Document:

EXHIBIT 10.6

Execution Copy

 

	
       
 	
       
 	
      June 11, 2008
 
	
                         
 	
       
 	
                         
 
	
      To:
 	
                         
 	
                        Sotheby’s 
 1334 York Avenue 
 New York, NY 10021 
 Attn: Mike Gillis 
 Telephone: 212-894-2352 
 Facsimile: 212-894-2245
 
	
                         
 	
                         
 	
                         
 
	
                        From:
 	
                         
 	
                        Bank of America, N.A. 
 c/o Banc of America Securities LLC 
 Bank of America Tower at One Bryant Park 
 New York, NY 10036 
 Attn: John Servidio 
 Telephone: 646-855-7127 
 Facsimile: 212-230-8610
 
	
                         
 	
                         
 	
                         
 
	
                        Re:
 	
                         
 	
  Issuer Warrant Transaction
 (Transaction Reference Number: NY-35264)
 

Ladies and Gentlemen:

The purpose of this communication (this “Confirmation”) is to set forth the terms and conditions of the above-referenced transaction entered into on the Trade Date specified below (the “Transaction”) between Bank of America, N.A. (“Dealer”) and Sotheby’s (“Issuer”). This communication constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below.

1. This Confirmation is subject to, and incorporates, the definitions and provisions of the 2006 ISDA Definitions (the “2006 Definitions”) and the definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”, and together with the 2006 Definitions, the “Definitions”), in each case as published by the International Swaps and Derivatives Association, Inc. (“ISDA”). In the event of any inconsistency between the 2006 Definitions and the Equity Definitions, the Equity Definitions will govern. For purposes of the Equity Definitions, each reference herein to a Warrant shall
be deemed to be a reference to a Call Option or an Option, as context requires.

This Confirmation evidences a complete and binding agreement between Dealer and Issuer as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall supplement, form a part of, and be subject to an agreement (the “Agreement”) in the form of the 2002 ISDA Master Agreement (the “ISDA Form”) as if Dealer and Issuer had executed an agreement in such form (without any Schedule but with the elections set forth in this Confirmation) on the Trade Date. For the avoidance of doubt, the Transaction shall be the only transaction under the Agreement.

All provisions contained in, or incorporated by reference to, the Agreement will govern this Confirmation except as expressly modified herein. In the event of any inconsistency between this Confirmation and either the Definitions or the Agreement, this Confirmation shall govern.

2. The Transaction is a Warrant Transaction, which shall be considered a Share Option Transaction for purposes of the Equity Definitions. The terms of the particular Transaction to which this Confirmation relates are as follows:

 

	
      General Terms:
 	
       
 	
       
 
	
                        Trade Date:
 	
                         
 	
                        June 11, 2008
 
	
                        Effective Date:
 	
                         
 	
  June 17, 2008, or such other date as agreed between the parties, subject to Section 8(n) below
 

 

 

 

 

  	Components:
	 
	The Transaction will be divided into individual Components, each with the terms set forth in this Confirmation, and, in particular, with the Number of Warrants and Expiration Date set forth in this Confirmation. The payments and deliveries to be made upon settlement of the Transaction will be determined separately for each Component as if each Component were a separate Transaction under the Agreement.

	Warrant Style:
	 
	European

	Warrant Type:
	 
	Call

	Seller:
	 
	Issuer

	Buyer:
	 
	Dealer

	Shares:
	 
	The Common Stock of Issuer, par value USD 0.10 per share (Ticker Symbol: “BID”).

	Number of Warrants:
	 
	For each Component, as provided in Annex A to this Confirmation, subject to Section 8(o) below.

	Warrant Entitlement:
	 
	One Share per Warrant

	Strike Price:
	 
	USD 44.9050

	Premium:
	 
	USD9,756,251.90 (Premium per Warrant USD 3.790944); provided that if the Number of Warrants is increased pursuant to Section 8(o) below, an additional Premium equal to the product of the number of Additional Warrants (as defined below) and the Premium per Warrant shall be paid on the Additional Premium Payment Date.

	Premium Payment Date:
	 
	The Effective Date

	Additional Premium Payment Date:
	 
	The closing date for the purchase and sale of the additional convertibles notes issued to the Initial Purchasers (as defined in the Purchase Agreement dated as of the Trade Date between Issuer, Banc of America Securities LLC and Goldman, Sachs & Co., as representative of the Initial Purchasers party thereto (the “Purchase Agreement”)) pursuant to Section 2(c) of the Purchase Agreement.

	Exchange:
	 
	New York Stock Exchange

	Related Exchange:
	 
	All Exchanges

	Procedures for Exercise:
	 
	 

	In respect of any Component:
	 
	 

	Expiration Time:
	 
	Valuation Time

	Expiration Date:
	 
	As provided in Annex A to this Confirmation (or, if such date is not a Scheduled Trading Day, the next following Scheduled Trading Day that is not already an Expiration Date for another Component); provided that if that date is a Disrupted Day, the Expiration Date for such Component shall be the first succeeding Scheduled Trading Day that is not a Disrupted Day and is not or is not deemed to be an Expiration Date in respect of any other Component of the Transaction hereunder; and provided further that if the Expiration Date has not occurred pursuant to the preceding proviso as of the Final Disruption Date, the Final
        Disruption Date shall be the Expiration Date (irrespective of whether such date is

 

 

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	an Expiration Date occurring on the Final Disruption Date in respect of any other Component for the Transaction) and, notwithstanding anything to the contrary in this Confirmation or the Definitions, the Relevant Price for the Expiration Date shall be the prevailing market value per Share determined by the Calculation Agent in a commercially reasonable manner. Notwithstanding the foregoing and anything to the contrary in the Equity Definitions, if a Market Disruption Event occurs on any Expiration Date, the Calculation Agent may determine that such Expiration Date is a Disrupted Day only in part, in which case the Calculation Agent shall make adjustments to the number of Warrants for the relevant Component for which such day shall be the Expiration Date and shall designate the Scheduled Trading Day determined in the manner described in the immediately
        preceding sentence as the Expiration Date for the remaining Warrants for such Component. Section 6.6 of the Equity Definitions shall not apply to any Valuation Date occurring on an Expiration Date. “Final Disruption Date” means December 9, 2013.

	Market Disruption Event:
	 
	Section 6.3(a) of the Equity Definitions is hereby amended by deleting the words “during the one hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be,” in clause (ii) thereof. 

          Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.

	Automatic Exercise:
	 
	Applicable; and means that the Number of Warrants for each Component will be deemed to be automatically exercised at the Expiration Time on the Expiration Date for such Component unless Dealer notifies Seller in writing prior to the Expiration Time on the Expiration Date that it does not wish Automatic Exercise to occur, in which case Automatic Exercise will not apply.

	Issuer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:
	 
	To be provided by Issuer.

	Settlement Terms:
	 
	 

	In respect of any Component:
	 
	 

	Settlement Currency:
	 
	USD

	Net Share Settlement:
	 
	On each Settlement Date, Issuer shall deliver to Dealer a number of Shares equal to the Number of Shares to be Delivered for such Settlement Date to the account specified by Dealer and cash in lieu of any fractional shares valued at the Relevant Price on the Valuation Date corresponding to such Settlement Date.

	Number of Shares to be Delivered:
	 
	In respect of any Exercise Date, subject to the last sentence of Section 9.5 of the Equity Definitions, the product of (i) the number of Warrants exercised or deemed exercised on such Exercise Date, (ii) the Warrant Entitlement and (iii) (A) the excess of the VWAP Price on the Valuation Date occurring on such Exercise Date over the Strike Price divided by (B) such VWAP Price.

 

 

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                        The Number of Shares to be Delivered shall be delivered by Issuer to Dealer no later than 4:00 P.M. (local time in New York City) on the relevant Settlement Date.
 
	
                        VWAP Price:
 	
                         
 	
                        For any Valuation Date, the dollar volume weighted average price per Share for such Valuation Date based on transactions executed on the Exchange during such Valuation Date, as reported on Bloomberg Screen “BID.N <Equity> AQR” (or any successor thereto) or, in the event such price is not so reported on such Valuation Date for any reason, as reasonably determined by the Calculation Agent.
 
	
                        Other Applicable Provisions:
 	
                         
 	
                        The provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 (except that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws as a result of the fact that Seller is the Issuer of the Shares) and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction.
 
	
                        Adjustments:
 	
                         
 	
                         
 
	
                        In respect of any Component:
 	
                         
 	
                         
 
	
                        Method of Adjustment:
 	
                         
 	
                        Calculation Agent Adjustment
 
	
                        Extraordinary Dividend:
 	
                         
 	
                        Any dividend or distribution (i) that has an ex-dividend date occurring on or after the Trade Date and on or prior to the Expiration Date and (ii) the amount or value of which exceeds the Ordinary Dividend Amount for such dividend or distribution, as determined by the Calculation Agent.
 
	
                        Ordinary Dividend Amount:
 	
                         
 	
                        For the period beginning on the Trade Date and ending on the last day of the second calendar quarter of 2008, USD 0; for all other calendar quarters, USD 0.15 per quarter per Share.
 
	
                        Extraordinary Events:
 	
                         
 	
                         
 
	
                        New Shares:
 	
                         
 	
                        In the definition of New Shares in Section 12.1(i) of the Equity Definitions, the text in clause (i) thereof shall be deleted in its entirety (including the word “and” following clause (i)) and replaced with “publicly quoted, traded or listed on any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Global Market (or their respective successors)”.
 
	
                        Consequences of Merger Events:
 	
                         
 	
                         
 
	
                        (a) Share-for-Share:
 	
                         
 	
                        Modified Calculation Agent Adjustment
 
	
                        (b) Share-for-Other:
 	
                         
 	
                        Cancellation and Payment (Calculation Agent Determination)
 
	
                        (c) Share-for-Combined:
 	
                         
 	
                        Cancellation and Payment (Calculation Agent Determination)
 
	
                        Tender Offer:
 	
                         
 	
                        Applicable
 
	
                        Consequences of Tender Offers:
 	
                         
 	
                         
 
	
                        (a) Share-for-Share:
 	
                         
 	
                        Modified Calculation Agent Adjustment
 
	
                        (b) Share-for-Other:
 	
                         
 	
                        Cancellation and Payment (Calculation Agent Determination) on that portion of the Other Consideration that consists of cash;
 

 

 

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                        Modified Calculation Agent Adjustment on the remainder of the Other Consideration.
 
	
                         
 	
                         
 
	
                        (c) Share-for-Combined:
 	
                         
 	
                        Modified Calculation Agent Adjustment
 
	
                        Modified Calculation Agent Adjustment:
 	
                         
 	
                        If, in respect of any Merger Event to which Modified Calculation Agent Adjustment  applies,  the  adjustments  to  be  made  in accordance with Section 12.2(e)(i) of the Equity Definitions would result in Issuer being different from the issuer of the Shares, then with respect to such Merger Event, as a condition precedent to the adjustments contemplated in Section 12.2(e)(i) of the Equity Definitions, Issuer and the issuer of the Shares shall, prior to the Merger Date, have entered into such documentation containing representations, warranties and agreements relating to securities law and other issues as requested by Dealer that Dealer has determined, in its reasonable discretion, to be reasonably necessary or appropriate to allow Dealer to continue as a party to the Transaction, as adjusted under Section 12.2(e)(i) of the Equity Definitions, and to
preserve its hedging or hedge unwind activities in connection with the Transaction in a manner compliant with applicable legal, regulatory or self-regulatory requirements, or with related policies and procedures applicable to Dealer, and if such conditions are not met or if the Calculation Agent determines that no adjustment that it could make under Section 12.2(e)(i) of the Equity Definitions will produce a commercially reasonable result, then the consequences set forth in Section 12.2(e)(ii) of the Equity Definitions shall apply.
 
	
                        Nationalization, Insolvency or Delisting:
 	
                         
 	
                        Cancellation and Payment (Calculation Agent Determination); provided that in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York  Stock Exchange,  the American  Stock Exchange,  The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re- listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.
 
	
                        Additional Disruption Events:
 	
                         
 	
                         
 
	
                        (a) Change in Law:
 	
                         
 	
                        Applicable
 
	
                        (b) Failure to Deliver:
 	
                         
 	
                        Applicable
 
	
                        (c) Insolvency Filing:
 	
                         
 	
                        Applicable
 
	
                        (d) Loss of Stock Borrow:
 	
                         
 	
                        Applicable
 
	
                               Maximum Stock Loan Rate:
 	
                         
 	
                        150 basis points per annum
 
	
                        (e) Increased Cost of Stock Borrow:
 	
                         
 	
                        Applicable
 
	
                               Initial Stock Loan Rate:
 	
                         
 	
                        50 basis points per annum
 
	
                        Hedging Party:
 	
                         
 	
                        Dealer for all applicable Additional Disruption Events
 

 

 

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                        Determining Party:
 	
                         
 	
                        Dealer for all applicable Extraordinary Events; provided that in the case of a Change in Law, the Determining Party shall deliver, within five Exchange Business Days of a written request by the other party, a written explanation of any calculation made by it, and including,  where applicable,  the methodology  and data applied, it being understood that the Determining Party shall not be obligated to disclose any proprietary models used by it for such calculation.
 
