EXHIBIT 2
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EXECUTION COPY
FORWARD PURCHASE TERM SHEET
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TRANSACTION: Forward Purchase Transaction
TRADE DATE: June 17th, 2002
EFFECTIVE DATE June 17th, 2002
FORWARD SELLER: Citibank, N.A. ("Citibank").
FORWARD BUYER: Warburg Pincus Private Equity VIII, L.P.
(the "Company").
COMMON STOCK: The Common Stock of Agere Systems Inc ("AGR/A").
MAXIMUM AMOUNT: $25 million.
MATURITY: 6 weeks
STRUCTURING FEE: None
AGGREGATE AMOUNT: Initial Price times Transaction Shares. In no
event shall the Aggregate Amount exceed the Maximum
Amount.
INITIAL PRICE: The average price of Common Stock acquired by
Citibank under this Transaction plus brokerage of
5 cents per share
TRANSACTION SHARES: The number of shares of Common Stock acquired by
Citibank to hedge its position under this
Transaction.
FORWARD PRICE: Initial Price plus Carrying Cost less Actual
Dividends.
CARRYING COST: The Carrying Rate, calculated on Actual/360
daycount basis times the Initial Price.
CARRYING RATE: 1-month LIBOR + Carrying Spread compounded monthly,
or swapped to fixed.
CARRYING SPREAD: 75 basis points
ACTUAL DIVIDENDS: Actual dividends paid on the Common Stock.
DETERMINATION DATE: Maturity.
DETERMINATION PRICE: The closing price of the Common Stock on the
Determination Date minus 5 cents per share.
SETTLEMENT AMOUNT: Transaction Shares times the difference between the
Determination Price and the Forward Price. If this
amount is positive, Citibank shall pay to the
Company the Settlement Amount; if negative, the
Company shall pay to Citibank the absolute value of
the Settlement Amount.
NET CASH SETTLEMENT: Cash equal to the Settlement Amount paid to the
appropriate party.
NET SHARE SETTLEMENT: A number of Shares of the Common Stock equal to the
Settlement Amount divided by the Determination
Price delivered to the appropriate party. Provided
that if Company is required to deliver Common Stock
to Citibank under Net Share Settlement then the
Determination Price shall be the price at which
Citibank sells shares of Common Stock received from
Company.
PHYSICAL SETTLEMENT: The Company receives Transaction Shares in exchange
for cash equal to the Forward Price times
Transaction Shares subject to the Condition to
Physical Settlement.
CONDITION TO PHYSICAL
SETTLEMENT: As a condition to electing physical settlement, the
Company must deliver to Citibank on or prior to the
second Business Day prior to the Termination Date
(i) reasonable evidence of the FTC's clearance
under the HSR Act of the purchase of the Shares or
(ii) a written certification from the Company that
it has concluded in good faith and based on the
advice of counsel reasonably acceptable to Citibank
that HSR clearance is not necessary because the
Company qualifies for an exemption to the filing
requirements of the HSR Act. With respect to clause
(ii), the Company will permit Citibank (and its
external counsel) upon request to discuss the basis
of their advice to the Company prior to the
Termination Date.
TERMINATION EVENT: A "Termination Event" shall occur if (i) the price
of AGR/A common shares falls to 60% of the Initial
Price AND (ii) Company fails to post additional
cash collateral on terms mutually acceptable to the
parties. Upon the occurrence of a Termination
Event, Citibank shall be entitled to unwind the
entire outstanding Aggregate Amount.
ADJUSTMENTS: Method of Adjustment: In the event of the
occurrence of a Potential Adjustment Event, the
Calculation Agent will determine whether such
Potential Adjustment Event has a material effect on
the theoretical value of the Shares or the
Transaction and, if so, will (i) make the
corresponding adjustment(s), if any, to the Number
of Shares, the
Number of Shares to be Delivered,
the Initial Price and, in any case, any other
variable relevant to the valuation, settlement or
payment terms of the Transaction as the Calculation
Agent determines appropriate to account for that
material effect and (ii) determine the effective
date(s) of the adjustment(s).
