EXHIBIT 1.2
FORWARD STOCK CONTRACT
To: Xxxxxxxx Properties Trust
0000 Xxxx XX Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Xxxxxxxx Properties Acquisition Partners, L.P.
0000 Xxxx XX Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn.: Xxxxxxx X. Xxxxx
From: Union Bank of Switzerland, London Branch
c/o UBS Securities LLC, as agent
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Date: 2 February 1998
Ladies and Gentlemen,
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 Confirmation constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
This Confirmation supplements, forms a part of, and is subject to, the ISDA
Master Agreement dated as of 2 February 1998, as amended and supplemented from
time to time (the "Agreement"), between you and us. All provisions contained in
the Agreement govern this Confirmation except as expressly modified below. In
the event of any inconsistency between the provisions of that agreement and this
Confirmation, this Confirmation will prevail for the purposes of this
Transaction.
The Agreement and each Confirmation thereunder will be governed by and construed
in accordance with the laws of the State of New York without reference to choice
of law doctrine.
I. THE TRANSACTION
Xxxxxxxx Properties Trust (the "Trust") and Xxxxxxxx Properties Acquisition
Partners, L.P. ("PPAP") (such entities collectively referred to herein as the
"Company") the Union Bank of Switzerland, London Branch ("UBS") acting through
UBS Securities LLC as its agent for each purchase or sale of Securities ("UBS
LLC"), hereby agree to make the payments and deliveries provided for in Sections
III., IV. and V. hereof, all on the terms more particularly specified herein
(this "Confirmation").
II. DEFINITIONS
For the purposes of this Confirmation, the following terms shall have the
meanings set opposite:
Adjustments: In the event of:
(a) a subdivision, consolidation or reclassification of the
Common Shares, or a free distribution or dividend of any Common
Shares to all existing holders of Common Shares by way of bonus,
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FORWARD STOCK CONTRACT
capitalization or similar issue;
(b) a distribution or dividend to all existing
holders of Common Shares of (i) additional Common
Shares or (ii) other share capital or securities
granting right to payment of dividends and/or the
proceeds of liquidation of the Company equally or
proportionally with such payments to holders of
Common Shares or (iii) any other type of
securities, warrants or other assets, in any case
for payment (cash or otherwise) at less than the
prevailing market price; or
(c) any other event that has a diluting or
concentrative effect on the value of the
Underlying Shares,
an adjustment shall thereupon be effected to the
Forward Price and/or the Underlying Shares at the
time of such event with the intent that following
such adjustment, the value of this Transaction is
economically equivalent to the value immediately
prior to the occurrence of the event causing the
adjustment.
Calculation Agent: UBS, whose calculations and determinations shall
be made in a commercially reasonable manner and
shall be binding absent manifest error.
Calculation Period: Means each period commencing on and including:
(i) in the case of the first Calculation Period,
the Effective Date and ending on but excluding
the first Interim Settlement Date, and
(ii) for each period thereafter, an Interim
Settlement Date and ending on but excluding the
earlier of the next following Interim Settlement
Date or Day S.
If there is a Partial Settlement, then (i) the
Calculation Period for the Settlement Shares
covered by such Partial Settlement Share shall
end on Day S for such Partial Settlement and (ii)
the Calculation Period for the remaining
Underlying Shares shall be determined without
regard to such Partial Settlement.
Collateral Release Shares: Common Shares delivered pursuant to Section V.C.
Collateral Valuation Date: In the event that the Company posts cash
collateral pursuant to Section V. or VI. any day
upon which the amount of collateral required is
calculated.
Common Shares: common shares of Xxxxxxxx Properties Trust
(ticker "PP"), par value $0.01.
Compounding Period: Means each period commencing on and including:
(i) in the case of the first Compounding Period,
the Effective Date
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FORWARD STOCK CONTRACT
and ending on but excluding the first Reset Date, and
(ii) for each period thereafter, a Reset Date and
ending on (but excluding) the earlier of the next
following Reset Date or Day S.
If there is a Partial Settlement, then (i) the
Compounding Period for the Settlement Shares covered
by such Partial Settlement shall end on Day S for such
Partial Settlement and (ii) the Compounding Period for
the remaining Underlying Shares shall be determined
without regard to such Partial Settlement.
Customer Account: means the account established in favor of the Company
pursuant to the Customer Agreement dated the date
hereof between the Company and UBS Securities LLC
Daycount Fraction: Actual/360
Day S: For Settlement pursuant to Section III. or VI. or
Interim Net Stock Settlement pursuant to Section IV.,
the day upon which settlement activities shall begin.
Dividend Amount: A) Means, on each Reset Date or Day S an amount in
U.S. Dollars equal to the sum of all cash
distributions paid on a single Common Share during the
relevant Compounding Period; and
B) Separately, and not included in Dividend Amount,
UBS will cause UBS LLC to pay to the Company on the
Business Day after the relevant dividend payment date
declared by the Company's Board of Directors, (i) all
cash dividends or cash distributions on Common Shares
that have gone ex-dividend, but on which such
dividends or cash distributions have not been paid,
prior to the end of the final Compounding Period for
any settlement, based on a number of Common Shares
equal to the number of Settlement Shares for such
settlement, (ii) all cash dividends or cash
distributions received by UBS at any time, on Common
Shares delivered by the Company pursuant to Section
III. E. that have gone ex-dividend after Day S but
prior to the end of the Unwind Period for any
settlement, and (iii) all cash dividends or cash
distributions paid on Common Shares held in the
Customer Account.
