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EXHIBIT 10.4
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[DEUTSCHE BANK SECURITIES LOGO]
Deutsche Bank Securities, Inc.
31 West 52nd Street
New York, NY 10019
Telephone: (212) 469-5000
As of March 23, 2000
TELXON SYSTEMS SERVICES INC.
Attn: John Castle
Tel: 330-664-1000
Fax: 330-664-2009
THIS CONFIRMATION SUPERSEDES ALL PREVIOUS CONFIRMATIONS WITH RESPECT TO THE
TRANSACTION EVIDENCED HEREBY.
FIRST TRANSACTION AMENDMENT DBS REFERENCE NO. 23824-A
Dear Sir/Madam,
The purpose of this facsimile agreement (this "Confirmation") is to confirm the
terms and conditions of the Transaction entered into between DEUTSCHE BANK AG
ACTING THROUGH ITS LONDON BRANCH ("PARTY A") and TELXON SYSTEMS SERVICES, INC.
("PARTY B") on the Trade Date specified below (the "Transaction"). For purposes
of the ISDA Master Agreement referred to below, Component #1 and Component #2 of
this Transaction shall constitute a single Transaction. This Confirmation
constitutes a "Confirmation" as referred to in the ISDA Master Agreement
specified below. This Confirmation constitutes the entire agreement and
understanding of the parties with respect to the subject matter and terms of the
Transaction and supersedes all prior or contemporaneous written and oral
communications with respect thereto.
DEUTSCHE BANK AG IS NOT REGISTERED AS A BROKER DEALER UNDER THE U.S. SECURITIES
EXCHANGE ACT OF 1934. DEUTSCHE BANK SECURITIES INC. ("DBS") HAS ACTED SOLELY AS
AGENT IN CONNECTION WITH THIS TRANSACTION AND HAS NO OBLIGATION, BY WAY OF
ISSUANCE, ENDORSEMENT, GUARANTEE OR OTHERWISE WITH RESPECT TO THE PERFORMANCE OF
EITHER PARTY UNDER THE TRANSACTION.
The definitions and provisions contained in the 1996 ISDA Equity Derivatives
Definitions (the "Equity Definitions"), as published by the International Swaps
and Derivatives Association, Inc., are incorporated into this Confirmation. In
the event of any inconsistency between the Equity Definitions and this
Confirmation, this Confirmation will govern.
1. This Confirmation evidences a complete and binding agreement between Party
A and Party B as to the terms of the Transaction to which this Confirmation
relates. In addition Party A and Party B agree to use all reasonable
efforts promptly to negotiate, execute and deliver an agreement in the form
of the ISDA Master Agreement (Multicurrency-Cross Border) (the "ISDA Form")
with such modifications as you and we will in good faith agree. Upon
execution by Party A and Party B of such an agreement, this Confirmation
will supplement, form part of, and be subject to that agreement. All
provisions contained or incorporated by reference in that agreement upon
its execution will govern this Confirmation. Until we execute and deliver
that agreement, this Confirmation, together with all other documents
referring to the ISDA Form (each a "Confirmation") confirming transactions
(each a "Transaction") entered into between us (notwithstanding anything to
the contrary in a Confirmation) shall supplement, form a part of, and be
subject to an agreement in the form of the ISDA Form as if we had executed
an agreement on the Trade Date of the first such Transaction between us in
such form with the Schedule thereto (i) specifying only that (a) the
governing law is the law of the State of New York without reference to
choice of law doctrine and (b) the Termination Currency is U.S., Dollars,
(ii) incorporating the addition to the definition of "Indemnifiable Tax"
contained in (page 48 of) the ISDA "Users Guide to the 1992 ISDA Master
Agreements" and (iii) incorporating any other modifications to the ISDA
form specified below.
"Loss" payment measure and "Second Method" payment method shall apply
to this Transaction.
MODIFICATIONS TO THE ISDA FORM:
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(a) "Threshold" means, with respect to Party A: 3% of its shareholders'
equity (i.e., the sum of capital and disclosed reserves as reported in the
most recently published annual audited consolidated financial statements of
Deutsche Bank AG).
"Threshold" means, with respect to Party B or any Credit Support Provider:
the higher of $50,000,000 or 1% of its shareholders' equity (as calculated
in accordance with generally accepted accounting principles applicable to
it).
(b) The "Cross Default" provision of Section 5(a)(vi) of the ISDA Master
Agreement will apply to both parties and is hereby amended by adding the
following at the end hereof:
and if, and only if, the other party determines in good faith that it has
reasonable grounds to conclude that the performance by the Defaulting Party
of its financial obligations hereunder is endangered.
If such provisions apply:
For Party A and Party B, "Specified Indebtedness" will mean (x) all
obligations of that person identified as Specified Indebtedness in Section
14 of the ISDA Master Agreement (except as excluded in the proviso to this
definition below), as well as all reimbursement obligations in respect of
letters of credit or financial guaranty insurance or surety bonds issued
for the account of that person, provided, however, that obligations in
respect of interbank deposits received shall not constitute Specified
Indebtedness for purposes of clause (2) of Section 5(a)(iv) of the ISDA
Master Agreement to the extent they are not paid when due only as the
result of inadvertence or administrative error and (y) all Derivatives
Transactions (other than any Specified Transaction) of the party.
"Derivative Transaction" in the case of a party, means: any transaction
(including an agreement with respect thereto) now existing or hereafter
entered into between such party (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and any other
person or entity (including, without limitation, the other party),
including without limitation any rate swap transaction, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest rate option,
repurchase or reverse repurchase transaction, foreign exchange transaction,
commodity transaction, credit derivative transaction, securities lending
transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option, any transaction that is a "swap agreement", "commodity contract",
or "forward contract" under the U.S. Bankruptcy Code as amended, or any
other similar transaction (including any option with respect to any of
these transactions).