	
                        Non-Reliance:
 	
                         
 	
                        Applicable
 
	
                        Agreements and Acknowledgments Regarding Hedging Activities:
 	
                         
 	
                        Applicable
 
	
                        Additional Acknowledgments:
 	
                         
 	
                        Applicable
 
	
                        3. Calculation Agent:
 	
                         
 	
                        Dealer. All calculations and determinations by the Calculation Agent shall be made in good faith and in a commercially reasonable manner. The Calculation Agent shall deliver, within five Exchange Business Days of a written request by Issuer, a written explanation of any calculation made by it, and including, where applicable, the methodology and data applied, it being understood that the Calculation Agent shall not be obligated to disclose any proprietary models used by it for such calculation.
 
	
                        4. Account Details:
 	
                         
 	
                         
 
	
                        Dealer Payment Instructions:
 	
                         
 	
                        Bank of America
 New York, NY 
 SWIFT: BOFAUS65 
 Bank Routing: 026o009o593 
 Account Name: Bank of America 
 Account No.: 0012333 o34172
 
	
                        Issuer Payment Instructions:
 	
                         
 	
                        To be provided by Issuer.
 

5. Offices:

The Office of Dealer for the Transaction is: New York

Bank of America, N.A.

c/o Banc of America Securities LLC

Bank of America Tower at One Bryant Park

New York, NY 10036

	
                        Attention:
 	
                        John Servidio
 
	
                        Telephone:
 	
                        646-855-7217
 
	
                        Facsimile:
 	
                        212-230-8610
 

The Office of Issuer for the Transaction is: Not applicable

6. Notices: For purposes of this Confirmation:

(a) Address for notices or communications to Issuer:

 

	
                        To:
 	
                        Sotheby’s
 
	
                         
 	
                        1334 York Avenue
 
	
                         
 	
                        New York, NY 10021
 
	
                        Attn:
 	
                        Mike Gillis
 
	
                        Telephone:
 	
                        212-894-2352
 
	
                        Facsimile:
 	
                        212-894-2245
 

(b) Address for notices or communications to Dealer:

 

 

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                        To:
 	
                         
 	
                        Bank of America, N.A. 
 c/o Banc of America Securities LLC 
 Bank of America Tower at One Bryant Park 
 New York, NY 10036
 
	
                        Attn:
 	
                         
 	
                        John Servidio
 
	
                        Telephone:
 	
                         
 	
                        646-855-7127
 
	
                        Facsimile:
 	
                         
 	
                        212-230-8610
 

7. Representations, Warranties and Agreements:

(a) In addition to the representations and warranties in the Agreement and those contained elsewhere herein, Issuer represents and warrants to and for the benefit of, and agrees with, Dealer as follows:

(i) On the Trade Date, and as of the date of any election by Issuer of the Share Termination Alternative under (and as defined in) Section 8(a) below, (A) none of Issuer and its officers and directors is aware of any material nonpublic information regarding Issuer or the Shares and (B) all reports and other documents filed by Issuer with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), when considered as a whole (with the more recent such reports and documents deemed to amend inconsistent statements contained in any earlier such reports and documents), do not contain any untrue statement of a material fact or any omission of a material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances in which they were made, not misleading.

(ii) Without limiting the generality of Section 13.1 of the Equity Definitions, Issuer acknowledges that Dealer is not making any representations or warranties with respect to the treatment of the Transaction under FASB Statements 128, 133, 149 (each as amended), or 150, EITF Issue No. 00-19, 01-6, 03-6 or 07-5 (or any successor issue statements) or under FASB’s Liabilities & Equity Project.

(iii) Prior to the Trade Date, Issuer shall deliver to Dealer a consent of the Finance Committee of Issuer’s board of directors authorizing the Transaction, a resolution of Issuer’s board of directors delegating the relevant authority to such Finance Committee and such other certificate or certificates as Dealer shall reasonably request.

(iv) Issuer is not entering into this Confirmation to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for Shares) or otherwise in violation of the Exchange Act.

(v) Issuer is not, and after giving effect to the transactions contemplated hereby will not be, an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

(vi) On the Trade Date (A) the assets of Issuer at their fair valuation exceed the liabilities of Issuer, including contingent liabilities, (B) the capital of Issuer is adequate to conduct the business of Issuer and (C) Issuer has the ability to pay its debts and obligations as such debts mature and does not intend to, or does not believe that it will, incur debt beyond its ability to pay as such debts mature.

(vii) Issuer shall not take any action to decrease the number of Available Shares below the Capped Number (each as defined below).

(viii) The representations and warranties of Issuer set forth in Section 3 of the Agreement are true and correct.

(ix) Issuer understands no obligations of Dealer to it hereunder will be entitled to the benefit of deposit insurance and that such obligations will not be guaranteed by any Affiliate of Dealer or any governmental agency.

(x) (A) On the Trade Date and during the period starting on the first Expiration Date and ending on the last Expiration Date (the “Settlement Period”), the Shares or securities that are convertible into, or exchangeable or exercisable for Shares, are not, and shall not be, subject to a “restricted period,” as such term is defined in Regulation M under the Exchange Act (“Regulation M”) and (B) Issuer shall not engage in any “distribution,” as such term is defined in Regulation M, other than a distribution meeting the requirements of

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the exceptions set forth in sections 101(b)(10) and 102(b)(7) of Regulation M, from the Trade Date until the second Exchange Business Day immediately following the Trade Date or from the commencement of the Settlement Period until the second Exchange Business Day immediately following the Settlement Period, as applicable.

(xi) During the Settlement Period, neither Issuer nor any “affiliate” or “affiliated purchaser” (each as defined in Rule 10b-18 of the Exchange Act (“Rule 10b-18”)) shall directly or indirectly (including, without limitation, by means of any cash-settled or other derivative instrument) purchase, offer to purchase, place any bid or limit order that would effect a purchase of, or commence any tender offer relating to, any Shares (or an equivalent interest, including a unit of beneficial interest in a trust or limited partnership or a depository share) or any security convertible into or exchangeable or exercisable for Shares, except through Dealer.

(xii) The Shares of Issuer initially issuable upon exercise of the Warrant (the “Warrant Shares”) have been reserved for issuance by all required corporate action of Issuer. The Warrant Shares have been duly authorized and, when delivered against payment therefor (which may include Net Share Settlement in lieu of cash) and otherwise as contemplated by the terms of the Warrant following the exercise of the Warrant in accordance with the terms and conditions of the Warrant, will be validly issued, fully-paid and non-assessable, and the issuance of the Warrant Shares will not be subject to any preemptive or similar rights.

(b) Each of Dealer and Issuer agrees and represents that it is an “eligible contract participant” as defined in

Section 1a(12) of the U.S. Commodity Exchange Act, as amended.

(c) Each of Dealer and Issuer acknowledges that the offer and sale of the Transaction to it is intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by virtue of Section 4(2) thereof. Accordingly, Dealer represents and warrants to Issuer that (i) it has the financial ability to bear the economic risk of its investment in the Transaction and is able to bear a total loss of its investment, (ii) it is an “accredited investor” as that term is defined in Regulation D as promulgated under the Securities Act, (iii) it is entering into the Transaction for its own account without a view to the distribution or resale thereof and (iv) the assignment, transfer or other disposition of the Transaction has not been and will not be registered
under the Securities Act and is restricted under this Confirmation, the Securities Act and state securities laws.

(d) Each of Dealer and Issuer agrees and acknowledges that Dealer is a “financial institution,” “swap participant” and “financial participant” within the meaning of Sections 101(22), 101(53C) and 101(22A) of Title 11 of the United States Code (the “Bankruptcy Code”). The parties hereto further agree and acknowledge (A) that this Confirmation is (i) a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “settlement payment” within the meaning of Section 546 of
the Bankruptcy Code, and (ii) a “swap agreement,” as such term is defined in Section 101(53B) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” a “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “transfer” within the meaning of Section 546 of the Bankruptcy Code, and (B) that Dealer is entitled to the protections afforded by, among other sections, Sections 362(b)(6), 362(b)(17), 362(b)(27), 362(o), 546(e), 546(g), 546(j), 548(d)(2), 555, 560 and 561 of the Bankruptcy Code.

(e) Issuer shall deliver to Dealer an opinion of counsel, dated as of the Effective Date and reasonably acceptable to Dealer in form and substance.

8. Other Provisions:

(a) Alternative Calculations and Payment on Early Termination and on Certain Extraordinary Events. If Issuer shall owe Dealer any amount pursuant to Sections 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions (except in the event of an Insolvency, a Nationalization, a Tender Offer or a Merger Event, in each case, in which the consideration or proceeds to be paid to holders of Shares consists solely of cash) or pursuant to Section 6(e) of the Agreement (except in the event of an Event of Default in which Issuer is the Defaulting Party or a Termination Event in which Issuer is the Affected Party, that resulted from an event or events within Issuer’s control) (a “Payment Obligation”), Issuer shall have the
right, in its sole discretion, to satisfy any such Payment Obligation by the Share Termination Alternative (as defined below) by giving irrevocable telephonic notice to Dealer, confirmed in writing within one Scheduled Trading Day, between the hours of 9:00 A.M. and 4:00 P.M. New York City time on the Merger Date, Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable (“Notice of Share Termination”), provided that if Issuer does not elect to satisfy its Payment

 

 

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Obligation by the Share Termination Alternative, Dealer shall have the right, in its sole discretion, to require Issuer to satisfy its Payment Obligation by the Share Termination Alternative, notwithstanding Issuer’s failure to elect or election to the contrary. Upon such Notice of Share Termination, the following provisions shall apply on the Scheduled Trading Day immediately following the Merger Date, the Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable:

 

	
                        Share Termination Alternative:
 	
                         
 	
                        Applicable and means that Issuer shall deliver to Dealer the Share Termination Delivery Property on the date on which the Payment Obligation would otherwise be due pursuant to Section 12.7 or 12.9 of the Equity Definitions or Section 6(d)(ii) of the Agreement, as applicable (the “Share Termination Payment Date”), in satisfaction of the Payment Obligation.
 
	
                        Share Termination Delivery 
 Property:
 	
                         
 	
                        A number of Share Termination Delivery Units, as calculated by the Calculation Agent, equal to the Payment Obligation divided by the Share Termination Unit Price. The Calculation Agent shall adjust the Share Termination Delivery Property by replacing any fractional portion of a security therein with an amount of cash equal to the value of such fractional security based on the values used to calculate the Share Termination Unit Price.
 
	
                        Share Termination Unit Price:
 	
                         
 	
                        The value of property contained in one Share Termination Delivery Unit on the date such Share Termination Delivery Units are to be delivered as Share Termination Delivery Property, as determined by the Calculation Agent in its discretion by commercially reasonable means and notified by the Calculation Agent to Issuer at the time of notification of the Payment Obligation.
 
	
                        Share Termination Delivery Unit:
 	
                         
 	
                        In the case of a Termination Event, Event of Default, Delisting or Additional Disruption Event, one Share or, in the case of an Insolvency, Nationalization, Merger Event or Tender Offer, a unit consisting of the number or amount of each type of property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional amounts of any securities) in such Insolvency, Nationalization, Merger Event or Tender Offer. If such Insolvency, Nationalization, Merger Event or Tender Offer involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash.
 
	
                        Failure to Deliver:
 	
                         
 	
                        Applicable
 
	
                        Other applicable provisions:
 	
                         
 	
                        If Share Termination Alternative is applicable, the provisions of Sections 9.8, 9.9, 9.10, 9.11 (except that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws as a result of the fact that Seller is the Issuer of the Shares) and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction, except that all references to “Shares” shall be read as references to “Share Termination Delivery Units”.
 

(b) Registration/Private Placement Procedures. (i) If, in the reasonable judgment of Dealer based on the advice of outside counsel, for any reason (other than the status of Dealer as an “affiliate” as such term is defined in Rule 144 under the Securities Act, determined without regard to this Transaction or any Shares received hereunder), any Shares or any securities of Issuer or its affiliates comprising any Share Termination Delivery Units deliverable to Dealer hereunder (any such Shares or securities, “Delivered Securities”) would not be immediately freely transferable by Dealer under Rule 144 under the Securities Act, then the provisions set forth in this Section 8(b) shall apply. At the election of
Issuer by notice to Dealer within one Exchange Business Day after the relevant delivery obligation arises, but in any event at least one Exchange Business Day prior to the date on which such delivery obligation is due, either (A) all Delivered Securities delivered by Issuer to Dealer shall be, at the time of such delivery, covered by an effective registration statement of Issuer for immediate resale by Dealer (such registration statement and the corresponding prospectus (the “Prospectus”) (including, without limitation, any sections describing the plan of distribution) in form and content commercially reasonably satisfactory to Dealer including, without limitation, with regard to disclosure of

 

 

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matters identified during the due diligence investigation described below) or (B) Issuer shall deliver additional Delivered Securities so that the value of such Delivered Securities, as determined by the Calculation Agent to reflect an appropriate liquidity discount, equals the value of the number of Delivered Securities that would otherwise be deliverable if such Delivered Securities were freely tradeable (without prospectus delivery) upon receipt by Dealer (such value, the “Freely Tradeable Value”); provided that Issuer may not make the election described in this clause (B) if, on the date of its election, it has taken, or caused to be taken, any action that would make unavailable either the exemption pursuant to Section 4(2) of the Securities Act for the
delivery by Issuer to Dealer (or any affiliate designated by Dealer) of the Delivered Securities or the exemption pursuant to Section 4(1) or Section 4(3) of the Securities Act for resales of the Delivered Securities by Dealer (or any such affiliate of Dealer). (For the avoidance of doubt, as used in this paragraph (b) only, the term “Issuer” shall mean the issuer of the relevant securities, as the context shall require.)

