[LOGO] Santander Serfin
Banco Santander Mexicano, S.A.
Institucion de Banca Multiple
Grupo Financiero Santander Xxxxxx
Xxxxx 7, 2003
Centro Distribuidor de Cemento, S.A. de C.V.
Ave. Constitucion 444 Pte.
64000 Monterrey, Nuevo Xxxx, Mexico
Ref. No.: 6032-001
Dear Sirs:
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the transaction entered into between us on the Trade
Date specified below (the "Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the Agreement specified below.
In this Confirmation "Party A" means Banco Santander Mexicano, S.A., Institucion
de Banca Multiple, Grupo Financiero Santander Serfin and "Party B" means Centro
Distribuidor de Cemento, S.A. de C.V.
1. The definitions and provisions contained in the 2000 ISDA Definitions and
the 1996 ISDA Equity Derivatives Definitions (as published by the
International Swaps and Derivatives Association, Inc.) are incorporated
into this Confirmation. In the event of any inconsistency between the 2000
ISDA Definitions and the 1996 ISDA Equity Derivatives Definitions, the 1996
ISDA Equity Definitions will govern. In the event of any inconsistency
between those definitions and this Confirmation, this Confirmation will
govern.
This Confirmation supplements, forms a part of, and is subject to the 1992
ISDA Master Agreement (Multicurrency-Cross Border) dated as of February 14,
2003 (the "Agreement") between Party A and Party B, and all provisions
contained in the Agreement shall govern this Transaction except as
expressly modified below. In the event of any inconsistency between the
provisions of the Agreement and this Confirmation, this Confirmation will
prevail for the purpose of this Transaction.
2. This Transaction shall be deemed to be a Share Swap Transaction for
purposes of the 1996 ISDA Equity Derivatives Definitions. The terms of the
particular Transaction to which this Confirmations relates are as follows:
Trade Date: April 7, 2003
Effective Date: April 9, 2003
Termination Date: May 10, 2004, subject to adjustment in
accordance with the Following Business Day
Convention.
Shares: The Certificados de Participacion Ordinaria
(CPO's) related to common stock of CEMEX,
S.A. de C.V. (Ticker Symbol: Reuters
XXXXXXXX.XX)
Exchange: The Mexican Stock Exchange (Boisa Mexicana de
Valores, S.A. de C.V.), or any successor
exchange.
1
[LOGO] Santander Serfin
Banco Santander Mexicano, S.A.
Institucion de Banca Multiple
Grupo Financiero Santander Serfin
Related Exchange: With respect to the Shares, each principal
exchange or quotation system on which options
contracts or futures contracts on the Shares
trade.
Equity Amounts:
Equity Amount Payer: Party A
Number of Shares: 10,890,900
Equity Notional Amount: USD 42,243,132.83
Equity Notional Reset: Inapplicable
Equity Payment Dates: The second Exchange Business Day following
each Valuation Date.
Type of Return: Total Return
Initial Price: USD 3.878755
Forward Price: USD 3.997534
Initial Amount: USD 43,536,743.04
FX Rate//1//: 10.715
Final Price: The product of (i) the weighted average per
share price in MXN at which Party A or its
Affiliates sold Shares on the Exchange on
each Valuation Date, divided by the FX
Rate//2// and (ii) 99.85%.
Valuation Dates: Each Exchange Business Day from and including
the 25th Exchange Business Day to and
including the second Exchange Business Day
immediately prior to the Termination Date or
the Partial Termination Date pursuant to
Section 3(b), provided that if Market
Disruption Event occurs on any Valuation
Date, Valuation Dates shall be added (and the
Termination Date accordingly extended) until
25 Valuation Dates have occurred on which no
Market Disruption Event has occurred.
FX Rate//2//: The MXN-USD exchange rate determined in good
faith by the Calculation Agent. The exchange
rate will be calculated as the weighted
average rate at which Party A purchases USD
in order to convert the MXN proceeds of the
Shares sold on the Valuation Dates.
Equity Amount: On any Equity Payment Date, an amount in USD
equal to: (Final Price-Forward Price) x the
number of Shares sold by Party A or its
Affiliates on the Exchange on the
2
[LOGO] Santander Serfin
Banco Santander Mexicano, S.A.
