UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 9, 2016
GROUPON, INC.
(Exact name of registrant as specified in its charter)
Delaware | 1-35335 | 27-0903295 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
||
600 West Chicago Avenue, Suite 400 Chicago, Illinois |
60654 | |||
(Address of principal executive offices) | (Zip Code) |
312-334-1579
(Registrants telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 | Entry into a Material Definitive Agreement. |
As previously announced, Groupon, Inc. (the Company ) issued on April 4, 2016 $250 million aggregate principal amount of 3.25% convertible senior notes due 2022 (the Notes ).
Note Hedge Transactions
On May 9, 2016, the Company entered into Note hedge transactions with respect to its Class A common stock (the common stock) with Morgan Stanley, Bank of America Merrill Lynch, and J.P. Morgan or their respective affiliates (collectively, the Counterparties ). The Note hedge transactions cover approximately 46.3 million shares of the Companys common stock underlying the Notes at an initial strike price equal to $5.40, which corresponds to the conversion price of the Notes and are exercisable upon conversion of the Notes. The Company is obligated to pay an aggregate amount, expected to be in the range of approximately $48.3 million to $61.0 million, to the Counterparties for the Note hedge transactions, with the exact amount to be determined following completion of the Counterparties initial hedging activities described below. The Note hedge transactions are intended to offset the potential economic impacts of dilution to the Companys common stock upon conversion of the Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of any converted Notes, as the case may be, in the event that the market price of the Companys common stock, as measured under the terms of the Note hedge transactions, is greater than the strike price of the Note hedge transactions. If, however, the market price of the Companys common stock, as measured under the terms of the warrant transactions described below, exceeds the strike price of the warrant transactions, there would nevertheless be dilution to the extent that such market price exceeds such strike price. The Note hedge transactions are subject to anti-dilution adjustments substantially similar to those applicable to the Notes. The foregoing description of the Note hedge transactions is qualified in its entirety by reference to the form of confirmation relating to the Note hedge transactions, which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
Warrant Transactions
On May 9, 2016, the Company also entered into warrant transactions (the Warrants ), whereby the Company sold to the Counterparties net share-settled warrants initially exercisable into approximately 46.3 million shares of the Companys common stock, at an initial strike price equal to $8.50. The Warrants are subject to customary anti-dilution adjustments. The Company will receive aggregate proceeds, expected to be in the range of approximately $27.9 million to $36.7 million, from the sale of the Warrants to the Counterparties, with the exact amount to be determined following completion of the Counterparties initial hedging activities described below. The Warrants were sold in a private placement pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the Securities Act ), provided by Section 4(a)(2) of the Securities Act. The foregoing description of the Warrants is qualified in its entirety by reference to the form of Warrant confirmation, which is attached hereto as Exhibit 10.2 and incorporated herein by reference.
Hedging Activities
In connection with establishing their initial hedge of the Note hedge transactions and Warrants, the Counterparties expect to purchase shares of the Companys common stock during a specified initial hedge period. This activity could increase (or reduce the size of any decrease in) the market price of the Companys common stock. In addition, the Counterparties may modify their hedge positions by
entering into or unwinding various derivatives with respect to the Companys common stock and/or purchasing or selling the Companys common stock or other securities in secondary market transactions following the conclusion of the initial hedge period and prior to the maturity of the Notes (and are likely to do so in connection with any conversion of Notes). This activity could also cause or avoid an increase or a decrease in the market price of the Companys common stock or the Notes.
The establishment of the Counterparties initial hedge is expected to be complete no later than May 12, 2016. Settlement of the premiums for the Note hedge transactions and the Warrants are expected to occur on May 12, 2016 and the Companys net cash outflow at that time is expected to be in the range of $20.4 million to $24.3 million based on the respective ranges of the cost for the Note hedge transactions and the proceeds from the Warrants as set forth above.
Item 3.02 | Unregistered Sales of Securities |
The information contained in Item 1.01 of this Current Report on Form 8-K relating to the Warrants is incorporated herein by reference.
Item 9.01 | Financial Statements and Exhibits. |
(d) | Exhibits: |
Exhibit No. |
Description |
|
10.1 | Form of Note Hedge Confirmation, dated May 9, 2016, between Groupon, Inc. and each of the Counterparties. | |
10.2 | Form of Warrant Confirmation, dated May 9, 2016, between Groupon, Inc. and each of the Counterparties. |
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations. The words may, will, should, could, expect, anticipate, believe, estimate, intend, continue and other similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, but are not limited to, our senior convertible notes, our ability to complete and realize the anticipated benefits from the hedge and warrant transactions and those risks and other factors discussed in Part I, Item 1A: Risk Factors of our 2015 Annual Report on Form 10-K for the year ended December 31, 2015, and Part II, Item 1A: Risk Factors of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, as well as in our condensed consolidated financial statements, related notes, and the other financial information appearing elsewhere in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 and our other filings with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time.
It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
GROUPON, INC. | ||||||
Dated: May 9, 2016 | By: |
/s/ Michael Randolfi |
||||
Name: | Michael Randolfi | |||||
Title: | Chief Financial Officer |
Exhibit Index
Exhibit No. |
Description |
|
10.1 | Form of Note Hedge Confirmation, dated May 9, 2016, between Groupon, Inc. and each of the Counterparties. | |
10.2 | Form of Warrant Confirmation, dated May 9, 2016, between Groupon, Inc. and each of the Counterparties. |
Exhibit 10.1
[Dealer]
[Address]
May 9, 2016
To: | Groupon, Inc. |
600 West Chicago Avenue, Suite 400
Chicago, Illinois 60654
Attention: Brian Stevens, Chief Accounting Officer
Telephone No.: [ ]
Email: [ ]
Re: | Call Option Transaction |
The purpose of this letter agreement (this Confirmation ) is to confirm the terms and conditions of the call option transaction entered into between [ ] ( Dealer ) and Groupon, Inc. ( Counterparty ) as of the Trade Date specified below (the Transaction ). This letter agreement constitutes a Confirmation as referred to in the ISDA Master Agreement specified below. This Confirmation shall replace any previous agreements and serve as the final documentation for the Transaction.
The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the Equity Definitions ), as published by the International Swaps and Derivatives Association, Inc. ( ISDA ), are incorporated into this Confirmation. In the event of any inconsistency between the Equity Definitions and this Confirmation, this Confirmation shall govern. Certain terms defined herein are based on terms that relate to the 3.25% Convertible Senior Notes due 2022 (as originally issued by Counterparty, the Convertible Notes and each USD 1,000 principal amount of Convertible Notes, a Convertible Note ) issued by Counterparty in an aggregate principal amount of USD 250 million pursuant to an Indenture dated as of April 4, 2016 between Counterparty and U.S. Bank National Association, as trustee (the Indenture ). In the event of any inconsistency between the Indenture and this Confirmation, this Confirmation shall govern. The parties acknowledge that the Indenture section numbers used herein are based on the Indenture as executed. References to the Indenture herein are references to the Indenture as in effect on the date of its execution, and if the Indenture is amended or supplemented following such date, any such amendment or supplement (other than any amendment or supplement pursuant to Section 9.01(i) of the Indenture, subject to the second proviso under Consequence of Merger Events/Tender Offers in Section 3 below) will be disregarded for purposes of this Confirmation unless the parties agree otherwise in writing.
Each party is hereby advised, and each such party acknowledges, that the other party has engaged in, or refrained from engaging in, substantial financial transactions and has taken other material actions in reliance upon the parties entry into the Transaction to which this Confirmation relates on the terms and conditions set forth below.
1. This Confirmation evidences a complete and binding agreement between Dealer and Counterparty as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall supplement, form a part of, and be subject to an agreement in the form of the ISDA 2002 Master Agreement (the Agreement ) as if Dealer and Counterparty had executed on the Trade Date an agreement in such form (but without any Schedule except for (i) the election of the laws of the State of New York as the governing law (without reference to choice of law doctrine) and (ii) the election that the provisions of Section 5(a)(vi) of the Agreement shall apply to Dealer with Specified Indebtedness having the meaning set out in Section 14 of the Agreement and an applicable Threshold Amount of three percent (3%) of shareholders equity of Dealers ultimate parent; provided that (A) the words , or becoming capable at such time of being declared, shall be deleted from such Section 5(a)(vi) and (B) the following language shall be added to the end of such Section 5(a)(vi): Notwithstanding the foregoing, a default under subsection (2) hereof shall not constitute an Event of Default if (i) the default was caused solely by error or omission of an administrative or operational nature; (ii) funds were available to enable the party to make the payment when due; and (iii) the payment is made within two Local Business Days of such partys receipt of written notice of its failure to pay.). In the event of any inconsistency between provisions of the Agreement and this Confirmation or the Equity Definitions, this Confirmation or the Equity Definitions will prevail for the purpose of the Transaction to which this Confirmation relates. For the avoidance of doubt, except to the extent of an express conflict, the application of any provision of this Confirmation, the Agreement or the Equity Definitions shall not be construed to exclude or limit the application of any other provision of this Confirmation, the Agreement or the Equity Definitions. The parties hereby agree that no transaction other than the Transaction to which this Confirmation relates shall be governed by the Agreement.
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Multiple Exercise: |
Applicable, as described under Automatic Exercise below | |
Automatic Exercise: |
Notwithstanding Section 3.4 of the Equity Definitions, on each Conversion Date in respect of which a Conversion Notice (as such term is defined in the Indenture) that is effective as to Counterparty has been delivered by the relevant converting Holder, a number of Options equal to the number of Convertible Notes in denominations of USD 1,000 as to which such Conversion Date has occurred shall be deemed to be automatically exercised; provided that such Options shall be exercised or deemed exercised only if Counterparty has provided or is deemed to have provided a Notice of Exercise to Dealer in accordance with Notice of Exercise below. | |
Notwithstanding the foregoing, in no event shall the number of Options that are exercised or deemed exercised hereunder exceed the Number of Options. | ||
Notice of Early Redemption: |
In order to exercise any Options on any Conversion Date in respect of any Convertible Notes that have been called for redemption pursuant to Section 13.01 of the Indenture, Counterparty must notify Dealer in writing before 5:00 p.m. (New York City time) on the Scheduled Valid Day immediately preceding the 22 nd Scheduled Valid Day immediately preceding the scheduled redemption date specified by Counterparty for such Convertible Notes pursuant to Section 13.03 of the Indenture (the Scheduled Redemption Date ) of (i) the number of Convertible Notes then outstanding that constitute Atairos Securities (as such term is defined in the Indenture), (ii) the Scheduled Redemption Date and (iii) the Settlement Method (and, if applicable, the Specified Option Cash Amount (as defined below)) elected or deemed to be elected with respect to any Convertible Notes with a Conversion Date occurring following delivery of the relevant redemption notice to the Holders of such Convertible Notes but prior to the Scheduled Redemption Date (such period, the Redemption Conversion Period and, any such notice, a Notice of Early Redemption ). If Counterparty elects a Settlement Method for such Options other than Net Share Settlement, the Notice of Early Redemption shall also include the information, representations, acknowledgments and agreements required pursuant to Settlement Method Election Conditions below. | |
Notice of Exercise: |
Notwithstanding anything to the contrary in the Equity Definitions or under Automatic Exercise above, in order to exercise any Options on any Conversion Date, Counterparty must notify Dealer in writing before 5:00 p.m. (New York City time) on the Scheduled Valid Day immediately preceding the scheduled first day of the Settlement Averaging Period for the Options being exercised of (i) the number of such Options (and the number of $1,000 principal amount of Convertible Notes |
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being converted on such Conversion Date and the number of such Convertible Notes that constitute Atairos Securities (as such term is defined in the Indenture) (if any)), (ii) the scheduled first day of the Settlement Averaging Period and the scheduled Settlement Date and (iii) if Counterparty elects a Settlement Method for such Options other than Net Share Settlement, such notice shall also include the information, representations, acknowledgments and agreements required pursuant to Settlement Method Election Conditions below; provided that (A) in respect of any Options relating to Convertible Notes with a Conversion Date occurring on or after the Cut-Off Date, (x) such notice may be given at any time before 5:00 p.m. (New York City time) on the second Scheduled Valid Day immediately preceding the Expiration Date and need only specify the information required in clause (i) above and (y) if the Settlement Method for any Options relating to Convertible Notes with a Conversion Date occurring on or after the Cut-Off Date is not Net Share Settlement, Dealer shall have received a separate notice (the Notice of Final Settlement Method ) in respect of all such Convertible Notes before 5:00 p.m. (New York City time) on the second Scheduled Valid Day immediately preceding the Cut-Off Date specifying the information required in clause (iii) above and (B) if Counterparty has at any time delivered a Notice of Early Redemption, (x) in respect of any Convertible Notes not constituting Atairos Securities (as such term is defined in the Indenture), such notice may be given at any time before 5:00 p.m. (New York City time) on the second Scheduled Valid Day immediately preceding the Scheduled Redemption Date and need only specify the information required in clause (i) above and (y) in respect of all Convertible Notes constituting Atairos Securities (as such term is defined in the Indenture), such notice shall be deemed to have been given at 5:00 p.m. (New York City time) on the second Scheduled Valid Day immediately preceding the Scheduled Redemption Date and, to the extent a Conversion Notice (as such term is defined in the Indenture) has not been provided in respect of any such Convertible Notes, the Conversion Date applicable to such Convertible Notes shall be deemed to be such second preceding Scheduled Valid Day. | ||
Valuation Time: |
The close of trading of the regular trading session on the Exchange; provided that if the principal trading session is extended, the Calculation Agent shall determine the Valuation Time in its commercially reasonable discretion. | |
Market Disruption Event: |
Section 6.3(a) of the Equity Definitions is hereby replaced in its entirety by the following: | |
Market Disruption Event means (i) a failure by the Exchange or, if the Shares are not then listed on the Exchange, the principal other U.S. national or regional securities exchange or market on which the Shares are |
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listed or admitted for trading to open for trading during its regular trading session or (ii) the occurrence or existence prior to 1:00 p.m., New York City time, on any Scheduled Valid Day for the Shares for more than a one half-hour period in the aggregate during regular trading hours of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the relevant securities exchange or otherwise) in the Shares or in any options contracts or futures contracts relating to the Shares. | ||
Settlement Terms. |
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Settlement Method: |
