Exhibit 4.4
Bear ▇▇▇▇▇▇▇ International Limited
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
December 23, 2004
To: Scientific Games Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Treasurer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Re: Warrants
Reference: NY33267
The purpose of this letter agreement is to confirm the terms and
conditions of the Warrants issued by Scientific Games Corporation (the
"Company") to Bear, ▇▇▇▇▇▇▇ International Limited ("Bear ▇▇▇▇▇▇▇") on the Trade
Date specified below (the "Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below. This
Confirmation shall replace any previous letter and serve as the final
documentation for this Transaction.
The definitions and provisions contained in the 1996 ISDA Equity
Derivatives Definitions (the "Equity Definitions"), as published by the
International Swaps and Derivatives Association, Inc., are incorporated into
this Confirmation. In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation shall govern. This
Transaction shall be deemed to be a Share Option Transaction within the meaning
set forth in the Equity Definitions.
Each party is hereby advised, and each such party acknowledges, that the
other party has engaged in, or refrained from engaging in, substantial financial
transactions and has taken other material actions in reliance upon the parties'
entry into the Transaction to which this Confirmation relates on the terms and
conditions set forth below.
1. This Confirmation evidences a complete and binding agreement between Bear
▇▇▇▇▇▇▇ and the Company as to the terms of the Transaction to which this
Confirmation relates. This Confirmation shall supplement, form a part of,
and be subject to an agreement in the form of the 2002 ISDA Master
Agreement (the "Agreement") as if Bear ▇▇▇▇▇▇▇ and the Company had
executed an agreement in such form (but without any Schedule except for
the election of the laws of the State of New York as the governing law and
United States dollars as the Termination Currency) on the Trade Date. In
the event of any inconsistency between provisions of that Agreement and
this Confirmation, this Confirmation will prevail for the purpose of the
Transaction to which this Confirmation relates. The parties hereby agree
that no Transaction other than the Transaction to which this Confirmation
relates shall be governed by the Agreement.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
General Terms:
Trade Date: December 23, 2004
Warrants: Equity call warrants on the terms hereof, each
giving the holder the right to purchase one
Share at the Strike Price, subject to the
Settlement Terms set forth below. For the
purposes of the Equity Definitions, each
reference to a Warrant shall be deemed to be a
reference to a Call Option.
Warrant Style: European
Buyer: Bear ▇▇▇▇▇▇▇
Seller: Company
Shares: The Class A Common Stock of the Company, par
value USD 0.01 per Share (Exchange symbol
"SGMS")
Number of Warrants: 4,295,533
Daily Number of Warrants: 71,592.22, subject to adjustments provided
herein.
Warrant Entitlement: One Share per Warrant
Strike Price: USD 37.248
Premium: USD 17,130,000
Premium Payment Date: December 23, 2004
Exchange: The NASDAQ National Market System
Related Exchange(s): The principal exchange(s) for options
contracts or futures contracts, if any, with
respect to the Shares
Exercise and Valuation:
Expiration Time: The Valuation Time
First Expiration Date: June 1, 2010, subject to Market Disruption
Event below.
Expiration Date: For any Daily Number of Warrants, each of the
60 Exchange Business Days beginning on and
including the First Expiration Date.
Automatic Exercise: Applicable; and means that a number of
Warrants for each Expiration Date equal to the
Daily Number of Warrants (as adjusted pursuant
to the terms hereof) for such Expiration Date
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will be deemed to be automatically exercised.
For the avoidance of doubt, Automatic Exercise
shall apply separately to each Expiration
Date.
Market Disruption Event: Modified Postponement (as if each Expiration
Date were an Averaging Date for the purposes
of Section 4.4(d)(iii)(A) of the Equity
Definitions and for the purposes of the
definition of "Valid Date"); provided that
references in Section 4.4(d)(iii)(A) to "fifth
Exchange Business Day" shall be replaced by
"eighth Exchange Business Day".
Valuation applicable to each
Warrant:
Valuation Time: At 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
reasonable discretion.
Valuation Date: Each Exercise Date.
Settlement Terms applicable to
the Transaction:
Method of Settlement: Net Share Settlement; and means that, on each
Settlement Date, Company shall deliver to Bear
▇▇▇▇▇▇▇, the Share Delivery Quantity of Shares
for such Settlement Date to the account
specified hereto free of payment through the
Clearance System.
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 in respect of such
Settlement Date, plus cash in lieu of any
fractional shares (based on such Settlement
Price).
Net Share Settlement Amount: For any Settlement Date, any amount equal to
(i) the Number of Warrants being exercised on
the relevant Exercise Date multiplied by (ii)
the Strike Price Differential for such
Settlement Date.
Strike Price Differential: (a) If the Settlement Price for any Valuation
Date is greater than the Strike Price, an
amount equal to the excess of such Settlement
Price over the Strike Price; or
(b) If such Settlement Price is less than or
equal to the Strike Price, zero.
Settlement Price: For any Valuation Date, the official closing
price per Share quoted by the Exchange (or, if
no closing price is so quoted, the last
reported sale price) as of the Valuation Time
on such Valuation Date.
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Settlement Date: For any Exercise Date, the date defined as
such in Section 6.2 of the Equity Definitions,
subject to Section 9(o)(i) hereof.
Failure to Deliver: Inapplicable
Other Applicable Provisions: The provisions of Sections 6.6, 6.7, 6.8, 6.9
and 6.10 of the Equity Definitions will be
applicable, except that all references in such
provisions to "Physically-Settled" shall be
read as references to "Net Share Settled".
"Net Share Settled" in relation to any Warrant
means that Net Share Settlement is applicable
to that Warrant.
3. Additional Terms applicable
to the Transaction:
Adjustments applicable to the
Warrants:
Method of Adjustment: Calculation Agent Adjustment. For avoidance of
doubt, in making any adjustments under the
Equity Definitions, the Calculation Agent may
adjust the Daily Number of Warrants.
Notwithstanding the foregoing, any cash
dividends or distributions, whether or not
extraordinary, shall be governed by Section
9(j) of this Confirmation and not by Section
9.1(c) of the Equity Definitions.
Extraordinary Events applicable
to the Transaction:
Consequence of Merger Events
(a) Share-for-Share: Alternative Obligation; provided that the
Calculation Agent will determine if the Merger
Event affects the theoretical value of the
Transaction and if so Bear ▇▇▇▇▇▇▇ in its sole
discretion may elect to make adjustments to
the Strike Price and any other term necessary
to reflect the characteristics (including
volatility, dividend practice, borrow cost,
and policy and liquidity) of the New Shares.
Notwithstanding the foregoing, Cancellation
and Payment shall apply in the event the New
Shares are not publicly traded on a United
States national securities exchange or quoted
on the NASDAQ National Market System.
(b) Share-for-Other: Cancellation and Payment
(c) Share-for-Combined: Cancellation and Payment
Nationalization or
Insolvency: Cancellation and Payment
4. Calculation Agent: Bear ▇▇▇▇▇▇▇, whose calculations and
determinations shall be made in good faith and
in a commercially reasonable manner.
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5. Account Details:
(a) Account for payments to Company:
Scientific Games Management Corp., Agent
The Bank of New York
New York, NY
ABA # ▇▇▇-▇▇▇-▇▇▇
CHIPS # 0001
SWIFT Code IRVUS3N
Account Number 6302386623
Reference: Scientific Games Corp.