CREDIT TERMS: On the Trade Date or the following business day,
Company will deliver to Citibank cash collateral
equal to 50% of the Aggregate Amount or other
collateral acceptable to Citibank (collectively the
"Collateral"), having a value at least equal to
$250,000. (as determined by the Calculation Agent)
Company hereby grants Citibank a continuing first
priority, perfected security interest in and right
of setoff against the Collateral, all distributions
thereon and rights relating thereto, and any other
collateral acceptable to Citibank in its sole
discretion that may be delivered by or on behalf of
Company in connection with this Transaction, and
all proceeds of any of the foregoing, as security
for the prompt and complete payment and performance
when due (whether on an Early Termination Date or
otherwise) of all of Company's payment and
performance obligations under the Transaction
hereunder and the ISDA Master Agreement. If Company
defaults on any obligation to Citibank under this
Confirmation or otherwise, Citibank may exercise
all rights with respect to the Collateral, sell or
liquidate the Collateral to satisfy any of
Company's obligations to Citibank and set off any
amounts payable by Company with respect to any
obligations against any Collateral held by Citibank
or the cash equivalent of any Collateral (or any
obligation of Citibank to deliver any Collateral to
Company). Company will not permit any lien,
security interest, charge, adverse claim,
restriction on transfer or other encumbrance, other
than the lien and security interest Company created
hereby in favor of Citibank to exist upon any of
the Collateral. Company will not take any action
that could in any way limit or adversely affect the
ability of Citibank to realize upon its rights in
the Collateral. Company represents, on each date on
which Company delivers or Citibank otherwise
receives Collateral, that (i) Company is the owner
of all Collateral free of any lien, security
interest, charge, adverse claim, restriction on
transfer or other encumbrance, (ii) Company has the
power and authority and has obtained all of the
necessary consents and approvals to grant a first
priority security interest to Citibank in the
Collateral, (iii) upon the delivery of the
Collateral Shares as described above and any other
Collateral in a manner acceptable to Citibank,
Citibank will have a valid and perfected first
priority security interest in the other Collateral.
EXTRAORDINARY EVENTS:
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Merger Event Means, in respect of any relevant Shares, any (i)
reclassification or change of such Shares that
results in a transfer of or an irrevocable
commitment to transfer outstanding Shares, (ii)
consolidation, amalgamation or merger of the Issuer
with or into another entity (whether or not the
Issuer is the continuing entity), (iii) tender or
exchange offer for such Shares that results in a
transfer of or an irrevocable commitment to
transfer outstanding Shares, (iv) sale, transfer,
lease or conveyance of a material portion of the
Issuer's assets to another entity or entities in a
single transaction or series of related
transactions, (v) purchase or other acquisition of
an entity, division, business or any material
portion thereof in a single transaction or series
of related transactions that results in a material
increase or change in the Issuer's assets, and (vi)
any other corporate event or action affecting the
Issuer that may have a material effect on the
theoretical value of the Shares or a Transaction,
in each case if the Merger Date occurs on or before
the Valuation Date.
Consequences of Merger
Events:
(a) Share-for-Share: Subject to the provisions for Negotiated Resolution
set forth below, Cancellation and Payment.
(b) Share-for-Other: Cancellation and Payment.
(c) Share-for-Combined
and any other Merger
Event: Subject to the provisions for Negotiated Resolution
set forth below, Cancellation and Payment.
Notwithstanding Section 9.2(b) of the Definitions,
"MERGER DATE" means, in respect of a Merger Event,
the date of the first public announcement of a firm
intention to enter into the Merger Event, as
determined by the Calculation Agent.
Negotiated Resolution. Notwithstanding anything in
the Definitions to the contrary, beginning on the
Merger Date with respect to a Merger Event other
than a Share-for-Other Merger Event, the parties
will negotiate for five Exchange Business Days to
determine whether to continue the Transactions
subject to this Master Confirmation on revised
terms to which the parties agree (a "NEGOTIATED
RESOLUTION") or to terminate such Transactions. If
the parties do not agree on a Negotiated Resolution
within that negotiation period, then Cancellation
and Payment as described below shall apply.
Cancellation and Payment. Notwithstanding anything
in the Definitions to the contrary, if Cancellation
and Payment is applicable, then the Transactions
subject to this Master Confirmation will be
cancelled and Company will pay Citibank an amount
determined as provided below, such payment to be
made not later than three Currency Business Days
following the determination by the Calculation
Agent of such amount (denominated in the currency
for settlement of the relevant Transaction as
determined by the Calculation Agent). The amount to
be paid by Company to Citibank will be the amount
agreed promptly by the parties after the end of the
negotiation period referred to in "Negotiated
Resolution" above (in the case of Merger Events
other than a Share-for-Other Merger Event), the
Merger Date (in the case of a Share-for-Other
Merger Event) or the date Citibank elects
Cancellation and Payment as the result of the
occurrence of a Nationalization, Insolvency or
De-Listing Event, as the case may be, failing which
it will be determined by the Calculation Agent
based on an amount representing the Calculation
Agent's determination of the fair value to Citibank
of a comparable security with terms (including but
not limited to imbedded options) that would
preserve for Citibank the economic equivalent of
any payment or delivery (assuming satisfaction of
each applicable condition precedent) by the parties
in respect of the relevant Transaction that would
have been required after that date but for the
occurrence of the Merger Event, Nationalization,
Insolvency or De-Listing Event, as the case may be.