For any Option, Net Share Settlement; provided that Counterparty may elect Cash Settlement or Combination Settlement for such Option if the Settlement Method Election Conditions have been satisfied and Counterparty shall have notified Dealer of the Settlement Method in the Notice of Exercise, Notice of Early Redemption or Notice of Final Settlement Method, as applicable, for such Option; provided further that if Counterparty has elected to settle its conversion obligations in respect of the related Convertible Notes (A) entirely in Shares pursuant to Section 10.02(a)(iv)(A) of the Indenture (together with cash in lieu of fractional Shares), or (B)(x) in a combination of cash and Shares pursuant to Section 10.02(a)(iv)(C) of the Indenture with a Specified Option Cash Amount (as defined below) less than USD 1,000, or (y) in a combination of cash and Shares pursuant to Section 10.02(a)(iv)(C) of the Indenture with a Specified Option Cash Amount (as defined below) equal to USD 1,000, then, in each case, the Settlement Method for such Option shall be Net Share Settlement. | |
Settlement Method Election Conditions: |
In order to elect a Settlement Method other than Net Share Settlement for any Option, the Notice of Exercise, Notice of Early Redemption or Notice of Final Settlement Method, as applicable, shall contain: | |
(i) Counterpartys election of such other Settlement Method, which shall correspond to Counterpartys election under the Convertible Notes of whether it elects to settle its conversion obligations in respect of the related Convertible Notes: | ||
(A) in a combination of cash and Shares pursuant to Section 10.02(a)(iv)(C) of the Indenture with a Specified Option Cash Amount (as defined below) greater than USD 1,000, in which case the Settlement Method for such Option shall be Combination Settlement; or | ||
(B) entirely in cash pursuant to Section 10.02(a)(iv)(B) of the Indenture, in which case the Settlement Method for such Option shall be Cash Settlement; | ||
(ii) if the Settlement Method for such Option is Combination Settlement, the fixed amount of cash per |
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Convertible Note applicable to the settlement of each related Convertible Note (the Specified Option Cash Amount ); | ||
(iii) a representation that, on the date of such Notice of Exercise, Notice of Early Redemption or Notice of Final Settlement Method, as applicable, Counterparty is not aware of any material non-public information with respect to Counterparty or the Shares; | ||
(iv) a representation that Counterparty is electing the Settlement Method for the related Convertible Note and such Settlement Method in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the Securities Exchange Act of 1934, as amended (the Exchange Act ); | ||
(v) a representation that Counterparty has not entered into or altered any hedging transaction relating to the Shares corresponding to or offsetting the Transaction; | ||
(vi) a representation that Counterparty is not electing the settlement method for the related Convertible Note and such Settlement Method to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for the Shares) or to manipulate the price of the Shares (or any security convertible into or exchangeable for the Shares); and | ||
(vii) an acknowledgment by Counterparty that (A) any transaction by Dealer following Counterpartys election of the settlement method for the related Convertible Note and such Settlement Method shall be made at Dealers sole discretion and for Dealers own account and (B) Counterparty does not have, and shall not attempt to exercise, any influence over how, when, whether or at what price to effect such transactions, including, without limitation, the price paid or received per Share pursuant to such transactions, or whether such transactions are made on any securities exchange or privately. | ||
Net Share Settlement: |
If Net Share Settlement is applicable to any Option exercised or deemed exercised hereunder, Dealer will deliver to Counterparty, on the relevant Settlement Date for each such Option, a number of Shares (the Net Share Settlement Amount ) equal to the sum, for each Valid Day during the Settlement Averaging Period for each such Option, of (i) (a) the Daily Option Value for such Valid Day, divided by (b) the Relevant Price on such Valid Day, divided by (ii) the number of Valid Days in the Settlement Averaging Period; provided that in no event shall the Net Share Settlement Amount for any Option exceed a number of Shares equal to the Applicable Limit for such Option divided by the Applicable Limit Price on the Convertible Note Settlement Date for such Option. |
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Dealer will pay cash in lieu of delivering any fractional Shares to be delivered with respect to any Net Share Settlement Share Amount valued at the Relevant Price for the last Valid Day of the Settlement Averaging Period. | ||
Combination Settlement: |
If Combination Settlement is applicable to any Option exercised or deemed exercised hereunder, Dealer will deliver to Counterparty, on the relevant Settlement Date for each such Option: | |
(i) an amount of cash (the Combination Settlement Cash Amount ) equal to the sum, for each Valid Day during the Settlement Averaging Period for such Option, of (A) an amount (the Daily Combination Settlement Cash Amount ) equal to the lesser of (1) the product of (x) the Applicable Percentage and (y) the excess of (i) the Specified Option Cash Amount over (ii) USD 1,000 and (2) the Daily Option Value, divided by (B) the number of Valid Days in the Settlement Averaging Period; provided that if the calculation in clause (A) above results in zero or a negative number for any Valid Day, the Daily Combination Settlement Cash Amount for such Valid Day shall be deemed to be zero; and | ||
(ii) a number of Shares (the Combination Settlement Share Amount ) equal to the sum, for each Valid Day during the Settlement Averaging Period for such Option, of a number of Shares for such Valid Day (the Daily Combination Settlement Share Amount ) equal to (A) (1) the Daily Option Value on such Valid Day minus the Daily Combination Settlement Cash Amount for such Valid Day, divided by (2) the Relevant Price on such Valid Day, divided by (B) the number of Valid Days in the Settlement Averaging Period; provided that if the calculation in clause (A)(1) above results in zero or a negative number for any Valid Day, the Daily Combination Settlement Share Amount for such Valid Day shall be deemed to be zero; | ||
provided that in no event shall the sum of (x) the Combination Settlement Cash Amount for any Option and (y) the Combination Settlement Share Amount for such Option multiplied by the Applicable Limit Price on the Convertible Note Settlement Date for such Option exceed the Applicable Limit for such Option. | ||
Dealer will pay cash in lieu of delivering any fractional Shares to be delivered with respect to any Combination Settlement Share Amount valued at the Relevant Price for the last Valid Day of the Settlement Averaging Period. | ||
Cash Settlement: |
If Cash Settlement is applicable to any Option exercised or deemed exercised hereunder, in lieu of Section 8.1 of the Equity Definitions, Dealer will pay to Counterparty, on the relevant Settlement Date for each such Option, an amount of cash (the Cash Settlement Amount ) equal to the sum, for each Valid Day during the Settlement |
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Averaging Period for such Option, of (i) the Daily Option Value for such Valid Day, divided by (ii) the number of Valid Days in the Settlement Averaging Period; provide d that in no event shall the Cash Settlement Amount exceed the Applicable Limit for such Option. | ||
Daily Option Value: |
For any Valid Day, an amount equal to (i) the Option Entitlement on such Valid Day, multiplied by (ii) the Relevant Price on such Valid Day less the Strike Price on such Valid Day; provided that if the calculation contained in clause (ii) above results in a negative number, the Daily Option Value for such Valid Day shall be deemed to be zero. In no event will the Daily Option Value be less than zero. | |
Make-Whole Adjustment: |
Notwithstanding anything to the contrary herein, in respect of any exercise of Options relating to a conversion of Convertible Notes for which additional Shares will be added to the Conversion Rate (as such term is defined in the Indenture), the Daily Option Value shall be calculated as if the Option Entitlement included the Applicable Percentage of the number of such additional Shares as determined with reference to the adjustment set forth in Section 10.14 of the Indenture; provided that if the sum of (i) the product of (a) the number of Shares (if any) deliverable by Dealer to Counterparty per exercised Option and (b) the market price per Share at the time of delivery as determined by the Calculation Agent and (ii) the amount of cash (if any) payable by Dealer to Counterparty per exercised Option would otherwise exceed the amount per Option, as determined by the Calculation Agent, that would be payable by Dealer under Section 6 of the Agreement if (x) the relevant Conversion Date were an Early Termination Date resulting from an Additional Termination Event with respect to which the Transaction was the sole Affected Transaction and Counterparty was the sole Affected Party and (y) Section 10.14 of the Indenture were deleted, then each Daily Option Value shall be proportionately reduced to the extent necessary to eliminate such excess. | |
Applicable Limit: |
For any Option, an amount of cash equal to the Applicable Percentage multiplied by the excess of (i) the aggregate of (A) the amount of cash, if any, paid to the Holder of the related Convertible Note upon conversion of such Convertible Note as determined with reference to Section 10.02(a)(iv) of the Indenture and (B) the number of Shares, if any, delivered to the Holder of the related Convertible Note upon conversion of such Convertible Note as determined with reference to Section 10.02(a)(iv) of the Indenture multiplied by the Applicable Limit Price on the Convertible Note Settlement Date for such Option, over (ii) USD 1,000. | |
Convertible Note Settlement Date: |
For any Option, the final date on which Counterparty is obligated to deliver any consideration upon conversion of the related Convertible Note pursuant to Section 10.02(c) |
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of the Indenture, which date Counterparty shall notify Dealer in writing of at least one Scheduled Valid Day in advance of such date. | ||
Applicable Limit Price: |
On any day, the opening price as displayed under the heading Op on Bloomberg page GRPN <equity> (or its equivalent successor if such page is not available). | |
Valid Day: |
A day on which (i) there is no Market Disruption Event and (ii) trading in the Shares generally occurs on the Exchange or, if the Shares are not then listed on the Exchange, on the principal other U.S. national or regional securities exchange on which the Shares are then listed or, if the Shares are not then listed on a U.S. national or regional securities exchange, on the principal other market on which the Shares are then listed or admitted for trading. If the Shares are not so listed or admitted for trading, Valid Day means a Business Day. | |
Scheduled Valid Day: |
A day that is scheduled to be a Valid Day on the Exchange or, if the Shares are not then listed on the Exchange, the principal other U.S. national or regional securities exchange or market on which the Shares are then listed or admitted for trading. If the Shares are not so listed or admitted for trading, Scheduled Valid Day means a Business Day. | |
Business Day: |
Any day other than a Saturday, a Sunday or a day on which or the Federal Reserve Bank of New York is authorized or required by law or executive order to close or be closed. | |
Relevant Price: |
On any Valid Day, the per Share volume-weighted average price as displayed under the heading Bloomberg VWAP on Bloomberg page GRPN <equity> AQR (or its equivalent successor if such page is not available) in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary trading session on such Valid Day (or if such volume-weighted average price is unavailable at such time, the market value of one Share on such Valid Day determined, by the Calculation Agent (using a volume-weighted average method, if practicable). The Relevant Price will be determined without regard to after-hours trading or any other trading outside of the regular trading session trading hours. | |
Settlement Averaging Period: |
For any Option and regardless of the Settlement Method applicable to such Option: | |
(i) if the related Conversion Date occurs prior to the Cut-Off Date, the 20 consecutive Valid Day period beginning on, and including, the second Valid Day after such Conversion Date; or |
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(ii) if the related Conversion Date occurs on or after the Cut-Off Date, the 20 consecutive Valid Day |
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period beginning on, and including, the 22nd Scheduled Valid Day immediately preceding the Expiration Date; |
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provided that , if Counterparty has at any time delivered a Notice of Early Redemption, the Settlement Averaging Period for any Option whose related Conversion Date occurs or is deemed to occur during the Redemption Conversion Period shall be the 20 consecutive Valid Day period beginning on, and including, the 22 nd Scheduled Valid Day immediately preceding the Scheduled Redemption Date. | ||
Settlement Date: |
For any Option, the later of (x) the date one Settlement Cycle immediately following the last Valid Day of the Settlement Averaging Period for such Option and (y) the Convertible Note Settlement Date. | |
Settlement Currency: |
USD | |
Other Applicable Provisions: |
The provisions of Sections 9.1(c), 9.8, 9.9, 9.11 and 9.12 of the Equity Definitions will be applicable to Net Share Settlement or Combination Settlement as if Physical Settlement applied to the Transaction. | |
Representation and Agreement: |
Notwithstanding anything to the contrary in the Equity Definitions (including, but not limited to, Section 9.11 thereof), the parties acknowledge that (i) any Shares delivered to Counterparty shall be, upon delivery, subject to restrictions and limitations arising from Counterpartys status as Issuer of the Shares under applicable securities laws, (ii) Dealer may deliver any Shares required to be delivered hereunder in certificated form in lieu of delivery through the Clearance System and (iii) any Shares delivered to Counterparty may be restricted securities (as defined in Rule 144 under the Securities Act of 1933, as amended (the Securities Act )). | |
3. Additional Terms applicable to the Transaction. |
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Adjustments applicable to the Transaction: |
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Potential Adjustment Events: |
Notwithstanding Section 11.2(e) of the Equity Definitions, a Potential Adjustment Event means an occurrence of any event or condition, as set forth in any Dilution Adjustment Provision, that would result in an adjustment under the Indenture to the Conversion Rate or the composition of a unit of Reference Property or to any Closing Sale Price, Daily VWAP, Daily Conversion Value or Daily Settlement Amount (each as such term is defined in the Indenture). For the avoidance of doubt, Dealer shall not have any delivery or payment obligation hereunder, and no adjustment shall be made to the terms of the Transaction, on account of (x) any distribution of cash, property or securities by Counterparty to holders of the Convertible Notes (upon conversion or otherwise) or (y) any other transaction in |
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which holders of the Convertible Notes are entitled to participate, in each case, in lieu of an adjustment under the Indenture of the type referred to in the immediately preceding sentence (including, without limitation, pursuant to the third sentence of Section 10.06(c) of the Indenture or the third sentence of Section 10.06(d) of the Indenture). | ||
Method of Adjustment: |
Calculation Agent Adjustment, which means that, notwithstanding Section 11.2(c) of the Equity Definitions, upon any Potential Adjustment Event, the Calculation Agent shall adjust any one or more of the Strike Price, Number of Options, Option Entitlement, the composition of the Shares and any other variable relevant to the exercise, settlement or payment for the Transaction as determined pursuant to the corresponding adjustment under the Indenture; provided that, notwithstanding the foregoing, if the Calculation Agent in good faith disagrees with any adjustment pursuant to the terms and provisions of the Indenture that is the basis of any calculation or adjustment herein and that involves an exercise of discretion by Counterparty or its board of directors (including, without limitation, pursuant to Section 10.08 of the Indenture or any supplemental indenture entered into pursuant to Section 9.01(i) of the Indenture or in connection with any proportional adjustment or the determination of the fair value of any securities, property, rights or other assets), then in each such case, the Calculation Agent will determine the adjustment to be made to any one or more of the composition of the Shares, Strike Price, Number of Options, Option Entitlement and any other variable relevant to the exercise, settlement or payment for the Transaction in a commercially reasonable manner; provided further that, notwithstanding the foregoing, if any Potential Adjustment Event occurs during the Settlement Averaging Period but no adjustment was made under or to any Convertible Note under the Indenture because the relevant Holder (as such term is defined in the Indenture) was deemed to be a record owner of the underlying Shares on the related Conversion Date, then the Calculation Agent shall make an adjustment, consistent with the methodology set forth in the Indenture, to the terms hereof in order to account for such Potential Adjustment Event. | |
