Exhibit 10.4


	
 

	
 

	
 


	
 

	
December 12, 2007


	
 

	
 


	
To:

	
The Great Atlantic and
 Pacific Tea Company, Inc.


	
 

	
2 Paragon Drive


	
 

	
Montvale, NJ 07645


	
 

	
Attn:


	
 

	
Telephone:

	
201-573-9700


	
 

	
Facsimile:

	
201-937-4079


	
 

	
 


	
From:

	
Lehman Brothers Inc.,
 acting as Agent


	
 

	
Lehman Brothers OTC
 Derivatives Inc., acting as Principal


	
 

	
745 Seventh Avenue


	
 

	
New York, NY 10019


	
 

	
Telephone:

	
212-526-9986


	
 

	
Facsimile: 

	
646-885-9546 (United States of America)


	
 

	
 

	
 


	
Re:

	
Issuer
 Warrant Transaction (2012)


	
 

	
(Global
 ID: 3534964)





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 Lehman Brothers OTC
Derivatives Inc. (“Dealer”) and The Great Atlantic and Pacific
Tea Company, Inc. (“Issuer”). This communication constitutes a
“Confirmation” as referred to in the ISDA Master Agreement specified below. This
Confirmation is sent on behalf of both Dealer and Lehman Brothers Inc. (“LBI”). Lehman Brothers OTC Derivatives Inc.
is not a member of the Securities Investor Protection Corporation.


          1. This
Confirmation is subject to, and incorporates, the definitions and provisions of
the 2000 ISDA Definitions (including the Annex thereto) (the “2000
Definitions”) and the definitions and provisions of the 2002 ISDA
Equity Derivatives Definitions (the “Equity Definitions”, and together with the
2000 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 2000 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, and supersedes any
prior agreements, written or oral, 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 2002 ISDA Master Agreement (the “ISDA 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 12, 2007











	
 

	
 

	
 

	
 


	
 

	
Effective Date:

	
 

	
December 18, 2007, or such other date as agreed
 between the parties, subject to Section 8(n) below


	
 

	
 

	
 

	
 


	
 

	
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 1.00 per
 share (Ticker Symbol: “GAP”).


	
 

	
 

	
 

	
 


	
 

	
Number of Warrants:

	
 

	
For each Component, as provided in Annex A to this
 Confirmation.


	
 

	
 

	
 

	
 


	
 

	
Warrant Entitlement:

	
 

	
One Share per Warrant


	
 

	
 

	
 

	
 


	
 

	
Strike Price:

	
 

	
USD 49.00


	
 

	
 

	
 

	
 


	
 

	
Premium:

	
 

	
USD 10,637,500.00


	
 

	
 

	
 

	
 


	
 

	
Premium Payment Date:

	
 

	
The Effective Date


	
 

	
 

	
 

	
 


	
 

	
Exchange:

	
 

	
New York Stock Exchange


	
 

	
 

	
 

	
 


	
 

	
Related Exchange:

	
 

	
All Exchanges


	
 

	
 

	
 

	
 


	
Procedures for Exercise:

	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
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 occurring on the Final Disruption 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 the
 Expiration Date shall be the prevailing market value per Share determined in
 good faith by the Calculation Agent in a commercially reasonable manner. “Final Disruption Date” means ten Exchange
Business Days after
 July 24, 2013. 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 the Calculation Agent shall make
 adjustments





2







	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
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. 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 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.


	
 

	
 

	
 

	
 


	
 

	
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.


	
 

	
 

	
 

	
 


	
Settlement Terms:

	
 

	
 


	
 

	
 

	
 

	
 


	
In
 respect of any Component:

	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
Settlement Currency:

	
 

	
USD


	
 

	
 

	
 

	
 


	
 

	
Settlement Method Election:

	
 

	
Applicable; provided
 that the same Settlement Method shall apply to all Components; and
 provided further that
 references in the Equity Definitions to “Physical Settlement” shall be deemed
 to be references to “Net Share Settlement” as defined herein. If the Issuer
 elects Cash Settlement or Cash Settlement becomes the Default Settlement
 Method, the Issuer shall use its reasonable best efforts to provide Dealer
 with a written statement that the representations contained in paragraphs
 (a)(i) and (a)(iv) of “Representations, Warranties and Agreements” below
 are true and correct as of and as if made on the date of such election.