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
GENERAL TERMS
Trade Date: March 23, 2000
Option Style: European
Shares: "CSCO", Cusip# 1727R102, common stock of
Cisco Systems, Inc.. (the "Issuer").
Number of Options: 20,800
Option Entitlement: 100 Share(s) per Option
Multiple Exercise: Inapplicable
Exchange: The Nasdaq Stock Market, or any successor to
such exchange or quotation system.
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Related Exchange(s): Any relevant exchange or recognized
quotation system (and any other successor
thereto) on which futures and/or options
contracts on the Share is traded, as
determined by the Calculation Agent.
Calculation Agent: Party A
Netting of Premiums: Applicable. Netting of Premium payments
shall occur between Component #1 and
Component #2 for this Transaction.
Premium: USD 0.00
COMPONENT #1:
Option Type: Put
Seller: Party A
Buyer: Party B
Strike Price: USD 66.7508
Premium: USD 0.00
Premium Payment Date: Inapplicable
Component #1 Option
Seller's Agent
Telephone Number and
Facsimile Number and
Contact Details for
Purpose of Giving
Notice: John Castle
Tel: (330) 664-1000
COMPONENT #2 OPTION:
Option Type: Call
Seller: Party B
Buyer: Party A
Strike Price: USD 94.2508
Premium: USD 0.00
Premium Payment Date: Inapplicable
Component #2 Option
Seller's Agent
Telephone Number and
Facsimile Number and
Contact Details for
Purpose of Giving
Notice: Gary Zentner
Tel: (212) 469-4940
PROCEDURE FOR EXERCISE:
Expiration Time: 5:00 p.m. (local time in New York)
Expiration Date: March 26, 2001
Automatic Exercise: Applicable
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Linked Transaction: Neither Component #1 nor Component #2 of
this Transaction may be exercised,
transferred or terminated independently of
the other. Upon exercise of either of
Component #1 or Component #2, the other
component shall automatically be terminated
and the Buyer and Seller of such terminated
component shall have no further rights or
obligations thereunder.
VALUATION:
Valuation Time: 4:00 p.m. (New York time)
Valuation Date: The Expiration Date
SETTLEMENT TERMS:
SETTLEMENT: THIS TRANSACTION SHALL BE PHYSICALLY-SETTLED
UNLESS PARTY B REQUESTS IN WRITING OR
TELEPHONICALLY (CONFIRMED IN WRITING) NOT
LATER THAN 12:00 P.M. (LOCAL TIME IN NEW
YORK), TEN (10) EXCHANGE BUSINESS DAYS PRIOR
TO THE EXERCISE DATE THAT THE TRANSACTION
WILL BE CASH-SETTLED. FAILURE TO PROVIDE
WRITTEN CONFIRMATION WILL NOT AFFECT THE
VALIDITY OF AN ORAL NOTICE.
WITH RESPECT TO THE EXERCISE DATE, IF PARTY B DOES NOT GIVE NOTICE OF ITS
ELECTION TO CASH-SETTLE, THEN THE OPTION SHALL BE PHYSICALLY-SETTLED AND THE
FOLLOWING TERMS SHALL APPLY;
PHYSICAL SETTLEMENT: APPLICABLE
FAILURE TO DELIVER: APPLICABLE
REFERENCE PRICE: THE LAST SALE PRICE PER SHARE ON THE EXCHANGE
AT THE EXPIRATION TIME ON THE EXPIRATION DATE.
With respect to the Exercise Date, if Party B does give notice of its election
to Cash-settle, then the Option shall be Cash-settled and the following terms
shall apply;
Cash Settlement: Applicable
Settlement Price: The last sale price per Share quoted by the
Exchange at the Valuation Time on the
Valuation Date.
Strike Price
Differential: (i) In the case of the Put, an amount equal
to the greater of (a) the excess of the
Strike Price over the Settlement Price, and
(b) zero.
(ii) In the case of the Call, an amount
equal to the greater of (a) the excess of
the Settlement Price over the Strike Price,
and (b) zero.
Cash Settlement
Payment Date: 3 Currency Business Days after the Valuation
Date.
ADJUSTMENTS:
Method of Adjustment: Calculation Agent Adjustment
Potential Adjustment Section 9.1(e) of the Equity Definitions is
Events: amended by replacing the existing words in
subparagraph (iii) with the words, "an
Extraordinary Cash Dividend".
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EXTRAORDINARY CASH DIVIDEND: Means, as determined by the Calculation
Agent, (i) any cash dividend declared on the
Shares at a time when the Issuer has not
previously declared or paid dividends on
such Shares for the prior four quarterly
periods; (ii) any cash dividend declared on
the Shares that is greater than the Expected
Dividend Amount; or (iii) any other
"special" cash dividend on the Shares which
is, by its terms or declared intent,
declared and paid outside the normal
operations or normal dividend procedures of
the Issuer; PROVIDED that, in all cases, the
related ex-dividend date occurs during the
period from and including the Trade Date to
and including the Expiration Date.
For purposes hereof, "Expected Dividend
Amount" shall mean USD 0.00.
STRIKE PRICE ADJUSTMENT: In the event of an Extraordinary Cash
Dividend, the Strike Price of the Put Option
and the Call Option shall be decreased by an
amount equal to the sum of the Excess
Dividend Amount and the Interest Amount, as
determined by the Calculation Agent.
For purposes hereof,
(1) "Excess Dividend Amount" shall mean, (a) in
the case of the Extraordinary Cash Dividend
described in (i) above, the amount of the
cash dividend; (b) in the case of the
Extraordinary Cash Dividend described in
(ii) above, the amount by which the relevant
cash dividend exceeds the Expected Dividend
Amount; and (c) in the case of the
Extraordinary Cash Dividend described in
(iii) above, the amount of the "special"
cash dividend.