Account for delivery of Shares to Company:
As notified to Bear ▇▇▇▇▇▇▇ by Company in writing from time to
time.
(b) Account for payments to Bear ▇▇▇▇▇▇▇:
Citibank, N.A., New York
ABA: ▇▇▇-▇▇▇-▇▇▇
Account Name: Bear, ▇▇▇▇▇▇▇ Securities Corp.
Account Number: ▇▇▇▇▇▇▇▇
Further Credit: Bear, ▇▇▇▇▇▇▇ International Limited
Sub Account Number: ▇▇▇-▇▇▇▇▇-▇▇
Account for delivery of Shares from Bear ▇▇▇▇▇▇▇:
DTC 352
6. Offices:
The Office of Company for the Transaction is: Inapplicable, Company is not a
Multibranch Party.
The Office of Bear ▇▇▇▇▇▇▇ for the Transaction is: Inapplicable, Bear ▇▇▇▇▇▇▇
is not a Multibranch Party.
7. Notices: For purposes of this Confirmation:
(a) Address for notices or communications to Company: ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Treasurer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Address for notices or communications to Bear ▇▇▇▇▇▇▇:
Bear, ▇▇▇▇▇▇▇ International Limited.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: Legal Department
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With a copy to:
Bear, ▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
8. Representations and Warranties of the Company and Other Matters
(a) The Company hereby represents and warrants to Bear ▇▇▇▇▇▇▇ that the
Company and each of its subsidiaries have been duly organized and
are validly existing and in good standing under the laws of their
respective jurisdictions of organization, are duly qualified to do
business and are in good standing in each jurisdiction in which
their respective ownership or lease of property or the conduct of
their respective businesses requires such qualification, and have
all power and authority necessary to own or hold their respective
properties and to conduct the businesses in which they are engaged,
except where the failure to be so qualified or have such power or
authority would not, individually or in the aggregate, have a
material adverse effect on the business, properties, management,
financial position, results of operations or prospects of the
Company and its subsidiaries taken as a whole or on the performance
by the Company of its obligations under the Transaction (a "Material
Adverse Effect").
(b) The Company hereby represents and warrants to Bear ▇▇▇▇▇▇▇ that the
Company has all necessary corporate power and authority to execute,
deliver and perform its obligations in respect of this Transaction;
such execution, delivery and performance have been duly authorized
by all necessary corporate action on the Company's part; and this
Confirmation has been duly and validly executed and delivered by the
Company and constitutes its valid and binding obligation,
enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and
except that rights to indemnification and contribution thereunder
may be limited by federal or state securities laws or public policy
relating thereto.
(c) The Company hereby represents and warrants to Bear ▇▇▇▇▇▇▇ that
neither the Company nor any of its subsidiaries is (i) in violation
of its charter or by-laws or similar organizational documents; (ii)
in default, and no event has occurred that, with notice or lapse of
time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject; or (iii) in
violation of any applicable law or statute or any judgment, order,
rule or regulation of any court or arbitrator or governmental or
regulatory authority having jurisdiction over the Company or any of
its subsidiaries or any of their properties, as applicable,
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except, in the case of clauses (ii) and (iii) above, for any such
default or violation that would not, individually or in the
aggregate, have a Material Adverse Effect.
(d) The Company hereby represents and warrants to Bear ▇▇▇▇▇▇▇ that the
execution, delivery and performance by the Company of this
Confirmation and compliance by the Company with the terms hereof
and the consummation of the Transaction will not (i) conflict with
or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries
pursuant to, any indenture, mortgage, deed of trust, loan agreement
(including but not limited to the Credit Agreement dated as of
December 23, 2004 among the Counterparty, as borrower, the several
lenders from time to time thereto and JPMorgan, as administrative
agent) or other agreement or instrument to which the Company or any
of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the property or assets
of the Company or any of its subsidiaries is subject, (ii) result
in any violation of the provisions of the charter or by-laws or
similar organizational documents of the Company or any of its
subsidiaries or (iii) result in the violation of any applicable law
or statute or any judgment, order, rule or regulation of any court
or arbitrator or governmental or regulatory authority having
jurisdiction over the Company or any of its subsidiaries or any of
their properties, as applicable, except, in the case of clauses (i)
and (iii) above, for any such conflict, breach or violation that
would not, individually or in the aggregate, have a Material
Adverse Effect.
(e) The Company hereby represents and warrants to Bear ▇▇▇▇▇▇▇ that the
Shares of the Company initially issuable upon exercise of the
Warrant by the net share settlement method (the "Warrant Shares")
have been reserved for issuance by all required corporate action of
the Company. The Warrant Shares have been duly authorized and, when
delivered against payment therefor (which may include Net Share
Settlement in lieu of cash) and otherwise as contemplated by the
terms of the Warrant following the exercise of the Warrant in
accordance with the terms and conditions of the Warrant, will be
validly issued, fully-paid and non-assessable, and the issuance of
the Warrant Shares will not be subject to any preemptive or similar
rights.
(f) The Company hereby represents and warrants to Bear ▇▇▇▇▇▇▇ that
except as set forth or incorporated by reference in the Company's
Annual Report on Form 10-K for the year ended December 31, 2003
(the "Company's 10-K"), as updated by any subsequent filings, there
are no legal, governmental or regulatory investigations, actions,
suits or proceedings pending to which the Company or any of its
subsidiaries is or may be a party or to which any property of the
Company or any of its subsidiaries is or may be the subject that,
individually or in the aggregate, if determined adversely to the
Company or any of its subsidiaries, could reasonably be expected to
have a Material Adverse Effect; and no such investigations,
actions, suits or proceedings are threatened or, to the knowledge
of the Company, are contemplated by any governmental or regulatory
authority or threatened in writing by others.
(g) The Company hereby represents and warrants to Bear ▇▇▇▇▇▇▇ that the
Company's 10-K, as updated by any subsequent filings, does not, as
of the Trade Date, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(h) The Company hereby represents and warrants to Bear ▇▇▇▇▇▇▇ that it
is an "eligible contract participant" (as such term is defined in
Section 1(a)(12) of the Commodity Exchange Act, as amended (the
"CEA") because one or more of the following is true:
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The Company is a corporation, partnership, proprietorship,
organization, trust or other entity and:
(A) the Company has total assets in excess of USD 10,000,000;
(B) the obligations of Company hereunder are guaranteed, or
otherwise supported by a letter of credit or keepwell, support
or other agreement, by an entity of the type described in
Section 1a(12)(A)(i) through (iv), 1a(12)(A)(v)(I),
1a(12)(A)(vii) or 1a(12)(C) of the CEA; or
(C) the Company has a net worth in excess of USD 1,000,000 and has
entered into this Agreement in connection with the conduct of
Company's business or to manage the risk associated with an
asset or liability owned or incurred or reasonably likely to
be owned or incurred by Company in the conduct of Company's
business.
(i) The Company hereby represents and warrants to Bear ▇▇▇▇▇▇▇ that
neither the Company nor any of its subsidiaries is an "investment
company" or an entity "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, and
the rules and regulations of the Commission thereunder.