Dilution Adjustment Provisions: |
Sections 10.06(a), 10.06(b), 10.06(c), 10.06(d), 10.06(e) and Section 10.08 of the Indenture. | |
Extraordinary Events applicable to the Transaction: |
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Merger Events: |
Applicable; provided that notwithstanding Section 12.1(b) of the Equity Definitions, a Merger Event means the occurrence of any event or condition set forth in the definition of Merger Event in Section 10.11 of the Indenture. |
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Tender Offers: |
Applicable; provided that notwithstanding Section 12.1(d) of the Equity Definitions, a Tender Offer means the occurrence of any event or condition set forth in Section 10.06(e) of the Indenture. | |
Consequence of Merger Events / Tender Offers: |
Notwithstanding Section 12.2 and Section 12.3 of the Equity Definitions, upon the occurrence of a Merger Event or a Tender Offer, the Calculation Agent shall make a corresponding adjustment in respect of any adjustment under the Indenture to any one or more of the nature of the Shares (in the case of a Merger Event), Strike Price, Number of Options, Option Entitlement and any other variable relevant to the exercise, settlement or payment for the Transaction to account for the economic effect of the event on the Transaction, provided, however , that such adjustment shall be made without regard to any adjustment to the Conversion Rate (as such term is defined in the Indenture) pursuant to any Excluded Provision, subject to the provisions set forth under Make-Whole Adjustment under Section 2 above, provided further that, notwithstanding the foregoing, if the Calculation Agent in good faith disagrees with any adjustment pursuant to the terms and provisions of the Indenture that is the basis of any calculation or adjustment herein and that involves an exercise of discretion by Counterparty or its board of directors (including, without limitation, pursuant to 9.01(i) of the Indenture), then the Calculation Agent will determine the adjustment to be made to any one or more of the nature of the Shares, Strike Price, Number of Options, Option Entitlement and any other variable relevant to the exercise, settlement or payment for the Transaction in a commercially reasonable manner; provided further that if, with respect to a Merger Event or a Tender Offer, (i) the consideration for the Shares includes (or, at the option of a holder of Shares, may include) shares of an entity or person that is not a corporation or is not organized under the laws of the United States, any State thereof or the District of Columbia or (ii) the counterparty to the Transaction following such Merger Event or Tender Offer will not be a corporation or will not be the Issuer following such Merger Event or Tender Offer, then Dealer, in its commercially reasonable discretion, may elect for Cancellation and Payment (Calculation Agent Determination) to apply. | |
Nationalization, Insolvency or Delisting: |
Cancellation and Payment (Calculation Agent Determination); provided that, 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 NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately |
12
re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors), such exchange or quotation system shall thereafter be deemed to be the Exchange. | ||
Additional Disruption Events: |
||
Change in Law: |
Applicable; provided that (i) Section 12.9(a)(ii) of the Equity Definitions is hereby amended by replacing the parenthetical beginning after the word regulation in the second line thereof with the words (including, for the avoidance of doubt and without limitation, (x) any tax law or (y) adoption or promulgation of new regulations authorized or mandated by existing statute), and (ii) Section 12.9(a)(ii)(X) of the Equity Definitions is hereby amended by replacing the word Shares with the phrase Hedge Positions. | |
Failure to Deliver: |
Applicable | |
Hedging Disruption: |
Applicable; provided that: | |
(i) Section 12.9(a)(v) of the Equity Definitions is hereby amended by (a) inserting the following words at the end of clause (A) thereof: in the manner contemplated by the Hedging Party on the Trade Date and (b) inserting the following two phrases at the end of such Section: |
||
For the avoidance of doubt, the term equity price risk shall be deemed to include, but shall not be limited to, stock price and volatility risk. And, for the further avoidance of doubt, any such transactions or assets referred to in phrases (A) or (B) above must be available on commercially reasonable pricing terms.; and |
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(ii) Section 12.9(b)(iii) of the Equity Definitions is hereby amended by inserting in the third line thereof, after the words to terminate the Transaction, the words or a portion of the Transaction affected by such Hedging Disruption. |
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Increased Cost of Hedging: |
Applicable | |
Hedging Party: |
For all applicable Additional Disruption Events, Dealer. | |
Determining Party: |
For all applicable Extraordinary Events, Dealer. For the avoidance of doubt, whenever the Determining Party is called upon to determine an amount or make an adjustment pursuant to the terms of this Confirmation or the Equity Definitions to take into account the effect of an event the Determining Party shall make such adjustment or determination by reference to the effect of such event, assuming that the Dealer maintains a commercially reasonable hedge position. |
13
To: |
Groupon, Inc. | |
600 West Chicago Avenue, Suite 400 | ||
Chicago, Illinois 60654 |
14
Attention: |
General Counsel | |
Telephone No.: |
[ ] | |
Email: |
[ ] | |
(b) Address for notices or communications to Dealer: |
||
To: |
[ ] | |
Attention: |
[ ] | |
Telephone No.: |
[ ] | |
Facsimile: |
[ ] | |
Email: |
[ ] |
8. Representations and Warranties of Counterparty . |
||
Counterparty hereby represents and warrants to Dealer that each of the representations and warranties of Counterparty set forth in Section 3.01 of the Investment Agreement (the Investment Agreement ), dated as of April 3, 2016, between Counterparty and A-G Holdings, L.P., is true and correct and is hereby deemed to be repeated to Dealer as if set forth herein, provided that any such representation or warranty that is made as of a specific date is true and correct as of such date. Counterparty hereby further represents and warrants to Dealer on the date hereof, on and as of the Premium Payment Date and, in the case of the representation in Section 8(f), on any date on which Counterparty delivers a Notice of Early Redemption, that: |
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(a) |
Counterparty has all necessary corporate power and authority to execute, deliver and perform its obligations in respect of the Transaction; such execution, delivery and performance have been duly authorized by all necessary corporate action on Counterpartys part; and this Confirmation has been duly and validly executed and delivered by Counterparty and constitutes its valid and binding obligation, enforceable against Counterparty in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except that rights to indemnification and contribution hereunder may be limited by federal or state securities laws or public policy relating thereto. | |
(b) |
Neither the execution and delivery of this Confirmation nor the incurrence or performance of obligations of Counterparty hereunder will conflict with or result in a breach of the certificate of incorporation or by-laws (or any equivalent documents) of Counterparty, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any material agreement or instrument to which Counterparty or any of its subsidiaries is a party or by which Counterparty or any of its subsidiaries is bound or to which Counterparty or any of its subsidiaries is subject, or constitute a default under, or result in the creation of any lien under, any such material agreement or instrument. | |
(c) |
No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required in connection with the execution, delivery or performance by Counterparty of this Confirmation, except such as have been obtained or made and such as may be required under the Securities Act or state securities laws. | |
(d) |
Counterparty is not and, after consummation of the transactions contemplated hereby, will not be required to register as an investment company as such term is defined in the Investment Company Act of 1940, as amended. | |
(e) |
Counterparty is an eligible contract participant (as such term is defined in Section 1a(18) of the Commodity Exchange Act, as amended). |
15
(f) |
Counterparty and each of its affiliates is not, on the date of this representation, in possession of any material non-public information with respect to Counterparty or the Shares. | |
(g) |
No state or local (including any non-U.S. jurisdictions) law, rule, regulation or regulatory order applicable to the Shares would give rise to any reporting, consent, registration or other requirement (including without limitation a requirement to obtain prior approval from any person or entity) as a result of Dealer or its affiliates owning or holding (however defined) Shares. | |
(h) |
Counterparty (A) is capable of evaluating investment risks independently, both in general and with regard to all transactions and investment strategies involving a security or securities, (B) will exercise independent judgment in evaluating the recommendations of any broker-dealer or its associated persons, unless it has otherwise notified the broker-dealer in writing and (C) has total assets of at least $50 million. | |
(i) |
Without limiting the generality of Section 13.1 of the Equity Definitions, Counterparty acknowledges that Dealer is not making any representations or warranties or taking any position or expressing any view with respect to the treatment of the Transaction under any accounting standards including ASC Topic 260, Earnings Per Share, ASC Topic 815, Derivatives and Hedging, or ASC Topic 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging Contracts in Entitys Own Equity (or any successor issue statements) or under FASBs Liabilities & Equity Project. | |
(j) |
On each of the Trade Date and the Premium Payment Date, Counterparty is not, and will not be, insolvent (as such term is defined under Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States Code) (the Bankruptcy Code )) and Counterparty would be able to purchase 46,296,296 Shares in compliance with the corporate laws of the jurisdiction of its incorporation. | |
(k) |
Counterparty 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(a)(2) thereof. Accordingly, Counterparty represents and warrants to Dealer 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, (iii) it is entering into the Transaction for its own account and without a view to the distribution or resale thereof and (iv) the assignment, transfer or other disposition of the Transaction has not been and will not be registered under the Securities Act and is restricted under this Confirmation, the Securities Act and state securities laws. | |
(l) |
Counterparty represents and warrants that it has received, read and understands the OTC Options Risk Disclosure Statement and a copy of the most recent disclosure pamphlet prepared by The Options Clearing Corporation entitled Characteristics and Risks of Standardized Options. | |
(m) |
Counterparty acknowledges its responsibilities under federal securities laws, and in particular Sections 9 and 10(b) of the Exchange Act and the rules and regulations thereunder, in respect of this Transaction and the Convertible Notes, including, without limitation, with respect to any exercise or redemption hereunder or thereunder. | |
9. Other Provisions . |
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(a) |
Opinions . Counterparty shall deliver to Dealer on the Premium Payment Date an opinion of counsel, dated as of such date, with respect to the matters set forth in Sections 8(a) through (c) of this Confirmation (subject to customary exceptions and qualifications). Delivery of such opinion to Dealer shall be a condition precedent for the purpose of Section 2(a)(iii) of the Agreement with respect to each obligation of Dealer under Section 2(a)(i) of the Agreement. | |
(b) |
Conversion Rate Adjustment and Repurchase Notices . Counterparty shall, on any day on which Counterparty effects any repurchase of Shares or consummates or otherwise executes or engages in any transaction or event (a Conversion Rate Adjustment Event ) that would lead to an |
16
increase in the Conversion Rate (as such term is defined in and determined with reference to the Indenture), promptly give Dealer a written notice of such repurchase or Conversion Rate Adjustment Event (a Repurchase Notice ) on such day if following such repurchase or Conversion Rate Adjustment Event, as the case may be, the number of outstanding Shares as determined on such day is (i) less than 518.8 million (in the case of the first such notice) or (ii) thereafter more than 106.8 million less than the number of Shares included in the immediately preceding Repurchase Notice. Counterparty agrees to indemnify and hold harmless Dealer and its affiliates and their respective officers, directors, employees, affiliates, advisors, agents and controlling persons (each, an Indemnified Person ) from and against any and all losses (including losses relating to Dealers hedging activities as a consequence of becoming, or of the risk of becoming, a Section 16 insider, including without limitation, any forbearance from hedging activities or cessation of hedging activities and any losses in connection therewith with respect to the Transaction), claims, damages, judgments, liabilities and expenses (including reasonable attorneys fees), joint or several, to which an Indemnified Person may become subject, as a result of Counterpartys failure to provide Dealer with a Repurchase Notice on the day and in the manner specified in this paragraph, and to reimburse, within 30 days, upon written request, each of such Indemnified Persons for any reasonable legal or other expenses incurred in connection with investigating, preparing for, providing testimony or other evidence in connection with or defending any of the foregoing, provided that Counterparty shall have no obligations under this Section 9(b) for the fraud, willful misconduct or gross negligence of any Indemnified Person. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against the Indemnified Person as a result of Counterpartys failure to provide Dealer with a Repurchase Notice in accordance with this paragraph, such Indemnified Person shall promptly notify Counterparty in writing, and Counterparty, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others Counterparty may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding. Counterparty shall not be liable for any settlement of any proceeding contemplated by this paragraph that is effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, Counterparty agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Counterparty shall not, without the prior written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding contemplated by this paragraph that is in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such proceeding on terms reasonably satisfactory to such Indemnified Person. If the indemnification provided for in this paragraph is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then Counterparty hereunder, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities. The remedies provided for in this paragraph (b) are not exclusive and shall not limit any rights or remedies that may otherwise be available to any Indemnified Person at law or in equity. The indemnity and contribution agreements contained in this paragraph shall remain operative and in full force and effect regardless of the termination of the Transaction. Dealer shall not have the right to set off any indemnification or contribution amount due from Counterparty under this Section 9(b), against any obligation of Dealer to Counterparty under the Transaction. | ||
(c) |
Regulation M . Counterparty is not on the Trade Date engaged in a distribution, as such term is used in Regulation M under the Exchange Act, of any securities of Counterparty, other than a distribution meeting the requirements of the exception set forth in Rules 101(b)(10) and 102(b)(7) of Regulation M. Counterparty shall not, until the second Scheduled Trading Day immediately following the Premium Payment Date, engage in any such distribution. | |
(d) |
No Manipulation . Counterparty is not entering into the Transaction to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for the Shares) or otherwise in violation of the Exchange Act. |
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(e) |
Transfer or Assignment . | |||||
(i) | Counterparty shall have the right to transfer or assign its rights and obligations hereunder with respect to all, but not less than all, of the Options hereunder (such Options, the Transfer Options ); provided that such transfer or assignment shall be subject to reasonable conditions that Dealer may impose, including but not limited, to the following conditions: | |||||
(A) | With respect to any Transfer Options, Counterparty shall not be released from its notice and indemnification obligations pursuant to Section 9(b) or any obligations under Section 9(m) or 9(r) of this Confirmation; | |||||
(B) | Any Transfer Options shall only be transferred or assigned to a third party that is a United States person (as defined in the Internal Revenue Code of 1986, as amended); | |||||
(C) | Such transfer or assignment shall be effected on terms, including any reasonable undertakings by such third party (including, but not limited to, an undertaking with respect to compliance with applicable securities laws in a manner that, in the reasonable judgment of Dealer, will not expose Dealer to material risks under applicable securities laws) and execution of any documentation and delivery of legal opinions with respect to securities laws and other matters by such third party and Counterparty, as are reasonably requested and reasonably satisfactory to Dealer; | |||||
