Mogen Inc

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To: MoGen, Inc. Senior Management
From: Mr. Dar Maanavi, Managing Director, Equity-Linked Capital Markets Group of Merrill Lynch

Re: $5 Billon Convertible Debt Offering Proposal

Dear Gentlemen:

We are pleased to present to you the salient features of our proposed $5B convertible debt offering for your careful review and approval. We deemed it appropriate to walk you through the analytical process in coming up with the right mix of conversion premium and coupon rate. We initially consider a conversion premium of 25% and determine its corresponding coupon rate. We then explore the appropriateness of such a premium and explore other conversion premium-coupon rate combinations and determine which combination would be optimal for both the
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We however consider the company’s concern about its stock price being underpriced, and given the company’s impressive performance for the past few years and growth opportunities as evidenced in the planned use of the issuance proceeds, we believe that it is possible to explore higher conversion premia, which would still be well-received by both retail and institutional investors.

In the 2003 issue for MoGen, we were able to sell the 7-year convertibles at a 48% conversion premium. If we pro-rate the said premium for this 5-year issuance, we obtain a conversion premium of about 34% . This assumes that the company’s risk profile has not materially changed since then and investor expectations on the company’s performance are more or less the same.

We note that the company’s previous stock repurchases and its plans to continue with the said program effectively signals to the market that the management feels that its stock is underpriced and that it has a positive outlook on the stock’s future performance. Adding to this the company’s relatively low leverage position and a strong A+ rating, which is the highest in the
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