	
 

	
 

	
 

	
 


	
 

	
Electing Party:

	
 

	
Issuer


	
 

	
 

	
 

	
 


	
 

	
Settlement Method Election Date:

	
 

	
Five Scheduled Trading Days prior to, and including,
 the scheduled Expiration Date for the Component with the earliest scheduled
 Expiration Date.


	
 

	
 

	
 

	
 


	
 

	
Default Settlement Method:

	
 

	
Net Share Settlement; provided that, unless on the Settlement
    Method Election Date, the number of Reserved Shares, as defined in Section
    8(e), is at least equal to the Capped Number, as defined in Section 8(e),
    the Default Settlement Method shall be Cash Settlement; provided further that
    if the default settlement method applicable to warrant transactions entered
    into between the Issuer and Bank of America, N.A. (“Bank of America”)
    on the Trade Date becomes cash settlement pursuant to a proviso identical
    to the proceeding proviso, the Default Settlement Method hereunder shall
    be Cash Settlement.





3







	
 

	
 

	
 

	
 


	
 

	
VWAP Price:

	
 

	
For any Valuation Date, the Rule 10b-18 dollar
 volume weighted average price per Share for such Valuation Date based on
 transactions executed during such Valuation Date, as reported on Bloomberg
 Page “GAP<Equity> AQR SEC” (or any successor thereto) or, in the event
 such price is not so reported on such Valuation Date for any reason, as reasonably
 determined by the Calculation Agent.


	
 

	
 

	
 

	
 


	
Cash Settlement Terms:

	
 

	
 


	
 

	
 

	
 

	
 


	
In
 respect of any Component:

	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
Settlement Currency:

	
 

	
USD


	
 

	
 

	
 

	
 


	
 

	
Cash Settlement Payment Date:

	
 

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


	
 

	
 

	
 

	
 


	
Net Share Settlement Terms:

	
 

	
 


	
 

	
 

	
 

	
 


	
In
 respect of any Component:

	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
Net Share Settlement:

	
 

	
On each 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 shares valued at the Relevant Price on the Valuation Date
 corresponding to such Settlement Date.


	
 

	
 

	
 

	
 


	
 

	
Number of Shares to be Delivered:

	
 

	
In respect of any Exercise Date, subject to the last
 sentence of Section 9.5 of the Equity Definitions, the product of (i) the
 number of Warrants exercised or deemed exercised on such Exercise Date, (ii)
 the Warrant Entitlement and (iii) (A) the excess of the VWAP Price on the
 Valuation Date occurring on such Exercise Date over the Strike Price divided by
 (B) such VWAP Price.


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
The Number of Shares to be Delivered shall be
 delivered by Issuer to Dealer no later than 4:00 P.M. (local time in New York
 City) on the relevant Settlement Date.


	
 

	
 

	
 

	
 


	
 

	
Other Applicable Provisions:

	
 

	
The provisions of Sections 9.1(c), 9.8, 9.9, 9.10,
 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 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 or distribution (i) that has an
 ex-dividend date occurring on or after the Trade Date and on or prior to the
 Expiration Date and (ii) the amount or value of which exceeds the Ordinary
 Dividend Amount for such dividend or distribution, as determined by the
 Calculation Agent.


	
 

	
 

	
 

	
 


	
 

	
Ordinary Dividend Amount:

	
 

	
USD 0.00.





4







	
 

	
 

	
 

	
 


	
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)


	
 

	
 

	
 

	
 


	
 

	
Tender Offer:

	
 

	
Applicable


	
 

	
 

	
 

	
 


	
 

	
Consequences of Tender Offers:

	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
      (a) Share-for-Share:

	
 

	
Modified Calculation Agent Adjustment


	
 

	
 

	
 

	
 


	
 

	
      (b) Share-for-Other:

	
 

	
Cancellation and Payment (Calculation Agent
 Determination) on that portion of the Other Consideration that consists of
 cash; Modified Calculation Agent Adjustment on the remainder of the Other
 Consideration.