(D) | Dealer will not, as a result of such transfer and assignment, be required to pay the transferee on any payment date an amount under Section 2(d)(i)(4) of the Agreement greater than an amount that Dealer would have been required to pay to Counterparty in the absence of such transfer and assignment; | |||||
(E) | An Event of Default, Potential Event of Default or Termination Event will not occur as a result of such transfer and assignment; | |||||
(F) | Without limiting the generality of clause (B), Counterparty shall cause the transferee to make such Payee Tax Representations and to provide such tax documentation as may be reasonably requested by Dealer to permit Dealer to determine that results described in clauses (D) and (E) will not occur upon or after such transfer and assignment; and | |||||
(G) | Counterparty shall be responsible for all commercially reasonable out-of-pocket costs and expenses, including commercially reasonable counsel fees, incurred by Dealer in connection with such transfer or assignment. | |||||
(ii) | Dealer may, without Counterpartys consent, transfer or assign all or any part of its rights or obligations under the Transaction (A) to any affiliate of Dealer (1) that has a rating for its long term, unsecured and unsubordinated indebtedness that is equal to or better than Dealers credit rating at the time of such transfer or assignment, or (2) whose obligations hereunder will be guaranteed, pursuant to the terms of a customary guarantee in a form used by Dealer generally for similar transactions, by Dealer or [ ], or (B) to any other third party with a rating for its long term, unsecured and unsubordinated indebtedness equal to or better than BBB- by Standard and Poors Ratings Services or its successor ( S&P ), or Baa3 by Moodys Investors Service, Inc. ( Moodys ) or, if either S&P or Moodys ceases to rate such debt, at least an equivalent rating or better by a substitute rating agency mutually agreed by Counterparty and Dealer. If at any time at which (A) the Section 16 Percentage exceeds 7.5%, (B) the Option Equity Percentage exceeds |
18
14.5%, or (C) the Share Amount exceeds the Applicable Share Limit (if any applies) (any such condition described in clauses (A), (B) or (C), an Excess Ownership Position ), Dealer is unable after using its commercially reasonable efforts to effect a transfer or assignment of Options to a third party on pricing terms reasonably acceptable to Dealer and within a time period reasonably acceptable to Dealer such that (after giving effect to such transfer or assignment and any resulting change in Dealers commercially reasonable Hedge Positions) no Excess Ownership Position exists, then Dealer may designate any Exchange Business Day as an Early Termination Date with respect to a portion of the Transaction (the Terminated Portion ), such that following such partial termination (and giving effect to any resulting change in Dealers commercially reasonable Hedge Positions) no Excess Ownership Position exists. In the event that Dealer so designates an Early Termination Date with respect to a portion of the Transaction, a payment shall be made pursuant to Section 6 of the Agreement as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to the Transaction and a Number of Options equal to the number of Options underlying the Terminated Portion, (2) Counterparty were the sole Affected Party with respect to such partial termination and (3) the Terminated Portion were the sole Affected Transaction. The Section 16 Percentage as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the number of Shares that Dealer and each person subject to aggregation of Shares with Dealer and each group of which Dealer or such other person is a member or may be deemed a member, in each case under Section 13 or Section 16 of the Exchange Act and rules promulgated thereunder, directly or indirectly beneficially own (as defined under Section 13 or Section 16 of the Exchange Act and rules promulgated thereunder) and (B) the denominator of which is the number of Shares outstanding. The Option Equity Percentage as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the sum of (1) the product of the Number of Options and the Option Entitlement and (2) the aggregate number of Shares underlying any other call option transaction sold by Dealer to Counterparty, and (B) the denominator of which is the number of Shares outstanding. The Share Amount as of any day is the number of Shares that Dealer and any person whose ownership position would be aggregated with that of Dealer (Dealer or any such person, a Dealer Person ) under any law, rule, regulation, regulatory order or organizational documents or contracts of Counterparty that are, in each case, applicable to ownership of Shares ( Applicable Restrictions ), owns, beneficially owns, constructively owns, controls, holds the power to vote or otherwise meets a relevant definition of ownership under any Applicable Restriction, as determined by Dealer in its commercially reasonable discretion. The Applicable Share Limit means a number of Shares equal to (A) the minimum number of Shares that could give rise to reporting or registration obligations or other requirements (including obtaining prior approval from any person or entity) of a Dealer Person, or could result in an adverse effect on a Dealer Person, under any Applicable Restriction, as determined by Dealer in its commercially reasonable discretion, minus (B) 1% of the number of Shares outstanding. | ||||||
(iii) | 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, or make or receive any payment in cash, to or from Counterparty, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities, or to make or receive such payment in cash, and otherwise to perform Dealers obligations in respect of the 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. | |||||
(f) |
Staggered Settlement . Notwithstanding anything to the contrary herein, Dealer may, by prior notice to Counterparty, satisfy its obligation to deliver any Shares or other securities on any date due (an Original Delivery Date ) by making separate deliveries of Shares or such securities, as the case may be, at more than one time on or prior to such Original Delivery Date, so long as the aggregate number of Shares and other securities so delivered on or prior to such Original Delivery Date is equal to the number required to be delivered on such Original Delivery Date. |
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(g) |
[ Reserved .] | |||||
(h) |
Additional Termination Event . Notwithstanding anything to the contrary in this Confirmation, if an event of default with respect to Counterparty occurs under and determined with reference to the terms of the Convertible Notes as set forth in Section 6.01 of the Indenture, and the Convertible Notes have been declared due and payable as a result thereof and such declaration has not been rescinded pursuant to Section 6.02 of the Indenture, then such event of default shall constitute an Additional Termination Event applicable to the Transaction and, with respect to such Additional Termination Event, (A) Counterparty shall be deemed to be the sole Affected Party and (B) the Transaction shall be the sole Affected Transaction. | |||||
(i) |
Amendments to Equity Definitions . | |||||
(i) | Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (1) deleting from the fourth line thereof the word or after the word official and inserting a comma therefor, and (2) deleting the semi-colon at the end of subsection (B) thereof and inserting the following words therefor or (C) the occurrence of any of the events specified in Section 5(a)(vii)(1) through (9) of the ISDA Master Agreement with respect to that Issuer. | |||||
(ii) | Section 12.9(b)(i) of the Equity Definitions is hereby amended by (1) replacing either party may elect with Dealer may elect and (2) replacing notice to the other party with notice to Counterparty in the first sentence of such section. |
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Share Termination Delivery Property: | A number of Share Termination Delivery Units, as calculated by the Calculation Agent, equal to the Payment Obligation divided by the Share Termination Unit Price. The Calculation Agent shall adjust the Share Termination Delivery Property by replacing any fractional portion of a security therein with an amount of cash equal to the value of such fractional security based on the values used to calculate the Share Termination Unit Price. | |||||
Share Termination Unit Price: | The value of property contained in one Share Termination Delivery Unit, as determined by the Calculation Agent in its discretion by commercially reasonable means and notified by the Calculation Agent to Dealer at the time of notification of the Payment Obligation. For the avoidance of doubt, the parties agree that in determining the Share Termination Unit Price the Calculation Agent may consider the purchase price paid in connection with the purchase of Share Termination Delivery Property, to the extent doing so results in a commercially reasonable Share Termination Unit Price. | |||||
Share Termination Delivery Unit: | One Share or, if a Nationalization, Insolvency or Merger Event has occurred and a corresponding adjustment to the Transaction has been made, a unit consisting of the type and amount of such property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional amounts of any securities) in such Nationalization, Insolvency or Merger Event, as determined by the Calculation Agent. | |||||
Failure to Deliver: | Applicable | |||||
Other applicable provisions: | If Share Termination Alternative is applicable, the provisions of Sections 9.8, 9.9 and 9.11 (as modified above) of the Equity Definitions will be applicable as if Physical Settlement applied to the Transaction and the provisions set forth opposite the caption Representation and Agreement in Section 2 will be applicable. |
(l) |
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 the Transaction. Each party (i) certifies that no representative, agent or attorney of either 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 the Transaction, as applicable, by, among other things, the mutual waivers and certifications provided herein. | |||||
(m) |
Registration . Counterparty hereby agrees that if, in the good faith reasonable judgment of Dealer based on the advice of counsel, the Shares ( Hedge Shares ) acquired by Dealer for the purpose |
21
of effecting a commercially reasonable hedge of its obligations pursuant to the Transaction cannot be sold in the public market by Dealer without registration under the Securities Act, Counterparty shall, at its election, either (i) in order to allow Dealer to sell the Hedge Shares in a registered offering, make available to Dealer an effective registration statement under the Securities Act and enter into an agreement, in form and substance satisfactory to Dealer, substantially in the form of an underwriting agreement for a registered secondary offering; provided, however , that if Dealer, 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 paragraph shall apply at the election of Counterparty, (ii) in order to allow Dealer to sell the Hedge Shares in a private placement, enter into a private placement agreement, and use best efforts to include therein representations and other provisions customary for private placements of equity securities of similar size, in form and substance commercially reasonably satisfactory to Dealer (in which case, the Calculation Agent shall make any adjustments to the terms of the Transaction that are necessary, in its commercially reasonable judgment, to compensate Dealer 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 Dealer at the Relevant Price on such Exchange Business Days, and in the amounts, requested by Dealer. | ||||||
(n) |
Tax Disclosure . 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. | |||||
(o) |
Right to Extend . Dealer may postpone or add, in whole or in part, any Valid Day or Valid Days during the Settlement Averaging Period or any other date of valuation, payment or delivery by Dealer, with respect to some or all of the Options hereunder, if Dealer determines, in its commercially reasonable discretion, that such action is reasonably necessary or appropriate to preserve Dealers commercially reasonable hedging or hedge unwind activity hereunder in light of existing liquidity conditions or to enable Dealer to effect transactions in Shares in connection with its commercially reasonable hedging, hedge unwind or settlement activity hereunder in a manner that would, if Dealer were Counterparty or an affiliated purchaser of Counterparty, be in compliance with applicable legal, regulatory or self-regulatory requirements, or with related policies and procedures applicable to Dealer. | |||||
(p) |
Status of Claims in Bankruptcy . Dealer acknowledges and agrees that this Confirmation is not intended to convey to Dealer rights against Counterparty with respect to the Transaction that are senior to the claims of common stockholders of Counterparty in any United States bankruptcy proceedings of Counterparty; provided that nothing herein shall limit or shall be deemed to limit Dealers right to pursue remedies in the event of a breach by Counterparty of its obligations and agreements with respect to the Transaction other than during any such bankruptcy proceedings; provided further that nothing herein shall limit or shall be deemed to limit Dealers rights in respect of any transactions other than the Transaction. | |||||
(q) |
Securities Contract; Swap Agreement . The parties hereto intend for (i) the Transaction to be a securities contract and a swap agreement as defined in the Bankruptcy Code, and the parties hereto to be entitled to the protections afforded by, among other Sections, Sections 362(b)(6), 362(b)(17), 546(e), 546(g) 555 and 560 of the Bankruptcy Code, (ii) a partys right to liquidate the 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 described in the Bankruptcy Code, and (iii) each payment and delivery of cash, securities or other property hereunder to constitute a margin payment or settlement payment and a transfer as defined in the Bankruptcy Code. | |||||
(r) |
Notice of Certain Other Events . Counterparty covenants and agrees that: |
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(i) | promptly following the public announcement of the results of any election by the holders of Shares with respect to the consideration due upon consummation of any Merger Event, Counterparty shall give Dealer written notice of the weighted average of the types and amounts of consideration received by the holders of Shares that affirmatively makes such an election (or, if no holders of Shares affirmatively make such an election, the types and amounts of consideration actually received by the holders of the Shares) (the date of such notification, the Consideration Notification Date ); provided that in no event shall the Consideration Notification Date be later than the date on which such Merger Event is consummated; and | |||||
(ii) | promptly following any adjustment to the terms of the Convertible Notes as set forth in the Indenture (used as reference herein) in connection with any Potential Adjustment Event, Merger Event or Tender Offer, Counterparty shall give Dealer written notice of the details of such adjustment. | |||||
(s) |
Wall Street Transparency and Accountability Act . In connection with Section 739 of the Wall Street Transparency and Accountability Act of 2010 ( WSTAA ), the parties hereby agree that neither the enactment of WSTAA or any regulation under the WSTAA, nor any requirement under WSTAA or an amendment made by WSTAA, shall limit or otherwise impair either partys otherwise applicable rights to terminate, renegotiate, modify, amend or supplement this Confirmation or the Agreement, as applicable, arising from a termination event, force majeure, illegality, increased costs, regulatory change or similar event under this Confirmation, the Equity Definitions incorporated herein, or the Agreement (including, but not limited to, rights arising from Change in Law, Hedging Disruption, Increased Cost of Hedging, an Excess Ownership Position, or Illegality (as defined in the Agreement)). | |||||
(t) |
Agreements and Acknowledgements Regarding Hedging . Counterparty understands, acknowledges and agrees that: (A) at any time on and prior to the Expiration Date, Dealer and its affiliates may buy or sell Shares or other securities or buy or sell options or futures contracts or enter into swaps or other derivative securities in order to adjust its hedge position with respect to the Transaction, (B) Dealer and its affiliates also may be active in the market for Shares other than in connection with hedging activities in relation to the Transaction, (C) Dealer shall make its own determination as to whether, when or in what manner any hedging or market activities in securities of Issuer shall be conducted and shall do so in a manner that it deems appropriate to hedge its price and market risk with respect to the Relevant Prices and (D) any market activities of Dealer and its affiliates with respect to Shares may affect the market price and volatility of Shares, as well as the Relevant Prices, each in a manner that may be adverse to Counterparty. | |||||
(u) |