(ii) If Issuer makes the election described in clause (b)(i)(A) above:

(A) Dealer (or an Affiliate of Dealer designated by Dealer) shall be afforded a reasonable opportunity to conduct a due diligence investigation with respect to Issuer that is customary in scope for underwritten offerings of equity securities;

(B) Dealer (or an Affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Registration Agreement”) on commercially reasonable terms in connection with the public resale of such Delivered Securities by Dealer or such Affiliate substantially similar to underwriting agreements customary for underwritten offerings of equity securities, in form and substance commercially reasonably satisfactory to Dealer or such Affiliate and Issuer, which Registration Agreement shall include, without limitation, provisions substantially similar to those contained in such underwriting agreements relating to the indemnification of, and contribution in connection with the liability of, Dealer and its Affiliates and Issuer, shall provide for the payment by Issuer of all
expenses in connection with such resale, including all registration costs and all fees and expenses of counsel for Dealer, and shall provide for the delivery of accountants’ “comfort letters” to Dealer or such Affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the Prospectus; and

(C) Issuer shall have no obligation to maintain a Prospectus or comply with this clause (b)(ii) during such period that any Delivered Securities are determined by Dealer, upon the advice of Dealer’s outside counsel, to be freely transferable by Dealer under Rule 144 under the Securities Act (the “Rule 144 Availability Period”).

(iii) If Issuer makes the election described in clause (b)(i)(B) above:

(A) Dealer (or an Affiliate of Dealer designated by Dealer) and any potential institutional purchaser of any such Delivered Securities from Dealer or such Affiliate identified by Dealer shall be afforded a commercially reasonable opportunity to conduct a due diligence investigation in compliance with applicable law with respect to Issuer customary in scope for private placements of equity securities (including, without limitation, the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them);

(B) Dealer (or an Affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Private Placement Agreement”) on commercially reasonable terms in connection with the private placement of such Delivered Securities by Issuer to Dealer or such Affiliate and the private resale of such shares by Dealer or such Affiliate, substantially similar to private placement purchase agreements customary for private placements of equity securities, in form and substance commercially reasonably satisfactory to Dealer and Issuer, which Private Placement Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating to the indemnification of, and contribution in connection with the
liability of, Dealer and its Affiliates and Issuer, shall provide for the payment by Issuer of all expenses in connection with such resale, including all fees and expenses of counsel for Dealer, shall contain representations, warranties and agreements of Issuer reasonably necessary or advisable to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for such resales at all times other than during the Rule 144 Availability Period, and shall use best efforts to provide for the delivery of accountants’ “comfort letters” to Dealer or such Affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the offering memorandum prepared for the resale of such Shares;

 

 

10

 

(C) Issuer agrees that any Delivered Securities so delivered to Dealer, (i) may be transferred by and among Dealer and its Affiliates, and Issuer shall effect such transfer without any further action by Dealer and (ii) after the minimum “holding period” within the meaning of Rule 144(d) under the Securities Act has elapsed with respect to such Delivered Securities, Issuer shall promptly remove, or cause the transfer agent for such Shares or securities to remove, any legends referring to any such restrictions or requirements from such Delivered Securities upon delivery by Dealer (or such Affiliate of Dealer) to Issuer or such transfer agent of any seller’s and broker’s representation letters customarily delivered by Dealer in connection with resales of restricted securities pursuant to Rule 144 under the Securities Act, without any further
requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document, any transfer tax stamps or payment of any other amount or any other action by Dealer (or such affiliate of Dealer); and

(D) Neither Issuer nor Dealer shall take, or cause to be taken, any action that would make unavailable either the exemption pursuant to Section 4(2) of the Securities Act for the sale by Issuer to Dealer (or any affiliate designated by Dealer) of the Shares or Share Termination Delivery Units, as the case may be, or the exemption pursuant to Section 4(1) or Section 4(3) of the Securities Act for resales of the Shares or Share Termination Delivery Units, as the case may be, by Dealer (or any such affiliate of Dealer).

(c) Make-whole. If Issuer makes the election described in clause (b)(i)(B) of paragraph (b) of this Section 8, then Dealer or its affiliate may sell such Shares or Share Termination Delivery Units, as the case may be, during a period (the “Resale Period”) commencing on the Exchange Business Day following delivery of such Shares or Share Termination Delivery Units, as the case may be, and ending on the Exchange Business Day on which Dealer completes the sale of all such Shares or Share Termination Delivery Units, as the case may be, or a sufficient number of Shares or Share Termination Delivery Units, as the case may be, so that the realized net proceeds of such sales exceed the Freely Tradeable Value (such amount
of the Freely Tradeable Value, the “Required Proceeds”). If any of such delivered Shares or Share Termination Delivery Units remain after such realized net proceeds exceed the Required Proceeds, Dealer shall return such remaining Shares or Share Termination Delivery Units to Issuer. If the Required Proceeds exceed the realized net proceeds from such resale, Issuer shall transfer to Dealer by the open of the regular trading session on the Exchange on the Exchange Trading Day immediately following the last day of the Resale Period the amount of such excess (the “Additional Amount”) in cash or in a number of additional Shares or Share Termination Delivery Units, as the case may be (“Make-whole Shares”), in an amount that,
based on the Relevant Price on the last day of the Resale Period (as if such day was the “Valuation Date” for purposes of computing such Relevant Price), has a dollar value equal to the Additional Amount. The Resale Period shall continue to enable the sale of the Make-whole Shares in the manner contemplated by this Section 8(c). This provision shall be applied successively until the Additional Amount is equal to zero, subject to Section 8(e).

(d) Beneficial Ownership. Notwithstanding anything to the contrary in the Agreement or this Confirmation, in no event shall Dealer be entitled to receive, or shall be deemed to receive, any Shares in connection with this Transaction if, immediately upon giving effect to such receipt of such Shares (i) Dealer’s Beneficial Ownership would be equal to or greater than 8.0% of the outstanding Shares or (ii) Dealer or any “affiliate” or “associate” of Dealer, would be an “interested stockholder” of Issuer, as all such terms are defined in Section 203 of the Delaware General Corporation Law (each of clause (i) and (ii) above, an “Ownership Limitation”). If any delivery owed to Dealer
hereunder is not made, in whole or in part, as a result of an Ownership Limitation, Dealer’s right to receive such delivery shall not be extinguished and Issuer shall make such delivery as promptly as practicable after, but in no event later than one Exchange Business Day after, Dealer gives notice to Issuer that such delivery would not result in any of such Ownership Limitations being breached. “Dealer’s Beneficial Ownership” means the “beneficial ownership” (within the meaning of Section 13 of the Exchange Act and the rules promulgated thereunder (collectively, “Section 13”) of Shares by Dealer, together with any affiliate or other person subject to aggregation with Dealer under Section 13, or by any “group” (within the meaning of Section 13) of which Dealer is or may be deemed
to be a part. Notwithstanding anything in the Agreement or this Confirmation to the contrary, Dealer (or the affiliate designated by Dealer pursuant to Section 8(k) below) shall not become the record or beneficial owner, or otherwise have any rights as a holder, of any Shares that Dealer (or such affiliate) is not entitled to receive at any time pursuant to this Section 8(d), until such time as such Shares are delivered pursuant to this Section 8(d).

(e) Limitations on Settlement by Issuer. Notwithstanding anything herein or in the Agreement to the contrary, in no event shall Issuer be required to deliver Shares in connection with the Transaction in excess of 7,720,703 Shares (the “Capped Number”). Issuer represents and warrants (which shall be deemed to be repeated on each day that the Transaction is outstanding) that the Capped Number is equal to or less than the number of authorized but unissued Shares of the Issuer that are not reserved for future issuance in connection with transactions in the Shares (other than the

 

 

11

 

Transaction) on the date of the determination of the Capped Number (such Shares, the “Available Shares”). In the event Issuer shall not have delivered the full number of Shares otherwise deliverable as a result of this Section 8(e) (the resulting deficit, the “Deficit Shares”), Issuer shall be continually obligated to deliver, from time to time until the full number of Deficit Shares have been delivered pursuant to this paragraph, Shares when, and to the extent, that (i) Shares are repurchased, acquired or otherwise received by Issuer or any of its subsidiaries after the Trade Date (whether or not in exchange for cash, fair value or any other consideration), (ii) authorized and unissued Shares reserved for issuance in
respect of other transactions prior to such date which prior to the relevant date become no longer so reserved or (iii) Issuer additionally authorizes any unissued Shares that are not reserved for other transactions. Issuer shall promptly notify Dealer of the occurrence of any of the foregoing events (including the number of Shares subject to clause (i), (ii) or (iii) and the corresponding number of Shares to be delivered) and promptly deliver such Shares thereafter.

(f) Right to Extend. Dealer may postpone any Exercise Date or any other date of valuation or delivery with respect to some or all of the relevant Warrants (in which event the Calculation Agent shall make appropriate adjustments to the Number of Shares to be Delivered with respect to one or more Components), if Dealer determines, in its reasonable discretion, that such extension is reasonably necessary or appropriate to preserve Dealer’s hedging or hedge unwind activity hereunder in light of existing liquidity conditions or to enable Dealer to effect purchases of Shares in connection with its hedging, hedge unwind or settlement activity hereunder in a manner that would, if Dealer were Issuer or an affiliated purchaser of Issuer, be in compliance with applicable legal, regulatory or self-regulatory
requirements, or with related policies and procedures applicable to Dealer.

(g) Equity Rights. Dealer acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the Transaction that are senior to the claims of common stockholders in the event of Issuer’s bankruptcy. For the avoidance of doubt, the parties agree that the preceding sentence shall not apply at any time other than during Issuer’s bankruptcy to any claim arising as a result of a breach by Issuer of any of its obligations under this Confirmation or the Agreement. For the avoidance of doubt, the parties acknowledge that this Confirmation is not secured by any collateral that would otherwise secure the obligations of Issuer herein under or pursuant to any other agreement.

(h) Amendments to Equity Definitions and the Agreement. The following amendments shall be made to the Equity Definitions and to the Agreement:

(i) The first sentence of Section 11.2(c) of the Equity Definitions, prior to clause (A) thereof, is hereby amended to read as follows: ‘(c) If “Calculation Agent Adjustment” is specified as the Method of Adjustment in the related Confirmation of a Share Option Transaction, then following the announcement or occurrence of any Potential Adjustment Event, the Calculation Agent will determine whether such Potential Adjustment Event has a material effect on the theoretical value of the relevant Shares or options on the Shares and, if so, will (i) make appropriate adjustment(s), if any, to any one or more of:’ and, the portion of such sentence immediately preceding clause (ii) thereof is hereby amended by deleting the words “diluting or concentrative” and the words “(provided that no adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant
Shares)” and replacing such latter phrase with the words “(and, for the avoidance of doubt, adjustments may be made to account solely for material changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)”;

(ii) Sections 11.2(a) and 11.2(e)(vii) of the Equity Definitions are hereby amended by deleting the words “diluting or concentrative” and replacing them with “material” and adding the phrase “or Warrants” at the end of the sentence;

(iii) Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (1) deleting from the fourth line thereof the word “or” after the word “official” and inserting a comma therefor, and (2) deleting the semicolon at the end of subsection (B) thereof and inserting the following words therefor “or (C) at Dealer’s option, the occurrence of any of the events specified in Section 5(a)(vii) (1) through (9) of the ISDA 2002 Master Agreement with respect to that Issuer.”;

(iv) Section 12.9(b)(iv) of the Equity Definitions is hereby amended by:

(A) deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase “in each case” in subsection (B); and

(B) deleting the phrase “neither the Non-Hedging Party nor the Lending Party lends Shares in the amount of the Hedging Shares or” in the penultimate sentence; and

 

 

12

 

(v) Section 12.9(b)(v) of the Equity Definitions is hereby amended by:

(A) adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and

(B) (1) deleting subsection (C) in its entirety, (2) deleting the word “or” immediately preceding subsection (C) and (3) deleting the penultimate sentence in its entirety and replacing it with the sentence “The Determining Party will determine the Cancellation Amount payable by one party to the other.” and (4) deleting clause (X) in the final sentence.

(i) Transfer and Assignment. Dealer may transfer or assign its rights and obligations hereunder and under the Agreement, in whole or in part, at any time to any person or entity whatsoever without the consent of Issuer.