(j) The Company hereby represents and warrants to Bear ▇▇▇▇▇▇▇ that the
Company and its subsidiaries possess all licenses, certificates,
permits and other authorizations issued by, and have made all
declarations and filings with, the appropriate federal, state, local
or foreign governmental or regulatory authorities that are necessary
for the ownership or lease of their respective properties or the
conduct of their respective businesses as described in the Company's
10-K, as updated by any subsequent filings, except where the failure
to possess or make the same would not, individually or in the
aggregate, have a Material Adverse Effect; and except as described
in the Company's 10-K, as updated by any subsequent filings, neither
the Company nor any of its subsidiaries has received written notice
of any revocation or modification of any such license, certificate,
permit or authorization or has any reason to believe that any such
license, certificate, permit or authorization will not be renewed in
the ordinary course.
(k) The Company hereby represents and warrants to Bear ▇▇▇▇▇▇▇ that no
order, consent, approval, license, authorization or validation of,
or filing, recording, qualification or registration with, or
exemption or waiver by, any governmental authority or other person
with responsibility for regulating gaming laws having jurisdiction
over the Company or its subsidiaries, is required for the execution,
delivery and performance by the Company of this Confirmation, other
than the Order of the West Virginia State Lottery Commission dated
and obtained December 7, 2004 and a waiver by the New Jersey Casino
Control Commission (the "New Jersey Commission") of the requirement
that Bear ▇▇▇▇▇▇▇ satisfy the applicable qualification provisions of
the New Jersey Casino Control Act and the regulations promulgated
thereunder by the New Jersey Commission; further, subject to
compliance with the requirements described above, the execution,
delivery and performance of this Confirmation does not and will not
result in a violation in any material respect of any gaming law or
regulation.
(l) The Company represents and warrants to Bear ▇▇▇▇▇▇▇ that each of it
and its affiliates is not, on the date hereof, in possession of any
material non-public information with respect to Company.
(m) The Company shall deliver an opinion of counsel, dated as of the
Trade Date, to Bear ▇▇▇▇▇▇▇ in the forms attached as Exhibit A,
Exhibit B and Exhibit C.
8
(n) If the Initial Purchasers party to the Purchase Agreement among the
Company and ▇.▇. ▇▇▇▇▇▇ Securities Inc. and Bear, ▇▇▇▇▇▇▇ & Co., as
representatives of the Initial Purchasers, dated as of December 1,
2004, relating to the purchase of the Convertible Notes exercise
their right to receive additional Convertible Notes pursuant to the
Initial Purchasers' option to purchase additional Convertible Notes,
then, at the discretion of the Company, Bear ▇▇▇▇▇▇▇ and the Company
will amend this Confirmation (substantially in the form attached as
Exhibit D to this Confirmation) to provide for such increase in
Convertible Notes (such amendment to this Confirmation to provide
for the payment by the Company to Bear ▇▇▇▇▇▇▇ of the additional
premium related thereto).
9. Other Provisions:
(a) No Reliance, etc. Each party represents that (i) it is entering into
the Transaction evidenced hereby as principal (and not as agent or
in any other capacity); (ii) neither the other party or parties nor
any of its or their agents are acting as a fiduciary for it; (iii)
it is not relying upon any representations except those expressly
set forth in the Agreement or this Confirmation; (iv) it has not
relied on the other party or parties for any legal, regulatory, tax,
business, investment, financial, and accounting advice, and it has
made its own investment, hedging, and trading decisions based upon
its own judgment and not upon any view expressed by the other party
or parties or any of its or their agents; and (v) it is entering
into this Transaction with a full understanding of the terms,
conditions and risks thereof and it is capable of and willing to
assume those risks.
(b) Share De-listing Event. If at any time during the period from and
including the Trade Date, to and including the final Valuation Date,
the Shares cease to be listed or quoted on the Exchange for any
reason (other than a Merger Event as a result of which all of the
property underlying the Options consists of shares of common stock
that are listed or quoted on The New York Stock Exchange, The
American Stock Exchange or the NASDAQ National Market System (or
their respective successors) (the "Successor Exchange")) and are not
immediately re-listed or quoted as of the date of such de-listing on
the Successor Exchange, then Cancellation and Payment (as defined in
Section 9.6 of the Equity Definitions treating the "Announcement
Date" as the date of first public announcement that the Share
De-Listing will occur and the "Merger Date" as the date of the Share
De-Listing) shall apply, and the date of the de-listing shall be
deemed the date of termination for purposes of calculating any
payment due from one party to any of the others in connection with
the cancellation of this Transaction. If the Shares are immediately
re-listed on a Successor Exchange upon their de-listing from the
Exchange, this Transaction shall continue in full force and effect,
provided that the Successor Exchange shall be deemed to be the
Exchange for all purposes hereunder. In addition, the Calculation
Agent shall make any adjustments it deems necessary to the terms of
the Transaction in accordance with Calculation Agent Adjustment
method as defined under Section 9.1(c) of the Equity Definitions.
(c) Repurchase Notices. Company shall, on any day on which Company
effects any repurchase of Shares, promptly give Bear ▇▇▇▇▇▇▇ a
written notice of such repurchase (a "Repurchase Notice") on such
day if following such repurchase, the Warrants Equity Percentage as
determined on such day is (i) equal to or greater than 7.5% and (ii)
greater by 0.5% than the Warrants Equity Percentage included in the
immediately preceding Repurchase Notice (or, in the case of the
first such Repurchase Notice, greater than the Warrants Equity
Percentage as of the date hereof). The "Warrants Equity Percentage"
as of any day is the fraction (A) the numerator of which is the
product of the Number of Warrants and the Warrant Entitlement and
(B) the denominator of which is the number of Shares outstanding on
such day. Company agrees to indemnify and hold harmless Bear ▇▇▇▇▇▇▇
and its affiliates and their respective officers, directors,
employees,
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affiliates, advisors, agents and controlling persons (each, an
"Indemnified Person") from and against any and all losses (including
losses relating to Bear ▇▇▇▇▇▇▇'▇ 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 this Transaction), claims,
damages, judgments, liabilities and expenses (including reasonable
attorney's fees), joint or several, which an Indemnified Person
actually may become subject to, a result of Company's failure to
provide Bear ▇▇▇▇▇▇▇ with a Repurchase Notice on the day and in the
manner specified in this Section 9(c), and to reimburse, within 30
days, upon written request, each of such Indemnified Persons for any
reasonable legal or other expenses incurred in connection with
investigating, preparing for, providing testimony or other evidence
in connection with or defending any of the foregoing. If any suit,
action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against
the Indemnified Person, such Indemnified Person shall promptly
notify the Company in writing, and the Company, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to
the Indemnified Person to represent the Indemnified Person and any
others the Company may designate in such proceeding and shall pay
the fees and expenses of such counsel related to such proceeding.
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 (c) 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 (c) are not exclusive and
shall not limit any rights or remedies which may otherwise be
available to any Indemnified Person at law or in equity. The
indemnity and contribution agreements contained in this paragraph
(c) shall remain operative and in full force and effect regardless
of the termination of this Transaction.
(d) Regulation M. The Company was not on the Trade Date and is not on
the date hereof engaged in a distribution, as such term is used in
Regulation M under the Securities Exchange Act of 1934, as amended
("Exchange Act"), of any securities of Company, other than a
distribution of securities meeting the requirements of the exception
set forth in sections 101(b)(10) and 102(b)(7) of Regulation M. The
Company shall not, until the fifth Exchange Business Day immediately
following the Trade Date, engage in any such distribution.
(e) No Manipulation. The Company is not entering into this Transaction
to create actual or apparent trading activity in the Shares (or any
security convertible into or exchangeable for the Shares) or to
raise or depress or otherwise manipulate the price of the Shares (or
any security convertible into or exchangeable for the Shares).
