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EXHIBIT 10.67
OTC ISSUER STOCK OPTION MASTER AGREEMENT
TERMS AND CONDITIONS
The terms and conditions below shall govern all transactions in Options
(as hereinafter defined) between Xxxxxxx Xxxxx & Co. ("GS&Co.") and the
undersigned (the "Company") if the Confirmation relating thereto refers to this
Agreement. These terms and conditions are collectively referred to as the
"Agreement". Please acknowledge your agreement to and acceptance of this
Agreement by signing and returning the enclosed copy hereof
1. Definitions.
As used herein, the following terms have the following meanings:
(a) American Option: An Option that may be exercised on any Business Day, except
on the Expiration Date, between the hours of 9:00 A.M. and 2:30 P.M. New York
time, and on the Expiration Date between the hours of 9:00 A.M. and 4:30 P.M.,
New York time.
(b) Averaging Period: The number of consecutive Business Days indicated in the
Confirmation to be used in determining the Settlement Value, beginning on and
including the Exercise Date.
(c) Business Day: A day (other than a Saturday or Sunday) that (i) Federal
Reserve Member Banks in New York, NY are open for business, and (ii) the primary
market for trading the Option Securities is (or, but for the existence of a
Market Disruption Event, would be) open for business.
(d) Common Stock of GS&Co.: The common stock of GS&Co. The market price of the
Common Stock of GS&Co. shall be equal to the closing sale price per share
reported on the New York Stock Exchange, Inc.
(e) Confirmation: The written evidence of an Option delivered by GS&Co. to the
Company, containing the specific terms with respect thereto. Each Confirmation,
signed by both the Company and GS&Co., together with this Agreement, shall
constitute the written agreement between the Company and GS&Co. with respect to
the related Option. GS&Co. shall send the Confirmation to the Company by
facsimile on the Trade Date (or as otherwise directed by the Company) and the
Company shall immediately review the terms thereof for accuracy and, if
accurate, countersign and return the Confirmation (by facsimile) to GS&Co.
within one Business Day of receipt. If the Confirmation is inaccurate, GS&Co.
will promptly correct the Confirmation and resend it to the Company for
signature. Such confirmation delivered by GS&Co. and signed by the Company,
together with this Agreement shall constitute the written agreement between the
Company and GS&Co. with respect to such option.
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(f) Contract: The "trading unit" of an Option that specifies the number of
Option Securities that underlie each Option. Unless otherwise specified in the
related Confirmation, a Contract shall consist of 100 shares of the Option
Security, subject to adjustment as provided in Section 2.
(g) Default Payment Amount: The net amount payable in the event of an Event of
Default by one party to the other, as reasonably calculated by the
Non-Defaulting Party by aggregating and setting-off, as applicable, and without
duplication:
(i) the outstanding payments due (or that would have been due but for
Section 6) under this Agreement to each party immediately prior to the Default
Termination Date (as defined in Section 10);
(ii) the Replacement Value of Options to be settled under Section 10
which are unexercised immediately prior to the Default Termination Date;
(iii) the Non-Defaulting Party's Other Expenses; and
(iv) at the option of the Non-Defaulting Party, any Cash Performance
Assurance or collateral or the liquidation value of Non-Cash Performance
Assurance or collateral.
(h) Early Termination Amount: The net amount payable in the event of an Early
Termination Event by one party to the other, as reasonably calculated by GS&Co.
by aggregating and setting-off, as applicable, and without duplication:
(i) the outstanding payments due (or that would have been due but for
Section 6) under this Agreement to each party immediately prior to the Early
Termination Date; and
(ii) the Replacement Value of Options to be settled under Section 10
which are unexercised immediately prior to the Early Termination Date;
(iii) at the option of the Non-Defaulting Party, any Cash Performance
Assurance or collateral or the liquidation value of Non-Cash Performance
Assurance or collateral.
(i) European Option: An Option that may be exercised only on the Expiration Date
between the hours of 9:00 A.M. and 4:30 P.M. New York time.
(j) Exercise Date: The Business Day on which exercise of an Option is, or is
deemed to be, effective.
(k) Exercise Price: The price per share, as set forth in a Confirmation, at
which an Option Security may be purchased or sold or otherwise settled upon
exercise of the related Option.
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(l) Expiration Date: For an American or European Option, 4:30 P.M., New York
time, on the date identified as the Expiration Date in the related Confirmation,
at which time, if the Option has not been exercised, the rights granted to the
holder thereunder expire and the Option is deemed terminated. If an Expiration
Date is not a Business Day, then the next following Business Day shall be the
Expiration Date.
(m) Major Dealer: A securities broker/dealer or bank other than an affiliate of
either party selected by GS&Co., which has a net worth of at least
U.S.$200,000,000 (or its equivalent) and regularly makes markets in options on
securities and indices.
(n) Market Disruption Event: The occurrence, at any time during the half hour
period immediately prior to the time at which a valuation of an Option will take
place, of a suspension or material limitation of trading in (i) Option
Securities on the primary market or (ii) options or futures on Option Securities
on the primary market or on any other exchange on which such options or futures
are traded. For the purposes of this definition, (X) a limitation on the hours
and number of days of trading will not by itself constitute a Market Disruption
Event if it results from an announced change in the regular business hours of
the primary market or other relevant exchange and (Y) a limitation on trading of
the Option Securities or securities generally imposed during the course of a day
by reason of movements in price levels that exceed the movements permitted by
the primary market or other relevant stock exchange, if GS&Co. so reasonably
determines, will constitute a Market Disruption Event.
(o) Market Price: If the Option Security is listed on the New York Stock
Exchange, Inc. or the American Stock Exchange, the closing sale price per share
reported on the New York Stock Exchange, Inc. or on the American Stock Exchange,
as applicable. If the Option Security is not listed on the New York Stock
Exchange, Inc. or the American Stock Exchange, then the Market Price will be the
average of the closing bid and asked prices per share quoted by The NASDAQ Stock
Market or, in the event such closing bid and asked prices are not quoted, the
average of the bid prices obtained by GS & Co. from Major Dealers (GS & Co.
using reasonable efforts to obtain at least thee such bid prices).
(p) Option: An instrument conveying the right, but not the obligation, of the
holder (purchaser) of an Option to purchase from the issuer (seller) of the
Option (in the case of a "Call Option") or to sell to its issuer (in the case of
a "Put Option") the number of Contracts set forth in the applicable
Confirmation, subject to adjustment as provided in Section 2.
(q) Option Security: With respect to any Option, the security of the Company
identified in the related Confirmation for purchase or sale upon exercise of the
Option.
(r) Other Expenses: In relation to a Default Termination Date or an Early
Termination Date, all reasonable costs, losses, expenses, damages or liabilities
(including, without limitation, legal fees, stamp, registration, documentation
and similar taxes, and value added taxes actually incurred or suffered by a
party as a result of (i) the occurrence of an Early Termination Event or Event
of Default with respect to or by
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the other party or (ii) the other party's breach of its material obligations
hereunder, including, without limitation, the costs and expenses of all steps
taken by the Non-Defaulting Party to implement, protect or enforce its rights
under the Agreement and all commercially reasonable steps taken by the
Non-Defaulting Party, including, without limitation, purchase or sale of Option
Securities or other securities, in order to unwind any xxxxxx or cover any
market positions, provided, however, that, except as otherwise expressly
recoverable hereunder, neither party hereto shall be entitled, in the event of a
Default or an Early Termination of this Agreement, to recovery from the other of
any consequential or punitive damages.