Institucion de Banca Multiple
Grupo Financiero Santander Serfin
corresponding Valuation Date, or an amount in
USD equal to: (Final Price-Early Termination
Forward Price) x the number of Shares
terminated on each Partial Termination Date.
Dividend Payment Dates: The second Exchange Business Day following
the receipt of any Dividend Amount.
Dividend Amount: An amount in MXN equal to the Number of
Shares multiplied by all amounts actually
received by Party A as net dividends and
special distributions accorded to a Share
held by Party A, net of any withholding or
other taxes, duties, imposts or charges,
provided that if the record date for the
Shares occurs on a Valuation Date, Dividend
Amounts shall only be paid on Shares not yet
sold by Party A on the Exchange on such date;
provided further, that If Party A is entitled
to elect to receive a stock dividend instead
of a cash dividend, Party A shall elect to
receive the stock dividend up to the total
amount declared and payable in cash, net of
any withholding or other taxes, duties,
imposts or charges and shall deliver the
stock dividend to Party B instead of the
amount in MXN.
Dividend Period: The period from and including the Effective
Date to but excluding the second Exchange
Business Day immediately prior to the
Termination Date.
Re-Investment of Dividends: Inapplicable
Business Days: Mexico City, Mexico; New York, New York
Exchange Business Days: Mexico City, Mexico
Alternative to Equity Amount:
As an alternative to the Equity Amount applicable for this Transaction,
provided that the Conditions to Physical Settlement, as defined hereunder,
are met, Party B may elect Physical Settlement by giving notice to Party A
not more than 60 and not less than 45 Exchange Business Days prior to the
Early Termination date or the Termination Date, as the case may be.
For the purpose of this Transaction, the "Conditions to Physical
Settlement" shall mean that, at least 45 Exchange Business Days prior to
the Termination Date (or such shorter period as may be agreed to by Party A
acting in good faith in its sole reasonable judgment), Party B delivers to
Party A any reasonable evidence requested by Party A (including a legal
opinion in form and substance satisfactory and acceptable to Party A) that
Party B is authorized and permitted to take physical delivery of the
Shares.
If Physical Settlement is applicable, on the first day after the Valuation
Date that settlement of a sale of the Shares customarily would take place
through the relevant Clearance System (the "Settlement Date"), (a) the
Equity Amount hereinabove shall be deemed to be zero and Party B shall
deliver to Party A an amount in USD equal to the product of (x) the Number
of Shares and (y)
3
[LOGO] Santander Serfin
Banco Santander Mexicano, S.A.
Institucion de Banca Multiple
Grupo Financiero Santander Serfin
the Forward Price, free and clear of and without deduction for any and all
present or future taxes, levies, imposts, duties, deductions, or other
charges or withholdings of any nature; provided that, if Party B shall be
required to deduct or withhold any such taxes, levies, imposts, duties,
deductions, or other charges or withholdings, (i) the sum payable will be
increased as necessary so that, after all required deductions or
withholdings (including deductions or withholdings applicable to additional
sums payable under this paragraph) are made, Party A receives an amount
equal to the sum it would have received had no such deductions or
withholdings been made; (ii) Party B shall make such deductions or
withholdings; (iii) Party B shall pay the full amount deducted or withheld
to the relevant governmental authority in accordance with applicable law;
and (iv) Party B shall deliver to Party A an original or certified copy of
a receipt issued by such governmental authority evidencing payment of any
such amount deducted or withheld, within 5 days after payment thereof; and
(b) promptly thereafter Party A shall deliver to Party B the number of
Shares equal to the Number of Shares. In the event that Physical Settlement
is elected, the Settlement Date shall be the Termination Date of this
Transaction.
Adjustment:
Method of Adjustment: Calculation Agent Adjustment
Extraordinary Events
Consequences of Merger events or stock dividend:
(a) Share-for-Share: Alternative Obligation
(b) Share-for-Other: Alternative Obligation
(c) Share-for-Combined: Alternative Obligation
Nationalization or Insolvency
Cancellation and Payment
3. Early Termination Provisions:
a) Early Termination by Party A:
Upon providing at least 27 Exchange Business Days' written notice to Party
B after the occurrence of any event specified below, Party A may designate
an Exchange Business Day (the "Early Termination Date") to terminate this
Transaction in whole only. Upon such designation, the 25th Exchange
Business Day prior to the Early Termination Date shall be deemed the first
Valuation Date.
