section shall
apply at the election of Counterparty; (ii) in order to allow Seller to
sell the Hedge Shares in a private placement, enter into a private placement
agreement substantially similar to private placement purchase agreements
customary for private placements of equity securities, in form and substance
satisfactory to Seller, including customary representations, covenants, blue
sky and other governmental filings and/or registrations, indemnities to Seller,
due diligence rights (for Seller or any designated buyer of the Hedge Shares
from Seller), opinions and certificates and such other documentation as is
customary for private placements agreements, all reasonably acceptable to
Seller (in which case, the Calculation Agent shall make any adjustments to the
terms of the Transaction that are necessary to compensate
10
Seller for any discount
from the public market price of the Shares incurred on the sale of Hedge Shares
in a private
placement); or (iii) purchase
the Hedge Shares from Seller at the VWAP Price on such Exchange Business Days,
and
in such amounts, as requested by Seller. “
VWAP
Price
” means, on any Exchange Business Day, the per Share
volume-weighted average price as displayed under
the heading “Bloomberg VWAP” on Bloomberg page AAR.N
<equity>
VAP (or any successor thereto) in respect of the period from 9:30 a.m. to
4:00 p.m. (New York City time) on such Exchange Business Day (or if such
volume-weighted average price is unavailable, the market value of one Share on
such Exchange Business Day, as determined by the Calculation Agent using a
volume-weighted method).
Repurchase Notices
:
Counterparty shall, on
any day on which Counterparty effects any repurchase of Shares, promptly give
Seller a written notice of such repurchase (a “Repurchase Notice”) on such day
if following such repurchase, the Notice Percentage as determined on such day
is (i) greater than 6% and (ii) greater by 0.5% than the Notice
Percentage included in the immediately preceding Repurchase Notice (or, in the
case of the first such Repurchase Notice, greater than the Notice Percentage as
of the date hereof). In the event that Counterparty fails to provide Seller
with a Repurchase Notice on the day and in the manner specified in this
section, then Counterparty agrees to indemnify and hold harmless Seller, its
affiliates and their respective directors, officers, employees, agents and
controlling persons (Seller and each such person being an “Indemnified Party”)
from and against any and all losses, claims, damages and liabilities (or
actions in respect thereof), joint or several, to which such Indemnified Party
may become subject under applicable securities laws, including without
limitation, Section 16 of the Exchange Act, relating to or arising out of
such failure. If for any reason the foregoing indemnification is unavailable to
any Indemnified Party or insufficient to hold harmless any Indemnified Party,
then Counterparty shall contribute, to the maximum extent permitted by law, to
the amount paid or payable by the Indemnified Party as a result of such loss,
claim, damage or liability. In addition, Counterparty will reimburse any
Indemnified Party for all reasonable and documented expenses (including
reasonable counsel fees and expenses) as they are incurred (after notice to
Counterparty) in connection with the investigation of, preparation for or
defense or settlement of any pending or threatened claim or any action, suit or
proceeding arising therefrom, whether or not such Indemnified Party is a party
thereto and whether or not such claim, action, suit or proceeding is initiated
or brought by or on behalf of Counterparty. This indemnity shall survive the
completion of the Transaction contemplated by this Confirmation and any assignment
and delegation of the Transaction made pursuant to this Confirmation or the
Agreement shall inure to the benefit of any permitted assignee of Seller.
Counterparty will not be liable under this Indemnity provision to the extent
that any loss, claim, damage, liability or expense is found in a final judgment
by a court to have resulted from Dealer’s gross negligence or willful
misconduct. The “Notice Percentage” as of any day is the fraction, expressed as
a percentage, (i) the numerator of which is the product of (a) the
number of outstanding Reference Notes and (b) a number of Shares per
Reference Note equal to the Conversion Rate (as defined in the Note Indenture)
and (ii) the denominator of which is the number of Shares outstanding on
such day.
Conversion Rate Adjustment
Notices
In connection with any
adjustments to the Conversion Rate under the terms of the Note Indenture,
Counterparty shall provide to Dealer a copy of the notice of adjustment
required to be delivered to the Trustee (as defined in the Note Indenture)
pursuant to Section 9.11 of the Note Indenture concurrently with filing of
such notice with the Trustee.
11
|
Compliance
with
Securities Laws:
|
Each party represents
and agrees that, in connection with this Transaction and all related or
contemporaneous sales and purchases of Shares by either party, Buyer, or in
the case of Seller, the person(s) that directly influences the specific
trading decisions of Seller, has complied and will comply with the applicable
provisions of the Securities Act of 1933, as amended (the “
Securities Act
”
),
and the Exchange Act, and the rules and regulations each
thereunder, including, without limitation, Section 9(a) of, and Rules 10b-5 and 13e and
Regulation M under, the Exchange Act; provided that each party shall be
entitled to rely conclusively on any information communicated by the other
party concerning such other party’s market activities.
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|
Each
party acknowledges that the offer and sale of the Transaction to it is
intended to be exempt from registration under the Securities Act by virtue of
Section 4(2) thereof. Accordingly, Buyer represents and warrants to
Seller that (i) it has the financial ability to bear the economic risk
of its investment in the Transaction and is able to
bear a total loss of its investment, (ii) it
is an “accredited investor” as that term is defined in Regulation D as promulgated under the Securities Act and
(iii) the disposition of the
Transaction is restricted under this Confirmation, the Securities Act and
state securities laws.
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|
Buyer
further represents:
|
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|
|
|
(a) Buyer
is not entering into this Transaction to create actual or apparent trading
activity in the Shares (or any security convertible into or exchangeable for
Shares) or to raise or depress or otherwise manipulate the price of the
Shares (or any security convertible into or exchangeable for Shares);
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|
(b) Buyer
acknowledges that as of the date hereof and without limiting the generality
of Section 13.1 of the Equity Definitions, Seller is not making any
representations or
warranties with respect
to the treatment of the Transaction under FASB Statements
149 or 150, EITF Issue No. 00-19 (or any
successor issue statements) or under
FASB’s Liabilities &
Equity Project.
|
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|
|
Account Details:
|
Account
for payments to Buyer:
|
To be
advised
|
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|
|
|
|
|
|
|
Account
for payment to Seller:
|
Merrill Lynch Financial
Markets
|
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|
|
|
Chase Manhattan Bank
|
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ABA# 021000021
|
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Acct# 066642892
|
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Accounts
for deliveries of Shares:
|
To be
advised
|
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|
Bankruptcy Rights:
|
In
the event of Buyer’s bankruptcy, Seller’s rights in connection with this
Transaction
shall not exceed those rights
held by common shareholders. For the avoidance of doubt,
the parties acknowledge and agree that Seller’s
rights with respect to any other claim arising from this Transaction prior to
Buyer’s bankruptcy shall remain in full force and
effect and shall not
be otherwise abridged or modified in connection herewith.
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Set-Off:
|
Each party waives any and all rights it may have to
set-off, whether arising under any
agreement, applicable law or otherwise.
|
|
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|
Collateral:
|
None.
|
12
|
Transfer:
|
Buyer
shall have the right to assign its rights and delegate its obligations
hereunder with
respect to any portion of this Transaction, subject to Seller’s
consent, such consent not to be unreasonably withheld; provided that such
assignment or transfer shall be subject to receipt by Seller of opinions and
documents reasonably satisfactory to Seller and effected on terms reasonably
satisfactory to the Seller with respect to any legal and regulatory
requirements relevant to the Seller; provided further that Buyer shall not be
released from its obligation to deliver any Exercise Notice or its obligations
pursuant to “Disposition of Hedge Shares”, “Repurchase Notices” or
“Conversion Rate Adjustment Notices” above.
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Seller may transfer any
of its rights or delegate its obligations under this Transaction with the
prior written consent of Buyer, such consent not to be unreasonably withheld.
In addition, if, as determined in Seller’s sole discretion, its “beneficial
ownership” (within the meaning of Section 13 of the Exchange Act and
rules promulgated thereunder) could be deemed to exceed 8% of Counterparty’s
outstanding Shares, Seller may, without Counterparty’s consent, transfer or
assign all or any part of its rights or obligations under this Transaction to
reduce such “beneficial ownership” to 7.5% to any third party with a rating
for its (or, if applicable, its Credit Support Provider’s) long term,
unsecured and unsubordinated indebtedness of AA or better by
Standard & Poor’s Ratings Service or its successor (“S&P”), or
Aa3 or better by Moody’s Investors Service (“Moody’s”) or, if either S&P
or Moody’s ceases to rate such debt, at least an equivalent rating or better
by a substitute rating agency mutually agreed by Company and Seller. If after
Seller’s commercially reasonable efforts, Seller is unable to effect such a
transfer or assignment on pricing terms reasonably acceptable to Seller and
within a time period reasonably acceptable to Seller of a sufficient number
of Options to reduce Seller’s “beneficial ownership” (within the meaning of
Section 13 of the Exchange Act and rules promulgated thereunder) to
7.5% of Counterparty’s outstanding Shares or less, Seller 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 will be equal to or less than
7.5%. In the event that Seller so designates an Early Termination Date with
respect to a portion of this Transaction, a payment shall be made pursuant to
Section 6 of the Agreement as if (i) an Early Termination Date had
been designated in respect of a Transaction having terms identical to this
Transaction and a Number of Options equal to the Terminated Portion,
(ii) Counterparty shall be the sole Affected Party with respect to such
partial termination and (iii) such Transaction shall be the only
Terminated Transaction.
|
Matters Relating to Agent:
1
.
Agent
will be responsible for the operational aspects of the Transactions effected
through it, such as record keeping, reporting, and confirming Transactions to
Buyer and Seller;
2
.
Unless
Buyer is a “major U.S. institutional investor,” as defined in Rule 15a-6
of the Exchange Act, neither Buyer nor Seller will contact the other without
the direct involvement of Agent;
3
.
Agent’s
sole role under this Agreement and with respect to any Transaction is as an
agent of Buyer and Seller on a disclosed basis and Agent shall have no
responsibility or liability to Buyer or Seller hereunder except for gross
negligence or willful misconduct in the performance of its duties as agent.
Agent is authorized to act as agent for Buyer, but only to the extent expressly
required to satisfy the requirements of Rule 15a-6 under the Exchange Act
in respect of the Options described hereunder. Agent shall have no authority to
act as agent for Buyer generally or with respect to transactions or other
matters governed by
this Agreement, except to
the extent expressly required to satisfy the requirements of Rule 15a-6 or
in
13
accordance with express instructions from Buyer.
Certain Important Information:
Dealer is an OTC
Derivatives Dealer registered with the U.S. Securities and Exchange Commission
(SEC). Applicable SEC rules require us to provide you with the following
information regarding SEC regulation of OTC Derivatives Dealers: Dealer is
exempt from the provisions of the Securities Investor Protection Act of 1970
(SIPA), including membership in the Securities Investor Protection Corporation
(SIPC). Therefore, your account is not covered by SIPA protection. Except as
otherwise agreed in writing by you and us, Dealer may repledge and otherwise
use in its business collateral you have pledged to Dealer under the Agreement.
Collateral you have pledged to Dealer will not be subject to the requirements
of Securities Exchange Act Rules: 8c-1 and 15c2-1 regarding hypothecation of
collateral; 15c3-2 regarding free credit balances; or 15c3-3 regarding custody
of securities and calculations of a reserve formula applicable to a fully
regulated SEC registered broker or dealer. In the event of Dealer’s failure (by
insolvency or otherwise), you would likely be considered to be an unsecured
creditor of Dealer as to any collateral pledged to Dealer under the Agreement.
Dealer is incorporated in
Delaware and is a direct, wholly owned subsidiary of Merrill Lynch &
Co., Inc. Dealer has entered into this transaction as principal through
Agent as its agent. The time of this Transaction shall be notified to the
Counterparty upon request.
ISDA
Master Agreement:
With respect to the
Agreement, Seller and Counterparty each agree as follows:
“
Specified Entity
”
means in relation to Seller and in
relation to Counterparty for purposes of this Transaction: Not applicable.
“
Specified
Transaction
” has the meaning assigned to such term in Section 14
of this Agreement.
The “
Cross Default
”
provisions of
Section 5(a)(vi)
of
the Agreement will apply to Seller and will apply to Counterparty. For such purpose, “
Threshold
Amount
” means, with respect to Counterparty, USD10,000,000 and, with respect to Seller, three percent of
the consolidated shareholders equity of Merrill Lynch and Co., Inc.
The “
Credit Event Upon Merger
”
provisions of
Section 5(b)(v)
of
the Agreement will not apply to Seller and will not apply to Counterparty.
The “
Automatic Early Termination
”
provision of
Section 6(a)
of
the Agreement will not apply to Seller or to
Counterparty.
“
Termination Currency
”
means USD.
Tax
Representations.
(a)
Payer Representations.
For the purpose of Section 3(e) of the
Agreement, each party represents to the other party that it is not required by
any applicable law, as modified by the practice of any relevant governmental
revenue authority, of any Relevant Jurisdiction to make any deduction or
withholding for or
on account of any Tax from any payment (other than
interest under Section 2(e), 6(d)(ii), or 6(e) of the
Agreement) to be made by it to the other party
under the Agreement. In making this representation, each party may rely on (i) the
accuracy of any representations made by the other party pursuant to Section 3(f) of
the Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or
4(a)(iii) of the Agreement, and the accuracy and effectiveness of any
document provided by the other party pursuant to Section 4(a)(i) or
4(a)(iii) of the Agreement, and (iii) the satisfaction of the
agreement of the other party contained in Section 4(d) of the
Agreement; provided that it will not be a breach of this representation where
reliance is placed on clause (ii) above and the other party does not
deliver a form or document
14
under
Section 4(a)(iii) of the Agreement by reason of
material prejudice to its legal or commercial position.
(b)
Payee
Representations.
For the purpose of Section 3(f) of the
Agreement, each party makes the following representations to the other party:
(i)
Dealer
represents that it is a company incorporated in a jurisdiction within the
United States.
(ii)
Counterparty
represents that it is a corporation incorporated in Delaware.
Delivery
Requirements.
For the purpose of
Sections 4(a)(i)
and
(ii)
of the Agreement, each party agrees to deliver the following
documents:
(a)
Tax
forms, documents or certificates to be delivered are:
Dealer agrees to complete
(accurately and in a manner reasonably satisfactory to Counterparty), execute,
and deliver to Counterparty, United States Internal Revenue Service Form W-9
and all required attachments, or any successor of such form(s): (i) before
the first payment date under this agreement; (ii) promptly upon reasonable
demand by Counterparty; and (iii) promptly upon learning that any such Form previously
provided by Dealer has become obsolete or incorrect.
Counterparty agrees to
complete (accurately and in a manner reasonably satisfactory to Dealer),
execute, and deliver to Dealer, United States Internal Revenue Service Form W-9
or W-8 BEN, or any successor of such form(s): (i) before the first payment
date under this agreement; (ii) promptly upon reasonable demand by Dealer;
and (iii) promptly upon learning that any such form(s) previously
provided by Counterparty has become obsolete or incorrect.
(b)
Other documents to be
delivered:
|
Party Required to
Deliver Document
|
|
Document Required to be Delivered
|
|
When Required
|
|
Covered by
Section 3(d)
Representation
|
|
Counterparty and
Dealer
|
|
Evidence of the
authority and true signatures of each official or representative signing this
Confirmation
|
|
Upon or before
execution and delivery of this Confirmation
|
|
Yes
|
|
Counterparty
|
|
Certified copy
of the resolution of the Board of Directors or equivalent document
authorizing the execution and delivery of this Confirmation and such other
certificates as Seller shall reasonably request
|
|
Upon or before
execution and delivery of this Confirmation
|
|
Yes
|
|
Dealer
|
|
Guarantee of its
Credit Support Provider, substantially in the form of Exhibit A attached
hereto, together with evidence of the authority and true signatures of the
signatories, if applicable
|
|
Upon or before
execution and delivery of this Confirmation
|
|
No
|
Additional Notice Requirements.
Counterparty hereby agrees to promptly deliver to
Seller a copy of all notices and other communications required or permitted to
be given to the holders of any Reference Notes pursuant to the terms of the
Note Indenture on the dates so required or permitted in the Note Indenture and
all other notices given
and other
communications made by Counterparty in respect of the Reference Notes to
holders of any Reference
Notes. Counterparty further covenants to Seller
that it shall promptly notify Seller of each Conversion Date,
Amendment Event
15
(including in such notice
a detailed description of any such amendment) and Repayment Event (identifying
in such notice the nature of such Repayment Event and the principal amount at
maturity of Reference Notes being paid).
|
Addresses for Notices.
For
the purpose of
Section 12(a)
of the Agreement:
|
|
|
|
Address for notices or
communications to Seller for all purposes:
|
|
|
|
|
Address:
|
Merrill Lynch Financial Markets, Inc.
|
|
|
|
4 World Financial Center, 17
th
Floor
|
|
|
|
New York, New York 10080
|
|
|
|
Merrill Lynch Financial Centre
|
|
|
Attention:
|
Manager of Equity Documentation
|
|
|
Facsimile No.:
|
(917) 778-0835
|
|
|
Telephone No.:
|
(212) 449-1951
|
|
|
|
|
|
Additionally, a copy of
all notices pursuant to
Sections 5
,
6
, and
7
as well as
any changes to Counterparty’s address, telephone number or facsimile number
should be sent to:
|
|
Address:
|
Merrill Lynch Financial
Markets, Inc.
|
|
|
|
|
4 World Financial
Center, 17
th
Floor
|
|
|
|
|
New York, New York
10080
|
|
|
|
|
Merrill Lynch Financial
Centre
|
|
|
|
Attention:
|
Manager of Equity
Documentation
|
|
|
|
Facsimile No.:
|
(917) 778-0835
|
|
|
|
Telephone No.:
|
(212) 449-1951
|
|
Address
for notices or communications to Counterparty for all purposes:
|
|
Address:
|
AAR CORP.
|
|
|
|
1100
N.
Wood Dale
Road
|
|
|
|
Wood Dale, Illinois 60191
|
|
|
Attention:
|
Richard J. Poulton,
Chief Financial Officer
|
|
|
Facsimile No.:
|
(630) 227-2039
|
|
|
Telephone No.:
|
(630) 227-2075
|
In addition, in the case
of notices or communications relating to
Section 5
,
6
,
11
or
13
of this Agreement, a second copy of any such notice or
communication shall be addressed to the attention of Counterparty’ General
Counsel as follows:
|
|
Address:
|
AAR CORP.
|
|
|
|
1100 N.
Wood Dale Road
|
|
|
|
Wood Dale, Illinois 60191
|
|
|
Attention:
|
General Counsel’s Office
|
|
|
Facsimile
No.:
|
(630) 227-2058
|
|
|
Telephone
No.:
|
(630) 227-2000
|
Process
Agent.
For the purpose
of Section 13(c) of the Agreement, Seller appoints as its Process
Agent:
|
|
Address:
|
Merrill Lynch, Pierce,
Fenner & Smith Incorporated
|
|
|
|
|
222 Broadway, 16th
Floor
|
|
|
|
|
New York, New York
10038
|
|
|
|
|
|
|
|
|
Attention:
|
Litigation Department
|
|
16
|
|
Counterparty does not
appoint a Process Agent.
|
|
Multibranch Party.
|
For
the purpose of
Section 10(c)
of the Agreement: Neither
Seller nor Counterparty is a
Multibranch Party.
|
|
|
|
|
Calculation Agent.
|
Seller;
provided
that
all determinations made by the Calculation Agent shall be made in good faith
and in a commercially reasonable manner.
|
Credit
Support Document.
Seller: Guarantee of
Merrill Lynch & Co., Inc. in the form attached hereto as Exhibit A.
Counterparty: Not Applicable
Credit
Support Provider.
With
respect to Seller:
Merrill Lynch & Co., Inc.
With respect to
Counterparty: Not Applicable.
Governing
Law.
This
Confirmation will be governed by, and construed in accordance with, the laws of
the State of New York.
Submission to Jurisdiction
. Each party hereby irrevocably and
unconditionally submits for itself and its property in any legal action or
proceeding by the other party against it relating to the Transaction to which
it is a party, or for recognition and enforcement of any judgment in respect
thereof, to the exclusive jurisdiction of the Supreme Court of the State of New
York, sitting in New York County, the courts of the United States of America
for the Southern District of New York, and appellate courts from any of the
foregoing.
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.
Netting
of Payments.
The provisions of
Section 2(c)
of
the Agreement shall not be applicable to this Transaction.
Basic
Representations.
Section 3(a)
of the
Agreement is hereby amended by the deletion of “and” at the end of
Section 3(a)(iv);
the substitution of a semicolon for the period at the end of
Section 3(a)(v)
and
the addition of
Sections 3(a)(vi),
as follows:
Eligible
Contract Participant; Line of Business.
Each
party agrees and represents that it is an “eligible contract participant” as
defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended
(
“
CEA
”
),
this Agreement and the Transaction
thereunder are subject to individual negotiation by the parties and have not been
executed or traded on a “trading facility” as defined in Section 1a(33) of
the CEA, and it has entered into this Confirmation and this Transaction in
connection with its business or a line of business (including financial
intermediation), or the financing of its business.
Acknowledgements:
(a)
The parties acknowledge and agree that there are no
other representations, agreements or other
undertakings of the parties
in relation to this Transaction, except as set forth in this Confirmation.
17
(b)
The
parties hereto intend for:
(i)
Seller
to be a “financial institution” as defined in Section 101(22) of Title 11
of the United States Code (the “
Bankruptcy
Code
”
)
and this
Transaction to be a “securities contract” as defined in Section 741(7) of
the Bankruptcy Code
and a “swap agreement” as defined in Section 101(53C)
of the Bankruptcy Code,
qualifying
for the protections of, among other sections, Sections 362(b)(6), 362 (b)(17),
546(e), 546(g), 555 and 560 of the Bankruptcy Code;
(ii)
a
party’s right to liquidate this Transaction and to exercise any other remedies
upon the occurrence of any Event of Default under the Agreement with respect to
the other party to constitute a “contractual right” as defined in the
Bankruptcy Code;
(iii)
all
payments for, under or in connection with this Transaction, all payments for
the Shares and the
transfer of such Shares to constitute “settlement payments” as defined in the
Bankruptcy Code.
Amendment of Section 6(d)(ii).
Section 6(d)(ii)
of the Agreement is modified by deleting the words
“on the day”
in the second line thereof and substituting therefore “on
the day that is three Local Business Days after the day.”
Section 6(d)(ii)
is
further modified by deleting the words “two Local Business Days” in the fourth
line thereof and substituting therefore “three Local Business Days.”
Consent
to Recording.
Each party consents to the recording of the
telephone conversations of trading and marketing personnel of the parties and
their Affiliates in connection with this Confirmation. To the extent that one
party records telephone conversations (the “Recording Party”) and the other
party does not (the “Non-Recording
Party”), the Recording Party shall in the
event of any dispute, make a complete and unedited copy of such party’s tape of
the entire day’s conversations with the Non-Recording Party’s personnel
available to the Non-Recording Party. The Recording Party’s tapes may be used
by either party in any forum in which a dispute is sought to be resolved and
the Recording Party will retain tapes for a consistent period of time in
accordance with the Recording Party’s policy unless one party notifies the
other that a particular transaction is under review and warrants further
retention.
Disclosure.
Each party hereby acknowledges and agrees that Seller has
authorized Counterparty to disclose this Transaction and any related hedging
transaction between the parties if and to the extent that Counterparty
reasonably
determines (after consultation
with Seller) that such disclosure is required by law or by the rules of
the New York Stock Exchange or
any securities exchange. Notwithstanding the foregoing, effective from
the date of commencement of discussions concerning the Transaction, Counterparty
and each of its employees, representatives, or other agents may disclose to any
and all persons, without limitation of any kind, the tax treatment and tax
structure of the Transaction and all materials of any kind (including opinions
or other tax analyses) that are provided to Counterparty relating to such tax
treatment and tax structure.
Severability.
If any term, provision, covenant or condition of this Confirmation, or
the application thereof to any
party or circumstance, shall be held to
be invalid or unenforceable in whole or in part for any reason, the remaining
terms, provisions, covenants, and conditions hereof shall continue in full
force and effect as if this Confirmation had been executed with the invalid or
unenforceable provision eliminated, so long as this Confirmation as so modified
continues to express, without material change, the original intentions of the
parties as to the subject matter of this
Confirmation
and the deletion of such portion of this Confirmation will not substantially impair
the respective benefits or expectations of parties to this Agreement;
provided,
however,
that this severability provision shall not be
applicable if
any provision of
Section 2
,
5
,
6
or
13
of the
Agreement (or any definition or provision in
Section 14
to the
extent that it relates to, or is used in or in connection with any such
Section) shall be so held to be invalid or unenforceable.