(s) Premium: The purchase price of an Option specified in the Confirmation.
(t) Replacement Value: With respect to an Option, the amount that would be
required to be paid by or to the Non-Defaulting Party for an instrument that
would have the effect of preserving the economic equivalent of the payment
and/or delivery obligations of the parties under the Option that would, but for
the occurrence of an Event of Default or an Early Termination Event (as the case
may be), otherwise have fallen due as reasonably calculated by GS & Co. using
the "Black-Scholes" or other applicable method of option valuation. In
calculating the Replacement Value, GS&Co. shall use the six month volatility of
the Option Security calculated over the six month period preceding the Business
Day prior to the Default Termination Date, the Early Termination Date or, in the
case of an Early Termination Event as specified in Section 8(v), the
announcement date of such event, as the case may be.
(u) Settlement Value: The amount in U.S. dollars by which the Exercise Price
exceeds the Market Price (in the case of a Put Option), or the Market Price
exceeds the Exercise Price (in the case of a Call Option), in either case
multiplied by the number of shares of the Option Security covered by the
exercise of the Option. The Market Price shall be determined as of the Exercise
Date, or, if an Averaging Period is specified in the related confirmation, the
average of the Market Prices for each Business Day in the Averaging Period,
subject to adjustment as provided in Section 5(f).
2. Adjustments. The Exercise Price and the Trading Units of an Option are each
subject to adjustments as follows:
(a) During the term an Option is in effect (the "Exercise Period"), if any
adjustment is made by the Options Clearing Corporation or its successors ("OCC")
in the terms of outstanding OCC-issued options ("OCC Options") on the Option
Securities, an equivalent and pro rata adjustment shall be made in the terms of
such Option to the extent such adjustment is applicable on the date of any
exercise of such Option. Except as provided in Section 2(b) below, no
adjustments shall be made in the terms of such Option in any event that does not
result in an adjustment to the terms of outstanding OCC Options on Option
Securities. Without limiting the generality of the foregoing no adjustment shall
be made in the terms of any option for ordinary cash dividends on Option
Securities. A summary of the terms under which the OCC may make adjustments is
set forth below:
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(i) Whenever there is a dividend, stock dividend, stock distribution,
stock split, reverse stock split, rights offering, distribution, reorganization,
recapitalization, reclassification or similar event in respect of the Option
Securities or a merger, consolidation, dissolution or liquidation of the issuer
of the Option Securities, the number of option contracts, the unit of trading,
the exercise price, and the Option Securities, or any of them, with respect to
all outstanding option contracts open for trading in the Option Securities may
be adjusted.
(ii) All adjustments pursuant to this Section shall be made by GS&Co. by
reference to actions taken by the Securities Committee of the OCC and in
consultation with the Company. The Securities Committee determines whether to
make adjustments to reflect particular events in respect of the Option
Securities and the nature and extent of any such adjustment, based on its
judgment as to what is appropriate for the protection of investors and the
public interest, taking into account such factors as fairness to holders and
writers of option contracts on the Option Securities, the maintenance of a fair
and orderly market in options on the Option Securities, consistency of
interpretation and practice, efficiency of exercise settlement procedures, and
the coordination with other clearing agencies of the clearance and settlement of
transactions in the Option Securities. The Securities Committee of the OCC may,
in addition to determining adjustments on a case-by-case basis, adopt statements
of policy or interpretation having general application to specified types of
events.
(iii) In the case of a stock dividend, stock distribution or stock split
whereby one or more Option Securities are issued with respect to each
outstanding Option Security, each Option covering the Option Securities shall be
increased by the same number of additional rights as the number of shares issued
with respect to each Option Security under the Option. The Exercise Price per
share in effect immediately prior to such event shall be proportionately
reduced, and the unit of trading shall remain the same.
(iv) In the case of a stock dividend, stock distribution or stock split
whereby other than a whole number of Option Securities are issued in respect of
each outstanding share, the Exercise Price in effect immediately prior to such
event shall be proportionately reduced, and conversely, in the case of a reverse
stock split or combination of shares of the Option Security, the Exercise Price
in effect immediately prior to such event shall be proportionately increased.
Whenever the Exercise Price with respect to an Option has been reduced or
increased in accordance with this sub-paragraph (iv), the unit of trading shall
be proportionately increased or reduced, as the case may be.
(v) In the case of any distribution made with respect to Option
Securities, other than cash distributions subject to Section 2(a) and other than
distributions for which adjustments are provided in sub-paragraph (iii) or (iv),
if an adjustment is determined by the Securities Committee of the OCC to be
appropriate, 1) the Exercise Price in effect immediately prior to such event
shall be reduced by the value per share of the distributed property, in which
event the unit of trading shall not be adjusted, or 2) the unit of trading in
effect immediately prior to such event shall be adjusted so as to include the
amount of property distributed with respect to the number of shares of the
Option
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Security represented by the unit of trading in effect prior to such adjustment,
in which event the Exercise Price shall not be adjusted.
(vi) Adjustments shall as a general rule become effective on the
"ex-date" established by the primary market on which the Option Securities are
open for trading.
(b) If at any time during the life of an Option there shall be no outstanding
OCC options on Option Securities, and an event shall occur for which an
adjustment might have been required under the By-Laws, Rules and stated policies
of the OCC applicable to the adjustment of OCC options, as described above, (the
"OCC Adjustment Rules"), GS&Co. shall determine, applying the principles set
forth in the OCC Adjustment Rules, whether to adjust the terms of such Option,
and the terms of any such adjustment. Any such reasonable adjustment shall be
binding on the parties.
(c) No adjustment of the Exercise Price shall be required unless such adjustment
would require an increase or decrease in such price of at least one U.S. cent:
provided however, that any adjustment which by reason of this Section 2(c) is
not required to be made shall be carried forward and taken into account (as if
such adjustment had been made at the time when it would have made but for the
provisions of this Section 2(c)) in any subsequent adjustment. All calculations
under this Section 2(c) shall be made to the nearest U.S. cent with five tenths
or more of a U.S. cent to be considered (rounded up) a full cent.
(d) If the Exercise Date falls on or after a date with effect from which an
adjustment takes retroactive effect pursuant to any of the provisions of this
Section 2 and such adjustment has not yet been reflected on such Exercise Date,
the Settlement Value will be adjusted to reflect the additional Option
Securities, being equal to the excess of the number of the Option Securities
which would have been used in the calculation of the Settlement Value at such
retroactively adjusted Exercise Price over the number of Option Securities
covered by the Option immediately prior to such adjustment.