	
 

	
 

	
 

	
 


	
 

	
      (c)
 Share-for-Combined:

	
 

	
Modified Calculation Agent Adjustment


	
 

	
 

	
 

	
 


	
 

	
Modified Calculation

 Agent Adjustment:

	
 

	


 If, in respect of any Merger Event or Tender Offer to which Modified
 Calculation Agent Adjustment applies, the adjustments to be made in
 accordance with Section 12.2(e)(i) or Section 12.3(d)(i), as the case may be,
 of the Equity Definitions would result in Issuer being different from the
 issuer of the Shares, then with respect to such Merger Event or Tender Offer,
 as a condition precedent to the adjustments contemplated in Section
 12.2(e)(i) or Section 12.3(d)(i), as the case may be, of the Equity
 Definitions, Issuer and the issuer of the Shares shall, prior to the Merger
 Date or Tender Offer, as the case may be, have entered into such
 documentation containing representations, warranties and agreements relating
 to securities law and other issues as requested by Dealer that Dealer has
 determined, in its commercially reasonable discretion, to be reasonably
 necessary or appropriate to allow Dealer to continue as a party to the Transaction,
 as adjusted under Section 12.2(e)(i) or Section 12.3(d)(i), as the case may
 be, of the Equity Definitions, and to preserve its hedging or hedge unwind
 activities in connection with the Transaction in a manner compliant with
 applicable legal, regulatory or self-regulatory requirements, or with related
 policies and procedures applicable to Dealer, and if such conditions are not
 met or if the Calculation Agent determines that no adjustment that it could
 make under Section 12.2(e)(i) or Section 12.3(d)(i), as the case may be, of
 the Equity Definitions will produce a commercially reasonable result, then
 the consequences set forth in Section 12.2(e)(ii) or Section 12.3(d)(ii), as
 the case may be, of the Equity Definitions 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 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 American Stock Exchange, The NASDAQ Global
 Select Market or The NASDAQ Global Market





5







	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
(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


	
 

	
 

	
 

	
 


	
 

	
     (b) Failure to
 Deliver:

	
 

	
Applicable


	
 

	
 

	
 

	
 


	
 

	
     (c) Insolvency Filing:

	
 

	
Applicable


	
 

	
 

	
 

	
 


	
 

	
     (d) Hedging
 Disruption:

	
 

	
Applicable


	
 

	
 

	
 

	
 


	
 

	
     (e) Increased Cost of
 Hedging:

	
 

	
Applicable


	
 

	
 

	
 

	
 


	
 

	
     (f) Loss of Stock
 Borrow:

	
 

	
Applicable


	
 

	
 

	
 

	
 


	
 

	
          Maximum
 Stock Loan Rate:

	
 

	
100 basis points


	
 

	
 

	
 

	
 


	
 

	
     (g) Increased Cost of
 Stock Borrow:

	
 

	
Applicable


	
 

	
 

	
 

	
 


	
 

	
          Initial
 Stock Loan Rate:

	
 

	
50 basis points


	
 

	
 

	
 

	
 


	
 

	
     Hedging Party:

	
 

	
Dealer for all applicable Additional Disruption
 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:

	
 

	
LBI is acting as agent on behalf of Dealer and
 Issuer for the Transaction. LBI has no obligations, by guarantee, endorsement
 or otherwise, with respect to the performance of the Transaction by either
 party. LBI shall at all times act in good faith and in a commercially
 reasonable manner. In addition, LBI shall use commercially reasonable efforts
 under the circumstances to consult with Issuer on decisions it makes in its
 capacity as Calculation Agent; provided
 that LBI shall not be required to take into account or be bound by any
 considerations raised by Issuer.


	
 

	
 

	
 

	
 


	
 

	
4. Account Details:

	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
Dealer Payment
 Instructions:

	
 

	
To be provided by Dealer.


	
 

	
 

	
 

	
 


	
 

	
Issuer Payment
 Instructions:

	
 

	
To be provided by Issuer.


	
 

	
 

	
 

	
 


	
 

	
5. Offices:

	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
The Office of Dealer
 for the Transaction is: New York


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
Lehman Brothers Inc.,
 acting as Agent


	
 

	
 

	
Lehman Brothers OTC
 Derivatives Inc., acting as Principal


	
 

	
 

	
745 Seventh Avenue


	
 

	
 

	
New York, NY 10019


	
 

	
 

	
Attention:

	
Transaction Management Group


	
 

	
 

	
Telephone:

	
212-526-9986


	
 

	
 

	
Facsimile:

	
646-885-9546 (United States of America)


	
 

	
 

	
 

	
 


	
 

	
    The Office of Issuer for the Transaction is: Not
 applicable





6







	
 

	
 

	
 

	
 


	
 

	
6. Notices: For purposes of this
 Confirmation:


	
 

	
 

	
 


	
 

	
(a) Address for notices or communications to Issuer:


	
 

	
 

	
 


	
 

	
 