Early Unwind . In the event Counterparty fails to deliver to Dealer opinions of counsel as required pursuant to Section 9(a) by 5:00 p.m. (New York City time) on the Premium Payment Date, or such later date as agreed upon by the parties (the Premium Payment Date or such later date, the Early Unwind Date ), the Transaction shall automatically terminate (the Early Unwind ) on the Early Unwind Date and (i) the Transaction and all of the respective rights and obligations of Dealer and Counterparty under the Transaction shall be cancelled and terminated and (ii) each party shall be released and discharged by the other party from and agrees not to make any claim against the other party with respect to any obligations or liabilities of the other party arising out of and to be performed in connection with the Transaction either prior to or after the Early Unwind Date. Each of Dealer and Counterparty represents and acknowledges to the other that, upon an Early Unwind, all obligations with respect to the Transaction shall be deemed fully and finally discharged. | |||||
(v) |
Payment by Counterparty . In the event that, following payment of the Premium, (i) an Early Termination Date occurs or is designated with respect to the Transaction as a result of a Termination Event or an Event of Default (other than an Event of Default arising under Section 5(a)(ii) or 5(a)(iv) of the Agreement) and, as a result, Counterparty owes to Dealer an amount calculated under Section 6(e) of the Agreement, or (ii) Counterparty owes to Dealer, pursuant to Section 12.7 or Section 12.9 of the Equity Definitions, an amount calculated under Section 12.8 of the Equity Definitions, such amount shall be deemed to be zero. |
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(w) |
Tax Matters . | |||||
(i) | Withholding Tax imposed on payments to non-US counterparties under the United States Foreign Account Tax Compliance Act . Tax and Indemnifiable Tax, each as defined in Section 14 of the Agreement, shall not include any U.S. federal withholding tax imposed or collected pursuant to Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended (the Code ), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code (a FATCA Withholding Tax ). For the avoidance of doubt, a FATCA Withholding Tax is a Tax the deduction or withholding of which is required by applicable law for the purposes of Section 2(d) of the Agreement. | |||||
(ii) | HIRE Act . Tax and Indemnifiable Tax, each as defined in Section 14 of the Agreement, shall not include any tax imposed on payments treated as dividends from sources within the United States under Section 871(m) of the Code or any regulations issued thereunder. | |||||
(iii) | Tax documentation . For the purpose of Section 4(a)(i) of the Agreement, Counterparty shall provide to Dealer a valid U.S. Internal Revenue Service Form W-9, or any successor thereto, (i) on or before the date of execution of this Confirmation and (ii) promptly upon learning that any such tax form previously provided by Counterparty has become obsolete or incorrect. Additionally, Counterparty shall, promptly upon request by Dealer, provide such other tax forms and documents reasonably requested by Dealer. | |||||
(iv) | Tax Representations . For the purpose of Section 3(f) of the Agreement, Counterparty is a corporation for U.S. federal income tax purposes and is organized under the laws of the State of Delaware. Counterparty is a U.S. person (as that term is used in section 1.1441-4(a)(3)(ii) of United States Treasury Regulations) for U.S. federal income tax purposes and an exempt recipient under Treasury Regulation Section 1.6049-4(c)(1)(ii). |
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Please confirm that the foregoing correctly sets forth the terms of the agreement between Dealer and Counterparty with respect to the Transaction, by manually signing this Confirmation or this page hereof as evidence of agreement to such terms and providing the other information requested herein and returning an executed copy to Dealer.
Yours faithfully, | ||
[DEALER] | ||
By: |
|
|
Name: | ||
Title: |
Accepted and confirmed
as of the Trade Date:
GROUPON, INC. | ||
By: |
|
|
Authorized Signatory | ||
Name: |
Exhibit 10.2
[Dealer]
[Address]
May 9, 2016
To: | Groupon, Inc. |
600 West Chicago Avenue, Suite 400
Chicago, Illinois 60654
Attention: Brian Stevens, Chief Accounting Officer
Telephone No.: [ ]
Email: [ ]
Re: | Warrants |
The purpose of this letter agreement (this Confirmation ) is to confirm the terms and conditions of the Warrants issued by Groupon, Inc. ( Company ) to [ ] ( Dealer ) as of the Trade Date specified below (the Transaction ). This letter agreement constitutes a Confirmation as referred to in the ISDA Master Agreement specified below. This Confirmation shall replace any previous agreements and serve as the final documentation for the Transaction.
The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the Equity Definitions ), as published by the International Swaps and Derivatives Association, Inc. ( ISDA ), are incorporated into this Confirmation. In the event of any inconsistency between the Equity Definitions and this Confirmation, this Confirmation shall govern.
Each party is hereby advised, and each such party acknowledges, that the other party has engaged in, or refrained from engaging in, substantial financial transactions and has taken other material actions in reliance upon the parties entry into the Transaction to which this Confirmation relates on the terms and conditions set forth below.
1. This Confirmation evidences a complete and binding agreement between Dealer and Company as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall supplement, form a part of, and be subject to an agreement in the form of the ISDA 2002 Master Agreement (the Agreement ) as if Dealer and Company had executed an agreement in such form (but without any Schedule except for the election of the laws of the State of New York as the governing law (without reference to choice of law doctrine)) on the Trade Date. In the event of any inconsistency between provisions of the Agreement and this Confirmation or the Equity Definitions, this Confirmation or the Equity Definitions, as the case may be, will prevail for the purpose of the Transaction to which this Confirmation relates. For the avoidance of doubt, except to the extent of an express conflict, the application of any provision of this Confirmation, the Agreement or the Equity Definitions shall not be construed to exclude or limit the application of any other provision of this Confirmation, the Agreement or the Equity Definitions. The parties hereby agree that no Transaction other than the Transaction to which this Confirmation relates shall be governed by the Agreement.
2. The Transaction is a Warrant Transaction, which shall be considered a Share Option Transaction for purposes of the Equity Definitions. The terms of the particular Transaction to which this Confirmation relates are as follows:
General Terms . |
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Trade Date: |
May 9, 2016 | |
Warrants: |
Equity call warrants, each giving the holder the right to purchase a number of Shares equal to the Warrant Entitlement at a price per Share equal to the Strike Price, subject to the terms set forth under the caption Settlement Terms below. For the purposes of the Equity Definitions, each reference to a Warrant herein shall be deemed to be a reference to a Call Option. | |
Warrant Style: |
European |
Seller: |
Company | |
Buyer: |
Dealer | |
Shares: |
The Class A common stock of Company, par value USD 0.0001 per Share (Exchange symbol GRPN) | |
Number of Warrants: |
[ ]. For the avoidance of doubt, the Number of Warrants shall be reduced by any Warrants exercised or deemed exercised hereunder. In no event will the Number of Warrants be less than zero. | |
Warrant Entitlement: |
One Share per Warrant | |
Strike Price: |
USD 8.50 | |
Notwithstanding anything to the contrary in the Agreement, this Confirmation or the Equity Definitions, in no event shall the Strike Price be subject to adjustment to the extent that, after giving effect to such adjustment, the Strike Price would be less than USD 3.29, except for any adjustment pursuant to the terms of this Confirmation and the Equity Definitions in connection with stock splits or similar changes to Companys capitalization. | ||
Premium: |
As separately agreed by the parties. | |
Premium Payment Date: |
As separately agreed by the parties. | |
Exchange: |
The NASDAQ Global Select Market | |
Related Exchange(s): |
All Exchanges | |
Procedures for Exercise . |
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Expiration Time: |
The Valuation Time | |
Expiration Dates: |
Each Scheduled Trading Day during the period from, and including, the First Expiration Date to, but excluding, the 40th Scheduled Trading Day following the First Expiration Date shall be an Expiration Date for a number of Warrants equal to the Daily Number of Warrants on such date; provided that, notwithstanding anything to the contrary in the Equity Definitions, if any such date is a Disrupted Day, the Calculation Agent shall (i) reduce the Daily Number of Warrants for which such date shall be an Expiration Date and shall designate a Scheduled Trading Day or Scheduled Trading Days following the last scheduled Expiration Date as the Expiration Date(s) for the remaining Daily Number of Warrants for the originally scheduled Expiration Date and (ii) if the Daily Number of Warrants for such Disrupted Day is not reduced to zero, determine the Settlement Price for such Disrupted Day based on transactions in the Shares on such Disrupted Day taking into account the nature and duration of such Market Disruption Event on such day; and provided further that if such Expiration Date has not occurred pursuant to this clause as of the |
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eighth Scheduled Trading Day following the last scheduled Expiration Date under the Transaction, the Calculation Agent shall have the right to declare such Scheduled Trading Day to be the final Expiration Date and the Calculation Agent shall determine its good faith estimate of the fair market value for the Shares as of the Valuation Time on that eighth Scheduled Trading Day or on any subsequent Scheduled Trading Day, as the Calculation Agent shall determine using commercially reasonable means. Any Scheduled Trading Day on which, as of the date hereof, the Exchange is scheduled to close prior to its normal close of trading shall be deemed not to be a Scheduled Trading Day; if a closure of the Exchange prior to its normal close of trading on any Scheduled Trading Day is scheduled following the date hereof, then such Scheduled Trading Day shall be deemed to be a Disrupted Day in full. | ||
First Expiration Date: |
July 1, 2022 (or if such day is not a Scheduled Trading Day, the next following Scheduled Trading Day), subject to Market Disruption Event below. | |
Daily Number of Warrants: |
For any Expiration Date, the Number of Warrants, divided by the remaining number of Expiration Dates (in each case as of the First Expiration Date), rounded down to the nearest whole number (with any remainder created by rounding added to the last scheduled Expiration Date), subject to adjustment pursuant to the provisos to Expiration Dates. | |
Automatic Exercise: |
Applicable; and means that for each Expiration Date, a number of Warrants equal to the Daily Number of Warrants for such Expiration Date will be deemed to be automatically exercised at the Expiration Time on such Expiration Date. | |
Market Disruption Event: |
Section 6.3(a) of the Equity Definitions is hereby amended by replacing clauses (ii) and (iii) in their entirety with (ii) an Exchange Disruption, (iii) an Early Closure or (iv) a Regulatory Disruption; in each case that the Calculation Agent determines is material. | |
Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the words Scheduled Closing Time in the fourth line thereof. | ||
Regulatory Disruption: |
Any event that Dealer, in its reasonable discretion, based on advice of counsel, determines makes it appropriate with regard to any legal, regulatory or self-regulatory requirements or related policies and procedures (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by Dealer), to refrain from or decrease any market activity in connection with its commercially reasonable hedge of the Transaction. Dealer shall notify Company as soon as reasonably practicable that a Regulatory Disruption has occurred and the Expiration Dates affected by it. |
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Valuation Terms . |
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Valuation Time: |
Scheduled Closing Time; provided that if the principal trading session is extended, the Calculation Agent shall determine the Valuation Time in its reasonable discretion. | |
Valuation Date: |
Each Exercise Date. | |
Settlement Terms . |
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Settlement Method: |
Net Share Settlement | |
Net Share Settlement: |
On the relevant Settlement Date, Company shall deliver to Dealer a number of Shares equal to the Share Delivery Quantity for such Settlement Date to the account specified herein free of payment through the Clearance System and Company shall pay to Dealer any Fractional Share Amount. Dealer shall be treated as the holder of record of such Shares at the time of delivery of such Shares or, if earlier, at 5:00 p.m. (New York City time) on such Settlement Date. | |
Share Delivery Quantity: |
For any Settlement Date, a number of Shares, as calculated by the Calculation Agent, equal to the Net Share Settlement Amount for such Settlement Date divided by the Settlement Price on the Valuation Date for such Settlement Date, rounded down to the nearest whole number. | |
Section 9.7 of the Equity Definitions is hereby amended by (i) replacing the words Number of Shares to be Delivered with the words Share Delivery Quantity in the second and third lines thereof and (ii) deleting the parenthetical in clause (a) thereof. | ||
Net Share Settlement Amount: |
For any Settlement Date, an amount equal to the product of (i) the number of Warrants exercised or deemed exercised on the relevant Exercise Date, (ii) the Strike Price Differential for the relevant Valuation Date and (iii) the Warrant Entitlement. | |
Settlement Price: |
For any Valuation Date, the per Share volume-weighted average price as displayed under the heading Bloomberg VWAP on Bloomberg page GRPN <equity> AQR (or any successor thereto) in respect of the period from the scheduled opening time of the Exchange to the Scheduled Closing Time on such Valuation Date (or if such volume-weighted average price is unavailable, the market value of one Share on such Valuation Date, as determined by the Calculation Agent). | |
Settlement Dates: |
As determined pursuant to Section 9.4 of the Equity Definitions, subject to Section 9(k)(i) hereof. |
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Tender Offer: |
Applicable; provided that Section 12.1(d) of the Equity Definitions is hereby amended by replacing the reference to outstanding voting shares in the fourth line thereof with outstanding Shares. | |
Share-for-Share: |
Modified Calculation Agent Adjustment | |
Share-for-Other: |
Modified Calculation Agent Adjustment | |
Share-for-Combined: |
Modified Calculation Agent Adjustment | |
Consequences of Announcement Events: |
Modified Calculation Agent Adjustment as set forth in Section 12.3(d) of the Equity Definitions; provided that, in respect of an Announcement Event, (x) references to Tender Offer shall be replaced by references to Announcement Event and references to Tender Offer Date shall be replaced by references to date of such Announcement Event, (y) the word shall in the second line shall be replaced with may and the fifth and sixth lines shall be deleted in their entirety and replaced with the words effect on the Warrants of such Announcement Event solely to account for changes in volatility, expected dividends, stock loan rate or liquidity relevant to the Shares or the Warrants, and (z) for the avoidance of doubt, the Calculation Agent may determine whether the relevant Announcement Event has had a material effect on the Transaction (and, if so, adjust the terms of the Transaction accordingly) on one or more occasions on or after the date of the Announcement Event up to, and including, the Expiration Date, any Early Termination Date and/or any other date of cancellation, it being understood that any adjustment in respect of an Announcement Event shall take into account any earlier adjustment relating to the same Announcement Event. An Announcement Event shall be an Extraordinary Event for purposes of the Equity Definitions, to which Article 12 of the Equity Definitions is applicable. | |
Announcement Event: |
(i) The public announcement by any entity of (x) any transaction or event that, if completed, would constitute a Merger Event or Tender Offer, (y) any potential acquisition by Issuer and/or its subsidiaries where the aggregate consideration exceeds 25% of the market capitalization of Issuer as of the date of such announcement (an Acquisition Transaction ) or (z) the intention to enter into a Merger Event or Tender Offer or an Acquisition Transaction, (ii) the public announcement by Issuer of an intention to solicit or enter into, or to explore strategic alternatives or other similar undertaking that may include, a Merger Event or Tender Offer or an Acquisition Transaction or (iii) any subsequent public announcement by any entity of a change to a transaction or intention that is the subject of an announcement of the type described in clause (i) or (ii) of this sentence (including, without limitation, a new announcement, whether or not by the same party, relating to such a transaction or intention or the announcement of a |
6
withdrawal from, or the abandonment or discontinuation of, such a transaction or intention), as determined by the Calculation Agent. For the avoidance of doubt, the occurrence of an Announcement Event with respect to any transaction or intention shall not preclude the occurrence of a later Announcement Event with respect to such transaction or intention. For purposes of this definition of Announcement Event, the remainder of the definition of Merger Event in Section 12.1(b) of the Equity Definitions following the definition of Reverse Merger therein shall be disregarded. | ||