(f) Board Authorization. Company represents that it is entering into the
Transaction, solely for the purposes stated in the board resolution
authorizing this Transaction and in its public disclosure. Company
further represents that there is no internal policy, whether written
or oral, of Company
10
that would prohibit Company from entering into any aspect of this
Transaction, including, but not limited to, the purchases of Shares
to be made pursuant hereto.
(g) Transfer or Assignment. Company may not transfer any of its rights
or obligations under this Transaction without the prior written
consent of Bear ▇▇▇▇▇▇▇. Bear ▇▇▇▇▇▇▇ may transfer or assign all or
any portion of its rights or obligations under this Transaction
without consent of the Company. If Bear ▇▇▇▇▇▇▇, in its sole
discretion, determines that its "beneficial ownership" (within the
meaning of Section 16 of the Exchange Act and rules promulgated
thereunder) exceeds 8 % or more of the Company's outstanding Shares
and, in its sole discretion, Bear ▇▇▇▇▇▇▇ is unable after its
commercially reasonable efforts to effect a transfer or assignment
on pricing terms and in a time period reasonably acceptable to Bear
▇▇▇▇▇▇▇ that would reduce its "beneficial ownership" to 7.5 %, Bear
▇▇▇▇▇▇▇ may designate any Exchange Business Day as an Early
Termination Date with respect to a portion (the "Terminated
Portion") of this Transaction, such that the its "beneficial
ownership" following such partial termination will be equal to or
less than 8%. In the event that Bear ▇▇▇▇▇▇▇ so designates an Early
Termination Date with respect to a portion of this Transaction, a
payment shall be made pursuant to Section 6 of the Agreement as if
(i) an Early Termination Date had been designated in respect of a
Transaction having terms identical to this Transaction and a Number
of Warrants equal to the Terminated Portion, (ii) the Company and
Bear ▇▇▇▇▇▇▇ shall both be Affected Parties with respect to such
partial termination and (iii) such Transaction shall be the only
Terminated Transaction. For the avoidance of doubt, if Bear ▇▇▇▇▇▇▇
assigns or terminates any Warrants hereunder, each Daily Number of
Warrants not previously settled shall be reduced proportionally, as
calculated by the Calculation Agent. Notwithstanding any other
provision in this Confirmation to the contrary requiring or allowing
Bear ▇▇▇▇▇▇▇ to purchase, sell, receive or deliver any shares or
other securities to or from Company, Bear ▇▇▇▇▇▇▇ may designate any
of its affiliates to purchase, sell, receive or deliver such shares
or other securities and otherwise to perform Bear ▇▇▇▇▇▇▇'▇
obligations in respect of this Transaction and any such designee may
assume such obligations. Bear ▇▇▇▇▇▇▇ shall be discharged of its
obligations to Company to the extent of any such performance.
(h) Amendment. Paragraph (i) of Section 9.7(b) of the Equity Definitions
is hereby amended for purposes of this Transaction by replacing
"two-year" with "90 calendar day".
(i) Damages. Neither party shall be liable under Section 6.10 of the
Equity Definitions for special, indirect or consequential damages,
even if informed of the possibility thereof.
(j) Dividends. If at any time during the period from and including the
Trade Date, to but excluding the Expiration Date, an ex-dividend
date for a cash dividend occurs with respect to the Shares (an
"Ex-Dividend Date"), and that dividend is greater than the Regular
Dividend on a per Share basis then the Calculation Agent will adjust
the Strike Price to preserve the fair value of the Warrant to Bear
▇▇▇▇▇▇▇ after taking into account such dividend. "Regular Dividend"
shall mean USD 0.00 per Share per quarter.
(k) Role of Agent. Each party agrees and acknowledges that (i) Calyon
("Agent"), has acted solely as agent and not as principal with
respect to this Transaction and (ii) Agent has no obligation or
liability, by way of guaranty, endorsement or otherwise, in any
manner in respect of this Transaction (including, if applicable, in
respect of the settlement thereof). Each party agrees it will look
solely to the other party (or any guarantor in respect thereof) for
performance of such other party's obligations under this
Transaction.
11
(l) Additional Provisions.
---------------------
(i) The first paragraph of Section 9.1(c) of the Equity Definitions
is hereby amended to read as follows: (c) `If "Calculation Agent
Adjustment" is specified as the method of adjustment in the
Confirmation of a Share Option Transaction, then following the
declaration by the Issuer of the terms of any Potential Adjustment
Event, the Calculation Agent will determine whether such Potential
Adjustment Event has a material effect on the theoretical value of
the relevant Shares or Warrants and, if so, will (i) make
appropriate adjustment(s), if any, to any one or more of:' and, the
sentence immediately preceding Section 9.1(c)(ii) is hereby amended
by deleting the words "diluting or concentrative".
(ii) Section 9.1(e)(vi) of the Equity Definitions is hereby amended
by deleting the words "other similar" between "any" and "event";
deleting the words "diluting or concentrative" and replacing them
with "material"; and adding the following words at the end of the
sentence "or Warrants".
(iii) Section 9.6(a)(ii) of the Equity Definitions is hereby amended
by (1) deleting from the third line thereof the word "or" after the
word "official" and inserting a comma therefor, and (2) deleting the
period at the end of subsection (ii) thereof and inserting the
following words therefor " or (C) at Bear ▇▇▇▇▇▇▇'▇ option, 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."
(iv) Notwithstanding Section 9.7 of the Equity Definitions,
everything in the first paragraph of Section 9.7(b) of the Equity
Definitions after the words "Calculation Agent" in the third line
through the remainder of such Section 9.7 shall be deleted and
replaced with the following:
"based on an amount representing the Calculation Agent's
determination of the fair value to Buyer of an option with terms
that would preserve for Buyer the economic equivalent of any payment
or delivery (assuming satisfaction of each applicable condition
precedent) by the parties in respect of the relevant Transaction
that would have been required after that date but for the occurrence
of the Merger Event, Nationalization, Insolvency or De-Listing
Event, as the case may be."
(m) No Collateral, Netting or Setoff. Notwithstanding any provision of
the Agreement or any other agreement between the parties to the
contrary, the obligations of the Company hereunder are not secured
by any collateral. Obligations under this Transaction shall not be
netted or set off against any other obligations of the parties,
whether arising under the Agreement, this Confirmation, under any
other agreement between the parties hereto, by operation of law or
otherwise. Any provision in the Agreement with respect to the
satisfaction of the Company's payment obligations to the extent of
Bear ▇▇▇▇▇▇▇'▇ payment obligations to the Company in the same
currency and in the same Transaction (including, without limitation
Section 2(c) thereof) shall not apply to the Company and, for the
avoidance of doubt, the Company shall fully satisfy such payment
obligations notwithstanding any payment obligation to the Company by
Bear ▇▇▇▇▇▇▇ in the same currency and in the same Transaction. In
calculating any amounts under Section 6(e) of the Agreement,
notwithstanding anything to the contrary in the Agreement, (i)
separate amounts shall be calculated as set forth in such Section
6(e) with respect to (a) this Transaction and (ii) all other
Transactions, and (2) such separate amounts shall be payable
pursuant to Section 6(d)(ii) of the Agreement.