	
To:

	
The Great Atlantic & Pacific Tea Company


	
 

	
 

	
 

	
2 Paragon Drive


	
 

	
 

	
 

	
Montvale, New Jersey 07645


	
 

	
 

	
Attn:

	
Brenda Galgano, Senior Vice President and Chief
 Financial Officer


	
 

	
 

	
Telephone:

	
201-571-4363


	
 

	
 

	
Facsimile:

	
201-571-8715


	
 

	
 

	
 

	
 


	
 

	
(b) Address for notices or communications to Dealer:


	
 

	
 

	
 


	
 

	
 

	
To:

	
Lehman Brothers Inc., acting as Agent


	
 

	
 

	
 

	
Lehman Brothers OTC Derivatives Inc., acting as
 Principal


	
 

	
 

	
 

	
745 Seventh Avenue


	
 

	
 

	
 

	
New York, New York 10019


	
 

	
 

	
Attn:

	
Transaction Management Group


	
 

	
 

	
Telephone No.:

	
(212) 526-9986


	
 

	
 

	
Facsimile No.:

	
(646) 885-9546


	
 

	
 

	
 

	
 


	
 

	
with a copy:


	
 

	
 


	
 

	
 

	
To:

	
Lehman Brothers Inc., acting as Agent


	
 

	
 

	
 

	
Lehman Brothers OTC Derivatives Inc., acting as
 Principal


	
 

	
 

	
 

	
745 Seventh Avenue


	
 

	
 

	
 

	
New York, New York 10019


	
 

	
 

	
Attn:

	
Steve Roti – US Equity Linked


	
 

	
 

	
Telephone No.:

	
(212) 526-0055


	
 

	
 

	
Facsimile No.:

	
(917) 552-0561





          7.
Representations, Warranties and Agreements:


          (a) 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:


	
 

	
 


	
 

	
          (i)
 On the Trade Date, (A) none of Issuer and its officers and directors is 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 Securities Exchange Act of 1934, as
 amended (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 with respect to the treatment of the Transaction under FASB
 Statements 133, as amended, or 150, EITF Issue No. 00-19 (or any successor
 issue statements) or under FASB’s Liabilities & Equity Project.


	
 

	
 


	
 

	
          (iii)
 Prior to the Trade Date, Issuer shall deliver to Dealer a resolution of
 Issuer’s board of directors authorizing the Transaction and such other
 certificate or certificates as Dealer shall reasonably request.


	
 

	
 


	
 

	
          (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, an “investment company” as such term is defined in the
 Investment Company Act of 1940, as amended.





7







	
 

	
 


	
 

	
          (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)
 The representations and warranties of Issuer set forth in Section 3 of the
 Agreement and Sections 1 and 3 of the Underwriting Agreement (the “Underwriting Agreement”) dated as of
 December 12, 2007 between Bank of America, N.A. and Lehman Brothers Inc., as
 representatives of the underwriters party thereto are true and correct and
 are hereby deemed to be repeated to Dealer as if set forth herein.


	
 

	
 


	
 

	
          (ix)
 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.


	
 

	
 


	
 

	
          (x)
 (A) 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, 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”) and (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)(10) and 102(b)(7) of Regulation M,
 until the second Exchange Business Day immediately following the Settlement
 Period.


	
 

	
 


	
 

	
          (xi)
 During the Settlement Period, neither Issuer nor any “affiliate” or
 “affiliated purchaser” (each as defined in Rule 10b-18 of 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.


	
 

	
 


	
 

	
          (xii)
 As of the Trade Date, the Issuer has not entered into any obligation that
 would contractually limit it from effecting Cash Settlement or Net Share
 Settlement under the Transaction.


	
 

	
 


	
 

	
          (xiii)
 Issuer has received and read and understands the Notice of Regulatory
 Treatment and OTC Option Risk Disclosure Statement.





          (b)
Each of Dealer and Issuer agrees and represents that it is an “eligible
contract participant” as defined in Section 1a(12) of 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 “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 (A) that 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 is a “settlement
payment,” as such term is defined in Section 741(8) 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 is a
“transfer,” as such term is defined in Section 101(54) of the Bankruptcy Code,
and (B) that Dealer is entitled to the protections afforded by, among other
sections, Section 362(b)(6), 362(b)(17), 546(e), 546(g), 555 and 560 of the
Bankruptcy Code. 