(2) "Interest Amount" shall mean the product of
(a) the Excess Dividend Amount and (b) the
prevailing LIBOR rate (or such other swap
rate as provided by the Calculation Agent)
with a designated maturity that most closely
approximates the number of days from and
including the relevant ex-dividend date to
but excluding the Expiration Date and (c)
the number of days elapsed from and
including such relevant ex-dividend date to
and including the Expiration Date DIVIDED by
360.
EXTRAORDINARY EVENTS:
Consequences of Merger Events:
(a) Share-for-Share: Calculation Agent Adjustment
(b) Share-for-Other: Merger Event Termination (as defined below)
(c) Share-for-Cash: Means a Share-for-Other Merger Event in
which the Other Consideration consists
solely of cash. The Consequence of such
Merger Event shall be Merger Event
Termination (as defined below)
(d) Share-for-Combined: Merger Event Termination (as defined below)
Calculation Agent
Adjustment: For purposes of the relevant Consequence of
Merger Event for which Calculation Agent
applies, the Calculation Agent will make
such adjustments, effective as of the Merger
Date, in respect of the Strike Price, Number
of Options, Option Entitlement and any
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other variable relevant to the exercise,
settlement or payment terms of the
Transaction, as the Calculation Agent
determines appropriate in its good faith
commercially reasonable judgment, with
reference (as deemed appropriate) to any
relevant adjustment rules and precedents in
effect for any primary options exchange for
exchange traded options on the relevant
Shares.
Merger Event
Termination: For purposes of the relevant Consequences of
Merger Event for which Merger Event Termination
applies, effective as of the Merger Date, the
Transaction shall be terminated and, in such
connection, the Calculation Agent shall
determine the Early Termination Amount.
NATIONALIZATION OR INSOLVENCY: Extraordinary Event Termination (as defined
below).
Extraordinary Event
Termination: For purposes of a Nationalization or Insolvency
event effective as of the date designated by
the Calculation Agent (the "Event Date"), the
Transaction shall be terminated and, in such
connection, the Calculation Agent shall
determine the Early Termination Amount.
MISCELLANEOUS:
Additional Termination
Event(s): The occurrence of the following events shall
constitute an Additional Termination Event with
respect to this Transaction solely and the
amount payable by either party will be
determined by the Calculation Agent using the
valuation methods provided for in Early
Termination Amount. The affected party shall
give written notice to the other party and the
Calculation Agent indicating the effective date
of termination ("Event Date") and final
settlement thereof.
(a) Any "Hedging Disruption Event", which term
shall mean with respect to either party any
inability, due to market illiquidity,
Illegality (as defined in the ISDA Form, but
with respect to the Transaction hedge), or lack
of availability of hedging transaction market
participants, to establish, re-establish or
maintain any hedging transaction(s) necessary
in the normal course of such party's business
of hedging the price and market risk of
entering into and performing under the
Transaction.
(b) Any "Regulatory Change" that: (a) shall subject
Party A or any of its Affiliates to any loss
due to the characterization of any payments or
deliveries made under this Transaction; (b)
shall impose or adversely modifies any reserve,
special deposit, compulsory loan or similar
requirement against assets acquired or to be
acquired pursuant to this Transaction; (c)
shall, in Party A's good faith determination
(taking into account Party A's policies with
respect to net capital and capital adequacy)
affect the amount of capital to be maintained
by Party A or any Affiliate, or the amount of
such regulatory capital is increased as a
direct or indirect consequence of this
Transaction; or (d) shall have the effect of
reducing the rate of return on Party A's
capital as a direct or indirect consequence of
this Transaction;
"Regulatory Change" shall mean the introduction or
change after the Trade Date of this Transaction in
the United States or the United Kingdom (or other
relevant jurisdiction of the Issuer or Exchange
respecting the Shares) of any law or regulation or in
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the interpretation application or administration
thereof, or the adoption or making after such date of
any directive by the United States or the United
Kingdom (or above referenced other jurisdiction)
court or governmental authority or any requests
(whether or not having the force of law) of any
regulatory authority having jurisdiction over Party A
or its Affiliates;
(c) Any "Issuer Disruption Event", which term
shall mean any legal or regulatory action,
order or proceeding affecting the Issuer, as
a result of which the related Shares are no
longer (or any Settlement Shares are not)
freely tradeable (as determined by the
Calculation Agent), including without
limitation the issuance of any regulatory
stop order respecting the Shares (or any
Settlement Shares), cessation of the
effectiveness of any registration statement
relating to the Shares (or any Settlement
Shares), the delisting or ceasing of trading
of the Shares on the Exchange (other than by
reason of a Market Disruption Event).
Early Termination
Amount: The Calculation Agent shall determine
termination amounts employing (among other
considerations) the following factors: (A)
the average of the Transaction option
volatility (using Calculation Agent's
Black-Scholes-derived option pricing model)
for a sixty (60) day historical period
(i.e., "60-day trailing volatility")
immediately preceding, and ending on, the
Event Date (or Announcement Date, in the
case of the relevant Merger Event); and (B)
the then prevailing market pricing (or the
Calculation Agent's good faith determination
of pricing) of the relevant Shares as of the
Event Date (or Merger Date, in the case of
the relevant Merger Event).
3. COLLATERAL:
Party B hereby pledges and grants to Party A a continuing first priority
security interest in and a lien upon and right of set-off against, with
power of sale, all of its right title and interest in and to the Shares to
secure the prompt and complete payment and performance when due of Party
B's obligations under the Transaction until fully paid and performed. The
parties agree that this Confirmation constitutes, among other things, a
security agreement with respect to the Shares under Articles 8 and 9 of the
New York Uniform Commercial Code ("NYUCC").
