Morgan Stanley
& Co. International Limited
c/o Morgan Stanley Bank, as agent
c/o Morgan Stanley
One New York Plaza
New York, NY 10004
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To: Maverick
Tube Corporation
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16401 Swingley
Ridge Road, Ste 700
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Chesterfield,
Missouri 63017
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Attention:
Chief Financial Officer
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(636)
733-1600
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(636)
733-5570
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Re: Call Option
Transaction
The purpose of
this letter agreement is to confirm the terms and conditions of the
Transaction entered into between Morgan Stanley & Co.
International Limited (“ MSIL ”), represented by
Morgan Stanley Bank (“ MSB ”), as its agent, and
Maverick Tube Corporation, a Delaware corporation (“
Counterparty ”), on the Trade Date specified below
(the “ Transaction ”). This letter agreement
constitutes a “Confirmation” as referred to in the ISDA
Master Agreement specified below. This Confirmation shall replace
any previous letter and serve as the final documentation for this
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 shall govern. Certain defined terms used herein
have the meanings assigned to them in the Offering Memorandum dated
November 9, 2005 (the “ Offering Memorandum
”) relating to the USD 220,000,000 principal amount of
Convertible Notes due November 15, 2025 (the “
Convertible Notes ” and each USD 1,000 principal
amount of Convertible Notes, a “ Convertible Note
”) issued by Counterparty pursuant to an Indenture to be
dated on or about November 15, 2005 between Counterparty and
The Bank of New York, as trustee (the “ Indenture
”). In the event of any inconsistency between the terms
defined in the Offering Memorandum and this Confirmation, the
Confirmation shall govern.
Each party is
hereby advised, and each such party acknowledges, that the other
party has engaged in, or refrained from engaging in, substantial
financial transactions and has taken other material actions in
reliance upon the parties’ entry into the Transaction to
which this Confirmation relates on the terms and conditions set
forth below.
1. This
Confirmation evidences a complete and binding agreement between
MSIL and Counterparty as to the terms of the Transaction to which
this Confirmation relates. This Confirmation shall supplement, form
a part of, and be subject to an agreement in the form of the 2002
ISDA Master Agreement (the “ Agreement ”) as if
MSIL and Counterparty had executed an agreement in such form (but
without any Schedule except for (i) the election of the laws
of the State of New York as the governing law, (ii) the
identification of Morgan Stanley as a Credit Support Provider with
respect to MSIL and (iii) the identification of the Guarantee
of Morgan Stanley attached hereto as a Credit Support Document with
respect to MSIL) on the Trade Date. In the event of any
inconsistency between provisions of that Agreement and this
Confirmation, this Confirmation will prevail for the purpose of the
Transaction to which this Confirmation relates. The parties hereby
agree that no Transaction other than the Transaction to which this
Confirmation relates shall be governed by the Agreement.
2. The terms of
the particular Transaction to which this Confirmation relates are
as follows:
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November 9, 2005
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modified
American, as described in the “Exercise and Valuation”
provisions set forth below
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Call
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Counterparty
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MSIL
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The common
stock of Counterparty, par value USD 0.01 per Share (Exchange
symbol “MVK”)
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220,000
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As of any date,
a number equal to the Conversion Rate as of such date (as defined
in the Indenture, but without regard to any adjustments to the
Conversion Rate pursuant to Sections 15.01(e) and 15.04(g) of
the Indenture), for each Convertible Note.
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USD
77,033,642.00
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November 15, 2005
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The New York
Stock Exchange
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The principal
exchange(s) for options contracts or futures contracts, if any,
with respect to the Shares
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Notwithstanding
the Equity Definitions, in respect of Exercisable Options with a
particular Conversion Date (each as defined below), the Exercise
Period shall be the period commencing on and including the
Conversion Date for such Exercisable Options to and including the
Exchange Business Day immediately following such Conversion
Date.