8







          (e)
Issuer shall deliver to Dealer an opinion of counsel, dated as of the Trade
Date and reasonably acceptable to Dealer in form and substance (subject to
customary qualifications, assumptions and exceptions), with respect to the
matters set forth in Section 3(a) of the Agreement. 


          (f)
LBI will furnish Issuer, upon written request, a statement as to the source and
amount of any remuneration received or to be received by the Agent in
connection with the Transactions evidenced hereby.


          8.
Other Provisions:


          (a)
Alternative
Calculations and Payment on Early Termination and on Certain Extraordinary
Events. If, subject to Section 8(l) below, Issuer shall owe Dealer
any amount pursuant to Sections 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity
Definitions (except in the event of 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 pursuant to Section
6(d)(ii) of the Agreement (except in the event of an Event of Default in which
Issuer is the Defaulting Party or a Termination Event in which Issuer is the Affected
Party, that resulted from an event or events within Issuer’s control) (a “Payment
Obligation”), Issuer shall have the right, in its sole discretion,
to satisfy any such Payment Obligation by the Share Termination Alternative (as
defined below) by giving irrevocable telephonic notice to Dealer, confirmed in
writing within one Scheduled Trading Day, between the hours of 9:00 A.M. and
4:00 P.M. New York City time on the Merger Date, Tender Offer Date,
Announcement Date or Early Termination Date, as applicable (“Notice of
Share Termination”). Upon such Notice of Share Termination, the
following provisions shall apply on the Scheduled Trading Day immediately
following the Merger Date, the Tender Offer Date, Announcement Date or Early
Termination Date, 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,
 in satisfaction of the Payment Obligation. 


	
 

	
 

	
 


	
Share Termination Delivery
Property:

	
 

	

A number of Share Termination Delivery Units, as
 calculated by the Calculation Agent in good faith, 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 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
 or Delisting, one Share or, in the case of an Insolvency, Nationalization,
 Merger Event or Tender Offer, 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. 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 9.1(c), 9.8, 9.9, 9.10, 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 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” 





9







	
 

	
 

	
 


	
 

	
 

	
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 commercially reasonable
judgment of Dealer, 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 the provisions of Rule 144 of the Securities Act,
as may be amended from time to time (including the amendment adopted on
November 15, 2007 pursuant to Release No. 33-8869) applicable to sales of
restricted securities by non-affiliates of an issuer, then the provisions set
forth in this Section 8(b) shall apply. At the election of Issuer by notice to
Dealer within one Exchange Business Day after the relevant delivery obligation
arises, but in any event at least one Exchange Business Day prior to the date
on which such delivery obligation is due, either (A) all Delivered Securities
delivered by 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 underwritten offerings of equity
 securities and that yields results that are commercially reasonably
 satisfactory to Dealer or such Affiliate, as the case may be, in its
 commercially reasonable 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 underwritten offerings of equity securities, 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 reasonable expenses in
 connection with such resale, including all registration costs and all
 reasonable 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.


	
 

	
 


	
 

	
(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 securities (including, without limitation, the right to have made
 available to them for inspection all financial and other records, pertinent
 corporate documents and other information reasonably requested by them); 


	
 

	
 


	
 

	
          (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 securities, in form and substance commercially reasonably satisfactory
 to Dealer and Issuer, which Private Placement Agreement shall include,
 without limitation, 





10







	
 

	
 


	
 

	
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
 reasonable expenses in connection with such resale, including all reasonable
 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 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).





          (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 Business 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 (“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 if, upon such receipt of such Shares, the
“beneficial ownership” (within the meaning of Section 13 of the Exchange Act and
the rules promulgated thereunder) of Shares by Dealer or any affiliate of
Dealer or other person subject to aggregation with Dealer under such Section 13
and rules (collectively, “Buyer Group”) would be equal to or greater
than 8.5% or more of the outstanding Shares. If any delivery owed to Dealer
hereunder is not made, in whole or in part, as a result of this provision,
Issuer’s obligation to make 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 Buyer Group directly or indirectly so
beneficially owning in excess of 8.5% of the outstanding Shares.