(n) Alternative Calculations and Payment on Early Termination and on
Certain Extraordinary Events. If, in respect of this Transaction, an
amount is payable by the Company to Bear ▇▇▇▇▇▇▇, (i) pursuant to
Section 9.7 of the Equity Definitions (except in the event of a
Nationalization or Insolvency or a Merger Event, in each case, in
which the consideration to be paid to holders of
12
Shares consists solely of cash) or (ii) pursuant to Section 6(d)(ii)
of the Agreement (except in the event of an Event of Default in
which Company is the Defaulting Party or a Termination Event in
which Company is the Affected Party, other than an Event of Default
of the type described in Section 5(a)(iii), (v), (vi) or (vii) of
the Agreement or a Termination Event of the type described in
Section 5(b)(i), (ii), (iii), (iv),(v) or (vi) of the Agreement that
resulted from an event or events outside Company's control) (a
"Payment Obligation"), Company may, in its sole discretion, satisfy
any such Payment Obligation by the Share Termination Alternative (as
defined below) and shall give irrevocable telephonic notice to Bear
▇▇▇▇▇▇▇, confirmed in writing within one Currency Business Day,
between the hours of 9:00 a.m. and 4:00 p.m. New York local time on
the Merger Date, the date of the occurrence of the Nationalization
or Insolvency, or Early Termination Date, as applicable ("Notice of
Share Termination"). Upon Notice of Share Termination no later than
8:00 a.m. on the Exchange Business Day immediately following the
Merger Date, the date of the occurrence of the Nationalization or
Insolvency, or Early Termination Date, as applicable, the following
provisions shall apply:
Share Termination Alternative: Applicable and means that Company
shall deliver to Bear ▇▇▇▇▇▇▇ the
Share Termination Delivery Property
on the date (the "Share Termination
Payment Date") when the Payment
Obligation would otherwise be due,
subject to paragraph (o)(i) below, in
satisfaction, subject to paragraph
(o)(ii) below, of the Payment
Obligation in the manner reasonably
requested by Bear ▇▇▇▇▇▇▇ free of
payment.
Share Termination Delivery A number of Share Termination
Property: Delivery Units, as calculated by the
Calculation Agent, equal to the
Payment Obligation divided by the
Share Termination Unit Price. The
Calculation Agent shall adjust the
Share Termination Delivery Property
by replacing any fractional portion
of a security therein with an amount
of cash equal to the value of such
fractional security based on the
values used to calculate the Share
Termination Unit Price.
Share Termination Unit Price: The value to Bear ▇▇▇▇▇▇▇ of property
contained in one Share Termination
Delivery Unit on the date such Share
Termination Delivery Units are to be
delivered as Share Termination
Delivery Property, as determined by
the Calculation Agent in its
discretion by commercially reasonable
means and notified by the Calculation
Agent to Company at the time of
notification of the Payment
Obligation. In the case of a Private
Placement of Share Termination
Delivery Units that are Restricted
Shares (as defined below) as
13
set forth in paragraph (o)(i) below,
the Share Termination Unit Price
shall be determined by the discounted
price applicable to such Share
Termination Delivery Units. In the
case of a Registered Settlement of
Share Termination Delivery Units that
are Restricted Shares (as defined
below) as set forth in paragraph
(o)(ii) below, the Share Termination
Unit Price shall be the Settlement
Price on the Merger Date, the date of
the occurrence of the Nationalization
or Insolvency, or Early Termination
Date, as applicable.
Share Termination Delivery In the case of a Termination Event or
Unit: Event of Default, one Share or, in
the case of Nationalization or
Insolvency or a Merger Event, a unit
consisting of the number or amount of
each type of property received by a
holder of one Share (without
consideration of any requirement to
pay cash or other consideration in
lieu of fractional amounts of any
securities) in such Nationalization
or Insolvency or such Merger Event.
If a Share Termination Delivery Unit
consists of property other than cash
or New Shares, the Calculation Agent
will replace such property with cash,
New Shares or a combination thereof
as components of a Share Termination
Delivery Unit in such amounts, as
determined by the Calculation Agent
in its discretion by commercially
reasonable means, as shall have a
value equal to the value of the
property so replaced. If such Merger
Event involves a choice of
consideration to be received by
holders, such holder shall be deemed
to have elected to receive the
maximum possible amount of cash.
Other applicable provisions: If this Transaction is to be Share
Termination Settled, the provisions
of Sections 6.6, 6.7, 6.8, 6.9 and
6.10 (as modified above) of the
Equity Definitions will be
applicable, except that all
references in such provisions to
"Physically-Settled" shall be read as
references to "Share Termination
Settled" and all references to
"Shares" shall be read as references
to "Share Termination Delivery
Units". "Share Termination Settled"
in relation to this Transaction means
that Share Termination Settlement is
applicable to this Transaction.
(o) Registration/Private Placement Procedures. If, in the reasonable
opinion of Bear ▇▇▇▇▇▇▇, following any delivery of Shares or Share
Termination Delivery Property to Bear ▇▇▇▇▇▇▇ hereunder, such
Shares or Share Termination Delivery Property would be in the hands
of Bear ▇▇▇▇▇▇▇ subject to any applicable restrictions with respect
to any registration or qualification requirement or prospectus
delivery requirement for such Shares or Share Termination Delivery
Property pursuant to any applicable federal or state securities law
(including, without limitation, any such requirement arising under
Section 5 of the Securities Act as a result of such Shares or Share
Termination Delivery Property being "restricted securities", as
such term is defined in Rule 144 under the Securities Act, or as a
result of the sale of such Shares or Share Termination Delivery
Property being subject to paragraph (c) of Rule 145 under the
Securities Act) (such
14
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 waived by Bear ▇▇▇▇▇▇▇. Notwithstanding the foregoing, solely
in respect of any Daily Number of Warrants exercised or deemed
exercised on any Expiration Date, the Company shall elect, prior to
the first Settlement Date for the first Expiration Date, a Private
Placement Settlement or Registered Settlement for all deliveries of
Restricted Shares for all such Expiration Dates which election shall
be applicable to all Settlement Dates for such Daily Number of
Warrants and the procedures in clause (i) or clause (ii) below shall
apply for all such delivered Restricted Shares on an aggregate basis
commencing after the final Settlement Date for such Daily Number of
Warrants. The Calculation Agent shall make reasonable adjustments to
settlement terms and provisions under this Confirmation to reflect a
single Private Placement or Registered Settlement for such aggregate
Restricted Shares delivered hereunder.
