Exhibit 10.1

 

   Reference Number: DP1:7015020    Account Number: 033192766

 

LOGO [g598270ex10_1pg01.jpg]   

MORGAN STANLEY & CO. LLC

1585 BROADWAY

NEW YORK, NY 10036-8293

(212) 761-4000

August 1, 2013

Fixed Dollar Capped Accelerated Share Repurchase Transaction

MSCI Inc.

7 World Trade Center

250 Greenwich Street, 49th Floor

New York, New York 10007

Attention: Robert Qutub

Facsimile: 212-804-2919

 

 

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 (“MSCO”) and MSCI Inc. (“Issuer”) on the Trade Date specified below (the
“Transaction”). 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. The Transaction is a Share Forward Transaction for purposes
of the Equity Definitions. Any reference to a currency shall have the meaning
contained in Section 1.7 of the 2006 ISDA Definitions, as published by ISDA.

1. This Confirmation evidences a complete and binding agreement between MSCO and
Issuer as to the terms of the Transaction to which this Confirmation relates and
shall supersede all prior or contemporaneous written or oral communications with
respect thereto. This Confirmation shall be subject to an agreement (the
“Agreement”) in the form of the 2002 ISDA Master Agreement as if MSCO and Issuer
had executed an agreement in such form without any Schedule but with the (i) the
election of an executed guarantee of Morgan Stanley dated as of the Trade Date
in substantially the form attached hereto as Annex A as a Credit Support
Document, (ii) the election of Morgan Stanley as a Credit Support Provider in
relation to Party A, (iii) the election of USD as the Termination Currency and
(iv) the additional elections set forth in this Confirmation.

The Transaction shall be the only transaction under the Agreement. If there
exists any ISDA Master Agreement between MSCO and Issuer or any confirmation or
other agreement between MSCO and Issuer pursuant to which an ISDA Master
Agreement is deemed to exist between MSCO and Issuer, then, notwithstanding
anything to the contrary in such ISDA Master Agreement, such confirmation or
agreement or any other agreement to which MSCO and Issuer are parties, the
Transaction shall not be considered a transaction under, or otherwise governed
by, such existing or deemed to be existing ISDA Master Agreement.

If there is any inconsistency between the Agreement, this Confirmation and the
Equity Definitions, the following will prevail for purposes of the Transaction
in the order of precedence indicated: (i) this Confirmation; (ii) the Equity
Definitions; and (iii) the Agreement.

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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:    MSCO
Shares:    Common Stock, par value USD 0.01 per share, of Issuer (Ticker: MSCI)
Tranches:    The Transaction will be divided into multiple Tranches, each with
the terms set forth in this Confirmation, and in particular with the Prepayment
Amount, Observation Dates, the Scheduled Valuation Date and the Lock-Out Date
set forth in Schedule I. The payments and deliveries to be made upon settlement
of the Transaction will be determined separately for each Tranche as if each
Tranche were a separate Transaction under the Agreement. 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 Observation
Date that is a 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. Discount:    As specified in Schedule I Forward Cap Price:    As
specified in Schedule I 10b-18 VWAP:    On any Trading Day, a price per Share
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 the Calculation
Agent by reference to the screen entitled “MSCI.N <Equity> AQR SEC” or any
successor page as reported by Bloomberg L.P. or any successor (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) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) on such Trading Day) or,
if the price displayed on such screen is clearly erroneous, as determined by the
Calculation Agent in good faith and in a commercially reasonable manner
Observation Dates:    As specified in Schedule I Calculation Period:    The
period from, and including, the first Observation Date that is a Trading Day
that occurs on or after the Prepayment Date to, but excluding, the relevant
Valuation Date; provided, however, that if the Valuation Date is the Scheduled
Valuation Date, then the Valuation Date shall be included in the Calculation
Period.

 

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Trading Day:    Any Exchange Business Day that is not a Disrupted Day in whole
Initial Shares:    As specified in Schedule I Initial Share Delivery Date:   
One Exchange Business Day following 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:    One Exchange Business Day following
the Trade Date. On the Prepayment Date, Buyer shall pay to Seller the Prepayment
Amount. Exchange:    The New York Stock Exchange Related Exchange:    All
Exchanges Market Disruption Event:   

The definition of “Market Disruption Event” in Section 6.3(a) of the Equity
Definitions is hereby amended by deleting the words “at any time during the
one-hour period that ends at the relevant Valuation Time, Latest Exercise Time,
Knock-in Valuation Time or Knock-out Valuation Time, as the case may be,”
starting in the third line thereof.

 

Section 6.3(d) of the Equity Definitions is hereby amended by deleting the
remainder of the provision following the term “Scheduled Closing Time” in the
fourth line thereof.

 

Notwithstanding anything to the contrary in the Equity Definitions, if any
Exchange Business Day in the Calculation Period is a Disrupted Day, the
Calculation Agent shall have the option in its good faith and commercially
reasonable discretion to take one or more of the following actions: (i)
determine that such Exchange Business Day is a Disrupted Day in part, in which
case the Calculation Agent shall (x) determine the 10b-18 VWAP on such Exchange
Business 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 the volume, historical trading patterns and price of the Shares and
(y) determine the Forward Price using an appropriately weighted average of
10b-18 VWAPs instead of an arithmetic mean, and/or (ii) elect to postpone the
Scheduled Valuation Date by up to one Observation Date for every Observation
Date that is a

 

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Disrupted Day during the Calculation Period. For the avoidance of doubt, if the
Calculation Agent takes the action described in clause (i) above, then such
Disrupted Day shall be a Trading Day for purposes of calculating the Forward
Price.

 

Any Exchange Business Day on which, as of the date hereof, the Exchange is
scheduled to close prior to its normal close of trading shall be deemed not to
be an Exchange Business Day; if a closure of the Exchange prior to its normal
close of trading on any Exchange Business Day is scheduled following the date
hereof, then such Exchange Business Day shall be deemed to be a Disrupted Day in
full.

 

If a Disrupted Day occurs during the Calculation Period and each of the nine
immediately following Scheduled Trading Days is a Disrupted Day, then the
Calculation Agent may, in its good faith and commercially reasonable discretion,
deem such ninth Scheduled Trading Day to be an Exchange Business Day that is not
a Disrupted Day and determine the VWAP Price 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 Date:   

The earlier of (i) the Scheduled Valuation Date and (ii) any earlier accelerated
Valuation Date as a result of MSCO’s election in accordance with the immediately
succeeding paragraph.

 

MSCO shall have the right, in its absolute discretion but subject to the
limitation set forth in the immediately succeeding paragraph, to accelerate the
Valuation Date, in whole or in part, to any Exchange Business Day that is on or
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 Exchange Business Day immediately following the accelerated
Valuation Date.

 

MSCO 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 USD
20,000,000). If the portion of the Prepayment Amount that is subject to
acceleration is less than the full Prepayment Amount, then the Calculation Agent
shall adjust the terms of the Transaction as 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).

 

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   On each Valuation Date, the Calculation Agent shall calculate the Settlement
Amount. Scheduled Valuation Date:    As specified in Schedule I, subject to
postponement in accordance with “Market Disruption Event” above Lock-Out Date:
   As specified in Schedule I 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, minus (b)
the Initial Shares (such number of Shares, the “Settlement Amount”), rounded to
the nearest whole number of Shares.

Settlement Currency:    USD Settlement Date:    The date that falls one Trading
Day after the relevant Valuation Date Other Applicable Provisions:    The last
sentence of Section 9.2, Sections 9.8, 9.9, 9.10 and 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 to the
Transaction. 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.

 

It shall constitute a Potential Adjustment Event if a Disrupted Day occurs or,
pursuant to Section 11 below, is deemed to occur (in whole or in part) on any
Trading Day on or prior to the Valuation Date.

Extraordinary Dividend:    Any dividend or distribution on the Shares with an
ex-dividend date occurring during the period from, and including, the Trade Date
to, and including, the last day of the Calculation Period (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

 

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EXTRAORDINARY EVENTS:    Consequences of Merger Events:    Share-for-Share:   
Modified Calculation Agent Adjustment Share-for-Other:    Cancellation and
Payment on that portion of the Other Consideration that consists of cash;
Modified Calculation Agent Adjustment on the remainder of the Other
Consideration Share-for-Combined:    Component Adjustment Tender Offer:   
Applicable; provided that Section 12.1(d) of the Equity Definitions is hereby
amended by replacing “10%” with “25%” in the third line thereof. Consequences of
Tender Offers:    Share-for-Share:    Modified Calculation Agent Adjustment
Share-for-Other:    Modified Calculation Agent Adjustment Share-for-Combined:   
Modified Calculation Agent Adjustment New Shares:    In the definition of New
Shares in Section 12.1(i) of the Equity Definitions, the text in clause (i)
thereof shall be deleted in its entirety (including the word “and” following
such clause (i)) and replaced with “publicly quoted, traded or listed on any of
the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ
Global Market (or their respective successors)”.

For purposes of the Transaction,

 

  (i) the definition of Merger Date in Section 12.1(c) of the Equity Definitions
shall be amended to read, “Merger Date shall mean the Announcement Date.”;

 

  (ii) the definition of Tender Offer Date in Section 12.1(e) of the Equity
Definitions shall be amended to read, “Tender Offer Date shall mean the
Announcement Date.”;

 

  (iii) the definition of “Announcement Date” in Section 12.1(l) of the Equity
Definitions is hereby amended by (a) replacing the words “a firm” with the word
“any” in the second and fourth lines thereof, (b) replacing the word “leads to
the” with the words “, if completed, would lead to a” in the third and the fifth
lines thereof, (c) replacing the words “voting shares” with the word “Shares” in
the fifth line thereof, (d) inserting the words “by any entity” after the word
“announcement” in the second and the fourth lines thereof, (e) inserting the
words “or to explore the possibility of engaging in” after the words “engage in”
in the second line thereof and (f) inserting the words “or to explore the
possibility of purchasing or otherwise obtaining” after the word “obtain” in the
fourth line thereof; and

 

  (iv) Section 12.2 of the Equity Definitions is hereby amended by inserting the
words “Announcement Date in respect of any Merger Event or any potential” before
the words “Merger Event” in the final line thereof.

 

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Composition of Combined Consideration:    Not Applicable 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
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. Additional
Disruption Events:    Change in Law:    Applicable; provided that (i) any
determination as to whether (A) the adoption of or any change in any applicable
law or regulation (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) or (B) the promulgation of or any change in the
interpretation by any court, tribunal or regulatory authority with competent
jurisdiction of any applicable law or regulation (including any action taken by
a taxing authority), in each case, constitutes a “Change in Law” shall be made
without regard to Section 739 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 or any similar legal certainty provision in any
legislation enacted, or rule or regulation promulgated, on or after the Trade
Date, and (ii) 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 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 Insolvency Filing:    Applicable Hedging Disruption:    Not
Applicable Increased Cost of Hedging:    Not Applicable Loss of Stock Borrow:   
Applicable

Maximum Stock Loan Rate:

   200 bps Increased Cost of Stock Borrow:    Applicable

Initial Stock Loan Rate:

   33 bps

 

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Determining Party:    For all applicable events, MSCO; provided that when making
any determination or calculation as “Determining Party,” MSCO shall be bound by
the same obligations relating to required acts of the Calculation Agent as set
forth in Section 1.40 of the Equity Definitions and the Confirmation as if the
Determining Party were the Calculation Agent. Hedging Party:    For all
applicable events, MSCO; provided that when making any determination or
calculation as “Hedging Party,” MSCO shall be bound by the same obligations
relating to required acts of the Calculation Agent as set forth in Section 1.40
of the Equity Definitions and the Confirmation as if the Hedging Party were the
Calculation Agent. Non-Reliance:    Applicable Agreements and Acknowledgements
Regarding Hedging Activities:    Applicable Additional Acknowledgments:   
Applicable 3. Calculation Agent:    MSCO; provided that following any
determination or calculation hereunder, upon a written request by Buyer, the
Calculation Agent will promptly provide to Buyer, by email to the email address
provided by Buyer in such written request, a report (in a commonly used file
format for the storage and manipulation of financial data) displaying, in
reasonable detail, the basis for such determination or calculation, it being
understood that the Calculation Agent shall not be obligated to disclose any
proprietary models or other confidential or proprietary information used by it
for such determination or calculation.

4. Account Details and Notices:

(a) Account for delivery of Shares to Issuer:

Computershare

Jersey City, NJ 07310

RE: MSCI Inc. (CUSIP 55354G100)

Account Name: MSCI Inc Buyback Treasury Account

Account Number: T027

(b) Account for payments to Issuer:

Bank of America NY

ABA: 026009593

MSCI Inc

Acct: 1233159065

(c) Account for payments to MSCO:

Citibank NY

ABA: 021000089

Morgan Stanley

Acct: 38890774

MSCI Reference: 23-05161

 

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(d) For purposes of this Confirmation:

(i) Address for notices or communications to Issuer:

MSCI Inc.

7 World Trade Center

250 Greenwich Street, 47th Floor

New York, New York 10007

Attention: Chris Cassiliano

Telephone: 212-804-1579

Facsimile: 212-804-3952

(ii) Address for notices or communications to MSCO:

Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036-8293

Attention: Anthony Cicia

Telephone: (212) 761-4000

Facsimile: (212) 507-4338

5. Amendments to the Equity Definitions.

(a) Section 9.2(a)(iii) of the Equity Definitions is hereby amended by deleting
the words “the Excess Dividend Amount, if any, and”.

(b) Section 11.2(a) of the Equity Definitions is hereby amended by deleting the
words “a diluting or concentrative effect on the theoretical value of the
relevant Shares” and replacing them with the words “a material economic effect
on the relevant Transaction”.

(c) The first sentence of Section 11.2(c) of the Equity Definitions, prior to
clause (A) thereof, is hereby amended to read as follows: ‘(c) If “Calculation
Agent Adjustment” is specified as the Method of Adjustment in the related
Confirmation of a Share Option Transaction or Share Forward Transaction, then,
following the announcement or occurrence of any Potential Adjustment Event, the
Calculation Agent will determine whether such Potential Adjustment Event has a
material economic effect on the Transaction and, if so, will (i) make
appropriate adjustment(s), if any, to any one or more of:’ and the portion of
such sentence immediately preceding clause (ii) thereof is hereby amended by
deleting the words “diluting or concentrative” and the words “(provided that no
adjustments will be made to account solely for changes in volatility, expected
dividends, stock loan rate or liquidity relative to the relevant Share)” and
replacing such latter phrase with the words “(including adjustments to account
for changes in volatility, stock loan rate or liquidity relevant to the Shares
or to the Transaction)”.

(d) Section 11.2(e)(vii) of the Equity Definitions is hereby amended by deleting
the words “diluting or concentrative effect on the theoretical value of the
relevant Shares” and replacing them with the words “material economic effect on
the relevant Transaction”.

(e) [Reserved.]

(f) Section 12.9(b)(iv) of the Equity Definitions is hereby amended by
(A) deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)”
following subsection (A) and (3) the phrase “in each case” in subsection (B);
and (B) deleting the phrase “neither the Non-Hedging Party nor the Lending Party
lends Shares in the amount of the Hedging Shares or” in the penultimate
sentence.

 

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(g) Section 12.9(b)(v) of the Equity Definitions is hereby amended by (A) adding
the word “or” immediately before subsection “(B)” and deleting the comma at the
end of subsection (A); and (B)(1) deleting subsection (C) in its entirety,
(2) deleting the word “or” immediately preceding subsection (C) and
(3) replacing in the penultimate sentence the words “either party” with “the
Hedging Party” and (4) deleting clause (X) in the final sentence.

6. Certain Payments and Deliveries by MSCO.

Notwithstanding anything to the contrary herein, or in the Equity Definitions,
if at any time (i) an Early Termination Date occurs and MSCO would be required
to make a payment pursuant to Section 6 of the Agreement or (ii) an
Extraordinary Event occurs and MSCO would be required to make a payment pursuant
to Article 12 of the Equity Definitions (the amount of any such payment
obligation described in Section 6(i) or (ii) above, an “MSCO Payment Amount”),
then MSCO shall settle such payment obligation in Shares in lieu of cash unless,
by prior written notice to MSCO, Issuer elects to have MSCO settle such payment
obligation by making a cash payment; provided, however, that Issuer shall be
deemed to have given such notice to MSCO in the event of (i) an Insolvency, a
Nationalization or a Merger Event, in each case, in which the consideration or
proceeds to be paid to holders of Shares consists solely of cash or (ii) an
Event of Default in which Issuer is the Defaulting Party or a Termination Event
in which Issuer is an Affected Party, which Event of Default or Termination
Event resulted from an event or events within Issuer’s control. If Issuer does
not so elect to have MSCO settle such payment obligation by making a cash
payment, then MSCO shall deliver to Issuer, on or within a commercially
reasonable time following the date on which such MSCO Payment Amount would have
been due, a number of Shares with a market value, as determined by the
Calculation Agent, equal to all or a portion (which portion may be zero) of the
MSCO Payment Amount. If the market value of such Shares equals a portion, but
not all, of the MSCO Payment Amount, then, on the date such MSCO Payment Amount
is due, a notional balance (the “Settlement Balance”) shall be established equal
to the remaining portion of the MSCO Payment Amount, and MSCO shall commence
purchasing Shares for delivery to Issuer. At the end of each Trading Day on
which MSCO purchases Shares pursuant to this Section 6, MSCO shall reduce the
Settlement Balance by the amount paid by MSCO to purchase the Shares purchased
on such Trading Day. MSCO shall deliver any Shares purchased on a Trading Day
pursuant to this Section 6 to Issuer on the third Exchange Business Day
following such Trading Day. MSCO shall continue so purchasing and delivering
Shares until the Settlement Balance has been reduced to zero. In making any
purchases of Shares contemplated by this Section 6, MSCO shall use commercially
reasonable efforts to purchase such Shares in a manner that would qualify for
the safe harbor provided by Rule 10b-18 under the Exchange Act (“Rule
10b-18”) if such purchases were made by or on behalf of Issuer. The period until
the Settlement Balance is reduced to zero shall be considered to be part of the
Calculation Period for purposes of the representations, warranties and covenants
and other provisions herein as the context requires.

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 Section 6 of the Agreement or (ii) an
Extraordinary Event occurs and Issuer would be required to make a payment
pursuant to Article 12 of the Equity Definitions (any such payment described in
Section 7(i) or (ii) above, an “Early Settlement Payment”), then Issuer shall
settle such payment obligation in Shares (such Shares, “Early Settlement
Shares”) unless, by prior written notice to MSCO, Issuer elects to settle such
payment obligation by making a cash payment; provided, however, that Issuer
shall be deemed to have given such notice to MSCO in the event of (i) an
Insolvency, a Nationalization or a Merger Event, in each case, in which the
consideration or proceeds to be paid to holders of Shares consists solely of
cash or (ii) an Event of Default in which Issuer is the Defaulting Party or a
Termination Event in which Issuer is an Affected Party, which Event of Default
or Termination Event resulted from an event or events within Issuer’s control.
Unless Issuer has given notice to MSCO of its election to settle the payment
obligation described in this Section 7 through the payment of cash,

 

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(i) Issuer must give notice to MSCO by no later than 6:00 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 specifying whether such Early Settlement Shares
are to be sold by means of a registered offering or by means of a private
placement and (ii) Issuer must comply with Section 8(a) or 8(b) (as the case may
be) and 8(c) below. If Issuer fails to give the notice described in clause
(i) of the preceding sentence by the deadline specified in such clause, such
Early Settlement Shares shall be deemed to be sold by means of a private
placement.

8. Provisions Relating to Delivery of Early Settlement Shares.

(a) Issuer may deliver Early Settlement Shares and Make-Whole Shares (as defined
below) by means of a registered offering only if the following conditions are
satisfied:

(i) On the later of (A) the Trading Day following Issuer’s notice to MSCO that
it will 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, but in no event later than the date the Early Settlement Payment is
due, Issuer shall deliver to MSCO 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 (the date of
such delivery, the “Registered Share Delivery Date”).

(ii) Promptly following the Registration Notice Date, Issuer shall file with the
SEC a registration statement (“Registration Statement”) covering the public sale
by MSCO 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, in each case, as
promptly as possible. The Registration Statement shall be effective and subject
to no stop order as of the Registered Share Delivery Date.

(iii) Promptly following the Registration Notice Date, Issuer shall afford MSCO
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 (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 MSCO for inspection
all financial and other records, pertinent corporate documents and other
information reasonably requested by MSCO), and MSCO 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) unless
and until MSCO 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 MSCO, Issuer shall, at the request of MSCO, make
available to MSCO 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 MSCO (a “Prospectus”, which
term shall include any prospectus supplement thereto), in such quantities as
MSCO shall reasonably request.

 

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(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 issued, to obtain the lifting thereof as soon
thereafter as is practicably 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 MSCO 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 MSCO (or any affiliate of MSCO
designated by MSCO) relating to the public sale of the Registered Securities and
substantially similar to underwriting agreements customary for underwritten
offerings of equity securities of similar size, in form and substance reasonably
satisfactory to MSCO (or such affiliate), which Transfer Agreement shall
(without limiting 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, MSCO and its affiliates,

(B) the delivery to MSCO (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 letters of counsel relating to 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 fees and expenses in connection with such
resale, including all registration costs and all reasonable fees and expenses of
one counsel for MSCO (or such affiliate).

(vii) On the Registered Share Delivery Date, a notional balance (the “Early
Settlement Balance”) shall be established with an initial balance equal to the
amount of the Early Settlement Payment. Following the delivery of Early
Settlement Shares or any Make-Whole Shares, MSCO shall sell all such Early
Settlement Shares or Make-Whole Shares 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 net proceeds to be received by MSCO upon settlement of
such sales, and (B) increased by an amount (as reasonably determined by the
Calculation Agent) equal to MSCO’s funding cost with respect to the Early
Settlement Balance as of the close of business on the day one Settlement Cycle
prior to such day.

(ix) If, on any date, the 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 MSCO 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.

 

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(x) If, on any date, all of the Early Settlement Shares have been sold and the
Settlement Balance has not been reduced to zero, Issuer shall promptly deliver
to MSCO an additional number of Shares (“Make-Whole Shares”) equal to (A) the
Settlement Balance as of such date divided by (B) a price per Share as
reasonably determined by the Calculation Agent or, if Issuer so elects, pay the
remaining Early Settlement Balance to MSCO in cash. This clause (x) shall be
applied successively until the 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 MSCO, file
additional registration statement(s) to register the sale of all Registered
Securities required to be delivered to MSCO.

(xii) Issuer shall cooperate with MSCO and use its commercially reasonable
efforts to take any other action necessary to effect the intent of the
provisions set forth in this Section 8(a).

(xiii) The provisions of Section 8(b) shall apply to any then-current Early
Settlement Balance if on any given day Issuer cannot satisfy any of the
conditions set forth in this Section 8(a), unless Issuer pays such then-current
Early Settlement Balance to MSCO in cash pursuant to the Registration Statement.

(b) If Issuer notifies MSCO that it will 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 MSCO
(or any affiliate of MSCO designated by MSCO) pursuant to the exemption from the
registration requirements of the Securities Act provided by
Section 4(2) thereof.

(ii) Issuer shall afford MSCO and any potential purchaser of any such Shares
from MSCO (or any affiliate of MSCO designated by MSCO) identified by MSCO 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 (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 MSCO (or any affiliate of MSCO designated by MSCO) in connection with the
private placement of such Shares by Issuer to MSCO (or any such affiliate) and
the private resale of such Shares by MSCO (or any such affiliate), substantially
similar to private placement purchase agreements customary for private
placements of equity securities of similar size, in form and substance
commercially reasonably satisfactory to MSCO 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, MSCO
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 MSCO but not including any underwriter or broker
discounts and commissions, and shall contain representations, warranties and
agreements of Issuer and MSCO 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) Issuer shall not take or cause to be taken any action that would make
unavailable either (A) the exemption set forth in Section 4(2) of the Securities
Act for the sale of any Early Settlement Shares or Make-Whole Shares by Issuer
to MSCO or (B) an exemption from the registration requirements of the Securities
Act reasonably acceptable to MSCO for resales of Early Settlement Shares and
Make-Whole Shares by MSCO.

 

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(v) On the date requested by MSCO, Issuer shall deliver a number of Early
Settlement Shares equal to the quotient of (A) the amount of the Early
Settlement Payment divided by (B) a per Share value, determined by MSCO in a
commercially reasonable manner, which value shall take into account transfer
restrictions applicable to such Shares and may be based on indicative bids from
institutional “accredited investors” (as defined in Rule 501 under the
Securities Act), and 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) Unless Issuer has given notice to MSCO of its election to settle the payment
obligation described in Section 7 through the payment of cash, then, if
necessary, Issuer shall use its best efforts to cause the number of authorized
but unissued Shares of Common Stock 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 Transactions.

Notwithstanding anything to the contrary herein or in the Equity Definitions:

(a) Issuer agrees that:

(i) It will not during the term of 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 Securities Act) of any Merger Transaction or potential
Merger Transaction unless such public announcement is made prior to the open or
after the close of the regular trading session on the Exchange for the Shares.

(ii) To the extent that an announcement of a potential Merger Transaction occurs
during the term of the Transaction and such announcement does not cause the
Transaction to be cancelled or terminated in whole pursuant to “Extraordinary
Events” in Section 2 above, then promptly following such announcement (but in
any event prior to the next opening of the regular trading session on the
Exchange), Issuer shall provide MSCO with written notice of such announcement;
promptly (but in any event prior to the next opening of the regular trading
session on the Exchange), Issuer shall provide MSCO with written notice
specifying (x) Issuer’s average daily “Rule 10b-18 purchases” (as defined in
Rule 10b-18) during the three full calendar months immediately preceding the
Announcement Date that were not effected through MSCO or its affiliates and
(y) the number of Shares purchased pursuant to the block purchase proviso in
Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months
preceding the Announcement Date. Such written notice shall be deemed to be a
certification by Issuer to MSCO that such information is true and correct.
Issuer understands that MSCO will use this information in calculating the
trading volume for purposes of Rule 10b-18. In addition, Issuer shall promptly
notify MSCO of the earlier to occur of the completion of such transaction and
the completion of the vote by target shareholders. Issuer acknowledges that any
such public announcement may trigger the provision set forth in Section 11
below. Accordingly, Issuer acknowledges that its actions in relation to any such
announcement or transaction must comply with the standards set forth in
Section 13(b) below.

(b) Upon the occurrence of any such public announcement, MSCO in its good faith
discretion may (i) apply the provisions of Section 11 below and/or (ii) treat
the occurrence of such announcement as an Additional Termination Event with
respect to which the Transaction shall be the sole Affected Transaction, Issuer
shall be the sole Affected Party and MSCO shall be the party entitled to
designate an Early Termination Date pursuant to Section 6(b) of the Agreement.

 

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“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.

10. Special Provisions for Acquisition Transaction Announcements.

(a) If an Acquisition Transaction Announcement occurs on or prior to the final
Valuation Date, then the Calculation Agent shall make such adjustments to the
exercise, settlement, payment or any other terms of the Transaction as the
Calculation Agent reasonably determines appropriate (including, for the
avoidance of doubt, to the Discount and the Forward Cap Price) at such time or
at multiple times as the Calculation Agent reasonably determines appropriate, to
account for the economic effect on the Transaction of such Transaction
Announcement (including adjustments to account for changes in volatility,
expected dividends, stock loan rate and liquidity relevant to the Shares or to
the Transaction). If an Acquisition Transaction Announcement occurs after the
Trade Date but prior to the Lock-Out Date, the Lock-Out Date shall be deemed to
be the date of such Acquisition Transaction Announcement.

(b) “Acquisition Transaction Announcement” means (i) the announcement of an
Acquisition Transaction, (ii) an announcement that Issuer or any of its
subsidiaries has entered into an agreement, a letter of intent or an
understanding designed to result in an Acquisition Transaction, (iii) the
announcement of the intention to solicit or enter into, or to explore strategic
alternatives or other similar undertaking that may include, an Acquisition
Transaction or (iv) any announcement subsequent to an Acquisition Transaction
Announcement relating to an amendment, extension, withdrawal or other change to
the subject matter of the previous Acquisition Transaction Announcement. For the
avoidance of doubt, the term “announcement” as used in the definition of
Acquisition Transaction Announcement refers to any public announcement whether
made by Issuer or a third party.

(c) “Acquisition Transaction” means (i) any Merger Event (for purposes of this
definition, the definition of Merger Event shall be read with the references
therein to “100%” being replaced by “25%” and to “50%” by “75%” and without
reference to the clause beginning immediately following the definition of
Reverse Merger therein to the end of such definition), Tender Offer or Merger
Transaction or any other transaction involving the merger of Issuer with or into
any third party, (ii) the sale or transfer of all or substantially all of the
assets or liabilities of Issuer, (iii) a recapitalization, reclassification,
binding share exchange or other similar transaction, (iv) any acquisition,
lease, exchange, transfer, disposition (including by way of spin-off or
distribution) of assets or liabilities (including any capital stock or other
ownership interests in subsidiaries) or other similar event by Issuer or any of
its subsidiaries where the aggregate consideration transferable or receivable by
or to Issuer or its subsidiaries exceeds 25% of the market capitalization of
Issuer and (v) any transaction with respect to which Issuer or its board of
directors has a legal obligation to make a recommendation to its shareholders in
respect of such transaction (whether pursuant to Rule 14e-2 under the Exchange
Act or otherwise).

11. MSCO Adjustments.

In the event that MSCO reasonably determines based on the advice of counsel that
it is appropriate with regard to any legal, regulatory or self-regulatory
requirements or related policies and procedures (so long as such requirements,
policies and procedures are generally applicable to transactions similar to the
Transaction, and whether or not such requirements, policies or procedures are
imposed by law or have been voluntarily adopted by MSCO, and including, without
limitation, Rule 10b-18, Rule 10b-5, Regulations 13D-G and Regulations 14 D-E
under the Exchange Act), for MSCO to refrain from purchasing Shares or engaging
in other market activity or to purchase fewer than the number of Shares or to
engage in fewer or smaller other market transactions MSCO would otherwise
purchase or engage in on any Trading Day on or prior to the last day of the
Calculation Period, then MSCO may, in its commercially reasonable discretion,
elect that a Market Disruption shall be deemed to have occurred on such Trading
Day. MSCO shall notify Issuer upon the exercise of MSCO’s rights pursuant to
this Section 11 and shall subsequently notify Issuer on the day MSCO believes
that the circumstances giving rise to such exercise have changed.

 

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12. Covenants.

Issuer covenants and agrees that:

(a) Until the end of the Potential Purchase Period (as defined below), 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 or other derivative or structured Share
repurchase transaction with a hedging period, calculation period or settlement
valuation period or similar period that overlaps with the Transaction) purchase,
offer to purchase, place any bid or limit order relating to a purchase of or
commence any tender offer relating to Shares (or any security convertible into
or exchangeable for Shares) except through MSCO without the prior written
approval of MSCO (other than (w) purchases of Shares that do not constitute
“Rule 10b-18 purchases” under subparagraphs (ii) or (iii) of Rule 10b-18(a)(13)
and that are not reasonably expected to result in purchases of Shares in the
market, (x) withholding of Shares from holders of employee stock options to
cover amounts payable (including tax liabilities and/or payment of exercise
price) in respect of the exercise of such employee stock options, (y) purchases
of Shares from employees to satisfy obligations under employee compensation
agreements with such employees and (z) privately negotiated off-exchange
repurchases of Shares that are not reasonably expected to result in purchases of
Shares in the market) or take any other action that would cause the purchase by
MSCO of any Shares in connection with this Agreement not to qualify for the safe
harbor provided in Rule 10b-18 under the Exchange Act (assuming for the purposes
of this paragraph that such safe harbor were otherwise available for such
purchases). “Potential Purchase Period” means the period from, and including,
the Trade Date to, and including, the latest of (i) the last day of the
Calculation Period, (ii) the earlier of (A) the date ten Exchange Business Days
immediately following the last day of the Calculation Period and (B) the
Scheduled Valuation Date and (iii) if an Early Termination Date occurs or the
Transaction is cancelled pursuant to Article 12 of the Equity Definitions, a
date determined by MSCO in its commercially reasonable discretion and
communicated to Issuer no later than the Exchange Business Day immediately
following such date.

(b) [Reserved.]

(c) Without limiting the generality of Section 13.1 of the Equity Definitions,
it is not relying, and has not relied, upon MSCO 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 MSCO 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 Issuer and that MSCO and its affiliates may continue to conduct
such transactions during the term of this Agreement. Without limiting the
generality of the foregoing, Issuer acknowledges that MSCO is not making any
representations or warranties or taking any position or expressing any view with
respect to the treatment of the Transaction under any accounting standards
including ASC Topic 260, Earnings Per Share, ASC Topic 815, Derivatives and
Hedging, or ASC Topic 480, Distinguishing Liabilities from Equity and ASC
815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity (or any
successor issue statements) or under FASB’s Liabilities & Equity Project.

(d) Neither it nor any affiliates shall take any action that would cause a
restricted period (as defined in Regulation M under the Exchange Act
(“Regulation M”)) to be applicable to any purchases of Shares, or of any
security for which Shares is a reference security (as defined in Regulation M),
by Issuer or any affiliated purchasers (as defined in Regulation M) of Issuer
during the Potential Purchase Period unless Issuer has delivered written notice
to MSCO of the relevant restricted period (as defined in Regulation M) not later
than the Scheduled Trading Day immediately preceding the first day of such
restricted period, in which case an Additional Termination Event shall occur
with the Transaction as the sole Affected Transaction and Issuer as the sole
Affected Party and MSCO shall be the party entitled to designate an Early
Termination Date pursuant to Section 6(b) of the Agreement; Issuer acknowledges
that, in addition, delivery of any such notice may cause a Disrupted Day to
occur pursuant to Section 11 above.

 

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(e) It will not make any election hereunder while aware of any material
nonpublic information regarding Issuer or the Shares.

(f) It shall not declare or pay any Extraordinary Dividend until the earlier of
(i) the Scheduled Valuation Date or (ii) the date ten Exchange Business Days
immediately following the Valuation Date.

13. Representations, Warranties and Acknowledgments.

(a) Issuer hereby represents and warrants to MSCO on the date hereof and on and
as of the Initial Share Delivery Date that:

(i) (A) None of Issuer and its officers and directors is aware of any material
nonpublic information regarding Issuer or the Shares, and Issuer is entering
into the Transaction in good faith and not as part of a plan or scheme to evade
the prohibitions of federal securities laws, including, without limitation, Rule
10b-5 under the Exchange Act and (B) Issuer agrees not to alter or deviate from
the terms of the Agreement or enter into or alter a corresponding or hedging
transaction or position with respect to the Shares (including, without
limitation, with respect to any securities convertible or exchangeable into the
Shares) during the term of the Agreement. Without limiting the generality of the
foregoing, all reports and other documents filed by Issuer with the Securities
and Exchange Commission pursuant to the Exchange Act when considered as a whole
(with the more recent such reports and documents deemed to amend inconsistent
statements contained in any earlier such reports and documents) do not contain
any untrue statement of a material fact or any omission of a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances in which they were made, not misleading.

(ii) The transactions contemplated by this Confirmation have been authorized
under Issuer’s publicly announced program to repurchase Shares and, prior to the
Trade Date, MSCO shall deliver to Issuer a resolution of Issuer’s board of
directors authorizing the Transaction and such other certificate or certificates
as MSCO shall reasonably request.

(iii) Issuer 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.

(iv) Issuer 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) in violation of the federal
securities laws.

(v) There have been no purchases of Shares in Rule 10b-18 purchases of blocks
pursuant to the once-a-week block exception contained in Rule 10b-18(b)(4) by or
for Issuer or any of its affiliated purchasers during each of the four calendar
weeks preceding the Trade Date and during the calendar week in which the Trade
Date occurs (“Rule 10b-18 purchase”, “blocks” and “affiliated purchaser” each
being used as defined in Rule 10b-18).

(vi) Issuer is as of the date hereof, and immediately 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 Issuer is not less than the total amount required to pay the liabilities of
Issuer on its total existing debts and liabilities (including contingent
liabilities) as they become absolute and matured, (B) Issuer 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,
Issuer is not incurring debts or liabilities beyond its ability to pay as such
debts and liabilities mature, (D) Issuer is

 

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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 Issuer is engaged, (E) Issuer is not a
defendant in any civil action that could reasonably be expected to result in a
judgment that Issuer is or would become unable to satisfy, (F) Issuer 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 (G) Issuer would be able to purchase Shares with an aggregate purchase price
equal to the Prepayment Amount in compliance with the corporate laws of the
jurisdiction of its incorporation.

(vii) Issuer is not, and after giving effect to the transactions contemplated
hereby will not be, required to register as an “investment company” as such term
is defined in the Investment Company Act of 1940, as amended.

(viii) No state or local (including non-U.S. jurisdictions) law, rule,
regulation or regulatory order applicable to the Shares would give rise to any
reporting, consent, registration or other requirement (including without
limitation a requirement to obtain prior approval from any person or entity) as
a result of MSCO or its affiliates owning or holding (however defined) Shares.

(b) Issuer acknowledges and agrees that the Initial Shares may be sold short to
Issuer. Issuer further acknowledges and agrees that MSCO may purchase Shares in
connection with the Transaction, which Shares may be used to cover all or a
portion of such short sale or may be delivered to Issuer. Such purchases and any
other market activity by MSCO will be conducted independently of Issuer by MSCO
as principal for its own account. All of the actions to be taken by MSCO in
connection with the Transaction shall be taken by MSCO independently and without
any advance or subsequent consultation with Issuer. 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 shall be interpreted to comply with the requirements of such Rule,
and Issuer shall not take any action that results in the Transaction not so
complying with such requirements. Without limiting the generality of the
preceding sentence, Issuer acknowledges and agrees that (A) Issuer does not
have, and shall not attempt to exercise, any influence over how, when or whether
MSCO effects any market transactions in connection with the Transaction and
(B) neither Issuer nor its officers or employees shall, directly or indirectly,
communicate any information regarding Issuer or the Shares to any employee of
MSCO or its Affiliates identified by MSCO in writing to Issuer responsible for
executing market transactions in connection with the Transaction. Issuer also
acknowledges and agrees that any amendment, modification, waiver or termination
of this Confirmation 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 Issuer or any officer or director of Issuer is aware of any
material nonpublic information regarding Issuer or the Shares.

(c) Each of Issuer and MSCO represents and warrants to the other that it is an
“eligible contract participant” as defined in Section 1a(18) of the U.S.
Commodity Exchange Act, as amended.

(d) Each of Issuer and MSCO acknowledges that the offer and sale of the
Transaction to it is intended to be exempt from registration under the
Securities Act by virtue of Section 4(2) thereof. Accordingly, it represents and
warrants to the other party that (i) it has the financial ability to bear the
economic risk of its investment in the Transaction and is able to bear a total
loss of its investment, (ii) it is an “accredited investor” as that term is
defined in Regulation D as promulgated under the Securities Act, (iii) it is
entering into the Transaction for its own account and without a view to the
distribution or resale thereof and (iv) the assignment, transfer or other
disposition of the Transaction has not been and will not be registered under the
Securities Act and is restricted under this Confirmation, the Securities Act and
state securities laws.

(e) Notwithstanding anything to the contrary in this Confirmation, the Agreement
or the Definitions, under no circumstances will any MSCO Payment Amount or Early
Settlement Payment payable in connection with any early termination or
cancellation of the Transaction include the effects of any Dividends declared or
paid by Issuer.

 

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14. Acknowledgements of Issuer Regarding Hedging and Market Activity.

Issuer agrees, understands and acknowledges that:

(a) during the period from (and including) the Trade Date to (and including) the
Settlement Date, MSCO 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 transactions in order to adjust its Hedge Position with respect
to the Transaction;

(b) MSCO and its Affiliates also may be active in the market for the Shares or
options, futures contracts, swaps or other derivative transactions relating to
the Shares other than in connection with hedging activities in relation to the
Transaction;

(c) MSCO shall make its own determination as to whether, when and in what manner
any hedging or market activities in Issuer’s securities or other securities or
transactions shall be conducted and shall do so in a manner that it deems
appropriate to hedge its price and market risk with respect to the Transaction;
and

(d) any such market activities of MSCO and its Affiliates may affect the market
price and volatility of the Shares, including the 10b-18 VWAP and the Forward
Price, each in a manner that may be adverse to Issuer.

15. [Reserved].

16. Other Provisions.

(a) Issuer agrees and acknowledges that MSCO is a “financial institution” and
“financial participant” within the meaning of Sections 101(22) and 101(22A) of
the Bankruptcy Code. The parties hereto further agree and acknowledge that it is
the intent of the parties that (A) this Confirmation is a “securities contract,”
as such term is defined in Section 741(7) of the Bankruptcy Code, with respect
to which each payment and delivery hereunder or in connection herewith is a
“termination value,” “payment amount” or “other transfer obligation” within the
meaning of Section 362 of the Bankruptcy Code and a “settlement payment,” within
the meaning of Section 546 of the Bankruptcy Code, and (B) MSCO is entitled to
the protections afforded by, among other sections, Sections 362(b)(6),
362(b)(17), 362(o), 546(e), 555 and 561 of the Bankruptcy Code.

(b) MSCO and Issuer hereby agree and acknowledge that MSCO has authorized Issuer
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 Issuer to use any information that Issuer receives or has received
with respect to the Transaction in any manner.

(c) In the event Issuer becomes the subject of proceedings (“Bankruptcy
Proceedings”) under the Bankruptcy Code or any other applicable bankruptcy or
insolvency statute, any rights or claims of MSCO hereunder in respect of the
Transaction shall rank for all purposes no higher than, but on a parity with,
the rights or claims of holders of Shares, and MSCO hereby agrees that its
rights and claims hereunder shall be subordinated to those of all parties with
claims or rights against Issuer (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 MSCO
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

 

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the related Bankruptcy Proceedings. Notwithstanding any right it might otherwise
have to assert a higher priority claim in any such Bankruptcy Proceedings, MSCO
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, MSCO 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 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 Confirmation or any other agreement
between the parties to the contrary, neither the obligations of Issuer nor the
obligations of MSCO hereunder are secured by any collateral, security interest,
pledge or lien.

(e) Each party waives any and all rights it may have to set off obligations
arising under the Agreement and the Transaction against other obligations
between the parties, whether arising under any other agreement, applicable law
or otherwise.

(f) Notwithstanding anything to the contrary herein, MSCO may, by prior notice
to Issuer, 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.

(g) It shall constitute an Additional Termination Event with respect to which
the Transaction is the sole Affected Transaction and Issuer is the sole Affected
Party and MSCO shall be the party entitled to designate an Early Termination
Date pursuant to Section 6(b) of the Agreement if, on any Exchange Business Day
on or prior to the Valuation Date, the closing price per Share on the Exchange,
as determined by the Calculation Agent, is at or below the Threshold Price (as
specified in Schedule I).

17. Share Cap.

Notwithstanding any other provision of this Confirmation or the Agreement to the
contrary, in no event shall Issuer be required to deliver to MSCO in the
aggregate a number of Shares that exceeds the Share Cap as of the date of
delivery (as specified in Schedule I).

18. Transfer and Assignment.

MSCO may transfer or assign its rights and obligations hereunder and under the
Agreement, in whole or in part, to any of its Affiliates of equivalent credit
quality (or whose obligations are guaranteed by an entity of equivalent credit
quality) without the consent of Issuer; provided that MSCO may not assign its
rights and obligations hereunder and under the Agreement if such assignment
would result in (i) Issuer being required to pay the assignee an amount in
respect of an Indemnifiable Tax under Section 2(d)(i)(4) of the Agreement
greater than the amount in respect of which Issuer would have been required to
pay to MSCO in the absence of such assignment or (ii) Issuer receiving a payment
from which an amount has been withheld or deducted, on account of a Tax under
Section 2(d)(i) of the Agreement in excess of that which Issuer would have been
required to so withhold or deduct in the absence of such assignment, unless the
assignee would be required to make additional payments pursuant to
Section 2(d)(i)(4) of the Agreement corresponding to such withholding or
deduction.

19. Governing Law; Jurisdiction; Waiver.

THIS CONFIRMATION AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED
TO THIS CONFIRMATION SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THE
PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE

 

Page 20

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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.

EACH PARTY 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 THE TRANSACTION OR THE ACTIONS
OF ISSUER OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT
HEREOF.

Remainder of Page Intentionally Blank

 

Page 21

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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:

 

MSCI INC.   MORGAN STANLEY & CO. LLC By:  

/s/ Robert Qutub

    By:  

/s/ Sebastian Crapanzano

  Name:   Robert Qutub       Name:   Sebastian Crapanzano   Title:   Chief
Financial Officer       Title:   Managing Director

 

Page 22

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Schedule I

For the purposes of the Transaction, the following terms shall have the
following values or meanings:

Tranche #1:

The Trade Date shall be August 1, 2013.

The Discount equals USD 0.34.

The Forward Cap Price equals USD 52.1714.

The Initial Shares equal 958,379 Shares.

The Prepayment Amount equals USD 50,000,000.

The Scheduled Valuation Date shall be December 27, 2013.

The Lock-Out Date shall be November 1, 2013.

Observation Dates: Until (and including) the later of the Lock-Out Date and the
“Lock-Out Date” in respect of Tranche 2, alternate Scheduled Trading Days
beginning on the Scheduled Trading Day immediately following the Trade Date;
thereafter, each Scheduled Trading Day.

Threshold Price: USD 10.00

Tranche #2:

The Trade Date shall be August 1, 2013.

The Discount equals USD 0.34.

The Forward Cap Price equals USD 52.1714.

The Initial Shares equal 958,379 Shares.

The Prepayment Amount equals USD 50,000,000.

The Scheduled Valuation Date shall be December 27, 2013.

The Lock-Out Date shall be November 1, 2013.

Observation Dates: Until (and including) the later of the Lock-Out Date and the
“Lock-Out Date” in respect of Tranche 1, alternate Scheduled Trading Days
beginning on the second Scheduled Trading Day immediately following the Trade
Date; thereafter, each Scheduled Trading Day.

Threshold Price: USD 10.00

As of any date, the Share Cap (applicable to both Tranches in aggregate) shall
equal the lesser of (i) 5 million Shares and (ii) 20% of the total number of
Shares that Issuer has outstanding as of such date.

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Annex A

 

LOGO [g598270ex10_1pg024.jpg]   

1585 BROADWAY

NEW YORK, NY 10036-8293

August 1, 2013

To:

MSCI INC.

250 GREENWICH STREET 49TH FLOOR 7 WORLD TRADE CENTER

NEW YORK, NY 10007

Ladies and Gentlemen:

In consideration of MSCI INC. (hereinafter “Counterparty”) having entered into
or entering into that certain trade dated as of August 1, 2013, Confirm Number
DP1:7015020 with Morgan Stanley & Co. LLC (hereinafter “Obligor”) (such
confirmation exchanged between the parties hereinafter the “Confirmation”),
Morgan Stanley, a Delaware corporation (hereinafter “Guarantor”), hereby
irrevocably and unconditionally guarantees to Counterparty, with effect from the
date of the Confirmation, the due and punctual payment of all amounts payable by
Obligor under the Confirmation when the same shall become due and payable,
whether on scheduled payment dates, upon demand, upon declaration of termination
or otherwise, in accordance with, and subject to, the terms of the Confirmation
and giving effect to any applicable grace period. Upon failure of Obligor
punctually to pay any such amounts, and upon written demand by Counterparty to
Guarantor at its address set forth in the signature block of this guarantee (the
“Guarantee”) (or to such other address as Guarantor may specify in writing),
Guarantor agrees to pay or cause to be paid such amounts; provided that delay by
Counterparty in giving such demand shall in no event affect Guarantor’s
obligations under this Guarantee. This Guarantee is of payment and not of
collection.

Guarantor hereby agrees that its obligations hereunder shall be continuing and
unconditional and will not be discharged except by complete payment of the
amounts payable under the Confirmation, irrespective of (1) any claim as to the
Confirmation’s validity, regularity or enforceability or the lack of authority
of Obligor to execute or deliver the Confirmation; or (2) any change in or
amendment to the Confirmation; or (3) any waiver or consent by Counterparty with
respect to any provisions thereof; or (4) the absence or existence of any action
to enforce the Confirmation, or the recovery of any judgment against Obligor or
of any action to enforce a judgment against Obligor under the Confirmation; or
(5) the dissolution, winding up, liquidation or insolvency of Obligor, including
any discharge of obligations therefrom; or (6) any similar circumstance which
might otherwise constitute a legal or equitable discharge or defense of a
guarantor generally.

Guarantor hereby waives diligence, presentment, demand on Obligor for payment or
otherwise (except as provided hereinabove), filing of claims, requirement of a
prior proceeding against Obligor and protest or notice, except as provided for
in the Confirmation

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with respect to amounts payable by Obligor. If at any time payment under the
Confirmation is rescinded or must be otherwise restored or returned by
Counterparty upon the insolvency, bankruptcy or reorganization of Obligor or
Guarantor or otherwise, Guarantor’s obligations hereunder with respect to such
payment shall be reinstated upon such restoration or return being made by
Counterparty.

Guarantor represents to Counterparty, as of the date hereof, that:

1. it is duly organized and validly existing under the laws of the jurisdiction
of its incorporation and has full power and legal right to execute and deliver
this Guarantee and to perform the provisions of this Guarantee on its part to be
performed;

2. its execution, delivery and performance of this Guarantee have been and
remain duly authorized by all necessary corporate action and do not contravene
any provision of its certificate of incorporation or by-laws or any law,
regulation or contractual restriction binding on it or its assets;

3. all consents, authorizations, approvals and clearances (including, without
limitation, any necessary exchange control approval) and notifications, reports
and registrations requisite for its due execution, delivery and performance of
this Guarantee have been obtained from or, as the case may be, filed with the
relevant governmental authorities having jurisdiction and remain in full force
and effect and all conditions thereof have been duly complied with and no other
action by, and no notice to or filing with, any governmental authority having
jurisdiction is required for such execution, delivery or performance; and

4. this Guarantee is its legal, valid and binding obligation enforceable against
it in accordance with its terms except as enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors’ right or by general equity principles.

Each of the provisions contained in this Guarantee shall be severable and
distinct from one another and if one or more of such provisions are now or
hereafter becomes invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Guarantee shall not in any
way be affected, prejudiced or impaired thereby.

By accepting this Guarantee and executing the Confirmation, Counterparty agrees
that Guarantor shall be subrogated to all rights of Counterparty against Obligor
in respect of any amounts paid by Guarantor pursuant to this Guarantee, provided
that Guarantor shall be entitled to enforce or to receive any payment arising
out of or based upon such right of subrogation only to the extent that it has
paid all amounts payable by Obligor under the Confirmation.

This Guarantee shall expire on December 27, 2013, however, this guarantee may be
terminated upon 15 days prior written notice to that effect actually received by
Counterparty. Such expiration or termination shall not, however, affect or
reduce Guarantor’s obligation hereunder for any liability of Obligor incurred
with respect to transactions entered into by Obligor prior to such expiration.

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This Guarantee shall be governed by and construed in accordance with the laws of
the State of New York, without reference of its choice of law doctrine. All
capitalized terms not otherwise defined herein shall have the respective
meanings assigned to them in the Confirmation.

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MORGAN STANLEY By: /s/ Marc Sgaraglino Name:   Marc Sgaraglino Title:  
Authorized Signatory Address:   1585 Broadway   New York, NY 10036 Attn:  
Treasurer Fax No.:   212-762-0337 Phone:   212-761-4000

Signature page to Morgan Stanley Guarantee issued to MSCI INC.

and dated August 1, 2013