          (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 a number of Shares equal
to 1.2 times the aggregate Number of Shares for all Components (the “Capped Number”). If at any time the Issuer
does 


11







not have a number of authorized but unissued Shares
that are not reserved for future issuance in connection with other transactions
in the Shares (the “Available Shares”)
that is greater than the Capped Number, Issuer agrees to use its reasonable
best efforts to seek approval from its shareholders at the next meeting of
shareholders, or, if necessary, a subsequent meeting of shareholders, to
increase the number of authorized but unissued Shares and to reserve a number of
Shares at least equal to the Capped Number for settlement of this Transaction
(the “Reserved Shares”). If Issuer
does not succeed in obtaining shareholder approval for such an increase and so
increasing the number of Reserved Shares at or prior to its second annual
meeting of shareholders following the Trade Date, (i) the Number of Shares
for each Component shall be automatically increased by 10% and (ii) an
Additional Termination Event shall occur with respect to which the Transaction
shall be the sole Affected Transaction and Issuer shall be the sole Affected
Party; provided however that if
such shareholder approval is obtained and such increase in the number of
Reserved Shares occurs after Issuer’s second annual meeting of shareholders
but before the earlier of the Expiration Date for such Component and any earlier
date that Dealer has designated as an Early Termination Date or other date for
cancellation or termination of the Transaction, the Additional Termination
Event arising from such prior failure to obtain shareholder approval or failure
to increase the number of Reserved Shares shall cease to exist. For the
avoidance of doubt Dealer shall have no obligation to exercise its right
pursuant to such Additional Termination Event, such right will be an ongoing
right until Issuer has obtained such approval from its shareholders for such
an increase in the number of Available Shares and has so increased the number
of Reserved Shares, and such right will automatically terminate upon Issuer
obtaining such shareholder approval for such an increase and so increasing the
number of Reserved Shares. Unless  the number of Reserved Shares is at least
equal to the Capped Number, Issuer shall not retire any Shares that are
repurchased, acquired or otherwise received by Issuer or any of its
subsidiaries from any persons (whether or not in exchange for cash, fair value
or any other consideration, and including, for the avoidance of doubt, any
Shares received in settlement of any option or other derivative transaction)
(such Shares, “Acquired Shares”)
or issue or deliver or agree to issue or deliver any Acquired Shares to any
person other than Issuer except that such Acquired Shares may be used to settle
this Transaction and any other warrant transactions entered into between Issuer
and Dealer or Bank of America on the Trade Date.


          (f)
Right
to Extend. Dealer may postpone any Exercise 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 commercially reasonable discretion, that such
extension is reasonably necessary or appropriate (i) to preserve Dealer’s
hedging or hedge unwind activity hereunder in light of existing liquidity
conditions 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.


          (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.


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


	
 

	
 


	
 

	
          (i)
 The first sentence of Section 11.2(c) of the Equity Definitions, prior to
 clause (A) thereof, is hereby amended to read as follows: ‘(c) If
 “Calculation Agent Adjustment” is specified as the Method of Adjustment in the
 related Confirmation of a Share Option Transaction, then following the
 announcement or occurrence of any Potential Adjustment Event, the Calculation
 Agent will determine whether such Potential Adjustment Event has a material
 effect on the theoretical value of the relevant Shares or options on the
 Shares and, if so, will (i) make appropriate adjustment(s), if any, to any
 one or more of:’ and, the portion of such sentence immediately preceding
 clause (ii) thereof is hereby amended by deleting the words “diluting or
 concentrative” and the words “(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 such latter
 phrase with the words “(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)”; 




12







	
 

	
 


	
 

	
          (ii)
 Section 11.2(e)(vii) of the Equity Definitions is hereby amended by deleting
 the words “diluting or concentrative” and replacing them with “material”;


	
 

	
 


	
 

	
          (iii)
 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.”.


	
 

	
 


	
 

	
          (iv)
 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) deleting the final two
 sentences in its entirety and replacing it with the sentence “The Hedging
 Party will determine (in a manner consistent, for such purposes, with Section
 3 hereunder governing the conduct of the Calculation Agent) the Cancellation
 Amount payable by one party to the other.”





          (i)
Transfer
and Assignment. Dealer may transfer or assign its rights and
obligations under the Transaction with the prior written consent of the Issuer,
such consent not to be unreasonably withheld. Notwithstanding the foregoing,
Dealer may transfer or assign its rights and obligations hereunder and under
the Agreement, in whole or in part, without the consent of the Issuer to (i)
any of its affiliates or (ii) any entities sponsored or organized by, or on
behalf of or for the benefit of Dealer. 


          (j)
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.


          (k)
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 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 to the extent of any such performance.