Affected
Parties.
For purposes of
Section 6(e)
of the
Agreement, each party shall be deemed to be an Affected Party in connection
with Illegality and any Tax Event.
[
Signatures follow on separate page
]
18
Please confirm that the
foregoing correctly sets forth the terms of our agreement by executing the copy
of this Confirmation enclosed for that purpose and returning it to us.
|
|
Very truly yours,
|
|
|
|
|
|
MERRILL LYNCH FINANCIAL MARKETS, INC.
|
|
|
|
|
|
By:
|
/s/ Fran
Jacobson
|
|
|
|
Name: Fran
Jacobson
|
|
|
Title:
Authorized Signatory
|
|
Confirmed as of the
date first above written:
|
|
|
|
AAR CORP.
|
|
|
|
|
|
By:
|
/s/ Timothy
J. Romenesko
|
|
|
Name: Timothy J.
Romenesko
|
|
Title:
President & COO
|
|
|
|
|
|
Acknowledged and agreed
as to matters to the Agent:
|
|
|
|
MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED
|
|
|
|
|
|
Solely in its capacity
as Agent hereunder
|
|
|
|
By:
|
/s/
Angelina Lopes
|
|
|
Name: Angelina Lopes
|
|
Title: Authorized
Signatory
|
EXHIBIT A
GUARANTEE
OF MERRILL LYNCH & CO., INC.
FOR VALUE
RECEIVED, receipt of which is hereby acknowledged, MERRILL LYNCH &
CO., INC., a corporation duly organized and existing under the laws of the
State of Delaware (“ML & Co.”), hereby unconditionally guarantees to
AAR Corp. (the “Company”), the due and punctual payment of any and all amounts
payable by Merrill Lynch Financial Markets, Inc., a company incorporated
in Delaware (“ML”), under the terms of the Confirmation of OTC Convertible Note
Hedge between the Company and ML (ML as Seller), dated as of February 5,
2008, with respect to the Reference Notes (as defined therein) of Company due
2014 (the “Confirmation”), including, in case of default, interest on any
amount due, when and as the same shall become due and payable, whether on the
scheduled payment dates, at maturity, upon declaration of termination or
otherwise, according to the terms thereof.
In case of the failure of ML punctually to make any such payment, ML &
Co. hereby agrees to make such payment, or cause such payment to be made,
promptly upon demand made by the Company to ML & Co.; provided,
however that delay by the Company in giving such demand shall in no event
affect ML & Co.’s obligations under this Guarantee. This Guarantee shall remain in full force and
effect or shall be reinstated (as the case may be) if at any time any payment
guaranteed hereunder, in whole or in part, is rescinded or must otherwise be
returned by the Company upon the insolvency, bankruptcy or reorganization of ML
or otherwise, all as though such payment had not been made.
ML & Co.
hereby agrees that its obligations hereunder constitute a guarantee of payment
when due and not of collection and that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of
the Confirmation; the absence of any action to enforce the same; any waiver or
consent by the Company concerning any provisions thereof; the rendering of any
judgment against ML or any action to enforce the same; or any other
circumstances that might otherwise constitute a legal or equitable discharge of
a guarantor or a defense of a guarantor.
ML covenants that this guarantee will not be discharged except by
complete payment of the amounts payable under the Confirmation. This Guarantee shall continue to be effective
if ML merges or consolidates with or into another entity, loses its separate
legal identity or ceases to exist.
ML & Co.
shall not exercise any rights that it may acquire by way of subrogation as a
result of a payment by it under this Guarantee at any time when any of the
obligations of ML shall have become due and remain unpaid. Any amount paid to
ML & Co. in violation of the preceding sentence shall be held for the
benefit of the Company and shall forthwith be paid to the Company to be
credited and applied to such obligations of ML then due and unpaid. Subject to the foregoing, upon payment of all
such obligations of ML, ML & Co. shall be subrogated to the rights of
the Company against ML, and the Company agrees to take at ML & Co.’s
expense such steps as ML &Co. may reasonably request to implement such
subrogation.
ML & Co.
hereby waives diligence; presentment; protest; notice of protest, acceleration,
and dishonor; filing of claims with a court in the event of insolvency or
bankruptcy of ML; all demands whatsoever, except as noted in the first
paragraph hereof; and any right to require a proceeding first against ML.
ML & Co.
hereby certifies and warrants that this Guarantee constitutes the valid
obligation of ML & Co. and
complies with all applicable laws.
This Guarantee
shall be governed by, and construed in accordance with, the laws of the State
of New York.
This Guarantee
becomes effective concurrent with the effectiveness of the Confirmation,
according to its terms.
IN WITNESS WHEREOF, ML &
Co. has caused this Guarantee to be executed in its corporate name by its duly
authorized representative.
|
|
MERRILL
LYNCH & CO., INC.
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Patricia Kropiewnicki
|
|
|
|
|
Name:
Patricia Kropiewnicki
|
|
|
|
Title:
Designated Signatory
|
|
|
|
Date:
February 6, 2008
|
Exhibit
10.2
EXECUTION
COPY
Confirmation
of OTC Convertible Note Hedge
Date: February 5, 2008
To:
AAR
Corp.
(“
Counterparty
”)
1100
N. Wood Dale Road
Wood
Dale, Illinois 60191
Attention:
Richard J. Poulton, Chief Financial Officer
Facsimile
No.: (630) 227-2039
Telephone
No.: (630) 227-2075
From:
Merrill Lynch Financial Markets, Inc.
(“
Dealer
”
)
Dealer Reference:
Dear Sir / Madam:
The purpose of this
letter agreement (this “
Confirmation
”
)
is to confirm the terms and conditions of
the above-referenced transaction entered into among Counterparty, Dealer and
Merrill Lynch, Pierce, Fenner & Smith Incorporated
,
(the
“
Agent
”
)
on the Trade Date specified below (the “
Transaction
”). This Confirmation
constitutes a “Confirmation” as referred to in the Agreement specified below.
The definitions and
provisions contained in the 2000 ISDA Definitions (the “
Swap Definitions
”) and the 2002 ISDA
Equity Derivatives Definitions (the “
Equity
Definitions
”
and,
together with the Swap Definitions, the “
Definitions
”),
in
each case as published by the International Swaps and Derivatives Association, Inc.
are incorporated into this Confirmation. In the event of any inconsistency
between the Swap Definitions and the Equity Definitions, the Equity Definitions
will govern, and in the event of any inconsistency between the Definitions and
this Confirmation, this Confirmation will govern. References herein to a
“Transaction” shall be deemed to be references to a “Share Option Transaction”
for purposes of the Equity Definitions and a “Swap Transaction” for the
purposes of the Swap Definitions.
This Confirmation
evidences a complete binding agreement between you and us as to the terms of
the
Transaction to which this Confirmation
relates. This Confirmation (notwithstanding anything to the contrary
herein),
shall be subject to, and form part of, an agreement in the 2002 form of the
ISDA Master Agreement (the “
Master
Agreement
” or “
Agreement
”
)
as if we had executed an agreement in
such form (but without any Schedule and with the
elections specified in the “ISDA Master Agreement” Section of this
Confirmation) on the Trade Date. In the event of any inconsistency between the
provisions of that
Agreement
and this Confirmation, this Confirmation will
prevail for the purpose of this Transaction.
The parties hereby agree
that the Transaction evidenced by this
Confirmation shall be the only Transaction subject to and governed by the
Agreement.
The parties acknowledge
that this Confirmation is entered into on the date hereof with the
understanding that the provisions of the Note Indenture (as defined below) that
are referred to herein will conform to the descriptions thereof in the
Offering Memorandum dated February 5,
2008 (the “
Offering Memorandum
”)
relating to the Reference Notes (as defined below). The parties agree that in the event of any
inconsistency between the Note Indenture and the Offering Memorandum, the
parties will amend this Confirmation in good faith to preserve the intent of
the parties.
The
terms of the particular Transaction to which this Confirmation relates are as
follows:
OTC
Convertible Note Hedge (2016)
General Terms:
|
Trade Date:
|
|
February 5, 2008
|
|
|
|
|
|
Effective Date:
|
|
The date of issuance of
the Reference Notes.
|
|
|
|
|
|
Option Style:
|
|
Modified American, as
described under “Settlement Terms” below.
|
|
|
|
|
|
Option Type:
|
|
Call
|
|
|
|
|
|
Seller:
|
|
Dealer
|
|
|
|
|
|
Buyer:
|
|
Counterparty
|
|
|
|
|
|
Shares:
|
|
The shares of Common
Stock, $1.00 par value, of Counterparty (Security Symbol: “AIR”) or such
other securities or property (including cash) into which the Reference Notes
are convertible on the date of determination.
|
|
|
|
|
|
Number of Options:
|
|
The number of Reference
Notes in denominations of USD1,000 principal amount issued by Counterparty on
the closing date for the initial issuance of the Reference Notes;
provided
that the Number of Options shall be automatically increased as of the date of
exercise by Merrill Lynch, Pierce, Fenner & Smith Incorporated of
the Initial Purchasers’ (as such term is defined in the Purchase Agreement)
option to purchase additional Reference Notes pursuant to
Section 2(b) of the Purchase Agreement related to the purchase and
sale of the Reference Notes dated as of February 5, 2008 among
Counterparty and the Initial Purchasers (the “
Purchase Agreement
”) by the
number of Reference Notes in denominations of USD1,000 principal amount
issued pursuant to such exercise (such Reference Notes, the “
Additional Reference Notes
”).
|
|
|
|
|
|
Number of Shares:
|
|
The product of the
Number of Options and the Conversion Rate (as defined in the Note Indenture),
but without regard to any adjustment to the Conversion Rate as a result of
the Excluded Provisions.
|
|
|
|
|
|
Premium:
|
|
$30,890,000;
provided
that if the Number of Options is increased pursuant to the proviso to the
definition of “Number of Options” above, an additional Premium equal to the
product of the number of Options by which the Number of Options is so
increased and $308.90 shall be paid on the Additional Premium Payment Date.
|
|
|
|
|
|
Premium Payment Date:
|
|
The date of issuance of
the Reference Notes.
|
|
|
|
|
|
Additional Premium
Payment Date:
|
|
The closing date for
the purchase and sale of the Additional Reference Notes.
|
|
|
|
|
|
Exchange:
|
|
New York Stock
Exchange, Chicago Stock Exchange
|
|
|
|
|
|
Related Exchange(s):
|
|
All Exchanges
|
|
|
|
|
|
Reference Notes:
|
|
2.25% Convertible
Senior Notes due 2016 of Counterparty
|
2
|
Note Indenture:
|
|
The indenture, dated as
of closing of the issuance of the Reference Notes, between Counterparty and
U.S. Bank National Association, as trustee relating to the Reference Notes,
as the same may be amended, modified or
supplemented from time to time. Certain defined terms used herein have the
meanings assigned to them in the
Note Indenture.
|
Procedures for Exercise:
|
Potential Exercise
Dates:
|
|
Each Conversion Date.
|
|
|
|
|
|
Conversion Date:
|
|
Each “conversion date”
for any Reference Note pursuant to the terms of the Note Indenture occurring
before the Expiration Date.
|
|
|
|
|
|
Exercise on Conversion
Dates:
|
|
On each Conversion Date, a number of Options equal to the number of Reference
Notes in denominations of USD1,000 principal amount validly submitted for
conversion on such Conversion Date in accordance with the terms of the Note
Indenture shall be automatically exercised;
provided
that if Counterparty makes the direction described in Section 9.6 of the
Note Indenture for the surrender of any Reference Notes for exchange in lieu
of conversion, such Reference Notes shall be deemed not to have been
submitted for conversion and no Conversion Date shall be deemed to have
occurred for such Reference Notes.
|
|
|
|
|
|
Exercise Period:
|
|
The period from and
excluding the Effective Date to and including the Expiration Date.
|
|
|
|
|
|
Expiration Date:
|
|
The earliest of
(i) the maturity date of the Reference Notes and (ii) the first day
on which none of such Reference Notes remain outstanding, whether by virtue
of conversion, issuer repurchase or otherwise.
|
|
|
|
|
|
Multiple Exercise:
|
|
Applicable, as provided
above under “Required Exercise on Conversion Dates”.
|
|
|
|
|
|
Minimum Number of
Options:
|
|
Zero
|
|
|
|
|
|
Maximum Number of
Options:
|
|
Number of Options
|
|
|
|
|
|
Automatic Exercise:
|
|
As provided above under
“Required Exercise on Conversion Dates”.
|
3
|
Exercise Notice:
|
|
Notwithstanding the
exercise of any Options hereunder, Buyer shall be entitled to receive the
deliveries provided under “Settlement Terms” below only if Buyer shall have
delivered to Seller a written notice (“
Exercise Notice
”)
prior to 5:00 PM, New York City time, on the “Business Day”, as defined in
the Note Indenture, prior to the first Scheduled Trading Day of the
Conversion Reference Period relating to the Reference Notes converted on the
Conversion Date occurring on the relevant Exercise Date (such time, the “
Notice Deadline
”) of
(i) the number of Options being exercised, (ii) the first Scheduled
Trading Day of the Conversion Reference Period, (iii) the scheduled
settlement date under the Note Indenture for the Reference Notes converted on
the Conversion Date occurring on the Exercise Date for such exercise and
(iv) the applicable Cash Percentage (as defined in the Note Indenture),
if any;
provided
that with respect
to Reference Notes converted during the period beginning on February 1,
2016 and ending on the
Business
Day immediately preceding the
Stated Maturity (as defined in the Note Indenture) of the Reference Notes,
the related Exercise Notice need not contain the information specified in
clause (i) of this sentence and, in order to exercise any Options hereunder,
Buyer shall deliver to Seller prior to 5:00 p.m. New York City time on
the Business Day (as defined in the Note Indenture) prior to such Stated
Maturity a written notice (“
Supplemental Exercise
Notice
”) setting forth the number of Reference Notes converted
during such period;
provided further
that, notwithstanding the foregoing, such notice (and the related automatic
exercise of Options) shall be effective if given after the relevant Notice
Deadline but prior to 5:00 PM New York City time, on the fifth Scheduled
Trading Day following the Notice Deadline, in which event (A) the
Calculation Agent shall adjust the Delivery Obligation (as defined below) as
appropriate to reflect the additional costs (including, but not limited to,
hedging mismatches and market losses) and reasonable expenses incurred by
Seller in connection with its hedging activities (including the unwinding of
any hedge position) as a result of its not having received such notice prior
to the applicable Notice Deadline and (B) the Cash Percentage shall be
deemed to be zero. If Buyer wishes to designate a Cash Percentage different
from zero, then Buyer shall represent and warrant in the Exercise Notice
that, at the time such election was made, Buyer has publicly disclosed all
material information with respect to itself and the Shares necessary for
Buyer to be able to purchase or sell Shares in compliance with applicable
federal securities laws.
|
|
Seller’s Telephone Number and Telex and/or Facsimile Number and Contact
Details for purpose of Giving Notice:
|
|
Address:
Attention:
Facsimile No.:
Telephone No.:
|
Merrill Lynch Financial
Markets, Inc.
4 World Financial Center, 17
th
Floor
New York, New York 10080
Merrill Lynch Financial Centre
Manager of Equity Documentation
(917) 778-0835
(212) 449-1951
|
Settlement Terms:
|
Settlement Date:
|
|
The settlement date
specified in the Note Indenture for the delivery of Shares upon the
conversion of Reference Notes.
|
4
|
Delivery Obligation:
|
|
In lieu of the obligations
set forth in Sections 8.1 and 9.1 of the Equity Definitions, and subject to
“Exercise Notice” above, in respect of an Exercise Date occurring on a
Conversion Date, Seller will deliver to Buyer on the related Settlement Date
the product of the number of Options exercised on such Exercise Date and the
sum of (x) the number of Shares, if any, and (y) the amount of
cash, if any, in lieu of the “Remaining Shares”, as defined in the Note
Indenture, in each case, that Buyer is obligated to deliver or pay, as the
case may be, to the holder of a Convertible Note (in the principal amount of
USD1,000) converted on such Conversion Date pursuant to
Section 9.18(a) or Section 9.18(b), as applicable, of the Note
Indenture (such Shares and cash, collectively, the “
Convertible Obligation
”);
provided
that the Delivery Obligation shall be determined
by excluding any Shares (and cash in lieu of fractional Shares) that Buyer is
obligated to deliver to holders of the Reference Notes as a direct or
indirect result of any adjustments to the Conversion Rate pursuant to the
Excluded Provisions of the Note Indenture and any interest payment or
distribution that Buyer is obligated to deliver in respect of References
Notes converted on such Conversion Date (including, for the avoidance of
doubt, any distributed property that Buyer is obligated to deliver in lieu of
any adjustment pursuant to Sections 9.8(c), (d) or (e) of the Note
Indenture);
provided further
that, for
purposes of determining the Delivery Obligation, the Cash Percentage shall be
deemed to be zero if Buyer has not made the representation and warranty
specified in the final sentence under “Exercise Notice” above or if the final
proviso to the first sentence under “Exercise Notice” above is applicable.
Any fractional Shares
to be delivered with respect to any Delivery Obligation shall be valued at
the Relevant Price for the last Trading Day (as defined in the Note
Indenture) of the Conversion Reference Period, and Dealer shall deliver cash
in lieu thereof.
|
|
|
|
|
|
Excluded Provisions:
|
|
Section 9.12 of
the Note Indenture. Notwithstanding anything to the contrary herein or in the
Equity Definitions, in no event shall any adjustments in respect of any
Potential Adjustment Event or Extraordinary Event be made hereunder as a
result of any adjustments to the Conversion Rate pursuant to the Excluded
Provisions of the Note Indenture.
|
|
|
|
|
|
Conversion Reference
Period:
|
|
For any Exercise Date,
the “conversion reference period” as defined in the Note Indenture with
respect to the Conversion Date occurring on such Exercise Date.
|
|
|
|
|
|
Other Applicable
Provisions:
|
|
To the extent Seller is
obligated to deliver Shares hereunder, the provisions of Sections 9.1(c),
9.8, 9.9, 9.10, 9.11 (except that the Representation and Agreement contained
in Section 9.11 of the Equity Definitions shall be modified by excluding
any representations therein relating to restrictions, obligations,
limitations or requirements under applicable securities laws as a result of
the fact that Buyer is the issuer of the Shares) and 9.12 of the Equity
Definitions will be applicable as if “Physical Settlement” applied to the
Transaction.
|
5
Adjustments:
|
Method of Adjustment:
|
|
Calculation Agent
Adjustment; provided that the terms of this Transaction shall be adjusted in
a manner consistent with adjustments of the Conversion Rate of the Reference
Notes as provided in the Note Indenture; provided that no adjustment in
respect of any Potential Adjustment Event or Extraordinary Event shall be
made hereunder as a result of any adjustments to the Conversion Rate pursuant
to the Excluded Provisions of the Note Indenture.
|
|
|
|
|
|
Potential Adjustment
Event:
|
|
Notwithstanding
Section 11.2(e) of the Equity Definitions, a “Potential Adjustment
Event” means, subject to the preceding paragraph, the occurrence of an event
or condition that would result in an adjustment of the Conversion Rate of the
Reference Notes pursuant to the Note Indenture.
|
Extraordinary Events:
|
Merger Events:
|
|
Notwithstanding
Section 12.1(b) of the Equity Definitions, a “Merger Event” means
the occurrence of any event or condition to which Section 9.14 of the
Note Indenture applies.
|
|
|
|
|
|
Consequences for Merger
Events:
|
|
|
|
|
|
|
|
Share-for-Share:
|
|
The Transaction will be
adjusted in a manner corresponding to the adjustments to the Reference Notes
as provided in the Note Indenture.
|
|
|
|
|
|
Share-for-Other:
|
|
The Transaction will be
adjusted in a manner corresponding to the adjustments to the Reference Notes
as provided in the Note Indenture.
|
|
|
|
|
|
Share-for-Combined:
|
|
The Transaction will be
adjusted in a manner corresponding to the adjustments to the Reference Notes
as provided in the Note Indenture.
|
|
|
|
|
|
Notice of Merger
Consideration:
|
|
Upon the occurrence of
a Merger Event that causes the Shares to be converted into the right to
receive more than a single type of consideration (determined based in part
upon any form of stockholder election), Buyer shall reasonably promptly (but
in any event prior to the third Exchange Business Day prior to the effective
date of such Merger Event) notify the Calculation Agent of the weighted
average of the types and amounts of consideration (a) received by the
holders of Shares entitled to receive cash, securities or other property or
assets with respect to or in exchange for such Shares in any Merger Event who
affirmatively make such an election and (b) selected by holders of the
Reference Notes as the form of consideration into which the Reference Notes
shall be convertible from and after the effective date of such Merger Event.
|
|
|
|
|
|
Tender Offer:
|
|
Applicable, subject to
“Consequences of Tender Offers” below. Notwithstanding
Section 12.1(d) of the Equity Definitions, “Tender Offer” means the
occurrence of any event or condition set forth in Section 9.8(f) of
the Note Indenture.
|
|
|
|
|
|
Consequences of Tender
Offers:
|
|
The Transaction will be
adjusted in a manner corresponding to the adjustments to the Reference Notes
as provided in the Note Indenture.
|
6
|
Nationalization,
Insolvency and Delisting
:
|
|
Cancellation and
Payment (Calculation Agent Determination);
provided
that Buyer shall determine whether payment shall be settled in cash or
Shares. In addition to the provisions of Section 12.6(a)(iii) of
the Equity Definitions, it will also constitute a Delisting if the Exchange
is located in the United States and the Shares are not immediately re-listed,
re-traded or re-quoted on any of the New York Stock Exchange, the American
Stock Exchange, the NASDAQ Global Market or the NASDAQ Global Select Market
(or their respective successors); if the Shares are immediately re-listed,
re-traded or re-quoted on any such exchange or quotation system, such
exchange or quotation system shall thereafter be deemed to be the Exchange.
|
|
|
|
|
|
Additional Disruption
Events:
|
|
|
|
|
|
|
|
Change
in Law:
|
|
Applicable
|
|
|
|
|
|
Failure to
Deliver:
|
|
Applicable.
|
|
|
|
|
|
Insolvency
Filing:
|
|
Applicable
|
|
|
|
|
|
Hedging
Disruption Event:
|
|
Applicable
|
|
|
|
|
|
Increased Cost
of Hedging:
|
|
Not Applicable
|
|
|
|
|
|
Loss of Stock Borrow:
|
|
Not Applicable
|
|
|
|
|
|
Increased Cost
of Stock Borrow:
|
|
Not Applicable
|
|
|
|
|
|
Hedging Party:
|
|
Seller
|
|
|
|
|
|
Determining
Party:
|
|
Seller
|
|
|
|
|
|
Non-Reliance:
|
|
Applicable
|
|
|
|
|
|
Agreements and
Acknowledgments Regarding Hedging Activities:
|
|
Applicable
|
|
|
|
|
|
Additional
Acknowledgments:
|
|
Applicable
|
Additional
Agreements, Representations and Covenants of Buyer, Etc.:
1
.
Buyer
hereby represents and warrants to Seller, on each day from the Trade Date to
and including the earlier of (i) March 5, 2008 and (ii) the date
by which Seller is able to initially complete a hedge of its position relating
to this Transaction, that:
a
.
it will effect
(and cause any “affiliated purchaser” (as defined in Rule 10b-18
promulgated under the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”))
to
effect) any purchases, direct or indirect (including by means of any
cash-settled or other derivative instrument), of Shares
7
or any security convertible into or exchangeable or exercisable for
Shares solely through Agent in a manner that would not cause any purchases by
Seller of its hedge in connection with this
Transaction not to
comply applicable securities laws;
b
.
it will not engage
in, or be engaged in, any “distribution,” as such term is defined in Regulation
M promulgated under the Exchange Act, other than a distribution meeting the
requirements of the
exceptions set forth in
sections 101(b)(10) and
102
(b)(7) of
Regulation M (it being understood
that
Buyer makes no representation pursuant to this clause in respect of any action
or inaction
taken by Seller or any initial purchaser of the Reference
Notes); and
c.
Buyer has
publicly disclosed all material information necessary for Buyer to be able to
purchase or
sell Shares in compliance with
applicable federal securities laws
.
2
.
