EXHIBIT 3
FORWARD CONTRACT AGREEMENT
Between
AT&T BROADBAND CSC HOLDINGS, INC.
As Counterparty,
and
EQUITY SECURITIES TRUST I
Dated as of
October 23, 2001
FORWARD CONTRACT AGREEMENT
THIS AGREEMENT is made as of this October 23, 2001 among AT&T Broadband
CSC Holdings, Inc., a corporation organized under the laws of the State of
Delaware ("Counterparty") and Equity Securities Trust I, a business trust
organized under the laws of the State of Delaware under and by virtue of an
amended and restated declaration of trust, dated as of October 16, 2001 (the
"Declaration of Trust") (such trust and the trustees thereof acting in their
capacity as such being referred to herein as the "Trust").
WHEREAS, Counterparty owns shares of Cablevision NY Group Class A common
stock, $.01 par value (the "Common Stock") of Cablevision Systems Corporation,
a Delaware corporation (including its successors) (the "Company");
WHEREAS, Trust has filed with the Securities and Exchange Commission a
registration statement contemplating the offering of up to 26,918,195 Equity
Trust Securities (the "Equity Trust Securities"), the terms of which
contemplate delivery by the Trust to the holders thereof of a number of shares
of Common Stock (or, if the Counterparty exercises its cash settlement option,
cash in lieu thereof), on, or shortly after, November 15, 2004 (as further
defined herein, the "Exchange Date");
WHEREAS, in exchange for certain consideration to be paid by the Trust
hereunder, the Trust and Counterparty desire to provide for the future
acquisition and delivery of all or a portion of the aggregate number of shares
of Common Stock, or the cash value thereof, contemplated to be delivered by the
Trust in respect of the Equity Trust Securities on the Exchange Date, at a
price to be established under this Agreement and such other agreements;
WHEREAS, Counterparty has agreed to enter into a Collateral Agreement (the
"Collateral Agreement") dated as of the date hereof, among the Trust,
Counterparty and The Bank of New York, as collateral agent (the "Collateral
Agent"), to grant the Trust a security interest in the shares of Common Stock
specified therein and in certain other circumstances certain other collateral
to secure the obligations of Counterparty hereunder;
WHEREAS, the Trust has agreed, pursuant to an underwriting agreement,
dated October 17, 2001 (the "Underwriting Agreement"), among the Trust,
Counterparty, the Company, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc., Bear, ▇▇▇▇▇▇▇ & Co. Inc.
and ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated (each an "Underwriter",
and collectively, the "Underwriters"), to issue and sell to the Underwriters an
aggregate of 23,407,127 Equity Trust Securities (together with the 2 Equity
Trust Securities purchased by ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc. in connection with the
organization of the Trust, the "Initial Equity Trust Securities") and, at the
Underwriters' option, up to 3,551,068 additional Equity Trust Securities (the
"Additional Equity Trust Securities") to cover over-allotments, if any.
NOW, THEREFORE, in consideration of their mutual covenants herein
contained, the parties hereto, intending to be legally bound, hereby mutually
covenant and agree as follows:
DEFINITIONS
As used herein, the following words and phrases shall have the following
meanings:
"Acceleration Date" has the meaning provided in Article VII.
"Acceleration Value" has the meaning provided in Article VII.
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Additional Equity Trust Securities" has the meaning provided in the
recitals of this Agreement.
"Additional Contract Price" has the meaning provided in Section 1.2(b).
"Additional Shares" has the meaning provided in Section 1.1(b).
"Additional STRIPS" means the U.S. Treasury obligations purchased by the
Trust for settlement on the Option Closing Date.
"Adjustment Event" has the meaning provided in Section 6.2.
"Administrator" means The Bank of New York, administrator for the Trust
under the Administration Agreement dated as of October 23, 2001, or any
successor thereto.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a partner in, or a trustee, settlor, beneficiary, member, manager,
director or officer of, such Person and, with respect to any Person that is a
natural person, further includes such Person's immediate family members,
including his father, mother, spouse and children, the spouses of his children,
his siblings and their spouses and children. For purposes of this definition,
"control" (including the terms "controlled by" or "under common control with")
means, as to any Person, the possession, direct or indirect, of the power to
vote ten percent or more of the corporate or beneficial interests of such
Person (or of the securities having ordinary voting power for the election of
directors of such Person), or the power to direct or cause the direction of the
management and policies of such Person, whether through ownership of voting
securities or by contract or otherwise.
"Bankruptcy Code" has the meaning provided in Section 8.7.
"Business Day" means any day that is not a Saturday, a Sunday or a day on
which the NYSE or banking institutions or trust companies in The City of New
York are authorized or obligated by law or executive order to close.
"Calculation Period" means any period of Trading Days for which an average
security price must be determined pursuant to this Agreement.
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"Cash Delivery Option" has the meaning provided in Section 1.3(d).
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of
deposit with maturities of six months or less from the date of the acquisition,
bankers' acceptances with maturities not exceeding six months and overnight
bank deposits, in each case with any domestic commercial bank having capital
and surplus in excess of $500 million and a ▇▇▇▇▇▇▇▇ Bank Watch Rating of "B"
or better, (iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (ii) above entered
into with any financial institution meeting the qualifications specified in
clause (iii) above, (v) commercial paper having the highest rating obtainable
from ▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's Ratings Group and in
each case maturing within six months after the date of acquisition and (vi)
money market funds at least 95% of the assets of which constitute Cash
equivalents of the kinds described in clauses (i)-(v) of this definition.
"Closing Price" means, for any security on any date of determination, (i)
the closing sale price (or, if no closing price is reported, the last reported
sale price) of such security (regular way) on the NYSE on such date, (ii) if
such security is not listed for trading on the NYSE on any such date, as
reported in the composite transactions for the principal United States
securities exchange on which such security is so listed, (iii) if such security
is not so listed on a United States national or regional securities exchange,
as reported by The NASDAQ Stock Market, (iv) if such security is not so
reported, the last quoted bid price for such security in the over-the-counter
market as reported by the National Quotation Bureau or similar organization, or
(v) if such security is not so quoted, the average of the mid-point of the last
bid and ask prices for such security from at least three nationally recognized
investment banking firms that the Administrator selects for such purpose. The
Closing Price as determined pursuant to the foregoing shall be subject to
adjustment in certain circumstances as provided in Section 6.1(c).
"Collateral" has the meaning provided in the Collateral Agreement.
"Collateral Agent" has the meaning provided in the recitals of this
Agreement.
"Collateral Agreement" has the meaning provided in the recitals of this
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" has the meaning provided in the recitals of this Agreement.
"Company" has the meaning provided in the recitals of this Agreement.
"Counterparty" has the meaning provided in the introductory paragraph of
this Agreement.
"Custodian" means The Bank of New York, custodian for the Trust under the
Custodian Agreement dated as of October 2, 2001, or any successor thereto.
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"Declaration of Trust" has the meaning provided in the introductory
paragraph of this Agreement.
"Dilution Adjustment" means any fraction or number by which the Exchange
Rate shall be multiplied pursuant to Section 6.1(a) or (b) or by which Closing
Prices may be divided pursuant to Section 6.1(c).
"Equity Trust Securities" has the meaning provided in the recitals of this
Agreement.
"Event of Default" has the meaning provided in Article VII.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Exchange Date" means November 15, 2004, subject to (i) extension by
Counterparty pursuant to Section 1.3(f) and (ii) subsequent acceleration by
Counterparty pursuant to Section 1.3(g).
"Exchange Price" means the average Closing Price per share of Common Stock
on the 20 Trading Days immediately prior to (but not including) the Exchange
Date; provided, however, that if there are not 20 Trading Days for the Common
Stock occurring later than the 60th calendar day immediately prior to, but not
including, the Exchange Date, Exchange Price shall mean the market value per
share of the Common Stock as of the Exchange Date as determined by a nationally
recognized independent investment banking firm retained for this purpose by the
Administrator; provided, further, that for purposes of determining the payment
required upon cash settlement of this Agreement in connection with a Rollover
Offering, "Exchange Price" means the Closing Price per share of Common Stock on
the Trading Day immediately preceding the date that the Rollover Offering is
priced (the "Pricing Date") or, if the Rollover Offering is priced after 4:00
p.m., New York City time, on the Pricing Date, the Closing Price per share of
Common Stock on the Pricing Date. The Exchange Price as determined pursuant to
the foregoing shall be subject to adjustment in certain circumstances as
provided in Section 6.1(c).
"Exchange Rate" has the meaning provided in Section 1.1(c).
"Extension Amount" means the product of (i) $0.5858 multiplied by (ii) the
sum of the number of Initial Equity Trust Securities plus the number of
Additional Equity Trust Securities multiplied by (iii) a fraction, the
numerator of which is the sum of the Firm Share Base Amount and the denominator
of which is the number of Initial Equity Trust Securities and Additional Equity
Trust Securities.
"Firm Payment Date" has the meaning provided in Section 1.3(a).
"Firm Contract Price" has the meaning provided in Section 1.2(a).
"Firm Share Base Amount" has the meaning provided in Section 1.1(a).
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"Firm Shares" has the meaning provided in Section 1.1(a).
"Forward Contract Characterization" has the meaning provided in Section
5.2(a).
"Independent Dealers" has the meaning provided in Article VII.
"Initial Equity Trust Securities" has the meaning provided in the recitals
of this Agreement.
"Initial Price" has the meaning provided in Section 1.1(c).
"Lien" has the meaning provided in the Collateral Agreement.
"Market Price" means, as of any date of determination, the average Closing
Price per share of Common Stock on the 20 Trading Days immediately prior to
(but not including) the date of determination; provided, however, that if there
are not 20 Trading Days for the Common Stock occurring later than the 60th
calendar day immediately prior to, but not including, such date, the Market
Price shall mean the market value per share of Common Stock as of such date as
determined by a nationally recognized investment banking firm retained for such
purpose by the Administrator.
"NYSE" means the New York Stock Exchange, Inc.
"Officer" shall mean the manager, trustee, president, any vice president,
the chief financial officer, the treasurer or the secretary of a Person.
"Officer's Certificate" means a certificate signed by an Officer of a
Person.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trust.
"Option Closing Date" means the settlement dates for the Additional Equity
Trust Securities under Section 5 of the Underwriting Agreement.
"Ordinary Cash Dividend" means, with respect to any consecutive 365-day
period, any dividend with respect to Common Stock paid in cash to the extent
that the amount of such dividend, together with the aggregate amount of all
other dividends on the Common Stock paid in cash during such 365-day period,
does not exceed on a per share basis 10% of the average of the Closing Prices
of the Common Stock over such 365-day period; provided that, for purposes of
the foregoing definition, the amount of cash dividends paid on a per share
basis shall be appropriately adjusted to reflect the occurrence during such
period of any event described in Article VI.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
limited liability company, joint venture or other entity, or a government or
any political subdivision or agency thereof.
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"Reimbursement Agreement" means the reimbursement agreement, to be dated
as of October 23, 2001 among ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc., AT&T Broadband CSC
Holdings, Inc. and AT&T Broadband CSC II, Inc.
"Reported Securities" has the meaning provided in Section 6.2.
"Rollover Offering" means a reoffering or refinancing of the Equity Trust
Securities effected by the Counterparty not earlier than November 8, 2004 by
means of a completed public offering or offerings or another similar offering
(which may include one or more exchange offers), by or on behalf of such
Counterparty.
"Rollover Offering Election" means a written election made in accordance
with Section 1.3(e).
"Share Components" means the numbers of shares of Common Stock per Equity
Trust Security specified in clauses (i), (ii) and (iii) of Section 1.1(c).
"Threshold Appreciation Price" has the meaning provided in Section 1.1(c).
"Trading Day" means, with respect to any security the Closing Price of
which is being determined, a day on which such security (A) is not suspended
from trading on any national or regional securities exchange or association or
over-the-counter market at the close of business and (B) has traded at least
once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of such
security.
"Transaction Value" has the meaning provided in Section 6.2.
"Trust" has the meaning provided in the introductory paragraph of this
Agreement.
"Underwriter" and "Underwriters" have the meaning provided in the recitals
of this Agreement.
"Underwriting Agreement" has the meaning provided in the recitals of this
Agreement.
ARTICLE I
PAYMENT AND DELIVERY
1.1 Payment and Delivery.
(a) Firm Shares. Upon the terms and subject to the conditions of this
Agreement, the Trust agrees to pay Counterparty the Firm Contract Price (as
defined in Section 1.2(a)) on the Firm Payment Date (as defined in Section
1.3(a)), in exchange the Counterparty agrees to deliver to the Trust on the
Exchange Date the number of shares of Common Stock (the
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"Firm Shares") equal to the product of (x) 20,991,124 (the "Firm Share Base
Amount") multiplied by (y) the Exchange Rate (as defined in Section 1.1(b)).
(b) Exchange Rate. The "Exchange Rate" shall be determined in accordance
with the following formula, subject to adjustment as a result of certain events
as provided in Article VI: (i) if the Exchange Price is greater than $43.981
(the "Threshold Appreciation Price"), 0.8197, (ii) if the Exchange Price is
less than or equal to the Threshold Appreciation Price but greater than $36.05
(the "Initial Price"), a fraction (rounded upward or downward to the nearest
1/10,000th or, if there is not a nearest 1/10,000th, to the next higher
1/10,000th) equal to the Initial Price divided by the Exchange Price and (iii)
if the Exchange Price is less than or equal to the Initial Price, 1.
