FEBRUARY 26, 2007
VARIABLE TERM ACCELERATED SHARE REPURCHASE TRANSACTION
To:
Federated Department Stores, Inc.
7 West Seventh Street
Cincinnati, OH 45202
From:
Credit Suisse, New York Branch
Eleven Madison Avenue
New York, NY 10010
________________________________________________________________________________
Dear Sirs:
This letter agreement (this "
Confirmation ") confirms the terms and conditions of
the accelerated share repurchase transaction (the "
Transaction ") to be entered into between Federated
Department Stores, Inc. (" Counterparty ") and Credit
Suisse, New York Branch (" CSNY ") on the Trade Date
specified below. This Confirmation constitutes a
"Confirmation" under the Agreement specified below.
1. The definitions and provisions contained
in the 2002 ISDA Equity Derivatives Definitions (the "
Definitions ") (as published by the International
Swaps and Derivatives Association, Inc.) are incorporated into this
Confirmation. References herein to a "Transaction" shall be
deemed to be references to a "Share Forward Transaction" for
purposes of the Definitions. This Confirmation evidences a
complete binding agreement between Counterparty and CSNY 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 (the "
Agreement ") in the form of the 1992 ISDA Master
Agreement (Multicurrency - Cross Border), as if, on the date
hereof, CSNY and Counterparty had executed that agreement (but
without any Schedule other than the provisions in Section 15 of
this Confirmation). In the event of any inconsistency between
the Definitions and the Agreement, the Definitions will
govern. In the event of any inconsistency between this
Confirmation, on the one hand, and the Definitions or the
Agreement, on the other hand, this Confirmation will govern.
2. The following terms and conditions shall
govern the Transaction:
General Terms:
Trade
Date:
February 27, 2007
Buyer:
Counterparty.
Seller:
CSNY.
Shares:
The common stock, par value $0.01 of Counterparty (sometimes also
referred to as the " Issuer ").
Price Adjustment Period
Termination
Date:
The earlier of:
(i) the Scheduled
Termination Date; and
(ii) the Scheduled
Trading Day immediately preceding the Accelerated Termination
Date.
Scheduled Termination
Date:
July 26, 2007; subject to adjustment as provided in "Market
Disruption Event" below.
Accelerated Termination
Date:
Any Exchange Business Day after April 23, 2007 and prior to the
Scheduled Termination Date that is so designated by CSNY by written
notice to Counterparty of its intention to terminate the Price
Adjustment Period (it being understood that such notice may be
given on the Accelerated Termination Date).
Price Adjustment Period: The
period commencing on and including the Scheduled Trading Day
immediately following the Initial Share Delivery Date and ending on
and including the Price Adjustment Period Termination Date.
Initial Settlement:
Prepayment:
Applicable.
Prepayment
Amount:
USD 994,500,000
Prepayment
Date:
Counterparty will pay to CSNY the Prepayment Amount on the Initial
Share Delivery Date.
Initial Share
Price:
USD 44.20
Number of
Shares:
22,500,000
Initial Share
Delivery:
CSNY shall deliver a number of shares equal to the Number of Shares
to Counterparty on the Initial Share Delivery Date in accordance
with Section 9.4 of the Definitions (with the Initial Share
Delivery Date deemed to be a "Settlement Date" for purposes of such
Section 9.4), against payment by Counterparty of the Prepayment
Amount.
Initial Share Delivery
Date:
The day that is three (3) Clearance System Business Days after the
date hereof.
Exchange:
New York Stock Exchange
Related
Exchange(s):
All Exchanges
Final Settlement:
Net Share
Settlement:
Subject to the "Cash Settlement" provisions hereof, and
notwithstanding anything to the contrary in the Definitions, (i) if
the Average Reference Price is less than the Initial Share Price,
CSNY shall deliver to Counterparty the CSNY Share Delivery Amount,
and (ii) if the Average Reference Price is greater than the Initial
Share Price, Counterparty shall deliver to CSNY the Counterparty
Share Delivery Amount, in either case on the Settlement Date.
CSNY Share Delivery
Amount:
A number of Shares, rounded down to the nearest whole Share, equal
to (a) the Prepayment Amount divided by the Average
Reference Price minus (b) the Number of Shares,
provided that in no event shall CSNY be required to deliver
more than 45,000,000 Shares (as such number may be adjusted for
stock splits or similar events) or as otherwise agreed by the
parties.
Counterparty Share
Delivery
Amount:
A number of Shares, rounded down to the nearest whole Share, equal
to (a) the Number of Shares minus (b) the Prepayment Amount
divided by the Average Reference Price,
provided that that if Counterparty delivers Unregistered
Shares, Counterparty shall deliver a number of Shares, rounded down
to the nearest whole Share, equal to the product of the
Counterparty Share Delivery Amount and 1.0075; provided
further , in no event shall Counterparty be required to
deliver more than 45,000,000 Shares (as such number may be adjusted
for stock splits or similar events) or as otherwise agreed by the
parties.
Settlement
Date:
The day that is three Exchange Business Days following the Price
Adjustment Period Termination Date.
Daily Share Reference
Price:
For each Valuation Date, (a) the 10b-18 volume-weighted average
price per Share on the Exchange on such day as published on
Bloomberg Page "FD.N <Equity> AQR SEC" (the " Daily
10b-18 VWAP Price ") or any successor page thereto,
minus (b) the Daily Reference Price Adjustment specified in
Schedule I.
Average Reference Price: The
arithmetic average of the Daily Share Reference Prices for each
Valuation Date during the Price Adjustment Period.
Valuation
Date:
Any Scheduled Trading Day in the Price Adjustment Period or the
Cash Settlement Pricing Period, as the case may be, that is not a
Valuation Disruption Day.
Valuation Disruption Day: A Scheduled
Trading Day designated as such pursuant to the provisions of
Market Disruption Event .
Market Disruption Event:
Section 6.3(a) of the Definitions is hereby amended by replacing
clause (ii) thereof in its entirety with the following: "(ii) an
Exchange Disruption at any time prior to the relevant Valuation
Time on the relevant Valuation Date, or" and inserting immediately
following clause (iii) thereof the following: "; in each case that
the Calculation Agent determines is material."
Notwithstanding anything to the contrary in the Definitions, for
each Scheduled Trading Day in the Price Adjustment Period or the
Cash Settlement Pricing Period (i) that is a Disrupted Day or a day
designated as a Disrupted Day pursuant to Section 5.6 or Section 7
hereof or (ii) on which CSNY or its affiliates (collectively, "
CS ") reasonably determine that it would be
appropriate, in light of 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 CS), for CS to refrain from
purchasing Shares in connection with this Transaction or to
purchase fewer than the number of Shares that it would otherwise
purchase in connection with this Transaction on such day, CSNY may,
by written notice to Counterparty at any time on or prior to the
Price Adjustment Period Termination Date or the final Scheduled
Trading Day of the Cash Settlement Pricing Period, as the case may
be, in its good faith sole discretion, elect to designate such day
a Valuation Disruption Day and extend the Price Adjustment Period
or the Cash Settlement Pricing Period, as applicable, by an
additional Valuation Date.
Cash
Settlement:
Counterparty may, in lieu of its obligation to deliver Shares in
accordance with the "Net Share Settlement" provisions hereof, by
written notice to CSNY at any time no later than the opening of
trading on the fifth Scheduled Trading Day prior to the Scheduled
Termination Date (or, in the case of an Accelerated Termination
Date, immediately following receipt of notice from CSNY of the
designation of such Accelerated Termination Date), elect to pay to
CSNY on the Cash Settlement Date an amount in cash equal to the
Cash Settlement Amount.
Cash Settlement
Date:
The Exchange Business Day immediately following the last day of the
Cash Settlement Pricing Period.
Cash Settlement Amount: The
Counterparty Share Delivery Amount multiplied by the
arithmetic average of the Daily 10b-18 VWAP Prices for each
Valuation Date during the Cash Settlement Pricing Period.
Cash Settlement Pricing
Period:
The number of Valuation Dates so specified by CSNY following
receipt by CSNY of the notice described in the Cash Settlement
provision hereof, commencing on the Scheduled Trading Day
immediately following the Price Adjustment Period Termination
Date.
Calculation
Agent:
CSNY.
Credit Support Documents: None
Share Adjustments:
Potential Adjustment
Events:
Section 11.2(e)(iii) of the Definitions shall be deleted in its
entirety.
Method of Adjustment:
Calculation Agent Adjustment.
Extraordinary Events:
New
Shares:
In the definition of New Shares in Section 12.1(i) of the
Definitions, the text in clause (i) shall be deleted in its
entirety and replaced with "publicly quoted, traded or listed on
any of the New York Stock Exchange, the American Stock Exchange,
the NASDAQ Global Select Market or the NASDAQ Global Market (or
their respective successors)".
Consequences of Merger Events:
(a)
Share-for-Share:
Modified Calculation Agent Adjustment; provided however ,
any adjustment shall not be made to account for changes in expected
dividends or stock loan rate.
(b)
Share-for-Other:
Cancellation and Payment (Calculation Agent Determination);
provided however , the calculation of Cancellation Amount
shall not take into account any changes in expected dividends or
stock loan rate.
(c) Share-for-Combined: Component
Adjustment
Determining Party:
CSNY
Tender
Offer:
Applicable
Consequences of Tender Offer:
(a)
Share-for-Share:
Modified Calculation Agent Adjustment; provided however ,
any adjustment shall not be made to account for changes in expected
dividends or stock loan rate.
(b)
Share-for-Other:
Cancellation and Payment (Calculation Agent Determination);
provided however , the calculation of Cancellation Amount
shall not take into account any changes in expected dividends or
stock loan rate.
(c) Share-for-Combined: Component
Adjustment
Determining Party: CSNY
Additional Termination
Event:
CSNY may designate any Scheduled Trading Day as an Early
Termination Date with respect to the Transaction if at any time
during the Price Adjustment Period or the Cash Settlement Pricing
Period, as the case may be, Counterparty declares a cash dividend
the amount per share of which differs from its Ordinary Cash
Dividend Amount. In such case, this Transaction shall be the sole
Affected Transaction and Counterparty shall be the sole Affected
Party. " Ordinary Cash Dividend Amount " means USD
0.1275 per Share for the first dividend or distribution, USD 0.1300
per Share or 0.1275 per Share for the second dividend or
distribution, in each case, on the Shares for which the ex-dividend
date falls within a regular dividend period of the Issuer, and zero
for any subsequent dividend or distribution on the Shares for which
the ex-dividend date falls within the same regular dividend period
of the Issuer. In calculating any payment payable by one
party to the other pursuant to an Additional Termination Event,
CSNY shall not take into account any expected dividends or stock
loan rate.
Nationalization,
Insolvency
or Delisting:
Cancellation and Payment (Calculation Agent Determination);
provided however , the calculation of Cancellation Amount
shall not take into account any changes in expected dividends or
stock loan rate; provided further , in addition to the
provisions of Section 12.6(a)(iii) of the Definitions, it shall
also constitute a Delisting if the Shares are not immediately
re-listed, re-traded or re-quoted on any of the New York Stock
Exchange, the American Stock Exchange, the NASDAQ Global Market or
the NASDAQ Global Select Market (or their respective successors);
if the Shares are immediately re-listed, re-traded or re-quoted on
any such exchange or quotation system, such exchange or quotation
system shall be deemed to be the Exchange.
Additional Disruption Events:
(a)
Change-in-Law:
Applicable
(b) Insolvency
Filing:
Applicable
(c) Hedging
Disruption: Applicable
Determining Party:
CSNY
Non-Reliance/ Agreements and
Acknowledgments Regarding
Hedging Activities/ Additional
Acknowledgments:
Applicable
CSNY's Contact Details
for Purpose of Giving
Notice:
Address for notices and communications to CSNY (other than by
facsimile)(for all purposes):
Credit Suisse, New York Branch
Eleven Madison Avenue
New York, NY 10010
Attn: Senior Legal Officer
Tel: (212) 538-4488
Fax: (212) 325-4585
For payments and deliveries:
Attn: DSG Settlements Manager
Tel: (212) 538-9810
Fax: (212) 325-0275
For all other communications:
Attn: DSG Equities Documentation Manager
Tel: (212) 538-4437
Fax: (212) 325-8719
Counterparty's Contact
Details for Purpose of
Giving
Notice:
Federated Department Stores, Inc.
7 West Seventh Street
Cincinnati, OH 45202
Attention: Dennis J. Broderick,
Senior Vice President, General Counsel and Secretary
Tel: (513) 579-7560
Fax: (513) 579-7354
With a copy to:
Federated Department Stores, Inc.
7 West Seventh Street
Cincinnati, OH 45202
Attention: Brian Szames, Treasurer
Tel: (513) 579-7182
Fax: (513) 579-7393
3. Share Settlement :
3.1 Upon (x) the occurrence or effective designation of
an Early Termination Date in respect of the Transaction or (y) the
occurrence of an Extraordinary Event that results in the
cancellation or termination of the Transaction pursuant to Section
12.2, 12.3, 12.6 or 12.9 of the 2002 Definitions (any such event as
described in clause (x) or (y) above, an " Early Termination
Event ") (except, in the case of clause (y), an Extraordinary
Event that is a Nationalization, Insolvency, a Merger Event or a
Tender Offer, in each case, in which the consideration or proceeds
to be paid to holders of Shares consists solely of cash), if one
party would owe any amount to the other party pursuant to Section
6(d)(ii) of the Agreement or any Cancellation Amount pursuant to
Section 12.2, 12.3, 12.6 or 12.9 of the 2002 Definitions (any such
amount, a " Payment Amount "), then on the date on which any
Payment Amount is due, in lieu of any payment or delivery of such
Payment Amount, Buyer may elect, by prior written notice to Seller,
that the party owing such amount shall deliver to the other party a
number of Shares (or, in the case of a Merger Event, Tender Offer,
Nationalization or Insolvency, a number of units, each comprising
the number or amount of the securities or property that a
hypothetical holder of one Share would receive in such
Extraordinary Event (each such unit, an " Alternative
Termination Delivery Unit " and, the securities or property
comprising such unit, " Alternative Termination Property "))
with a value equal to the Payment Amount based on the market value
of the Shares (or such Alternative Termination Property) as of the
Early Termination Date or the date as of which the Cancellation
Amount is determined, as the case may be, as determined by the
Calculation Agent; provided that, notwithstanding anything
to the contrary in the Definitions or the Agreement, any Payment
Amount shall be determined without taking into account any expected
dividend, interest rate, stock loan rate or liquidity relevant to
the Shares; provided further that in determining the
composition of any Alternative Termination Delivery Unit, if the
relevant Extraordinary Event involves a choice of consideration to
be received by holders, such holder shall be deemed to have elected
to receive the maximum possible amount of cash.
3.2 Notwithstanding anything to the contrary in this
Confirmation, Counterparty acknowledges and agrees that CSNY's
right to receive or CSNY's obligation to deliver, as the case may
be, any Shares (or any other class of voting securities of
Counterparty) shall be suspended, in whole or in part, if such
delivery or receipt would result in the ultimate parent entity of
CSNY directly or indirectly beneficially owning (as such term
is defined for purposes of Section 13(d) of the Securities Exchange
Act of 1934, as amended (the " Exchange Act ")) in
excess of 9.0% of the outstanding Shares or any other class of
voting securities of Counterparty.
If, on any day, any
delivery or receipt of Shares by CSNY is suspended, in whole or in
part, as a result of this provision, (i) any purported receipt or
delivery of Shares shall be void and have no effect; and (ii) the
respective obligations of Counterparty and CSNY to make or accept
such receipt or delivery shall not be extinguished and such receipt
or delivery shall be effected over time as promptly as practicable
after CSNY determines, in a commercially reasonable manner, that
such receipt or delivery would not result in its ultimate parent
entity directly or indirectly beneficially owning in excess of 9.0%
of the outstanding Shares or any other class of voting securities
of Counterparty.
3.3 Notwithstanding Section 9.11 of the Definitions,
but subject to the last paragraph of this Section 3.3, the parties
acknowledge that Shares delivered as part of Counterparty Share
Delivery Amount or pursuant to this Section 3 may be Unregistered
Shares. For the purposes hereof, " Unregistered
Shares " means Shares that have not been registered
pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the " Securities
Act ") or any state securities laws (" Blue Sky
Laws ") or Shares that cannot otherwise be freely sold,
transferred, pledged or otherwise disposed of without registration
under the Securities Act unless such sale, transfer, pledge or
other disposition is made in a transaction exempt from or not
subject to registration thereunder.
Upon request by CS,
Counterparty agrees to promptly remove, or cause to be removed, any
legends referring to any transfer restrictions from such
Unregistered Shares upon delivery by CS to Counterparty of a
seller's representation letter in the form customarily delivered by
CS in connection with resales of restricted securities pursuant to
Rule 144 under the Securities Act in order to substantiate the
legality of such sale, each without any further requirement for the
delivery of any certificate, consent, agreement, opinion of
counsel, notice or any other document, any transfer tax stamps or
payment of any other amount or any other action by CS;
provided that at the time of such request, CS has satisfied
all holding period and other requirements of Rule 144 applicable to
CS.
Notwithstanding anything to the contrary in this Confirmation, at
the election of CS by notice to Counterparty no later than two
Exchange Business Days prior to the Scheduled Termination Date (or
in the case of an Accelerated Termination Date, no later than the
time of designation thereof), any delivery of Shares by
Counterparty as part of the Counterparty Share Delivery Amount or
pursuant to this Section 3 shall comply with the terms of Annex A
hereof.
4. Additional Agr