The Shares subject to this pledge ("Pledge") shall be the same as the
Shares underlying the Transaction, and the pledge of the Shares shall
secure Party B's obligations under the Transaction. In connection with the
occurrence and continuation of an Event of Default or Termination Event
with respect to Party B, Party A and its affiliates shall be entitled to
realize upon any and all Shares pledged to Party A to satisfy Party B
obligations under any and all then-outstanding Transactions.
In order to perfect the security interest of Party A in the Shares,
Party B shall deliver and pledge such Shares as security hereunder in
accordance with such procedures as required by Party A from time to
time and take such other action as Party A may request to establish the
"control" (within the meaning of Section 8-106 of the NYUCC) of Party A
and/or Party A's Collateral Custodian over the Shares including the
following express grant of control: Party A, Party B and Deutsche Bank
Securities Inc. ("DBSI") agree that DBSI is authorized and agrees to
transfer the Shares to a securities account of Party A, to be held in a
segregated manner. Party A, Party B and DBSI agree that DBSI is
authorized and agrees to act on instructions (including entitlement
orders under the NYUCC) originated by Party A without further consent
of Party B as required by the NYUCC.
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Each party hereto agrees that the Shares credited to a securities
account will be treated as a "Financial Asset" under the NYUCC.
"Collateral Custodian" means a "securities intermediary" (as defined in
the NYUCC) and/or, in the case of cash, a financial institution
designated by Party A as its agent to hold the Shares in accordance
with the terms of this Pledge. The Collateral Custodian may be an
affiliate of Party A or an unaffiliated securities intermediary and/or
financial institution in the United States.
In the event that an Event of Default or Termination Event has occurred
and is continuing with respect to Party B, Party A may exercise in
respect of the Shares, in addition to the rights and remedies otherwise
available to it, all the rights and remedies of a secured party on
default under the NYUCC, and Party A may sell the Shares or any part
thereof upon such terms as Party A may deem commercially reasonable. To
the extent permitted by applicable law, Party A or its affiliates may
be the purchaser of the whole or any part of the Shares so sold. In the
event that an Event of Default or Termination Event has occurred and is
continuing in connection with the Shares, Party A is hereby authorized
and empowered, at its election, to act with respect to the Shares or
the proceeds thereof as though Party A were the outright owner thereof,
Party B hereby irrevocably constituting Party A as its proxy and
attorney-in-fact, coupled with an interest, with full power of
substitution to do so.
The parties hereto agree that Party A is entitled, but not required, to
take ownership of the Shares pledged herein, in full satisfaction of
the delivery obligations of Party B under the Transaction, free of any
lien or pledge on such Shares.
4. REPRESENTATIONS:
Each party represents to the other party as of the date that it enters
into this Transaction that (absent a written agreement between the
parties that expressly imposes affirmative obligations to the contrary
for this Transaction):
(i) NON-RELIANCE. It is acting for its own account, and it has
made its own independent decisions to enter into this
Transaction and as to whether the Transaction is appropriate
or proper for it based upon its own judgement and upon advice
from such advisers as it has deemed necessary. It is not
relying on any communication (written or oral) of the other
party as investment advice or as a recommendation to enter
into this Transaction, it being understood that information
and explanations related to the terms and conditions of this
Transaction shall not be considered to be investment advice or
a recommendation to enter into the Transaction. No
communication (written or oral) received from the other party
shall be deemed to be an assurance or guarantee as to the
expected results of this Transaction.
(ii) ASSESSMENT AND UNDERSTANDING. It is capable of assessing the
merits of and understanding (on its own behalf or through
independent professional advice), and understands and accepts
the terms and conditions and risks of this Transaction. It is
also capable of assuming, and assumes, the risks of the
Transaction.
(iii) STATUS OF PARTIES. The other party is not acting as a
fiduciary for or adviser to it in respect of this Transaction.
(iv) U.S. FEDERAL SECURITIES LAWS. It understands that the offer
and sale of the Options constituting a Transaction is intended
to be exempt from registration under the US Securities Act of
1933, as amended (the "Securities Act"), by virtue of Section
4(2) thereof. In furtherance thereof, it represents and
warrants that (a) it is experienced in investing in or
otherwise entering into options and other financial
instruments similar to the Transaction and has determined that
the Transaction is suitable investment for it, and (b) it is
an institution which qualifies as an "accredited investor" or
"qualified institutional buyer" as such terms are defined
under relevant regulations promulgated under the Securities
Act.
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5. ACCOUNT DETAILS:
Payment to PARTY A in USD: Attn: John Canale
Bank of New York
ABA # 021000018
A/C # 8900327634
A/C Deutsche Bank Securities Inc.
FBO: Deutsche Bank AG London
Payment to PARTY B in USD: Please Advise
6. CONTACT NAMES PARTY A:
Confirmations: Tarana Oommen
Telephone: (212) 469-2786
Fax No.: (212) 469-5220
Payments/Fixings: Richard Kennedy
Telephone: (212) 469-4927
Fax No.: (212) 469-4992
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Each Party has agreed to make payments to the other in accordance with this
Confirmation. Please confirm that the foregoing correctly sets forth the terms
of our agreement by sending a return executed acknowledgment hereof to such
effect to the contact person named above who is responsible for the
administration of this Transaction. The time of execution of this Transaction
will be made available by Party A upon written request.
Party A is regulated by the Securities and Futures Authority
We are very pleased to have concluded this Transaction with you.