If Buyer would be obligated to pay cash (other
than payment of the Premium and
except in the case of an Event of
Default in which Buyer is the Defaulting Party or a Termination Event in which
Buyer is the Affected Party, other than an (x) Event of Default of the
type described in Section 5(a)(iii), (v), (vi) or (vii) of the
Master Agreement or (y) a Termination Event of the type described in Section 5(b)(i),
(ii), (iii), (iv), or (v) of the Master Agreement that in the case of
either (x) or (y) resulted from an event or events outside Buyer’s
control
) to, or receive cash from, Seller
pursuant to the terms of this
Agreement for any reason without having
had the right (other than pursuant to this paragraph (2), but including (x) the
right to deliver Shares under the Note Indenture upon conversion of the
Reference Notes or (y) the right to deliver or receive Shares in any other
document or agreement that would result, directly or indirectly, in a cash payment
hereunder) to elect
to deliver or receive
Shares in satisfaction of such payment obligation, then Buyer may elect (by
giving notice to Seller no later than 8 a.m. New York time on the Exchange
Business Day immediately following the date of occurrence of the event giving
rise to such payment obligation) that such payment obligation shall be
satisfied by the delivery of a number of Shares (or, if the Shares have been
converted into other securities or property in
connection with an Extraordinary Event, a number or amount
of such other securities or property as a holder of
Shares would be entitled to receive upon the
consummation or closing of
such Extraordinary Event) having a cash value equal to the amount of such
payment obligation. Such number of Shares or amount of other securities or
property to be delivered shall be determined by the Calculation Agent to be the
number of Shares or amount of such other
securities
or property that could be purchased or sold, as applicable, over a reasonable
period of time with
the cash equivalent of or producing the cash
equivalent of such payment obligation). Settlement relating to any delivery of
Shares or other securities or property pursuant to this paragraph (2) shall
occur within a reasonable period of time.
Notwithstanding anything herein or in the Agreement to the contrary, the
aggregate number of Shares that Counterparty may be required to deliver to
Dealer under this Transaction shall not exceed the product of (a) 1.5 and (b) the
Number of Shares, as adjusted by the Calculation Agent to account for any
subdivision, stock-split, stock combination, reclassification or similar
dilutive or anti-dilutive event with respect to the Shares.
3
.
Counterparty is
not, and after giving effect to the Transaction contemplated hereby, will not
be, an “investment company” as such term is defined in the Investment Company
Act of 1940, as amended.
4
.
As of the Trade Date and each date on which a
payment or delivery is made by Counterparty hereunder, (i)
the
assets of Counterparty at their fair valuation exceed the liabilities of
Counterparty, including contingent liabilities; (ii) the capital of
Counterparty is adequate to conduct its business; and (iii) Counterparty
has the
ability to pay its debts and other
obligations as such obligations mature and does not intend to, or believe
that
it will, incur debt or other obligations beyond its ability to pay as such
obligations mature.
5.
The
representations and warranties set forth in Section 1 of the Purchase
Agreement (as defined herein) are hereby deemed to be repeated to Dealer as if
set forth herein.
8
Additional
Termination Events:
The occurrence of an
Amendment Event or a Repayment Event shall be an Additional Termination Event
with respect to which the Transaction is the sole Affected Transaction,
Counterparty is the sole Affected Party and Dealer is the sole party entitled
to designate an Early Termination Date;
provided
that
in the case of a Repayment Event, the Transaction shall be subject to
termination only in respect of the number of Reference Notes that cease to be
outstanding in connection with or as a result of such Repayment Event:
1
.
“
Amendment
Event
” means that the Counterparty, without Dealer’s consent,
amends, modifies, supplements or obtains a waiver of (a) any term of the
Note Indenture (as in effect prior to such amendment, modification, supplement
or waiver) or the Reference Notes relating to the principal amount,
coupon, maturity, repurchase obligation of the Counterparty
or redemption right of the Counterparty, (b) any material term relating to
conversion of the Reference Notes, including, without limitation, any changes
to the conversion price,
conversion
settlement dates or conversion conditions or (c) any term that would
require consent of the
holders of 100% of the principal amount of the
Reference Notes to amend.
2
.
“
Repayment Event
” means that
(a) any Reference Notes are repurchased (whether in connection with or as
a result of a fundamental change or change of control, howsoever defined, or
for any other reason) by the Counterparty, (b) any Reference Notes are
delivered to the Counterparty in exchange for delivery of any property or
assets of the
Counterparty or any of its
subsidiaries (howsoever described), other than as a result of and in connection
with a Conversion Date, (c) any
principal of any of the Reference Notes is repaid prior to the Stated Maturity
(as defined in the Note Indenture) (whether following acceleration of the
Reference Notes or
otherwise),
provided that no payments of cash made in respect of the conversion of a
Reference Note shall
be deemed a
payment of principal under this clause (c), (d) any Reference Notes are
exchanged by or for the benefit of the holders thereof for any other securities
of the Counterparty or any of its Affiliates (or any other property, or any
combination thereof) pursuant to any exchange offer or similar transaction or
(e) any of the Reference Notes is surrendered by Counterparty to the
trustee for cancellation, other than registration
of a transfer of such
Reference Notes or as a result of and in connection with a Conversion Date.
3
.
Initial Purchase Event.
If an Initial Purchase Event (as
defined below) occurs, this Transaction shall
terminate
automatically in its entirety and, notwithstanding anything to the contrary
herein, only the
payments specified below shall be required hereunder in
connection with such Initial Purchase Event.
“
Initial Purchase Event
” means that the
transactions contemplated by the Purchase Agreement shall fail to close for any
reason by the closing date for the offering of the Reference Notes as specified
in the Purchase Agreement.
If an Initial Purchase
Event occurs for any reason other than due to a breach of the Purchase Agreement
by the Initial Purchasers, then all payments previously made hereunder shall be
returned to the person making such
payment,
including the Premium, less an amount equal to the product of (a)
the
Number of Shares
, (b) 0.50 and
(c) an amount equal to the excess, if any, of
the closing price of the Shares on the Trade Date over the
closing price
of the Shares on the date of the Termination Event (the “
Break Expense
”); provided that any
negative amount shall be replaced by zero and provided further that to the
extent the Premium has not been
paid, Buyer
shall promptly pay Seller the Break Expense. Seller and Buyer agree that actual
damages would be difficult to ascertain under these circumstances and that the
amount of liquidated damages
resulting from the determination in the
preceding sentence is a good faith estimate of such damages and not a penalty.
If an Initial Purchase
Event occurs due to a breach of the Purchase Agreement by the Initial
Purchasers, then all payments previously made hereunder, including the Premium,
promptly shall be returned to the
9
person
making such payment and no payments shall be
required hereunder in connection with such Initial
Purchase Event.
Staggered
Settlement:
If Seller determines
reasonably and in good faith that the number of Shares required to be delivered
to Buyer hereunder on any Settlement Date would exceed 8.0% of all outstanding
Shares, then Seller may, by notice to Buyer
on
or prior to such Settlement Date (a “
Nominal
Settlement Date
”
),
elect
to deliver the Shares comprising the
related
Delivery Obligation on two or more dates (each, a “
Staggered Settlement Date
”
)
or at two or
more times on the
Nominal Settlement Date as follows:
1
.
in such notice, Seller will specify to Buyer the
related Staggered Settlement Dates
(each
of which will be such Nominal Settlement Date and the last of which will be no
later than twenty (20) Trading Days following such Nominal Settlement Date) or
delivery times and how it will allocate the Shares it is required to deliver
hereunder among the Staggered Settlement Dates or delivery times;
2
.
the aggregate
number of Shares that Seller will deliver to Buyer hereunder on all such
Staggered Settlement Dates or delivery times will equal the number of Shares
that Seller would otherwise be required to deliver on such Nominal Settlement
Date; and
3.
the procedures
set forth above under the heading “Settlement Terms” will apply on each
Staggered Settlement Date, except that the Shares comprising the Delivery
Obligation will be allocated among such Staggered Settlement Dates or delivery
times as specified by Seller in the notice referred to in clause (1) above.
Notwithstanding anything
herein to the contrary, solely in connection with a Staggered Settlement Date,
Seller shall be entitled to deliver Shares to Buyer from time to time prior to
the date on which Seller would be obligated to deliver them to Buyer pursuant
to the Delivery Obligation terms set forth above, and Buyer agrees to credit
all such early deliveries against Seller’s obligations hereunder in the direct
order in which such obligations arise. No such early delivery of Shares will
accelerate or otherwise affect any of Buyer’s obligations to Seller hereunder.
Disposition
of Hedge Shares:
Counterparty
hereby agrees that if, in the reasonable judgment of Seller based on advice of
counsel, the
Shares acquired by Seller for the purpose of hedging its obligations
pursuant to the Transaction (the “
Hedge
Shares
”) cannot be sold in the
U.S. public market by Seller without registration under the Securities Act,
Counterparty shall, at its election: (i) in order to allow Seller to sell
the Hedge Shares in a registered
offering, make available to Seller an
effective registration statement under the Securities Act to cover the resale
of such Hedge Shares and (a) enter into an agreement, in form and
substance satisfactory to Seller, substantially in the form of an underwriting
agreement for a registered offering, (b) provide accountant’s “comfort”
letters in customary form for registered offerings of equity securities, (c) provide
disclosure opinions of nationally recognized outside
counsel to Counterparty reasonably acceptable to Seller, (d) provide
other customary opinions, certificates and closing documents customary in form
for registered offerings of equity securities and (e) afford Seller a
reasonable opportunity to conduct a “due diligence” investigation with respect
to Counterparty customary in scope for underwritten offerings of equity
securities;
provided, however,
that
if Seller, in its sole reasonable discretion, is not satisfied with access to
due diligence materials, the results of its due diligence investigation, or the
procedures and
documentation for the registered offering referred to above,
then clause (ii) or clause (iii) of this Section shall apply at
the election of Counterparty; (ii) in order to allow Seller to sell the
Hedge Shares in a private placement, enter into a private placement agreement
substantially similar to private placement purchase agreements customary for
private placements of equity securities, in form and substance satisfactory to
Seller, including customary representations, covenants, blue sky and other
governmental filings and/or registrations, indemnities to Seller, due diligence
rights (for Seller or any designated buyer of the Hedge Shares from Seller),
opinions and certificates and such other documentation as is customary for
private placements agreements, all reasonably acceptable to Seller (in which
case, the Calculation Agent shall make any adjustments to the terms of the
Transaction that are necessary to compensate
10
Seller for any discount
from the public market price of the Shares incurred on the sale of Hedge Shares
in a private
placement); or (iii) purchase
the Hedge Shares from Seller at the VWAP Price on such Exchange Business Days,
and
in such amounts, as requested by Seller. “
VWAP
Price
” means, on any Exchange Business Day, the per Share
volume-weighted average price as displayed under
the heading “Bloomberg VWAP” on Bloomberg page AAR.N
<equity>
VAP (or any successor thereto) in respect of the period from 9:30 a.m. to
4:00 p.m. (New York City time) on such Exchange Business Day (or if such
volume-weighted average price is unavailable, the market value of one Share on
such Exchange Business Day, as determined by the Calculation Agent using a
volume-weighted method).
Repurchase Notices
:
Counterparty shall, on
any day on which Counterparty effects any repurchase of Shares, promptly give
Seller a written notice of such repurchase (a “Repurchase Notice”) on such day
if following such repurchase, the Notice Percentage as determined on such day
is (i) greater than 6% and (ii) greater by 0.5% than the Notice Percentage
included in the immediately preceding Repurchase Notice (or, in the case of the
first such Repurchase Notice, greater than the Notice Percentage as of the date
hereof). In the event that Counterparty fails to provide Seller with a
Repurchase Notice on the day and in the manner specified in this section, then
Counterparty agrees to indemnify and hold harmless Seller, its affiliates and
their respective directors, officers, employees, agents and controlling persons
(Seller and each such person being an “Indemnified Party”) from and against any
and all losses, claims, damages and liabilities (or actions in respect
thereof), joint or several, to which such Indemnified Party may become subject
under applicable securities laws, including without limitation, Section 16
of the Exchange Act, relating to or arising out of such failure. If for any
reason the foregoing indemnification is unavailable to any Indemnified Party or
insufficient to hold harmless any Indemnified Party, then Counterparty shall
contribute, to the maximum extent permitted by law, to the amount paid or
payable by the Indemnified Party as a result of such loss, claim, damage or
liability. In addition, Counterparty will reimburse any Indemnified Party for
all reasonable and documented expenses (including reasonable counsel fees and
expenses) as they are incurred (after notice to Counterparty) in connection
with the investigation of, preparation for or defense or settlement of any
pending or threatened claim or any action, suit or proceeding arising
therefrom, whether or not such Indemnified Party is a party thereto and whether
or not such claim, action, suit or proceeding is initiated or brought by or on
behalf of Counterparty. This indemnity shall survive the completion of the
Transaction contemplated by this Confirmation and any assignment and delegation
of the Transaction made pursuant to this Confirmation or the Agreement shall
inure to the benefit of any permitted assignee of Seller. Counterparty will not
be liable under this Indemnity provision to the extent that any loss, claim,
damage, liability or expense is found in a final judgment by a court to have
resulted from Dealer’s gross negligence or willful misconduct. The “Notice
Percentage” as of any day is the fraction, expressed as a percentage, (i) the
numerator of which is the product of (a) the number of outstanding
Reference Notes and (b) a number of Shares per Reference Note equal to the
Conversion Rate (as defined in the Note Indenture) and (ii) the
denominator of which is the number of Shares outstanding on such day.
Conversion Rate Adjustment
Notices
In connection with any
adjustments to the Conversion Rate under the terms of the Note Indenture,
Counterparty shall provide to Dealer a copy of the notice of adjustment
required to be delivered to the Trustee (as defined in the Note Indenture)
pursuant to Section 9.11 of the Note Indenture concurrently with filing of
such notice with the Trustee.
11
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Compliance
with Securities Laws:
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Each party represents
and agrees that, in connection with this Transaction and all related or
contemporaneous sales and purchases of Shares by either party, Buyer, or in
the case of Seller, the person(s) that directly influences the specific
trading decisions of Seller, has complied and will comply with the applicable
provisions of the Securities Act of 1933, as amended (the “
Securities Act
”
),
and the Exchange Act, and the rules and regulations each
thereunder, including, without limitation, Section 9(a) of, and Rules 10b-5 and 13e and
Regulation M under, the Exchange Act; provided that each party shall be
entitled to rely conclusively on any information communicated by the other
party concerning such other party’s market activities.
Each
party acknowledges that the offer and sale of the Transaction to it is
intended to be exempt from registration under the Securities Act by virtue of
Section 4(2) thereof. Accordingly, Buyer represents and warrants to
Seller that (i) it has the financial ability to bear the economic risk
of its investment in the Transaction and is able to
bear a total loss of its investment, (ii) it
is an “accredited investor” as that term is defined in Regulation D as promulgated under the Securities Act and
(iii) the disposition of the
Transaction is restricted under this Confirmation, the Securities Act and
state securities laws.
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Buyer
further represents:
(a) Buyer
is not entering into this Transaction to create actual or apparent trading
activity in the Shares (or any security convertible into or exchangeable for
Shares) or to raise or depress or otherwise manipulate the price of the
Shares (or any security convertible into or exchangeable for Shares);
(b) Buyer
acknowledges that as of the date hereof and without limiting the generality
of Section 13.1 of the Equity Definitions, Seller is not making any
representations or
warranties with respect
to the treatment of the Transaction under FASB Statements
149 or 150, EITF Issue No. 00-19 (or any
successor issue statements) or under
FASB’s Liabilities &
Equity Project.
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Account
for payments to Buyer:
|
To be
advised
|
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Account Details:
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|
Account
for payment to Seller:
|
Merrill Lynch Financial
Markets
Chase Manhattan Bank
ABA# 021000021
Acct# 066642892
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Accounts
for deliveries of Shares:
|
To be
advised
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Bankruptcy Rights:
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In
the event of Buyer’s bankruptcy, Seller’s rights in connection with this
Transaction
shall not exceed those rights
held by common shareholders. For the avoidance of doubt,
the parties acknowledge and agree that Seller’s
rights with respect to any other claim arising from this Transaction prior to
Buyer’s bankruptcy shall remain in full force and
effect and shall not
be otherwise abridged or modified in connection herewith.
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Set-Off:
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Each party waives any and all rights it may have to
set-off, whether arising under any
agreement, applicable law or otherwise.
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Collateral:
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None.
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12
|
Transfer:
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Buyer
shall have the right to assign its rights and delegate its obligations
hereunder with
respect to any portion of this Transaction, subject to Seller’s
consent, such consent not to be unreasonably withheld; provided that such
assignment or transfer shall be subject to receipt by Seller of opinions and
documents reasonably satisfactory to Seller and effected on terms reasonably
satisfactory to the Seller with respect to any legal and regulatory
requirements relevant to the Seller; provided further that Buyer shall not be
released from its obligation to deliver any Exercise Notice or its
obligations pursuant to “Disposition of Hedge Shares”, “Repurchase Notices”
or “Conversion Rate Adjustment Notices” above.
Seller may transfer any
of its rights or delegate its obligations under this Transaction with the prior
written consent of Buyer, such consent not to be unreasonably withheld. In
addition, if, as determined in Seller’s sole discretion, its “beneficial
ownership” (within the meaning of Section 13 of the Exchange Act and
rules promulgated thereunder) could be deemed to exceed 8% of
Counterparty’s outstanding Shares, Seller may, without Counterparty’s
consent, transfer or assign all or any part of its rights or obligations
under this Transaction to reduce such “beneficial ownership” to 7.5% to any
third party with a rating for its (or, if applicable, its Credit Support
Provider’s) long term, unsecured and unsubordinated indebtedness of AA or
better by Standard & Poor’s Ratings Service or its successor
(“S&P”), or Aa3 or better by Moody’s Investors Service (“Moody’s”) or, if
either S&P or Moody’s ceases to rate such debt, at least an equivalent
rating or better by a substitute rating agency mutually agreed by Company and
Seller. If after Seller’s commercially reasonable efforts, Seller is unable
to effect such a transfer or assignment on pricing terms reasonably
acceptable to Seller and within a time period reasonably acceptable to Seller
of a sufficient number of Options to reduce Seller’s “beneficial ownership”
(within the meaning of Section 13 of the Exchange Act and
rules promulgated thereunder) to 7.5% of Counterparty’s outstanding
Shares or less, Seller 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 will be equal to or less than 7.5%. In the event that Seller so
designates an Early Termination Date with respect to a portion of this
Transaction, a payment shall be made pursuant to Section 6 of the
Agreement as if (i) an Early Termination Date had been designated in
respect of a Transaction having terms identical to this Transaction and a
Number of Options equal to the Terminated Portion, (ii) Counterparty
shall be the sole Affected Party with respect to such partial termination and
(iii) such Transaction shall be the only Terminated Transaction.
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Matters Relating to Agent:
1
.
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Agent will be responsible for the
operational aspects of the Transactions effected through it, such as record
keeping, reporting, and confirming Transactions to Buyer and Seller;
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2
.
|
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Unless Buyer is a “major U.S. institutional
investor,” as defined in Rule 15a-6 of the Exchange Act, neither Buyer
nor Seller will contact the other without the direct involvement of Agent;
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3
.
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Agent’s sole role under this Agreement and
with respect to any Transaction is as an agent of Buyer and Seller on a
disclosed basis and Agent shall have no responsibility or liability to Buyer
or Seller hereunder except for gross negligence or willful misconduct in the
performance of its duties as agent. Agent is authorized to act as agent for
Buyer, but only to the extent expressly required to satisfy the requirements
of Rule 15a-6 under the Exchange Act in respect of the Options described
hereunder. Agent shall have no authority to act as agent for Buyer generally
or with respect to transactions or other matters governed by
this Agreement, except to the extent expressly
required to satisfy the requirements of Rule 15a-6 or in
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13
accordance with express instructions from Buyer.
Certain Important Information:
Dealer is an OTC
Derivatives Dealer registered with the U.S. Securities and Exchange Commission
(SEC). Applicable SEC rules require us to provide you with the following
information regarding SEC regulation of OTC Derivatives Dealers: Dealer is
exempt from the provisions of the Securities Investor Protection Act of 1970
(SIPA), including membership in the Securities Investor Protection Corporation
(SIPC). Therefore, your account is not covered by SIPA protection. Except as
otherwise agreed in writing by you and us, Dealer may repledge and otherwise
use in its business collateral you have pledged to Dealer under the Agreement.
Collateral you have pledged to Dealer will not be subject to the requirements
of Securities Exchange Act Rules: 8c-1 and 15c2-1 regarding hypothecation of
collateral; 15c3-2 regarding free credit balances; or 15c3-3 regarding custody
of securities and calculations of a reserve formula applicable to a fully
regulated SEC registered broker or dealer. In the event of Dealer’s failure (by
insolvency or otherwise), you would likely be considered to be an unsecured
creditor of Dealer as to any collateral pledged to Dealer under the Agreement.
Dealer is incorporated in
Delaware and is a direct, wholly owned subsidiary of Merrill Lynch &
Co., Inc. Dealer has entered into this transaction as principal through
Agent as its agent. The time of this Transaction shall be notified to the Counterparty
upon request.
ISDA
Master Agreement:
With respect to the
Agreement, Seller and Counterparty each agree as follows:
“
Specified Entity
”
means in relation to Seller and in
relation to Counterparty for purposes of this Transaction: Not applicable.
“
Specified
Transaction
” has the meaning assigned to such term in Section 14
of this Agreement.
The “
Cross Default
”
provisions of
Section 5(a)(vi)
of
the Agreement will apply to Seller and will apply to Counterparty. For such purpose, “
Threshold
Amount
” means, with respect to Counterparty, USD10,000,000 and, with respect to Seller, three percent of
the consolidated shareholders equity of Merrill Lynch and Co., Inc.
The “
Credit Event Upon Merger
”
provisions of
Section 5(b)(v)
of
the Agreement will not apply to Seller and will not apply to Counterparty.
The “
Automatic Early Termination
”
provision of
Section 6(a)
of
the Agreement will not apply to Seller or to
Counterparty.
“
Termination Currency
”
means USD.
Tax
Representations.
(a)
Payer Representations.
For the purpose of Section 3(e) of the
Agreement, each party represents to the other party that it is not required by
any applicable law, as modified by the practice of any relevant governmental
revenue authority, of any Relevant Jurisdiction to make any deduction or
withholding for or
on account of any Tax from any payment (other than
interest under Section 2(e), 6(d)(ii), or 6(e) of the
Agreement) to be made by it to the other party
under the Agreement. In making this representation, each party may rely on (i) the
accuracy of any representations made by the other party pursuant to Section 3(f) of
the Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or
4(a)(iii) of the Agreement, and the accuracy and effectiveness of any document
provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of
the Agreement, and (iii) the satisfaction of the agreement of the other
party contained in Section 4(d) of the Agreement; provided that it
will not be a breach of this representation where reliance is placed on clause (ii) above
and the other party does not deliver a form or document
14
under
Section 4(a)(iii) of the Agreement by reason of
material prejudice to its legal or commercial position.
(b)
Payee
Representations.
For the purpose of Section 3(f) of the
Agreement, each party makes the following representations to the other party:
(i)
Dealer
represents that it is a company incorporated in a jurisdiction within the
United States.
(ii)
Counterparty
represents that it is a corporation incorporated in Delaware.
Delivery
Requirements.
For the purpose of
Sections 4(a)(i)
and
(ii)
of the Agreement, each party agrees to deliver the following
documents:
(a)
Tax
forms, documents or certificates to be delivered are:
Dealer agrees to complete
(accurately and in a manner reasonably satisfactory to Counterparty), execute,
and deliver to Counterparty, United States Internal Revenue Service Form W-9
and all required attachments, or any successor of such form(s): (i) before
the first payment date under this agreement; (ii) promptly upon reasonable
demand by Counterparty; and (iii) promptly upon learning that any such Form previously
provided by Dealer has become obsolete or incorrect.
Counterparty agrees to
complete (accurately and in a manner reasonably satisfactory to Dealer),
execute, and deliver to Dealer, United States Internal Revenue Service Form W-9
or W-8 BEN, or any successor of such form(s): (i) before the first payment
date under this agreement; (ii) promptly upon reasonable demand by Dealer;
and (iii) promptly upon learning that any such form(s) previously
provided by Counterparty has become obsolete or incorrect.
(b)
Other
documents to be delivered:
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Party
Required to
Deliver Document
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|
Document
Required to be Delivered
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When
Required
|
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Covered
by
Section 3(d)
Representation
|
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Counterparty and
Dealer
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Evidence of the
authority and true signatures of each official or representative signing this
Confirmation
|
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Upon or before
execution and delivery of this Confirmation
|
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Yes
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Counterparty
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Certified copy
of the resolution of the Board of Directors or equivalent document
authorizing the execution and delivery of this Confirmation and such other
certificates as Seller shall reasonably request
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Upon or before
execution and delivery of this Confirmation
|
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Yes
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Dealer
|
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Guarantee of its
Credit Support Provider, substantially in the form of Exhibit A attached
hereto, together with evidence of the authority and true signatures of the
signatories, if applicable
|
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Upon or before
execution and delivery of this Confirmation
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No
|
Additional Notice Requirements.