1.2 Contract Price.
(a) Firm Contract Price. The price for the Firm Shares (the "Firm Contract
Price") shall be $28.1198 in cash per share of Common Stock multiplied by the
Firm Share Base Amount.
1.3 Payment for and Delivery of Firm Shares.
(a) Firm Payment Date. Upon the terms and subject to the conditions of
this Agreement, the Trust shall deliver to Counterparty the Firm Contract Price
on October 23, 2001 (the "Firm Payment Date") at the offices of Shearman &
Sterling, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other
place as shall be agreed upon by the Trust and Counterparty, paid by wire
transfer of Federal (immediately available same-day) funds to an account
designated by Counterparty, against delivery by Counterparty to the Collateral
Agent of the number of shares of Common Stock and/or cash, securities and other
property necessary to comply with Counterparty's obligations under the
Collateral Agreement.
(b) Delivery of Firm Shares.
(i) Except as otherwise provided in this Agreement, Counterparty
agrees to deliver the Firm Shares to the Trust on the Exchange Date.
Counterparty shall be deemed to have instructed the Collateral Agent to
deliver to the Custodian, for the account of the Trust, shares of Common
Stock then held by the Collateral Agent as collateral under the Collateral
Agreement, in an amount equal to the number of Firm Shares, rounded down
to the nearest whole number. Instead of any fractional shares of Common
Stock that would otherwise be deliverable (prior to rounding) to the Trust
at the Exchange Date, Counterparty agrees to make a cash payment in
respect of such fractional shares of Common Stock in an amount equal to
the value thereof at the Exchange Price. Notwithstanding the foregoing, if
an Adjustment Event shall have occurred prior to the Exchange Date then,
in lieu of the foregoing, Counterparty shall be deemed to have instructed:
(A) in the case of any cash required to be delivered on the Exchange Date
as provided in Section 6.2, the Collateral Agent to deliver such cash by
wire transfer Federal (immediately available same-day) funds to an account
designated by the Trust; and (B) in the case of any Reported Securities
required to be delivered by Counterparty in lieu of cash as provided in
Section 6.2, the Collateral Agent to deliver to the Custodian, for the
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account of the Trust, a specified number of Reported Securities then held
as collateral under the Collateral Agreement, as provided in Section 6(g)
of the Collateral Agreement.
(ii) In the event that by the Exchange Date any substitute collateral
delivered to the Collateral Agent pursuant to Section 6(b) of the
Collateral Agreement has not been replaced by shares of Common Stock
(and/or, after an Adjustment Event, cash or Reported Securities)
sufficient to meet Counterparty's obligations hereunder, delivery shall be
effected by delivery by the Collateral Agent to the Custodian, for the
account of the Trust, of the market value of the shares of Common Stock
required to be delivered hereunder, in the form of any shares of Common
Stock then pledged by Counterparty plus cash generated from the
liquidation of U.S. Government obligations then pledged by Counterparty
(and/or, after an Adjustment Event, the market value of the alternative
consideration required to be delivered hereunder, in the form of any
Reported Securities then pledged, plus any cash then pledged, plus cash
generated from the liquidation of U.S. Government obligations then
pledged). In such event, Counterparty shall be deemed to have instructed
the Collateral Agent to liquidate and turn into cash the U.S. Government
obligations then pledged by Counterparty to the extent necessary to
satisfy Counterparty's obligations hereunder.
(iii) Certificates representing Common Stock (or Reported Securities)
in registered form that are part of the Firm Shares shall be registered in
the Trust's name or in the name of a depositary or a nominee of a
depositary as requested by the Trust, unless such Common Stock (and/or
Reported Securities) is represented by one or more global certificates
registered in the name of a depositary or a nominee of a depositary or are
book entry securities, in which event the Trust's interest in such
securities shall be noted in a manner satisfactory to the Trust and its
counsel.
(iv) Counterparty's right to deliver (or cause to be delivered) to
the Trust hereunder Common Stock and Reported Securities shall be
conditioned upon such Common Stock and Reported Securities to be so
delivered being transferable (i) by Counterparty to the Trust in
accordance with the provisions hereof and in accordance with the terms of
any agreement among shareholders applicable to such Common Stock or
Reported Securities, and (ii) by the Trust, following receipt from
Counterparty, without any restrictions not generally applicable to all
holders of such Common Stock or Reported Securities, as the case may be.
If the conditions set forth in the preceding sentence shall not be
satisfied with respect to any Common Stock or Reported Securities to be
delivered by Counterparty, then, notwithstanding the provisions hereof,
Counterparty shall exercise the Cash Delivery Option.
(d) Cash Delivery Option. At its option, Counterparty may deliver to the
Trust on the Exchange Date (even if the Exchange Date is not extended pursuant
to Section 1.3(f)), in lieu of the Firm Shares, an amount in cash equal to,
subject to adjustment as provided in Section 6.2, the Exchange Price of the
Firm Shares (the "Cash Delivery Option"), paid by wire transfer to an account
designated by the Trust, in Federal (immediately available same-day) funds;
provided that in connection with a Rollover Offering which is consummated and
as to which Counterparty has duly elected the Cash Delivery Option and has duly
made a Rollover Offering Election, such cash payment shall be made no later
than the fifth Business Day after the
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Exchange Date. Counterparty may elect the Cash Delivery Option in respect of
all, but not less than all, of the Firm Shares and may do so by notice to the
Trust, the Collateral Agent and the Custodian not less than 30 Business Days
prior to the Exchange Date. If Counterparty elects the Cash Delivery Option and
so notifies the Trust, the Trust shall promptly notify The Depository Trust
Company and publish a notice in a daily newspaper of national circulation
stating whether the holders of Equity Trust Securities will receive shares of
Common Stock or cash (and specifying whether any such cash settlement is being
made in connection with a Rollover Offering).
(e) Rollover Offering Election. The provisions of Sections 1.3(f) and (g)
shall be applicable if Counterparty has made a Rollover Offering Election by
written notice given to the Trust not earlier than August 16, 2004 and not
later than October 15, 2004. Any Rollover Offering Election made by
Counterparty] (i) shall be irrevocable once made, and (ii) may be made only if
Counterparty] has also elected, or simultaneously elects, the Cash Delivery
Option.
(f) Extension of Exchange Date. At its option, Counterparty may, by notice
given to the Trust not earlier than August 16, 2004 and not later than October
15, 2004 elect to extend the Exchange Date to February 15, 2005. Any such
extension shall be effective (i) only in connection with a Rollover Offering as
to which Counterparty shall have duly made a Rollover Offering Election and
(ii) only if Counterparty shall have delivered to the Collateral Agent, in
pledge under the Collateral Agreement, (A) direct obligations of the United
States of America which through the scheduled payment of principal and interest
in accordance with their terms will provide, not later than one Business Day
before February 15, 2005, cash in an amount equal to not less than the
Extension Amount (the "Additional Government Securities") or (B) an equivalent
amount of Cash Equivalents. Unless Counterparty has duly elected, in connection
with a Rollover Offering, to accelerate the Exchange Date in accordance with
Section 1.3(g) hereof, Counterparty shall on such extended Exchange Date pay to
the Trust by wire transfer of Federal (immediately available same-day) funds an
amount equal to the Extension Amount.
In addition, Counterparty hereby covenants and agrees to take all other
actions necessary to cause the Trust to be a protected purchaser of such
Additional Government Securities, within the meaning of Article 8 of the New
York Uniform Commercial Code, as amended.
If Counterparty elects to extend the Exchange Date and so notifies the
Trust, the Trust shall promptly notify the Depository Trust Company and publish
a notice in a daily newspaper of national circulation stating that the
Counterparty has elected to extend the Exchange Date.
(g) Acceleration of Exchange Date. At any time after the Exchange Date has
been extended pursuant to Section 1.3(f) hereof, Counterparty may, at its
option but only in connection with the consummation of a Rollover Offering,
accelerate the Exchange Date to any date on or after November 15, 2004, by
notice to the Trust not later than 10:00 a.m. on the date to which the Exchange
Date is accelerated; provided that such acceleration shall be effective only if
at or prior to 10:00 a.m. on such accelerated Exchange Date, Counterparty has
paid to the Trust, by wire transfer to an account designated by the Trust, in
Federal (immediately available same-day) funds, an amount not less than (i) the
Extension Amount multiplied by (ii) the number
10
of days in the period from (and including) November 15, 2004 to (but excluding)
the Exchange Date as accelerated, calculated on the basis of a 360 day year
consisting of twelve 30-day months divided by (iii) 90.
If Counterparty elects to accelerate the Exchange Date and so notifies the
Trust, the Trust shall provide notice of such election to the holders of the
Equity Trust Securities not later than the accelerated Exchange Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COUNTERPARTY
Counterparty represents and warrants to the Trust that each representation
and warranty made by Counterparty in Section 3 of the Underwriting Agreement is
true and correct on the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants to Counterparty that:
(a) each representation and warranty made by the Trust in Section 1 of the
Underwriting Agreement is true and correct on the date hereof; and
(b) it acknowledges that the Common Stock delivered pursuant to this
Agreement and the Collateral Agreement may contain one or more of the type of
legends referred to in Section 3(e) of the Collateral Agreement (which legend
(i) will not be applicable to the delivery of any such Common Stock to the
Trust pursuant to this Agreement and the Collateral Agreement or to the
delivery of any such Common Stock by the Trust to the holders of Equity Trust
Securities pursuant to the Equity Trust Securities and (ii) will be removed at
the request of the Collateral Agent to the depository for the Common Stock
prior to any such delivery to holders of Equity Trust Securities).
ARTICLE IV
CONDITIONS TO THE TRUST'S OBLIGATIONS
(a) The obligation of the Trust to deliver the Firm Contract Price on the
Firm Payment Date is subject to the satisfaction of the following conditions:
(i) the purchase by the Underwriters of the Equity Trust Securities
pursuant to the Underwriting Agreement shall have been consummated as
contemplated under the Underwriting Agreement;
Date;
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(ii) the representations and warranties of the Counterparty contained
in Article II hereof shall be true and correct as of the Firm Payment
(iii) the Collateral Agreement shall have been executed by the
Counterparty and the delivery of the Collateral thereunder shall have been
made; and
(iv) the Reimbursement Agreement shall have been executed by the
Counterparty.
(b) The obligation of the Trust to deliver the Additional Contract Price
on the Option Closing Date is subject to the satisfaction of the following
conditions:
(i) the purchase by the Underwriters of the Additional Equity Trust
Securities pursuant to the Underwriting Agreement shall have been
consummated as contemplated under the Underwriting Agreement;
(ii) the representations and warranties of the Counterparty contained
in Article II hereof shall be true and correct as of the Option Closing
Date (except to the extent that they refer to an earlier date, in which
case they shall be true and correct as of such earlier date); and
(iii) the delivery of any additional Collateral under the Collateral
Agreement shall have been made.
ARTICLE V
COVENANTS
5.1 Taxes. Counterparty shall pay any and all documentary, stamp, transfer
or similar taxes and charges that may be payable in respect of the entry into
this Agreement and the transfer and delivery of the Firm Shares, cash or
Reported Securities pursuant hereto.
5.2 Forward Contract. Each of the Trust and Counterparty hereby agrees
that:
(a) it will treat this Agreement in its entirety as a forward contract for
the delivery of the Firm Shares on the Exchange Date (including as a result of
acceleration or otherwise) (the "Forward Contract Characterization"), under the
terms of which contract (i) at the time of issuance of the Equity Trust
Securities, the Trust is required to pay the Counterparty a fixed amount of
cash equal to the Firm Contract Price of the Equity Trust Securities, in
consideration for the Counterparty's obligation to deliver Common Stock (or
cash in lieu of Common Stock) to the Trust at maturity, and (ii) at maturity,
the Counterparty will deliver to the Trust the number of shares of Common Stock
that the Trust is entitled to receive at that time pursuant to the terms of the
Equity Trust Securities (subject to the right of the Counterparty to deliver
cash in lieu of the Common Stock);
(b) it will treat the delivery of the Firm Shares, if any, as occurring on
the Exchange Date;
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(c) it will not treat this Agreement, any portion of this Agreement or any
obligation hereunder as giving rise to any interest income or other inclusions
of ordinary income (in the case of the Trust) or as giving rise to any interest
expense or other deductions of ordinary expense (in the case of Counterparty);
(d) it will not treat the delivery of any portion of the Firm Shares, cash
or Reported Securities to be delivered pursuant to this Agreement as the
payment of interest or ordinary income; and
(e) it will not take any action (including filing any tax return or form
or taking any position in any tax proceeding) that is inconsistent with the
obligations contained in clauses (a) through (d), unless such action or
position is required by an applicable taxing authority or unless such action or
position is required by a change in statutory law or regulation or by a
judicial or other authoritative interpretation of the law enacted, promulgated
or published after the date of this Agreement.
5.3 Limitations on Trading During Certain Days. Counterparty hereby agrees
that it will not, and will cause each of its Affiliates that is under its
control not to, buy shares of Common Stock of the Company or Reported
Securities for its own account during the ten days prior to the Exchange Date.
5.4 Notices. Counterparty will cause to be delivered to the Trust:
(a) immediately upon the occurrence of any Event of Default hereunder
or under the Collateral Agreement; and
(b) promptly after Counterparty receives notice, or otherwise obtains
knowledge, at any time prior to the Exchange Date that any event requiring
that an adjustment be effected pursuant to Article VI hereof shall have
occurred or be pending;
a notice identifying such event and stating, if known to Counterparty, the date
on which such event is to occur and, if applicable, the record date relating to
such event. Counterparty shall cause further notices to be delivered to the
Trust if Counterparty shall subsequently receive notice, or shall otherwise
obtain knowledge, of any further or revised information regarding the terms or
timing of such event or any record date relating thereto.