Regards,
DEUTSCHE BANK AG, LONDON BRANCH REVIEWED BY:
By: /s/ James S. Rowen By: /s/ William Davis
--------------------------- -----------------------
Name: James S. Rowen William Davis
Title: Attorney-in-Fact
By: /s/ Tanara Oomen By: /s/ Gary Zentner
--------------------------- -----------------------
Name: Tarana Oommen Gary Zentner
Title: Attorney-in-Fact
DEUTSCHE BANK SECURITIES INC.
acting solely as Agent in
connection with this Transaction
By: /s/ James S. Rowen
---------------------------
Name: James S. Rowen
Title: Managing Director
By: /s/ Tanara Oomen
---------------------------
Name: Tarana Oommen
Title: Vice President
Confirmed and Acknowledged as of
the date first above written:
TELXON SYSTEMS SERVICES INC.
By: /s/ Woody M. McGee
---------------------------
Name: Woody M. McGee
Title: VP CFO
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[DEUTSCHE BANK SECURITIES LOGO]
Deutsche Bank Securities, Inc.
31 West 52nd Street
New York, NY 10019
Telephone: (212) 469-5000
As of March 23, 2000
TELXON SYSTEMS SERVICES INC.
Attn: John Castle, VP & Treasurer
Tel: 330-664-1000
Fax: 330-664-2009
SHARE OPTION TRANSACTION CASH OR PHYSICAL SETTLEMENT-DBS REFERENCE NO. 23825
Dear Sir/Madam,
The purpose of this facsimile agreement (this "Confirmation") is to confirm the
terms and conditions of the Transaction entered into between DEUTSCHE BANK AG
ACTING THROUGH ITS LONDON BRANCH ("PARTY A") and TELXON SYSTEMS SERVICES, INC.
("PARTY B") on the Trade Date specified below (the "Transaction"). For purposes
of the ISDA Master Agreement referred to below, Component #1 and Component #2 of
this Transaction shall constitute a single Transaction. This Confirmation
constitutes a "Confirmation" as referred to in the ISDA Master Agreement
specified below. This Confirmation constitutes the entire agreement and
understanding of the parties with respect to the subject matter and terms of the
Transaction and supersedes all prior or contemporaneous written and oral
communications with respect thereto.
DEUTSCHE BANK AG IS NOT REGISTERED AS A BROKER DEALER UNDER THE U.S. SECURITIES
EXCHANGE ACT OF 1934. DEUTSCHE BANK SECURITIES INC. ("DBS") HAS ACTED SOLELY AS
AGENT IN CONNECTION WITH THIS TRANSACTION AND HAS NO OBLIGATION, BY WAY OF
ISSUANCE, ENDORSEMENT, GUARANTEE OR OTHERWISE WITH RESPECT TO THE PERFORMANCE OF
EITHER PARTY UNDER THE TRANSACTION.
The definitions and provisions contained in the 1996 ISDA Equity Derivatives
Definitions (the "Equity Definitions"), as published by the International Swaps
and Derivatives Association, Inc., are incorporated into this Confirmation. In
the event of any inconsistency between the Equity Definitions and this
Confirmation, this Confirmation will govern.
1. This Confirmation evidences a complete and binding agreement between Party
A and Party B as to the terms of the Transaction to which this Confirmation
relates. In addition Party A and Party B agree to use all reasonable
efforts promptly to negotiate, execute and deliver an agreement in the form
of the ISDA Master Agreement (Multicurrency-Cross Border) (the "ISDA Form")
with such modifications as you and we will in good faith agree. Upon
execution by Party A and Party B of such an agreement, this Confirmation
will supplement, form part of, and be subject to that agreement. All
provisions contained or incorporated by reference in that agreement upon
its execution will govern this Confirmation. Until we execute and deliver
that agreement, this Confirmation, together with all other documents
referring to the ISDA Form (each a "Confirmation") confirming transactions
(each a "Transaction") entered into between us (notwithstanding anything to
the contrary in a Confirmation) shall supplement, form a part of, and be
subject to an agreement in the form of the ISDA Form as if we had executed
an agreement on the Trade Date of the first such Transaction between us in
such form with the Schedule thereto (i) specifying only that (a) the
governing law is the law of the State of New York without reference to
choice of law doctrine and (b) the Termination Currency is U.S., Dollars,
(ii) incorporating the addition to the definition of "Indemnifiable Tax"
contained in (page 48 of) the ISDA "Users Guide to the 1992 ISDA Master
Agreements" and (iii) incorporating any other modifications to the ISDA
form specified below.
"Loss" payment measure and "Second Method" payment method shall apply
to this Transaction.
MODIFICATIONS TO THE ISDA FORM:
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(a) "Threshold" means, with respect to Party A: 3% of its shareholders'
equity (i.e., the sum of capital and disclosed reserves as reported in the
most recently published annual audited consolidated financial statements of
Deutsche Bank AG).
"Threshold" means, with respect to Party B or any Credit Support Provider:
the higher of $50,000,000 or 1% of its shareholders' equity (as calculated
in accordance with generally accepted accounting principles applicable to
it).
(b) The "Cross Default" provision of Section 5(a)(vi) of the ISDA Master
Agreement will apply to both parties and is hereby amended by adding the
following at the end hereof:
and if, and only if, the other party determines in good faith that it has
reasonable grounds to conclude that the performance by the Defaulting Party
of its financial obligations hereunder is endangered.
If such provisions apply:
For Party A and Party B, "Specified Indebtedness" will mean (x) all
obligations of that person identified as Specified Indebtedness in Section
14 of the ISDA Master Agreement (except as excluded in the proviso to this
definition below), as well as all reimbursement obligations in respect of
letters of credit or financial guaranty insurance or surety bonds issued
for the account of that person, provided, however, that obligations in
respect of interbank deposits received shall not constitute Specified
Indebtedness for purposes of clause (2) of Section 5(a)(iv) of the ISDA
Master Agreement to the extent they are not paid when due only as the
result of inadvertence or administrative error and (y) all Derivatives
Transactions (other than any Specified Transaction) of the party.