Nationalization, Insolvency or Delisting: |
Cancellation and Payment (Calculation Agent Determination); provided that, 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 NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors), such exchange or quotation system shall thereafter be deemed to be the Exchange. | |
Additional Disruption Events: |
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Change in Law: |
Applicable; provided that (i) Section 12.9(a)(ii) of the Equity Definitions is hereby amended by replacing the parenthetical beginning after the word regulation in the second line thereof with the words (including, for the avoidance of doubt and without limitation, (x) any tax law or (y) adoption or promulgation of new regulations authorized or mandated by existing statute), and (ii) Section 12.9(a)(ii)(X) of the Equity Definitions is hereby amended by replacing the word Shares with the phrase Hedge Positions. | |
Failure to Deliver: |
Not Applicable | |
Insolvency Filing: |
Applicable | |
Hedging Disruption: |
Applicable; provided that: | |
(i) Section 12.9(a)(v) of the Equity Definitions is hereby amended by (a) inserting the following words at the end of clause (A) thereof: in the manner contemplated by the Hedging Party on the Trade Date and (b) inserting the following two phrases at the end of such Section: |
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For the avoidance of doubt, the term equity price risk shall be deemed to include, but shall not be limited to, stock price and volatility risk and, for the further avoidance of doubt, any such |
7
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9
incorporation or by-laws (or any equivalent documents) of Company, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any material agreement or instrument to which Company or any of its subsidiaries is a party or by which Company or any of its subsidiaries is bound or to which Company or any of its subsidiaries is subject, or constitute a default under, or result in the creation of any lien under, any such material agreement or instrument. |
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(c) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required in connection with the execution, delivery or performance by Company of this Confirmation, except such as have been obtained or made and such as may be required under the Securities Act of 1933, as amended (the Securities Act ) or state securities laws. |
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(d) A number of Shares equal to the Maximum Number of Shares (as defined below) (the Warrant Shares ) have been reserved for issuance by all required corporate action of Company. The Warrant Shares have been duly authorized and, when delivered against payment therefor (which may include Net Share Settlement in lieu of cash) and otherwise as contemplated by the terms of the Warrants following the exercise of the Warrants in accordance with the terms and conditions of the Warrants, will be validly issued, fully-paid and non-assessable, and the issuance of the Warrant Shares will not be subject to any preemptive or similar rights. |
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(e) Company is not and, after consummation of the transactions contemplated hereby, will not be required to register as an investment company as such term is defined in the Investment Company Act of 1940, as amended. |
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(f) Company is an eligible contract participant (as such term is defined in Section 1a(18) of the Commodity Exchange Act, as amended). |
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(g) Company and each of its affiliates is not, on the date hereof, in possession of any material non-public information with respect to Company or the Shares. |
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(h) No state or local (including any non-U.S. jurisdictions) law, rule, regulation or regulatory order applicable to the Shares would give rise to any reporting, consent, registration or other requirement (including without limitation a requirement to obtain prior approval from any person or entity) as a result of Dealer or its affiliates owning or holding (however defined) Shares. |
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(i) Company (A) is capable of evaluating investment risks independently, both in general and with regard to all transactions and investment strategies involving a security or securities; (B) will exercise independent judgment in evaluating the recommendations of any broker-dealer or its associated persons, unless it has otherwise notified the broker-dealer in writing; and (C) has total assets of at least $50 million. |
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(j) Without limiting the generality of Section 13.1 of the Equity Definitions, Company acknowledges that Dealer is not making any representations or warranties or taking any position or expressing any view with respect to the treatment of the Transaction under any accounting standards including ASC Topic 260, Earnings Per Share, ASC Topic 815, Derivatives and Hedging, or ASC Topic 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging Contracts in Entitys Own Equity (or any successor issue statements) or under FASBs Liabilities & Equity Project. |
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(k) (A) The assets of Company at their fair valuation exceed the liabilities of Company, including contingent liabilities, (B) the capital of Company is adequate to conduct the business of Company and (C) Company has the ability to pay its debts and obligations as such debts mature and does not intend to, or does not believe that it will, incur debt beyond its ability to pay as such debts mature. |
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(l) Company represents and warrants that it has received, read and understands the OTC Options Risk Disclosure Statement and a copy of the most recent disclosure pamphlet prepared by The Options Clearing Corporation entitled Characteristics and Risks of Standardized Options. |
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9. Other Provisions . |
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(a) Opinions . Company shall deliver to Dealer on the Premium Payment Date an opinion of counsel, dated as of such date, with respect to the matters set forth in Sections 8(a) through (d) of this Confirmation. Delivery of such opinion to Dealer shall be a condition precedent for the purpose of Section 2(a)(iii) of the Agreement with respect to each obligation of Dealer under Section 2(a)(i) of the Agreement. |
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(b) Repurchase Notices . Company shall, on any day on which Company effects any repurchase of Shares, promptly give Dealer a written notice of such repurchase (a Repurchase Notice ) on such day if following such repurchase, the number of outstanding Shares on such day, subject to any adjustments provided herein, is (i) less than 518.8 million (in the case of the first such notice) or (ii) thereafter more than 106.8 million less than the number of Shares included in the immediately preceding Repurchase Notice. Company agrees to indemnify and hold harmless Dealer and its affiliates and their respective officers, directors, employees, affiliates, advisors, agents and controlling persons (each, an Indemnified Person ) from and against any and all losses (including losses relating to Dealers hedging activities as a consequence of becoming, or of the risk of becoming, a Section 16 insider, including without limitation, any forbearance from hedging activities or cessation of hedging activities and any losses in connection therewith with respect to the Transaction), claims, damages, judgments, liabilities and expenses (including reasonable attorneys fees), joint or several, to which an Indemnified Person actually may become subject, as a result of Companys failure to provide Dealer with a Repurchase Notice on the day and in the manner specified in this paragraph, and to reimburse, within 30 days, upon written request, each of such Indemnified Persons for any reasonable legal or other expenses incurred in connection with investigating, preparing for, providing testimony or other evidence in connection with or defending any of the foregoing, provided that Company shall have no obligations under this Section 9(b) for the fraud, willful misconduct or gross negligence of any Indemnified Person. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against the Indemnified Person, such Indemnified Person shall promptly notify Company in writing, and Company, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others Company may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding. Company shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, Company agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Company shall not, without the prior written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such proceeding on terms reasonably satisfactory to such Indemnified Person. If the indemnification provided for in this paragraph is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then Company under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities. The remedies provided for in this paragraph are not exclusive and shall not limit any rights or remedies that may otherwise be available to any Indemnified Person at law or in equity. The indemnity and contribution agreements contained in this paragraph shall remain operative and in full force and effect regardless of the termination of the Transaction. Dealer shall not have the right to set off any indemnification or contribution amount due from Company under this Section 9(b), against any obligation of Dealer to Company under the Transaction. |
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(c) Regulation M . Company is not on the Trade Date and will not be during the period starting on the first Expiration Date and ending on the last 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 ), of any securities of Company, other than a distribution meeting the requirements of the |
11
exception set forth in Rules 101(b)(10) and 102(b)(7) of Regulation M. Company shall not, until the second Scheduled Trading Day immediately following the Premium Payment Date, engage in any such distribution. |
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(d) No Manipulation . Company is not entering into the Transaction to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for the Shares) or otherwise in violation of the Exchange Act. |
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(e) Transfer or Assignment . Company may not transfer any of its rights or obligations under the Transaction without the prior written consent of Dealer. Dealer may, without Companys consent, transfer or assign all or any part of its rights or obligations under the Transaction to any third party. If at any time at which (A) the Section 16 Percentage exceeds 7.5%, (B) the Warrant Equity Percentage exceeds 14.5%, or (C) the Share Amount exceeds the Applicable Share Limit (if any applies) (any such condition described in clauses (A), (B) or (C), an Excess Ownership Position ), Dealer is unable after using its commercially reasonable efforts to effect a transfer or assignment of Warrants to a third party on pricing terms reasonably acceptable to Dealer and within a time period reasonably acceptable to Dealer such that no Excess Ownership Position exists, then Dealer may designate any Exchange Business Day as an Early Termination Date with respect to a portion of the Transaction (the Terminated Portion ), such that following such partial termination no Excess Ownership Position exists. In the event that Dealer so designates an Early Termination Date with respect to a Terminated Portion, a payment shall be made pursuant to Section 6 of the Agreement as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to the Transaction and a Number of Warrants equal to the number of Warrants underlying the Terminated Portion, (2) Company were the sole Affected Party with respect to such partial termination and (3) the Terminated Portion were the sole Affected Transaction (and, for the avoidance of doubt, the provisions of Section 9(j) shall apply to any amount that is payable by Company to Dealer pursuant to this sentence as if Company were not the Affected Party). The Section 16 Percentage as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the number of Shares that Dealer and each person subject to aggregation of Shares with Dealer and each group of which Dealer or such other person is a member or may be deemed a member, in each case under Section 13 or Section 16 of the Exchange Act and rules promulgated thereunder, directly or indirectly beneficially own (as defined under Section 13 or Section 16 of the Exchange Act and rules promulgated thereunder) and (B) the denominator of which is the number of Shares outstanding. The Warrant Equity Percentage as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the sum of (1) the product of the Number of Warrants and the Warrant Entitlement and (2) the aggregate number of Shares underlying any other warrants purchased by Dealer from Company, and (B) the denominator of which is the number of Shares outstanding. The Share Amount as of any day is the number of Shares that Dealer and any person whose ownership position would be aggregated with that of Dealer (Dealer or any such person, a Dealer Person ) under any law, rule, regulation, regulatory order or organizational documents or contracts of Company that are, in each case, applicable to ownership of Shares ( Applicable Restrictions ), owns, beneficially owns, constructively owns, controls, holds the power to vote or otherwise meets a relevant definition of ownership under any Applicable Restriction, as determined by Dealer in its reasonable discretion. The Applicable Share Limit means a number of Shares equal to (A) the minimum number of Shares that could give rise to reporting or registration obligations or other requirements (including obtaining prior approval from any person or entity) of a Dealer Person, or could result in an adverse effect on a Dealer Person, under any Applicable Restriction, as determined by Dealer in its reasonable discretion, minus (B) 1% of the number of Shares outstanding. 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, or make or receive any payment in cash, to or from Company, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities, or make or receive such payment in cash, and otherwise to perform Dealers obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Company to the extent of any such performance. |
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(f) Dividends . If at any time during the period from and including the date that is one Settlement Cycle following the Trade Date, to and including the last Expiration Date, an ex-dividend date for a cash dividend or distribution (whether or not extraordinary) occurs with respect to the Shares (an Ex-Dividend Date ), then the Calculation Agent will adjust any of the Strike Price, Number of Warrants, Daily Number of Warrants and/or any other variable relevant to the exercise, settlement or payment of the Transaction as the Calculation Agent determines appropriate to account for the economic effect on the Transaction of such dividend. |
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(g) [ Reserved .] |
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(h) Additional Provisions . |
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(i) Amendments to the Equity Definitions: |
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(A) Section 11.2(a) of the Equity Definitions is hereby amended by deleting the words a diluting or concentrative and replacing them with the words a material economic; and adding the phrase or Warrants at the end of the sentence. |
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(B) Section 11.2(c) of the Equity Definitions is hereby amended by (w) replacing the words a diluting or concentrative with an in the fifth line thereof, (x) adding the phrase or Warrants after the words the relevant Shares in the same sentence, (y) deleting the words diluting or concentrative in the sixth to last line thereof and (z) deleting the phrase (provided that no adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares) and replacing it with the phrase (and, for the avoidance of doubt, adjustments may be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares); provided that no adjustment under Section 11.2(c) of the Equity Definitions shall accelerate Dealers ability to exercise the Warrants or extend the length of time in which the Warrants are exercisable on account of any event that is based on (a) an observable market, other than the market for Companys own stock or (b) an observable index, other than an index calculated or measured solely by reference to Companys own operations. |
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(C) Section 11.2(e)(vii) of the Equity Definitions is hereby amended by deleting the words a diluting or concentrative and replacing them with the words a material; and adding the phrase or Warrants at the end of the sentence. |
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(D) Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (1) deleting from the fourth line thereof the word or after the word official and inserting a comma therefor, and (2) deleting the semi-colon at the end of subsection (B) thereof and inserting the following words therefor or (C) the occurrence of any of the events specified in Section 5(a)(vii) (1) through (9) of the ISDA Master Agreement with respect to that Issuer. |
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(E) Section 12.9(b)(iv) of the Equity Definitions is hereby amended by: |
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(x) deleting (1) subsection (A) in its entirety, (2) the phrase or (B) following subsection (A) and (3) the phrase in each case in subsection (B); and |