(j) Disclosure. Effective from the date of commencement of discussions concerning the Transaction, Issuer and each of its employees, representatives, or other agents may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the Transaction and all materials of any kind (including opinions or other tax analyses) that are provided to Issuer relating to such tax treatment and tax structure.

(k) Designation by Dealer. Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to or from Issuer, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such shares or other securities and otherwise to perform Dealer obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Issuer to the extent of any such performance.

(l) Additional Termination Events. The occurrence of any of the following shall constitute an Additional Termination Event with respect to which the Transaction shall be the sole Affected Transaction and Issuer shall be the sole Affected Party; provided that with respect to any Additional Termination Event, Dealer may choose to treat part of the Transaction as the sole Affected Transaction, and, upon the termination of the Affected Transaction, a Transaction with terms identical to those set forth herein except with a Number of Warrants equal to the unaffected number of Warrants shall be treated for all purposes as the Transaction, which shall remain in full force and effect:

(i) Dealer reasonably determines that it is advisable to terminate a portion of the Transaction so that Dealer’s related hedging activities will comply with applicable securities laws, rules or regulations or related policies and procedures of Dealer (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by Dealer), or Dealer, despite using commercially reasonable efforts, is unable or reasonably determines that it is illegal for Dealer to hedge its obligations pursuant to this Transaction in the public market without registration under the Securities Act or as a result of any legal, regulatory or self-regulatory requirements;

(ii) any Person (as defined below) or “group” (within the meaning of Section 13(d) of the Exchange Act), other than Issuer, its subsidiaries or their respective employee benefit plans, files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of more than 50% of the voting power of all shares of Issuer’s capital stock entitled to vote generally in elections of directors;

(iii) consummation of any share exchange, exchange offer, tender offer, consolidation or merger of Issuer pursuant to which the Shares will be converted into cash, securities or other property or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of Issuer and its subsidiaries, taken as a whole, to any Person other than one of Issuer’s subsidiaries;

(iv) continuing directors cease to constitute at least a majority of the Issuer’s board of directors; 

(v) Issuer’s stockholders approve any plan or proposal for liquidation or dissolution of Issuer; or

(vi) the Shares cease to be listed on a U.S. national securities exchange.

Notwithstanding the foregoing, a transaction set forth in clause (ii) or (iii) above will not constitute an Additional Termination Event if at least 90% of the consideration paid for the Shares (excluding cash payments for fractional shares) in such transaction or transactions otherwise constituting an Additional Termination Event consists of shares of common stock, depositary receipts or other certificates representing common equity interests, in each case,

 

 

13

 

traded on any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Global Market (or any of their respective successors) (or will be so traded or quoted immediately following the completion of such transaction or transactions).

“Person” includes any syndicate or group that would be deemed to be a “person” under Section 13(d)(3) of the Exchange Act.

“Continuing Directors” means a director who either was a member of Issuer’s board of directors on the Trade Date or who becomes a member of the board of directors subsequent to that date and whose election, appointment or nomination for election by Issuer’s stockholders is duly approved by a majority of the continuing directors on Issuer’s board of directors at the time of such approval, either by a specific vote or by approval of the proxy statement issued by Issuer on behalf of the entire board of directors in which such individual is named as nominee for director.

(m) Netting and Set-off. Each party waives any and all rights it may have to set off obligations arising under the Agreement and the Transaction against other obligations between the parties, whether arising under any other agreement, applicable law or otherwise.

(n) Effectiveness. If, prior to the Effective Date, Dealer reasonably determines that it is advisable to cancel the Transaction because of concerns that Dealer’s related hedging activities could be viewed as not complying with applicable securities laws, rules or regulations, the Transaction shall be cancelled and shall not become effective, and neither party shall have any obligation to the other party in respect of the Transaction.

(o) Amendment. If the Initial Purchasers (as defined in the Purchase Agreement) exercise their option pursuant to Section 2(c) of the Purchase Agreement to purchase additional convertible notes as set forth therein, then Dealer and Issuer will amend this Confirmation to increase the Number of Warrants by a corresponding number of additional Warrants to be issued by Issuer to Dealer (such Warrants, the “Additional Warrants”), effective upon payment by Dealer to Issuer of the additional Premium on the Additional Premium Payment Date. In particular, the Number of Warrants in respect of any Component shall be increased by a number of Additional Warrants equal to the product of (i) the Number of Warrants for such
Component as reflected on Annex A to this Confirmation and (ii) a fraction (A) whose numerator is the aggregate principal amount of the convertible notes issued pursuant to such exercise and (B) whose denominator is the aggregate principal amount of the convertible notes issued prior to such exercise (with such result rounded down to the nearest whole number and any remainder allocated to the final Component).

(p) Delivery of Cash. For the avoidance of doubt, nothing in this Confirmation shall be interpreted as requiring the Issuer to deliver cash in respect of the settlement of the Transaction, except in circumstances where the required cash settlement thereof is permitted for classification of the contract as equity by EITF Issue No. 00-19 as in effect on the Trade Date (including, without limitation, where the Issuer so elects to deliver cash or fails timely to elect to deliver Shares or Share Termination Delivery Property in respect of such settlement).

(q) Waiver of Trial by Jury. EACH OF ISSUER AND BUYER HEREBY IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE TRANSACTION OR THE ACTIONS OF BUYER OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.

(r) Governing Law; Jurisdiction. THIS CONFIRMATION SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

 

 

14

 

Counterparty hereby agrees (a) to check this Confirmation carefully and promptly upon receipt so that errors or discrepancies can be promptly identified and rectified and (b) to confirm that the foregoing (in the exact form provided by Dealer) correctly sets forth the terms of the agreement between Dealer and Counterparty with respect to the Transaction, by manually signing this Confirmation or this page hereof as evidence of agreement to such terms and providing the other information requested herein and promptly returning an executed copy to us.

 

  	 
	 
	Yours faithfully,

	 
	 
	BANK OF AMERICA, N.A.

	 
	 
	By:
	 

	 
	 
	 
	

      
	 
	 
	 
	Name:
	Christopher A. Hutmaker

	 
	 
	 
	Title:
	Managing Director

Agreed and Accepted By:

SOTHEBY’S 

 

	
                         
 	
                         
 	
                         
 	
                         
 
	
                        By: 
 	
                          
 	
                         
 	
                         
 	
                          
 
	
                         
 	
                        
 	
                         
 	
                         
 	
                         
 
	 	Name: 
	
                         
 	
                         
 	
                         
 
	 	Title: 
	
                         
 	
                         
 	
                         
 

 

Counterparty hereby agrees (a) to check this Confirmation carefully and promptly upon receipt so that errors or discrepancies can be promptly identified and rectified and (b) to confirm that the foregoing (in the exact form provided by Dealer) correctly sets forth the terms of the agreement between Dealer and Counterparty with respect to the Transaction, by manually signing this Confirmation or this page hereof as evidence of agreement to such terms and providing the other information requested herein and promptly returning an executed copy to us.

 

  	 
	 
	Yours faithfully,

	 
	 
	BANK OF AMERICA, N.A.

	 	 	 	 
	 
	 
	By:
	 

	 
	 
	 
	

      
	 
	 
	 
	Name:
	 

	 
	 
	 
	Title:
	 

Agreed and Accepted By:

SOTHEBY’S

 

  	By: 
	 

	 
	

      
	 
	Name:
	Michael L. Gillis

	 
	Title:
	SVP, Treasurer

 

 

Annex A

For each Component of the Transaction, the Number of Warrants and Expiration Date are set forth below.

 

	
                        Component Number
 	
                         
 	
                        Number of Warrants
 	
                         
 	Expiration Date

	
                        1.
 	
                         
 	
                        58,824
 	
                         
 	September 17, 2013

	
                        2.
 	
                         
 	
                        58,824
 	
                         
 	September 18, 2013

	
                        3.
 	
                         
 	
                        58,824
 	
                         
 	September 19, 2013

	
                        4.
 	
                         
 	
                        58,824
 	
                         
 	September 20, 2013

	
                        5.
 	
                         
 	
                        58,824
 	
                         
 	September 23, 2013

	
                        6.
 	
                         
 	
                        58,824
 	
                         
 	September 24, 2013

	
                        7.
 	
                         
 	
                        58,824
 	
                         
 	September 25, 2013

	
                        8.
 	
                         
 	
                        58,824
 	
                         
 	September 26, 2013

	
                        9.
 	
                         
 	
                        58,824
 	
                         
 	September 27, 2013

	
                        10.
 	
                         
 	
                        58,824
 	
                         
 	September 30, 2013

	
                        11.
 	
                         
 	
                        58,824
 	
                         
 	October 1, 2013

	
                        12.
 	
                         
 	
                        58,824
 	
                         
 	October 2, 2013

	
                        13.
 	
                         
 	
                        58,824
 	
                         
 	October 3, 2013

	
                        14.
 	
                         
 	
                        58,824
 	
                         
 	October 4, 2013

	
                        15.
 	
                         
 	
                        58,824
 	
                         
 	October 7, 2013

	
                        16.
 	
                         
 	
                        58,824
 	
                         
 	October 8, 2013

	
                        17.
 	
                         
 	
                        58,824
 	
                         
 	October 9, 2013

	
                        18.
 	
                         
 	
                        58,824
 	
                         
 	October 10, 2013

	
                        19.
 	
                         
 	
                        58,824
 	
                         
 	October 11, 2013

	
                        20.
 	
                         
 	
                        58,824
 	
                         
 	October 14, 2013

	
                        21.
 	
                         
 	
                        58,824
 	
                         
 	October 15, 2013

	
                        22.
 	
                         
 	
                        58,824
 	
                         
 	October 16, 2013

	
                        23.
 	
                         
 	
                        58,824
 	
                         
 	October 17, 2013

	
                        24.
 	
                         
 	
                        58,824
 	
                         
 	October 18, 2013

	
                        25.
 	
                         
 	
                        58,824
 	
                         
 	October 21, 2013

	
                        26.
 	
                         
 	
                        58,824
 	
                         
 	October 22, 2013

	
                        27.
 	
                         
 	
                        58,824
 	
                         
 	October 23, 2013

	
                        28.
 	
                         
 	
                        58,824
 	
                         
 	October 24, 2013

	
                        29.
 	
                         
 	
                        58,824
 	
                         
 	October 25, 2013

	
                        30.
 	
                         
 	
                        58,824
 	
                         
 	October 28, 2013

	
                        31.
 	
                         
 	
                        58,824
 	
                         
 	October 29, 2013

	
                        32.
 	
                         
 	
                        58,824
 	
                         
 	October 30, 2013

	
                        33.
 	
                         
 	
                        58,824
 	
                         
 	October 31, 2013

	
                        34.
 	
                         
 	
                        58,824
 	
                         
 	November 1, 2013

	
                        35.
 	
                         
 	
                        58,824
 	
                         
 	November 4, 2013

	
                        36.
 	
                         
 	
                        58,824
 	
                         
 	November 5, 2013

	
                        37.
 	
                         
 	
                        58,824
 	
                         
 	November 6, 2013

	
                        38.
 	
                         
 	
                        58,824
 	
                         
 	November 7, 2013

	
                        39.
 	
                         
 	
                        58,824
 	
                         
 	November 8, 2013

	
                        40.
 	
                         
 	
                        58,824
 	
                         
 	November 11, 2013

	
                        41.
 	
                         
 	
                        58,824
 	
                         
 	November 12, 2013

	
                        42.
 	
                         
 	
                        58,824
 	
                         
 	November 13, 2013

	
                        43.
 	
                         
 	
                        58,824
 	
                         
 	November 14, 2013

	
                        44.
 	
                         
 	
                        58,824
 	
                         
 	November 15, 2013

	
                        45.
 	
                         
 	
                        58,824
 	
                         
 	November 18, 2013

	
                        46.
 	
                         
 	
                        58,824
 	
                         
 	November 19, 2013

	
                        47.
 	
                         
 	
                        58,824
 	
                         
 	November 20, 2013

	
                        48.
 	
                         
 	
                        58,824
 	
                         
 	November 21, 2013

	
                        49.
 	
                         
 	
                        58,824
 	
                         
 	November 22, 2013

	
                        50.
 	
                         
 	
                        58,844
 	
                         
 	November 25, 2013EXHIBIT 10.7

Execution Copy

 

	
                         
 	
                        June 11, 2008
 
	
                         
 	
                         
 
	
                        To:
 	
                        Sotheby’s
 1334 York Avenue
 New York, NY 10021
 
	
                         
 	
      Attn: 
 	
                        Mike Gillis
 
	
                         
 	
                        Telephone: 
 	
                        212-894-2352
 
	
                         
 	
                        Facsimile: 
 	
                        212-894-2245
 
	
                         
 	
                         
 
	
                        From:
 	
                        Goldman, Sachs & Co.
 One New York Plaza
 New York, NY 10004
 
	
                         
 	
                         
 
	
                        Re:
 	
                        Issuer Warrant Transaction
 (Transaction Reference Number: SDB1627455582)
 

Ladies and Gentlemen:

The purpose of this communication (this “Confirmation”) is to set forth the terms and conditions of the above-referenced transaction entered into on the Trade Date specified below (the “Transaction”) between Goldman, Sachs & Co. (“Dealer”) and Sotheby’s (“Issuer”). This communication constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below.

