Exhibit 10.1

 

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MORGAN STANLEY & CO. LLC

1585 BROADWAY

NEW YORK, NY 10036-8293

(212) 761-4000

 

May 24, 2018

 

Fixed Dollar Accelerated Share Repurchase Transaction

 

 

Anika Therapeutics, Inc.

32 Wiggins Avenue

Bedford, MA 01730

United States

 

 

 

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 Anika Therapeutics, 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
elections set forth in this Confirmation (and the election of USD as the
Termination Currency).

 

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.

 

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

 

Page 2

 

  Shares: Common Stock, par value USD 0.01 per share, of Issuer (Ticker: ANIK)

 

  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.    
  Discount: 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 “ANIK  <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.

 

  Calculation Period: The period from, and including, the first Trading Day that
occurs on the Prepayment Date to, and including, the relevant Valuation Date.

 

  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

 

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  Prepayment Date: One Exchange Business Day following the Trade Date.  On the
Prepayment Date, Buyer shall pay to Seller the Prepayment Amount.

 

  Exchange: Nasdaq Global Select Market

 

  Related Exchange: All Exchanges 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 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 sole 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 (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
Scheduled Trading Day for every Trading Day that is a 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.

 

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  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 10b-18 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 (the “Acceleration Date”).

 

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; provided, however, that if the Settlement
Amount is less than zero, then Buyer shall deliver to Seller a number of Shares
which shares shall be delivered to Seller by means of a private placement equal
to 101% of the absolute value of the Settlement Amount (such number of Shares,
the “Payment Shares”).

 

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  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 a notice by no later than the
Valuation Date (or, if later, the date on which MSCO delivers an Acceleration
Notice) electing to cash settle its obligation to deliver the Payment Shares.
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) Issuer satisfies its obligation to deliver the Payment Shares to MSCO in
accordance with the terms of this paragraph or (ii) the Settlement Balance (as
defined below) is reduced to zero in connection with the cash settlement of the
Issuer’s obligation to deliver Payment Shares (as described under “Cash
Settlement of Payment Shares” below), Issuer 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: The earlier of (x) December
31, 2018 and (y) the date that falls one Settlement Cycle after the relevant
Valuation Date; provided that with respect to any accelerated Valuation Date,
the date shall be the date that falls one Settlement Cycle following the
Acceleration Date.       Cash Settlement of Payment Shares: If Buyer elects to
cash settle its obligation to deliver Payment Shares, then on the Valuation Date
a notional Share 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 an amount in USD equal to the
Payment Shares 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 Valuation Date, Seller may
begin purchasing Shares in a commercially reasonable manner (all such Shares
purchased, “Cash Settlement Shares”) and a notional cash balance (the “Cash
Balance”) shall be created with an initial balance equal to the Initial Cash
Settlement Amount.  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 Cash Balance by the aggregate purchase price (including
commissions) of the Cash Settlement Shares purchased on such Exchange Business
Day.  If, on any Exchange Business Day, the Cash Balance is reduced to or below
zero but the Settlement Balance is greater than zero, the Buyer shall
(i) deliver to Seller or as directed by Seller on the next Currency Business Day
after such Exchange Business Day an additional amount in USD (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, and the Cash Balance shall be increased by such amount.  This
provision shall be applied successively until the Settlement Balance is reduced
to zero.  On the Currency Business Day immediately following the Exchange
Business Day that the Settlement Balance is reduced to zero, Seller shall return
to Buyer an amount in USD equal to the remaining Cash Balance, if any, as of
such Exchange Business Day.  In making any purchases of Cash Settlement Shares
contemplated by this paragraph, 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 and subject to Rule 10b-18.  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 (but, for the
avoidance of doubt, not for purposes of determining the Forward Price).

 

Page 6

 

  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 later of (i) the last day of the Calculation Period  or
(ii) the day upon which the transactions contemplated under “Cash Settlement of
Payment Shares” are complete.

 

  Method of Adjustment: Calculation Agent Adjustment

 

Page 7

 

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

 

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.

 

  Composition of Combined Consideration: Not Applicable

 

Page 8

 

  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: Applicable

 

  Increased Cost of Hedging: Applicable       Loss of Stock Borrow: Applicable  
  Maximum Stock Loan Rate: 100 bps

 

  Increased Cost of Stock Borrow: Applicable     Initial Stock Loan Rate: 25 bps

 

  Determining Party: For all applicable events, MSCO

 

  Hedging Party: For all applicable events, MSCO

 

Page 9

 

  Additional Termination Event(s): The declaration by the Issuer of any
Extraordinary Dividend, the ex-dividend date for which occurs or is scheduled to
occur during the Relevant Dividend Period, will constitute an Additional
Termination Event, with Counterparty as the sole Affected Party and all
Transactions hereunder as the Affected Transactions.       Relevant Dividend
Period: The period from, and including, the Trade Date for the Transaction to,
and including, the third Scheduled Trading Day following the Scheduled Valuation
Date for the Transaction.

 

  Non-Reliance: Applicable

 

  Agreements and Acknowledgements Regarding Hedging Activities: Applicable

 

  Additional Acknowledgments: Applicable

 

3.  Calculation Agent: MSCO

 

4. Account Details and Notices:

 

(a)       Account for delivery of Shares to Issuer:

 

Company: 12629

Anika Therapeutics, Inc.

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

 

(b)        Account for payments to Issuer:

 

Bank of America, NY

ABA#: 026009593

Anika Therapeutics, Inc.

Account#: 9363574995

 

(c)        Account for payments to MSCO:

 

Citibank, NY

ABA #: 021000089

Morgan Stanley & Co.

Account #: 38890774

Anika Therapeutics, Inc.

# 023-05370

 

Page 10

 

(d)       For purposes of this Confirmation:

 

(i)       Address for notices or communications to Issuer:

 

Anika Therapeutics, Inc.

32 Wiggins Avenue

Bedford, MA 01730

Attention: Sylvia Cheung

Telephone: 781-457-9214

Facsimile: 781-305-9720

Email Address: scheung@anikatherapeutics.com

 

With a copy to:

Anika Therapeutics, Inc.

32 Wiggins Avenue

Bedford, MA 01730

Attention: Charles Sherwood III

Telephone: 781-457-9261

Facsimile: 781-305-9720

Email: chsherwoodiii@anikatherapeutics.com

 

(ii)       Address for notices or communications to MSCO:

 

Morgan Stanley & Co. LLC

1585 Broadway

New York, NY 10036-8293

Attention: Usman Khan

Telephone: 212-761-0955

Facsimile: 212-507-4261

Email Address: usman.s.khan@morganstanley.com

 

With a copy to:

Morgan Stanley & Co. LLC

1585 Broadway

New York, NY 10036-8293

Attention: Steven Seltzer

Telephone: 212-761-1719

Email: Steven.Seltzer1@morganstanley.com

 

 

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)”.

 

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(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)       Section 12.6(c)(ii) of the Equity Definitions is hereby amended by
replacing the words “the Transaction will be cancelled,” in the first line with
the words “MSCO will have the right to cancel the Transaction,”.

 

(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.

 

(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 Issuer shall have the right, by prior written notice to MSCO, to require
MSCO to settle such payment obligation in Shares in lieu of cash; provided,
however, that Issuer shall not have the right to so elect in the event of (i) an
Insolvency, a Nationalization, a Merger Event or a Tender Offer, in each case,
in which the consideration or proceeds to be paid to holders of Shares consists
solely of cash 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 for MSCO to settle an MSCO Payment Amount
in Shares, then MSCO shall have the right, in its sole discretion, to elect to
settle such MSCO Payment Amount in Shares. If either Issuer or MSCO so elects,
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 if such purchases were made by or on behalf of Issuer
and subject to Rule 10b-18. 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.

 

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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
(i) or (ii) above, an “Early Settlement Payment”), then Issuer shall have the
right, by prior written notice to MSCO, in lieu of making such cash payment, to
settle such payment obligation in Shares (such Shares, “Early Settlement
Shares”); provided, however, that Issuer shall not have the right to so elect in
the event of (i) an Insolvency, a Nationalization, a Merger Event or a Tender
Offer, in each case, in which the consideration or proceeds to be paid to
holders of Shares consists solely of cash 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. In order to elect to deliver Early
Settlement Shares, (i) Issuer must notify MSCO of its election by no later than
4:00 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, (ii) Issuer must
specify whether such Early Settlement Shares are to be sold by means of a
registered offering or by means of a private placement and (iii) Issuer must
comply with Section 8 below.

 

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 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, 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 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 for companies of comparable size, maturity and line of business
(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 in connection with underwritten offerings of this type 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.

 

Page 13

 

(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.

 

(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 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 for companies of comparable size,
maturity and line of business, 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 and the Prospectus); 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.

 

Page 14

 

(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.

 

(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, at its
election, either pay the remaining Early Settlement Balance to MSCO in cash or
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. 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 (i) on any given day, Issuer cannot satisfy any of
the conditions set forth in this Section 8(a) or (ii) for a period of at least
10 consecutive Exchange Business Days, MSCO has determined that it is
inadvisable to effect sales of Registered Securities, unless in either case
Issuer pays such then-current Early Settlement Balance to MSCO in cash pursuant
to the Registration Statement.

 

(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 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(a)(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 for companies of comparable size, maturity and line of
business (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 in connection with
underwritten offerings of this type) 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 for companies of
comparable size, maturity and line of business, 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.

 

Page 15

 

(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(a)(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.

 

(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)        If Issuer elects to deliver Early Settlement Shares to settle its
obligation to make an Early Settlement Payment, then, if necessary, Issuer shall
use its commercially reasonable 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 as soon as practicable 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.

 

Page 16

 

(b)        Upon the occurrence of any public announcement of a Merger
Transaction, MSCO in its sole 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.

 

“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 Forward Price shall be determined as if the words
“minus (ii) the Discount” were deleted from the definition thereof. 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 a material amendment, extension, withdrawal or other
material 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 by a third party that is reasonably
likely to be a party to the Acquisition Transaction.

 

(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).

 

Page 17

 

11. MSCO Adjustments.

 

In the event that MSCO reasonably determines, based on advice of counsel, that
it is appropriate with regard to any legal, regulatory or self-regulatory
requirements or related policies and procedures (whether or not such
requirements, policies or procedures are imposed by law or have been voluntarily
adopted by MSCO, and including, without limitation, Rule 10b-18, Rule 10b-5,
Regulations 13D-G and Regulations 14 D-E under the Exchange Act, provided that
such requirements, policies and procedures are generally applicable in similar
situations and applied in a consistent manner in similar transactions), 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
reasonable discretion, elect that a Market Disruption shall be deemed to have
occurred on such Trading Day. Such Trading Day shall be treated as a Disrupted
Day in full. 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.

 

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) without the prior written
approval of MSCO 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).

 

Notwithstanding the immediately preceding paragraph or anything herein to the
contrary (i) an agent independent of Issuer may purchase Shares on behalf of an
issuer plan sponsored by Issuer or any affiliate in accordance with the
requirements of Section 10b-18(a)(13)(ii) under the Exchange Act (with “issuer
plan” and “agent independent of Issuer” each being used herein as defined in
Rule 10b-18), (ii) Issuer or any “affiliated purchaser” may purchase Shares in
(x) unsolicited transactions or (y) privately negotiated (off-market)
transactions, in each case, that are not and are not reasonably likely to result
in “Rule 10b-18 purchases” (as defined in Rule 10b-18), in each case, without
MSCO’s consent, and (iii) Issuer may repurchase Shares from holders of awards
granted under Issuer’s equity incentive plans for the purpose of paying the tax
withholding obligations arising from the vesting of, or paying the exercise
price in connection with the exercise of, or reacquiring Shares as a result of
the forfeiture of, any such awards (collectively, (i) through (iii) referred to
herein as the “Permitted 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)        It will comply with all laws, rules and regulations applicable to it
(including, without limitation, the Securities Act and the Exchange Act) in
connection with the transactions contemplated by this Confirmation.

 

(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.

 

Page 18

 

(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.

 

(e)       It will not make any election or take any other action in connection
with the Transaction while aware of any material nonpublic information regarding
Issuer or the Shares.

 

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.

 

(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).

 

Page 19

 

(vi)       Issuer 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 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 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
other than any such law, rule, regulation or regulatory order that applies
solely as a result of the business, identity, place of business or jurisdiction
of organization of MSCO or any such affiliate.

 

(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 that have been identified by MSCO to Issuer in writing as
employees 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.

 

Page 20

 

(c)       Each of Issuer and MSCO represents and warrants to the other that it
is an “eligible contract participant” as defined in Section 1a(12) 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.

 

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. Indemnification.

 

In the event that MSCO becomes involved in any capacity in any third-party
action, proceeding or investigation brought by or against any person in
connection with any matter referred to in this Agreement, Issuer will reimburse
MSCO for its reasonable legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith. Issuer also
will indemnify and hold MSCO harmless against any losses, claims, damages or
liabilities to which it may become subject in connection with any matter
referred to in this Confirmation. If for any reason the foregoing
indemnification is unavailable to MSCO or insufficient to hold it harmless, then
Issuer shall contribute to the amount paid or payable by MSCO as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of Issuer on one hand and MSCO on the other hand with
respect to such loss, claim, damage, or liability and any other relevant
equitable considerations. The reimbursement, indemnity and contribution
obligations of Issuer under this Section 15 shall be in addition to any
liability that Issuer may otherwise have, shall extend upon the same terms and
conditions to any Affiliate of MSCO and the partners, directors, officers,
agents, employees and controlling persons (if any), as the case may be, of MSCO
and any such Affiliate and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of Issuer, MSCO, any
such Affiliate and any such person. Issuer also agrees that neither MSCO nor any
of such Affiliates, partners, directors, officers, agents, employees or
controlling persons shall have any liability to Issuer for or in connection with
any matter referred to in this Confirmation. Notwithstanding the foregoing, the
reimbursement, indemnity, contribution and exculpation obligations of Issuer
under this Section 15 shall not apply for the benefit of any person to the
extent that any losses, claims, damages, liabilities or expenses result from the
negligence or bad faith of such person in effecting the Transaction. The
foregoing provisions shall survive any termination or completion of the
Transaction. The foregoing reimbursement, indemnity and contribution obligations
of Issuer shall be paid promptly in cash.

 

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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 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.

 

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(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, at any time on or
prior to the Valuation Date, the 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), subject to reduction by the number of
Shares delivered hereunder by Issuer on any prior date.

 

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. MSCO will provide prompt written notice
of any such transfer to Issuer.

 

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 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

 

 

 

 

 

 

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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:

 

ANIKA THERAPEUTICS, INC.   MORGAN STANLEY & CO. LLC       By:  /s/ Joseph
Darling   By:  /s/ Darren McCarley   Name: Joseph Darling     Name: Darren
McCarley   Title: President and Chief Executive Officer     Title: Managing
Director