Date: June 19, 2007 To: Iconix Brand Group, Inc. (Counterparty) Attention: Chief Executive Officer Telephone No.:212 ###-###-#### Facsimile No.: 212 ###-###-#### From: Lehman Brothers Inc., acting as Agent Lehman Brothers OTC Derivatives Inc., acting as Principal (Lehman Brothers) Attention: Andrew Yare - Transaction Management Group Telephone: (212) 526-9986 Facsimile: (646) 885-9546

Attention: Chief Executive Officer 

Telephone No.:  ###-###-####

Facsimile No.:   ###-###-####

Lehman Brothers OTC Derivatives Inc., acting as Principal (“Lehman Brothers”)

Attention: Andrew Yare - Transaction Management Group

Telephone: (212) 526-9986

Facsimile: (646) 885-9546

Trade Date:

June 14, 2007

Effective Date:

June 20, 2007 subject to cancellation of the OTC Warrant Transaction prior to 5:00 p.m. (New York City time) on such date by the Counterparty. In the event of such cancellation, any payments previously made hereunder, including the Premium, shall be returned to the person making such payment. In addition, Counterparty shall reimburse Lehman Brothers for any costs or expenses (including market losses) relating to the unwinding of its hedging activities in connection with the Transaction (including any loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position).

Warrant Style:

The Warrants shall be exercisable as set forth under “Procedures for Exercise” below.

Warrant Type:

Call

Seller:

Counterparty

Buyer:

Lehman Brothers

Shares:

Shares of common stock, $0.001 par value, of Counterparty (Security Symbol: “ICON”).

Number of Warrants:

4,172,718

Daily Number of Warrants:

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

Warrant Entitlement:

One (1) Share per Warrant

Strike Price:

$42.40

Premium:

$14,996,000.00

Premium Payment Date:

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

Exchange:

NASDAQ Global Market

Related Exchange(s):

All Exchanges

Full Exchange Business Day:

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

Expiration Time:

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

Expiration Dates:

The 75 consecutive Full Exchange Business Days beginning on and including September 28, 2012 each shall be the Expiration Date for a number of Warrants equal to the Daily Number of Warrants on such date.

Exercise Dates:

Each Expiration Date shall be an Exercise Date for a number of Warrants equal to the Daily Number of Warrants on such date.

Automatic Exercise:

Applicable; provided that Section 3.4(a) of the Equity Definitions shall apply to Cash Settlement and Net Physical Settlement; and provided further that, unless all Warrants have been previously exercised hereunder, a number of Warrants for each Expiration Date equal to the Daily Number of Warrants for such Expiration Date shall be deemed to be automatically exercised.

Counterparty’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:

Address: 1450 Broadway 

New York, New York 10018

 

Attention: Chief Executive Officer

Facsimile No.: 212 ###-###-#### 

Telephone No.:  ###-###-####

Valuation Dates:

Each Exercise Date

Cash Settlement:

Applicable; provided that it shall be a condition of Counterparty’s right to elect Cash Settlement that Counterparty delivers to Buyer on the date of the Cash Settlement election a representation signed by Counterparty that Counterparty has publicly disclosed all material information necessary for Counterparty to be able to purchase or sell Shares in compliance with applicable federal securities laws. If Counterparty elects to settle the Transaction by Cash Settlement, Counterparty represents and agrees that:

 

(i) Counterparty is not, on the date of the Cash Settlement election, and will not be, on any day during the period from and including the first Expiration Date to and including the final Expiration Date, engaged in a distribution, as such term is used in Regulation M under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and

(ii) during the period from and including the first Expiration Date to and including the final Expiration Date, without the prior written consent of Lehman Brothers, the Counterparty shall not, and shall cause its affiliates and affiliated purchasers (each as defined in Rule 10b-18 under the Exchange Act) not to, directly or indirectly (including, without limitation, by means of a derivative instrument) purchase, offer to purchase, place any bid or limit order that would effect a purchase of, or commence any tender offer relating to, any Shares (or equivalent interest, including a unit of beneficial interest in a trust or limited partnership or a depository share) or any security convertible into or exchangeable for the Shares.

Settlement Currency:

USD

Settlement Price:

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

 

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

Cash Settlement Payment Date:

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

Settlement Method Election:

Applicable with respect to Cash Settlement or Net Physical Settlement only.

Electing Party:

Counterparty

Settlement Method Election Date:

Ten (10) Business Days prior to the first Expiration Date

Default Settlement Method:

Net Physical Settlement.

Net Physical Settlement:

In the event that the Counterparty elects, or is deemed to elect, to settle this Transaction by Net Physical Settlement, subject to “Conditions of Net Physical Settlement” below, Counterparty shall deliver to Lehman Brothers on the Settlement Date a number of Shares (the “Delivered Shares”) equal to the Share Delivery Quantity, provided that in the event that the number of Shares calculated comprises any fractional Share, only whole Shares shall be delivered and an amount in cash equal to the value of such fractional share shall be payable by the Counterparty to Lehman Brothers in lieu of such fractional Share.

Share Delivery Quantity:

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

Net Physical Settlement Amount:

For any Exercise Date, an amount equal to the product of (i) the Number of Warrants being exercised on the relevant Exercise Date, (ii) the Strike Price Differential for such Exercise Date and (iii) the Warrant Entitlement.

Strike Price Differential:

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

Settlement Date:

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

Conditions to Net Physical Settlement:

If, in connection with or six months following delivery of Shares hereunder, Lehman Brothers notifies the Counterparty that Lehman Brothers has reasonably determined after advice from counsel that there is a considered risk that such Shares are subject to restrictions on transfer in the hands of Lehman Brothers pursuant to the rules and regulations promulgated under the Securities Act of 1933, as amended (the “Securities Act”), then Counterparty shall either (i) deliver Shares that are covered by an effective registration statement of Counterparty for immediate resale by Lehman Brothers or (ii) agree to deliver additional Shares so that the value of such Shares as determined by the Calculation Agent to reflect an appropriate liquidity discount, equals the value of the number of Shares that would otherwise be deliverable if such Shares were freely tradable upon receipt by Lehman Brothers.

 

(A) If Counterparty elects to deliver Shares as described in above clause (i), then promptly following such notification from Lehman Brothers

 

(a) Counterparty shall afford Lehman Brothers a reasonable opportunity to conduct a due diligence investigation with respect to Counterparty that is customary in scope for underwritten offerings of equity securities that yields a result reasonably satisfactory to Lehman Brothers;

 

(b) Counterparty shall as soon as practicable make available to Lehman Brothers an effective registration statement for immediate resale (the “Registration Statement”) in form and content reasonably satisfactory to Lehman Brothers and Counterparty and filed pursuant to Rule 415 under the Securities Act, and such prospectuses as Lehman Brothers may reasonably request to comply with the applicable prospectus delivery requirements (the “Prospectus”) for the resale by Lehman Brothers of such number of Shares as Lehman Brothers shall reasonably specify in accordance with this paragraph, such Registration Statement to be effective and Prospectus to be current until the earliest of the date on which (1) all Delivered Shares have been sold by Lehman Brothers, (2) Lehman Brothers has advised Counterparty that it no longer requires that such Registration Statement be effective, (3) all remaining Delivered Shares could be sold by Lehman Brothers without registration pursuant to Rule 144 promulgated under the Securities Act (the “Registration Period”) or (4) Counterparty has provided a legal opinion in form and substance satisfactory to Lehman Brothers (with customary assumptions and exceptions) that the Shares issuable upon exercise of these Warrants will be freely tradable under the Securities Act upon delivery to Lehman Brothers and not subject to any legend restricting transferability. It is understood that the Registration Statement and Prospectus will cover a number of Shares equal to the aggregate number of Shares (if any) reasonably estimated by Lehman Brothers to be potentially deliverable by Counterparty in connection with Net Physical Settlement hereunder (not to exceed the Maximum Deliverable Share Amount) and shall be subject to the same suspension of sales during “blackout dates” as provided in the following paragraph; and

(c) Counterparty will enter into a registration rights agreement with Lehman Brothers in form and substance reasonably acceptable to Lehman Brothers and Counterparty, which agreement will contain among other things, customary representations and warranties and indemnification, restrictions on sales during “blackout dates” as provided for in the registration rights agreement (the “Registration Rights Agreement”) entered into by Counterparty on or about the date hereof, provide for delivery of comfort letters and opinions of counsel and other rights relating to the registration of a number of Shares equal to the number of Delivered Shares and other Shares deliverable hereunder up to the Maximum Deliverable Share Amount.

 

(d) Counterparty shall promptly pay to Lehman Brothers a $0.04 per Share fee with all Shares delivered in connection with Net Physical Settlement pursuant to a Registration Statement.

 

(B) If Counterparty elects to deliver Shares as described in above clause (ii), then promptly following such notification from Lehman Brothers

 

(a) Counterparty shall afford Lehman Brothers and any potential institutional purchaser of any Shares identified by Lehman Brothers a reasonable opportunity to conduct a due diligence investigation with respect to Counterparty that is customary in scope for private placements of equity securities subject to execution of any customary confidentiality agreements;

 

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

 

(c) Lehman Brothers shall sell the Delivered Shares in a commercially reasonable manner until the amount received by Lehman Brothers for the sale of the Shares (the “Proceeds  Amount”) is equal to the Net Physical Settlement Amount. Any remaining Delivered Shares shall be returned to Counterparty. If the Proceeds Amount is less than the Net Physical Settlement Amount, Counterparty shall promptly deliver upon notice from Lehman Brothers additional Shares to Lehman Brothers until the dollar amount from the sale of such Shares by Lehman Brothers equals the difference between the Net Physical Settlement Amount and the Proceeds Amount. In no event shall Counterparty be required to deliver to Lehman Brothers a number of Shares greater than the Maximum Deliverable Share Amount.

 

(C) Notwithstanding the foregoing: (I) if Counterparty has elected to deliver Shares as described in clause (i) above and either (a) Counterparty does not provide for the sale of the Shares under the Registration Statement as provided in the Registration Rights Agreement or (b) some Shares cannot be registered under the Registration Statement due to Rule 415(a)(4) under the Securities Act, then the provisions of sub-paragraph (B) shall apply to the extent Counterparty has not satisfied its obligations hereunder by the delivery of Shares pursuant to sub-paragraph (A). (II) If sub-paragraph (B) is applicable and Counterparty fails to satisfy its obligations under such sub-paragraph (B), then Counterparty may deliver unregistered Shares of equivalent value to the Net Physical Settlement Amount (or, if applicable, the unsatisfied portion thereof). The value of any unregistered Shares so delivered shall be discounted to reflect an appropriate liquidity discount (determined by Lehman Brothers in a commercially reasonable manner, taking into account Lehman Brothers’ policies and determinations with respect to any transfer restrictions that Lehman Brothers deems it advisable to observe in connection with sales of such Shares). (III) If some or all of the Delivered Shares cannot be used to close out stock loans in the shares of Counterparty entered into to establish or maintain short positions by Lehman Brothers in connection with this Transaction without a prospectus being required by applicable law to be delivered to such lender, then the value of any such Delivered Shares shall reflect the cost (determined by the Calculation Agent in good faith and in a commercially reasonable manner and taking into account the policies and determinations of Lehman Brothers with respect to compliance with applicable legal and regulatory requirements) to Lehman Brothers of trading Shares in order to close out its hedge position if any, in all cases for purposes of calculating the Delivered Shares. In no event shall Counterparty be required to top up the delivery in cash.

Limitations on Net Physical Settlement by Counterparty:

Notwithstanding anything herein or in the Agreement to the contrary, the number of Shares that may be delivered at settlement by Counterparty shall not exceed 6,259,076 at any time (“Maximum Deliverable Share Amount”), as adjusted by Calculation Agent to account for any subdivision, stock-split, stock combination, reclassification or similar dilutive or anti-dilutive event with respect to the Shares.

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

 

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

Extraordinary Dividends

Any and all dividends declared by the Issuer for which the ex-dividend date occurs during the period from, and including, the Trade Date to, and including, the date on which Counterparty has fully performed its obligations to deliver Shares hereunder.

Method of Adjustment:

Calculation Agent Adjustment

Consequences of Merger Events:

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

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

 

(c) Share-for-Combined: Cancellation and Payment (Calculation Agent Determination)

Tender Offer:

Applicable

Consequences of Tender Offers:

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

 

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

 

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

 

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

Nationalization, Insolvency or Delisting:

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

Determining Party:

Lehman Brothers, acting in good faith and in a commercially reasonable manner

Change in Law:

Applicable

Failure to Deliver:

Not Applicable

Insolvency Filing:

Applicable

Hedging Disruption Event:

Applicable

Increased Cost of Hedging:

Not Applicable

Loss of Stock Borrow:

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

Maximum Stock Loan Rate:

0.60 %

Increased Cost of Stock Borrow:

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

Initial Stock Loan Rate:

0.25%

Hedging Party:

Lehman Brothers

Determining Party:

Lehman Brothers

Non-Reliance:

Applicable

Agreements and Acknowledgments Regarding Hedging Activities:

Applicable

Additional Acknowledgments:

Applicable

Additional Agreements:

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

Early Termination:

Notwithstanding any provision to the contrary, upon the designation of an Early Termination Date or the occurrence of Cancellation and Payment in whole or in part hereunder, Counterparty’s payment obligation in respect of this Transaction (which shall, in the case of an Early Termination Date be determined in accordance with Second Method and Loss (which shall be determined using commercially reasonable procedures in order to produce a commercially reasonable result)) (the “Transaction Early Termination Amount”) may, at the option of Counterparty, be satisfied by the delivery of a number of Shares equal to the Transaction Early Termination Amount divided by the Termination Price (“Early Termination Stock Settlement”); provided, however, that Counterparty must notify Lehman Brothers of its election of Early Termination Stock Settlement by the close of business on the day that is two Exchange Business Days following the day that the notice designating the Early Termination Date, or notice that an Extraordinary Event has resulted in the cancellation or termination of the Transaction in whole or in part, is effective. “Termination Price” means the market value per Share on the Early Termination Date, as determined by the Calculation Agent in a commercially reasonable manner taking into account any applicable discount to reflect any restrictions on transfer.

 

A number of Shares calculated as being due in respect of any Early Termination Stock Settlement will be deliverable on the third Clearance System Business Day following the date that notice specifying the number of Shares deliverable is effective; provided that, if Counterparty is delivering Shares as a result of a Merger Event, the Settlement Date for such delivery will be immediately prior to the effective time of the Merger Event and the Shares will be deemed delivered at such time such that Lehman Brothers will be a holder of the Shares prior to such effective time. Section 6(d)(i) of the Agreement is hereby amended by adding the following words after the word “paid” in the fifth line thereof: “or any delivery is to be made, as applicable.”

 

On or prior to the Early Termination Date or date on which notice that an Extraordinary Event has resulted in the cancellation or termination of the Transaction in whole or in part is effective, as applicable, if Early Termination Stock Settlement is elected and if so requested by Lehman Brothers upon advice of counsel, Counterparty shall (subject to its right to make the election described in the immediately succeeding paragraph) enter into a registration rights agreement with Lehman Brothers in form and substance reasonably acceptable to Lehman Brothers and Counterparty which agreement will contain among other things, customary representations and warranties and indemnification, restrictions on sales during “blackout dates” as provided for in the Registration Rights Agreement and shall satisfy the conditions contained therein and Counterparty shall file and diligently pursue to effectiveness a Registration Statement pursuant to Rule 415 under the Securities Act. If and when such Registration Statement shall have been declared effective by the Securities and Exchange Commission, Counterparty shall have made available to Lehman Brothers such Prospectuses as Lehman Brothers may reasonably request to comply with the applicable prospectus delivery requirements for the resale by Lehman Brothers of such number of Shares as Lehman Brothers shall specify (or, if greater, the number of Shares that Counterparty shall specify). Such Registration Statement shall be effective and Prospectus shall be current until the earliest of the date on which (i) all Shares delivered by Counterparty in connection with an Early Termination Date have been sold, (ii) Lehman Brothers has advised Counterparty that it no longer requires that such Registration Statement be effective or (iii) all remaining Shares could be sold by Lehman Brothers without registration pursuant to Rule 144 promulgated under the Securities Act (the “Termination Registration Period”). It is understood that the Registration Statement and Prospectus will cover a number of Shares equal to the number of Shares plus the aggregate number of Shares (if any) reasonably estimated by Lehman Brothers to be potentially deliverable by Counterparty in connection with Early Termination Stock Settlement hereunder, but in no event exceeding the Maximum Deliverable Share Amount. On each day during the Termination Registration Period Counterparty shall represent that each of its filings under the Securities Act, the Exchange Act or other applicable securities laws that are required to be filed have been filed and that, as of the respective dates thereof and as of the date of this representation, they do not contain any untrue statement of a material fact or omission of a material fact required to be stated therein or necessary to make the statements made, in the light of the circumstances under which they were made, not misleading.

If Counterparty elects not to deliver Shares subject to an effective Registration Statement (or if some or all of the Shares delivered cannot be used to close out stock loans in the shares of Counterparty entered into to establish or maintain short positions by Lehman Brothers in connection with this Transaction without a prospectus being required by applicable law to be delivered to such lender), the provisions of sub-paragraphs (B) and (C) set forth above under “Conditions to Net Physical Settlement” shall apply, mutatis mutandis, as if the Net Physical Settlement Amount were the Transaction Early Termination Amount. In no event shall Counterparty be required to deliver to Lehman Brothers a number of Shares greater than the Maximum Deliverable Share Amount.

Compliance With Securities Laws:

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

 

Each party acknowledges that the offer and sale of the Transaction to it is intended to be exempt from registration under the Securities Act by virtue of Section 4(2) thereof. Accordingly, each party represents and warrants to the other party that (i) it has the financial ability to bear the economic risk of its investment in the Transaction and is able to bear a total loss of its investment, (ii) it is an “accredited investor” as that term is defined in Regulation D as promulgated under the Securities Act and (iii) the disposition of the Transaction is restricted under this Confirmation, the Securities Act and state securities laws.

 

Counterparty further represents and warrants that:

 

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

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

 

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

 

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

Account Details:

Account for payments to Counterparty:

 

To be advised.

 

Account for payments to Lehman Brothers:

 

To be advised.

 

Account for delivery of Shares to Lehman Brothers:

 

To be advised.

Agreement Regarding Shares:

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

Bankruptcy Rights:

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

Set-Off:

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

Transfer:

Neither party may transfer its rights or delegate its obligations under this Transaction without the prior written consent of the other party, except that Lehman Brothers, after payment in full of the Premium, may assign its rights and delegate its obligations hereunder, in whole or in part, to any other person (an “Assignee”) without the prior consent of the Counterparty, effective (the “Transfer Effective Date”) upon delivery to Counterparty of an executed acceptance and assumption by the Assignee (an “Assumption”) of the transferred obligations of Lehman Brothers under this Transaction (the “Transferred Obligations”). Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Lehman Brothers to purchase, sell, receive or deliver any Shares or other securities to or from Counterparty, Lehman Brothers may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to perform Lehman Brothers’ obligations in respect of this Transaction and any such designee may assume such obligations. Lehman Brothers shall be discharged of its obligations to Counterparty to the extent of any such performance.

Indemnity:

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

(a)

Counterparty hereby represents and warrants to Lehman Brothers, on each day from the Trade Date to and including the earlier of (i) July 20, 2007 (ii) the date by which Lehman Brothers is able to initially complete a hedge of its position created by this Transaction, that:

(1)

it will not, and will not permit any person or entity subject to its control to, bid for or purchase Shares during such period except pursuant to transactions or arrangements which have been approved by Lehman Brothers or an affiliate of Lehman Brothers; and

(2)

it has publicly disclosed all material information necessary for it to be able to purchase or sell Shares in compliance with applicable federal securities laws.

(c)

Notwithstanding anything to the contrary herein, Lehman Brothers shall not be entitled to exercise any Warrant or receive any Shares deliverable hereunder, and Automatic Exercise shall not apply with respect to any Warrant to the extent (but only to the extent) that after such receipt of any Shares upon the exercise of such Warrant or otherwise hereunder Lehman Brothers, or its ultimate parent entity would, directly or indirectly, be the beneficial owner (as such term is defined for purposes of Section 13(d) of the Exchange Act) at any time of more than 8.0 percent of the class of the Counterparty’s outstanding equity securities that is comprised of the Shares (an “Excess Share Owner”).

(I)

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

(II)

Payee Representations. For the purpose of Section 3(f) of the Agreement, each party makes the following representations to the other party:

Counterparty

Evidence of the authority and true signatures of each official or representative signing this Confirmation

Upon or before execution and delivery of this Confirmation

Yes

Counterparty

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

Upon or before execution and delivery of this Confirmation

Yes

Lehman Brothers Inc., acting as Agent

Lehman Brothers OTC Derivatives Inc., acting as Principal

745 Seventh Avenue

New York, NY 10019

(a)

The parties acknowledge and agree that there are no other representations, agreements or other undertakings of the parties in relation to this Transaction, except as set forth in this Confirmation.

(i)

Buyer to be a “financial institution” as defined in Section 101(22) of Title 11 of the United States Code (the “Bankruptcy Code”) and this Transaction to be a “securities contract” as defined in Section 741(7) of the Bankruptcy Code and a “swap agreement” as defined in Section 101(53C) of the Bankruptcy Code, qualifying for the protections of, among other sections, Sections 362(b)(6), 362 (b)(17), 546(e), 546(g), 555 and 560 of the Bankruptcy Code;

(ii)

a party’s right to liquidate this Transaction and to exercise any other remedies upon the occurrence of any Event of Default under the Agreement with respect to the other party to constitute a “contractual right” as defined in the Bankruptcy Code;

(iii)

all payments for, under or in connection with this Transaction, all payments for the Shares and the transfer of such Shares to constitute “settlement payments” as defined in the Bankruptcy Code.

(c)

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