Effective Date: 2 February 1998
Equity Capitalization: At any time, the product of Common Shares outstanding
(excluding operating partnership units) times the
Market Price of the Underlying Shares.
Exchange Trading Day: Each day on which the Relevant Exchange is open for
trading.
Forward Price: On each Reset Date or Day S, the Forward Price shall
be determined for such day by:
a) multiplying the Initial Price for the Compounding
Period by the
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FORWARD STOCK CONTRACT
sum of
1 plus the product of the appropriate Daycount
Fraction times the sum of (i) LIBOR, determined
as of the previous Reset Date or, in the case of
the first Reset Date, the Trade Date for a
Designated Maturity of 3 months, plus (ii)
Spread; and
b) subtracting the Dividend Amount at that date;
provided, however that if the Company delivers
Interim Settlement Shares pursuant to Section IV.
or Collateral Release Shares pursuant to Section
V.C. during any Calculation Period, the Forward
Price for purposes of determining the Initial
Price for the first Compounding Period during
such Calculation Period, shall be adjusted to a
price equal to the closing price of the Common
Shares on the Exchange Trading Day immediately
prior to the most recent Interim Settlement Date,
adjusted up for any positive result or down for
any negative result of the following formula:
(i) the Interim Settlement Amount for the most
recent Interim Settlement Date,
minus,
(ii) the product of (a) the number of Interim
Settlement Shares or Collateral Release Shares,
as the case may be, times (b) the average closing
price of the Common Shares on the five (5)
Exchange Trading Days immediately following the
receipt of the Interim Settlement Shares by UBS
pursuant to Section IV. or the Collateral Release
Shares pursuant to Section V.C.,
such result divided by,
(iii) the number of Underlying Shares.
Initial Price: Means, for each Common Share,
a) for the Compounding Period ending on the first
Reset Date, an amount in U.S. Dollars equal to
$27.00, and
b) for each subsequent Reset Date, the Forward
Price as calculated on or adjusted as of the
prior Reset Date.
Interim Settlement Dates: each Reset Date.
Interim Settlement Amount: on any Interim Settlement Date, the product of
(a) the number of Underlying Shares, and (b) the
difference between the Forward Price and the
closing sale price of the Common Shares on the
Relevant Exchange on the Exchange Trading Day
immediately prior to such Interim Settlement
Date.
Interim Settlement Shares: Means the number of Common Shares equal to (i)
105% times (ii) the
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FORWARD STOCK CONTRACT
Interim Settlement Amount divided by (iii) the
closing sale price of the Common Shares on the
Relevant Exchange on the Exchange Trading Day
immediately prior to such Interim Settlement
Date.
LIBOR: "LIBOR" means the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of
1%) appearing on Dow Xxxxx Markets Page 3750 (or
any successor page) as the London interbank
offered rate for deposits in USD at approximately
11:00 a.m. (London time) two (2) Business Days
prior to a Reset Date. If for any reason such
rate is not available, then the term "LIBOR"
shall mean, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the
London interbank offered rate for deposits in USD
at approximately 11:00 a.m. (London time) two (2)
Business Days prior to a Reset Date; provided,
however, if more than one rate is specified on
Reuters Screen LIBO Page, then the applicable
rate shall be the arithmetic mean of all such
rates (rounded upwards, if necessary, to the
nearest 1/100 of 1%). For purposes of the First
reset Date LIBOR shall be 5.625%.
Line of Credit: Means the Credit Agreement, dated as of December
30, 1997, among Xxxxxxxx Properties Acquisition
Partners, L.P. ("PPAP"), Bank One, Texas, N.A.
and NationsBank of Texas, N.A., as the same may
be amended, restated or superseded from time to
time.
Mandatory Unwind Date: In the case of a Mandatory Unwind Event specified
in clause (i) of the definition thereof, 1
Exchange Trading Day after such Mandatory Unwind
Event occurs. In the case of a Mandatory Unwind
Event specified in clause (ii) of such provision,
the date specified in the notice delivered to the
Company (which date shall be at least 5 Business
Days after the date such notice becomes
effective).
Mandatory Unwind
Thresholds: Mandatory
Unwind Thresholds Unwind Share Limit
----------------- ------------------
$20.50 up to 40.0% of Underlying
Shares
$18.50 67.0%
$16.40 100.0%
$600,000,000 Equity
Capitalization 100.0%
Market Price: With respect to any security that is traded on a
Stock Exchange, means the average of the closing
sale prices on such Stock Exchange for such
security for the 10 Exchange Trading Days
immediately prior to the calculation date.
Maturity Date: One (1) year after the Effective Date, subject to
extension upon the written approval of UBS in its
sole discretion.
Maturity Placement Fee: 1.00%, based on the mechanics in Section III. E.
The parties may agree to alter the settlement
mechanics which may result in a different
Maturity Placement Fee.
Relevant Exchange: Means, with respect to any Exchange Trading Day,
the principal
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FORWARD STOCK CONTRACT
Stock Exchange on which the Common Shares are
traded on that day.
Reset Dates: 30 April 1998, 30 July 1998, 30 October 1998,
subject to adjustment in accordance with the
Modified Following Business Day convention.
Settlement Amount: The product of the Settlement Price times the
Settlement Shares.
