EX-10.3



 





Exhibit 10.3




Confirmation of OTC Warrant Transaction




	 	 	 
	Date:

	 	October 17, 2007
	 
	 	 
	To:

	 	Morgans Hotel Group Co. (“Counterparty”)
	 

	 	Attention:
	 

	 	Telephone No.:
	 

	 	Facsimile No.:
	 
	 	 
	From:

	 	Merrill Lynch Financial Markets, Inc. (“Dealer” or “MLFM”)
	 

	 	4 World Financial Center 5th Floor
	 

	 	New York, New York 10080
	 

	 	Attention: Corporate Derivatives
	 

	 	Facsimile No.: (212) 738-1069
	 

	 	Telephone No.: (212) 449-6763






MLFM Reference:



 




Dear Sir / Madam:




     The purpose of this letter agreement (this “Confirmation”) is to amend and restate the
terms and conditions of the above-referenced transaction entered into among Counterparty, Dealer
and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Agent”) on the Trade Date
specified below (the “Transaction”). This Confirmation amends, restates, and supercedes in
its entirety the Confirmation in respect of the Transactions dated as of October 11, 2007. This
Confirmation constitutes a “Confirmation” as referred to in the Agreement specified below.



     The definitions and provisions contained in the 2000 ISDA Definitions (the “Swap
Definitions”) and the 2002 ISDA Equity Derivatives Definitions (the “Equity
Definitions” and, together with the Swap Definitions, the “Definitions”), in each case
as published by the International Swaps and Derivatives Association, Inc., are incorporated into
this Confirmation. In the event of any inconsistency between the Swap Definitions and the Equity
Definitions, the Equity Definitions will govern, and in the event of any inconsistency between the
Definitions and this Confirmation, this Confirmation will govern. References herein to a
“Transaction” shall be deemed to be references to a “Share Option Transaction” for the purposes of
the Equity Definitions and to a “Swap Transaction” for the purposes of the Swap Definitions. For
purposes of this Transaction, “Warrant Style”, “Warrant Type”, “Number of Warrants” and “Warrant
Entitlement” (each as defined below) shall be used herein as if such terms were referred to as
“Option Style”, “Option Type”, “Number of Options” and “Option Entitlement”, respectively, in the
Definitions.



     This Confirmation evidences a complete binding agreement between you and us as to the terms of
the Transaction to which this Confirmation relates. This Confirmation (notwithstanding anything to
the contrary herein), shall be subject to, and form part of, an agreement in the 1992 form of the
ISDA Master Agreement (Multicurrency Cross Border) (the “Master Agreement” or
“Agreement”) as if we had executed an agreement in such form (but without any Schedule and
with elections specified in the “ISDA Master Agreement” Section of this Confirmation) on the Trade
Date. In the event of any inconsistency between the provisions of that Agreement and this
Confirmation, this Confirmation will prevail for the purpose of this Transaction. The parties
hereby agree that the Transaction evidenced by this Confirmation shall be the only Transaction
subject to and governed by the Agreement.



     The terms of the particular Transaction to which this Confirmation relates are as follows:




Amended and Restated OTC Warrant Confirmation




 












 





	 	 	 
	General Terms: 
	 	 
	 
	 	 
	Trade Date:

	 	October 11, 2007
	 
	 	 
	Effective Date:

	 	October 17, 2007 subject to cancellation of the OTC Warrant Transaction
prior to 5:00 p.m. (New York City time) on such date by the Counterparty.
In the event of such cancellation, any payments previously made hereunder,
including the Premium, shall be returned to the person making such
payment. In addition, Counterparty shall reimburse Dealer for any costs
or expenses (including market losses) relating to the unwinding of its
hedging activities in connection with the Transaction (including any loss
or cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position).
	 
	 	 
	Warrant Style:

	 	European
	 
	 	 
	Warrant Type:

	 	Call
	 
	 	 
	Seller:

	 	Counterparty
	 
	 	 
	Buyer:

	 	Dealer
	 
	 	 
	Shares:

	 	Shares of Common Stock, $0.01 par value, of Counterparty (Security Symbol:
	 

	 	“MHGC”).
	 
	 	 
	Number of Warrants:

	 	4,276,885
	 
	 	 
	Daily Number of Warrants:

	 	For any day, the unexercised Number of Warrants on such day divided by the
remaining number of Expiration Dates (including such day) and rounded down
to the nearest whole number, with the balance of the Number of Warrants
exercised on the final Expiration Date.
	 
	 	 
	Warrant Entitlement:

	 	One (1) Share per Warrant
	 
	 	 
	Strike Price:

	 	$40.00
	 
	 	 
	Premium:

	 	$22,712,500
	 
	 	 
	Premium Payment Date:

	 	The Effective Date; provided that no cancellation of the Transaction has
occurred prior to 5:00 p.m. (New York City time) on such date by the
Counterparty.
	 
	 	 
	Exchange:

	 	Nasdaq Global Market
	 
	 	 
	Related Exchange(s):

	 	All Exchanges
	 
	 	 
	Full Exchange Business Day:

	 	A Scheduled Trading Day that has a scheduled closing time for its regular
trading session at 4:00 p.m. (New York City time) or the then standard
closing time for regular trading on the Exchange and is not a Disrupted
Day.
	 
	 	 
	Procedures for Exercise:
	 	 
	 
	 	 
	Expiration Time:

	 	11:59 p.m. (New York City time).






2






Amended and Restated OTC Warrant Confirmation











 





	 	 	 	 	 
	Expiration Dates:	 	The 90 consecutive Full Exchange Business Days beginning on and including
January 15, 2015 each shall be the Expiration Date for a number of
Warrants equal to the Daily Number of Warrants on such date.
	 
	 	 	 	 
	Exercise Dates:	 	Each Expiration Date shall be an Exercise Date for a number of Warrants
equal to the Daily Number of Warrants on such date. The Warrants shall
not be exercised prior to the first such Exercise Date.
	 
	 	 	 	 
	Automatic Exercise:	 	Applicable; provided that Section 3.4(a) of the Equity Definitions shall
apply to Cash Settlement and Net Physical Settlement; and provided further
that, unless all Warrants have been previously exercised hereunder, a
number of Warrants for each Expiration Date equal to the Daily Number of
Warrants for such Expiration Date shall be deemed to be automatically
exercised.
	 
	 	 	 	 
	Counterparty’s Telephone
Number and Telex and/or
Facsimile Number and
Contact Details for
purpose of Giving Notice:

	 	Address:
 

Attention:

Facsimile
No.:

Telephone No.:
	 	To be advised.
	 
	 	 	 	 
	Valuation:
	 	 	 	 
	 
	 	 	 	 
	Valuation Dates:	 	Each Exercise Date
	 
	 	 	 	 
	Settlement Terms:
	 	 	 	 
	 
	 	 	 	 
	Cash Settlement:	 	Applicable; provided that it shall be a condition of Counterparty’s right
to elect Cash Settlement that on the date of the Cash Settlement election,
none of Counterparty, its directors, executive officers, or any person
controlling, or exercising influence over, its decision to elect Cash
Settlement is in possession of any material non-public information with
respect to Counterparty or the Shares. If Counterparty elects to settle
the Transaction by Cash Settlement, Counterparty represents and agrees
that:
	 
	 	 	 	 
	 	 	(i) Counterparty is not, on the date of the Cash Settlement election, and
will not be, on any day during the period from and including the first
Expiration Date to and including the final Expiration Date, engaged in a
distribution, as such term is used in Regulation M under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”); and
	 
	 	 	 	 
	 	 	(ii) during the period from and including the first Expiration Date to and
including the final Expiration Date, without the prior written consent of
Dealer, the Counterparty shall not, and shall cause its affiliates and
affiliated purchasers (each as defined in Rule 10b-18 under the Exchange
Act) not to, directly or indirectly (including, without limitation, by
means of a derivative instrument) purchase, offer to purchase, place any
bid or limit order that would effect a purchase of, or commence any tender
offer relating to, any Shares (or equivalent interest, including a unit of
beneficial interest in a trust or limited partnership or a depository
share) or any security convertible into or exchangeable for the Shares.






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Amended and Restated OTC Warrant Confirmation









 





	 	 	 
	Settlement Currency:

	 	USD
	 
	 	 
	Settlement Price:

	 	For each Valuation Date, the Rule 10b-18 Dollar Volume Weighted Average
Price of the Shares (“VWAP”) calculated from 9:45 a.m. to 3:45 p.m., as
observed under the heading Bloomberg “VWAP” on Bloomberg page MHGC.Q
<equity> VAP (or any successor thereto) (or if such volume-weighted
average price is unavailable, the market value of one Share on such
Valuation Date, as determined by the Calculation Agent); provided that, if
the scheduled weekday closing time of the Exchange for any Valuation Date
is later than 4:00 p.m. (without regard to after hours or any other
trading outside of the regular trading session hours) the VWAP shall be
calculated for such Valuation Date from 9:45 a.m. until 15 minutes prior
to such later closing time of the Exchange.
	 
	 	 
	 

	 	Section 6.3(a) of the Equity Definitions is hereby amended by replacing
clause (ii) in its entirety with “(ii) an Exchange Disruption, or” and
inserting immediately following clause (iii) the phrase “; in each case
that the Calculation Agent determines is material.”
	 
	 	 
	Cash Settlement Payment 

Date:

	 	With respect to each Valuation Date, three (3) Currency Business Days
after the final Valuation Date.
	 
	 	 
	Settlement Method Election:

	 	Applicable with respect to Cash Settlement or Net Physical Settlement only.
	 
	 	 
	Electing Party:

	 	Counterparty
	 
	 	 
	Settlement Method Election 

Date:

	 	Ten (10) Business Days prior to the first Expiration Date
	 
	 	 
	Default Settlement Method:

	 	Net Physical Settlement.
	 
	 	 
	Net Physical Settlement:

	 	In the event that the Counterparty elects to settle this Transaction by
Net Physical Settlement, Counterparty shall deliver to Dealer on the
Settlement Date a number of Shares (the “Delivered Shares”) equal to the
Share Delivery Quantity; provided that in the event that the number of
Shares calculated comprises any fractional Share, only whole Shares shall
be delivered and an amount in cash equal to the value of such fractional
share shall be payable by the Counterparty to Dealer in lieu of such
fractional Share. If, in the reasonable opinion of Dealer based on advice
of counsel, for any reason, the Shares deliverable upon Net Physical
Settlement would not be immediately freely transferable by Dealer under
Rule 144(k) under the Securities Act of 1933, as amended (the “Securities
Act”), then Dealer may elect to either (x) accept delivery of such Shares
notwithstanding any restriction on transfer or (y) have the provisions set
forth under “Registration/Private Placement” below apply, mutatis
mutandis.
	 
	 	 
	Share Delivery Quantity:

	 	For each Exercise Date, a number of Shares, as calculated by the
Calculation Agent, equal to the Net Physical Settlement Amount for such
Exercise Date divided by the Settlement Price on the Valuation Date in
respect of such Settlement Date plus an amount in cash in lieu of any
fractional shares (based on the applicable Settlement Price).
	 
	 	 
	Net Physical Settlement 

Amount:

	 	For any Exercise Date, an amount equal to the product of (i) the Number of
Warrants being exercised on the relevant Exercise Date, (ii) the Strike
Price






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Amended and Restated OTC Warrant Confirmation










 





	 	 	 
	 

	 	Differential for such Exercise Date and (iii) the Warrant
Entitlement.
	 
	 	 
	Strike Price Differential:

	 	For any Valuation Date, (i) if the Settlement Price is greater than the
Strike Price, an amount equal to the excess of such Settlement Price over
the Strike Price for such Valuation Date or (ii) if such Settlement Price
is less than or equal to the Strike Price, zero.
	 
	 	 
	Settlement Date:

	 	Settlement with respect to each Exercise Date shall occur on the third
(3rd) Full Exchange Business Day following the final Valuation Date;
provided that Dealer shall have the right to request by prior written
notice to Counterparty a Settlement Date with respect to any Exercise Date
and the related Share Delivery Quantity that is three (3) Full Exchange
Business Days following such Exercise Date. Such request shall not
unreasonably be denied.
	 
	 	 
	Limitations on Net 

Physical Settlement by 

Counterparty:

	 	Notwithstanding anything herein or in the Agreement to the contrary, the
number of Shares that may be delivered at settlement by Counterparty shall
not exceed
6,415,327 Shares at any time (“Maximum Deliverable Share Amount”), as
adjusted by Calculation Agent to account for any subdivision, stock-split,
stock combination, reclassification or similar dilutive or anti-dilutive
event with respect to the Shares.
	 
	 	 
	 

	 	Counterparty represents and warrants that the number of Available Shares
as of the Trade Date is greater than the Maximum Deliverable Share Amount.
Counterparty covenants and agrees that (i) Counterparty shall not take any
action of corporate governance or otherwise to reduce the number of
Available Shares below the Maximum Deliverable Share and (ii) Counterparty
shall use its reasonable efforts to cause the number of Available Shares
at all times to be greater than the Maximum Deliverable Share Amount.
	 
	 	 
	 

	 	For this purpose, “Available Shares” means the number of Shares
Counterparty currently has authorized (but not issued and outstanding)
less the maximum number of Shares that may be required to be issued by
Counterparty in connection with stock options, convertibles, and other
commitments of Counterparty that may require the issuance or delivery of
Shares in connection therewith.
	 
	 	 
	Dividends:
	 	 
	 
	 	 
	Dividends:

	 	If at any time during the period from and including the Trade Date, to and
including the date on which Counterparty has fully performed its
obligations to deliver Shares hereunder, an ex-dividend date for a cash
dividend occurs with respect to the Shares (an “Ex-Dividend Date”), and
that dividend is different from the Regular Dividend on a per Share basis,
then the Calculation Agent will, in its reasonable discretion, adjust the
Strike Price, the Number of Warrants, the Daily Number of Warrants, the
Warrant Entitlement and any other variable it deems appropriate to
preserve the fair value of the Warrants after taking into account such
dividend.
	 
	 	 
	Regular Dividend:

	 	Initially USD $0.00 per Share per quarter in respect of the Shares. In
the event that, in any quarter, a regular quarterly Ex-Dividend Date
occurs for which the amount of the corresponding cash dividend is
different (the “New Dividend Amount”) from the Regular Dividend or no
Ex-Dividend Date occurs (in which case the New Dividend Amount shall be
zero), then following the adjustment by the Calculation Agent pursuant to
“Dividends” above, the Regular Dividend shall






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Amended and Restated OTC Warrant Confirmation










 





	 	 	 
	 

	 	equal the New Dividend
Amount.
	 
	 	 
	Extraordinary Dividends:

	 	Any dividend other than Regular Dividends. For the avoidance of doubt, if
more than one Ex-Dividend Date occurs in a quarter, the Calculation Agent
shall designate any cash dividend other than a Regular Dividend as an
Extraordinary Dividend and will, in its reasonable discretion, adjust the
Strike Price, the Number of Warrants, the Daily Number of Warrants, the
Warrant Entitlement and any other variable it deems appropriate to
preserve the fair value of the Warrants after taking into account such
Extraordinary Dividend.
	 
	 	 
	Adjustments:
	 	 
	 
	 	 
	Method of Adjustment:

	 	Calculation Agent Adjustment
	 
	 	 
	Extraordinary Events:
	 	 
	 
	 	 
	Consequences of Merger
Events:

	 	(a) Share-for-Share: Modified Calculation Agent Adjustment
	 
	 	 
	 

	 	(b) Share-for-Other: Cancellation and Payment (Calculation Agent Determination)
	 
	 	 
	 

	 	(c) Share-for-Combined: Component Adjustment (Calculation Agent Determination)
	 
	 	 
	Tender Offer:

	 	Applicable
	 
	 	 
	Consequences of Tender
Offers:

	 	(a) Share-for-Share: Modified Calculation Agent Adjustment
	 
	 	 
	 

	 	(b) Share-for-Other: Cancellation and Payment (Calculation Agent Determination)
	 
	 	 
	 

	 	(b) Share-for-Combined: Component Adjustment (Calculation Agent Determination)
	 
	 	 
	 

	 	With respect to any Extraordinary Events hereunder, upon the occurrence of
Cancellation and Payment in whole or in part, the parties agree that the
amount to be paid, in accordance with the Equity Definitions, shall
constitute a Transaction Early Termination Amount, subject to satisfaction
by the payment or delivery of Shares or cash as set forth in the Early
Termination section below.
	 
	 	 
	Nationalization, 

Insolvency or Delisting:

	 	Cancellation and Payment (Calculation Agent Determination) (subject to
satisfaction by payment or delivery of Shares or cash as set forth in
“Early Termination” below). In addition to the provisions of Section
12.6(a)(iii) of the Equity Definitions, it will also constitute a
Delisting if the Exchange is located in the United States and the Shares
are not immediately re-listed, re-traded or re-quoted on any of the New
York Stock Exchange, the American 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.






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Amended and Restated OTC Warrant Confirmation










 





	 	 	 
	Determining Party:

	 	Dealer
	 
	 	 
	Additional Disruption 

Events:
	 	 
	 
	 	 
	Change in Law:

	 	Applicable
	 
	 	 
	Failure to Deliver:

	 	Not Applicable
	 
	 	 
	Insolvency Filing:

	 	Applicable
	 
	 	 
	Hedging Disruption Event:

	 	Applicable
	 
	 	 
	Increased Cost of Hedging:

	 	Not Applicable
	 
	 	 
	Loss of Stock Borrow:

	 	Applicable. Section 12.9(b)(iv) of the Equity Definitions is hereby
amended by deleting the text from and including “(A)” to and including
“(B)” and by deleting the words “in each case”.
	 
	 	 
	Maximum Stock Loan Rate:

	 	0.60%
	 
	 	 
	Increased Cost of Stock
Borrow:

	 	Applicable; provided that it shall be a condition to Counterparty’s right
to make the election described in clause (C) of Section 12.9(b)(v) of the
Equity Definitions that on the date of such election, none of
Counterparty, its directors, executive officers, or any person
controlling, or exercising influence over, its decision to make such
election is in possession of any material non-public information with
respect to Counterparty or the Shares; and provided further that, if
Counterparty timely makes the election described in clause (A) or (B) of
Section 12.9(b)(v) of the Equity Definitions, Counterparty shall
thereafter remain entitled, subject to the foregoing condition, to
terminate the Transaction pursuant to Section 12.9(b)(v)(C) of the Equity
Definitions upon ten Scheduled Trading Days’ notice to Dealer. Section
12.9(b)(v) of the Equity Definitions is hereby amended by deleting the
text from and including “(X)” to and including “(Y)”.
	 
	 	 
	Initial Stock Loan Rate:

	 	0.25%
	 
	 	 
	Hedging Party:

	 	Dealer
	 
	 	 
	Determining Party:

	 	Dealer
	 
	 	 
	Non-Reliance:

	 	Applicable
	 
	 	 
	Agreements and
Acknowledgments Regarding
Hedging Activities:

	 	Applicable
	 
	 	 
	Additional Acknowledgments:

	 	Applicable
	 
	 	 
	Other Provisions:
	 	 
	 
	 	 
	Additional Agreements:

	 	If Counterparty would be obligated to pay cash to Dealer pursuant to the
terms of






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Amended and Restated OTC Warrant Confirmation










 





	 	 	 
	 

	 	this Agreement due to an event or circumstance outside
Counterparty’s control without having had the right (other than pursuant
to this paragraph) to elect to deliver Shares in satisfaction of such
payment obligation, then Counterparty may elect to deliver to Dealer a
number of Shares (whether registered or unregistered) having a cash value
equal to the amount of such payment obligation. Such number of Shares to
be delivered shall be the number of Shares, determined by the Calculation
Agent, sufficient for Dealer to realize the cash equivalent of such
payment obligation from proceeds of the sale of such number of Shares over
a reasonable period of time taking into account any applicable discount
(determined in a commercially reasonable manner) to reflect any
restrictions on transfer as well as the market value of the Shares.
Settlement relating to any delivery of Shares pursuant to this paragraph
shall occur within a reasonable period of time. The number of Shares
delivered pursuant to this paragraph shall not exceed the Maximum
Deliverable Share Amount and shall be subject to the provisions under
“Early Termination” hereof regarding Proceeds Amount and the provisions
set forth in subsection (c) under “Additional Agreements, Representations
and Covenants of Counterparty, Etc.” below.
	 
	 	 
	Early Termination:

	 	Notwithstanding any provision to the contrary, upon the designation of an
Early Termination Date or the occurrence of Cancellation and Payment in
whole or in part hereunder (except in the case of an Event of Default in
which Counterparty is the Defaulting Party or a Termination Event in which
Counterparty is the Affected Party, other than an (x) Event of Default of
the type described in Section 5(a)(iii), (v), (vi) or (vii) of the Master
Agreement or (y) a Termination Event of the type described in Section
5(b)(i), (ii), (iii), (iv), or (v) of the Master Agreement that in the
case of either (x) or (y) resulted from an event or events outside
Counterparty’s control), Counterparty’s payment obligation in respect of
this Transaction (which shall, in the case of an Early Termination Date be
determined in accordance with Second Method and Loss) (the “Transaction
Early Termination Amount”) may, at the option of Counterparty, be
satisfied by the delivery of a number of Shares equal to the Transaction
Early Termination Amount divided by the Termination Price (“Early
Termination Stock Settlement”); provided, however, that Counterparty must
notify Dealer of its election of Early Termination Stock Settlement by the
close of business on the day that is two Exchange Business Days following
the day that the notice designating the Early Termination Date, or notice
that an Extraordinary Event has resulted in the cancellation or
termination of the Transaction in whole or in part, is effective.
“Termination Price” means the market value per Share on the date that
Shares are delivered in connection with such Early Termination Date, as
determined by the Calculation Agent in a commercially reasonable manner
taking into account any applicable discount to reflect any restrictions on
transfer.
	 
	 	 
	 

	 	A number of Shares calculated as being due in respect of any Early
Termination Stock Settlement will be deliverable on the third Clearance
System Business Day following the date that notice specifying the number
of Shares deliverable is effective; provided that, if Counterparty is
delivering Shares as a result of a Merger Event, the Settlement Date for
such delivery will be immediately prior to the effective time of the
Merger Event and the Shares will be deemed delivered at such time such
that Dealer will be a holder of the Shares prior to such effective time
and be entitled to receive such merger consideration as a holder of Shares
at such time would be entitled to receive (and references in herein to
Shares shall be deemed to refer to such merger consideration, as
applicable). Section 6(d)(i) of the Agreement is hereby amended by adding
the following words after the word






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Amended and Restated OTC Warrant Confirmation










 





	 	 	 	 	 
	 	 	“paid” in the fifth line thereof: “or
any delivery is to be made, as applicable.”
	 
	 	 	 	 
	 	 	On or prior to the Early Termination Date or date on which notice that an
Extraordinary Event has resulted in the cancellation or termination of the
Transaction in whole or in part is effective, as applicable, if Early
Termination Stock Settlement is elected and if so requested by Dealer upon
advice of counsel, Counterparty shall comply with the provisions set forth
below opposite the caption “Registration/Private Placement”.
	 
	 	 	 	 
	Registration/Private 

Placement:	 	If the provisions under this heading “Registration/Private Placement”
apply, Counterparty shall (subject to its right to make the election
described in the immediately succeeding paragraph) (A) afford Dealer a
reasonable opportunity to conduct a due diligence investigation with
respect to Counterparty that is customary in scope for underwritten
offerings of equity securities that yields a result reasonably
satisfactory to Dealer; (B) enter into a registration rights agreement
with Dealer (a “Registered Settlement”) in form and substance reasonably
acceptable to Dealer which agreement (“Registration Rights Agreement”)
will contain among other things, customary representations and warranties
and indemnification, restrictions on sales during “blackout dates” as
provided for in the Registration Rights Agreement and shall satisfy the
conditions contained therein; and (C) promptly file and procure the
effectiveness a Registration Statement pursuant to Rule 415 under the
Securities Act. If and when such Registration Statement shall have been
declared effective by the Securities and Exchange Commission, Counterparty
shall have made available to Dealer such Prospectuses as Dealer may
reasonably request to comply with the applicable prospectus delivery
requirements for the resale by Dealer of such number of Shares as Dealer
shall specify (or, if greater, the number of Shares that Counterparty
shall specify). Such Registration Statement shall be effective and
Prospectus shall be current until the earliest of the date on which (i)
all the Delivered Shares or Shares delivered by Counterparty in connection
with an Early Termination Date, as the case may be, have been sold, (ii)
Dealer has advised Counterparty that it no longer requires that such
Registration Statement be effective or (iii) all remaining Shares could be
sold by Dealer without registration pursuant to Rule 144 promulgated under
the Securities Act (the “Termination Registration Period”). It is
understood that the Registration Statement and Prospectus will cover a
number of Shares equal to the aggregate number of Shares (if any)
reasonably estimated by Dealer to be potentially deliverable by
Counterparty in connection with Net Physical Settlement or Early
Termination Stock Settlement hereunder, as the case may be, but in no
event exceeding the Maximum Deliverable Share Amount. On each day during
the Termination Registration Period Counterparty shall represent that each
of its filings under the Securities Act, the Exchange Act or other
applicable securities laws that are required to be filed have been filed
and that, as of the respective dates thereof and as of the date of this
representation, they do not contain any untrue statement of a material
fact or omission of a material fact required to be stated therein or
necessary to make the statements made, in the light of the circumstances
under which they were made, not misleading.
	 
	 	 	 	 
	 	 	In lieu of a Registered Settlement, Counterparty may elect, by notice to
Dealer no later than the time the relevant delivery obligation is due ,
that this paragraph shall apply:
	 
	 	 	 	 
	 

	 	 	 	(a) Counterparty shall afford Dealer and any potential institutional






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Amended and Restated OTC Warrant Confirmation










 





	 	 	 	 	 
	 

	 	 	 	purchaser of any Shares identified by Dealer a reasonable opportunity to
conduct a due diligence investigation with respect to Counterparty that is
customary in scope for private placements of equity securities subject to
execution of any customary confidentiality agreements;
	 
	 	 	 	 
	 

	 	 	 	(b) Counterparty shall enter into an agreement (a “Private Placement
Agreement”) with Dealer on commercially reasonable terms in connection
with the private placement of such Shares (including any additional Shares
pursuant to clause (c) below) by Counterparty to Dealer or an affiliate
and the private resale of such shares by Dealer or such affiliate,
substantially similar to private placement purchase agreements customary
for private placements of equity securities, in form and substance
commercially reasonably satisfactory to Dealer, which Private Placement
Agreement shall include provisions relating to the indemnification of, and
contribution in connection with the liability of, Dealer and its
affiliates, shall provide for the payment by Counterparty of all expenses
in connection with such resale, including all reasonable and documented
fees and expenses of counsel for Dealer, shall contain representations,
warranties and agreements of Counterparty reasonably necessary or
advisable to establish and maintain the availability of an exemption from
the registration requirements of the Securities Act for such resales, and
shall use commercially reasonable efforts to provide for the delivery of
accountants’ “comfort letters” to Dealer or such affiliate with respect to
the financial statements and certain financial information contained in or
incorporated by reference into the offering memorandum prepared for the
resale of such Shares;
	 
	 	 	 	 
	 

	 	 	 	(c) Dealer shall sell the Delivered Shares or the Shares delivered
by Counterparty in connection with Early Termination Stock Settlement, as
the case may be, in a commercially reasonable manner until the amount
received by Dealer for the sale of the Shares (the “Proceeds Amount”) is
equal to the Net Physical Settlement Amount or the Transaction Early
Termination Amount, as applicable. Any remaining delivered Shares shall be
returned to Counterparty. If the Proceeds Amount is less than the Net
Physical Settlement Amount or the Transaction Early Termination Amount, as
applicable, Counterparty shall promptly deliver upon notice from Dealer
additional Shares to Dealer until the dollar amount from the sale of such
Shares by Dealer equals the difference between the Net Physical Settlement
Amount or the Transaction Early Termination Amount, as applicable, and the
Proceeds Amount. In no event shall Counterparty be required to deliver to
Dealer a number of Shares greater than the Maximum Deliverable Share
Amount.
	 
	 	 	 	 
	 	 	Notwithstanding the foregoing: (I) if Counterparty has elected to deliver
Shares as described in paragraph (a) above and either (A) Counterparty
does not provide for the sale of the Shares under the Registration
Statement as provided in the Registration Rights Agreement, (B) some
Shares cannot be registered under the Registration Statement due to Rule
415(a)(4) under the Securities Act or (C) some Shares cannot be sold due
to the application of a blackout period or the failure of the Registration
Statement to become effective on or prior to the date on which the
relevant delivery obligation is due, then the provisions of the preceding
paragraph shall apply to the extent Counterparty has not satisfied its
obligations hereunder. (II) If the preceding paragraph is applicable and






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Amended and Restated OTC Warrant Confirmation










 





	 	 	 
	 

	 	Counterparty fails to satisfy its obligations under such paragraph, then
Counterparty may deliver unregistered Shares of equivalent value to the
Net Physical Settlement Amount or the Transaction Early Termination
Amount, as applicable, (or, if applicable, the unsatisfied portion
thereof). The value of any unregistered Shares so delivered shall be
discounted to reflect an appropriate liquidity discount (determined by
Dealer in a commercially reasonable manner, taking into account Dealer’s
policies and determinations with respect to any transfer restrictions that
Dealer deems it advisable to observe in connection with sales of such
Shares). (III) If some or all of the Delivered Shares or Shares delivered
in connection with an Early Termination Stock Settlement, as applicable,
cannot be used to close out stock loans in the shares of Counterparty
entered into to establish or maintain short positions by Dealer in
connection with this Transaction without a prospectus being required by
applicable law to be delivered to such lender, then the value of any such
Shares shall reflect the cost (determined by Dealer in good faith and in a
commercially reasonable manner) to Dealer of trading Shares in order to
close out its hedge position if any, and the number of Shares required to
be delivered shall be adjusted accordingly. In no event shall Counterparty
be required to (i) top-up the delivery in cash or (ii) deliver to Dealer a
number of Shares greater than the Maximum Deliverable Share Amount.
	 
	 	 
	Compliance With Securities 

Laws:

	 	Counterparty represents and agrees that it has complied, and will comply,
in connection with this Transaction and all related or contemporaneous
sales and purchases of Shares, with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder, including, without limitation, Rule 10b-5 and 13e and
Regulation M under the Exchange Act.
	 
	 	 
	 

	 	Each party 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, each party 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 and (iii) the disposition of the Transaction is restricted under this
Confirmation, the Securities Act and state securities laws.

	 
	 	 
	 

	 	Counterparty further represents and
warrants that:
(a) Counterparty is not entering into this Transaction to create actual or
apparent trading activity in the Shares (or any security convertible into
or exchangeable for Shares) or to raise or depress or otherwise manipulate
the price of the Shares (or any security convertible into or exchangeable
for Shares);
	 
	 	 
	 

	 	(b) Counterparty represents and acknowledges that as of the date hereof
and without limiting the generality of Section 13.1 of the Equity
Definitions, Dealer is not making any representations or warranties with
respect to the treatment of the Transaction under FASB Statements 149 or
150, EITF Issue No. 00-19 (or any successor issue statements) or under
FASB’s Liabilities & Equity Project;
	 
	 	 
	 

	 	(c) Counterparty is not, and after giving effect to the Transaction
contemplated hereby, will not be, an “investment company” as such term is
defined in the Investment Company Act of 1940, as amended;






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Amended and Restated OTC Warrant Confirmation










 





	 	 	 
	 

	 	(d) As of the Trade Date and each date on which a payment of cash is made
by Counterparty hereunder, (i) the assets of Counterparty at their fair
valuation exceed the liabilities of Counterparty, including contingent
liabilities; (ii) the capital of Counterparty is adequate to conduct its
business; and (iii) Counterparty has the ability to pay its debts and
other obligations as such obligations mature and does not intend to, or
believe that it will, incur debt or other obligations beyond its ability
to pay as such obligations mature.
	 
	 	 
	Account Details:

	 	Account for payments to Counterparty:
	 

	 	          To be advised.
	 
	 	 
	 

	 	Account for payments to Dealer:
	 

	 	          To be advised.
	 
	 	 
	 

	 	Account for delivery of Shares to Dealer:
	 
	 	 
	 

	 	          To be advised.
	 
	 	 
	Agreement Regarding Shares:

	 	Counterparty agrees that, in respect of any Shares delivered to Dealer,
such Shares shall be, upon such delivery, duly and validly authorized,
issued and outstanding, fully paid and non-assessable and subject to no
adverse claims of any other party. The issuance of such Shares does not
and will not require the consent, approval, authorization, registration or
qualification of any government authority, except such as shall have been
obtained on or before the delivery date of any Shares or as may be
required in connection with any Registration Statement filed with respect
to any Shares.
	 
	 	 
	Bankruptcy Rights:

	 	In the event of Counterparty’s bankruptcy, Dealer’s rights in connection
with this Transaction shall not exceed those rights held by common
shareholders. For the avoidance of doubt, the parties acknowledge and
agree that Dealer’s rights with respect to any other claim arising from
this Transaction prior to Counterparty’s bankruptcy shall remain in full
force and effect and shall not be otherwise abridged or modified in
connection herewith.
	 
	 	 
	Set-Off:

	 	Each party waives any and all rights it may have to set-off, whether
arising under any agreement, applicable law or otherwise.
	 
	 	 
	Transfer:

	 	Neither party may transfer its rights or delegate its obligations under
this Transaction without the prior written consent of the other party,
except that Dealer, after payment in full of the Premium, may assign its
rights and delegate its obligations hereunder, in whole or in part, to any
other person (an “Assignee”) without the prior consent of the
Counterparty, so long as Assignee makes to Counterparty the
representations set forth in the second paragraph under “Compliance with
Securities Laws,” effective (the “Transfer Effective Date”) upon delivery
to Counterparty of an executed acceptance and assumption by the Assignee
(an “Assumption”) of the transferred obligations of Dealer under this
Transaction (the “Transferred Obligations”). Notwithstanding any other
provision in this Confirmation to the contrary requiring or allowing
Dealer to purchase, sell, receive or deliver any Shares or other
securities to or from Counterparty, Dealer may designate any of its
affiliates to purchase, sell, receive or deliver such Shares or other
securities and otherwise to perform Dealer’s






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Amended and Restated OTC Warrant Confirmation










 





	 	 	 
	 

	 	obligations in respect of
this Transaction and any such designee may assume such obligations. Dealer
shall be discharged of its obligations to Counterparty to the extent of
any such performance.
	 
	 	 
	Indemnity:

	 	Counterparty agrees to indemnify Dealer, its Affiliates and their
respective directors, officers, agents and controlling parties (each such
person being an “Indemnified Party”) from and against any and all losses,
claims, damages and liabilities, joint and several, to which such
Indemnified Party may become subject because of a breach of any
representation or covenant hereunder, in the Agreement or any other
agreement relating to the Agreement or Transaction and will reimburse
Indemnified Party for all reasonable expenses (including reasonable legal
fees and expenses) as they are incurred in connection with the
investigation of, preparation for, or defense of, any pending or
threatened claim or any action or proceeding arising therefrom, whether or
not such Indemnified Party is a party thereto. Seller will not be liable
under the foregoing Indemnity provision to the extent that any loss,
claim, damage, liability or expense is found in a final judgment by a
court to have resulted from Dealer’s gross negligence or willful
misconduct.






Additional Agreements, Representations and Covenants of Counterparty, Etc.: 





	(a)	 	Counterparty hereby represents and warrants to Dealer, on each day from the Trade Date to and
including the earlier of (i) November 17, 2007 and (ii) the date by which Dealer is able to
initially complete a hedge of its position created by this Transaction, that:






	 	(1)	 	it will not, and will not permit any person or entity subject to its control
to, bid for or purchase Shares during such period except pursuant to transactions or
arrangements which have been approved by Dealer or an affiliate of Dealer; and
	 
	 	(2)	 	it has publicly disclosed all material information necessary for it to be able
to purchase or sell Shares in compliance with applicable federal securities laws.






	(b)	 	No collateral shall be required by either party for any reason in connection with this Transaction.
	 
	(c)	 	Notwithstanding anything to the contrary herein, Dealer shall not be entitled to exercise any
Warrant or receive any Shares deliverable hereunder, and Automatic Exercise shall not apply
with respect to any Warrant to the extent (but only to the extent) that after such receipt of
any Shares upon the exercise of such Warrant or otherwise hereunder Dealer, or its ultimate
parent entity would, directly or indirectly, be the beneficial owner (as such term is defined
for purposes of Section 13(d) of the Exchange Act) at any time of more than 8.0 percent of the
class of the Counterparty’s outstanding equity securities that is comprised of the Shares (an
“Excess Share Owner”).
	 
	 	 	Dealer shall provide prior notice to Counterparty if the exercise of any Warrant or delivery
of Shares hereunder would cause Dealer to become directly or indirectly, an Excess Share
Owner; provided that the failure of Dealer to provide such notice shall not alter the
effectiveness of the provisions set forth in the preceding sentence and any purported
exercise or delivery in violation of such provisions shall be void and have no effect. If any
delivery owed to Dealer hereunder is not made, in whole or in part, as a result of this
provision, Counterparty’s obligation to make such delivery shall not be extinguished and
Counterparty shall make such delivery as promptly as practicable after Dealer gives notice
that such delivery would not result in Dealer being an Excess Share Owner.
	 
	 	 	If Dealer is not entitled to exercise any Warrant because such exercise would cause Dealer to
become,





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Amended and Restated OTC Warrant Confirmation










 






	 	 	directly or indirectly, an Excess Share Owner and Dealer thereafter disposes of Shares owned
by it or any action is taken that would then permit Dealer to exercise such Warrant without
such exercise causing it to become, directly or indirectly, an Excess Share Owner, then
Dealer shall provide notice of the taking of such action to Counterparty and such Warrant
shall then become exercisable by Dealer to the extent such Warrant is otherwise or had
otherwise become exercisable hereunder. In such event, the Expiration Date with respect to
such Warrant shall be the date on which Counterparty receives such notice from Dealer, and
the related Settlement Date shall be as soon as reasonably practicable after receipt of such
notice but no more than three (3) Exchange Business Days thereafter (but in no event shall
the Settlement Date occur prior to the date on which it would have otherwise occurred but for
the provisions of this subsection); provided that the related Net Physical Settlement
Amount shall be the same as the Net Physical Settlement Amount but for the provisions of this
subsection. In addition, within 30 calendar days of any Settlement Date, Counterparty shall
use its reasonable efforts to refrain from activities that could reasonably be expected to
result in Dealer’s ownership of Shares exceeding 10% of all issued and outstanding Shares.





Matters Relating to Agent: 





	1.	 	Agent will be responsible for the operational aspects of the Transactions effected through
it, such as record keeping, reporting, and confirming Transactions to Counterparty and Dealer;
	 
	2.	 	Unless Counterparty is a “major U.S. institutional investor,” as defined in Rule 15a-6 of the
Exchange Act, neither Counterparty nor Dealer will contact the other without the direct
involvement of Agent;
	 
	3.	 	Agent’s sole role under this Agreement and with respect to any Transaction is as an agent of
Counterparty and Dealer on a disclosed basis and Agent shall have no responsibility or
liability to Counterparty or Dealer hereunder except for gross negligence or willful
misconduct in the performance of its duties as agent. Agent is authorized to act as agent for
Dealer, but only to the extent expressly required to satisfy the requirements of Rule 15a-6
under the Exchange Act in respect of the Options described hereunder. Agent shall have no
authority to act as agent for Counterparty generally or with respect to transactions or other
matters governed by this Agreement, except to the extent expressly required to satisfy the
requirements of Rule 15a-6 or in accordance with express instructions from Counterparty.





Certain Important Information:



Dealer is an OTC Derivatives Dealer registered with the U.S. Securities and Exchange Commission
(SEC). Applicable SEC rules require us to provide you with the following information regarding SEC
regulation of OTC Derivatives Dealers: Dealer is exempt from the provisions of the Securities
Investor Protection Act of 1970 (SIPA), including membership in the Securities Investor Protection
Corporation (SIPC). Therefore, your account is not covered by SIPA protection. Except as otherwise
agreed in writing by you and us, Dealer may repledge and otherwise use in its business collateral
you have pledged to Dealer under the Agreement. Collateral you have pledged to Dealer will not be
subject to the requirements of Securities Exchange Act Rules: 8c-1 and 15c2-1 regarding
hypothecation of collateral; 15c3-2 regarding free credit balances; or 15c3-3 regarding custody of
securities and calculations of a reserve formula applicable to a fully regulated SEC registered
broker or dealer. In the event of Dealer’s failure (by insolvency or otherwise), you would likely
be considered to be an unsecured creditor of Dealer as to any collateral pledged to Dealer under
the Agreement.



Dealer is incorporated in Delaware and is a direct, wholly owned subsidiary of Merrill Lynch & Co.,
Inc. Dealer has entered into this transaction as principal through Agent as its agent. The time of
this Transaction shall be notified to the Counterparty upon request.




ISDA Master Agreement: 



With respect to the Agreement, Dealer and Counterparty each agree as follows:




14






Amended and Restated OTC Warrant Confirmation










 




“Specified Entity” means in relation to Seller and in relation to Counterparty for purposes of this
Transaction: Not applicable.



The definition of “Specified Transaction” in Section 14 of this Agreement is hereby amended by
adding the text “commodity transaction, credit derivative transaction, repurchase or reverse
purchase transaction, securities lending transaction, futures transaction, prime brokerage or
margin lending transaction” after the words “foreign exchange transaction” in the sixth line
thereof and by replacing the words “any other similar transaction” in the eighth line thereof with
the text “any other transaction between the parties”. “Specified Transaction” shall exclude any
default under a Specified Transaction if caused solely by the general unavailability of the
currency in which payments under such Specified Transaction are denominated due to exchange
controls or other governmental action.



The “Cross Default” provisions of Section 5(a)(vi) of the Agreement will not apply to
Dealer and will apply to Counterparty.



“Threshold Amount” means, with respect to Counterparty, $25,000,000.



The “Credit Event Upon Merger” provisions of Section 5(b)(iv) of the Agreement will not
apply to Dealer or to Counterparty.




Additional Termination Event.



The occurrence of any of the following shall constitute an Additional Termination Event with
respect to which the Transaction shall be the sole Affected Transaction and Counterparty shall be
the sole Affected Party; provided that with respect to any Additional Termination Event,
Dealer may choose to treat part of the Transaction as the sole Affected Transaction, and, upon the
termination of the Affected Transaction, a Transaction with terms identical to those set forth
herein except with a Number of Warrants equal to the unaffected number of Warrants shall be treated
for all purposes as the Transaction, which shall remain in full force and effect:





     (i) within the period commencing on the Trade Date and ending on the second anniversary
of the Premium Payment Date (or at the end of such shorter period as specified in Rule 144(k)
under the Securities Act or any successor rule), Buyer reasonably determines that it is
advisable to terminate a portion of the Transaction so that Buyer’s related hedging activities
will comply with applicable securities laws, rules or regulations;




     (ii) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have beneficial ownership of all shares that such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of voting stock
representing 50% or more of the total voting power of all outstanding voting stock of the
company;




     (iii) Counterparty consolidates with, or merges with or into, another person or
Counterparty sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, other than any such transaction (a) entered
into solely for the purpose of changing the Counterparty’s jurisdiction of incorporation and
resulting in a reclassification, conversion or exchange of outstanding shares of common stock
solely into shares of common stock of the surviving entity, or (b) where immediately after
such transaction the person or persons that “beneficially owned” (as defined in Rules 13d-3
and 13d-5 under the Exchange Act) immediately prior to such transaction, directly or
indirectly, voting stock representing a majority of the total voting power of all outstanding
voting stock of Counterparty, “beneficially own or owns” (as so determined), directly or
indirectly, voting stock representing a majority of the total voting power of the outstanding
voting stock of the surviving or transferee person;




     (iv) during any consecutive two-year period, the continuing directors cease for any
reason to constitute a majority of the board of directors of Counterparty;



15






Amended and Restated OTC Warrant Confirmation










 






     (v) the adoption of a plan of liquidation or dissolution of Counterparty; or




     (vi) the Shares (or other common stock into which the Shares have been converted or for
which the Shares have been exchanged in connection with any merger, reclassification or
recapitalization of Counterparty) cease to be listed on a U.S. national securities exchange or
approved for quotation and trading on a national automated dealer quotation system or
established automated over the counter trading market in the U.S. or cease to be so traded or
quoted in contemplation of a delisting or withdrawal of approval.


“Continuing directors” means, as of any date of determination, any member of the board of directors
of Counterparty who was (a) a member of such board of directors on the Effective Date or (b)
nominated for election or elected to such board of directors with the approval of a majority of the
continuing directors who were members of such board at the time of such nomination or election.




     Notwithstanding the foregoing, a transaction described in clause (ii), (iii), (iv) or (v)
above will not constitute an Additional Termination Event if 90% or more of the consideration for
the Shares (excluding cash payments for fractional shares and cash payments made in respect of
dissenters’ appraisal rights) in the transaction or transactions consists of common stock and any
associated rights listed on a United States national securities exchange or quoted on a national
automated dealer quotation system, or which will be so traded or quoted when issued or exchanged in
connection with such transaction, and as a result of such transaction or transactions the notes
become convertible solely into such common stock.


The “Automatic Early Termination” provision of Section 6(a) of the Agreement will not apply
to Dealer or to Counterparty.



Payments on Early Termination. For the purpose of Section 6(e) of the Agreement: (i) Loss
shall apply; and (ii) the Second Method shall apply.



“Termination Currency” means USD.



Tax Representations.





	(I)	 	Payer Representations. For the purpose of Section 3(e) of the Agreement, each party
represents to the other party that it is not required by any applicable law, as modified by
the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to
make any deduction or withholding for or on account of any Tax from any payment (other than
interest under Section 2(e), 6(d)(ii), or 6(e) of the Agreement) to be made by it to the other
party under the Agreement. In making this representation, each party may rely on (i) the
accuracy of any representations made by the other party pursuant to Section 3(f) of the
Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of
the Agreement, and the accuracy and effectiveness of any document provided by the other party
pursuant to Section 4(a)(i) or 4(a)(iii) of the Agreement, and (iii) the satisfaction of the
agreement of the other party contained in Section 4(d) of the Agreement; provided that
it will not be a breach of this representation where reliance is placed on clause (ii) above
and the other party does not deliver a form or document under Section 4(a)(iii) of the
Agreement by reason of material prejudice to its legal or commercial position.
	 
	(II)	 	Payee Representations. For the purpose of Section 3(f) of the Agreement, each party makes the
following representations to the other party:






	 	(i)	 	Dealer represents that it is a company incorporated in Delaware.
	 
	 	(ii)	 	Counterparty represents that it is a corporation incorporated in Delaware.




Delivery Requirements. For the purpose of Sections 4(a)(i) and (ii) of the
Agreement, each party agrees to deliver the following documents:




16






Amended and Restated OTC Warrant Confirmation










 






	(a)	 	Tax forms, documents or certificates to be delivered are:
	 
	 	 	Dealer agrees to complete (accurately and in a manner reasonably satisfactory to
Counterparty), execute, and deliver to Counterparty, United States Internal Revenue Service
Form W-9 and all required attachments, or any successor of such form(s): (i) before the
first payment date under this agreement; (ii) promptly upon reasonable demand by
Counterparty; and (iii) promptly upon learning that any such Form previously provided by
Dealer has become obsolete or incorrect.
	 
	 	 	Counterparty agrees to complete (accurately and in a manner reasonably satisfactory to
Dealer), execute, and deliver to Dealer, United States Internal Revenue Service Form W-9, or
any successor of such form(s): (i) before the first payment date under this agreement; (ii)
promptly upon reasonable demand by Dealer; and (iii) promptly upon learning that any such
form(s) previously provided by Counterparty has become obsolete or incorrect.
	 
	(b)	 	Other documents to be delivered:





	 	 	 	 	 	 	 
	 	 	 	 	 	 	Covered by
	Party Required to	 	 	 	 	 	Section 3(d)
	Deliver Document	 	Document Required to be Delivered	 	When Required	 	Representation
	Counterparty

	 	Evidence of the authority and
true signatures of each official
or representative signing this
Confirmation
	 	Upon or before
execution and
delivery of this
Confirmation
	 	Yes
	 
	 	 	 	 	 	 
	Counterparty

	 	Certified copy of the resolution
of the Board of Directors or
equivalent document authorizing
the execution and delivery of
this Confirmation and such other
certificate or certificates as
Dealer shall reasonably request
	 	Upon or before
execution and
delivery of this
Confirmation
	 	Yes





Effectiveness. If, prior to the Effective Date, Dealer reasonably determines that it is advisable
to cancel the Transaction because of concerns that Dealer’s related hedging activities could be
viewed as not complying with applicable securities laws, rules or regulations, such Transaction
shall be cancelled and shall not become effective, and neither party shall have any obligation in
respect of such Transaction.



Addresses for Notices: For the purpose of Section 12(a) of the Agreement:



Address for notices or communications to Dealer for all purposes:




	 	 	 
	Address:

	 	Merrill Lynch Financial Markets, Inc.
	 

	 	4 World Financial Center, 17th Floor
	 

	 	New York, New York 10080
	 

	 	Merrill Lynch Financial Centre
	Attention:

	 	Manager of Equity Documentation
	Facsimile No.:

	 	(917) 778-0835
	Telephone No.:

	 	(212) 449-1951






17






Amended and Restated OTC Warrant Confirmation










 





Address for notices or communications to Counterparty for all purposes:




	 	 	 
	Address:

	 	To be advised.
	 
	 	 
	 
	 	 
	Attention:
	 	 
	Facsimile No.:
	 	 
	Telephone No.:
	 	 
	 
	 	 
	In addition, in the case of notices or communications relating to Section 5, 6, 11 or 13 of
this Agreement, a second copy of any such notice or communication shall be addressed to the
attention of Counterparty’ General Counsel as follows:
	 
	 	 
	Address:

	 	To be advised.
	 
	 	 
	 
	 	 
	Attention:
	 	 
	Facsimile No.:
	 	 
	Telephone No.:
	 	 





Multibranch Party. For the purpose of Section 10(c) of the Agreement: Neither Dealer nor
Counterparty is a Multibranch Party.



Calculation Agent. “Calculation Agent” means Dealer, acting in good faith and in a commercially
reasonable manner.



Credit Support Document.



Dealer: Not Applicable.



Counterparty: Not Applicable



Credit Support Provider.



With respect to Dealer: Not Applicable.



With respect to Counterparty: Not Applicable.



Governing Law. This Confirmation will be governed by, and construed in accordance with, the laws of
the State of New York.



Submission to Jurisdiction. Each party hereby irrevocably and unconditionally submits for itself
and its property in any legal action or proceeding by the other party against it relating to the
Transaction to which it is a party, or for recognition and enforcement of any judgment in respect
thereof, to the exclusive jurisdiction of the Supreme Court of the State of New York, sitting in
New York County, the courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof.



Waiver of Jury Trial. Each party waives, to the fullest extent permitted by applicable law, any
right it may have to a trial by jury in respect of any suit, action or proceeding relating to this
Transaction. Each party (i) certifies that no representative, agent or attorney of the other party
has represented, expressly or otherwise, that such other party would not, in the event of such a
suit, action or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and
the other party have been induced to enter into this Transaction, as applicable, by, among




18






Amended and Restated OTC Warrant Confirmation










 




other things, the mutual waivers and certifications provided herein.



Netting of Payments. The provisions of Section 2(c) of the Agreement shall not be
applicable to this Transaction.



Basic Representations. Section 3(a) of the Agreement is hereby amended by the deletion of
“and” at the end of Section 3(a)(iv); the substitution of a semicolon for the period at the
end of Section 3(a)(v) and the addition of Sections 3(a)(vi), as follows:





Eligible Contract Participant; Line of Business. Each party agrees and represents that it is
an “eligible contract participant” as defined in Section 1 (a)(12) of the U.S. Commodity
Exchange Act, as amended (“CEA”), this Agreement and the Transaction thereunder are subject
to individual negotiation by the parties and have not been executed or traded on a “trading
facility” as defined in Section 1(a)(33) of the CEA, and it has entered into this
Confirmation and this Transaction in connection with its business or a line of business
(including financial intermediation), or the financing of its business.



Acknowledgements:





	(a)	 	The parties acknowledge and agree that there are no other representations, agreements or
other undertakings of the parties in relation to this Transaction, except as set forth in this
Confirmation.
	 
	(b)	 	The parties hereto intend for:






	 	(i)	 	Buyer to be a “financial institution” as defined in Section 101(22) of Title 11
of the United States Code (the “Bankruptcy Code”) and this Transaction to be a
“securities contract” as defined in Section 741(7) of the Bankruptcy Code and a “swap
agreement” as defined in Section 101(53C) of the Bankruptcy Code, qualifying for the
protections of, among other sections, Sections 362(b)(6), 362 (b)(17), 546(e), 546(g),
555 and 560 of the Bankruptcy Code;
	 
	 	(ii)	 	a party’s right to liquidate this Transaction and to exercise any other
remedies upon the occurrence of any Event of Default under the Agreement with respect
to the other party to constitute a “contractual right” as defined in the Bankruptcy
Code;
	 
	 	(iii)	 	all payments for, under or in connection with this Transaction, all payments
for the Shares and the transfer of such Shares to constitute “settlement payments” as
defined in the Bankruptcy Code.






	(c)	 	The parties acknowledge and agree that in the event of an Early Termination Date as a result
of an Event of Default that is within Counterparty’s control, the amount payable under the
Agreement will be a cash amount calculated as described therein and that any delivery
specified in this Transaction will no longer be required.




Amendment of Section 6(d)(ii). Section 6(d)(ii) of the Agreement is modified by deleting
the words “on the day” in the second line thereof and substituting therefor “on the day that is
three Local Business Days after the day”. Section 6(d)(ii) is further modified by deleting
the words “two Local Business Days” in the fourth line thereof and substituting therefor “three
Local Business Days.”



Consent to Recording. Each party consents to the recording of the telephone conversations of
trading and marketing personnel of the parties and their Affiliates in connection with this
Confirmation. To the extent that one party records telephone conversations (the “Recording Party”)
and the other party does not (the “Non-Recording Party”), the Recording Party shall in the event of
any dispute, make a complete and unedited copy of such party’s tape of the entire day’s
conversations with the Non-Recording Party’s personnel available to the Non-Recording Party. The
Recording Party’s tapes may be used by either party in any forum in which a dispute is sought to be
resolved and the Recording Party will retain tapes for a consistent period of time in accordance
with the Recording




19






Amended and Restated OTC Warrant Confirmation










 




Party’s policy unless one party notifies the other that a particular transaction is under review
and warrants further retention.



Disclosure. Each party hereby acknowledges and agrees that Dealer has authorized Counterparty to
disclose this Transaction and any related hedging transaction between the parties if and to the
extent that Counterparty reasonably determines (after consultation with Dealer) that such
disclosure is required by law or by the rules of the New York Stock Exchange or any securities
exchange. Notwithstanding the foregoing, effective from the date of commencement of discussions
concerning the Transaction, Counterparty and each of its employees, representatives, or other
agents may disclose to any and all persons, without limitation of any kind, the tax treatment and
tax structure of the Transaction and all materials of any kind (including opinions or other tax
analyses) that are provided to Counterparty relating to such tax treatment and tax structure.



Severability. If any term, provision, covenant or condition of this Confirmation, or the
application thereof to any party or circumstance, shall be held to be invalid or unenforceable in
whole or in part for any reason, the remaining terms, provisions, covenants, and conditions hereof
shall continue in full force and effect as if this Confirmation had been executed with the invalid
or unenforceable provision eliminated, so long as this Confirmation as so modified continues to
express, without material change, the original intentions of the parties as to the subject matter
of this Confirmation and the deletion of such portion of this Confirmation will not substantially
impair the respective benefits or expectations of parties to this Agreement; provided,
however, that this severability provision shall not be applicable if any provision of
Section 2, 5, 6 or 13 of the Agreement (or any definition or
provision in Section 14 to the extent that it relates to, or is used in or in connection
with any such Section) shall be so held to be invalid or unenforceable.



Affected Parties. For purposes of Section 6(e) of the Agreement, each party shall be deemed
to be an Affected Party in connection with Illegality and any Tax Event.




[Signatures follow on separate page]




20






Amended and Restated OTC Warrant Confirmation










 





     Please confirm that the foregoing correctly sets forth the terms of our agreement by executing
the copy of this Confirmation enclosed for that purpose and returning it to us.



	 	 	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 	 	 
	 	 	MERRILL LYNCH FINANCIAL MARKETS, INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Fran Jacobson
	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Fran Jacobson	 	 
	 

	 	Title:	 	Authorized Signatory	 	 






Confirmed as of the date first above written:

MORGANS HOTEL GROUP CO.




	 	 	 	 	 
	By:

	 	/s/ Marc Gordon
	 	 
	 

	 	 	 	 
	Name:	 	Marc Gordon
	Title:	 	Chief Investment Officer & Executive
	 	 	Vice President of Capital Markets






Acknowledged and agreed as to matters to the Agent:




MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED




Solely in its capacity as Agent hereunder




	 	 	 	 	 
	By:

	 	/s/ Angelina Lopes
	 	 
	 

	 	 	 	 
	Name:	 	Angelina Lopes
	Title:	 	Authorized Signatory







 



Amended and Restated OTC Warrant Confirmation