5.5 Affirmative Covenants. During the term of this Agreement, Counterparty
covenants and agrees that it will:
(a) Comply in all material respects with all applicable laws, rules,
regulations and orders to the extent noncompliance would have a material
adverse effect on the ability of Counterparty to perform its obligations
hereunder or under the Collateral Agreement, such compliance to include,
without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon Counterparty or upon
Counterparty's property, including the collateral pledged under the Collateral
Agreement, except to the extent contested in good faith.
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(b) Furnish to the Trust as soon as possible and in any event within
twenty calendar days after Counterparty shall become aware of the occurrence of
any failure by Counterparty to comply with or perform any agreement or
obligation contained in this Agreement or the Collateral Agreement, a statement
of Counterparty describing such failure and setting forth details of such
failure and the action which Counterparty has taken and proposes to take with
respect thereto.
5.6 Further Assurances. From time to time on and after the date hereof
through the Exchange Date (or, if later, the date on which this Agreement has
been fully performed), each of the parties hereto shall use its best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper and advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement in
accordance with the terms and conditions hereof, including (i) using reasonable
best efforts to remove any legal impediment to the consummation of such
transactions and (ii) the execution and delivery of all such deeds, agreements,
assignments and further instruments of transfer and conveyance necessary,
proper or advisable to consummate and make effective the transactions
contemplated by the Agreement in accordance with the terms and conditions
hereof.
ARTICLE VI
ADJUSTMENT OF EXCHANGE RATE, EXCHANGE PRICE AND CLOSING PRICE
6.1 Dilution Adjustments. The Exchange Rate, Exchange Price and Closing
Price shall be subject to adjustment successively from time to time as follows:
(a) Stock Dividends, Splits, Reclassifications, Etc. If the Company shall,
after the date hereof,
(i) pay a stock dividend or make a distribution, in either case, with
respect to Common Stock in shares of such stock;
(ii) subdivide or split its outstanding shares of Common Stock into a
greater number of shares;
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares; or
(iv) issue by reclassification (other than a reclassification
pursuant to clause (b), (c), (d) or (e) of the definition of Adjustment
Event) of its shares of Common Stock any other equity securities of the
Company;
then, the Exchange Rate shall be multiplied by a Dilution Adjustment equal to
the number of shares of Common Stock (or the fraction thereof) that a holder
who held one share of Common Stock immediately prior to such event would be
entitled solely by reason of such event to hold immediately after such event.
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In the case of the reclassification of any shares of Common Stock into any
other equity securities of the Company other than the Common Stock, such other
equity securities shall be deemed shares of Common Stock for all purposes
hereunder. The Exchange Price and Closing Price shall also be adjusted in the
manner described in paragraph (c) of this Section 6.1.
(b) Right or Warrant Issuances. If the Company shall, after the date
hereof, issue, or declare a record date in respect of an issuance of, rights or
warrants (other than rights to purchase Common Stock pursuant to a plan for the
reinvestment of dividends or interest) to all holders of Common Stock entitling
them to subscribe for or purchase shares of Common Stock at a price per share
less than the Market Price of the Common Stock on the Business Day next
following the record date for the determination of holders of Common Stock
entitled to receive such rights or warrants, then, in each such case, the
Exchange Rate shall be multiplied by the following Dilution Adjustment: a
fraction, of which the numerator shall be (A) the number of shares of Common
Stock outstanding on the record date for the issuance of such rights or
warrants plus (B) the number of additional shares of Common Stock offered for
subscription or purchase pursuant to such rights or warrants, and of which the
denominator shall be (x) the number of shares of Common Stock outstanding on
the record date for the issuance of such rights or warrants plus (y) the number
specified in clause (B) above multiplied by the quotient of the exercise price
of such rights or warrants divided by the Market Price of the Common Stock on
the Business Day next following the record date for the determination of
holders of Common Stock entitled to receive such rights or warrants; provided
that the Exchange Rate shall not be adjusted to more than one share of Common
Stock per Equity Trust Security. To the extent that such rights or warrants
expire prior to the Exchange Date and shares of Common Stock are delivered with
respect to less than all of such rights or warrants prior to such expiration,
the Exchange Rate shall be readjusted to the Exchange Rate which would then be
in effect had such adjustments for the issuance of such rights or warrants been
made upon the basis of delivery of only the number of shares of Common Stock
actually delivered pursuant to such rights or warrants. For purposes of this
Section 6.1(b), dividends will be deemed to be paid as of the record date for
such dividend. The Exchange Price and Closing Price shall also be adjusted in
the manner described in paragraph (c) of this Section 6.1.
(c) Corresponding Adjustments to Exchange Price; Adjustment of Closing
Price in Certain Circumstances.
(i) If any adjustment is made to the Exchange Rate pursuant to
paragraph (a) or (b) of this Section 6.1, an adjustment shall also be made
to the Exchange Price as such term is used throughout the definition of
Exchange Rate. The required adjustment to the Exchange Price shall be made
at the Exchange Date by multiplying the Exchange Price by the cumulative
Dilution Adjustment.
(ii) If, during any Calculation Period used in calculating the
Exchange Price, the Market Price or the Transaction Value, there shall
occur any event requiring an adjustment to be effected pursuant to this
Section 6.1, then the Closing Price for each Trading Day in the
Calculation Period occurring prior to the day on which such adjustment is
effected shall be adjusted by being multiplied by the relevant Dilution
Adjustment.
15
(d) Timing of Dilution Adjustments. Each Dilution Adjustment shall be
effected:
(i) in the case of any dividend, distribution, or issuance of rights
or warrants, at the opening of business on the Business Day next following
the record date for determination of holders of Common Stock entitled to
receive such dividend, distribution or issuance or, if the announcement of
any such dividend, distribution or issuance is after such record date, at
the time such dividend, distribution or issuance shall be announced by the
Company; and
(ii) in the case of any subdivision, split, combination or
reclassification, on the effective date of such transaction.
(e) General; Failure of Dilution Event to Occur. All Dilution Adjustments
shall be rounded upward or downward to the nearest 1/10,000th (or if there is
not a nearest 1/10,000th to the next higher 1/10,000th). No adjustment in the
Exchange Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided, however, that
any adjustments which by reason of this sentence are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
If any announcement or declaration of a record date in respect of a dividend,
distribution or issuance requiring an adjustment pursuant to this Section 6.1
shall subsequently be canceled by the Company, or such dividend, distribution
or issuance shall fail to receive requisite approvals or shall fail to occur
for any other reason, then, upon such cancellation, failure of approval or
failure to occur, the Exchange Rate shall be readjusted to the Exchange Rate
which would then have been in effect had adjustment for such event not been
made. If an Adjustment Event shall occur after the occurrence of one or more
events requiring an adjustment pursuant to this Section 6.1, the Dilution
Adjustments previously applied to the Exchange Rate in respect of such events
shall not be rescinded but shall be applied to the new Exchange Rate provided
for under Section 6.2.
6.2 Adjustment for Consolidation, Merger or Other Adjustment Event. In the
event of (a) any dividend or distribution by the Company to all holders of
Common Stock of evidences of its indebtedness or other assets (excluding any
dividends or distributions referred to in Section 6.1(a)(i), any other equity
securities issued pursuant to a reclassification referred to in Section
6.1(a)(iv) and any Ordinary Cash Dividends) or any issuance by the Company to
all holders of Common Stock of rights or warrants to subscribe for or purchase
any of its securities (other than rights or warrants referred to in Section
6.1(b)), (b) any consolidation or merger of the Company, or any surviving
entity or subsequent surviving entity of the company (any such entity, a
"Company Successor") with or into another entity (other than a merger or
consolidation in which the Company is the continuing corporation and in which
the Common Stock outstanding immediately prior to the merger or consolidation
is not exchanged for cash, securities or other property of the Company or
another corporation), (c) any sale, transfer, lease or conveyance to another
corporation of the property of the Company as an entirety or substantially as
an entirety, (d) any statutory exchange of securities of the Company or any
Company Successor with another corporation (other than in connection with a
merger or acquisition) or (e) any liquidation, dissolution or winding up of the
Company (any such event described in clause (a), (b), (c), (d) or (e), an
"Adjustment Event"), the Exchange Rate shall be
16
adjusted so that on the Exchange Date Counterparty shall deliver to the Trust,
in lieu of or (in the case of an Adjustment Event described in clause (a)
above) in addition to, the Firm Shares, cash in an amount equal to:
(A) if the Exchange Price is greater than the Threshold Appreciation
Price, 0.8197 multiplied by the Transaction Value (as defined below);
(B) if the Exchange Price is less than or equal to the Threshold
Appreciation Price but greater than the Initial Price, the product of
(x) the Initial Price divided by the Exchange Price multiplied by (y)
the Transaction Value; and
(C) if the Exchange Price is less than or equal to the Initial Price, the
Transaction Value;
provided, however, that if the consideration received by all holders of
Common Stock in such Adjustment Event does not and may not at the option of
such holders include Reported Securities, then (except in the case of an
Adjustment Event solely of the type described in clause (a) above) (i)
Counterparty's delivery obligations hereunder will be accelerated and promptly
upon consummation of the Adjustment Event Counterparty will be required to
deliver to the Trust cash in an amount equal to (x) if the Transaction Value is
greater than the Threshold Appreciation Price, 0.8197 multiplied by the
Transaction Value, (y) if the Transaction Value is less than or equal to the
Threshold Appreciation Price but greater than Initial Price, the Initial Price,
and (z) if the Transaction Value is less than or equal to the Initial Price,
the Transaction Value.
If the consideration received by holders of Common Stock in an Adjustment
Event includes Reported Securities, and, to any extent, consideration other
than Reported Securities, and in the case of an Adjustment Event described in
(b), (c) or (d) of the definition of that term , the Transaction Value of the
consideration other than Reported Securities comprises 25% or more of the
aggregate Transaction Value for such Adjustment Event, then (a) Counterparty's
delivery obligations hereunder will be accelerated to the extent that the value
of the consideration received in such Adjustment Event does not derive from
Reported Securities and promptly upon consummation of the Adjustment Event
Counterparty will be required to deliver to the Trust cash in an amount equal
to (x) if the Transaction Value is greater than the Threshold Appreciation
Price, 0.8197 multiplied by (i) the Transaction Value and (ii) the percentage
of the value of the consideration received in connection with the Adjustment
Event that does not derive from Reported Securities, (y) if the Transaction
Value is less than or equal to the Threshold Appreciation Price but greater
than the Initial Price, the Initial Price multiplied by the percentage of the
value of the consideration received in connection with the Adjustment Event
that does not derive from Reported Securities, and (z) if the Transaction Value
is less than or equal to the Initial Price, the Transaction Value multiplied by
the percentage of the value of the consideration received in connection with
the Adjustment Event that does not derive from Reported Securities.
Following the occurrence of an Adjustment Event, the Exchange Price, as
such term is used throughout the definition of Exchange Rate, shall be deemed
to equal (A) if shares
17
of Common Stock are outstanding at the Exchange Date, the Exchange Price of the
Common Stock, as adjusted pursuant to Section 6.1(c), otherwise zero, plus (B)
the Transaction Value.
Notwithstanding the foregoing, with respect to any Reported Securities (as
defined below) received by holders of Common Stock in an Adjustment Event,
Counterparty shall, in lieu of delivering cash in respect of such Reported
Securities as described above, deliver a number of such Reported Securities
with a value, as determined in accordance with clause (ii) of the definition of
Transaction Value, equal to all cash amounts that would otherwise be
deliverable in respect of Reported Securities received in such Adjustment
Event, except to the extent Counterparty has made an election to exercise the
Cash Delivery Option or such Reported Securities have not yet been delivered to
the holders entitled thereto following such Adjustment Event or any record date
with respect thereto. If, following any Adjustment Event, any Reported Security
ceases to qualify as a Reported Security, then (x) Counterparty shall not
deliver such Reported Security but instead shall deliver an equivalent amount
of cash and (y) notwithstanding clause (ii) of the definition of Transaction
Value, the Transaction Value of such Reported Security shall mean the fair
market value of such Reported Security on the date such security ceases to
qualify as a Reported Security, as determined by a nationally recognized
investment banking firm retained for this purpose by the Administrator.