Counterparty hereby agrees to promptly deliver to
Seller a copy of all notices and other communications required or permitted to
be given to the holders of any Reference Notes pursuant to the terms of the
Note Indenture on the dates so required or permitted in the Note Indenture and
all other notices given
and other
communications made by Counterparty in respect of the Reference Notes to holders
of any Reference
Notes. Counterparty further covenants to Seller that it
shall promptly notify Seller of each Conversion Date, Amendment Event
(including in such notice a detailed description of any such amendment) and
Repayment Event
15
(identifying in such
notice the nature of such Repayment Event and the principal amount at maturity
of Reference Notes being paid).
Addresses
for Notices.
For the
purpose of
Section 12(a)
of the Agreement:
Address
for notices or communications to Seller for all purposes:
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Address:
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|
Merrill Lynch Financial
Markets, Inc.
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4 World Financial
Center, 17
th
Floor
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New York, New York
10080
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Merrill Lynch Financial
Centre
|
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Attention:
|
|
Manager of Equity
Documentation
|
|
Facsimile No.:
|
|
(917) 778-0835
|
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Telephone No.:
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(212) 449-1951
|
Additionally, a copy of
all notices pursuant to
Sections 5
,
6
, and
7
as well as
any changes to Counterparty’s address, telephone number or facsimile number
should be sent to:
|
Address:
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|
Merrill Lynch Financial
Markets, Inc.
|
|
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|
4 World Financial
Center, 17
th
Floor
|
|
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New York, New York
10080
|
|
|
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Merrill Lynch Financial
Centre
|
|
Attention:
|
|
Manager of Equity
Documentation
|
|
Facsimile
No.:
|
|
(917) 778-0835
|
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Telephone
No.:
|
|
(212) 449-1951
|
Address
for notices or communications to Counterparty for all purposes:
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Address:
|
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AAR CORP.
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1100 N.
Wood Dale Road
|
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Wood Dale, Illinois 60191
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Attention:
|
|
Richard J. Poulton,
Chief Financial Officer
|
|
Facsimile
No.:
|
|
(630) 227-2039
|
|
Telephone
No.:
|
|
(630) 227-2075
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In addition, in the case
of notices or communications relating to
Section 5
,
6
,
11
or
13
of this Agreement, a second copy of any such notice or
communication shall be addressed to the attention of Counterparty’ General
Counsel as follows:
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Address:
|
|
AAR CORP.
|
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|
1100 N.
Wood Dale Road
|
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Wood Dale, Illinois 60191
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Attention:
|
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General Counsel’s Office
|
|
Facsimile
No.:
|
|
(630) 227-2058
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Telephone
No.:
|
|
(630) 227-2000
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Process
Agent.
For the purpose
of Section 13(c) of the Agreement, Seller appoints as its Process
Agent:
|
Address:
|
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Merrill Lynch, Pierce,
Fenner & Smith Incorporated
|
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222 Broadway, 16th
Floor
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New York, New York
10038
|
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Attention:
|
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Litigation Department
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16
Counterparty does not
appoint a Process Agent.
|
Multibranch Party.
|
|
For
the purpose of
Section 10(c)
of the Agreement: Neither
Seller nor Counterparty is a
Multibranch Party.
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Calculation
Agent.
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Seller;
provided
that all determinations made by the Calculation
Agent shall be made in good faith and in a commercially reasonable manner.
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Credit
Support Document.
Seller: Guarantee of
Merrill Lynch & Co., Inc. in the form attached hereto as Exhibit A.
Counterparty: Not Applicable
Credit
Support Provider.
With
respect to Seller:
Merrill Lynch & Co., Inc.
With respect to
Counterparty: Not Applicable.
Governing
Law.
This
Confirmation will be governed by, and construed in accordance with, the laws of
the State of New York.
Submission to Jurisdiction
. Each party hereby irrevocably and unconditionally
submits for itself and its property in any legal action or proceeding by the
other party against it relating to the Transaction to which it is a party, or
for recognition and enforcement of any judgment in respect thereof, to the
exclusive jurisdiction of the Supreme Court of the State of New York, sitting
in New York County, the courts of the United States of America for the Southern
District of New York, and appellate courts from any of the foregoing.
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.
Netting
of Payments.
The provisions of
Section 2(c)
of
the Agreement shall not be applicable to this Transaction.
Basic
Representations.
Section 3(a)
of
the Agreement is hereby amended by the deletion of “and” at the end of
Section 3(a)(iv);
the substitution of a semicolon for the period at the end of
Section 3(a)(v)
and
the addition of
Sections 3(a)(vi),
as follows:
Eligible
Contract Participant; Line of Business.
Each
party agrees and represents that it is an “eligible contract participant” as
defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended
(
“
CEA
”
),
this Agreement and the Transaction
thereunder are subject to individual negotiation by the parties and have not
been executed or traded on a “trading facility” as defined in Section 1a(33)
of the CEA, and it has entered into this Confirmation and this Transaction in
connection with its business or a line of business (including financial
intermediation), or the financing of its business.
Acknowledgements:
(a)
The
parties acknowledge and agree that there are no other representations,
agreements or other undertakings of the parties in relation to this
Transaction, except as set forth in this Confirmation.
17
(b)
The
parties hereto intend for:
(i)
Seller
to be a “financial institution” as defined in Section 101(22) of Title 11
of the United States Code (the “
Bankruptcy
Code
”
)
and this
Transaction to be a “securities contract” as defined in Section 741(7) of
the Bankruptcy Code
and a “swap agreement” as defined in Section 101(53C)
of the Bankruptcy Code,
qualifying
for the protections of, among other sections, Sections 362(b)(6), 362 (b)(17),
546(e), 546(g), 555 and 560 of the Bankruptcy Code;
(ii)
a
party’s right to liquidate this Transaction and to exercise any other remedies
upon the occurrence of any Event of Default under the Agreement with respect to
the other party to constitute a “contractual right” as defined in the
Bankruptcy Code;
(iii)
all payments for, under
or in connection with this Transaction, all payments for the Shares and the transfer
of such Shares to constitute “settlement payments” as defined in the Bankruptcy
Code.
Amendment of Section 6(d)(ii).
Section 6(d)(ii)
of the Agreement is modified by deleting the words
“on the day”
in the second line thereof and substituting therefore “on
the day that is three Local Business Days after the day.”
Section 6(d)(ii)
is
further modified by deleting the words “two Local Business Days” in the fourth
line thereof and substituting therefore “three Local Business Days.”
Consent
to Recording.
Each party consents to the recording of the
telephone conversations of trading and marketing personnel of the parties and
their Affiliates in connection with this Confirmation. To the extent that one
party records telephone conversations (the “Recording Party”) and the other
party does not (the “Non-Recording
Party”), the Recording Party shall in the
event of any dispute, make a complete and unedited copy of such party’s tape of
the entire day’s conversations with the Non-Recording Party’s personnel
available to the Non-Recording Party. The Recording Party’s tapes may be used
by either party in any forum in which a dispute is sought to be resolved and
the Recording Party will retain tapes for a consistent period of time in
accordance with the Recording Party’s policy unless one party notifies the
other that a particular transaction is under review and warrants further
retention.
Disclosure.
Each party hereby acknowledges and agrees that Seller has
authorized Counterparty to disclose this Transaction and any related hedging
transaction between the parties if and to the extent that Counterparty reasonably
determines (after consultation with Seller)
that such disclosure is required by law or by the rules of the New York
Stock Exchange or
any securities exchange. Notwithstanding the foregoing, effective from
the date of commencement of discussions concerning the Transaction,
Counterparty and each of its employees, representatives, or other agents may
disclose to any and all persons, without limitation of any kind, the tax
treatment and tax structure of the Transaction and all materials of any kind
(including opinions or other tax analyses) that are provided to Counterparty
relating to such tax treatment and tax structure.
Severability.
If any term, provision, covenant or condition of this Confirmation, or
the application thereof to any
party or circumstance, shall be held to
be invalid or unenforceable in whole or in part for any reason, the remaining
terms, provisions, covenants, and conditions hereof shall continue in full
force and effect as if this Confirmation had been executed with the invalid or
unenforceable provision eliminated, so long as this Confirmation as so modified
continues to express, without material change, the original intentions of the
parties as to the subject matter of this
Confirmation
and the deletion of such portion of this Confirmation will not substantially
impair the respective benefits or expectations of parties to this Agreement;
provided,
however,
that this severability provision shall not be
applicable if
any provision of
Section 2
,
5
,
6
or
13
of the
Agreement (or any definition or provision in
Section 14
to the
extent that it relates to, or is used in or in connection with any such
Section) shall be so held to be invalid or unenforceable.
Affected
Parties.
For purposes of
Section 6(e)
of the
Agreement, each party shall be deemed to be an Affected Party in connection
with Illegality and any Tax Event.
[
Signatures follow on separate page
]
18
Please confirm that the
foregoing correctly sets forth the terms of our agreement by executing the copy
of this Confirmation enclosed for that purpose and returning it to us.
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Very truly
yours,
|
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|
|
|
|
MERRILL LYNCH FINANCIAL MARKETS, INC.
|
|
|
|
|
|
By:
|
/s/
Fran Jacobson
|
|
|
|
Name: Fran
Jacobson
|
|
|
Title:
Authorized Signatory
|
Confirmed as of
the date first above written:
AAR CORP.
|
By:
|
/s/
Timothy J. Romenesko
|
|
|
|
Name: Timothy J.
Romenesko
|
|
|
Title:
President & COO
|
|
Acknowledged and agreed
as to matters to the Agent:
MERRILL LYNCH,
PIERCE, FENNER & SMITH INCORPORATED
Solely in its
capacity as Agent hereunder
|
By:
|
/s/
Angelina Lopes
|
|
|
|
Name: Angelina
Lopes
|
|
|
Title:
Authorized Signatory
|
|
EXHIBIT A
GUARANTEE
OF MERRILL LYNCH & CO., INC.
FOR VALUE
RECEIVED, receipt of which is hereby acknowledged, MERRILL LYNCH &
CO., INC., a corporation duly organized and existing under the laws of the
State of Delaware (“ML & Co.”), hereby unconditionally guarantees to
AAR Corp. (the “Company”), the due and punctual payment of any and all amounts
payable by Merrill Lynch Financial Markets, Inc., a company incorporated
in Delaware (“ML”), under the terms of the Confirmation of OTC Convertible Note
Hedge between the Company and ML (ML as Seller), dated as of February 5,
2008, with respect to the Reference Notes (as defined therein) of Company due
2016 (the “Confirmation”), including, in case of default, interest on any
amount due, when and as the same shall become due and payable, whether on the
scheduled payment dates, at maturity, upon declaration of termination or
otherwise, according to the terms thereof.
In case of the failure of ML punctually to make any such payment, ML &
Co. hereby agrees to make such payment, or cause such payment to be made,
promptly upon demand made by the Company to ML & Co.; provided,
however that delay by the Company in giving such demand shall in no event
affect ML & Co.’s obligations under this Guarantee. This Guarantee shall remain in full force and
effect or shall be reinstated (as the case may be) if at any time any payment
guaranteed hereunder, in whole or in part, is rescinded or must otherwise be
returned by the Company upon the insolvency, bankruptcy or reorganization of ML
or otherwise, all as though such payment had not been made.
ML & Co. hereby
agrees that its obligations hereunder constitute a guarantee of payment when
due and not of collection and that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of
the Confirmation; the absence of any action to enforce the same; any waiver or
consent by the Company concerning any provisions thereof; the rendering of any
judgment against ML or any action to enforce the same; or any other
circumstances that might otherwise constitute a legal or equitable discharge of
a guarantor or a defense of a guarantor.
ML covenants that this guarantee will not be discharged except by
complete payment of the amounts payable under the Confirmation. This Guarantee shall continue to be effective
if ML merges or consolidates with or into another entity, loses its separate
legal identity or ceases to exist.
ML & Co. shall
not exercise any rights that it may acquire by way of subrogation as a result
of a payment by it under this Guarantee at any time when any of the obligations
of ML shall have become due and remain unpaid. Any amount paid to ML &
Co. in violation of the preceding sentence shall be held for the benefit of the
Company and shall forthwith be paid to the Company to be credited and applied
to such obligations of ML then due and unpaid.
Subject to the foregoing, upon payment of all such obligations of ML, ML &
Co. shall be subrogated to the rights of the Company against ML, and the
Company agrees to take at ML & Co.’s expense such steps as ML &Co.
may reasonably request to implement such subrogation.
ML & Co.
hereby waives diligence; presentment; protest; notice of protest, acceleration,
and dishonor; filing of claims with a court in the event of insolvency or
bankruptcy of ML; all demands whatsoever, except as noted in the first
paragraph hereof; and any right to require a proceeding first against ML.
ML & Co.
hereby certifies and warrants that this Guarantee constitutes the valid
obligation of ML & Co. and
complies with all applicable laws.
This Guarantee
shall be governed by, and construed in accordance with, the laws of the State
of New York.
This Guarantee becomes
effective concurrent with the effectiveness of the Confirmation, according to
its terms.
IN WITNESS WHEREOF, ML &
Co. has caused this Guarantee to be executed in its corporate name by its duly
authorized representative.
|
|
MERRILL
LYNCH & CO., INC.
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Patricia Kropiewnicki
|
|
|
|
|
Name:
Patricia Kropiewnicki
|
|
|
|
Title:
Designated Signatory
|
|
|
|
Date:
February 6, 2008
|
Exhibit
10.3
EXECUTION COPY
Confirmation
of OTC Warrant Transaction
|
Date:
|
February 5,
2008
|
|
To:
|
AAR
Corp. (“
Counterparty
”
)
|
|
|
1100 N. Wood Dale Road
|
|
|
Wood Dale, Illinois 60191
|
|
|
Attention:
Richard J. Poulton, Chief Financial Officer
|
|
|
Facsimile No.: (630) 227-2039
|
|
|
Telephone No.: (630) 227-2075
|
|
From:
|
Merrill
Lynch Financial Markets, Inc. (“Dealer” or “MLFM”)
|
|
|
4 World Financial Center 5
th
Floor
|
|
|
New York, New York 10080
|
|
|
Attention: Corporate Derivatives
|
|
|
Facsimile No.: (212) 738-1069
|
|
|
Telephone No.: (212) 449-6763
|
MLFM
Reference:
Dear Sir / Madam:
The purpose of this
letter agreement (this “
Confirmation
”)
is to confirm the terms and conditions of the above-referenced transaction
entered into among Counterparty, Dealer and Merrill Lynch, Pierce, Fenner &
Smith Incorporated (the “
Agent
”)
on the Trade Date specified below (the “
Transaction
”
).
This
Confirmation constitutes a “Confirmation” as referred to in the Agreement
specified below.
The definitions and
provisions contained in the 2000 ISDA Definitions (the “
Swap Definitions
”) and the 2002 ISDA
Equity Derivatives Definitions (the “
Equity
Definitions
”
and,
together with the Swap Definitions, the “
Definitions
”
),
in each case as published by the
International Swaps and Derivatives Association, Inc., are incorporated
into this Confirmation. In the event of any inconsistency between the Swap
Definitions and the Equity Definitions, the Equity Definitions will govern, and
in the event of any inconsistency between the Definitions and this
Confirmation, this Confirmation will govern. References herein to a
“Transaction” shall be deemed to be references to a “Share Option Transaction”
for the purposes of the Equity Definitions and to a “Swap Transaction” for the
purposes of the Swap Definitions. For purposes of this Transaction, “Warrant
Style”, “Warrant Type”, “Number of Warrants” and “Warrant Entitlement” (each as
defined below) shall be used herein as if such terms were referred to as
“Option Style”, “Option Type”, “Number of Options” and “Option Entitlement”,
respectively, in the Definitions.
This Confirmation
evidences a complete binding agreement between you and us as to the terms of
the Transaction to which this Confirmation relates. This Confirmation
(notwithstanding anything to the contrary herein), shall be subject to, and
form part of, an agreement in the 2002 form of the ISDA Master Agreement (the “
Master Agreement
”
or “
Agreement
”)
as if we had executed an agreement in such form (but without any Schedule and
with elections specified in the “ISDA Master Agreement” Section of this
Confirmation) on the Trade Date. In the event of any inconsistency between the
provisions of that Agreement and this Confirmation, this Confirmation will
prevail for the purpose of this Transaction. The parties hereby agree that the
Transaction evidenced by this Confirmation shall be the only Transaction
subject to and governed by the Agreement.
The terms of the
particular Transaction to which this Confirmation relates are as follows:
OTC Warrant Confirmation (2014)
General
Terms:
|
Trade Date:
|
|
February 5, 2008
|
|
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Effective Date:
|
|
February 11, 2008
subject to cancellation of the OTC Warrant Transaction prior to
5:00 p.m. (New York City time) on such date by the Counterparty.
In the event
of such cancellation, any
payments previously made hereunder, including the Premium, shall be returned
to the person making such payment. In addition, Counterparty shall reimburse
Dealer for any costs or expenses (including market losses) relating to the
unwinding of its hedging activities in connection with the Transaction
(including any loss or cost incurred as a result of its terminating,
liquidating, obtaining or reestablishing any hedge or related trading
position).
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Warrant Style:
|
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European
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Warrant Type:
|
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Call
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Seller:
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Counterparty
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Buyer:
|
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Dealer
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Shares:
|
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Shares of Common Stock,
$1.00 par value, of Counterparty (Security Symbol: “AIR”
).
|
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Number of Warrants:
|
|
3,513,950
|
|
|
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Daily Number of
Warrants:
|
|
For any day, the
unexercised Number of Warrants on such day
divided
by the remaining number of Expiration Dates (including such day)
and rounded down to the nearest whole number, with the balance of the Number
of Warrants exercised on the final Expiration Date.
|
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Warrant Entitlement:
|
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One (1) Share per
Warrant
|
|
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Strike Price:
|
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$48.825
|
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Premium:
|
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$17,250,000.00
|
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Premium Payment Date:
|
|
The Effective Date;
provided
that no cancellation of the Transaction has occurred prior to 5:00 p.m.
(New York City time) on such date by the Counterparty.
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|
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Exchange:
|
|
New York Stock
Exchange, Chicago Stock Exchange
|
|
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Related Exchange(s):
|
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All Exchanges
|
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Full Exchange Business
Day:
|
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A Scheduled Trading Day
that has a scheduled closing time for its regular trading session at
4:00 p.m. (New York City time) or the then standard closing time for
regular trading on the Exchange and is not a Disrupted Day.
|
Procedures for Exercise:
|
Expiration Time:
|
|
11:59 p.m. (New
York City time).
|
2
|
Expiration Dates:
|
|
The 90 consecutive Full Exchange Business Days
beginning on and including May 30, 2014 each shall be the Expiration
Date for a number of Warrants equal to the Daily Number of Warrants on such
date.
|
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Exercise Dates:
|
|
Each Expiration Date
shall be an Exercise Date for a number of Warrants equal to the Daily Number
of Warrants on such date. The Warrants shall not be exercised prior to the
first such Exercise Date.
|
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Automatic Exercise:
|
|
Applicable;
provided
that Section 3.4(a) of the Equity Definitions shall apply to Cash
Settlement and Net Physical Settlement; and
provided
further
that, unless all Warrants have been previously exercised hereunder, a number
of Warrants for each Expiration Date equal to the Daily Number of Warrants
for such Expiration Date shall be deemed to be automatically exercised.
|
|
Counterparty’s Telephone Number and Telex and/or Facsimile Number and Contact
Details for purpose of Giving Notice:
|
|
Address:
Attention:
Facsimile No.:
Telephone No.:
|
AAR CORP.
1100 N.
Wood Dale Road
Wood Dale, Illinois 60191
Richard J. Poulton, Chief Financial Officer
(630) 227-2039
(630) 227-2075
|
Valuation:
|
Valuation Dates:
|
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Each Exercise Date
|
Settlement Terms:
|
Cash Settlement:
|
|
Applicable;
provided
that it shall be a
condition of Counterparty’s right to elect Cash Settlement that on the date
of the Cash Settlement election, none of Counterparty, its directors,
executive officers, or any person controlling, or exercising influence over,
its decision to elect Cash Settlement is in possession of any material
non-public information with respect to Counterparty or the Shares. If
Counterparty elects to settle the Transaction by Cash Settlement,
Counterparty represents and agrees that:
(i) Counterparty is not, on the date of the
Cash Settlement election, and will not be, on any day during the period from
and including the first Expiration Date to and including the final Expiration
Date, engaged in a distribution, as such term is used in Regulation M under
the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”);
and
(ii) during the period from and including the
first Expiration Date to and including the final Expiration Date, without the
prior written consent of Dealer, the Counterparty shall not, and shall cause
its affiliates and 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 equivalent interest, including a
unit of beneficial interest in a trust or limited partnership or a depository
share) or any security convertible into or exchangeable for the Shares.
|
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Settlement Currency:
|
|
USD
|
3
|
Settlement Price:
|
|
For each Valuation
Date, the Rule 10b-18 Dollar Volume Weighted Average Price of the Shares
(“VWAP”) calculated from 9:45 a.m. to 3:45 p.m., as observed under
the heading Bloomberg “VWAP” on Bloomberg page AIR.N <equity> VAP
(or any successor thereto) (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);
provided
that, if the scheduled
weekday closing time of the Exchange for any Valuation Date is later than
4:00 p.m. (without regard to after hours or any other trading outside of
the regular trading session hours) the VWAP shall be calculated for such
Valuation Date from 9:45 a.m. until 15 minutes prior to such later
closing time of the Exchange.
Section 6.3(a) of
the Equity Definitions is hereby amended by replacing clause (ii) in its
entirety with “(ii) an Exchange Disruption, or” and inserting
immediately following clause (iii) the phrase “; in each case that the
Calculation Agent determines is material.”
|
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Cash Settlement Payment
Date:
|
|
With respect to each
Valuation Date, three (3) Currency Business Days after the final
Valuation Date.
|
|
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|
Settlement Method
Election:
|
|
Applicable with respect
to Cash Settlement or Net Physical Settlement only.
|
|
|
|
|
|
Electing Party:
|
|
Counterparty
|
|
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|
|
|
Settlement Method Election Date:
|
|
Ten (10) Business Days prior to the first
Expiration Date
|
|
|
|
|
|
Default Settlement
Method:
|
|
Net Physical Settlement.
|
|
|
|
|
|
Net Physical
Settlement:
|
|
In the event that the
Counterparty elects to settle this Transaction by Net Physical Settlement,
Counterparty shall deliver to Dealer on the Settlement Date a number of
Shares (the “
Delivered Shares
”)
equal to the Share Delivery Quantity;
provided
that in the event that the number of Shares calculated comprises any
fractional Share, only whole Shares shall be delivered and an amount in cash
equal to the value of such fractional share shall be payable by the
Counterparty to Dealer in lieu of such fractional Share. If, in the
reasonable opinion of Dealer based on advice of counsel, for any reason, the
Shares deliverable upon Net Physical Settlement would not be immediately
freely transferable by Dealer under Rule 144(b)(1) under the
Securities Act of 1933, as amended (the “Securities Act”), then Dealer may
elect to either (x) accept delivery of such Shares notwithstanding any
restriction on transfer or (y) have the provisions set forth under
“Registration/Private Placement” below apply, mutatis mutandis.
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|
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Share Delivery
Quantity:
|
|
For each Exercise Date,
a number of Shares, as calculated by the Calculation Agent, equal to the Net
Physical Settlement Amount for such Exercise Date divided by the Settlement
Price on the Valuation Date in respect of such Settlement Date plus an amount
in cash in lieu of any fractional shares (based on the applicable Settlement
Price).
|
|
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|
|
Net Physical Settlement
Amount:
|
|
For any Exercise Date,
an amount equal to the product of (i) the Number of Warrants being
exercised on the relevant Exercise Date, (ii) the Strike Price
Differential for such Exercise Date and (iii) the Warrant Entitlement.
|
|
|
|
|
|
Strike Price
Differential:
|
|
For any Valuation Date,
(i) if the Settlement Price is greater than the Strike Price, an amount
equal to the excess of such Settlement Price over the Strike Price for
|
4
|
|
|
such Valuation Date or
(ii) if such Settlement Price is less than or equal to the Strike Price,
zero.
|
|
|
|
|
|
Settlement Date:
|
|
Settlement with respect
to each Exercise Date shall occur on the third (3rd) Full Exchange Business
Day following the final Valuation Date;
provided
that
Dealer shall have the right to request
by prior written notice to Counterparty a Settlement Date with respect to any
Exercise Date and the related Share Delivery Quantity that is three
(3) Full Exchange Business Days following such Exercise Date. Such
request shall not unreasonably be denied.
|
|
|
|
|
|
Limitations on Net
Physical Settlement by Counterparty:
|
|
Notwithstanding
anything herein or in the Agreement to the contrary, the number of Shares
that may be delivered at settlement by Counterparty shall not exceed
5,270,925 Shares at any time
(“
Maximum
Deliverable Share Amount
”
),
as
adjusted by Calculation Agent to account for any subdivision, stock-split,
stock combination, reclassification or similar dilutive or anti-dilutive
event with respect to the Shares.