1. This Confirmation is subject to, and incorporates, the definitions and provisions of the 2006 ISDA Definitions (the “2006 Definitions”) and the definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”, and together with the 2006 Definitions, the “Definitions”), in each case as published by the International Swaps and Derivatives Association, Inc. (“ISDA”). In the event of any inconsistency between the 2006 Definitions and the Equity Definitions, the Equity Definitions will govern. For purposes of the Equity Definitions, each reference herein to a Warrant shall
be deemed to be a reference to a Call Option or an Option, as context requires.

This Confirmation evidences a complete and binding agreement between Dealer and Issuer as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall supplement, form a part of, and be subject to an agreement (the “Agreement”) in the form of the 2002 ISDA Master Agreement (the “ISDA Form”) as if Dealer and Issuer had executed an agreement in such form (without any Schedule but with the elections set forth in this Confirmation) on the Trade Date. For the avoidance of doubt, the Transaction shall be the only transaction under the Agreement.

All provisions contained in, or incorporated by reference to, the Agreement will govern this Confirmation except as expressly modified herein. In the event of any inconsistency between this Confirmation and either the Definitions or the Agreement, this Confirmation shall govern.

2. The Transaction is a Warrant Transaction, which shall be considered a Share Option Transaction for purposes of the Equity Definitions. The terms of the particular Transaction to which this Confirmation relates are as follows:

 

	
                        General Terms:
 	
                         
 	
                         
 
	
                        Trade Date:
 	
                         
 	
                        June 11, 2008
 
	
                        Effective Date:
 	
                         
 	
                        June 17, 2008, or such other date as agreed between the parties, subject to Section 8(n) below
 
	
                        Components:
 	
                         
 	
                        The Transaction will be divided into individual Components, each with the terms set forth in this Confirmation, and, in particular, with the Number of Warrants and Expiration Date set forth in this Confirmation. The payments and deliveries to be made upon
 

 

 

	
                         
 	
                         
 	
                        settlement of the Transaction will be determined separately for each Component as if each Component were a separate Transaction under the Agreement.
 
	
                        Warrant Style:
 	
                         
 	
                        European
 
	
                        Warrant Type:
 	
                         
 	
                        Call
 
	
                        Seller:
 	
                         
 	
                        Issuer
 
	
                        Buyer:
 	
                         
 	
                        Dealer
 
	
                        Shares:
 	
                         
 	
                        The Common Stock of Issuer, par value USD 0.10 per share (Ticker Symbol: “BID”).
 
	
                        Number of Warrants:
 	
                         
 	
                        For each Component, as provided in Annex A to this Confirmation, subject to Section 8(o) below.
 
	
                        Warrant Entitlement:
 	
                         
 	
                        One Share per Warrant
 
	
                        Strike Price:
 	
                         
 	
                        USD 44.9050
 
	
                        Premium:
 	
                         
 	
                        USD9,756,248.10 (Premium per Warrant USD 3.790944); provided that if the Number of Warrants is increased pursuant to Section 8(o) below, an additional Premium equal to the product of the number of Additional Warrants (as defined below) and the Premium per Warrant shall be paid on the Additional Premium Payment Date.
 
	
                        Premium Payment Date:
 	
                         
 	
                        The Effective Date
 
	
                        Additional Premium Payment Date:
 	
                         
 	
                        The closing date for the purchase and sale of the additional convertibles notes issued to the Initial Purchasers (as defined in the Purchase Agreement dated as of the Trade Date between Issuer, Banc of America Securities LLC and Goldman, Sachs & Co., as representative of the Initial Purchasers party thereto (the “Purchase Agreement”)) pursuant to Section 2(c) of the Purchase Agreement.
 
	
                        Exchange:
 	
                         
 	
                        New York Stock Exchange
 
	
                        Related Exchange:
 	
                         
 	
                        All Exchanges
 
	
                        Procedures for Exercise:
 	
                         
 	
                         
 
	
                        In respect of any Component:
 	
                         
 	
                         
 
	
                        Expiration Time:
 	
                         
 	
                        Valuation Time
 
	
                        Expiration Date:
 	
                         
 	
                        As provided in Annex A to this Confirmation (or, if such date is not a Scheduled Trading Day, the next following Scheduled Trading Day that is not already an Expiration Date for another Component); provided that if that date is a Disrupted Day, the Expiration Date for such Component shall be the first succeeding Scheduled Trading Day that is not a Disrupted Day and is not or is not deemed to be an Expiration Date in respect of any other Component of the Transaction hereunder; and provided further that if the Expiration Date has not occurred pursuant to the preceding proviso as of the Final Disruption Date, the Final
Disruption Date shall be the Expiration Date (irrespective of whether such date is an Expiration Date occurring on the Final Disruption Date in respect of any other Component for the Transaction) and, notwithstanding anything to the contrary in this Confirmation or the Definitions, the Relevant Price for the Expiration Date shall be 
 

 

 

2

 

	
                         
 	
                         
 	
                        the prevailing market value per Share determined by the Calculation Agent in a commercially reasonable manner. Notwithstanding the foregoing and anything to the contrary in the Equity Definitions, if a Market Disruption Event occurs on any Expiration Date, the Calculation Agent may determine that such Expiration Date is a Disrupted Day only in part, in which case the Calculation Agent shall make adjustments to the number of Warrants for the relevant Component for which such day shall be the Expiration Date and shall designate the Scheduled Trading Day determined in the manner described in the immediately preceding sentence as the Expiration Date for the remaining Warrants for such Component. Section 6.6 of the Equity Definitions shall not apply to any Valuation Date occurring on an Expiration Date. “Final
Disruption Date” means December 9, 2013.
 
	
                        Market Disruption Event:
 	
                         
 	
                        Section 6.3(a) of the Equity Definitions is hereby amended by deleting the words “during the one hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be,” in clause (ii) thereof.
 
	
                         
 	
                         
 	
                        Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.
 
	
                        Automatic Exercise:
 	
                         
 	
                        Applicable; and means that the Number of Warrants for each Component will be deemed to be automatically exercised at the Expiration Time on the Expiration Date for such Component unless Dealer notifies Seller in writing prior to the Expiration Time on the Expiration Date that it does not wish Automatic Exercise to occur, in which case Automatic Exercise will not apply.
 
	
                        Issuer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:
 	
                         
 	
                        To be provided by Issuer.
 
	
                        Settlement Terms:
 	
                         
 	
                         
 
	
                        In respect of any Component:
 	
                         
 	
                         
 
	
                        Settlement Currency:
 	
                         
 	
                        USD
 
	
                        Net Share Settlement:
 	
                         
 	
                        On each Settlement Date, Issuer shall deliver to Dealer a number of Shares equal to the Number of Shares to be Delivered for such Settlement Date to the account specified by Dealer and cash in lieu of any fractional shares valued at the Relevant Price on the Valuation Date corresponding to such Settlement Date.
 
	
                        Number of Shares to be Delivered:
 	
                         
 	
                        In respect of any Exercise Date, subject to the last sentence of Section 9.5 of the Equity Definitions, the product of (i) the number of Warrants exercised or deemed exercised on such Exercise Date, (ii) the Warrant Entitlement and (iii) (A) the excess of the VWAP Price on the Valuation Date occurring on such Exercise Date over the Strike Price divided by (B) such VWAP Price.
 
	
                         
 	
                         
 	
                        The Number of Shares to be Delivered shall be delivered by Issuer to Dealer no later than 4:00 P.M. (local time in New York City) on the relevant Settlement Date.
 

 

 

3

 

 

	
                        VWAP Price:
 	
                         
 	
                        For any Valuation Date, the dollar volume weighted average price per Share for such Valuation Date based on transactions executed on the Exchange during such Valuation Date, as reported on Bloomberg Screen “BID.N <Equity> AQR” (or any successor thereto) or, in the event such price is not so reported on such Valuation Date for any reason, as reasonably determined by the Calculation Agent.
 
	
                        Other Applicable Provisions:
 	
                         
 	
                        The provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 (except that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws as a result of the fact that Seller is the Issuer of the Shares) and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction.
 
	
                        Adjustments:
 	
                         
 	
                         
 
	
                        In respect of any Component:
 	
                         
 	
                         
 
	
                        Method of Adjustment:
 	
                         
 	
                        Calculation Agent Adjustment
 
	
                        Extraordinary Dividend:
 	
                         
 	
                        Any dividend or distribution (i) that has an ex-dividend date occurring on or after the Trade Date and on or prior to the Expiration Date and (ii) the amount or value of which exceeds the Ordinary Dividend Amount for such dividend or distribution, as determined by the Calculation Agent.
 
	
                        Ordinary Dividend Amount:
 	
                         
 	
                        For the period beginning on the Trade Date and ending on the last day of the second calendar quarter of 2008, USD 0; for all other calendar quarters, USD 0.15 per quarter per Share.
 
	
                        Extraordinary Events:
 	
                         
 	
                         
 
	
                        New Shares:
 	
                         
 	
                        In the definition of New Shares in Section 12.1(i) of the Equity Definitions, the text in clause (i) thereof shall be deleted in its entirety (including the word “and” following clause (i)) and replaced with “publicly quoted, traded or listed on any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Global Market (or their respective successors)”.
 
	
                        Consequences of Merger Events:
 	
                         
 	
                         
 
	
                        (a) Share-for-Share:
 	
                         
 	
                        Modified Calculation Agent Adjustment
 
	
                        (b) Share-for-Other:
 	
                         
 	
                        Cancellation and Payment (Calculation Agent Determination)
 
	
                        (c) Share-for-Combined:
 	
                         
 	
                        Cancellation and Payment (Calculation Agent Determination)
 
	
                        Tender Offer:
 	
                         
 	
                        Applicable
 
	
                        Consequences of Tender Offers:
 	
                         
 	
                         
 
	
                        (a) Share-for-Share:
 	
                         
 	
                        Modified Calculation Agent Adjustment
 
	
                        (b) Share-for-Other:
 	
                         
 	
                        Cancellation and Payment (Calculation Agent Determination) on that portion of the Other Consideration that consists of cash; Modified Calculation Agent Adjustment on the remainder of the Other Consideration.
 
	
                        (c) Share-for-Combined:
 	
                         
 	
                        Modified Calculation Agent Adjustment 
 

 

 

4

 

	
                        Modified Calculation
 	
                         
 	
                         
 
	
                        Agent Adjustment:
 	
                         
 	
                        If, in respect of any Merger Event to which Modified Calculation Agent Adjustment applies, the adjustments to be made in accordance with Section 12.2(e)(i) of the Equity Definitions would result in Issuer being different from the issuer of the Shares, then with respect to such Merger Event, as a condition precedent to the adjustments contemplated in Section 12.2(e)(i) of the Equity Definitions, Issuer and the issuer of the Shares shall, prior to the Merger Date, have entered into such documentation containing representations, warranties and agreements relating to securities law and other issues as requested by Dealer that Dealer has determined, in its reasonable discretion, to be reasonably necessary or appropriate to allow Dealer to continue as a party to the Transaction, as adjusted under Section 12.2(e)(i) of the Equity Definitions, and to preserve
its hedging or hedge unwind activities in connection with the Transaction in a manner compliant with applicable legal, regulatory or self-regulatory requirements, or with related policies and procedures applicable to Dealer, and if such conditions are not met or if the Calculation Agent determines that no adjustment that it could make under Section 12.2(e)(i) of the Equity Definitions will produce a commercially reasonable result, then the consequences set forth in Section 12.2(e)(ii) of the Equity Definitions shall apply.
 
	
                        Nationalization, Insolvency
 	
                         
 	
                         
 
	
                        or Delisting:
 	
                         
 	
                        Cancellation and Payment (Calculation Agent Determination); provided that in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, the American Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.
 
	
                        Additional Disruption Events:
 	
                         
 	
                         
 
	
                        (a) Change in Law:
 	
                         
 	
                        Applicable
 
	
                        (b) Failure to Deliver:
 	
                         
 	
                        Applicable
 
	
                        (c) Insolvency Filing:
 	
                         
 	
                        Applicable
 
	
                        (d) Loss of Stock Borrow:
 	
                         
 	
                        Applicable
 
	
                          Maximum Stock Loan Rate:
 	
                         
 	
                        150 basis points per annum
 
	
                        (e) Increased Cost of Stock Borrow:
 	
                         
 	
                        Applicable
 
	
                          Initial Stock Loan Rate:
 	
                         
 	
                        50 basis points per annum
 
	
                        Hedging Party:
 	
                         
 	
                        Dealer for all applicable Additional Disruption Events
 
	
                        Determining Party:
 	
                         
 	
                        Dealer for all applicable Extraordinary Events; provided that in the case of a Change in Law, the Determining Party shall deliver, within five Exchange Business Days of a written request by the other party, a written explanation of any calculation made by it, and including, where applicable, the methodology and data 
 

 

 

5

 

 

	
                         
 	
                         
 	
                        applied, it being understood that the Determining Party shall not be obligated to disclose any proprietary models used by it for such calculation.
 