"Transaction Value" means (i) for any cash received in any Adjustment
Event, the amount of cash received per share of Common Stock, (ii) for any
Reported Securities received in any Adjustment Event, an amount equal to (x)
the average Closing Price per security of such Reported Securities on the 20
Trading Days immediately prior to (but not including) the Exchange Date (except
in the case of a Rollover Offering, in which case the Closing Price on the
Trading Day immediately preceding the Pricing Date or, if the Rollover Offering
is priced after 4:00 p.m. New York City time on the Pricing Date, the Closing
Price on the Pricing Date shall be used for purposes of this clause) multiplied
by (y) the number of such Reported Securities (as adjusted pursuant to the
definition thereof) received per share of Common Stock and (iii) for any
property received in any Adjustment Event other than cash or Reported
Securities, an amount equal to the fair market value of the property received
per share of Common Stock on the date such property is received, as determined
by a nationally recognized investment banking firm retained for this purpose by
the Administrator; provided, however, that in the case of clause (ii), (x) with
respect to securities that are Reported Securities by virtue of only clause
(iv) of the definition of Reported Securities, Transaction Value with respect
to any such Reported Security means the average of the mid-point of the last
bid and ask prices for such Reported Security as of the Exchange Date from each
of at least three nationally recognized investment banking firms retained for
such purpose by the Administrator multiplied by the number of such Reported
Securities (as adjusted pursuant to the definition thereof) received per share
of Common Stock and (y) with respect to all Reported Securities other than
securities that are Reported Securities by virtue of only clause (iv) of the
definition of Reported Securities, if there are not 20 Trading Days for any
particular Reported Security occurring after the 60th calendar day immediately
prior to, but not including, the Exchange Date, Transaction Value with respect
to such Reported Security means the fair market value per security of such
Reported Security as of the Exchange Date as determined by a nationally
recognized investment banking firm retained for such purpose by the
Administrator multiplied by the number of such Reported Securities (as adjusted
pursuant to the definition thereof) received per share of Common Stock. For
purposes of calculating the Transaction Value, any cash, Reported Securities or
other property receivable in
18
an Adjustment Event shall be deemed to have been received immediately prior to
the close of business on the record date for such Adjustment Event or, if there
is no record date for such Adjustment Event, immediately prior to the close of
business on the effective date of such Adjustment Event.
"Reported Securities" means any securities received in an Adjustment Event
that (A) are (i) listed on a United States national securities exchange, (ii)
reported on a United States national securities system subject to last sale
reporting, (iii) traded in the over-the-counter market and reported on the
National Quotation Bureau or similar organization or (iv) for which bid and ask
prices are available from at least three nationally recognized investment
banking firms; and (B) are either (x) perpetual equity securities or (y)
non-perpetual equity or debt securities with a stated maturity after the
Exchange Date. The number of shares of any Reported Securities included in the
calculation of Transaction Value pursuant to clause (ii) of the definition
thereof shall be subject to adjustment if any event that would, had it occurred
with respect to the Common Stock or the Company, have required an adjustment
pursuant to Section 6.1 or 6.2, shall occur with respect to such Reported
Securities or the issuer thereof subsequent to the date the Adjustment Event is
consummated. Adjustment for such subsequent events shall be as nearly
equivalent as practicable to the adjustments provided for in Section 6.1 or
6.2, as applicable.
ARTICLE VII
ACCELERATION
If one or more of the following events (each an "Event of Default") shall
occur:
(a) Counterparty or AT&T Corp., a New York corporation ("AT&T"), shall
commence a voluntary case or other proceeding seeking a liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or shall take any action to authorize any of the foregoing;
(b) an involuntary case or other proceeding shall be commenced against
Counterparty or AT&T seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property; or an order for relief shall be entered
against Counterparty or AT&T under any bankruptcy, insolvency or other similar
law as now or hereafter in effect; or
(c) a Collateral Event of Default within the meaning of the Collateral
Agreement;
19
then an "Acceleration Date" shall occur, Counterparty's rights under Section
1.3(d), (e) (f) and (g) shall terminate immediately and (i) in the case of
clause (c), Counterparty shall become obligated to the extent permitted by law
to deliver to the Trust (and shall be deemed to instruct the Collateral Agent
to deliver to the Custodian, for the account of the Trust, and to liquidate and
turn into cash the U.S. Government obligations and Cash Equivalents then
pledged by Counterparty to the extent necessary to satisfy such obligation) the
Firm Share Base Amount plus the Additional Share Base Amount, if any, in the
form of the shares of Common Stock then pledged by Counterparty, or cash
generated from the liquidation of U.S. Government obligations and Cash
Equivalents then pledged by Counterparty, or a combination thereof (or, after
an Adjustment Event, the alternate consideration to be delivered, in the form
of Reported Securities then pledged, cash then pledged, cash generated from the
liquidation of U.S. Government obligations and Cash Equivalents then pledged,
or a combination thereof); or (ii) in the case of clauses (a) or (b),
Counterparty shall become obligated to the extent permitted by law to deliver
to the Trust (and shall be deemed to instruct the Collateral Agent to deliver
to the Custodian, for the account of the Trust, and to liquidate and turn into
cash the U.S. Government obligations and Cash Equivalents then pledged by
Counterparty to the extent necessary to satisfy such obligation) a number of
shares of Common Stock, in the form of the shares of Common Stock then pledged
by Counterparty, or cash generated from the liquidation of U.S. Government
obligations and Cash Equivalents then pledged by Counterparty, or a combination
thereof (or, after an Adjustment Event, the alternate consideration to be
delivered, in the form of Reported Securities then pledged, cash then pledged,
cash generated from the liquidation of U.S. Government obligations and Cash
Equivalents then pledged, or a combination thereof), with an aggregate value
(based on the Closing Price on the Acceleration Date) equal to the Acceleration
Value (as defined below).
"Acceleration Value" means an amount determined by the Administrator on
the basis of quotations from Independent Dealers (as defined below). Each
quotation will be for an amount that would be paid to the relevant Independent
Dealer in consideration of an agreement between the Trust and such Independent
Dealer that would have the effect of preserving for the Trust the economic
equivalent of the payments and deliveries that the Trust would, but for the
occurrence of the Acceleration Date, have been entitled to receive after the
Acceleration Date hereunder (taking into account any adjustments to the
Exchange Rate that may have been effected on or prior to the Acceleration
Date). On or as soon as reasonably practicable following the Acceleration Date,
the Administrator will request each Independent Dealer to provide its quotation
as soon as reasonably practicable, but in any event within two Business Days.
The Administrator shall compute the Acceleration Value upon receipt of each
Independent Dealer's quotation, provided that if, at the close of business on
the fourth Business Day following the Acceleration Date, the Administrator
shall have received quotations from fewer than four of the Independent Dealers,
the Administrator shall compute the Acceleration Value using the quotations, if
any, it shall have received at or prior to such time. If four quotations are
provided, the Acceleration Value will be the arithmetic mean of the two
quotations remaining after disregarding the highest and lowest quotations. (For
this purpose, if more than one quotation has the same highest or lowest value,
then one of such quotations shall be disregarded.) If two or three quotations
are provided, the Acceleration Value will be the arithmetic mean of such
quotations. If one quotation is provided, the Acceleration Value will be equal
to such quotation. If no quotations are provided, the Acceleration Value will
be the aggregate value (based on the Closing Price on the Acceleration Date) of
the number of shares of Common Stock (or, after an
20
Adjustment Event, Reported Securities, cash or a combination thereof) that
would be required to be delivered hereunder on the Acceleration Date if the
Exchange Date were redefined to be the Acceleration Date.
"Independent Dealers" means four nationally recognized independent
investment banking firms selected in good faith by the Administrator.
As promptly as reasonably practicable after receipt of the quotations on
which the Acceleration Value is based (or, as the case may be, after failure to
receive any such quotations within the time period prescribed above), the Trust
shall deliver to Counterparty and the Collateral Agent a notice specifying the
number of shares of Common Stock (or, after an Adjustment Event, the alternate
consideration) required to be delivered by Counterparty. the Trust and
Counterparty agree that the obligations contained in clauses (i) and (ii) above
are a reasonable pre-estimate of loss and not a penalty. Such amount is payable
for the loss of bargain and the Trust will not be entitled to recover
additional damage as a consequence of loss resulting from an Event of Default.
ARTICLE VIII
MISCELLANEOUS
8.1 Adjustments; Selection of Independent Investment Banking Firm. The
Trust shall be responsible for the effectuation and calculation of any
adjustment pursuant to Article VI hereof and shall furnish Counterparty notice
of any such adjustment and shall provide Counterparty reasonable opportunity to
review the calculations pertaining to any such adjustment. If, pursuant to the
terms and conditions hereof, the Administrator shall be required to retain a
nationally recognized independent investment banking firm for any purpose
provided herein, such nationally recognized independent investment banking firm
shall be selected and retained by the Administrator only after consultation
with Counterparty; provided, however, that Counterparty shall be deemed to have
waived its right to consult if Counterparty fails to consult within five
Business Days of notice being sent by the Administrator to Counterparty seeking
consultation. the Trust may delegate the effectuation and calculation of any
such adjustments to its Administrator.
8.2 Notices. Notices to the Trust shall be directed to it in care of the
Administrator for the Trust, The Bank of New York, ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, Telecopier: (212)
896-7295; notices to Counterparty shall be directed to care of AT&T Broadband
CSC Holdings, Inc., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, #▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
(fax no.: (▇▇▇) ▇▇▇-▇▇▇▇), Attention: President. Notwithstanding the foregoing,
notices to a party shall be directed to such other address for such party as
shall be specified by such party in a like notice given pursuant to this
Section 8.2. All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if either (i) personally delivered
(including delivery by courier service or by Federal Express or any other
nationally recognized overnight delivery service for next day delivery) to the
offices specified in the preceding sentence, in which case they shall be deemed
received on the first Business Day by which delivery shall have been made to
said offices; or (ii) sent by certified mail, return receipt requested, in
accordance with the preceding sentence, in
21
which case they shall be deemed received when receipted for unless
acknowledgment is refused (in which case delivery shall be deemed to have been
received on the first Business Day on which such acknowledgment is refused).
Any notice, demand or other communication to be provided by or on behalf of the
Trust pursuant to this Agreement shall be sent to the address of Counterparty,
provided in this Section 8.2. Any failure by Counterparty or any guardian,
conservator, executor, administrator or other similarly appointed person to
receive any such notice, demand or communication shall in no way abrogate,
invalidate or otherwise affect the validity or enforceability of the notice,
demand or communication or the matters set forth therein.
8.3 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
8.4 Entire Agreement. Except as expressly set forth herein, this Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, among the parties with respect to the
subject matter of this Agreement.
8.5 Amendments; Waivers. Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by the Trust and Counterparty, or, in the case of a
waiver, by the party or parties against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law.
8.6 No Third Party Rights; Successors and Assigns. Except as otherwise
agreed in writing, this Agreement is not intended and shall not be construed to
create any rights in any person other than Counterparty and the Trust and their
respective successors and assigns and no person shall assert any rights as
third party beneficiary hereunder. Whenever any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
permitted assigns of such party.
8.7 Application of Bankruptcy Code. The parties hereto acknowledge and
agree that the Collateral Agent is a "financial institution" within the meaning
of Section 101(22) of Title 11 of the United States Code (the "Bankruptcy
Code") and is acting as agent and custodian for the Trust in connection with
this Agreement and that the Trust is a "customer" of the Collateral Agent
within the meaning of said Section 101(22). The parties hereto further
acknowledge and agree that this Agreement is a "securities contract", as such
term is defined in Section 741(7) of the Bankruptcy Code, entitled to the
protection of Section 555 of the Bankruptcy Code.
8.8 Governing Law; Jurisdiction; Severability; Waiver of Jury Trial. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York. For the purpose of any suit, action or proceeding arising
out of or relating to this Agreement, the parties hereto hereby expressly and
irrevocably consent and submit to the non-
22
exclusive jurisdiction of any United States Federal or New York State court
sitting in the Borough of Manhattan, City and State of New York, and expressly
and irrevocably waive, to the extent permitted under applicable law, any
immunity from the jurisdiction thereof and any claim or defense in such suit,
action or proceeding based on a claim of improper venue, forum non conveniens
or any similar basis to which it might otherwise be entitled. To the extent
permitted by law, the unenforceability or invalidity of any provision or
provisions of this Agreement shall not render any other provision or provisions
herein contained unenforceable or invalid. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT
ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY
JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN
CONTRACT OR TORT OR OTHERWISE. EACH PARTY HERETO ACKNOWLEDGES THAT IT OR HE HAS
BEEN INFORMED BY THE OTHER PARTY HERETO THAT THE PROVISIONS OF THIS SECTION
CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH SUCH OTHER PARTY HERETO HAS RELIED,
IS RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT AND ANY DOCUMENT
RELATED THERETO. EACH PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTY
HERETO TO THE WAIVER OF ITS OR HIS RIGHTS TO TRIAL BY JURY.
23
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
and year first above written.
TRUST: COUNTERPARTY:
EQUITY SECURITIES TRUST I: AT&T BROADBAND CSC HOLDINGS, INC.
By: By:
--------------------------------- -------------------------------
Name: Name:
Title: Title:
EXECUTION VERSION
FORWARD CONTRACT AGREEMENT
Between
AT&T BROADBAND CSC II, INC.
As Counterparty,
and
EQUITY SECURITIES TRUST I
Dated as of
October 23, 2001
FORWARD CONTRACT AGREEMENT
THIS AGREEMENT is made as of this October 23, 2001 among AT&T Broadband
CSC II, Inc., a corporation organized under the laws of the State of Delaware
("Counterparty") and Equity Securities Trust I, a business trust organized
under the laws of the State of Delaware under and by virtue of an amended and
restated declaration of trust, dated as of October 16, 2001 (the "Declaration
of Trust") (such trust and the trustees thereof acting in their capacity as
such being referred to herein as the "Trust").