Settlement Disruption Event: Means an event beyond the control of the parties
as a result of which The Depository Trust Company
("DTC") or any successor depository cannot effect
a transfer of the Settlement Shares or the Common
Shares. If there is a Settlement Disruption Event
on a Valuation Date, then the transfer of the
Common Shares that would otherwise be due to be
made by UBS LLC for the account of UBS or the
transfer of the Common Shares that would
otherwise be due to be made by the Company, as
applicable, on that date shall take place on the
first succeeding Exchange Trading Day on which
settlement can take place through DTC, provided
that if such a Settlement Disruption Event
persists for five consecutive Business Days, then
the Party obliged to deliver such Settlement
Shares shall use its best efforts to cause such
Shares to be delivered promptly thereafter to the
other Party in any commercially reasonable
manner.
Settlement Price: If Day S is a Reset Date, the Forward Price. If
Day S is not a Reset Date, the Forward Price
adjusted for LIBOR breakage adjustments (either
positive or negative) for the Settlement Shares
for the period from Day S to the next following
Reset Date. Any breakage adjustments shall be
calculated by the Calculation Agent in accordance
with the provisions for similar calculations set
forth in the Line of Credit.
Settlement Shares: The number of shares up to the full number of
Underlying Shares subject to settlement under
Section III. or VI.
Spread: 1.35% per annum. In the event the company's
securities or any securities of PPAP are rated
BBB- or the equivalent or higher, then on the
next Reset Date, this Spread will be adjusted to
equal the spread over LIBOR then provided for in
the Line of Credit, for the Company's unsecured
borrowing rate.
Stock Exchange: Means the New York Stock Exchange, the American
Stock Exchange or The NASDAQ Stock Market.
Stock Settlement
Unwind Price: The daily average closing sale price of the
Common Shares on the Relevant Exchange for the
Exchange Trading Days during the Unwind Period.
In the event of an extension of the Unwind Period
after the Unwind Period has commenced, such
average may be adjusted by the Calculation Agent,
in a commercially reasonable manner, to reflect
the effect if any of such extension.
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FORWARD STOCK CONTRACT
Trade Date: 2 February 1998
UBS LLC: UBS Securities LLC
Unwind Period: In the event of Stock Settlement or Net Stock
Settlement, such number of Exchange Trading Days
as the Company shall specify in a Settlement
Notice (which shall not be more than 60; subject
to change based on mutual agreement) beginning on
Day S; provided that such period may be extended
upon at least two (2) Exchange Trading Days
written notice by either the Company or UBS for
up to an additional 10 Exchange Trading Days and
shall also be extended for a number of Exchange
Trading Days equal to the number of Exchange
Trading Days during which any Market Disruption
Event occurs during the Unwind Period.
Underlying Shares: 1,100,000 Common Shares of the Company (ticker
"PP"), subject to adjustment in the event of
Partial Settlements.
Valuation Date: In the case of determining any Physical
Settlement value, Net Stock Settlement Shares or
Stock Settlement Shares, Day S, the day preceding
Day S and all Exchange Trading Days during the
Unwind Period respectively; in the case of
determining any Preliminary Stock Settlement
Shares or Preliminary Net Stock Settlement
Shares, the Exchange Trading Day immediately
preceding Day S; in the case of determining the
Interim Settlement Amount and related
calculation, the day prior to the Interim
Settlement Date, and the five (5) Exchange
Trading Days following receipt of Interim
Settlement Shares by UBS.
Valuation Time: 4:00 pm EST, or in the event the Relevant
Exchange closes early, such closing time.
III. SETTLEMENT
A. NOTICE AND PROCEDURES
1. The Company may on any Exchange Trading Day up to and including the
Maturity Date, upon the giving of at least five (5) Business Days
telephonic notice to UBS (the "Settlement Notice"), settle all or part of
this Transaction. The Settlement Notice shall specify:
(i) the Settlement Shares,
(ii) the settlement method (Physical, Stock or Net Stock Settlement,
as such methods are described below);
(iii) the number of Exchange Trading Days in the Unwind Period, and
(iv) Day S, which must be an Exchange Trading Day; provided however,
that if Physical or Net Stock Settlement is selected and in UBS'
reasonable judgement the settlement of the Settlement Shares would
potentially violate or contravene any legal or regulatory prohibition
or requirement applicable to UBS or cause UBS to contravene any
established UBS corporate policy or compliance policy of general
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FORWARD STOCK CONTRACT
application which relates to any legal or regulatory prohibition or
requirement applicable to UBS (other than any corporate policy
limiting the amount of UBS's investment in another entity) then UBS
shall at least three (3) Business Days prior to the proposed Day S,
notify the Company telephonically (confirmed by writing) of any such
impediment and its estimate of the period during which such impediment
will preclude UBS' ability to settle all or part of this Transaction.
The Settlement Notice shall be effective only if the notice
requirements specified above are fulfilled; provided, that if no
settlement method is specified, then the settlement method shall be
deemed to be Physical Settlement and provided further that the Company
may upon telephonic notice to UBS at least one (1) Exchange Trading
Day prior to the proposed Day S withdraw any Settlement Notice.
In the case of any Partial Settlement, following such settlement the number
of Underlying Shares to which this Transaction shall relate shall be
adjusted, as of Day S, by subtracting the number of Settlement Shares from
the number of Underlying Shares (as the same may have been adjusted prior
to such Partial Settlement) immediately prior to such Day S. The Settlement
Shares shall not be subject to forward accretion and shall be treated
separately from the remaining Underlying Shares during any Unwind Period.