3. Exercise Procedure; Automatic Exercise.
(a) An Option may be exercised in accordance with its terms by the holder
thereof by giving notice of exercise either orally or in writing to the person
specified for such purpose by the writer of such Option in the space provided
below the signature block of this Agreement or as otherwise notified in writing
by the writer of such Option to the holder of such Option. Oral notice of
exercise shall be confirmed in writing by 2:30 P.M. New York time on the
following Business Day. An Option may be exercised only in whole and not in part
unless "Exercisable in part" is specified in the related Confirmation.
(b) If the holder of an Option has not given notice of exercise or notice of
intent not to exercise to the writer by 4:30 P.M., New York time, on the
Expiration Date, the Option shall be deemed to have been exercised by the holder
if such Option is in-the-money based upon the Market Price on the Expiration
Date. An Option is "in the money" as of 4:30 P.M. on the Expiration Date if the
Settlement Value of the unexercised portion of
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such Option is based on an amount equal to or greater than twenty-five cents
($.25) per underlying Option Security. Each party shall attempt to notify the
other party of such automatic exercise as soon as practicable but in any case by
4.30 p.m. New York time on the Business Day following the Expiration Date.
Failure or inability to give such notice will not affect the validity of
exercise pursuant to this Section 3(b).
4. Exercise Limit. If an Option is an American style option, the maximum
aggregate number of shares of the Option Security as to which such Option and
any similar (i.e., put or call) Option then outstanding may be exercised by the
holder on any Business Day is the number of shares, if any, specified in the
related Confirmation as the "Exercise Limit".
5. Settlement upon Exercise.
(a) If "Physical Settlement" is specified in the related Confirmation, within
three Business Days following the Exercise Date (or such other period as agreed
to by the Company and GS&Co.) payment for the Option Securities relating to that
Option exercise shall be made at the Exercise Price per share therefor in
clearing house funds against delivery of such Option Securities. Option
Securities will be delivered in good transferable form as is customary for that
type of Option Security. Whenever an Option Security is transferable or
deliverable by book entry at a depository or clearing house at which both
parties or their clearing agents are members, such method shall be used to
effect transfer or delivery. Physical delivery shall only be made if the
transfer or delivery cannot be effected reasonably through a depositary or
clearinghouse.
(b) If "Cash Settlement" is specified in the related Confirmation, an Option
shall be settled by a payment in clearing house funds of an amount equal to the
Settlement Value on the third Business Day following the Exercise Date or as
otherwise stated in the Confirmation or agreed to by the Company and GS&Co.
(c) If "Physical Settlement" is specified in the related Confirmation and "Cash
Settlement at Company's Election" is specified in such Confirmation, then,
unless the Company has notified GS&Co. that the Option will settle for cash
pursuant to Section 5(b) above at least two Business Days before the Exercise
Date (or such other period as may be specified in the related Confirmation), the
Option will settle by physical delivery of the Option Securities pursuant to
Section 5(a) above. Such notice may be given orally or in writing. Oral notice
shall be confirmed by 4:30 P.M. New York time on the following Business Day.
(d) If "Net Share Settlement" is specified in the related Confirmation, then the
Company may elect to have the related Option settled by payment of the
Settlement Value in shares of the Option Security by giving notice of such
election to GS&Co. not less than five Business Days before the Exercise Date.
If Net Share Settlement applies, settlement shall be made by delivery of
the number of shares of the Option Security equal in value to the Settlement
Value, with such shares valued based on the average of the Market Prices for the
consecutive
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Business Days in the Net Share Valuation Period. The "Net Share Valuation
Period" shall commence on (but exclude) the final Business Day of the applicable
Averaging Period and end on (and include) the date which follows it by the same
number of Business Days in the Averaging Period. If no Averaging Period is
indicated on the Confirmation, the Net Share Valuation Period shall be deemed to
be the Business Day following the Exercise Date. Delivery of such shares shall
be made "free" in good transferable form by the third Business Day following the
last day of the Net Share Valuation Period.
Net Share Settlement of an Option issued by the Company is subject to
Section 8, Section 9 and Section 10 hereof and the following conditions: the
Company at its sole expense shall (i) have, prior to the Exercise Date,
registered pursuant to an effective registration statement reasonably
satisfactory to GS&Co. (the "Registration Statement") filed under the Securities
Act of 1933, as amended, (the "Securities Act") the offering and sale by GS&Co.
of not less than 150% of the shares of the Option Security necessary to fulfill
the Net Share Settlement delivery obligation by the Company (determining the
number of such shares to be registered on the basis of the average of the Market
Prices on the five (5) Business Days prior to the Exercise Date); (ii) maintain
the effectiveness of the Registration Statement from the Exercise Date until the
earlier of (a) the one year anniversary of the Exercise Date and (b) the date
GS&Co. has sold all shares to be delivered by the Company in satisfaction of its
Net Share Settlement obligations, (iii) have entered into an underwriting
agreement with GS&Co. and/or its designee(s) in a form reasonably satisfactory
to GS&Co., prior to the Exercise Date, covering the shares to be delivered by
the Company in satisfaction of its Net Share Settlement obligations, (iv) have
delivered to GS&Co. prior to the Exercise Date such number of prospectuses
relating thereto as GS&Co. shall have reasonably requested and shall promptly
update and provide GS&Co. with replacement prospectuses as necessary to ensure
the prospectus does not contain any untrue statement of a material fact or any
omission of a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading, (v) have delivered to GS&Co. prior to the Exercise Date an
opinion of counsel and an accountant's comfort letter with respect to the
Registration Statement and prospectus in each case as is customary in
underwritten public offerings, (vi) have taken all steps necessary for the
shares sold by GS&Co. to be listed or quoted on the primary exchange or
quotation system that the Option Securities are listed or quoted on, (vii)
entered into an indemnification agreement reasonably acceptable to GS&Co.
covering the information contained in such Registration Statement and prospectus
and (viii) take such action as is required to ensure that GS&Co.'s sale of the
Option Securities does not violate, or result in a violation of, the federal
securities laws. If any of these conditions are not satisfied on or after the
Exercise Date and prior to the delivery of the Option Securities by the Company,
GS&Co. may require such Option to be settled, at its option in cash pursuant to
Section 5(b) or physically pursuant to Section 5(a). Subject to the next
Section, if any of these conditions are not satisfied at any time after the
delivery of the Option Securities by the Company, GS&Co. may require the Company
to repurchase any or all of the unsold Option Securities, upon three Business
Days notice, for cash at the Market Price per Option Security used to determine
the
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Settlement Value; provided, however, that the Company has the right (the
"Black-out Right"), at any time following the delivery of Net Share Settlement
shares to GS&Co., notify GS&Co. that the then-current prospectus, in the
Company's judgment, requires amendment; provided, further, that in such case,
(x) the Company shall file an appropriate amendment reasonably satisfactory to
GS&Co. within five (5) Business Days; (y) GS&Co. shall not use any prior
prospectus pending such amendment, and (z) if such amendment is not so filed or
a prospectus reasonably acceptable to GS&Co. cannot be used by GS&Co. for not
less than five (5) consecutive business days following the filing of the
amendment, GS&Co. shall have the right to require repurchase by the Company on
demand of all unsold Option Securities delivered hereunder at the market price
per Option Security used to determine the Settlement Value.