(i) If the Company elects to settle the Transaction pursuant to
this clause (i) (a "Private Placement Settlement"), then
delivery of Restricted Shares by the Company shall be
effected in customary private placement procedures with
respect to such Restricted Shares reasonably acceptable to
Bear ▇▇▇▇▇▇▇; provided that the Company may not elect a
Private Placement Settlement if, on the date of its election,
it has taken, or caused to be taken, any action that would
make unavailable either the exemption pursuant to Section
4(2) of the Securities Act for the sale by the Company to
Bear ▇▇▇▇▇▇▇ (or any affiliate designated by Bear ▇▇▇▇▇▇▇) of
the Restricted Shares or the exemption pursuant to Section
4(1) or Section 4(3) of the Securities Act for resales of the
Restricted Shares by Bear ▇▇▇▇▇▇▇ (or any such affiliate of
Bear ▇▇▇▇▇▇▇). The Private Placement Settlement of such
Restricted Shares shall include customary representations,
covenants, blue sky and other governmental filings and/or
registrations, indemnities to Bear ▇▇▇▇▇▇▇, due diligence
rights (for Bear ▇▇▇▇▇▇▇ or any designated buyer of the
Restricted Shares by Bear ▇▇▇▇▇▇▇), opinions and
certificates, and such other documentation as is customary
for private placement agreements, all reasonably acceptable
to Bear ▇▇▇▇▇▇▇. In the case of a Private Placement
Settlement, Bear ▇▇▇▇▇▇▇ shall determine the appropriate
discount to the Share Termination Unit Price (in the case of
settlement of Share Termination Delivery Units pursuant to
paragraph (n) above) or any Settlement Price (in the case of
settlement of Shares pursuant to Section 2 above) applicable
to such Restricted Shares in a commercially reasonable manner
and appropriately adjust the amount of such Restricted Shares
to be delivered to Bear ▇▇▇▇▇▇▇ hereunder; provided that in
no event shall such number be greater than 49,619,010 (the
"Maximum Amount"). Notwithstanding the Agreement or this
Confirmation, the date of delivery of such Restricted Shares
shall be the Exchange Business Day following notice by Bear
▇▇▇▇▇▇▇ to the Company, of such applicable discount and the
number of Restricted Shares to be delivered pursuant to this
clause (i). For the avoidance of doubt, delivery of
Restricted Shares shall be due as set forth in the previous
sentence and not be due on the Share Termination Payment Date
(in the case of settlement of Share Termination Delivery
Units pursuant to paragraph (n) above) or on the Settlement
Date for such Restricted Shares (in the case of settlement of
Shares pursuant to Section 2 above).
In the event of a Private Placement, the Net Share Settlement
Amount or the Payment Obligation, respectively, shall be
deemed to be the Net Share Settlement Amount or the Payment
Obligation, respectively, plus an additional amount
(determined from time to time by the Calculation Agent in its
commercially reasonable judgment) attributable to interest
that would be earned on such Net Share Settlement Amount or
the Payment Obligation, respectively, (increased on a daily
basis to reflect the accrual of such interest and reduced
from time to time by the amount of net proceeds received by
Bear ▇▇▇▇▇▇▇ as
15
provided herein) at a rate equal to the open Federal Funds
Rate plus the Spread for the period from, and including, such
Settlement Date or the date on which the Payment Obligation
is due, respectively, to, but excluding, the related date on
which all the Restricted Shares have been sold and calculated
on an Actual/360 basis. The foregoing provision shall be
without prejudice to Bear ▇▇▇▇▇▇▇'▇ rights under the
Agreement (including, without limitation, Sections 5 and 6
thereof).
As used in this Section 9(o)(i), "Spread" means, with respect
to any Net Share Settlement Amount or Payment Obligation,
respectively, the credit spread over the applicable overnight
rate that would be imposed if Bear ▇▇▇▇▇▇▇ were to extend
credit to Company in an amount equal to such Net Share
Settlement Amount, all as determined by the Calculation Agent
using its commercially reasonable judgment as of the related
Settlement Date or the date on which the Payment Obligation
is due, respectively. Commercial reasonableness shall take
into consideration all factors deemed relevant by the
Calculation Agent, which are expected to include, among other
things, the credit quality of the Company (and any relevant
affiliates) in the then-prevailing market and the credit
spread of similar companies in the relevant industry and
other companies having a substantially similar credit
quality.
(ii) If the Company elects to settle the Transaction pursuant to
this clause (ii) (a "Registration Settlement"), then the
Company shall promptly (but in any event no later than the
beginning of the Resale Period) file and use its reasonable
best efforts to make effective under the Securities Act a
registration statement or supplement or amend an outstanding
registration statement in form and substance reasonably
satisfactory to Bear ▇▇▇▇▇▇▇, to cover the resale of such
Restricted Shares in accordance with customary resale
registration procedures, including covenants, conditions,
representations, underwriting discounts (if applicable),
commissions (if applicable), indemnities due diligence
rights, opinions and certificates, and such other
documentation as is customary for equity resale underwriting
agreements, all reasonably acceptable to Bear ▇▇▇▇▇▇▇. If
Bear ▇▇▇▇▇▇▇, in its sole reasonable discretion, is not
satisfied with such procedures and documentation Private
Placement Settlement shall apply. If Bear ▇▇▇▇▇▇▇ 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 of Share Termination Delivery Units pursuant to
paragraph (n) above or (y) the Settlement Date in respect of
the final Expiration Date for all Daily Number of Warrants)
and ending on the earliest of (i) the Exchange Business Day
on which Bear ▇▇▇▇▇▇▇ completes the sale of all Restricted
Shares 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 exceed the
Payment Obligation (as defined above), (ii) the date upon
which all Restricted Shares have been sold or transferred
pursuant to Rule 144 (or similar provisions then in force) or
Rule 145(d)(1) or (2) (or any similar provision then in
force) under the Securities Act and (iii) the date upon which
all Restricted Shares may be sold or transferred by a
non-affiliate pursuant to Rule 144(k) (or any similar
provision then in force) or Rule 145(d)(3) (or any similar
provision then in force) under the Securities Act. If the
Payment Obligation exceeds the realized net proceeds from
such resale, Company shall transfer to Bear ▇▇▇▇▇▇▇ by the
open of the regular trading session on the Exchange on the
Exchange Trading Day immediately following the last day of
the Resale Period the amount of such excess (the "Additional
Amount") in cash or in a number of Shares ("Make-whole
Shares") in an amount that, based on the
16
Settlement Price on the last day of the Resale Period (as if
such day was the "Valuation Date" for purposes of computing
such Settlement Price), has a dollar value equal to the
Additional Amount. The Resale Period shall continue to enable
the sale of the Make-whole Shares. If 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 the Company
deliver a number of Restricted Shares greater than the
Maximum Amount.
(iii) Without limiting the generality of the foregoing, Company
agrees that any Restricted Shares delivered to Bear ▇▇▇▇▇▇▇,
as purchaser of such Restricted Shares, (i) may be
transferred by and among Bear ▇▇▇▇▇▇▇ ▇▇▇▇▇ Bank and its
affiliates and Company shall effect such transfer without any
further action by Bear ▇▇▇▇▇▇▇ and (ii) after the minimum
"holding period" within the meaning of Rule 144(d) under the
Securities Act has elapsed after any Settlement Date for such
Restricted Shares, Company shall promptly remove, or cause
the transfer agent for such Restricted Shares to remove, any
legends referring to any such restrictions or requirements
from such Restricted Shares upon delivery by Bear ▇▇▇▇▇▇▇ (or
such affiliate of Bear ▇▇▇▇▇▇▇) to Company or such transfer
agent of seller's and broker's representation letters
customarily delivered by Bear ▇▇▇▇▇▇▇ in connection with
resales of restricted securities pursuant to Rule 144 under
the Securities Act, without any further requirement for the
delivery of any certificate, consent, agreement, opinion of
counsel, notice or any other document, any transfer tax
stamps or payment of any other amount or any other action by
Bear ▇▇▇▇▇▇▇ (or such affiliate of Bear ▇▇▇▇▇▇▇).
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.
