Document:

exv10w6

Exhibit 10.6

Capped Call Transaction

	 	 	 
	Date:

	 	June 26, 2008
	 
	 	 
	To:

	 	Evergreen Solar, Inc.
	 

	 	138 Bartlett Street
	 

	 	Marlboro, Massachusetts 01752
	 

	 	Telephone No.: (508) 357-2221
	 

	 	Facsimile No.: (646) 885-9546]
	 
	 	 
	From:

	 	Lehman Brothers OTC Derivatives Inc., acting as principal
	 

	 	c/o Lehman Brothers Inc.
	 

	 	745 Seventh Avenue
	 

	 	New York, New York 10019
	 

	 	Attention: Andrew Yare, Capital Markets Contracts — Legal
	 

	 	Telephone No.: 646-333-9493
	 

	 	Facsimile No.: 646-885-9546 (United States of America)
	 
	 	 
	Ref. Numbers:

	 	Global Deal ID: [  ]

Dear Sir or Madam:

The purpose of this communication (this “Confirmation”) is to confirm the terms and conditions of
the transaction (the “Transaction”) entered into between Lehman Brothers OTC Derivatives Inc.
(“Party A”) and Evergreen Solar, Inc. (“Party B”) on the Trade Date specified below. This
Confirmation constitutes a “Confirmation” as referred to in the Agreement specified below. This
Confirmation is sent on behalf both Party A and Lehman Brothers Inc. (“LBI”). Lehman Brothers OTC
Derivatives Inc. is not a member of the Securities Investor Protection Corporation.

This Confirmation evidences a complete and binding agreement between Party A and Party B as to the
terms of the Transaction to which this Confirmation relates. This Confirmation supplements, forms
part of, and is subject to, an agreement in the form of the 1992 ISDA Master Agreement
(Multicurrency—Cross Border) (the “Agreement”) as if we had executed an agreement in such form
(but without any Schedule except for the elections set forth herein) on the Trade Date of the
Transaction.

The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the
“Equity Definitions”) and the 2000 ISDA Definitions (the “Swap Definitions”, and together with the
Equity Definitions, the “Definitions”), in each case as published by the International Swaps and
Derivatives Association, Inc. (“ISDA”) are incorporated into this Confirmation. The Transaction
constitutes a Share Option Transaction for the purposes of the Equity Definitions. References
herein to “Transaction” shall be deemed references to “Swap Transaction” for purposes of the Swap
Definitions. In the event of any inconsistency between the Equity Definitions and the Swap
Definitions, the Equity Definitions will govern. In the event of any inconsistency between either
set of Definitions and this Confirmation, this Confirmation will govern.

Certain defined terms used herein have the meanings assigned to them in the Offering Memorandum
dated June 26 2008 (the “Offering Memorandum”) relating to the USD325 million aggregate principal
amount of 4.00% Convertible Senior Notes due 2013 (the “Convertible Notes” and each USD1,000
principal amount of Convertible Notes, a “Convertible Note”) issued by Party B pursuant to an
Indenture to be dated as of July 2, 2008 between Party B and U.S. Bank, as trustee (as in effect on
the date of its execution, the “Indenture”). In the event of any inconsistency between the terms
defined in the Offering Memorandum, the Indenture and this Confirmation, this Confirmation shall
govern. The parties acknowledge that this

 

 

Confirmation is entered into on the date hereof with the understanding that (i) definitions set
forth in the Indenture that are also defined herein by reference to the Indenture and (ii) sections
of the Indenture that are referred to herein, in each case, will conform to the descriptions
thereof in the Offering Memorandum. If any such definitions in the Indenture or any such sections
of the Indenture differ from the descriptions thereof in the Offering Memorandum, the descriptions
thereof in the Offering Memorandum will govern for purposes of this Confirmation. The parties
further acknowledge that the Indenture section numbers used herein are based on the draft of the
Indenture last reviewed by Party A and Party B as of the date of this Confirmation, and if any such
section numbers are changed in the Indenture as executed, the parties will amend this Confirmation
in good faith to preserve the intent of the parties. For the avoidance of doubt, references to the
Indenture herein are references to the Indenture as in effect on the date of its execution and if
the Indenture is amended following its execution, any such amendment will be disregarded for
purposes of this Confirmation unless the parties agree otherwise in writing.

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

	 	 	 	 	 	 	 
	General Terms:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Agent:
	 	LBI is acting as agent on behalf of Party A
and Party B for the Transaction. LBI has no
obligations, by guarantee, endorsement or
otherwise, with respect to the performance
of the Transaction by either party.

	 
	 	 	 	 	 	 
	 

	 	Trade Date:
	 	June 26, 2008

	 
	 	 	 	 	 	 
	 

	 	Option Style:
	 	“Modified American” as set forth under
“Procedures for Exercise” below.

	 
	 	 	 	 	 	 
	 

	 	Option Type:
	 	Call

	 
	 	 	 	 	 	 
	 

	 	Seller:
	 	Party A

	 
	 	 	 	 	 	 
	 

	 	Buyer:
	 	Party B

	 
	 	 	 	 	 	 
	 

	 	Shares:

Number of Options:
	 	The common stock of Evergreen Solar, Inc.
(the “Issuer”), par value USD0.01 per share,
Ticker: ESLR

325,000, provided that if Lehman Brothers
Inc. as representative of the Initial
Purchasers (as defined in the Underwriting
Agreement dated as of June 26, 2008 between
Party B and Lehman Brothers Inc. as
representative of the underwriters party
thereto (the “Underwriting Agreement”)),
exercises the option to purchase additional
Convertible Notes pursuant to Section 2 of
the Underwriting Agreement, the Number of
Options hereunder shall be automatically
increased, effective upon payment by Party B
of the Additional Premium on the Additional
Premium Payment Date, by the Applicable
Percentage times the number of Convertible
Notes in denominations of USD1,000 principal
amount issued pursuant to such exercise
(such Convertible Notes, the “Additional
Convertible Notes”). For the avoidance of
doubt, the Number of Options shall be
reduced by the number of any Options
exercised or terminated by Party B. In no
event will the Number of Options be less
than zero.

2

 

	 	 	 	 	 	 	 
	 

	 	Option Entitlement:
	 	As of any date, a number equal to the
Conversion Rate as of such date (as defined
in the Indenture, but without regard to any
adjustments to the Conversion Rate pursuant
to Section 9.04(b) or Section 9.05(h) of the
Indenture) for each Convertible Note.

	 
	 	 	 	 	 	 
	 

	 	Applicable Percentage:
	 	100%	 	 
	 
	 	 	 	 	 	 
	 

	 	Number of Shares:
	 	The product of the Number of Options and the Option Entitlement.

	 
	 	 	 	 	 	 
	 

	 	Strike Price:
	 	
USD $12.1125

	 
	 	 	 	 	 	 
	 

	 	Cap Price:
	 	USD$19.00

	 
	 	 	 	 	 	 
	 

	 	Premium:
	 	USD59,247,500 (Premium per Option: USD182.3)
which shall be paid as (i) an upfront
premium of USD34,385,000 on the Initial
Premium Payment Date and (ii) 9 subsequent
equal installments of USD2,762,500 where one
such installment is paid on each Premium
Payment Date (each, an “Installment
Premium”), provided that if the Number of
Options is increased pursuant to the proviso
to the definition of “Number of Options”
above, (A) Party B shall pay on the
Additional Premium Payment Date an
additional premium (the “Additional
Premium”) equal to the product of (1) the
quotient of the number of Options by which
the Number of Options is so increased
divided by the Number of Options prior to
such increase (such quotient, the “Upsize
Percentage”) multiplied by (2)
USD34,385,000 and (B) each of the 9
remaining Installment Premiums shall be
increased by an amount equal to the product
of (x) the Installment Premium multiplied by
(y) the Upsize Percentage.

	 
	 

	 	Initial Premium Payment Date:
	 	4 Currency Business Days after the Trade Date

	 
	 	 	 	 	 	 
	 

	 	Premium Payment Dates:
	 	January 15 and July 15 of each year
commencing on January 15, 2009 and ending on
January 15, 2013; provided that if any such
day is not a Currency Business Day, the
applicable Premium Payment Date shall be the
immediately following Currency Business Day.

	 
	 	 	 	 	 	 
	 

	 	Additional Premium Payment Date:
	 	The closing date for the purchase and sale
of the Additional Convertible Notes.

	 
	 	 	 	 	 	 
	 

	 	Exchange:
	 	NASDAQ Global Market

	 
	 	 	 	 	 	 
	 

	 	Related Exchange(s):
	 	All Exchanges

	 
	 	 	 	 	 	 
	 

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

3

 

	 	 	 	 	 	 	 
	 

	 	 	 	inserting the words “at any time on
any Averaging Date for an aggregate one half
hour period or a period of any duration if
such period occurs in the one-hour period
that ends at the relevant Valuation Time,
Latest Exercise Time, Knock-in Valuation
Time or Knock-out Valuation Time, as the
case may be” after the word “material,” in
the third line thereof.

	 
	 	 	 	 	 	 
	 

	 	Disrupted Day:
	 	The definition of “Disrupted Day” in Section
6.4 of the Equity Definitions shall be
amended by adding the following sentence
after the first sentence: “A Scheduled
Trading Day on which a Related Exchange
fails to open during its regular trading
session will not be a Disrupted Day if the
Calculation Agent determines that such
failure will not have a material adverse
impact on Party A’s ability to unwind any
related hedging transactions related to the
Transaction.”

	 
	 	 	 	 	 	 
	Procedure for Exercise:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Exercise Period:
	 	Notwithstanding anything to the contrary in
the Equity Definitions, an Exercise Period
shall occur with respect to an Option
hereunder only if such Option is an
Exercisable Option (as defined below) and
the Exercise Period shall be, in respect of
any Exercisable Option, the period
commencing on, and including, the relevant
Conversion Date and ending on, but
excluding, the first Averaging Date in
respect of such Conversion Date; provided
that in respect of any Exercisable Options
relating to Convertible Notes for which the
relevant Conversion Date occurs during the
period beginning on, and including, the 25th
scheduled trading day prior to the
Expiration Date, the final day of the
Exercise Period shall be the Scheduled
Trading Day immediately prior to the
Expiration Date (such Exercise Period, the
“Final Exercise Period”).

	 
	 	 	 	 	 	 
	 

	 	Conversion Date:
	 	With respect to any conversion of
Convertible Notes, the date on which the
holder of such Convertible Notes satisfies
all of the requirements for conversion
thereof as set forth in Section 9.02 of the
Indenture.

	 
	 	 	 	 	 	 
	 

	 	Exercisable Options:
	 	Upon the occurrence of a Conversion Date, a
number of Options equal to (x) the
Applicable Percentage times (y) the number
of Convertible Notes in denominations of
USD1,000 principal amount converted on such
Conversion Date.

	 
	 	 	 	 	 	 
	 

	 	Expiration Time:
	 	The Valuation Time

	 
	 	 	 	 	 	 
	 

	 	Expiration Date:
	 	July 15, 2013

	 
	 	 	 	 	 	 
	 

	 	Multiple Exercise:
	 	Applicable, as described under “Exercisable
Options” above.

4

 

	 	 	 	 	 	 	 
	 

	 	Automatic Exercise:
	 	Applicable; and means that, in respect of
any Exercise Period other than the Final
Exercise Period, a number of Options not
previously exercised hereunder equal to the
number of Exercisable Options shall be
deemed to be exercised on the relevant
Averaging Dates to which such Options relate
and, in respect of the Final Exercise
Period, all Options not previously exercised
shall be deemed exercised on the relevant
Averaging Dates to which such Options
relate; provided that in each case, if a
Notice of Exercise is required, such Options
shall be deemed exercised only to the extent
that Party B has provided a Notice of
Exercise to Party A (in each case, such
number of Options deemed exercised, the
“Exercised Options”); provided further that,
with respect to Exercised Options relating
to an Exercise Period occurring prior to the
Final Exercise Period (an “Early
Conversion”), Automatic Exercise means that
an Additional Termination Event shall be
deemed to occur with respect to a portion of
the Transaction relating to a number of
Options equal to the number of such
Exercised Options, as provided in clause (i)
under “Additional Termination Events” below;
provided further that to the extent the
number of Exercised Options relating to any
Conversion Date is less than the number of
Exercisable Options relating to such
Conversion Date, Party B shall be deemed to
make to Party A on the date it provided the
related Notice of Exercise to Party A (or,
if no such notice is provided, the final day
of such Exercise Period) the representations
and warranties contained in paragraphs (g)
and (i) under “Additional Representations
and Warranties of Party B” below as if the
reference therein to “at the time of placing
any order with respect to the Transaction”
were replaced with “as of the date of the
related Notice of Exercise (or, if no such
notice is provided, the final day of the
related Exercise Period).”

	 
	 	 	 	 	 	 
	 

	 	Notice of Exercise:
	 	Notwithstanding anything to the contrary in
the Equity Definitions, in order to exercise
any Exercisable Options in respect of any
Conversion Date occurring prior to the Final
Exercise Period, Party B must notify Party A
in writing before 5:00 p.m. (New York City
time) on the Scheduled Trading Day prior to
the first scheduled Averaging Date for the
Exercisable Options being exercised of (i)
the number of such Options, and (ii) such
first scheduled Averaging Date and the
scheduled Settlement Date.

	 
	 	 	 	 	 	 
	Valuation:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Valuation Time:
	 	At the close of trading on the Exchange,
without regard

5

 

	 	 	 	 	 	 	 
	 

	 	 	 	to extended or after hours trading.

	 
	 	 	 	 	 	 
	 

	 	Averaging Dates:
	 	(x) For any Exercised Option relating to an
Exercise Period occurring prior to the Final
Exercise Period, the 20 consecutive
Scheduled Trading Days commencing on and
including the third “Settlement Period
Trading Day” (as defined in the Indenture)
following the relevant Conversion Date, or
(y) for any Exercisable Option relating to
the Final Exercise Period, the 20
consecutive Scheduled Trading Days
commencing on, and including, the
22nd Scheduled Trading Day
immediately preceding the Expiration Date.

	 
	 	 	 	 	 	 
	 

	 	Averaging Date Market Disruption:
	 	Modified Postponement; provided that,
notwithstanding anything to the contrary in
the Equity Definitions and in addition to
the provisions of Section 6.7(c)(iii) of the
Equity Definitions, if any Averaging Date is
a Disrupted Day, the Calculation Agent may
assign additional dates to be Averaging
Dates and/or make adjustments to the number
of Options to which each Averaging Date
relates (including increasing such number or
reducing such number to zero with respect to
one or more Averaging Dates).

	 
	 	 	 	 	 	 
	 

	 	Relevant Price:
	 	For any Averaging Date, the VWAP Price for
such Averaging Date.

	 
	 	 	 	 	 	 
	 

	 	VWAP Price:
	 	For any Exchange Business Day, the dollar
volume weighted average price per Share for
that Exchange Business Day based on
transactions executed during that Exchange
Business Day on the Exchange, as reported on
Bloomberg Page “ESLR <Equity> AQR” (or
any successor thereto), or in the event such
price is not so reported on such Exchange
Business Day for any reason, as reasonably
determined by the Calculation Agent.

	 
	 	 	 	 	 	 
	Settlement Terms:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Settlement Currency:
	 	USD

	 
	 	 	 	 	 	 
	 

	 	Settlement Date:
	 	For any Exercised Option, the date Shares
will be delivered with respect to the
Convertible Notes related to such Exercised
Options, under the terms of the Indenture.

	 
	 	 	 	 	 	 
	 

	 	Settlement Method Election:
	 	Not Applicable

	 
	 	 	 	 	 	 
	 

	 	Settlement Method:
	 	Physical Settlement

	 
	 	 	 	 	 	 
	 

	 	Physical Settlement:
	 	With respect to any Exercised Options, a
relevant portion of the Transaction shall
expire on each Averaging Date with respect
to a number of Options equal to the relevant
number of Exercised Options divided by the
number of scheduled Averaging Dates, rounded
down to the nearest whole number, except the

6

 

	 	 	 	 	 	 	 
	 

	 	 	 	portion relating to the last such Averaging
Date shall equal such relevant number of
Exercised Options minus the number of
Options relating to all preceding Averaging
Dates relating to such Exercised Options (in
each case subject to adjustment by the
Calculation Agent in respect of any
Disrupted Day). On the Settlement Date
relating to the relevant Exercised Options,
Party A shall deliver to Party B the
aggregate Number of Shares to be Delivered
for all related Averaging Dates and pay to
Party B any Fractional Share Amount
resulting from such aggregation (valued at
the Relevant Price for the last Averaging
Date).

	 
	 	 	 	 	 	 
	 

	 	Number of Shares to be Delivered:
	 	An amount of Shares equal to the Physical
Settlement Amount for such Averaging Date
divided by the Relevant Price for such
Averaging Date.

	 
	 	 	 	 	 	 
	 

	 	Physical Settlement Amount:
	 	For each Averaging Date, an amount, as
calculated by the Calculation Agent, equal
to (i) the Strike Price Differential for
such Averaging Date, multiplied by (ii) the
number of Options to which such Averaging
Date relates, multiplied by (iii) the Option
Entitlement as of such Averaging Date.

	 
	 	 	 	 	 	 
	 

	 	Strike Price Differential:
	 	For each Averaging Date, if the Relevant
Price for such Averaging Date is (a) greater
than the Strike Price and less than or equal
to the Cap Price, an amount equal to the
excess of the Relevant Price for such
Averaging Date over the Strike Price, (b)
greater than the Cap Price, an amount equal
to the excess of the Cap Price over the
Strike Price, or (c) less than or equal to
the Strike Price, zero.

	 
	 	 	 	 	 	 
	 

	 	Other Applicable Provisions
in Respect of Physical Settlement:
	 	The representations and agreements contained
in Section 9.11 of the Equity Definitions
shall be modified by excluding any
representations therein relating to
restrictions, obligations, limitations or
requirements under applicable securities
laws that exist as a result of the fact that
Party B is the issuer of the Shares.

	 
	 	 	 	 	 	 
	Share Adjustments:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Potential Adjustment Events:
	 	Notwithstanding Section 11.2(e) of the
Equity Definitions, a “Potential Adjustment
Event” means an occurrence of any event or
condition, as set forth in Section 9.05 of
the Indenture, that would result in an
adjustment to the Conversion Rate of the
Convertible Notes; provided that in no event
shall there be any adjustment hereunder as a
result of an adjustment to the Conversion
Rate pursuant to Section 9.04(b) or Section
9.05(h) of the Indenture.

7

 

	 	 	 	 	 	 	 
	 

	 	Method of Adjustment:
	 	Calculation Agent Adjustment; which means,
notwithstanding anything to the contrary in
the Equity Definitions, upon any adjustment
to the Conversion Rate of the Convertible
Notes pursuant to the Indenture (other than
pursuant to Section 9.04(b) or Section
93.05(h) of the Indenture) (i) the
Calculation Agent shall make a corresponding
adjustment to any of the Strike Price,
Number of Options and the Option Entitlement
and (ii) the Calculation Agent may, but is
not required to, make any adjustment
consistent with the Calculation Agent
Adjustment set forth in Section 11.2(c) of
the Equity Definitions to the Cap Price or
any other variable relevant to the exercise,
settlement or payment for the Transaction to
preserve the fair value of the Options to
Party A after taking into account the effect
of such Potential Adjustment Event;
provided, that adjustments may be made to
account for changes in volatility, expected
dividends, stock loan rate and liquidity
relevant to the Shares or to the
Transaction; provided further, that in no
event shall the Cap Price be less than the
Strike Price.

	 
	 	 	 	 	 	 
	Extraordinary Events:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Merger Events:
	 	Notwithstanding Section 12.1(b) of the
Equity Definitions, a “Merger Event” means
the occurrence of any event or condition set
forth in Section 9.06(a) or Section 9.06(b)
of the Indenture.

	 
	 	 	 	 	 	 
	 

	 	Tender Offers:
	 	Applicable; provided that notwithstanding
Section 12.1(d) of the Equity Definitions, a
“Tender Offer” means the occurrence of any
event or condition set forth in Section
9.05(f) or clauses (1) or (2) of the
definition of Fundamental Change in Section
2 of the Indenture.

	 
	 	 	 	 	 	 
	 

	 	Consequence of Merger Events/Tender
Offers:
	 	Notwithstanding Sections 12.2 and 12.3 of
the Equity Definitions, upon the occurrence
of a Merger Event or a Tender Offer:

	 
	 	 	 	 	 	 
	 

	 	 	 	(i) the Calculation Agent shall make a
corresponding adjustment in respect of any
adjustment under the Indenture to any one or
more of the nature of the Shares, Strike
Price, Number of Options and the Option
Entitlement; provided, however, that such
adjustment shall be made without regard to
any adjustment to the Conversion Rate for
the issuance of additional shares as set
forth in Section 9.04(b) or Section 9.05(h)
of the Indenture; and

	 
	 	 	 	 	 	 
	 

	 	 	 	(ii) the Calculation Agent may, in its sole discretion, make any adjustment
consistent with the Modified Calculation Agent Adjustment set forth in Section

8

 

	 	 	 	 	 	 	 
	 

	 	 	 	12.2(e) or 12.3(d) of the Equity
Definitions, as applicable, to the Cap Price
or any other variable relevant to the
exercise, settlement or payment for the
Transaction;

	 
	 	 	 	 	 	 
	 

	 	 	 	provided, further, that, for the avoidance
of doubt, adjustments shall be made pursuant
to the provisions of subparagraphs (i) and
(ii) above regardless of whether any Merger
Event or Tender Offer gives rise to an Early
Conversion; and

	 
	 	 	 	 	 	 
	 

	 	 	 	provided further that, notwithstanding the
foregoing, with respect to any Majority
Tender Offer, Party A may elect for
Cancellation and Payment (Calculation Agent
Determination) to apply. “Majority Tender
Offer” means a Tender Offer as defined in
Section 12.1(d) of the Equity Definitions
that results in the relevant entity or
person purchasing, or otherwise obtaining or
having the right to obtain, by conversion or
other means, 50% or greater than 50% of the
outstanding voting shares of the Issuer, as
determined by the Calculation Agent, based
upon the making of filings with governmental
or self-regulatory agencies or such other
information as the Calculation Agent deems
relevant.

	 
	 	 	 	 	 	 
	 

	 	Modified Calculation Agent

Adjustment:
	 	For greater certainty, the definition of
“Modified Calculation Adjustment” in
Sections 12.2 and 12.3 of the Equity
Definitions shall be amended by adding the
following italicized language after the
stipulated parenthetical provision:

	 

	 	 	 	“(including adjustments to account for
changes in volatility, expected dividends,
stock loan rate or liquidity relevant to the
Shares or to the Transaction) from the
Announcement Date to the Merger Date
(Section 12.2) or Tender Offer Date (Section
12.3).”

	 
	 	 	 	 	 	 
	 

	 	Announcement Event:
	 	If an Announcement Event occurs, the
Calculation Agent will determine the
economic effect of the Announcement Event on
the theoretical value of the Transaction
(including without limitation any change in
volatility, expected dividends, stock loan
rate or liquidity relevant to the Shares or
to the Transaction) from the Announcement
Date to the Expiration Date. If such
economic effect is material, the Calculation
Agent may, in its sole discretion, adjust
the terms of the Transaction to reflect such
economic effect. “Announcement Event” shall
mean the occurrence of (i) the first public
announcement of an intention to engage in a
transaction that may lead to a Merger Event,
(ii) the first public announcement of an
intention to purchase or otherwise obtain
the requisite number of shares that may lead
to a Tender Offer or (iii) in each

9

 

	 	 	 	 	 	 	 
	 

	 	 	 	case, any
subsequent amendment to or withdrawal of
such announcement.

	 
	 	 	 	 	 	 
	 

	 	Composition of Combined Consideration:
	 	Not Applicable

	 
	 	 	 	 	 	 
	 

	 	Nationalization, Insolvency or Delisting:
	 	Cancellation and Payment

	 
	 	 	 	 	 	 
	 

	 	 	 	     (Calculation Agent Determination)

	 
	 	 	 	 	 	 
	 

	 	Delisting:
	 	The definition of “Delisting” in Section
12.6 of the Equity Definitions shall be
deleted in its entirety and replaced with
the following: ‘“Delisting” means that the
Exchange announces that pursuant to the
rules of such Exchange, the Shares cease (or
will cease) to be listed, traded or publicly
quoted on the Exchange for any reason (other
than a Merger Event or Tender Offer) and are
not immediately re-listed, re-traded or
re-quoted on the New York Stock Exchange,
the American Stock Exchange, the NASDAQ
Global Select Market or the NASDAQ Global
Market (or their respective successors)”

	 
	 	 	 	 	 	 
	Additional Disruption Events:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Change in Law:
	 	Applicable

	 
	 	 	 	 	 	 
	 

	 	Failure to Deliver:
	 	Applicable

	 
	 	 	 	 	 	 
	 

	 	Insolvency Filing:
	 	Applicable

	 
	 	 	 	 	 	 
	 

	 	 	 	The definition of “Insolvency Filing” in
Section 12.9 of the Equity Definitions shall
be amended by deleting the clause “provided
that such proceedings instituted or
petitions presented by creditors and not
consented to by the Issuer shall not be
deemed an Insolvency Filing” at the end of
such definition and replacing it with the
following: “; or it has instituted against
it a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief
under any bankruptcy or insolvency law or
other similar law affecting creditors’
rights, or a petition is presented for its
winding-up or liquidation by a creditor and
such proceeding is not dismissed,
discharged, stayed or restrained in each
case within thirty (30) days of the
institution or presentation thereof.”

	 
	 	 	 	 	 	 
	 

	 	Hedging Disruption:
	 	Applicable, but only if the Hedging Party
determines that such Hedging Disruption
could reasonably be expected to have a
material adverse effect on its expected
benefits under this Transaction; provided,
that it shall not be a Hedging Disruption if
the Hedging Party’s inability is primarily
due to a deterioration of its
creditworthiness.

	 
	 	 	 	 	 	 
	 

	 	Increased Cost of Hedging:
	 	Applicable, but only if the Hedging Party
determines that such Increased Cost of
Hedging could reasonably

10

 

	 	 	 	 	 	 	 
	 

	 	 	 	be expected to have
a material adverse effect on its expected
benefits under this Transaction; provided,
that any increased cost of funds as a result
of the deterioration of the Hedging Party’s
creditworthiness shall not be an Increased
Cost of Hedging.

	 
	 	 	 	 	 	 
	 

	 	Loss of Stock Borrow:
	 	Not Applicable

	 
	 	 	 	 	 	 
	 

	 	Increased Cost of Stock Borrow:
	 	Not Applicable

	 
	 	 	 	 	 	 
	 

	 	Hedging Party:
	 	Party A shall be the Hedging Party for all
Extraordinary Events

	 
	 	 	 	 	 	 
	 

	 	Determining Party:
	 	Party A shall be the Determining Party for
all Extraordinary Events

	 
	 	 	 	 	 	 
	Additional Provisions:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Non-Reliance:
	 	Applicable

	 
	 	 	 	 	 	 
	 

	 	Agreements and Acknowledgments Regarding Hedging Activities:
	 	Applicable

	 
	 	 	 	 	 	 
	 

	 	Additional Acknowledgments:
	 	Applicable

	 
	 	 	 	 	 	 
	Additional Representations and Warranties of
Party B:	 	In addition to the representations set forth
in the Agreement, Party B further represents
that;

	 
	 	 	 	 	 	 
	 

	 	 	 	(a) (i) It is not entering into the
Transaction on behalf of or for the accounts
of any other person or entity, and will not
transfer or assign its obligations under the
Transaction or any portion of such
obligations to any other person or entity
except in compliance with applicable laws
and the terms of the Transaction; (ii) it is
authorized to enter into the Transaction and
such action does not violate any laws of its
jurisdiction of organization or residence
(including, but not limited to, any
applicable position or exercise limits set
by any self-regulatory organization, either
acting alone or in concert with others) or
the terms of any agreement to which it is a
party; (iii) it has consulted with its legal
advisor(s) and has reached its own
conclusions about the Transaction, and any
legal, regulatory, tax, accounting or
economic consequences arising from the
Transaction; and (iv) it has concluded that
the Transaction is suitable in light of its
own investment objectives, financial
capabilities and expertise.

	 
	 	 	 	 	 	 
	 

	 	 	 	(b) If Party B purchases any Shares pursuant
to the Transaction, such purchase(s) will
comply with (i) all laws and regulations
applicable to it and (ii) all contractual
obligations of Party B.

	 
	 	 	 	 	 	 
	 

	 	 	 	(c) At all times until termination of the
Transaction, Party B is an “eligible
contract participant” as the term is defined
in the Commodity Exchange Act, as amended.

11

 

	 	 	 	 	 	 	 
	 

	 	 	 	(d) Neither Party A nor any of its
affiliates has advised it with respect to
any legal, regulatory, tax, accounting or
economic consequences arising from the
Transaction, and neither Party A nor any of
its affiliates is acting as agent, or
advisor for Party B in connection with the
Transaction.

	 
	 	 	 	 	 	 
	 

	 	 	 	(e) Each of its required filings under all
applicable securities laws have been filed
and that, as of the respective dates thereof
there is no material misstatement of
material fact contained therein or omission
of a material fact required to be stated
therein or necessary to make the statements
therein not misleading.

	 
	 	 	 	 	 	 
	 

	 	 	 	(f) It has not entered into any obligation
that would contractually limit it from
effecting Physical Settlement under the
Transaction.

	 
	 	 	 	 	 	 
	 

	 	 	 	(g) It is not in possession of any material
non-public information within the meaning of
Rule 10b5-1 under the Securities Exchange
Act of 1934, as amended, concerning the
business, operations or prospects of the
Issuer and was not in possession of any such
information at the time of placing any order
with respect to the Transaction.

	 
	 	 	 	 	 	 
	 

	 	 	 	(h) The Transaction and any repurchase of
Shares by Party B in connection with the
Transaction has been approved by its board
of directors and that any such repurchase
has been publicly disclosed.

	 
	 	 	 	 	 	 
	 

	 	 	 	(i) It is not entering into the Transaction
to create actual or apparent trading
activity in the Shares (or any security
convertible into or exchangeable for
Shares), to manipulate the price of the
Shares (or any security convertible into or
exchangeable for Shares) or to facilitate a
distribution of Shares (or any security
convertible into or exchangeable for
Shares).

	 
	 	 	 	 	 	 
	 

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

	 
	 	 	 	 	 	 
	 

	 	 	 	(k) It is not on the Trade Date engaged in a
distribution, as such term is used in
Regulation M (“Regulation M”) under the
Securities Exchange Act of 1934, as amended
(the “Exchange Act”), of any securities of
Party B, other than a distribution meeting
the requirements of the exception set forth
in section 101(b)(10) or 102(b)(7) of
Regulation M. Party B shall not, until the
second Exchange Business Day immediately
following the Trade Date, engage in any

12

 

	 	 	 	 	 	 	 
	 

	 	 	 	such distribution.

	 
	 	 	 	 	 	 
	 

	 	 	 	(l) On the Trade Date and on any Additional
Premium Payment Date (A) the assets of Party
B at their fair valuation exceed the
liabilities of Party B, including contingent
liabilities, (B) the capital of Party B is
adequate to conduct the business of Party B
and (C) Party B has the ability to pay its
debts and obligations as such debts mature
and does not intend to, or does not believe
that it will, incur debt beyond its ability
to pay as such debts mature.

	 	 	 	 	 
	 

	 	Other Provisions:	 	 
	 
	 	 	 	 
	 

	 	Alternative Calculations and Payment on Early
Termination and on Certain Extraordinary
Events:
	 	If, in respect of the
Transaction, an amount is payable
by Party A to Party B (i)
pursuant to Sections 12.2, 12.3,
12.6, 12.7 or 12.9 of the Equity
Definitions (except in the event
of a Nationalization, Insolvency,
Tender Offer or a Merger Event,
in each case, in which the
consideration to be paid to
holders of Shares consists solely
of cash) or (ii) pursuant to
Section 6(d)(ii) of the Agreement
(except in the event of an Event
of Default in which Party B is
the Defaulting Party or a
Termination Event in which Party
B is the Affected Party that
resulted from an event or events
outside Party B’s control) (a
“Payment Obligation”), Party B
shall have the right, in its sole
discretion, to require Party A to
satisfy any such Payment
Obligation by the Share
Termination Alternative (as
defined below) by giving
irrevocable telephonic notice to
Party A, confirmed in writing
within one Currency Business Day,
no later than 4:00 p.m. New York
local time on the Merger Date,
Tender Offer Date, Announcement
Date or Early Termination Date,
as applicable (“Notice of Share
Termination”).
	 
	 	 	 	 
	 

	 	 	 	Notwithstanding anything to the
contrary in the foregoing, with
respect to any Payment Obligation
resulting from an Additional
Termination Event in connection
with an Early Conversion, Party B
shall be deemed to have elected
as of the Trade Date to require
Party A to satisfy any such
Payment Obligation by the Share
Termination Alternative; provided
that Party B may elect for the
Share Termination Alternative not
to apply to such Payment
Obligation by (x) giving written
notice of such election to Party
A no later than 4:00 p.m., New
York local time, on the Scheduled
Trading Day immediately preceding
the relevant Early Termination
Date and (y) making to Party A in
such written notice the
representations and warranties
contained in paragraphs (g) and
(i) under “Additional

13

 

	 	 	 	 	 
	 

	 	 	 	Representations and Warranties of
Party B” above where the
reference therein to “at the time
of placing any order with respect
to the Transaction” shall be
replaced with “as of the date of
this written notice.”
	 
	 	 	 	 
	 

	 	 	 	Upon Notice of Share Termination
no later than 8:00 a.m. on the
Exchange Business Day immediately
following the Merger Date, Tender
Offer Date, Announcement or Early
Termination Date, as applicable,
the following provisions shall
apply:
	 
	 	 	 	 
	 

	 	Share Termination
Alternative:
	 	Applicable and means that Party A
shall deliver to Party B the
Share Termination Delivery
Property on the date, or within a
commercially reasonable period of
time after, when the Payment
Obligation would otherwise be due
pursuant to Section 12.7 or 12.9
of the Equity Definitions or
Section 6(d)(ii) and 6(e) of the
Agreement, as applicable (the
“Share Termination Payment
Date”), in satisfaction of the
Payment Obligation in the manner
reasonably requested by Party B
free of payment.
	 
	 	 	 	 
	 

	 	Share Termination Delivery
Property:
	 	A number of Share Termination
Delivery Units, as calculated by
the Calculation Agent, equal to
the Payment Obligation divided by
the Share Termination Unit Price.
The Calculation Agent shall
adjust the Share Termination
Delivery Property by replacing
any fractional portion of a
security therein with an amount
of cash equal to the value of
such fractional security based on
the values used to calculate the
Share Termination Unit Price.
	 
	 	 	 	 
	 

	 	Share Termination Unit Price:
	 	The value to Party A of property
contained in one Share
Termination Delivery Unit on the
date such Share Termination
Delivery Units are to be
delivered as Share Termination
Delivery Property, as determined
by the Calculation Agent in its
discretion by commercially
reasonable means and notified by
the Calculation Agent to Party A
at the time of notification of
the Payment Obligation.
	 
	 	 	 	 
	 

	 	Share Termination Delivery
Unit:
	 	In the case of a Termination
Event or Event of Default, one
Share or, in the case of
Nationalization, Insolvency or
Merger Event or Tender Offer, a
unit consisting of the number or
amount of each type of property
received by a holder of one Share
(without consideration of any
requirement to pay cash or other
consideration in lieu of
fractional amounts of any
securities) in such
Nationalization, Insolvency,
Merger Event or Tender Offer, as
determined by the Calculation
Agent. If a Share Termination
Delivery Unit consists of
property other than cash or New
Shares and if Party B provides

14

 

	 	 	 	 	 
	 

	 	 	 	irrevocable written notice to the
Calculation Agent on or prior to
the Merger Date that it elects to
have Party A deliver cash, New
Shares or a combination thereof
(in such proportion as Party B
designates) in lieu of such other
property, the Calculation Agent
will replace such property with
cash, New Shares or a combination
thereof as components of a Share
Termination Delivery Unit in such
amounts, as determined by the
Calculation Agent in its
discretion by commercially
reasonable means, as shall have a
value equal to the value of the
property so replaced. If such
Nationalization, Insolvency,
Merger Event or Tender Offer
involves a choice of
consideration to be received by
holders, such holder shall be
deemed to have elected to receive
the maximum possible amount of
cash.
	 
	 	 	 	 
	 

	 	               Failure to Deliver:
	 	Applicable
	 
	 	 	 	 
	 

	 	               Other applicable provisions:
	 	If the Transaction is to be Share
Termination Settled, the
provisions of Sections 9.8, 9.9,
9.10, 9.11 and 9.12 (as modified
above) of the Equity Definitions
will be applicable, as if
“Physical Settlement” applied to
the Transaction; provided that
all references to “Shares” shall
be read as references to “Share
Termination Delivery Units” and
the representations and
agreements contained in Section
9.11 of the Equity Definitions
shall be modified by excluding
any representations therein
relating to restrictions,
obligations, limitations or
requirements under applicable
securities laws that exist as a
result of the fact that Party B
is the issuer of the Shares.
“Share Termination Settled” in
relation to a Transaction means
that Share Termination Settlement
is applicable to the Transaction.
	 
	 	 	 	 
	 

	 	Regulatory Provisions:
	 	(a) Party B represents and
warrants that it has received and
read and understands the Notice
of Regulatory Treatment and the
OTC Option Risk Disclosure
Statement.
	 
	 	 	 	 
	 

	 	 	 	(b) The Agent will furnish Party
B upon written request a
statement as to the source and
amount of any remuneration
received or to be received by the
Agent in connection with the
Transaction evidenced hereby.
	 
	 	 	 	 
	 

	 	Transfer:
	 	Notwithstanding Section 7 of the
Agreement, Party A may assign its
rights and obligations under the
Transaction, in whole and not in
part, to any Affiliate of Lehman
Brothers Holdings Inc.
(“Holdings”) whose obligations
hereunder are guaranteed by
Holdings, in favor of Party B, of
the obligations of such
Affiliate.

15

 

	 	 	 	 	 
	 

	 	 	 	If Party A, in its sole
discretion, determines that its
“beneficial ownership” at any
time (within the meaning of
Section 13 of the Exchange Act
and rules promulgated thereunder)
exceeds 8.0% or more of Party B’s
outstanding Shares; and, in its
sole discretion, Party A is
unable after its commercially
reasonable efforts to effect a
transfer or assignment on pricing
terms and in a time period
reasonably acceptable to Party A
that would reduce its “beneficial
ownership” to 7.5%; Party A may
designate any Exchange Business
Day as an Early Termination Date
with respect to a portion (the
“Terminated Portion”) of the
Transaction, such that its
“beneficial ownership” following
such partial termination will be
equal to or less than 7.5%. In
the event that Party A so
designates an Early Termination
Date with respect to a portion of
the Transaction, a payment shall
be made pursuant to Section 6 of
the Agreement as if (i) an Early
Termination Date had been
designated in respect of
Transaction having terms
identical to the Transaction and
Numbers of Options equal to the
Terminated Portion, (ii) Party B
shall be the sole Affected Party
with respect to such partial
termination and (iii) such
Transaction shall be the only
Terminated Transaction.
	 
	 	 	 	 
	 

	 	Staggered Settlement:
	 	Party A may, by notice to Party B
on or prior to any Settlement
Date (a “Nominal Settlement
Date”), elect to deliver any
Shares required to be delivered
by it on two or more dates (each,
a “Staggered Settlement Date”) as
follows:
	 
	 	 	 	 
	 

	 	 	 	(i)   in such notice, Party A will
specify to Party B the related
Staggered Settlement Dates (the
first of which will be such
Nominal Settlement Date and the
last of which will be no later
than the twentieth
(20th) Exchange
Business Day following such
Nominal Settlement Date) and the
number of Shares that it will
deliver on each Staggered
Settlement Date;

	 
	 	 	 	 
	 

	 	 	 	(ii)  the aggregate number of
Shares that Party A will deliver
to Party B hereunder on all such
Staggered Settlement Dates will
equal the number of Shares that
Party A would otherwise be
required to deliver on such
Nominal Settlement Date; and

	 
	 	 	 	 
	 

	 	 	 	(iii) if the Physical Settlement
terms set forth above were to
apply on such Nominal Settlement
Date, then the Physical
Settlement terms will apply on
each Staggered Settlement Date,
except that the related Shares to
be delivered by Party A will be
allocated among such Staggered
Settlement Dates as specified by
Party A in the notice referred to in

16

 

	 	 	 	 	 
	 

	 	 	 	clause (i) above and Party B
shall pay the Settlement Amount
for those Shares on the Nominal
Settlement Date.

	 
	 	 	 	 
	 

	 	Set-Off and Netting:
	 	Party A agrees not to set-off or
net amounts due from Party B with
respect to the Transaction
hereunder against amounts due
from Party A to Party B under
obligations other than Equity
Contracts. Section 2(c) of the
Agreement as it applies to
payments due with respect to the
Transaction hereunder shall
remain in effect and is not
subject to the first sentence of
this provision.
	 
	 	 	 	 
	 

	 	 	 	Upon the occurrence of an Event
of Default or Termination Event
with respect to a party who is
the Defaulting Party or the
Affected Party (“X”), the other
party (“Y”) will have the right
(but not be obliged) without
prior notice to X or any other
person to set-off or apply any
obligation of X under an Equity
Contract owed to Y (or any
Affiliate of Y) (whether or not
matured or contingent and whether
or not arising under the
Agreement, and regardless of the
currency, place of payment or
booking office of the obligation)
against any obligation of Y (or
any Affiliate of Y) under an
Equity Contract owed to X
(whether or not matured or
contingent and whether or not
arising under the Agreement, and
regardless of the currency, place
of payment or booking office of
the obligation). Y will give
notice to the other party of any
set-off effected under this
paragraph.
	 
	 	 	 	 
	 

	 	 	 	“Equity Contract” shall mean for
purposes of this paragraph any
transaction relating to Shares
between X and Y (or any Affiliate
of Y) that qualifies as ‘equity’
under applicable accounting
rules.
	 
	 	 	 	 
	 

	 	 	 	Amounts (or the relevant portion
of such amounts) subject to
set-off may be converted by Y
into the Termination Currency at
the rate of exchange at which
such party would be able, acting
in a reasonable manner and in
good faith, to purchase the
relevant amount of such currency.
	 
	 	 	 	 
	 

	 	 	 	If any obligation is
unascertained, Y may in good
faith estimate that obligation
and set-off in respect of the
estimate, subject to the relevant
party accounting to the other
when the obligation is
ascertained.
	 
	 	 	 	 
	 

	 	 	 	Nothing in this section shall be
effective to create a charge or
other security interest. This
section shall be without
prejudice and in addition to any
right of set-off, combination of
accounts, lien or other right to
which any party is at any time
otherwise entitled (whether by

17

 

	 	 	 	 	 
	 

	 	 	 	operation of law, contract or
otherwise).
	 
	 	 	 	 
	 

	 	Equity Rights:
	 	Party A acknowledges and agrees
that this Confirmation is not
intended to convey to it rights
with respect to the Transaction
that are senior to the claims of
common stockholders in the event
of Party B’s bankruptcy. For the
avoidance of doubt, the parties
agree that the preceding sentence
shall not apply at any time other
than during Party B’s bankruptcy
to any claim arising as a result
of a breach by Party B of any of
its obligations under this
Confirmation or the Agreement.
For the avoidance of doubt, the
parties acknowledge that this
Confirmation is not secured by
any collateral that would
otherwise secure the obligations
of Party B herein under or
pursuant to any other agreement.
	 
	 	 	 	 
	 

	 	No Collateral:
	 	No collateral is required to be
posted by Party B in respect of
the Transaction.
	 
	 	 	 	 
	 

	 	Bankruptcy Code Provisions:
	 	Each of Party A and Party B
agrees and acknowledges that
Party A is a “swap participant”
and/or “financial participant”
within the meaning of Sections
101(53C) and 101(22A) of Title 11
of the United States Code (the
“Bankruptcy Code”). The parties
hereto further agree and
acknowledge (A) that this
Confirmation is (i) a “securities
contract,” as such term is
defined in Section 741(7) of the
Bankruptcy Code, with respect to
which each payment and delivery
hereunder is a “settlement
payment,” as such term is defined
in Section 741(8) of the
Bankruptcy Code, and (ii) a “swap
agreement,” as such term is
defined in Section 101(53B) of
the Bankruptcy Code, with respect
to which each payment and
delivery hereunder is a
“transfer,” as such term is
defined in Section 101(54) of the
Bankruptcy Code, and (B) that
Party A is entitled to the
protections afforded by, among
other sections, Sections
362(b)(6), 362(b)(17), 546(e),
546(g), 555 and 560 of the
Bankruptcy Code.
	 
	 	 	 	 
	 

	 	Early Unwind:
	 	In the event the sale of the
Convertible Notes by the Issuer
is not consummated with the
initial purchasers for any
reason, other than as a result of
a breach by Party A, by the close
of business in New York on July
2, 2008 (or such later date as
agreed upon by the parties) (July
2, 2008 or such later date as
agreed upon being the “Early
Unwind Date”), Party B shall have
the right to elect that the
Transaction shall terminate (the
“Early Unwind”), on the Early
Unwind Date and:
	 
	 	 	 	 
	 

	 	 	 	(A) if Party B makes the election
in the preceding sentence, (i)
the Transaction and all of the
respective rights and obligations
of Party A and Party B under the

18

 

	 	 	 	 	 
	 

	 	 	 	Transaction shall be cancelled
and terminated and (ii) each
party shall be released and
discharged by the other party
from and agrees not to make any
claim against the other party
with respect to any obligations
or liabilities of the other party
arising out of and to be
performed in connection with the
Transaction either prior to or
after the Early Unwind Date;
provided, that if the sale of the
Convertible Notes is not
consummated for a reason other
than a breach by the initial
purchasers, that Party B shall
reimburse the costs and expenses
(including market losses)
relating to reselling those
Shares to unwind its hedge
positions, and will assume, or
reimburse the cost of unwinding,
any and all derivatives entered
into by Party A or one or more of
its affiliates in connection with
hedging the Transaction. The
purchase price paid by Party B
shall be Party A’s actual cost of
such Shares and derivatives as
Party A informs Party B and shall
be paid in immediately available
funds on the Early Unwind Date.
Party A and Party B represent and
acknowledge to the other that,
subject to the proviso included
in the preceding sentence, upon
an Early Unwind, all obligations
with respect to the Transaction
shall be deemed fully and finally
discharged, or
	 
	 	 	 	 
	 

	 	 	 	(B) if Party B does not make the
election to terminate in the
preceding sentence, the
Calculation Agent shall amend the
relevant terms (including pricing
terms and adjustment provisions)
of the Transaction to reflect the
corresponding terms and
provisions contained in the final
prospectus related to the
Convertible Notes dated as of
June 26, 2008.
	 
	 	 	 	 
	 

	 	Additional Termination Events:
	 	Notwithstanding anything to the
contrary in this Confirmation,
(i) upon the occurrence of an
Early Conversion:

	 	 	 	 	 
	 

	 	 	 	(A) such Early Conversion shall
constitute an Additional
Termination Event hereunder with
respect to a number of Options
equal to the number of the
relevant Exercised Options (the
“Affected Number of Options”), in
which case (x) the sole Affected
Transaction shall consist of a
transaction identical to the
Transaction except that Number of
Options for such Affected
Transaction shall equal the
Affected Number of Options and
Party B shall be deemed the sole
Affected Party and (y) the
Transaction shall remain in full
force and effect, except that the
Number of Options subject to the
Transaction immediately prior to
the Conversion Date for such
Early Conversion shall as of such

19

 

	 	 	 	 	 
	 

	 	 	 	Conversion Date be reduced by the
Affected Number of Options;
	 
	 	 	 	 
	 

	 	 	 	(B) notwithstanding anything to
the contrary in the Agreement,
Party A shall designate an Early
Termination Date in respect of
such Affected Transaction, which
shall be no earlier than one
Scheduled Trading Day following
the Conversion Date for the
related Early Conversion;
	 
	 	 	 	 
	 

	 	 	 	(C) notwithstanding anything to
the contrary in the Agreement,
the amount equal to the
difference between (1) the amount
payable in respect of such
Affected Transaction in respect
of each Option that is part of
such Affected Transaction minus
(2) the portion of such amount
that is attributable to the
remaining Installment Premiums
shall equal the lesser of (i) the
amount payable pursuant to
Section 6 of the Agreement in
respect of each Option part of
such Affected Transaction and
(ii) the total value deliverable
by Counterparty in respect of
each $1,000 principal amount of
such Convertible Notes in excess
of $1,000, whether in cash and/or
in Shares; and
	 
	 	 	 	 
	 

	 	 	 	(C) for the avoidance of doubt,
in determining the amount payable
in respect of such Affected
Transaction pursuant to Section 6
of the Agreement, the Calculation
Agent shall assume that (x) the
relevant Early Conversion and any
adjustments, agreements,
payments, deliveries or
acquisitions by or on behalf of
Party B leading thereto had not
occurred, (y) no adjustments to
the Conversion Rate have occurred
pursuant to Section 9.04(b) or
Section 9.05(h) of the Indenture
and (z) the corresponding
Convertible Notes remain
outstanding; and

	 	 	 	 	 
	 

	 	 	 	(ii) if there has occurred an
event of default with respect to
Party B under the terms of the
Convertible Notes as set forth in
Section 9.04(b) or Section
9.05(h) of the Indenture, then
such event of default shall
constitute an Additional
Termination Event applicable to
the Transaction and, with respect
to such event of default (A)
Party B shall be deemed to be the
sole Affected Party and the
Transaction shall be the sole
Affected Transaction and (B)
Party A shall be the party
entitled to designate an Early
Termination Date pursuant to
Section 6(b) of the Agreement.

20

 

	 	 	 	 	 
	 

	 	Right to Extend:
	 	Party A may extend, for as long
as it is reasonably necessary,
any Averaging Date, the
Expiration Date, the Settlement
Date or any other date of
delivery by Party A, with respect
to some or all of the Options
hereunder, if Party A determines,
in its commercially reasonable
discretion, that such extension
is reasonably necessary or
appropriate to preserve Party A’s
hedging or hedge unwind activity
hereunder in light of existing
liquidity conditions or to enable
Party A to effect purchases or
sales of Shares in connection
with its hedging or settlement
activity hereunder in a manner
that would, if Party A were Party
B or an affiliated purchaser of
Party B, be in compliance with
applicable legal and regulatory
or self-regulatory requirements
or with related policies or
procedures applicable to Party A.
	 
	 	 	 	 
	 

	 	Registration of Hedge Shares:
	 	Party B hereby agrees that if, in
the good faith reasonable
judgment of Party A upon advice
of outside legal counsel, the
Shares (the “Hedge Shares”)
acquired by Party A for the
purpose of hedging its
obligations pursuant to the
Transaction cannot be sold in the
U.S. public market by Party A
without registration under the
Securities Act, Party B shall, at
its election: (i) in order to
allow Party A to sell the Hedge
Shares in a registered offering,
make available to Party A an
effective registration statement
under the Securities Act to cover
the resale of such Hedge Shares
and (A) enter into an agreement,
in form and substance
satisfactory to Party A,
substantially in the form of an
underwriting agreement for a
registered offering, (B) provide
accountant’s “comfort” letters in
customary form for registered
offerings of equity securities,
(C) provide disclosure opinions
of nationally recognized outside
counsel to Party B reasonably
acceptable to Party A, (D)
provide other customary opinions,
certificates and closing
documents customary in form for
registered offerings of equity
securities and (E) afford Party A
a reasonable opportunity to
conduct a “due diligence”
investigation with respect to
Party B customary in scope for
underwritten offerings of equity
securities (provided, however,
that if Party A, in its sole
reasonable discretion, is not
satisfied with access to due
diligence materials, the results
of its due diligence
investigation, or the procedures
and documentation for the
registered offering referred to
above, then clause (ii) or clause
(iii) of this paragraph shall
apply at the election of Party
B); (ii) in order to allow Party
A to sell the Hedge Shares in a
private placement, use its best
efforts to enter into a private
placement agreement substantially
similar to private placement purchase

21

 

	 	 	 	 	 
	 

	 	 	 	agreements customary for
private placements of equity
securities, in form and substance
satisfactory to Party A,
including customary
representations, covenants, blue
sky and other governmental
filings and/or registrations,
indemnities to Party A, due
diligence rights (for Party A or
any designated buyer of the Hedge
Shares from Party A), opinions
and certificates and such other
documentation as is customary for
private placements agreements,
all reasonably acceptable to
Party A (in which case, the
Calculation Agent shall make any
adjustments to the terms of the
Transaction that are necessary,
in its reasonable judgment, to
compensate Party A for any
discount from the public market
price of the Shares incurred on
the sale of Hedge Shares in a
private placement); or (iii)
purchase the Hedge Shares from
Party A at the VWAP Price on such
Exchange Business Days, and in the amounts, as requested by
Party A. For the avoidance of
doubt, the obligation of Party B
to repurchase the Hedge Shares
under clause (iii) above shall be
at Party B’s option.
	 
	 	 	 	 
	 

	 	Repurchase Notices:
	 	Party B shall, no later than ten
Scheduled Trading Days prior to
the day on which Party B effects
any repurchase of Shares, give
Party A a written notice of such
repurchase (a “Repurchase
Notice”) on such day if following
such repurchase, the Options
Equity Percentage as determined
on such day is (i) greater than
8.0% and (ii) greater by 0.5%
than the Options Equity
Percentage included in the
immediately preceding Repurchase
Notice (or, in the case of the
first such Repurchase Notice,
greater than the Options Equity
Percentage as of the date
hereof). The “Options Equity
Percentage” as of any day is the
fraction (A) the numerator of
which is the Number of Shares and
(B) the denominator of which is
the number of Shares outstanding
on such day. Party B agrees to
indemnify and hold harmless Party
A and its affiliates and their
respective officers, directors,
employees, affiliates, advisors,
agents and controlling persons
(each, an “Indemnified Person”)
from and against any and all
losses (including, without
limitation, losses relating to
Party A’s hedging activities as a
consequence of becoming, or of
the risk of becoming, a Section
16 “insider” and any forbearance
from hedging activities or
cessation of hedging activities
and any losses in connection
therewith with respect to the
Transaction), claims, damages,
judgments, liabilities and
expenses (including reasonable
attorney’s fees), joint or
several, which an Indemnified
Person may become subject to, as
a result of Party B’s failure to
provide Party A with a

22

 

	 	 	 	 	 
	 

	 	 	 	Repurchase Notice on the day and in the
manner specified in this
paragraph, and to reimburse,
within 30 days, upon written
request, each of such Indemnified
Persons for any reasonable legal
or other expenses incurred in
connection with investigating,
preparing for, providing
testimony or other evidence in
connection with or defending any
of the foregoing. If any suit,
action, proceeding (including any
governmental or regulatory
investigation), claim or demand
shall be brought or asserted
against the Indemnified Person,
such Indemnified Person shall
promptly notify Party B in
writing, and Party B, upon
request of the Indemnified
Person, shall retain counsel
reasonably satisfactory to the
Indemnified Person to represent
the Indemnified Person and any
others Party B may designate in
such proceeding and shall pay the
fees and expenses of such counsel
related to such proceeding.
Party B shall not be liable for
any settlement of any proceeding
effected without its written
consent, but if settled with such
consent or if there be a final
judgment for the plaintiff, Party
B agrees to indemnify any
Indemnified Person from and
against any loss or liability by
reason of such settlement or judgment. Party B shall not,
without the prior written consent
of the Indemnified Person, effect
any settlement of any pending or
threatened proceeding in respect
of which any Indemnified Person
is or could have been a party and
indemnity could have been sought
hereunder by such Indemnified
Person, unless such settlement
includes an unconditional release
of such Indemnified Person from
all liability on claims that are
the subject matter of such
proceeding on terms reasonably
satisfactory to such Indemnified
Person. If the indemnification
provided for in this paragraph is
unavailable to an Indemnified
Person or insufficient in respect
of any losses, claims, damages or
liabilities referred to therein,
then Party B, in lieu of
indemnifying such Indemnified
Person thereunder, shall
contribute to the amount paid or
payable by such Indemnified
Person as a result of such
losses, claims, damages or
liabilities. The remedies
provided for in this paragraph
are not exclusive and shall not
limit any rights or remedies that
may otherwise be available to any
Indemnified Person at law or in
equity. The indemnity and
contribution agreements contained
in this paragraph shall remain
operative and in full force and
effect regardless of the
termination of the Transaction.
	 
	 	 	 	 
	 

	 	Restrictions on Repurchases:
	 	On any Averaging Date, neither
Party B nor any “affiliate” or
“affiliated purchaser” (each as
defined in

23

 

	 	 	 	 	 
	 

	 	 	 	Rule 10b-18 under the
Exchange Act (“Rule 10b-18”))
shall directly or indirectly
(including, without limitation,
by means of any cash-settled or
other 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 an
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
or exercisable for Shares;
provided that Party B or its
affiliates may effect repurchases
of Shares pursuant to exercises
of outstanding options, warrants
or other contracts or securities,
so long as such purchases are not
made on the Exchange.
	 
	 	 	 	 
	 

	 	Restrictions on Certain Distributions:
	 	During any Averaging Period, the
Shares or securities that are
convertible into, or exchangeable
or exercisable for Shares shall
not be subject to a “restricted
period” (as such term is defined
in Regulation M) and Party A
shall not engage in any
“distribution” (as such term is
defined in Regulation M) until
the sixth Exchange Business Day
immediately following the
Averaging Period.
	 
	 	 	 	 
	 

	 	Payments on Early Termination:
	 	Party A and Party B agree that
for the Transaction, for the
purposes of Section 6(e) of the
Agreement, Loss and the Second
Method will apply.
	 
	 	 	 	 
	 

	 	Governing Law:
	 	The laws of the State of New York
(without reference to choice of
law doctrine other than Section
5-1401 of the New York General
Obligations Law).
	 
	 	 	 	 
	 

	 	Termination Currency:
	 	USD
	 
	 	 	 	 
	 

	 	Office:
	 	For the purposes of the
Transaction, Party A is not a
Multibranch Party, and Party B is
not a Multibranch Party.
	 
	 	 	 	 
	 

	 	Calculation Agent:
	 	LBI; provided that if an Event of
Default shall have occurred and
be continuing hereunder with
respect to Party A, then Party B
shall have the right to designate
an alternate Calculation Agent
from among the principal
affiliate entities of JPMorgan
Chase, Morgan Stanley, Goldman,
Sachs, Deutsche Bank, Bank of
America, Merrill Lynch, Citigroup
or UBS that trade in the product
for which the relevant
calculation needs to be made.
The costs of such alternate
Calculation Agent shall be borne
by Party A.
	 
	 	 	 	 
	 

	 	Credit Support Document:
	 	With respect to Party A: the
Guaranty of Holdings, dated as of
the date hereof, duly authorized,
executed and delivered to Party B
simultaneously with this
Confirmation.

24

 

	 	 	 	 	 
	 

	 	Credit Support Provider:
	 	With respect to Party A: Holdings
	 
	 	 	 	 
	 

	 	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 THE 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 THE TRANSACTION, AS
APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS PROVIDED HEREIN.
	 
	 	 	 	 
	 

	 	Tax Disclosure:
	 	Effective from the date of
commencement of discussions
concerning the Transaction, Party
B 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
Party B relating to such tax
treatment and tax structure.

THE SECURITIES REPRESENTED BY THE CONFIRMATION HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR ANY OTHER UNITED STATES FEDERAL OR
STATE SECURITIES LAWS; SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
APPROPRIATE REGISTRATION UNDER SUCH SECURITIES LAWS OR EXCEPT IN A TRANSACTION EXEMPT FROM OR NOT
SUBJECT TO THE REGISTRATION REQUIREMENTS OF SUCH SECURITIES LAWS.

25

 

Please confirm your agreement with the foregoing by executing this Confirmation and returning such
Confirmation, in its entirety, to us at facsimile number 646-885-9546, Attention: Documentation.

	 	 	 	 	 	 	 	 	 	 	 
	Yours sincerely,	 	 	 	Accepted and agreed to:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Lehman Brothers OTC Derivatives Inc.	 	 	 	Evergreen Solar, Inc.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By: 

Name:

	 	/s/ Anatoly Kozlov
 

Anatoly Kozlov
	 	 	 	By:

Name:
	 	/s/ Michael El-Hillow
 

 Michael El- Hillow
	 	 
	Title:

	 	Authorized Signatory
	 	 	 	Title
	 	: Chief Financial Officer and Secretary	 	 

Execution time will be furnished upon Party B’s written request.

Capped Call Confirmationexv4w6

Exhibit 4.6

July 28, 2008

RXi Pharmaceuticals Corporation

One Innovation Drive

Worcester, Massachusetts 01605

     Re: Amendment to Stockholders Agreement

Gentlemen:

     This letter will serve to amend in certain respects set forth below the Stockholders
Agreement, dated February 15, 2007, among RXi Pharmaceuticals Corporation (“RXi”), CytRx
Corporation (“CytRx”), and Michael P. Czech, Ph.D., Gregory J. Hannon, Ph.D., Craig C. Mello,
Ph.D., and Tariq M. Rana, Ph.D. (the “Stockholders Agreement”). Unless otherwise defined herein,
capitalized terms used in this letter, including Annex 1 hereto, shall have the meanings ascribed
to them in the Stockholders Agreement.

     In accordance with Section 7 of the Stockholders Agreement, the Stockholders Agreement is
hereby amended as follows:

     1. Preemptive Rights. Annex 1 to the Stockholders Agreement is hereby amended and
restated in its entirety to read as set forth in Annex 1 to this letter.

     2. No Other Effect. Except as set forth in this letter, including Annex 1 hereto, the
Stockholders Agreement shall remain in full force and effect.

[Remainder of page intentionally left blank]

 

 

RXi Corporation

July 28, 2008

Page 2

     If the foregoing correctly states the parties’ agreement, please acknowledge the same by
signing and returning a copy of this letter.

	 	 	 	 	 	 	 
	 

	 	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ Steven A. Kriegsman
 

	 	 
	 

	 	 	 	Steven A. Kriegsman	 	 
	 

	 	 	 	President and Chief Executive Officer	 	 
	 

	 	 	 	CytRx Corporation	 	 
	 
	 	 	 	 	 	 
	AGREED AND ACCEPTED:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Tod Woolf
 

	 	 	 	Dated: July 28, 2008
	 	 
	Tod Woolf, Ph.D.
	 	 	 	 	 	 
	President
	 	 	 	 	 	 
	RXi Pharmaceuticals Corporation
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Craig C. Mello
 

	 	 	 	Dated: July 28, 2008
	 	 
	Craig C. Mello, Ph.D.
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Tariq M. Rana
 

	 	 	 	Dated: July 28, 2008
	 	 
	Tariq M. Rana, Ph.D.
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Dated: 	 	 
	 

Michael P. Czech, Ph.D.

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Gregory J. Hannon
 

	 	 	 	Dated: July 28, 2008
	 	 
	Gregory J. Hannon, Ph.D.
	 	 	 	 	 	 

 

 

ANNEX 1

Preemptive Rights

SECTION 1. General

	A.	 	CytRx shall have the right, on the terms and provisions of this Annex 1, to purchase New
Securities (as defined below in Paragraph B) that RXi may, from time to time, sell, issue or
exchange.

	B.	 	“New Securities” shall mean, subject to Section 4.B, any shares of common stock of
RXi (“RXi Common Stock”) and other equity securities of RXi, whether now authorized or
not, any rights, options, and warrants to purchase RXi Common Stock or other equity
securities, and securities of any type whatsoever that are, or may become, convertible into,
or exercisable or exchangeable for, shares of RXi Common Stock or other equity securities.

SECTION 2. Sales and Issuances of New Securities for Cash

	A.	 	RXi shall not at any time issue or sell for cash any New Securities (each, a “Cash
Sale”), unless and until RXi shall have first delivered to CytRx notice of the proposed
Cash Sale (the “Cash Offer Notice”) and otherwise complied with the provisions of this
paragraph A, as follows:

	 	(i)	 	The Cash Offer Notice shall (1) describe in reasonable detail the proposed Cash
Sale, (2) set forth the maximum number of New Securities proposed to be offered in the
Cash Sale (the “Offered Securities”), (3) describe the sale price, or where the
price has not been established the method for determining the same, of the Offered
Securities and other proposed terms of the proposed Cash Sale to the extent known,
(4) identify the persons or entities, if known, or the class of persons or entities, to
which the Offered Securities are proposed to be offered, issued or sold, and
(5) include an express offer to issue and sell to CytRx a portion of such Offered
Securities determined by multiplying the total dollar amount of Offered Securities by
CytRx’s Proportionate Percentage (as hereinafter defined) as determined as of the date
of the Cash Offer Notice. CytRx’s “Proportionate Percentage” for purposes of
this Annex shall mean, as of any determination date, a fraction, expressed as a
percentage, the numerator of which is the sum of (w) the number of issued and
outstanding shares of RXi Common Stock then owned beneficially (as hereinafter defined)
by CytRx plus (x) the number of shares of RXi Common Stock that may be acquired by
CytRx upon the exercise, conversion or exchange of rights, options, warrants and other
securities of RXi owned beneficially by CytRx that are exercisable or exchangeable for,
or convertible into, shares of RXi Common Stock within 60 days of the date of
determination of such beneficial ownership, and the denominator of which is the sum of
(y) the total number of shares of RXi Common Stock then issued and

A-1

 

ANNEX 1

	 	 	 	outstanding plus (z) the number of shares referred to in clause (x) above. CytRx
shall be deemed to “beneficially own” shares of RXi Common Stock and other
securities that are held of record by CytRx or held in the name of a broker or other
custodian for CytRx’s account.
	 
	 	(ii)	 	CytRx shall have the right during the 10-business day period following delivery
of the Cash Offer Notice to elect to purchase, at the price and upon the other terms
specified therein, its Proportionate Percentage of the Offered Securities; provided,
however, that RXi may postpone or terminate the transaction described in the Cash Offer
Notice, which shall have the effect of postponing or terminating CytRx’s rights under
this paragraph A. To exercise its rights under this paragraph A, CytRx must notify RXi
on or prior to the expiration of the foregoing 10-business day period of the amount, if
any, of the Offered Securities (not to exceed its CytRx’s Proportionate Percentage
thereof) that CytRx elects to purchase (the “Notice of Acceptance”).
	 
	 	(iii)	 	RXi shall have 90 days from the date of the Cash Offer Notice to consummate
the Cash Sale in accordance with the Cash Offer Notice, which may include the issuance
or sale of all or any part of the Offered Securities which CytRx has not elected to
purchase as reflected in the Notice of Acceptance. Any of the Offered Securities not
so issued or sold by RXi within such 90-day period shall not be issued or sold by RXi,
unless and until RXi again complies with the procedures specified in this Annex.
	 
	 	(iv)	 	In the event RXi determines in good faith to issue or sell less than all the
Offered Securities pursuant to the Cash Sale, then the amount of the Offered Securities
that CytRx shall be entitled to purchase shall automatically be reduced to an amount
equal to the amount of the Offered Securities, if any, that CytRx elected to purchase
as set forth in its Notice of Acceptance multiplied by a fraction, (1) the numerator of
which shall be the amount of Offered Securities that RXi issues or sell (including the
Offered Securities to be issued or sold to CytRx pursuant to subparagraph A(ii) above
prior to such reduction) and (2) the denominator of which shall be the amount of the
Offered Securities that RXi initially proposed to issue or sell as specified in the
Cash Offer Notice.
	 
	 	(v)	 	On the date of the closing of the issuance or sale of all or less than all the
Offered Securities, CytRx shall purchase from RXi, and RXi shall sell and issue to
CytRx, the amount of Offered Securities specified in the Notice of Acceptance (as
reduced pursuant to subparagraph A(iv) above, if applicable) upon the terms and
conditions specified in the Cash Offer Notice. The purchase by CytRx of any of the
Offered Securities is subject in all cases to the preparation, execution and delivery
by RXi and CytRx of a customary purchase agreement relating to such Offered Securities
and other documents consistent with the terms of the Cash

A-2

 

ANNEX 1

	 	 	 	Offer Notice and reasonably satisfactory in form and substance to CytRx, RXi and
their respective counsel.

SECTION 3. Sales and Issuances of New Securities Other than for Cash

	A.	 	If at any time or from time to time RXi shall issue or sell for consideration other than cash
any New Securities (each, a “Non-Cash Sale”), it shall comply with the provisions of
this Section 3, as follows:

	 	 (i)	 	RXi shall deliver to CytRx notice of the Non-Cash Sale (the “Non-Cash Offer
Notice”). Except as provided below, the Non-Cash Offer Notice shall be delivered
within 10 days following the issuance or sale of such New Securities and (1) describe
in reasonable detail the Non-Cash Sale, (2) set forth the maximum number of New
Securities, (3) describe the proposed price or value attributable to the New
Securities, or where the same has not been determined the method for determining the
price or value, and other proposed terms of the Non-Cash Sale to the extent known,
(4) identify the persons or entities, if known, or the class of persons or entities, to
which such New Securities are proposed to be offered, issued or sold, and (5) include
an express offer to issue and sell to CytRx from RXi’s authorized but unissued shares
of RXi Common Stock, or from treasury shares, such number of shares of RXi Common Stock
as are necessary and sufficient to restore CytRx, after giving effect to such award,
issuance, sale or exchange, to its Proportionate Percentage as of the time immediately
preceding such Non-Cash Sale. Notwithstanding the foregoing, if the amount of the New
Securities issued or sold in a Non-Cash Sale, when added to all other New Securities
issued and sold in Non-Cash Sales of which CytRx shall not have been notified by RXi in
accordance with this subparagraph A(i), represents 5% or less of the shares of RXi
Common Stock outstanding immediately prior to such Non-Cash Sale, then RXi may postpone
the Non-Cash Offer Notice hereunder until the date 10 days following the earlier of
(1) the end of the calendar quarter during which such Non-Cash Sale occurred and
(2) the date of the next subsequent issuance or sale of New Securities in a Non-Cash
Sale which, when added to all other New Securities issued and sold by RXi in Non-Cash
Sales as to which no Non-Cash Offer Notice shall have been given to CytRx, exceeds 1%
of the shares of RXi Common Stock outstanding immediately prior to the earliest of all
such unreported Non-Cash Sales; provided, however, that in the event the Board of
Directors of RXi shall determine to authorize or approve of a merger of RXi with or
into any other person or entity, or a sale or other disposition of all or substantially
all of RXi shares of capital stock, business or assets, RXi shall immediately deliver
to CytRx all previously postponed Non-Cash Offer Notices.
	 
	 	 (ii)	 	CytRx shall have the right during the 30-day period following delivery of the
Non-Cash Offer Notice to elect in its discretion to purchase all or any portion of the
number of shares of RXi Common Stock determined as provided in

A-3

 

\

ANNEX 1

	 	 	 	subparagraph A(i) above. To exercise its rights under this paragraph A, CytRx must
notify RXi on or prior to the expiration of the foregoing 30-day period of the
number, if any, of such shares of RXi Common Stock, up to the whole number thereof,
that CytRx elects to purchase (the “Notice of Acceptance”). The purchase
price to CytRx of such shares of RXi Common Stock shall be the Fair Value (as
defined below) of such shares.

	 	 (iii)	 	At a closing to be held on a date that is mutually agreeable to RXi and CytRx
that is not more than 20 days after the Notice of Acceptance, CytRx shall acquire from
RXi, and RXi shall sell and issue to CytRx, the number of shares of RXi Common Stock
specified in the Notice of Acceptance. The purchase by CytRx of such shares of RXi
Common Stock is subject in all cases to the preparation, execution and delivery by RXi
and CytRx of a customary purchase agreement relating to such shares of RXi Common Stock
and other documents consistent with the terms hereof and reasonably satisfactory in
form and substance to CytRx, RXi and their respective counsel.
	 
	 	 (iv)	 	The “Fair Value” per share of RXi’s Common Stock shall be equal to the average
closing price of RXi Common Stock as reported on Nasdaq (or other principal exchange on
which such shares are then traded) over the 10 trading days ending on the earlier of
(1) the date of any press release or other announcement by RXi of the transaction
involving such New Securities and (2) the date that CytRx delivers its Notice of
Acceptance under subparagraph B(ii) above. If RXi Common Stock is not publicly traded
at that time, the Fair Value of a share of RXi Common Stock shall be the fair market
value per share of RXi Common Stock as determined in good faith by the Board of
Directors of RXi acting by not less than a majority of the disinterested directors of
RXi.

SECTION 4. Excluded Securities and New Option Securities

	A.	 	Notwithstanding any other provision of this Annex, this Annex shall not apply to (i) any New
Securities issued as a dividend or other distribution on or with respect to RXi Common Stock,
or (ii) any stock split, recapitalization or reclassification of RXi Common Stock.

	B.	 	Notwithstanding any other provision of this Annex, the provisions of this Annex shall not
apply to the grant, award or issuance for consideration other than cash of any New Securities
consisting solely of options, warrants or other rights to subscribe for or purchase shares of
RXi Common Stock or other equity securities (“New Option Securities”). With respect
to any New Option Securities granted, awarded or issued by RXi for consideration other than
cash, the provisions of Section 3 shall apply in all respects to the issuance or sale of any
New Securities upon the exercise or conversion of such New Option Securities. Without
limiting the generality of the preceding sentence, the purchase price to CytRx of any shares
of RXi Common Stock that it elects to

A-4

 

ANNEX 1

	 	 	purchase upon any such exercise or
conversion shall be the Fair Value of
such shares as of the date of CytRx’s
Notice of Acceptance delivered in
accordance with Section 3.

SECTION 5. Miscellaneous

	A.	 	All notices and other communications provided for or permitted to be given under this Annex
shall be in writing and shall be given by depositing the notice in the United States mail,
addressed to the party to be notified, postage paid, and registered or certified with return
receipt requested, or by such notice being delivered in person or by facsimile communication
to such party. Notices or other communications given or served pursuant hereto shall be
effective upon receipt by the party to be notified. All notices or other communications to be
sent to RXi shall be sent to One Innovation Drive, Worcester, Massachusetts 01605, or such
other address as RXi may specify by notice hereunder to CytRx. All notices or other
communications to be sent to CytRx shall be sent or made at the address of CytRx as set forth
in RXi’s books and records or such other address as CytRx may specify by notice hereunder to
RXi.

	B.	 	No delay or failure on the part of any party in exercising any rights hereunder, and no
partial or single exercise thereof, shall constitute a waiver of such rights or of any other
rights hereunder.

	C.	 	In the event that any provision of this Annex, or the application of such provision to any
person or circumstance, is determined by a court, arbitrator or other adjudicator to be
invalid or unenforceable to any extent, the remainder of this Annex, and the application of
such provision to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and such provision and each other provision of
this Annex shall be valid and enforceable to the greatest extent permitted by law.

	D.	 	In the event of any arbitration, litigation or other legal proceeding involving the
interpretation of this Annex or enforcement of the rights or obligations of the parties
hereto, the prevailing party or parties shall be entitled to recover reasonable attorneys’
fees and expenses as determined by the court, arbitrator or other adjudicator. In the event
that the arbitration, litigation or other legal proceeding is successful only in party, the
court, arbitrator or other adjudicator shall be entitled to prorate and allocate said fees and
expenses between the parties.

A-5

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