(e) Settlement for Fair Value. On any Business Day prior to the Expiration Date,
the Company may request that GS&Co. provide a Settlement Value for the Net Share
Settlement of an Option or portion thereof, by orally notifying GS&Co. of the
number of Contracts (and underlying Option Securities) for which such request
applies. The Company shall deliver written confirmation to GS&Co. of such
request by 2:30 P.M. New York time on the following Business Day. Upon receipt
of such request, GS&Co. will quote to the Company a Settlement Value. If the
Company accepts such Settlement Value, it shall notify GS&Co. of its irrevocable
election to Cash Settle or Net Share Settle such Option (or portion thereof) and
deliver written confirmation of such irrevocable acceptance by 2:30 P.M. New
York time on the Business Day (the "Notification Date") following the date
GS&Co. quotes such Settlement Value. Where an Option is to be Cash Settled by
Settlement for Fair Value, the options shall settle on the third Business Day
following the Notification Date by payment in clearing house funds to the holder
of the Option of an amount equal to the Settlement Value. Where an Option is to
be Net Share Settled by Settlement for Fair Value, the options shall settle on
the third Business Day following the Notification Date by delivery to the holder
of the Option of a number of shares of the Option Security equal to the
Settlement Value in the manner specified in Section 5(a), with such shares
valued based on the Market Price on the Business Day following the Notification
Date. Where settlement pursuant to this Section 5(e) would entail a delivery of
Option Securities by the Company to GS&Co., then delivery of such Option
Securities under this Section 5(e) is subject to the conditions precedent set
forth in Section 5(d) (with the Notification Date being the Exercise Date for
purposes of such conditions) and, if the Company fails to satisfy such
conditions, GS&Co. shall have the rights specified in Section 5(d).
(f) With respect to any Option that is to be cash-settled or that is to be
settled by Net Share Settlement, if GS&Co. determines that a Market Disruption
Event is occurring on what would otherwise be the Exercise Date, then the
Exercise Date shall be the next Business Day on which a Market Disruption Event
is not occurring, provided that if a Market Disruption Event is still subsisting
on the fifth Business Day after the Exercise Date, then such fifth Business Day
shall be the Exercise Date and GS&Co. shall determine the Market Price as of
such fifth day. In the event that GS&Co. determines that a Market Disruption
Event is occurring on a Business Day in an Averaging Period or a Net Share
Valuation Period, then such period shall be extended so that the number of
Business Days in such period on which a Market Disruption Event is not occurring
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equals the number of days indicated in the Confirmation for the Averaging
Period, provided that if a Market Disruption Event is subsisting for five
Business Days, then such fifth Business Day shall be deemed to conclude the
Averaging Period or the Net Share Valuation Period.
(g) Adjustment of number of shares of the Option Security used to Net Share
Settle. If (i) the Company elects to Net Share Settle under subsection (d) or
(e) hereof, (ii) the Company elects to exercise its Black-out Right under
subsection (d) hereof, and (iii) on the Business Day that GS&Co. is first able
to use a prospectus reasonably satisfactory to it to sell Option Securities (the
"Restart Date") the Market Price of the Option Securities is less than the
Market Price of the Option Securities used to determine the Settlement Value,
then, on or before the Restart Date, the Company shall deliver an additional
number of shares of the Option Security (the "Top-up Shares") so that (x) equals
(y) where (x) is the Market Price of the Option Securities on the Restart Date
multiplied by the number of Top-up Shares and (y) is the difference between the
Market Price of the Option Securities used to determine the Settlement Value and
the Market Price of the Option Securities on the Restart Date multiplied by the
number of unsold Option Securities held by GS&Co. on the Restart Date prior to
the delivery of the Top-up Shares.
(h) The number of shares required to be delivered by the Company pursuant to
subsection (d), (e) or (g) hereof, in order that their value equals the
Settlement Value shall be rounded up to the next whole number and GS&Co.
undertakes to return to the Company, if applicable, an amount of cash equal to
the value of the fraction of a share of the Option Security that exceeds the
Settlement Value.
6. No Event of Default or Early Termination Event . Each obligation of a party
in respect of each Option to make a payment or deliver Option Securities is
subject to the condition precedent that no Event of Default or Early Termination
Event (or event that, with the lapse of time or the giving of notice or both,
would become an Event of Default) in each case by or with respect to the other
party has occurred and is continuing.
7. Representations, Warranties and Covenants.
(a) At the time of this Agreement and at the time each Option is entered into,
the Company and GS&Co. each represent and warrant to and covenant with the other
with respect to this Agreement and each Option that:
(i) each party is duly organized and validly existing under the laws of
the jurisdiction of its organization or incorporation and, if relevant under
such laws, in good standing;
(ii) this Agreement has been duly authorized, executed and delivered by
such party and constitutes its valid and legally binding obligation, enforceable
against such party in accordance with its terms; and the issuance, sale and
purchase, as the case may be, of each Option will be duly authorized, executed
and, when delivered by such party, will constitute the valid and legally binding
obligation of such party
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enforceable against such party in accordance with the terms thereof (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to
equitable principles of general application (regardless of whether enforcement
is sought in a proceeding in equity or at law));
(iii) the execution and delivery of this Agreement by such party does
not, and the performance by it of its obligations hereunder and under each
Option will not, violate, conflict with or constitute a breach under any law
applicable to it, any provision of its constitutional documents, any order or
judgement of any court or other agency of government applicable to it or any
agreement or instrument to which it is party or which is binding on any of its
properties;
(iv) all governmental and other consents that are required to have been
obtained by it with respect to this Agreement have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with;
(v) no Event of Default or, to its knowledge, Early Termination Event
with respect to it has occurred and is continuing and no such event or
circumstance would occur as a result of its entering into or performing its
obligations under this Agreement; and
(vi) there is not pending or, to its knowledge, threatened against it
any action, suit or proceeding at law or in equity or before any court,
tribunal, governmental body, agency or official or any arbitrator that is likely
to affect the legality, validity or enforceability against it of this Agreement
or its ability to perform its obligations under this Agreement.
(b) At the time of this Agreement and at the time each Option is entered into,
each party represents and warrants to the other that it has the power (corporate
or otherwise) to enter into Option transactions.
