Lexmark International, Inc.
Exhibit
10.1
Execution
Version
Lexmark
International, Inc.
One
Lexmark Centre Drive
000 Xxxx
Xxx Xxxxxx Xxxx
Xxxxxxxxx,
XX 00000
August 28, 2008
Re: Accelerated Share
Repurchase
Ladies
and Gentlemen:
This letter (the “Letter Agreement”)
sets forth the agreement we have reached with respect to a transaction between
Citibank, N.A. (“Citibank”), and Lexmark International,
Inc (the “Company”) in relation
to shares of the Company’s common stock, par value USD 0.01 (the “Common
Stock”).
I. Definitions
As used
in this Letter Agreement, the following terms shall have the following
meanings:
“Bankruptcy Code” has
the meaning specified in Section XV.
“Cash Tender
Termination” has the meaning specified in Section VIII(a).
“Corporate Event
Termination” has the meaning specified in Section VIII(b).
“Defaulting Party” has
the meaning specified in Section IX.
“Delisting
Termination” has the meaning specified in Section VIII(c).
“Discount Per Share”
means an amount in U.S. dollars specified in Schedule I.
“Disrupted Day” means
a Trading Day on which a Market Disruption Event occurs.
“Dividend Event
Termination” has the meaning specified in Section VII(b).
“Exchange” means New
York Stock Exchange or any successor exchange.
“Exchange Act” means
the Securities Exchange Act of 1934, as amended.
“Expected Dividend
Amount” has the meaning specified in Section VII(a).
“Indemnified Party”
has the meaning specified in Section XIV.
“Initial Pricing Period
Termination Date” means the date specified in Schedule I.
“Initial Settlement
Date” has the meaning specified in Section II(b).
“Initial Share Price”
has the meaning specified in Section II(a).
“Loss” has the meaning
specified in Section X(a).
“Loss Notice” has the
meaning specified in Section X(a).
“Loss of Borrow
Termination” has the meaning specified in Section VI(b).
“Market Disruption
Event” means any (i) suspension of or limitation imposed on trading by
any exchange or market on which the Common Stock is listed for trading, (ii)
event that disrupts or impairs (in the reasonable business judgment of Citibank)
the ability of market participants in general to effect transaction in, or
obtain market values for, the shares of Common Stock or futures or options
contracts relating to the Common Stock or (iii) material decrease, on any
Trading Day, in the trading volume for the Common Stock such that in the
reasonable business judgment of Citibank it cannot purchase the contemplated
number of shares for such Trading Day.
“Maximum Borrow Cost”
means 50 basis points per annum based on the closing price per share of Common
Stock on the Trading Day immediately preceding the relevant day.
“Non-Defaulting Party”
has the meaning specified in Section IX.
“Number of Initial
Shares” has the meaning specified in Section II(b).
“Number of Shares” has
the meaning specified in Section II(a).
“Payment Amount” has
the meaning specified in Section III(b).
“Pricing Period” means
the period of consecutive Trading Days commencing on the Pricing Period
Commencement Date and ending on the Pricing Period Termination Date; provided that the
Pricing Period may be extended by Citibank upon the occurrence of a Market
Disruption Event.
“Pricing Period Commencement
Date” means August 29, 2008.
“Pricing Period Termination
Date” means the earlier of (a) the Scheduled Pricing Period Termination
Date, or (b) any Trading Day occurring on or following the Initial Pricing
Period Termination Date and immediately preceding any Trading Day, on which
Citibank shall notify the Company, prior to the close of regular trading on the
Exchange on such Trading Day, of its intention to terminate the Pricing Period;
provided that,
for the avoidance of doubt, any date relating to the termination of the
Transaction and designated as such pursuant to Section X of this Letter
Agreement shall not be deemed the Pricing Period Termination Date and
accordingly the settlement of the Transaction shall be governed by such Section
X and not by provisions of Section III of this Letter Agreement.
“Private Placement
Agreement” has the meaning set forth in Annex B hereto.
“Private Placement
Price” has the meaning set forth in Annex B hereto.
“Private Placement
Settlement” has the meaning set forth in
Section III(b).
“Private Securities”
has the meaning set forth in Annex B hereto.
“Prospectus” has the
meaning specified in Annex A hereto.
“Purchase Date” has
the meaning specified in Section II(a).
“Purchase Price” has
the meaning specified in Section II(a).
“Registered
Settlement” has the meaning set forth in
Section III(b).
“Registration
Statement” has the meaning specified in Annex A hereto.
“Regulation M” means
Regulation M under the Exchange Act.
“Remaining Share
Amount” for any Trading Day equals (i) the Number of Initial Shares,
minus (ii) the
cumulative number of shares of Common Stock that Citibank has repurchased to
cover its short position in respect of this Transaction. For the
avoidance of doubt, such shares shall be considered repurchased by Citibank as
of the Trading Day on which such transactions settle.
“Rule 10b-18” means
Rule 10b-18 under the Exchange Act.
“Rule 10b-18 VWAP”
means, for any Trading Day, the volume-weighted average price at which the
Common Stock trades as reported in the composite transactions for the principal
U.S. securities exchange on which such Common Stock is then listed on such
Trading Day, excluding (i) trades that do not settle regular way, (ii) opening
(regular way) reported trades in the consolidated system on such Trading Day,
(iii) trades that occur in the last ten minutes before the scheduled close of
trading on the Exchange on such Trading Day and ten minutes before the scheduled
close of the primary trading in the market where the trade is effected, and (iv)
trades on such Trading Day that do not satisfy the requirements of Rule
10b-18(b)(3) of the Exchange Act, as determined in good faith by
Citibank. The Company acknowledges that Citibank may refer to the
Bloomberg Page “LXK.N <Equity> AQR SEC” (or any successor thereto), in its
judgment, for such Trading Day to determine the Rule 10b-18 VWAP.
“SEC” has the meaning
specified in Annex A hereto.
“Scheduled Pricing Period
Termination Date” means the date specified in Schedule I; provided that, the
Scheduled Pricing Period Termination Date may be postponed by Citibank upon the
occurrence of a Market Disruption Event on any scheduled Trading Day during the
Pricing Period.
“Securities Act” means
the Securities Act of 1933, as amended.
“Settlement Date”
means the fourth Trading Day immediately following the last day of the Pricing
Period.
“Settlement Number”
means (a) the Purchase Price divided by the
Settlement Price, minus (b) the Number
of Initial Shares.
“Settlement Price”
means (i) the average of the Rule 10b-18 VWAP prices for all Trading Days during
the Pricing Period minus (ii) the
Discount Per Share.
“Share Cap” means, as
of any date of determination, ten (10) times the Number of Initial Shares minus
the number of shares of Common Stock delivered by the Company to Citibank on or
prior to such date hereunder (in each case subject to adjustment pursuant to
Section VI(b) and VIII).
“Trading Day” means
any day (i) other than a Saturday, a Sunday or a Disrupted Day, and (ii) on
which the Exchange is open for trading during its regular trading session,
notwithstanding the Exchange closing prior to its scheduled closing
time.
“Transaction” means
the transaction contemplated by this Letter Agreement.
“Transfer Agreement”
has the meaning specified in Annex A hereto.
“Valuation Period”
means a period commencing on the first Trading Day immediately following the
last Trading Day of the Pricing Period and ending on the Trading Day on which
Citibank completes its purchase of a number of shares of Common Stock equal to
the Settlement Number, pursuant to Section III(b), and as determined in good
faith by Citibank in consultation with the Company.
II. Initial
Shares
(a) Purchase. Subject
to the terms and conditions of this Letter Agreement, the Company agrees to
purchase from Citibank, and Citibank will sell to the Company, on the date
hereof or on such other Trading Day as the Company and Citibank shall otherwise
agree (the “Purchase
Date”), for a single aggregate price of $150,000,000 (the “Purchase Price”),
4,065,041 shares of Common Stock (“Number of Shares”)
and, if the Settlement Number is greater than zero, additional number of shares
of Common Stock equal to such Settlement Number. Citibank will hedge
this Transaction by entering into a short sale with respect to the Number of
Initial Shares effected at the closing price per share of Common Stock on the
Purchase Date (the “Initial Share
Price”). Such purchase, sale and hedge shall be effected in
accordance with Citibank’s customary procedures.
(b) Initial
Settlement. On the third Trading Day immediately following the
Purchase Date (the “Initial Settlement
Date”), Citibank shall deliver to the Company, a number of Shares equal
to the product of (i) 85% and (ii) the Number of Shares (the “Number of Initial
Shares”), upon payment by the Company of the Purchase Price in U.S.
dollars.
III. Settlement
(a) Citibank Settlement
Obligation. If, following the expiration of the Pricing
Period, the Settlement Number is greater than zero, on the Settlement Date,
Citibank shall transfer to the Company through its agent, for no additional
consideration, a number of shares of Common Stock equal to the Settlement
Number.
(b) Company Settlement
Obligation. If, following the expiration of the Pricing
Period, the Settlement Number is less than zero, on the Settlement Date, (i) the
Company shall, in accordance with the provisions of this paragraph (b), transfer
to Citibank through its agent, for no additional consideration, a number of
shares of Common Stock equal to the absolute value of the Settlement Number or,
(ii) if the Company so elects pursuant to this paragraph, in lieu of such share
delivery, the Company shall make a cash payment to Citibank in an amount equal
to the absolute value of the Settlement Number multiplied by the
weighted average purchase price at which Citibank purchases shares of Common
Stock equal to the Settlement Number during the Valuation Period (the “Payment Amount”), to
be paid on the Trading Day immediately following the last day of the Valuation
Period; provided that, for
the avoidance of doubt, in accordance with the calculation of the Settlement
Number, in calculating any corresponding settlement obligations of the parties,
Citibank shall take into consideration the actual payments and deliveries made
by the parties on the Initial Settlement Date for the
Transaction. The Company shall notify Citibank in writing of its
election (i) to pay the absolute value of the Settlement Number in cash or,
(ii) to effect the delivery of the Settlement Number of shares in accordance
with Annex A (“Registered
Settlement”) or Annex B (“Private Placement
Settlement”) to this Letter Agreement; provided that (A) the
failure to make an election and notify Citibank in accordance with the preceding
sentence with respect to matters described in clause (i), shall constitute an
irrevocable election by the Company to deliver shares, and, (B) the failure to
make an election and notify Citibank with respect to matters described in clause
(ii), shall constitute an election of “Private Placement
Settlement”.
(c) Delivery
Limitation. Notwithstanding anything to the contrary in this
Letter Agreement, the Company acknowledges and agrees that, on any day, Citibank
(or its agent or affiliate) shall not be obligated to deliver or receive any
shares of Common Stock to or from the Company and the Company shall not be
entitled to receive any shares of Common Stock if such receipt or delivery would
result in Citibank directly or indirectly beneficially owning (as such term is
defined for purposes of Section 13(d) of the Exchange Act) at any time in excess
of 4.9% of the outstanding shares of Common Stock. Any purported
receipt or delivery of shares of Common Stock shall be void and have no effect
to the extent (but only to the extent) that any receipt or delivery of such
shares of Common Stock would result in Citibank directly or indirectly so
beneficially owning in excess of 4.9% of the outstanding shares of Common
Stock. If, on any day, any delivery or receipt of shares of Common
Stock by Citibank (or its agent or affiliate) is not effected, in whole or in
part, as a result of this provision, Citibank’s and the Company’s respective
obligations 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 Citibank reasonably determines that such
receipt or delivery would not result in Citibank directly or indirectly
beneficially owning in excess of 4.9% of the outstanding shares of Common
Stock.
(d) Company Settlement
Representations. The Company represents and warrants, as of
the Pricing Period Termination Date, that each of its filings under the
Securities Act, the Exchange Act or other applicable securities laws that are
required to be filed have been filed and that, as of the date of this
representation, there is no misstatement of material fact contained therein or
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading in the circumstances under which they were
made.
IV. Citibank
Purchases
(a) Manner of
Purchases. During the Pricing Period or, if applicable, the
Valuation Period, Citibank (or its agent or affiliate) may purchase shares of
Common Stock in connection with this Transaction. The timing of such
purchases by Citibank, 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 sole judgment of Citibank; provided that, during
the Valuation Period, Citibank will use good faith efforts to make all purchases
of Common Stock in connection with this Transaction in a manner that would
comply with the limitations set forth in clauses (b)(2), (b)(3), (b)(4) and (c)
of Rule 10b-18 as if such rule were applicable to such purchases.
(b) 10b5-1
Plan. The Company acknowledges and agrees that (i) all
purchases pursuant to this Section IV hereunder shall be made in Citibank’s sole
discretion and for Citibank’s own account and (ii) the Company does not have,
and shall not attempt to exercise, any influence over how, when or whether to
make such purchases, including, without limitation, the price paid per share of
Common Stock pursuant to such purchases whether such purchases are made on any
securities exchange or privately. It is the intent of the Company and
Citibank that this Transaction comply with the requirements of Rule 10b5-1(c) of
the Exchange Act and that this Letter Agreement shall be interpreted to comply
with the requirements of Rule 10b5-1(c)(1)(i)(B) and Citibank shall take no
action that results in the transaction not so complying with such
requirements.
(c) Regulatory
Suspension. In the event that Citibank reasonably concludes in
good faith, that it is appropriate with respect 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 Citibank), or due to any Market Disruption Event, for it
to refrain from purchasing Common Stock on any Trading Day during the Pricing Period, the Pricing Period shall be suspended
for such day. Citibank shall promptly notify the Company upon
exercising its rights pursuant to this Section IV(c) and shall subsequently
notify the Company in writing on the day Citibank believes that it may resume
purchasing Common Stock. Citibank shall not be required to
communicate to the Company the reason for Citibank’s exercise of its rights
pursuant to this Section IV(c) if Citibank reasonably determines in good faith
that disclosing such reason may result in a violation of any legal, regulatory,
or self-regulatory requirements or related policies and procedures.
V. Company
Purchases
The Company (including its “affiliated purchasers”, as defined in
Rule 10b-18) shall not, without a prior written consent of Citibank,
purchase any shares of Common Stock (or an
equivalent interest, or any security convertible into or exchangeable for such
shares) on
the open market, or enter into any accelerated share repurchase program, or any
derivative share repurchase transaction, or other similar transaction, during
the Pricing Period and thereafter until all payments or deliveries of shares
pursuant to Section III have been made. During such time, any
purchases of Common Stock by the Company shall be made through Citibank or its
affiliates, subject to such reasonable conditions as Citibank or such affiliate
shall impose, and in compliance with Rule 10b-18 or otherwise in a manner that
the Company and Citibank believe is in compliance with applicable
requirements.
VI. Borrow
Events
(a) Borrow Cost
Increase. If at any time during this Transaction, Citibank
does not, after using commercially reasonable efforts, successfully borrow
Common Stock (up to a number equal to the Remaining Share Amount) on terms that
require Citibank to pay or bear costs in connection with such borrow in an
amount less than or equal to the Maximum Borrow Cost, then Citibank will act in
good faith and in a commercially reasonable manner to (a) make the corresponding
adjustment(s), if any, as Citibank determines appropriate (and in consultation
with the Company) to account for any excess borrowing costs and (b) determine
the effective date(s) of the adjustment(s).
(b) Loss of Borrow
Termination. On any Trading Day, Citibank may elect to
terminate (“Loss of
Borrow Termination”) this Transaction, in whole or in part, as the case
may be, in the event and pro rata to the extent it is no longer able, after
commercially reasonable efforts, to borrow (or maintain a borrowing of),
including at a cost that may exceed the Maximum Borrow Cost, shares of Common
Stock in an amount equal to the Remaining Share Amount. Upon the
occurrence of a Loss of Borrow Termination, an Event of Default shall be deemed
to have occurred with the Company deemed the Defaulting Party and Citibank, the
Non-Defaulting Party.
VII. Dividend
Event
(a) Dividend Amount. If
100% of the aggregate gross cash dividends per share of Common Stock (including
any cash extraordinary dividends) declared by the Company and for which the
ex-date occurs at any time during the Pricing Period exceeds $0.00 per share of
Common Stock (subject to adjustment in accordance with Section VIII) (the “Expected Dividend
Amount”) per calendar quarter, a Dividend Event shall be deemed to have
occurred.
(b) Dividend Event
Termination. Upon the occurrence of a Dividend Event, on any
Trading Day on or after the occurrence of such Dividend Event, Citibank may
terminate this Transaction (a “Dividend Event
Termination”). Upon the occurrence of a Dividend Event
Termination, an Event of Default shall be deemed to have occurred with the
Company deemed the Defaulting Party and Citibank, the Non-Defaulting
Party.
VIII. Extraordinary
Events
(a)
Tender
Offers. In the event an offer is made to the holders of Common
Stock to tender in excess of 15% of the outstanding shares of Common Stock for
cash, Citibank may, in its reasonable discretion, (i) adjust the terms of this
Transaction, so that (x) the final day of the Pricing Period shall be the
earlier of the scheduled final Trading Day of the Pricing Period and the date
the tender offer is consummated and (y) for each of the Trading Days in the
Pricing Period following the date on which the offer is made, the price used in
computing the Settlement Price shall equal the price per share of Common Stock
at which the tender offer is to be consummated, where Citibank shall notify the
Company in writing as to the terms of any adjustment made pursuant to this
Section VIII(a) no later than 5 days after the tender offer is made or (ii)
elect to terminate this Transaction (a “Cash Tender
Termination”). Upon the occurrence of a Cash Tender
Termination, an Event of Default shall be deemed to have occurred with the
Company deemed the Defaulting Party and Citibank, the Non-Defaulting
Party.
(b)
Corporate
Events. In the event of any corporate event involving the
Company or the Common Stock not specifically addressed in subsection (a) of this
Section VIII (including, without limitation, the announcement of a non-cash
dividend, stock split, reorganization, merger, offer to tender Common Stock for
consideration other than cash, rights offering, recapitalization or spin-off) or
in the event that Citibank, in its reasonable good faith judgment, determines
that the adjustments described in subsection (a) of this Section VIII will not
result in an equitable adjustment of the terms of this Transaction, Citibank may
(i) adjust the terms of this Transaction (including, without limitation, with
respect to the Expected Dividend Amount and the number of Trading Days in the
Pricing Period) as in the exercise of its good faith judgment it deems
appropriate under the circumstances or (ii) elect to terminate this Transaction
(a “Corporate Event
Termination”). Upon the occurrence of a Corporate Event
Termination, an Event of Default shall be deemed to have occurred with the
Company deemed the Defaulting Party and Citibank, the Non-Defaulting
Party.
(c) Delisting. In
the event that the Exchange announces that pursuant to the rules of such
Exchange, the Common Stock ceases (or will cease) to be listed, traded or
publicly quoted on the Exchange for any reason (other than the occurrence of an
event addressed in subsections (a) or (b) of this Section VIII) and are not
immediately re-listed, re-traded or re-quoted on an exchange or quotation system
located in the same country as the Exchange (or, where the Exchange is within
the European Union, in any member state of the European Union), Citibank may (i)
adjust the terms of this Transaction or (ii) elect to terminate this Transaction
(a “Delisting
Termination”). Upon the occurrence of a Delisting Termination,
an Event of Default shall be deemed to have occurred with the Company deemed the
Defaulting Party and Citibank, the Non-Defaulting Party.
IX. Events of
Default
In
addition to events contemplated by Sections VI(b), VII(b) and VIII, the
occurrence of any of the following events with respect to a party (such party,
the “Defaulting
Party” with respect to such event, and the other party, the “Non-Defaulting
Party”) shall be an Event of Default:
(a) Payment. The
failure to make any payment or any delivery of shares pursuant to the terms of
the Letter Agreement.
(b) Breach. Any
representation or warranty made in this Letter Agreement shall prove to have
been false in any material respect at the time it was made, given or
reaffirmed.
(c) Performance. The
failure to perform or comply in any material respect with any other obligation
in this Letter Agreement which failure shall continue for 5 business days after
written notice of such failure has been sent to the Defaulting
Party.
(d) Insolvency. (A)
The initiation of any case, proceeding or other action (1) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or other relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to have itself adjudicated as
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution or composition or other relief under
bankruptcy or insolvency law with respect to it or its debts or (2) which seeks
appointment of a receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its assets; (B) a general
assignment for the benefit of its creditors; (C) the initiation of any case,
proceeding or other action of a nature referred to in clause (A) hereof which
(1) results in the entry of an order for relief or any such adjudication or
appointment with respect to the party or any of its assets or (2) is not
dismissed, stayed, discharged or bonded for a period of 5 days; (D) the
initiation of any case, proceeding or other action seeking issuance of a warrant
of attachment, execution, or similar process against all or any substantial part
of its assets, which case, proceeding or other action results in the entry of an
order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 30 days from the entry thereof; (E) a
party shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clauses (A) - (D)
hereof; or (F) either party shall generally not, or shall admit in writing its
inability to, pay its debts as they become due.
(e) Cross-Default. Any
loan or other obligation in respect of borrowed money (whether present or
future, contingent or otherwise, as principal or surety or otherwise) of a party
in an amount, in excess of $100,000,000 shall have become payable before the due
date thereof as a result of acceleration of maturity caused by the occurrence of
any event of default thereunder or if any other such loan or obligation shall
not be repaid when due, as extended by any applicable grace period specified in
the contracts or agreements constituting such loan or obligation.
(f) Merger,
Consolidation. Any consolidation or amalgamation or merger
with or into, or any transfer of all or substantially all its assets (i) to
another entity by a party, resulting in the creditworthiness of the surviving or
transferee entity being materially weaker than that of the party immediately
prior to such action, or (ii) into any person unless the surviving person is the
Company or another person formed under the laws of a State of the United States
of America and such entity assumes or is responsible, by operation of law, for
all obligations of the Company hereunder.
X. Remedies
(a) Settlement Loss
Determination. Upon the occurrence and the continuance of an
Event of Default, notwithstanding any other provision to the contrary in this
Letter Agreement, the Non-Defaulting Party, upon notice to the Defaulting Party,
may, in its sole discretion, immediately terminate this Transaction and, if
applicable, purchasing the number of Shares equal to the Remaining Share Amount
to cover its short position or adjusting any other term hereof, and may sell,
liquidate, offset or take any other action with respect to any short position
established or maintained by it in connection with this
Transaction. The Non-Defaulting Party shall act in good faith and in
a commercially reasonable manner to determine the amount that such party
reasonably in good faith believes to be its total unreimbursed net losses and
costs (which may be positive or negative) incurred in connection with the
termination of this Letter Agreement (the “Loss”) and upon
completion of such determination shall deliver to the Defaulting Party a written
notice indicating the amount of such Loss (a “Loss
Notice”). Such computation shall include any out-of-pocket
losses (which may include but not be limited to the difference between the
Initial Share Price and the average price at which the shares are purchased
during the term of this Transaction (as this Transaction may be terminated early
as a result of the operation of this Section X(a)) and any actual or anticipated loss or cost incurred as
a result of its terminating, liquidating, obtaining or reestablishing any hedge
or related trading position. In addition to the foregoing, the
Non-Defaulting Party may include in its determination of its Loss hereunder such
losses and costs (or gains) in respect of any payment or delivery required to
have been made on or before the relevant termination date. In
determining Loss, the Non-Defaulting Party may consider any relevant
information, including, without limitation, one or more of the following types
of information: (i) quotations (either firm or indicative) for replacement
transactions supplied by one or more third parties that may take into account
the creditworthiness of the Non-Defaulting Party at the time the quotation is
provided and the terms of any relevant documentation, including credit support
documentation, between the Non-Defaulting Party and the third party providing
the quotation; (ii) information consisting of relevant market data in the
relevant market supplied by one or more third parties including, without
limitation, relevant rates, prices, yields, yield curves, volatilities, spreads,
correlations or other relevant market data in the relevant market; or (iii)
information of the types described in clause (i) or (ii) above from internal
sources (including any of the Non-Defaulting Party’s affiliates) if that
information is of the same type used by the Non-Defaulting Party in the regular
course of its business for the valuation of similar transactions. The
Non-Defaulting Party will consider, taking into account the standards and
procedures described in this paragraph, quotations pursuant to clause (i) above
or relevant market data pursuant to clause (ii) above unless the Non-Defaulting
Party reasonably believes in good faith that such quotations or relevant market
data are not readily available or would produce a result that would not satisfy
those standards. When considering information described in clause
(i), (ii) or (iii) above, the Non-Defaulting Party may include costs of funding,
to the extent costs of funding are not and would not be a component of the other
information being utilized. Third parties supplying quotations
pursuant to clause (i) above or market data pursuant to clause (ii) above may
include, without limitation, dealers in the relevant markets, end-users of the
relevant product, information vendors, brokers and other sources of market
information. Notwithstanding the foregoing, and without affecting the
respective parties’ obligations to make payments in accordance with Section
X(b), upon reasonable written request by the Defaulting Party, the
Non-Defaulting Party shall provide a written explanation of any calculation or
adjustment made by it in connection with calculation of the Loss, including,
where applicable, a reasonable description of the methodology and the basis for
such calculation or adjustment in reasonable detail and shall consult with the
Defaulting Party with respect to the amount of such Loss, it being understood
that the Non-Defaulting Party shall not be obligated to disclose any proprietary
models used by it for such calculation.
(b) Payments. Upon
receipt of a Loss Notice from the Non-Defaulting Party, (i) if the amount
determined in accordance with paragraph (a) above is a positive number, then the
Defaulting Party
shall
promptly pay to the Non-Defaulting Party, the amount of such Loss in cash or
(ii) if the amount determined in accordance with paragraph (a) above is a
negative number, then the Non-Defaulting Party shall promptly pay to the
Defaulting Party, the absolute value of the amount of such Loss in cash; provided that, in the
event the Company is the party owing the Loss amount, then this paragraph (b)
shall be subject to the terms of paragraphs (c) and (d) below.
(c) Loss Settlement
Election. If the Company is the owing party in accordance with
paragraph (b) above, upon receipt of a Loss Notice from Citibank as the
Non-Defaulting Party, the Company may, in addition to its option to promptly pay
to Citibank the amount of such Loss in cash, elect to deliver to Citibank within
two Trading Days a number of shares of Common Stock equal to (i) the amount of
such Loss divided
by (ii) the closing price of the Common Stock on the Exchange for the day
upon which the Company receives such Loss Notice, rounded up to the nearest
whole share. Such share delivery is subject to the provisions of the
last sentence of Section III(b); provided that, for
the avoidance of doubt, in calculating any settlement obligations of the parties
in accordance with this Section X, Citibank shall take into consideration the
actual payments and deliveries made by the parties on the Initial Settlement
Date for the Transaction; provided, further that in no
event shall the Company be required to deliver a number of shares of Common
Stock that exceeds the then applicable Share Cap.
(d) Costs and
Expenses. In addition to the payments set forth in subsections
(b) and (c) above, the Defaulting Party agrees to indemnify the Non-Defaulting
Party from and against any reasonable expenses (including reasonable external
counsel fees and other expenses of collection) it may incur as a result of any
default by such party.
XI. Representations of the
Parties
Each
party represents to the other party that:
(a) Status. It
is duly organized and validly existing under the laws of the jurisdiction of its
organization or incorporation and, if relevant under such laws, in good
standing;
(b) Powers. It
has the corporate or other organizational power to execute and deliver this
Letter Agreement and to perform its obligations under this Letter Agreement and
has taken all necessary action to authorize such execution, delivery and
performance;
(c) No Violation or
Conflict. Such execution, delivery and performance do not
violate or conflict with any law applicable to it, any provision of its
constitutional documents, any order or judgment of any court or other agency of
government applicable to it or any of its assets or any contractual restriction
binding on or affecting it or any of its assets;
(d) Consents. All
governmental and other consents that are required to have been obtained by it
with respect to this Letter Agreement have been obtained and are in full force
and effect and all conditions of any such consents have been complied
with;
(e) Obligations
Binding. Its obligations under this Letter Agreement
constitute its legal, valid and binding obligations, enforceable in accordance
with its respective terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors’ rights generally and
subject, as to enforceability, to equitable principles of general application
(regardless of whether enforcement is sought in a proceeding in equity or at
law)); and
(f) Absence of Certain
Events. No Event of Default (as defined in the Agreement) or
event that, with the giving of notice or the passage of time or both, would
constitute an Event of Default has occurred and is continuing and no such event
or circumstance would occur as a result of its entering into or performing its
obligations under this Letter Agreement.
XII. Representations of the
Company
The
Company additionally hereby represents on the Purchase Date to Citibank
that:
(a) Liquidity. Its
financial condition is such that it has no need for liquidity with respect to
its investment in the transactions contemplated by this Letter Agreement and no
need to dispose of any portion thereof to satisfy any existing or contemplated
undertaking or indebtedness. Its investments in and liabilities in
respect of such transactions, which it understands are not readily marketable,
is not disproportionate to its net worth;
(b) Private
Placement. It acknowledges that
the offer and sale of this Transaction to
it is intended to be exempt from registration under the Securities Act, by
virtue of Section 4(2) thereof. Accordingly, the Company represents
and warrants to Citibank that (i) it is an “accredited investor” as that term is
defined in Regulation D as promulgated under the Securities Act, (ii) it is
entering into this Transaction for its own
account and without a view to the distribution or resale thereof,
and it
understands that Citibank has no obligation or intention to register the
transactions contemplated by this Letter Agreement under the Securities Act or
any state securities law or other applicable federal securities
law;
(c) No Deposit
Insurance. It understands
that no obligations of Citibank to it hereunder will be entitled to the benefit
of deposit insurance and that such obligations will not be guaranteed by any
affiliate of Citibank or any governmental agency;
(d) Assumption of
Risk. IT UNDERSTANDS THAT THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT ARE SUBJECT TO COMPLEX RISKS THAT MAY ARISE WITHOUT WARNING AND
MAY AT TIMES BE VOLATILE AND THAT LOSSES MAY OCCUR QUICKLY AND IN UNANTICIPATED
MAGNITUDE AND IS WILLING TO ACCEPT SUCH TERMS AND CONDITIONS AND ASSUME
(FINANCIALLY AND OTHERWISE) SUCH RISKS;
(e) Compliance with Filing
Requirements. Each of its filings under the Securities Act,
the Exchange Act, or other applicable securities laws that are required to be
filed have been filed and that, as of the respective dates thereof, there is no
misstatement of material fact contained therein or omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading
(f) Material Non-Public
Information. It is not
entering into this Letter Agreement on the basis of, and is not aware of, any
material non-public information with respect to the Common Stock or in
anticipation of, in connection with, or to facilitate, a distribution of its
securities, a self tender offer or a third-party tender offer;
(g) No Manipulation. It is not entering into any
transaction to create, and will not engage in any other securities or
derivatives transactions to create, actual or apparent trading activity in the
Common Stock (or any security convertible into or exchangeable for Common Stock)
or to raise or depress or to manipulate the price of the Common Stock (or any
security convertible into or exchangeable for Common Stock);
(h) Compliance with Securities
Laws. It has not and will
not directly or indirectly violate any applicable law, rule or regulation
(including, without limitation, the Securities Act and the Exchange Act) in
connection with the transactions contemplated by this Letter
Agreement;
(i) Required Company
Approvals. The transactions contemplated by this Letter
Agreement and any repurchase of Common Stock by the Company in connection with
such transactions are pursuant to a publicly announced share repurchase program
that has been approved by its Board of Directors and any such repurchase has
been or will when so required be publicly disclosed in its periodic filings
under the Exchange Act and its financial statements and notes thereto and, at
the time of making this representation, such transactions are not subject to any
internal policy or procedure of the Company which would prohibit the Company
from effecting any transactions in the shares of Common Stock at such
time;
(j) Regulation
M. The Company is not on the date hereof, and will not be
during the term of the transactions contemplated by this Letter Agreement,
engaged in a distribution, as such term is used in Regulation M under the
Exchange Act, that would preclude purchases by the Company of the Common Stock
or cause the Company to violate any law, rule or regulation with respect to such
purchases;
(k) Non-Reliance. It
is not relying, and has not relied upon, Citibank or any of its affiliates with respect to the
legal, accounting, tax or other implications of this Letter Agreement and that
it has conducted its own analyses of the legal, accounting, tax and other
implications of this Letter Agreement. Further, it acknowledges and agrees that neither Citibank nor any
affiliate of Citibank has acted as its advisor in any capacity in connection
with this Letter Agreement or the transactions contemplated
hereby. The Company is entering into this Letter Agreement with a
full understanding of all of the terms and risks hereof (economic and
otherwise), has adequate expertise in financial matters to evaluate those terms
and risks and is capable of assuming (financially and otherwise) those
risks; and
(l) Acknowledgement of Citibank
Activity. It understands and acknowledges that Citibank and
its affiliates may from time to time effect transactions for their own account
or the account of customers and hold positions in securities or options on
securities of the Company and that Citibank and its affiliates may continue to
conduct such transactions during the Pricing Period and the Valuation
Period.
XIII. Agreements of the
Company
(a) Authorized
Shares. The Company agrees that while this Letter Agreement is
in effect, it shall cause (i) the number of authorized shares of Common
Stock minus
(ii) the number of outstanding shares of Common Stock minus (iii) the
number of shares of Common Stock reserved for other purposes minus
(iv) without duplication of clause (iii), the aggregate maximum number of
shares of Common Stock deliverable under warrants, options, swaps, forwards,
convertible or exchangeable securities or other similar transactions, agreements
or instruments issued by the Company or to which the Company is a party that
provide for physical or net share settlement or otherwise may require the
issuance of shares of Common Stock by the Company, to exceed the then applicable
Share Cap. At the conclusion of the Pricing Period, the Company will
have a sufficient number of treasury shares or duly authorized but unissued
shares of Common Stock available to satisfy its obligations with respect to this
Transaction, such shares of Common Stock to be fully paid and nonassessable and
free of preemptive and other rights. The Company agrees that a
failure by the Company to comply with the preceding sentence shall be an Event
of Default hereunder with respect to the Company without regard to any grace
period that would otherwise be applicable.
(b) Nature of
Rights. The Company acknowledges and agrees that this Letter
Agreement is not intended to convey to Citibank rights against the Company
hereunder that are senior to the claims of common stockholders in any U.S.
bankruptcy proceedings of the Company; provided, however, that nothing herein
shall limit or shall be deemed to limit Citibank’s right to pursue remedies in
the event of a breach by the Company of its obligations and agreements with
respect to this Letter Agreement; and provided further that in pursuing a claim
against the Company in the event of a bankruptcy, insolvency or dissolution with
respect to Company, Citibank’s rights hereunder shall rank on a parity with the
rights of a holder of shares of Common Stock enforcing similar rights under a
contract involving shares of Common Stock.
(c) Disclosure. The
Company agrees that the material terms of this Transaction (and any other
similar transactions), and the consequences of such transactions on the
financial condition and results of operations of the Company, will be disclosed
by the Company in accordance with all rules, regulations, accounting principles
(including EITF Issue No. 00-19) and laws applicable to the Company in its
periodic filings under the Exchange Act and its financial statements and notes
thereto.
(d) Corporate Event
Notification. During the Pricing
Period, the Company shall (i) notify Citibank 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 Citibank
following any such announcement that such announcement has been made, and (iii)
promptly deliver to Citibank 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
Citibank 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 Pricing Period to
be suspended pursuant to Section IV(c). Accordingly, the Company
acknowledges that its actions in relation to any such announcement or
transaction must comply with the standards set forth in Section
IV(a).
XIV. Indemnification
The
Company agrees to indemnify and hold harmless Citibank, its affiliates and its
assignees and their respective directors, officers, employees, agents and
controlling persons (Citibank and each such person being an “Indemnified Party”)
from and against any and all losses, claims, damages and liabilities, joint or
several, to which such Indemnified Party may become subject, and relating to or
arising out of the transactions contemplated by this Letter Agreement, and will
reimburse any Indemnified Party for all expenses (including reasonable counsel
fees and expenses) as they are incurred in connection with the investigation of,
preparation for or defense or settlement of any pending or threatened claim or
any action, suit or proceeding arising therefrom, whether or not such
Indemnified Party is a party thereto and whether or not such claim, action, suit
or proceeding is initiated or brought by or on behalf of the
Company. The Company will not be liable under the foregoing
indemnification provision to the extent that any loss, claim, damage, liability
or expense is found in a nonappealable judgment by a court of competent
jurisdiction to have resulted from Citibank’s breach of a material term of this
Letter Agreement, willful misconduct or negligence. If for any reason
the foregoing indemnification is unavailable to any Indemnified Party or
insufficient to hold harmless any Indemnified Party, then the Company shall
contribute, to the maximum extent permitted by law (but only to the extent that
such harm was not caused by Citibank’s breach of a material term of this Letter
Agreement, willful misconduct or negligence), to the amount paid or payable by
the Indemnified Party as a result of such loss, claim, damage or
liability. The Company also agrees that no Indemnified Party shall
have any liability to the Company or any person asserting claims on behalf of or
in right of the Company in connection with or as a result of any matter referred
to in this Letter Agreement except to the extent that any losses, claims,
damages, liabilities or expenses incurred by the Company result from the breach
of a material term of this Letter Agreement, or the Indemnified Party’s
negligence or willful misconduct. The provisions of this Section XIV
shall survive completion of the transactions contemplated by this Letter
Agreement and shall inure to the benefit of any permitted assignee of
Citibank.
XV. Miscellaneous
(a) No
Collateral. Notwithstanding any provision of this Letter
Agreement, or any other agreement between the parties, to the contrary, the
obligations of the Company under this Letter Agreement are not secured by any
collateral.
(b) Waiver of Trial by
Jury. EACH OF THE COMPANY AND CITIBANK HEREBY IRREVOCABLY
WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON
BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS LETTER AGREEMENT OR THE ACTIONS OF CITIBANK OR ITS AFFILIATES
IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.
(c) Governing
Law. THIS LETTER AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE
STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW RULES
THEREOF.
(d) Submission to
Jurisdiction. THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH
ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN,
AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.
(e) Non-Confidentiality. Notwithstanding
anything to the contrary herein, (i) Citibank acknowledges that this Letter
Agreement may be intended to produce U.S. federal income tax benefits for the
Company and (ii) the Company and Citibank hereby agree that (A) the Company
is not obligated to Citibank to keep confidential from any and all persons or
otherwise limit the use of any aspect of this Letter Agreement relating to the
structure or tax aspects thereof, and (B) Citibank does not assert any claim of
proprietary ownership in respect of any such aspect of this Letter
Agreement.
(f) Bankruptcy
Code. The parties hereto intend for (i) the Transaction
hereunder to be a “securities contract” and a “swap agreement” as defined in the
Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”),
and the parties hereto are entitled to the protections afforded by, among other
Sections, Sections 362(b)(6), 362(b)(17), 362(o), 546, 555, 560 and 561 of the
Bankruptcy Code; (ii) a party’s right to liquidate, terminate or accelerate the
Transaction and to exercise any other remedies upon the occurrence of any Event
of Default, a Loss of Borrow Termination, a Dividend Event Termination, a Cash
Tender Termination, a Corporate Event Termination or a Delisting Termination
under this Letter Agreement with respect to the other party to constitute a
“contractual right” within the meaning of the Bankruptcy Code; (iii) all
transfers of cash, securities or other property under or in connection with the
Transaction are “transfers” made “by or to (or for the benefit of)” a “master
netting agreement participant”, a “financial institution”, a “financial
participant”, a “forward contract merchant” or a “swap participant”, (each as
defined in the Bankruptcy Code) within the meaning of Sections 546(e), 546(f),
546(g) and 546(j) of the Bankruptcy Code; (iv) all obligations under or in
connection with the Transaction represent obligations in respect of “termination
values”, “payment amounts” or “other transfer obligations” within the meaning of
Section 362, 560 and 561 of the Bankruptcy Code; and (v) each of the parties
hereto to be a “swap participant” and “financial participant” within the meaning
of Sections 101(53C) and 101(22A) of the Bankruptcy Code.
(g) Assignment and
Transfer. The rights and duties under this Letter Agreement
may not be assigned or transferred by either party hereto without the prior
written consent of the other party hereto; provided, however, that
Citibank may assign its obligation to deliver or receive delivery of Common
Stock hereunder to any of its affiliates without the prior written consent of
the Company. Upon any such assignment Citibank shall indemnify the
Company from and against any loss, cost or expense relating to the failure of
such affiliate to perform its delivery obligation.
(h) Calculations. To
the extent any calculation, adjustment or determination is required to be made
by Citibank hereunder, Citibank shall make any such calculation, adjustment, or
determination in good faith.
(i) Notices. Unless
otherwise specified, notices under this Letter Agreement may be made by
telephone, to be confirmed in writing to the address below. Changes
to the Notices must be made in writing.
(i) If
to the Company:
Lexmark
International, Inc.
One
Lexmark Centre Drive
000 Xxxx
Xxx Xxxxxx Xxxx
Xxxxxxxxx,
XX 00000
Attn: Xxxxxxx
Xxxxxx
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
(ii) If
to Citibank:
Citibank,
N.A.
000 Xxxxxxxxx Xxxxxx, 0xx
Xxxxx
Xxx Xxxx, XX 00000
Attn: Equity
Derivatives
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Please
confirm your agreement to the foregoing by signing and returning to us the
enclosed duplicate of this Letter Agreement.
Very truly yours,
CITIBANK,
N.A.
By: /s/Xxxxx Xxxxxxxxx
Name: Xxxxx Xxxxxxxxx
Authorized Representative
Acknowledged
and agreed to as of
the date
first above written,
LEXMARK
INTERNATIONAL, INC.
| By: | /s/Xxxxx X. Xxxxx | ||
| Name: | Xxxxx X. Xxxxx | ||
| Title: | Assistant Treasurer |