Counterparty represents
and warrants that the number of Available Shares as of the Trade Date is
greater than the Maximum Deliverable Share Amount. Counterparty covenants and
agrees that (i) Counterparty shall not take any action of corporate
governance or otherwise to reduce the number of Available Shares below the
Maximum Deliverable Share and (ii) Counterparty shall use its reasonable
efforts to cause the number of Available Shares at all times to be greater
than the Maximum Deliverable Share Amount.
For this purpose, “
Available Shares
”
means the number of Shares Counterparty
currently has authorized (but not issued and outstanding) less the maximum
number of Shares that may be required to be issued by Counterparty in
connection with stock options, convertibles, and other commitments of
Counterparty that may require the issuance or delivery of Shares in
connection therewith.
|
Dividends:
|
Dividends:
|
|
If at any time during
the period from and including the Trade Date, to and including the date on
which Counterparty has fully performed its obligations to deliver Shares
hereunder, 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, the Warrant Entitlement and any other variable
it deems appropriate to preserve the fair value of the Warrants after taking
into account such dividend.
|
|
|
|
|
|
Regular Dividend:
|
|
Initially USD $0.00 per
Share per quarter in respect of the Shares. In the event that, in any
quarter, a regular quarterly Ex-Dividend Date occurs for which the amount of
the corresponding cash dividend is different (the “New Dividend Amount”) from
the Regular Dividend or no Ex-Dividend Date occurs (in which case the New
Dividend Amount shall be zero), then following the adjustment by the
Calculation Agent pursuant to “Dividends” above, the Regular Dividend shall
equal the New Dividend Amount.
|
|
|
|
|
|
Extraordinary
Dividends:
|
|
Any dividend other than
Regular Dividends. For the avoidance of doubt, if more
|
5
|
|
|
than one Ex-Dividend
Date occurs in a quarter, the Calculation Agent shall designate any cash
dividend other than a Regular Dividend as an Extraordinary Dividend and will,
in its reasonable discretion, adjust the Strike Price, the Number of
Warrants, the Daily Number of Warrants, the Warrant Entitlement and any other
variable it deems appropriate to preserve the fair value of the Warrants
after taking into account such Extraordinary Dividend.
|
Adjustments:
|
Method of Adjustment:
|
|
Calculation Agent
Adjustment
|
Extraordinary Events:
|
Consequences of Merger
Events:
|
|
(a) Share-for-Share:
|
Modified Calculation
Agent Adjustment
|
|
|
|
(b) Share-for-Other:
|
Cancellation and
Payment (Calculation Agent Determination)
|
|
|
|
|
|
|
|
|
(c) Share-for-Combined:
|
Component Adjustment
(Calculation Agent Determination)
|
|
|
|
|
|
Tender Offer:
|
|
Applicable
|
|
|
|
|
|
Consequences of Tender
Offers:
|
|
(a) Share-for-Share:
|
Modified Calculation
Agent Adjustment
|
|
|
|
|
|
|
|
|
(b) Share-for-Other:
|
Cancellation and
Payment (Calculation Agent Determination)
|
|
|
|
|
|
|
|
|
(b) Share-for-Combined:
|
Component Adjustment
(Calculation Agent Determination)
|
|
|
|
|
|
|
|
With respect to any
Extraordinary Events hereunder, upon the occurrence of Cancellation and
Payment in whole or in part, the parties agree that the amount to be paid, in
accordance with the Equity Definitions, shall constitute a Transaction Early
Termination Amount, subject to satisfaction by the payment or delivery of
Shares or cash as set forth in the Early Termination section below.
|
|
|
|
|
|
Nationalization,
Insolvency or Delisting:
|
|
Cancellation and
Payment (Calculation Agent Determination) (subject to satisfaction by payment
or delivery of Shares or cash as set forth in “
Early Termination
”
below). In addition to the provisions of Section 12.6(a)(iii) of
the Equity Definitions, it will also constitute a Delisting if the Exchange
is located in the United States and the Shares are not immediately re-listed,
re-traded or re-quoted on any of the New York Stock Exchange, the American
Stock Exchange, the NASDAQ Global Market or the NASDAQ Global Select Market
(or their respective successors); if the Shares are immediately re-listed,
re-traded or re-quoted on any such exchange or quotation system, such
exchange or quotation system shall thereafter be deemed to be the Exchange.
|
|
|
|
|
|
Determining Party:
|
|
Dealer
|
Additional Disruption Events:
|
Change in Law:
|
|
Applicable
|
6
|
Failure to Deliver:
|
|
Not Applicable
|
|
|
|
|
|
Insolvency Filing:
|
|
Applicable
|
|
|
|
|
|
Hedging Disruption
Event:
|
|
Applicable
|
|
|
|
|
|
Increased Cost of
Hedging:
|
|
Not Applicable
|
|
|
|
|
|
Loss of Stock Borrow:
|
|
Applicable.
Section 12.9(b)(iv) of the Equity Definitions is hereby amended by
deleting the text from and including “(A)” to and including “(B)” and by
deleting the words “in each case”.
|
|
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|
|
Maximum Stock Loan
Rate:
|
|
0.60%
|
|
|
|
|
|
Increased Cost of Stock
Borrow:
|
|
Applicable;
provided
that it shall be a condition to Counterparty’s right to make the election
described in clause (C) of Section 12.9(b)(v) of the Equity
Definitions that on the date of such election, none of Counterparty, its
directors, executive officers, or any person controlling, or exercising
influence over, its decision to make such election is in possession of any
material non-public information with respect to Counterparty or the Shares;
and
provided
further
that, if Counterparty timely makes the
election described in clause (A) or (B) of Section 12.9(b)(v) of
the Equity Definitions, Counterparty shall thereafter remain entitled,
subject to the foregoing condition, to terminate the Transaction pursuant to
Section 12.9(b)(v)(C) of the Equity Definitions upon ten Scheduled
Trading Days’ notice to
Dealer.
Section 12.9(b)(v) of the Equity Definitions is hereby amended by
deleting the text from and including “(X)” to and including “(Y)”.
|
|
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|
|
|
Initial Stock Loan
Rate:
|
|
0.25%
|
|
|
|
|
|
Hedging Party:
|
|
Dealer
|
|
|
|
|
|
Determining Party:
|
|
Dealer
|
|
|
|
|
|
Non-Reliance:
|
|
Applicable
|
|
|
|
|
|
Agreements and
Acknowledgments Regarding Hedging Activities:
|
|
Applicable
|
|
|
|
|
|
Additional
Acknowledgments:
|
|
Applicable
|
Other Provisions:
|
Additional Agreements:
|
|
If Counterparty would
be obligated to pay cash to Dealer pursuant to the terms of this Agreement
due to an event or circumstance outside Counterparty’s control without having
had the right (other than pursuant to this paragraph) to elect to deliver
Shares in satisfaction of such payment obligation, then Counterparty may elect
to deliver to Dealer a number of Shares (whether registered or unregistered)
having a cash value equal to the amount of such payment obligation. Such
number of Shares to be delivered shall be the number of Shares, determined by
the Calculation Agent, sufficient for
Dealer to realize the cash equivalent of such payment obligation
from proceeds of the sale of such number of Shares over a reasonable period
of time taking into account any applicable discount
|
7
|
|
|
(determined in a
commercially reasonable manner) to reflect any restrictions on transfer as
well as the market value of the Shares. Settlement relating to any delivery
of Shares pursuant to this paragraph shall occur within a reasonable period
of time. The number of Shares delivered pursuant to this paragraph shall not
exceed the Maximum Deliverable Share Amount and shall be subject to the
provisions under “Early Termination” hereof regarding Proceeds Amount and the
provisions set forth in subsection (c) under “Additional Agreements,
Representations and Covenants of Counterparty, Etc.” below.
|
|
|
|
|
|
Early Termination:
|
|
Notwithstanding any
provision to the contrary, upon the designation of an Early Termination Date
or the occurrence of Cancellation and Payment in whole or in part hereunder
(except in the case of an Event of Default in which Counterparty is the
Defaulting Party or a Termination Event in which Counterparty is the Affected
Party, other than an (x) Event of Default of the type described in Section 5(a)(iii),
(v), (vi) or (vii) of the Master Agreement or (y) a
Termination Event of the type described in Section 5(b)(i), (ii), (iii),
(iv), or (v) of the Master Agreement that in the case of either
(x) or (y) resulted from an event or events outside Counterparty’s
control), Counterparty’s payment obligation in respect of this Transaction
(the “
Transaction Early Termination
Amount
”) may, at the option of Counterparty, be satisfied by
the delivery of a number of Shares equal to the Transaction Early Termination
Amount divided by the Termination Price (“
Early Termination Stock Settlement
”);
provided
,
however
,
that Counterparty must notify
Dealer of its election of Early Termination Stock Settlement by
the close of business on the day that is two Exchange Business Days following
the day that the notice designating the Early Termination Date, or notice
that an Extraordinary Event has resulted in the cancellation or termination
of the Transaction in whole or in part, is effective. “
Termination Price
” means the market
value per Share on the date that Shares
are delivered in connection with such Early Termination Date, as
determined by the Calculation Agent in a commercially reasonable manner
taking into account any applicable discount to reflect any restrictions on
transfer.
A number of Shares
calculated as being due in respect of any Early Termination Stock Settlement
will be deliverable on the third Clearance System Business Day following the
date that notice specifying the number of Shares deliverable is effective;
provided
that, if Counterparty is delivering Shares as a result of a Merger Event,
the Settlement Date for such delivery will be immediately prior to the
effective time of the Merger Event and the Shares will be deemed delivered at
such time such that
Dealer
will be a holder of the Shares prior to such effective time and be entitled to receive such merger consideration
as a holder of Shares at such time would be entitled to receive (and
references herein to Shares shall be deemed to refer to such merger
consideration, as applicable). Section 6(d)(i) of the
Agreement is hereby amended by adding the following words after the word
“paid” in the fifth line thereof: “or any delivery is to be made, as
applicable.”
On or prior to the
Early Termination Date or date on which notice that an Extraordinary Event
has resulted in the cancellation or termination of the Transaction in whole
or in part is effective, as applicable, if Early Termination Stock Settlement
is elected and if so requested by Dealer upon advice of counsel, Counterparty
shall comply with the provisions set forth below opposite the caption
“Registration/Private Placement”.
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Registration/Private
Placement:
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If the provisions under
this heading “Registration/Private Placement” apply, Counterparty shall
(subject to its right to make the election described in the immediately
succeeding paragraph)
(A) afford
Dealer a reasonable opportunity to
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conduct a due diligence investigation with respect to Counterparty that
is customary in scope for underwritten offerings of equity securities that
yields a result reasonably satisfactory to Dealer; (B)
enter into
a registration rights agreement with
Dealer (a “
Registered Settlement
”)
in form and substance reasonably acceptable to Dealer which agreement (“
Registration Rights
Agreement
”) will contain among other things, customary
representations and warranties and indemnification, restrictions on sales
during “blackout dates” as provided for in the Registration Rights Agreement
and shall satisfy the conditions contained therein; and (C) promptly file and procure the effectiveness a Registration Statement pursuant to
Rule 415 under the Securities Act. If and when such Registration
Statement shall have been declared effective by the Securities and Exchange
Commission, Counterparty shall have made available to Dealer such Prospectuses as Dealer may reasonably request to comply with the applicable
prospectus delivery requirements for the resale by Dealer of such number of Shares as Dealer shall specify (or, if greater, the number of Shares that
Counterparty shall specify). Such Registration Statement shall be effective
and Prospectus shall be current until the earliest of the date on which
(i) all the Delivered Shares or Shares
delivered by Counterparty in connection with an Early Termination Date, as the case may be, have been sold,
(ii) Dealer has advised
Counterparty that it no longer requires that such Registration Statement be
effective or (iii) all remaining Shares could be sold by Dealer without registration pursuant
to Rule 144 promulgated under the Securities Act (the “
Termination Registration Period
”
).
It is understood that the Registration
Statement and Prospectus will cover a number of Shares equal to the aggregate
number of Shares (if any) reasonably estimated by Dealer to be potentially deliverable by Counterparty in connection
with Net Physical Settlement or
Early Termination Stock Settlement hereunder, as the case may be, but in no event exceeding the Maximum
Deliverable Share Amount. On each day during the Termination Registration
Period Counterparty shall represent that each of its filings under the
Securities Act, the Exchange Act or other applicable securities laws that are
required to be filed have been filed and that, as of the respective dates
thereof and as of the date of this representation, they do not contain any
untrue statement of a material fact or omission of a material fact required
to be stated therein or necessary to make the statements made, in the light
of the circumstances under which they were made, not misleading.
In lieu of a Registered
Settlement, Counterparty may elect
, by notice to Dealer no later than the time the relevant delivery
obligation is due , that this paragraph shall apply:
(a) Counterparty
shall afford
Dealer
and any potential institutional purchaser of any Shares identified by Dealer a reasonable opportunity to
conduct a due diligence investigation with respect to Counterparty that is
customary in scope for private placements of equity securities subject to
execution of any customary confidentiality agreements;
(b) Counterparty
shall enter into an agreement (a “
Private
Placement Agreement
”) with Dealer on commercially reasonable
terms in connection with the private placement of such Shares
(including any additional Shares pursuant to
clause (c) below) by Counterparty to Dealer or an affiliate and the private resale of such shares by Dealer or such affiliate,
substantially similar to private placement purchase agreements customary for
private placements of equity securities, in form and substance commercially
reasonably satisfactory to Dealer,
which Private Placement Agreement shall include provisions relating to
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the indemnification of,
and contribution in connection with the liability of,
Dealer and its affiliates, shall
provide for the payment by Counterparty of all expenses in connection with
such resale, including all reasonable and documented fees and expenses of
counsel for Dealer, shall
contain representations, warranties and agreements of Counterparty reasonably
necessary or advisable to establish and maintain the availability of an
exemption from the registration requirements of the Securities Act for such
resales, and shall use commercially reasonable efforts to provide for the
delivery of accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial statements
and certain financial information contained in or incorporated by reference
into the offering memorandum prepared for the resale of such Shares;
(c) Dealer
shall sell the
Delivered Shares
or the Shares
delivered by Counterparty in connection with Early Termination Stock
Settlement, as the case may be, in a commercially reasonable manner
until the amount received by Dealer
for the sale of the Shares (the “
Proceeds
Amount
”) is equal to the Net Physical Settlement Amount or the Transaction Early
Termination Amount, as applicable.
Any remaining delivered Shares
shall be returned to Counterparty. If the Proceeds Amount is less than the Net Physical Settlement Amount or the Transaction
Early Termination Amount, as
applicable, Counterparty shall promptly deliver upon notice from Dealer additional Shares to Dealer until the dollar amount from
the sale of such Shares by Dealer
equals the difference between the Net
Physical Settlement Amount or the Transaction Early Termination Amount, as applicable, and the Proceeds
Amount. In no event shall Counterparty be required to deliver to Dealer a number of Shares greater than
the Maximum Deliverable Share Amount.
Notwithstanding the
foregoing: (I) if Counterparty has elected to deliver Shares
as described in paragraph (a) above and
either (A) Counterparty does not provide for the sale of the Shares
under the Registration Statement as provided in the Registration Rights
Agreement, (B) some Shares
cannot be registered under the Registration Statement due to
Rule 415(a)(4) under the Securities Act or (C) some Shares cannot be sold due to the application of a
blackout period or the failure of the Registration Statement to become
effective on or prior to the date on which the relevant delivery obligation
is due, then the provisions of the preceding paragraph shall apply to
the extent Counterparty has not satisfied its obligations hereunder.
(II) If the preceding paragraph is applicable and Counterparty fails to
satisfy its obligations under such paragraph, then Counterparty may deliver
unregistered Shares of equivalent value to the Net Physical Settlement Amount or the Transaction Early
Termination Amount, as applicable,
(or, if applicable, the unsatisfied portion thereof). The value of any
unregistered Shares so delivered shall be discounted to reflect an
appropriate liquidity discount (determined by Dealer in a commercially reasonable manner, taking into account Dealer’s policies and determinations
with respect to any transfer restrictions that Dealer deems it advisable to observe in connection with sales of
such Shares). (III) If some or all of the Delivered Shares or Shares delivered in connection with an
Early Termination Stock Settlement, as applicable, cannot be used to
close out stock loans in the shares of Counterparty entered into to establish
or maintain short positions by Dealer
in connection with this Transaction without a prospectus being required by
applicable law to be delivered to such lender, then the value of any such
Shares shall reflect the cost (determined by Dealer in good faith and in a commercially reasonable manner) to Dealer of trading Shares in order to
close out its hedge position if any, and
the
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number of Shares required to be delivered shall be adjusted accordingly.
In
no event shall Counterparty be required to (i) top-up the delivery in
cash or (ii) deliver to
Dealer
a number of Shares greater than the Maximum Deliverable Share Amount.
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Compliance With
Securities Laws:
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Counterparty represents
and agrees that it has complied, and will comply, in connection with this
Transaction and all related or contemporaneous sales and purchases of Shares,
with the applicable provisions of the Securities Act, the Exchange Act and
the rules and regulations promulgated thereunder, including, without
limitation, Rule 10b-5 and 13e and Regulation M under the Exchange Act.
Each party acknowledges
that the offer and sale of the Transaction to it is intended to be exempt
from registration under the Securities Act by virtue of
Section 4(2) thereof. Accordingly, each party represents and
warrants to the other party that (i) it has the financial ability to
bear the economic risk of its investment in the Transaction and is able to
bear a total loss of its investment, (ii) it is an “accredited investor”
as that term is defined in Regulation D as promulgated under the Securities
Act and (iii) the disposition of the Transaction is restricted under
this Confirmation, the Securities Act and state securities laws.
Counterparty further
represents and warrants that:
(a) Counterparty
is not entering into this Transaction to create actual or apparent trading
activity in the Shares (or any security convertible into or exchangeable for
Shares) or to raise or depress or otherwise manipulate the price of the
Shares (or any security convertible into or exchangeable for Shares);
(b) Counterparty
represents and acknowledges that as of the date hereof and without limiting
the generality of Section 13.1 of the Equity Definitions,
Dealer is not making any
representations or warranties with respect to the treatment of the
Transaction under FASB Statements 149 or 150, EITF Issue No. 00-19 (or
any successor issue statements) or under FASB’s Liabilities & Equity
Project;
(c) Counterparty
is not, and after giving effect to the Transaction contemplated hereby, will
not be, an “investment company” as such term is defined in the Investment
Company Act of 1940, as amended;
(d) As
of the Trade Date and each date on which a payment of cash is made by
Counterparty hereunder, (i) the assets of Counterparty at their fair
valuation exceed the liabilities of Counterparty, including contingent
liabilities; (ii) the capital of Counterparty is adequate to conduct its
business; and (iii) Counterparty has the ability to pay its debts and other
obligations as such obligations mature and does not intend to, or believe
that it will, incur debt or other obligations beyond its ability to pay as
such obligations mature.
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Account Details:
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Account for payments to
Counterparty:
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To be
advised.
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Account
for payments to
Dealer:
Merrill Lynch Financial
Markets
Chase Manhattan Bank
ABA# 021000021
Acct# 066642892
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11
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Account for delivery of
Shares to
Dealer:
To be advised.
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Agreement Regarding
Shares:
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Counterparty agrees
that, in respect of any Shares delivered to
Dealer, such Shares shall be, upon
such delivery, duly and validly authorized, issued and outstanding, fully
paid and non-assessable and subject to no adverse claims of any other party.
The issuance of such Shares does not and will not require the consent,
approval, authorization, registration or qualification of any government
authority, except such as shall have been obtained on or before the delivery
date of any Shares or as may be required in connection with any Registration
Statement filed with respect to any Shares.
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Bankruptcy Rights:
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In the event of
Counterparty’s bankruptcy,
Dealer’s rights in connection with this Transaction shall not
exceed those rights held by common shareholders. For the avoidance of doubt,
the parties acknowledge and agree that Dealer’s rights with respect to any other claim arising from this
Transaction prior to Counterparty’s bankruptcy shall remain in full force and
effect and shall not be otherwise abridged or modified in connection
herewith.
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Set-Off:
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Each party waives any
and all rights it may have to set-off, whether arising under any agreement,
applicable law or otherwise.
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Transfer:
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Neither party may
transfer its rights or delegate its obligations under this Transaction
without the prior written consent of the other party, except that
Dealer, after payment in full of the
Premium, may assign its rights and delegate its obligations hereunder, in
whole or in part, to any other person (an “
Assignee
”) without the prior consent of the
Counterparty, so long as Assignee makes to Counterparty the representations
set forth in the second paragraph under “Compliance with Securities Laws,”
effective (the “
Transfer Effective Date
”)
upon delivery to Counterparty of an executed acceptance and assumption by the
Assignee (an “
Assumption
”)
of the transferred obligations of Dealer
under this Transaction (the “
Transferred
Obligations
”). Notwithstanding any other provision in this
Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other
securities to or from Counterparty, Dealer
may designate any of its affiliates to purchase, sell, receive or deliver
such Shares or other securities and otherwise to perform Dealer’s obligations in respect of
this Transaction and any such designee may assume such obligations. Dealer shall be discharged of its
obligations to Counterparty to the extent of any such performance.
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Indemnity:
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Counterparty agrees to
indemnify
Dealer,
its Affiliates and their respective directors, officers, agents and
controlling parties (each such person being an “
Indemnified
Party
”) from and against any and all losses, claims, damages
and liabilities, joint and several, to which such Indemnified Party may
become subject because of a breach of any representation or covenant
hereunder, in the Agreement or any other agreement relating to the Agreement
or Transaction and will reimburse Indemnified Party for all reasonable
expenses (including reasonable legal fees and expenses) as they are incurred
in connection with the investigation of, preparation for, or defense of, any
pending or threatened claim or any action or proceeding arising therefrom,
whether or not such Indemnified Party is a party thereto. Seller will not be
liable under the foregoing Indemnity provision to the extent that any loss,
claim, damage, liability or expense is found in a final judgment by a court
to have resulted from Dealer’s
gross negligence or
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12
Additional
Agreements, Representations and Covenants of Counterparty, Etc.:
(a)
Counterparty
hereby represents and warrants to Dealer,
on each day from the Trade Date to and including the earlier of (i) March 5,
2008 and (ii) the date by which Dealer
is able to initially complete a hedge of its position created by this
Transaction, that:
(1)
it
will not, and will not permit any person or entity subject to its control to,
bid for or purchase Shares during such period except pursuant to transactions
or arrangements which have been approved by Dealer or an affiliate of Dealer;
and
(2)
it
has publicly disclosed all material information necessary for it to be able to
purchase or sell Shares in compliance with applicable federal securities laws.
(b)
No
collateral shall be required by either party for any reason in connection with
this Transaction.
(c)
Notwithstanding
anything to the contrary herein, Dealer
shall not be entitled to exercise any Warrant or receive any Shares deliverable
hereunder, and Automatic Exercise shall not apply with respect to any Warrant
to the extent (but only to the extent) that after such receipt of any Shares
upon the exercise of such Warrant or otherwise hereunder Dealer, or its ultimate parent entity
would, directly or indirectly, be the beneficial owner (as such term is defined
for purposes of Section 13(d) of the Exchange Act) at any time of
more than 8.0 percent of the class of the Counterparty’s outstanding equity securities
that is comprised of the Shares (an “
Excess
Share Owner
”).
Dealer
shall provide prior notice to Counterparty if the exercise of any Warrant or
delivery of Shares hereunder would cause
Dealer to become directly or indirectly, an Excess Share Owner;
provided
that the failure of Dealer to
provide such notice shall not alter the effectiveness of the provisions set
forth in the preceding sentence and any purported exercise or delivery in
violation of such provisions shall be void and have no effect. If any delivery
owed to Dealer hereunder is not
made, in whole or in part, as a result of this provision, Counterparty’s
obligation to make such delivery shall not be extinguished and Counterparty
shall make such delivery as promptly as practicable after Dealer gives notice that such delivery
would not result in Dealer being
an Excess Share Owner.