"Derivative Transaction" in the case of a party, means: any transaction
(including an agreement with respect thereto) now existing or hereafter
entered into between such party (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and any other
person or entity (including, without limitation, the other party),
including without limitation any rate swap transaction, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest rate option,
repurchase or reverse repurchase transaction, foreign exchange transaction,
commodity transaction, credit derivative transaction, securities lending
transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option, any transaction that is a "swap agreement", "commodity contract",
or "forward contract" under the U.S. Bankruptcy Code as amended, or any
other similar transaction (including any option with respect to any of
these transactions).
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
GENERAL TERMS
Trade Date: March 23, 2000
Option Style: European
Shares: "CSCO", Cusip# 1727R102, common stock of
Cisco Systems, Inc.. (the "Issuer").
Number of Options: 20,800
Option Entitlement: 100 Share(s) per Option
Multiple Exercise: Inapplicable
Exchange: The Nasdaq Stock Market, or any successor to
such exchange or quotation system.
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Related Exchange(s): Any relevant exchange or recognized
quotation system (and any other successor
thereto) on which futures and/or options
contracts on the Share is traded, as
determined by the Calculation Agent.
Calculation Agent: Party A
Netting of Premiums: Applicable. Netting of Premium payments
shall occur between Component #1 and
Component #2 for this Transaction.
Premium: USD 0.00
COMPONENT #1:
Option Type: Put
Seller: Party A
Buyer: Party B
Strike Price: USD 59.3340
Premium: USD 0.00
Premium Payment Date: Inapplicable
Component #1 Option
Seller's Agent Telephone
Number and Facsimile
Number and Contact
Details for Purpose of
Giving Notice: John Castle
Tel: (330) 664-1000
COMPONENT #2 OPTION:
Option Type: Call
Seller: Party B
Buyer: Party A
Strike Price: USD 106.9866
Premium: USD 0.00
Premium Payment Date: Inapplicable
Component #2 Option
Seller's Agent Telephone
Number and Facsimile
Number and Contact
Details for Purpose of
Giving Notice: Gary Zentner
Tel: (212) 469-4940
PROCEDURE FOR EXERCISE:
Expiration Time: 5:00 p.m. (local time in New York)
Expiration Date: March 26, 2001
Automatic Exercise: Applicable
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<PAGE> 14
Linked Transaction: Neither Component #1 nor Component #2 of
this Transaction may be exercised,
transferred or terminated independently of
the other. Upon exercise of either of
Component #1 or Component #2, the other
component shall automatically be terminated
and the Buyer and Seller of such terminated
component shall have no further rights or
obligations thereunder.
VALUATION:
Valuation Time: 4:00 p.m. (New York time)
Valuation Date: The Expiration Date
SETTLEMENT TERMS:
With respect to the Exercise Date, if Party B does give notice of its election
to Cash-settle, then the Option shall be Cash-settled and the following terms
shall apply;
Cash Settlement: Applicable
Settlement Price: The last sale price per Share quoted by the
Exchange at the Valuation Time on the
Valuation Date.
Strike Price Differential: (i) In the case of the Put, an amount equal
to the greater of (a) the excess of the
Strike Price over the Settlement Price, and
(b) zero.
(ii) In the case of the Call, an amount
equal to the greater of (a) the excess of
the Settlement Price over the Strike Price,
and (b) zero.
Cash Settlement
Payment Date: 3 Currency Business Days after the Valuation
Date.
ADJUSTMENTS:
Method of Adjustment: Calculation Agent Adjustment
Potential Adjustment Events: Section 9.1(e) of the Equity Definitions is
amended by replacing the existing words in
subparagraph (iii) with the words, "an
Extraordinary Cash Dividend".
EXTRAORDINARY CASH DIVIDEND: Means, as determined by the Calculation
Agent, (i) any cash dividend declared on the
Shares at a time when the Issuer has not
previously declared or paid dividends on
such Shares for the prior four quarterly
periods; (ii) any cash dividend declared on
the Shares that is greater than the Expected
Dividend Amount; or (iii) any other
"special" cash dividend on the Shares which
is, by its terms or declared intent,
declared and paid outside the normal
operations or normal dividend procedures of
the Issuer; PROVIDED that, in all cases, the
related ex-dividend date occurs during the
period from and including the Trade Date to
and including the Expiration Date.
For purposes hereof, "Expected Dividend
Amount" shall mean USD 0.00.
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<PAGE> 15
STRIKE PRICE ADJUSTMENT: In the event of an Extraordinary Cash
Dividend, the Strike Price of the Put Option
and the Call Option shall be decreased by an
amount equal to the sum of the Excess
Dividend Amount and the Interest Amount, as
determined by the Calculation Agent.
For purposes hereof,
(1) "Excess Dividend Amount" shall mean, (a) in
the case of the Extraordinary Cash Dividend
described in (i) above, the amount of the
cash dividend; (b) in the case of the
Extraordinary Cash Dividend described in
(ii) above, the amount by which the relevant
cash dividend exceeds the Expected Dividend
Amount; and (c) in the case of the
Extraordinary Cash Dividend described in
(iii) above, the amount of the "special"
cash dividend.
(2) "Interest Amount" shall mean the product of
(a) the Excess Dividend Amount and (b) the
prevailing LIBOR rate (or such other swap
rate as provided by the Calculation Agent)
with a designated maturity that most closely
approximates the number of days from and
including the relevant ex-dividend date to
but excluding the Expiration Date and (c)
the number of days elapsed from and
including such relevant ex-dividend date to
and including the Expiration Date DIVIDED by
360.