(p) Limit on Beneficial Ownership. Notwithstanding any other provisions
hereof, Bear ▇▇▇▇▇▇▇ may not exercise any Warrant hereunder, and
Automatic Exercise shall not apply with respect thereto, to the
extent (but only to the extent) that such receipt would result in
Bear ▇▇▇▇▇▇▇ directly or indirectly beneficially owning (as such
term is defined for purposes of Section 13(d) of the Exchange Act)
at any time in excess of 9.0% of the outstanding Shares. Any
purported delivery hereunder shall be void and have no effect to
the extent (but only to the extent) that such delivery would result
in Bear ▇▇▇▇▇▇▇ directly or indirectly so beneficially owning in
excess of 9.0% of the outstanding Shares. If any delivery owed to
Bear ▇▇▇▇▇▇▇ hereunder is not made, in whole or in part, as a
result of this provision, the Company's obligation to make such
delivery shall not be extinguished and the Company shall make such
delivery as promptly as practicable after, but in no event later
than one Business Day after, Bear ▇▇▇▇▇▇▇ gives notice to the
Company that such delivery would not result in Bear ▇▇▇▇▇▇▇
directly or indirectly so beneficially owning in excess of 9.0% of
the outstanding Shares.
(q) Share Deliveries. The Company acknowledges and agrees that, to the
extent the holder of this Warrant is not then an affiliate and has
not been an affiliate for 90 days (it being understood that Bear
▇▇▇▇▇▇▇ will not be considered an affiliate under this Section 9(q)
solely by reason of its receipt of Shares pursuant to this
Transaction), and otherwise satisfies all holding period and other
requirements of Rule 144 of the Securities Act applicable to it,
any delivery of Shares or Share
17
Termination Property hereunder at any time after 2 years from the
Trade Date shall be eligible for resale under Rule 144(k) of the
Securities Act and the Company agrees to promptly remove, or cause
the transfer agent for such Shares or Share Termination Property,
to remove, any legends referring to any restrictions on resale
under the Securities Act from the Shares or Share Termination
Property. The Company further agrees, for any delivery of Shares or
Share Termination Property hereunder at any time after 1 year from
the Trade Date but within 2 years of the Trade Date, to the to the
extent the holder of this Warrant then satisfies the holding period
and other requirements of Rule 144 of the Securities Act, to
promptly remove, or cause the transfer agent for such Restricted
Share to remove, any legends referring to any such restrictions or
requirements from such Restricted Shares. Such Restricted Shares
will be de-legended upon delivery by Bear ▇▇▇▇▇▇▇ (or such
affiliate of Bear ▇▇▇▇▇▇▇) to the Company or such transfer agent of
customary seller's and broker's representation letters in
connection with resales of restricted securities pursuant to Rule
144 of the Securities Act, without any further requirement for the
delivery of any certificate, consent, agreement, opinion of
counsel, notice or any other document, any transfer tax stamps or
payment of any other amount or any other action by Bear ▇▇▇▇▇▇▇ (or
such affiliate of Bear ▇▇▇▇▇▇▇). The Company further agrees that
any delivery of Shares or Share Termination Delivery Property prior
to the date that is 1 year from the Trade Date, may be transferred
by and among Bear ▇▇▇▇▇▇▇ and its affiliates and the Company shall
effect such transfer without any further action by Bear ▇▇▇▇▇▇▇.
Notwithstanding anything to the contrary herein, the 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 the Company herein shall be deemed
modified to the extent necessary, in the opinion of outside counsel
of the Company, to comply with Rule 144 of the Securities Act,
including Rule 144(k) as in effect at the time of delivery of the
relevant Shares or Share Termination Property.
(r) Hedging Disruption Event. The occurrence of a Hedging Disruption
Event will constitute an Additional Termination Event under the
Agreement permitting Bear ▇▇▇▇▇▇▇ to terminate the Transaction,
with Counterparty as the sole Affected Party and the Transaction as
the sole Affected Transaction.
"Hedging Disruption Event" means with respect to Bear ▇▇▇▇▇▇▇, as
determined in its reasonable discretion, the inability or
impracticality, due to market illiquidity, illegality, lack of
hedging transactions, credit worthy market participants or other
similar events, to establish, re-establish or maintain any
transactions necessary or advisable to hedge, directly or
indirectly, the equity price risk of entering into and performing
under the Transaction on terms including costs reasonable to Bear
▇▇▇▇▇▇▇ or an affiliate in its reasonable discretion, including the
event that at any time Bear ▇▇▇▇▇▇▇ reasonably concludes that it or
any of its affiliates are unable to establish, re-establish or
maintain a full hedge of its position in respect of the Transaction
through share borrowing arrangements on terms including costs
deemed reasonable to Bear ▇▇▇▇▇▇▇ in its reasonable discretion. For
the avoidance of doubt, the parties hereto agree that if (i) Bear
▇▇▇▇▇▇▇ reasonably determines that it is unable to borrow Shares to
hedge its exposure with respect to the Transaction at a stock loan
rebate rate equal to or in excess of zero; or (ii) the prevailing
stock loan rebate rate for the Shares, as determined by the
Calculation Agent, is less than zero, an Additional Termination
Event under the Agreement shall occur with Counterparty as the sole
Affected Party and the Transaction as the sole Affected
Transaction.
(s) Gaming Laws. If, in connection with the Transaction or in
connection with acquiring, establishing, re-establishing,
substituting, maintaining, unwinding or disposing of any
transactions or assets Bear ▇▇▇▇▇▇▇ or any of its affiliates in its
reasonable discretion deems necessary or desirable to hedge the
equity price risk of entering into and performing its obligations
with respect to the Transaction, or in
18
performing such obligations themselves, or in connection with
holding any interest that would be considered an ownership interest
in the Company's securities for purposes of any gaming law, rule or
regulation, Bear ▇▇▇▇▇▇▇ or any of its affiliates determines in its
sole good faith discretion that it is, or is reasonably likely to
be, (A) in violation of any gaming law, rule or regulation, (B)
obligated to register with or provide notification or information
to any gaming authority, and that such registration or notification
or the provision of such information, when viewed in the aggregate
for all relevant gaming authorities, would be Unduly Burdensome, or
(C) incurring additional risk, liability or cost as a result of
gaming laws or rules or regulations (except to the extent such
costs have been paid or reimbursed by the Company, and except for
up to $250,000 of costs that have not yet been paid or reimbursed
by the Company but are paid or reimbursed by the Company within 60
days following the Company's receipt of an invoice therefor); then,
subject to the third following paragraph, such event shall
constitute an Additional Termination Event applicable to this
Transaction and, with respect to such event, (i) the Company shall
be deemed to be the sole Affected Party and Bear ▇▇▇▇▇▇▇ shall be
deemed to be the party that is not the Affected Party and (ii) Bear
▇▇▇▇▇▇▇ shall be the party entitled to designate an Early
Termination Date pursuant to Section 6(b) of the Agreement solely
with respect to this Transaction. The Company shall indemnify Bear
▇▇▇▇▇▇▇ and its affiliates on an as-incurred basis for any costs,
expenses, losses or liabilities or losses incurred by them in
connection with any gaming law, rule or regulation (including, for
the avoidance of doubt, any filing fees or costs, legal fees and
regulatory investigation fees), in each case incurred in connection
with this Transaction.
Any determination made by Bear ▇▇▇▇▇▇▇ in respect of clause (A) or
(C), or (B) (as to the obligation to register or provide
notification or information), above shall be made on the advice of
counsel, and any determination made by Bear ▇▇▇▇▇▇▇ in respect of
clause (C) above shall also be made after consultation with the
Company.