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In respect of
any date on which one or more holders of Convertible Notes properly
surrenders to Counterparty a Convertible Note for conversion (a
“ Conversion Date ”), a number of Options equal
to the lesser of (i) the remaining Number of Options as of the
relevant Exercise Date and (ii) the number of Convertible
Notes properly surrendered to Counterparty for conversion on the
relevant Conversion Date.
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At the close of
trading of the regular trading session on the Exchange
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For any
Exercisable Option, the earlier of (i) the final day of the
Exercise Period applicable to such Exercisable Options and
(ii) the Final Expiration Date.
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2
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November 15, 2013
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Applicable, as
described under Exercisable Options above.
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Not
Applicable
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Notwithstanding
anything to the contrary in the Equity Definitions, in order to
exercise any Options, Counterparty must notify MSIL in writing on
or prior to the last day of the relevant Exercise Period of
(i) the number of Exercisable Options for such Exercise Period
being exercised, (ii) the Conversion Date that triggered such
Exercise Period and (iii) the scheduled settlement date for
the Convertible Notes relating to such Exercisable
Options.
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Net Share
Settlement
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In respect of a
Conversion Date, the settlement date for the Shares to be delivered
under the related Convertible Note(s) under the terms of the
Indenture.
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In respect of a
Conversion Date, MSIL will deliver to Counterparty, on the related
Settlement Date, a number of Shares equal to the aggregate number
of Shares that Counterparty is obligated to deliver to the holders
of the Convertible Note(s) relating to such Exercisable Options,
provided , however , that such obligation shall be
determined excluding any Shares that Counterparty is obligated to
deliver to holders of the Convertible Note(s) as a result of any
adjustments to the Conversion Rate pursuant to
Sections 15.01(e) and 15.04(g) of the Indenture.
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Other Applicable
Provisions:
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The provisions
of Sections 6.6, 6.7, 6.8, 6.9 and 6.10 of the Equity
Definitions will be applicable, except that all references in such
provisions to “Physically-Settled” shall be read as
references to “Net Share Settled”. “Net Share
Settled” in relation to any Option means that Net Share
Settlement is applicable to such Option.
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Applicable
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3. Additional
Terms applicable to the Transaction:
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Adjustments
applicable to the Transaction:
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Not
applicable.
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Extraordinary
Events applicable to the Transaction:
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Notwithstanding
Section 9.2(a) of the Equity Definitions, a “Merger
Event” means the occurrence of any event or condition set
forth in Section 15.06 of the Indenture.
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Consequence of
Merger Events:
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Notwithstanding
Section 9.3 of the Equity Definitions, upon the occurrence of
a Merger Event, the Calculation Agent shall make a
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3
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corresponding
adjustment in respect of any adjustment under the Indenture to any
one or more of the nature of the Shares and any other variable
relevant to the exercise, settlement or payment for the
Transaction; provided, however, that such adjustment shall
be made without regard to any adjustment to the Conversion Rate for
the issuance of additional shares as set forth in
Section 15.01(e) of the Indenture.
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Additional
Termination Events:
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If
Counterparty’s obligations under the Indenture or the
Convertible Notes are accelerated following the occurrence of any
event of default under the terms of the Convertible Notes, as set
forth in Section 7.01 of the Indenture, then such event shall
constitute an Additional Termination Event applicable to this
Transaction with respect to which (i) Counterparty shall be
deemed to be the sole Affected Party and this Transaction shall be
the sole Affected Transaction and (ii) MSIL shall be the party
entitled to designate an Early Termination Date pursuant to
Section 6(b) of the Agreement.
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If any
provision of the Indenture or the Convertible Notes is amended,
modified, supplemented or waived such that there is a material
effect, as determined by the Calculation Agent in its sole
discretion, on this Transaction or MSIL’s ability to hedge
all or a portion of this Transaction, then such event (an “
Amendment Event ”) shall constitute an Additional
Termination Event applicable to this Transaction with respect to
which (i) Counterparty shall be deemed to be the sole Affected
Party and this Transaction shall be the sole Affected Transaction
and (ii) MSIL shall be the party entitled to designate an
Early Termination Date pursuant to Section 6(b) of the Agreement.