If
Dealer is not entitled to exercise any
Warrant because such exercise would cause Dealer to become, directly or indirectly, an Excess Share Owner and Dealer thereafter disposes of Shares
owned by it or any action is taken that would then permit Dealer to exercise such Warrant without
such exercise causing it to become, directly or indirectly, an Excess Share
Owner, then Dealer shall provide
notice of the taking of such action to Counterparty and such Warrant shall then
become exercisable by Dealer to
the extent such Warrant is otherwise or had otherwise become exercisable
hereunder. In such event, the Expiration Date with respect to such Warrant
shall be the date on which Counterparty receives such notice from Dealer, and the related Settlement Date
shall be as soon as reasonably practicable after receipt of such notice but no
more than three (3) Exchange Business Days thereafter (but in no event
shall the Settlement Date occur prior to the date on which it would have
otherwise occurred but for the provisions of this subsection);
provided
that the related Net Physical Settlement Amount shall be the same as the Net
Physical Settlement Amount but for the provisions of this subsection. In
addition, within 30 calendar days of any Settlement Date, Counterparty shall
use its reasonable efforts to refrain from activities that could reasonably be
expected to result in Dealer’s
ownership of Shares exceeding 10% of all issued and outstanding Shares.
Matters
Relating to Agent:
1.
Agent
will be responsible for the operational aspects of the Transactions effected
through it, such as record keeping, reporting, and confirming Transactions to
Counterparty and Dealer;
13
2.
Unless
Counterparty is a “major U.S. institutional investor,” as defined in Rule 15a-6
of the Exchange Act, neither Counterparty nor Dealer will contact the other without the direct involvement of
Agent;
3.
Agent’s
sole role under this Agreement and with respect to any Transaction is as an
agent of Counterparty and Dealer
on a disclosed basis and Agent shall have no responsibility or liability to
Counterparty or Dealer hereunder
except for gross negligence or willful misconduct in the performance of its
duties as agent. Agent is authorized to act as agent for Dealer, but only to the extent expressly
required to satisfy the requirements of Rule 15a-6 under the Exchange Act
in respect of the Options described hereunder. Agent shall have no authority to
act as agent for Counterparty generally or with respect to transactions or
other matters governed by this Agreement, except to the extent expressly
required to satisfy the requirements of Rule 15a-6 or in accordance with express
instructions from Counterparty.
Certain Important Information:
Dealer is an OTC
Derivatives Dealer registered with the U.S. Securities and Exchange Commission
(SEC). Applicable SEC rules require us to provide you with the following
information regarding SEC regulation of OTC Derivatives Dealers: Dealer is
exempt from the provisions of the Securities Investor Protection Act of 1970
(SIPA), including membership in the Securities Investor Protection Corporation
(SIPC). Therefore, your account is not covered by SIPA protection. Except as
otherwise agreed in writing by you and us, Dealer may repledge and otherwise
use in its business collateral you have pledged to Dealer under the Agreement.
Collateral you have pledged to Dealer will not be subject to the requirements
of Securities Exchange Act Rules: 8c-1 and 15c2-1 regarding hypothecation of
collateral; 15c3-2 regarding free credit balances; or 15c3-3 regarding custody
of securities and calculations of a reserve formula applicable to a fully
regulated SEC registered broker or dealer. In the event of Dealer’s failure (by
insolvency or otherwise), you would likely be considered to be an unsecured
creditor of Dealer as to any collateral pledged to Dealer under the Agreement.
Dealer is incorporated in
Delaware and is a direct, wholly owned subsidiary of Merrill Lynch &
Co., Inc. Dealer has entered into this transaction as principal through
Agent as its agent. The time of this Transaction shall be notified to the
Counterparty upon request.
ISDA
Master Agreement:
With respect to the
Agreement,
Dealer
and Counterparty each agree as follows:
“
Specified Entity
”
means in relation to Seller and in relation to Counterparty
for purposes of this Transaction: Not applicable.
“
Specified
Transaction
” has the meaning assigned to such term in Section 14
of this Agreement.
The “
Cross Default
”
provisions of
Section 5(a)(vi)
of the
Agreement will apply to Dealer and will apply to Counterparty.
“Threshold Amount” means
with respect to Dealer, 3% of the consolidated shareholders equity of Merrill
Lynch & Co., Inc.
“Threshold Amount” means
with respect to Counterparty, $10,000,000.
The “
Credit Event Upon Merger
”
provisions of
Section 5(b)(v)
of
the Agreement will not apply to
Dealer or to Counterparty.
Additional Termination Event
.
The occurrence of any of the following shall
constitute an Additional Termination Event with respect to which the
Transaction shall be the sole Affected Transaction and Counterparty shall be
the sole Affected Party;
provided
that with respect to any Additional Termination Event,
Dealer may choose to treat part of the Transaction
as the sole
14
Affected Transaction, and, upon the
termination of the Affected Transaction, a Transaction with terms identical to
those set forth herein except with a Number of Warrants equal to the unaffected
number of Warrants shall be treated for all purposes as the Transaction, which
shall remain in full force and effect:
(i) within the
period commencing on the Trade Date and ending on the second anniversary of the
Premium Payment Date, Buyer reasonably determines that it is advisable to
terminate a portion of the Transaction so that Buyer’s related hedging
activities will comply with applicable securities laws, rules or
regulations;
(ii)
any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the “beneficial owner” (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a person shall be deemed to have
beneficial ownership of all shares that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of voting stock representing 50% or more of the
total voting power of all outstanding voting stock of the company;
(iii) Counterparty
consolidates with, or merges with or into, another person or Counterparty
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, other than any such transaction (a) entered
into solely for the purpose of changing the Counterparty’s jurisdiction of
incorporation and resulting in a reclassification, conversion or exchange of
outstanding shares of common stock solely into shares of common stock of the
surviving entity, (b) where immediately after such transaction the person
or persons that “beneficially owned” (as defined in Rules 13d-3 and 13d-5
under the Exchange Act) immediately prior to such transaction, directly or
indirectly, voting stock representing a majority of the total voting power of
all outstanding voting stock of Counterparty, “beneficially own or owns” (as so
determined), directly or indirectly, voting stock representing a majority of
the total voting power of the outstanding voting stock of the surviving or
transferee person or (c) that does not result in a reclassification,
conversion, exchange or cancellation of outstanding hares of common stock;
(iv) the
adoption of a plan of liquidation or dissolution of Counterparty; or
(v) the Shares
(or
other common stock into which the Shares have been converted or for which the
Shares have been exchanged in connection with any merger, reclassification or
recapitalization of Counterparty) are not listed for trading on the New York
Stock Exchange or the NASDAQ Global
Market or the NASDAQ Global Select Market (or their respective successors) or
cease to be so traded or quoted in contemplation of a delisting or withdrawal
of approval
.
Notwithstanding the foregoing, a transaction
described in clause (ii) or (iii) above will not constitute an
Additional Termination Event if all the consideration for the Shares (excluding
cash payments for fractional shares and cash payments made in respect of
dissenters’ appraisal rights) in the transaction or transactions consists of
common stock and any associated rights listed on a United States national
securities exchange, or which will be so traded or quoted when issued or
exchanged in connection with such transaction, and as a result of such
transaction or transactions the Warrants hereunder become convertible solely
into such common stock.
The “
Automatic Early Termination
”
provision of
Section 6(a)
of
the Agreement will not apply to
Dealer or to Counterparty.
“
Termination Currency
” means USD.
Tax
Representations.
(I)
Payer Representations.
For the purpose of Section 3(e) of
the Agreement, each party represents to the other party that it is not required
by any applicable law, as modified by the practice of any relevant governmental
revenue authority, of any Relevant Jurisdiction to make any deduction or
withholding for or on account of any Tax from any payment (other than interest
under Section 2(e), 6(d)(ii), or 6(e) of the Agreement) to be made by
it to the other party under the Agreement. In making this representation, each
15
party may rely on (i) the
accuracy of any representations made by the other party pursuant to Section 3(f) of
the Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or
4(a)(iii) of the Agreement, and the accuracy and effectiveness of any
document provided by the other party pursuant to Section 4(a)(i) or
4(a)(iii) of the Agreement, and (iii) the satisfaction of the
agreement of the other party contained in Section 4(d) of the
Agreement;
provided
that it will not be a breach of this representation
where reliance is placed on clause (ii) above and the other party does not
deliver a form or document under Section 4(a)(iii) of the Agreement by
reason of material prejudice to its legal or commercial position.
(II)
Payee Representations.
For the purpose of Section 3(f) of
the Agreement, each party makes the following representations to the other
party:
(i)
Dealer represents that it is a company
incorporated in Delaware.
(ii)
Counterparty
represents that it is a corporation incorporated in Delaware.
Delivery
Requirements.
For the purpose of
Sections 4(a)(i)
and
(ii)
of the Agreement, each party agrees to deliver the following
documents:
(a)
Tax
forms, documents or certificates to be delivered are:
Dealer
agrees to complete (accurately and in a manner reasonably satisfactory to
Counterparty), execute, and deliver to Counterparty, United States Internal
Revenue Service Form W-9 and all required attachments, or any successor of
such form(s): (i) before the first payment date under this agreement; (ii) promptly
upon reasonable demand by Counterparty; and (iii) promptly upon learning
that any such Form previously provided by
Dealer has become obsolete or incorrect.
Counterparty agrees to
complete (accurately and in a manner reasonably satisfactory to
Dealer), execute, and deliver to Dealer, United States Internal Revenue
Service Form W-9, or any successor of such form(s): (i) before the
first payment date under this agreement; (ii) promptly upon reasonable
demand by Dealer; and (iii) promptly
upon learning that any such form(s) previously provided by Counterparty
has become obsolete or incorrect.
(b)
Other
documents to be delivered:
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Party
Required to
Deliver Document
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Document
Required to be Delivered
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When
Required
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Covered
by
Section 3(d)
Representation
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Counterparty and Dealer
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Evidence of the
authority and true signatures of each official or representative signing this
Confirmation
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Upon or before
execution and delivery of this Confirmation
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Yes
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Counterparty
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Certified copy of the
resolution of the Board of Directors or equivalent document authorizing the
execution and delivery of this Confirmation and such other certificate or
certificates as
Dealer
shall reasonably request
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Upon or before
execution and delivery of this Confirmation
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Yes
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Effectiveness.
If, prior to the Effective Date, Dealer reasonably determines
that it is advisable to cancel the
16
Transaction
because of concerns that
Dealer’s related hedging activities could be viewed
as not complying with applicable securities laws, rules or regulations,
such Transaction shall be cancelled and shall not become effective, and neither
party shall have any obligation in respect of such Transaction.
Addresses
for Notices:
For the purpose of
Section 12(a)
of
the Agreement:
Address
for notices or communications to
Dealer
for all purposes:
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Address:
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Merrill Lynch Financial
Markets, Inc.
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4 World Financial
Center, 17
th
Floor
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New York, New York
10080
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Merrill Lynch Financial
Centre
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Attention:
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Manager of Equity
Documentation
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Facsimile No.:
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(917) 778-0835
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Telephone No.:
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(212) 449-1951
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Address
for notices or communications to Counterparty for all purposes:
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Address:
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AAR CORP.
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1100 N.
Wood Dale Road
|
|
|
Wood Dale, Illinois 60191
|
|
Attention:
|
Richard J. Poulton, Chief Financial Officer
|
|
Facsimile No.:
|
(630) 227-2039
|
|
Telephone No.:
|
(630) 227-2075
|
In addition, in the case
of notices or communications relating to Section 5, 6, 11 or 13 of this
Agreement, a second copy of any such notice or communication shall be addressed
to the attention of Counterparty’ General Counsel as follows:
|
Address:
|
AAR CORP.
|
|
|
1100 N.
Wood Dale Road
|
|
|
Wood Dale, Illinois 60191
|
|
A
ttention:
|
General Counsel’s
Office
|
|
Facsimile No.:
|
(630) 227
-2058
|
|
Telephone No.:
|
(630) 227-2000
|
Multibranch
Party.
For the purpose of
Section 10(c)
of
the Agreement: Neither Dealer nor
Counterparty is a Multibranch Party.
Calculation
Agent.
“Calculation
Agent” means Dealer, acting in
good faith and in a commercially reasonable manner.
Credit
Support Document.
Dealer
:
Not Applicable.
Counterparty: Not
Applicable
Credit
Support Provider.
With respect to
Dealer: Not Applicable.
With respect to
Counterparty: Not Applicable.
Governing
Law.
This Confirmation will be governed by, and construed in
accordance with, the laws of the State of New York.
Submission to Jurisdiction
. Each party hereby irrevocably and
unconditionally submits for itself and its property
17
in any legal action or
proceeding by the other party against it relating to the Transaction to which
it is a party, or for recognition and enforcement of any judgment in respect
thereof, to the exclusive jurisdiction of the Supreme Court of the State of New
York, sitting in New York County, the courts of the United States of America
for the Southern District of New York, and appellate courts from any thereof.
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.
Netting
of Payments.
The provisions of
Section 2(c)
of
the Agreement shall not be applicable to this Transaction.
Basic
Representations.
Section 3(a)
of the
Agreement is hereby amended by the deletion of “and” at the end of
Section 3(a)(iv);
the substitution of a semicolon for the period at the end of
Section 3(a)(v)
and
the addition of
Sections 3(a)(vi),
as follows:
Eligible
Contract Participant; Line of Business.
Each party agrees and
represents that it is an “eligible contract participant” as defined in Section 1
(a)(12) of the U.S. Commodity Exchange
Act, as amended
(
“
CEA
”
),
this
Agreement and the Transaction thereunder are subject to individual negotiation
by the parties and have not been executed or traded on a “trading facility” as
defined in Section 1(a)(33) of the CEA, and it has entered into this
Confirmation and this Transaction in connection with its business or a line of
business (including financial intermediation), or the financing of its
business.
Acknowledgements:
(a)
The
parties acknowledge and agree that there are no other representations,
agreements or other undertakings of the parties in relation to this
Transaction, except as set forth in this Confirmation.
(b)
The
parties hereto intend for:
(i)
Buyer
to be a “financial institution” as defined in Section 101(22) of Title 11
of the United States Code (the “
Bankruptcy
Code
”
)
and this
Transaction to be a “securities contract” as defined in Section 741(7) of
the Bankruptcy Code
and a “swap agreement” as defined in Section 101(53C)
of the Bankruptcy Code,
qualifying
for the protections of, among other sections, Sections 362(b)(6), 362 (b)(17),
546(e), 546(g), 555 and 560 of the Bankruptcy Code;
(ii)
a
party’s right to liquidate this Transaction and to exercise any other remedies
upon the occurrence of any Event of Default under the Agreement with respect to
the other party to constitute a “contractual right” as defined in the Bankruptcy
Code;
(iii)
all payments for, under or
in connection with this Transaction, all payments for the Shares and the
transfer of such Shares to constitute “settlement payments” as defined in the
Bankruptcy Code.
(c)
The
parties acknowledge and agree that in the event of an Early Termination Date as
a result of an Event of Default that is within Counterparty’s control, the
amount payable under the Agreement will be a cash amount calculated as
described therein and that any delivery specified in this Transaction will no
longer be required.
Amendment
of
Section 6(d)(ii)
.
Section 6(d)(ii) of
the Agreement is modified by deleting the words “on the day” in the second line
thereof and substituting therefor “on the day that is three Local Business Days
after the day”.
Section 6(d)(ii)
is further modified by
deleting the words “two Local Business Days” in the fourth line thereof and
substituting therefor “three Local Business Days.”
18
Consent
to Recording.
Each party consents to the recording of the
telephone conversations of trading and marketing personnel of the parties and
their Affiliates in connection with this Confirmation. To the extent that one
party records telephone conversations (the “Recording Party”) and the other
party does not (the “Non-Recording Party”), the Recording Party shall in the
event of any dispute, make a complete and unedited copy of such party’s tape of
the entire day’s conversations with the Non-Recording Party’s personnel
available to the Non-Recording Party. The Recording Party’s tapes may be used
by either party in any forum in which a dispute is sought to be resolved and
the Recording Party will retain tapes for a consistent period of time in
accordance with the Recording Party’s policy unless one party notifies the
other that a particular transaction is under review and warrants further
retention.
Disclosure.
Each party hereby acknowledges and agrees that Dealer has authorized Counterparty to
disclose this Transaction and any related hedging transaction between the
parties if and to the extent that Counterparty reasonably determines (after
consultation with Dealer) that
such disclosure is required by law or by the rules of the New York Stock
Exchange or any securities exchange. Notwithstanding
the foregoing, effective from the date of commencement of discussions
concerning the Transaction, Counterparty and each of its employees,
representatives, or other agents may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the Transaction
and all materials of any kind (including opinions or other tax analyses) that
are provided to Counterparty relating to such tax treatment and tax structure.
Severability.
If any term, provision, covenant or condition of this
Confirmation, or the application thereof to any party or circumstance, shall be
held to be invalid or unenforceable in whole or in part for any reason, the
remaining terms, provisions, covenants, and conditions hereof shall continue in
full force and effect as if this Confirmation had been executed with the
invalid or unenforceable provision eliminated, so long as this Confirmation as
so modified continues to express, without material change, the original
intentions of the parties as to the subject matter of this Confirmation and the
deletion of such portion of this Confirmation will not substantially impair the
respective benefits or expectations of parties to this Agreement;
provided
,
however
, that this severability provision shall not be applicable if any
provision of
Section 2
,
5
,
6
or
13
of the
Agreement (or any definition or provision in
Section 14
to the
extent that it relates to, or is used in or in connection with any such
Section) shall be so held to be invalid or unenforceable.
Affected
Parties.
For purposes of
Section 6(e)
of the
Agreement, each party shall be deemed to be an Affected Party in connection
with Illegality and any Tax Event.
[
Signatures follow on separate page
]
19
Please confirm that the
foregoing correctly sets forth the terms of our agreement by executing the copy
of this Confirmation enclosed for that purpose and returning it to us.
|
|
Very truly yours,
|
|
|
|
|
|
MERRILL LYNCH FINANCIAL MARKETS, INC.
|
|
|
|
|
|
By:
|
/s/ Fran
Jacobson
|
|
|
|
Name: Fran Jacobson
|
|
|
Title: Authorized
Signatory
|
Confirmed as of
the date first above written:
AAR CORP.
|
By:
|
/s/ Timothy
J. Romenesko
|
|
|
|
Name: Timothy J.
Romenesko
|
|
|
Title:
President & COO
|
|
Acknowledged and agreed
as to matters to the Agent:
MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED
Solely in its capacity as
Agent hereunder
|
By:
|
/s/
Angelina Lopes
|
|
|
|
Name: Angelina Lopes
|
|
|
Title: Authorized
Signatory
|
|
Exhibit 10.4
EXECUTION
COPY
Confirmation
of OTC Warrant Transaction
|
Date:
|
|
February 5,
2008
|
|
To:
|
|
AAR
Corp. (“
Counterparty
”
)
|
|
|
|
1100 N. Wood Dale Road
|
|
|
|
Wood Dale, Illinois 60191
|
|
|
|
Attention:
Richard J. Poulton, Chief Financial Officer
|
|
|
|
Facsimile No.: (630) 227-2039
|
|
|
|
Telephone No.: (630) 227-2075
|
|
|
|
|
|
From:
|
|
Merrill
Lynch Financial Markets, Inc. (“Dealer” or “MLFM”)
|
|
|
|
4 World Financial Center 5
th
Floor
|
|
|
|
New York, New York 10080
|
|
|
|
Attention: Corporate Derivatives
|
|
|
|
Facsimile No.: (212) 738-1069
|
|
|
|
Telephone No.: (212) 449-6763
|
MLFM
Reference:
Dear Sir / Madam:
The purpose of this
letter agreement (this “
Confirmation
”)
is to confirm the terms and conditions of the above-referenced transaction
entered into among Counterparty, Dealer and Merrill Lynch, Pierce, Fenner &
Smith Incorporated (the “
Agent
”)
on the Trade Date specified below (the “
Transaction
”
).
This
Confirmation constitutes a “Confirmation” as referred to in the Agreement
specified below.
The definitions and
provisions contained in the 2000 ISDA Definitions (the “
Swap Definitions
”) and the 2002 ISDA
Equity Derivatives Definitions (the “
Equity
Definitions
”
and,
together with the Swap Definitions, the “
Definitions
”
),
in each case as published by the
International Swaps and Derivatives Association, Inc., are incorporated
into this Confirmation. In the event of any inconsistency between the Swap
Definitions and the Equity Definitions, the Equity Definitions will govern, and
in the event of any inconsistency between the Definitions and this
Confirmation, this Confirmation will govern. References herein to a “Transaction”
shall be deemed to be references to a “Share Option Transaction” for the
purposes of the Equity Definitions and to a “Swap Transaction” for the purposes
of the Swap Definitions. For purposes of this Transaction, “Warrant Style”, “Warrant
Type”, “Number of Warrants” and “Warrant Entitlement” (each as defined below)
shall be used herein as if such terms were referred to as “Option Style”, “Option
Type”, “Number of Options” and “Option Entitlement”, respectively, in the
Definitions.
This Confirmation
evidences a complete binding agreement between you and us as to the terms of
the Transaction to which this Confirmation relates. This Confirmation
(notwithstanding anything to the contrary herein), shall be subject to, and
form part of, an agreement in the 2002 form of the ISDA Master Agreement (the “
Master Agreement
”
or “
Agreement
”)
as if we had executed an agreement in such form (but without any Schedule and
with elections specified in the “ISDA Master Agreement” Section of this
Confirmation) on the Trade Date. In the event of any inconsistency between the
provisions of that Agreement and this Confirmation, this Confirmation will
prevail for the purpose of this Transaction. The parties hereby agree that the
Transaction evidenced by this Confirmation shall be the only Transaction
subject to and governed by the Agreement.
The terms of the
particular Transaction to which this Confirmation relates are as follows:
OTC Warrant Confirmation (2016)
General
Terms:
|
Trade Date:
|
February 5, 2008
|
|
|
|
|
Effective Date:
|
February 11, 2008
subject to cancellation of the OTC Warrant Transaction prior to
5:00 p.m. (New York City time) on such date by the Counterparty.
In the event
of such cancellation, any
payments previously made hereunder, including the Premium, shall be returned
to the person making such payment. In addition, Counterparty shall reimburse
Dealer for any costs or expenses (including market losses) relating to the
unwinding of its hedging activities in connection with the Transaction
(including any loss or cost incurred as a result of its terminating,
liquidating, obtaining or reestablishing any hedge or related trading
position).
|
|
|
|
|
Warrant Style:
|
European
|
|
|
|
|
Warrant Type:
|
Call
|
|
|
|
|
Seller:
|
Counterparty
|
|
|
|
|
Buyer:
|
Dealer
|
|
|
|
|
Shares:
|
Shares of Common Stock,
$1.00 par value, of Counterparty (Security Symbol: “AIR”
).
|
|
|
|
|
Number of Warrants:
|
2,811,160
|
|
|
|
|
Daily Number of
Warrants:
|
For any day, the
unexercised Number of Warrants on such day
divided
by the remaining number of Expiration Dates (including such day)
and rounded down to the nearest whole number, with the balance of the Number
of Warrants exercised on the final Expiration Date.
|
|
|
|
|
Warrant Entitlement:
|
One (1) Share per
Warrant
|
|
|
|
|
Strike Price:
|
$48.825
|
|
|
|
|
Premium:
|
$18,790,000
|
|
|
|
|
Premium Payment Date:
|
The Effective Date;
provided
that no cancellation of the Transaction has occurred prior to 5:00 p.m.