WHEREAS, Counterparty owns shares of Cablevision NY Group Class A common
stock, $.01 par value (the "Common Stock") of Cablevision Systems Corporation,
a Delaware corporation (including its successors) (the "Company");
WHEREAS, Trust has filed with the Securities and Exchange Commission a
registration statement contemplating the offering of up to 26,918,195 Equity
Trust Securities (the "Equity Trust Securities"), the terms of which
contemplate delivery by the Trust to the holders thereof of a number of shares
of Common Stock (or, if the Counterparty exercises its cash settlement option,
cash in lieu thereof), on, or shortly after, November 15, 2004 (as further
defined herein, the "Exchange Date");
WHEREAS, in exchange for certain consideration to be paid by the Trust
hereunder, the Trust and Counterparty desire to provide for the future
acquisition and delivery of all or a portion of the aggregate number of shares
of Common Stock, or the cash value thereof, contemplated to be delivered by the
Trust in respect of the Equity Trust Securities on the Exchange Date, at a
price to be established under this Agreement and such other agreements;
WHEREAS, Counterparty has agreed to enter into a Collateral Agreement (the
"Collateral Agreement") dated as of the date hereof, among the Trust,
Counterparty and The Bank of New York, as collateral agent (the "Collateral
Agent"), to grant the Trust a security interest in the shares of Common Stock
specified therein and in certain other circumstances certain other collateral
to secure the obligations of Counterparty hereunder;
WHEREAS, the Trust has agreed, pursuant to an underwriting agreement,
dated October 17, 2001 (the "Underwriting Agreement"), among the Trust,
Counterparty, the Company, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc., Bear, ▇▇▇▇▇▇▇ & Co. Inc.
and ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated (each an "Underwriter",
and collectively, the "Underwriters"), to issue and sell to the Underwriters an
aggregate of 23,407,127 Equity Trust Securities (together with the 2 Equity
Trust Securities purchased by ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc. in connection with the
organization of the Trust, the "Initial Equity Trust Securities") and, at the
Underwriters' option, up to 3,551,068 additional Equity Trust Securities (the
"Additional Equity Trust Securities") to cover over-allotments, if any.
NOW, THEREFORE, in consideration of their mutual covenants herein
contained, the parties hereto, intending to be legally bound, hereby mutually
covenant and agree as follows:
DEFINITIONS
As used herein, the following words and phrases shall have the following
meanings:
"Acceleration Date" has the meaning provided in Article VII.
"Acceleration Value" has the meaning provided in Article VII.
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Additional Equity Trust Securities" has the meaning provided in the
recitals of this Agreement.
"Additional Contract Price" has the meaning provided in Section 1.2(b).
"Additional Share Base Amount" means a number equal to the number of
Additional Equity Trust Securities that the Underwriters elect to purchase
under the Underwriting Agreement.
"Additional Shares" has the meaning provided in Section 1.1(b).
"Additional STRIPS" means the U.S. Treasury obligations purchased by the
Trust for settlement on the Option Closing Date.
"Adjustment Event" has the meaning provided in Section 6.2.
"Administrator" means The Bank of New York, administrator for the Trust
under the Administration Agreement dated as of October 23, 2001, or any
successor thereto.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a partner in, or a trustee, settlor, beneficiary, member, manager,
director or officer of, such Person and, with respect to any Person that is a
natural person, further includes such Person's immediate family members,
including his father, mother, spouse and children, the spouses of his children,
his siblings and their spouses and children. For purposes of this definition,
"control" (including the terms "controlled by" or "under common control with")
means, as to any Person, the possession, direct or indirect, of the power to
vote ten percent or more of the corporate or beneficial interests of such
Person (or of the securities having ordinary voting power for the election of
directors of such Person), or the power to direct or cause the direction of the
management and policies of such Person, whether through ownership of voting
securities or by contract or otherwise.
"Bankruptcy Code" has the meaning provided in Section 8.7.
"Business Day" means any day that is not a Saturday, a Sunday or a day on
which the NYSE or banking institutions or trust companies in The City of New
York are authorized or obligated by law or executive order to close.
3
"Calculation Period" means any period of Trading Days for which an average
security price must be determined pursuant to this Agreement.
"Cash Delivery Option" has the meaning provided in Section 1.3(d).
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of
deposit with maturities of six months or less from the date of the acquisition,
bankers' acceptances with maturities not exceeding six months and overnight
bank deposits, in each case with any domestic commercial bank having capital
and surplus in excess of $500 million and a ▇▇▇▇▇▇▇▇ Bank Watch Rating of "B"
or better, (iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (ii) above entered
into with any financial institution meeting the qualifications specified in
clause (iii) above, (v) commercial paper having the highest rating obtainable
from ▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's Ratings Group and in
each case maturing within six months after the date of acquisition and (vi)
money market funds at least 95% of the assets of which constitute Cash
equivalents of the kinds described in clauses (i)-(v) of this definition.
"Closing Price" means, for any security on any date of determination, (i)
the closing sale price (or, if no closing price is reported, the last reported
sale price) of such security (regular way) on the NYSE on such date, (ii) if
such security is not listed for trading on the NYSE on any such date, as
reported in the composite transactions for the principal United States
securities exchange on which such security is so listed, (iii) if such security
is not so listed on a United States national or regional securities exchange,
as reported by The NASDAQ Stock Market, (iv) if such security is not so
reported, the last quoted bid price for such security in the over-the-counter
market as reported by the National Quotation Bureau or similar organization, or
(v) if such security is not so quoted, the average of the mid-point of the last
bid and ask prices for such security from at least three nationally recognized
investment banking firms that the Administrator selects for such purpose. The
Closing Price as determined pursuant to the foregoing shall be subject to
adjustment in certain circumstances as provided in Section 6.1(c).
"Collateral" has the meaning provided in the Collateral Agreement.
"Collateral Agent" has the meaning provided in the recitals of this
Agreement.
"Collateral Agreement" has the meaning provided in the recitals of this
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" has the meaning provided in the recitals of this Agreement.
"Company" has the meaning provided in the recitals of this Agreement.
"Contract Shares" has the meaning provided in Section 1.1.
4
"Counterparty" has the meaning provided in the introductory paragraph of
this Agreement.
"Custodian" means The Bank of New York, custodian for the Trust under the
Custodian Agreement dated as of October 2, 2001, or any successor thereto.
"Declaration of Trust" has the meaning provided in the introductory
paragraph of this Agreement.
"Dilution Adjustment" means any fraction or number by which the Exchange
Rate shall be multiplied pursuant to Section 6.1(a) or (b) or by which Closing
Prices may be divided pursuant to Section 6.1(c).
"Equity Trust Securities" has the meaning provided in the recitals of this
Agreement.
"Event of Default" has the meaning provided in Article VII.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Exchange Date" means November 15, 2004, subject to (i) extension by AT&T
Broadband CSC Holdings, Inc. pursuant to Section 1.3(f) of the Holdings Forward
Contract (as defined below) and (ii) subsequent acceleration by AT&T Broadband
CSC Holdings, Inc. pursuant to Section 1.3(g) of the Holdings Forward Contract.
"Exchange Price" means the average Closing Price per share of Common Stock
on the 20 Trading Days immediately prior to (but not including) the Exchange
Date; provided, however, that if there are not 20 Trading Days for the Common
Stock occurring later than the 60th calendar day immediately prior to, but not
including, the Exchange Date, Exchange Price shall mean the market value per
share of the Common Stock as of the Exchange Date as determined by a nationally
recognized independent investment banking firm retained for this purpose by the
Administrator; provided, further, that for purposes of determining the payment
required upon cash settlement of this Agreement in connection with a Rollover
Offering, "Exchange Price" means the Closing Price per share of Common Stock on
the Trading Day immediately preceding the date that the Rollover Offering is
priced (the "Pricing Date") or, if the Rollover Offering is priced after 4:00
p.m., New York City time, on the Pricing Date, the Closing Price per share of
Common Stock on the Pricing Date. The Exchange Price as determined pursuant to
the foregoing shall be subject to adjustment in certain circumstances as
provided in Section 6.1(c).
"Exchange Rate" has the meaning provided in Section 1.1(c).
"Extension Amount" means the product of (i) $0.5858 multiplied by (ii) the
sum of the number of Initial Equity Trust Securities plus the number of
Additional Equity Trust Securities multiplied by (iii) a fraction, the
numerator of which is the sum of the Firm Share Base Amount and the Additional
Share Base Amount and the denominator of which is the number of Initial Equity
Trust Securities and Additional Equity Trust Securities.
5
"Firm Payment Date" has the meaning provided in Section 1.3(a).
"Firm Contract Price" has the meaning provided in Section 1.2(a).
"Firm Share Base Amount" has the meaning provided in Section 1.1(a).
"Firm Shares" has the meaning provided in Section 1.1(a).
"Forward Contract Characterization" has the meaning provided in Section
5.2(a).
"Independent Dealers" has the meaning provided in Article VII.
"Initial Equity Trust Securities" has the meaning provided in the recitals
of this Agreement.
"Initial Price" has the meaning provided in Section 1.1(c).
"Lien" has the meaning provided in the Collateral Agreement.
"Market Price" means, as of any date of determination, the average Closing
Price per share of Common Stock on the 20 Trading Days immediately prior to
(but not including) the date of determination; provided, however, that if there
are not 20 Trading Days for the Common Stock occurring later than the 60th
calendar day immediately prior to, but not including, such date, the Market
Price shall mean the market value per share of Common Stock as of such date as
determined by a nationally recognized investment banking firm retained for such
purpose by the Administrator.
"NYSE" means the New York Stock Exchange, Inc.
"Officer" shall mean the manager, trustee, president, any vice president,
the chief financial officer, the treasurer or the secretary of a Person.
"Officer's Certificate" means a certificate signed by an Officer of a
Person.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trust.
"Option Closing Date" means the settlement dates for the Additional Equity
Trust Securities under Section 5 of the Underwriting Agreement.
"Ordinary Cash Dividend" means, with respect to any consecutive 365-day
period, any dividend with respect to Common Stock paid in cash to the extent
that the amount of such dividend, together with the aggregate amount of all
other dividends on the Common Stock paid in cash during such 365-day period,
does not exceed on a per share basis 10% of the average of the Closing Prices
of the Common Stock over such 365-day period; provided that, for purposes of
the foregoing definition, the amount of cash dividends paid on a per share
basis shall be appropriately adjusted to reflect the occurrence during such
period of any event described in Article VI.
6
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
limited liability company, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Reimbursement Agreement" means the reimbursement agreement, to be dated
as of October 23, 2001 among ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc., AT&T Broadband CSC
Holdings, Inc. and AT&T Broadband CSC II, Inc.
"Reported Securities" has the meaning provided in Section 6.2.
"Rollover Offering" means a reoffering or refinancing of the Equity Trust
Securities effected by the Counterparty not earlier than November 8, 2004 by
means of a completed public offering or offerings or another similar offering
(which may include one or more exchange offers), by or on behalf of such
Counterparty.
"Rollover Offering Election" means a written election made in accordance
with Section 1.3(e).
"Share Components" means the numbers of shares of Common Stock per Equity
Trust Security specified in clauses (i), (ii) and (iii) of Section 1.1(c).
"Threshold Appreciation Price" has the meaning provided in Section 1.1(c).
"Trading Day" means, with respect to any security the Closing Price of
which is being determined, a day on which such security (A) is not suspended
from trading on any national or regional securities exchange or association or
over-the-counter market at the close of business and (B) has traded at least
once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of such
security.
"Transaction Value" has the meaning provided in Section 6.2.
"Trust" has the meaning provided in the introductory paragraph of this
Agreement.
"Underwriter" and "Underwriters" have the meaning provided in the recitals
of this Agreement.
"Underwriting Agreement" has the meaning provided in the recitals of this
Agreement.
7
ARTICLE I
PAYMENT AND DELIVERY
1.1 Payment and Delivery.
(a) Firm Shares. Upon the terms and subject to the conditions of this
Agreement, the Trust agrees to pay Counterparty the Firm Contract Price (as
defined in Section 1.2(a)) on the Firm Payment Date (as defined in Section
1.3(a)), in exchange the Counterparty agrees to deliver to the Trust on the
Exchange Date the number of shares of Common Stock (the "Firm Shares") equal to
the product of (x) 2,416,003 (the "Firm Share Base Amount") multiplied by (y)
the Exchange Rate (as defined in Section 1.1(c)).
(b) Additional Shares. Upon the terms and subject to the conditions of
this Agreement, the Trust agrees to pay Counterparty the Additional Contract
Price on the Option Closing Date (as defined in Section 1.3(b)), and in
exchange, the Counterparty agrees to deliver to the Trust on the Exchange Date
a number of additional shares of Common Stock (the "Additional Shares") equal
to the product of (x) the Additional Share Base Amount multiplied by (y) the
Exchange Rate. In addition to the other conditions set forth herein, such
payment and delivery shall be conditioned on the Underwriters' purchase of the
Additional Equity Trust Securities pursuant to the Underwriting Agreement on
the Option Closing Date. Promptly after receipt by the Trust of notice that the
Underwriters are exercising their option to purchase Additional Equity Trust
Securities, the Trust will provide Counterparty with written notice of such
exercise by the Underwriters, stating the related Additional Share Base Amount
and the date on which the Trust shall deliver the contract price for the
Additional Shares, which shall be the Option Closing Date for the Additional
Equity Trust Securities. The Firm Shares and the Additional Shares (if any) are
collectively referred to herein as the "Contract Shares".
(c) Exchange Rate. The "Exchange Rate" shall be determined in accordance
with the following formula, subject to adjustment as a result of certain events
as provided in Article VI: (i) if the Exchange Price is greater than $43.981
(the "Threshold Appreciation Price"), 0.8197, (ii) if the Exchange Price is
less than or equal to the Threshold Appreciation Price but greater than $36.05
(the "Initial Price"), a fraction (rounded upward or downward to the nearest
1/10,000th or, if there is not a nearest 1/10,000th, to the next higher
1/10,000th) equal to the Initial Price divided by the Exchange Price and (iii)
if the Exchange Price is less than or equal to the Initial Price, 1.