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(y) replacing the phrase neither the Non-Hedging Party nor the Lending Party lends Shares with the phrase such Lending Party does not lend Shares in the penultimate sentence. |
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(F) Section 12.9(b)(v) of the Equity Definitions is hereby amended by: |
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(x) adding the word or immediately before subsection (B) and deleting the comma at the end of subsection (A); and |
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(y) (1) deleting subsection (C) in its entirety, (2) deleting the word or immediately preceding subsection (C), (3) deleting the penultimate sentence in its entirety and replacing it with the sentence The Hedging Party will determine the Cancellation Amount payable by one party to the other in a commercially reasonable manner. and (4) deleting clause (X) in the final sentence. |
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(ii) Notwithstanding anything to the contrary in this Confirmation, upon the occurrence of one of the following events, with respect to the Transaction, (1) Dealer shall have the right to designate such event an Additional Termination Event and designate an Early Termination Date pursuant to Section 6(b) of the Agreement, (2) Company shall be deemed the sole Affected Party with respect to such Additional Termination Event and (3) the Transaction shall be deemed the sole Affected Transaction ( provided that with respect to any such Additional Termination Event, Dealer may choose to treat part of the Transaction as the sole Affected Transaction, in which case the remainder of the Transaction shall continue in full force and effect): |
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(A) a person or group within the meaning of Section 13(d) of the Exchange Act, other than Company, its wholly owned subsidiaries and its and their employee benefit plans, has become the direct or indirect beneficial owner of more than 50% of (I) the Shares or (II) the voting power of the Companys common equity; |
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(B) the consummation of (I) any recapitalization, reclassification or change of the Shares (other than changes resulting from a subdivision or combination) as a result of which the Shares would be converted into, or exchanged for, stock, other securities, or other property or assets; (II) any share exchange, consolidation or merger of Company pursuant to which the Shares will be converted into cash, securities or other property or assets; or (III) any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of Company and its subsidiaries, taken as a whole, to any person other than one of Companys wholly owned subsidiaries; provided, however , that a transaction described in clause (II) in which the holders of the Shares immediately prior to such transaction own, directly or indirectly, more than 50% of all classes of common equity of the continuing or surviving corporation or transferee or the parent thereof immediately after such transaction in substantially the same proportions as such ownership immediately prior to such transaction shall not constitute an Additional Termination Event pursuant to this clause (B); |
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provided, however, that any transaction or transactions set forth in clause (A) or clause (B) above shall not constitute an Additional Termination Event if (x) 100% of the consideration received or to be received by holders of the Shares, excluding cash payments for fractional Shares, in connection with such transaction or transactions consists of shares of common stock that are listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective successors) or will be so listed or quoted when issued or exchanged in connection with such transaction or transactions, and (y) as a result of such transaction or transactions, the Shares will consist of such consideration, excluding cash payments for fractional Shares; |
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(C) Companys stockholders approve any plan or proposal for the liquidation or dissolution of Company; |
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Payment Obligation would otherwise be due pursuant to Section 12.7 or Section 12.9 of the Equity Definitions or Section 6(d)(ii) of the Agreement, as applicable, subject to Section 9(k)(i) below, in satisfaction, subject to Section 9(k)(ii) below, of the relevant Payment Obligation, in the manner reasonably requested by Dealer free of payment. | ||
Share Termination Delivery Property: |
A number of Share Termination Delivery Units, as calculated by the Calculation Agent, equal to the relevant Payment Obligation divided by the Share Termination Unit Price. The Calculation Agent shall adjust the amount of Share Termination Delivery Property by replacing any fractional portion of a security therein with an amount of cash equal to the value of such fractional security based on the values used to calculate the Share Termination Unit Price (without giving effect to any discount pursuant to Section 9(k)(i)). | |
Share Termination Unit Price: |
The value of property contained in one Share Termination Delivery Unit on the date such Share Termination Delivery Units are to be delivered as Share Termination Delivery Property, as determined by the Calculation Agent in its discretion by commercially reasonable means. In the case of a Private Placement of Share Termination Delivery Units that are Restricted Shares (as defined below), as set forth in Section 9(k)(i) below, the Share Termination Unit Price shall be determined by the discounted price applicable to such Share Termination Delivery Units. In the case of a Registration Settlement of Share Termination Delivery Units that are Restricted Shares (as defined below) as set forth in Section 9(k)(ii) below, notwithstanding the foregoing, the Share Termination Unit Price shall be the Settlement Price on the Merger Date, Tender Offer Date, Announcement Date (in the case of a Nationalization, Insolvency or Delisting), Early Termination Date or date of cancellation, as applicable. The Calculation Agent shall notify Company of the Share Termination Unit Price at the time of notification of such Payment Obligation to Company or, if applicable, at the time the discounted price applicable to the relevant Share Termination Units is determined pursuant to Section 9(k)(i). | |
Share Termination Delivery Unit: |
One Share or, if the Shares have changed into cash or any other property or the right to receive cash or any other property as the result of a Nationalization, Insolvency or Merger Event (any such cash or other property, the Exchange Property ), a unit consisting of the type and amount of Exchange Property received by each holder of one Share (without consideration of any requirement to pay |
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cash or other consideration in lieu of fractional amounts of any securities) in such Nationalization, Insolvency or Merger Event. If such Nationalization, Insolvency or Merger Event involves a choice of Exchange Property to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash. | ||
Failure to Deliver: | Inapplicable | |
Other applicable provisions: | If Share Termination Alternative is applicable, the provisions of Sections 9.8, 9.9, 9.11 and 9.12 (as modified above) of the Equity Definitions will be applicable as if Physical Settlement applied to the Transaction and the provisions set forth opposite the caption Representation and Agreement in Section 2 will be applicable. |
(k) Registration/Private Placement Procedures . If in the reasonable determination of Dealer, based on the advice of counsel, following any delivery of Shares or Share Termination Delivery Property to Dealer hereunder, such Shares or Share Termination Delivery Property would be in the hands of Dealer subject to any applicable restrictions, or any registration or qualification requirement or prospectus delivery requirement for such Shares or Share Termination Delivery Property, pursuant to any applicable federal or state securities law (including, without limitation, any such requirement arising under Section 5 of the Securities Act as a result of such Shares or Share Termination Delivery Property being subject to restrictions on resale under the Securities Act) (such Shares or Share Termination Delivery Property, Restricted Shares ), then delivery of such Restricted Shares shall be effected pursuant to either clause (i) or (ii) below at the election of Company, unless Dealer waives the need for registration/private placement procedures set forth in (i) and (ii) below. Notwithstanding the foregoing, solely in respect of any Daily Number of Warrants exercised or deemed exercised on any Expiration Date, Company shall elect, prior to the first Settlement Date for the first applicable Expiration Date, a Private Placement Settlement or Registration Settlement for all deliveries of Restricted Shares for all such Expiration Dates, which election shall be applicable to all remaining Settlement Dates for such Warrants and the procedures in clause (i) or clause (ii) below shall apply for all such delivered Restricted Shares on an aggregate basis commencing after the final Settlement Date for such Warrants. The Calculation Agent shall make reasonable adjustments to settlement terms and provisions under this Confirmation to reflect a single Private Placement or Registration Settlement for such aggregate Restricted Shares delivered hereunder. For the avoidance of doubt, these adjustments will only be commercially reasonable in nature (such as to consider changes in volatility, expected dividends, stock loan rate or liquidity relevant to the Shares and the ability to maintain a commercially reasonable hedge position in the Shares) and will not impact the Companys unilateral right to settle in Shares. |
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(i) If Company elects to settle the Transaction pursuant to this clause (i) (a Private Placement Settlement ), then delivery of Restricted Shares by Company shall be effected in customary private placement procedures with respect to such Restricted Shares commercially reasonably acceptable to Dealer; provided that Company may not elect a Private Placement Settlement if, on the date of its election, it has taken, or caused to be taken, any action that would make unavailable either the exemption pursuant to Section 4(a)(2) of the Securities Act for the sale by Company to Dealer (or any affiliate designated by Dealer) of the Restricted Shares or the exemption pursuant to Section 4(a)(1) or Section 4(a)(3) of the Securities Act for resales of the Restricted Shares by Dealer (or any such affiliate of Dealer). The Company shall use its best efforts to cause the Private Placement Settlement of such Restricted Shares to include customary representations, covenants, blue sky and other governmental filings and/or registrations, indemnities to Dealer, due diligence rights (for Dealer or any designated buyer of the |
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Restricted Shares by Dealer), opinions and certificates, and such other documentation as is customary for private placement agreements for private placements of similar size, all commercially reasonably acceptable to Dealer. In the case of a Private Placement Settlement, Dealer shall determine the appropriate discount to the Share Termination Unit Price (in the case of settlement of Share Termination Delivery Units pursuant to Section 9(j) above) or any Settlement Price (in the case of settlement of Shares pursuant to Section 2 above) applicable to such Restricted Shares in a commercially reasonable manner and appropriately adjust the number of such Restricted Shares to be delivered to Dealer hereunder, which discount shall only take into account the illiquidity resulting from the fact that the Restricted Shares will not be registered for resale and any commercially reasonable fees and expenses of Dealer (and any affiliate thereof) in connection with such resale. Notwithstanding anything to the contrary in the Agreement or this Confirmation, the date of delivery of such Restricted Shares shall be the Exchange Business Day following notice by Dealer to Company, of such applicable discount and the number of Restricted Shares to be delivered pursuant to this clause (i). For the avoidance of doubt, delivery of Restricted Shares shall be due as set forth in the previous sentence and not be due on the Share Termination Payment Date (in the case of settlement of Share Termination Delivery Units pursuant to Section 9(j) above) or on the Settlement Date for such Restricted Shares (in the case of settlement in Shares pursuant to Section 2 above). |
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(ii) If Company elects to settle the Transaction pursuant to this clause (ii) (a Registration Settlement ), then Company shall promptly (but in any event no later than the beginning of the Resale Period) file and use its reasonable best efforts to make effective under the Securities Act a registration statement or supplement or amend an outstanding registration statement in form and substance reasonably satisfactory to Dealer, to cover the resale of such Restricted Shares in accordance with customary resale registration procedures, including covenants, conditions, representations, commercially reasonable underwriting discounts (if applicable), commercially reasonable commissions (if applicable), indemnities, due diligence rights, opinions and certificates, and such other documentation as is customary for equity resale underwriting agreements for underwritten offerings of similar size, all commercially reasonably acceptable to Dealer. If Dealer, in its sole commercially reasonable discretion, is not satisfied with such procedures and documentation Private Placement Settlement shall apply. If Dealer is satisfied with such procedures and documentation, it shall sell the Restricted Shares pursuant to such registration statement during a period (the Resale Period ) commencing on the Exchange Business Day following delivery of such Restricted Shares (which, for the avoidance of doubt, shall be (x) the Share Termination Payment Date in case of settlement in Share Termination Delivery Units pursuant to Section 9(j) above or (y) the Settlement Date in respect of the final Expiration Date for all Daily Number of Warrants) and ending on the Exchange Business Day on which Dealer completes the sale of all Restricted Shares in a commercially reasonable manner or, in the case of settlement of Share Termination Delivery Units, a sufficient number of Restricted Shares so that the realized net proceeds of such sales equals or exceeds the Payment Obligation (as defined above). If the Payment Obligation exceeds the realized net proceeds from such resale, Company shall transfer to Dealer by the open of the regular trading session on the Exchange on the Exchange Business Day immediately following such resale the amount of such excess (the Additional Amount ) in cash or in a number of Shares ( Make-whole Shares ) in an amount that, based on the Settlement Price on such day (as if such day were the Valuation Date for purposes of computing such Settlement Price), has a dollar value equal to the Additional Amount. The Resale Period shall continue to enable the sale of the Make-whole Shares. If Company elects to pay the Additional Amount in Shares, the requirements and provisions for Registration Settlement shall apply. This provision shall be applied successively until the Additional Amount is equal to zero. In no event shall Company deliver a number of Restricted Shares greater than the Maximum Number of Shares. |
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(iii) If the Private Placement Settlement or the Registration Settlement shall not be effected as set forth in clauses (i) or (ii), as applicable, then failure to effect such Private Placement Settlement or such Registration Settlement shall constitute an Event of Default with respect to which Company shall be the Defaulting Party. |
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(l) Limit on Beneficial Ownership . Notwithstanding any other provisions hereof, Dealer may not exercise any Warrant hereunder or be entitled to take delivery of any Shares deliverable hereunder, and Automatic Exercise shall not apply with respect to any Warrant hereunder, to the extent (but only to the extent) that, after such receipt of any Shares upon the exercise of such Warrant or otherwise hereunder, (i) the Section 16 Percentage would exceed 7.5%, or (ii) the Share Amount would exceed the Applicable Share Limit. Any purported delivery hereunder shall be void and have no effect to the extent (but only to the extent) that, after such delivery, (i) the Section 16 Percentage would exceed 7.5%, or (ii) the Share Amount would exceed the Applicable Share Limit. If any delivery owed to Dealer hereunder is not made, in whole or in part, as a result of this provision, Companys obligation to make such delivery shall not be extinguished and Company shall make such delivery as promptly as practicable after, but in no event later than one Exchange Business Day after, Dealer gives notice to Company that, after such delivery, (i) the Section 16 Percentage would not exceed 7.5%, and (ii) the Share Amount would not exceed the Applicable Share Limit. |