2. On Day S, the Settlement Price for the Settlement Shares and the Settlement
Amount shall be determined for Day S.
3. The Settlement Amount shall be settled pursuant to the settlement method
(B, C, or D of this section III.) selected by the Company in its sole
discretion.
4. If settlement with respect to the Settlement Shares shall occur pursuant to
Section III.A.1. (but not as a result of a Mandatory Unwind Event) on or
before the 270th day following the Effective Date, then the Settlement
Price for purposes of such settlement shall be increased by any positive
amount, calculated by UBS as follows:
Spread x Forward Price x (270 - calendar days since Trade Date)
--------------------------------------
360
provided, that such increase shall not apply to up to 25% of the Underlying
Shares to be settled on or after the 90th day following the Effective Date
and up to 50% of the Underlying Shares to be settled on or after the 180th
day following the Effective Date.
5. It shall be a condition precedent to any right of the Company to elect
Stock Settlement (III. C. below) or Net Stock Settlement (III. D. below),
that the Company must (i) notify UBS of such election at least 5 Business
Days prior to Day S and (ii) prior to Day S, cause to be filed with the
Securities and Exchange Commission (the "Commission") and cause to become
effective under the Securities Act of 1933, as amended (the "Securities
Act") a registration statement that results in UBS being able to resell all
Common Shares to be delivered by the Company to UBS LLC for the account of
UBS in effecting such Stock Settlement or Net Stock Settlement without
further registration under the Securities Act of 1933, as amended, such
registration statement to include one or more preliminary prospectuses,
prospectuses, and any amendments and supplements thereto such that any
preliminary prospectus or prospectus, as amended or supplemented, shall not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they are
made. In addition, the Company shall not deliver any Common Shares to UBS
LLC for the account of UBS pursuant
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FORWARD STOCK CONTRACT
to Sections IV. or V.C. below unless at the time of such delivery a
registration statement has become effective under the Securities Act that
results in UBS being able to resell such Common Shares without further
registration under the Securities Act, such Registration Statement to
include one or more preliminary prospectuses, prospectus and any amendments
or supplements thereto such that any preliminary prospectus or prospectus,
as amended or supplemented, shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances under which they are made. The Company further agrees
that it will cause any such Registration Statement referred to in this
paragraph 5 of Section III.A. to remain in effect until the earliest of the
date on which (i) all Common Shares issued pursuant hereto and not required
to be delivered to the Company hereunder have been sold by UBS LLC for the
account of UBS and UBS agrees to notify the Company of such fact, within
two (2) Business Days of its occurrence, (ii) UBS LLC for the account of
UBS is able to sell the Common Shares subject thereto under Rule 144(k), or
(iii) UBS has advised the Company that it no longer requires that such
registration statement be effective; provided, however, that in no event
shall the Company be obligated to keep such Registration Statement
effective for more than 10 Exchange Trading Days after the end of the
applicable Unwind Period.
B. PHYSICAL SETTLEMENT
If the Company elects Physical Settlement, the Company shall settle by
delivering cash in an amount equal to the Settlement Amount in exchange for
the Settlement Shares ("Physical Settlement") on the Exchange Trading Day
immediately succeeding Day S. UBS shall cause UBS LLC for the account of
UBS to deliver the Settlement Shares to the Company on the Exchange Trading
Day immediately succeeding Day S upon receipt of such Physical Settlement.
C. STOCK SETTLEMENT
If the Company elects to settle the Settlement Amount by delivering Common
Shares in exchange for the Settlement Shares ("Stock Settlement"), the
number of Common Shares to be delivered (the "Stock Settlement Shares")
shall be equal to (a) the Settlement Amount divided by (b) the Stock
Settlement Unwind Price. The mechanics for settlement are set forth in
Section III. E. below and Section VI.
D. NET STOCK SETTLEMENT
If the Company elects to settle the Settlement Amount on a net stock basis
("Net Stock Settlement"), the number of net stock settlement shares (the
"Net Stock Settlement Shares") shall equal:
i) the number of Settlement Shares, times
ii) the Settlement Price minus the Stock Settlement Unwind Price,
divided by
iii) the Stock Settlement Unwind Price.
If such calculation yields a negative number, this shall indicate the
number of Common Shares to be delivered from UBS LLC for the account of UBS
to the Company. The mechanics for settlement are set forth in Section III.
E. below and Article VI. (This section
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FORWARD STOCK CONTRACT
does not apply for purposes of Interim Net Stock Settlement.)
E. STOCK AND NET STOCK SETTLEMENT MECHANICS
1. Preliminary Stock Settlement:
If the Company has chosen Stock Settlement, the Company shall deliver
to UBS LLC for the account of UBS, by 11:00 a.m. on Day S, that number
of Common Shares (the "Preliminary Stock Settlement Shares"), equal to
the product of (i)(a) the Settlement Amount divided by (b) the closing
price of the Common Shares on the Exchange Trading Day immediately
preceding Day S, times (ii) 110%. Upon receipt of the Preliminary
Stock Settlement Shares, UBS will cause UBS LLC to deposit the
Settlement Shares in the Company's Customer Account.
2. Preliminary Net Stock Settlement:
If the Company has chosen Net Stock Settlement and if the Settlement
Price exceeds the closing price of the Common Shares on the Exchange
Trading Day immediately preceding Day S, the Company shall deliver to
UBS LLC for the account of UBS by 11:00 a.m. on Day S, that number of
Common Shares (the "Preliminary Net Stock Settlement Shares") equal to
(i)(a) the number of Settlement Shares times (b) the difference
between the Settlement Price and the closing price of the Common
Shares on the Exchange Trading Day immediately preceding Day S divided
by (ii) the closing price of the Common Shares on the Exchange Trading
Day immediately preceding Day S times (iii) 125%. If the closing price
of the Common Shares on the Exchange Trading Day immediately preceding
Day S exceeds the Settlement Price, the Company shall not be required
to deliver any shares to UBS LLC for the account of UBS under this
subsection III.E.2.
3. By 11:00 a.m. on every fifth (5th) Exchange Trading Day (other than
the final Exchange Trading Day) during the Unwind Period and on the
Business Day following the final Exchange Trading Day of the Unwind
Period:
A. For Stock Settlement:
Stock Settlement Shares shall be calculated as if such Exchange
Trading Day were Day S, except that (a) there shall be no
recalculation of the Settlement Amount and (b) for purposes of
calculating the Stock Settlement Unwind Price, the Unwind Period shall
be deemed to have ended on the Exchange Trading Day for which the
calculation is made.
(i) if (a) Stock Settlement Shares (calculated as set forth above) are
greater than (b) the sum of (x) Preliminary Stock Settlement Shares
plus (y) any shares previously delivered pursuant to this subparagraph
(i), then the Company shall deliver that number of Common Shares equal
to the difference between (a) and (b) to UBS LLC for the account of
UBS, and
(ii) as of the final day of the Unwind Period, if (a) the sum of (x)
Preliminary Stock Settlement Shares plus (y) any shares previously
delivered pursuant to this settlement under subparagraph (i), above is
greater than Stock Settlement Shares, then UBS LLC, for the account of
UBS, shall deliver that number of Common Shares equal to
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FORWARD STOCK CONTRACT
the difference between (a) and (b) above to the Company's Customer Account,
B. For Net Stock Settlement:
Net Stock Settlement Shares shall be calculated as if such Exchange Trading
Day were Day S except that (a) there shall be no recalculation of the
Settlement Amount and (b) for purposes of calculating the Stock Settlement
Unwind Price, the Unwind Period shall be deemed to have ended on the
Exchange Trading Day for which the calculation is made.
(i) if (a) Net Stock Settlement Shares are greater than (b) the sum of (x)
Preliminary Net Stock Settlement Shares plus (y) any shares previously
delivered pursuant to this settlement under this subparagraph (i), then the
Company shall deliver Common Shares (which Common Shares may be delivered
from its Margin Account) equal in number to the difference between (a) and
(b) to UBS LLC for the account of UBS, or
(ii) as of the final day of the Unwind Period, if (a) the sum of (x)
Preliminary Net Stock Settlement Shares plus (y) any shares previously
delivered pursuant to this settlement under subparagraph (i), above is
greater than (b) Net Stock Settlement Shares, then UBS LLC, for the account
of UBS, shall deliver that number of Common Shares equal to the difference
between (a) and (b) above to the Company's Customer Account.
4. The Company shall cause all shares delivered by it to UBS LLC for the
account of UBS to be delivered within two Exchange Trading Days following
its receipt of a statement showing the calculation of the number of shares
to be delivered and to be fully and effectively registered under the
Securities Act (as provided in Section III.A.5. above).
5. As of 11:00 a.m. on the Exchange Trading Day following the final Exchange
Trading Day of the Unwind Period, UBS LLC for the account of UBS shall (i)
release all claims to Common Shares held in the Company's Customer Account,
including any Settlement Shares delivered pursuant to Preliminary Stock
Settlement (Section III.E.1. above), and deliver all such Common Shares
to the Company with the dollar value of all fractional shares settled in
cash and (ii) release to the Company all Cash Collateral held by UBS.
6. In the event of Stock or Net Stock Settlement pursuant to Section III.C. or
III.D., the Company shall pay an unwind accretion fee, in cash or stock,
calculated in accordance with the following formula:
Settlement Amount x (days in Unwind Period) x (1 month LIBOR + Spread)
----------------- ---------------------
2 360
7. In the event of Stock or Net Stock Settlement pursuant to Section III.C. or
III.D., the Company shall pay a placement fee to UBS LLC for the account of
UBS calculated as:
Settlement Amount x Maturity Placement Fee%
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FORWARD STOCK CONTRACT
IV. INTERIM NET STOCK SETTLEMENT
On each Interim Settlement Date, if the Interim Settlement Shares is a
positive number, then on the Business Day following the fifth (5th)
Exchange Trading Day thereafter the Company shall deliver a number of
Common Shares to UBS LLC for the account of UBS equal to the Interim
Settlement Shares; provided, however, that if the Company is restricted by
law or regulation or self-regulatory requirements or related policies and
procedures, whether or not such requirements, policies or procedures are
imposed by law directly or have been voluntarily adopted by the Company to
insure compliance with applicable laws, or in its reasonable judgement is
otherwise unable or unwilling to deliver registered Common Shares, the
Company shall deliver Cash Collateral to UBS as described in Section V.B.
below.
V. COLLATERAL PROVISIONS
A. If the Company fails to deliver an effective resale registration statement
within 90 days of the Trade Date, then until an effective resale
registration statement is provided and an Interim Net Stock Settlement can
be effected, the Company shall deliver Cash Collateral to a Cash Collateral
Account at UBS in an amount equal to any Interim Settlement Amount due to
UBS. If Cash Collateral is delivered pursuant to this Section V.A., then
until an Interim Net Settlement can be effected or the transaction is
settled on a Physical Settlement basis or a registration statement becomes
effective, the Interim Settlement Amount shall be recalculated twice per
month thereafter (each such date being a Collateral Adjustment Date) until
an effective resale registration statement is delivered and the amount of
Cash Collateral shall be adjusted to equal such recalculated Interim
Settlement Amount.
B. In the event that the Company does not deliver Common Shares pursuant to
Paragraph IV. for one or more of the reasons described in the provision at
the end of such paragraph, then, unless Cash Collateral has been delivered
pursuant to Section V.A. above, the Company shall deliver Cash Collateral
in an amount equal to the Interim Settlement Amount to a Cash Collateral
Account at UBS as promptly as practicable, but not later than the Business
Day following the fifth (5th) Exchange Trading Day after the applicable
Interim Settlement Date.
C. If the Company has delivered Cash Collateral to UBS pursuant to paragraphs
A. or B. above, at the Company's option, the Company may deliver freely
saleable registered Common Shares to UBS equal in saleable market value,
based on closing sale prices of Common Shares on the Relevant Exchange on
the Exchange Trading Day prior to such delivery, to the value of the Cash
Collateral held in the Cash Collateral Account at UBS. Simultaneously with
the delivery of such Common Shares, UBS shall release all claims to Cash
Collateral held in the Cash Collateral Account and deliver such amounts to
the Company by 11:00 a.m. on the second (2nd) subsequent Exchange Trading
Day. On any subsequent Interim Settlement Date, if Cash Collateral is held
by UBS, UBS shall deliver to the Company by 11:00 a.m. on the second (2nd)
subsequent Exchange Trading Day after such Interim Settlement Date, the
amount by which the amount of Cash Collateral exceeds the Interim
Settlement Amount.
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FORWARD STOCK CONTRACT
D. Security Interest
The Company hereby pledges to UBS, as security for its obligations herein,
a first priority continuing security interest in, lien on and right of set-
off against all Cash Collateral Paid to UBS, or UBS Securities LLC, as its
agent. Upon release to the Company by UBS of such Cash Collateral, the
security interest and lien granted hereunder will be released immediately,
and, to the extent possible, without any further action by either party.
E. Representations
The Company represents to UBS (which representations will be deemed to be
repeated as of each date that the Company Pays Cash Collateral to UBS)
that:
(i) it has the power to grant a security interest in and lien on any Cash
Collateral it Pays to UBS and has taken all necessary actions to authorize
the granting of that security interest and lien;
(ii) it is the sole owner of or otherwise has the right to Pay all Cash
Collateral to UBS hereunder, free and clear of any security interest, lien,
encumbrance or other restrictions other than the security interest and lien
created hereby;
(iii) upon Payment of any Cash Collateral to UBS under the terms of this
Confirmation, UBS will have a valid and perfected first priority security
interest therein (assuming that any third-party financial intermediary or
other entity not within its control involved in the transfer of the Cash
Collateral gives the notices and takes the action required of it under
applicable law for perfection of that interest), and
(iv) the performance by it of its obligations under this Confirmation will
not result in the creation of any security interest, lien or other
encumbrance on any Cash Collateral other than the security interest and
lien granted hereunder.
F. Return of Collateral
(i) On each Interim Settlement Date or Collateral Adjustment Date the
Interim Settlement Amount shall be calculated and compared to the existing
cash Collateral as of the prior Exchange Trading Day. No later than 11:00
a.m. on the second (2nd) subsequent Exchange Trading Day the parties shall
exchange payments such that the Cash Collateral amount will then equal the
calculated Interim Settlement Amount.
(ii) Any Cash Collateral held by UBS or UBS Securities LLC, as agent,
during settlement of the Transaction pursuant to Sections III. or VI. shall
be held until the end of the applicable Unwind Period and shall be released
upon the final Settlement Date for that Unwind Period.
G. Interest on Cash Collateral
Any Cash Collateral Paid in USD and held by UBS shall accrue interest at 1
month LIBOR (LIBOR shall be established on the collateral delivery date).
In the event that Collateral Release Shares are delivered and the Forward
Price is adjusted to reflect such delivery, no interest will be paid on the
collateral returned by UBS to the Company.
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FORWARD STOCK CONTRACT
H. Definitions related to Collateral Provisions
"Cash Collateral" means the amount of cash, cash equivalents or letters of
credit issued in favor of UBS by one or more banks having a credit rating
with respect to their unsecured debt of at least A- or the equivalent and
having expiration dates not less than 70 Exchange Trading Days after the
Maturity Date, all denominated in USD, if any, Paid by the Company to or
for the benefit of UBS, acting through UBS Securities LLC as its agent,
pursuant to sections IV. or V. of this Confirmation.
"Collateral Adjustment Date" means any day upon which the amount of Cash
Collateral required pursuant to Section V.A. of this Confirmation is
calculated.
"Local Business Day" means a day on which commercial banks in New York, New
York are open for business (including dealings in foreign exchange).
"Paid", "Pays" or "Payment" means payment in same day funds in the same
manner provided for payments to be made to UBS, or UBS Securities LLC as
its agent under this Forward Stock Contract.
VI. CERTAIN COVENANTS AND OTHER PROVISIONS
Ability to Settle in Stock: As of the date hereof, the Company has not, and
after the date hereof, the Company will not,
enter into any obligation that would
contractually prohibit the Company from Stock
Settlement of any shares under this Agreement.
Condition Precedent to
Physical Settlement: It shall be a condition precedent to any right of
the Company to elect Physical Settlement, that
the Company must not more than 180 days prior to
such Day S have completed the private placement
or public offering of such number of Common
Shares or any security that may be converted,
exchanged or exercised into Common Shares, having
such initial purchase price so as to provide the
Company with net cash proceeds in an amount not
less than the Settlement Amount.
Joint and Several Liability: All obligations of the Trust or PPAP hereunder
shall be joint and several obligations of the
Trust and PPAP.
Mandatory Unwind Event: If at any time prior to the Maturity Date:
(i) the average closing price on the Relevant
Exchange of the Common Shares on any three (3)
consecutive Exchange Trading Days, or the Equity
Capitalization, is equal to or less than any of
the Mandatory Unwind Thresholds, then such day
shall be declared a Reset Date, and UBS shall
have the right, upon written notice to the
Company, to require the parties to settle all or
a portion of the Transaction (up to the
cumulative Unwind Share Limit for the
corresponding Mandatory Unwind Threshold) on the
Mandatory Unwind Date pursuant to the settlement
procedures set forth in Section III. above,
Once a Mandatory Unwind Event has occurred, if
the trading price of
14
FORWARD STOCK CONTRACT
the Common Shares is less than a lower Mandatory
Unwind Threshold, UBS shall have the right upon
providing written notice to the Company, to require
the parties to settle on the Mandatory Unwind Date
pursuant to Section III. above, all or a portion of
the Transaction, up to a number of Common Shares equal
to the number of Underlying Shares multiplied by the
corresponding cumulative Unwind Share Limit, on the
mandatory Unwind Date pursuant to the settlement
procedures set forth in Section III. above.
or,
(ii) if any of the following events occur:
(1) any Financial Covenant Default as more
particularly described in Exhibit A attached hereto;
(2) any Event of Default that has not been cured or
waived by the respective lender(s) under the Company's
Line of Credit.
(3) any Event of Default that has not been cured or
waived by the respective lender(s) under any other
unsecured and/or recourse lending agreement involving
the Company involving Specified Indebtedness in
aggregate amount of no less than the Threshold Amount;
(4) Bankruptcy or Insolvency (as such terms are
defined in the Agreement); and/or
(5) any failure of the Company to post Cash Collateral
pursuant to IV.C. herein if such failure is not
remedied on or before the third Local Business Day
after notice of such failure is given to such party.
then, UBS LLC for the account of UBS may require all
or part of the Transaction to be settled early on the
Mandatory Unwind Date pursuant to the settlement
procedures set forth in Section III.
For purposes of the settlement procedures set forth in
Section III, "Day S" shall be the Mandatory Unwind
Date and the "Settlement Shares" shall be the number
of Common Shares to be settled pursuant to clause (i)
or (ii) above. The Company may elect the method of
settlement for such early settlement in accordance
with the settlement provisions set forth herein;
provided, however, that if Stock Settlement or Net
Stock Settlement is elected, and (1) no resale
Registration Statement has been provided and declared
effective prior to Day S or (2) any resale
Registration Statement so provided and declared
effective becomes, on Day S or during an Unwind
Period, the subject of a stop order suspending its
effectiveness or is the subject of any proceeding for
that purpose or any such proceeding is threatened by
the Commission, then the Company at its sole option
may choose to (A) cash collateralize 125% of its
obligation to UBS in a manner similar to that
described in Section V. (including the applicable
periods for delivery of cash collateral), (B)
15
FORWARD STOCK CONTRACT
effect Physical Settlement as to all of the Settlement
Shares in accordance with Section III.B. hereof on the
Exchange Trading Day immediately succeeding the
occurrence of one of the events specified in (1) or
(2) above or (C) effect settlement with Common Shares
that are not subject to a resale Registration
Statement to allow UBS to unwind the Transaction and
liquidate any position it may hold in such
unregistered Settlement Shares by means of negotiated
private resales reasonably acceptable to the Company,
to the extent and in the manner permitted by
applicable federal and state securities laws. In
recognition that such negotiated private resales, if
any, are likely to be completed at prices reflective
of a discount to the prevailing open market prices for
any freely tradeable Common Shares, the Company agrees
to deliver such number of supplemental Common Shares
as UBS may reasonably request to which UBS shall
assign a dollar price in order to approximate an
aggregate amount equal to the aggregate discount
accepted by UBS in connection with the resale of the
Settlement Shares or the Company shall pay an amount
to UBS equal to the aggregate discount accepted by UBS
in connection with the resale of the Settlement
Shares.
Upon completion of all settlement activities, UBS LLC
for the account of UBS, will promptly return all
remaining shares in the Company's Customer Account to
the Company.
Market Disruption Event: The occurrence or existence on any Exchange Trading
Day during the one-half hour period that ends at the
Valuation Time of any suspension of or limitation
imposed on trading on (i) any of the Relevant
Exchanges or (ii) any of the exchange or boards of
trade or futures contract market on which options or
future contracts on the Common Shares of the Company
are traded if, in the reasonable determination of the
Calculation Agent, such suspension or limitation is
material. In the event that a Market Disruption Event
occurs or is continuing on a Valuation Date, then any
determination of the closing sale price of the Common
Shares shall be postponed to the first succeeding
Exchange Trading Day on which there is no Market
Disruption Event, provided that if there is a Market
Disruption Event on each of the five Exchange Trading
Days immediately following the original Valuation Date
that but for the Market Disruption Event would have
been a day on which the closing sale price of the
Common Shares would have been determined, such fifth
Exchange Trading Day shall be deemed to be such
Valuation Date notwithstanding the Market Disruption
Event and the Calculation Agent shall, in consultation
with the Company, determine the closing sale price for
that Valuation Date based upon the last closing sale
price prior to such Market Disruption Event, and if
applicable, shall effect the settlement of the
Underlying Shares by using such last closing sale
price for the determination of the Stock Settlement
Unwind Price.
The Calculation Agent shall within one (1) Business
Day notify the other party of the existence or
occurrence of a Market Disruption Event on any day
that but for the occurrence or existence of a Market
16
FORWARD STOCK CONTRACT
Disruption Event would have been a Valuation
Date.
Regulatory Compliance: Each party agrees that if the delivery of shares
upon settlement is subject to any restriction
imposed by a regulatory authority, it shall not
be an event of default, and the parties will
negotiate in good faith a procedure to effect
settlement of such shares in a manner which
complies with any relevant rules of such
regulatory authority and which is satisfactory in
form and substance to their respective counsel.
Securities Law Compliance: Each party agrees that it will comply, in
connection with this Transaction and all related
or contemporaneous sales and purchases of the
Company's Common Shares, with the applicable
provisions of the Securities Act, the Securities
Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations thereunder.
Settlement: All settlements shall occur through DTC or any
other mutually acceptable depository.
Settlement Stock Delivery: Pursuant to the Stock Settlement and Net Stock
Settlement provisions under Section III. above,
UBS LLC for the account of UBS shall deliver all
Settlement Shares to the Company's Customer
Account. Such Common Shares will serve as
collateral until released by UBS LLC for the
account of UBS in accordance with the settlement
mechanics noted under III.E. above, or delivered
to the Company pursuant to Section III.E.5.
Common Shares held in the Company's Customer
Account shall not be voted.
The Company covenants and agrees with UBS that
Common Shares delivered by the Company pursuant
to settlement events in accordance herewith will
be duly authorized, validly issued and, upon
receipt of the consideration therefor, fully paid
and non-assessable. The issuance of such Common
Shares will not require the consent, approval,
authorization, registration, or qualification of
any government authority, except such as shall
have been obtained on or before the delivery date
to UBS LLC for the account of UBS in connection
with any registration statement filed with
respect to any share or otherwise.
Solvency: Immediately following the execution of this
agreement, the Company will be solvent and able
to pay its debts as they mature, will have
capital sufficient to carry on business and all
businesses in which it engages, and will have
assets which will have a present fair market
valuation greater than the amount of all of its
liabilities.
Trading Authorization: The following individuals and/or any individual
authorized in writing by the Chairman, President,
Chief Financial Officer or Treasurer of the
Company are authorized by the Company to provide
trading instructions to UBS LLC for the account
of UBS with regard to this transaction.
Xxxxxxx X. Xxxxxxxx Xxxxxx X. August,
17
FORWARD STOCK CONTRACT
Xxxx X. Xxxxx, Xxxxxxx X. Xxxxx
UBS shall consult with the Company in advance
with respect to the method and timing of any
disposition that it proposes to make of any
Common Shares delivered to it pursuant this
Agreement or the related Purchase Agreement. UBS
shall use its best efforts to cause such
disposition to be made pursuant to the method and
timetable and to the individuals or classes of
individuals designated by the Company, provided
that any such disposition pursuant to a Stock
Settlement or Net Stock Settlement shall be
completed within the applicable Unwind Period.
18
FORWARD STOCK CONTRACT
VII. DELIVERY INSTRUCTIONS:
Party A: Chase, NYC
UBS Securities LLC
ABA 000000000
A/C No. ###-##-####
Attn: GED
Party B: Bank One Texas, XX
Xxxx. #000 000 0000
XXX 111 000 614
Location: Dallas
Re: Xxxxxxxx Properties
Attn: X. Xxxxxxxxxx
Please confirm that the foregoing correctly sets
forth the terms of our agreement by executing the
copy of this Confirmation enclosed for that
purpose and returning it to Xx. Xxxx Xxxxxxx,
29th. Floor.
Yours faithfully,
Union Bank of Switzerland, London Branch:
By: /s/ X. Xxxx By: /s/ Xxxx Xxxxxxxx
-------------------------- ---------------------------
Name: X. Xxxx Name: Xxxx Xxxxxxxx
Title: Vice President Title: Vice President
Date: Date:
Xxxxxxxx Properties Trust
By: /s/ Xxxxxxx Xxxxx By: /s/ Xxxx X. Xxxxx
-------------------------- ---------------------------
Name: Xxxxxxx Xxxxx Name: Xxxx X. Xxxxx
Title: VP & Treasurer Title: EVP & CFO
Date: Date:
Xxxxxxxx Properties Acquisition Partners, L.P.
By: Xxxxxxxx Properties I, Inc. its general partner:
By: /s/ Xxxxxxx Xxxxx By: /s/ Xxxx X. Xxxxx
-------------------------- ---------------------------
Name: Xxxxxxx Xxxxx Name: Xxxx X. Xxxxx
Title: VP & Treasurer Title: EVP & CFO
Date: Date:
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