(c) In addition to the foregoing, the Company represents and warrants to GS&Co.
that as of the date hereof and as of the trade date of each Option:
(i) the Company's most recent Annual Report on Form 10-K, together with
all reports subsequently filed by the Company pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act"), when filed did not contain any untrue
statement of a material fact or any omission of a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and the Company is not in
possession of any material non-public information that would make it unlawful
for the Company to effect transactions in its own securities;
(ii) it has taken such advice from its legal, tax and accounting
advisors as it has deemed necessary prior to entering into this Agreement, is
not relying on GS&Co. for any such advice regarding this Agreement or any action
either party may take or
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refrain from taking thereunder, including, without limitation, the purchase or
writing of Options;
(iii) it is fully familiar with the purposes, techniques and uses of
options and understands and accepts the risks involved in their use. It
understands and acknowledges that GS&Co. may, at its own expense, liability and
risk, hedge its exposure with respect to Options and that such hedging may
involve transactions in Option Securities or options or other derivatives in
respect thereof (collectively "Hedging Transactions"), such Hedging Transactions
may be effected at any time and the Company shall not have any financial
interest in or any right to direct the amount or timing of such Hedging
Transactions;
(iv) it confirms that it is familiar with the rules of the National
Association of Securities Dealers, Inc. (the "NASD") applicable to the purchase
and/or sale of options, including without limitation rules relating to position
and exercise limits, as such limits may be in effect from time to time, and
agrees that, whether acting by itself or in concert with others, it will not
violate or attempt to violate any position or exercise limits established by the
NASD; and
(v) with respect to the purchase or writing of each Option, the Option
Securities or securities that are convertible into, or exchangeable or
exercisable for Option Securities, are not subject to a "restricted period" as
such term is defined in Regulation M under the Exchange Act (a "Restricted
Period") and the purchase or writing of the Option will not violate Rule 13e-1
or Rule 13e-4 under the Exchange Act. It will use its best efforts to ensure
that physically-settled American Options are not exercised during a Restricted
Period.
(d) In addition to the foregoing, GS&Co. represents to the Company now and as of
the trade date of each Option, that (i) it will not engage in any transactions
hereunder in the Option Securities (whether in connection with its hedging
activities or otherwise) in violation of applicable securities laws, (ii) GS&Co.
is an "accredited investor" as defined in Rule 501(a) of Regulation D under the
Securities Act, and (iii) at the time each transaction is entered into, GS&Co.
is acquiring all Options for its own account and without a specific intent to
distribute.
(e) In addition to the foregoing, the Company covenants that on the first
Business Day of each and every calendar month until the Master Agreement is
terminated, it will send to GS &Co. written confirmation that the Company's
unrestricted cash balance as of the final Business Day in the previous calendar
month exceeds $75,000,000. Such confirmation should be marked "Confidential" and
sent by facsimile to Xxxxxxx X. XxXxxxxxx, Credit Department, Xxxxxxx Sachs &
Co. at (000) 000-0000.
8. Early Termination . If any of the following events (each an "Early
Termination Event") shall occur, then (a) in the case of clauses (i), (iii), (v)
and (vi), GS&Co. shall have the right to terminate and settle all (but not some)
Options by providing written notice of such election to the Company, (b) in the
case of clauses (ii) and (iv), the Company shall have the right to terminate and
settle all (but not some) Options by providing written notice of such election
to GS&Co., and (c) in the case of clause (vii), both the Company and GS&Co.
shall have the right to terminate and settle all (but not some) Options by
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providing written notice of such election to the other party. The date of such
notice shall be the "Early Termination Date". In the case of an event specified
in clause (vi), the right of GS&Co. to terminate all of the Options shall expire
at 5:30 pm (New York time) on the 10th Business Day after the announcement of
such event. Any decision by GS&Co. not to terminate all of the Options upon the
occurrence of such event shall not operate as a waiver of the right to terminate
all of the Options upon the announcement of a subsequent event specified in
clause (vi). The party exercising its termination rights pursuant to this
Section 8 shall have the rights and obligations of the Non-Defaulting Party and
the other party shall have the rights and obligations of the Defaulting Party,
each as set forth in Section 10(b) through Section 10(e):
(i) The Market Price falls below $5.00 per share;
(ii) The market price of the Common Stock of GS&Co. falls below $5.00
per share;
(iii) The unsecured and unsubordinated long-term obligations of the
Company are rated either below B by Standard & Poor's Rating Services or below
b2 by Xxxxx'x Investors Services, Inc.;
(iv) The unsecured and unsubordinated long-term obligations of GS&Co.
are rated either below B by Standard & Poor's Rating Services or below b2 by
Xxxxx'x Investors Services, Inc.;
(v) The Company consolidates or amalgamates with, or merges with or
into, or transfers all or substantially all its assets to, another entity, where
(a) the Company is not the surviving entity, (b) the common stock of the other
entity is not traded on the New York Stock Exchange, Inc. or the American Stock
Exchange, Inc. or quoted by The NASDAQ Stock Market, or (c) such entity has a
market capitalization of more than 50% of the market capitalization of the
Company (measured with respect to the Company and such entity without giving
effect to the consolidation, amalgamation, merger or transfer of assets);
(vi) the unrestricted cash balance of the Company falls below
$75,000,000 at any time; or
(vii) it becomes unlawful to perform any absolute or contingent
obligation to make a payment or delivery or to receive a payment or delivery in
respect of such Option or to comply with any other material provision of this
Agreement relating to an Option, due to the adoption of, or any change in,
applicable law after the date on which an Option is entered into, or due to the
promulgation of, or any change in, the interpretation by any court, tribunal or
regulatory authority with competent jurisdiction of any applicable law after
such date.
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9. Default. If any of the following events (each an "Event of Default") shall
occur with respect to a party to an Option (the "Defaulting Party"), the party
which is not in default (the "Non-Defaulting Party") shall have the rights set
forth in Section 10(a) through Section 10(e):
(i) the Defaulting Party fails to perform any material obligation
required to be performed under this Agreement or any Option entered into
hereunder, including, without limitation, the failure to pay any Premium when
due, and such failure is not cured within three Business Days after receipt of
notice thereof;
(ii) the Defaulting Party repudiates any of its obligations hereunder or
under any Option;
(iii) a case in bankruptcy shall be commenced or consented to or a
petition for the appointment of a receiver shall be filed by the Defaulting
Party or brought against the Defaulting Party or the Defaulting Party shall make
a general assignment for the benefit of creditors or admit in writing that it is
unable to pay its debts as they become due, or shall suspend the transaction of
its usual business or any material portion thereof or (if a corporation) shall
be dissolved or shall be a party, other than the surviving party, to a merger or
consolidation;
(iv) a representation made or repeated or deemed to have been made or
repeated by a party proves to have been incorrect or misleading in any material
respect when made or repeated or deemed to have been made or repeated;
(v) the Option Securities are not listed or quoted (as the case may be)
on the New York Stock Exchange, Inc., the American Stock Exchange or The NASDAQ
Stock Market;
(vi) a default, event of default or other similar condition or event in
respect of the Company under one or more agreements or instruments relating to
indebtedness of the Company in an aggregate amount in excess of $20,000,000
which has resulted in such indebtedness becoming due and payable shall have
occurred; or a default by the Company in making one or more payments on the due
date thereof in an aggregate amount in excess of $20,000,000 under such
agreements or instruments (after giving effect to any applicable notice
requirement or grace period) shall have occurred; or
(vii) a default, event of default or other similar condition or event in
respect of GS&Co. under one or more agreements or instruments relating to
indebtedness of GS&Co. in an aggregate amount in excess of $50,000,000 which has
resulted in such indebtedness becoming due and payable shall have occurred; or a
default by GS&Co. in making one or more payments on the due date thereof in an
aggregate amount in excess of $50,000,000 under such agreements or instruments
(after giving effect to any applicable notice requirement or grace period) shall
have occurred.
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10. Remedies.