EXTRAORDINARY EVENTS:
Consequences of Merger Events:
(a) Share-for-Share: Calculation Agent Adjustment
(b) Share-for-Other: Merger Event Termination (as defined below)
(c) Share-for-Cash: Means a Share-for-Other Merger Event in
which the Other Consideration consists
solely of cash. The Consequence of such
Merger Event shall be Merger Event
Termination (as defined below)
(d) Share-for-Combined: Merger Event Termination (as defined below)
Calculation Agent Adjustment: For purposes of the relevant Consequence of
Merger Event for which Calculation Agent
applies, the Calculation Agent will make
such adjustments, effective as of the Merger
Date, in respect of the Strike Price, Number
of Options, Option Entitlement and any other
variable relevant to the exercise,
settlement or payment terms of the
Transaction, as the Calculation Agent
determines appropriate in its good faith
commercially reasonable judgment, with
reference (as deemed appropriate) to any
relevant adjustment rules and precedents in
effect for any primary options exchange for
exchange traded options on the relevant
Shares.
Merger Event Termination: For purposes of the relevant Consequences of
Merger Event for which Merger Event
Termination applies, effective as of the
Merger Date, the Transaction shall be
terminated and, in such connection, the
Calculation Agent shall determine the Early
Termination Amount.
NATIONALIZATION OR INSOLVENCY: Extraordinary Event Termination (as defined
below).
Extraordinary Event
Termination: For purposes of a Nationalization or
Insolvency event effective as of the date
designated by the Calculation Agent (the
"Event Date"),
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<PAGE> 16
the Transaction shall be terminated and, in
such connection, the Calculation Agent shall
determine the Early Termination Amount.
MISCELLANEOUS:
Additional Termination
Event(s): The occurrence of the following events shall
constitute an Additional Termination Event
with respect to this Transaction solely and
the amount payable by either party will be
determined by the Calculation Agent using
the valuation methods provided for in Early
Termination Amount. The affected party shall
give written notice to the other party and
the Calculation Agent indicating the
effective date of termination ("Event Date")
and final settlement thereof.
(a) Any "Hedging Disruption Event",
which term shall mean with respect
to either party any inability, due
to market illiquidity, Illegality
(as defined in the ISDA Form, but
with respect to the Transaction
hedge), or lack of availability of
hedging transaction market
participants, to establish,
re-establish or maintain any
hedging transaction(s) necessary in
the normal course of such party's
business of hedging the price and
market risk of entering into and
performing under the Transaction.
(b) Any "Regulatory Change" that: (a)
shall subject Party A or any of its
Affiliates to any loss due to the
characterization of any payments or
deliveries made under this
Transaction; (b) shall impose or
adversely modifies any reserve,
special deposit, compulsory loan or
similar requirement against assets
acquired or to be acquired pursuant
to this Transaction; (c) shall, in
Party A's good faith determination
(taking into account Party A's
policies with respect to net
capital and capital adequacy)
affect the amount of capital to be
maintained by Party A or any
Affiliate, or the amount of such
regulatory capital is increased as
a direct or indirect consequence of
this Transaction; or (d) shall have
the effect of reducing the rate of
return on Party A's capital as a
direct or indirect consequence of
this Transaction;
"Regulatory Change" shall mean the
introduction or change after the Trade Date
of this Transaction in the United States or
the United Kingdom (or other relevant
jurisdiction of the Issuer or Exchange
respecting the Shares) of any law or
regulation or in the interpretation
application or administration thereof, or
the adoption or making after such date of
any directive by the United States or the
United Kingdom (or above referenced other
jurisdiction) court or governmental
authority or any requests (whether or not
having the force of law) of any regulatory
authority having jurisdiction over Party A
or its Affiliates;
(c) Any "Issuer Disruption Event",
which term shall mean any legal or
regulatory action, order or
proceeding affecting the Issuer, as
a result of which the related
Shares are no longer (or any
Settlement Shares are not) freely
tradeable (as determined by the
Calculation Agent), including
without limitation the issuance of
any regulatory stop order
respecting the Shares (or any
Settlement Shares), cessation of
the effectiveness of any
registration statement relating to
the Shares (or any Settlement
Shares), the delisting or ceasing
of
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<PAGE> 17
trading of the Shares on the Exchange
(other than by reason of a Market
Disruption Event).
Early Termination Amount: The Calculation Agent shall determine
termination amounts employing (among other
considerations) the following factors: (A)
the average of the Transaction option
volatility (using Calculation Agent's
Black-Scholes-derived option pricing model)
for a sixty (60) day historical period
(i.e., "60-day trailing volatility")
immediately preceding, and ending on, the
Event Date (or Announcement Date, in the
case of the relevant Merger Event); and (B)
the then prevailing market pricing (or the
Calculation Agent's good faith determination
of pricing) of the relevant Shares as of the
Event Date (or Merger Date, in the case of
the relevant Merger Event).
3. COLLATERAL:
Party B hereby pledges and grants to Party A a continuing first priority
security interest in and a lien upon and right of set-off against, with
power of sale, all of its right title and interest in and to the Shares to
secure the prompt and complete payment and performance when due of Party
B's obligations under the Transaction until fully paid and performed. The
parties agree that this Confirmation constitutes, among other things, a
security agreement with respect to the Shares under Articles 8 and 9 of the
New York Uniform Commercial Code ("NYUCC").
The Shares subject to this pledge ("Pledge") shall be the same as the
Shares underlying the Transaction, and the pledge of the Shares shall
secure Party B's obligations under the Transaction. In connection with the
occurrence and continuation of an Event of Default or Termination Event
with respect to Party B, Party A and its affiliates shall be entitled to
realize upon any and all Shares pledged to Party A to satisfy Party B
obligations under any and all then-outstanding Transactions.