For the avoidance of doubt, an election by Counterparty to increase
the conversion rate pursuant to Section 15.04(g) of the
Indenture shall not constitute an Amendment Event.
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(a)
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Account for payments to
Counterparty:
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Bank Name:
JPMorgan Chase Bank
ABA No.: 021 000 021
Account Name: Maverick Tube Corporation
Account No.: 323-326641
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Account for delivery of Shares to
Counterparty:
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(b)
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Account for payments to
MSIL:
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Citibank,
N.A.
ABA# 021-000-089
A/C Morgan Stanley Bank
A/C No. 30440939
For further credit to Customer Account 33AC0030
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Account for delivery of Shares from
MSIL:
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The Office of
Counterparty for the Transaction is: Inapplicable, Counterparty is
not a Multibranch Party.
The Office of
MSIL for the Transaction is:
Morgan Stanley
& Co. International Limited
c/o Morgan Stanley Bank
c/o Morgan Stanley
One New York Plaza
4 th
Floor
New York, NY 10004
7. Notices: For
purposes of this Confirmation:
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(a)
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Address for notices or
communications to Counterparty:
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Maverick Tube
Corporation
16401 Swingley Ridge Road, Ste 700
Chesterfield, Missouri 63017
Attention: Chief Financial Officer
Telephone No.: (636) 733-1600
Facsimile: (636) 733-5570
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(b)
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Address for notices or
communications to MSIL:
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Morgan Stanley
& Co. International Limited
c/o Morgan Stanley Bank
c/o Morgan Stanley
One New York Plaza
4 th
Floor
New York, NY 10004
Attn: Fred Gonfiantini
Telephone No: (212) 276-2427
Facsimile No: (212) 507-0724
Legal
Department
Morgan Stanley & Co. Incorporated
1585 Broadway
38 th
Floor
New York, NY 10036
Attn: Anthony Cicia
Telephone No: (212) 761-3452
Facsimile No: (212) 507-4338
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8.
Representations and Warranties of Counterparty
The
representations and warranties of Counterparty set forth in
Section 3 of the Agreement and Section 1 of the Purchase
Agreement (the “ Purchase Agreement ”) dated as
of the Trade Date between Counterparty and Morgan Stanley & Co.
Incorporated (“ MS&Co. ”) are true and
correct and are hereby deemed to be repeated to MSIL as if set
forth herein. Counterparty hereby further represents and warrants
to MSIL that:
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(a)
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Counterparty has all necessary
corporate power and authority to execute, deliver and perform its
obligations in respect of this Transaction; such execution,
delivery and performance have been duly authorized by all necessary
corporate action on Counterparty’s part; and this
Confirmation has been duly and validly executed and delivered by
Counterparty and constitutes its valid and binding obligation,
enforceable against Counterparty in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity) and except that rights to
indemnification and contribution hereunder may be limited by
federal or state securities laws or public policy relating
thereto.
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(b)
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Neither the execution and delivery
of this Confirmation nor the incurrence or performance of
obligations of Counterparty hereunder will conflict with or result
in a breach of the certificate of incorporation or by-laws (or any
equivalent documents) of Counterparty, or any applicable law or
regulation, or any order, writ, injunction or decree of any court
or governmental authority or agency, or any agreement or instrument
to which Counterparty or any of its subsidiaries is a party or by
which Counterparty or any of its subsidiaries is bound or to which
Counterparty or any of its subsidiaries is subject, or constitute a
default under, or result in the creation of any lien under, any
such agreement or instrument, or breach or constitute a default
under any agreements and contracts of Counterparty or its
significant subsidiaries filed as exhibits to Counterparty’s
Annual Report on Form 10-K for the year ended December 31,
2004, incorporated by reference in the Offering Memorandum, as
updated by any subsequent filings.
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(c)
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No
consent, approval, authorization, or order of, or filing with, any
governmental agency or body or any court is required in connection
with the execution, delivery or performance by Counterparty of this
Confirmation, except such as have been obtained or made and such as
may be required under the Securities Act of 1933, as amended (the
“ Securities Act ”) or state securities
laws.
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(d)
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Counterparty is an “eligible
contract participant” (as such term is defined in
Section 1(a)(12) of the Commodity Exchange Act, as amended
(the “ CEA ”) because one or more of the
following is true:
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Counterparty is a corporation,
partnership, proprietorship, organization, trust or other entity
and:
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(A)
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Counterparty has total assets in
excess of USD 10,000,000;
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(B)
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the
obligations of Counterparty hereunder are guaranteed, or otherwise
supported by a letter of credit or keepwell, support or other
agreement, by an entity of the type described in
Section 1a(12)(A)(i) through (iv), 1a(12)(A)(v)(I),
1a(12)(A)(vii) or 1a(12)(C) of the CEA; or
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(C)
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Counterparty has a net worth in
excess of USD 1,000,000 and has entered into this Agreement in
connection with the conduct of Counterparty’s business or to
manage the risk associated with an asset or liability owned or
incurred or reasonably likely to be owned or incurred by
Counterparty in the conduct of Counterparty’s
business.
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(e)
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Each of Counterparty and its
affiliates is not, on the date hereof, in possession of any
material non-public information with respect to
Counterparty.
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(f)
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Counterparty is an “accredited
investor” (as such term is defined in Section 2(a)(15)(ii) of
the Securities Act).
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(g)
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Counterparty’s financial
condition is such that it has no need for liquidity with respect to
its investment in the Transaction and no need to dispose of any
portion thereof to satisfy any existing or contemplated undertaking
or indebtedness.
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(h)
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Counterparty’s investments in
and liabilities in respect of the Transaction, which it understands
are not readily marketable, are not disproportionate to its net
worth, and it is able to bear any loss in connection with the
Transaction, including the loss of its entire investment in the
Transaction.
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(i)
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Counterparty hereby agrees and
acknowledges that the Transaction has not been registered with the
Securities and Exchange Commission or any state securities
commission and that the Options are being written by MSIL to
Counterparty in reliance upon exemptions from any such registration
requirements. Counterparty acknowledges that all Options acquired
from MSIL will be acquired for investment purposes only and not for
the purpose of resale or other transfer except in compliance with
the requirements of the Securities Act. Counterparty will not sell
or otherwise transfer any Option or any interest therein except in
compliance with the requirements of the Securities Act and any
subsequent offer or sale of the Options will be solely for
Counterparty’s account and not as part of a distribution that
would be in violation of the Securities Act.
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(j)
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Counterparty understands no
obligations of MSIL to it hereunder will be entitled to the benefit
of deposit insurance and that such obligations will not be
guaranteed by any affiliate of MSIL or any governmental
agency.
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(k)
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Counterparty is capable of assessing
the merits of and understanding (on its own behalf or through
independent professional advice), and understands and accepts, the
terms, conditions and risks of the Transaction.
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(a)
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Opinions . Counterparty shall deliver to MSIL
an opinion of counsel, dated as of the Trade Date, with respect to
the matters set forth in Sections 8(a) through (c) of this
Confirmation.
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(b)
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Amendment . If the Initial Purchasers party to
the Purchase Agreement exercise their right to purchase additional
Convertible Notes as set forth therein, then, at the discretion of
Counterparty, MSIL and Counterparty will either enter into a new
confirmation or amend this Confirmation to provide for such
increase in Convertible Notes (but on pricing terms acceptable to
MSIL and Counterparty) (such additional confirmation or amendment
to this Confirmation to provide for the payment by Counterparty to
MSIL of the additional premium related thereto).
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(c)
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No Reliance, etc
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Each party represents
that (i) it is entering into the Transaction evidenced hereby
as principal (and not as agent or in any other capacity);
(ii) neither the other party nor any of its agents are acting
as a fiduciary for it; (iii) it is not relying upon any
representations except those expressly set forth in the Agreement
or this Confirmation; (iv) it has not relied on the other
party for any legal, regulatory, tax, business, investment,
financial, and accounting advice, and it has made its own
investment, hedging, and trading decisions based upon its own
judgment and not upon any view expressed by
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