(a) Upon the occurrence of an Event of Default and with respect to all unexpired
but unexercised Options (for which purpose a partially exercised Option is an
unexercised Option but only as to the unexercised portion), the Non-Defaulting
Party may by written notice to the Defaulting Party sent at any time while an
Event of Default is continuing and specifying the Event of Default, elect to
terminate and settle all (but not some) Options in accordance with this Section
10 on the date specified in and no earlier than the date of the notice (the
"Default Termination Date").
(b) If a Default Termination Date or Early Termination Date (as the case may be)
occurs, (i) GS&Co. shall reasonably calculate the Replacement Value and shall
give the Company written notice thereof (including reasonable detail of the
calculation thereof) and (ii) the Non-Defaulting Party shall calculate the
Default Payment Amount or Early Termination Amount (as the case may be) payable
by one party to the other and shall as soon as reasonably practicable give to
the Defaulting Party a statement thereof.
(c) The Default Payment Amount shall be payable on the Business Day immediately
after notice of its amount is given to the Defaulting Party and, unless payable
by the Non-Defaulting Party, shall be paid in cash in immediately available
funds together with interest thereon from (and including) the Default
Termination Date to (but excluding) the date of payment at the rate, to the
extent permitted by applicable law, of 2 per cent per annum above Xxxxxx
Guaranty Trust Company's prime (or base) commercial loan rate for short term
borrowings as in effect from time to time.
(d) The Early Termination Amount shall be payable on the Business Day
immediately after notice of its amount is given to the Defaulting Party and,
unless payable by the Non-Defaulting Party, shall be payable in cash, in
immediately available funds. Notwithstanding the previous sentence, if the
following conditions are satisfied, the Company may elect to Net Share Settle
the Early Termination Amount by delivering to GS&Co. a number of shares
reasonably estimated by GS&Co. to have a value equal to 120% of the Early
Termination Amount; (i) the Company shall have delivered to GS&Co. Performance
Assurance equal to its Aggregate Performance Assurance Requirement in the event
that it wishes to Net Share Settle the Early Termination Amount, and (ii) the
conditions specified in Section 5(d) hereof are satisfied, provided that for the
avoidance of doubt, the Black-out-Right shall not be available to the Company if
it elects to Net Share Settle the Early Termination Amount. If after three
Business Days immediately following the Early Termination Date (the third such
Business Day being the "Resale Date"), the aggregate proceeds of any sales of
any shares of the Option Security so delivered, net of customary fees,
commissions and expenses incurred in connection with the offer and sale of the
shares of the Option Security so delivered (including, but without limitation to
the covering of any over-allotment or short position (syndicated or
otherwise))(the "Net Proceeds") are less than the Early Termination Amount (it
being understood that, subject to the following proviso, GS&Co. shall use
commercially reasonable efforts to sell the shares of the Option Security on or
before the Resale Date, provided that GS&Co. shall be under no obligation to
sell any of such shares unless GS&Co.'s Commitments Committee, in accordance
with its customary review
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process, shall have approved the undertaking of GS&Co. to sell the shares of the
Option Security), the Company agrees to indemnify GS&Co. to the extent of such
shortfall by the payment of that short-fall amount in cash, in immediately
available funds, on the date that is two Business Days after the Resale Date
(the "Final Payment Due Date"). Within two Business Days after the Early
Termination Amount is paid in full, GS&Co. will refund in cash, in immediately
available funds, any excess of the Net Proceeds over the Early Termination
Amount and if any of the shares of the Option Security so delivered remain
unsold as of the Resale Date, such unsold shares will be refunded to the
Company.
(e) The Company and GS&Co. hereby agree that the Default Payment Amount or the
Early Termination Amount (as the case may be) and all other amounts due
hereunder shall rank pari passu with that party's senior most debt.
(f) The parties agree that this Agreement shall be treated as a securities
contract upon the occurrence of any of the events specified in clause (iii) of
Section 9.
(g) The parties hereby agree that the amounts recoverable under this Section 10
are not a penalty.
(h) The Non-Defaulting Party's rights under this Section 10 shall be cumulative
and in addition to, and not in limitation or exclusion of, any other rights
which the Non-Defaulting Party may have (whether by agreement, operation of law
or otherwise) against the Defaulting Party.
11. Miscellaneous.
(a) A Confirmation sent by GS&Co. to the Company on a Business Day shall be
deemed to have been received by the Company on the same day (or, if sent on a
day which is not a Business Day, on the next succeeding Business Day) if sent by
same-day messenger, by telex or other telecommunication device capable of
transmitting or creating a written record of transmission, and on the third day
after the day it is sent if by first class mail, postage prepaid (or, if mailed
on a day which is a Federal holiday, three days after the next succeeding day
which is not a Federal holiday). If the Company fails to object to the terms
contained in a Confirmation within three Business Days after receipt thereof,
the terms of such Option (as evidenced by the Confirmation) shall be deemed to
have been accepted.
(b) Neither this Agreement nor any Option may be assigned or transferred by
either party hereto without the consent of the other party, except for an
assignment and delegation of all of GS&Co.'s rights and obligations hereunder in
whatever form GS&Co. determines may be appropriate to a partnership,
corporation, trust or other organization in whatever form that succeeds to all
or substantially all of GS&Co.'s assets and business and that assumes such
obligations by contract, operation of law or otherwise. Upon any such delegation
and assumption of obligations, GS&Co. shall be relieved of and fully discharged
from all obligations hereunder, whether such obligations arose before or after
such delegation and assumption.
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(c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
(d) This Agreement and each Option entered into hereunder shall be subject to
all laws, rules and regulations applicable thereto, including, but not by way of
limitation, the provisions of the Securities Act, and the Exchange Act and all
rules and regulations, promulgated or to be promulgated thereunder. The Company
and GS&Co. each acknowledge that the Options acquired by it from the other party
hereunder will not be registered under the Securities Act and will be sold by
the issuer of the Option in reliance upon the exemption for private placements
pursuant to Section 4(2) of the Securities Act.
(e) The parties hereby agree that this Agreement and the terms of each Option
entered into hereunder are confidential and may not be publicly disclosed by
either party except (a) as reasonably determined by the Company to be required
or desirable to comply with its obligations under the Securities Act or the
Exchange Act or (b) with the prior written consent of the other party or
pursuant to the demand or requirement of any court, or (c) regulatory agency
having jurisdiction over a party.
(f) Each Option is being entered into by the parties hereto acting as principal
for their respective own account. Subject to the termination of any Option by
expiration or full performance upon exercise, no failure on the part of either
party to exercise, and no delay in exercising, any contractual right prior to
termination of any such Option as aforesaid will operate as a waiver thereof,
nor will any single or partial exercise by either party of any right preclude
any other or future exercise thereof or the exercise of any other right. No
modification or waiver of any provision hereof nor any consent to any departure
by either party therefrom shall in any event be effective unless the same shall
be in writing, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. All written notices
hereunder shall be sent to a party at its address by mail, hand delivery or
facsimile transmission as set forth below, or to such other address or telex
number as a party shall have last notified the other party in writing, or to
such other address as either party shall have last notified the other party in
writing. For purposes of telephone notice, GS&Co.'s relevant telephone number
and the Company's relevant telephone number are set forth below and each of
GS&Co. and the Company shall notify the other in writing of any change thereof.
