EXHIBIT 10.1

EXECUTION VERSION

Morgan Stanley & Co. LLC
1585 Broadway
New York, NY 10036-8293
Attn: Joshua Birbach
Telephone: 212-761-1719
Facsimile:  212-507-8717
 
April 29, 2015
 
Capped Accelerated Share Repurchase Transaction
Express Scripts Holding Company
One Express Way
St. Louis, MO 63121
Attention:
Timothy Smith
Telephone:     
314-684-5759

   

 
Dear Sir/Madam:
 
The purpose of this letter agreement (this “Confirmation”) is to confirm the
terms and conditions of the Transaction entered into between Morgan Stanley &
Co. LLC (“Dealer”) and Express Scripts Holding Company (“Issuer”) on the Trade
Date specified below (the “Transaction”).  This confirmation, together with any
Trade Notification substantially in the form of Exhibit I hereto which
references this Confirmation and which shall supplement, form a part of, and be
subject to this Confirmation, constitutes a “Confirmation” as referred to in the
Agreement specified below.
 
The definitions and provisions contained in the 2002 ISDA Equity Derivatives
Definitions (as published by the International Swaps and Derivatives
Association, Inc. (“ISDA”)) (the “Equity Definitions”) are incorporated into
this Confirmation.  In the event of any inconsistency between the Equity
Definitions, this Confirmation and any Trade Notification, the following will
prevail for purposes of the Transaction in the order of precedence indicated:
(i) the Trade Notification, (ii) this Confirmation and (iii) the Equity
Definitions.
 
1.         This Confirmation and any related Trade Notification evidence a
complete and binding agreement between Dealer and Issuer as to the terms of the
Transaction to which this Confirmation and such Trade Notification
relates.  This Confirmation and such Trade Notification shall be subject to an
agreement (the “Agreement”) in the form of the 2002 ISDA Master Agreement as if
Dealer and Issuer had executed an agreement in such form without any Schedule
but with (i) the election that the “Cross Default” provisions of Section
5(a)(vi) shall apply to Dealer as if (x) the “Threshold Amount” with respect to
Dealer were equal to 3% of Dealer’s shareholders’ equity as of the Trade Date
and (y) “Specified Indebtedness” had the meaning specified in Section 14 of the
Agreement, except that such term shall not include obligations in respect of
deposits received in the ordinary course of Dealer’s banking business,

 
 

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and (ii) the other elections set forth in this Confirmation.  For the avoidance
of doubt, the Transaction shall be the only Transaction under the Agreement.
 
2.         The terms of the particular Transaction to which this Confirmation
relates are as follows:
 
GENERAL TERMS:
 
Trade Date:
 
As specified in Schedule I
     
Buyer:
 
Issuer
     
Seller:
 
Dealer
     
Shares:
 
Common Stock of Issuer (Ticker: ESRX)
     
Number of Shares:
 
The number of Shares delivered in accordance with Physical Settlement below.
     
Forward Price:
 
As specified in Schedule I
     
Discount:
 
As specified in Schedule I
     
10b-18 VWAP:
 
For each Trading Day during the Hedge Period or the Calculation Period, a price
per share (as determined by the Calculation Agent) equal to the volume-weighted
average price of the Rule 10b-18 eligible trades in the Shares for the entirety
of such Trading Day as determined by reference to the screen entitled “ESRX
<Equity> AQR SEC” or any successor page as reported by Bloomberg L.P. (without
regard to pre-open or after-hours trading outside of any regular trading session
for such Trading Day or block trades (as defined in Rule 10b-18(b)(5) under the
Securities Exchange Act of 1934 as amended (the “Exchange Act”) and such Rule
10b-18, “Rule 10b-18”) on such Trading Day) or, in the event such price is not
so reported on such day for any reason or is manifestly incorrect, as reasonably
determined by the Calculation Agent using a volume weighted method.
     
Calculation Period:
 
The period from, and including, the Calculation Period Start Date to, and
including, the Valuation Date.
     
Calculation Period Start Date:
 
As specified in Schedule I
     
Trading Day:
 
Any Exchange Business Day that is not a Disrupted Day or an Excluded Day

 
 
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Excluded Days:
 
November 27, 2015 and December 24, 2015
     
Initial Shares:
 
As specified in Schedule I
     
Initial Share Delivery Date:
 
The Trade Date.
         
On the Initial Share Delivery Date, Seller shall deliver to Buyer a number of
Shares equal to the Initial Shares in accordance with Section 9.4 of the Equity
Definitions, with the Initial Share Delivery Date being deemed to be a
“Settlement Date” for purposes of such Section 9.4.
     
Prepayment:
 
Applicable
     
Prepayment Amount:
 
As specified in Schedule I
     
Prepayment Date:
 
The Trade Date.
         
On the Prepayment Date, Buyer shall pay to Seller the Prepayment Amount.
     
Exchange:
 
NASDAQ Global Select Market
     
Related Exchange:
 
The primary exchange on which options or futures on the Shares are traded.
     
Market Disruption Event:
 
The definition of “Market Disruption Event” in Section 6.3(a) of the Equity
Definitions is hereby amended by replacing the words “at any time during the
one-hour period that ends at the relevant Valuation Time, Latest Exercise Time,
Knock-in Time, Valuation Time or Knock-out Valuation Time, as the case may be”
with the words “at any time on any Exchange Business Day during the Hedge Period
or the Calculation Period” after the word “material”.
         
Notwithstanding anything to the contrary in the Equity Definitions, if any
Exchange Business Day in the Hedge Period or the Calculation Period is a
Disrupted Day, other than a Disrupted Day that is deemed not to be a Disrupted
Day pursuant to the immediately following paragraph, the Calculation Agent shall
(i) determine the 10b-18 VWAP for such day based on Rule 10b-18 eligible trades
in the Shares on such day taking into account the nature and duration of the
relevant Market Disruption Event and determine the weighting of the 10b-18 VWAP
for such Disrupted Day using

 
 
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its commercially reasonable judgment for purposes of calculating the Hedge
Period Reference Price or the Forward Price, or (ii) extend the Hedge Period End
Date or the Scheduled Valuation Date by a number of Exchange Business Days equal
to the number of Disrupted Days during the Hedge Period or the Calculation
Period.  In each such case, the Calculation Agent shall promptly notify Issuer
in writing of (A) circumstances giving rise to such Disrupted Day, and (B) any
such weighting, extension or suspension as soon as reasonably practicable after
the occurrence of such Disrupted Day.  For the avoidance of doubt, if the
Calculation Agent elects the option described in clause (i) above, then such
Disrupted Day shall be deemed to be a Trading Day for purposes of calculating
the Hedge Period Reference Price or the Forward Price.
 
If a Disrupted Day occurs during the Hedge Period or the Calculation Period and
each of the nine immediately following Scheduled Trading Days is a Disrupted Day
(a “Disruption Event”), then the Calculation Agent shall, in its good faith and
commercially reasonable discretion, deem such ninth Scheduled Trading Day to be
a Trading Day and determine the 10b-18 VWAP for such ninth Scheduled Trading Day
using its good faith and commercially reasonable estimate of the value of the
Shares on such ninth Scheduled Trading Day based on the volume, historical
trading patterns and price of the Shares and such other factors as it deems
appropriate.
VALUATION:
   
Valuation Time:
 
The Scheduled Closing Time on the relevant Exchange
     
Valuation Date:
 
The earlier of (i) the Scheduled Valuation Date and (ii) any earlier accelerated
Valuation Date as a result of Dealer’s election in accordance with the
immediately succeeding paragraph, in either case, subject to extension in
accordance with “Market Disruption Event” above or Section 9 or Section 10
below.

 
 
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Dealer shall have the right, in its absolute discretion but subject to the
limitations set forth in the immediately succeeding paragraph, to accelerate the
Valuation Date, in whole or in part, to any Exchange Business Day that is after
the Lock-Out Date and prior to the Scheduled Valuation Date by notice (each such
notice, an “Acceleration Notice”) to Issuer by 9:00 p.m., New York City time, on
the accelerated Valuation Date.
         
Dealer shall specify in each Acceleration Notice the portion of the Prepayment
Amount that is subject to acceleration (which may be less than the full
Prepayment Amount, but only so long as such portion is not less than 35% of the
Prepayment Amount (or, if less, the remainder of the Prepayment Amount for which
an Acceleration Notice has yet to be delivered)), and the Calculation Agent
shall adjust all terms of the Transaction as it deems appropriate in order to
take into account the occurrence of such accelerated Valuation Date (including
cumulative adjustments to take into account all prior accelerated Valuation
Dates).
         
On each Valuation Date, Calculation Agent shall calculate the Settlement Amount.
     
Scheduled Valuation Date:
 
As specified in Schedule I
     
Lock-Out Date:
 
As specified in Schedule I
     
Hedge Period:
 
The period from, and including, the Hedge Period Start Date to, and including,
the Hedge Completion Date.
     
Hedge Period Start Date:
 
As specified in Schedule I
     
Hedge Completion Date:
 
As determined by Seller in its sole discretion, but in no event later than the
Hedge Period End Date.
     
Hedge Period End Date:
 
As specified in Schedule I
     
Hedge Period Reference Price:
 
The arithmetic mean (not a weighted average) of the 10b-18 VWAP on each Trading
Day during the Hedge Period.
     
Trade Notification:
 
Seller shall deliver to Buyer, no later than 5:00 p.m. (New York City time) on
the Exchange

 
 
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Business Day immediately following the Hedge Completion Date, a notice
substantially in the form of Exhibit I hereto setting forth the Hedge Completion
Date, the Calculation Period Start Date, the Hedge Period Reference Price, the
Forward Cap Price and the Minimum Shares.
     
SETTLEMENT TERMS:
         
Physical Settlement:
 
Applicable.
         
On the Settlement Date, Seller shall deliver to Buyer a number of Shares equal
to (a) (i) the Prepayment Amount divided by (ii) the Forward Price as determined
on the relevant Valuation Date, minus (b) the sum of the Initial Shares and the
number of Shares delivered, if any, pursuant to the provision opposite the
caption “Minimum Share Delivery” below (such number of Shares, the “Settlement
Amount”), rounded to the nearest whole number of Shares; provided, however, that
if the Settlement Amount is less than zero, then Buyer shall deliver to Seller a
number of Shares equal to 101% of the absolute value of the Settlement Amount
(such number of Shares, the “Payment Shares”).
         
Notwithstanding the proviso in the immediately preceding paragraph, if the
Settlement Amount is less than zero, Buyer may cash settle its obligation to
deliver the Payment Shares by delivering to Seller by no later than the relevant
Valuation Date (i) a notice electing to cash settle its obligation to deliver
the Payment Shares and (ii) a written representation that, at the time of such
notice, Buyer is not in possession of any material non-public information with
respect to Buyer or any of its securities.  Any such cash settlement shall be
effected in accordance with “Cash Settlement of Payment Shares” below.
         
For the avoidance of doubt, upon the date that (i) Buyer satisfies its
obligation to deliver the Payment Shares to Seller in accordance with the terms
of this paragraph or (ii) the Settlement Balance (as defined below) is reduced
to zero in connection with cash settlement of Buyer’s obligation to deliver
Payment Shares (as described

 
 
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under “Cash Settlement of Payment Shares” below), Buyer shall have no further
delivery or payment obligations under the terms of the Transaction and the
Transaction shall be deemed to have been settled as of such date.
     
Settlement Currency:
 
USD
     
Settlement Date:
 
Three Exchange Business Days after the Valuation Date, or if such date is not a
Clearance System Business Day or if there is a Settlement Disruption Event on
such day, the immediately succeeding Clearance System Business Day on which
there is no Settlement Disruption Event.
     
Minimum Share Delivery:
 
Seller shall deliver a number of Shares equal to the excess, if any, of the
Minimum Shares over the Initial Shares on the Minimum Share Delivery Date in
accordance with Section 9.4 of the Equity Definitions, with such Minimum Share
Delivery Date deemed to be a “Settlement Date” for purposes of such Section 9.4.
     
Minimum Share Delivery Date:
 
Three Exchange Business Days after the Hedge Completion Date, or if such date is
not a Clearance System Business Day or if there is a Settlement Disruption Event
on such day, the immediately succeeding Clearance System Business Day on which
there is no Settlement Disruption Event.
     
Minimum Shares:
 
The number of Shares (rounded down to the nearest whole number) equal to (a) the
Prepayment Amount, divided by (b) the Forward Cap Price.
     
Forward Cap Price:
 
As specified in Schedule I
     
Other Applicable Provisions:
 
To the extent that either party is obligated to deliver Shares hereunder, the
provisions of the last sentence of Section 9.2 and Sections 9.8, 9.9, 9.10, 9.11
(except that the Representation and Agreement contained in Section 9.11 of the
Equity Definitions shall be modified by excluding any representations therein
relating to restrictions, obligations, limitations or requirements under
applicable securities laws arising as a result of the fact that Buyer is the
issuer of the Shares) and Section 9.12 of the Equity Definitions will be
applicable as if “Physical Settlement” applied to the Transaction.

 
 
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Cash Settlement of Payment Shares:
 
If Buyer elects to cash settle its obligation to deliver Payment Shares, then on
the Valuation Date a balance (the “Settlement Balance”) shall be created with an
initial balance equal to the absolute value of the Settlement Amount.  On the
Settlement Date, Buyer shall deliver to Seller a U.S. dollar amount equal to the
absolute value of the Settlement Amount multiplied by a price per Share as
reasonably determined by the Calculation Agent (such cash amount, the “Initial
Cash Settlement Amount”).  On the Exchange Business Day immediately following
the delivery of the Initial Cash Settlement Amount, Seller shall begin
purchasing Shares in a commercially reasonable manner (all such Shares
purchased, “Cash Settlement Shares”).  At the end of each Exchange Business Day
on which Seller purchases Cash Settlement Shares, Seller shall reduce (i) the
Settlement Balance by the number of Cash Settlement Shares purchased on such
Exchange Business Day and (ii) the Initial Cash Settlement Amount by an amount
equal to the product of (x) the number of Cash Settlement Shares purchased on
such Exchange Business Day and (y) the 10b-18 VWAP on such Exchange Business
Day. If, on any Exchange Business Day, the Initial Cash Settlement Amount is
reduced to or below zero but the Settlement Balance is above zero, the Buyer
shall deliver to Seller or as directed by Seller on the next Exchange Business
Day after such Exchange Business Day an additional U.S. dollar amount (an
“Additional Cash Settlement Amount”) equal to the Settlement Balance as of such
Exchange Business Day multiplied by a price per Share as reasonably determined
by the Calculation Agent.  This provision shall be applied successively until
the Settlement Balance is reduced to zero.  On the Exchange Business Day that
the Settlement Balance is reduced to zero, Seller shall return to Buyer any
unused portion of the Initial Cash Settlement Amount or any Additional Cash
Settlement Amount, as the case may be.  In making any purchases of Cash
Settlement Shares contemplated by this paragraph

 
 
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Seller shall use commercially reasonable efforts to purchase such shares in a
manner that would comply with Rule 10b-18 under the Exchange Act (“Rule 10b-18”)
if such purchases were subject to Rule 10b-18.
     
SHARE ADJUSTMENTS:
         
Potential Adjustment Event:
 
Notwithstanding anything to the contrary in Section 11.2(e) of the Equity
Definitions, an Extraordinary Dividend shall not constitute a Potential
Adjustment Event.
     
Extraordinary Dividend:
 
Any dividend or distribution on the Shares with an ex-dividend date occurring
during the term of the Transaction (other than any dividend or distribution of
the type described in Section 11.2(e)(i), Section 11.2(e)(ii)(A) or Section
11.2(e)(ii)(B) of the Equity Definitions).
     
Method of Adjustment:
 
Calculation Agent Adjustment
     
EXTRAORDINARY EVENTS:
         
Consequences of Merger Events:
         
Share-for-Share:
 
Modified Calculation Agent Adjustment
     
Share-for-Other:
 
Cancellation and Payment
     
Share-for-Combined:
 
Component Adjustment
     
Consequences of Tender Offers:
         
Tender Offer:
 
Applicable; provided that the definition of “Tender Offer” in Section 12.1(d) of
the Equity Definitions will be amended by replacing “10%” with “15%” in the
third and fourth line thereof.
     
Share-for-Share:
 
Modified Calculation Agent Adjustment
     
Share-for-Other:
 
Modified Calculation Agent Adjustment
     
Share-for-Combined:
 
Modified Calculation Agent Adjustment
     
Modified Calculation Agent Adjustment:
 
For greater certainty, the definition of “Modified Calculation Agent Adjustment”
in Sections 12.2 and 12.3 of the Equity Definitions shall be amended by (i)
adding the following italicized language after the stipulated parenthetical

 
 
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provision: “(including adjustments to account for changes in volatility,
expected dividends, stock loan rate or liquidity relevant to the Shares or to
the Transaction) from the Exchange Business Day immediately preceding the
Announcement Date or the Determination Date, as applicable, to the first
Exchange Business Day immediately following the Merger Date (Section 12.2) or
Tender Offer Date (Section 12.3).”
     
Composition of Combined Consideration:
 
Not Applicable
     
Announcement Event:
 
If, during the term of the Transaction, an Announcement Date occurs in respect
of a Merger Event (for the avoidance of doubt, determined without regard to the
language in the definition of “Merger Event” following the definition of
“Reverse Merger” therein) or Tender Offer (such occurrence, an “Announcement
Event”), then on the earliest of the Valuation Date, any Early Termination Date
or other date of cancellation (the “Announcement Event Adjustment Date”), the
Calculation Agent will determine the economic effect on the Transaction of the
Announcement Event and any related, prior announcements by any entity
(regardless of whether the Announcement Event actually results in a Merger Event
or Tender Offer, and taking into account such factors as the Calculation Agent
may determine, including, without limitation, changes in volatility, expected
dividends, stock loan rate or liquidity relevant to the Shares or the
Transaction whether prior to or after the Announcement Event or for any period
of time, including, without limitation, the period from the Announcement Event
to the relevant Announcement Event Adjustment Date).  If the Calculation Agent
determines that such economic effect on the Transaction is material, then on the
Announcement Event Adjustment Date, the Calculation Agent shall make such
adjustment to one or more terms of the Transaction, including, without
limitation, adjustments to the Settlement Amount, Forward Cap Price and/or
Forward Price, as the Calculation Agent determines appropriate to account for
such economic effect, which adjustment shall be effective immediately prior to
the valuation,

 
 
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termination or cancellation of the Transaction, as the case may be.
     
Announcement Date:
 
The definition of “Announcement Date” in Section 12.1(l) of the Equity
Definitions is hereby amended by (i) replacing the words “a firm” with the word
“any” in the second and fourth lines thereof, (ii) replacing the word “leads to
the” with the words “, if completed, would lead to a” in the third and the fifth
lines thereof, (iii) inserting the following words at the end of each of clauses
(i) and (ii) therein: “and that the Calculation Agent determines is reasonably
likely to be completed (which determination may, for the avoidance of doubt,
take into account the effect of such announcement on the market price of the
Shares or options relating thereto)”, (iv) replacing the words “voting shares”
with the words “Shares” in the fifth line thereof and (v) inserting the words
“by any party thereto or the Issuer or any affiliate or representative of the
foregoing” after the word “announcement” in the second and the fourth lines
thereof.
     
Nationalization, Insolvency or Delisting:
 
Cancellation and Payment; provided that in addition to the provisions of Section
12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if
the Exchange is located in the United States and the Shares are not immediately
re-listed, re-traded or re-quoted on any of the New York 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
thereafter be deemed to be the Exchange.
     
Cancellation Amount:
 
Section 12.8(d) of the Equity Definitions shall be amended by deleting the
second sentence thereof and Section 12.8(e) of the Equity Definitions shall be
amended by replacing the words “(or any gain resulting from any of them)” at the
end thereof with the words “and shall, in calculating any Cancellation Amount,
consider any gain resulting from its terminating, liquidating or re-establishing
any hedge related to such Transaction”.

 
 
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Additional Disruption Events:
         
Change in Law:
 
Applicable; provided Section 12.9(a)(ii) of the Equity Definitions is hereby
amended by replacing the parenthetical beginning after the word “regulation” in
the second line thereof with the words “(including, for the avoidance of doubt
and without limitation, (x) any tax law or (y) adoption or promulgation of new
regulations authorized or mandated by existing statute)”.
     
Failure to Deliver:
 
Applicable; provided that, notwithstanding Section 12.9(b)(ii)(B) of the Equity
Definitions, Dealer will use commercially reasonable efforts to deliver any
Shares not initially delivered on the Initial Share Delivery Date or the
Settlement Date as soon as commercially practicable following the Initial Share
Delivery Date or the Settlement Date, as applicable.
     
Insolvency Filing:
 
Applicable
     
Hedging Disruption:
 
Not Applicable
     
Increased Cost of Hedging:
 
Not Applicable
     
Loss of Stock Borrow:
 
Applicable
     
Maximum Stock Loan Rate:
 
500 basis points
     
Increased Cost of Stock Borrow:
 
Applicable
     
Initial Stock Loan Rate:
 
35 basis points
     
Determining Party:
 
For all Extraordinary Events, Dealer
     
Hedging Party:
 
For all Additional Disruption Events, Dealer
     
Non-Reliance:
 
Applicable
     
AGREEMENTS AND ACKNOWLEDGMENTS:
         
Regarding Hedging Activities:
 
Applicable
     
Additional Acknowledgments:
 
Applicable

 
3.         Calculation Agent:  Dealer, provided that, notwithstanding anything
to the contrary, all determinations, adjustments and calculations performed by
Dealer in its capacity as Calculation Agent, as well as any determinations,
adjustments or calculations by Dealer in any other

 
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capacity, pursuant to this Confirmation, the Agreement and the Equity
Definitions shall be made in good faith and in a commercially reasonable manner,
including, without limitation, with respect to calculations, adjustments and
determinations that are made in its sole discretion or otherwise. In the event
the Calculation Agent or Dealer makes any calculation, adjustment or
determination pursuant to this Confirmation, the Agreement or the Equity
Definitions, the Calculation Agent or Dealer shall promptly provide an
explanation in reasonable detail of the basis for any such determination,
adjustment or calculation if requested by Issuer (including any quotations,
market data or information from external sources used in making such
calculation, adjustment or determination, as the case may be, but without
disclosing Calculation Agent’s or Dealer’s proprietary models or other
information that is subject to contractual, legal or regulatory obligations to
not disclose such information); provided that following the occurrence of an
Event of Default pursuant to Section 5(a)(vii) of the Agreement with respect to
which Dealer is the Defaulting Party, Issuer shall have the right to designate a
nationally recognized third-party dealer in over-the-counter corporate equity
derivatives to act, during the period commencing on the date such Event of
Default occurred and ending on the Early Termination date with respect to such
Event of Default, as the Calculation Agent.
 
4.         Account Details:  To be provided.
 
5.         Miscellaneous.
 
(a)         Additional Termination Event.  The declaration of an Extraordinary
Dividend by Issuer during the term of the Transaction shall constitute an
Additional Termination Event with respect to which the Transaction is the sole
Affected Transaction, Issuer is the sole Affected Party and Dealer shall be the
party entitled to designate an Early Termination Date pursuant to Section 6(b)
of the Agreement.
 
(b)        Share Forward Transaction.  For the avoidance of doubt, the
Transaction shall be deemed to be a “Share Forward Transaction” for purposes of
the Equity Definitions; provided, however, that in Section 9.2(a)(iii) of the
Equity Definitions the words “the Excess Dividend Amount, if any, and” shall be
deleted.
 
(c)        The words “that diluting or concentrative effect” in the fifth and
sixth rows from the end of Section 11.2(c) of the Equity Definitions shall be
replaced with the words “the economic effect on the Transaction”.
 
(d)        The proviso appearing in parentheses beginning on the fifth row from
the end of Section 11.2(c) of the Equity Definitions shall be replaced with the
following: “(and, for the avoidance of doubt, adjustments may be made to account
solely for changes in volatility, expected dividends, stock loan rate or
liquidity relative to the relevant Shares).”
 
6.         Certain Payments and Deliveries by Dealer.
 
Notwithstanding anything to the contrary herein, or in the Equity Definitions,
if at any time (i) an Early Termination Date occurs and Dealer would be required
to make a payment pursuant to Sections 6(d) and 6(e) of the Agreement, (ii) a
Tender Offer occurs and Dealer would be required to make a payment pursuant to
Sections 12.3 and 12.7 of the Equity Definitions, (iii) a Merger Event occurs
and Dealer would be required to make a payment pursuant to Sections 12.2

 
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and 12.7 of the Equity Definitions, (iv) an Additional Disruption Event occurs
and Dealer would be required to make a payment pursuant to Sections 12.8 and
12.9 of the Equity Definitions or (v) a Nationalization, Insolvency or Delisting
occurs and Dealer would be required to make a payment pursuant to Sections 12.6
and 12.7 of the Equity Definitions (any such payment described in Sections 6(i),
(ii), (iii), (iv) or (v) above, a “Dealer Payment Amount”), then, in lieu of any
payment of such Dealer Payment Amount in cash, unless Issuer makes an election
to the contrary no later than 4 p.m., New York City time, on the Early
Termination Date or the date on which the Transaction is terminated or
cancelled, a balance (the “Settlement Balance”) shall be established equal to
the Dealer Payment Amount on the date such Dealer Payment Amount is due.  On
such date, Dealer shall commence purchasing Shares for delivery to Issuer.  At
the end of each Trading Day on which Dealer purchases Shares pursuant to this
Section 6, Dealer shall reduce the Settlement Balance by the amount paid by
Dealer to purchase the Shares purchased on such Trading Day.  Dealer shall
deliver any Shares purchased on a Trading Day to Issuer on the third Exchange
Business Day following the relevant Trading Day.  Dealer shall continue
purchasing Shares until the Settlement Balance has been reduced to zero.
 
7.         Certain Payments and Deliveries by Issuer.
 
Notwithstanding anything to the contrary herein, or in the Equity Definitions,
if at any time (i) an Early Termination Date occurs and Issuer would be required
to make a payment pursuant to Sections 6(d) and 6(e) of the Agreement, (ii) a
Tender Offer occurs and Issuer would be required to make a payment pursuant to
Sections 12.3 and 12.7 of the Equity Definitions, (iii) a Merger Event occurs
and Issuer would be required to make a payment pursuant to Sections 12.2 and
12.7 of the Equity Definitions, (iv) an Additional Disruption Event occurs and
Issuer would be required to make a payment pursuant to Sections 12.8 and 12.9 of
the Equity Definitions or (v) a Nationalization, Insolvency or Delisting occurs
and Issuer would be required to make a payment pursuant to Sections 12.6 and
12.7 of the Equity Definitions (any such payment described in Sections 7(i),
(ii), (iii), (iv) or (v) above, an “Early Settlement Payment”), then, in lieu of
any payment of such Early Settlement Payment in cash, unless Issuer makes an
election to the contrary no later than 4 p.m., New York City time, on the date
that is three Exchange Business Days before the date that the Early Settlement
Payment is due, Issuer shall settle its payment obligations under Sections 7(i),
(ii), (iii), (iv) or (v) above in Shares (such Shares, the “Early Settlement
Shares”); provided that if (i) Issuer does not specify whether such Early
Settlement Shares are to be sold by means of a registered offering or by means
of a private placement or (ii) the conditions described in Section 8 below are
not satisfied on each day Early Settlement Shares are to be sold by Seller in
connection with Buyer’s election to deliver Early Settlement Shares in
connection with the settlement of an Early Settlement Payment, then Issuer shall
make the Early Settlement Payment in cash.
 
8.         Conditions to Delivery of Early Settlement Shares.
 
Issuer may only deliver Early Settlement Shares and Make-Whole Shares (as
defined below) by means of a registered offering pursuant to clause (a) below or
by means of a private placement pursuant to clause (b) below:
 
(a)        If Issuer timely elects to deliver Early Settlement Shares and
Make-Whole Shares by means of a registered offering, the following provisions
shall apply:

 
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(i)         On the later of (A) the Trading Day following Issuer’s election to
deliver Early Settlement Shares and any Make-Whole Shares by means of a
registered offering (the “Registration Notice Date”), and (B) the date on which
the Registration Statement is declared effective by the SEC or becomes effective
(the “Registered Share Delivery Date”), Issuer shall deliver to Dealer a number
of Early Settlement Shares equal to the quotient of (I) the relevant Early
Settlement Payment divided by (II) a price per Share as reasonably determined by
the Calculation Agent.
 
(ii)        Promptly following the Registration Notice Date, Issuer shall file
with the SEC a registration statement (“Registration Statement”) covering the
public sale by Dealer of the Early Settlement Shares and any Make-Whole Shares
(collectively, the “Registered Securities”) on a continuous or delayed basis
pursuant to Rule 415 (or any similar or successor rule), if available, under the
Securities Act of 1933, as amended (the “Securities Act”); provided that no such
filing shall be required pursuant to this paragraph (ii) if Issuer shall have
filed a similar registration statement with unused capacity at least equal to
the relevant Early Settlement Payment and such registration statement has become
effective or been declared effective by the SEC on or prior to the Registration
Notice Date and no stop order is in effect with respect to such registration
statement as of the Registration Notice Date, in which case such registration
statement shall be the Registration Statement.  Issuer shall use its
commercially reasonable efforts to file the Registration Statement as an
automatic shelf registration statement or have the Registration Statement
declared effective by the SEC as promptly as possible.
 
(iii)       Promptly following the Registration Notice Date, Issuer shall afford
Dealer a reasonable opportunity to conduct a due diligence investigation with
respect to Issuer customary in scope for underwritten offerings of equity
securities of similar size by similar issuers (including, without limitation,
the availability of senior management to respond to questions regarding the
business and financial condition of Issuer and the right to have made available
to Dealer for inspection all financial and other records, pertinent corporate
documents and other information reasonably requested by Dealer), and Dealer
shall be satisfied in all material respects with the results of such due
diligence investigation of Issuer.  For the avoidance of doubt, Issuer shall not
have the right to deliver Shares pursuant to this Section 8(a) (and the
conditions to delivery of Early Settlement Shares specified in this Section 8(a)
shall not be satisfied) until Dealer is satisfied in all material respects with
the results of such due diligence investigation of Issuer.
 
(iv)       From the effectiveness of the Registration Statement until all
Registered Securities have been sold by Dealer, Issuer shall, at the request of
Dealer, make available to Dealer a printed prospectus relating to the Registered
Securities in form and substance (including, without limitation, any sections
describing the plan of distribution) reasonably satisfactory to Dealer (a
“Prospectus”, which term shall include any prospectus supplement thereto), in
such quantities as Dealer shall reasonably request.
 
(v)        Issuer shall use its commercially reasonable efforts to avoid or
prevent the issuance of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
Prospectus and, if any such order is

 
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issued, to obtain the lifting thereof as soon thereafter as is possible.  If the
Registration Statement, the Prospectus or any document incorporated therein by
reference contains a misstatement of a material fact or omits to state a
material fact required to be stated therein or necessary to make any statement
therein not misleading, Issuer shall as promptly as practicable file any
required document and prepare and furnish to Dealer a reasonable number of
copies of such supplement or amendment thereto as may be necessary so that the
Prospectus, as thereafter delivered to the purchasers of the Registered
Securities will not contain a misstatement of a material fact or omit to state a
material fact required to be stated therein or necessary to make any statement
therein not misleading.
 
(vi)       On or prior to the Registered Share Delivery Date, Issuer shall enter
into an agreement (a “Transfer Agreement”) with Dealer (or any affiliate of
Dealer designated by Dealer) in connection with the public sale of the
Registered Securities, substantially similar to underwriting agreements
customary for underwritten offerings of equity securities of similar size by
similar issuers, in form and substance satisfactory to Dealer (or such
affiliate), which Transfer Agreement shall (without limiting of the foregoing)
contain provisions substantially similar to those contained in such underwriting
agreements relating to:
 
(A)        the indemnification of, and contribution in connection with the
liability of, Dealer and its affiliates;
 
(B)        delivery to Dealer (or such affiliate) of customary letters
and opinions (including, without limitation, accountants’ comfort letters,
opinions relating to the due authorization, valid issuance and fully paid and
non-assessable nature of the Registered Securities and the lack of material
misstatements and omissions in the Registration Statement, the Prospectus and
Issuer’s filings under the Exchange Act); and
 
(C)        the payment by Issuer of all reasonable and documented fees and
expenses in connection with such resale, including all registration costs and
all reasonable and documented fees and expenses of counsel for Dealer (or such
affiliate), but such Transfer Agreement shall not provide for any underwriter
discount, commission or fee or any selling concessions.
 
(vii)      On the Registered Share Delivery Date, a notional balance (the “Early
Settlement Balance”) shall be established with an initial balance equal to the
applicable amount of the relevant Early Settlement Payment.  Following the
delivery of Early Settlement Shares or any Make-Whole Shares, Dealer shall sell
all such Registered Securities in a commercially reasonable manner.
 
(viii)      At the end of each day on which sales have been made pursuant to
paragraph 8(a)(vii) above, the Early Settlement Balance shall be (A) reduced by
an amount equal to the aggregate proceeds received by Dealer upon settlement of
the sale of such Share, and (B) increased by an amount (as reasonably determined
by the Calculation

 
16

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Agent) equal to Dealer’s funding cost with respect to the then-current Early
Settlement Balance as of the close of business on such day.
 
(ix)       If, on any date, the Early Settlement Balance has been reduced to
zero but not all of the Early Settlement Shares have been sold, no additional
Early Settlement Shares shall be sold and Dealer shall promptly deliver to
Issuer (A) any remaining Early Settlement Shares and (B) if the Early Settlement
Balance has been reduced to an amount less than zero, an amount in cash equal to
the absolute value of the then-current Early Settlement Balance.
 
(x)        If, on any date, all of the Early Settlement Shares have been sold
and the Early Settlement Balance has not been reduced to zero, Issuer shall
promptly deliver to Dealer an additional number of Shares (“Make-Whole Shares”)
equal to (A) the Early Settlement Balance as of such date divided by (B) the
price per Share on the date of such delivery as reasonably determined by the
Calculation Agent.  This clause (x) shall be applied successively until the
Early Settlement Balance is reduced to zero.
 
(xi)       If at any time the number of Shares covered by the Registration
Statement is less than the number of Registered Securities required to be
delivered pursuant to this Section 8(a), Issuer shall, at the request of Dealer,
file additional registration statement(s) to register the sale of all Registered
Securities required to be delivered to Dealer.
 
(xii)      Issuer shall cooperate with Dealer and use its reasonable best
efforts to take any other action necessary to effect the intent of the
provisions set forth in this Section 8(a).
 
(b)        If Issuer timely elects to deliver Early Settlement Shares and
Make-Whole Shares by means of a private placement, the following provisions
shall apply:
 
(i)         All Early Settlement Shares and Make-Whole Shares shall be delivered
to Dealer (or any affiliate of Dealer designated by Dealer) pursuant to the
exemption from the registration requirements of the Securities Act provided by
Section 4(a)(2) thereof.
 
(ii)        Issuer shall afford Dealer and any potential purchaser of any such
Shares from Dealer (or any affiliate of Dealer designated by Dealer) identified
by Dealer shall have been afforded a commercially reasonable opportunity to
conduct a due diligence investigation with respect to Issuer customary in scope
for private placements of equity securities of similar size by similar issuers
(including, without limitation, the right to have made available to them for
inspection all financial and other records, pertinent corporate documents and
other information reasonably requested by them) and Issuer shall not disclose
material non-public information in connection with such due diligence
investigation.
 
(iii)       Issuer shall enter into an agreement (a “Private Placement
Agreement”) with Dealer (or any affiliate of Dealer designated by Dealer) in
connection with the private placement of such Shares by Issuer to Dealer (or any
such affiliate) and the private resale of such Shares by Dealer (or any such
affiliate), substantially similar to private placement purchase agreements
customary for private placements of equity

 
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securities of similar size by similar issuers, in form and substance
commercially reasonably satisfactory to Dealer and Issuer, which Private
Placement Agreement shall include, without limitation, provisions substantially
similar to those contained in such private placement purchase agreements
relating to the indemnification of, and contribution in connection with the
liability of, Dealer and its affiliates, and shall provide for the payment by
Issuer of all fees and expenses in connection with such resale, including all
reasonable fees and expenses of one counsel for Dealer but not including any
underwriter or broker discounts and commissions, and shall contain
representations, warranties and agreements of Issuer and Dealer reasonably
necessary or advisable to establish and maintain the availability of an
exemption from the registration requirements of the Securities Act for such
resales.
 
(iv)       If Issuer elects to deliver Early Settlement Shares to satisfy its
payment obligation of an Early Settlement Payment, neither Issuer nor Dealer
shall take or cause to be taken any action that would make unavailable either
(A) the exemption set forth in Section 4(a)(2) of the Securities Act for the
sale of any Early Settlement Shares or Make-Whole Shares by Issuer to Dealer or
(B) an exemption from the registration requirements of the Securities Act
reasonably acceptable to Dealer for resales of Early Settlement Shares and
Make-Whole Shares by Dealer.
 
(v)        On the date requested by Dealer, (A) Issuer shall deliver a number of
Early Settlement Shares equal to the quotient of (I) the relevant Early
Settlement Payment divided by (II) a per Share value, determined by Dealer in a
commercially reasonable manner and which may be based on indicative bids from
institutional “accredited investors” (as defined in Rule 501 under the
Securities Act) and (B) the provisions of Section 8(a)(vii) through (x) shall
apply to the Early Settlement Shares delivered pursuant to this Section
8(b)(v).  For purposes of applying the foregoing, the Registered Share Delivery
Date referred to in Section 8(a)(vii) shall be the date on which Issuer delivers
the Early Settlement Shares.
 
(c)        The provisions of Section 8(b) shall apply to any then-current Early
Settlement Balance if (i) on any given day, Issuer cannot satisfy any of the
conditions of Section 8(a) or (ii) for a period of at least ten (10) consecutive
Exchange Business Days, Dealer has determined that it is inadvisable to effect
sales of Registered Securities.
 
(d)        If Issuer elects to deliver Early Settlement Shares to settle its
delivery obligation of an Early Settlement Payment, then, if necessary, Issuer
shall use its commercially reasonable efforts to cause the number of authorized
but unissued Shares to be increased to an amount sufficient to permit Issuer to
fulfill its obligations under Sections 8(a) and/or 8(b) above.
 
9.           Special Provisions for Merger Events.
 
(a)        Issuer agrees that it:
 
(i)         will not during the period commencing on the Trade Date through the
end of the Calculation Period for the Transaction make, or, to the extent within
its control, permit to be made, any public announcement (as defined in Rule
165(f) under the

 
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Securities Act) of any Merger Transaction or proposed Merger Transaction that,
in the reasonable judgment of Dealer, causes Rule 10b-18 Purchases by or for
Issuer or any affiliated purchaser (as defined in Rule 10b-18) to be limited to
purchases described in Rule 10b-18(a)(13)(iv)(B) (a “Public Announcement”)
unless such Public Announcement is made prior to the opening or after the close
of the regular trading session on the Exchange for the Shares;
 
(ii)        shall promptly (but in any event prior to the next opening of the
regular trading session on the Exchange) notify Dealer following any such Public
Announcement that such Public Announcement has been made; and
 
(b)        Promptly after request from Dealer, Issuer shall provide Dealer with
written notice specifying (i) Issuer’s average daily Rule 10b-18 Purchases (as
defined in Rule 10b-18) during the three full calendar months immediately
preceding the date of such Public Announcement that were not effected through
Dealer or its affiliates and (ii) the number of Shares purchased pursuant to the
proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar
months preceding the date of such Public Announcement.  Such written notice
shall be deemed to be a certification by Issuer to Dealer that such information
is true and correct.  Issuer understands that Dealer will use this information
in calculating the trading volume for purposes of Rule 10b-18.
 
(c)        Issuer acknowledges that a Public Announcement may cause the terms of
the Transaction to be adjusted or the Transaction to be terminated; accordingly,
Issuer acknowledges that in making any Public Announcement, it must comply with
the standards set forth in Section 12(c) below.
 
(d)        Upon the occurrence of any Public Announcement (whether made by
Issuer or a third party), Dealer shall (i) make adjustments in good faith and in
a commercially reasonable manner to the terms of the Transaction as appropriate
to account for the economic effect on the Transaction of such Public
Announcement, including, without limitation, the Scheduled Valuation Date and/or
suspend the Hedge Period and/or the Calculation Period and, in each case,
determine the effective date of that adjustment, or (ii) if it determines that
no such adjustment would produce a commercially reasonable result (and, in any
event, if the Scheduled Valuation Date is postponed more than 9 Scheduled
Trading Days), and upon consultation with Issuer, treat the occurrence of such
Public Announcement as an Additional Termination Event with Issuer as the sole
Affected Party and the Transaction hereunder as the Affected Transaction and
with the amount under Section 6(e) of the Agreement determined taking into
account the fact that the Calculation Period, as the case may be, had fewer
Scheduled Trading Days than originally anticipated.
 
“Merger Transaction” means any merger, acquisition or similar transaction
involving a recapitalization of Issuer as contemplated by Rule 10b-18(a)(13)(iv)
under the Exchange Act, other than any such transaction in which the
consideration consists solely of cash and there is no valuation period.
 
10.        Seller Adjustments.

 
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In the event that Seller determines in good faith and commercially reasonable
discretion, based on advice of outside counsel, that it is advisable with regard
to any legal, regulatory or self-regulatory requirements or related policies and
procedures similarly applicable to transactions of the type of the Transaction
contemplated hereby and consistently applied (whether or not such policies or
procedures are imposed by law or have been voluntarily adopted by Seller, and
including, without limitation, Rule 10b-18, Rule 10b-5, Regulation 13D-G and
Regulation 14E, “Requirements”), for Seller to refrain from purchasing Shares or
to purchase fewer than the number of Shares Seller would otherwise purchase on
any Trading Day during the duration of the Transaction, then Seller may, in its
discretion, elect that a Market Disruption Event shall be deemed to have
occurred on such Trading Day and, therefore, without limiting the generality of
“Market Disruption Event” above, that the Hedge Period and/or the Calculation
Period be suspended and, if appropriate, extended with regard to any
Requirements; provided that only the consequences described in clause (ii) of
the second paragraph under Market Disruption Event above shall apply.  Seller
shall notify Issuer as soon as practicable upon the exercise of Seller’s rights
pursuant to this Section 10, but in no event later than the second Business Day
following such exercise, that a Market Disruption Event has occurred and the
Scheduled Trading Days affected by it and shall subsequently notify Issuer on
the day Seller believes that the circumstances giving rise to such exercise have
changed.
 
11.        Covenants.
 
Buyer covenants and agrees that:
 
(a)        during the term of this Agreement, neither it nor any of its
affiliated purchasers (as defined in Rule 10b-18 under the Exchange Act) shall
directly or indirectly (which shall be deemed to include the writing or purchase
of any cash-settled derivative instrument) purchase Shares (or any security
convertible into or exchangeable for Shares) without the prior written approval
of Seller;
 
(b)        it is not relying, and has not relied, upon Seller or any of its
representatives or advisors with respect to the legal, accounting, tax or other
implications of this Agreement and that it has conducted its own analyses of the
legal, accounting, tax and other implications of this Agreement, and that Seller
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 Buyer and that Seller and its affiliates may continue to
conduct such transactions during the term of this Agreement; and
 
(c)        that neither it nor any affiliates shall take any action that would
cause the Shares to be subject to a “restricted period” (as defined in
Regulation M under the Exchange Act (“Regulation M”)) during the Hedge Period or
the Calculation Period, unless Buyer has provided written notice to Dealer of
such restricted period not later than the Scheduled Trading Day immediately
preceding the first day of such “restricted period”; Buyer acknowledges that any
such notice may cause a Disrupted Day to occur pursuant to Section 10 above;
accordingly, Buyer acknowledges that its delivery of such notice must comply
with the standards set forth in Section 12(c) below.
 
12.        Representations, Warranties and Acknowledgments.

 
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(a)        Buyer hereby represents and warrants to Seller that:
 
(i)         as of the date hereof, Buyer is not in possession of any material,
non-public information with respect to Buyer or any of its securities;
 
(ii)        the transactions contemplated by this Confirmation and the
performance of the obligations of Buyer hereunder have been authorized by all
necessary corporate action of Buyer’s board of directors and/or an authorized
committee of Buyer’s board or directors, and are authorized under the terms of
Buyer’s publicly announced program to repurchase Shares;
 
(iii)       Buyer is not entering into this Agreement to facilitate a
distribution of the Shares (or any security convertible into or exchangeable for
Shares) or in connection with a future issuance of securities (it being
understood that Buyer may continue to issue Shares or options in the ordinary
course under its employee compensation plans);
 
(iv)       Buyer is not entering into this Agreement to create actual or
apparent trading activity in the Shares (or any security convertible into or
exchangeable for Shares) or to raise or depress the price of the Shares (or any
security convertible into or exchangeable for Shares);
 
(v)        Buyer is as of the date hereof, and after giving effect to the
transactions contemplated hereby will be, Solvent; as used in this paragraph,
the term “Solvent” means, with respect to a particular date, that on such date
(A) the present fair market value (or present fair saleable value) of the assets
of Buyer is not less than the total amount required to pay the liabilities of
Buyer on its total existing debts and liabilities (including contingent
liabilities) as they become absolute and matured, (B) Buyer is able to realize
upon its assets and pay its debts and other liabilities, contingent obligations
and commitments as they mature and become due in the normal course of business,
(C) assuming consummation of the transactions as contemplated by this Agreement,
Buyer is not incurring debts or liabilities beyond its ability to pay as such
debts and liabilities mature, (D) Buyer is not engaged in any business or
transaction, and does not propose to engage in any business or transaction, for
which its property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which Buyer is
engaged and (E) Buyer is not a defendant in any civil action that could
reasonably be expected to result in a judgment that Buyer is or would become
unable to satisfy;
 
(vi)       on the Trade Date, the Prepayment Date, the Initial Share Delivery
Date, the Minimum Share Delivery Date and the Settlement Date, Buyer is not
“insolvent” (as such term is defined under Section 101(32) of the U.S.
Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”))
and Buyer would be able to purchase the Shares hereunder in compliance with the
corporate laws of the jurisdiction of its incorporation; and
 
(vii)      Buyer (A) is capable of evaluating investment risks independently,
both in general and with regard to all transactions and investment strategies
involving a security

 
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or securities, (B) will exercise independent judgment in evaluating the
recommendations of any broker-dealer or its associated persons, unless it has
otherwise notified the broker-dealer in writing and (C) has total assets of at
least $50 million.
 
(b)        Each of Seller and Buyer hereby acknowledges that any transactions by
Seller in the Shares will be undertaken by Seller as principal for its own
account.  Except as expressly set forth herein, all of the actions to be taken
by Seller in connection with this Agreement shall be taken by Seller
independently and without any advance or subsequent consultation with Buyer.
 
(c)        It is the intent of the parties that the Transaction comply with the
requirements of Rule 10b5-1(c)(1)(i)(B) of the Exchange Act, and the parties
agree that this Confirmation and any Trade Notification shall be interpreted to
comply with the requirements of Rule 10b5-1(c).  Without limiting the generality
of the preceding sentence, Buyer acknowledges and agrees that (A) Buyer does not
have, and shall not attempt to exercise, any influence over how, when or whether
Seller effects any purchases of Shares in connection with the Transaction, (B)
during the period beginning on (but excluding) the date of this Confirmation and
ending on (and including) the last Valuation Date, neither Buyer nor its
officers or employees shall, directly or indirectly, communicate any information
regarding Buyer or the Shares to any employee of Seller or its Affiliates (such
employee identified in writing by Seller) who is responsible for trading the
Shares in connection with the transactions contemplated hereby, (C) Buyer is
entering into the Transaction 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) Buyer will not alter or
deviate from this Confirmation or any Trade Notification or enter into or alter
a “corresponding or hedging transaction” (within the meaning of Rule 10b5-1
under the Exchange Act) with respect to the Shares.  Buyer also acknowledges and
agrees that any amendment, modification, waiver or termination of this
Confirmation or any Trade Notification 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 or waiver
shall be made at any time at which Buyer or any officer or director of Buyer is
aware of any material nonpublic information regarding Buyer or the Shares.
 
13.        Acknowledgements of Buyer Regarding Hedging and Market Activity.
 
Buyer agrees, understands and acknowledges that:
 
(a)        during the period from (and including) the Trade Date to (and
including) the Settlement Date, Seller and its affiliates may buy or sell Shares
or other securities or buy or sell options or futures contracts or enter into
swaps or other derivative securities in order to adjust its Hedge Positions with
respect to the Transaction;
 
(b)        Seller and its affiliates also may be active in the market for the
Shares other than in connection with hedging activities in relation to the
Transaction;

 
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(c)        Seller shall make its own determination as to whether, when and in
what manner any hedging or market activities in Issuer’s securities shall be
conducted and shall do so in a manner that it deems appropriate to hedge its
price and market risk with respect to 10b-18 VWAP; and
 
(d)        any market activities of Seller and its affiliates with respect to
the Shares may affect the market price and volatility of the Shares, as well as
the 10b-18 VWAP, each in a manner that may be adverse to Buyer.
 
14.        Other Provisions.
 
(a)        The parties hereto agree and acknowledge that Seller is a “financial
participant” within the meaning of Section 101(22) of the Bankruptcy Code.  The
parties hereto further agree and acknowledge that the Transaction is either (i)
a “securities contract” as such term is defined in Section 741(7) of the
Bankruptcy Code, in which case each payment and delivery made pursuant to the
Transaction is a “settlement payment”, as such term is defined in Section 741(8)
of the Bankruptcy Code, and that Seller is entitled to the protections afforded
by, among other sections, Sections 362(b)(6), 546(e) and 555 of the Bankruptcy
Code, or (ii) a “swap agreement”, as such term is defined in Section 101(53B) of
the Bankruptcy Code, in which case each party is a “swap participant”, as such
term is defined in Section 101(53C) of the Bankruptcy Code, and that Seller is
entitled to the protections afforded by, among other sections, Sections
362(b)(17), 546(g) and 560 of the Bankruptcy Code.
 
(b)        Seller and Buyer hereby agree and acknowledge that Seller has
authorized Buyer to disclose the Transaction to any and all persons, and there
are no express or implied agreements, arrangements or understandings to the
contrary, and authorizes Buyer to use any information that Buyer receives or has
received with respect to the Transaction in any manner.
 
(c)        If Buyer becomes the subject of proceedings (“Bankruptcy
Proceedings”) under the Bankruptcy Code or any other applicable bankruptcy or
insolvency statute from time to time in effect, any rights or claims of Seller
hereunder in respect of this transaction shall rank for all purposes no higher
than, but on a parity with, the rights or claims of holders of Shares, and
Seller hereby agrees that its rights and claims hereunder shall be subordinated
to those of all parties with claims or rights against Buyer (other than common
stockholders) to the extent necessary to assure such ranking.  Without limiting
the generality of the foregoing, after the commencement of Bankruptcy
Proceedings, the claims of Seller hereunder shall for all purposes have rights
equivalent to the rights of a holder of a percentage of the Shares equal to the
aggregate amount of such claims (the “Claim Amount”) taken as a percentage of
the sum of (i) the Claim Amount and (ii) the aggregate fair market value of all
outstanding Shares on the record date for distributions made to the holders of
such Shares in the related Bankruptcy Proceedings.  Notwithstanding any right it
might otherwise have to assert a higher priority claim in any such Bankruptcy
Proceedings, Seller shall be entitled to receive a distribution solely to the
extent and only in the form that a holder of such percentage of the Shares would
be entitled to receive in such Bankruptcy Proceedings, and, from and after the
commencement of such Bankruptcy Proceedings, Seller expressly waives (i) any
other rights or distributions to which it might otherwise be entitled in such
Bankruptcy Proceedings in respect of its rights and claims

 
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hereunder and (ii) any rights of setoff it might otherwise be entitled to assert
in respect of such rights and claims.
 
(d)        Notwithstanding any provision of this Agreement or any other
agreement between the parties to the contrary, neither the obligations of Buyer
nor the obligations of Seller hereunder are secured by any collateral, security
interest, pledge or lien.
 
(e)        Notwithstanding anything to the contrary herein, Seller may, by prior
notice to Buyer, satisfy its obligation to deliver any Shares or other
securities on any date due (an “Original Delivery Date”) by making separate
deliveries of Shares or such securities, as the case may be, at more than one
time on or prior to such Original Delivery Date, so long as the aggregate number
of Shares and other securities so delivered on or prior to such Original
Delivery Date is equal to the number required to be delivered on such Original
Delivery Date.
 
15.        Share Caps.
 
Notwithstanding any other provision of this Confirmation, any Trade Notification
or the Agreement to the contrary, in no event shall Buyer be required to deliver
to Seller in the aggregate under the Transaction a number of Shares that exceeds
the Share Cap (as specified in Schedule I), subject to reduction by the number
of Shares delivered hereunder by the Buyer on any prior date.
 
16.        Additional Termination Event.
 
It shall constitute an Additional Termination Event with respect to which the
Transaction is the sole Affected Transaction and Buyer is the sole Affected
Party and Seller shall be the party entitled to designate an Early Termination
Date pursuant to Section 6(b) of the Agreement if, for five or more Trading Days
in any period of 10 consecutive Trading Days during the Calculation Period, the
closing price per Share on the Exchange, as determined by the Calculation Agent,
was at or below the Threshold Price (as specified in Schedule I); provided that
Seller may only designate an Early Termination Date pursuant to Section 6(b) of
the Agreement in respect of such Additional Termination Event if Seller gives
notice of such designation during such a period of 10 consecutive Trading Days.
 
17.        Governing Law; Jurisdiction; Waiver
 
THIS CONFIRMATION AND EACH TRADE NOTIFICATION AND ANY CLAIM, CONTROVERSY OR
DISPUTE ARISING UNDER OR RELATED TO THIS CONFIRMATION AND EACH TRADE
NOTIFICATION SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.  THE
PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK AND THE UNITED STATES 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.

 
24

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EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY WITH
RESPECT TO ANY LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
CONFIRMATION, EACH TRADE NOTIFICATION OR ANY TRANSACTION CONTEMPLATED HEREBY.
 
18.        Wall Street Transparency and Accountability Act.  In connection with
Section 739 of the Wall Street Transparency and Accountability Act of 2010
(“WSTAA”), the parties hereby agree that neither the enactment of WSTAA or any
regulation under the WSTAA, nor any requirement under WSTAA or an amendment made
by WSTAA, nor any similar legal certainty provision in any legislation enacted,
or rule or regulation promulgated, on or after the date of this Confirmation,
shall limit or otherwise impair either party’s otherwise applicable rights to
terminate, renegotiate, modify, amend or supplement this Confirmation, any Trade
Notification or the Agreement, as applicable, arising from a termination event,
force majeure, illegality, increased costs, regulatory change or similar event
under this Confirmation, any Trade Notification, the Equity Definitions
incorporated herein, or the Agreement (including, without limitation, rights
arising from Change in Law, Loss of Stock Borrow, Increased Cost of Stock
Borrow, or Illegality).
 
19.        Limit on Beneficial Ownership.  Notwithstanding any other provisions
hereof, Dealer shall not be entitled to take delivery of any Shares deliverable
hereunder to the extent (but only to the extent) that, after such receipt of any
Shares hereunder (i) the Section 16 Percentage would exceed 8.0%, or (ii) the
Share Amount would exceed the Applicable Share Limit.  Any purported delivery
hereunder shall be void and have no effect to the extent (but only to the
extent) that, after such delivery (i) the Section 16 Percentage would exceed
8.0%, or (ii) the Share Amount would exceed the Applicable Share Limit. If any
delivery owed to Dealer hereunder is not made, in whole or in part, as a result
of this provision, Issuer’s obligation to make such delivery shall not be
extinguished and Issuer shall make such delivery as promptly as practicable
after, but in no event later than one Exchange Business Day after, Dealer gives
notice to Issuer that, after such delivery, (i) the Section 16 Percentage would
not exceed 8.0%, and (ii) the Share Amount would not exceed the Applicable Share
Limit.  The “Share Amount” as of any day is the number of Shares that Dealer and
any person whose ownership position would be aggregated with that of Dealer
(Dealer or any such person, a “Dealer Person”) under any law, rule, regulation,
regulatory order or organizational documents or contracts of Issuer that are, in
each case, applicable to ownership of Shares (“Applicable Restrictions”), owns,
beneficially owns, constructively owns, controls, holds the power to vote or
otherwise meets a relevant definition of ownership under any Applicable
Restriction, as determined by Dealer in its reasonable discretion.  The
“Applicable Share Limit” means a number of Shares equal to (A) the minimum
number of Shares that could give rise to reporting or registration obligations
or other requirements (including obtaining prior approval from any person or
entity) of a Dealer Person, or could result in an adverse effect on a Dealer
Person, under any Applicable Restriction, as determined by Dealer in its
reasonable discretion, minus (B) 1% of the number of Shares outstanding.  The
“Section 16 Percentage” as of any day is the fraction, expressed as a
percentage, (A) the numerator of which is the number of Shares that Dealer and
each person subject to aggregation of Shares with Dealer under Section 13 or
Section 16 of the Exchange Act and rules promulgated thereunder directly or
indirectly beneficially own (as defined under Section 13 or Section 16 of the
Exchange Act and rules promulgated thereunder) and (B) the denominator of which
is the number of Shares outstanding.

 
25

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20.        Designation by Dealer.  Notwithstanding any other provision in this
Confirmation to the contrary requiring or allowing Dealer to purchase, sell,
receive or deliver any Shares or other securities to or from Issuer, Dealer (the
“Designator”) may designate any of its Affiliates (the “Designee”) to deliver or
take delivery, as the case may be, and otherwise perform its obligations to
deliver, if any, or take delivery of, as the case may be, any such Shares or
other securities in respect of the Transaction, and the Designee may assume such
obligations, if any.  Such designation shall not relieve the Designator of any
of its obligations, if any, hereunder. Notwithstanding the previous sentence, if
the Designee shall have performed the obligations, if any, of the Designator
hereunder, then the Designator shall be discharged of its obligations, if any,
to Issuer to the extent of such performance.
 
21.        Agreements regarding the Trade Notification.
 
(a)        Issuer accepts and agrees to be bound by the contractual terms and
conditions as set forth in the Trade Notification for the Transaction, absent
manifest error.  Upon receipt of the Trade Notification for the Transaction,
Issuer shall promptly execute and return the Trade Notification to Dealer;
provided that Issuer’s failure to so execute and return the Trade Notification
shall not affect the binding nature of the Trade Notification, and the terms set
forth therein shall be binding on Issuer to the same extent, and with the same
force and effect, as if Issuer had executed a written version of the Trade
Notification.
 
(b)        Issuer and Dealer agree and acknowledge that (A) the Transaction will
be entered into in reliance on the fact that this Confirmation and the Trade
Notification form a single agreement between Issuer and Dealer, and Dealer would
not otherwise enter into the Transaction, (B) this Confirmation is a “qualified
financial contract”, as such term is defined in Section 5-701(b)(2) of the
General Obligations Law of New York (the “General Obligations Law”); (C) the
Trade Notification, regardless of whether the Trade Notification is transmitted
electronically or otherwise, constitutes a “confirmation in writing sufficient
to indicate that a contract has been made between the parties” hereto, as set
forth in Section 5-701(b)(3)(b) of the General Obligations Law; and (D) this
Confirmation constitutes a prior “written contract”, as set forth in Section
5-701(b)(1)(b) of the General Obligations Law, and each party hereto intends and
agrees to be bound by this Confirmation.
 
(c)        Issuer and Dealer further agree and acknowledge that this
Confirmation constitutes a contract “for the sale or purchase of a security”, as
set forth in Section 8-113 of the Uniform Commercial Code of New York.
 
[Remainder of Page Intentionally Blank]

 
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Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning it to us by facsimile to
the number provided on the attached facsimile cover page.
 
Confirmed as of the date first written above:
 
EXPRESS SCRIPTS HOLDING COMPANY
 
MORGAN STANLEY & CO. LLC
           
By:  
/s/ Tim Smith
 
By:  
/s/ Scott McDavid
 
Name:  
Tim Smith
   
Name:  
Scott McDavid
 
Title:
VP/Treasurer
   
Title:
Managing Director

 

[Signature Page to Confirmation]
 
 

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SCHEDULE I
 
This Schedule I, dated April 29, 2015 may be amended and/or superseded from time
to time by mutual agreement of both parties.  For the purposes of the
Transaction, the following terms shall have the following values/meanings:
 
1.
Trade Date:
 
April 30, 2015
       
2.
Forward Price:
 
A price per Share (as determined by the Calculation Agent) equal to (i) the
arithmetic mean (not a weighted average) of the 10b-18 VWAP on each Trading Day
during the Calculation Period minus (ii) the Discount; provided, however, that
if the Forward Price would otherwise be greater than the Forward Cap Price, the
Forward Price shall equal the Forward Cap Price.
       
3.
Discount:
 
[*]
       
4.
Calculation Period Start Date:
 
As set forth in the Trade Notification for the Transaction, to be the Scheduled
Trading Day immediately following the Hedge Completion Date.
       
5.
Initial Shares:
 
55,136,219
       
6.
Prepayment Amount:
 
USD 5,500,000,000
       
7.
Scheduled Valuation Date:
 
[*]
       
8.
Lock-Out Date:
 
[*]
       
9.
Threshold Price:
 
USD 21.20
       
10.
Share Cap:
 
On any date, in the aggregate for the Transaction, the lesser of (i) 129,732,280
Shares and (ii) 20% of the total number of Shares outstanding as of such date.
       
11.
Forward Cap Price:
 
[*]% of the Hedge Period Reference Price.
       
12.
Hedge Period Start Date:
 
April 30, 2015
       
13.
Hedge Period End Date:
 
April 30, 2015

 
* This information has been omitted based on a request for confidential
treatment. The omitted portions have been separately filed with the Securities
and Exchange Commission.
 
[Remainder of Page Intentionally Blank]

 
 

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AGREED AND ACKNOWLEDGED (as of the date listed above)
 
EXPRESS SCRIPTS HOLDING COMPANY

By:  
/s/ Tim Smith
               
Name:  
Tim Smith
 
Title:
VP/Treasurer
           
MORGAN STANLEY & CO. LLC
           
By:
/s/ Scott McDavid
   
Name:
Scott McDavid
 
Title:
Managing Director

 

[Signature Page to Schedule I]
 
 

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EXHIBIT I
 
FORM OF TRADE NOTIFICATION

Morgan Stanley & Co. LLC
1585 Broadway
New York, NY 10036-8293
Attn: Joshua Birbach
Telephone: 212-761-1719
Facsimile:  212-507-8717

 
 [            ], 2015
 
To: 
Express Scripts Holding Company
One Express Way
St. Louis, MO 63121
 
Attention: 
Timothy Smith
 
Telephone:
314-684-5759

Re: 
Trade Notification—Capped Accelerated Share Repurchase Transaction

 
The purpose of this Trade Notification is to notify you of certain terms of the
Transaction entered into between Morgan Stanley & Co. LLC (“Seller”) and Express
Scripts Holding Company (“Buyer”) under the confirmation specified below.
 
This Trade Notification supplements, forms part of, and is subject to the
Confirmation, dated April 29, 2015, between Seller and Buyer, as amended and
supplemented from time to time.

Hedge Completion Date:
 
[            ], 2015
Calculation Period Start Date:
 
[            ], 2015
Hedge Period Reference Price:
 
USD [            ]
Forward Cap Price:
 
USD [            ]
Minimum Shares:
 
[            ] Shares

 
Very truly yours,
         
Morgan Stanley & Co. LLC
             
By:  
     
Name:  
     
Title:
 

 
 

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AGREED AND ACKNOWLEDGED (as of the date listed above)
EXPRESS SCRIPTS HOLDING COMPANY

By:  
     
Name:  
   
Title:
 

 
 
[Signature Page to Trade Notification]