1.2 Contract Price.
(a) Firm Contract Price. The price for the Firm Shares (the "Firm Contract
Price") shall be $28.1198 in cash per share of Common Stock multiplied by the
Firm Share Base Amount.
(b) Additional Contract Price. The price for the Additional Shares (the
"Additional Contract Price") shall be an amount equal to the difference between
(1) the aggregate proceeds to the Trust from the sale of the Additional Equity
Trust Securities and (2) the aggregate cost to the Trust, as notified by the
Trust to Counterparty on the Option Closing Date for the Additional Equity
Trust Securities, of the Additional STRIPS.
8
1.3 Payment for and Delivery of Contract Shares.
(a) Firm Payment Date. Upon the terms and subject to the conditions of
this Agreement, the Trust shall deliver to Counterparty the Firm Contract Price
on October 23, 2001 (the "Firm Payment Date") at the offices of Shearman &
Sterling, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other
place as shall be agreed upon by the Trust and Counterparty, paid by wire
transfer of Federal (immediately available same-day) funds to an account
designated by Counterparty, against delivery by Counterparty to the Collateral
Agent of the number of shares of Common Stock and/or cash, securities and other
property necessary to comply with Counterparty's obligations under the
Collateral Agreement.
(b) Option Closing Date. Upon the terms and subject to the conditions of
this Agreement, the Trust shall deliver to Counterparty the Additional Contract
Price on the Option Closing Date at the offices of Shearman & Sterling, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as shall be
agreed upon by the Trust and Counterparty, paid by wire transfer of Federal
(immediately available same-day) funds to an account designated by
Counterparty, against delivery by Counterparty to the Collateral Agent of the
additional number of shares of Common Stock and/or cash, securities and other
property necessary to comply with Counterparty's obligations under the
Collateral Agreement.
(c) Delivery of Contract Shares.
(i) Except as otherwise provided in this Agreement, Counterparty
agrees to deliver the Contract Shares to the Trust on the Exchange Date.
Counterparty shall be deemed to have instructed the Collateral Agent to
deliver to the Custodian, for the account of the Trust, shares of Common
Stock then held by the Collateral Agent as collateral under the Collateral
Agreement, in an amount equal to the number of Contract Shares, rounded
down to the nearest whole number. Instead of any fractional shares of
Common Stock that would otherwise be deliverable (prior to rounding) to
the Trust at the Exchange Date, Counterparty agrees to make a cash payment
in respect of such fractional shares of Common Stock in an amount equal to
the value thereof at the Exchange Price. Notwithstanding the foregoing, if
an Adjustment Event shall have occurred prior to the Exchange Date then,
in lieu of the foregoing, Counterparty shall be deemed to have instructed:
(A) in the case of any cash required to be delivered on the Exchange Date
as provided in Section 6.2, the Collateral Agent to deliver such cash by
wire transfer Federal (immediately available same-day) funds to an account
designated by the Trust; and (B) in the case of any Reported Securities
required to be delivered by Counterparty in lieu of cash as provided in
Section 6.2, the Collateral Agent to deliver to the Custodian, for the
account of the Trust, a specified number of Reported Securities then held
as collateral under the Collateral Agreement, as provided in Section 6(g)
of the Collateral Agreement.
(ii) In the event that by the Exchange Date any substitute collateral
delivered to the Collateral Agent pursuant to Section 6(b) of the
Collateral Agreement has not been replaced by shares of Common Stock
(and/or, after an Adjustment Event, cash or Reported Securities)
sufficient to meet Counterparty's obligations hereunder, delivery shall be
effected by delivery by the Collateral Agent to the Custodian, for the
account of the Trust, of the market value of the shares of Common Stock
required to be delivered
9
hereunder, in the form of any shares of Common Stock then pledged by
Counterparty plus cash generated from the liquidation of U.S. Government
obligations then pledged by Counterparty (and/or, after an Adjustment
Event, the market value of the alternative consideration required to be
delivered hereunder, in the form of any Reported Securities then pledged,
plus any cash then pledged, plus cash generated from the liquidation of
U.S. Government obligations then pledged). In such event, Counterparty
shall be deemed to have instructed the Collateral Agent to liquidate and
turn into cash the U.S. Government obligations then pledged by
Counterparty to the extent necessary to satisfy Counterparty's obligations
hereunder.
(iii) Certificates representing Common Stock (or Reported Securities)
in registered form that are part of the Contract Shares shall be
registered in the Trust's name or in the name of a depositary or a nominee
of a depositary as requested by the Trust, unless such Common Stock
(and/or Reported Securities) is represented by one or more global
certificates registered in the name of a depositary or a nominee of a
depositary or are book entry securities, in which event the Trust's
interest in such securities shall be noted in a manner satisfactory to the
Trust and its counsel.
(iv) Counterparty's right to deliver (or cause to be delivered) to
the Trust hereunder Common Stock and Reported Securities shall be
conditioned upon such Common Stock and Reported Securities to be so
delivered being transferable (i) by Counterparty to the Trust in
accordance with the provisions hereof and in accordance with the terms of
any agreement among shareholders applicable to such Common Stock or
Reported Securities, and (ii) by the Trust, following receipt from
Counterparty, without any restrictions not generally applicable to all
holders of such Common Stock or Reported Securities, as the case may be.
If the conditions set forth in the preceding sentence shall not be
satisfied with respect to any Common Stock or Reported Securities to be
delivered by Counterparty, then, notwithstanding the provisions hereof,
Counterparty shall exercise the Cash Delivery Option.
(d) Cash Delivery Option. At its option, Counterparty may deliver to the
Trust on the Exchange Date (even if the Exchange Date is not extended pursuant
to Section 1.3(f)), in lieu of the Contract Shares, an amount in cash equal to,
subject to adjustment as provided in Section 6.2, the Exchange Price of the
Contract Shares (the "Cash Delivery Option"), paid by wire transfer to an
account designated by the Trust, in Federal (immediately available same-day)
funds; provided, however, that Counterparty hereby waives its right to exercise
the Cash Delivery Option and agrees to be bound by the decision AT&T Broadband
CSC Holdings, Inc. ("Holdings") makes with respect to the Cash Delivery Option
under the Forward Contract Agreement, dated as of the date hereof by and
between the Trust and Holdings (the "Holdings Forward Contract"); provided,
further, that in connection with a Rollover Offering which is consummated and
as to which Counterparty has duly elected the Cash Delivery Option and has duly
made a Rollover Offering Election, such cash payment shall be made no later
than the fifth Business Day after the Exchange Date. If Holdings elects the
Cash Delivery Option and so notifies the Trust, the Trust shall promptly notify
The Depository Trust Company and publish a notice in a daily newspaper of
national circulation stating whether the holders of Equity Trust Securities
will receive shares of Common Stock or cash (and specifying whether any such
cash settlement is being made in connection with a Rollover Offering).
10
(e) Rollover Offering Election. The provisions of Sections 1.3(f) and (g)
shall be applicable if Holdings has made a Rollover Offering Election by
written notice given to the Trust not earlier than August 16, 2004 and not
later than October 15, 2004. Any Rollover Offering Election made by Holdings
(i) shall be irrevocable once made, and (ii) may be made only if Holdings has
also elected, or simultaneously elects, the Cash Delivery Option.
(f) Extension of Exchange Date. At its option, Counterparty may, by notice
given to the Trust not earlier than August 16, 2004 and not later than October
15, 2004 elect to extend the Exchange Date to February 15, 2005; provided,
however, that Counterparty hereby waives its right to extend the Exchange Date
hereunder and agrees to be bound by the decision Holdings makes with respect to
extension of the Exchange Date pursuant to Section 1.3(f) of the Holdings
Forward Contract. Any such extension shall be effective (i) only in connection
with a Rollover Offering as to which Holdings shall have duly made a Rollover
Offering Election and (ii) only if Counterparty shall have delivered to the
Collateral Agent, in pledge under the Collateral Agreement, (A) direct
obligations of the United States of America which through the scheduled payment
of principal and interest in accordance with their terms will provide, not
later than one Business Day before February 15, 2005, cash in an amount equal
to not less than the Extension Amount (the "Additional Government Securities")
or an equivalent amount of Cash Equivalents. Unless Holdings has duly elected,
in connection with a Rollover Offering, to accelerate the Exchange Date in
accordance with Section 1.3(g) hereof, Counterparty shall on such extended
Exchange Date pay to the Trust by wire transfer of Federal (immediately
available same-day) funds an amount equal to the Extension Amount.
In addition, Counterparty hereby covenants and agrees to take all other
actions necessary to cause the Trust to be a protected purchaser of such
Additional Government Securities, within the meaning of Article 8 of the New
York Uniform Commercial Code, as amended.
If Counterparty elects to extend the Exchange Date and so notifies the
Trust, the Trust shall promptly notify the Depository Trust Company and publish
a notice in a daily newspaper of national circulation stating that the
Counterparty has elected to extend the Exchange Date.
(g) Acceleration of Exchange Date. At any time after the Exchange Date has
been extended pursuant to Section 1.3(f) hereof, Counterparty may, at its
option but only in connection with the consummation of a Rollover Offering,
accelerate the Exchange Date to any date on or after November 15, 2004, by
notice to the Trust not later than 10:00 a.m. on the date to which the Exchange
Date is accelerated; provided, however, that Counterparty hereby waives its
right to accelerate the Exchange Date hereunder and agrees to be bound by the
decision Holdings makes with respect to acceleration of the Exchange Date
pursuant to Section 1.3(g) of the Holdings Forward Contract; provided, further,
that such acceleration shall be effective only if at or prior to 10:00 a.m. on
such accelerated Exchange Date, Counterparty has paid to the Trust, by wire
transfer to an account designated by the Trust, in Federal (immediately
available same-day) funds, an amount not less than (i) the Extension Amount
multiplied by (ii) the number of days in the period from (and including)
November 15, 2004 to (but excluding) the Exchange Date as accelerated,
calculated on the basis of a 360 day year consisting of twelve 30-day months
divided by (iii) 90.
11
If Holdings elects to accelerate the Exchange Date and so notifies the
Trust, the Trust shall provide notice of such election to the holders of the
Equity Trust Securities not later than the accelerated Exchange Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COUNTERPARTY
Counterparty represents and warrants to the Trust that each representation
and warranty made by Counterparty in Section 3 of the Underwriting Agreement is
true and correct on the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants to Counterparty that:
(a) each representation and warranty made by the Trust in Section 1 of the
Underwriting Agreement is true and correct on the date hereof; and
(b) it acknowledges that the Common Stock delivered pursuant to this
Agreement and the Collateral Agreement may contain one or more of the type of
legends referred to in Section 3(e) of the Collateral Agreement (which legend
(i) will not be applicable to the delivery of any such Common Stock to the
Trust pursuant to this Agreement and the Collateral Agreement or to the
delivery of any such Common Stock by the Trust to the holders of Equity Trust
Securities pursuant to the Equity Trust Securities and (ii) will be removed at
the request of the Collateral Agent to the depository for the Common Stock
prior to any such delivery to holders of Equity Trust Securities).
ARTICLE IV
CONDITIONS TO THE TRUST'S OBLIGATIONS
(a) The obligation of the Trust to deliver the Firm Contract Price on the
Firm Payment Date is subject to the satisfaction of the following conditions:
(i) the purchase by the Underwriters of the Equity Trust Securities
pursuant to the Underwriting Agreement shall have been consummated as
contemplated under the Underwriting Agreement;
(ii) the representations and warranties of the Counterparty contained
in Article II hereof shall be true and correct as of the Firm Payment
Date;
(iii) the Collateral Agreement shall have been executed by the
Counterparty and the delivery of the Collateral thereunder shall have been
made; and
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(iv) the Reimbursement Agreement shall have been executed by the
Counterparty.
(b) The obligation of the Trust to deliver the Additional Contract Price
on the Option Closing Date is subject to the satisfaction of the following
conditions:
(i) the purchase by the Underwriters of the Additional Equity Trust
Securities pursuant to the Underwriting Agreement shall have been
consummated as contemplated under the Underwriting Agreement;
(ii) the representations and warranties of the Counterparty contained
in Article II hereof shall be true and correct as of the Option Closing
Date (except to the extent that they refer to an earlier date, in which
case they shall be true and correct as of such earlier date); and
(iii) the delivery of any additional Collateral under the Collateral
Agreement shall have been made.
ARTICLE V
COVENANTS
5.1 Taxes. Counterparty shall pay any and all documentary, stamp, transfer
or similar taxes and charges that may be payable in respect of the entry into
this Agreement and the transfer and delivery of the Contract Shares, cash or
Reported Securities pursuant hereto.
5.2 Forward Contract. Each of the Trust and Counterparty hereby agrees
that:
(a) it will treat this Agreement in its entirety as a forward contract for
the delivery of the Contract Shares on the Exchange Date (including as a result
of acceleration or otherwise) (the "Forward Contract Characterization"), under
the terms of which contract (i) at the time of issuance of the Equity Trust
Securities, the Trust is required to pay the Counterparty a fixed amount of
cash equal to the Firm Contract Price of the Equity Trust Securities, in
consideration for the Counterparty's obligation to deliver Common Stock (or
cash in lieu of Common Stock) to the Trust at maturity, and (ii) at maturity,
the Counterparty will deliver to the Trust the number of shares of Common Stock
that the Trust is entitled to receive at that time pursuant to the terms of the
Equity Trust Securities (subject to the right of the Counterparty to deliver
cash in lieu of the Common Stock);
(b) it will treat the delivery of the Contract Shares, if any, as
occurring on the Exchange Date;
(c) it will not treat this Agreement, any portion of this Agreement or any
obligation hereunder as giving rise to any interest income or other inclusions
of ordinary income (in the case of the Trust) or as giving rise to any interest
expense or other deductions of ordinary expense (in the case of Counterparty);
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(d) it will not treat the delivery of any portion of the Contract Shares,
cash or Reported Securities to be delivered pursuant to this Agreement as the
payment of interest or ordinary income; and
(e) it will not take any action (including filing any tax return or form
or taking any position in any tax proceeding) that is inconsistent with the
obligations contained in clauses (a) through (d), unless such action or
position is required by an applicable taxing authority or unless such action or
position is required by a change in statutory law or regulation or by a
judicial or other authoritative interpretation of the law enacted, promulgated
or published after the date of this Agreement.