12. Arbitration.
(a) ARBITRATION IS FINAL AND BINDING ON THE COMPANY AND GS&CO.
(b) THE COMPANY AND GS&CO. ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT,
INCLUDING THE RIGHT TO A JURY TRIAL.
(c) PRE-ARBITRATION DISCOVERY SHALL BE GENERALLY MORE LIMITED THAN AND DIFFERENT
FROM DISCOVERY ALLOWED IN COURT PROCEEDINGS.
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(d) THE ARBITRATOR'S AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY
THE ARBITRATORS IS STRICTLY LIMITED.
(e) THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS
WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
ANY CONTROVERSY BETWEEN OR AMONG GS&CO. OR ITS AFFILIATES, OR ANY OF ITS
OR THEIR PARTNERS, DIRECTORS, AGENTS OR EMPLOYEES, ON THE ONE HAND, AND THE
COMPANY OR ITS AGENTS AND AFFILIATES, ON THE OTHER HAND, ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OPTION ENTERED INTO HEREUNDER, SHALL BE
SETTLED BY BINDING ARBITRATION, INCLUDING, WITHOUT LIMITATION, EITHER PARTY
SEEKING INJUNCTIVE OR OTHER PRELIMINARY RELIEF NECESSARY TO PRESERVE THE STATUS
QUO OR MATERIAL RIGHTS HEREUNDER PENDING ARBITRATION OF CLAIMS, IN ACCORDANCE
WITH THE THEN CURRENT RULES OF, AT THE COMPANY'S ELECTION, THE AMERICAN
ARBITRATION ASSOCIATION ("AAA") OR THE BOARD OF ARBITRATION OF THE NEW YORK
STOCK EXCHANGE, INC. ("BANYSE"). IF THE COMPANY DOES NOT MAKE SUCH ELECTION BY
REGISTERED MAIL ADDRESSED TO GS&CO. WITHIN FIVE (5) BUSINESS DAYS AFTER RECEIPT
OF NOTIFICATION FROM GS&CO. REQUESTING SUCH ELECTION, THEN THE COMPANY
IRREVOCABLY AUTHORIZES GS&CO. TO MAKE SUCH ELECTION ON BEHALF OF THE COMPANY.
THE AWARD OF THE ARBITRATORS SHALL BE FINAL, AND JUDGMENT UPON THE AWARD
RENDERED MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION
THEREOF.
NEITHER PARTY SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO
ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST
ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE CLASS ACTION; WHO IS A MEMBER
OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY
CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL:
(i) THE CLASS CERTIFICATION IS DENIED;
(ii) THE CLASS IS DECERTIFIED; OR
(iii) THE CUSTOMER IS EXCLUDED FROM THE CLASS BY THE COURT.
SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A
WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.
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BY SIGNING BELOW, THE COMPANY ACKNOWLEDGES RECEIPT OF A COPY OF THIS
OPTIONS AGREEMENT. A PRE-DISPUTE ARBITRATION CLAUSE IS CONTAINED IN SECTION 12
HEREOF.
XXXXXXX, SACHS & CO.
Name: Xxxx Xxxxxx
Address: 00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telex No.:
Domestic: WU Tlex 12-5654 Goldsachs
International: ITT421344GOLSAX
TRT 177784 GSUT
WUI62506GOLSAC
Telefax No.: 000-000-0000
Telephone No.: 000-000-0000
Exercise Notice to: Equity Operations: Options
and Derivatives
Accepted and Agreed to this
14th day of June, 1999.
By: XXX RESEARCH
Name: Xxxxx Xxxxxx
Address: 0000 Xxxxxxx Xxxxxxx
Xxxxxxxx XX 00000
Telefax No.: 000-000-0000
Telephone No.: 000-000-0000
Exercise Notice to: Xxxxx Xxxxxx
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PERFORMANCE ASSURANCE AMENDMENT TO
OTC ISSUER STOCK OPTION MASTER AGREEMENT
Xxxxxxx, Xxxxx & Co. ("GS&Co.") and Xxx Research Corporation (the "Company"),
having entered into an OTC Issuer Stock Option Master Agreement (the "Master
Agreement"), agree that the Master Agreement is hereby amended and modified by
adding the following subsections which shall form and be deemed an integral
part of the Master Agreement as though included therein as of the date the
Master Agreement became effective. All terms used but not defined herein shall
have the meanings ascribed to such terms in the Master Agreement.
1. PERFORMANCE ASSURANCE
(a) For each Put Option, the Company's "Performance Assurance Requirement" as
of any day shall equal such Put Option's In-the-money amount on such day (if
any); provided that in no event shall the Performance Assurance Requirement for
any Put Option be less than zero. No Performance Assurance Requirement shall be
applicable to Call Options or to any other obligation, duty or liability of the
Company under the Master Agreement.
(b) The Company's "Aggregate Performance Assurance Requirement" as of any day
shall equal the sum of (i) the Company's Basic Amount, plus the amount, if any,
representing (ii) the sum of the Performance Assurance Requirements on such day
for all outstanding Put Options written by the Company under the Master
Agreement; provided that, notwithstanding the foregoing, if an Early
Termination Event has occurred and is continuing and the Company elects to Net
Share Settle the Early Termination Amount then the Company's "Aggregate
Performance Assurance Requirement" shall be an amount equal to 110% of the
aggregate strike price value of all of the Put Options.
(c) "Performance Assurance" will have the meaning specified in Section 4
hereof.
(d) "Basic Amount" shall mean an amount equal to 30% of the aggregate strike
price value of all of the Put Options.
(e) "In-the-money" shall mean, in respect of a Put Option, an amount equal to
the product of the excess (if any) of such Put Option's Exercise Price over the
Market Price, multiplied by the quantity of Option Securities in respect of
such Put Option.
(f) "Cash Performance Assurance" will have the meaning specified in Section 4
hereof.
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(g) "Non-Cash Performance Assurance" will have the meaning specified in
Section 4 hereof.
2. PAYMENT/DELIVERY OF PERFORMANCE ASSURANCE
The Company will, on demand by GS&Co., pay or deliver to GS&Co., by the close
of business in New York on the second Business Day following such demand,
Performance Assurance equal to the Company's Aggregate Performance Assurance
Requirement;
3. GRANT OF SECURITY INTEREST
(a) The Company hereby grants to GS&Co. a first priority security interest in
and a lien on, and a right of set-off against, all Performance Assurance and
all property included therein, together with the proceeds thereof, any
distributions thereon and any property delivered in substitution therefor, as
security for the satisfaction of the obligations of the Company in respect of
Put Options under the Master Agreement. In the event of an Event of Default or
an Early Termination Event, GS&Co. shall have all of the rights with respect to
the Performance Assurance granted to a secured party under the Uniform
Commercial Code as then in effect in the State of New York. All Performance
Assurance shall at all times remain the property of the Company subject only to
the extent of the interest and rights therein of GS&Co. as the pledgee and
secured party thereof.
