Exhibit 10.4

 

Deutsche Bank [g178683ki01i001.gif]

 

EXECUTION VERSION

Deutsche Bank AG, London Branch

Winchester House

1 Great Winchester St, London

EC2N 2DB

Telephone:  44 20 7545 8000

 

c/o Deutsche Bank Securities Inc.

60 Wall Street

New York, NY 10005

Telephone: 212-250-2500

 

 

September 16, 2010

 

To:

American Equity Investment Life Holding Company

 

6000 Westown Parkway

 

West Des Moines, IA 50266

 

Attention:

Treasurer

 

Telephone No.:

(515) 221-0002

 

Facsimile No.:

(515) 221-9947

 

Re:                             Call Option Transaction

 

Internal Reference Nr.: 400999

 

DEUTSCHE BANK AG IS NOT REGISTERED AS A BROKER DEALER UNDER THE U.S. SECURITIES
EXCHANGE ACT OF 1934.  DEUTSCHE BANK SECURITIES INC. (“DBSI”) HAS ACTED SOLELY
AS AGENT IN CONNECTION WITH THIS TRANSACTION AND HAS NO OBLIGATION, BY WAY OF
ISSUANCE, ENDORSEMENT, GUARANTEE OR OTHERWISE WITH RESPECT TO THE PERFORMANCE OF
EITHER PARTY UNDER THE TRANSACTION.  AS SUCH, ALL DELIVERY OF FUNDS, ASSETS,
NOTICES, DEMANDS AND COMMUNICATIONS OF ANY KIND RELATING TO THIS TRANSACTION
BETWEEN PARTY A AND PARTY B SHALL BE TRANSMITTED THROUGH DBSI.  DEUTSCHE BANK AG
ACTING THROUGH ITS LONDON BRANCH IS NOT A MEMBER OF THE SECURITIES INVESTOR
PROTECTION CORPORATION (SIPC).

 

The purpose of this letter agreement (this “Confirmation”) is to confirm the
terms and conditions of the call option transaction entered into between
Deutsche Bank AG, London Branch (“Dealer”) and American Equity Investment Life
Holding Company (“Counterparty”) as of the Trade Date specified below (the
“Transaction”).  This letter agreement constitutes a “Confirmation” as referred
to in the ISDA Master Agreement specified below.  This Confirmation shall
replace any previous agreements and serve as the final documentation for the
Transaction.

 

The definitions and provisions contained in the 2002 ISDA Equity Derivatives
Definitions (the “Equity Definitions”), as published by the International Swaps
and Derivatives Association, Inc. (“ISDA”) are incorporated into this
Confirmation.  In the event of any inconsistency between the Equity Definitions
and this Confirmation, this Confirmation shall govern.  Certain defined terms
used herein are based on terms that are defined in the Offering Memorandum dated
September 16, 2010 (the “Offering Memorandum”) relating to the 3.50% Convertible
Senior Notes due September 15, 2015 (as originally issued by Counterparty, the
“Convertible Notes” and each USD 1,000 principal amount of Convertible Notes, a
“Convertible Note”) issued by Counterparty in an aggregate initial principal
amount of USD 170,000,000 (as increased by up to an aggregate principal amount
of USD 30,000,000 if and to the extent that the Initial Purchasers (as defined
herein) exercise their option to purchase additional

 

Chairman of the Supervisory Board: Clemens Börsig
Board of Managing Directors: Hermann-Josef Lamberti, Josef Ackermann, Dr. Hugo
Banziger, Anthony DiIorio

 

Deutsche Bank AG is regulated by the FSA for the conduct of designated
investment business in the UK, is a member of the London Stock Exchange and is a
limited liability company incorporated in the Federal Republic of Germany HRB
No. 30 000 District Court of Frankfurt am Main; Branch Registration No. in
England and Wales BR000005, Registered address: Winchester House, 1 Great
Winchester Street, London EC2N 2DB.

 

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Convertible Notes pursuant to the Purchase Agreement (as defined herein))
pursuant to an Indenture to be dated September 22, 2010 between Counterparty and
U.S. Bank National Association, as trustee (the “Indenture”).  In the event of
any inconsistency between the terms defined in the Offering Memorandum, the
Indenture and this Confirmation, this Confirmation shall govern.  The parties
acknowledge that this Confirmation is entered into on the date hereof with the
understanding that (i) definitions set forth in the Indenture which are also
defined herein by reference to the Indenture and (ii) sections of the Indenture
that are referred to herein will conform to the descriptions thereof in the
Offering Memorandum.  If any such definitions in the Indenture or any such
sections of the Indenture differ from the descriptions thereof in the Offering
Memorandum, the descriptions thereof in the Offering Memorandum will govern for
purposes of this Confirmation.  The parties further acknowledge that the
Indenture section numbers used herein are based on the draft of the Indenture
last reviewed by Dealer as of the date of this Confirmation, and if any such
section numbers are changed in the Indenture as executed, the parties will amend
this Confirmation in good faith to preserve the intent of the parties.  Subject
to the foregoing, references to the Indenture herein are references to the
Indenture as in effect on the date of its execution, and if the Indenture is
amended following such date, any such amendment will be disregarded for purposes
of this Confirmation unless the parties agree otherwise in writing.

 

Each party is hereby advised, and each such party acknowledges, that the other
party has engaged in, or refrained from engaging in, substantial financial
transactions and has taken other material actions in reliance upon the parties’
entry into the Transaction to which this Confirmation relates on the terms and
conditions set forth below.

 

1.                                     This Confirmation evidences a complete
and binding agreement between Dealer and Counterparty as to the terms of the
Transaction to which this Confirmation relates.  This Confirmation shall
supplement, form a part of, and be subject to an agreement in the form of the
2002 ISDA Master Agreement (the “Agreement”) as if Dealer and Counterparty had
executed an agreement in such form (but without any Schedule except for the
election of the laws of the State of New York as the governing law (without
reference to choice of law doctrine)) on the Trade Date.  In the event of any
inconsistency between provisions of the Agreement and this Confirmation, this
Confirmation will prevail for the purpose of the Transaction to which this
Confirmation relates.  The parties hereby agree that no transaction other than
the Transaction to which this Confirmation relates shall be governed by the
Agreement.

 

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

 

General Terms.

 

 

 

 

 

Trade Date:

 

September 16, 2010

 

 

 

Effective Date:

 

The third Exchange Business Day immediately prior to the Premium Payment Date

 

 

 

Option Style:

 

“Modified American”, as described under “Procedures for Exercise” below

 

 

 

Option Type:

 

Call

 

 

 

Buyer:

 

Counterparty

 

 

 

Seller:

 

Dealer

 

 

 

Shares:

 

The common stock of Counterparty, par value USD 1.00 per share (Exchange symbol
“AEL”).

 

 

 

Number of Options:

 

170,000.  For the avoidance of doubt, the Number of Options shall be reduced by
any Options exercised by Counterparty.  In no event will the Number of Options
be less than zero.

 

 

 

Applicable Percentage:

 

The fraction, expressed as a percentage, (i) the numerator of which is 60 and
(ii) the denominator of which is 170.

 

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Option Entitlement:

 

A number equal to the product of the Applicable Percentage and 80.0000.

 

 

 

Strike Price:

 

USD 12.5000

 

 

 

Premium:

 

USD 11,100,000.00

 

 

 

Premium Payment Date:

 

September 22, 2010

 

 

 

Exchange:

 

The New York Stock Exchange

 

 

 

Related Exchange(s):

 

All Exchanges

 

 

 

Excluded Provisions:

 

Section 14.03 and Section 14.04(g) of the Indenture.

 

 

 

Procedures for Exercise.

 

 

 

 

 

Conversion Date:

 

With respect to any conversion of a Convertible Note, the date on which the
Holder (as such term is defined in the Indenture) of such Convertible Note
satisfies all of the requirements for conversion thereof as set forth in
Section 14.02(b) of the Indenture; provided that in no event shall a Conversion
Date be deemed to occur hereunder (and no Option shall be exercised or deemed to
be exercised hereunder) with respect to any Convertible Note surrendered for
conversion in respect of which Counterparty has elected to designate (and such
designation is accepted) a financial institution for exchange in lieu of
conversion of such Convertible Note pursuant to Section 14.13 of the Indenture
(regardless of whether such financial institution delivers any amounts due in
respect of such Convertible Note, or whether such Convertible Note is
resubmitted to Counterparty for conversion following a failure by such financial
institution to deliver any such amounts or otherwise).

 

 

 

Final Settlement Method Election Date:

 

March 15, 2015

 

 

 

Expiration Time:

 

The Valuation Time

 

 

 

Expiration Date:

 

September 15, 2015, subject to earlier exercise.

 

 

 

Multiple Exercise:

 

Applicable, as described under “Automatic Exercise” below.

 

 

 

Automatic Exercise:

 

Notwithstanding Section 3.4 of the Equity Definitions, on each Conversion Date,
a number of Options equal to the number of Convertible Notes in denominations of
USD 1,000 as to which such Conversion Date has occurred shall be deemed to be
automatically exercised; provided that such Options shall be exercised or deemed
exercised only if Counterparty has provided a Notice of Exercise to Dealer in
accordance with “Notice of Exercise” below.

 

 

 

 

 

Notwithstanding the foregoing, in no event shall the number of Options that are
exercised or deemed exercised hereunder exceed the Number of Options.

 

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Notice of Exercise:

 

Notwithstanding anything to the contrary in the Equity Definitions or under
“Automatic Exercise” above, in order to exercise any Options, Counterparty must
notify Dealer in writing (i) before 5:00 p.m. (New York City time) on the
Scheduled Valid Day immediately preceding the scheduled first day of the
Settlement Averaging Period for the Options being exercised or (ii) before
5:00 p.m. (New York City time) on the fifth Scheduled Valid Day immediately
following the scheduled first day of the Settlement Averaging Period for the
Options being exercised (in which case the Calculation Agent will determine the
adjustment to be made to any one or more of the Strike Price, Number of Options,
Option Entitlement and any other variable relevant to the exercise, settlement
or payment for the Transaction in a commercially reasonable manner as
appropriate to reflect the additional costs (including, but not limited to,
hedging mismatches and market losses) and reasonable expenses incurred by Dealer
in connection with its hedging activities (including the unwinding of any Hedge
Position)  due to such notification occurring after the time specified in the
immediately preceding clause (i)) of:

 

 

 

 

 

(A)         the number of such Options (without regard to any adjustments by the
Calculation Agent in accordance with the immediately preceding clause (ii));

 

 

 

 

 

(B)           in respect of any Options relating to Convertible Notes with a
Conversion Date occurring prior to the Final Settlement Method Election Date,
(I) the scheduled first day of the Settlement Averaging Period and the scheduled
Settlement Date, (II) whether the condition set forth in Section 14.01(b)(i)(A)
of the Indenture (the “Trading Price Condition”) was satisfied on such
Conversion Date, (III) whether an Option Counterparty Reorganization Event (as
defined below) has occurred as of the close of business on the Valid Day
immediately following such Conversion Date, (IV) if either the Trading Price
Condition was so satisfied or an Option Counterparty Reorganization Event has so
occurred, the Relevant Settlement Method for such Options, (V) if the Relevant
Settlement Method for such Options is Combination Settlement (as defined below),
the fixed amount of cash per Convertible Note that Counterparty has elected to
deliver to Holders (as such term is defined in the Indenture) of the related
Convertible Notes (the “Specified Dollar Amount”), and (VI) if the Relevant
Settlement Method for such Options is not Cash Settlement, such notice shall
also include the information, representations, acknowledgements and agreements
required pursuant to “Settlement Method Election Conditions” below;

 

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provided that, notwithstanding the immediately preceding clause (i), in respect
of any Options relating to Convertible Notes with a Conversion Date occurring on
or after the Final Settlement Method Election Date, such notice may be given on
or prior to the Scheduled Valid Day immediately preceding the Expiration Date.

 

 

 

Notice of Final Settlement Method:

 

Notwithstanding anything to the contrary in the Equity Definitions or under
“Automatic Exercise” above, in order to exercise any Options with a Conversion
Date occurring on or after the Final Settlement Method Election Date in respect
of which an the Option Counterparty Reorganization Event has occurred as of the
close of business on the Final Settlement Method Election Date, Counterparty
must notify Dealer in writing before 9:00 a.m. (New York City time) on the Final
Settlement Method Election Date specifying:

 

 

 

 

 

(i)                that an Option Counterparty Reorganization Event has occurred
as of the close of business on the Final Settlement Method Election Date;

 

 

 

 

 

(ii)             the Relevant Settlement Method for such Options;

 

 

 

 

 

(iii)          if the Relevant Settlement Method for such Options is Combination
Settlement (as defined below), the Specified Dollar Amount for all Convertible
Notes with Conversion Dates occurring on or after the Final Settlement Method
Election Date; and

 

 

 

 

 

(iv)         if the Relevant Settlement Method for such Options is not Cash
Settlement, such notice shall also include the information, representations,
acknowledgements and agreements required pursuant to “Settlement Method Election
Conditions” below.

 

 

 

Option Counterparty Reorganization Event:

 

Either (i) Dealer or JPMorgan Chase Bank, National Association, or one or more
“significant subsidiaries” (as defined in Article 1, Rule 1-02 of Regulation S-X
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of
one or more of the foregoing (each such named party or significant subsidiary,
an “Option Counterparty”) shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to such Option
Counterparty or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of such Option Counterparty or
any substantial part of its property, or shall consent to any such relief or to
the appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or (ii) an involuntary case or other proceeding shall
be commenced

 

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against one or more of the Option Counterparties seeking liquidation,
reorganization or other relief with respect to such Option Counterparty or its
debts under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of such Option Counterparty or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 30 consecutive days.

 

 

 

Valuation Time:

 

At the close of trading of the regular trading session on the Exchange; provided
that if the principal trading session is extended, the Calculation Agent shall
determine the Valuation Time in its reasonable discretion.

 

 

 

Market Disruption Event:

 

Section 6.3(a) of the Equity Definitions is hereby replaced in its entirety by
the following:

 

 

 

 

 

“‘Market Disruption Event’ means, in respect of a Share, (i) a failure by the
primary United States national securities exchange or market on which the Shares
are listed or admitted for trading to open for trading during its regular
trading session or (ii) the occurrence or existence prior to 1:00 p.m. (New York
City time) on any Scheduled Valid Day for the Shares for more than one half-hour
period in the aggregate during regular trading hours of any suspension or
limitation imposed on trading (by reason of movements in price exceeding limits
permitted by the relevant stock exchange or otherwise) in the Shares or in any
options, contracts or future contracts relating to the Shares.”

 

 

 

Settlement Terms.

 

 

 

 

 

Settlement Method:

 

For any Option, Cash Settlement. Notwithstanding the forgoing:

 

 

 

 

 

(i)                in respect of any Option relating to a Convertible Note with
a Conversion Date occurring prior to the Final Settlement Method Election Date,
if (A) Counterparty has notified Dealer in the Notice of Exercise for such
Option that either the Trading Price Condition was satisfied on such Conversion
Date or an Option Counterparty Reorganization Event has occurred as of the close
of business on the Valid Day immediately following such Conversion Date, and
(B) the Settlement Method Election Conditions have been satisfied with respect
to such Option, then the Settlement Method shall be the Relevant Settlement
Method elected by Counterparty for such Option in such Notice of Exercise; and

 

 

 

 

 

(ii)             in respect of any Option relating to a Convertible Note with a
Conversion Date occurring on or after the Final Settlement Method Election Date,
if (A) Counterparty has timely delivered a Notice of Final

 

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Settlement Method to Dealer stating that an Option Counterparty Reorganization
Event has occurred as of the close of business on the Final Settlement Method
Election Date, and (B) the Settlement Method Election Conditions have been
satisfied with respect to such Option, then the Settlement Method shall be the
Relevant Settlement Method elected by Counterparty for such Option in such
Notice of Final Settlement Method;

 

 

 

 

 

provided that if Counterparty fails to specify in such Notice of Exercise or
Notice of Final Settlement Method the Relevant Settlement Method, Cash
Settlement shall apply; provided further that if Counterparty elects Combination
Settlement in such Notice of Exercise or Notice of Final Settlement Method, but
fails to specify in such Notice of Exercise or Notice of Final Settlement Method
the Specified Dollar Amount, the Settlement Method shall be Net Share
Settlement.

 

 

 

Relevant Settlement Method:

 

In respect of any Option, subject to the Settlement Method Election Conditions:

 

 

 

 

 

(i)                if Counterparty has, in accordance with Section 14.02(a) of
the Indenture, elected to settle its conversion obligations in respect of the
related Convertible Note (A) entirely in Shares pursuant to
Section 14.02(a)(iv)(A) of the Indenture (together with cash in lieu of
fractional Shares) (such settlement method, “Settlement in Shares”), (B) in a
combination of cash and Shares pursuant to Section 14.02(a)(iv)(C) of the
Indenture with a Specified Dollar Amount less than USD 1,000 (such settlement
method, “Low Cash Combination Settlement”) or (C) in a combination of cash and
Shares pursuant to Section 14.02(a)(iv)(C) of the Indenture with a Specified
Dollar Amount equal to USD 1,000, then, in each case, the Relevant Settlement
Method for such Option shall be Net Share Settlement;

 

 

 

 

 

(ii)             if Counterparty has, in accordance with Section 14.02(a) of the
Indenture, elected to settle its conversion obligations in respect of the
related Convertible Note in a combination of cash and Shares pursuant to
Section 14.02(a)(iv)(C) of the Indenture with a Specified Dollar Amount greater
than USD 1,000, then the Relevant Settlement Method for such Option shall be
Combination Settlement; and

 

 

 

 

 

(iii)          if Counterparty has, in accordance with Section 14.02(a) of the
Indenture, elected to settle its conversion obligations in respect of the
related Convertible Note entirely in cash pursuant to Section 14.02(a)(iv)(B) of
the Indenture, then the Relevant Settlement Method for such Option shall be Cash
Settlement.

 

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Settlement Method Election Conditions:

 

In respect of any Option, for any Relevant Settlement Method other than Cash
Settlement, such Relevant Settlement Method shall apply to such Option only if
the Notice of Exercise or Notice of Final Settlement Method, as applicable, for
such Option contains:

 

 

 

 

 

(i)                a representation that, on the date of such Notice of Exercise
or Notice of Final Settlement Method, as applicable, Counterparty is not in
possession of any material non-public information with respect to Counterparty
or the Shares;

 

 

 

 

 

(ii)             a representation that Counterparty is electing the settlement
method for the related Convertible Note and such Relevant Settlement Method in
good faith and not as part of a plan or scheme to evade the prohibitions of
Rule 10b-5 under the Exchange Act;

 

 

 

 

 

(iii)          a representation that Counterparty has not entered into or
altered any hedging transaction relating to the Shares corresponding to or
offsetting the Transaction;

 

 

 

 

 

(iv)         a representation that Counterparty is not electing the settlement
method for the related Convertible Note and such Relevant Settlement Method to
create actual or apparent trading activity in the Shares (or any security
convertible into or exchangeable for the Shares) or to raise or depress or
otherwise manipulate the price of the Shares (or any security convertible into
or exchangeable for the Shares); and

 

 

 

 

 

(v)            an acknowledgment by Counterparty that (A) any transaction by
Dealer following Counterparty’s election of the settlement method for the
related Convertible Note and such Relevant Settlement Method shall be made at
Dealer’s sole discretion and for Dealer’s own account and (B) Counterparty does
not have, and shall not attempt to exercise, any influence over how, when,
whether or at what price to effect such transactions, including, without
limitation, the price paid or received per Share pursuant to such transactions,
or whether such transactions are made on any securities exchange or privately.

 

 

 

Cash Settlement:

 

If Cash Settlement is applicable to any Option exercised or deemed exercised
hereunder, in lieu of Section 8.1 of the Equity Definitions, Dealer will pay to
Counterparty, on the relevant Settlement Date for each such Option, an amount of
cash (the “Cash Settlement Amount”) equal to the sum, for each Valid Day during
the Settlement Averaging Period for such Option, of (i) the Daily Option Value
for such Valid Day, divided by (ii) the number of Valid Days in the Settlement
Averaging Period.

 

 

 

Net Share Settlement:

 

If Net Share Settlement is applicable to any Option exercised or deemed
exercised hereunder, Dealer will

 

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deliver to Counterparty, on the relevant Settlement Date for each such Option, a
number of Shares (the “Net Share Settlement Amount”) equal to the sum, for each
Valid Day during the Settlement Averaging Period for each such Option, of
(i) the Daily Option Value for such Valid Day, divided by (ii) the Relevant
Price on such Valid Day, divided by (iii) the number of Valid Days in the
Settlement Averaging Period; provided that in no event shall the Net Share
Settlement Amount for any Option exceed a number of Shares equal to the
Applicable Limit for such Option, divided by the Applicable Limit Price on the
Settlement Date for such Option.

 

 

 

 

 

Dealer will deliver cash in lieu of any fractional Shares to be delivered with
respect to any Net Share Settlement Share Amount valued at the Relevant Price
for the last Valid Day of the Settlement Averaging Period.

 

 

 

Combination Settlement:

 

If Combination Settlement is applicable to any Option exercised or deemed
exercised hereunder, Dealer will deliver to Counterparty, on the relevant
Settlement Date for each such Option:

 

 

 

 

 

(i)                an amount of cash (the “Combination Settlement Cash Amount”)
equal to the sum, for each Valid Day during the Settlement Averaging Period for
such Option, of an amount of cash for such Valid Day (the “Daily Combination
Settlement Cash Amount”) equal to (A) the lesser of (1) the product of (x) the
Applicable Percentage and (y) the Specified Dollar Amount, minus USD 1,000 and
(2) the Daily Option Value, divided by (B) the number of Valid Days in the
Settlement Averaging Period; provided that if the calculation in clause
(A) above results in zero or a negative number for any Valid Day, the Daily
Combination Settlement Cash Amount for such Valid Day shall be deemed to be
zero; and

 

 

 

 

 

(ii)             a number of Shares (the “Combination Settlement Share Amount”)
equal to the sum, for each Valid Day during the Settlement Averaging Period for
such Option, of a number of Shares for such Valid Day (the “Daily Combination
Settlement Share Amount”) equal to (A) the Daily Option Value on such Valid Day,
minus the Daily Combination Settlement Cash Amount for such Valid Day, divided
by (B) the Relevant Price on such Valid Day, divided by (C) the number of Valid
Days in the Settlement Averaging Period; provided that if the calculation in
clause (A) above results in zero or a negative number for any Valid Day, the
Daily Combination Settlement Share Amount for such Valid Day shall be deemed to
be zero;

 

 

 

 

 

provided that in no event shall the sum of (x) the Combination Settlement Cash
Amount for any Option and (y) the Combination Settlement Share Amount for such

 

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Option, multiplied by the Applicable Limit Price on the Settlement Date for such
Option, exceed the Applicable Limit for such Option.

 

 

 

 

 

Dealer will deliver cash in lieu of any fractional Shares to be delivered with
respect to any Combination Settlement Share Amount valued at the Relevant Price
for the last Valid Day of the Settlement Averaging Period.

 

 

 

Daily Option Value:

 

For any Valid Day, an amount equal to (i) the Option Entitlement on such Valid
Day, multiplied by (ii) the Relevant Price on such Valid Day less the Strike
Price on such Valid Day; provided that if the calculation contained in clause
(ii) above results in a negative number, the Daily Option Value for such Valid
Day shall be deemed to be zero.  In no event will the Daily Option Value be less
than zero.

 

 

 

Applicable Limit:

 

For any Option, an amount of cash equal to the Applicable Percentage, multiplied
by the excess of (i) the aggregate of (A) the amount of cash, if any, delivered
to the Holder of the related Convertible Note upon conversion of such
Convertible Note and (B) the number of Shares, if any, delivered to the Holder
of the related Convertible Note upon conversion of such Convertible Note,
multiplied by the Applicable Limit Price on the Settlement Date for such Option,
over (ii) USD 1,000.

 

 

 

Applicable Limit Price:

 

On any day, the opening price as displayed under the heading “Op” on Bloomberg
page AEL <equity> (or any successor thereto).

 

 

 

Valid Day:

 

A day on which (i) there is no Market Disruption Event and (ii) trading in the
Shares generally occurs on the Exchange or, if the Shares are not then listed on
the Exchange, on the principal other United States national securities exchange
on which the Shares are then listed or, if the Shares are not then listed on a
United States national securities exchange, on the principal other market on
which the Shares are then listed or admitted for trading. If the Shares are not
so listed or admitted for trading, “Valid Day” means a Business Day.

 

 

 

Scheduled Valid Day:

 

A day that is scheduled to be a Valid Day on the principal United States
national securities exchange or market on which the Shares are listed or
admitted for trading.  If the Shares are not so listed or admitted for trading,
“Scheduled Valid Day” means a Business Day.

 

 

 

Business Day:

 

Any day other than a Saturday, a Sunday or a day on which the Federal Reserve
Bank of New York is authorized or required by law or executive order to close or
be closed.

 

 

 

Relevant Price:

 

On any Valid Day, the per Share volume-weighted average price as displayed under
the heading “Bloomberg VWAP” on Bloomberg page AEL <equity> AQR (or its

 

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equivalent successor if such page is not available) in respect of the period
from the scheduled open of trading until the scheduled close of trading of the
primary trading session on such Valid Day (or if such volume-weighted average
price is unavailable, the market value of one Share on such Valid Day, as
determined by the Calculation Agent using a volume-weighted method).  The
“Relevant Price” will be determined without regard to after-hours trading or any
other trading outside of the regular trading session trading hours.

 

 

 

Settlement Averaging Period:

 

For any Option, regardless of the Settlement Method applicable to such Option:

 

 

 

 

 

(i)                if the related Conversion Date occurs prior to the Final
Settlement Method Election Date, the 40 consecutive Valid Days commencing on,
and including, the second Valid Day following such Conversion Date; provided
that if the Notice of Exercise for such Option specifies that (A) the Trading
Price Condition was satisfied on the Conversion Date for such related
Convertible Note or an Option Counterparty Reorganization Event has occurred as
of the close of business on the Valid Day immediately following such Conversion
Date, and (B) Settlement in Shares or Low Cash Combination Settlement applies to
the related Convertible Note, the Settlement Averaging Period shall be the 80
consecutive Valid Day period commencing on, and including, the second Valid Day
immediately following such Conversion Date; or

 

 

 

 

 

(ii)             if the related Conversion Date occurs on or following the Final
Settlement Method Election Date, the 40 consecutive Valid Days commencing on,
and including, the 42nd Scheduled Valid Day immediately prior to the Expiration
Date; provided that if Counterparty has timely delivered a Notice of Final
Settlement Method for such Option specifying that (A) an Option Counterparty
Reorganization Event has occurred as of the close of business on the Final
Settlement Method Election Date, and (B) Settlement in Shares or Low Cash
Combination Settlement applies to the related Convertible Note, the Settlement
Averaging Period shall be the 80 consecutive Valid Day period commencing on, and
including, the 82nd Scheduled Valid Day immediately prior to the Expiration
Date.

 

 

 

Settlement Date:

 

For any Option, the third Business Day immediately following the final Valid Day
of the Settlement Averaging Period for such Option.

 

 

 

Settlement Currency:

 

USD

 

11

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Other Applicable Provisions:

 

The provisions of Sections 9.1(c), 9.8, 9.9, 9.11, 9.12 and 10.5 of the Equity
Definitions will be applicable, except that all references in such provisions to
“Physically-settled” shall be read as references to “Share Settled”.  “Share
Settled” in relation to any Option means that Net Share Settlement or
Combination Settlement is applicable to that Option.

 

 

 

Representation and Agreement:

 

Notwithstanding anything to the contrary in Equity Definitions (including, but
not limited to, Section 9.11 thereof), the parties acknowledge that (i) any
Shares delivered to Counterparty shall be, upon delivery, subject to
restrictions and limitations arising from Counterparty’s status as issuer of the
Shares under applicable securities laws, (ii) Dealer may deliver any Shares
required to be delivered hereunder in certificated form in lieu of delivery
through the Clearance System and (iii) any Shares delivered to Counterparty may
be “restricted securities” (as defined in Rule 144 under the Securities Act of
1933, as amended (the “Securities Act”)).

 

 

 

3.                                    Additional Terms applicable to the
Transaction.

 

 

 

 

 

Adjustments applicable to the Transaction:

 

 

 

 

 

Potential Adjustment Events:

 

Notwithstanding Section 11.2(e) of the Equity Definitions, a “Potential
Adjustment Event” means an occurrence of any event or condition, as set forth in
any Dilution Adjustment Provision, that would result in an adjustment to the
Conversion Rate (as defined in the Indenture) of the Convertible Notes.

 

 

 

Method of Adjustment:

 

Calculation Agent Adjustment, which means that, notwithstanding
Section 11.2(c) of the Equity Definitions, upon any Potential Adjustment Event,
the Calculation Agent shall make a corresponding adjustment to any one or more
of the Strike Price, Number of Options, Option Entitlement and any other
variable relevant to the exercise, settlement or payment for the Transaction;
provided that, notwithstanding the foregoing, if the Calculation Agent in good
faith disagrees with any adjustment to the Convertible Notes that involves an
exercise of discretion by Counterparty or its board of directors (including,
without limitation, pursuant to Section 14.05 of the Indenture or in connection
with any proportional adjustment or the determination of the fair value of any
securities, property, rights or other assets), then in each such case, the
Calculation Agent will determine the adjustment to be made to any one or more of
the Strike Price, Number of Options, Option Entitlement and any other variable
relevant to the exercise, settlement or payment for the Transaction in a
commercially reasonable manner; provided, further, that, notwithstanding the
foregoing, if any Potential Adjustment Event occurs during the Settlement
Averaging Period but no adjustment was made to any Convertible Note under the
Indenture because the relevant

 

12

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Holder (as such term is defined in the Indenture) was deemed to be a record
owner of the underlying Shares on the related Conversion Date, then the
Calculation Agent shall make an adjustment, as determined by it, to the terms
hereof in order to account for such Potential Adjustment Event.

 

 

 

Dilution Adjustment Provisions:

 

Section 14.04(a), (b), (c), (d) and (e) and Section 14.05 of the Indenture.

 

 

 

Extraordinary Events applicable to the Transaction:

 

 

 

 

 

Merger Events:

 

Applicable; provided that notwithstanding Section 12.1(b) of the Equity
Definitions, a “Merger Event” means the occurrence of any event or condition set
forth in the definition of “Merger Event” in Section 14.07 of the Indenture.

 

 

 

Tender Offers:

 

Applicable; provided that notwithstanding Section 12.1(d) of the Equity
Definitions, a “Tender Offer” means the occurrence of any event or condition set
forth in Section 14.04(e) of the Indenture.

 

 

 

Consequence of Merger Events / Tender Offers:

 

Notwithstanding Section 12.2 and Section 12.3 of the Equity Definitions, upon
the occurrence of a Merger Event or a Tender Offer, the Calculation Agent shall
make a corresponding adjustment in respect of any adjustment under the Indenture
to any one or more of the nature of the Shares (in the case of a Merger Event),
Strike Price, Number of Options, Option Entitlement and any other variable
relevant to the exercise, settlement or payment for the Transaction; provided,
however, that such adjustment shall be made without regard to any adjustment to
the Conversion Rate pursuant to any Excluded Provision; provided further that
if, with respect to a Merger Event or a Tender Offer, (i) the consideration for
the Shares includes (or, at the option of a holder of Shares, may include)
shares of an entity or person not organized under the laws of the United States,
any State thereof or the District of Columbia or (ii) the Counterparty to the
Transaction following such Merger Event or Tender Offer, will not be the Issuer
following such Merger Event or Tender Offer, then Cancellation and Payment
(Calculation Agent Determination) shall apply.

 

 

 

Nationalization, Insolvency or Delisting:

 

Cancellation and Payment (Calculation Agent Determination); provided that, 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 NASDAQ Global Select Market or The NASDAQ
Global Market (or their respective successors); if the Shares are immediately
re-listed, re-traded or re-quoted on any of the New York

 

13

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Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or
their respective successors), such exchange or quotation system shall thereafter
be deemed to be the Exchange.

 

 

 

Additional Disruption Events:

 

 

 

 

 

Change in Law:

 

Applicable; provided that Section 12.9(a)(ii)(X) of the Equity Definitions is
hereby amended by replacing the word “Shares” with the phrase “Hedge Positions.”

 

 

 

Failure to Deliver:

 

Applicable

 

 

 

Hedging Disruption:

 

Applicable; provided that:

 

 

 

 

 

(i)                Section 12.9(a)(v) of the Equity Definitions is hereby
amended by inserting the following two phrases at the end of such Section:

 

 

 

 

 

“For the avoidance of doubt, the term “equity price risk” shall be deemed to
include, but shall not be limited to, stock price and volatility risk. And, for
the further avoidance of doubt, any such transactions or assets referred to in
phrases (A) or (B) above must be available on commercially reasonable pricing
terms.”; and

 

 

 

 

 

(ii)             Section 12.9(b)(iii) of the Equity Definitions is hereby
amended by inserting in the third line thereof,  after the words “to terminate
the Transaction”, the words “or a portion of the Transaction affected by such
Hedging Disruption”.

 

 

 

Increased Cost of Hedging:

 

Applicable

 

 

 

Hedging Party:

 

For all applicable Additional Disruption Events, Dealer.

 

 

 

Determining Party:

 

For all applicable Extraordinary Events, Dealer.

 

 

 

Non-Reliance:

 

Applicable

 

 

 

Agreements and Acknowledgements Regarding Hedging Activities:

 

Applicable

 

 

 

Additional Acknowledgments:

 

Applicable

 

 

 

4.                                    Calculation Agent.

 

Dealer, whose judgments, determinations and calculations shall be made in good
faith and in a commercially reasonable manner. Following any calculation by the
Calculation Agent hereunder and a prior written request by Counterparty, the
Calculation Agent shall provide Counterparty a written explanation of any
calculation or adjustment made by it including, where applicable, a description
of the methodology and the basis for such calculation or adjustment in
reasonable detail, it being understood that the Calculation Agent shall not be
obligated to disclose any proprietary models used by it for such calculation.

 

14

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5.

Account Details.

 

 

 

(a)

Account for payments to Counterparty:

 

 

 

 

 

Bank:

West Bank

 

 

ABA#:

073903354

 

 

Acct No.:

905432

 

 

Beneficiary:

American Equity Investment Life Holding Company

 

 

Ref:

Derivatives

 

 

 

 

 

Account for delivery of Shares to Counterparty:

 

 

 

 

 

DTC 50108

 

 

 

 

(b)

Account for payments to Dealer:

 

 

 

 

 

Deutsche Bank AG, London Branch

 

 

The Bank of New York

 

 

Bank Routing: 021-000-018

 

 

Account Name: Deutsche Bank Securities, Inc.

 

 

Account No.: 8900327634

 

 

 

 

 

Account for delivery of Shares from Dealer:

 

 

 

 

 

To be provided by Dealer

 

 

 

6.

Offices.

 

 

 

(a)

The Office of Counterparty for the Transaction is: Inapplicable, Counterparty is
not a Multibranch Party.

 

 

 

 

(b)

The Office of Dealer for the Transaction is: London

 

 

 

 

 

Deutsche Bank AG, London Branch

 

 

Winchester house

 

 

1 Great Winchester St, London

 

 

EC2N 2DB

 

 

7.

Notices.

 

 

 

(a)

Address for notices or communications to Counterparty:

 

 

 

 

 

American Equity Investment Life Holding Company

 

 

6000 Westown Parkway

 

 

West Des Moines, IA 50266

 

 

Attention:

Treasurer

 

 

Telephone No.:

(515) 221-0002

 

 

Facsimile No.:

(515) 221-9947

 

 

 

 

 

(b)

Address for notices or communications to Dealer:

 

 

 

 

 

Deutsche Bank AG, London Branch

 

 

c/o Deutsche Bank Securities Inc.

 

 

60 Wall Street

 

 

New York, NY 10005

 

 

Attention: Andrew Yaeger and Paul Stowell

 

 

Telephone No:

212-250-6270

 

15

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Facsimile No:

212-797-8974

 

 

Email: andrew.yaeger@db.com

 

 

Email: paul.stowell@db.com

 

 

 

 

 

With a copy to:

 

 

 

 

 

Deutsche Bank AG, London Branch

 

 

c/o Deutsche Bank Securities Inc.

 

 

60 Wall Street

 

 

New York, NY 10005

 

 

 

 

 

Attention: Lars Kestner

 

 

Telephone:

212-250-6043

 

 

Facsimile:

646-593-8200

 

 

Email: lars.kestner@db.com

 

8.                                      Representations and Warranties of
Counterparty.

 

Counterparty hereby represents and warrants to Dealer on the date hereof and on
and as of the Premium Payment Date that:

 

(a)                                  Counterparty has all necessary corporate
power and authority to execute, deliver and perform its obligations in respect
of the Transaction; such execution, delivery and performance have been duly
authorized by all necessary corporate action on Counterparty’s part; and this
Confirmation has been duly and validly executed and delivered by Counterparty
and constitutes its valid and binding obligation, enforceable against
Counterparty in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except that
rights to indemnification and contribution hereunder may be limited by federal
or state securities laws or public policy relating thereto.

 

(b)                                 Neither the execution and delivery of this
Confirmation nor the incurrence or performance of obligations of Counterparty
hereunder will conflict with or result in a breach of the certificate of
incorporation or by-laws (or any equivalent documents) of Counterparty, or any
applicable law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or any agreement or instrument filed
as exhibits to Counterparty’s Annual Report on Form 10-K for the year ended
December 31, 2009, as updated by any subsequent filings, to which Counterparty
or any of its subsidiaries is a party or by which Counterparty or any of its
subsidiaries is bound or to which Counterparty or any of its subsidiaries is
subject, or constitute a default under, or result in the creation of any lien
under, any such agreement or instrument, in each case which would have a
material adverse effect on the Transaction or Dealer’s rights or obligations
relating to the Transaction.

 

(c)                                  No consent, approval, authorization, or
order of, or filing with, any governmental agency or body or any court is
required in connection with the execution, delivery or performance by
Counterparty of this Confirmation, except such as have been obtained or made and
such as may be required under the Securities Act or state securities laws.

 

(d)                                 Counterparty is not and will not be required
to register as an “investment company” as such term is defined in the Investment
Company Act of 1940, as amended.

 

(e)                                  Counterparty is an “eligible contract
participant” (as such term is defined in Section 1a(12) of the Commodity
Exchange Act, as amended, other than a person that is an eligible contract
participant under Section 1a(12)(C) of the Commodity Exchange Act).

 

16

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(f)                                    Counterparty is not, on the date hereof,
in possession of any material non-public information with respect to
Counterparty or the Shares.

 

(g)                                 All reports and other documents filed by
Counterparty with the Securities and Exchange Commission pursuant to the
Exchange Act when considered as a whole (with the more recent such reports and
documents deemed to amend inconsistent statements contained in any earlier such
reports and documents), do not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances in which they
were made, not misleading.

 

9.                                      Other Provisions.

 

(a)                                  Opinions.  Counterparty shall deliver to
Dealer an opinion of counsel, dated as of the Premium Payment Date, with respect
to the matters set forth in Sections 8(a) through (c) of this Confirmation. 
Delivery of such opinion to Dealer shall be a condition precedent for the
purpose of Section 2(a)(iii) of the Agreement with respect to each obligation of
Dealer under Section 2(a)(i) of the Agreement.

 

(b)                                 Repurchase Notices.  Counterparty shall, on
any day on which Counterparty effects any repurchase of Shares, promptly give
Dealer a written notice of such repurchase (a “Repurchase Notice”) on such day
if following such repurchase, the number of outstanding Shares as determined on
such day is (i) less than 56.7 million (in the case of the first such notice) or
(ii) thereafter more than 1.7 million less than the number of Shares included in
the immediately preceding Repurchase Notice.  Counterparty agrees to indemnify
and hold harmless Dealer and its affiliates and their respective officers,
directors, employees, affiliates, advisors, agents and controlling persons
(each, an “Indemnified Person”) from and against any and all losses (including
losses relating to Dealer’s hedging activities as a consequence of becoming, or
of the risk of becoming, a Section 16 “insider”, including without limitation,
any forbearance from hedging activities or cessation of hedging activities and
any losses in connection therewith with respect to the Transaction), claims,
damages, judgments, liabilities and expenses (including reasonable attorney’s
fees), joint or several, which an Indemnified Person may become subject to, as a
result of Counterparty’s failure to provide Dealer with a Repurchase Notice on
the day and in the manner specified in this paragraph, and to reimburse, within
30 days, upon written request, each of such Indemnified Persons for any
reasonable legal or other expenses incurred in connection with investigating,
preparing for, providing testimony or other evidence in connection with or
defending any of the foregoing.  If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against the Indemnified Person as a result of Counterparty’s failure to
provide Dealer with a Repurchase Notice in accordance with this paragraph, such
Indemnified Person shall promptly notify Counterparty in writing, and
Counterparty, upon request of the Indemnified Person, shall retain counsel
reasonably satisfactory to the Indemnified Person to represent the Indemnified
Person and any others Counterparty may designate in such proceeding and shall
pay the fees and expenses of such counsel related to such proceeding. 
Counterparty shall not be liable for any settlement of any proceeding
contemplated by this paragraph that is effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
Counterparty agrees to indemnify any Indemnified Person from and against any
loss or liability by reason of such settlement or judgment.  Counterparty shall
not, without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding contemplated by this
paragraph that is in respect of which any Indemnified Person is or could have
been a party and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liability on claims that are the subject matter of
such proceeding on terms reasonably satisfactory to such Indemnified Person.  If
the indemnification provided for in this paragraph is unavailable to an
Indemnified Person or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then Counterparty hereunder, in lieu of
indemnifying such Indemnified Person thereunder, shall contribute to the amount
paid or payable by such Indemnified Person as a result

 

17

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of such losses, claims, damages or liabilities.  The remedies provided for in
this paragraph (b) are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any Indemnified Person at law or in equity. 
The indemnity and contribution agreements contained in this paragraph shall
remain operative and in full force and effect regardless of the termination of
the Transaction.

 

(c)                                  Regulation M.  Counterparty is not on the
Trade Date engaged in a distribution, as such term is used in Regulation M under
the Exchange Act, of any securities of Counterparty, other than a distribution
meeting the requirements of the exception set forth in Rules 101(b)(10) and
102(b)(7) of Regulation M.  Counterparty shall not, until the second Scheduled
Trading Day immediately following the Effective Date, engage in any such
distribution.

 

(d)                                 No Manipulation.  Counterparty is not
entering into the Transaction to create actual or apparent trading activity in
the Shares (or any security convertible into or exchangeable for the Shares) or
to raise or depress or otherwise manipulate the price of the Shares (or any
security convertible into or exchangeable for the Shares) or otherwise in
violation of the Exchange Act.

 

(e)                                  Transfer or Assignment.

 

(i)                                   Counterparty shall have the right to
transfer or assign its rights and obligations hereunder with respect to all, but
not less than all, of the Options hereunder (such Options, the “Transfer
Options”); provided that such transfer or assignment shall be subject to
reasonable conditions that Dealer may impose, including but not limited, to the
following conditions:

 

(A)                            With respect to any Transfer Options,
Counterparty shall not be released from its notice and indemnification
obligations pursuant to Section 9(b) or any obligations under Section 9(o) or
9(s) of this Confirmation;

 

(B)                              Any Transfer Options shall only be transferred
or assigned to a third party that is a United States person (as defined in the
Internal Revenue Code of 1986, as amended);

 

(C)                              Such transfer or assignment shall be effected
on terms, including any reasonable undertakings by such third party (including,
but not limited to, an undertaking with respect to compliance with applicable
securities laws in a manner that, in the reasonable judgment of Dealer, will not
expose Dealer to material risks under applicable securities laws) and execution
of any documentation and delivery of legal opinions with respect to securities
laws and other matters by such third party and Counterparty, as are requested
and reasonably satisfactory to Dealer;

 

(D)                             Dealer will not, as a result of such transfer
and assignment, be required to pay the transferee on any payment date an amount
under Section 2(d)(i)(4) of the Agreement greater than an amount that Dealer
would have been required to pay to Counterparty in the absence of such transfer
and assignment;

 

(E)                               An Event of Default, Potential Event of
Default or Termination Event will not occur as a result of such transfer and
assignment;

 

(F)                               Without limiting the generality of clause (B),
Counterparty shall cause the transferee to make such Payee Tax Representations
and to provide such tax documentation as may be reasonably requested by Dealer
to permit Dealer to determine that results described in clauses (D) and (E) will
not occur upon or after such transfer and assignment; and

 

18

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(G)                              Counterparty shall be responsible for all
reasonable costs and expenses, including reasonable counsel fees, incurred by
Dealer in connection with such transfer or assignment.

 

(ii)                                Dealer may, without Counterparty’s consent,
transfer or assign all or any part of its rights or obligations under the
Transaction to any affiliate of Dealer (1) that has a rating for its long term,
unsecured and unsubordinated indebtedness that is equal to or better than
Dealer’s credit rating at the time of such transfer or assignment, or (2) whose
obligations hereunder will be guaranteed, pursuant to the terms of a customary
guarantee in a form used by Dealer generally for similar transactions, by Dealer
or Deutsche Bank AG.  If at any time at which (A) the Section 16 Percentage
exceeds 8.0%, (B) the Option Equity Percentage exceeds 14.5%, or (C) the Share
Amount exceeds the Applicable Share Limit (if any applies) (any such condition
described in clauses (A), (B) or (C), an “Excess Ownership Position”), Dealer is
unable after using its commercially reasonable efforts to effect a transfer or
assignment of Options in accordance with the preceding sentence within a time
period reasonably acceptable to Dealer such that no Excess Ownership Position
exists, then Dealer may designate any Exchange Business Day as an Early
Termination Date with respect to a portion of the Transaction (the “Terminated
Portion”), such that following such partial termination no Excess Ownership
Position exists.  In the event that Dealer so designates an Early Termination
Date with respect to a portion of the Transaction, a payment shall be made
pursuant to Section 6 of the Agreement as if (1) an Early Termination Date had
been designated in respect of a Transaction having terms identical to the
Transaction and a Number of Options equal to the number of Options underlying
the Terminated Portion, (2) Counterparty were the sole Affected Party with
respect to such partial termination and (3) the Terminated Portion were the sole
Affected Transaction (and, for the avoidance of doubt, the provisions of
Section 9(m) shall apply to any amount that is payable by Dealer to Counterparty
pursuant to this sentence as if Counterparty was not the Affected Party).  The
“Section 16 Percentage” as of any day is the fraction, expressed as a
percentage, (A) the numerator of which is the number of Shares that Dealer and
each person subject to aggregation of Shares with Dealer under Section 13 or
Section 16 of the Exchange Act and rules promulgated thereunder directly or
indirectly beneficially own (as defined under Section 13 or Section 16 of the
Exchange Act and rules promulgated thereunder) and (B) the denominator of which
is the number of Shares outstanding.  The “Option Equity Percentage” as of any
day is the fraction, expressed as a percentage, (A) the numerator of which is
the sum of (1) the product of the Number of Options and the Option Entitlement
and (2) the aggregate number of Shares underlying any other call option
transaction sold by Dealer to Counterparty, and (B) the denominator of which is
the number of Shares outstanding.  The “Share Amount” as of any day is the
number of Shares that Dealer and any person whose ownership position would be
aggregated with that of Dealer (Dealer or any such person, a “Dealer Person”)
under any insurance or other law, rule, regulation, regulatory order or
organizational documents or contracts of Counterparty that are, in each case,
applicable to ownership of Shares (“Applicable Restrictions”), owns,
beneficially owns, constructively owns, controls, holds the power to vote or
otherwise meets a relevant definition of ownership under any Applicable
Restriction, as determined by Dealer in its reasonable discretion.  The
“Applicable Share Limit” means a number of Shares equal to (A) the minimum
number of Shares that could give rise to reporting or registration obligations
or other requirements (including obtaining prior approval from any person or
entity) of a Dealer Person, or could result in an adverse effect on a Dealer
Person, under any Applicable Restriction, as determined by Dealer in its
reasonable discretion, minus (B) 1% of the number of Shares outstanding.

 

(iii)                             Notwithstanding any other provision in this
Confirmation to the contrary requiring or allowing Dealer to purchase, sell,
receive or deliver any Shares or other securities, or make or receive any
payment in cash, to or from Counterparty, Dealer may designate any of its
affiliates to purchase, sell, receive or deliver such Shares or other
securities, or to

 

19

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make or receive such payment in cash, and otherwise to perform Dealer’s
obligations in respect of the Transaction and any such designee may assume such
obligations.  Dealer shall be discharged of its obligations to Counterparty to
the extent of any such performance.

 

(f)                                    Ratings Decline.  If at any time the long
term, unsecured and unsubordinated indebtedness of Dealer is rated Ba1 or lower
by Moody’s or BB+ or lower by S&P (any such rating, a “Ratings Downgrade”), then
Counterparty may, at any time following the occurrence and during the
continuation of such Ratings Downgrade, provide written notice to Dealer
specifying that it elects for this Section 9(f) to apply (a “Trigger Notice”). 
Upon receipt by Dealer of a Trigger Notice from Counterparty, Dealer shall
promptly elect that either (i) the parties shall negotiate in good faith terms
for collateral arrangements pursuant to which Dealer is required to provide
collateral (including, but not limited to, equity or equity-linked securities
issued by Counterparty) to Counterparty in respect of the Transaction with a
value equal to the full mark-to-market exposure of Counterparty under the
Transaction, or (ii) an Additional Termination Event shall occur and, with
respect to such Additional Termination Event, (A) Counterparty shall be deemed
to be the sole Affected Party, and (B) the Transaction shall be the sole
Affected Transaction.

 

(g)                                 Staggered Settlement.  If upon advice of
counsel with respect to applicable legal and regulatory requirements, including
any requirements relating to Dealer’s hedging activities hereunder, Dealer
reasonably determines that it would not be practicable or advisable to deliver,
or to acquire Shares to deliver, any or all of the Shares to be delivered by
Dealer on the Settlement Date for the Transaction, Dealer may, by notice to
Counterparty on or prior to any Settlement Date (a “Nominal Settlement Date”),
elect to deliver the Shares on two or more dates (each, a “Staggered Settlement
Date”) as follows:

 

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

 

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

 

(iii)                             the Settlement Method applicable on the
Nominal Settlement Date will apply on each Staggered Settlement Date, except
that the cash and/or Shares deliverable to Counterparty will be allocated among
such Staggered Settlement Dates as specified by Dealer in the notice referred to
in clause (i) above.

 

(h)                                 Method of Delivery.  Whenever delivery of
funds or other assets is required hereunder by or to Counterparty, such delivery
shall be effected through DBSI.  In addition, all notices, demands and
communications of any kind relating to the Transaction between Dealer and
Counterparty shall be transmitted exclusively through DBSI.

 

(i)                                     Dividends.  If at any time during the
period from and including the Effective Date, to but excluding the Expiration
Date, (i) an ex-dividend date for a regular annual cash dividend occurs with
respect to the Shares (an “Ex-Dividend Date”), and that dividend is less than
the Regular Dividend on a per Share basis or (ii) if no Ex-Dividend Date for a
regular annual cash dividend occurs with respect to the Shares in any annual
dividend period of Counterparty, then the Calculation Agent will make a
corresponding adjustment to any one or more of the Strike Price, Number of
Options, Option Entitlement and/or any other variable relevant to the exercise,
settlement or payment for the Transaction to preserve the fair value of the
Options to Dealer after taking into account such dividend or lack thereof. 
“Regular Dividend” shall mean USD 0.08 per Share per calendar year.  Upon any
adjustment to the Initial Dividend Threshold (as defined in the

 

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Indenture) for the Convertible Notes pursuant to the Indenture, the Calculation
Agent will make a corresponding adjustment to the Regular Dividend for the
Transaction.

 

(j)                                   Additional Termination Events. 
Notwithstanding anything to the contrary in this Confirmation:

 

(i)                                       If an event of default with respect to
Counterparty that results in an acceleration of the Convertible Notes pursuant
to the terms of the Indenture occurs under the terms of the Convertible Notes as
set forth in Section 6.01 of the Indenture, then such event of default shall
constitute an Additional Termination Event applicable to the Transaction and,
with respect to such Additional Termination Event, (A) Counterparty shall be
deemed to be the sole Affected Party, (B) the Transaction shall be the sole
Affected Transaction and (C) Dealer shall designate, at its own election or at
Counterparty’s request, an Exchange Business Day (which Exchange Business Day
shall be on or as promptly as reasonably practicable after the occurrence of
such acceleration) as an Early Termination Date pursuant to Section 6(b) of the
Agreement.

 

(ii)                                    Following any repurchase of Convertible
Notes (whether pursuant to Section 15.02 of the Indenture in connection with a
Fundamental Change (as defined in the Indenture) or otherwise), Counterparty may
notify Dealer of such repurchase and the aggregate principal amount of
Convertible Notes so repurchased and cancelled (any such notice, a “Repurchase
Notice”).  The receipt by Dealer from Counterparty of any Repurchase Notice
shall constitute an Additional Termination Event as provided in this
Section 9(j)(ii). Upon receipt of any such Repurchase Notice, Dealer shall
designate an Exchange Business Day following receipt of such Repurchase Notice
(which Exchange Business Day shall be on or as promptly as reasonably
practicable after the related settlement date for the repurchase of such
Convertible Notes) as an Early Termination Date with respect to the portion of
this Transaction corresponding to a number of Options (the “Repurchase Options”)
equal to the lesser of (A) the aggregate principal amount of such Convertible
Notes specified in such Repurchase Notice, divided by USD 1,000 and (B) the
Number of Options as of the date Dealer designates such Early Termination Date
and, as of such date, the Number of Options shall be reduced by the number of
Repurchase Options.  Any payment hereunder with respect to such termination
shall be calculated pursuant to Section 6 of the Agreement as if (1) an Early
Termination Date had been designated in respect of a Transaction having terms
identical to this Transaction and a Number of Options equal to the number of
Repurchase Options, (2) Counterparty were the sole Affected Party with respect
to such Additional Termination Event and (3) the terminated portion of the
Transaction were the sole Affected Transaction.

 

(iii)                                 The receipt by Dealer from Counterparty,
within the applicable time period set forth under “Notice of Exercise” above, of
any Notice of Exercise in respect of Options that relates to Convertible Notes
as to which additional Shares would be added to the Conversion Rate pursuant to
Section 14.03 of the Indenture in connection with a “Fundamental Change” (as
defined in the Indenture) shall constitute an Additional Termination Event as
provided in this Section 9(j)(iii).  Upon receipt of any such Notice of
Exercise, Dealer shall designate an Exchange Business Day following such
Additional Termination Event (which Exchange Business Day shall be on or as
promptly as reasonably practicable after the related settlement date for such
Convertible Notes) as an Early Termination Date with respect to the portion of
this Transaction corresponding to a number of Options (the “Make-Whole
Conversion Options”) equal to the lesser of (A) the number of such Options
specified in such Notice of Exercise and (B) the Number of Options as of the
date Dealer designates such Early Termination Date and, as of such date, the
Number of Options shall be reduced by the number of Make-Whole Conversion
Options.  Any payment hereunder with respect to such termination (the
“Make-Whole Unwind Payment”) shall be calculated pursuant to Section 6 of the
Agreement as if (1) an Early Termination Date had been designated in respect of
a Transaction having terms identical to this Transaction and a Number of Options
equal to the number of Make-

 

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Whole Conversion Options, (2) Counterparty were the sole Affected Party with
respect to such Additional Termination Event and (3) the terminated portion of
the Transaction were the sole Affected Transaction (and, for the avoidance of
doubt, in determining the amount payable pursuant to Section 6 of the Agreement,
the Calculation Agent shall not take into account any adjustments to the Option
Entitlement that result from corresponding adjustments to the Conversion Rate
pursuant to Section 14.03 of the Indenture); provided that the amount of cash
deliverable in respect of such early termination by Dealer to Counterparty shall
not be greater than the product of (x) the Applicable Percentage and (y) the
excess of (I) (1) the number of Make-Whole Conversion Options multiplied by
(2) the Conversion Rate (after taking into account any applicable adjustments to
the Conversion Rate pursuant to Section 14.03 of the Indenture) multiplied by
(3) a price per Share determined by the Calculation Agent over (II) the
aggregate principal amount of such Convertible Notes, as determined by the
Calculation Agent in a commercially reasonable manner.  Counterparty may
irrevocably elect, if so designated in its Notice of Exercise to Dealer as set
forth above, to receive the Make-Whole Unwind Payment in Shares, in which case,
in lieu of making such Make-Whole Unwind Payment as set forth above, Dealer
shall deliver to Counterparty, within a commercially reasonable period of time
after such designation as determined by Dealer (taking into account existing
liquidity conditions and Dealer’s hedging and hedge unwind activity or
settlement activity in connection with such delivery) a number of Shares equal
to such Make-Whole Unwind Payment divided by a price per Share determined by the
Calculation Agent in good faith and in a commercially reasonable manner.

 

(k)                                Amendments to Equity Definitions.

 

(i)                                   Section 12.6(a)(ii) of the Equity
Definitions is hereby amended by (1) deleting from the fourth line thereof the
word “or” after the word “official” and inserting a comma therefor, and
(2) deleting the semi-colon at the end of subsection (B) thereof and inserting
the following words therefor “or (C) at Dealer’s option, the occurrence of any
of the events specified in Section 5(a)(vii)(1) through (9) of the ISDA Master
Agreement with respect to that Issuer.”

 

(ii)                                Section 12.9(b)(i) of the Equity Definitions
is hereby amended by (1) replacing “either party may elect” with “Dealer may
elect” and (2) replacing “notice to the other party” with “notice to
Counterparty” in the first sentence of such section.

 

(l)                                   Setoff.  Each party waives any and all
rights it may have to set off obligations arising under the Agreement and the
Transaction against other obligations between the parties, whether arising under
any other agreement, applicable law or otherwise.

 

(m)                             Alternative Calculations and Payment on Early
Termination and on Certain Extraordinary Events.  If in respect of the
Transaction, an amount is payable by Dealer to Counterparty (i) pursuant to
Section 12.7 or Section 12.9 of the Equity Definitions or (ii) pursuant to
Section 6(d)(ii) of the Agreement (any such amount, a “Payment Obligation”),
Counterparty may request Dealer to satisfy the Payment Obligation by the Share
Termination Alternative (as defined below) (except that Counterparty shall not
have the right to make such an election in the event of (I) a
Nationalization, Insolvency, Merger Event or Tender Offer, in each case, in
which the consideration to be paid to holders of Shares consists solely of cash,
(II) a Merger Event or Tender Offer that is within Counterparty’s control, or
(III) an Event of Default in which Counterparty is the Defaulting Party or a
Termination Event in which Counterparty is the Affected Party, other than an
Event of Default of the type described in Section 5(a)(iii), (v), (vi), (vii) or
(viii) of the Agreement or a Termination Event of the type described in
Section 5(b) of the Agreement in each case that resulted from an event or events
outside Counterparty’s control) and shall give irrevocable telephonic notice to
Dealer, confirmed in writing within one Scheduled Trading Day, no later than
12:00 p.m. (New York City time) on the Merger Date, the Tender Offer Date, the
Announcement Date (in the case of Nationalization, Insolvency or Delisting), the
Early Termination Date or date of cancellation, as applicable; provided that if
Counterparty does not

 

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validly request Dealer to satisfy the Payment Obligation by the Share
Termination Alternative, Dealer shall have the right, in its sole discretion, to
satisfy its Payment Obligation by the Share Termination Alternative,
notwithstanding Counterparty’s election to the contrary.

 

Share Termination Alternative:

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

 

 

Share Termination Delivery Property:

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

 

 

Share Termination Unit Price:

The value to Dealer of property contained in one Share Termination Delivery
Unit, as determined by the Calculation Agent in its discretion by commercially
reasonable means and notified by the Calculation Agent to Dealer at the time of
notification of the Payment Obligation. For the avoidance of doubt, the parties
agree that in determining the Share Termination Delivery Unit Price the
Calculation Agent may consider the purchase price paid in connection with the
purchase of Share Termination Delivery Property.

 

 

Share Termination Delivery Unit:

One Share or, if a Merger Event has occurred and a corresponding adjustment to
the Transaction has been made, a unit consisting of the number or amount of each
type of property received by a holder of one Share (without consideration of any
requirement to pay cash or other consideration in lieu of fractional amounts of
any securities) in such Merger Event, as determined by the Calculation Agent.

 

 

Failure to Deliver:

Applicable

 

 

Other applicable provisions:

If Share Termination Alternative is applicable, the provisions of Sections 9.8,
9.9, 9.11, 9.12 and 10.5 (as modified above) of the Equity Definitions and the
provisions set forth opposite the caption “Representation and Agreement” in
Section 2 will be applicable, except that all references in such provisions to
“Physically-settled” shall be read as references to “Share Termination Settled”
and all references to “Shares” shall be read as references to

 

23

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“Share Termination Delivery Units”.  “Share Termination Settled” in relation to
the Transaction means that the Share Termination Alternative is applicable to
the Transaction.

 

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

 

(o)                                 Registration.  Counterparty hereby agrees
that if, in the good faith reasonable judgment of Dealer,  based on the advice
of outside counsel, the Shares (“Hedge Shares”) acquired by Dealer for the
purpose of hedging its obligations pursuant to the Transaction cannot be sold in
the public market by Dealer without registration under the Securities Act,
Counterparty shall, at its election, either (i) in order to allow Dealer to sell
the Hedge Shares in a registered offering, make available to Dealer an effective
registration statement under the Securities Act and enter into an agreement, in
form and substance reasonably satisfactory to Dealer, substantially in the form
of an underwriting agreement for a registered secondary offering; provided,
however, that if Dealer, in its sole reasonable discretion, is not satisfied
with access to due diligence materials, the results of its due diligence
investigation, or the procedures and documentation for the registered offering
referred to above, then clause (ii) or clause (iii) of this paragraph shall
apply at the election of Counterparty, (ii) in order to allow Dealer to sell the
Hedge Shares in a private placement, enter into a private placement agreement
substantially similar to private placement purchase agreements customary for
private placements of equity securities, in form and substance satisfactory to
Dealer (in which case, the Calculation Agent shall make any adjustments to the
terms of the Transaction that are necessary, in its reasonable judgment, to
compensate Dealer for any discount from the public market price of the Shares
incurred on the sale of Hedge Shares in a private placement), or (iii) purchase
the Hedge Shares from Dealer at the Relevant Price on such Exchange Business
Days, and in the amounts, requested by Dealer.

 

(p)                                 Tax Disclosure.  Effective from the date of
commencement of discussions concerning the Transaction, Counterparty and each of
its employees, representatives, or other agents may disclose to any and all
persons, without limitation of any kind, the tax treatment and tax structure of
the Transaction and all materials of any kind (including opinions or other tax
analyses) that are provided to Counterparty relating to such tax treatment and
tax structure.

 

(q)                                 Right to Extend.  Dealer may postpone or
add, in whole or in part, any Valid Day or Valid Days during the Settlement
Averaging Period or any other date of valuation, payment or delivery by Dealer,
with respect to some or all of the Options hereunder, if Dealer reasonably
determines, in its discretion, that such action is reasonably necessary or
appropriate to preserve Dealer’s hedging or hedge unwind activity hereunder in
light of existing liquidity conditions or to enable Dealer to effect purchases
of Shares in connection with its hedging, hedge unwind or settlement activity
hereunder in a manner that would, if Dealer were Counterparty or an affiliated
purchaser of Counterparty, be in compliance with applicable legal, regulatory or
self-regulatory requirements, or with related policies and procedures applicable
to Dealer.

 

(r)                                    Securities Contract; Swap Agreement.  The
parties hereto intend for (i) the Transaction to be a “securities contract” and
a “swap agreement” as defined in the Bankruptcy Code (Title 11 of the United
States Code) (the “Bankruptcy Code”), and the parties hereto to be entitled to
the protections afforded by, among other Sections, Sections 362(b)(6),
362(b)(17), 546(e), 546(g), 555 and 560 of the Bankruptcy Code, (ii) a party’s
right to liquidate the 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 described in the Bankruptcy Code,
and (iii) 

 

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each payment and delivery of cash, securities or other property hereunder to
constitute a “margin payment” or “settlement payment” and a “transfer” as
defined in the Bankruptcy Code.

 

(s)                                Notice of Certain Other Events. Counterparty
covenants and agrees that:

 

(i)                                   promptly following the public announcement
of the results of any election by the holders of Shares with respect to the
consideration due upon consummation of any consolidation, merger and binding
share exchange to which Counterparty is a party, or any sale of all or
substantially all of Counterparty’s assets, in each case pursuant to which the
Shares will be converted into cash, securities or other property, Counterparty
shall give Dealer written notice of the types and amounts of consideration that
holders of Shares have elected to receive upon consummation of such transaction
or event (the date of such notification, the “Consideration Notification Date”);
provided that in no event shall the Consideration Notification Date be later
than the date on which such transaction or event is consummated; and

 

(ii)                                promptly following any adjustment to the
Convertible Notes in connection with any Potential Adjustment Event, Merger
Event or Tender Offer, Counterparty shall give Dealer written notice of the
details of such adjustment.

 

(t)                                  Early Unwind.  In the event that the sale
of the “Underwritten Securities” (as defined in the Purchase Agreement (the
“Purchase Agreement”), dated as of September 16, 2010, between Counterparty and
J.P. Morgan Securities LLC, as representative of the Initial Purchasers party
thereto (the “Initial Purchasers”)) is not consummated with the Initial
Purchasers for any reason, or Counterparty fails to deliver to Dealer opinions
of counsel as required pursuant to Section 9(a), in each case by 5:00 p.m. (New
York City time) on the Premium Payment Date, or such later date as agreed upon
by the parties (the Premium Payment Date or such later date, the “Early Unwind
Date”), then the Transaction shall automatically terminate (the “Early Unwind”)
on the Early Unwind Date and (i) the Transaction and all of the respective
rights and obligations of Dealer and Counterparty under the Transaction shall be
cancelled and terminated and (ii) each party shall be released and discharged by
the other party from and agrees not to make any claim against the other party
with respect to any obligations or liabilities of the other party arising out of
and to be performed in connection with the Transaction either prior to or after
the Early Unwind Date; provided that Counterparty shall, to the extent permitted
by the Credit Agreement, dated as of November 20, 2006, among Counterparty, as
Borrower, the several lenders from time to time party thereto, Keybank National
Association, as Administrative Agent, Co-Lead Arranger, Sole Book Runner and
Swingline Lender, and LaSalle Bank National Association, as Co-Lead Arranger,
purchase from Dealer on the Early Unwind Date all Shares purchased by Dealer or
one or more of its affiliates in connection with the Transaction at the then
prevailing market price.  Each of Dealer and Counterparty represent and
acknowledge to the other that, subject to the proviso included in this
Section 9(t), upon an Early Unwind, all obligations with respect to the
Transaction shall be deemed fully and finally discharged.

 

(u)                               Payment by Counterparty. In the event that
(i) an Early Termination Date occurs or is designated with respect to the
Transaction as a result of a Termination Event or an Event of Default (other
than an Event of Default arising under Section 5(a)(ii) or 5(a)(iv) of the
Agreement) and, as a result, Counterparty owes to Dealer an amount calculated
under Section 6(e) of the Agreement, or (ii) Counterparty owes to Dealer,
pursuant to Section 12.7 or Section 12.9 of the Equity Definitions, an amount
calculated under Section 12.8 of the Equity Definitions, such amount shall be
deemed to be zero.

 

25

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Please confirm that the foregoing correctly sets forth the terms of our
agreement by sending to us a letter or telex substantially similar to this
facsimile, which letter or telex sets forth the material terms of the
Transaction to which this Confirmation relates and indicates your agreement to
those terms. Dealer will make the time of execution of the Transaction available
upon request.

 

 

Very truly yours,

 

 

 

 

 

 

 

 

Dealer is regulated by the Financial Services Authority.

 

 

 

 

 

Deutsche Bank AG, London Branch

 

 

 

 

 

 

 

 

 

 

By:

/s/ Lars Kestner

 

 

Name:

Lars Kestner

 

 

Title:

Managing Director

 

 

 

 

 

 

 

 

 

 

By:

/s/ Natalie Horton

 

 

Name:

Natalie Horton

 

 

Title:

Managing Director

 

 

 

 

 

 

 

 

 

 

Deutsche Bank Securities Inc., acting solely as Agent in connection with the
Transaction

 

 

 

 

 

 

 

 

 

 

By:

/s/ Lars Kestner

 

 

Name:

Lars Kestner

 

 

Title:

Managing Director

 

 

 

 

 

 

 

 

 

 

By:

/s/ Natalie Horton

 

 

Name:

Natalie Horton

 

 

Title:

Managing Director

 

 

 

 

 

 

 

 

Accepted and confirmed

 

 

 

as of the Trade Date:

 

 

 

 

 

 

 

American Equity Investment Life Holding Company

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ John M. Matovina

 

 

 

Authorized Signatory

 

 

 

Name:

John M. Matovina

 

 

 

Title:

Chief Financial Officer & Treasurer

 

 

 

 

 

 

Chairman of the Supervisory Board: Clemens Börsig
Board of Managing Directors: Hermann-Josef Lamberti, Josef Ackermann, Dr. Hugo
Banziger, Anthony DiIorio

 

Deutsche Bank AG is regulated by the FSA for the conduct of designated
investment business in the UK, is a member of the London Stock Exchange and is a
limited liability company incorporated in the Federal Republic of Germany HRB
No. 30 000 District Court of Frankfurt am Main; Branch Registration No. in
England and Wales BR000005, Registered address: Winchester House, 1 Great
Winchester Street, London EC2N 2DB.

 

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