In order to perfect the security interest of Party A in the Shares, Party B
shall deliver and pledge such Shares as security hereunder in accordance
with such procedures as required by Party A from time to time and take such
other action as Party A may request to establish the "control" (within the
meaning of Section 8-106 of the NYUCC) of Party A and/or Party A's
Collateral Custodian over the Shares including the following express grant
of control: Party A, Party B and Deutsche Bank Securities Inc. ("DBSI")
agree that DBSI is authorized and agrees to transfer the Shares to a
securities account of Party A, to be held in a segregated manner. Party A,
Party B and DBSI agree that DBSI is authorized and agrees to act on
instructions (including entitlement orders under the NYUCC) originated by
Party A without further consent of Party B as required by the NYUCC.
Each party hereto agrees that the Shares credited to a securities account
will be treated as a "Financial Asset" under the NYUCC. "Collateral
Custodian" means a "securities intermediary" (as defined in the NYUCC)
and/or, in the case of cash, a financial institution designated by Party A
as its agent to hold the Shares in accordance with the terms of this
Pledge. The Collateral Custodian may be an affiliate of Party A or an
unaffiliated securities intermediary and/or financial institution in the
United States.
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<PAGE> 18
In the event that an Event of Default or Termination Event has occurred and
is continuing with respect to Party B, Party A may exercise in respect of
the Shares, in addition to the rights and remedies otherwise available to
it, all the rights and remedies of a secured party on default under the
NYUCC, and Party A may sell the Shares or any part thereof upon such terms
as Party A may deem commercially reasonable. To the extent permitted by
applicable law, Party A or its affiliates may be the purchaser of the whole
or any part of the Shares so sold. In the event that an Event of Default or
Termination Event has occurred and is continuing in connection with the
Shares, Party A is hereby authorized and empowered, at its election, to act
with respect to the Shares or the proceeds thereof as though Party A were
the outright owner thereof, Party B hereby irrevocably constituting Party A
as its proxy and attorney-in-fact, coupled with an interest, with full
power of substitution to do so.
The parties hereto agree that Party A is entitled, but not required, to
take ownership of the Shares pledged herein, in full satisfaction of the
delivery obligations of Party B under the Transaction, free of any lien or
pledge on such Shares.
4. REPRESENTATIONS:
Each party represents to the other party as of the date that it enters into
this Transaction that (absent a written agreement between the parties that
expressly imposes affirmative obligations to the contrary for this
Transaction):
(i) NON-RELIANCE. It is acting for its own account, and it has made its
own independent decisions to enter into this Transaction and as to
whether the Transaction is appropriate or proper for it based upon
its own judgement and upon advice from such advisers as it has deemed
necessary. It is not relying on any communication (written or oral)
of the other party as investment advice or as a recommendation to
enter into this Transaction, it being understood that information and
explanations related to the terms and conditions of this Transaction
shall not be considered to be investment advice or a recommendation
to enter into the Transaction. No communication (written or oral)
received from the other party shall be deemed to be an assurance or
guarantee as to the expected results of this Transaction.
(ii) ASSESSMENT AND UNDERSTANDING. It is capable of assessing the merits
of and understanding (on its own behalf or through independent
professional advice), and understands and accepts the terms and
conditions and risks of this Transaction. It is also capable of
assuming, and assumes, the risks of the Transaction.
(iii) STATUS OF PARTIES. The other party is not acting as a fiduciary for
or adviser to it in respect of this Transaction.
(iv) U.S. FEDERAL SECURITIES LAWS. It understands that the offer and sale
of the Options constituting a Transaction is intended to be exempt
from registration under the US Securities Act of 1933, as amended
(the "Securities Act"), by virtue of Section 4(2) thereof. In
furtherance thereof, it represents and warrants that (a) it is
experienced in investing in or otherwise entering into options and
other financial instruments similar to the Transaction and has
determined that the Transaction is suitable investment for it, and
(b) it is an institution which qualifies as an "accredited investor"
or "qualified institutional buyer" as such terms are defined under
relevant regulations promulgated under the Securities Act.
5. ACCOUNT DETAILS:
Payment to PARTY A in USD: Attn: John Canale
Bank of New York
ABA # 021000018
A/C # 8900327634
A/C Deutsche Bank Securities Inc.
FBO: Deutsche Bank AG London
Payment to PARTY B in USD: Please Advise
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<PAGE> 19
6. CONTACT NAMES PARTY A:
Confirmations: Tarana Oommen
Telephone: (212) 469-2786
Fax No.: (212) 469-5220
Payments/Fixings: Richard Kennedy
Telephone: (212) 469-4927
Fax No.: (212) 469-4992
Each Party has agreed to make payments to the other in accordance with this
Confirmation. Please confirm that the foregoing correctly sets forth the terms
of our agreement by sending a return executed acknowledgment hereof to such
effect to the contact person named above who is responsible for the
administration of this Transaction. The time of execution of this Transaction
will be made available by Party A upon written request.
Party A is regulated by the Securities and Futures Authority
We are very pleased to have concluded this Transaction with you.
Regards,
DEUTSCHE BANK AG, LONDON BRANCH REVIEWED BY:
By: /s/ James S. Rowen By: /s/ William Davis
------------------------------- ------------------------
Name: James S. Rowen William Davis
Title: Attorney-in-Fact
By: /s/ Tanara Oomen By: /s/ Gary Zentner
------------------------------- -------------------------
Name: Tarana Oommen Gary Zentner
Title: Attorney-in-Fact
DEUTSCHE BANK SECURITIES INC.
acting solely as Agent in
connection with this Transaction
By: /s/ James S. Rowen
--------------------------------
Name: James S. Rowen
Title: Managing Director
By: /s/ Tanara Oomen
--------------------------------
Name: Tarana Oommen
Title: Vice President
Confirmed and Acknowledged as of the date first above written:
TELXON SYSTEMS SERVICES INC.
By: /s/ Woody M. McGee
--------------------------------
Name: Woody M. McGee
Title: VP CFO
9