	
                        Non-Reliance:
 	
                         
 	
                        Applicable
 
	
                        Agreements and Acknowledgments
 	
                         
 	
                         
 
	
                        Regarding Hedging Activities:
 	
                         
 	
                        Applicable
 
	
                        Additional Acknowledgments:
 	
                         
 	
                        Applicable
 
	
                        3. Calculation Agent:
 	
                         
 	
                        Dealer. All calculations and determinations by the Calculation Agent shall be made in good faith and in a commercially reasonable manner. The Calculation Agent shall deliver, within five Exchange Business Days of a written request by Issuer, a written explanation of any calculation made by it, and including, where applicable, the methodology and data applied, it being understood that the Calculation Agent shall not be obligated to disclose any proprietary models used by it for such calculation.
 
	
                        4. Account Details:
 	
                         
 	
                         
 
	
                        Dealer Payment Instructions:
 	
                         
 	
                        Goldman, Sachs & Co. 
 Chase Manhattan Bank, New York 
 For A/C Goldman, Sachs & Co. 
 A/C #930-1-011483 
 ABA: 021-000021
 
	
                        Issuer Payment Instructions:
 	
                         
 	
                        To be provided by Issuer.
 

5. Offices:

The Office of Dealer for the Transaction is: New York

Goldman, Sachs & Co. 

One New York Plaza 

New York, NY 10004

The Office of Issuer for the Transaction is: Not applicable

6. Notices: For purposes of this Confirmation:

(a) Address for notices or communications to Issuer:

 

	
                        To:
 	
                        Sotheby’s
 
	
                         
 	
                        1334 York Avenue
 
	
                         
 	
                        New York, NY 10021
 
	
                        Attn:
 	
                        Mike Gillis
 
	
                        Telephone:
 	
                        212-894-2352
 
	
                        Facsimile:
 	
                        212-894-2245
 

(b) Address for notices or communications to Dealer:

 

	
                        To:
 	
                        Goldman, Sachs & Co.
 
	
                         
 	
                        One New York Plaza
 
	
                         
 	
                        New York, NY 10004
 
	
                        Attention:
 	
                        Equity Derivatives Documentation
 
	
                        Facsimile:
 	
                        212-428-1980/1983
 
	
                        with a copy to:
 	
                         
 
	
                         
 	
                        Goldman, Sachs & Co.
 

 

 

6

 

 

	
                         
 	
                        One New York Plaza
 
	
                         
 	
                        New York, NY 10004
 
	
                        Attention:
 	
                        Jason Lee / Equity Capital Markets
 
	
                        Telephone:
 	
                        212-902-0923
 
	
                        Facsimile:
 	
                        212-346-2126
 

7. Representations, Warranties and Agreements:

(a) In addition to the representations and warranties in the Agreement and those contained elsewhere herein, Issuer represents and warrants to and for the benefit of, and agrees with, Dealer as follows:

(i) On the Trade Date, and as of the date of any election by Issuer of the Share Termination Alternative under (and as defined in) Section 8(a) below, (A) none of Issuer and its officers and directors is aware of any material nonpublic information regarding Issuer or the Shares and (B) all reports and other documents filed by Issuer with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), when considered as a whole (with the more recent such reports and documents deemed to amend inconsistent statements contained in any earlier such reports and documents), do not contain any untrue statement of a material fact or any omission of a material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances in which they were made, not misleading.

(ii) Without limiting the generality of Section 13.1 of the Equity Definitions, Issuer acknowledges that Dealer is not making any representations or warranties with respect to the treatment of the Transaction under FASB Statements 128, 133, 149 (each as amended), or 150, EITF Issue No. 00-19, 01-6, 03-6 or 07-5 (or any successor issue statements) or under FASB’s Liabilities & Equity Project.

(iii) Prior to the Trade Date, Issuer shall deliver to Dealer a consent of the Finance Committee of Issuer’s board of directors authorizing the Transaction, a resolution of Issuer’s board of directors delegating the relevant authority to such Finance Committee and such other certificate or certificates as Dealer shall reasonably request.

(iv) Issuer is not entering into this Confirmation to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for Shares) or otherwise in violation of the Exchange Act.

(v) Issuer is not, and after giving effect to the transactions contemplated hereby will not be, an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

(vi) On the Trade Date (A) the assets of Issuer at their fair valuation exceed the liabilities of Issuer, including contingent liabilities, (B) the capital of Issuer is adequate to conduct the business of Issuer and (C) Issuer has the ability to pay its debts and obligations as such debts mature and does not intend to, or does not believe that it will, incur debt beyond its ability to pay as such debts mature.

(vii) Issuer shall not take any action to decrease the number of Available Shares below the Capped Number (each as defined below).

(viii) The representations and warranties of Issuer set forth in Section 3 of the Agreement are true and correct.

(ix) Issuer understands no obligations of Dealer to it hereunder will be entitled to the benefit of deposit insurance and that such obligations will not be guaranteed by any Affiliate of Dealer or any governmental agency.

(x) (A) On the Trade Date and during the period starting on the first Expiration Date and ending on the last Expiration Date (the “Settlement Period”), the Shares or securities that are convertible into, or exchangeable or exercisable for Shares, are not, and shall not be, subject to a “restricted period,” as such term is defined in Regulation M under the Exchange Act (“Regulation M”) and (B) Issuer shall not engage in any “distribution,” as such term is defined in Regulation M, other than a distribution meeting the requirements of the exceptions set forth in sections 101(b)(10) and 102(b)(7) of Regulation M, from the Trade Date until the second Exchange Business Day
immediately following the Trade Date or from the commencement of the

 

 

7

 

Settlement Period until the second Exchange Business Day immediately following the Settlement Period, as applicable.

(xi) During the Settlement Period, neither Issuer nor any “affiliate” or “affiliated purchaser” (each as defined in Rule 10b-18 of the Exchange Act (“Rule 10b-18”)) shall directly or indirectly (including, without limitation, by means of any cash-settled or other derivative instrument) purchase, offer to purchase, place any bid or limit order that would effect a purchase of, or commence any tender offer relating to, any Shares (or an equivalent interest, including a unit of beneficial interest in a trust or limited partnership or a depository share) or any security convertible into or exchangeable or exercisable for Shares, except through Dealer.

(xii) The Shares of Issuer initially issuable upon exercise of the Warrant (the “Warrant Shares”) have been reserved for issuance by all required corporate action of Issuer. The Warrant Shares have been duly authorized and, when delivered against payment therefor (which may include Net Share Settlement in lieu of cash) and otherwise as contemplated by the terms of the Warrant following the exercise of the Warrant in accordance with the terms and conditions of the Warrant, will be validly issued, fully-paid and non-assessable, and the issuance of the Warrant Shares will not be subject to any preemptive or similar rights.

(xiii) Issuer represents and warrants that it has received, read and understands the OTC Options Risk Disclosure Statement and a copy of the most recent disclosure pamphlet prepared by The Options Clearing Corporation entitled “Characteristics and Risks of Standardized Options”.

(b) Each of Dealer and Issuer agrees and represents that it is an “eligible contract participant” as defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended.

(c) Each of Dealer and Issuer acknowledges that the offer and sale of the Transaction to it is intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by virtue of Section 4(2) thereof. Accordingly, Dealer represents and warrants to Issuer that (i) it has the financial ability to bear the economic risk of its investment in the Transaction and is able to bear a total loss of its investment, (ii) it is an “accredited investor” as that term is defined in Regulation D as promulgated under the Securities Act, (iii) it is entering into the Transaction for its own account without a view to the distribution or resale thereof and (iv) the assignment, transfer or other disposition of the Transaction has not been and will not be registered
under the Securities Act and is restricted under this Confirmation, the Securities Act and state securities laws.

(d) Each of Dealer and Issuer agrees and acknowledges that Dealer is a “financial institution,” “swap participant” and “financial participant” within the meaning of Sections 101(22), 101(53C) and 101(22A) of Title 11 of the United States Code (the “Bankruptcy Code”). The parties hereto further agree and acknowledge (A) that this Confirmation is (i) a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “settlement payment” within the meaning of Section 546 of
the Bankruptcy Code, and (ii) a “swap agreement,” as such term is defined in Section 101(53B) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” a “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “transfer” within the meaning of Section 546 of the Bankruptcy Code, and (B) that Dealer is entitled to the protections afforded by, among other sections, Sections 362(b)(6), 362(b)(17), 362(b)(27), 362(o), 546(e), 546(g), 546(j), 548(d)(2), 555, 560 and 561 of the Bankruptcy Code.

(e) Issuer shall deliver to Dealer an opinion of counsel, dated as of the Effective Date and reasonably acceptable to Dealer in form and substance.

(f) Each of Dealer and Issuer acknowledges and agrees to be bound by the Conduct Rules of the National Association of Securities Dealers, Inc. applicable to transactions in options, and further agrees not to violate the position and exercise limits set forth therein.

8. Other Provisions:

(a) Alternative Calculations and Payment on Early Termination and on Certain Extraordinary Events. If Issuer shall owe Dealer any amount pursuant to Sections 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions (except in the event of an Insolvency, a Nationalization, a Tender Offer or a Merger Event, in each case, in which the consideration or proceeds to be paid to holders of Shares consists solely of cash) or pursuant to Section 6(e) of the Agreement (except in the event of an Event of Default in which Issuer is the Defaulting Party or a Termination Event in which Issuer is the Affected Party, that resulted from an event or events within Issuer’s control) (a “Payment

 

 

8

 

Obligation”), Issuer shall have the right, in its sole discretion, to satisfy any such Payment Obligation by the Share Termination Alternative (as defined below) by giving irrevocable telephonic notice to Dealer, confirmed in writing within one Scheduled Trading Day, between the hours of 9:00 A.M. and 4:00 P.M. New York City time on the Merger Date, Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable (“Notice of Share Termination”), provided that
if Issuer does not elect to satisfy its Payment Obligation by the Share Termination Alternative, Dealer shall have the right, in its sole discretion, to require Issuer to satisfy its Payment Obligation by the Share Termination Alternative, notwithstanding Issuer’s failure to elect or election to the contrary. Upon such Notice of Share Termination, the following provisions shall apply on the Scheduled Trading Day immediately following the Merger Date, the Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable:

	
                        Share Termination Alternative:
 	
                         
 	
                        Applicable and means that Issuer shall deliver to Dealer the Share Termination Delivery Property on the date on which the Payment Obligation would otherwise be due pursuant to Section 12.7 or 12.9 of the Equity Definitions or Section 6(d)(ii) of the Agreement, as applicable (the “Share Termination Payment Date”), in satisfaction of the Payment Obligation.
 
	
                        Share Termination Delivery Property:
 	
                         
 	
                        A number of Share Termination Delivery Units, as calculated by the Calculation Agent, equal to the Payment Obligation divided by the Share Termination Unit Price. The Calculation Agent shall adjust the Share Termination Delivery Property by replacing any fractional portion of a security therein with an amount of cash equal to the value of such fractional security based on the values used to calculate the Share Termination Unit Price.
 
	
                        Share Termination Unit Price:
 	
                         
 	
                        The value of property contained in one Share Termination Delivery Unit on the date such Share Termination Delivery Units are to be delivered as Share Termination Delivery Property, as determined by the Calculation Agent in its discretion by commercially reasonable means and notified by the Calculation Agent to Issuer at the time of notification of the Payment Obligation.
 
	
                        Share Termination Delivery Unit:
 	
                         
 	
                        In the case of a Termination Event, Event of Default, Delisting or Additional Disruption Event, one Share or, in the case of an Insolvency, Nationalization, Merger Event or Tender Offer, a unit consisting of the number or amount of each type of property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional amounts of any securities) in such Insolvency, Nationalization, Merger Event or Tender Offer. If such Insolvency, Nationalization, Merger Event or Tender Offer involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash.
 
	
                        Failure to Deliver:
 	
                         
 	
                        Applicable
 
	
                        Other applicable provisions:
 	
                         
 	
                        If Share Termination Alternative is applicable, the provisions of Sections 9.8, 9.9, 9.10, 9.11 (except that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws as a result of the fact that Seller is the Issuer of the Shares) and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction, except that all references to “Shares” shall be read as references to “Share Termination Delivery Units”.
 

