Reference Number: o Account Number: o Morgan Stanley MORGAN STANLEY & CO. INCORPORATED NEW YORK, NY 10036-8293
EXHIBIT 10.17
| Reference Number: o | Account Number: o |
Morgan Xxxxxxx
|
XXXXXX XXXXXXX & CO. INCORPORATED | |
| 0000 XXXXXXXX | ||
| XXX XXXX, XX 00000-0000 | ||
| (000) 000-0000 |
February 7, 2008
Alkermes, Inc.
00 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
00 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Dear Sir/Madam:
The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions
of the Transaction entered into between Xxxxxx Xxxxxxx & Co. Incorporated (“MSCO”) and Alkermes,
Inc. (the “Issuer”) on the Trade Date specified below (the “Transaction”). This confirmation
constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (as
published by the International Swaps and Derivatives Association, Inc. (“ISDA”)) (the “Equity
Definitions”) are incorporated into this Confirmation. In the event of any inconsistency between
the Equity Definitions and this Confirmation, this Confirmation will govern. Any reference to a
currency shall have the meaning contained in Annex A to the 1998 ISDA FX and Currency Option
Definitions, as published by ISDA.
1. This Confirmation evidences a complete and binding agreement between MSCO and Issuer
as to the terms of the Transaction to which this Confirmation relates. This Confirmation
shall be subject to an agreement (the “Agreement”) in the form of the 2002 ISDA Master
Agreement (the “ISDA Form”) as if MSCO and Issuer had executed an agreement in such form
without any Schedule. For the avoidance of doubt, the Transaction shall be the only
transaction under the Agreement.
2. The terms of the particular Transaction to which this Confirmation relates are as follows:
GENERAL TERMS:
Trade Date:
|
As specified in Schedule I | |
Buyer:
|
Issuer | |
Seller:
|
MSCO | |
Shares:
|
Common Stock of Issuer (Ticker: ALKS) | |
Number of Shares:
|
The number of Shares delivered in accordance with Physical Settlement below. | |
Forward Price:
|
A price per Share (as determined by the Calculation Agent) equal to (i) the sum of the 10b-18 VWAP for each Trading Day during the Calculation Period divided by (ii) the number |
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| of Trading Days in the Calculation Period minus (iii) the Discount (as specified in Schedule I) | ||
10b-18 VWAP:
|
For each Trading Day during the Calculation Period, a price per share (as determined by the Calculation Agent) equal to the volume-weighted average price of the Rule 10b-18 eligible trades in the Shares for the entirety of such Trading Day as determined by reference to the screen entitled “ALKS.Q <Equity> AQR SEC” or any successor page as reported by Bloomberg L.P. (without regard to pre-open or after hours trading outside of any regular trading session for such Trading Day or block trades (as defined in Rule 10b- 18(b)(5) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”)) on such Trading Day). | |
Calculation Period:
|
The period from and including the second Trading Day that occurs after the Trade Date to but excluding the relevant Valuation Date. | |
Trading Day:
|
Any Exchange Business Day that is not a Disrupted Day or an Excluded Day (as defined below) | |
Initial Shares:
|
As specified in Schedule I | |
Initial Share Delivery Date:
|
Two Exchange Business Days following the Trade Date. On the Initial Share Delivery Date, Seller shall deliver a number of Shares equal to the Initial Shares to Buyer in accordance with Section 9.4 of the Equity Definitions, with the Initial Share Delivery Date deemed to be a “Settlement Date” for purposes of such Section 9.4. | |
Prepayment:
|
Applicable | |
Prepayment Amount:
|
As specified in Schedule I | |
Commission Amount:
|
As specified in Schedule I | |
Adjustment Amount:
|
As specified in Schedule I | |
Structuring Fee:
|
As specified in Schedule I | |
Prepayment Date:
|
Two Exchange Business Days following the Trade Date. On the Prepayment Date, Buyer shall pay to Seller the Prepayment Amount, the Commission Amount, the Adjustment Amount and the Structuring Fee. | |
Exchange:
|
Nasdaq Global Select Market | |
Related Exchange:
|
The primary exchange on which options or futures on the relevant Shares are traded. | |
Market Disruption Event:
|
The definition of “Market Disruption Event” in Section 6.3(a) of the Equity Definitions is hereby amended by inserting the words “at any time on any Scheduled Trading Day during the |
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| Calculation Period or” after the word “material,” in the third line thereof. | ||
| Notwithstanding anything to the contrary in the Equity Definitions, if any Scheduled Trading Day in the Calculation Period is a Disrupted Day, the Calculation Agent shall have the option in its sole discretion either (i) to determine the weighting of each Rule 10b-18 eligible transaction in the Shares on the relevant Disrupted Day using its commercially reasonable judgment for purposes of calculating the Forward Price, as applicable, (ii) to elect to extend the Calculation Period by a number of Scheduled Trading Days equal to the number of Disrupted Days during the Calculation Period or (iii) to suspend the Calculation Period, as appropriate, until the circumstances giving rise to such suspension have ceased. For the avoidance of doubt, if Calculation Agent elects the option described in clause (i) above, then such Disrupted Day shall be deemed to be a Trading Day for purposes of calculating the Forward Price. | ||
Excluded Days:
|
None | |
VALUATION: |
||
Valuation Time:
|
The Scheduled Closing Time on the relevant Exchange | |
Valuation Date:
|
The earlier of (i) The Scheduled Valuation Date (as specified in Schedule I) and (ii) any date after the Lock-Out Date (as specified in Schedule I) specified by MSCO to Issuer by 9:00pm EST on such date as a Valuation Date, in each case, subject to extension in accordance with “Market Disruption Event” above or Section 9 or Section 10 below; provided, however, that if a Valuation Date occurs pursuant to clause (ii) above, then (A) the Calculation Period for this Transaction (or portion thereof) shall be deemed to end as of the Trading Day immediately preceding the relevant Valuation Date and (B) MSCO shall have the right to specify a Valuation Date with respect to any portion of this Transaction as it selects (any such Valuation Date on a portion of this Transaction for less than the full Prepayment Amount, a “Partial Acceleration Date”); provided, however, that MSCO can elect no more than three Partial Acceleration Dates during the term of this Transaction. | |
| In the case of a Partial Acceleration Date, MSCO shall specify in its notice to Issuer designating a Valuation Date in connection with a Partial Acceleration Date the percentage of the Prepayment Amount that is subject to such Valuation Date and Calculation Agent shall adjust all terms of this Transaction as it deems reasonable in order to take into account the occurrence of any Partial Acceleration Date (including cumulative adjustments to take into account all Partial Acceleration Dates that occur during the term of this Transaction). |
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| On each Valuation Date, Calculation Agent shall calculate the Settlement Amount. | ||
SETTLEMENT TERMS: |
||
Physical Settlement:
|
Applicable. | |
| On the Settlement Date, Seller shall deliver to Buyer a number of Shares equal to (a) (i) the Prepayment Amount divided by (ii) the Forward Price as determined on each Valuation Date, minus (b) the Initial Shares (such number of Shares, the “Settlement Amount”), rounded to the nearest whole number of Shares; provided, however, that if the Settlement Amount is less than zero, then Buyer shall deliver to Seller a number of Shares equal to 105% of the absolute value of the Settlement Amount (such number of Shares, the “Payment Shares”). | ||
| Notwithstanding the proviso above, if the Settlement Amount is less than zero, Buyer may cash settle its obligation to deliver the Payment Shares by delivering to Seller a notice by no later than each Valuation Date electing to cash settle its obligation to deliver the Payment Shares. Any such cash settlement shall be effected in accordance with “Cash Settlement of Payment Shares” below. | ||
| For the avoidance of doubt, upon the date that (i) Buyer satisfies its obligation to deliver the Payment Shares to Seller in accordance with the terms of this paragraph or (ii) the Settlement Balance (as defined below) is reduced to zero in connection with cash settlement of Buyer’s obligation to deliver Payment Shares (as described under “Cash Settlement of Payment Shares” below), then Buyer shall have no further delivery or payment obligations under the terms of this Transaction and this Transaction shall be deemed to have been settled as of such date. | ||
Settlement Currency:
|
USD | |
Settlement Date:
|
Three Exchange Business Days after each Valuation Date, or if such date is not a Clearance System Business Day or if there is a Settlement Disruption Event on such day, the immediately succeeding Clearance System Business Day on which there is no Settlement Disruption Event. | |
Cash Settlement of Payment Shares
|
If Buyer elects to cash settle its obligation to deliver Payment Shares, then on each Valuation Date a balance (the “Settlement Balance”) shall be created with an initial balance equal to the absolute value of the Settlement Amount. On the Settlement Date, Buyer shall deliver to Seller a U.S. dollar amount equal to the Settlement Amount multiplied by the |
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| closing price on the Trading Day immediately preceding the Settlement Date (such cash amount, the “Initial Cash Settlement Amount”). On the Exchange Business Day immediately following the delivery of the Initial Cash Settlement Amount, Seller shall begin purchasing Shares in a commercially reasonable manner (all such Shares purchased, “Cash Settlement Shares”). At the end of each Exchange Business Day on which Seller purchases Cash Settlement Shares, Seller shall reduce (i) the Settlement Balance by the number of Cash Settlement Shares purchased on such Exchange Business Day and (ii) the Initial Cash Settlement Amount by the aggregate purchase price (including commissions) of the Cash Settlement Shares on such Exchange Business Day. If, on any Exchange Business Day, the Initial Cash Settlement Amount is reduced to or below zero but the Settlement Balance is above zero, the Buyer shall (i) deliver to Seller or as directed by Seller on the next Exchange Business Day after such Exchange Business Day an additional U.S. dollar amount (an “Additional Cash Settlement Amount”) equal to the Settlement Balance as of such Exchange Business Day multiplied by a price per Share as reasonably determined by the Calculation Agent. This provision shall be applied successively until the Settlement Balance is reduced to zero. On the Exchange Business Day that the Settlement Balance is reduced to zero, Seller shall return to Buyer any unused portion of the Initial Cash Settlement Amount or the Additional Cash Settlement Amount, as the case may be. For the avoidance of doubt, any purchases of Cash Settlement Shares contemplated by this paragraph shall be subject to Seller’s covenants in Section 11(b). | ||
Share Adjustments: |
||
Potential Adjustment Event:
|
Notwithstanding anything to the contrary in Section 11.2(e) of the Equity Definitions, an Extraordinary Dividend shall not constitute a Potential Adjustment Event | |
Extraordinary Dividend:
|
For any fiscal quarter occurring (in whole or in part) during the period from and including the first day of the Calculation Period to and including the Termination Date, any dividend or distribution on the Shares with an ex-dividend date occurring during such fiscal quarter (other than any dividend or distribution of the type described in Section 11.2(e)(i) or Section 11.2(e)(ii)(A) or (B) of the Equity Definitions) (a “Dividend”) that is either (i) a non-regularly scheduled Divided or (ii) the amount or value of which (as determined by the Calculation Agent) exceeds the Ordinary Dividend Amount. | |
Ordinary Dividend Amount:
|
For any calendar quarter, USD0.00 | |
Method of Adjustment:
|
Calculation Agent Adjustment; provided that if Seller |
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| suspends trading in the Shares for all or any portion of a Trading Day within the Calculation Period, the suspension shall be treated as a Potential Adjustment Event subject to Calculation Agent Adjustment. In the case of a suspension pursuant to Section 10, the Calculation Agent shall make such adjustments prior to the period of suspension, if it is practical to do so. Otherwise, and in all cases of a suspension as contemplated under “Market Disruption Event” above, the Calculation Agent shall make such adjustments promptly following the period of suspension. | ||
EXTRAORDINARY EVENTS: |
||
Consequences of Merger Events: |
||
Share-for-Share:
|
Modified Calculation Agent Adjustment | |
Share-for-Other:
|
Cancellation and Payment on that portion of the Other Consideration that consists of cash; Modified Calculation Agent Adjustment on the remainder of the Other Consideration | |
Share-for-Combined:
|
Modified Calculation Agent Adjustment | |
Tender Offer:
|
Applicable | |
Consequences of Tender Offers: |
||
Share-for-Share:
|
Modified Calculation Agent Adjustment | |
Share-for-Other:
|
Modified Calculation Agent Adjustment | |
Share-for-Combined:
|
Modified Calculation Agent Adjustment |
For purposes of this Transaction, the definition of Merger Date in Section 12.1(c) shall be amended
to read, “Merger Date shall mean the Announcement Date.” For purposes of this Transaction, the
definition of Tender Offer Date in Section 12.1(e) shall be amended to read, “Tender Offer Date
shall mean the Announcement Date.”
Composition of Combined Consideration:
|
Applicable | |
Nationalization, Insolvency or Delisting:
|
Cancellation and Payment | |
Additional Disruption Events: |
||
Change in Law:
|
Applicable | |
Failure to Deliver:
|
Applicable | |
Insolvency Filing:
|
Applicable | |
Hedging Disruption:
|
Applicable |
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Increased Cost of Hedging:
|
Applicable | |
Loss of Stock Borrow:
|
Applicable; provided that the following clause shall be added directly after the word Rate in the seventh line of Section 12.9(b)(iv) of the Equity Definitions: “or (C) terminate the Transaction”. | |
Maximum Stock Loan Rate:
|
100bps | |
Increased Cost of Stock Borrow:
|
Applicable | |
Initial Stock Loan Rate:
|
25bps | |
Determining Party:
|
For all Extraordinary Events, MSCO | |
Hedging Party:
|
For all Additional Disruption Events, MSCO | |
Non-Reliance:
|
Applicable |
AGREEMENTS AND ACKNOWLEDGMENTS:
Regarding Hedging Activities:
|
Applicable | |
Additional Acknowledgments:
|
Applicable | |
3. Calculation Agent:
|
MSCO | |
4. Account Details:
|
To be provided. |
5. (a) Nationalization or Insolvency. The words “the Transaction will be cancelled,” in the
first line of
Section 12.6(c)(ii) are replaced with the words “MSCO will have the right to cancel this
Transaction,”.
(b) Additional Termination Event. The declaration of any Extraordinary Dividend by Issuer
during the period from and including the Trade Date to but excluding the final Valuation Date shall
constitute an Additional Termination Event with this Transaction as the only “Affected Transaction”
and Issuer as the sole “Affected Party”.
(c) For the avoidance of doubt, this Transaction shall be deemed to be a “Forward Transaction”
for purposes of the Equity Definitions; provided,
however, that in Section 9.2(a)(iii) of the
Equity Definitions the words “the Excess Dividend Amount, if any, and” shall be deleted.
6. Certain Payments and Deliveries by MSCO. Notwithstanding anything to the contrary herein, or
in the Equity Definitions, if at any time (i) an Early Termination Date occurs and MSCO would
be required to make a payment pursuant to Sections 6(d) and 6(e) of the Agreement, (ii) a
Tender Offer occurs and MSCO would be required to make a payment pursuant to Sections 12.3 and
12.7 of the Equity Definitions, (iii) a Merger Event occurs and MSCO would be required to make
a payment pursuant to Sections 12.2 and 12.7 of the Equity Definitions or (iv) an Additional
Disruption Event occurs and MSCO would be required to make a payment pursuant to Sections 12.8
and 12.9 of the Equity Definitions, then Issuer shall have the option to require MSCO to make
such payment in cash or to settle such payment amount in Shares (any such payment described in
Sections 6(i), (ii), (iii), or (iv) above, an “MSCO Payment Amount”). If Issuer elects for
MSCO to settle an MSCO Payment Amount in Shares, then on the date such MSCO Payment Amount is
due, a Settlement Balance shall be established with an initial balance equal to the MSCO
Payment Amount. On such date, MSCO shall commence purchasing Shares for delivery to Issuer. At
the end of each Trading Day on which MSCO
purchases Shares pursuant to this Section 6, MSCO shall reduce the Settlement Balance by the
amount paid by
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MSCO to purchase the Shares purchased on such Trading Day. MSCO shall deliver any Shares purchased
on a Trading Day to Issuer on the third Exchange Business Day following the relevant Trading Day.
MSCO shall continue purchasing Shares until the Settlement Balance has been reduced to zero.
7. Certain Payments and Deliveries by Issuer. Notwithstanding anything to the contrary herein,
or in the Equity Definitions, if at any time (i) an Early Termination Date occurs and Issuer
would be required to make a payment pursuant to Sections 6(d) and 6(e) of the Agreement, (ii)
a Tender Offer occurs and Issuer would be required to make a payment pursuant to Sections 12.3
and 12.7 of the Equity Definitions, (iii) a Merger Event occurs and Issuer would be required
to make a payment pursuant to Sections 12.2 and 12.7 of the Equity Definitions or (iv) an
Additional Disruption Event occurs and Issuer would be required to make a payment pursuant to
Sections 12.8 and 12.9 of the Equity Definitions (any such payment described in Sections 7(i),
(ii), (iii), or (iv) above, an “Early Settlement Payment”), then Issuer shall have the option,
in lieu of making such cash payment, to settle its payment obligations under Sections 7(i),
(ii), (iii), or (iv) above in Shares (such Shares, the “Early Settlement Shares”). In order to
elect to deliver Early Settlement Shares, (i) Issuer must notify MSCO of its election by no
later than 4 p.m. EST on the date that is three Exchange Business Days before the date that
the Early Settlement Payment is due, (ii) must specify whether such Early Settlement Shares
are to be sold by means of a registered offering or by means of a private placement and (iii)
the conditions described in Section 8 below must be satisfied on each day Early Settlement
Shares are to be sold by Seller in connection with Buyer’s election to deliver Early
Settlement Shares in connection with the settlement of an Early Settlement Payment. For the
avoidance of doubt, nothing in this Section 7 should be read as requiring Issuer to deliver
cash with respect to the settlement of the transactions contemplated by this agreement.
8. Conditions to Delivery of Early Settlement Shares.
Issuer may only deliver Early Settlement Shares and Make-Whole Shares (as defined below)
subject to satisfaction of the following conditions:
(a) If Issuer timely elects to deliver Early Settlement Shares and Make-Whole Shares by means
of a registered offering, the following provisions shall apply:
(i) On the later of (A) the Trading Day following the Issuer’s election to deliver
Early Settlement Shares and any Make-Whole Shares by means of a registered offering (the
“Registration Notice Date”), and (B) the date on which the Registration Statement is
declared effective by the SEC or becomes effective (the “Registered Share Delivery Date”),
the Issuer shall deliver to MSCO a number of Early Settlement Shares equal to the quotient
of (I) the relevant Early Settlement Payment divided by (II) a price per Share as
reasonably determined by the Calculation Agent.
(ii) Promptly following the Registration Notice Date, the Issuer shall file with the
SEC a registration statement (“Registration Statement”) covering the public resale by MSCO
of the Early Settlement Shares and any Make-Whole Shares (collectively, the “Registered
Securities”) on a continuous or delayed basis pursuant to Rule 415 (or any similar or
successor rule), if available, under the Securities Act; provided that no such filing shall
be required pursuant to this paragraph (ii) if the Issuer shall have filed a similar
registration statement with unused capacity at least equal to the relevant Early Settlement
Payment and such registration statement has become effective or been declared effective by
the SEC on or prior to the Registration Notice Date and no stop order is in effect with
respect to such registration statement as of the Registration Notice Date. The Issuer shall
use its best efforts to file an automatic shelf registration statement or have the
Registration Statement declared effective by the SEC as promptly as possible.
(iii) Promptly following the Registration Notice Date, the Issuer shall afford MSCO a
reasonable opportunity to conduct a due diligence investigation with respect to the Issuer
customary in scope for underwritten offerings of equity securities (including, without
limitation, the availability of senior management to respond to questions regarding the
business and financial condition of the Issuer
Page 9
and the right to have made available to MSCO for inspection all financial and other records,
pertinent corporate documents and other information reasonably requested by MSCO), and MSCO
shall be satisfied in all material respects with the results of such due diligence
investigation of the Issuer. For the avoidance of doubt, the Issuer shall not have the right
to deliver Shares pursuant to this Section 8(a) (and the conditions to delivery of Early
Settlement Shares specified in this Section 8(a) shall not be satisfied) until MSCO is
satisfied in all material respects with the results of such due diligence investigation of
the Issuer.
(iv) From the effectiveness of the Registration Statement until all Registered
Securities have been sold by MSCO, the Issuer shall, at the request of MSCO, make available
to MSCO a printed prospectus relating to the Registered Securities in form and substance
(including, without limitation, any sections describing the plan of distribution)
satisfactory to MSCO (a “Prospectus”, which term shall include any prospectus supplement
thereto), in such quantities as Xxxxxx shall reasonably request.
(v) The Issuer shall use its best efforts to prevent the issuance of any stop order
suspending the effectiveness of the Registration Statement or of any order preventing or
suspending the use of any Prospectus and, if any such order is issued, to obtain the lifting
thereof as soon thereafter as is possible. If the Registration Statement, the Prospectus or
any document incorporated therein by reference contains a misstatement of a material fact or
omits to state a material fact required to be stated therein or necessary to make any
statement therein not misleading, the Issuer shall as promptly as practicable file any
required document and prepare and furnish to MSCO a reasonable number of copies of such
supplement or amendment thereto as may be necessary so that the Prospectus, as thereafter
delivered to the purchasers of the Registered Securities will not contain a misstatement of a
material fact or omit to state a material fact required to be stated therein or necessary to
make any statement therein not misleading.
(vi) On or prior to the Registered Share Delivery Date, the Issuer shall enter into an
agreement (a “Transfer Agreement”) with MSCO (or any affiliate of MSCO designated by MSCO) in
connection with the public resale of the Registered Securities, substantially similar to
underwriting agreements customary for underwritten offerings of equity securities, in form
and substance satisfactory to MSCO (or such affiliate), which Transfer Agreement shall
(without limitation of the foregoing):
(A) contain provisions substantially similar to those contained in such
underwriting agreements relating to the indemnification of, and contribution in
connection with the liability of, MSCO and its affiliates,
(B) provide for delivery to MSCO (or such affiliate) of customary opinions
(including, without limitation, accounting comfort letters, opinions relating to the
due authorization, valid issuance and fully paid and non-assessable nature of the
Registered Securities and the lack of material misstatements and omissions in the
Registration Statement, the Prospectus and the Issuer’s filings under the Exchange Act
of 1934, as amended and modified (the “Exchange Act”)); and
(C) provide for the payment by the Issuer of all fees and expenses in connection
with such resale, including all registration costs and all fees and expenses of counsel
for MSCO (or such affiliate).
(vii) On the Registered Share Delivery Date, a balance (the “Settlement Balance”) shall
be established with an initial balance equal to the applicable amount of the relevant Early
Settlement Payment. Following the delivery of Early Settlement Shares or any Make-Whole
Shares, Seller shall sell all such Early Settlement Shares or Make-Whole Shares in a
commercially reasonable manner.
Page 10
(viii) At the end of each day upon which sales have been made, the Settlement Balance
shall be (A) reduced by an amount equal to the aggregate proceeds received by MSCO upon
settlement of the sale of such Share, and (B) increased by an amount (as reasonably determined
by the Calculation Agent) equal to MSCO’s funding cost with respect to the then-current
Settlement Balance as of the close of business on such day.
(ix) If, on any date, the Settlement Balance has been reduced to zero but not all of the
Early Settlement Shares have been sold, no additional Early Settlement Shares shall be sold and
MSCO shall promptly deliver to the Issuer (A) any remaining Early Settlement Shares and (B) if
the Settlement Balance has been reduced to an amount less than zero, an amount in cash equal to
the absolute value of the then-current Settlement Balance.
(x) If, on any date, all of the Early Settlement Shares have been sold and the Settlement
Balance has not been reduced to zero, the Issuer shall promptly deliver to MSCO an additional
number of Shares (“Make-Whole Shares”) equal to (A) the Settlement Balance as of such date
divided by (B) the price per Share as reasonably determined by the Calculation Agent. This
clause (x) shall be applied successively until the Settlement Balance is reduced to zero.
(xi) If at any time the number of Shares covered by the Registration Statement is less
than the number of Registered Securities required to be delivered pursuant to this Section
8(a), the Issuer shall, at the request of MSCO, file additional registration statement(s) to
register the sale of all Registered Securities required to be delivered to MSCO.
(xii) The Issuer shall cooperate with MSCO and use its reasonable best efforts to take
any other action necessary to effect the intent of the provisions set forth in this Section
8(a).
(b) If Issuer timely elects to deliver Early Settlement Shares and Make-Whole Shares by
means of a private placement, the following provisions shall apply:
(i) all Early Settlement Shares and Make-Whole Shares shall be delivered to the Seller
(or any affiliate of the Seller designated by the Seller) pursuant to the exemption from the
registration requirements of the Securities Act provided by Section 4(2) thereof;
(ii) Seller and any potential purchaser of any such Shares from the Seller (or any
affiliate of the Seller designated by the Seller) identified by Seller shall have been afforded
a commercially reasonable opportunity to conduct a due diligence investigation with respect to
Issuer customary in scope for private placements of equity securities (including, without
limitation, the right to have made available to them for inspection all financial and other
records, pertinent corporate documents and other information reasonably requested by them) and
Buyer shall not disclose material non-public information in connection with such due diligence
investigation; and
(iii) an agreement (a “Private Placement Agreement”) shall have been entered into between
Issuer and the Seller (or any affiliate of the Seller designated by the Seller) in connection
with the private placement of such Shares by Issuer to the Seller (or any such affiliate) and
the private resale of such Shares by the Seller (or any such affiliate), substantially similar
to private placement purchase agreements customary for private placements of equity securities,
in form and substance commercially reasonably satisfactory to the Seller and the Issuer, which
Private Placement Agreement shall include, without limitation, provisions substantially similar
to those contained in such private placement purchase agreements relating to the
indemnification of, and contribution in connection with the liability of, the Seller and its
affiliates, and shall provide for the payment by Issuer of all fees and expenses in connection
with such resale, including all reasonable fees and expenses of one counsel for the Seller
but not including any underwriter or broker discounts and commissions, and shall contain
representations, warranties and agreements of Issuer and Seller reasonably necessary or
advisable to
Page 11
establish and maintain the availability of an exemption from the registration
requirements of the Securities Act for such resales.
(iv) If Issuer elects to deliver Early Settlement Shares to satisfy its payment
obligation of an Early Settlement Payment, neither Issuer nor Seller shall take or cause to
be taken any action that would make unavailable either (i) the exemption set forth in
Section 4(2) of the Securities Act for the sale of any Early Settlement Shares or
Make-Whole Shares by Issuer to the Seller or (ii) an exemption from the registration
requirements of the Securities Act reasonably acceptable to the Seller for resales of Early
Settlement Shares and Make-Whole Shares by the Seller.
(v) On the date requested by MSCO, (A) Issuer shall deliver a number of Early
Settlement Shares equal to the quotient of (I) the relevant Early Settlement Payment
divided by (II) a per share value, determined by MSCO in a commercially reasonable manner
and which may be based on indicative bids from institutional “accredited investors” (as
defined in Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”))
and (B) the provisions of Sections 8(a)(vii) –(x) shall apply to the Early Settlement
Shares delivered pursuant to this Section 8(b)(v). For purposes of applying the foregoing,
the Registered Share Delivery Date referred to in 8(a)(vii) shall be the date on which
Issuer delivers the Early Settlement Shares.
(c) The provisions of Section 8(b) shall apply to any then-current Settlement Balance if (i)
on any given day, Issuer cannot satisfy any of the conditions of Section 8(a) or (ii) for a period
of at least ten (10) consecutive Exchange Business Days, MSCO has determined that it is inadvisable
to effect sales of Registered Securities.
(d) If Issuer elects to deliver Early Settlement Shares to satisfy its payment obligation of
an Early Settlement Payment, then, if necessary, Issuer shall use its best efforts to cause the
number of authorized but unissued Shares of Common Stock to be increased to an amount sufficient to
permit Issuer to fulfill its obligations to satisfy its payment obligation of an Early Settlement
Payment by delivering Early Settlement Shares.
9. Special Provisions for Merger Events. Notwithstanding anything to the contrary herein or in
the Equity
Definitions, to the extent that an Announcement Date for a potential Merger Transaction occurs
during the term of this Transaction and such Announcement Date does not cause this Transaction to
terminate in whole under the provisions of “Extraordinary Event” in paragraph 2 above:
(a) As soon as practicable following the public announcement of such potential Merger
Transaction, Issuer shall provide MSCO with written notice of such announcement;
(b) Promptly after request from MSCO, Issuer shall provide MSCO with written notice specifying
(i) Issuer’s average daily Rule 10b-18 Purchases (as defined in Rule 10b-18) during the three full
calendar months immediately preceding the Announcement Date that were not effected through MSCO or
its affiliates and (ii) the number of Shares purchased pursuant to the block purchase proviso in
Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months preceding the
Announcement Date. Such written notice shall be deemed to be a certification by Issuer to MSCO that
such information is true and correct. Issuer understands that MSCO will use this information in
calculating the trading volume for purposes of Rule 10b-18; and
(c) MSCO in its sole discretion may extend the Calculation Period to account for any reduction
in the number of Shares that could be purchased on each day during the Calculation Period in
compliance with Rule 10b-18 following the Announcement Date.
Page 12
“Merger Transaction” means any merger, acquisition or similar transaction involving a
recapitalization of Issuer as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act.
10. Seller Adjustments. In the event that Seller reasonably determines that it is appropriate
with regard to any legal, regulatory or self-regulatory requirements or related policies and
procedures (whether or not such requirements, policies or procedures are imposed by law or have
been voluntarily adopted by Seller, and including, without limitation, Rule 10b-18, Rule 10b-5,
Regulation 13D-G and Regulation 14E, “Requirements”), for Seller to refrain from purchasing Shares
or to purchase fewer than the number of Shares Seller would otherwise purchase on any Trading Day
during the duration of this Transaction, then Seller may, in its discretion, elect that the
Calculation Period be suspended and, if appropriate, extended with regard to any Requirements.
Seller shall notify the Issuer upon the exercise of Seller’s rights pursuant to this Section 10 and
shall subsequently notify the Issuer on the day Seller believes that the circumstances giving rise
to such exercise have changed. If the Calculation Period is suspended pursuant to this Section 10,
at the end of such suspension Seller shall determine the number of Trading Days remaining in the
Calculation Period, as appropriate, and the terms of this Transaction shall be adjusted as set
forth above under “Physical Settlement.”
11. Covenants.
(a) The Buyer covenants and agrees:
(i)(a) that it will not treat this Transaction, any portion hereof, or any obligation
hereunder as giving rise to any interest income or other inclusions of ordinary income; (b) it will
not treat the delivery of any portion of the Shares or cash to be delivered pursuant to this
Transaction as the payment of interest or ordinary income; (c) it will treat this Transaction in
its entirety as a forward contract for the delivery of such Shares or cash; and (d) it will not
take any action (including filing any tax return or form or taking any position in any tax
proceeding) that is inconsistent with the obligations contained in (a) through (c). Notwithstanding
the preceding sentence, Buyer may take any action or position required by law, provided that Buyer
delivers to Seller an unqualified opinion of counsel, nationally recognized as expert in Federal
tax matters and acceptable to Buyer, to the effect that such action or position is required by a
statutory change or a Treasury regulation or applicable court decision published after the Trade
Date;
(ii) that, except as provided in Section 12(c) below, during the term of this Agreement,
neither it nor any of its affiliates shall directly or indirectly (which shall be deemed to include
the writing or purchase of any cash-settled derivative instrument) purchase Shares (or any security
convertible into or exchangeable for Shares) without the prior written approval of Seller or take
any other action that would cause the purchase by Seller of any Shares in connection with this
Agreement not to comply with Rule 10b-18 under the Exchange Act (assuming for the purposes of this
paragraph that such Rule were otherwise applicable to such purchases);
(iii) to comply with all laws, rules and regulations applicable to it (including, without
limitation, the Securities Act of 1933, as amended (the “Securities Act”) and the Exchange Act) in
connection with the transactions contemplated by this Confirmation;
(iv) that it is not relying, and has not relied, upon Seller or any of its representatives or
advisors with respect to the legal, accounting, tax or other implications of this Agreement and
that it has conducted its own analyses of the legal, accounting, tax and other implications of this
Agreement, and that Seller and its affiliates may from time to time effect transactions for their
own account or the account of customers and hold positions in securities or options on securities
of the Buyer and that Seller and its affiliates may continue to conduct such transactions during
the term of this Agreement; and
(v) that neither it nor any affiliates shall take any action that would cause Regulation M
under the Exchange Act (“Regulation M”), to be applicable to any purchases of Shares, or any
security for which Shares is a reference security (as defined in Regulation M), by Buyer or any
affiliated purchasers (as defined in Regulation M) during the Calculation Period.
Page 13
(b) Seller covenants and agrees that with respect to the purchase of any Shares in connection
with this Agreement, Seller shall make any such purchase in a manner that Seller reasonably
believes, based on the representations and warranties set forth herein and any other
information provided to Seller by Buyer, would meet the requirements of the safe harbor under
the provisions of Rule 10b-18 as if such purchases were made by
Buyer; provided, however, that
it is understood and agreed that Seller will not be obligated to comply with this paragraph in
connection with Seller’s ability to declare a Valuation Date other than the Scheduled Valuation
Date or if an Event of Default, Additional Disruption Event, Extraordinary Event or Additional
Termination Event occurs.
12. Representations, Warranties and Acknowledgments.
(a) The Buyer hereby represents and warrants to Seller that:
(i) as of the date hereof, the Buyer (A) is not in possession of any material, non-public
information with respect to the Buyer or any of its securities, and is entering into this Agreement
in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b5-1 of the
Exchange Act and (B) agrees not to alter or deviate from the terms of this Agreement or enter into
or alter a corresponding or hedging transaction or position with respect to the Shares (including,
without limitation, with respect to any securities convertible or exchangeable into the Shares)
during the term of this Agreement;
(ii) the transactions contemplated by this Confirmation have been authorized under Buyer’s
publicly announced program to repurchase Shares;
(iii) the Buyer is not entering into this Agreement to facilitate a distribution of the Shares
(or any security convertible into or exchangeable for Shares) or in connection with a future
issuance of securities except pursuant to the Buyer’s employee benefit plans and dividend
reinvestment plan or other publicly disclosed transaction;
(iv) the Buyer is not entering into this Agreement to create actual or apparent trading
activity in the Shares (or any security convertible into or exchangeable for Shares) or to raise or
depress the price of the Shares (or any security convertible into or exchangeable for Shares); and
(v) the Buyer is as of the date hereof, and after giving effect to the transactions
contemplated hereby will be, Solvent. As used in this paragraph, the term “Solvent” means, with
respect to a particular date, that on such date (A) the present fair market value (or present fair
saleable value) of the assets of the Buyer is not less than the total amount required to pay the
liabilities of the Buyer on its total existing debts and liabilities (including contingent
liabilities) as they become absolute and matured, (B) the Buyer is able to realize upon its assets
and pay its debts and other liabilities, contingent obligations and commitments as they mature and
become due in the normal course of business, (C) assuming consummation of the transactions as
contemplated by this Agreement, the Buyer is not incurring debts or liabilities beyond its ability
to pay as such debts and liabilities mature, (D) the Buyer is not engaged in any business or
transaction, and does not propose to engage in any business or transaction, for which its property
would constitute unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which the Buyer is engaged and (E) the Buyer is not a defendant in any
civil action that could reasonably be expected to result in a judgment that Buyer is or would
become unable to satisfy.
(b) Seller and the Buyer each hereby acknowledges that any transactions by Seller in the Shares
will be undertaken by Seller as principal for its own account. All of the actions to be taken by
Seller in connection with this Agreement, shall be taken by Seller independently and without any
advance or subsequent consultation with the Buyer.
Page 14
(c) Seller and the Buyer each hereby acknowledges that nothing in this Confirmation shall prohibit
(i) Buyer from engaging in open market repurchase programs or privately negotiated repurchases
prior to the last Valuation Date outside of any transactions that occur in connection with this
Agreement and (ii) any transactions in the Shares that are effected by an “agent independent of the
issuer” as defined in Rule 10b-18. Buyer hereby agrees that to the extent it will effect open
market repurchases as described above, then Buyer shall (i) enter into an open market repurchase
agreement engaging Seller as agent in connection with any such repurchases and (ii) shall only
communicate any such open market repurchase orders to the “Designated Seller Personnel”. Designated
Seller Personnel shall mean Xxxxxx Xxxxx (phone: 000-000-0000; email:
Xxxxxx.Xxxxx@xxxxxxxxxxxxx.xxx) and Xxxxxxx Xxxxxxx (phone: 000-000-0000; email:
Xxxxxxx.Xxxxxxx@xxxxxxxxxxxxx.xxx).
13. Acknowledgements of Buyer Regarding Hedging and Market Activity. Buyer agrees, understands and
acknowledges that:
| (a) | during the period from (and including) the Trade Date to (and including) the Settlement Date, Seller and its affiliates may buy or sell Shares or other securities or buy or sell options or futures contracts or enter into swaps or other derivative securities in order to adjust its hedge position with respect to the transactions contemplated by this Transaction; | ||
| (b) | Seller and its affiliates also may be active in the market for the Shares other than in connection with hedging activities in relation to the transactions contemplated by this Transaction; | ||
| (c) | Seller shall make its own determination as to whether, when and in what manner any hedging or market activities in the Issuer’s securities shall be conducted and shall do so in a manner that it deems appropriate to hedge its price and market risk with respect to 10b-18 VWAP; and | ||
| (d) | any market activities of Seller and its affiliates with respect to the Shares may affect the market price and volatility of the Shares, as well as the 10b-18 VWAP, each in a manner that may be adverse to Buyer. |
14. Indemnification.
(a) In the event that Seller becomes involved in any capacity in any action, proceeding or
investigation brought by or against any person in connection with any matter referred to in this
Agreement, the Buyer will reimburse Seller for its reasonable legal and other expenses (including
the cost of any investigation and preparation) incurred in connection therewith. The Buyer also
will indemnify and hold Seller harmless against any losses, claims, damages or liabilities to which
it may become subject in connection with any matter referred to in this Agreement, except to the
extent that any such loss, claim, damage or liability results from the gross negligence or bad
faith of Seller in effecting the transactions which are the subject of this Agreement; provided,
however, that if it is determined by a court of competent jurisdiction in a final judgment that
Seller is not entitled to be indemnified hereunder in connection with such matter, then Seller
shall reimburse the Buyer for any expenses or other amounts paid or contributed pursuant to the
first, second or third sentences of this Section 14 and whether paid in cash or Shares pursuant to
Sections 14(b) or (c) below. If for any reason the foregoing indemnification is unavailable to
Seller or insufficient to hold it harmless, then the Buyer shall contribute to the amount paid or
payable by Seller as a result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the Buyer on one hand and Seller on the other hand
with respect to such loss, claim, damage, or liability and any other relevant equitable
considerations. The reimbursement, indemnity and contribution obligations of the Buyer under this
Section 14 shall be in addition to any liability which the Buyer may otherwise have, shall extend
upon the same terms and conditions to any affiliate of Seller and the partners, directors,
officers, agents, employees and controlling persons (if any), as the case may be, of Seller and any
such affiliate and shall be binding upon and inure to the benefit of any
Page 15
successors, assigns, heirs and personal representatives of the Buyer, Seller, any such affiliate
and any such person. The foregoing provisions shall survive any termination or completion of this
Agreement. For the purposes of this Section 14, the term “Seller” shall include MSCO and its
affiliates.
(b) Subject to Section 14(c), the reimbursement, indemnity and contribution obligations of the
Buyer under Section 14(a) (each, an “Obligation”) shall be paid promptly in cash.
(c) In connection with any Obligation under Section 14(b) above, the Buyer, in lieu of making
any cash payment as contemplated by that section, may elect to satisfy such Obligation by
delivering Shares to Seller (such Shares, the “Indemnity Shares”) by notifying Seller of such
election within five Trading Days of being informed by Seller that such Obligation is due and
payable. The provisions of “Certain Payments and Deliveries by Issuer” in Section 7 above shall
apply to such a share settlement of an Obligation as if the relevant Obligation was the “Early
Settlement Payment” and the Indemnity Shares were “Early Settlement Shares”. In order to elect to
deliver Indemnity Shares, Issuer must (i) specify whether such Indemnity Shares are to be sold by
means of a registered offering or by means of a private placement and (ii) the conditions described
in Section 8 above must be satisfied as if the Indemnity Shares were “Early Settlement Shares” and
any additional Shares Issuer delivers to reduce the settlement balance to zero in connection with
this Section 14 were “Make-Whole Shares”.
(d) Seller will (i) indemnify and hold Buyer harmless against any losses, claims, damages or
liabilities to which it may become subject in connection with any matter that involves the actual
or alleged violation by Seller of any laws in connection with its performance of the transactions
contemplated under this Agreement, except to the extent that any such loss, claim, damage or
liability results from the gross negligence or bad faith of Buyer and (ii) reimburse Buyer for its
reasonable legal and other expenses (including the cost of any investigation and preparation)
incurred in connection therewith; provided, however, that if it is determined by a court of
competent jurisdiction in a final judgment that Buyer is not entitled to be indemnified hereunder
in connection with such matter, then Buyer shall reimburse Seller for any expenses or other amounts
paid or contributed pursuant to this Section 14(d). If for any reason the foregoing indemnification
is unavailable to Buyer or insufficient to hold it harmless, then Seller shall contribute to the
amount paid or payable by Buyer as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect the relative fault of the Seller on one hand and Buyer on
the other hand with respect to such loss, claim, damage, or liability and any other relevant
equitable considerations. The reimbursement, indemnity and contribution obligations of the Seller
under this Section 14(d) shall be in addition to any liability which Seller may otherwise have,
shall extend upon the same terms and conditions to any affiliate of Buyer and the partners,
directors, officers, agents, employees and controlling persons (if any), as the case may be, of
Buyer and any such affiliate and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Buyer, Seller, any such affiliate and any such
person. The foregoing provisions shall survive any termination or completion of this Agreement. The
reimbursement, indemnity and contribution obligations of Seller under this Section 14(d) shall be
paid promptly in cash.
15. The parties hereto agree and acknowledge that Seller is a “financial participant” within the
meaning of Section 101(22) of Title 11 of the United States Code (the “Bankruptcy Code”). The
parties hereto further agree and acknowledge that this Transaction is either (i) a “securities
contract” as such term is defined in Section 741(7) of the Bankruptcy Code, in which case each
payment and delivery made pursuant to this Transaction is a “settlement payment”, as such term is
defined in Section 741(8) of the Bankruptcy Code, and that Seller is entitled to the protections
afforded by, among other sections, Sections 362(b)(6), 546(e) and 555 of the Bankruptcy Code, or
(ii) a “swap agreement”, as such term is defined in Section 101(53B) of the Bankruptcy Code, in
which case each party is a “swap participant”, as such term is defined in Section 101(53C) of the
Bankruptcy Code, and that Seller is entitled to the protections afforded by, among other sections,
Sections 362(b)(17), 546(g) and 560 of the Bankruptcy Code.
16. Seller and Issuer hereby agree and acknowledge that Seller has authorized the Issuer to
disclose this Transaction to any and all persons, and there are no express or implied
agreements, arrangements or
Page 16
understandings to the contrary, and authorizes the Issuer to use any information that the Issuer
receives or has received with respect to this Transaction in any manner.
17. Treatment in Bankruptcy; No Setoff; No Collateral.
(a) In the event the Buyer becomes the subject of proceedings (“Bankruptcy Proceedings”) under the
U.S. Bankruptcy Code or any other applicable bankruptcy or insolvency statute from time to time in
effect, any rights or claims of Seller hereunder in respect of this transaction shall rank for all
purposes no higher than, but on a parity with, the rights or claims of holders of Shares, and
Seller hereby agrees that its rights and claims hereunder shall be subordinated to those of all
parties with claims or rights against the Buyer (other than common stockholders) to the extent
necessary to assure such ranking. Without limiting the generality of the foregoing, after the
commencement of Bankruptcy Proceedings, the claims of Seller hereunder shall for all purposes have
rights equivalent to the rights of a holder of a percentage of the Shares equal to the aggregate
amount of such claims (the “Claim Amount”) taken as a percentage of the sum of (i) the Claim Amount
and (ii) the aggregate fair market value of all outstanding Shares on the record date for
distributions made to the holders of such Shares in the related Bankruptcy Proceedings.
Notwithstanding any right it might otherwise have to assert a higher priority claim in any such
Bankruptcy Proceedings, Seller shall be entitled to receive a distribution solely to the extent and
only in the form that a holder of such percentage of the Shares would be entitled to receive in
such Bankruptcy Proceedings, and, from and after the commencement of such Bankruptcy Proceedings,
Seller expressly waives (i) any other rights or distributions to which it might otherwise be
entitled in such Bankruptcy Proceedings in respect of its rights and claims hereunder and (ii) any
rights of setoff it might otherwise be entitled to assert in respect of such rights and claims.
(b) Notwithstanding any provision of this Agreement or any other agreement between the parties
to the contrary, neither the obligations of the Buyer nor the obligations of Seller hereunder are
secured by any collateral, security interest, pledge or lien.
18. Share Cap. Notwithstanding any other provision of this Agreement to the contrary, in no event
shall the Buyer be required to deliver to Seller a number of Shares that exceeds the Share Cap (as
specified in Schedule I), subject to reduction by the number of Shares delivered hereunder by the
Buyer on any prior date.
19. Account Details:
Account for Payments to MSCO: To be provided separately
Account for Payments to Issuer: To be provided by Issuer
| 20. | Governing law: The laws of the State of New York. | |
| EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS CONFIRMATION OR ANY TRANSACTION CONTEMPLATED HEREBY. |
Page 17
Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this
Confirmation and returning it to us by facsimile to the number provided on the attached facsimile
cover page.
Confirmed as of the date first written above:
| ALKERMES, INC. | XXXXXX XXXXXXX & CO. INCORPORATED | |||||||
By:
|
/s/ Xxxxx X. Xxxxxxxx | By: | /s/ Xxxxx Xxxxxxxx | |||||
| Name: Xxxxx X. Xxxxxxxx | Name: Xxxxx Xxxxxxxx | |||||||
| Title: President and CEO | Title: Managing Director | |||||||
By:
|
/s/ Xxxxx X. Xxxxxx | |||||||
| Name: Xxxxx X. Xxxxxx | ||||||||
| Title: Senior Vice President and CFO | ||||||||
Page 18
Schedule I
This Schedule I, dated February 7, 2008 may be amended and/or superseded from time to time by
mutual agreement of both parties. For the purposes of this Transaction, the following terms shall
have the following values/meanings:
1. The Trade Date shall be February 7, 2008
2. The Discount equals USD0.08.
3. The Initial Shares equal 3,373,313 Shares.
4. The Prepayment Amount equals USD60,000,000.
5. The Commission Amount equals zero.
6. The Adjustment Amount equals zero.
7. The Structuring Fee equals zero.
8. The Scheduled Valuation Date shall be May 9, 2008.
9. The Lock-Out Date shall mean March 10, 2008.
10. The Share Cap shall equal the lesser of (i) 8,995,502 Shares and (ii) 20% of the total number
of Shares that Issuer has outstanding as of any day.
Page 19
AGREED AND ACKNOWLEDGED (as of the date listed above)
| ALKERMES, INC. | ||||||||
By:
|
/s/ Xxxxx X. Xxxxxxxx | By: | /s/ Xxxxx X. Xxxxxx | |||||
| Name: Xxxxx X. Xxxxxxxx | Name: Xxxxx X. Xxxxxx | |||||||
| Title: President and CEO | Title: Senior Vice President and CFO | |||||||
XXXXXX XXXXXXX & CO. INCORPORATED
|
||||||||
By:
|
/s/ Xxxxx Xxxxxxxx | |||||||
| Name: Xxxxx Xxxxxxxx | ||||||||
| Title: Managing Director | ||||||||