5.3 Limitations on Trading During Certain Days. Counterparty hereby agrees
that it will not, and will cause each of its Affiliates that is under its
control not to, buy shares of Common Stock of the Company or Reported
Securities for its own account during the ten days prior to the Exchange Date.
5.4 Notices. Counterparty will cause to be delivered to the Trust:
(a) immediately upon the occurrence of any Event of Default hereunder
or under the Collateral Agreement; and
(b) promptly after Counterparty receives notice, or otherwise obtains
knowledge, at any time prior to the Exchange Date that any event requiring
that an adjustment be effected pursuant to Article VI hereof shall have
occurred or be pending;
a notice identifying such event and stating, if known to Counterparty, the date
on which such event is to occur and, if applicable, the record date relating to
such event. Counterparty shall cause further notices to be delivered to the
Trust if Counterparty shall subsequently receive notice, or shall otherwise
obtain knowledge, of any further or revised information regarding the terms or
timing of such event or any record date relating thereto.
5.5 Affirmative Covenants. During the term of this Agreement, Counterparty
covenants and agrees that it will:
(a) Comply in all material respects with all applicable laws, rules,
regulations and orders to the extent noncompliance would have a material
adverse effect on the ability of Counterparty to perform its obligations
hereunder or under the Collateral Agreement, such compliance to include,
without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon Counterparty or upon
Counterparty's property, including the collateral pledged under the Collateral
Agreement, except to the extent contested in good faith.
(b) Furnish to the Trust as soon as possible and in any event within
twenty calendar days after Counterparty shall become aware of the occurrence of
any failure by Counterparty to comply with or perform any agreement or
obligation contained in this Agreement or the Collateral Agreement, a statement
of Counterparty describing such failure and setting forth details of such
failure and the action which Counterparty has taken and proposes to take with
respect thereto.
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5.6 Further Assurances. From time to time on and after the date hereof
through the Exchange Date (or, if later, the date on which this Agreement has
been fully performed), each of the parties hereto shall use its best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper and advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement in
accordance with the terms and conditions hereof, including (i) using reasonable
best efforts to remove any legal impediment to the consummation of such
transactions and (ii) the execution and delivery of all such deeds, agreements,
assignments and further instruments of transfer and conveyance necessary,
proper or advisable to consummate and make effective the transactions
contemplated by the Agreement in accordance with the terms and conditions
hereof.
ARTICLE VI
ADJUSTMENT OF EXCHANGE RATE, EXCHANGE PRICE AND CLOSING PRICE
6.1 Dilution Adjustments. The Exchange Rate, Exchange Price and Closing
Price shall be subject to adjustment successively from time to time as follows:
(a) Stock Dividends, Splits, Reclassifications, Etc. If the Company shall,
after the date hereof,
(i) pay a stock dividend or make a distribution, in either case, with
respect to Common Stock in shares of such stock;
(ii) subdivide or split its outstanding shares of Common Stock into a
greater number of shares;
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares; or
(iv) issue by reclassification (other than a reclassification
pursuant to clause (b), (c), (d) or (e) of the definition of Adjustment
Event) of its shares of Common Stock any other equity securities of the
Company;
then, the Exchange Rate shall be multiplied by a Dilution Adjustment equal to
the number of shares of Common Stock (or the fraction thereof) that a holder
who held one share of Common Stock immediately prior to such event would be
entitled solely by reason of such event to hold immediately after such event.
In the case of the reclassification of any shares of Common Stock into any
other equity securities of the Company other than the Common Stock, such other
equity securities shall be deemed shares of Common Stock for all purposes
hereunder. The Exchange Price and Closing Price shall also be adjusted in the
manner described in paragraph (c) of this Section 6.1.
(b) Right or Warrant Issuances. If the Company shall, after the date
hereof, issue, or declare a record date in respect of an issuance of, rights or
warrants (other than rights to purchase Common Stock pursuant to a plan for the
reinvestment of dividends or interest) to all
15
holders of Common Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the Market Price of the Common
Stock on the Business Day next following the record date for the determination
of holders of Common Stock entitled to receive such rights or warrants, then,
in each such case, the Exchange Rate shall be multiplied by the following
Dilution Adjustment: a fraction, of which the numerator shall be (A) the number
of shares of Common Stock outstanding on the record date for the issuance of
such rights or warrants plus (B) the number of additional shares of Common
Stock offered for subscription or purchase pursuant to such rights or warrants,
and of which the denominator shall be (x) the number of shares of Common Stock
outstanding on the record date for the issuance of such rights or warrants plus
(y) the number specified in clause (B) above multiplied by the quotient of the
exercise price of such rights or warrants divided by the Market Price of the
Common Stock on the Business Day next following the record date for the
determination of holders of Common Stock entitled to receive such rights or
warrants; provided that the Exchange Rate shall not be adjusted to more than
one share of Common Stock per Equity Trust Security. To the extent that such
rights or warrants expire prior to the Exchange Date and shares of Common Stock
are delivered with respect to less than all of such rights or warrants prior to
such expiration, the Exchange Rate shall be readjusted to the Exchange Rate
which would then be in effect had such adjustments for the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of Common Stock actually delivered pursuant to such rights or warrants.
For purposes of this Section 6.1(b), dividends will be deemed to be paid as of
the record date for such dividend. The Exchange Price and Closing Price shall
also be adjusted in the manner described in paragraph (c) of this Section 6.1.
(c) Corresponding Adjustments to Exchange Price; Adjustment of Closing
Price in Certain Circumstances.
(i) If any adjustment is made to the Exchange Rate pursuant to
paragraph (a) or (b) of this Section 6.1, an adjustment shall also be made
to the Exchange Price as such term is used throughout the definition of
Exchange Rate. The required adjustment to the Exchange Price shall be made
at the Exchange Date by multiplying the Exchange Price by the cumulative
Dilution Adjustment.
(ii) If, during any Calculation Period used in calculating the
Exchange Price, the Market Price or the Transaction Value, there shall
occur any event requiring an adjustment to be effected pursuant to this
Section 6.1, then the Closing Price for each Trading Day in the
Calculation Period occurring prior to the day on which such adjustment is
effected shall be adjusted by being multiplied by the relevant Dilution
Adjustment.
(d) Timing of Dilution Adjustments. Each Dilution Adjustment shall be
effected:
(i) in the case of any dividend, distribution, or issuance of rights
or warrants, at the opening of business on the Business Day next following
the record date for determination of holders of Common Stock entitled to
receive such dividend, distribution or issuance or, if the announcement of
any such dividend, distribution or issuance is after
16
such record date, at the time such dividend, distribution or issuance
shall be announced by the Company; and
(ii) in the case of any subdivision, split, combination or
reclassification, on the effective date of such transaction.
(e) General; Failure of Dilution Event to Occur. All Dilution Adjustments
shall be rounded upward or downward to the nearest 1/10,000th (or if there is
not a nearest 1/10,000th to the next higher 1/10,000th). No adjustment in the
Exchange Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided, however, that
any adjustments which by reason of this sentence are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
If any announcement or declaration of a record date in respect of a dividend,
distribution or issuance requiring an adjustment pursuant to this Section 6.1
shall subsequently be canceled by the Company, or such dividend, distribution
or issuance shall fail to receive requisite approvals or shall fail to occur
for any other reason, then, upon such cancellation, failure of approval or
failure to occur, the Exchange Rate shall be readjusted to the Exchange Rate
which would then have been in effect had adjustment for such event not been
made. If an Adjustment Event shall occur after the occurrence of one or more
events requiring an adjustment pursuant to this Section 6.1, the Dilution
Adjustments previously applied to the Exchange Rate in respect of such events
shall not be rescinded but shall be applied to the new Exchange Rate provided
for under Section 6.2.
6.2 Adjustment for Consolidation, Merger or Other Adjustment Event. In the
event of (a) any dividend or distribution by the Company to all holders of
Common Stock of evidences of its indebtedness or other assets (excluding any
dividends or distributions referred to in Section 6.1(a)(i), any other equity
securities issued pursuant to a reclassification referred to in Section
6.1(a)(iv) and any Ordinary Cash Dividends) or any issuance by the Company to
all holders of Common Stock of rights or warrants to subscribe for or purchase
any of its securities (other than rights or warrants referred to in Section
6.1(b)), (b) any consolidation or merger of the Company, or any surviving
entity or subsequent surviving entity of the company (any such entity, a
"Company Successor"), with or into another entity (other than a merger or
consolidation in which the Company is the continuing corporation and in which
the Common Stock outstanding immediately prior to the merger or consolidation
is not exchanged for cash, securities or other property of the Company or
another corporation), (c) any sale, transfer, lease or conveyance to another
corporation of the property of the Company as an entirety or substantially as
an entirety, (d) any statutory exchange of securities of the Company or any
Company Successor with another corporation (other than in connection with a
merger or acquisition) or (e) any liquidation, dissolution or winding up of the
Company (any such event described in clause (a), (b), (c), (d) or (e), an
"Adjustment Event"), the Exchange Rate shall be adjusted so that on the
Exchange Date Counterparty shall deliver to the Trust, in lieu of or (in the
case of an Adjustment Event described in clause (a) above) in addition to, the
Contract Shares, cash in an amount equal to:
(A) if the Exchange Price is greater than the Threshold Appreciation
Price, 0.8197 multiplied by the Transaction Value (as defined below);
17
(B) if the Exchange Price is less than or equal to the Threshold
Appreciation Price but greater than the Initial Price, the product of
(x) the Initial Price divided by the Exchange Price multiplied by (y)
the Transaction Value; and
(C) if the Exchange Price is less than or equal to the Initial Price, the
Transaction Value;
provided, however, that if the consideration received by all holders of
Common Stock in such Adjustment Event does not and may not at the option of
such holders include Reported Securities, then (except in the case of an
Adjustment Event solely of the type described in clause (a) above) (i)
Counterparty's delivery obligations hereunder will be accelerated and promptly
upon consummation of the Adjustment Event Counterparty will be required to
deliver to the Trust cash in an amount equal to (x) if the Transaction Value is
greater than the Threshold Appreciation Price, 0.8197 multiplied by the
Transaction Value, (y) if the Transaction Value is less than or equal to the
Threshold Appreciation Price but greater than Initial Price, the Initial Price,
and (z) if the Transaction Value is less than or equal to the Initial Price,
the Transaction Value.
If the consideration received by holders of Common Stock in an Adjustment
Event includes Reported Securities, and, to any extent, consideration other
than Reported Securities, and in the case of an Adjustment Event described in
(b), (c) or (d) of the definition of that term , the Transaction Value of the
consideration other than Reported Securities comprises 25% or more of the
aggregate Transaction Value for such Adjustment Event, then (a) Counterparty's
delivery obligations hereunder will be accelerated to the extent that the value
of the consideration received in such Adjustment Event does not derive from
Reported Securities and promptly upon consummation of the Adjustment Event
Counterparty will be required to deliver to the Trust cash in an amount equal
to (x) if the Transaction Value is greater than the Threshold Appreciation
Price, 0.8197 multiplied by (i) the Transaction Value and (ii) the percentage
of the value of the consideration received in connection with the Adjustment
Event that does not derive from Reported Securities, (y) if the Transaction
Value is less than or equal to the Threshold Appreciation Price but greater
than the Initial Price, the Initial Price multiplied by the percentage of the
value of the consideration received in connection with the Adjustment Event
that does not derive from Reported Securities, and (z) if the Transaction Value
is less than or equal to the Initial Price, the Transaction Value multiplied by
the percentage of the value of the consideration received in connection with
the Adjustment Event that does not derive from Reported Securities.
Following the occurrence of an Adjustment Event, the Exchange Price, as
such term is used throughout the definition of Exchange Rate, shall be deemed
to equal (A) if shares of Common Stock are outstanding at the Exchange Date,
the Exchange Price of the Common Stock, as adjusted pursuant to Section 6.1(c),
otherwise zero, plus (B) the Transaction Value.
Notwithstanding the foregoing, with respect to any Reported Securities (as
defined below) received by holders of Common Stock in an Adjustment Event,
Counterparty shall, in lieu of delivering cash in respect of such Reported
Securities as described above, deliver a number of such Reported Securities
with a value, as determined in accordance with clause (ii) of the definition of
Transaction Value, equal to all cash amounts that would otherwise be
18
deliverable in respect of Reported Securities received in such Adjustment
Event, except to the extent Counterparty has made an election to exercise the
Cash Delivery Option or such Reported Securities have not yet been delivered to
the holders entitled thereto following such Adjustment Event or any record date
with respect thereto. If, following any Adjustment Event, any Reported Security
ceases to qualify as a Reported Security, then (x) Counterparty shall not
deliver such Reported Security but instead shall deliver an equivalent amount
of cash and (y) notwithstanding clause (ii) of the definition of Transaction
Value, the Transaction Value of such Reported Security shall mean the fair
market value of such Reported Security on the date such security ceases to
qualify as a Reported Security, as determined by a nationally recognized
investment banking firm retained for this purpose by the Administrator.