(i) Change of Control Event shall mean any entity or entities acting
together acquires at least 50% of the voting shares of the Shares.
(ii) Trigger Event shall mean the closing price of the Share in MXN divided
by then current MXN-USD exchange rate is equal to or below 35% of the
Initial Price.
4
[LOGO] Santander Serfin
Banco Santander Mexicano, S.A.
Institucion de Banca Multiple
Grupo Financiero Santander Serfin
(iii) Change of Ownership Event shall mean CEMEX, S.A. de C.V. ceases to
own, directly or indirectly, at least 51% of the economic and voting
interests in Party B, free and clear of any lien, encumbrance or
adverse interest.
b) Early Termination by Party B:
Upon providing at least 27 Exchange Business Days' written notice to Party
A, Party B may designate an Exchange Business Day (the "Early Termination
Date" or "Partial Termination Date" as the case may be) to terminate this
Transaction in whole or in part. In case of partial termination, Party B
shall inform Party A of the number of Shares that Party B shall terminate
on the Partial Termination Date and the partial termination amount (the
"Partial Termination Amount") shall equal to such number of Shares
multiplied by the Early Termination Forward Price. Upon such designation,
the 25th Exchange Business Day prior to the Early Termination Date shall be
deemed the first Valuation Date. In addition, the Early Termination Forward
Price will be determined by the Calculation Agent at its sole discretion
according to the following formula:
Early Termination Forward Price = Forward Price / (1 + Reference USD Rate x
NDays / 360)
As used herein:
Reference USD Rate: The LIBOR-BBA for the maturity that is closer
to NDays published on the corresponding
Valuation Date.
NDays: The number of calendar days between the
Termination Date and the Early Termination
Date.
4. Security Provisions:
Party B will be required to provide within two Business Days after receipt
of written notice from Party A, an irrevocable Letter of Credit in form and
substance satisfactory and acceptable to Party A (from a financial
institution outside Mexico with a long-term debt rating of A or higher by
S&P accepted by Party A) for the amount in USD in accordance with the
following Security Agreement Table:
Security Agreement Table
Underlying Share Price Range (% of
Initial Price based on the arithmetic
mean of the closing prices of the Shares
on the Exchange for 5 consecutive
Exchange Business Days, in MXN and then
divided by the MXN-USD exchange rate
specified by the Calculation Agent) USD Amount Required
------------------------------------------------ ----------------------------------
Lower than 80% but higher than 75% 5% of the Equity Notional Amount
Equal or lower than 75% but higher than 70% 10% of the Equity Notional Amount
Equal or lower than 70% but higher than 65% 15% of the Equity Notional Amount
Equal or lower than 65% but higher than 60% 20% of the Equity Notional Amount
Equal or lower than 60% but higher than 55% 25% of the Equity Notional Amount
Equal or lower than 55% but higher than 50% 30% of the Equity Notional Amount
Equal or lower than 50% but higher than 45% 35% of the Equity Notional Amount
Equal or lower than 45% but higher than 40% 40% of the Equity Notional Amount
Equal or lower than 40% but higher than 35% 45% of the Equity Notional Amount
Equal or lower than 35% 50% of the Equity Notional Amount
5
[LOGO] Santander Serfin
Banco Santander Mexicano, S.A.
Institucion de Banca Multiple
Grupo Financiero Santander Serfin
Alternatively, if Party B is unable to deliver the Letter of Credit, it may
deliver an amount in USD deposited with Party A, in accordance with the
Security Agreement Table. This amount in USD will be credited to any
payments due to Party A on the Termination Date.
To the extent that Party B delivers any amount in USD to Party A in lieu of
the Letter of Credit, Party B hereby grants Party A a first priority
security interest in, and a first priority lien on, the USD, as collateral
for its obligations under the Transaction and the Agreement.
If, after providing a Letter of Credit or an amount in USD in lieu of the
Letter of Credit, the underlying share price increases above 80% of the
Initial Price, Party B may on demand require Party A to return or cancel
the Letter of Credit or the amount in USD, as the case may be; provided,
however, that Party B's obligation to provide a Letter of Credit or an
amount in USD in lieu of Letter of Credit at the request of Party A in
accordance with the security provisions contained herein will continue.