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(m) Share Deliveries . Company acknowledges and agrees that, to the extent the holder of this Warrant is not then an affiliate and has not been an affiliate for 90 days (it being understood that Dealer will not be considered an affiliate under this paragraph solely by reason of its receipt of Shares pursuant to the Transaction), any Shares or Share Termination Delivery Property delivered hereunder at any time after 6 months from the Trade Date (or 1 year from the Trade Date if, at such time, informational requirements of Rule 144(c) are not satisfied with respect to Company) shall be eligible for resale without restriction under Rule 144 of the Securities Act and Company agrees to promptly remove, or cause the transfer agent for such Shares, Share Termination Delivery Property or Restricted Shares, to remove, any legends referring to any restrictions on resale under the Securities Act from any certificates representing such Shares or Share Termination Delivery Property upon request by Dealer to Company or such transfer agent, without any requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document, any transfer tax stamps or payment of any other amount or any other action by Dealer. Company further agrees that any Shares or Share Termination Delivery Property delivered hereunder prior to the date that is 6 months from the Trade Date (or 1 year from the Trade Date if, at such time, informational requirements of Rule 144(c) are not satisfied with respect to Company) may be transferred by and among Dealer and its affiliates and Company shall effect such transfer without any further action by Dealer, and any affiliate to which such Shares or Share Termination Delivery Property are transferred may request removal of any legends on such Shares or Share Termination Delivery Property, as the case may be, pursuant to the immediately preceding sentence. Notwithstanding anything to the contrary herein, Company agrees that any delivery of Shares or Share Termination Delivery Property shall be effected by book-entry transfer through the facilities of DTC, or any successor depositary, if at the time of delivery, such class of Shares or class of Share Termination Delivery Property is in book-entry form at DTC or such successor depositary. Notwithstanding anything to the contrary herein, to the extent the provisions of Rule 144 of the Securities Act or any successor rule are amended, or the applicable interpretation thereof by the Securities and Exchange Commission or any court change after the Trade Date, the agreements of Company herein shall be deemed modified to the extent necessary, in the opinion of outside counsel of Company, to comply with Rule 144 of the Securities Act or any successor rule, as in effect at the time of delivery of the relevant Shares or Share Termination Delivery Property. |
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(n) 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 the 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 the Transaction, as applicable, by, among other things, the mutual waivers and certifications provided herein. |
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(o) Tax Disclosure . Effective from the date of commencement of discussions concerning the Transaction, Company 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 Company relating to such tax treatment and tax structure. |
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(p) Maximum Share Delivery . |
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(i) Notwithstanding any other provision of this Confirmation, the Agreement or the Equity Definitions, in no event will Company at any time be required to deliver a number of Shares greater than two times the Number of Shares (the Maximum Number of Shares ) to Dealer in connection with the Transaction, including, without limitation, any Shares deliverable to Dealer as a result of any early termination of the Transaction. Company shall not take any action to decrease the number of authorized but unissued Shares that are not reserved for other transactions below the Maximum Number of Shares. |
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(ii) In the event Company shall not have delivered to Dealer the full number of Shares or Restricted Shares otherwise deliverable by Company to Dealer pursuant to the terms of the Transaction because Company has insufficient authorized but unissued Shares that are not reserved for other transactions (such deficit, the Deficit Shares ), Company shall be continually obligated to deliver, from time to time, Shares or Restricted Shares, as the case may be, to Dealer until the full number of Deficit Shares have been delivered pursuant to this Section 9(p)(ii), when, and to the extent that, (A) Shares are repurchased, acquired or otherwise received by Company or any of its subsidiaries after the Trade Date (whether or not in exchange for cash, fair value or any other consideration), (B) authorized and unissued Shares previously reserved for issuance in respect of other transactions become no longer so reserved or (C) Company additionally authorizes any unissued Shares that are not reserved for other transactions; provided that in no event shall Company deliver any Shares or Restricted Shares to Dealer pursuant to this Section 9(p)(ii) to the extent that such delivery would cause the aggregate number of Shares and Restricted Shares delivered to Dealer to exceed the Maximum Number of Shares. Company shall immediately notify Dealer of the occurrence of any of the foregoing events (including the number of Shares subject to clause (A), (B) or (C) and the corresponding number of Shares or Restricted Shares, as the case may be, to be delivered) and promptly deliver such Shares or Restricted Shares, as the case may be, thereafter. |
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(iii) Notwithstanding anything to the contrary in the Agreement, this Confirmation or the Equity Definitions, the Maximum Number of Shares shall not be adjusted on account of any event that is not within Companys control, to the extent that such adjustment would cause the Maximum Number of Shares to exceed the number of authorized but unissued Shares that are not reserved for other transactions. |
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(q) Right to Extend . Dealer may postpone or add, in whole or in part, any Expiration Date or any other date of valuation or delivery with respect to some or all of the relevant Warrants (in which event the Calculation Agent shall make appropriate adjustments to the Daily Number of Warrants with respect to one or more Expiration Dates) if Dealer determines, in its commercially reasonable judgment, that such extension is reasonably necessary or appropriate to preserve Dealers commercially reasonable hedging or hedge unwind activity hereunder in light of existing liquidity conditions or to enable Dealer to effect transactions in Shares in connection with its commercially reasonable hedging, hedge unwind or settlement activity hereunder in a manner that would, if Dealer were Issuer or an affiliated purchaser of Issuer, be in compliance with applicable legal, regulatory or self-regulatory requirements, or with related policies and procedures applicable to Dealer. |
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(r) Status of Claims in Bankruptcy . Dealer acknowledges and agrees that this Confirmation is not intended to convey to Dealer rights against Company with respect to the Transaction that are senior to the claims of common stockholders of Company in any United States bankruptcy proceedings of Company; provided that nothing herein shall limit or shall be deemed to limit Dealers right to pursue remedies in the event of a breach by Company of its obligations and agreements with respect to the Transaction other than during any such bankruptcy proceedings; provided, further , that nothing herein shall limit or shall be deemed to limit Dealers rights in respect of any transactions other than the Transaction. |
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(s) Securities Contract; Swap Agreement . The parties hereto intend for (i) the Transaction to be a securities contract and a swap agreement as defined in the Bankruptcy Code (Title 11 of the United States Code) (the Bankruptcy Code ), and the parties hereto to be entitled to the protections afforded by, among other Sections, Sections 362(b)(6), 362(b)(17), 546(e), 546(g), 555 and 560 of the Bankruptcy Code, (ii) a partys right to liquidate the 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 described in the Bankruptcy Code, and (iii) each payment and delivery of cash, securities or other property hereunder to constitute a margin payment or settlement payment and a transfer as defined in the Bankruptcy Code. |
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(t) Wall Street Transparency and Accountability Act . In connection with Section 739 of the Wall Street Transparency and Accountability Act of 2010 ( WSTAA ), the parties hereby agree that neither the enactment of WSTAA or any regulation under the WSTAA, nor any requirement under WSTAA or an amendment made by WSTAA, shall limit or otherwise impair either partys otherwise applicable rights to terminate, renegotiate, modify, amend or supplement this Confirmation or the Agreement, as applicable, arising from a termination event, force majeure, illegality, increased costs, regulatory change or similar event under this Confirmation, the Equity Definitions incorporated herein, or the Agreement (including, but not limited to, rights arising from Change in Law, Hedging Disruption, Increased Cost of Hedging, an Excess Ownership Position, or Illegality (as defined in the Agreement)). |
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(u) Agreements and Acknowledgements Regarding Hedging . Company understands, acknowledges and agrees that: (A) at any time on and prior to the last Expiration Date, Dealer and its affiliates may buy or sell Shares or other securities or buy or sell options or futures contracts or enter into swaps or other derivative securities in order to adjust its hedge position with respect to the Transaction, (B) Dealer and its affiliates also may be active in the market for Shares other than in connection with hedging activities in relation to the Transaction, (C) Dealer shall make its own determination as to whether, when or in what manner any hedging or market activities in securities of Issuer shall be conducted and shall do so in a manner that it deems appropriate to hedge its price and market risk with respect to the Settlement Prices and (D) any market activities of Dealer and its affiliates with respect to Shares may affect the market price and volatility of Shares, as well as the Settlement Prices, each in a manner that may be adverse to Company. |
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(v) Rule 10b-18 Purchases . On each Expiration Date, neither Company nor any affiliate or affiliated purchaser (each as defined in Rule 10b-18 under the Exchange Act) shall directly or indirectly (including, without limitation, by means of any cash-settled or other 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 an 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 or exercisable for Shares. |
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(w) Private Placement . Dealer acknowledges that the offer and sale of the Warrants to it is intended to be exempt from registration under the Securities Act, by virtue of Section 4(a)(2) thereof. Accordingly, Dealer represents and warrants to Company that (i) it has the financial ability to bear the economic risk of its investment in the Warrants and is able to bear a total loss of its |
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investment, (ii) it is an accredited investor as that term is defined in Regulation D as promulgated under the Securities Act, (iii) it is purchasing the Warrants for its own account without a view to the distribution or resale thereof and (iv) the assignment, transfer or other disposition of the Warrants has not been and will not be registered under the Securities Act and is restricted under this Confirmation, the Securities Act and state securities laws. |
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(x) Early Unwind . In the event Company fails to deliver to Dealer opinions of counsel as required pursuant to Section 9(a), by 5:00 p.m. (New York City time) on the Premium Payment Date, or such later date as agreed upon by the parties (the Premium Payment Date or such later date the Early Unwind Date ), the Transaction shall automatically terminate (the Early Unwind ), on the Early Unwind Date and (i) the Transaction and all of the respective rights and obligations of Dealer and Company under the Transaction shall be cancelled and terminated and (ii) each party shall be released and discharged by the other party from and agrees not to make any claim against the other party with respect to any obligations or liabilities of the other party arising out of and to be performed in connection with the Transaction either prior to or after the Early Unwind Date. Each of Dealer and Company represents and acknowledges to the other that upon an Early Unwind, all obligations with respect to the Transaction shall be deemed fully and finally discharged. |
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(y) Payment by Dealer . In the event that, following payment of the Premium, (i) an Early Termination Date occurs or is designated with respect to the Transaction as a result of a Termination Event or an Event of Default (other than an Event of Default arising under Section 5(a)(ii) or 5(a)(iv) of the Agreement) and, as a result, Dealer owes to Company an amount calculated under Section 6(e) of the Agreement, or (ii) Dealer owes to Company, pursuant to Section 12.7 or Section 12.9 of the Equity Definitions, an amount calculated under Section 12.8 of the Equity Definitions, such amount shall be deemed to be zero. |
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(z) Adjustments . For the avoidance of doubt, whenever the Calculation Agent or Determining Party is called upon to make an adjustment pursuant to the terms of this Confirmation or the Equity Definitions to take into account the effect of an event, the Calculation Agent or Determining Party shall make such adjustment by reference to the effect of such event on the Hedging Party, assuming that the Hedging Party maintains a commercially reasonable hedge position. |
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(aa) Delivery or Receipt of Cash . For the avoidance of doubt, other than receipt of the Premium by Company, nothing in this Confirmation shall be interpreted as requiring Company to cash settle the Transaction, except in circumstances where cash settlement is within Companys control (including, without limitation, where Company elects to deliver or receive cash, or where Company has made Private Placement Settlement unavailable due to the occurrence of events within its control) or in those circumstances in which holders of Shares would also receive cash. |
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(bb) Listing of Warrant Shares . Company shall have submitted an application for the listing of the Warrant Shares on the Exchange, and such application and listing shall have been approved by the Exchange, subject only to official notice of issuance, in each case, on or prior to the Premium Payment Date. Company agrees and acknowledges that such submission and approval shall be a condition precedent for the purpose of Section 2(a)(iii) of the Agreement with respect to each obligation of Dealer under Section 2(a)(i) of the Agreement. |
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(cc) Tax Matters . |
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(i) Withholding Tax imposed on payments to non-US counterparties under the United States Foreign Account Tax Compliance Act . Tax and Indemnifiable Tax, each as defined in Section 14 of the Agreement, shall not include any U.S. federal withholding tax imposed or collected pursuant to Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended (the Code ), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such |
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Sections of the Code (a FATCA Withholding Tax ). For the avoidance of doubt, a FATCA Withholding Tax is a Tax the deduction or withholding of which is required by applicable law for the purposes of Section 2(d) of the Agreement. |
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(ii) HIRE Act . Tax and Indemnifiable Tax, each as defined in Section 14 of the Agreement, shall not include any tax imposed on payments treated as dividends from sources within the United States under Section 871(m) of the Code or any regulations issued thereunder. |
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(iii) Tax documentation . For the purpose of Section 4(a)(i) of the Agreement, Company shall provide to Dealer a valid U.S. Internal Revenue Service Form W-9, or any successor thereto, (i) on or before the date of execution of this Confirmation and (ii) promptly upon learning that any such tax form previously provided by Company has become obsolete or incorrect. Additionally, Company shall, promptly upon request by Dealer, provide such other tax forms and documents reasonably requested by Dealer. |
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(iv) Tax Representations . For the purpose of Section 3(f) of the Agreement, Company is a corporation for U.S. federal income tax purposes and is organized under the laws of the State of Delaware. Issuer is a U.S. person (as that term is used in section 1.1441-4(a)(3)(ii) of United States Treasury Regulations) for U.S. federal income tax purposes and an exempt recipient under Treasury Regulation Section 1.6049-4(c)(1)(ii). |
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Please confirm that the foregoing correctly sets forth the terms of the agreement between Dealer and Company with respect to the Transaction, by manually signing this Confirmation or this page hereof as evidence of agreement to such terms and providing the other information requested herein and returning an executed copy to Dealer.
Yours faithfully, | ||
[DEALER] | ||
By: |
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Name: | ||
Title: |
Accepted and confirmed
as of the Trade Date:
GROUPON, INC. | ||
By: |
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Authorized Signatory | ||
Name: |