(b) Registration/Private Placement Procedures. (i) If, in the reasonable judgment of Dealer based on the advice of outside counsel, for any reason (other than the status of Dealer as an “affiliate” as such term is defined in Rule 144 under the Securities Act, determined without regard to this Transaction or any Shares received hereunder), any Shares or any securities of Issuer or its affiliates comprising any Share Termination Delivery Units deliverable to Dealer hereunder (any such Shares or securities, “Delivered Securities”) would not be immediately freely transferable by Dealer under Rule 144 under the Securities Act, then the provisions set forth in this Section 8(b) shall apply. At the election of
Issuer by notice to Dealer within one Exchange Business Day after the relevant delivery obligation arises, but

 

 

9

 

in any event at least one Exchange Business Day prior to the date on which such delivery obligation is due, either (A) all Delivered Securities delivered by Issuer to Dealer shall be, at the time of such delivery, covered by an effective registration statement of Issuer for immediate resale by Dealer (such registration statement and the corresponding prospectus (the “Prospectus”) (including, without limitation, any sections describing the plan of distribution) in form and content commercially reasonably satisfactory to Dealer including, without limitation, with regard to disclosure of matters identified during the due diligence investigation described below) or (B) Issuer shall deliver additional Delivered Securities so that the value of such Delivered Securities, as determined by the Calculation Agent to
reflect an appropriate liquidity discount, equals the value of the number of Delivered Securities that would otherwise be deliverable if such Delivered Securities were freely tradeable (without prospectus delivery) upon receipt by Dealer (such value, the “Freely Tradeable Value”); provided that Issuer may not make the election described in this clause (B) if, on the date of its election, it has taken, or caused to be taken, any action that would make unavailable either the exemption pursuant to Section 4(2) of the Securities Act for the delivery by Issuer to Dealer (or any affiliate designated by Dealer) of the Delivered Securities or the exemption pursuant to Section 4(1) or Section 4(3) of the Securities Act for resales of the Delivered Securities by Dealer (or any such affiliate of Dealer). (For the avoidance of doubt, as used in this paragraph (b)
only, the term “Issuer” shall mean the issuer of the relevant securities, as the context shall require.)

(ii) If Issuer makes the election described in clause (b)(i)(A) above:

(A) Dealer (or an Affiliate of Dealer designated by Dealer) shall be afforded a reasonable opportunity to conduct a due diligence investigation with respect to Issuer that is customary in scope for underwritten offerings of equity securities;

(B) Dealer (or an Affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Registration Agreement”) on commercially reasonable terms in connection with the public resale of such Delivered Securities by Dealer or such Affiliate substantially similar to underwriting agreements customary for underwritten offerings of equity securities, in form and substance commercially reasonably satisfactory to Dealer or such Affiliate and Issuer, which Registration Agreement shall include, without limitation, provisions substantially similar to those contained in such underwriting agreements relating to the indemnification of, and contribution in connection with the liability of, Dealer and its Affiliates and Issuer, shall provide for the payment by Issuer of all
expenses in connection with such resale, including all registration costs and all fees and expenses of counsel for Dealer, and shall provide for the delivery of accountants’ “comfort letters” to Dealer or such Affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the Prospectus; and

(C) Issuer shall have no obligation to maintain a Prospectus or comply with this clause (b)(ii) during such period that any Delivered Securities are determined by Dealer, upon the advice of Dealer’s outside counsel, to be freely transferable by Dealer under Rule 144 under the Securities Act (the “Rule 144 Availability Period”).

(iii) If Issuer makes the election described in clause (b)(i)(B) above:

(A) Dealer (or an Affiliate of Dealer designated by Dealer) and any potential institutional purchaser of any such Delivered Securities from Dealer or such Affiliate identified by Dealer shall be afforded a commercially reasonable opportunity to conduct a due diligence investigation in compliance with applicable law with respect to Issuer customary in scope for private placements of equity securities (including, without limitation, the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them);

(B) Dealer (or an Affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Private Placement Agreement”) on commercially reasonable terms in connection with the private placement of such Delivered Securities by Issuer to Dealer or such Affiliate and the private resale of such shares by Dealer or such Affiliate, substantially similar to private placement purchase agreements customary for private placements of equity securities, in form and substance commercially reasonably satisfactory to Dealer and Issuer, which Private Placement Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating to the indemnification of, and contribution in connection with the
liability of, Dealer and its Affiliates and Issuer, shall provide for the payment by Issuer of all expenses in connection with such resale, including all fees and expenses of counsel for Dealer, shall contain representations, warranties and agreements of Issuer reasonably necessary or advisable to establish and maintain the availability of an exemption from the registration

 

 

10

 

requirements of the Securities Act for such resales at all times other than during the Rule 144 Availability Period, and shall use best efforts to provide for the delivery of accountants’ “comfort letters” to Dealer or such Affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the offering memorandum prepared for the resale of such Shares;

(C) Issuer agrees that any Delivered Securities so delivered to Dealer, (i) may be transferred by and among Dealer and its Affiliates, and Issuer shall effect such transfer without any further action by Dealer and (ii) after the minimum “holding period” within the meaning of Rule 144(d) under the Securities Act has elapsed with respect to such Delivered Securities, Issuer shall promptly remove, or cause the transfer agent for such Shares or securities to remove, any legends referring to any such restrictions or requirements from such Delivered Securities upon delivery by Dealer (or such Affiliate of Dealer) to Issuer or such transfer agent of any seller’s and broker’s representation letters customarily delivered by Dealer in connection with resales of restricted securities pursuant to Rule 144 under the Securities Act, without any further
requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document, any transfer tax stamps or payment of any other amount or any other action by Dealer (or such affiliate of Dealer); and

(D) Neither Issuer nor Dealer shall take, or cause to be taken, any action that would make unavailable either the exemption pursuant to Section 4(2) of the Securities Act for the sale by Issuer to Dealer (or any affiliate designated by Dealer) of the Shares or Share Termination Delivery Units, as the case may be, or the exemption pursuant to Section 4(1) or Section 4(3) of the Securities Act for resales of the Shares or Share Termination Delivery Units, as the case may be, by Dealer (or any such affiliate of Dealer).

(c) Make-whole. If Issuer makes the election described in clause (b)(i)(B) of paragraph (b) of this Section 8, then Dealer or its affiliate may sell such Shares or Share Termination Delivery Units, as the case may be, during a period (the “Resale Period”) commencing on the Exchange Business Day following delivery of such Shares or Share Termination Delivery Units, as the case may be, and ending on the Exchange Business Day on which Dealer completes the sale of all such Shares or Share Termination Delivery Units, as the case may be, or a sufficient number of Shares or Share Termination Delivery Units, as the case may be, so that the realized net proceeds of such sales exceed the Freely Tradeable Value (such amount
of the Freely Tradeable Value, the “Required Proceeds”). If any of such delivered Shares or Share Termination Delivery Units remain after such realized net proceeds exceed the Required Proceeds, Dealer shall return such remaining Shares or Share Termination Delivery Units to Issuer. If the Required Proceeds exceed the realized net proceeds from such resale, Issuer shall transfer to Dealer by the open of the regular trading session on the Exchange on the Exchange Trading Day immediately following the last day of the Resale Period the amount of such excess (the “Additional Amount”) in cash or in a number of additional Shares or Share Termination Delivery Units, as the case may be (“Make-whole Shares”), in an amount that,
based on the Relevant Price on the last day of the Resale Period (as if such day was the “Valuation Date” for purposes of computing such Relevant Price), has a dollar value equal to the Additional Amount. The Resale Period shall continue to enable the sale of the Make-whole Shares in the manner contemplated by this Section 8(c). This provision shall be applied successively until the Additional Amount is equal to zero, subject to Section 8(e).

(d) Beneficial Ownership. Notwithstanding anything to the contrary in the Agreement or this Confirmation, in no event shall Dealer be entitled to receive, or shall be deemed to receive, any Shares in connection with this Transaction if, immediately upon giving effect to such receipt of such Shares (i) Dealer’s Beneficial Ownership would be equal to or greater than 8.0% of the outstanding Shares or (ii) Dealer or any “affiliate” or “associate” of Dealer, would be an “interested stockholder” of Issuer, as all such terms are defined in Section 203 of the Delaware General Corporation Law (each of clause (i) and (ii) above, an “Ownership Limitation”). If any delivery owed to Dealer
hereunder is not made, in whole or in part, as a result of an Ownership Limitation, Dealer’s right to receive such delivery shall not be extinguished and Issuer shall make such delivery as promptly as practicable after, but in no event later than one Exchange Business Day after, Dealer gives notice to Issuer that such delivery would not result in any of such Ownership Limitations being breached. “Dealer’s Beneficial Ownership” means the “beneficial ownership” (within the meaning of Section 13 of the Exchange Act and the rules promulgated thereunder (collectively, “Section 13”) of Shares by Dealer, together with any affiliate or other person subject to aggregation with Dealer under Section 13, or by any “group” (within the meaning of Section 13) of which Dealer is or may be deemed
to be a part. Notwithstanding anything in the Agreement or this Confirmation to the contrary, Dealer (or the affiliate designated by Dealer pursuant to Section 8(k) below) shall not become the record or beneficial owner, or otherwise have any rights as a holder, of any Shares that Dealer (or such affiliate) is not entitled to receive at any time pursuant to this Section 8(d), until such time as such Shares are delivered pursuant to this Section 8(d).

 

 

11

 

(e) Limitations on Settlement by Issuer. Notwithstanding anything herein or in the Agreement to the contrary, in no event shall Issuer be required to deliver Shares in connection with the Transaction in excess of 7,720,703 Shares (the “Capped Number”). Issuer represents and warrants (which shall be deemed to be repeated on each day that the Transaction is outstanding) that the Capped Number is equal to or less than the number of authorized but unissued Shares of the Issuer that are not reserved for future issuance in connection with transactions in the Shares (other than the Transaction) on the date of the determination of the Capped Number (such Shares, the “Available
Shares”). In the event Issuer shall not have delivered the full number of Shares otherwise deliverable as a result of this Section 8(e) (the resulting deficit, the “Deficit Shares”), Issuer shall be continually obligated to deliver, from time to time until the full number of Deficit Shares have been delivered pursuant to this paragraph, Shares when, and to the extent, that (i) Shares are repurchased, acquired or otherwise received by Issuer or any of its subsidiaries after the Trade Date (whether or not in exchange for cash, fair value or any other consideration), (ii) authorized and unissued Shares reserved for issuance in respect of other transactions prior to such date which prior to the relevant date become no longer so reserved or (iii) Issuer additionally authorizes any unissued Shares that are not reserved for other transactions. Issuer shall
promptly notify Dealer of the occurrence of any of the foregoing events (including the number of Shares subject to clause (i), (ii) or (iii) and the corresponding number of Shares to be delivered) and promptly deliver such Shares thereafter.

(f) Right to Extend. Dealer may postpone any Exercise Date or any other date of valuation or delivery with respect to some or all of the relevant Warrants (in which event the Calculation Agent shall make appropriate adjustments to the Number of Shares to be Delivered with respect to one or more Components), if Dealer determines, in its reasonable discretion, that such extension is reasonably necessary or appropriate to preserve Dealer’s hedging or hedge unwind activity hereunder in light of existing liquidity conditions or to enable Dealer to effect purchases of Shares in connection with its hedging, hedge unwind or settlement activity hereunder in a manner that would, if Dealer were Issuer or an affiliated purchaser of Issuer, be in compliance with applicable legal, regulatory or self-regulatory
requirements, or with related policies and procedures applicable to Dealer.

(g) Equity Rights. Dealer acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the Transaction that are senior to the claims of common stockholders in the event of Issuer’s bankruptcy. For the avoidance of doubt, the parties agree that the preceding sentence shall not apply at any time other than during Issuer’s bankruptcy to any claim arising as a result of a breach by Issuer of any of its obligations under this Confirmation or the Agreement. For the avoidance of doubt, the parties acknowledge that this Confirmation is not secured by any collateral that would otherwise secure the obligations of Issuer herein under or pursuant to any other agreement.

(h) Amendments to Equity Definitions and the Agreement. The following amendments shall be made to the Equity Definitions and to the Agreement:

(i) The first sentence of Section 11.2(c) of the Equity Definitions, prior to clause (A) thereof, is hereby amended to read as follows: ‘(c) If “Calculation Agent Adjustment” is specified as the Method of Adjustment in the related Confirmation of a Share Option Transaction, then following the announcement or occurrence of any Potential Adjustment Event, the Calculation Agent will determine whether such Potential Adjustment Event has a material effect on the theoretical value of the relevant Shares or options on the Shares and, if so, will (i) make appropriate adjustment(s), if any, to any one or more of:’ and, the portion of such sentence immediately preceding clause (ii) thereof is hereby amended by deleting the words “diluting or concentrative” and the words “(provided that no adjustments will be made to account solely for
changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)” and replacing such latter phrase with the words “(and, for the avoidance of doubt, adjustments may be made to account solely for material changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)”;

(ii) Sections 11.2(a) and 11.2(e)(vii) of the Equity Definitions are hereby amended by deleting the words “diluting or concentrative” and replacing them with “material” and adding the phrase “or Warrants” at the end of the sentence;

(iii) Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (1) deleting from the fourth line thereof the word “or” after the word “official” and inserting a comma therefor, and (2) deleting the semicolon at the end of subsection (B) thereof and inserting the following words therefor “or (C) at Dealer’s option, the occurrence of any of the events specified in Section 5(a)(vii) (1) through (9) of the ISDA 2002 Master Agreement with respect to that Issuer.”;

(iv) Section 12.9(b)(iv) of the Equity Definitions is hereby amended by:

 

 

12

 

(A) deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase “in each case” in subsection (B); and

(B) deleting the phrase “neither the Non-Hedging Party nor the Lending Party lends Shares in the amount of the Hedging Shares or” in the penultimate sentence; and

(v) Section 12.9(b)(v) of the Equity Definitions is hereby amended by:

(A) adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and

(B) (1) deleting subsection (C) in its entirety, (2) deleting the word “or” immediately preceding subsection (C) and (3) deleting the penultimate sentence in its entirety and replacing it with the sentence “The Determining Party will determine the Cancellation Amount payable by one party to the other.” and (4) deleting clause (X) in the final sentence.

(i) Transfer and Assignment. Dealer may transfer or assign its rights and obligations hereunder and under the Agreement, in whole or in part, at any time to any person or entity whatsoever without the consent of Issuer.

(j) Disclosure. Effective from the date of commencement of discussions concerning the Transaction, Issuer and each of its employees, representatives, or other agents may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the Transaction and all materials of any kind (including opinions or other tax analyses) that are provided to Issuer relating to such tax treatment and tax structure.

(k) Designation by Dealer. Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to or from Issuer, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such shares or other securities and otherwise to perform Dealer obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Issuer to the extent of any such performance.

(l) Additional Termination Events. The occurrence of any of the following shall constitute an Additional Termination Event with respect to which the Transaction shall be the sole Affected Transaction and Issuer shall be the sole Affected Party; provided that with respect to any Additional Termination Event, Dealer may choose to treat part of the Transaction as the sole Affected Transaction, and, upon the termination of the Affected Transaction, a Transaction with terms identical to those set forth herein except with a Number of Warrants equal to the unaffected number of Warrants shall be treated for all purposes as the Transaction, which shall remain in full force and effect:

(i) Dealer reasonably determines that it is advisable to terminate a portion of the Transaction so that Dealer’s related hedging activities will comply with applicable securities laws, rules or regulations or related policies and procedures of Dealer (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by Dealer), or Dealer, despite using commercially reasonable efforts, is unable or reasonably determines that it is illegal for Dealer to hedge its obligations pursuant to this Transaction in the public market without registration under the Securities Act or as a result of any legal, regulatory or self-regulatory requirements;

(ii) any Person (as defined below) or “group” (within the meaning of Section 13(d) of the Exchange Act), other than Issuer, its subsidiaries or their respective employee benefit plans, files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of more than 50% of the voting power of all shares of Issuer’s capital stock entitled to vote generally in elections of directors;

(iii) consummation of any share exchange, exchange offer, tender offer, consolidation or merger of Issuer pursuant to which the Shares will be converted into cash, securities or other property or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of Issuer and its subsidiaries, taken as a whole, to any Person other than one of Issuer’s subsidiaries;

(iv) continuing directors cease to constitute at least a majority of the Issuer’s board of directors; 

(v) Issuer’s stockholders approve any plan or proposal for liquidation or dissolution of Issuer; or

 

 

13

 

(vi) the Shares cease to be listed on a U.S. national securities exchange.

Notwithstanding the foregoing, a transaction set forth in clause (ii) or (iii) above will not constitute an Additional Termination Event if at least 90% of the consideration paid for the Shares (excluding cash payments for fractional shares) in such transaction or transactions otherwise constituting an Additional Termination Event consists of shares of common stock, depositary receipts or other certificates representing common equity interests, in each case, traded on any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Global Market (or any of their respective successors) (or will be so traded or quoted immediately following the completion of such transaction or transactions).

“Person” includes any syndicate or group that would be deemed to be a “person” under Section 13(d)(3) of the Exchange Act.

“Continuing Directors” means a director who either was a member of Issuer’s board of directors on the Trade Date or who becomes a member of the board of directors subsequent to that date and whose election, appointment or nomination for election by Issuer’s stockholders is duly approved by a majority of the continuing directors on Issuer’s board of directors at the time of such approval, either by a specific vote or by approval of the proxy statement issued by Issuer on behalf of the entire board of directors in which such individual is named as nominee for director.

(m) Netting and Set-off. Each party waives any and all rights it may have to set off obligations arising under the Agreement and the Transaction against other obligations between the parties, whether arising under any other agreement, applicable law or otherwise.

(n) Effectiveness. If, prior to the Effective Date, Dealer reasonably determines that it is advisable to cancel the Transaction because of concerns that Dealer’s related hedging activities could be viewed as not complying with applicable securities laws, rules or regulations, the Transaction shall be cancelled and shall not become effective, and neither party shall have any obligation to the other party in respect of the Transaction.

(o) Amendment. If the Initial Purchasers (as defined in the Purchase Agreement) exercise their option pursuant to Section 2(c) of the Purchase Agreement to purchase additional convertible notes as set forth therein, then Dealer and Issuer will amend this Confirmation to increase the Number of Warrants by a corresponding number of additional Warrants to be issued by Issuer to Dealer (such Warrants, the “Additional Warrants”), effective upon payment by Dealer to Issuer of the additional Premium on the Additional Premium Payment Date. In particular, the Number of Warrants in respect of any Component shall be increased by a number of Additional Warrants equal to the product of (i) the Number of Warrants for such
Component as reflected on Annex A to this Confirmation and (ii) a fraction (A) whose numerator is the aggregate principal amount of the convertible notes issued pursuant to such exercise and (B) whose denominator is the aggregate principal amount of the convertible notes issued prior to such exercise (with such result rounded down to the nearest whole number and any remainder allocated to the final Component).

(p) Delivery of Cash. For the avoidance of doubt, nothing in this Confirmation shall be interpreted as requiring the Issuer to deliver cash in respect of the settlement of the Transaction, except in circumstances where the required cash settlement thereof is permitted for classification of the contract as equity by EITF Issue No. 00-19 as in effect on the Trade Date (including, without limitation, where the Issuer so elects to deliver cash or fails timely to elect to deliver Shares or Share Termination Delivery Property in respect of such settlement).

(q) Waiver of Trial by Jury. EACH OF ISSUER AND BUYER HEREBY IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE TRANSACTION OR THE ACTIONS OF BUYER OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.

(r) Governing Law; Jurisdiction. THIS CONFIRMATION SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

 

 

14

 

Counterparty hereby agrees (a) to check this Confirmation carefully and promptly upon receipt so that errors or discrepancies can be promptly identified and rectified and (b) to confirm that the foregoing (in the exact form provided by Dealer) correctly sets forth the terms of the agreement between Dealer and Counterparty with respect to the Transaction, by manually signing this Confirmation or this page hereof as evidence of agreement to such terms and providing the other information requested herein and promptly returning an executed copy to us.

 

	
                         
 	
                         
 	
                        Yours faithfully,
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        GOLDMAN, SACHS & CO.
 
	
                          
 	
                         
 	
                        By: 
 	
       
 
	
                         
 	
                         
 	
                         
 	
                        
 
	
                         
 	
                         
 	
                         
 	
                        Name:
 	
                        Debra Tageldein
 
	
                         
 	
                         
 	
                         
 	
                        Title:
 	
                        Vice President
 

 

	
                        Agreed and Accepted By:
 

SOTHEBY’S

 

	
                        By: 
 	
                          
 
	
                         
 	
                        
 
	
                         
 	
                        Name:
 	
                         
 
	
                         
 	
                        Title:
 	
                         
 

 

Counterparty hereby agrees (a) to check this Confirmation carefully and promptly upon receipt so that errors or discrepancies can be promptly identified and rectified and (b) to confirm that the foregoing (in the exact form provided by Dealer) correctly sets forth the terms of the agreement between Dealer and Counterparty with respect to the Transaction, by manually signing this Confirmation or this page hereof as evidence of agreement to such terms and providing the other information requested herein and promptly returning an executed copy to us.

 

	
                         
 	
                         
 	
                        Yours faithfully,
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        GOLDMAN, SACHS & CO.
 
	 	 	 	 
	
                          
 	
                         
 	
                        By: 
 	
                          
 
	
                         
 	
                         
 	
       
 	
                        
 
	
                         
 	
                         
 	
                         
 	
                        Name:
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                        Title:
 	
                         
 

 

	
                        Agreed and Accepted By:
 

SOTHEBY’S

 

	
                        By: 
 	
       
 
	
                         
 	
                        
 
	
                         
 	
      Name:
 	
      Michael L. Gillis
 
	
                         
 	
                        Title:
 	
                        SVP, Treasurer
 

 

Annex A

For each Component of the Transaction, the Number of Warrants and Expiration Date are set forth below.

 

	
      Component Number
 	
       
 	
      Number of Warrants
 	
       
 	Expiration Date

	
                        
 	
                         
 	
                        
 	
                         
 	

        
	
      1.
 	
       
 	
      51,471
 	
       
 	September 17, 2013

	
                        2.
 	
                         
 	
                        51,471
 	
                         
 	September 18, 2013

	
                        3.
 	
                         
 	
                        51,471
 	
                         
 	September 19, 2013

	
                        4.
 	
                         
 	
                        51,471
 	
                         
 	September 20, 2013

	
                        5.
 	
                         
 	
                        51,471
 	
                         
 	September 23, 2013

	
                        6.
 	
                         
 	
                        51,471
 	
                         
 	September 24, 2013

	
                        7.
 	
                         
 	
                        51,471
 	
                         
 	September 25, 2013

	
                        8.
 	
                         
 	
                        51,471
 	
                         
 	September 26, 2013

	
                        9.
 	
                         
 	
                        51,471
 	
                         
 	September 27, 2013

	
                        10.
 	
                         
 	
                        51,471
 	
                         
 	September 30, 2013

	
                        11.
 	
                         
 	
                        51,471
 	
                         
 	October 1, 2013

	
                        12.
 	
                         
 	
                        51,471
 	
                         
 	October 2, 2013

	
                        13.
 	
                         
 	
                        51,471
 	
                         
 	October 3, 2013

	
                        14.
 	
                         
 	
                        51,471
 	
                         
 	October 4, 2013

	
                        15.
 	
                         
 	
                        51,471
 	
                         
 	October 7, 2013

	
                        16.
 	
                         
 	
                        51,471
 	
                         
 	October 8, 2013

	
                        17.
 	
                         
 	
                        51,471
 	
                         
 	October 9, 2013

	
                        18.
 	
                         
 	
                        51,471
 	
                         
 	October 10, 2013

	
                        19.
 	
                         
 	
                        51,471
 	
                         
 	October 11, 2013

	
                        20.
 	
                         
 	
                        51,471
 	
                         
 	October 14, 2013

	
                        21.
 	
                         
 	
                        51,471
 	
                         
 	October 15, 2013

	
                        22.
 	
                         
 	
                        51,471
 	
                         
 	October 16, 2013

	
                        23.
 	
                         
 	
                        51,471
 	
                         
 	October 17, 2013

	
                        24.
 	
                         
 	
                        51,471
 	
                         
 	October 18, 2013

	
                        25.
 	
                         
 	
                        51,471
 	
                         
 	October 21, 2013

	
                        26.
 	
                         
 	
                        51,471
 	
                         
 	October 22, 2013

	
                        27.
 	
                         
 	
                        51,471
 	
                         
 	October 23, 2013

	
                        28.
 	
                         
 	
                        51,471
 	
                         
 	October 24, 2013

	
                        29.
 	
                         
 	
                        51,471
 	
                         
 	October 25, 2013

	
                        30.
 	
                         
 	
                        51,471
 	
                         
 	October 28, 2013

	
                        31.
 	
                         
 	
                        51,471
 	
                         
 	October 29, 2013

	
                        32.
 	
                         
 	
                        51,471
 	
                         
 	October 30, 2013

	
                        33.
 	
                         
 	
                        51,471
 	
                         
 	October 31, 2013

	
                        34.
 	
                         
 	
                        51,471
 	
                         
 	November 1, 2013

	
                        35.
 	
                         
 	
                        51,471
 	
                         
 	November 4, 2013

	
                        36.
 	
                         
 	
                        51,471
 	
                         
 	November 5, 2013

	
                        37.
 	
                         
 	
                        51,471
 	
                         
 	November 6, 2013

	
                        38.
 	
                         
 	
                        51,471
 	
                         
 	November 7, 2013

	
                        39.
 	
                         
 	
                        51,471
 	
                         
 	November 8, 2013

	
                        40.
 	
                         
 	
                        51,471
 	
                         
 	November 11, 2013

	
                        41.
 	
                         
 	
                        51,471
 	
                         
 	November 12, 2013

	
                        42.
 	
                         
 	
                        51,471
 	
                         
 	November 13, 2013

	
                        43.
 	
                         
 	
                        51,471
 	
                         
 	November 14, 2013

	
                        44.
 	
                         
 	
                        51,471
 	
                         
 	November 15, 2013

	
                        45.
 	
                         
 	
                        51,471
 	
                         
 	November 18, 2013

	
                        46.
 	
                         
 	
                        51,471
 	
                         
 	November 19, 2013

	
                        47.
 	
                         
 	
                        51,471
 	
                         
 	November 20, 2013

	
                        48.
 	
                         
 	
                        51,471
 	
                         
 	November 21, 2013

	
                        49.
 	
                         
 	
                        51,471
 	
                         
 	November 22, 2013

	
                        50.
 	
                         
 	
                        51,488
 	
                         
 	November 25, 2013

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