(b) GS&Co. shall have the unrestricted right to use any Cash Performance
Assurance included in the Performance Assurance (subject only to its obligation
to return such Cash Performance Assurance to the Company in accordance with the
terms hereof), including but not limited to the right to rehypothecate or
transfer such Cash Performance Assurance to third parties.
(c) GS&Co. shall hold all Performance Assurance in a segregated account which
identifies the Company as the owner thereof (subject to GS&Co.'s security
interest therein) and shall take all action necessary to ensure that no
creditor of GS&Co. obtains any interest whatsoever in the Non-Cash Performance
Assurance therein.
4. PERFORMANCE ASSURANCE
(a) "Performance Assurance" shall be provided by the deposit with GS&Co. of
cash ("Cash Performance Assurance") or securities reasonably acceptable to
GS&Co. ("Non-Cash Performance Assurance"), which shall consist of the following
types and shall be valued at the current market value as determined in good
faith by GS&Co. less the percentage of the current market value indicated below:
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Securities issued or guaranteed by the United States
or its Agencies
Less than one year to maturity 1%
One year but less than three years to maturity 2
Three years but less than five years to maturity 3
Five years but less than ten years to maturity 4
Ten years but less than twenty years to maturity 5
Twenty years or more to maturity 6
U.S. Dollar denominated commercial paper rated at least
A1/P1 with less than 90 days to maturity (cannot
constitute more than 20% of the required Performance
Assurance) 5
Other Securities acceptable to GS&Co. (to be determined)
(b) Any Cash Performance Assurance shall bear interest at a rate equal to the
13-week T-Xxxx Rate as in effect from time to time minus 25 basis points. Such
accrued interest and any accrued interest and all products and proceeds of
Non-Cash Performance Assurance that would constitute Performance Assurance
hereunder shall automatically be included in the Performance Assurance.
(c) Provided that no Event of Default or Early Termination Event has occurred
and is continuing under the Master Agreement, the Company may substitute other
Performance Assurance for all or part of the Performance Assurance held by
GS&Co. provided that the current market value of such substitute Performance
Assurance as determined in good faith by GS&Co. less the percentage of the
current market value indicated above, is at least equal to that of the
Performance Assurance being replaced.
5. REPRESENTATIONS.
The Company continuously represents and warrants that (i) this Performance
Assurance Amendment to the Master Agreement has been duly authorized, executed
and delivered by the Company and constitutes a valid and legally binding
obligation of the Company enforceable in accordance with its terms, (ii) the
grant of the security interest hereunder and the delivery of the Performance
Assurance pursuant to this Performance Assurance Amendment to the Master
Agreement will create a valid first-priority lien on and first-priority
perfected security interest in the Performance Assurance securing the
obligations
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23
of the Company in respect of Put Options under the Master Agreement, (iii) it
has, and will have upon the deposit of any additional Performance Assurance
with GS&Co., title to all of the Performance Assurance, free and clear of all
claims, mortgages, pledges, liens, encumbrances and security interests of every
nature whatsoever ("Liens") and no Liens other than the Lien created hereby in
favor of GS&Co. exist upon or with respect to any of the Performance Assurance,
(iv) no consent or approval of any person, entity or governmental or regulatory
authority, or of any securities exchange, was or is necessary to create or
perfect the Company's pledge of Performance Assurance hereunder, (v) the
execution and delivery of this Performance Assurance Amendment to the Master
Agreement by the Company and the performance by the Company of its obligations
hereunder do not violate or conflict with, and will not result in a breach of
or default under, any law applicable to it, any of its constitutional
documents, any order, judgment or decree of any court or other agency or body
or any contract, agreement or instrument to which it is a party or affecting
any of its assets and will not result in the creation or imposition of a Lien
on any of its assets (other than the Lien created hereby), (vi) the Company
will faithfully preserve and protect GS&Co.'s security interest in the
Performance Assurance, will defend GS&Co.'s right, title, lien and security
interest in and to the Performance Assurance against the claims and demands of
all persons whomsoever, and will do all such acts and things and execute and
deliver all such documents and instruments, as GS&Co. in its sole discretion
may reasonably deem necessary or advisable from time to time in order to
preserve, protect and perfect such security interest or to enable GS&Co. to
exercise or enforce its rights under this Performance Assurance Amendment to
the Master Agreement with respect to any Performance Assurance, and (vii) the
Company will not permit any Liens other than the Lien created hereby in favor
of GS&Co. to exist upon any of the Performance Assurance.
6. CHARGING AGAINST PERFORMANCE ASSURANCE
(a) Upon the occurrence of an Event of Default or an Early Termination event,
GS&Co. may upon 1 Business Day's notice to the Company net the amount, if any,
then due, in respect of Put Options, to GS&Co. by the Company, against the
Performance Assurance held by GS&Co. The liquidation of Non-Cash Performance
Assurance shall be accomplished by a public or private sale of the Performance
Assurance conducted by GS&Co. in a commercially reasonable manner. The Company
agrees that GS&Co. may be the purchaser of any or all of the Performance
Assurance so sold.
(b) Promptly after any such netting, GS&Co. shall deliver to the Company a
detailed written itemization of amounts so charged and discharged. In the case
of all sales of Non-Cash Performance Assurance, public or private, the Company
shall pay all reasonable and customary costs and expenses of every kind for
sale or delivery, including brokers' and attorneys' fees and all liabilities
and advances made or incurred by GS&Co. in connection with such sale or
delivery, and after deducting such costs and expenses
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from the proceeds of sale, GS&Co. shall apply any residue first, to the payment
of the costs and expenses, including legal fees, incurred by GS&Co. in
connection with the enforcement of this Performance Assurance Amendment to the
Master Agreement and second, to the payment of any amounts owed to GS&Co. by
the Company in respect of Put Options. The balance, if any, remaining after
payment in full of all such amounts shall be paid to or on the order of the
Company in accordance with Section 7(b) hereof.
(c) The Company shall in all events remain liable for any amounts remaining
unpaid after any such netting.
7. RETURN OF PERFORMANCE ASSURANCE
(a) Provided that no Event of Default or Early Termination Event has occurred
and is continuing under the Master Agreement, if the value of Performance
Assurance held by GS&Co. exceeds the Company's Aggregate Performance Assurance
Requirement by more than $250,000, then GS&Co. shall, at the Company's written
request, return Performance Assurance to the Company sufficient to reduce the
amount of Performance Assurance held by GS&Co. to an amount not less than the
Company's Aggregate Performance Assurance Requirement at such time. Such return
shall not be later than the close of business in New York on the second
Business Day following such written request.
(b) Not later than the close of business in New York on the second Business Day
after there shall have been no Put Options outstanding under the Master
Agreement and the Company shall have satisfied its monetary obligations to
GS&Co. in respect of such Put Options, GS&Co. shall return to the Company all
Performance Assurance (including the Basic Amount) and all accrued interest
thereon and proceeds thereof.
Agreed to on June 14, 1999
Xxxxxxx, Xxxxx & Co. Xxx Research Corporation
By: By:
------------------------- -------------------------------------
Name: Name: Xxxxx Xxxxxx
Title: Managing Director Title: Vice President and Treasurer
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