RadioShack
Corporation
300 RadioShack Circle
MS CF3-307
Fort Worth, TX 76102
Attn: Senior Vice President and Chief Financial Officer
Re:
Overnight Share Repurchase
SECTION 1 .
Initial Shares; Seller’s Initial Hedge.
(a) Bank of
America, N.A. (the “ Seller ”) will sell to
RadioShack Corporation, a Delaware corporation (the “
Company ”), and the Company will purchase from the
Seller for settlement on August 8, 2005 (the “ Purchase
Date ”), 20,000,000 shares (the “ Initial
Shares ”) of common stock, par value $1.00 per share, of
the Company (the “ Common Stock ”) at a purchase
price (the “ Purchase Price ”) equal to the
number of the Initial Shares multiplied by $25.01. Such sale shall
be effected in accordance with the Seller’s customary
procedures.
(b) In
connection with its purchase of the Initial Shares, and in addition
to the payment of the Purchase Price, the Company will pay on the
Purchase Date a brokerage fee of $0.02 per Initial Share to Banc of
America Securities LLC (“ BAS ”), which is
registered as a broker and a dealer under the Securities Exchange
Act of 1934, as amended (the “ Exchange Act
”).
(c) Following
the Purchase Date, the Seller shall establish the Seller’s
initial hedge of the price and market risk of the transactions
contemplated hereby as a result of the Cap Price (which the parties
currently contemplate will consist of approximately 1,650,000
shares of Common Stock established over approximately seven Trading
Days) (the “ Seller’s Initial Hedge ”) (it
being understood that the Seller’s Initial Hedge shall not
include the sale and purchase of the Initial Shares pursuant to
Section 1(a) above). Subject to Section 7(b) below, upon the
completion of the Seller’s Initial Hedge, the Seller shall
determine the Cap Price, the Hedge Execution Price and the Premium
in the manner set forth below based on the Seller’s Initial
Hedge, and shall deliver to the Company a supplemental terms notice
substantially in the form of Annex C hereto (the “
Supplemental Terms Notice ”) within two Business Days
following the completion of the Seller’s Initial
Hedge.
(d) In
addition, in consideration of the terms contained in this Letter
Agreement, the Company hereby agrees to pay the Premium to the
Seller on the Premium Payment Date specified in the Supplemental
Terms Notice, subject to Section 7(b) below.
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 reasonable 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 last day of the Hedging Period and ending on the
Trading Day on which the Completed Share Amount equals the number
of Initial Shares.
“ BAS
” has the meaning specified in Section 1(b).
“ Borrow
Rebate Rate Shortfall ” has the meaning specified in
Section 7(c).
“
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 0.75 and the Repurchase Cost
(calculated without regard to the proviso to the definition
thereof) over the product of 15,000,000 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 equal 120% of the Hedge
Execution Price.
“ Common
Stock ” has the meaning specified in
Section 1(a).
“
Company ” has the meaning specified in
Section 1(a).
“
Completed Share Amount ” means, for any Trading Day,
the sum of the Daily Share Amounts for such Trading Day and each
prior Trading Day in the Averaging Period.
“
Corporate Event ” means a corporate event involving
the Company or the Common Stock, including without limitation a
stock split, stock dividend, bankruptcy, insolvency,
reorganization, rights offering, recapitalization, spin-off or
issuance of any securities convertible or exchangeable into shares
of Common Stock; provided that Corporate Event excludes cash
dividends on the Common Stock and any Merger Event or Tender
Offer.
“ Daily
Average Price ” means (i) for any Trading Day in the
Averaging Period or, if the Settlement Amount is greater than zero,
the Valuation Period, the Reported VWAP for such Trading Day or
(ii) if the Settlement Amount is less than zero, 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.
“ Daily
Rebate Amount ” means, for any day, the product of the
Outstanding Notional Amount on such day and the Rebate Rate for
such day.
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“ Daily
Share Amount ” means, for any Trading Day, a number as
determined by the Seller in its sole discretion, which number shall
be not less than 175,000 and not greater than 260,000, subject to
Section 3(b).
“
Designee ” has the meaning specified in
Section 14.
“
Effectiveness Period ” has the meaning specified in
Section 12(a).
“
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 then-existing 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 recommends
that its shareholders accept such transaction.
“ Hedge
Execution Price ” means the price per share specified as
such in the Supplemental Terms Notice, which shall be equal to the
volume weighted average price per share at which the Seller
executes the Seller’s Initial Hedge, as determined by the
Calculation Agent.
“ Hedging
Period ” means the period beginning on and including the
date hereof and ending on and including the date of completion of
the Seller’s Initial Hedge (as determined by the Seller in
good faith).
“ 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 60,000,000, 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.
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“ 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.
“
Outstanding Notional Amount ” means, on any day prior
to the Purchase Date, zero (0), and on any day on or following the
Purchase Date, the Purchase Price minus the aggregate amount
of payments made by the Seller on or prior to such day for
settlement of purchases executed by the Seller or its designated
affiliate during the Averaging Period pursuant to Section 3(a)
(which difference may be negative) (it being understood that 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 the Cap Price shall not be
considered in making such calculation).
“ Payment
Shares ” means Registered Payment Shares, 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) 15,000,000 multiplied by (ii) the
Hedge Execution Price multiplied by
(iii) 0.0104.
“ 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(b)(iii).
“
Prospectus ” has the meaning specified in
Section 6(a)(i).
“
Purchase Date ” has the meaning specified in
Section 1(a).
“
Purchase Price ” has the meaning specified in
Section 1(a).
“
Rebate ” means the sum of the Daily Rebate Amounts for
each day from and including the Purchase Date to but excluding the
last day of the Averaging Period.
“ Rebate
Rate ” means, for any day, the Federal Funds Rate for
such day (expressed as a daily rate) minus 80 basis points;
provided that if the Outstanding Notional Amount on such day
is negative, the Rebate Rate used to calculate the Daily Rebate
Amount for such day shall be the Federal Funds Rate (expressed as a
daily rate).
“ Refund
Shares ” has the meaning specified in
Section 5(a)(i)(A).
“
Registered Payment Shares ” has the meaning specified
in Section 5(a)(ii).
“
Registration Statement ” has the meaning specified in
Section 6(a)(i).
“
Regulation M ” means Regulation M under the
Exchange Act.
“
Remaining Scheduled Days ” means the scheduled number
of Trading Days remaining in the Valuation Period as of the time of
any suspension of the Valuation Period.
“
Remaining Share Amount ” means, for any Trading Day,
the number of Initial Shares minus the Completed Share
Amount for such Trading Day.
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“
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) transactions on such day that do not satisfy the requirements
of Rule 10b-18(b)(3) under the Exchange Act, as reported on
Bloomberg Page “RSH.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 sum of the products, for
all Trading Days in the Averaging Period, of (i) the Daily
Share Amount for such Trading Day and (ii) the Daily Average
Price for such Trading Day; 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 15,000,000 plus
(y) the Repurchase Cost calculated without regard to this
proviso multiplied by 0.25.
“
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, 97% 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).
“
Seller’s Initial Hedge ” has the meaning
specified in Section 1(c).
“
Settlement Amount ” means an amount equal to
(i) the Purchase Price minus (ii) the Repurchase
Cost plus (iii) the Rebate, 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) 100% of the Daily Average Price for that Trading Day, in the
case of Refund Shares pursuant to Section 5(a)(i)(A), or 97%
of the Daily Average Price for that Trading Day, in the case of
Registered Payment Shares pursuant to
Section 5(a)(ii)(A).
5
“
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.
“
Threshold Borrow Rebate Rate ” means, for any day, the
Federal Funds Rate for such day minus 20 basis points per
annum.
“ 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.
“
Transfer Agreement ” has the meaning specified in
Section 6(a)(iv).
“
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), 5(a)(ii)(A) or 5(a)(ii)(B),
the period commencing (i) on the first Trading Day immediately
following the final day of the Averaging Period or (ii) in the
case of Registered Payment Shares, if the Seller determines that
resale by it of such shares would constitute a distribution for
purposes of Regulation M, on the first Trading Day immediately
following the applicable “restricted period” (as
defined under Regulation M), measuring such restricted period
from the final day of the Averaging Period; provided that this
delay in commencement of the Valuation Period shall not apply in
the event that the Registered Payment Shares constitute
“excepted securities” as defined in Rule 101(c) of
Regulation M. 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. If the Valuation Period is suspended by the
Seller pursuant to Section 3(b), at the end of such suspension
the Seller shall determine the number of Trading Days remaining in
the Valuation Period, which number shall not exceed the Remaining
Scheduled Days as of the time of such suspension. 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)(C), there will be no Valuation
Period.
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 shall 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)(A). 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
6
Seller shall
effect such purchases of Common Stock (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) from the date
hereof until the end of the Valuation Period, if any, neither the
Company nor its executive 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 (other than general communications
and press releases not directly targeted to such individuals), who
currently include the individuals specified in Annex A hereto
(which Annex shall be updated from time to time by the Seller in
writing), (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 for the amendment or termination of a
“plan” as defined in 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, waiver or termination shall be made at any
time at which the Company or any executive officer or director of
the Company is aware of any material nonpublic information
regarding the Company or the Common Stock.
(b) In the
event that the Seller, in its discretion, 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 otherwise
applicable minimum Daily Share Amount of Common Stock 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 minimum Daily Share Amount
shall be reduced for such day to an amount determined by the Seller
in its discretion 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.
7
(c) The
Company shall not engage in any action that would cause
Regulation M to be applicable to any purchases of Common Stock
by the Company or any of its affiliated purchasers (as defined in
Regulation M) during the Averaging Period and, if the
Settlement Amount is greater than zero and there is a Valuation
Period, the Valuation Period. The parties acknowledge that under
Rule 102 of Regulation M, as in effect on the date
hereof, the Company may make distributions (as defined in
Regulation M) of shares of Common Stock pursuant to a plan (as
defined in Regulation M) without breaching this covenant if
such distribution complies with the requirements set forth in
paragraph (c) of Rule 102 of
Regulation M.
(d) 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 (other than any
recapitalization transactions contemplated by or related to this
Letter Agreement that have been disclosed to the Seller, which
transactions the Company acknowledges and agrees would not require
the Company to comply with the requirements of
Rule 10b-18(a)(13)(iv)(B) in order to purchase shares of
Common Stock subject to the safe harbor provided by
Rule 10b-18 prior to the completion of such transactions)
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 minimum Daily Share Amount on any
Trading Day to be reduced 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, which consent shall not be
unreasonably withheld or delayed, 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 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; provided that
purchases of shares of Common Stock effected by or for a plan of
the Company by an agent independent
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