"Unduly Burdensome" means (i) any registration or notification or
provision of information which is more burdensome to Bear ▇▇▇▇▇▇▇
or any of its affiliates or any of their employees, officers,
directors and agents in any particular instance than any of the
Known Filings, (ii) registrations, notifications or provision of
information to in excess of 20 jurisdictions, (iii) any obligation
to disclose information which Bear ▇▇▇▇▇▇▇ and/or any of its
affiliates is not otherwise required to disclose to the general
public in generally available filings (other than information that
is readily and generally publicly available) or to disclose any
information earlier or more frequently than it otherwise does or
would otherwise be obligated to do, or (iv) any registration of, or
provision of information by or in respect of, any employee, officer
or director or agents of Bear ▇▇▇▇▇▇▇ or any of its affiliates,
other than the provision of such information as Bear ▇▇▇▇▇▇▇ and/or
any of its affiliates is otherwise required to disclose to the
general public in generally available filings and other readily and
generally publicly available information, or (v) any requirement in
respect of the gaming laws of any jurisdiction which, in the sole
good faith discretion of Bear ▇▇▇▇▇▇▇, would cause undue hardship
on, injury to the business or reputation of, or disclosure of
confidential information of Bear ▇▇▇▇▇▇▇ or any of its affiliates
or any of their employees, officers, directors and agents. "Known
Filings" means initial filings with the States of New Jersey and
West Virginia in form and substance contemplated by Bear ▇▇▇▇▇▇▇ as
of December 1, 2004.
Prior to declaring an Additional Termination Event with respect to
the events described in clause (B) or (C) above, Bear ▇▇▇▇▇▇▇ shall
use commercially reasonable efforts to transfer or assign all or a
portion of this Transaction to any third party or parties each with
a rating for its long term, unsecured and unsubordinated
indebtedness of A+ or better by Standard and Poor's Rating Group,
Inc. or its successor ("S&P"), or A1 or better by ▇▇▇▇▇'▇ Investor
Service, Inc. or its successor ("Moody's") or, if either S&P or
Moody's ceases to rate such debt, at least an equivalent rating or
better by a substitute agency rating mutually agreed by the Company
and Bear ▇▇▇▇▇▇▇. If, in the discretion of Bear ▇▇▇▇▇▇▇, Bear
▇▇▇▇▇▇▇ is unable to effect such transfer or assignment after its
19
commercially reasonable efforts on pricing terms reasonably
acceptable to Bear ▇▇▇▇▇▇▇ and within a time period reasonably
acceptable to Bear ▇▇▇▇▇▇▇, Bear ▇▇▇▇▇▇▇ may designate any Exchange
Business Day as an Early Termination Date.
Notwithstanding any provision of the Agreement or any other
agreement between the parties to the contrary, if, with respect to
any Transaction relating to Shares under another 2002 ISDA Master
Agreement between Bear ▇▇▇▇▇▇▇ and the Company (any such other
Transaction, an "Other Transaction"), Bear ▇▇▇▇▇▇▇ or its successor
or assign designates an Early Termination Date thereunder due to
the occurrence of an Additional Termination Event substantially
similar to the Additional Termination Event set forth in this
Section 9(s), and Bear ▇▇▇▇▇▇▇ does not deliver a notice
designating an Early Termination Date in respect of this
Transaction due to the occurrence of the Additional Termination
Event set forth in this Section 9(s) within 5 Exchange Business
Days of the date of delivery of the notice designating an Early
Termination Date in respect of any Other Transaction, then the
Company has the right to deliver a written notice to Bear ▇▇▇▇▇▇▇
instructing Bear ▇▇▇▇▇▇▇ to designate an Early Termination Date
under the Agreement with respect to this Transaction. Bear ▇▇▇▇▇▇▇
hereby agrees to comply with such instruction and, for the
avoidance of doubt, such event shall constitute an Additional
Termination Event applicable solely with respect to this
Transaction and the Company shall be deemed to be the sole Affected
Party and Bear ▇▇▇▇▇▇▇ shall be deemed to be the party that is not
the Affected Party. For the avoidance of doubt, the parties hereto
agree that the occurrence of any event which constitutes an
Additional Termination Event as set forth in this Section 9(s) will
also constitute an Additional Termination Event with respect to any
Other Transactions the confirmation for which contains an
Additional Termination Event substantially similar to that set
forth in this Section 9(s), such that Bear ▇▇▇▇▇▇▇ has the right to
declare an Additional Termination Event in respect of such Other
Transaction and this Transaction.
(t) Governing Law. New York law (without reference to choice of law
doctrine).
(u) Waiver of Jury Trial. Each party waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by
jury in respect of any suit, action or proceeding relating to this
Transaction. Each party (i) certifies that no representative, agent
or attorney of the other party has represented, expressly or
otherwise, that such other party would not, in the event of such a
suit, action or proceeding, seek to enforce the foregoing waiver
and (ii) acknowledges that it and the other party have been induced
to enter into this Transaction, as applicable, by, among other
things, the mutual waivers and certifications provided herein.
(v) Tax Disclosure. Company acknowledges and understands that, in
connection with certain disclosure and list maintenance regulations
promulgated by the Internal Revenue Service (the "IRS"), Bear
▇▇▇▇▇▇▇ will retain documents related to this Transaction and other
information. The relevant regulations cover many transactions,
including certain transactions that create book-tax differences.
Upon request from the IRS, Bear ▇▇▇▇▇▇▇ expects to provide such
documents and information to the IRS. In addition, Company shall
consult with its tax advisors with respect to any disclosure
obligations that Company may have.
20
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning it to SEP Documentation
Group, Bear, ▇▇▇▇▇▇▇ & Co. Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, or by
fax on ▇▇▇-▇▇▇-▇▇▇▇.
Very truly yours,
Bear, ▇▇▇▇▇▇▇ International
Limited
By: _________________________
Authorized Signatory
Name:
Accepted and confirmed
as of the Trade Date:
Scientific Games Corporation
By:____________________________
Authorized Signatory
Name:
ANNEX A
PRICING GRID
Execution Price Premium Execution Price Premium
--------------- ------- --------------- -------
$22.00 $1,407,265.00 $24.00 $1,810,504.50
$22.10 $1,426,331.00 $24.10 $1,831,846.00
$22.20 $1,445,515.00 $24.20 $1,853,296.50
$22.30 $1,464,816.50 $24.30 $1,874,856.00
$22.40 $1,484,235.50 $24.40 $1,896,523.50
$22.50 $1,503,771.00 $24.50 $1,918,298.00
$22.60 $1,523,423.00 $24.60 $1,940,180.50
$22.70 $1,543,190.50 $24.70 $1,962,169.00
$22.80 $1,563,073.50 $24.80 $1,984,264.00
$22.90 $1,583,071.50 $24.90 $2,006,465.00
$23.00 $1,603,183.50 $25.00 $2,028,771.00
$23.10 $1,623,410.00 $25.10 $2,051,182.00
$23.20 $1,643,750.00 $25.20 $2,073,697.50
$23.30 $1,664,203.00 $25.30 $2,096,317.00
$23.40 $1,684,769.00 $25.40 $2,119,039.50
$23.50 $1,705,447.00 $25.50 $2,141,865.50
$23.60 $1,726,236.50 $25.60 $2,164,793.50
$23.70 $1,747,138.00 $25.70 $2,187,824.00
$23.80 $1,768,149.50 $25.80 $2,210,956.00
$23.90 $1,789,274.00 $25.90 $2,234,189.00