"Transaction Value" means (i) for any cash received in any Adjustment
Event, the amount of cash received per share of Common Stock, (ii) for any
Reported Securities received in any Adjustment Event, an amount equal to (x)
the average Closing Price per security of such Reported Securities on the 20
Trading Days immediately prior to (but not including) the Exchange Date (except
in the case of a Rollover Offering, in which case the Closing Price on the
Trading Day immediately preceding the Pricing Date or, if the Rollover Offering
is priced after 4:00 p.m. New York City time on the Pricing Date, the Closing
Price on the Pricing Date shall be used for purposes of this clause) multiplied
by (y) the number of such Reported Securities (as adjusted pursuant to the
definition thereof) received per share of Common Stock and (iii) for any
property received in any Adjustment Event other than cash or Reported
Securities, an amount equal to the fair market value of the property received
per share of Common Stock on the date such property is received, as determined
by a nationally recognized investment banking firm retained for this purpose by
the Administrator; provided, however, that in the case of clause (ii), (x) with
respect to securities that are Reported Securities by virtue of only clause
(iv) of the definition of Reported Securities, Transaction Value with respect
to any such Reported Security means the average of the mid-point of the last
bid and ask prices for such Reported Security as of the Exchange Date from each
of at least three nationally recognized investment banking firms retained for
such purpose by the Administrator multiplied by the number of such Reported
Securities (as adjusted pursuant to the definition thereof) received per share
of Common Stock and (y) with respect to all Reported Securities other than
securities that are Reported Securities by virtue of only clause (iv) of the
definition of Reported Securities, if there are not 20 Trading Days for any
particular Reported Security occurring after the 60th calendar day immediately
prior to, but not including, the Exchange Date, Transaction Value with respect
to such Reported Security means the fair market value per security of such
Reported Security as of the Exchange Date as determined by a nationally
recognized investment banking firm retained for such purpose by the
Administrator multiplied by the number of such Reported Securities (as adjusted
pursuant to the definition thereof) received per share of Common Stock. For
purposes of calculating the Transaction Value, any cash, Reported Securities or
other property receivable in an Adjustment Event shall be deemed to have been
received immediately prior to the close of business on the record date for such
Adjustment Event or, if there is no record date for such Adjustment Event,
immediately prior to the close of business on the effective date of such
Adjustment Event.
"Reported Securities" means any securities received in an Adjustment Event
that (A) are (i) listed on a United States national securities exchange, (ii)
reported on a United States national securities system subject to last sale
reporting, (iii) traded in the over-the-counter market
19
and reported on the National Quotation Bureau or similar organization or (iv)
for which bid and ask prices are available from at least three nationally
recognized investment banking firms; and (B) are either (x) perpetual equity
securities or (y) non-perpetual equity or debt securities with a stated
maturity after the Exchange Date. The number of shares of any Reported
Securities included in the calculation of Transaction Value pursuant to clause
(ii) of the definition thereof shall be subject to adjustment if any event that
would, had it occurred with respect to the Common Stock or the Company, have
required an adjustment pursuant to Section 6.1 or 6.2, shall occur with respect
to such Reported Securities or the issuer thereof subsequent to the date the
Adjustment Event is consummated. Adjustment for such subsequent events shall be
as nearly equivalent as practicable to the adjustments provided for in Section
6.1 or 6.2, as applicable.
ARTICLE VII
ACCELERATION
If one or more of the following events (each an "Event of Default") shall
occur:
(a) Counterparty or AT&T Corp., a New York corporation ("AT&T"), shall
commence a voluntary case or other proceeding seeking a liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or shall take any action to authorize any of the foregoing;
(b) an involuntary case or other proceeding shall be commenced against
Counterparty or AT&T seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property; or an order for relief shall be entered
against Counterparty or AT&T under any bankruptcy, insolvency or other similar
law as now or hereafter in effect; or
(c) a Collateral Event of Default within the meaning of the Collateral
Agreement;
then an "Acceleration Date" shall occur, Counterparty's rights under Section
1.3(d), (e) (f) and (g) shall terminate immediately and (i) in the case of
clause (c), Counterparty shall become obligated to the extent permitted by law
to deliver to the Trust (and shall be deemed to instruct the Collateral Agent
to deliver to the Custodian, for the account of the Trust, and to liquidate and
turn into cash the U.S. Government obligations and Cash Equivalents then
pledged by Counterparty to the extent necessary to satisfy such obligation) the
Firm Share Base Amount plus the Additional Share Base Amount, if any, in the
form of the shares of Common Stock then pledged by Counterparty, or cash
generated from the liquidation of U.S. Government obligations and Cash
Equivalents then pledged by Counterparty, or a combination thereof (or, after
an
20
Adjustment Event, the alternate consideration to be delivered, in the form of
Reported Securities then pledged, cash then pledged, cash generated from the
liquidation of U.S. Government obligations and Cash Equivalents then pledged,
or a combination thereof); or (ii) in the case of clauses (a) or (b),
Counterparty shall become obligated to the extent permitted by law to deliver
to the Trust (and shall be deemed to instruct the Collateral Agent to deliver
to the Custodian, for the account of the Trust, and to liquidate and turn into
cash the U.S. Government obligations and Cash Equivalents then pledged by
Counterparty to the extent necessary to satisfy such obligation) a number of
shares of Common Stock, in the form of the shares of Common Stock then pledged
by Counterparty, or cash generated from the liquidation of U.S. Government
obligations and Cash Equivalents then pledged by Counterparty, or a combination
thereof (or, after an Adjustment Event, the alternate consideration to be
delivered, in the form of Reported Securities then pledged, cash then pledged,
cash generated from the liquidation of U.S. Government obligations and Cash
Equivalents then pledged, or a combination thereof), with an aggregate value
(based on the Closing Price on the Acceleration Date) equal to the Acceleration
Value (as defined below).
"Acceleration Value" means an amount determined by the Administrator on
the basis of quotations from Independent Dealers (as defined below). Each
quotation will be for an amount that would be paid to the relevant Independent
Dealer in consideration of an agreement between the Trust and such Independent
Dealer that would have the effect of preserving for the Trust the economic
equivalent of the payments and deliveries that the Trust would, but for the
occurrence of the Acceleration Date, have been entitled to receive after the
Acceleration Date hereunder (taking into account any adjustments to the
Exchange Rate that may have been effected on or prior to the Acceleration
Date). On or as soon as reasonably practicable following the Acceleration Date,
the Administrator will request each Independent Dealer to provide its quotation
as soon as reasonably practicable, but in any event within two Business Days.
The Administrator shall compute the Acceleration Value upon receipt of each
Independent Dealer's quotation, provided that if, at the close of business on
the fourth Business Day following the Acceleration Date, the Administrator
shall have received quotations from fewer than four of the Independent Dealers,
the Administrator shall compute the Acceleration Value using the quotations, if
any, it shall have received at or prior to such time. If four quotations are
provided, the Acceleration Value will be the arithmetic mean of the two
quotations remaining after disregarding the highest and lowest quotations. (For
this purpose, if more than one quotation has the same highest or lowest value,
then one of such quotations shall be disregarded.) If two or three quotations
are provided, the Acceleration Value will be the arithmetic mean of such
quotations. If one quotation is provided, the Acceleration Value will be equal
to such quotation. If no quotations are provided, the Acceleration Value will
be the aggregate value (based on the Closing Price on the Acceleration Date) of
the number of shares of Common Stock (or, after an Adjustment Event, Reported
Securities, cash or a combination thereof) that would be required to be
delivered hereunder on the Acceleration Date if the Exchange Date were
redefined to be the Acceleration Date.
"Independent Dealers" means four nationally recognized independent
investment banking firms selected in good faith by the Administrator.
As promptly as reasonably practicable after receipt of the quotations on
which the Acceleration Value is based (or, as the case may be, after failure to
receive any such quotations
21
within the time period prescribed above), the Trust shall deliver to
Counterparty and the Collateral Agent a notice specifying the number of shares
of Common Stock (or, after an Adjustment Event, the alternate consideration)
required to be delivered by Counterparty. the Trust and Counterparty agree that
the obligations contained in clauses (i) and (ii) above are a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the loss of
bargain and the Trust will not be entitled to recover additional damage as a
consequence of loss resulting from an Event of Default.
ARTICLE VIII
MISCELLANEOUS
8.1 Adjustments; Selection of Independent Investment Banking Firm. The
Trust shall be responsible for the effectuation and calculation of any
adjustment pursuant to Article VI hereof and shall furnish Counterparty notice
of any such adjustment and shall provide Counterparty reasonable opportunity to
review the calculations pertaining to any such adjustment. If, pursuant to the
terms and conditions hereof, the Administrator shall be required to retain a
nationally recognized independent investment banking firm for any purpose
provided herein, such nationally recognized independent investment banking firm
shall be selected and retained by the Administrator only after consultation
with Counterparty; provided, however, that Counterparty shall be deemed to have
waived its right to consult if Counterparty fails to consult within five
Business Days of notice being sent by the Administrator to Counterparty seeking
consultation. the Trust may delegate the effectuation and calculation of any
such adjustments to its Administrator.
8.2 Notices. Notices to the Trust shall be directed to it in care of the
Administrator for the Trust, The Bank of New York, ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, Telecopier: (212)
896-7295; notices to Counterparty shall be directed to care of AT&T Broadband
CSC II, Inc., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, #▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ (fax
no.: (▇▇▇) ▇▇▇-▇▇▇▇), Attention: President. Notwithstanding the foregoing,
notices to a party shall be directed to such other address for such party as
shall be specified by such party in a like notice given pursuant to this
Section 8.2. All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if either (i) personally delivered
(including delivery by courier service or by Federal Express or any other
nationally recognized overnight delivery service for next day delivery) to the
offices specified in the preceding sentence, in which case they shall be deemed
received on the first Business Day by which delivery shall have been made to
said offices; or (ii) sent by certified mail, return receipt requested, in
accordance with the preceding sentence, in which case they shall be deemed
received when receipted for unless acknowledgment is refused (in which case
delivery shall be deemed to have been received on the first Business Day on
which such acknowledgment is refused). Any notice, demand or other
communication to be provided by or on behalf of the Trust pursuant to this
Agreement shall be sent to the address of Counterparty, provided in this
Section 8.2. Any failure by Counterparty or any guardian, conservator,
executor, administrator or other similarly appointed person to receive any such
notice, demand or communication shall in no way abrogate, invalidate or
otherwise affect the validity or enforceability of the notice, demand or
communication or the matters set forth therein.
22
8.3 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
8.4 Entire Agreement. Except as expressly set forth herein, this Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, among the parties with respect to the
subject matter of this Agreement.
8.5 Amendments; Waivers. Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by the Trust and Counterparty, or, in the case of a
waiver, by the party or parties against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law.
8.6 No Third Party Rights; Successors and Assigns. Except as otherwise
agreed in writing, this Agreement is not intended and shall not be construed to
create any rights in any person other than Counterparty and the Trust and their
respective successors and assigns and no person shall assert any rights as
third party beneficiary hereunder. Whenever any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
permitted assigns of such party.
8.7 Application of Bankruptcy Code. The parties hereto acknowledge and
agree that the Collateral Agent is a "financial institution" within the meaning
of Section 101(22) of Title 11 of the United States Code (the "Bankruptcy
Code") and is acting as agent and custodian for the Trust in connection with
this Agreement and that the Trust is a "customer" of the Collateral Agent
within the meaning of said Section 101(22). The parties hereto further
acknowledge and agree that this Agreement is a "securities contract", as such
term is defined in Section 741(7) of the Bankruptcy Code, entitled to the
protection of Section 555 of the Bankruptcy Code.
8.8 Governing Law; Jurisdiction; Severability; Waiver of Jury Trial. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York. For the purpose of any suit, action or proceeding arising
out of or relating to this Agreement, the parties hereto hereby expressly and
irrevocably consent and submit to the non-exclusive jurisdiction of any United
States Federal or New York State court sitting in the Borough of Manhattan,
City and State of New York, and expressly and irrevocably waive, to the extent
permitted under applicable law, any immunity from the jurisdiction thereof and
any claim or defense in such suit, action or proceeding based on a claim of
improper venue, forum non conveniens or any similar basis to which it might
otherwise be entitled. To the extent permitted by law, the unenforceability or
invalidity of any provision or provisions of this Agreement shall not render
any other provision or provisions herein contained unenforceable or invalid. TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND
COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF,
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DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF
ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED
UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH
PARTY HERETO ACKNOWLEDGES THAT IT OR HE HAS BEEN INFORMED BY THE OTHER PARTY
HERETO THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT
UPON WHICH SUCH OTHER PARTY HERETO HAS RELIED, IS RELYING AND WILL RELY IN
ENTERING INTO THIS AGREEMENT AND ANY DOCUMENT RELATED THERETO. EACH PARTY
HERETO MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTY HERETO TO THE WAIVER OF ITS
OR HIS RIGHTS TO TRIAL BY JURY.
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IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
and year first above written.
TRUST: COUNTERPARTY:
EQUITY SECURITIES TRUST I: AT&T BROADBAND CSC II, INC.
By: By:
-------------------------------- -------------------------------
Name: Name:
Title: Title: