Exhibit 10.6

 

   December 6, 2012 To:    Encore Capital Group, Inc.    3111 Camino Del Rio
North, Suite 1300    San Diego, California 92108    Attn:    Paul Grinberg,
Chief Financial Officer    Telephone:    858-309-6904    Facsimile:   
858-309-6977 From:    LOGO [g451182004.jpg]    Société Générale    1221 Avenue
of the Americas    New York, NY 10020 Re:    Additional Issuer Warrant
Transaction    (Transaction Reference Number:            )

Ladies and Gentlemen:

The purpose of this communication (this “Confirmation”) is to set forth the
terms and conditions of the above-referenced transaction entered into on the
Trade Date specified below (the “Transaction”) between Société Générale
(“Dealer”) and Encore Capital Group, Inc. (“Issuer”). This communication
constitutes a “Confirmation” as referred to in the ISDA Master Agreement
specified below. Dealer is acting as principal and SG Americas Securities, LLC
(“Agent”), its affiliate, is acting as agent for Dealer for the Transaction
under this Confirmation.

1. This Confirmation is subject to, and incorporates, the definitions and
provisions of the 2006 ISDA Definitions (the “2006 Definitions”) and the
definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (the
“Equity Definitions”, and together with the 2006 Definitions, the
“Definitions”), in each case as published by the International Swaps and
Derivatives Association, Inc. (“ISDA”). In the event of any inconsistency
between the 2006 Definitions and the Equity Definitions, the Equity Definitions
will govern. For purposes of the Equity Definitions, each reference herein to a
Warrant shall be deemed to be a reference to a Call Option or an Option, as
context requires.

This Confirmation evidences a complete and binding agreement between Dealer and
Issuer as to the terms of the Transaction to which this Confirmation relates.
This Confirmation shall be subject to an agreement (the “Agreement”) in the form
of the ISDA 2002 Master Agreement as if Dealer and Issuer had executed an
agreement in such form (without any Schedule but with the elections set forth in
this Confirmation). For the avoidance of doubt, the Transaction shall be the
only transaction under the Agreement.

All provisions contained in, or incorporated by reference to, the Agreement will
govern this Confirmation except as expressly modified herein. In the event of
any inconsistency between this Confirmation and either the Definitions or the
Agreement, this Confirmation shall govern.

2. The Transaction is a Warrant Transaction, which shall be considered a Share
Option Transaction for purposes of the Equity Definitions. The terms of the
particular Transaction to which this Confirmation relates are as follows:

 

General Terms:   Trade Date:    December 6, 2012   Effective Date:   
December 11, 2012, or such other date as agreed between the parties, subject to
Section 8(o) below.

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  Components:    The Transaction will be divided into individual Components,
each with the terms set forth in this Confirmation, and, in particular, with the
Number of Warrants and Expiration Date set forth in this Confirmation. The
payments and deliveries to be made upon settlement of the Transaction will be
determined separately for each Component as if each Component were a separate
Transaction under the Agreement.   Warrant Style:    European   Warrant Type:   
Call   Seller:    Issuer   Buyer:    Dealer   Shares:    The common stock of
Issuer, par value USD 0.01 per share (Ticker Symbol: “ECPG”).   Number of
Warrants:    For each Component, as provided in Annex A to this Confirmation.  
Warrant Entitlement:    One Share per Warrant   Strike Price:    As provided in
Annex A to this Confirmation. Notwithstanding anything to the contrary in the
Agreement, this Confirmation or the Definitions, in no event shall the Strike
Price be subject to adjustment to the extent that, after giving effect to such
adjustment, the Strike Price would be less than USD 27.17, except for any
adjustment pursuant to the terms of this Confirmation and the Equity Definitions
in connection with stock splits or similar changes to Issuer’s capitalization.  
Premium:    As provided in Annex A to this Confirmation.   Premium Payment Date:
   The Effective Date   Exchange:    The NASDAQ Global Select Market   Related
Exchange:    All Exchanges Procedures for Exercise:   

In respect of any Component:

     Expiration Time:    Valuation Time   Expiration Date:    As provided in
Annex A to this Confirmation (or, if such date is not a Scheduled Trading Day,
the next following Scheduled Trading Day that is not already an Expiration Date
for another Component); provided that if that date is a Disrupted Day, the
Expiration Date for such Component shall be the first succeeding Scheduled
Trading Day that is not a Disrupted Day and is not or is not deemed to be an
Expiration Date in respect of any other Component of the Transaction hereunder;
and provided further that if the Expiration Date has not occurred pursuant to
the preceding proviso as of the Final Disruption Date, the Final Disruption Date
shall be the Expiration Date (irrespective of whether such date is an Expiration
Date in respect of any other Component for the Transaction) and, notwithstanding
anything to the contrary in this Confirmation or the Definitions, the Relevant
Price for such Expiration Date shall be the prevailing market value per Share
determined by the Calculation Agent in a commercially reasonable

 

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     manner. “Final Disruption Date” means October 10, 2018. Notwithstanding the
foregoing and anything to the contrary in the Equity Definitions, if a Market
Disruption Event occurs on any Expiration Date, the Calculation Agent may
determine that such Expiration Date is a Disrupted Day only in part, in which
case (i) the Calculation Agent shall make adjustments to the Number of Warrants
for the relevant Component for which such day shall be the Expiration Date and
shall designate the Scheduled Trading Day determined in the manner described in
the immediately preceding sentence as the Expiration Date for the remaining
Warrants for such Component, and (ii) the Settlement Price for such Disrupted
Day shall be determined by the Calculation Agent based on transactions in the
Shares on such Disrupted Day taking into account the nature and duration of such
Market Disruption Event on such day. Any Scheduled Trading Day on which, as of
the date hereof, the Exchange is scheduled to close prior to its normal close of
trading shall be deemed not to be a Scheduled Trading Day; if a closure of the
Exchange prior to its normal close of trading on any Scheduled Trading Day is
scheduled following the date hereof, then such Scheduled Trading Day shall be
deemed to be a Disrupted Day in full. Section 6.6 of the Equity Definitions
shall not apply to any Valuation Date occurring on an Expiration Date.   Market
Disruption Event:    Section 6.3(a) of the Equity Definitions is hereby amended
by (i) deleting the words “during the one hour period that ends at the relevant
Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out
Valuation Time, as the case may be,” in clause (ii) thereof, (ii) deleting the
word “or” before clause (iii) thereof and (iii) inserting after clause
(iii) thereof “or (iv) a Regulatory Disruption”.      Section 6.3(d) of the
Equity Definitions is hereby amended by deleting the remainder of the provision
following the term “Scheduled Closing Time” in the fourth line thereof.  
Regulatory Disruption:    Any event that Dealer, in good faith and in its
reasonable discretion, based on advice of counsel, determines makes it
appropriate with regard to any legal, regulatory or self-regulatory requirements
or related policies and procedures, for Dealer to refrain from or decrease any
market activity in connection with the Transaction and that the Calculation
Agent determines is material. Dealer shall notify Issuer as soon as reasonably
practicable that a Regulatory Disruption has occurred and the Expiration Dates
affected by it.   Automatic Exercise:    Applicable; and means that the Number
of Warrants for each Component will be deemed to be automatically exercised at
the Expiration Time on the Expiration Date for such Component unless Dealer
notifies Seller (by telephone or in writing) prior to the Expiration Time on the
Expiration Date that it does not wish Automatic Exercise to occur, in which case
Automatic Exercise will not apply.  

Issuer’s Telephone Number

and Telex and/or Facsimile Number

and Contact Details for purpose of

Giving Notice:

   To be provided by Issuer.

 

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  Valuation Time:    Scheduled Closing Time; provided that if the principal
trading session is extended, the Calculation Agent shall determine the Valuation
Time in its reasonable discretion. Settlement Terms:   

In respect of any Component:

     Settlement Method Election:    Applicable; provided that, (i) any such
election by the Electing Party shall apply only with respect to the Component or
Components specified by the Electing Party thereunder and (ii) for any
particular Component hereunder, the same Settlement Method shall apply to each
Warrant under such Component; and provided further that references to “Physical
Settlement” in section 7.1 of the Equity Definitions shall be replaced with “Net
Share Settlement”; and provided further that Issuer may elect Cash Settlement
only if at the time of such election (i) it provides to Dealer a written
acknowledgment of its responsibilities under applicable securities laws, and in
particular Section 9 and Section 10(b) under the Securities Exchange Act of
1934, as amended (the “Exchange Act”) and the rules and regulations thereunder,
in respect of such election and (ii) in such written acknowledgement Issuer
remakes to Dealer the representations set forth in Section 7(a)(i)(A) of this
Confirmation as of the date of such written acknowledgement.   Electing Party:
   Issuer   Settlement Method Election Date:    For any Component, the eighth
Scheduled Trading Day prior to the scheduled Expiration Date for such Component.
  Default Settlement Method:    Net Share Settlement   Settlement Currency:   
USD   Net Share Settlement:    If Net Share Settlement is applicable to the
Component, on the Settlement Date, Issuer shall deliver to Dealer a number of
Shares equal to the Number of Shares to be Delivered for such Settlement Date to
the account specified by Dealer and cash in lieu of any fractional Share
(resulting from the rounding set forth under “Number of Shares to be Delivered”
below) valued at the Settlement Price on the Valuation Date corresponding to
such Settlement Date. The Number of Shares to be Delivered shall be delivered by
Issuer to Dealer no later than 5:00 P.M. (local time in New York City) on the
relevant Settlement Date.   Number of Shares to be Delivered:    In respect of
any Exercise Date, notwithstanding the last sentence of Section 9.5 of the
Equity Definitions (which shall not apply with respect to the Transaction), a
number of Shares (rounded down to the nearest whole Share), if any, equal to the
product of (i) the number of Warrants exercised or deemed exercised on such
Exercise Date, (ii) the Warrant Entitlement and (iii) the Strike Price
Differential for the relevant Valuation Date divided by (B) the Settlement Price
for the relevant Valuation Date.   Cash Settlement:    If Cash Settlement is
applicable to the Component, on the Cash Settlement Payment Date, Issuer shall
pay to Dealer an amount of

 

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     cash in USD equal to the Option Cash Settlement Amount, if any, for such
Cash Settlement Payment Date.   Option Cash Settlement Amount:    For any Cash
Settlement Payment Date, an amount in cash equal to the product of (i) the
Number of Warrants exercised or deemed exercised on the relevant Exercise Date,
(ii) the Warrant Entitlement and (iii) the Strike Price Differential for the
relevant Valuation Date.   Cash Settlement Payment Date:    The third Currency
Business Day after the relevant Valuation Date.   Settlement Price:    For any
Valuation Date, the volume-weighted average price per Share for the period from
the scheduled opening time of the Exchange to the Scheduled Closing Time on such
Valuation Date, as displayed under the heading “Bloomberg VWAP” on Bloomberg
page “ECPG <equity> AQR” (or any successor thereto), or if such price is not so
reported on such Valuation Date for any reason, as reasonably determined by the
Calculation Agent.   Other Applicable Provisions:    The provisions of Sections
9.1(c), 9.8, 9.9, 9.11 (except that the Representation and Agreement contained
in Section 9.11 of the Equity Definitions shall be modified by excluding any
representations therein relating to restrictions, obligations, limitations or
requirements under applicable securities laws arising as a result of the fact
that Seller is the Issuer of the Shares) and 9.12 of the Equity Definitions will
be applicable as if “Physical Settlement” applied to the Transaction.
Adjustments:   

In respect of any Component:

     Method of Adjustment:    Calculation Agent Adjustment   Extraordinary
Dividend:    Any Dividend (i) that has an ex-dividend date occurring on or after
the Trade Date and on or prior to the date on which Issuer satisfies all of its
delivery obligations hereunder and (ii) the amount or value of which differs
from the Ordinary Dividend Amount for such Dividend, as determined by the
Calculation Agent.   Dividend:    Any dividend or distribution on the Shares
(other than any dividend or distribution of the type described in Sections
11.2(e)(i), 11.2(e)(ii)(A) or 11.2(e)(ii)(B) of the Equity Definitions).  
Ordinary Dividend Amount:    USD 0.00. Extraordinary Events:      Consequences
of Merger Events:          (a) Share-for-Share:    Modified Calculation Agent
Adjustment       (b) Share-for-Other:    Cancellation and Payment (Calculation
Agent Determination)       (c) Share-for-Combined:    Cancellation and Payment
(Calculation Agent Determination); provided that Dealer may elect, in its
commercially reasonable judgment, Component Adjustment (Calculation Agent
Determination).   Tender Offer:    Applicable   Consequences of Tender Offers:
  

 

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      (a) Share-for-Share:    Modified Calculation Agent Adjustment       (b)
Share-for-Other:    Modified Calculation Agent Adjustment       (c)
Share-for-Combined:    Modified Calculation Agent Adjustment   Announcement
Event:    If an Announcement Date occurs in respect of a Merger Event or Tender
Offer (such occurrence, an “Announcement Event”), then on the earliest to occur
of (i) the date on which the transaction described in any Announcement Event (as
amended or modified) is cancelled, withdrawn, discontinued or otherwise
terminated and (ii) the Expiration Date, Early Termination Date or other date of
cancellation or termination in respect of each Component (the “Announcement
Event Adjustment Date”), the Calculation Agent will determine the cumulative
economic effect on such Component of the Announcement Event (without duplication
in respect of any other adjustment or cancellation valuation made pursuant to
this Confirmation, the Equity Definitions or the Agreement, regardless of
whether the Announcement Event actually results in a Merger Event or Tender
Offer, and taking into account such factors as the Calculation Agent may
determine, including, without limitation, changes in volatility, expected
dividends, stock loan rate or liquidity relevant to the Shares or the
Transaction during the period from the Announcement Event to the Announcement
Event Adjustment Date); provided that, for the avoidance of doubt (x) in no
event shall the modification or amendment of the terms of a transaction
described in an Announcement Event constitute a new, additional or different
Announcement Event hereunder (but any such modification or amendment may be
taken into account in determining the cumulative economic effect on such
Component of the Announcement Event) and (y) the occurrence of an Announcement
Event Adjustment Date in respect of the cancellation, withdrawal,
discontinuation or other termination of the transaction described in an
Announcement Event (as amended or modified) shall not preclude the occurrence of
a later Announcement Date with respect to such transaction. If the Calculation
Agent determines that such cumulative economic effect on any Component is
material, then on the Announcement Event Adjustment Date for such Component, the
Calculation Agent may make such adjustment to the exercise, settlement, payment
or any other terms of such Component as the Calculation Agent determines
appropriate to account for such economic effect, which adjustment shall be
effective immediately prior to the exercise, termination or cancellation of such
Component, as the case may be.   Announcement Date:    The definition of
“Announcement Date” in Section 12.1 of the Equity Definitions is hereby amended
by (i) replacing the words “a firm” with the word “any” in the second and fourth
lines thereof, (ii) replacing the word “leads to the” with the words “, if
completed, would lead to a” in the third and the fifth lines thereof,
(iii) replacing the words “voting shares” with the word “Shares” in the fifth
line thereof, and (iv) inserting the words “by any entity” after the word
“announcement” in the second and the fourth lines thereof.   New Shares:    In
the definition of New Shares in Section 12.1(i) of the Equity Definitions,
(a) the text in clause (i) thereof shall be deleted in its entirety (including
the word “and” following such clause (i)) and

 

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     replaced with “publicly quoted, traded or listed on any of The New York
Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or
their respective successors),” and (b) the phrase “and (iii) issued by a
corporation organized under the laws of the United States, any State thereof or
the District of Columbia that either (x) also becomes Seller under the relevant
Transaction following such Merger Event or Tender Offer or (y) wholly owns the
Seller under the relevant Transaction following such Merger Event or Tender
Offer (which Seller is a corporation organized under the laws of the United
States, any State thereof or the District of Columbia) and fully and
unconditionally guarantees the obligations of Seller under the Transaction with
the result that for purposes of Rule 144 under the Securities Act Dealer is able
to tack its holding period in the Warrants to its holding period in the Shares
issuable thereunder” shall be inserted immediately prior to the period.  

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
shall 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 such exchange or quotation
system, such exchange or quotation system shall thereafter be deemed to be the
Exchange.   Additional Disruption Events:          (a) Change in Law:   
Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is
hereby amended by (i) replacing the phrase “the interpretation” in the third
line thereof with the phrase “, or public announcement of, the formal or
informal interpretation”, (ii) replacing the word “Shares” with the phrase
“Hedge Positions” in clause (X) thereof, (iii) inserting the parenthetical
“(including, for the avoidance of doubt and without limitation, adoption or
promulgation of new regulations authorized or mandated by existing statute)” at
the end of clause (A) thereof, (iv) immediately following the word “Transaction”
in clause (X) thereof, adding the phrase “in the manner contemplated by the
Hedging Party on the Trade Date” and (v) adding the following proviso to the end
of clause (Y) thereof: “provided that such party has used good faith efforts to
avoid such increased cost on terms reasonably acceptable to such party, as long
as (i) such party would not incur a materially increased cost (including,
without limitation, due to any increase in tax liability, decrease in tax
benefit or other adverse effect on its tax position, or any increase in margin
or capital requirements), as reasonably determined by such party, in doing so,
(ii) such party would not violate any applicable law, rule, regulation or policy
of such party, as reasonably determined by such party, in doing so, (iii) such
party would not suffer a material penalty, injunction, non-financial burden,
reputational harm or other material adverse consequence in doing so, (iv) such
party would not incur any material operational or administrative burden in doing
so and (v)

 

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     such party would not, in doing so, be required to take any action that is
contrary to the intent of the law or regulation that is subject to the Change in
Law”.       (b) Failure to Deliver:    Not Applicable       (c) Insolvency
Filing:    Applicable       (d) 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”.

      (e) Increased Cost of Hedging:    Not Applicable       (f) Loss of Stock
Borrow:    Applicable            Maximum Stock Loan Rate:    As provided in
Annex A to this Confirmation.       (g) Increased Cost of Stock Borrow:   
Applicable             Initial Stock Loan Rate:    As provided in Annex A to
this Confirmation.

Hedging Party:

   Dealer for all applicable Potential Adjustment Events and Extraordinary
Events

Determining Party:

   Dealer for all applicable Extraordinary Events

Non-Reliance:

   Applicable

Agreements and Acknowledgments

Regarding Hedging Activities: Applicable

   Additional

Acknowledgments:

   Applicable

3. Calculation Agent: Dealer, whose judgments, determinations and calculations
shall be made in good faith and in a commercially reasonable manner. Following
any determination or calculation by the Calculation Agent hereunder, upon a
request by Issuer, the Calculation Agent shall promptly (but in any event within
three Scheduled Trading Days) provide to Issuer by email to the email address
provided by Issuer in such request a report (in a commonly used file format for
the storage and manipulation of financial data) displaying in reasonable detail
the basis for such determination or calculation (including any assumptions used
in making such determination or calculation), it being understood that the
Calculation Agent shall not be obligated to disclose any proprietary models used
by it for such determination or calculation.

4. Account Details:

 

Dealer Payment Instructions:    Payments to:    SOCIÉTÉ GENERALE   
Correspondent:    SOCIÉTÉ GENERALE/New York SOGEUS33    Beneficiary:   
SOCIÉTÉ GENERALE/Paris SOGEFRPPHCM    Account Number:    00187011

 

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  Issuer Payment Instructions:   To be provided by Issuer.   

5. Offices:

       The Office of Dealer for the Transaction is: Paris      The Office of
Issuer for the Transaction is: Not applicable   

6. Notices:

    

(a)    Address for notices or communications to Issuer for purposes of this
Confirmation:

       To:   Encore Capital Group, Inc.        3111 Camino Del Rio North, Suite
1300        San Diego, CA 92108           Attn:   Paul Grinberg, Chief Financial
Officer           Telephone:   858-309-6904           Facsimile:   858-309-6977
          With a copy to:           Attn:   Greg Call, General Counsel     
     Telephone:   858-569-3978           Facsimile:   858-309-6998   

(b) Address for notices or communications to Dealer for purposes of this
Confirmation:

       To:  

Société Générale

c/o SG Americas Securities, LLC

1221 Avenue of the Americas

New York, NY 10020

          Attn:   Sanjay Garg           Telephone:   (212) 278-5187     
     Facsimile:   (212) 278-5624           With a copy to: Société Générale     
 

c/o SG Americas Securities, LLC

1221 Avenue of the Americas

New York, NY 10020

          Attn:   Steve Milankov           Telephone:   (212) 278-6985     
     Facsimile:   (212) 278-7365   

7. Representations, Warranties and Agreements:

(a) Each of the representations and warranties of Issuer set forth in Section 1
of the Purchase Agreement (the “Purchase Agreement”), dated as of November 20,
2012, between Issuer and Morgan Stanley & Co. LLC, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Barclays Capital Inc. as representatives of the
initial purchasers party thereto (the “Initial Purchasers”), are true and
correct and are hereby deemed to be repeated to Dealer as if set forth herein.
In addition to the representations and warranties in the Agreement and those
contained elsewhere herein, Issuer represents and warrants to and for the
benefit of, and agrees with, Dealer as follows:

 

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(i) On the Trade Date (A) Issuer it not aware of any material nonpublic
information regarding Issuer or the Shares and (B) all reports and other
documents filed by Issuer 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 any omission of a 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.

(ii) Without limiting the generality of Section 13.1 of the Equity Definitions,
Issuer acknowledges that Dealer is not making any representations or warranties
or taking any position or expressing any view with respect to the treatment of
the Transaction under any accounting standards including ASC Topic 260, Earnings
Per Share, ASC Topic 815, Derivatives and Hedging, or ASC Topic 480,
Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging –
Contracts in Entity’s Own Equity (or any successor issue statements) or under
FASB’s Liabilities & Equity Project.

(iii) Prior to or on the Effective Date, Issuer shall deliver to Dealer a
resolution of Issuer’s board of directors authorizing the Transaction.

(iv) Issuer is not entering into this Confirmation 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) or
otherwise in violation of the Exchange Act.

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

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

(vii) Issuer shall not take any action to decrease the number of Available
Shares below the Capped Number (each as defined below).

(viii) Issuer understands no obligations of Dealer to it hereunder will be
entitled to the benefit of deposit insurance and that such obligations will not
be guaranteed by any Affiliate of Dealer or any governmental agency.

(ix) (A) On the Trade Date, the Shares or securities that are convertible into,
or exchangeable or exercisable for Shares, are not, and shall not be, subject to
a “restricted period,” as such term is defined in Regulation M under the
Exchange Act (“Regulation M”), (B) Issuer shall not engage in any
“distribution,” as such term is defined in Regulation M, other than a
distribution meeting the requirements of the exceptions set forth in sections
101(b) and 102(b) of Regulation M, until the second Exchange Business Day
immediately following the Trade Date and (C) during the period starting on the
first Expiration Date and ending on the last Expiration Date (the “Settlement
Period”), the Shares or securities that are convertible into, or exchangeable or
exercisable for, Shares will not be subject to a “restricted period,” as such
term is defined in Regulation M.

(x) During the Settlement Period, neither Issuer nor any “affiliated purchaser”
(as defined in Rule 10b-18 under the Exchange Act (“Rule 10b-18”)) shall
directly or indirectly (including, without limitation, by means of any
cash-settled or other derivative instrument) purchase, offer to purchase, place
any bid or limit order that would effect a purchase of, or commence any tender
offer relating to, any Shares (or an equivalent interest, including a unit of
beneficial interest in a trust or limited partnership or a depository share) or
any security convertible into or exchangeable or exercisable for Shares, except
through Dealer (or, with prior notice to Dealer by 5:00 p.m., New York City
time, on the Scheduled Trading Day immediately preceding such a transaction,
Deutsche Bank AG or Royal Bank of Canada); provided that, this clause (x) shall
not apply to any of the following: (A) purchases of Shares pursuant to the
exercise of stock options granted to former or current employees, officers,
directors, or other affiliates of Issuer or its subsidiaries, including the
withholding and/or purchase of Shares from holders of such options to satisfy
payment of the option exercise price and/or to satisfy tax withholding
requirements in connection with the exercise of such options; (B) purchases of
Shares from

 

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holders of performance shares or units or restricted shares or units to satisfy
tax withholding requirements in connection with vesting; or (C) purchases of
Shares effected by or for a plan by an agent independent of Issuer that satisfy
the requirements of Rule 10b-18(a)(13)(ii).

(xi) A number of Shares equal to the Capped Number (as provided in Annex A to
this Confirmation) (the “Warrant Shares”) have been reserved for issuance by all
required corporate action of Issuer. The Warrant Shares have been duly
authorized and, when delivered against payment therefor (which may include Net
Share Settlement in lieu of cash) and otherwise as contemplated by the terms of
the Warrant following the exercise of the Warrant in accordance with the terms
and conditions of the Warrant, will be validly issued, fully-paid and
non-assessable, and the issuance of the Warrant Shares will not be subject to
any preemptive or similar rights.

(xii) To Issuer’s knowledge, based on due inquiry, no state or local (including
non-U.S. jurisdictions) law, rule, regulation or regulatory order applicable to
the Shares would give rise to any reporting, consent, registration or other
requirement (including without limitation a requirement to obtain prior approval
from any person or entity) as a result of Dealer or its affiliates owning or
holding (however defined) Shares.

(b) Each of Dealer and Issuer agrees and represents that it is an “eligible
contract participant” as defined in the U.S. Commodity Exchange Act, as amended.

(c) Each of Dealer and Issuer acknowledges that the offer and sale of the
Transaction to it is intended to be exempt from registration under the
Securities Act of 1933, as amended (the “Securities Act”), by virtue of
Section 4(2) thereof. Accordingly, Dealer represents and warrants to Issuer 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, (iii) it is entering into the Transaction for its own
account without a view to the distribution or resale thereof and (iv) the
assignment, transfer or other disposition of the Transaction has not been and
will not be registered under the Securities Act and is restricted under this
Confirmation, the Securities Act and state securities laws.

(d) Each of Dealer and Issuer agrees and acknowledges that Dealer is a
“financial institution,” “swap participant” and “financial participant” within
the meaning of Sections 101(22), 101(53C) and 101(22A) of Title 11 of the United
States Code (the “Bankruptcy Code”). The parties hereto further agree and
acknowledge that it is the intent of the parties that (A) this Confirmation is
(i) a “securities contract,” as such term is defined in Section 741(7) of the
Bankruptcy Code, with respect to which each payment and delivery hereunder or in
connection herewith is a “termination value,” “payment amount” or “other
transfer obligation” within the meaning of Section 362 of the Bankruptcy Code
and a “settlement payment,” within the meaning of Section 546 of the Bankruptcy
Code, and (ii) a “swap agreement,” as such term is defined in Section 101(53B)
of the Bankruptcy Code, with respect to which each payment and delivery
hereunder or in connection herewith is a “termination value,” “payment amount”
or “other transfer obligation” within the meaning of Section 362 of the
Bankruptcy Code and a “transfer,” as such term is defined in Section 101(54) of
the Bankruptcy Code and a “payment or other transfer of property” within the
meaning of Sections 362 and 546 of the Bankruptcy Code, and (B) that Dealer is
entitled to the protections afforded by, among other sections, Sections
362(b)(6), 362(b)(17), 362(o), 546(e), 546(g), 548(d)(2), 555, 560 and 561 of
the Bankruptcy Code.

(e) Issuer shall deliver to Dealer an opinion of counsel, dated as of the
Effective Date, to Dealer with respect to the matters set forth in Section 3(a)
of the Agreement and Section 7(a)(xi) of this Confirmation; provided that such
opinion of counsel may contain customary exceptions and qualifications,
including, without limitation, exceptions and qualifications relating to
indemnification provisions.

8. Other Provisions:

(a) Alternative Calculations and Payment on Early Termination and on Certain
Extraordinary Events. If Issuer shall owe Dealer any amount (i) pursuant to
Sections 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions or
(ii) pursuant to Section 6(d)(ii) of the Agreement (a “Payment Obligation”),
Issuer shall satisfy any such Payment Obligation by the Share Termination
Alternative (as defined below), unless either (x) Issuer shall have elected to
satisfy any such Payment Obligation by delivering cash in USD by (1) giving
irrevocable telephonic notice to Dealer, confirmed in writing within one
Scheduled Trading Day, no later than 12:00 noon, New York City time, on the
Merger Date, Tender Offer Date, Announcement Date, Early Termination Date or
date of cancellation or termination in respect of an Extraordinary Event, as
applicable and (2) remaking the representation set forth in Section 7(a)(i)(A)
of this Confirmation on the date of such notice, confirmed in writing within one
Scheduled Trading Day, or (y) in the event of

 

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(1) an Insolvency, a Nationalization, a Tender Offer or a Merger Event, in each
case, in which the consideration or proceeds to be paid to holders of Shares
consists solely of cash or (2) an Event of Default in which Issuer is the
Defaulting Party or a Termination Event in which Issuer is the Affected Party,
which Event of Default or Termination Event resulted from an event or events
within Issuer’s control, in either of which cases under the immediately
preceding clauses (x) or (y), the provisions of Sections 12.2, 12.3, 12.6, 12.7
or 12.9 of the Equity Definitions or Section 6(d)(ii) of the Agreement, as the
case may be, shall apply in lieu of the provisions of this paragraph 8(a). In
the case of any such settlement by the Share Termination Alternative, the
following provisions shall apply on the Scheduled Trading Day immediately
following the Merger Date, the Tender Offer Date, Announcement Date, Early
Termination Date or date of cancellation or termination in respect of an
Extraordinary Event, as applicable:

 

Share Termination Alternative:

  Applicable and means that Issuer shall deliver to Dealer the Share Termination
Delivery Property on the date on which the Payment Obligation would otherwise be
due pursuant to Section 12.7 or 12.9 of the Equity Definitions or
Section 6(d)(ii) of the Agreement, as applicable (the “Share Termination Payment
Date”), in satisfaction of the Payment Obligation.

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

Share Termination Delivery Unit:

  In the case of a Termination Event, Event of Default, Delisting or Additional
Disruption Event, one Share or, in the case of an Insolvency, Nationalization,
Merger Event or Tender Offer, one Share or 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 Insolvency, Nationalization,
Merger Event or Tender Offer, as applicable. If such Insolvency,
Nationalization, Merger Event or Tender Offer involves a choice of consideration
to be received by holders, such holder shall be deemed to have elected to
receive the maximum possible amount of cash.

Failure to Deliver:

  Applicable

Other applicable provisions:

  If Share Termination Alternative is applicable, the provisions of Sections
9.8, 9.9, 9.11 (except that the Representation and Agreement contained in
Section 9.11 of the Equity Definitions shall be modified by excluding any
representations therein relating to restrictions, obligations, limitations or
requirements under applicable securities laws arising as a result of the fact
that Seller is the issuer of the Shares or any portion of the Share Termination
Delivery Units) and 9.12 of the Equity Definitions will be applicable as if
“Physical Settlement” applied to the Transaction, except that all references to
“Shares” shall be read as references to “Share Termination Delivery Units”.

(b) Registration/Private Placement Procedures. (i) If, in the reasonable
judgment of Dealer, based on the advice of counsel, for any reason, any Shares
or any securities of Issuer or its affiliates comprising any Share Termination
Delivery Units deliverable to Dealer hereunder (any such Shares or securities,
“Delivered Securities”) would not be immediately freely transferable by Dealer
under Rule 144 under the Securities Act, then the provisions set forth in this
Section 8(b) shall apply. At the election of Issuer, if applicable, by notice to
Dealer within three Exchange Business Day after the relevant delivery obligation
arises (or, if later, by the third Exchange Business Day following the date of
notification by Dealer of the need for such settlement procedures), either
(A) all Delivered Securities delivered by

 

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Issuer to Dealer shall be, at the time of such delivery, covered by an effective
registration statement of Issuer for immediate resale by Dealer (such
registration statement and the corresponding prospectus (the “Prospectus”)
(including, without limitation, any sections describing the plan of
distribution) in form and content commercially reasonably satisfactory to
Dealer) or (B) Issuer shall deliver additional Delivered Securities so that the
value of such Delivered Securities, as determined by the Calculation Agent to
reflect an appropriate liquidity discount, equals the value of the number of
Delivered Securities that would otherwise be deliverable if such Delivered
Securities were freely tradeable (without prospectus delivery) upon receipt by
Dealer (such value, the “Freely Tradeable Value”); provided that Issuer may not
make the election described in this clause (B) if, on the date of its election,
it has taken, or caused to be taken, any action that would make unavailable
either the exemption pursuant to Section 4(2) of the Securities Act for the
delivery by Issuer to Dealer (or any affiliate designated by Dealer) of the
Delivered Securities or the exemption pursuant to Section 4(1) or Section 4(3)
of the Securities Act for resales of the Delivered Securities by Dealer (or any
such affiliate of Dealer). (For the avoidance of doubt, as used in this
paragraph (b) only, the term “Issuer” shall mean the issuer of the relevant
securities, as the context shall require.)

(ii) If Issuer makes the election described in clause (b)(i)(A) above:

(A) Dealer (or an Affiliate of Dealer designated by Dealer) shall be afforded a
reasonable opportunity to conduct a due diligence investigation with respect to
Issuer that is customary in scope for registered secondary offerings of equity
securities of a substantially similar size and that yields results that are
commercially reasonably satisfactory to Dealer or such Affiliate, as the case
may be, in its discretion; and

(B) Dealer (or an Affiliate of Dealer designated by Dealer) and Issuer shall
enter into an agreement (a “Registration Agreement”) on commercially reasonable
terms in connection with the public resale of such Delivered Securities by
Dealer or such Affiliate substantially similar to underwriting agreements
customary for registered secondary offerings of equity securities of a
substantially similar size, in form and substance commercially reasonably
satisfactory to Dealer or such Affiliate and Issuer, which Registration
Agreement shall include, without limitation, provisions substantially similar to
those contained in such underwriting agreements relating to the indemnification
of, and contribution in connection with the liability of, Dealer and its
Affiliates and Issuer, shall provide for the payment by Issuer of all expenses
in connection with such resale, including all registration costs and all fees
and expenses of counsel for Dealer, and shall provide for the delivery of
accountants’ “comfort letters” to Dealer or such Affiliate with respect to the
financial statements and certain financial information contained in or
incorporated by reference into the Prospectus; provided that if Dealer, in its
sole reasonable discretion, is not satisfied with the procedures or
documentation described in this Section 8(b)(ii), the procedures set forth in
Section 8(b)(iii) shall apply as if Issuer had so elected in clause (b)(i)(B)
above.

(iii) If Issuer makes the election described in clause (b)(i)(B) above:

(A) Dealer (or an Affiliate of Dealer designated by Dealer) and any potential
institutional purchaser of any such Delivered Securities from Dealer or such
Affiliate identified by Dealer shall be afforded a commercially reasonable
opportunity to conduct a due diligence investigation in compliance with
applicable law with respect to Issuer customary in scope for private placements
of equity offerings of substantially similar size (including, without
limitation, the right to have made available to them for inspection financial
and other records, pertinent corporate documents and other information
reasonably requested by them);

(B) Dealer (or an Affiliate of Dealer designated by Dealer) and Issuer shall
enter into an agreement (a “Private Placement Agreement”) on commercially
reasonable terms in connection with the private placement of such Delivered
Securities by Issuer to Dealer or such Affiliate and the private resale of such
shares by Dealer or such Affiliate, substantially similar to private placement
purchase agreements customary for private placements of equity offerings of
substantially similar size, in form and substance commercially reasonably
satisfactory to Dealer and Issuer, which Private Placement Agreement shall
include, without limitation, provisions substantially similar to those contained
in such private placement purchase agreements relating to the indemnification
of, and contribution in connection with the liability of, Dealer and its
Affiliates and Issuer, shall provide for the payment by Issuer of all expenses
in connection with such resale, including all fees and expenses of counsel for
Dealer, shall contain representations, warranties and agreements of Issuer
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 best efforts to provide for the delivery of accountants’
“comfort letters” to Dealer or such Affiliate with respect to the financial
statements and

 

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certain financial information contained in or incorporated by reference into the
offering memorandum prepared for the resale of such Shares; and

(C) Issuer agrees that any Delivered Securities so delivered to Dealer, (i) may
be transferred by and among Dealer and its Affiliates, and Issuer shall effect
such transfer without any further action by Dealer and (ii) after the minimum
“holding period” within the meaning of Rule 144(d) under the Securities Act has
elapsed with respect to such Delivered Securities, Issuer shall promptly remove,
or cause the transfer agent for such Shares or securities to remove, any legends
referring to any such restrictions or requirements from such Delivered
Securities upon delivery by Dealer (or such Affiliate of Dealer) to Issuer or
such transfer agent of seller’s and broker’s representation letters customarily
delivered by Dealer in connection with resales of restricted securities pursuant
to Rule 144 under the Securities Act, without any further requirement for the
delivery of any certificate, consent, agreement, opinion of counsel, notice or
any other document, any transfer tax stamps or payment of any other amount or
any other action by Dealer (or such affiliate of Dealer).

(D) Issuer shall not take, or cause to be taken, any action that would make
unavailable either the exemption pursuant to Section 4(2) of the Securities Act
for the sale by Issuer to Dealer (or any affiliate designated by Dealer) of the
Shares or Share Termination Delivery Units, as the case may be, or the exemption
pursuant to Section 4(1) or Section 4(3) of the Securities Act for resales of
the Shares or Share Termination Delivery Units, as the case may be, by Dealer
(or any such affiliate of Dealer).

(iii) If in respect of any Delivered Securities subject to this Section 8(b)
neither the public resale contemplated by clause (ii) of this subsection nor the
private placement contemplated by clause (iii) of this subsection shall be
effected, then such failure to effect a public resale or private placement of
such Delivered Securities shall constitute an Event of Default with respect to
which Issuer shall be the Defaulting Party.

(c) Make-whole. If Issuer makes the election described in clause (b)(i)(B) of
paragraph (b) of this Section 8, then Dealer or its affiliate may sell such
Shares or Share Termination Delivery Units, as the case may be, during a period
(the “Resale Period”) commencing on the Exchange Business Day following delivery
of such Shares or Share Termination Delivery Units, as the case may be, and
ending on the Exchange Business Day on which Dealer completes the sale of all
such Shares or Share Termination Delivery Units, as the case may be, or a
sufficient number of Shares or Share Termination Delivery Units, as the case may
be, so that the realized net proceeds of such sales exceed the Freely Tradeable
Value (such amount of the Freely Tradeable Value, the “Required Proceeds”). If
any of such delivered Shares or Share Termination Delivery Units remain after
such realized net proceeds exceed the Required Proceeds, Dealer shall return
such remaining Shares or Share Termination Delivery Units to Issuer. If the
Required Proceeds exceed the realized net proceeds from such resale, Issuer
shall transfer to Dealer by the open of the regular trading session on the
Exchange on the Exchange Trading Day immediately following the last day of the
Resale Period the amount of such excess (the “Additional Amount”) in cash or in
a number of additional Shares or Share Termination Delivery Units, as the case
may be, (“Make-whole Shares”) in an amount that, based on the Relevant Price on
the last day of the Resale Period (as if such day was the “Valuation Date” for
purposes of computing such Relevant Price), has a dollar value equal to the
Additional Amount. The Resale Period shall continue to enable the sale of the
Make-whole Shares in the manner contemplated by this Section 8(c). This
provision shall be applied successively until the Additional Amount is equal to
zero, subject to Section 8(e).

(d) Beneficial Ownership. Notwithstanding anything to the contrary in the
Agreement or this Confirmation, in no event shall Dealer be entitled to receive,
or shall be deemed to receive, any Shares in connection with this Transaction
if, immediately upon giving effect to such receipt of such Shares, (i) Dealer’s
Beneficial Ownership would be equal to or greater than 9.0% of the outstanding
Shares, (ii) Dealer, or any “affiliate” or “associate” of Dealer, would be an
“interested stockholder” of Issuer, as all such terms are defined in Section 203
of the Delaware General Corporation Law or (iii) Dealer, Dealer Group (as
defined below) or any person whose ownership position would be aggregated with
that of Dealer or Dealer Group (Dealer, Dealer Group or any such person, a
“Dealer Person”) under any federal, state or local laws, regulations or
regulatory orders applicable to ownership of Shares (“Applicable Laws”), owns,
beneficially owns, constructively owns, controls, holds the power to vote or
otherwise meets a relevant definition of ownership in excess of a number of
Shares equal to (x) the number of Shares that would give rise to reporting or
registration obligations (except for any filings of Form 13F, Schedule 13D or
Schedule 13G under the Exchange Act) or other requirements (including obtaining
prior approval by a state or federal regulator) of a Dealer Person under
Applicable Laws and with respect to which such requirements have not been met or
the relevant approval has not been received minus (y) 1% of the number of Shares
outstanding on the date of determination (each of clause (i), (ii) and
(iii) above, an “Ownership Limitation”). If any delivery owed to Dealer
hereunder is not made, in whole or in

 

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part, as a result of an Ownership Limitation, Dealer’s right to receive such
delivery shall not be extinguished and Issuer shall make such delivery as
promptly as practicable after, but in no event later than one Exchange Business
Day after, Dealer gives notice to Issuer that such delivery would not result in
any of such Ownership Limitations being breached. “Dealer’s Beneficial
Ownership” as of any day is the fraction, expressed as a percentage, (A) the
numerator of which is the number of Shares that Dealer and any of its affiliates
or any other person subject to aggregation with Dealer, for purposes of the
“beneficial ownership” test under Section 13 of the Exchange Act, or of any
“group” (within the meaning of Section 13) of which Dealer is or may be deemed
to be a part (Dealer and any such affiliates, persons and groups, collectively,
“Dealer Group”), beneficially owns (within the meaning of Section 13 of the
Exchange Act), without duplication, on such day and (B) the denominator of which
is the number of Shares outstanding on such day (including, solely for such
purpose, Shares that would be deemed outstanding pursuant to the last sentence
of Rule 13d-3(d)(1)(i) as if such sentence were applicable to the calculation of
clause (B) of the definition of Dealer’s Beneficial Ownership). Notwithstanding
anything in the Agreement or this Confirmation to the contrary, Dealer (or the
affiliate designated by Dealer pursuant to Section 8(l) below) shall not become
the record or beneficial owner, or otherwise have any rights as a holder, of any
Shares that Dealer (or such affiliate) is not entitled to receive at any time
pursuant to this Section 8(d), until such time as such Shares are delivered
pursuant to this Section 8(d).

(e) Limitations on Settlement by Issuer. Notwithstanding anything herein or in
the Agreement to the contrary, in no event shall Issuer be required to deliver
Shares in connection with the Transaction in excess of the Capped Number (as
provided in Annex A to this Confirmation), subject to adjustment from time to
time in accordance with the provisions of this Confirmation or the Definitions
resulting from actions of Issuer or events within Issuer’s control (the “Capped
Number”). Issuer represents and warrants to Dealer (which representation and
warranty shall be deemed to be repeated on each day that the Transaction is
outstanding) that the Capped Number is equal to or less than the number of
authorized but unissued Shares of the Issuer that are not reserved for future
issuance in connection with transactions in the Shares (other than the
Transaction) on the date of the determination of the Capped Number (such Shares,
the “Available Shares”). In the event Issuer shall not have delivered the full
number of Shares otherwise deliverable as a result of this Section 8(e) (the
resulting deficit, the “Deficit Shares”), Issuer shall be continually obligated
to deliver, from time to time until the full number of Deficit Shares have been
delivered pursuant to this paragraph, Shares when, and to the extent, that
(i) Shares are repurchased, acquired or otherwise received by Issuer or any of
its subsidiaries after the Trade Date (whether or not in exchange for cash, fair
value or any other consideration), (ii) authorized and unissued Shares reserved
for issuance in respect of other transactions prior to such date which prior to
the relevant date become no longer so reserved or (iii) Issuer additionally
authorizes any unissued Shares that are not reserved for other transactions. At
such time as there may be Deficit Shares, Issuer shall promptly notify Dealer of
the occurrence of any of the foregoing events (including the number of Shares
subject to clause (i), (ii) or (iii) and the corresponding number of Shares to
be delivered) and promptly deliver such Shares thereafter.

(f) Right to Extend. Dealer may postpone any Exercise Date or Settlement Date or
any other date of valuation or delivery with respect to some or all of the
relevant Warrants (in which event the Calculation Agent shall make appropriate
adjustments to the Number of Shares to be Delivered with respect to one or more
Components), if Dealer determines, in its good faith and reasonable discretion,
based on advice of counsel in the case of the immediately following clause (ii),
that such extension is reasonably necessary or appropriate to (i) preserve
Dealer’s hedging or hedge unwind activity hereunder in light of existing
liquidity conditions in the cash market, the stock loan market or any other
relevant market or (ii) 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 Issuer or an affiliated purchaser of Issuer,
be in compliance with applicable legal, regulatory or self-regulatory
requirements, or with related policies and procedures applicable to Dealer;
provided that, no such Exercise Date, Settlement Date or any other date of
valuation or delivery may be postponed or extended more than 50 Exchange
Business Days after the original Exercise Date, Settlement Date or other date of
valuation or delivery, as the case may be.

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

 

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(h) Amendments to Equity Definitions. The following amendments shall be made to
the Equity Definitions:

(i) Section 11.2(a) of the Equity Definitions is hereby amended by deleting the
words “a diluting or concentrative” and replacing them with the words “a
material”; and adding the phrase “or Warrants” at the end of the sentence;

(ii) Section 11.2(c) of the Equity Definitions is hereby amended by (A) deleting
the words “diluting or concentrative” (in both instances) and replacing each
instance with the word “material”, (B) adding the phrase “or Warrants” after the
word “Shares” in the sixth line thereof and (C) deleting the phrase “(provided
that no adjustments will be made to account solely for changes in volatility,
expected dividends, stock loan rate or liquidity relative to the relevant
Shares)” and replacing it with the phrase “(and, for the avoidance of doubt,
adjustments may be made to account solely for changes in volatility, expected
dividends, stock loan rate or liquidity relative to the relevant Shares)”;

(iii) Section 11.2(e)(vii) of the Equity Definitions are hereby amended by
deleting the words “that may have a diluting or concentrative” and replacing
them with the words “that is the result of a corporate event involving Issuer or
its securities that may have a material” and adding the phrase “or Warrants” at
the end of the sentence;

(iv) [Reserved.];

(v) Section 12.9(b)(iv) of the Equity Definitions is hereby amended by
(A) deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)”
following subsection (A) and (3) the phrase “in each case” in subsection (B);
and (B) deleting the phrase “neither the Non-Hedging Party nor the Lending Party
lends Shares in the amount of the Hedging Shares or” in the penultimate
sentence; and

(vi) Section 12.9(b)(v) of the Equity Definitions is hereby amended by
(A) adding the word “or” immediately before subsection “(B)” and deleting the
comma at the end of subsection (A); and (B)(1) deleting subsection (C) in its
entirety, (2) deleting the word “or” immediately preceding subsection (C) and
(3) replacing in the penultimate sentence the words “either party” with “the
Hedging Party” and (4) deleting clause (X) in the final sentence.

(i) Transfer and Assignment. Subject to applicable law, Dealer may transfer or
assign all of its rights and obligations hereunder and under the Transaction and
Agreement, in whole or in part, without the consent of Issuer to any affiliate
of Dealer only if an Event of Default, Potential Event of Default or Termination
Event will not occur as a result of such transfer or assignment. Issuer may not
transfer or assign any of its rights or obligations under the Transaction or the
Agreement without the prior written consent of Dealer. At any time at which any
Ownership Limitation exists, if Dealer, in its discretion, is unable to effect a
transfer or assignment to a third party after using its commercially reasonable
efforts on pricing terms and within a time period reasonably acceptable to
Dealer such that an Ownership Limitation no longer exists, Dealer may designate
any Scheduled Trading Day as an Early Termination Date with respect to a portion
(the “Terminated Portion”) of the Transaction, such that such Ownership
Limitation no longer exists. In the event that Dealer so designates an Early
Termination Date with respect to a portion of the Transaction, a payment or
delivery shall be made pursuant to Section 6 of the Agreement and Section 8(b)
of this Confirmation as if (i) an Early Termination Date had been designated in
respect of a Transaction having terms identical to the Terminated Portion of the
Transaction, (ii) Issuer shall be the sole Affected Party with respect to such
partial termination and (iii) such portion of the Transaction shall be the only
Terminated Transaction.

(j) Adjustments. For the avoidance of doubt, whenever the Calculation Agent is
called upon to make an adjustment pursuant to the terms of this Confirmation or
the Definitions to take into account the effect of an event, the Calculation
Agent shall make such adjustment by reference to the effect of such event on the
Hedging Party.

(k) Disclosure. Effective from the date of commencement of discussions
concerning the Transaction, Issuer 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
Issuer relating to such tax treatment and tax structure.

(l) Designation by Dealer. 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 to or from Issuer, Dealer may
designate any of its affiliates to purchase, sell, receive or deliver such
shares or other securities and otherwise to

 

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perform Dealer obligations in respect of the Transaction and any such designee
may assume such obligations. Dealer shall be discharged of its obligations to
Issuer solely to the extent of any such performance.

(m) Additional Termination Events. The occurrence of any of the following shall
constitute an Additional Termination Event with respect to which the Transaction
shall be the sole Affected Transaction and Issuer shall be the sole Affected
Party; provided that with respect to any Additional Termination Event, Dealer
may choose to treat part of the Transaction as the sole Affected Transaction,
and, upon the termination of the Affected Transaction, a Transaction with terms
identical to those set forth herein except with a Number of Warrants equal to
the unaffected number of Warrants shall be treated for all purposes as the
Transaction, which shall remain in full force and effect:

(i) Dealer reasonably determines, based on advice of counsel, that it is
advisable to terminate a portion of the Transaction so that Dealer’s related
hedging activities will comply with applicable securities laws, rules or
regulations or related policies and procedures of Dealer (whether or not such
requirements, policies or procedures are imposed by law or have been voluntarily
adopted by Dealer);

(ii) a “person” or “group” within the meaning of Section 13(d) of the Exchange
Act, other than Issuer, Issuer’s employee benefit plans, Issuer’s subsidiaries
and Issuer’s subsidiaries’ employee benefit plans, files a Schedule TO or any
schedule, form or report under the Exchange Act disclosing that such person or
group has become the “beneficial owner,” as defined in Rule 13d-3 under the
Exchange Act, of Shares representing more than 50% of the voting power of all
shares of Issuer’s capital stock entitled to vote generally in elections of
directors; or

(iii) the consummation of (A) any recapitalization, reclassification or change
of Shares (other than changes resulting from a subdivision or combination)
pursuant to which the Shares would be converted into, or exchanged for, stock,
other securities, other property or assets; (B) any share exchange,
consolidation or merger of Issuer pursuant to which Shares will be converted
into cash, securities or other property, other than a merger of Issuer solely
for the purpose of changing Issuer’s jurisdiction of incorporation that results
in a reclassification, conversion or exchange of outstanding Shares solely into
shares of common stock of the surviving entity; or (C) any sale, lease or other
transfer in one transaction or a series of transactions of all or substantially
all of the consolidated assets of Issuer and its subsidiaries, taken as a whole,
to any person other than one of Issuer’s subsidiaries.

Notwithstanding the foregoing, a transaction set forth in clause (ii) or
(iii) above will not constitute an Additional Termination Event if at least 90%
of the consideration received or to be received by holders of the Shares,
excluding cash payments for fractional Shares and cash payments made pursuant to
dissenters’ appraisal rights, in connection with such transaction or
transactions consists of shares of common stock or ordinary shares that are
listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select
Market or The NASDAQ Global Market (or any of their respective successors) or
will be so traded or quoted when issued or exchanged in connection with such
transaction or transactions.

(n) No Netting and Set-off. 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.

(o) Early Unwind. In the event the sale by Issuer of the “Additional Securities”
is not consummated with the Initial Purchasers pursuant to the Purchase
Agreement for any reason by the close of business in New York on the Premium
Payment Date (or such later date as agreed upon by the parties, which in no
event shall be later than January 7, 2013) (the Premium Payment Date or such
later date being the “Early Unwind Date”), the Transaction shall automatically
terminate (the “Early Unwind”), on the Early Unwind Date and the Transaction and
all of the respective rights and obligations of Dealer and Issuer thereunder
shall be cancelled and terminated. Following such termination and cancellation,
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 either party arising out of and to be performed in connection
with the Transaction either prior to or after the Early Unwind Date; provided
that, unless such Early Unwind Date occurred as a result of a breach of the
Purchase Agreement by the Initial Purchasers, Issuer shall 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. Dealer and Issuer represent and acknowledge to the other that, subject to

 

17

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the proviso included in this Section 8(o), upon an Early Unwind, all obligations
with respect to the Transaction shall be deemed fully and finally discharged.

(p) Repurchase Notices. Issuer shall, on or prior to any day on which Issuer
effects any repurchase of Shares, give Dealer a written notice of such
repurchase (a “Repurchase Notice”) if, following such repurchase, the Notice
Percentage as determined on the date of such Repurchase Notice is (i) greater
than 9.0% and (ii) greater by 0.5% than the Notice Percentage included in the
immediately preceding Repurchase Notice (or, in the case of the first such
Repurchase Notice, greater than the Notice Percentage as of the date hereof).
The “Notice Percentage” as of any day is the fraction, expressed as a
percentage, the numerator of which is the Number of Shares and the denominator
of which is the number of Shares outstanding on such day. In the event that
Issuer fails to provide Dealer with a Repurchase Notice on the day and in the
manner specified in this Section 8(p) then Issuer agrees to indemnify and hold
harmless Dealer, its affiliates and their respective directors, officers,
employees, agents and controlling persons (Dealer and each such person being an
“Indemnified Party”) from and against any and all losses, claims, damages and
liabilities (or actions in respect thereof), joint or several, to which such
Indemnified Party may become subject under applicable securities laws, including
without limitation, Section 16 of the Exchange Act, relating to or arising out
of such failure. If for any reason the foregoing indemnification is unavailable
to any Indemnified Party or insufficient to hold harmless any Indemnified Party,
then Issuer shall contribute, to the maximum extent permitted by law, to the
amount paid or payable by the Indemnified Party as a result of such loss, claim,
damage or liability. In addition, Issuer will reimburse any Indemnified Party
for all reasonable expenses (including reasonable counsel fees and expenses) as
they are incurred (after notice to Issuer) in connection with the investigation
of, preparation for or defense or settlement of any pending or threatened claim
or any action, suit or proceeding arising therefrom, whether or not such
Indemnified Party is a party thereto and whether or not such claim, action, suit
or proceeding is initiated or brought by or on behalf of Issuer. This indemnity
shall survive the completion of the Transaction contemplated by this
Confirmation and any assignment and delegation of the Transaction made pursuant
to this Confirmation or the Agreement shall inure to the benefit of any
permitted assignee of Dealer.

(q) Share Deliveries. Issuer acknowledges and agrees that, to the extent the
holder of these Warrants is not then an affiliate and has not been an affiliate
for 90 days (it being understood that Dealer will not be considered an affiliate
under this paragraph solely by reason of its receipt of Shares pursuant to the
Transaction), and otherwise satisfies all holding period and other requirements
of Rule 144 of the Securities Act applicable to it, any delivery of Shares or
Share Termination Delivery Property hereunder at any time after 6 months from
the Trade Date (or 1 year from the Trade Date if, at such time, informational
requirements of Rule 144(c) are not satisfied with respect to Issuer) shall be
eligible for resale under Rule 144 of the Securities Act and Issuer agrees to
promptly remove, or cause the transfer agent for such Shares or Share
Termination Delivery Property, to remove, any legends referring to any
restrictions on resale under the Securities Act from the Shares or Share
Termination Delivery Property. Issuer further agrees that any delivery of Shares
or Share Termination Delivery Property prior to the date that is 6 months from
the Trade Date (or 1 year from the Trade Date if, at such time, informational
requirements of Rule 144(c) are not satisfied with respect to Issuer), may be
transferred by and among Dealer and its affiliates and Issuer shall effect such
transfer without any further action by Dealer. Notwithstanding anything to the
contrary herein, Issuer agrees that any delivery of Shares or Share Termination
Delivery Property shall be effected by book-entry transfer through the
facilities of DTC, or any successor depositary, if at the time of delivery, such
class of Shares or class of Share Termination Delivery Property is in book-entry
form at DTC or such successor depositary. Notwithstanding anything to the
contrary herein, to the extent the provisions of Rule 144 of the Securities Act
or any successor rule are amended, or the applicable interpretation thereof by
the Securities and Exchange Commission or any court change after the Trade Date,
the agreements of Issuer herein shall be deemed modified to the extent
necessary, in the opinion of outside counsel of Issuer, to comply with Rule 144
of the Securities Act, as in effect at the time of delivery of the relevant
Shares or Share Termination Delivery Property.

(r) Payment by Dealer. In the event that, following payment of the Premium,
(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, Dealer owes to Issuer an amount calculated under
Section 6(e) of the Agreement, or (ii) Dealer owes to Issuer, 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.

(s) Wall Street Transparency and Accountability Act of 2010. The parties hereby
agree that none of (v) Section 739 of the Wall Street Transparency and
Accountability Act of 2010 (“WSTAA”), (w) any similar legal certainty provision
in any legislation enacted, or rule or regulation promulgated, on or after the
Trade Date, (x) the

 

18

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enactment of WSTAA or any regulation under the WSTAA, (y) any requirement under
WSTAA nor (z) an amendment made by WSTAA, shall limit or otherwise impair either
party’s rights to terminate, renegotiate, modify, amend or supplement this
Confirmation or the Agreement, as applicable, arising from a termination event,
force majeure, illegality, increased costs, regulatory change or similar event
under this Confirmation, the Equity Definitions incorporated herein, or the
Agreement (including, but not limited to, rights arising from Change in Law,
Loss of Stock Borrow, Increased Cost of Stock Borrow, an Ownership Limitation or
Illegality (as defined in the Agreement)).

(t) Regulatory Provisions. Issuer represents and warrants that it has received
and read and understands the document titled “Risk Disclosure Statement for
Over-The Counter Derivative Option Transactions” heretofore provided by Dealer
to Issuer.

(u) Terms relating to the Agent. Dealer is not registered as a broker or dealer
under the Exchange Act. Agent has acted solely as agent for Dealer and Issuer to
the extent required by law in connection with the Transaction and has no
obligations, by way of issuance, endorsement, guarantee or otherwise, with
respect to the performance of either party under the Transaction. The parties
agree to proceed solely against each other, and not against Agent, in seeking
enforcement of their rights and obligations with respect to the Transaction,
including their rights and obligations with respect to payment of funds and
delivery of securities.

(v) Broker. Agent may have been paid a fee by Dealer in connection with the
Transaction. Further details will be furnished upon written request.

(w) Time of Dealing. The time of the Transaction will be furnished by Agent upon
written request.

(x) Hedging and Market Activity of Dealer. Issuer acknowledges and agrees that:

(i) During the term of the Transaction, Dealer and its affiliates may buy or
sell Shares or other securities or buy or sell options or futures contracts or
enter into swaps or other derivative securities in order to adjust Dealer’s
hedge position with respect to the Transaction.

(ii) Dealer and its affiliates may also be active in the market for the Shares
other than in connection with hedging activities in relation to the Transaction.

(iii) Dealer shall make its own determination as to whether, when or in what
manner any hedging or market activities in Issuer’s securities shall be
conducted and shall do so in a manner that it deems in good faith to be
appropriate to hedge its price and market risk with respect to the price at
which this Transaction settles.

(iv) Any market activities of Dealer and its affiliates with respect to the
Shares may affect the market price and volatility of the Shares, as well as the
price at which this Transaction settles, each in a manner that may be adverse to
Issuer.

(y) Waiver of Trial by Jury. EACH OF ISSUER AND DEALER HEREBY IRREVOCABLY WAIVES
(ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF
ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THE TRANSACTION OR THE ACTIONS OF DEALER OR ITS AFFILIATES IN THE
NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.

(z) Governing Law; Jurisdiction. THIS CONFIRMATION AND ANY CLAIM, CONTROVERSY OR
DISPUTE ARISING UNDER OR RELATED TO THIS CONFIRMATION SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK. THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ALL
MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND
ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

 

19

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Issuer hereby agrees (a) to check this Confirmation carefully and immediately
upon receipt so that errors or discrepancies can be promptly identified and
rectified and (b) to confirm that the foregoing (in the exact form provided by
Dealer ) correctly sets forth the terms of the agreement between Dealer and
Issuer with respect to the Transaction, by manually signing this Confirmation or
this page hereof as evidence of agreement to such terms and providing the other
information requested herein and immediately returning an executed copy to Steve
Milankov, Equity Derivatives Legal Department, Facsimile No. 212-278-7365.

 

Yours faithfully, SOCIETE GENERALE By:  

/s/ Judy Liu

  Name: Judy Liu   Title: OTC Documentation Manager

Confirmed and Acknowledged as of the date first above written:

 

ENCORE CAPITAL GROUP, INC. By:  

/s/ J. Brandon Black

  Name: J. Brandon Black   Title: President and Chief Executive Officer

--------------------------------------------------------------------------------

Annex A

For each Component of the Transaction, the Number of Warrants and Expiration
Date is set forth below.

 

Component Number

  

Number of Warrants

  

Expiration Date

1.

   634    26-Feb-18

2.

   634    27-Feb-18

3.

   634    28-Feb-18

4.

   634    1-Mar-18

5.

   634    2-Mar-18

6.

   634    5-Mar-18

7.

   634    6-Mar-18

8.

   634    7-Mar-18

9.

   634    8-Mar-18

10.

   634    9-Mar-18

11.

   634    12-Mar-18

12.

   634    13-Mar-18

13.

   634    14-Mar-18

14.

   634    15-Mar-18

15.

   634    16-Mar-18

16.

   634    19-Mar-18

17.

   634    20-Mar-18

18.

   634    21-Mar-18

19.

   634    22-Mar-18

20.

   634    23-Mar-18

21.

   634    26-Mar-18

22.

   634    27-Mar-18

23.

   634    28-Mar-18

24.

   634    29-Mar-18

25.

   634    2-Apr-18

26.

   634    3-Apr-18

27.

   634    4-Apr-18

28.

   634    5-Apr-18

29.

   634    6-Apr-18

30.

   634    9-Apr-18

31.

   634    10-Apr-18

32.

   634    11-Apr-18

33.

   634    12-Apr-18

34.

   634    13-Apr-18

35.

   634    16-Apr-18

36.

   634    17-Apr-18

37.

   634    18-Apr-18

38.

   634    19-Apr-18

39.

   634    20-Apr-18

40.

   634    23-Apr-18

41.

   634    24-Apr-18

42.

   634    25-Apr-18

43.

   634    26-Apr-18

44.

   634    27-Apr-18

45.

   634    30-Apr-18

46.

   634    1-May-18

47.

   634    2-May-18

48.

   634    3-May-18

49.

   634    4-May-18

50.

   634    7-May-18

51.

   634    8-May-18

--------------------------------------------------------------------------------

52.

   634    9-May-18

53.

   634    10-May-18

54.

   634    11-May-18

55.

   634    14-May-18

56.

   634    15-May-18

57.

   634    16-May-18

58.

   634    17-May-18

59.

   634    18-May-18

60.

   634    21-May-18

61.

   634    22-May-18

62.

   634    23-May-18

63.

   634    24-May-18

64.

   634    25-May-18

65.

   634    29-May-18

66.

   634    30-May-18

67.

   634    31-May-18

68.

   634    1-Jun-18

69.

   634    4-Jun-18

70.

   634    5-Jun-18

71.

   634    6-Jun-18

72.

   634    7-Jun-18

73.

   634    8-Jun-18

74.

   634    11-Jun-18

75.

   634    12-Jun-18

76.

   634    13-Jun-18

77.

   634    14-Jun-18

78.

   634    15-Jun-18

79.

   634    18-Jun-18

80.

   634    19-Jun-18

81.

   634    20-Jun-18

82.

   634    21-Jun-18

83.

   634    22-Jun-18

84.

   634    25-Jun-18

85.

   634    26-Jun-18

86.

   634    27-Jun-18

87.

   634    28-Jun-18

88.

   634    29-Jun-18

89.

   634    2-Jul-18

90.

   634    3-Jul-18

91.

   634    5-Jul-18

92.

   634    6-Jul-18

93.

   634    9-Jul-18

94.

   634    10-Jul-18

95.

   634    11-Jul-18

96.

   634    12-Jul-18

97.

   634    13-Jul-18

98.

   634    16-Jul-18

99.

   634    17-Jul-18

100.

   634    18-Jul-18

101.

   634    19-Jul-18

102.

   634    20-Jul-18

103.

   634    23-Jul-18

104.

   634    24-Jul-18

105.

   634    25-Jul-18

106.

   634    26-Jul-18

107.

   634    27-Jul-18

 

2

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108.

   634    30-Jul-18

109.

   634    31-Jul-18

110.

   634    1-Aug-18

111.

   634    2-Aug-18

112.

   634    3-Aug-18

113.

   634    6-Aug-18

114.

   634    7-Aug-18

115.

   634    8-Aug-18

116.

   634    9-Aug-18

117.

   634    10-Aug-18

118.

   634    13-Aug-18

119.

   634    14-Aug-18

120.

   634    15-Aug-18

121.

   634    16-Aug-18

122.

   634    17-Aug-18

123.

   634    20-Aug-18

124.

   634    21-Aug-18

125.

   634    22-Aug-18

126.

   634    23-Aug-18

127.

   634    24-Aug-18

128.

   634    27-Aug-18

129.

   634    28-Aug-18

130.

   634    29-Aug-18

131.

   634    30-Aug-18

132.

   634    31-Aug-18

133.

   634    4-Sep-18

134.

   634    5-Sep-18

135.

   634    6-Sep-18

136.

   634    7-Sep-18

137.

   634    10-Sep-18

138.

   634    11-Sep-18

139.

   634    12-Sep-18

140.

   634    13-Sep-18

141.

   634    14-Sep-18

142.

   634    17-Sep-18

143.

   634    18-Sep-18

144.

   634    19-Sep-18

145.

   634    20-Sep-18

146.

   634    21-Sep-18

147.

   634    24-Sep-18

148.

   634    25-Sep-18

149.

   634    26-Sep-18

150.

   634
   27-Sep-18

 

Strike Price:

   USD 44.1875   

Premium:

   USD 351,700   

Maximum Stock Loan Rate:

   100 basis points   

Initial Stock Loan Rate:

   25 basis points   

Capped Number:

  

190,100

  

 

3