The Calculation Agent shall provide Company with a
schedule or other reasonably detailed explanation
of the basis for and determination of such amount.
Nationalization,
Insolvency or De-Listing: Cancellation and Payment as described above shall
apply, at the election of Citibank at any time
after the relevant Announcement Date.
"INSOLVENCY" means that "Bankruptcy" as defined in
Section 5(a)(vii) of the ISDA Master Agreement has
occurred with respect to the Issuer (without regard
to any grace periods included therein).
"DE-LISTING EVENT" means that the Shares cease to
be listed on or quoted by any of the New York Stock
Exchange, the American Stock Exchange or the NASDAQ
National Market (or their respective successors)
for any reason other than a
Merger Event. For purposes of a De-Listing Event,
the Announcement Date shall be deemed to be the
date that the De-Listing Event first occurs (as
determined by the Calculation Agent).
CALCULATION AGENT: Citibank is the Calculation Agent and shall make
all calculations, adjustments and determinations
required pursuant to a Transaction, and such
calculations, adjustments and determinations shall
be binding absent manifest error.
REPRESENTATIONS
OF COMPANY: Company represents to Citibank that:
(a) Company is not, and within the preceding three
months has not been, an Insider of the Issuer.
Until the Maturity Date, Forward Seller will not
become an Insider. "INSIDER" means a person who is
an officer, director or beneficial owner of more
than 10% of any class of equity securities of the
Issuer required to file reports pursuant to Section
16(a) of the Securities Exchange Act of 1934, as
amended, or otherwise an affiliate of the Issuer
within the meaning of the Securities Act;
(b) Company is entering into this Forward Term
Sheet and this transaction for Company's own
account and not with a view to transfer, resale or
distribution and understands that this transaction
may involve the purchase or sale of a security as
defined in the Securities Act and the securities
laws of certain states, that any such security has
not been registered under the Securities Act or the
securities laws of any state and, therefore, may
not be sold, pledged, hypothecated, transferred or
otherwise disposed of unless such security is
registered under the Securities Act and any
applicable state securities law, or an exemption
from registration is available;
(c) On the Trade Date and on any day in which Net
Share Settlement or Net Cash Settlement have been
elected, Company will not be in possession of any
material non-public information regarding the
Issuer.
TERMINATION: At Maturity or upon the occurrence of the
Termination Event specified above, the Company
shall have the option to elect Net Cash Settlement,
Net Share Settlement or Physical Settlement.
Make-whole for Citibank on buying/selling shares
paid/received in net share settlement.
EARLY UNWIND PROVISION: The Company will pay Citibank the breakage costs of
the early unwind.
OTHER TERMS: This Term Sheet incorporates by reference the
definitions and provisions of the 1992 Cross Border
- Multi Currency ISDA Master Agreement without any
Schedule thereto (the "ISDA Master Agreement") and
the 1996 ISDA Equity Definitions (the
"Definitions"). This Term Sheet is a Confirmation
of a Transaction and a Credit Support Document each
as defined in the ISDA Master Agreement.
Capitalized terms not defined herein but defined in
the ISDA Master Agreement or the Definitions shall
the meaning set forth therein.
Second Method and Loss will apply to this
Contingent Forward Term Sheet.
The execution of this Forward Sale Term Sheet shall
be followed by the execution of a more detailed
Confirmation subject also to the ISDA Master
Agreement. Additional terms (not inconsistent with
the terms set forth above) shall be set forth in
the subsequent Confirmation.
The Seller and ▇▇▇▇▇ agree to conclude the
negotiation of an ISDA Master Agreement, Schedule
as soon as possible after the executing of this
Forward Term Sheet.
GOVERNING LAW: New York
Agreeing to be legally bound, the terms and conditions of this Forward Term
Sheet as set forth above are accepted and agreed by the parties as of the Trade
Date.
Citibank, N.A. Warburg ▇▇▇▇▇▇ Private Equity VIII, L.P.
By: Warburg, ▇▇▇▇▇▇ & Co.,
As General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Director Title: Partner