5. Credit Support Document:
An unconditional guaranty, in form and substance satisfactory to Party A,
issued by CEMEX, S.A. de C.V., shall be delivered to Party A as soon as
possible and in no event later than April 7, 2003.
6. Additional Representation:
CEMEX, S.A. de C.V. owns directly or indirectly all the economic and voting
interests in Party B, free and clear of any lien, encumbrance or adverse
interest.
7. Calculation Agent: Party A
8. Governing Law: As specified in the Agreement.
9. Account Details:
Payments to Party A: Instructions in USD
Bank of America
Concord, California
ABA: 121 000 358
ACCOUNT: 629 0926 846
BNF: Banco Santander Mexicano
Institucion de Banca Multiple
Grupo Financiero Santander Serfin
Instructions in MXN
Banco de Mexico
Mexico, D.F.
SPEUA: 40014
ACCOUNT: 227 700 014 5
SWIFT: XXXXXXXX
BNF: Banco Santander Mexicano
Institucion de Banca Multiple
Grupo Financiero Santander Serfin
6
[LOGO] Santander Serfin
Banco Santander Mexicano, S.A.
Institucion de Banca Multiple
Grupo Financiero Santander Serfin
Payments to Party B: Instructions in USD
Citibank NY
ABA: 021 000 089
ACCOUNT: 369 642 15
BNF: CEMEX, S.A. y/o Subsidiarias
Instructions in MXN
Banco de Nacional de Mexico (Banamex)
ACCOUNT: 01170 35739
SUC: 117
BNF: CEMEX, Mexico
REF: CEDICE
Instructions in Shares
Cuenta INDEVAL: No.8409
Para Credito en Cuenta: 203-807
BNF: Bear Xxxxxxx Securites Corp
F.F.C.: 668-29475
F.F.C. BNF: Centro Distribuidor de Cemento, S.A.
de C.V.
10. Offices:
(a) The Office of Party A for this Transaction is its Mexico City head
office located at Xxxxxxxxxxxx Xxxxx xx xx Xxxxxxx 000, Xxxxxxx Xxxxx
xx Xxxxx Xx, 00000, Xxxxxx, X.X.
(b) The Office of Party B for this Transaction is its head office located
at Xxxxxxx Xxxxxxxxxxxx 000 Xxx., 00000, Xxxxxxxxx, Xxxxx Xxxx,
Xxxxxx.
11. Party A and Party B each represents that entering into this Transaction is
within its capacity, is duly authorized and does not violate any laws of
its jurisdiction or organization or residence or the terms of any agreement
to which it is a party. Party A and Party B each represents that (i) it is
not relying on the other party in connection with its decision to enter
into this Transaction, and neither party is acting as an advisor to or
fiduciary of the other party in connection with this Transaction; (ii) it
understands the risks of the Transaction and any legal, regulatory, tax,
accounting and economic consequences resulting therefrom; (iii) it has
determined based upon its own judgement and upon any advice received form
its own professional advisors as it has deemed necessary to consult that
entering into the Transaction is appropriate for such party in lieu of its
financial capabilities and objectives. Party A and Party B each represents
that upon due execution and delivery of this Confirmation, it will
constitute a complete and binding agreement with respect to this
Transaction.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by signing and returning this Confirmation.
Yours sincerely,
7
[LOGO] Santander Serfin
Banco Santander Mexicano, S.A.
Institucion de Banca Multiple
Grupo Financiero Santander Serfin
Banco Santander Mexicano, S.A.
Institucion de Banca Multiple
Grupo Financiero Santander Serfin
By: /s/ Xxxxx Xxxx Xxxxxx
-----------------------------
Name: Xxxxx Xxxx Xxxxxx
Title: Attorney in Fact
By: /s/ Xxxxxxx Xxxxxxxxx Xxxx
-----------------------------
Name: Xxxxxxx Xxxxxxxxx Xxxx
Title: Attorney in Fact
Confirmed as of the date first above written:
Centro Distribuidor de Cemento, S.A. de C.V.
By: /s/ Illegible
-----------------------------
Name:
Title:
8