(New York City time) on such date by the Counterparty.
|
|
|
|
|
Exchange:
|
New York Stock
Exchange, Chicago Stock Exchange
|
|
|
|
|
Related Exchange(s):
|
All Exchanges
|
|
|
|
|
Full Exchange Business
Day:
|
A Scheduled Trading Day
that has a scheduled closing time for its regular trading session at
4:00 p.m. (New York City time) or the then standard closing time for
regular trading on the Exchange and is not a Disrupted Day.
|
|
|
|
|
Procedures
for Exercise:
|
|
|
|
|
|
Expiration Time:
|
11:59 p.m. (New
York City time).
|
2
|
Expiration Dates:
|
The 90 consecutive Full Exchange Business Days
beginning on and including May 31, 2016 each shall be the Expiration
Date for a number of Warrants equal to the Daily Number of Warrants on such
date.
|
|
|
|
|
|
|
Exercise Dates:
|
Each Expiration Date
shall be an Exercise Date for a number of Warrants equal to the Daily Number
of Warrants on such date. The Warrants
shall not be exercised prior to the first such Exercise Date.
|
|
|
|
|
|
|
Automatic Exercise:
|
Applicable;
provided
that Section 3.4(a) of the Equity Definitions shall apply to Cash Settlement
and Net Physical Settlement; and
provided
further
that, unless
all Warrants have been previously exercised hereunder, a number of Warrants
for each Expiration Date equal to the Daily Number of Warrants for such
Expiration Date shall be deemed to be automatically exercised.
|
|
|
|
Address:
|
AAR CORP.
|
|
Counterparty’s
Telephone
|
|
1100 N.
Wood Dale Road
|
|
Number and Telex and/or
|
|
Wood Dale, Illinois 60191
|
|
Facsimile Number and
Contact
|
Attention:
|
Richard J. Poulton, Chief Financial Officer
|
|
Details for purpose of
Giving
|
Facsimile
No.:
|
(630) 227-2039
|
|
Notice:
|
Telephone No.:
|
(630) 227-2075
|
|
|
|
|
|
Valuation
:
|
|
|
|
|
|
Valuation Dates:
|
Each Exercise Date
|
|
|
|
|
Settlement
Terms:
|
|
|
|
|
|
Cash Settlement:
|
Applicable;
provided
that it shall be a condition of Counterparty’s right to elect Cash Settlement
that on the date of the Cash Settlement election, none of Counterparty, its
directors, executive officers, or any person controlling, or exercising
influence over, its decision to elect Cash Settlement is in possession of any
material non-public information with respect to Counterparty or the Shares.
If Counterparty elects to settle the Transaction by Cash Settlement,
Counterparty represents and agrees that:
|
|
|
|
|
|
(i) Counterparty
is not, on the date of the Cash Settlement election, and will not be, on any
day during the period from and including the first Expiration Date to and
including the final Expiration Date, engaged in a distribution, as such term
is used in Regulation M under the Securities Exchange Act of 1934, as amended
(the “
Exchange Act
”);
and
|
|
|
|
|
|
(ii) during the period from and including the
first Expiration Date to and including the final Expiration Date, without the
prior written consent of Dealer, the Counterparty shall not, and shall cause
its affiliates and 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 equivalent interest, including a
unit of beneficial interest in a trust or limited partnership or a depository
share) or any security convertible into or exchangeable for the Shares.
|
|
|
|
|
Settlement Currency:
|
USD
|
|
|
|
|
|
3
|
Settlement Price:
|
For each Valuation
Date, the Rule 10b-18 Dollar Volume Weighted Average Price of the Shares
(“VWAP”) calculated from 9:45 a.m. to 3:45 p.m., as observed under
the heading Bloomberg “VWAP” on Bloomberg page AIR.N <equity> VAP
(or any successor thereto) (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);
provided
that, if the scheduled
weekday closing time of the Exchange for any Valuation Date is later than
4:00 p.m. (without regard to after hours or any other trading outside of
the regular trading session hours) the VWAP shall be calculated for such
Valuation Date from 9:45 a.m. until 15 minutes prior to such later
closing time of the Exchange.
Section 6.3(a) of
the Equity Definitions is hereby amended by replacing clause (ii) in its
entirety with “(ii) an Exchange Disruption, or” and inserting
immediately following clause (iii) the phrase “; in each case that the
Calculation Agent determines is material.”
|
|
|
|
|
Cash Settlement Payment
Date:
|
With respect to each
Valuation Date, three (3) Currency Business Days after the final
Valuation Date.
|
|
|
|
|
Settlement Method
Election:
|
Applicable with respect
to Cash Settlement or Net Physical Settlement only.
|
|
|
|
|
Electing Party:
|
Counterparty
|
|
|
|
|
Settlement Method Election Date:
|
Ten (10) Business Days prior to the first
Expiration Date
|
|
|
|
|
Default Settlement
Method:
|
Net Physical Settlement.
|
|
|
|
|
Net Physical
Settlement:
|
In the event that the
Counterparty elects to settle this Transaction by Net Physical Settlement,
Counterparty shall deliver to Dealer on the Settlement Date a number of
Shares (the “
Delivered Shares
”)
equal to the Share Delivery Quantity;
provided
that in the event that the number of Shares calculated comprises any
fractional Share, only whole Shares shall be delivered and an amount in cash
equal to the value of such fractional share shall be payable by the
Counterparty to Dealer in lieu of such fractional Share. If, in the
reasonable opinion of Dealer based on advice of counsel, for any reason, the
Shares deliverable upon Net Physical Settlement would not be immediately
freely transferable by Dealer under Rule 144(b)(1) under the
Securities Act of 1933, as amended (the “Securities Act”), then Dealer may
elect to either (x) accept delivery of such Shares notwithstanding any
restriction on transfer or (y) have the provisions set forth under
“Registration/Private Placement” below apply, mutatis mutandis.
|
|
|
|
|
Share Delivery
Quantity:
|
For each Exercise Date,
a number of Shares, as calculated by the Calculation Agent, equal to the Net
Physical Settlement Amount for such Exercise Date divided by the Settlement
Price on the Valuation Date in respect of such Settlement Date plus an amount
in cash in lieu of any fractional shares (based on the applicable Settlement
Price).
|
|
|
|
|
Net Physical Settlement
Amount:
|
For any Exercise Date,
an amount equal to the product of (i) the Number of Warrants being
exercised on the relevant Exercise Date, (ii) the Strike Price
Differential for such Exercise Date and (iii) the Warrant Entitlement.
|
|
|
|
|
Strike Price
Differential:
|
For any Valuation Date,
(i) if the Settlement Price is greater than the Strike Price, an amount
equal to the excess of such Settlement Price over the Strike Price for
|
4
|
|
such Valuation Date or
(ii) if such Settlement Price is less than or equal to the Strike Price,
zero.
|
|
|
|
|
Settlement Date:
|
Settlement with respect
to each Exercise Date shall occur on the third (3rd) Full Exchange Business
Day following the final Valuation Date;
provided
that
Dealer shall have the right to request
by prior written notice to Counterparty a Settlement Date with respect to any
Exercise Date and the related Share Delivery Quantity that is three
(3) Full Exchange Business Days following such Exercise Date. Such
request shall not unreasonably be denied.
|
|
|
|
|
Limitations on Net
Physical Settlement by Counterparty:
|
Notwithstanding
anything herein or in the Agreement to the contrary, the number of Shares
that may be delivered at settlement by Counterparty shall not exceed
4,216,740 Shares at any time
(“
Maximum
Deliverable Share Amount
”
),
as
adjusted by Calculation Agent to account for any subdivision, stock-split,
stock combination, reclassification or similar dilutive or anti-dilutive
event with respect to the Shares.
Counterparty represents
and warrants that the number of Available Shares as of the Trade Date is
greater than the Maximum Deliverable Share Amount. Counterparty covenants and
agrees that (i) Counterparty shall not take any action of corporate
governance or otherwise to reduce the number of Available Shares below the
Maximum Deliverable Share and (ii) Counterparty shall use its reasonable
efforts to cause the number of Available Shares at all times to be greater
than the Maximum Deliverable Share Amount.
For this purpose, “
Available Shares
”
means the number of Shares Counterparty
currently has authorized (but not issued and outstanding) less the maximum
number of Shares that may be required to be issued by Counterparty in
connection with stock options, convertibles, and other commitments of
Counterparty that may require the issuance or delivery of Shares in
connection therewith.
|
|
|
|
|
Dividends:
|
|
|
|
|
|
Dividends:
|
If at any time during
the period from and including the Trade Date, to and including the date on
which Counterparty has fully performed its obligations to deliver Shares
hereunder, 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, the Warrant Entitlement and any other variable
it deems appropriate to preserve the fair value of the Warrants after taking
into account such dividend.
|
|
|
|
|
Regular Dividend:
|
Initially USD $0.00 per
Share per quarter in respect of the Shares. In the event that, in any
quarter, a regular quarterly Ex-Dividend Date occurs for which the amount of
the corresponding cash dividend is different (the “New Dividend Amount”) from
the Regular Dividend or no Ex-Dividend Date occurs (in which case the New
Dividend Amount shall be zero), then following the adjustment by the
Calculation Agent pursuant to “Dividends” above, the Regular Dividend shall
equal the New Dividend Amount.
|
|
|
|
|
Extraordinary
Dividends:
|
Any dividend other than
Regular Dividends. For the avoidance of doubt, if more
|
5
|
|
than one Ex-Dividend
Date occurs in a quarter, the Calculation Agent shall designate any cash
dividend other than a Regular Dividend as an Extraordinary Dividend and will,
in its reasonable discretion, adjust the Strike Price, the Number of
Warrants, the Daily Number of Warrants, the Warrant Entitlement and any other
variable it deems appropriate to preserve the fair value of the Warrants after
taking into account such Extraordinary Dividend.
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
Method of Adjustment:
|
Calculation Agent
Adjustment
|
|
|
|
|
|
|
Extraordinary
Events:
|
|
|
|
|
|
|
|
Consequences of Merger
Events:
|
(a) Share-for-Share:
|
Modified Calculation
Agent Adjustment
|
|
|
|
|
|
|
|
|
(b) Share-for-Other:
|
Cancellation and
Payment (Calculation Agent Determination)
|
|
|
|
|
|
|
|
|
(c) Share-for-Combined:
|
Component Adjustment
(Calculation Agent Determination)
|
|
|
|
|
|
|
|
Tender Offer:
|
Applicable
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|
Consequences of Tender
Offers:
|
(a) Share-for-Share:
|
Modified Calculation
Agent Adjustment
|
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|
(b) Share-for-Other:
|
Cancellation and
Payment (Calculation Agent Determination)
|
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|
(b) Share-for-Combined:
|
Component Adjustment
(Calculation Agent Determination)
|
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With respect to any
Extraordinary Events hereunder, upon the occurrence of Cancellation and
Payment in whole or in part, the parties agree that the amount to be paid, in
accordance with the Equity Definitions, shall constitute a Transaction Early
Termination Amount, subject to satisfaction by the payment or delivery of
Shares or cash as set forth in the Early Termination section below.
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|
Nationalization,
Insolvency or Delisting:
|
Cancellation and
Payment (Calculation Agent Determination) (subject to satisfaction by payment
or delivery of Shares or cash as set forth in “
Early Termination
”
below). In addition to the provisions of Section 12.6(a)(iii) of
the Equity Definitions, it will also constitute a Delisting if the Exchange
is located in the United States and the Shares are not immediately re-listed,
re-traded or re-quoted on any of the New York Stock Exchange, the American
Stock Exchange, the NASDAQ Global Market or the NASDAQ Global Select Market
(or their respective successors); if the Shares are immediately re-listed,
re-traded or re-quoted on any such exchange or quotation system, such
exchange or quotation system shall thereafter be deemed to be the Exchange.
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Determining Party:
|
Dealer
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Additional
Disruption Events:
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Change in Law:
|
Applicable
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6
|
Failure to Deliver:
|
Not Applicable
|
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|
Insolvency Filing:
|
Applicable
|
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|
Hedging Disruption
Event:
|
Applicable
|
|
|
|
|
Increased Cost of
Hedging:
|
Not Applicable
|
|
|
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|
Loss of Stock Borrow:
|
Applicable.
Section 12.9(b)(iv) of the Equity Definitions is hereby amended by
deleting the text from and including “(A)” to and including “(B)” and by
deleting the words “in each case”.
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Maximum Stock Loan
Rate:
|
0.60%
|
|
|
|
|
Increased Cost of Stock
Borrow:
|
Applicable;
provided
that it shall be a condition to Counterparty’s right to make the election
described in clause (C) of Section 12.9(b)(v) of the Equity
Definitions that on the date of such election, none of Counterparty, its
directors, executive officers, or any person controlling, or exercising influence
over, its decision to make such election is in possession of any material
non-public information with respect to Counterparty or the Shares; and
provided
further
that, if Counterparty timely makes the election described in
clause (A) or (B) of Section 12.9(b)(v) of the Equity
Definitions, Counterparty shall thereafter remain entitled, subject to the
foregoing condition, to terminate the Transaction pursuant to
Section 12.9(b)(v)(C) of the Equity Definitions upon ten Scheduled
Trading Days’ notice to
Dealer.
Section 12.9(b)(v) of the Equity Definitions is hereby amended by
deleting the text from and including “(X)” to and including “(Y)”.
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|
Initial Stock Loan
Rate:
|
0.25%
|
|
|
|
|
Hedging Party:
|
Dealer
|
|
|
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|
Determining Party:
|
Dealer
|
|
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|
|
Non-Reliance:
|
Applicable
|
|
|
|
|
Agreements and
Acknowledgments Regarding Hedging Activities:
|
Applicable
|
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|
Additional
Acknowledgments:
|
Applicable
|
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|
Other
Provisions:
|
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|
Additional Agreements:
|
If Counterparty would
be obligated to pay cash to Dealer pursuant to the terms of this Agreement
due to an event or circumstance outside Counterparty’s control without having
had the right (other than pursuant to this paragraph) to elect to deliver
Shares in satisfaction of such payment obligation, then Counterparty may
elect to deliver to Dealer a number of Shares (whether registered or
unregistered) having a cash value equal to the amount of such payment
obligation. Such number of Shares to be delivered shall be the number of
Shares, determined by the Calculation Agent, sufficient for
Dealer to realize the cash equivalent
of such payment obligation from proceeds of the sale of such number of Shares
over a reasonable period of time taking into account any applicable discount
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7
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|
(determined in a commercially
reasonable manner) to reflect any restrictions on transfer as well as the
market value of the Shares. Settlement relating to any delivery of Shares
pursuant to this paragraph shall occur within a reasonable period of time.
The number of Shares delivered pursuant to this paragraph shall not exceed
the Maximum Deliverable Share Amount and shall be subject to the provisions
under “Early Termination” hereof regarding Proceeds Amount and the provisions
set forth in subsection (c) under “Additional Agreements,
Representations and Covenants of Counterparty, Etc.” below.
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Early Termination:
|
Notwithstanding any
provision to the contrary, upon the designation of an Early Termination Date
or the occurrence of Cancellation and Payment in whole or in part hereunder
(except in the case of an Event of Default in which Counterparty is the
Defaulting Party or a Termination Event in which Counterparty is the Affected
Party, other than an (x) Event of Default of the type described in
Section 5(a)(iii), (v), (vi) or (vii) of the Master Agreement
or (y) a Termination Event of the type described in
Section 5(b)(i), (ii), (iii), (iv), or (v) of the Master Agreement
that in the case of either (x) or (y) resulted from an event or
events outside Counterparty’s control), Counterparty’s payment obligation in
respect of this Transaction (the “
Transaction
Early Termination Amount
”) may, at the option of Counterparty,
be satisfied by the delivery of a number of Shares equal to the Transaction
Early Termination Amount divided by the Termination Price (“
Early Termination Stock Settlement
”);
provided
,
however
, that Counterparty must notify
Dealer of its election of Early
Termination Stock Settlement by the close of business on the day that is two
Exchange Business Days following the day that the notice designating the
Early Termination Date, or notice that an Extraordinary Event has resulted in
the cancellation or termination of the Transaction in whole or in part, is
effective. “
Termination Price
”
means the market value per Share on the date that Shares are delivered in connection with such Early
Termination Date, as determined by the Calculation Agent in a commercially
reasonable manner taking into account any applicable discount to reflect any
restrictions on transfer.
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A number of Shares
calculated as being due in respect of any Early Termination Stock Settlement
will be deliverable on the third Clearance System Business Day following the
date that notice specifying the number of Shares deliverable is effective;
provided
that, if Counterparty is delivering Shares as a result of a Merger Event,
the Settlement Date for such delivery will be immediately prior to the
effective time of the Merger Event and the Shares will be deemed delivered at
such time such that
Dealer
will be a holder of the Shares prior to such effective time and be entitled to receive such merger consideration
as a holder of Shares at such time would be entitled to receive (and
references herein to Shares shall be deemed to refer to such merger
consideration, as applicable). Section 6(d)(i) of the
Agreement is hereby amended by adding the following words after the word
“paid” in the fifth line thereof: “or any delivery is to be made, as
applicable.”
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|
On or prior to the
Early Termination Date or date on which notice that an Extraordinary Event
has resulted in the cancellation or termination of the Transaction in whole
or in part is effective, as applicable, if Early Termination Stock Settlement
is elected and if so requested by Dealer upon advice of counsel, Counterparty
shall comply with the provisions set forth below opposite the caption
“Registration/Private Placement”.
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|
Registration/Private
Placement:
|
If the provisions under
this heading “Registration/Private Placement” apply, Counterparty shall
(subject to its right to make the election described in the immediately
succeeding paragraph)
(A) afford
Dealer a reasonable opportunity
|
|
8
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|
to conduct a due diligence investigation with respect to Counterparty that
is customary in scope for underwritten offerings of equity securities that
yields a result reasonably satisfactory to Dealer; (B)
enter into
a registration rights agreement with
Dealer (a “
Registered Settlement
”)
in form and substance reasonably acceptable to Dealer which agreement (“
Registration Rights
Agreement
”) will contain among other things, customary
representations and warranties and indemnification, restrictions on sales
during “blackout dates” as provided for in the Registration Rights Agreement
and shall satisfy the conditions contained therein; and (C) promptly file and procure the effectiveness a Registration Statement pursuant to
Rule 415 under the Securities Act. If and when such Registration
Statement shall have been declared effective by the Securities and Exchange
Commission, Counterparty shall have made available to Dealer such Prospectuses as Dealer may reasonably request to comply with the applicable
prospectus delivery requirements for the resale by Dealer of such number of Shares as Dealer shall specify (or, if greater, the number of Shares that
Counterparty shall specify). Such Registration Statement shall be effective
and Prospectus shall be current until the earliest of the date on which
(i) all the Delivered Shares or Shares
delivered by Counterparty in connection with an Early Termination Date, as the case may be, have been sold,
(ii) Dealer has advised
Counterparty that it no longer requires that such Registration Statement be
effective or (iii) all remaining Shares could be sold by Dealer without registration pursuant
to Rule 144 promulgated under the Securities Act (the “
Termination Registration Period
”
).
It is understood that the Registration
Statement and Prospectus will cover a number of Shares equal to the aggregate
number of Shares (if any) reasonably estimated by Dealer to be potentially deliverable by Counterparty in connection
with Net Physical Settlement or
Early Termination Stock Settlement hereunder, as the case may be, but in no event exceeding the Maximum
Deliverable Share Amount. On each day during the Termination Registration
Period Counterparty shall represent that each of its filings under the
Securities Act, the Exchange Act or other applicable securities laws that are
required to be filed have been filed and that, as of the respective dates
thereof and as of the date of this representation, they do not contain any
untrue statement of a material fact or omission of a material fact required
to be stated therein or necessary to make the statements made, in the light of
the circumstances under which they were made, not misleading.
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|
In lieu of a Registered
Settlement, Counterparty may elect
, by notice to Dealer no later than the time the relevant delivery
obligation is due , that this paragraph shall apply:
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|
|
(a) Counterparty
shall afford
Dealer
and any potential institutional purchaser of any Shares identified by Dealer a reasonable opportunity to
conduct a due diligence investigation with respect to Counterparty that is
customary in scope for private placements of equity securities subject to
execution of any customary confidentiality agreements;
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|
(b) Counterparty
shall enter into an agreement (a “
Private
Placement Agreement
”) with Dealer on commercially reasonable
terms in connection with the private placement of such Shares
(including any additional Shares pursuant to
clause (c) below) by Counterparty to Dealer or an affiliate and the private resale of such shares by Dealer or such affiliate,
substantially similar to private placement purchase agreements customary for
private placements of equity securities, in form and substance commercially
reasonably satisfactory to Dealer,
which Private Placement Agreement shall include provisions relating to
|
9
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|
|
the indemnification of,
and contribution in connection with the liability of,
Dealer and its affiliates, shall
provide for the payment by Counterparty of all expenses in connection with
such resale, including all reasonable and documented fees and expenses of
counsel for Dealer, shall
contain representations, warranties and agreements of Counterparty reasonably
necessary or advisable to establish and maintain the availability of an
exemption from the registration requirements of the Securities Act for such
resales, and shall use commercially reasonable efforts to provide for the
delivery of accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial statements
and certain financial information contained in or incorporated by reference
into the offering memorandum prepared for the resale of such Shares;
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|
(c)
Dealer shall sell the Delivered Shares or the Shares delivered by Counterparty in connection with Early
Termination Stock Settlement, as the case may be, in a commercially
reasonable manner until the amount received by Dealer for the sale of the Shares (the “
Proceeds Amount
”) is equal to the Net Physical Settlement Amount or the Transaction
Early Termination Amount, as applicable.
Any remaining delivered Shares shall
be returned to Counterparty. If the Proceeds Amount is less than the Net Physical Settlement Amount or the Transaction
Early Termination Amount, as
applicable, Counterparty shall promptly deliver upon notice from Dealer additional Shares to Dealer until the dollar amount from
the sale of such Shares by Dealer
equals the difference between the Net
Physical Settlement Amount or the Transaction Early Termination Amount, as applicable, and the Proceeds
Amount. In no event shall Counterparty be required to deliver to Dealer a number of Shares greater than
the Maximum Deliverable Share Amount.
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|
Notwithstanding the
foregoing: (I) if Counterparty has elected to deliver Shares
as described in paragraph (a) above and
either (A) Counterparty does not provide for the sale of the Shares
under the Registration Statement as provided in the Registration Rights
Agreement, (B) some Shares
cannot be registered under the Registration Statement due to
Rule 415(a)(4) under the Securities Act or (C) some Shares cannot be sold due to the application of a
blackout period or the failure of the Registration Statement to become
effective on or prior to the date on which the relevant delivery obligation
is due, then the provisions of the preceding paragraph shall apply to
the extent Counterparty has not satisfied its obligations hereunder.
(II) If the preceding paragraph is applicable and Counterparty fails to
satisfy its obligations under such paragraph, then Counterparty may deliver
unregistered Shares of equivalent value to the Net Physical Settlement Amount or the Transaction Early
Termination Amount, as applicable,
(or, if applicable, the unsatisfied portion thereof). The value of any
unregistered Shares so delivered shall be discounted to reflect an
appropriate liquidity discount (determined by Dealer in a commercially reasonable manner, taking into account Dealer’s policies and determinations
with respect to any transfer restrictions that Dealer deems it advisable to observe in connection with sales of
such Shares). (III) If some or all of the Delivered Shares or Shares delivered in connection with an
Early Termination Stock Settlement, as applicable, cannot be used to
close out stock loans in the shares of Counterparty entered into to establish
or maintain short positions by Dealer
in connection with this Transaction without a prospectus being required by
applicable law to be delivered to such lender, then the value of any such
Shares shall reflect the cost (determined by Dealer in good faith and in a commercially reasonable manner) to Dealer of trading Shares in order to
close out its hedge position if any, and
the
|
10
|
|
number of Shares required to be delivered shall be adjusted accordingly.
In
no event shall Counterparty be required to (i) top-up the delivery in
cash or (ii) deliver to
Dealer
a number of Shares greater than the Maximum Deliverable Share Amount.
|
|
|
|
|
Compliance With
Securities Laws:
|
Counterparty represents
and agrees that it has complied, and will comply, in connection with this
Transaction and all related or contemporaneous sales and purchases of Shares,
with the applicable provisions of the Securities Act, the Exchange Act and
the rules and regulations promulgated thereunder, including, without
limitation, Rule 10b-5 and 13e and Regulation M under the Exchange Act.
|
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|
Each party acknowledges
that the offer and sale of the Transaction to it is intended to be exempt
from registration under the Securities Act by virtue of
Section 4(2) thereof. Accordingly, each party represents and
warrants to the other party that (i) it has the financial ability to
bear the economic risk of its investment in the Transaction and is able to
bear a total loss of its investment, (ii) it is an “accredited investor”
as that term is defined in Regulation D as promulgated under the Securities
Act and (iii) the disposition of the Transaction is restricted under
this Confirmation, the Securities Act and state securities laws.
|
|
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|
|
Counterparty further
represents and warrants that:
|
|
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|
|
|
(a) Counterparty
is not entering into this Transaction to create actual or apparent trading
activity in the Shares (or any security convertible into or exchangeable for
Shares) or to raise or depress or otherwise manipulate the price of the
Shares (or any security convertible into or exchangeable for Shares);
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|
(b) Counterparty
represents and acknowledges that as of the date hereof and without limiting
the generality of Section 13.1 of the Equity Definitions,
Dealer is not making any representations
or warranties with respect to the treatment of the Transaction under FASB
Statements 149 or 150, EITF Issue No. 00-19 (or any successor issue
statements) or under FASB’s Liabilities & Equity Project;
|
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|
|
(c) Counterparty
is not, and after giving effect to the Transaction contemplated hereby, will
not be, an “investment company” as such term is defined in the Investment
Company Act of 1940, as amended;
|
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|
|
(d) As
of the Trade Date and each date on which a payment of cash is made by Counterparty
hereunder, (i) the assets of Counterparty at their fair valuation exceed
the liabilities of Counterparty, including contingent liabilities;
(ii) the capital of Counterparty is adequate to conduct its business;
and (iii) Counterparty has the ability to pay its debts and other
obligations as such obligations mature and does not intend to, or believe
that it will, incur debt or other obligations beyond its ability to pay as
such obligations mature.
|
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|
Account Details:
|
Account for payments to
Counterparty:
|
|
|
|
To be
advised.
|
|
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|
|
|
Account for payments to
Dealer:
|
|
|
|
Merrill Lynch Financial
Markets
|
|
|
|
Chase Manhattan Bank
|
|
|
|
ABA# 021000021
|
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|
|
Acct# 066642892
|
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|
11
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|
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Account for delivery of
Shares to
Dealer:
To be advised.
|
|
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|
|
Agreement Regarding
Shares:
|
Counterparty agrees
that, in respect of any Shares delivered to
Dealer, such Shares shall be, upon
such delivery, duly and validly authorized, issued and outstanding, fully
paid and non-assessable and subject to no adverse claims of any other party.
The issuance of such Shares does not and will not require the consent,
approval, authorization, registration or qualification of any government
authority, except such as shall have been obtained on or before the delivery
date of any Shares or as may be required in connection with any Registration
Statement filed with respect to any Shares.
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|
Bankruptcy Rights:
|
In the event of
Counterparty’s bankruptcy,
Dealer’s rights in connection with this Transaction shall not exceed
those rights held by common shareholders. For the avoidance of doubt, the
parties acknowledge and agree that Dealer’s
rights with respect to any other claim arising from this Transaction prior to
Counterparty’s bankruptcy shall remain in full force and effect and shall not
be otherwise abridged or modified in connection herewith.
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|
Set-Off:
|
Each party waives any
and all rights it may have to set-off, whether arising under any agreement,
applicable law or otherwise.
|
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|
Transfer:
|
Neither party may transfer
its rights or delegate its obligations under this Transaction without the
prior written consent of the other party, except that
Dealer, after payment in full of the
Premium, may assign its rights and delegate its obligations hereunder, in
whole or in part, to any other person (an “
Assignee
”) without the prior consent of the
Counterparty, so long as Assignee makes to Counterparty the representations
set forth in the second paragraph under “Compliance with Securities Laws,”
effective (the “
Transfer Effective Date
”)
upon delivery to Counterparty of an executed acceptance and assumption by the
Assignee (an “
Assumption
”)
of the transferred obligations of Dealer
under this Transaction (the “
Transferred
Obligations
”). Notwithstanding any other provision in this
Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other
securities to or from Counterparty, Dealer
may designate any of its affiliates to purchase, sell, receive or deliver
such Shares or other securities and otherwise to perform Dealer’s obligations in respect of
this Transaction and any such designee may assume such obligations. Dealer shall be discharged of its
obligations to Counterparty to the extent of any such performance.
|
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|
Indemnity:
|
Counterparty agrees to
indemnify
Dealer,
its Affiliates and their respective directors, officers, agents and
controlling parties (each such person being an “
Indemnified
Party
”) from and against any and all losses, claims, damages
and liabilities, joint and several, to which such Indemnified Party may
become subject because of a breach of any representation or covenant
hereunder, in the Agreement or any other agreement relating to the Agreement
or Transaction and will reimburse Indemnified Party for all reasonable
expenses (including reasonable legal fees and expenses) as they are incurred
in connection with the investigation of, preparation for, or defense of, any
pending or threatened claim or any action or proceeding arising therefrom,
whether or not such Indemnified Party is a party thereto. Seller will not be
liable under the foregoing Indemnity provision to the extent that any loss,
claim, damage, liability or expense is found in a final judgment by a court
to have resulted from Dealer’s
gross negligence or willful misconduct.
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12
Additional
Agreements, Representations and Covenants of Counterparty, Etc.:
(a)
Counterparty
hereby represents and warrants to Dealer,
on each day from the Trade Date to and including the earlier of (i) March 5,
2008 and (ii) the date by which Dealer
is able to initially complete a hedge of its position created by this
Transaction, that:
(1)
it
will not, and will not permit any person or entity subject to its control to,
bid for or purchase Shares during such period except pursuant to transactions
or arrangements which have been approved by Dealer or an affiliate of Dealer;
and
(2)
it
has publicly disclosed all material information necessary for it to be able to
purchase or sell Shares in compliance with applicable federal securities laws.
(b)
No
collateral shall be required by either party for any reason in connection with
this Transaction.
(c)
Notwithstanding
anything to the contrary herein, Dealer
shall not be entitled to exercise any Warrant or receive any Shares deliverable
hereunder, and Automatic Exercise shall not apply with respect to any Warrant
to the extent (but only to the extent) that after such receipt of any Shares
upon the exercise of such Warrant or otherwise hereunder Dealer, or its ultimate parent entity
would, directly or indirectly, be the beneficial owner (as such term is defined
for purposes of Section 13(d) of the Exchange Act) at any time of more
than 8.0 percent of the class of the Counterparty’s outstanding equity
securities that is comprised of the Shares (an “
Excess Share Owner
”).
Dealer
shall provide prior notice to Counterparty if the exercise of any Warrant or
delivery of Shares hereunder would cause
Dealer to become directly or indirectly, an Excess Share Owner;
provided
that the failure of Dealer to
provide such notice shall not alter the effectiveness of the provisions set
forth in the preceding sentence and any purported exercise or delivery in
violation of such provisions shall be void and have no effect. If any delivery
owed to Dealer hereunder is not
made, in whole or in part, as a result of this provision, Counterparty’s
obligation to make such delivery shall not be extinguished and Counterparty
shall make such delivery as promptly as practicable after Dealer gives notice that such delivery
would not result in Dealer being
an Excess Share Owner.
If
Dealer is not entitled to exercise any
Warrant because such exercise would cause Dealer to become, directly or indirectly, an Excess Share Owner and Dealer thereafter disposes of Shares
owned by it or any action is taken that would then permit Dealer to exercise such Warrant without
such exercise causing it to become, directly or indirectly, an Excess Share
Owner, then Dealer shall provide
notice of the taking of such action to Counterparty and such Warrant shall then
become exercisable by Dealer to
the extent such Warrant is otherwise or had otherwise become exercisable
hereunder. In such event, the Expiration Date with respect to such Warrant shall
be the date on which Counterparty receives such notice from Dealer, and the related Settlement Date
shall be as soon as reasonably practicable after receipt of such notice but no
more than three (3) Exchange Business Days thereafter (but in no event
shall the Settlement Date occur prior to the date on which it would have
otherwise occurred but for the provisions of this subsection);
provided
that the related Net Physical Settlement Amount shall be the same as the Net
Physical Settlement Amount but for the provisions of this subsection. In
addition, within 30 calendar days of any Settlement Date, Counterparty shall
use its reasonable efforts to refrain from activities that could reasonably be
expected to result in Dealer’s
ownership of Shares exceeding 10% of all issued and outstanding Shares.
Matters
Relating to Agent:
1.
Agent
will be responsible for the operational aspects of the Transactions effected
through it, such as record keeping, reporting, and confirming Transactions to
Counterparty and Dealer;
2.
Unless
Counterparty is a “major U.S. institutional investor,” as defined in Rule 15a-6
of the Exchange Act, neither Counterparty nor Dealer will contact the other without the direct involvement of
Agent;
13
3.
Agent’s
sole role under this Agreement and with respect to any Transaction is as an
agent of Counterparty and Dealer
on a disclosed basis and Agent shall have no responsibility or liability to
Counterparty or Dealer hereunder
except for gross negligence or willful misconduct in the performance of its
duties as agent. Agent is authorized to act as agent for Dealer, but only to the extent expressly
required to satisfy the requirements of Rule 15a-6 under the Exchange Act
in respect of the Options described hereunder. Agent shall have no authority to
act as agent for Counterparty generally or with respect to transactions or
other matters governed by this Agreement, except to the extent expressly
required to satisfy the requirements of Rule 15a-6 or in accordance with
express instructions from Counterparty.
Certain Important Information:
Dealer is an OTC
Derivatives Dealer registered with the U.S. Securities and Exchange Commission
(SEC). Applicable SEC rules require us to provide you with the following
information regarding SEC regulation of OTC Derivatives Dealers: Dealer is
exempt from the provisions of the Securities Investor Protection Act of 1970
(SIPA), including membership in the Securities Investor Protection Corporation
(SIPC). Therefore, your account is not covered by SIPA protection. Except as
otherwise agreed in writing by you and us, Dealer may repledge and otherwise
use in its business collateral you have pledged to Dealer under the Agreement.
Collateral you have pledged to Dealer will not be subject to the requirements
of Securities Exchange Act Rules: 8c-1 and 15c2-1 regarding hypothecation of
collateral; 15c3-2 regarding free credit balances; or 15c3-3 regarding custody
of securities and calculations of a reserve formula applicable to a fully
regulated SEC registered broker or dealer. In the event of Dealer’s failure (by
insolvency or otherwise), you would likely be considered to be an unsecured
creditor of Dealer as to any collateral pledged to Dealer under the Agreement.
Dealer is incorporated in
Delaware and is a direct, wholly owned subsidiary of Merrill Lynch &
Co., Inc. Dealer has entered into this transaction as principal through
Agent as its agent. The time of this Transaction shall be notified to the
Counterparty upon request.
ISDA
Master Agreement:
With respect to the
Agreement,
Dealer
and Counterparty each agree as follows:
“
Specified Entity
”
means in relation to Seller and in relation to Counterparty
for purposes of this Transaction: Not applicable.
“
Specified
Transaction
” has the meaning assigned to such term in Section 14
of this Agreement.
The “
Cross Default
”
provisions of
Section 5(a)(vi)
of the
Agreement will apply to Dealer and will apply to Counterparty.
“Threshold Amount” means
with respect to Dealer, 3% of the consolidated shareholders equity of Merrill
Lynch & Co., Inc.
“Threshold Amount” means
with respect to Counterparty, $10,000,000.
The “
Credit Event Upon Merger
”
provisions of
Section 5(b)(v)
of
the Agreement will not apply to
Dealer or to Counterparty.
Additional Termination Event
.
The occurrence of any of the following shall
constitute an Additional Termination Event with respect to which the
Transaction shall be the sole Affected Transaction and Counterparty shall be
the sole Affected Party;
provided
that with respect to any Additional Termination Event,
Dealer may choose to treat part of the Transaction
as the sole Affected Transaction, and, upon the termination of the Affected
Transaction, a Transaction with terms identical to those set forth herein except
with a Number of Warrants equal to the unaffected number of Warrants shall be
treated for all purposes as the Transaction, which shall remain in full force
and effect:
14
(i) within the
period commencing on the Trade Date and ending on the second anniversary of the
Premium Payment Date, Buyer reasonably determines that it is advisable to
terminate a portion of the Transaction so that Buyer’s related hedging
activities will comply with applicable securities laws, rules or
regulations;
(ii)
any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the “beneficial owner” (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a person shall be deemed to have
beneficial ownership of all shares that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of voting stock representing 50% or more of the
total voting power of all outstanding voting stock of the company;
(iii) Counterparty
consolidates with, or merges with or into, another person or Counterparty
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, other than any such transaction (a) entered
into solely for the purpose of changing the Counterparty’s jurisdiction of
incorporation and resulting in a reclassification, conversion or exchange of
outstanding shares of common stock solely into shares of common stock of the
surviving entity, (b) where immediately after such transaction the person
or persons that “beneficially owned” (as defined in Rules 13d-3 and 13d-5
under the Exchange Act) immediately prior to such transaction, directly or
indirectly, voting stock representing a majority of the total voting power of
all outstanding voting stock of Counterparty, “beneficially own or owns” (as so
determined), directly or indirectly, voting stock representing a majority of
the total voting power of the outstanding voting stock of the surviving or
transferee person or (c) that does not result in a reclassification,
conversion, exchange or cancellation of outstanding hares of common stock;
(iv) the
adoption of a plan of liquidation or dissolution of Counterparty; or
(v) the Shares
(or
other common stock into which the Shares have been converted or for which the
Shares have been exchanged in connection with any merger, reclassification or
recapitalization of Counterparty) are not listed for trading on the New York
Stock Exchange or the NASDAQ Global
Market or the NASDAQ Global Select Market (or their respective successors) or
cease to be so traded or quoted in contemplation of a delisting or withdrawal
of approval
.
Notwithstanding the foregoing, a transaction
described in clause (ii) or (iii) above will not constitute an
Additional Termination Event if all the consideration for the Shares (excluding
cash payments for fractional shares and cash payments made in respect of
dissenters’ appraisal rights) in the transaction or transactions consists of
common stock and any associated rights listed on a United States national
securities exchange, or which will be so traded or quoted when issued or
exchanged in connection with such transaction, and as a result of such
transaction or transactions the Warrants hereunder become convertible solely
into such common stock.
The “
Automatic Early Termination
”
provision of
Section 6(a)
of
the Agreement will not apply to
Dealer or to Counterparty.
“
Termination Currency
” means USD.
Tax
Representations.
(I)
Payer Representations.
For the purpose of Section 3(e) of
the Agreement, each party represents to the other party that it is not required
by any applicable law, as modified by the practice of any relevant governmental
revenue authority, of any Relevant Jurisdiction to make any deduction or
withholding for or on account of any Tax from any payment (other than interest
under Section 2(e), 6(d)(ii), or 6(e) of the Agreement) to be made by
it to the other party under the Agreement. In making this representation, each
party may rely on (i) the accuracy of any representations made by the
other party pursuant to Section 3(f) of the Agreement, (ii) the
satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of
the Agreement, and the accuracy and effectiveness of any document provided by
the other party pursuant to Section 4(a)(i) or 4(a)(iii) of the
Agreement, and (iii) the satisfaction of the agreement of the other party
15
contained in Section 4(d) of the Agreement;
provided
that it will not be a breach of this representation where reliance is
placed on clause (ii) above and the other party does not deliver a form or
document under Section 4(a)(iii) of the Agreement by reason of
material prejudice to its legal or commercial position.
(II)
Payee Representations.
For the purpose of Section 3(f) of
the Agreement, each party makes the following representations to the other
party:
(i)
Dealer represents that it is a company
incorporated in Delaware.
(ii)
Counterparty
represents that it is a corporation incorporated in Delaware.
Delivery
Requirements.
For the purpose of
Sections 4(a)(i)
and
(ii)
of the Agreement, each party agrees to deliver the following documents:
(a)
Tax
forms, documents or certificates to be delivered are:
Dealer
agrees to complete (accurately and in a manner reasonably satisfactory to
Counterparty), execute, and deliver to Counterparty, United States Internal
Revenue Service Form W-9 and all required attachments, or any successor of
such form(s): (i) before the first payment date under this agreement; (ii) promptly
upon reasonable demand by Counterparty; and (iii) promptly upon learning
that any such Form previously provided by
Dealer has become obsolete or incorrect.
Counterparty agrees to
complete (accurately and in a manner reasonably satisfactory to
Dealer), execute, and deliver to Dealer, United States Internal Revenue
Service Form W-9, or any successor of such form(s): (i) before the
first payment date under this agreement; (ii) promptly upon reasonable
demand by Dealer; and (iii) promptly
upon learning that any such form(s) previously provided by Counterparty
has become obsolete or incorrect.
(b)
Other
documents to be delivered:
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Party Required to
Deliver Document
|
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Document Required to be Delivered
|
|
When Required
|
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Covered by
Section 3(d)
Representation
|
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Counterparty and
Dealer
|
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Evidence of the authority and true signatures of
each official or representative signing this Confirmation
|
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Upon or before execution and delivery of this
Confirmation
|
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Yes
|
|
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|
|
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Counterparty
|
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Certified copy of the resolution of the Board of
Directors or equivalent document authorizing the execution and delivery of
this Confirmation and such other certificate or certificates as
Dealer shall reasonably request
|
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Upon or before execution and delivery of this
Confirmation
|
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Yes
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Effectiveness.
If, prior to the Effective Date, Dealer reasonably determines
that it is advisable to cancel the Transaction because of concerns that Dealer’s related hedging activities could be viewed as not complying with
applicable securities laws, rules or regulations, such Transaction shall
be cancelled and shall not become effective, and neither party shall have any obligation
in respect of such Transaction.
16
Addresses
for Notices:
For the purpose of
Section 12(a)
of
the Agreement:
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Address
for notices or communications to
Dealer
for all
purposes:
|
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|
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Address:
|
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Merrill Lynch Financial
Markets, Inc.
|
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|
4 World Financial
Center, 17
th
Floor
|
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New York, New York
10080
|
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Merrill Lynch Financial
Centre
|
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Attention:
|
|
Manager of Equity
Documentation
|
|
Facsimile No.:
|
|
(917) 778-0835
|
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Telephone No.:
|
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(212) 449-1951
|
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Address for
notices or communications to Counterparty for all purposes:
|
Address:
|
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AAR CORP.
|
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1100 N.
Wood Dale Road
|
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|
Wood Dale, Illinois 60191
|
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Attention:
|
|
Richard J. Poulton, Chief Financial Officer
|
|
Facsimile
No.:
|
|
(630) 227-2039
|
|
Telephone
No.:
|
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(630) 227-2075
|
In addition, in the case
of notices or communications relating to Section 5, 6, 11 or 13 of this
Agreement, a second copy of any such notice or communication shall be addressed
to the attention of Counterparty’ General Counsel as follows:
|
Address:
|
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AAR CORP.
|
|
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1100 N.
Wood Dale Road
|
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Wood Dale, Illinois 60191
|
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Attention:
|
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General Counsel’s
Office
|
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Facsimile
No.:
|
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(630) 227-2058
|
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Telephone
No.:
|
|
(630) 227-2000
|
Multibranch
Party.
For the purpose of
Section 10(c)
of
the Agreement: Neither Dealer nor
Counterparty is a Multibranch Party.
Calculation
Agent.
“Calculation
Agent” means Dealer, acting in
good faith and in a commercially reasonable manner.
Credit
Support Document.
Dealer
:
Not Applicable.
Counterparty: Not
Applicable
Credit
Support Provider.
With respect to
Dealer: Not Applicable.
With respect to
Counterparty: Not Applicable.
Governing
Law.
This Confirmation will be governed by, and construed in
accordance with, the laws of the State of New York.
Submission to Jurisdiction
. Each party hereby irrevocably and
unconditionally submits for itself and its property in any legal action or
proceeding by the other party against it relating to the Transaction to which
it is a party, or for
17
recognition and
enforcement of any judgment in respect thereof, to the exclusive jurisdiction
of the Supreme Court of the State of New York, sitting in New York County, the
courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof.
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.
Netting
of Payments.
The provisions of
Section 2(c)
of
the Agreement shall not be applicable to this Transaction.
Basic
Representations.
Section 3(a)
of the
Agreement is hereby amended by the deletion of “and” at the end of
Section 3(a)(iv);
the substitution of a semicolon for the period at the end of
Section 3(a)(v)
and
the addition of
Sections 3(a)(vi),
as follows:
Eligible
Contract Participant; Line of Business.
Each party agrees and
represents that it is an “eligible contract participant” as defined in Section 1
(a)(12) of the U.S. Commodity Exchange
Act, as amended
(
“
CEA
”
),
this
Agreement and the Transaction thereunder are subject to individual negotiation
by the parties and have not been executed or traded on a “trading facility” as
defined in Section 1(a)(33) of the CEA, and it has entered into this
Confirmation and this Transaction in connection with its business or a line of
business (including financial intermediation), or the financing of its
business.
Acknowledgements:
(a)
The
parties acknowledge and agree that there are no other representations,
agreements or other undertakings of the parties in relation to this
Transaction, except as set forth in this Confirmation.
(b)
The
parties hereto intend for:
(i)
Buyer
to be a “financial institution” as defined in Section 101(22) of Title 11
of the United States Code (the “
Bankruptcy
Code
”
)
and this
Transaction to be a “securities contract” as defined in Section 741(7) of
the Bankruptcy Code
and a “swap agreement” as defined in Section 101(53C)
of the Bankruptcy Code,
qualifying
for the protections of, among other sections, Sections 362(b)(6), 362 (b)(17),
546(e), 546(g), 555 and 560 of the Bankruptcy Code;
(ii)
a
party’s right to liquidate this Transaction and to exercise any other remedies
upon the occurrence of any Event of Default under the Agreement with respect to
the other party to constitute a “contractual right” as defined in the
Bankruptcy Code;
(iii)
all payments for, under
or in connection with this Transaction, all payments for the Shares and the
transfer of such Shares to constitute “settlement payments” as defined in the
Bankruptcy Code.
(c)
The
parties acknowledge and agree that in the event of an Early Termination Date as
a result of an Event of Default that is within Counterparty’s control, the
amount payable under the Agreement will be a cash amount calculated as
described therein and that any delivery specified in this Transaction will no
longer be required.
Amendment
of
Section 6(d)(ii)
.
Section 6(d)(ii) of
the Agreement is modified by deleting the words “on the day” in the second line
thereof and substituting therefor “on the day that is three Local Business Days
after the day”.
Section 6(d)(ii)
is further modified by
deleting the words “two Local Business Days” in the fourth line thereof and
substituting therefor “three Local Business Days.”
18
Consent
to Recording.
Each party consents to the recording of the
telephone conversations of trading and marketing personnel of the parties and
their Affiliates in connection with this Confirmation. To the extent that one
party records telephone conversations (the “Recording Party”) and the other
party does not (the “Non-Recording Party”), the Recording Party shall in the
event of any dispute, make a complete and unedited copy of such party’s tape of
the entire day’s conversations with the Non-Recording Party’s personnel
available to the Non-Recording Party. The Recording Party’s tapes may be used
by either party in any forum in which a dispute is sought to be resolved and
the Recording Party will retain tapes for a consistent period of time in
accordance with the Recording Party’s policy unless one party notifies the
other that a particular transaction is under review and warrants further
retention.
Disclosure.
Each party hereby acknowledges and agrees that Dealer has authorized Counterparty to
disclose this Transaction and any related hedging transaction between the
parties if and to the extent that Counterparty reasonably determines (after
consultation with Dealer) that
such disclosure is required by law or by the rules of the New York Stock
Exchange or any securities exchange.
Notwithstanding the foregoing, effective from the date of commencement
of discussions concerning the Transaction, Counterparty and each of its
employees, representatives, or other agents may disclose to any and all
persons, without limitation of any kind, the tax treatment and tax structure of
the Transaction and all materials of any kind (including opinions or other tax
analyses) that are provided to Counterparty relating to such tax treatment and tax
structure.
Severability.
If any term, provision, covenant or condition of this
Confirmation, or the application thereof to any party or circumstance, shall be
held to be invalid or unenforceable in whole or in part for any reason, the
remaining terms, provisions, covenants, and conditions hereof shall continue in
full force and effect as if this Confirmation had been executed with the
invalid or unenforceable provision eliminated, so long as this Confirmation as
so modified continues to express, without material change, the original
intentions of the parties as to the subject matter of this Confirmation and the
deletion of such portion of this Confirmation will not substantially impair the
respective benefits or expectations of parties to this Agreement;
provided
,
however
, that this severability provision shall not be applicable if any
provision of
Section 2
,
5
,
6
or
13
of the
Agreement (or any definition or provision in
Section 14
to the
extent that it relates to, or is used in or in connection with any such
Section) shall be so held to be invalid or unenforceable.
Affected
Parties.
For purposes of
Section 6(e)
of the
Agreement, each party shall be deemed to be an Affected Party in connection
with Illegality and any Tax Event.
[
Signatures follow on separate page
]
19
Please confirm that the
foregoing correctly sets forth the terms of our agreement by executing the copy
of this Confirmation enclosed for that purpose and returning it to us.
|
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Very truly yours,
|
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MERRILL LYNCH FINANCIAL MARKETS, INC.
|
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By:
|
/s/ Fran Jacobson
|
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Name: Fran
Jacobson
|
|
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Title:
Authorized Signatory
|
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Confirmed as of the date first above written:
|
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AAR CORP.
|
|
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By:
|
/s/ Timothy J. Romenesko
|
|
|
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Name: Timothy J. Romenesko
|
|
Title: President & COO
|
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|
Acknowledged and agreed as to matters to the Agent:
|
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MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
|
|
|
|
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Solely in its capacity as Agent hereunder
|
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By:
|
/s/ Angelina Lopes
|
|
|
|
Name: Angelina Lopes
|
|
Title: Authorized Signatory
|
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:
