BASIC EQUITY ACQUISITION CONTRACT
BETWEEN
CITIBANK, N.A. AND CITIZENS UTILITIES COMPANY
The purpose of this Basic Equity Acquisition Contract (the
"Master Confirmation"), dated as of February 24, 2000, is to set forth certain
terms and conditions for equity purchase transactions that Citizens Utilities
Company ("Counterparty") will enter into with Citibank, N.A. ("Citibank"). Each
such transaction (a "Transaction") entered into between Citibank and
Counterparty that is to be subject to this Master Confirmation shall be
evidenced by a written confirmation substantially in the form of Exhibit A
hereto, with such modifications thereto as to which Counterparty and Citibank
mutually agree (a "Confirmation"). This Master Confirmation and each
Confirmation together constitute a "Confirmation" as referred to in the
Agreement specified below.
This Master Confirmation and a Confirmation evidence a
complete binding agreement between you and us as to the terms of the Transaction
to which this Master Confirmation and such Confirmation relates. In addition,
you and we agree to use our best efforts promptly to negotiate, execute and
deliver an ISDA Master Agreement (Multicurrency-Cross Border) (the "ISDA
Agreement") in the form published by the International Swaps and Derivatives
Association, Inc. ("ISDA"), with such modifications as you and we shall in good
faith agree (as modified, the "Agreement"). Upon the execution by you and us of
the Agreement, this Master Confirmation and each Confirmation will supplement,
form a part of, and be subject to the Agreement. A copy of the ISDA Agreement
has been, or promptly after the date hereof will be, delivered to you. Prior to
execution of the Agreement, this Master Confirmation and each Confirmation
hereunder, together with all other documents referring to the ISDA Agreement
(each a "Confirmation") confirming transactions (each a "Transaction") entered
into between you and us (notwithstanding anything to the contrary in a
Confirmation), shall supplement, form a part of, and be subject to an agreement
in the form of the ISDA Agreement as if we had executed an agreement in such
form (but without any Schedule) on the Trade Date of the first such Transaction
between you and us.
The ISDA Agreement, this Master Confirmation and each Confirm-
ation will be governed by the laws of the State of New York.
1. In the event of any inconsistency between this Master
Confirmation, on the one hand, and the ISDA Agreement, or when executed, the
Agreement, on the other hand, this Master Confirmation will control for the
purpose of the Transaction to which a Confirmation relates. In the event of any
inconsistency between the definitions and provisions of the ISDA Agreement, the
Agreement (when executed) and this Master Confirmation, on the one hand, and a
Confirmation, on the other hand, the Confirmation will govern. With respect to a
Transaction, capitalized terms used herein that are not otherwise defined shall
have the meaning assigned to them in the Confirmation relating to such
Transaction or, if not defined therein, in the ISDA Agreement or, when executed,
the Agreement.
2. Each party will make each payment specified in this Master
Confirmation or a Confirmation as being payable by it, not later than the due
date for value on that date in the place of the account specified below or
otherwise specified in writing, in freely transferable funds and in a manner
customary for payments in the required currency. This Master Confirmation and
the Agreement, together with the Confirmation relating to a Transaction, shall
constitute the written agreement between Counterparty and Citibank with respect
to such Transaction.
3. Each Transaction to which a Confirmation relates is a Basic
Equity Acquisition Contract ("BEACON") transaction, the terms of which include:
4. General Definitions:
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Actual Dividends: means, for any Transfer Date and subject to paragraph9(e)
("Funding Cost Adjustment"), the amount of all dividends
(other than dividends resulting in an adjustment pursuant
to paragraph 8(c) ("Adjustment Events") and other than
dividends transferred to Counterparty pursuant to
paragraph 9(f) ("Dividends")) paid before the day on which
the Unwind Period commences, to which would be entitled a
holder of a number of Common Shares equal to the applicable
Daily Transfer Amount (or portion thereof) outstanding on
the applicable ex-dividend date divided by the weighted
average of the Tranche Prices Per Share for each Tranche
Amount included in such Daily Transfer Amount (or portion
thereof).
BEACON Account(s): means the account(s) in which Citibank shall record any
Common Shares, Actual Dividends, interest on the Actual
Dividends that are cash dividends, and other amounts.
Counterparty shall be entitled to any remaining cash
amounts or property in the BEACON Account on the last
Trading Day in an Unwind Period, provided that Counterparty
has fully satisfied all of its payment obligations with
respect to Citibank pursuant to this Master Confirmation
and there is no remaining Outstanding Aggregate Amount.
The BEACON Account(s) will be captioned: "Master BEACON,
February 24, 2000, Citizens Utilities Company."
Business Day: means a day (other than a Saturday or a Sunday) on which
commercial banks generally are open for business in New
York City.
Carrying Rate: means on any day with respect to any Tranche Amount (i)
until but not including the Initial Reset Date specified
in the applicable Confirmation, the Tranche Initial Funding
Rate for that Tranche Amount plus the Carrying Spread
specified in the applicable Confirmation and (ii) during
each period thereafter, LIBOR determined as of the begin-
ning of such period plus the Carrying Spread specified
in the applicable Confirmation.
Closing Price: means, with respect to a Trading Day, the closing price per
Common Share on the principal Market on such day as reported
by Bloomberg L. P. ("Bloomberg") or (A) if such price is not
reported by Bloomberg, then as reported by such other
recognized source selected by Citibank on the relevant day
or (B) if the Common Shares cease to be listed on a national
securities exchange or included in a quotation system, then
the price as determined by Citibank in a commercially
reasonable manner.
Common Shares: means shares of Counterparty's common stock, par value $.25
per share.
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LIBOR: means the rate per annum for U.S. dollar LIBOR (determined
on the basis of the actual number of days elapsed over a
360-day year) for the appropriate reference period, as
determined by Citibank, appearing (except as provided in
the following sentence) on Telerate Page 3750 or any
replacement of that page, two London Banking Days prior to
the start of a relevant period, provided that if the rate
cannot be so determined, it shall be determined as if
USD-LIBOR-Reference Banks (as defined in the 1991 ISDA
Definitions) had been specified for purposes of determining
the rate. If the relevant period is one week or less, the
reference period shall be one week, and the rate shall be
as specified on Reuters Screen LIBO Page. LIBOR shall
otherwise be determined by linear interpolation if the
relevant period does not correspond exactly to a period for
which rates appear on Telerate Page 3750 or its
replacement. Except for the period ending on the Maturity
Date, or if Counterparty notifies Citibank with an accept-
able alternative period within 7 Trading Days prior to the
applicable Reset Date, or unless the parties otherwise
agree, the relevant period for determining LIBOR shall be
three months. Citibank agrees it will not unreasonably
withhold its acceptance of such alternative period.
London Banking Day: Means any day on which commercial banks are open for busi-
ness (including dealings in foreign exchange and foreign
currency deposits) in London.
Principal Market: means the New York Stock Exchange or the principal national
securities exchange or quotation system on which the Common
Shares may be listed or otherwise included in the future
should they cease to be quoted on such exchange or quota-
tion system. All references to closing prices or sales
prices for the Common Shares shall be to such prices on the
Principal Market.
Trading Day: means a day on which the Principal Market is open for
trading.
5. Initiation of a Transaction; Increasing Trans-
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action Amount; Fees:
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(a) Initiation of a Transaction. From time to time, Citibank may (but
shall not be obligated to) agree to initiate a new Transaction at Counterparty's
request. Counterparty shall specify in its request for a new Transaction a
proposed Trade Date, Initial Reset Date, and Maturity Date for such Transaction.
As promptly as practicable following the agreement to initiate a new
Transaction, Citibank shall send Counterparty a Confirmation which shall include
the Trade Date, Initial Reset Date, Notice Date, Optional Unwind Date, Maturity
Date, Carrying Spread, Tranche Fee Rate and Commitment Fee to which the parties
have agreed. Counterparty shall promptly either (i) sign such Confirmation
indicating agreement thereto and return it to Citibank or (ii) notify Citibank
of any disagreement with respect to the Confirmation.
(b) Increasing Transaction Amount. Except as hereinafter provided, on
any Trading Day (including the Trade Date) prior to the Initial Reset Date
specified in the applicable Confirmation, Counterparty and Citibank may agree to
increase the number of Common Shares under such Transaction. As used herein,
"Tranche Date" means, with respect to a Transaction, each Trading Day
(including, if applicable, the Trade Date) on which Common Shares are added to
such Transaction in accordance with this paragraph (b) and "Tranche Amount"
means, for each Tranche Date, the number of Common Shares added to such
Transaction on such date multiplied by the Tranche Price Per Share (as defined
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below) for such date. Citibank agrees that it will not unreasonably reject any
request by Counterparty for a Tranche Amount, provided that (i) at any time, the
sum of the Outstanding Aggregate Amounts (as defined below) for all Transactions
shall not exceed $100,000,000, (ii) at any time, the sum of the aggregate
numbers of Common Shares specified or to be specified on BEACON Account Schedule
A for all Transactions shall not exceed 7,500,000 (subject to adjustment
pursuant to paragraph 8(c) ("Adjustment Events")), (iii) Citibank may postpone a
request in its absolute discretion for up to five Trading Days and (iv) a
Tranche Amount may not be accumulated for more than one Transaction on a single
day.
(c) Outstanding Aggregate Amount. The term "Outstanding Aggregate
Amount" means, in respect of a Transaction as of any date, a dollar amount equal
to the sum of all original Tranche Amounts for such Transaction minus the sum of
the Daily Transfer Amounts for each related Transfer Date (each as defined in
paragraph 6) occurring prior to such date.
(d) Procedure for Updating BEACON Account Schedule A. As promptly as
practicable following any Tranche Date, Citibank and Counterparty shall update
the BEACON Account Schedule A to the applicable Confirmation using the following
procedure. Citibank shall send Counterparty a revised BEACON Account Schedule A
which shall include the price per Common Share (the "Tranche Price Per Share"),
and the rate to be used to calculate the funding cost to the third Trading Day
after the Initial Reset Date (the "Tranche Initial Funding Rate") to which the
parties have agreed for the related Tranche Amount. The Tranche Price Per Share
shall include an amount equal to the Tranche Fee Rate specified in the
applicable Confirmation. Counterparty shall promptly either (i) sign such
revised BEACON Account Schedule A indicating agreement to Citibank's revisions
thereof and return it to Citibank or (ii) notify Citibank of any disagreement
with respect to Citibank's revisions to BEACON Account Schedule A.
(e) Fees. Counterparty shall, by the third Trading Day following the
Trade Date for a Transaction, pay to Citibank a Commitment Fee equal to the
amount, if any, specified in the applicable Confirmation.
(f) Suspension of Transactions. Notwithstanding anything to the
contrary set forth in this paragraph 5, the obligation of Citibank to accumulate
additional Tranche Amounts shall be suspended on any date when (i) a Share Price
Event or Credit Event (each as defined in paragraph 7) has occurred on or before
such date or (ii) an Event of Default, Potential Event of Default or Termination
Event with this Transaction as an Affected Transaction has occurred and is
continuing.
6. Unwind Period Settlement Obligations:
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(a) Counterparty Unwind Period Settlement Option. Counterparty shall be
entitled to direct by timely written notice to Citibank whether Settlement of
the parties' respective obligations for a particular Unwind Period shall be by
(i) "Full Physical Settlement," (ii) "Net Share Settlement" or (iii) "Net Cash
Settlement" (or if Counterparty fails to so direct, it shall be Full Physical
Settlement according to the provisions below in paragraph (b)). If Counterparty
directs Net Share Settlement or Net Cash Settlement, Counterparty shall provide
notice of such direction (a "Net Settlement Notice") to Citibank not less than
twenty Trading Days prior to the commencement of the relevant Unwind Period. A
Net Settlement Notice shall be revocable by Counterparty through the close of
business on the eleventh Trading Day prior to the commencement of the relevant
Unwind Period. Upon (x) receipt by Citibank of a notice revoking a direction for
Net Share Settlement or Net Cash Settlement, or (y) failure of the Counterparty
to direct a settlement method by the close of business on the tenth Trading Day
prior to the commencement of the relevant Unwind Period, Counterparty shall be
deemed to have elected Full Physical Settlement. With respect to an Unwind
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Period in connection with a Partial Termination Event, Share Price Event or
Credit Event, Counterparty may elect Full Physical Settlement, Net Share
Settlement or Net Cash Settlement on the first Business Day after receipt of
notice from Citibank specifying the date of commencement of such Unwind Period
and, after receipt of timely election of a settlement method from Counterparty,
Citibank may, in response to a request by Counterparty to defer commencement of
such Unwind Period, but shall not be required to, defer commencement of such
Unwind Period to a date determined and designated by Citibank in a notice to
Counterparty. The commencement of such Unwind Period can not be suspended by
Counterparty other than pursuant to Section 7(f). The methods for determining
the beginning and length of the "Unwind Period" for a "Maturity Termination" as
well as for a "Share Price Event," a "Credit Event," an "Optional Unwind" and a
"Partial Termination" are set forth in paragraph 7.
Where: "Unwind Period" means a number of days designated by Citibank or
as determined in paragraph 7 in which Citibank transfers Common Shares to the
Counterparty or otherwise sells Common Shares in settlement or partial
settlement of this Transaction. (b) Full Physical Settlement. If Counterparty
does not otherwise direct Citibank, Full Physical Settlement shall take place
with respect to an Unwind Period. Under Full Physical Settlement, on each
Transfer Date in such Unwind Period, Citibank shall transfer to Counterparty a
number of Common Shares equal to the Citibank Share Amount for such Transfer
Date against payment by Counterparty to Citibank of cash equal to the Forward
Amount for such Transfer Date.
(c) Net Share Settlement. If Counterparty so directs Citibank,
Net Share Settlement will take place with respect to an Unwind Period. Under Net
Share Settlement, on each Transfer Date in such Unwind Period,
(i) Citibank shall sell for cash a number of the Common Shares
sufficient to yield proceeds equal to the Forward Amount
divided by the Determination Price (but not to exceed the
Citibank Share Amount) for the related Transfer Date, and
(A) hold such cash proceeds in the BEACON Account,
(B) and record a reduction (but not below zero) in the
number of Common Shares in the BEACON Account equal to
the number of Common Shares sold;
(ii) Citibank shall compute the "Counterparty Share Amount," which
shall be the Forward Amount for such Transfer Date divided by
the Determination Price for such Transfer Date;
(iii) (A) if the Citibank Share Amount minus the Counterparty
Share Amount (the "Net Share Amount") is positive, then
Citibank shall transfer to Counterparty a number of the
Common Shares equal to the Net Share Amount, and
(B) if the Net Share Amount is negative, then Counterparty
shall transfer into the BEACON Account a number of
Common Shares equal to the excess of the Counterparty
Share Amount over the Citibank Share Amount and
Citibank shall immediately sell for cash such
transferred Common Shares and hold such cash proceeds
in the BEACON Account; and
(iv) Counterparty shall pay to Citibank an amount of cash equal to
the Forward Amount.
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(d) Net Cash Settlement. If Counterparty so directs Citibank, Net
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Cash Settlement will take place with respect to an Unwind Period. Under Net Cash
Settlement, on each Transfer Date in such Unwind Period,
(i) Citibank shall sell (or be deemed to have sold) for cash at
the Determination Price a number of the Common Shares equal to
the Citibank Share Amount for the related Transfer Date and;
(A) hold such cash proceeds in the BEACON Account, and
(B) record a reduction (but not below zero) in the number
of Common Shares in the BEACON Account equal to the
number of Common Shares sold; and
(ii) Counterparty shall pay to Citibank an amount of cash equal to
the Forward Amount.
WHERE:
"Citibank Share Amount" means, for any Transfer Date, the Daily
Transfer Amount for such Transfer Date divided by the weighted average
of the Tranche Prices Per Share for each Tranche Amount included in
such Daily Transfer Amount.
"Daily Transfer Amount" means, for any Transfer Date, the portion of
the Outstanding Aggregate Amount subject to the related Unwind Period
divided by the number of Unwind Period Days for such Unwind Period
(each determined in accordance with paragraph 7). Tranche Amounts shall
be allocated to the Daily Transfer Amount for any Transfer Date as
determined by Citibank.
"Forward Amount" means, for any Transfer Date, a dollar amount equal to
(i) the Daily Transfer Amount for such Transfer Date plus (ii) Carrying
Costs for such Transfer.
"Transfer Date" means, in respect of each Unwind Period Day, the third
Trading Day after such Unwind Period Day.
"Unwind Period Day" means each Trading Day in an Unwind Period.
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"Carrying Costs" means, for any Transfer Date and subject to paragraph
9(e) ("Funding Cost Adjustment"), an amount equal to interest on the
Daily Transfer Amount for such Transfer Date at the applicable Carrying
Rate, compounded periodically each time LIBOR is reset on an actual/360
basis, for the period from and including the third Trading Day after
the Tranche Date for each Tranche Amount included in such Daily
Transfer Amount to but excluding such Transfer Date.
"Determination Price" means, (i) for any Transfer Date where
Counterparty has elected either Net Cash Settlement, or Net Share
Settlement, the volume weighted average price (net of brokerage costs)
of the Common Shares as traded on the New York Stock Exchange on the
relevant Unwind Period Day.
(e) Final Dividend Amount. In connection with each Unwind Period,
Citibank shall transfer to Counterparty, promptly after the related dividend
payment date and in the same form in which the dividend was made, the amount
of all dividends (other than dividends resulting in an adjustment pursuant to
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paragraph 8(c) ("Adjustment Events")) with an ex-dividend date before the last
Trading Day in such Unwind Period and a dividend payment date on or after the
first Trading Day in such Unwind Period to which a holder of a number of
Common Shares equal to the Remaining Share Amount on the applicable ex-dividend
date would be entitled.
WHERE:
"Remaining Share Amount" means, for any ex-dividend date, (i) the
portion of the Outstanding Aggregate Amount that is the subject of the Unwind
Period (determined in accordance with paragraph 7) outstanding on such
ex-dividend date divided by the weighted average of the Tranche Prices Per Share
for each Tranche Amount included in such portion of the Outstanding Aggregate
Amount minus (ii) the Citibank Share Amount for each Transfer Date with a
related Unwind Period Day occurring on or before such ex-dividend date.
(f) Citibank Unwind Period Settlement Right. If Counterparty fails to
comply with or perform any agreement or obligation contained in paragraph 10(c)
("Securities Laws and Registration--Registration Statement") or paragraph 10(e)
("Securities Laws and Registration--Due Diligence") or Counterparty's
representations contained in paragraph 10(d) ("Securities Laws and
Registration--Representations") are incorrect or misleading in any material
respect, Citibank and its affiliates shall be entitled (in addition to any other
remedies under the Agreement or otherwise) in connection with a Transfer Date:
(i) to eliminate Counterparty's right to direct Net Share Settle-
ment or Net Cash Settlement and effect Full Physical
Settlement. Citibank shall give Counterparty notice of any
such action; or
(ii) to the extent Counterparty effects Physical Share Settlement
in accordance with Section 6(b), to sell Common Shares in the
BEACON Account or Common Shares received from Counterparty
hereunder (including pursuant to this clause (ii)) on a
private placement basis and apply the proceeds of such sale
towards the payment of the Forward Amount for such Transfer
Date and if Common Shares are so sold, Counterparty shall
transfer to Citibank an amount of cash such that the aggregate
actual net proceeds of the Common Shares so sold plus such
cash amount is equal to the Forward Amount for such Transfer
Date. If Counterparty does not deliver such amount of cash,
Counterparty shall transfer to Citibank promptly upon request
the number of Common Shares Citibank reasonably determines
is adequate to realize actual net proceeds in such amount, and
Counterparty's obligation to transfer Common Shares under this
clause (ii) shall be a continuing one until Citibank or its
affiliates have received actual net proceeds equal to the
Forward Amount for such Transfer Date. Counterparty repre-
sents that each of its filings under the Securities Act of
1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or
other applicable securities laws that are required to be filed
have been filed and that, as of the dates thereof there is
and, as of each day on which Citibank or its affiliates
sell Common Shares pursuant to this clause (ii), as
supplemented by any information provided by Counterparty to
Citibank, there will be no misstatement of material fact
or omission of a material fact required to be stated
therein or necessary to make the statements therein not
misleading. Citibank and its affiliates shall be entitled to
disclose any material non-public information regarding
Counterparty in their possession to purchasers in such a
private placement.
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7. Unwind Periods:
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(a) Maturity Termination. By the close of business in New York on the
Notice Date specified in the applicable Confirmation, Counterparty shall propose
to Citibank a Trading Day on which the Unwind Period ending on the Maturity Date
specified in the applicable Confirmation will commence, such that the length of
such Unwind Period is from 1 to 75 consecutive Trading Days inclusive (a
"Maturity Termination"). If Citibank does not agree with Counterparty's
proposal, the parties shall negotiate in good faith and, in the event the
parties cannot agree by the tenth Business Day after the Notice Date, the Unwind
Period shall commence on a Trading Day determined by Citibank such that the
expected number of Trading Days in the Unwind Period ending on the Maturity Date
shall be 40. An Unwind Period will commence on such Trading Day with respect to
the entire Outstanding Aggregate Amount.
(b) Optional Unwind. At any time, Counterparty (i) may notify Citibank
of its desire to effect a transfer with respect to any portion or all of the
Outstanding Aggregate Amount for any one or more Transactions having a Notice
Date (as specified in the applicable Confirmation) after the proposed Unwind
Period commencement date over such number of Trading Days, from 1 to 75
consecutive Trading Days inclusive, as Counterparty may determine (an "Optional
Unwind") and (ii) shall include in such notice an irrevocable indication of its
election pursuant to paragraph 6(a) ("Counterparty Unwind Period Settlement
Option"). Citibank shall not unreasonably reject the proposed portion of such
Outstanding Aggregate Amount, Unwind Period length, or commencement date of the
Unwind Period relating to such Optional Unwind; provided that the provisions of
paragraph 6(a) regarding notice and method of settlement shall apply to any
Optional Unwind after Counterparty gives notice of its desire to effect an
Optional Unwind. If any such term is not reasonably acceptable to Citibank, the
parties shall negotiate in good faith to modify the proposed term, provided that
if the parties cannot agree regarding the Unwind Period length, the number of
Trading Days in the Unwind Period shall be 40. Citibank shall allocate the
portion of the Outstanding Aggregate Amount that is to be the subject of the
Unwind Period to one or more Transactions having a Notice Date after the Unwind
Period commencement date as it determines appropriate. If the first Trading Day
in the Unwind Period is before the Optional Unwind Date, if any, specified in
the applicable Confirmation, Counterparty shall pay Citibank by the second
Business Day following such Trading Day an amount equal to the present value
(calculated by Citibank using a discount rate equal to LIBOR minus 0.125% per
annum) of the Carrying Spread that would have been earned on the portion of the
Outstanding Aggregate Amount subject to such Optional Unwind had it remained
outstanding through such date.
(c) Partial Termination Event. A "Partial Termination Event" shall
occur if on any day (i) the Transaction Equity for such day exceeds 4.9% of the
number of outstanding Common Shares on such day or (ii) the Net Transfer Balance
for such day exceeds the Available Common Shares for such day, in each case
determined on an aggregate basis for all outstanding Transactions. Upon the
occurrence of a Partial Termination Event, Citibank shall be entitled to
commence an Unwind Period with respect to a portion of the Outstanding Aggregate
Amount for all Transactions equal to the amount determined by Citibank so that
after completion of the Unwind Period related to the Partial Termination Event,
(x) in the case of (i) above, the Transaction Equity would not exceed 4.9% of
the number of outstanding Common Shares and (y) in the case of (ii) above, the
Net Transfer Balance would not exceed the Available Common Shares. Citibank
shall allocate the portion of such Outstanding Aggregate Amount that is to be
the subject of the Unwind Period to one or more Transactions as it determines
appropriate. Such Unwind Period shall commence on a Trading Day and end on and
include a Trading Day, each as designated by Citibank in a notice to
Counterparty delivered at least two Business Days prior to the commencement date
of the Unwind Period designated in such notice. At the option of Citibank upon
8
notice to Counterparty, an Unwind Period that has commenced with respect to a
Transaction shall terminate on the Trading Day prior to the start of the Unwind
Period for such Partial Termination Event.
WHERE:
"Transaction Equity" means, with respect to any day, a number of Common
Shares equal to the sum of (i) the Counterparty Share Amount for such
day (determined using the Closing Price for such day and assuming an
Unwind Period of one day) and (ii) the number of Common Shares held by
Citibank or its affiliates on such day for other transactions with
Counterparty.
"Net Transfer Balance" means, with respect to any day, a number of
Common Shares equal to the Counterparty Share Amount for such day
(determined using the Closing Price for such day and assuming an Unwind
Period of one day) minus the Citibank Share Amount for such day
(assuming an Unwind Period of one day).
"Available Common Shares" means, with respect to any day, a number of
Common Shares equal to (i) the number of authorized Common Shares on
such day minus (ii) the sum of (x) the number of outstanding Common
Shares on such day and (y) the number of Common Shares reserved for
other purposes.
(d) Suspension of Unwind Period. Counterparty may, by notice to
Citibank by 8:30 a.m. New York time on any Trading Day, suspend an Unwind Period
for up to 5 days in the aggregate based on the advice of counsel respecting
applicable federal securities laws that such Unwind Period should be suspended.
As promptly as practicable after such suspension, Citibank will adjust any term
of this Transaction relating to an Unwind Period, Maturity Date or other Trading
Day or otherwise to the extent appropriate to effectuate the fundamental
economic terms of this Transaction.
(e) Unwind Periods in Effect. For purposes of "Optional Unwind" and
"Maturity Termination," and unless Citibank (in the case of "Share Price Event,"
"Credit Event" or "Partial Termination Event") elects to terminate an Unwind
Period in effect in accordance with the last sentence of such paragraphs, any
Daily Transfer Amount for which an Unwind Period is in effect shall be deemed
not outstanding for purposes of determining the Outstanding Aggregate Amount to
be subject to such an Unwind Period.
(f) Share Price Event. A "Share Price Event" shall occur if the Closing
Price on any Trading Day is equal to or less than $8.00 per share (subject to
adjustment pursuant to paragraph 8(c) ("Adjustment Events")). Upon the
occurrence of a Share Price Event, Citibank shall be entitled to commence an
Unwind Period with respect to the entire Outstanding Aggregate Amount two
Business Days after delivery of notice by Citibank to Counterparty of such
event. Such Unwind Period shall commence on a Trading Day and end on and include
a Trading Day, each as designated by Citibank. At the option of Citibank, any
Unwind Period that had commenced prior to the start of the Unwind Period for
such Share Price Event and not terminated shall terminate on the Trading Day
prior to the start of the Unwind Period for such Share Price Event.
(g) Credit Event. A "Credit Event" shall occur if (i) Counterparty's
unsecured and unsubordinated long-term debt rating (not supported by third party
credit enhancement), if any, falls to or below BBB- by Standard & Poor's Ratings
Services (including its successors, "S&P"), Baa3 by Xxxxx'x Investors Service,
Inc. (including its successors, "Moody's") or the equivalent rating by another
nationally recognized statistical rating agency or in any case is suspended,
9
withdrawn or otherwise unavailable, or (ii) an Event of Default described in
Section 5(a)(i), (ii), (iii), (iv), (v) or (vi) of the Agreement (other than an
Event of Default under Section 5(a)(i), (ii), (iii) or (iv) that does not arise
with respect to this Master Confirmation or a Transaction hereunder where the
Counterparty is the Affected Party, or a Termination Event described in Section
5(b) of the Agreement (other than an Additional Termination Event Described in
Section 10(f) hereof) where the Counterparty is an Affected Party. Upon the
occurrence and continuation of a Credit Event, Citibank shall be entitled to
commence an Unwind Period with respect to the entire Outstanding Aggregate
Amount. Such Unwind Period shall commence on a Trading Day and end on and
include a Trading Day, each as designated by Citibank. At the option of
Citibank, any Unwind Period that had commenced prior to the start of the Unwind
Period for such Credit Event and not terminated shall terminate on the Trading
Day prior to the start of the Unwind Period for such Credit Event.
Notwithstanding the provisions of Section 6 of the Agreement, upon the
occurrence of an Event of Default or Termination Event described in clause (ii)
above where the Counterparty is an Affected Party, the provisions of Section 6
of the Agreement will not be applicable, other than Section 6(b)(i), (ii) and
(iii) to the extent applicable.
8. Disruptions and Adjustments:
---------------------------
(a) Market Disruption Events. If on any day that would otherwise be a
Trading Day Citibank determines that there has been a material suspension or
material limitation of trading in the Common Shares on the Principal Market, or
that trading in securities in general on the Principal Market has been
materially suspended or materially limited (a "Market Disruption Event"), then
that day shall be deemed not to be a Trading Day (in whole or in part), and the
next Trading Day shall be postponed to the first succeeding Trading Day on
which, in Citibank's determination, there is no Market Disruption Event. As
promptly as practicable after the occurrence of a Market Disruption Event,
Citibank will adjust any term of this Transaction relating to an Unwind Period,
Maturity Date or other Trading Day or otherwise to the extent appropriate to
effectuate the fundamental economic terms of this Transaction.
(b) Disruption of Transfer. If on any date there occurs an event beyond
the control of the parties as a result of which The Depository Trust Company or
any successor depository cannot effect a transfer of the Common Shares pursuant
to this Transaction, the party obligated to transfer the Common Shares shall use
its best efforts to cause the Common Shares to be transferred as promptly as
practicable to the other party in any commercially reasonable manner. Each party
agrees that if transfer of the Common Shares on any Transfer Date is subject to
any restriction imposed by a regulatory authority, the parties will negotiate in
good faith a procedure to effect transfer of such Common Shares in a manner that
complies with any relevant rules of such regulatory authority.
(c) Adjustment Events. In the event of (i) a subdivision, consolidation
or reclassification of the Common Shares into a different number or kind of
shares of stock of Counterparty, (ii) a dividend on the Common Shares paid in
Common Shares, (iii) a merger or other transaction whereby the outstanding
Common Shares are exchanged for another class of securities, or securities of
another issuer, or (iv) any other similar event (an "Adjustment Event"), then in
each case, Citibank shall make appropriate adjustments to the terms of this
Transaction, and/or amend the definition of Common Shares or Share Price Event,
such that the fundamental economic terms of this Transaction are equivalent to
those in effect immediately prior to the Adjustment Event.
9. Miscellaneous:
-------------
(a) Early Termination. The parties agree that for purposes of Section
6(e) of the Agreement, Second Method and Loss will apply to this Transaction.
The parties further agree that for purposes of calculating Citibank's Loss in
10
connection with this Transaction, Citibank or any of its affiliates shall
dispose of any Common Shares in the BEACON Account over a period consisting of
(i) in the case of an Early Termination Date resulting from an Event of Default,
any number of Trading Days as Citibank may determine and (ii) in the case of an
Early Termination Date resulting from a Termination Event, any number of Trading
Days as Citibank may determine and to which Counterparty shall not unreasonably
object.
(b) Netting of Obligations; Rounding. The respective Common Share
transfer and cash payment obligations on any day of Counterparty, on the one
hand, and Citibank on the other hand, whether under a single or multiple
Transactions, shall be netted. The number of Common Shares required to be
transferred hereunder by either party shall be rounded down to the nearest
number of whole shares, such that neither party shall be required to transfer
any fractional shares.
(c) Agreement regarding Common Shares. Each party agrees with the other
that, in respect of any Common Shares transferred to the other party such shares
will, at the time transfer, be free of liens and other encumbrances, and, in the
case of Counterparty, such shares shall be, upon such transfer, duly and validly
authorized, issued and outstanding, fully paid and nonassessable, and subject to
no adverse claims of any other party. Citibank shall record any Common Shares in
the BEACON Account.
(d) Default Interest. If a party defaults in the performance of any
obligation required to be settled by transfer, it will indemnify the other party
on demand, in accordance with the practice of the Principal Market for the
Common Shares, for any costs, losses or expenses (including the costs of
borrowing Common Shares, if applicable) resulting from such default and, in
addition, shall indemnify the other party for interest computed at the Default
Rate for the period commencing on the Transfer Date and ending on the date such
default is cured. A certificate signed by the transferee setting out such costs,
losses or expenses in reasonable detail shall be conclusive evidence that they
have been incurred, absent manifest error.
(e) Funding Cost Adjustment. If for any reason the relevant interest
period does not correspond with the reference period used for purposes of
calculating Carrying Costs, Citibank shall adjust the terms of this Transaction
appropriately to reflect any additional funding costs incurred, or any reduction
in funding costs received, by Citibank.
(f) Dividends. Citibank shall record Actual Dividends in the BEACON
Account. Interest shall accrue at LIBOR less 0.125% on Actual Dividends that are
cash dividends, commencing with the dividend payment date and such interest
shall also be recorded in the BEACON Account. Citibank shall transfer to
Counterparty, promptly after the related dividend payment date and in the same
form in which the dividend was made, the amount of all dividends (other than
cash dividends and dividends resulting in an adjustment pursuant to paragraph
8(c) ("Adjustment Events")) to which a holder of a number of Common Shares equal
to the Dividend Share Amount on the applicable ex-dividend date would be
entitled.
WHERE:
"Dividend Share Amount" means, for any ex-dividend date, a number of
Common Shares equal to (i) the portion of the Outstanding Aggregate
Amount outstanding on such ex-dividend date that is not, and has not
been, the subject of an Unwind Period (determined in accordance with
paragraph 7) when such dividend is paid divided by (ii) the weighted
average of the Tranche Prices Per Share for each Tranche Amount
11
included in such portion of the Outstanding Aggregate Amount.
(g) Increased Costs. If Citibank determines that from the Trade Date of
the relevant Transaction (i) due to either (x) the introduction of or any change
in or in the interpretation of any law or regulation or (y) the compliance with
any guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
cost to Citibank or its affiliates of engaging in this Transaction or related
transactions, or (ii) compliance with any law or regulation or any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law) increases or would increase the amount of any capital
required or expected to be maintained by Citibank or any affiliate of Citibank
as a direct or indirect consequence of this Transaction ("Increased Costs"),
then Counterparty shall from time to time until this Transaction is no longer
outstanding (whether through Optional Unwind or otherwise), promptly upon demand
by Citibank, convey to Citibank additional amounts sufficient to compensate
Citibank for such Increased Costs as are incurred; provided, however, that
Counterparty's obligation to pay such additional amounts shall be limited to 15
percent of the Carrying Costs of this Transaction. Such additional amounts may,
at Counterparty's option, be paid in U.S. dollars or be satisfied by transfer of
a number of Common Shares having an equivalent value; provided, however, that
Counterparty shall be entitled to satisfy such obligation by transfer of Common
Shares only if it provides twenty Trading Days' notice and complies with its
obligations and makes the representations set forth in paragraph 10 "Securities
Laws and Registration") as if such transfer were in connection with Transfer
Date to which Net Share Settlement or Net Cash Settlement applied for purposes
of paragraph 6(a) ("Counterparty Unwind Period Settlement Option"). A
certificate as to the amount of Increased Costs, submitted to Counterparty by
Citibank, shall be conclusive and binding for all purposes absent manifest
error. In the event that Citibank determines that it has incurred Increased
Costs which exceed 15 percent of the Carrying Costs of this Transaction (an
"Increased Cost Event"), Citibank shall be entitled to commence an Unwind Period
with respect to the entire Outstanding Aggregate Amount. Such Unwind Period
shall commence on a Trading Day and end on and include a Trading Day, each as
designated by Citibank. At the option of Citibank, any Unwind Period that had
commenced prior to the start of the Unwind Period for such Increased Cost Event
and not terminated shall terminate on the Trading Day prior to the start of the
Unwind Period for such Increased Cost Event.
(h) Transfer. Notwithstanding Sections 7 or 10(b) of the Agreement,
Citibank shall assign its rights and obligations hereunder to make or receive
cash payments and transfer of Common Shares to a Citibank Affiliate (one or more
affiliates of Citibank, wholly-owned, directly or indirectly, by Citigroup Inc.,
or any successor thereto); provided that Counterparty shall have recourse to
Citibank in the event of the failure by a Citibank Affiliate to perform any of
such obligations hereunder. Notwithstanding the foregoing, recourse to Citibank
shall be limited to recoupment of Counterparty's monetary damages and
Counterparty hereby waives any right to seek specific performance by Citibank of
its obligations hereunder. Such failure after any applicable grace period shall
be an Additional Termination Event with this Transaction as the sole Affected
Transaction and Citibank as the sole Affected Party.
(i) Consent to Recording. Each party (i) consents to the recording of
the telephone conversations of trading and marketing personnel of the parties
and their affiliates in connection with this Transaction and (ii) agrees to
obtain any necessary consent of, and give notice of such recording to, such
personnel of it and its affiliates.
12
(j) Severability; Illegality. If compliance by either party with any
provision of this Transaction would be unenforceable or illegal, (i) the parties
shall negotiate in good faith to resolve such unenforceability or illegality in
a manner that preserves the economic benefits of the transactions contemplated
hereby and (ii) the other provisions of this Transaction shall not be
invalidated, but shall remain in full force and effect.
(k) Calculation Agent.Citibank shall make all calculations, adjustments
and determinations required pursuant to this Transaction. Citibank's good faith
calculations, adjustments and determinations shall be binding absent manifest
error.
(l) Cash Payments. All references herein to "dollars" or "$" are to
U.S. dollars. All amounts payable in cash shall be payable in dollars in
immediately available funds.
(m) Waiver of Trial by Jury. EACH OF COUNTERPARTY AND CITIBANK 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 THIS TRANSACTION OR THE ACTIONS OF CITIBANK OR ITS
AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.
(n) Financial Statements. Counterparty will provide to Citibank
promptly upon request copies of its most recent annual report containing audited
or certified financial statements.
(o) Delivery of Opinion. On the date hereof, Counterparty will provide
to Citibank an opinion of counsel regarding this Master Confirmation and the
Transactions contemplated hereby in form and substance reasonably satisfactory
to Citibank. Upon the request of Citibank, Counterparty will provide to Citibank
such an opinion in connection with particular Transactions on or prior to the
Trade Date thereof.
(p) Voting of Common Shares. Citibank and its affiliates shall not
exercise any voting rights with respect to any Common Shares recorded in the
BEACON Account. This provision shall not preclude Citibank or its affiliates
from voting Common Shares that are not held in connection with a Transaction.
The provisions of this paragraph shall not remain in force or effect (i) during
an Unwind Period, unless Counterparty has elected or been deemed to have elected
Full Physical Settlement in accordance with the provisions of paragraph 6(a) or
6(b) and performed in accordance with Section 6(b), or (ii) at any time an Event
of Default or Termination Event has occurred and is continuing and with respect
to which Counterparty is the Defaulting Party or an Affected Party.
(q) Tax Reporting. Citibank and the Counterparty agree that the
requirement of the Counterparty to pay the Forward Amount is an obligation
described in, and shall be reported in accordance with the requirements of,
Subtitle A, Ch. 1P, Part V, Subpart A of the Internal Revenue Code of 1986, as
amended. Citibank shall furnish Counterparty with all information necessary for
Counterparty to file its tax returns in such a manner.
10. Securities Laws and Registration:
--------------------------------
(a) Compliance with Securities Laws. Counterparty agrees:
------------------------------------------------------
13
(i) with respect to each Tranche Date, that if it were to
have effected transactions in the Common Shares on
such Tranche Date, whether on the Principal Market or
otherwise, such transactions would not have violated
any applicable securities law;
(ii) that it is not, on any Tranche Date, engaged in a
distribution, as such term is used in Regulation M
under the Securities Act, of any securities of the
Counterparty; and
(iii) that it is not entering into any Tranche to create
actual or apparent trading activity in the Common
Shares (or any security convertible into or
exchangeable for Common Shares) or to raise or
depress or to manipulate the price of the Common
Shares (or any shares convertible into or
exchangeable for Common Shares).
(b) Triggers for Shelf Registration. Unless Counterparty has (A) given
notice of its desire to effect an Optional Unwind with respect to the entire
Outstanding Aggregate Amount for all Transactions upon terms reasonably
satisfactory to Citibank and (B) irrevocably directed Full Physical Settlement
pursuant to paragraph 6(a) ("Counterparty Unwind Period Settlement Option"),
Counterparty shall file the Registration Statement referred to in paragraph (c)
below within five days of the occurrence of either (x) the Closing Price on any
Trading Day being equal to or less than $10.00 per share (subject to adjustment
pursuant to paragraph 8(c) ("Adjustment Events")) or (y) Counterparty's
unsecured and unsubordinated long-term debt rating (not supported by third party
credit enhancement) falling to or below BBB by S&P, Baa2 by Moody's or the
equivalent rating by another nationally recognized statistical rating agency or
in any case being suspended or withdrawn, and thereafter use its best efforts to
have the Registration Statement declared effective as soon as possible and
remain effective over the remaining term of this Transaction.
(c) Registration Statement. Unless in connection with an Unwind Period,
Counterparty directs Full Physical Settlement pursuant to paragraph 6(a)
("Counterparty Unwind Period Settlement Option"), Counterparty agrees to make
available to Citibank and its affiliates an effective registration statement
(the "Registration Statement") pursuant to Rule 415 under the Securities Act and
one or more prospectuses as necessary to allow Citibank and its affiliates to
comply with the applicable prospectus delivery requirements (the "Prospectus")
for the resale by Citibank and its affiliates of the Common Shares in the BEACON
Account (or such greater number as Citibank shall reasonably specify), such
Registration Statement to be effective and Prospectus to be current for each day
in the Unwind Period and for at least ten Trading Days after the Unwind Period
(excluding days on which the Unwind Period has been suspended pursuant to
paragraph 7(f) ("Suspension of Unwind Period")). It is understood that the
Registration Statement and Prospectus may cover a number of Common Shares equal
to all Common Shares acquired by Citibank or its affiliates in connection with
this Master Agreement plus all Common Shares transferred by Counterparty
pursuant to this Transaction. Citibank shall provide, by a reasonable time in
advance, such information regarding Citibank and its affiliates as Counterparty,
upon advice from counsel, reasonably determines is required to be included in
the Prospectuses. Counterparty shall pay the applicable registration fee and all
costs in connection with the preparation of the Registration Statement and the
Prospectus including, without limitation, Citibank's legal expenses in
connection with the preparation of the Registration Statement and the Prospectus
and the cost of printing the Prospectus. Citibank agrees that except as
Counterparty shall otherwise agree, it and its affiliates shall sell Common
Shares pursuant to the Prospectus only on the Principal Market, and Counterparty
agrees to take all required action so that all Common Shares covered by the
14
Registration Statement are eligible for sale on the Principal Market and
otherwise to take such actions reasonably requested by Citibank to facilitate
the disposition of the Common Shares.
(d) Representations. Counterparty represents (A) on the Trade Date of
this Transaction, (B) on each day on which the Transaction amount is being
increased, and (C) unless Counterparty directs Full Physical Settlement pursuant
to paragraph 6(a) ("Counterparty Unwind Period Settlement Option"), on each day
described in paragraph (c) above in connection with an Unwind Period, that (x)
each of its filings under the Securities Act, the Exchange Act or other
applicable securities laws that are required to be filed have been filed and
that, as of the respective dates thereof and as of the date of this
representation, there is no misstatement of material fact contained therein or
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading and (y) in the case of (B), a purchase by
Counterparty of a number of Common Shares equal to the Tranche Amount for the
related Tranche Date divided by the related Tranche Price Per Share, whether on
the Principal Market or otherwise, would be in compliance with applicable law
and all contractual obligations of Counterparty and its affiliates.
(e) Due Diligence. Unless by the close of business on the twentieth
Trading Day prior to the commencement of the relevant Unwind Period Counterparty
directs Full Physical Settlement pursuant to paragraph 6(a) ("Counterparty
Unwind Period Settlement Option"), Counterparty agrees to provide to Citibank
and its affiliates by the Trading Day before the commencement of the relevant
Unwind Period opinions of counsel, comfort letters, officers' certificates and
representations and such other documents as may be reasonably requested by
Citibank. Counterparty also agrees that beginning (x) no later than such
twentieth Trading Day before the commencement of the relevant Unwind Period and
(y) on the date of occurrence of an event that obligates Counterparty to file a
Registration Statement pursuant to paragraph (b) above, Citibank and its
affiliates shall be entitled to perform such diligence as Citibank may
reasonably request. In addition, from time to time, Citibank shall be entitled
to attend, with notice, Counterparty's meetings with equity analysts and make
reasonable inquiries of appropriate officers of Counterparty.
(f) Additional Termination Event. The failure by Counterparty to comply
with its obligations under paragraphs (b), (c) and (e) above, if such failure is
not remedied on or before the third Business Day after notice of such failure is
given to Counterparty, shall constitute an Additional Termination Event with
Counterparty as the sole Affected Party and this Transaction as the sole
Affected Transaction.
11. Indemnification and Contribution:
--------------------------------
(a) Indemnification by Counterparty. Counterparty agrees to indemnify
and hold harmless Citibank, its affiliates, their respective directors,
officers, employees, agents, advisors, brokers effecting sales of Common Shares
on behalf of Citibank or its affiliates and representatives and each person who
controls Citibank or its affiliates within the meaning of either the Securities
Act or the Exchange Act against, (and Counterparty agrees that no indemnified
party shall have any liability to Counterparty or any of its affiliates,
officers, directors, or employees for, any liability (whether direct or
indirect, in contract, tort or otherwise) for), any losses, claims, damages,
liabilities or expenses, joint or several, to which they or any of them may
become subject under the Securities Act, the Exchange Act or other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions, claims,
investigations or proceedings in respect thereof, whether commenced or
threatened) (A) arise out of or relate to (x) actions or failures to act by
15
Counterparty (including any misstatement or alleged misstatement of a material
fact contained in the Registration Statement or the Prospectus (or in any
offering materials or supplemental information provided by or on behalf of
Counterparty in connection with any sales on a private placement basis pursuant
to paragraph 6(f) ("Citibank Unwind Period Settlement Option")), or in any
amendment thereof or supplement thereto, or omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading) or (y) actions or failures to act by an
indemnified party with the consent of or in reliance on Counterparty or (z)
otherwise arise out of or relate to any breach or violation by Counterparty of,
or misrepresentation by Counterparty under, the Master Confirmation, or
allegation by a third party that Counterparty acted or failed to act in a manner
that, as alleged, would have constituted such a breach, violation or
misrepresentation. Counterparty agrees, promptly on demand, to reimburse each
such indemnified party for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability, expense or action. Notwithstanding anything to the contrary in the
foregoing, Counterparty will not be liable in any such case to the extent that
any such loss, claim, damage, liability or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to Counterparty by or on behalf of Citibank specifically
for use in connection with the preparation of the Prospectus or any supplement
thereto. This indemnity agreement will be in addition to any liability that
Counterparty may otherwise have.
(b) Indemnification by Citibank. Citibank agrees to indemnify and hold
harmless Counterparty, its affiliates, their respective directors, officers,
employees and agents, and each person who controls Counterparty within the
meaning of either the Securities Act or the Exchange Act, to the same extent as
the foregoing indemnity from Counterparty to Citibank, but only with reference
to written information furnished to Counterparty by or on behalf of Citibank
specifically for use in the preparation of the Prospectus or any supplement
thereto. This indemnity agreement will be in addition to any liability which
Citibank may otherwise have.
(c) Legal Proceedings. Promptly after receipt by an indemnified party
under paragraphs (a) or (b) above of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to be made against
the indemnifying party under paragraphs (a) or (b) above, notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve the indemnifying party from
any liability that it may have to any indemnified party otherwise than under
paragraphs (a) or (b) above or, in respect of paragraphs (a) or (b) above, to
the extent that the indemnifying party was not materially prejudiced by such
failure to notify. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent
that it may elect by written notice transferred to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party to
assume the defense thereof, with counsel satisfactory to such indemnified party;
provided that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to represent such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified party of its
election so to assume the defense of such action and approval by the indemnified
party of counsel, the indemnifying party will not be liable to such indemnified
party under paragraphs (a) or (b) above for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (A) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
16
more than one separate counsel (in addition to local counsel), representing the
indemnified parties who are parties to such action), (B) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action or (C) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party; and except that, if clause (A) or (C) is applicable, such
liability shall be only in respect of the counsel referred to in such clause (A)
or (C). The indemnifying party shall not be liable for any transfer of any
proceeding effected without its written consent, but if settled with such
consent or if there shall be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such transfer or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability arising from
such proceeding.
(d) Contribution. If the indemnification provided for above is
unavailable to an indemnified party in respect of any losses, claims, damages,
expenses or liabilities referred to herein, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, expenses or liabilities, in such proportion as is appropriate
to reflect not only the relative fault of Counterparty on the one hand and of
Citibank on the other in connection with the statements or omissions that
resulted in such losses, claims, damages, expenses or liabilities, but also any
other relevant equitable considerations. The relative fault of Counterparty on
the one hand and Citibank on the other shall be determined by reference to,
among other things, whether the misstatement or alleged misstatement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by Counterparty or by Citibank and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages and liabilities referred to above shall be
deemed to include, subject to the limitations set forth above, any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The parties agree that it would
not be just and equitable if contribution pursuant to this paragraph (d) were
determined by method of allocation that does not take account of the equitable
considerations referred to in this paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
12. Representations:
---------------
(a) Each party represents (which representations will be deemed to
be repeated on each Tranche Date) to the other party that:
(i) It is acting as principal for its own account and not as agent
when entering into this Transaction;
(ii) It has sufficient knowledge and expertise to enter into this
Transaction and it is entering into this Transaction in
reliance upon such tax, accounting, regulatory, legal, and
financial advice as its deems necessary and not upon any
view expressed by the other. It has made its own independent
decision to enter into this Transaction, is acting at
arm's length and is not relying on any communication (written
or oral) of the other party as a recommendation or investment
advice regarding this Transaction. It has the capability to
17
evaluate and understand (on its own behalf or through in-
dependent professional advice), and does understand, the
terms, conditions and risks of this Transaction and is willing
to accept those terms and conditions and to assume
(financially and otherwise) those risks. It acknowledges
and agrees that the other party is not acting as a fiduciary
or advisor to it in connection with this Transaction. It is
entering into this Transaction for the purposes of hedging
its underlying assets or liabilities, or in connection with
a line of business or a share repurchase program, and not
for purposes of speculation; and
(iii) It is an "accredited investor" as defined in Section 2(15)(ii)
of the Securities Act and an "eligible swap participant" as
such term is defined in 17 X.X.X.xx 35.1(b)(2).
(b) Counterparty represents (which representations will be deemed
to be repeated on each Tranche Date) to Citibank that:
(i) It understands no obligations of Citibank to it hereunder will
be entitled to the benefit of deposit insurance and that such
obligations will not be guaranteed by any affiliate of
Citibank or any governmental agency;
(ii) Its financial condition is such that it has no need for
liquidity with respect to its investment in this Transaction
and no need to dispose of any portion thereof to satisfy any
existing or contemplated undertaking or indebtedness. Its
investments in and liabilities in respect of this Transaction,
which it understands is not readily marketable, is not
disproportionate to its net worth, and it is able to bear any
loss in connection with this Transaction, including the loss
of its entire investment in this Transaction;
(iii) It understands that this Transaction and, except as provided
in paragraph 10 ("Securities Laws and Registration"), the
transactions contemplated herein will not be registered under
the Securities Act or any state securities law or other
applicable federal securities law;
(iv) IT UNDERSTANDS THAT THIS TRANSACTION IS SUBJECT TO COMPLEX
RISKS WHICH MAY ARISE WITHOUT WARNING AND MAY AT TIMES BE
VOLATILE AND THAT LOSSES MAY OCCUR QUICKLY AND IN
UNANTICIPATED MAGNITUDE AND IS WILLING TO ACCEPT SUCH TERMS
AND CONDITIONS AND ASSUME (FINANCIALLY AND OTHERWISE) SUCH
RISKS; and
(v) Its present intention is to direct Full Physical Settlement
under paragraph 6(a) ("Counterparty Unwind Period Settlement
Option") in connection with this Transaction.
(c) With respect to this Transaction, each representation under
the Agreement made or deemed made on each date on which a Transaction is entered
into shall be deemed made on each Tranche Date.
13. Accounts for Payment:
--------------------
To Citibank: Citibank, N.A.
ABA# 000000000
For credit to Equity Derivatives
DDA# 00167679
18
To Counterparty: To be advised.
14. Transfer Instructions:
---------------------
Unless otherwise directed in writing, any Common Shares to be
transferred hereunder shall be transferred as follows:
To Citibank: To be advised.
To Counterparty: To be advised.
15. Addresses for Notices:
---------------------
For purposes of Section 12(a) of the Agreement, unless otherwise
directed in writing, all notices or communications to Counterparty or Citibank
shall be delivered as specified in Part 4 of the Agreement.
Yours sincerely,
CITIBANK, N.A.
By:
------------------------------
Authorized Representative
By:
------------------------------
Authorized Representative
Confirmed as of the date first above written:
CITIZENS UTILITIES COMPANY
By:
---------------------------------------
Name:
Title:
19
EXHIBIT A
FORM OF
BEACON CONFIRMATION
CONFIRMATION
Date: _________________
To: Citizens Utilities Company
Telefax No.: [ ]
Attention: [ ]
From: Citibank, N.A.
Telefax No.: _________________
Transaction Reference Number: ____________________
The purpose of this communication is to set forth the terms
and conditions of the above-referenced Transaction entered into on the Trade
Date specified below (the "Transaction") between you and us. This communication,
together with the Master Confirmation (as defined below), constitutes a
"Confirmation" as referred to in the Master Confirmation.
1. The definitions and provisions contained in the Master
Confirmation are incorporated into this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern.
2. This Confirmation supplements, forms a part of, and is
subject to a Basic Equity Acquisition Contract ("BEACON") dated as of February
24, 2000 (the "Master Confirmation") between you and us. All provisions
contained in the Agreement (as modified and as defined in the Master
Confirmation) shall govern this Confirmation except as expressly modified below.
For the purposes of this Confirmation, "Citibank" means
Citibank, N.A. and "Counterparty" means Citizens Utilities Company.
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3. The particular Transaction to which this Confirmation
relates is a Basic Equity Acquisition Contract ("BEACON"), the terms of which
are as follows:
Trade Date: [ ].
Initial Reset Date: [ ] [The three-month anniversary of the
Tranche Date for the first Tranche Amount]
(or, if such date is not a Trading Day, the
next Trading Day).
Notice Date: [ ] (or, if such date is not a Business Day,
the next Business Day).
Optional Unwind Date: [1 year after the Initial Tranche Date] (or,
if such date is not a Trading Day, the next
Trading Day).
Maturity Date: [3 years after the Initial Tranche Date]
(or, if such date is not a Trading Day, the
next Trading Day).
Carrying Spread: [0.95]% per annum.
Commitment Fee Amount: [not applicable].
Tranche Fee Rate: $[0.025].
4. Counterparty hereby agrees (a) to check this Confirmation
carefully and immediately upon receipt so that errors or discrepancies can be
promptly identified and rectified and (b) to confirm that the foregoing
correctly sets forth the terms of the agreement between us with respect to the
particular Transaction to which this Confirmation relates by manually signing
this Confirmation and providing any other information requested herein or in the
Master Confirmation and immediately sending a facsimile transmission of an
executed copy to Confirmation Unit 000-000-0000, with an executed copy sent to
Citibank, N.A., Citibank Place, 000 Xxxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx X0X0X0,
Attention: Confirmation Unit.
Yours sincerely,
CITIBANK, N.A.
By:
------------------------------
Authorized Representative
By:
------------------------------
Authorized Representative
Confirmed as of the date first above written:
CITIZENS UTILITIES COMPANY
By:
---------------------------------------
Name:
Title:
2
BEACON Account Schedule A
-------------------------
[Date]
Citizens Utilities Company
[ ]
[ ]
[ ]
Attention: [ ]
Facsimile: [ ]
Counterparty hereby agrees (a) to check this Schedule A
carefully and immediately upon receipt to confirm that pursuant to "Procedure
for Updating Schedule A" of the Master Confirmation dated as of February 24,
2000, as supplemented by the Confirmation with a Trade Date of _______, _____,
between Citibank, N.A. and Citizens Utilities Company (together, the
"Confirmation") the Transaction amount has been increased as shown below and
otherwise so that errors or discrepancies can be promptly identified and
rectified and (b) to confirm that the following correctly sets forth the terms
of the agreement between us by manually signing this Schedule A and immediately
sending a facsimile transmission of an executed copy to Confirmation Unit
000-000-0000, with an executed copy sent to Citibank, N.A., Citibank Place, 000
Xxxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx X0X0X0, Attention: Confirmation Unit.
Capitalized terms used herein that are not otherwise defined shall be defined as
provided in the Confirmation.
Tranche
Citibank Number of Tranche Initial
Reference Tranche Common Price Per Tranche Funding
Number Date Shares Share Amount Rate
------ ------ ------- ----- ------- ----
Yours sincerely,
CITIBANK, N.A.
By:
--------------------------------
Authorized Representative
By:
--------------------------------
Authorized Representative
Confirmed as of the date first above written:
CITIZENS UTILITIES COMPANY
By:
---------------------------------------
Name:
Title:
