EXHIBIT 10.17

         
 
  Reference Number: o   Account Number: o

     
Morgan Stanley
  MORGAN STANLEY & CO. INCORPORATED
 
  1585 BROADWAY
 
  NEW YORK, NY 10036-8293
 
  (212) 761-4000

February 7, 2008
Fixed Dollar Accelerated Share Repurchase Transaction
Alkermes, Inc.
88 Sidney Street
Cambridge, MA 02139-4136
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. Incorporated (“MSCO”) and Alkermes, Inc. (the “Issuer”) on the Trade Date
specified below (the “Transaction”). This confirmation constitutes a
“Confirmation” as referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 2002 ISDA Equity Derivatives
Definitions (as published by the International Swaps and Derivatives
Association, Inc. (“ISDA”)) (the “Equity Definitions”) are incorporated into
this Confirmation. In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation will govern. Any reference
to a currency shall have the meaning contained in Annex A to the 1998 ISDA FX
and Currency Option 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.
This Confirmation shall be subject to an agreement (the “Agreement”) in the form
of the 2002 ISDA Master Agreement (the “ISDA Form”) as if MSCO and Issuer had
executed an agreement in such form without any Schedule. For the avoidance of
doubt, the Transaction shall be the only transaction under the Agreement.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
GENERAL TERMS:

     
Trade Date:
  As specified in Schedule I
 
   
Buyer:
  Issuer
 
   
Seller:
  MSCO
 
   
Shares:
  Common Stock of Issuer (Ticker: ALKS)
 
   
Number of Shares:
  The number of Shares delivered in accordance with Physical Settlement below.
 
   
Forward Price:
  A price per Share (as determined by the Calculation Agent) equal to (i) the
sum of the 10b-18 VWAP for each Trading Day during the Calculation Period
divided by (ii) the number

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  of Trading Days in the Calculation Period minus (iii) the Discount (as
specified in Schedule I)
 
   
10b-18 VWAP:
  For each Trading Day during the Calculation Period, a price per share (as
determined by the Calculation Agent) equal to the volume-weighted average price
of the Rule 10b-18 eligible trades in the Shares for the entirety of such
Trading Day as determined by reference to the screen entitled “ALKS.Q <Equity>
AQR SEC” or any successor page as reported by Bloomberg L.P. (without regard to
pre-open or after hours trading outside of any regular trading session for such
Trading Day or block trades (as defined in Rule 10b- 18(b)(5) of the Securities
Exchange Act of 1934 as amended (the “Exchange Act”)) on such Trading Day).
 
   
Calculation Period:
  The period from and including the second Trading Day that occurs after the
Trade Date to but excluding the relevant Valuation Date.
 
   
Trading Day:
  Any Exchange Business Day that is not a Disrupted Day or an Excluded Day (as
defined below)
 
   
Initial Shares:
  As specified in Schedule I
 
   
Initial Share Delivery Date:
  Two Exchange Business Days following the Trade Date. On the Initial Share
Delivery Date, Seller shall deliver a number of Shares equal to the Initial
Shares to Buyer in accordance with Section 9.4 of the Equity Definitions, with
the Initial Share Delivery Date deemed to be a “Settlement Date” for purposes of
such Section 9.4.
 
   
Prepayment:
  Applicable
 
   
Prepayment Amount:
  As specified in Schedule I
 
   
Commission Amount:
  As specified in Schedule I
 
   
Adjustment Amount:
  As specified in Schedule I
 
   
Structuring Fee:
  As specified in Schedule I
 
   
Prepayment Date:
  Two Exchange Business Days following the Trade Date. On the Prepayment Date,
Buyer shall pay to Seller the Prepayment Amount, the Commission Amount, the
Adjustment Amount and the Structuring Fee.
 
   
Exchange:
  Nasdaq Global Select Market
 
   
Related Exchange:
  The primary exchange on which options or futures on the relevant 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 inserting the words “at any time on any
Scheduled Trading Day during the

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  Calculation Period or” after the word “material,” in the third line thereof.
 
   
 
  Notwithstanding anything to the contrary in the Equity Definitions, if any
Scheduled Trading Day in the Calculation Period is a Disrupted Day, the
Calculation Agent shall have the option in its sole discretion either (i) to
determine the weighting of each Rule 10b-18 eligible transaction in the Shares
on the relevant Disrupted Day using its commercially reasonable judgment for
purposes of calculating the Forward Price, as applicable, (ii) to elect to
extend the Calculation Period by a number of Scheduled Trading Days equal to the
number of Disrupted Days during the Calculation Period or (iii) to suspend the
Calculation Period, as appropriate, until the circumstances giving rise to such
suspension have ceased. For the avoidance of doubt, if Calculation Agent elects
the option described in clause (i) above, then such Disrupted Day shall be
deemed to be a Trading Day for purposes of calculating the Forward Price.
 
   
Excluded Days:
  None
 
   
VALUATION:
   
 
   
Valuation Time:
  The Scheduled Closing Time on the relevant Exchange
 
   
Valuation Date:
  The earlier of (i) The Scheduled Valuation Date (as specified in Schedule I)
and (ii) any date after the Lock-Out Date (as specified in Schedule I) specified
by MSCO to Issuer by 9:00pm EST on such date as a Valuation Date, in each case,
subject to extension in accordance with “Market Disruption Event” above or
Section 9 or Section 10 below; provided, however, that if a Valuation Date
occurs pursuant to clause (ii) above, then (A) the Calculation Period for this
Transaction (or portion thereof) shall be deemed to end as of the Trading Day
immediately preceding the relevant Valuation Date and (B) MSCO shall have the
right to specify a Valuation Date with respect to any portion of this
Transaction as it selects (any such Valuation Date on a portion of this
Transaction for less than the full Prepayment Amount, a “Partial Acceleration
Date”); provided, however, that MSCO can elect no more than three Partial
Acceleration Dates during the term of this Transaction.
 
   
 
  In the case of a Partial Acceleration Date, MSCO shall specify in its notice
to Issuer designating a Valuation Date in connection with a Partial Acceleration
Date the percentage of the Prepayment Amount that is subject to such Valuation
Date and Calculation Agent shall adjust all terms of this Transaction as it
deems reasonable in order to take into account the occurrence of any Partial
Acceleration Date (including cumulative adjustments to take into account all
Partial Acceleration Dates that occur during the term of this Transaction).

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  On each Valuation Date, Calculation Agent shall calculate the Settlement
Amount.
 
   
SETTLEMENT TERMS:
   
 
   
Physical Settlement:
  Applicable.
 
   
 
  On the Settlement Date, Seller shall deliver to Buyer a number of Shares equal
to (a) (i) the Prepayment Amount divided by (ii) the Forward Price as determined
on each Valuation Date, 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 equal to 105% of the absolute value of the
Settlement Amount (such number of Shares, the “Payment Shares”).
 
   
 
  Notwithstanding the proviso above, 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 each Valuation Date 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) Buyer satisfies its
obligation to deliver the Payment Shares to Seller in accordance with the terms
of this paragraph or (ii) the Settlement Balance (as defined below) is reduced
to zero in connection with cash settlement of Buyer’s obligation to deliver
Payment Shares (as described under “Cash Settlement of Payment Shares” below),
then Buyer shall have no further delivery or payment obligations under the terms
of this Transaction and this Transaction shall be deemed to have been settled as
of such date.
 
   
Settlement Currency:
  USD
 
   
Settlement Date:
  Three Exchange Business Days after each Valuation Date, or if such date is not
a Clearance System Business Day or if there is a Settlement Disruption Event on
such day, the immediately succeeding Clearance System Business Day on which
there is no Settlement Disruption Event.
 
   
Cash Settlement of Payment Shares
  If Buyer elects to cash settle its obligation to deliver Payment Shares, then
on each Valuation Date a balance (the “Settlement Balance”) shall be created
with an initial balance equal to the absolute value of the Settlement Amount. On
the Settlement Date, Buyer shall deliver to Seller a U.S. dollar amount equal to
the Settlement Amount multiplied by the

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  closing price on the Trading Day immediately preceding the Settlement Date
(such cash amount, the “Initial Cash Settlement Amount”). On the Exchange
Business Day immediately following the delivery of the Initial Cash Settlement
Amount, Seller shall begin purchasing Shares in a commercially reasonable manner
(all such Shares purchased, “Cash Settlement Shares”). At the end of each
Exchange Business Day on which Seller purchases Cash Settlement Shares, Seller
shall reduce (i) the Settlement Balance by the number of Cash Settlement Shares
purchased on such Exchange Business Day and (ii) the Initial Cash Settlement
Amount by the aggregate purchase price (including commissions) of the Cash
Settlement Shares on such Exchange Business Day. If, on any Exchange Business
Day, the Initial Cash Settlement Amount is reduced to or below zero but the
Settlement Balance is above zero, the Buyer shall (i) deliver to Seller or as
directed by Seller on the next Exchange Business Day after such Exchange
Business Day an additional U.S. dollar amount (an “Additional Cash Settlement
Amount”) equal to the Settlement Balance as of such Exchange Business Day
multiplied by a price per Share as reasonably determined by the Calculation
Agent. This provision shall be applied successively until the Settlement Balance
is reduced to zero. On the Exchange Business Day that the Settlement Balance is
reduced to zero, Seller shall return to Buyer any unused portion of the Initial
Cash Settlement Amount or the Additional Cash Settlement Amount, as the case may
be. For the avoidance of doubt, any purchases of Cash Settlement Shares
contemplated by this paragraph shall be subject to Seller’s covenants in Section
11(b).
 
   
Share Adjustments:
   
 
   
Potential Adjustment Event:
  Notwithstanding anything to the contrary in Section 11.2(e) of the Equity
Definitions, an Extraordinary Dividend shall not constitute a Potential
Adjustment Event
 
   
Extraordinary Dividend:
  For any fiscal quarter occurring (in whole or in part) during the period from
and including the first day of the Calculation Period to and including the
Termination Date, any dividend or distribution on the Shares with an ex-dividend
date occurring during such fiscal quarter (other than any dividend or
distribution of the type described in Section 11.2(e)(i) or
Section 11.2(e)(ii)(A) or (B) of the Equity Definitions) (a “Dividend”) that is
either (i) a non-regularly scheduled Divided or (ii) the amount or value of
which (as determined by the Calculation Agent) exceeds the Ordinary Dividend
Amount.
 
   
Ordinary Dividend Amount:
  For any calendar quarter, USD0.00
 
   
Method of Adjustment:
  Calculation Agent Adjustment; provided that if Seller

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  suspends trading in the Shares for all or any portion of a Trading Day within
the Calculation Period, the suspension shall be treated as a Potential
Adjustment Event subject to Calculation Agent Adjustment. In the case of a
suspension pursuant to Section 10, the Calculation Agent shall make such
adjustments prior to the period of suspension, if it is practical to do so.
Otherwise, and in all cases of a suspension as contemplated under “Market
Disruption Event” above, the Calculation Agent shall make such adjustments
promptly following the period of suspension.
 
   
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:
  Modified Calculation Agent 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

For purposes of this Transaction, the definition of Merger Date in
Section 12.1(c) shall be amended to read, “Merger Date shall mean the
Announcement Date.” For purposes of this Transaction, the definition of Tender
Offer Date in Section 12.1(e) shall be amended to read, “Tender Offer Date shall
mean the Announcement Date.”

     
Composition of Combined Consideration:
  Applicable
 
   
Nationalization, Insolvency or Delisting:
  Cancellation and Payment
 
   
Additional Disruption Events:
   
 
   
Change in Law:
  Applicable
 
   
Failure to Deliver:
  Applicable
 
   
Insolvency Filing:
  Applicable
 
   
Hedging Disruption:
  Applicable

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Increased Cost of Hedging:
  Applicable
 
   
Loss of Stock Borrow:
  Applicable; provided that the following clause shall be added directly after
the word Rate in the seventh line of Section 12.9(b)(iv) of the Equity
Definitions: “or (C) terminate the Transaction”.
 
   
Maximum Stock Loan Rate:
  100bps
 
   
Increased Cost of Stock Borrow:
  Applicable
 
   
Initial Stock Loan Rate:
  25bps
 
   
Determining Party:
  For all Extraordinary Events, MSCO
 
   
Hedging Party:
  For all Additional Disruption Events, MSCO
 
   
Non-Reliance:
  Applicable

AGREEMENTS AND ACKNOWLEDGMENTS:

     
Regarding Hedging Activities:
  Applicable
 
   
Additional Acknowledgments:
  Applicable
 
   
3. Calculation Agent:
  MSCO
 
   
4. Account Details:
  To be provided.

5.        (a) Nationalization or Insolvency. The words “the Transaction will be
cancelled,” in the first line of Section 12.6(c)(ii) are replaced with the words
“MSCO will have the right to cancel this Transaction,”.
          (b) Additional Termination Event. The declaration of any Extraordinary
Dividend by Issuer during the period from and including the Trade Date to but
excluding the final Valuation Date shall constitute an Additional Termination
Event with this Transaction as the only “Affected Transaction” and Issuer as the
sole “Affected Party”.
          (c) For the avoidance of doubt, this Transaction shall be deemed to be
a “Forward Transaction” for purposes of the Equity Definitions; provided,
however, that in Section 9.2(a)(iii) of the Equity Definitions the words “the
Excess Dividend Amount, if any, and” shall be deleted.
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
Sections 6(d) and 6(e) of the Agreement, (ii) a Tender Offer occurs and MSCO
would be required to make a payment pursuant to Sections 12.3 and 12.7 of the
Equity Definitions, (iii) a Merger Event occurs and MSCO would be required to
make a payment pursuant to Sections 12.2 and 12.7 of the Equity Definitions or
(iv) an Additional Disruption Event occurs and MSCO would be required to make a
payment pursuant to Sections 12.8 and 12.9 of the Equity Definitions, then
Issuer shall have the option to require MSCO to make such payment in cash or to
settle such payment amount in Shares (any such payment described in
Sections 6(i), (ii), (iii), or (iv) above, an “MSCO Payment Amount”). If Issuer
elects for MSCO to settle an MSCO Payment Amount in Shares, then on the date
such MSCO Payment Amount is due, a Settlement Balance shall be established with
an initial balance equal to the MSCO Payment Amount. On such date, 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

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MSCO to purchase the Shares purchased on such Trading Day. MSCO shall deliver
any Shares purchased on a Trading Day to Issuer on the third Exchange Business
Day following the relevant Trading Day. MSCO shall continue purchasing Shares
until the Settlement Balance has been reduced to zero.
7. Certain Payments and Deliveries by Issuer. Notwithstanding anything to the
contrary herein, or in the Equity Definitions, if at any time (i) an Early
Termination Date occurs and Issuer would be required to make a payment pursuant
to Sections 6(d) and 6(e) of the Agreement, (ii) a Tender Offer occurs and
Issuer would be required to make a payment pursuant to Sections 12.3 and 12.7 of
the Equity Definitions, (iii) a Merger Event occurs and Issuer would be required
to make a payment pursuant to Sections 12.2 and 12.7 of the Equity Definitions
or (iv) an Additional Disruption Event occurs and Issuer would be required to
make a payment pursuant to Sections 12.8 and 12.9 of the Equity Definitions (any
such payment described in Sections 7(i), (ii), (iii), or (iv) above, an “Early
Settlement Payment”), then Issuer shall have the option, in lieu of making such
cash payment, to settle its payment obligations under Sections 7(i), (ii),
(iii), or (iv) above in Shares (such Shares, the “Early Settlement Shares”). In
order to elect to deliver Early Settlement Shares, (i) Issuer must notify MSCO
of its election by no later than 4 p.m. EST on the date that is three Exchange
Business Days before the date that the Early Settlement Payment is due,
(ii) 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) the
conditions described in Section 8 below must be satisfied on each day Early
Settlement Shares are to be sold by Seller in connection with Buyer’s election
to deliver Early Settlement Shares in connection with the settlement of an Early
Settlement Payment. For the avoidance of doubt, nothing in this Section 7 should
be read as requiring Issuer to deliver cash with respect to the settlement of
the transactions contemplated by this agreement.
8. Conditions to Delivery of Early Settlement Shares.
Issuer may only deliver Early Settlement Shares and Make-Whole Shares (as
defined below) subject to satisfaction of the following conditions:
          (a) If Issuer timely elects to deliver Early Settlement Shares and
Make-Whole Shares by means of a registered offering, the following provisions
shall apply:
     (i) On the later of (A) the Trading Day following the Issuer’s election to
deliver Early Settlement Shares and any Make-Whole Shares by means of a
registered offering (the “Registration Notice Date”), and (B) the date on which
the Registration Statement is declared effective by the SEC or becomes effective
(the “Registered Share Delivery Date”), the 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.
     (ii) Promptly following the Registration Notice Date, the Issuer shall file
with the SEC a registration statement (“Registration Statement”) covering the
public resale 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; provided that no such filing shall be required pursuant to this
paragraph (ii) if the 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. The Issuer shall use its best efforts to file an automatic shelf
registration statement or have the Registration Statement declared effective by
the SEC as promptly as possible.
     (iii) Promptly following the Registration Notice Date, the Issuer shall
afford MSCO a reasonable opportunity to conduct a due diligence investigation
with respect to the Issuer customary in scope for underwritten offerings of
equity securities (including, without limitation, the availability of senior
management to respond to questions regarding the business and financial
condition of the Issuer

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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 the Issuer. For the avoidance
of doubt, the Issuer shall not have the right to deliver Shares pursuant to this
Section 8(a) (and the conditions to delivery of Early Settlement Shares
specified in this Section 8(a) shall not be satisfied) until MSCO is satisfied
in all material respects with the results of such due diligence investigation of
the Issuer.
     (iv) From the effectiveness of the Registration Statement until all
Registered Securities have been sold by MSCO, the 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) satisfactory to MSCO (a “Prospectus”, which
term shall include any prospectus supplement thereto), in such quantities as
Morgan shall reasonably request.
     (v) The Issuer shall use its best efforts to 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, the 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, the Issuer shall
enter into an agreement (a “Transfer Agreement”) with MSCO (or any affiliate of
MSCO designated by MSCO) in connection with the public resale of the Registered
Securities, substantially similar to underwriting agreements customary for
underwritten offerings of equity securities, in form and substance satisfactory
to MSCO (or such affiliate), which Transfer Agreement shall (without limitation
of the foregoing):
     (A) contain provisions substantially similar to those contained in such
underwriting agreements relating to the indemnification of, and contribution in
connection with the liability of, MSCO and its affiliates,
     (B) provide for delivery to MSCO (or such affiliate) of customary opinions
(including, without limitation, accounting comfort letters, opinions relating to
the due authorization, valid issuance and fully paid and non-assessable nature
of the Registered Securities and the lack of material misstatements and
omissions in the Registration Statement, the Prospectus and the Issuer’s filings
under the Exchange Act of 1934, as amended and modified (the “Exchange Act”));
and
     (C) provide for the payment by the Issuer of all fees and expenses in
connection with such resale, including all registration costs and all fees and
expenses of counsel for MSCO (or such affiliate).
     (vii) On the Registered Share Delivery Date, a balance (the “Settlement
Balance”) shall be established with an initial balance equal to the applicable
amount of the relevant Early Settlement Payment. Following the delivery of Early
Settlement Shares or any Make-Whole Shares, Seller shall sell all such Early
Settlement Shares or Make-Whole Shares in a commercially reasonable manner.

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     (viii) At the end of each day upon which sales have been made, the
Settlement Balance shall be (A) reduced by an amount equal to the aggregate
proceeds received by MSCO upon settlement of the sale of such Share, and
(B) increased by an amount (as reasonably determined by the Calculation Agent)
equal to MSCO’s funding cost with respect to the then-current Settlement Balance
as of the close of business on 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 the Issuer
(A) any remaining Early Settlement Shares and (B) if the Settlement Balance has
been reduced to an amount less than zero, an amount in cash equal to the
absolute value of the then-current 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, the 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) the 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), the 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) The Issuer shall cooperate with MSCO and use its reasonable best
efforts to take any other action necessary to effect the intent of the
provisions set forth in this Section 8(a).
          (b) If Issuer timely elects to deliver Early Settlement Shares and
Make-Whole Shares by means of a private placement, the following provisions
shall apply:
     (i) all Early Settlement Shares and Make-Whole Shares shall be delivered to
the Seller (or any affiliate of the Seller designated by the Seller) pursuant to
the exemption from the registration requirements of the Securities Act provided
by Section 4(2) thereof;
     (ii) Seller and any potential purchaser of any such Shares from the Seller
(or any affiliate of the Seller designated by the Seller) identified by Seller
shall have been afforded a commercially reasonable opportunity to conduct a due
diligence investigation with respect to Issuer customary in scope for private
placements of equity securities (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 Buyer shall not disclose material non-public information in connection
with such due diligence investigation; and
     (iii) an agreement (a “Private Placement Agreement”) shall have been
entered into between Issuer and the Seller (or any affiliate of the Seller
designated by the Seller) in connection with the private placement of such
Shares by Issuer to the Seller (or any such affiliate) and the private resale of
such Shares by the Seller (or any such affiliate), substantially similar to
private placement purchase agreements customary for private placements of equity
securities, in form and substance commercially reasonably satisfactory to the
Seller and the 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, the Seller 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 the Seller but not including any underwriter or broker discounts and
commissions, and shall contain representations, warranties and agreements of
Issuer and Seller reasonably necessary or advisable to

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establish and maintain the availability of an exemption from the registration
requirements of the Securities Act for such resales.
     (iv) If Issuer elects to deliver Early Settlement Shares to satisfy its
payment obligation of an Early Settlement Payment, neither Issuer nor Seller
shall take or cause to be taken any action that would make unavailable either
(i) 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 the Seller or
(ii) an exemption from the registration requirements of the Securities Act
reasonably acceptable to the Seller for resales of Early Settlement Shares and
Make-Whole Shares by the Seller.
     (v) On the date requested by MSCO, (A) Issuer shall deliver a number of
Early Settlement Shares equal to the quotient of (I) the relevant Early
Settlement Payment divided by (II) a per share value, determined by MSCO in a
commercially reasonable manner and which may be based on indicative bids from
institutional “accredited investors” (as defined in Rule 501 under the
Securities Act of 1933, as amended (the “Securities Act”)) and (B) the
provisions of Sections 8(a)(vii) –(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 8(a)(vii) shall be
the date on which Issuer delivers the Early Settlement Shares.
          (c) The provisions of Section 8(b) shall apply to any then-current
Settlement Balance if (i) on any given day, Issuer cannot satisfy any of the
conditions of Section 8(a) or (ii) for a period of at least ten (10) consecutive
Exchange Business Days, MSCO has determined that it is inadvisable to effect
sales of Registered Securities.
          (d) If Issuer elects to deliver Early Settlement Shares to satisfy its
payment obligation of an Early Settlement Payment, 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 to satisfy its payment obligation of an Early Settlement
Payment by delivering Early Settlement Shares.
9. Special Provisions for Merger Events. Notwithstanding anything to the
contrary herein or in the Equity Definitions, to the extent that an Announcement
Date for a potential Merger Transaction occurs during the term of this
Transaction and such Announcement Date does not cause this Transaction to
terminate in whole under the provisions of “Extraordinary Event” in paragraph 2
above:
          (a) As soon as practicable following the public announcement of such
potential Merger Transaction, Issuer shall provide MSCO with written notice of
such announcement;
          (b) Promptly after request from MSCO, Issuer shall provide MSCO with
written notice specifying (i) Issuer’s average daily Rule 10b-18 Purchases (as
defined in Rule 10b-18) during the three full calendar months immediately
preceding the Announcement Date that were not effected through MSCO or its
affiliates and (ii) 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; and
          (c) MSCO in its sole discretion may extend the Calculation Period to
account for any reduction in the number of Shares that could be purchased on
each day during the Calculation Period in compliance with Rule 10b-18 following
the Announcement Date.

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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. Seller Adjustments. In the event that Seller reasonably determines 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 Seller, and including, without limitation, Rule 10b-18, Rule 10b-5,
Regulation 13D-G and Regulation 14E, “Requirements”), for Seller to refrain from
purchasing Shares or to purchase fewer than the number of Shares Seller would
otherwise purchase on any Trading Day during the duration of this Transaction,
then Seller may, in its discretion, elect that the Calculation Period be
suspended and, if appropriate, extended with regard to any Requirements. Seller
shall notify the Issuer upon the exercise of Seller’s rights pursuant to this
Section 10 and shall subsequently notify the Issuer on the day Seller believes
that the circumstances giving rise to such exercise have changed. If the
Calculation Period is suspended pursuant to this Section 10, at the end of such
suspension Seller shall determine the number of Trading Days remaining in the
Calculation Period, as appropriate, and the terms of this Transaction shall be
adjusted as set forth above under “Physical Settlement.”
11. Covenants.
(a) The Buyer covenants and agrees:
          (i)(a) that it will not treat this Transaction, any portion hereof, or
any obligation hereunder as giving rise to any interest income or other
inclusions of ordinary income; (b) it will not treat the delivery of any portion
of the Shares or cash to be delivered pursuant to this Transaction as the
payment of interest or ordinary income; (c) it will treat this Transaction in
its entirety as a forward contract for the delivery of such Shares or cash; and
(d) it will not take any action (including filing any tax return or form or
taking any position in any tax proceeding) that is inconsistent with the
obligations contained in (a) through (c). Notwithstanding the preceding
sentence, Buyer may take any action or position required by law, provided that
Buyer delivers to Seller an unqualified opinion of counsel, nationally
recognized as expert in Federal tax matters and acceptable to Buyer, to the
effect that such action or position is required by a statutory change or a
Treasury regulation or applicable court decision published after the Trade Date;
          (ii) that, except as provided in Section 12(c) below, during the term
of this Agreement, neither it nor any of its affiliates shall directly or
indirectly (which shall be deemed to include the writing or purchase of any
cash-settled derivative instrument) purchase Shares (or any security convertible
into or exchangeable for Shares) without the prior written approval of Seller or
take any other action that would cause the purchase by Seller of any Shares in
connection with this Agreement not to comply with Rule 10b-18 under the Exchange
Act (assuming for the purposes of this paragraph that such Rule were otherwise
applicable to such purchases);
          (iii) to comply with all laws, rules and regulations applicable to it
(including, without limitation, the Securities Act of 1933, as amended (the
“Securities Act”) and the Exchange Act) in connection with the transactions
contemplated by this Confirmation;
          (iv) that it is not relying, and has not relied, upon Seller or any of
its representatives or advisors with respect to the legal, accounting, tax or
other implications of this Agreement and that it has conducted its own analyses
of the legal, accounting, tax and other implications of this Agreement, and that
Seller and its affiliates may from time to time effect transactions for their
own account or the account of customers and hold positions in securities or
options on securities of the Buyer and that Seller and its affiliates may
continue to conduct such transactions during the term of this Agreement; and
          (v) that neither it nor any affiliates shall take any action that
would cause Regulation M under the Exchange Act (“Regulation M”), to be
applicable to any purchases of Shares, or any security for which Shares is a
reference security (as defined in Regulation M), by Buyer or any affiliated
purchasers (as defined in Regulation M) during the Calculation Period.

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(b) Seller covenants and agrees that with respect to the purchase of any Shares
in connection with this Agreement, Seller shall make any such purchase in a
manner that Seller reasonably believes, based on the representations and
warranties set forth herein and any other information provided to Seller by
Buyer, would meet the requirements of the safe harbor under the provisions of
Rule 10b-18 as if such purchases were made by Buyer; provided, however, that it
is understood and agreed that Seller will not be obligated to comply with this
paragraph in connection with Seller’s ability to declare a Valuation Date other
than the Scheduled Valuation Date or if an Event of Default, Additional
Disruption Event, Extraordinary Event or Additional Termination Event occurs.
12. Representations, Warranties and Acknowledgments.
(a) The Buyer hereby represents and warrants to Seller that:
          (i) as of the date hereof, the Buyer (A) is not in possession of any
material, non-public information with respect to the Buyer or any of its
securities, and is entering into this Agreement in good faith and not as part of
a plan or scheme to evade the prohibitions of Rule 10b5-1 of the Exchange Act
and (B) agrees not to alter or deviate from the terms of this 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 this Agreement;
          (ii) the transactions contemplated by this Confirmation have been
authorized under Buyer’s publicly announced program to repurchase Shares;
          (iii) the Buyer is not entering into this Agreement to facilitate a
distribution of the Shares (or any security convertible into or exchangeable for
Shares) or in connection with a future issuance of securities except pursuant to
the Buyer’s employee benefit plans and dividend reinvestment plan or other
publicly disclosed transaction;
          (iv) the Buyer is not entering into this Agreement to create actual or
apparent trading activity in the Shares (or any security convertible into or
exchangeable for Shares) or to raise or depress the price of the Shares (or any
security convertible into or exchangeable for Shares); and
          (v) the Buyer is as of the date hereof, and after giving effect to the
transactions contemplated hereby will be, Solvent. As used in this paragraph,
the term “Solvent” means, with respect to a particular date, that on such date
(A) the present fair market value (or present fair saleable value) of the assets
of the Buyer is not less than the total amount required to pay the liabilities
of the Buyer on its total existing debts and liabilities (including contingent
liabilities) as they become absolute and matured, (B) the Buyer is able to
realize upon its assets and pay its debts and other liabilities, contingent
obligations and commitments as they mature and become due in the normal course
of business, (C) assuming consummation of the transactions as contemplated by
this Agreement, the Buyer is not incurring debts or liabilities beyond its
ability to pay as such debts and liabilities mature, (D) the Buyer is not
engaged in any business or transaction, and does not propose to engage in any
business or transaction, for which its property would constitute unreasonably
small capital after giving due consideration to the prevailing practice in the
industry in which the Buyer is engaged and (E) the Buyer is not a defendant in
any civil action that could reasonably be expected to result in a judgment that
Buyer is or would become unable to satisfy.
(b) Seller and the Buyer each hereby acknowledges that any transactions by
Seller in the Shares will be undertaken by Seller as principal for its own
account. All of the actions to be taken by Seller in connection with this
Agreement, shall be taken by Seller independently and without any advance or
subsequent consultation with the Buyer.

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(c) Seller and the Buyer each hereby acknowledges that nothing in this
Confirmation shall prohibit (i) Buyer from engaging in open market repurchase
programs or privately negotiated repurchases prior to the last Valuation Date
outside of any transactions that occur in connection with this Agreement and
(ii) any transactions in the Shares that are effected by an “agent independent
of the issuer” as defined in Rule 10b-18. Buyer hereby agrees that to the extent
it will effect open market repurchases as described above, then Buyer shall
(i) enter into an open market repurchase agreement engaging Seller as agent in
connection with any such repurchases and (ii) shall only communicate any such
open market repurchase orders to the “Designated Seller Personnel”. Designated
Seller Personnel shall mean Marian Kelly (phone: 212-761-5292; email:
Marian.Kelly@morganstanley.com) and Darrell Alfieri (phone: 212-761-5292; email:
Darrell.Alfieri@morganstanley.com).
13. Acknowledgements of Buyer Regarding Hedging and Market Activity. Buyer
agrees, understands and acknowledges that:

  (a)   during the period from (and including) the Trade Date to (and including)
the Settlement Date, Seller and its affiliates may buy or sell Shares or other
securities or buy or sell options or futures contracts or enter into swaps or
other derivative securities in order to adjust its hedge position with respect
to the transactions contemplated by this Transaction;     (b)   Seller and its
affiliates also may be active in the market for the Shares other than in
connection with hedging activities in relation to the transactions contemplated
by this Transaction;     (c)   Seller shall make its own determination as to
whether, when and in what manner any hedging or market activities in the
Issuer’s securities shall be conducted and shall do so in a manner that it deems
appropriate to hedge its price and market risk with respect to 10b-18 VWAP; and
    (d)   any market activities of Seller and its affiliates with respect to the
Shares may affect the market price and volatility of the Shares, as well as the
10b-18 VWAP, each in a manner that may be adverse to Buyer.

14. Indemnification.
          (a) In the event that Seller becomes involved in any capacity in any
action, proceeding or investigation brought by or against any person in
connection with any matter referred to in this Agreement, the Buyer will
reimburse Seller for its reasonable legal and other expenses (including the cost
of any investigation and preparation) incurred in connection therewith. The
Buyer also will indemnify and hold Seller harmless against any losses, claims,
damages or liabilities to which it may become subject in connection with any
matter referred to in this Agreement, except to the extent that any such loss,
claim, damage or liability results from the gross negligence or bad faith of
Seller in effecting the transactions which are the subject of this Agreement;
provided, however, that if it is determined by a court of competent jurisdiction
in a final judgment that Seller is not entitled to be indemnified hereunder in
connection with such matter, then Seller shall reimburse the Buyer for any
expenses or other amounts paid or contributed pursuant to the first, second or
third sentences of this Section 14 and whether paid in cash or Shares pursuant
to Sections 14(b) or (c) below. If for any reason the foregoing indemnification
is unavailable to Seller or insufficient to hold it harmless, then the Buyer
shall contribute to the amount paid or payable by Seller as a result of such
loss, claim, damage or liability in such proportion as is appropriate to reflect
the relative fault of the Buyer on one hand and Seller 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 the Buyer under this Section 14 shall be in addition to any
liability which the Buyer may otherwise have, shall extend upon the same terms
and conditions to any affiliate of Seller and the partners, directors, officers,
agents, employees and controlling persons (if any), as the case may be, of
Seller and any such affiliate and shall be binding upon and inure to the benefit
of any

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successors, assigns, heirs and personal representatives of the Buyer, Seller,
any such affiliate and any such person. The foregoing provisions shall survive
any termination or completion of this Agreement. For the purposes of this
Section 14, the term “Seller” shall include MSCO and its affiliates.
          (b) Subject to Section 14(c), the reimbursement, indemnity and
contribution obligations of the Buyer under Section 14(a) (each, an
“Obligation”) shall be paid promptly in cash.
          (c) In connection with any Obligation under Section 14(b) above, the
Buyer, in lieu of making any cash payment as contemplated by that section, may
elect to satisfy such Obligation by delivering Shares to Seller (such Shares,
the “Indemnity Shares”) by notifying Seller of such election within five Trading
Days of being informed by Seller that such Obligation is due and payable. The
provisions of “Certain Payments and Deliveries by Issuer” in Section 7 above
shall apply to such a share settlement of an Obligation as if the relevant
Obligation was the “Early Settlement Payment” and the Indemnity Shares were
“Early Settlement Shares”. In order to elect to deliver Indemnity Shares, Issuer
must (i) specify whether such Indemnity Shares are to be sold by means of a
registered offering or by means of a private placement and (ii) the conditions
described in Section 8 above must be satisfied as if the Indemnity Shares were
“Early Settlement Shares” and any additional Shares Issuer delivers to reduce
the settlement balance to zero in connection with this Section 14 were
“Make-Whole Shares”.
          (d) Seller will (i) indemnify and hold Buyer harmless against any
losses, claims, damages or liabilities to which it may become subject in
connection with any matter that involves the actual or alleged violation by
Seller of any laws in connection with its performance of the transactions
contemplated under this Agreement, except to the extent that any such loss,
claim, damage or liability results from the gross negligence or bad faith of
Buyer and (ii) reimburse Buyer for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith; provided, however, that if it is determined by a court of competent
jurisdiction in a final judgment that Buyer is not entitled to be indemnified
hereunder in connection with such matter, then Buyer shall reimburse Seller for
any expenses or other amounts paid or contributed pursuant to this
Section 14(d). If for any reason the foregoing indemnification is unavailable to
Buyer or insufficient to hold it harmless, then Seller shall contribute to the
amount paid or payable by Buyer as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the Seller on one hand and Buyer 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 the Seller under this
Section 14(d) shall be in addition to any liability which Seller may otherwise
have, shall extend upon the same terms and conditions to any affiliate of Buyer
and the partners, directors, officers, agents, employees and controlling persons
(if any), as the case may be, of Buyer and any such affiliate and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Buyer, Seller, any such affiliate and any such
person. The foregoing provisions shall survive any termination or completion of
this Agreement. The reimbursement, indemnity and contribution obligations of
Seller under this Section 14(d) shall be paid promptly in cash.
15. The parties hereto agree and acknowledge that Seller is a “financial
participant” within the meaning of Section 101(22) of Title 11 of the United
States Code (the “Bankruptcy Code”). The parties hereto further agree and
acknowledge that this Transaction is either (i) a “securities contract” as such
term is defined in Section 741(7) of the Bankruptcy Code, in which case each
payment and delivery made pursuant to this Transaction is a “settlement
payment”, as such term is defined in Section 741(8) of the Bankruptcy Code, and
that Seller is entitled to the protections afforded by, among other sections,
Sections 362(b)(6), 546(e) and 555 of the Bankruptcy Code, or (ii) a “swap
agreement”, as such term is defined in Section 101(53B) of the Bankruptcy Code,
in which case each party is a “swap participant”, as such term is defined in
Section 101(53C) of the Bankruptcy Code, and that Seller is entitled to the
protections afforded by, among other sections, Sections 362(b)(17), 546(g) and
560 of the Bankruptcy Code.
16. Seller and Issuer hereby agree and acknowledge that Seller has authorized
the Issuer to disclose this Transaction to any and all persons, and there are no
express or implied agreements, arrangements or

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understandings to the contrary, and authorizes the Issuer to use any information
that the Issuer receives or has received with respect to this Transaction in any
manner.
17. Treatment in Bankruptcy; No Setoff; No Collateral.
(a) In the event the Buyer becomes the subject of proceedings (“Bankruptcy
Proceedings”) under the U.S. Bankruptcy Code or any other applicable bankruptcy
or insolvency statute from time to time in effect, any rights or claims of
Seller hereunder in respect of this transaction shall rank for all purposes no
higher than, but on a parity with, the rights or claims of holders of Shares,
and Seller hereby agrees that its rights and claims hereunder shall be
subordinated to those of all parties with claims or rights against the Buyer
(other than common stockholders) to the extent necessary to assure such ranking.
Without limiting the generality of the foregoing, after the commencement of
Bankruptcy Proceedings, the claims of Seller hereunder shall for all purposes
have rights equivalent to the rights of a holder of a percentage of the Shares
equal to the aggregate amount of such claims (the “Claim Amount”) taken as a
percentage of the sum of (i) the Claim Amount and (ii) the aggregate fair market
value of all outstanding Shares on the record date for distributions made to the
holders of such Shares in the related Bankruptcy Proceedings. Notwithstanding
any right it might otherwise have to assert a higher priority claim in any such
Bankruptcy Proceedings, Seller shall be entitled to receive a distribution
solely to the extent and only in the form that a holder of such percentage of
the Shares would be entitled to receive in such Bankruptcy Proceedings, and,
from and after the commencement of such Bankruptcy Proceedings, Seller expressly
waives (i) any other rights or distributions to which it might otherwise be
entitled in such Bankruptcy Proceedings in respect of its rights and claims
hereunder and (ii) any rights of setoff it might otherwise be entitled to assert
in respect of such rights and claims.
          (b) Notwithstanding any provision of this Agreement or any other
agreement between the parties to the contrary, neither the obligations of the
Buyer nor the obligations of Seller hereunder are secured by any collateral,
security interest, pledge or lien.
18. Share Cap. Notwithstanding any other provision of this Agreement to the
contrary, in no event shall the Buyer be required to deliver to Seller a number
of Shares that exceeds the Share Cap (as specified in Schedule I), subject to
reduction by the number of Shares delivered hereunder by the Buyer on any prior
date.
19. Account Details:
Account for Payments to MSCO:                 To be provided separately
Account for Payments to Issuer:                 To be provided by Issuer

20.   Governing law: The laws of the State of New York.       EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS CONFIRMATION OR ANY TRANSACTION
CONTEMPLATED HEREBY.

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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:

                  ALKERMES, INC.       MORGAN STANLEY & CO. INCORPORATED
 
               
By:
  /s/ David A. Broecker       By:   /s/ Kevin Woodruff
 
               
 
  Name: David A. Broecker           Name: Kevin Woodruff
 
  Title: President and CEO           Title: Managing Director
 
               
By:
  /s/ James M. Frates            
 
               
 
  Name: James M. Frates            
 
  Title: Senior Vice President and CFO            

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Schedule I
This Schedule I, dated February 7, 2008 may be amended and/or superseded from
time to time by mutual agreement of both parties. For the purposes of this
Transaction, the following terms shall have the following values/meanings:
1. The Trade Date shall be February 7, 2008
2. The Discount equals USD0.08.
3. The Initial Shares equal 3,373,313 Shares.
4. The Prepayment Amount equals USD60,000,000.
5. The Commission Amount equals zero.
6. The Adjustment Amount equals zero.
7. The Structuring Fee equals zero.
8. The Scheduled Valuation Date shall be May 9, 2008.
9. The Lock-Out Date shall mean March 10, 2008.
10. The Share Cap shall equal the lesser of (i) 8,995,502 Shares and (ii) 20% of
the total number of Shares that Issuer has outstanding as of any day.

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AGREED AND ACKNOWLEDGED (as of the date listed above)

                  ALKERMES, INC.        
 
               
By:
  /s/ David A. Broecker       By:   /s/ James M. Frates
 
               
 
  Name: David A. Broecker           Name: James M. Frates
 
  Title: President and CEO           Title: Senior Vice President and CFO
 
               
MORGAN STANLEY & CO. INCORPORATED
         
 
               
By:
  /s/ Kevin Woodruff            
 
               
 
  Name: Kevin Woodruff            
 
  Title: Managing Director