Re: Enhanced Overnight Share Repurchase

 

SECTION 2 .  Definitions.

 

As used in this Letter Agreement, the following terms shall have the following meanings:

 

“ Announcement Date ” means the date of first public announcement of any corporate event involving the Company or the Common Stock that, in the determination of the Calculation Agent, is, as of such date, or becomes at any date subsequent to such date but on or prior to the last day of the Averaging Period, a Friendly Transaction, or the first date of public announcement by the Company that the Company is engaged in discussions with another party concerning a potential Friendly Transaction or is considering strategic alternatives that, if consummated, would be or include a Friendly Transaction (as determined by the Calculation Agent in its reasonable discretion).

 

“ Averaging Period ” means the period of consecutive Trading Days commencing on the first Trading Day immediately following the Trade Date and ending on the date exactly five months after the Trade Date; provided that the Seller may, in its absolute discretion, accelerate the last day of the Averaging Period to any Trading Day on or after December 16, 2005 upon written notice to the Company (it being understood that such notice may be given on the same date that the Seller elects to be the last day of the Averaging Period).

 

“ Average Purchase Price ” means the arithmetic average of the Daily Average Prices for all Trading Days during the Averaging Period.

 

“ BAS ” has the meaning specified in Section 1(b).

 

“ Business Day ” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.

 

“ Calculation Agent ” means BAS.

 

“ Cap Fair Market Value ” means the fair market value on the Measurement Date, as determined by the Calculation Agent, of a call option, written by the Seller, with a settlement amount equal to the excess, if any, of the product of 0.50 and the Repurchase Cost (calculated without regard to the proviso to the definition thereof) over the product of 5,000,000 and the Cap Price, and a settlement date equal to the date that the Calculation Agent, in its good faith reasonable discretion, as of the Measurement Date, expects will be the last day of the Averaging Period.

 

“ Cap Price ” means the price per share specified as such in the Supplemental Terms Notice, which shall be equal to 115% of the Hedge Execution Price.

 

“ Common Stock ” has the meaning specified in Section 1(a).

 

“ Company ” has the meaning specified in Section 1(a).

 

“ Daily Average Price ” means (i) for any Trading Day in the Averaging Period, the Reported VWAP for such Trading Day minus $0.28 or (ii) for any Trading Day in the Valuation Period, the dollar volume weighted average price per share of Common Stock for that Trading Day based on transactions executed by the Seller or its designated affiliate during that Trading Day in connection with the settlement of this Letter Agreement.

 

2

 

“ Designee ” has the meaning specified in Section 15.

 

“ Exchange ” means, at any time, the principal national securities exchange or automated quotation system, if any, on which the Common Stock is listed or quoted at such time.

 

“ Exchange Act ” has the meaning specified in Section 1(b).

 

“ Federal Funds Rate ” means, for any day, the rate on such day for Federal Funds, as published by Bloomberg and found by pressing the following letters “FEDSOPEN” followed by pressing the <Index> key and pressing the following letters “HP” followed by pressing the <Go> key; provided that if any such day is not a New York Banking Day, the Federal Funds Rate for such day shall be the Federal Funds Rate for the immediately preceding New York Banking Day.

 

“ Friendly Transaction ” means any Merger Event or Tender Offer that is approved, agreed to or recommended by the Company or its board of directors, or negotiated by the Company or any authorized representative of the Company, including without limitation (i) any transaction involving the merger of the Company with or into any third party and (ii) any transaction in which the Company or its board of directors has a legal obligation to make a recommendation to its shareholders in respect of such transaction (whether pursuant to Rule 14e-2 under the Exchange Act or otherwise) and does not recommend that its shareholders reject such transaction.

 

“ Hedge Execution Price ” means the price per share specified as such in the Supplemental Terms Notice, which shall be equal to the net volume weighted average price per share at which the Seller executes the Seller’s Initial Hedge, as determined by the Calculation Agent.

 

“ Initial Shares ” has the meaning specified in Section 1(a).

 

“ ISDA Definitions ” means the 2002 ISDA Equity Derivatives Definitions, as published by the International Swaps and Derivatives Association, Inc.

 

“ Make-Whole Payment Shares ” has the meaning specified in Section 5(c).

 

“ Maximum Deliverable Number ” means 30,000,000, subject to adjustment pursuant to Section 7(a).

 

“ Measurement Date ” means the tenth Business Day prior to the Announcement Date.

 

“ Merger Event ” has the meaning specified in the ISDA Definitions.  For purposes of the ISDA Definitions, the Shares are shares of Common Stock, the Issuer is the Company, the Merger Date shall be deemed to be the Announcement Date and the final Valuation Date shall be deemed to be the last day of the Averaging Period.

 

“ New York Banking Day ” means any day except for a Saturday, Sunday or a day on which the Federal Reserve Bank of New York is closed.

 

“ Payment Shares ” means Restricted Payment Shares or Make-Whole Payment Shares.

 

“ Premium ” means the amount specified as such in the Supplemental Terms Notice, which shall be an amount equal to the product of (i) 5,000,000 multiplied by (ii) the Hedge Execution Price multiplied by (iii) 1.27%.

 

3

 

“ Premium Payment Date ” means the date specified as such in the Supplemental Terms Notice, which shall be the third Business Day following the completion of the Seller’s Initial Hedge.

 

“ Private Placement Agreement ” has the meaning specified in Section 6(a)(iii).

 

“ Purchase Date ” has the meaning specified in Section 1(a).

 

“ Purchase Price ” has the meaning specified in Section 1(a).

 

“ Refund Shares ” has the meaning specified in Section 5(a)(i)(A).

 

“ Regulation M ” means Regulation M under the Exchange Act.

 

“ Remaining Scheduled Days ” means the scheduled number of Trading Days remaining in the Averaging Period or the Valuation Period as of the time of any suspension of the Averaging Period or the Valuation Period, as the case may be.

 

“ Reported VWAP ” means, for any Trading Day, the dollar volume weighted average price per share of Common Stock for that Trading Day based on transactions executed during that Trading Day on the Exchange, excluding (i) transactions that do not settle regular way, (ii) opening transactions (regular way) reported in the consolidated system, (iii) transactions effected during the 10 minutes before the scheduled close of trading on the Exchange and 10 minutes before the scheduled close of the primary trading session in the market where the transaction is effected and (iv) and transactions on such day that do not satisfy the requirements of Rule 10b-18(b)(3) under the Exchange Act (in each case as determined by the Calculation Agent), as reported on Bloomberg Page ”FDO.N <Equity> AQR SEC” (or any successor thereto) or, in the event such price is not so reported on such Trading Day for any reason, as reasonably determined by the Calculation Agent.

 

“ Repurchase Cost ” means the product of (i) the Average Purchase Price multiplied by (ii) the number of Initial Shares; provided , that if such sum is greater than the product of the Cap Price and the number of the Initial Shares, then the Repurchase Cost shall be the sum of (x) the Cap Price multiplied by 5,000,000 plus (y) the Repurchase Cost calculated without regard to this proviso multiplied by 0.50.

 

“ Requirements ” has the meaning specified in Section 3(b).

 

“ Restricted Payment Shares ” has the meaning specified in Section 5(a)(ii).

 

“ Restricted Share Amount ” means the quotient of (i) the absolute value of the Settlement Amount divided by (ii) the Restricted Share Value of a Restricted Payment Share.

 

“ Restricted Share Value ” means, with respect to any Restricted Payment Shares or Make-Whole Payment Shares, 95% of the value thereof per share to the Seller, determined by the Calculation Agent by commercially reasonable means.

 

“ Rule 10b-18 ” means Rule 10b-18 under the Exchange Act.

 

“ Securities Act ” means the Securities Act of 1933, as amended.

 

“ Seller ” has the meaning specified in Section 1(a).

 

4

 

“ Seller’s Initial Hedge ” has the meaning specified in Section 1(c).

 

“ Seller’s Short Position ” means, at any time, the number of shares of Common Stock constituting the Seller’s theoretical net short position in relation to the transactions contemplated by this Letter Agreement at such time, as determined by the Calculation Agent.

 

“ Settlement Amount ” means an amount equal to (i) the Purchase Price minus (ii) the Repurchase Cost, subject to adjustment as provided in Section 7(b).

 

“ Settlement Balance ” has the meaning specified in Section 5(c).

 

“ Settlement Day ” means any day that is not a Saturday, a Sunday or a day on which banking institutions or trust companies in The City of New York are authorized or obligated by law or executive order to close.  A Settlement Day “corresponds” to a Trading Day if it is the day for settlement of regular way transactions for equity securities entered into on the Exchange on that Trading Day.

 

“ Share Amount ” means, for any Trading Day, the quotient of (i) the product of (A) the Valuation Fraction multiplied by (B) the absolute value of the Settlement Amount, divided by (ii) the Daily Average Price for that Trading Day.

 

“ Supplemental Terms Notice ” has the meaning specified in Section 1(c).

 

“ Tender Offer ” has the meaning specified in the ISDA Definitions.  For purposes of the ISDA Definitions, the Issuer is the Company.

 

“ Trade Date ” means the date of completion of the Seller’s Initial Hedge (as determined by the Seller in good faith).

 

“ Trading Day ” means any day (i) other than a Saturday, a Sunday or a day on which the Exchange is not open for business, (ii) during which trading of any securities of the Company on any national securities exchange has not been suspended and (iii) during which there has not been, in the Calculation Agent’s judgment, a material limitation in the trading of Common Stock.

 

“ Valuation Fraction ” means a fraction, the numerator of which is one and the denominator of which is the number of Trading Days in the Valuation Period.

 

“ Valuation Period ” means, in the case of settlement pursuant to Sections 5(a)(i)(A) or 5(a)(ii)(A), the period commencing on the first Trading Day immediately following the final day of the Averaging Period.  The number of Trading Days in the Valuation Period shall be determined by the Seller in its discretion and notified to the Company by the Seller prior to the commencement of the Valuation Period.  Without limiting the generality of Section 3(b), in the case of settlement pursuant to Section 5(a)(i)(A), the number of Trading Days in the Valuation Period shall be a number of Trading Days that the Seller reasonably expects, based on information provided to the Seller by the Company and readily available market information, will result in Share Amounts for each Trading Day during the Valuation Period that will be less than or equal to the maximum number of shares of Common Stock that the Company could have purchased on such Trading Day in compliance with the conditions set forth in Rule 10b-18.  For the avoidance of doubt, if the Company elects either to receive a cash payment pursuant to Section 5(a)(i)(B) or make a cash payment pursuant to Section 5(a)(ii)(B), there will be no Valuation Period.

 

5

 

SECTION 3 .  Seller Purchases.

 

(a)                                   The Initial Shares may be sold short to the Company.  It is understood that during the Averaging Period the Seller will purchase shares of Common Stock in connection with this Letter Agreement, which shares may be used to cover all or a portion of such short sale and, if the Settlement Amount is greater than zero, during the Valuation Period the Seller will purchase shares of Common Stock to fulfill its obligations to deliver Refund Shares to the Company pursuant to Section 5(a)(i).  Such purchases will be conducted independently of the Company.  The timing of such purchases by the Seller, the number of shares purchased by the Seller on any day, the price paid per share of Common Stock pursuant to such purchases and the manner in which such purchases are made, including without limitation whether such purchases are made on any securities exchange or privately, shall be within the absolute discretion of the Seller.  The Seller shall effect such purchases of Common Stock as well as purchases relating to the establishment of the Seller’s Initial Hedge (it being understood that for these purposes such purchases shall not be deemed to include any purchases made by the Seller in connection with dynamic hedge adjustments of the Seller’s exposure to the transactions contemplated hereby as a result of any equity optionality contained in such transactions) in a manner that would, if the Seller were the Company or an affiliated purchaser of the Company, be subject to the safe harbor provided by Rule 10b-18(b) or otherwise in a manner that the Seller reasonably believes is in compliance with applicable requirements.  For this reason, the Company shall, at least one day prior to the first day of the Averaging Period, notify the Seller of the total number of shares of Common Stock purchased in Rule 10b-18 purchases of blocks pursuant to the once-a-week block exception contained in Rule 10b-18(b)(4) by or for the Company or any of its affiliated purchasers during each of the four calendar weeks preceding the first day of the Averaging Period and during the calendar week in which the first day of the Averaging Period occurs (“Rule 10b-18 purchase”, “blocks” and “affiliated purchaser” each being used as defined in Rule 10b-18), which notice shall be substantially in the form set forth as Appendix B hereto.  It is the intent of the parties that this transaction comply with the requirements of Rule 10b5-1(c)(1)(i)(B) of the Exchange Act, and the parties agree that (i) this Letter Agreement shall be interpreted to comply with the requirements of Rule 10b5-1(c), and (ii) they shall take no action that results in this transaction not so complying with such requirements.  Without limiting the generality of the preceding sentence, the Company acknowledges and agrees that (A) the Company does not have, and shall not attempt to exercise, any influence over how, when or whether the Seller effects any purchases of Common Stock in connection with this Letter Agreement, (B) during the period beginning on (but excluding) the date of this Letter Agreement and ending on the last day of the Valuation Period, if any, neither the Company nor its officers or employees shall, directly or indirectly, communicate any information regarding the Company or the Common Stock to any employee of the Seller or its affiliates involved in trading the Common Stock in connection with the transactions contemplated hereby, who currently include the individuals specified in Annex A hereto, (C) the Company is entering into this Letter Agreement in good faith and not as part of a plan or scheme to evade compliance with federal securities laws including, without limitation, Rule 10b-5 promulgated under the Exchange Act and (D) the Company will not alter or deviate from this Letter Agreement or enter into or alter a corresponding hedging transaction with respect to the Common Stock.  The Company also acknowledges and agrees that any amendment, modification, waiver or termination of this Letter Agreement must be effected in accordance with the requirements of Rule 10b5-1(c) under the Exchange Act.  Without limiting the generality of the foregoing, any such amendment, modification, waiver or termination shall be made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the Exchange Act, and no such amendment, modification or waiver shall be made at any time at which the Company or any officer or director of the Company is aware of any material nonpublic information regarding the Company or the Common Stock.

 

6

 

(b)                                  In the event that the Seller reasonably determines that it is appropriate with regard to any legal, regulatory or self-regulatory requirements or related policies and procedures (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by the Seller, and including without limitation Rule 10b-18, Rule 10b-5, Regulation 13D-G and Regulation 14E under the Exchange Act, “ Requirements ”), for the Seller to refrain from purchasing Common Stock or to purchase fewer than the number of shares of Common Stock that the Seller would otherwise purchase on any Trading Day during the Averaging Period or, if the Settlement Amount is greater than zero, the Valuation Period, then the Seller may, in its discretion, elect that the Averaging Period or the Valuation Period, as the case may be, be suspended as appropriate with regard to any Requirements.  The Seller shall notify the Company upon the exercise of the Seller’s rights pursuant to this Section 3(b) and shall subsequently notify the Company on the day the Seller believes that the circumstances giving rise to such exercise have changed.  If the Averaging Period or the Valuation Period is suspended by the Seller pursuant to this Section 3(b), at the end of such suspension the Seller shall determine the number of Trading Days remaining in the Averaging Period or the Valuation Period, as the case may be, which number shall not exceed the Remaining Scheduled Days as of the time of such suspension.

 

(c)                                   The Company agrees that neither the Company nor any of its affiliates or agents shall take any action that would cause Regulation M to be applicable to any purchases of Common Stock, or any security for which the Common Stock is a reference security (as defined in Regulation M), by the Company or any of its affiliated purchasers (as defined in Regulation M) during the Averaging Period or, if the Settlement Amount is greater than zero, the Valuation Period.

 

(d)                                  From the date hereof through the last day of the Averaging Period or, if the Settlement Amount is greater than zero, through the last day of the Valuation Period, the Company shall (i) notify the Seller prior to the opening of trading in the Common Stock on any day on which the Company makes, or expects to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any merger, acquisition, or similar transaction involving a recapitalization relating to the Company (other than any such transaction in which the consideration consists solely of cash and there is no valuation period), (ii) promptly notify the Seller following any such announcement that such announcement has been made, and (iii) promptly deliver to the Seller following the making of any such announcement a certificate indicating (A) the Company’s average daily Rule 10b-18 purchases (as defined in Rule 10b-18) during the three full calendar months preceding the date of the announcement of such transaction and (B) the Company’s block purchases (as defined in Rule 10b-18) effected pursuant to paragraph (b)(4) of Rule 10b-18 during the three full calendar months preceding the date of the announcement of such transaction.  In addition, the Company shall promptly notify the Seller of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders.  The Company acknowledges that any such public announcement may cause the Averaging Period or Valuation Period, as the case may be, to be suspended pursuant to Section 3(b).  Accordingly, the Company acknowledges that its actions in relation to any such announcement or transaction must comply with the standards set forth in Section 3(a).

 

SECTION 4 .  Company Purchases.

 

Without the prior written consent of the Seller, the Company shall not, and shall cause its affiliates and affiliated purchasers (each as defined in Rule 10b-18) not to, directly or indirectly (including, without limitation, by means of a cash-settled or other derivative instrument) purchase, offer to purchase, place any bid or limit order that would effect a purchase of, or commence any tender offer relating to, any shares of Common Stock (or an equivalent interest, including a unit of beneficial interest in a trust or limited partnership or a depository share) or any security

 

7

 

convertible into or exchangeable for shares of Common Stock during the period beginning on, and including, the Purchase Date and ending on, and including, the date all payments or deliveries of shares pursuant to Section 5 below have been made.  During such time, any purchases of Common Stock (or any security convertible into or exchangeable for shares of Common Stock) by the Company shall be made through BAS, which is an affiliate of the Seller, pursuant to a letter substantially in the form of Appendix A hereto and subject to such conditions as the Seller shall impose, and shall be in compliance with Rule 10b-18 or otherwise in a manner that the Company and the Seller believe is in compliance with applicable requirements (including, without limitation, Rule 10b-5, Regulation 13D-G and Regulation 14E under the Exchange Act).  Notwithstanding the foregoing, the Seller acknowledges that directors, officers and employees of the Company shall be entitled, in their discretion, to exercise stock options granted by the Company pursuant to existing equity compensation plans without restriction or obligation to the Seller or BAS hereunder.

 

SECTION 5 .  Purchase Price Adjustment and Settlement.

 

(a)                                   After the expiration of the Averaging Period,

 

(i)                                      if the Settlement Amount is greater than zero, as an adjustment to the Purchase Price, the Company shall elect either for

 

(A)                          the Seller to transfer to the Company, for no additional consideration, a number of shares of Common Stock equal to the sum of the Share Amounts for each of the Trading Days in the Valuation Period (the “ Refund Shares ”) in the manner provided in Section 5(b), or

 

(B)                            t