          (l)
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 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;


	
 

	
 


	
 

	
          (ii)
 any Person (as defined below) acquires beneficial ownership (determined in
 accordance with Rule 13d-3 under the Exchange Act), directly or indirectly,
 through a purchase, merger or other acquisition transaction or series of
 transactions, of Shares entitling the Person to exercise 50% or more of the
 total voting power of all shares of Issuer’s capital stock entitled to vote
 generally in elections of directors, other than an acquisition by Issuer, any
 of Issuer’s subsidiaries or any of Issuer’s employee benefit plans; 


	
 

	
 


	
 

	
          (iii)
 Issuer (x) merges or consolidates with or into any other Person, other than a
 subsidiary of Issuer, another Person merges with or into Issuer, or Issuer
 conveys, sells, transfers or leases all or substantially all of its assets to
 another Person or (y) engages in any recapitalization, reclassification or
 other transaction in which all or substantially all Shares are exchanged for
 or converted into cash, securities or other property, in each case, other
 than any merger or consolidation: 





13







	
 

	
 

	
 

	
 


	
 

	
 

	
(A)

	
that does not result in a reclassification,
 conversion, exchange or cancellation of the outstanding Shares; 


	
 

	
 

	
 

	
 


	
 

	
 

	
(B)

	
pursuant to which the consideration received by
 holders of Shares immediately prior to the transaction entitles such holders
 to exercise, directly or indirectly, 50% or more of the voting power of all
 shares of capital stock entitled to vote generally in the election of
 directors of either (x) the continuing or surviving corporation or (y) a
 corporation that directly or indirectly owns 100% of the capital stock of
 such continuing or surviving corporation, in either case, immediately after
 such transaction; 


	
 

	
 

	
 


	
 

	
 

	
(C)

	
which is effected solely to change Issuer’s
 jurisdiction of incorporation and results in a reclassification, conversion
 or exchange of the outstanding Shares solely into shares of common stock of
 the surviving entity; or


	
 

	
 

	
 


	
 

	
          (iv) at any time Issuer’s Continuing Directors (as
 defined below) do not constitute a majority of Issuer’s board of directors
 (or, if applicable, a successor Person to Issuer);


	
 

	
 


	
 

	
          (v) if less than 25% of the outstanding shares of
 common stock is beneficially owned by persons other than a Permitted Holder
 (as discussed below);


	
 

	
 


	
 

	
          (vi) Issuer elects to redeem, in whole or in part,
 the senior notes issued by the Issuer pursuant to the terms of the Second Supplemental
 Indenture, dated as of December 18, 2007, at any time during the Issuer
 Redemption Period (as defined in the Second Supplemental Indenture); provided, however, that (i) redemption
 of senior notes by the Issuer shall not be treated as an Additional
 Termination Event with respect to the entire Transaction but only with
 respect to a number of Warrants that corresponds with the senior notes that
 are redeemed by the Issuer during the Issuer Redemption Period; and (ii)
 Warrants subject to early termination pursuant to this paragraph shall be
 terminated no sooner than 90 days following the related redemption of senior
 notes by the Issuer; or


	
 

	
 


	
 

	
          (vii) an Additional Termination Event which arises
 as provided and subject to cessation as described in 
Section 8(e).





          Notwithstanding
the foregoing, a transaction set forth in clause (ii), (iii) or (iv) above will
not constitute an Additional Termination Event if at least 90% of the
consideration paid for the Shares (excluding cash payments for fractional
shares and cash payments made pursuant to dissenters’ appraisal rights and cash
dividends) in such merger or consolidation or such other transaction otherwise
constituting an Additional Termination Event under clause (iii) above consists
of shares of capital stock or American Depositary Receipts in respect of shares
of capital stock traded on any of the New York Stock Exchange, the American
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 immediately
following the completion of the merger or consolidation or such other
transaction).


          “Person” includes
any syndicate or group that would be deemed to be a “person” under Section
13(d)(3) of the Exchange Act.


          “Continuing Directors” means a directors
who
either were members of the Issuer’s board of directors on the date hereof or
who become members of the Issuer’s board of directors subsequent to the date
hereof and whose appointment, election or nomination for election by the Issuer’s
shareholders is duly approved by a majority of the Continuing Directors on the
Issuer’s board of directors at the time of such approval, either by specific
vote or by approval of the proxy statement issued by the Issuer on behalf of
the board of directors in which such individuals are named as nominees for
director.


          
“Permitted
Holder” means (1) Tengelmann Warenhandelsgesellschaft, a partnership
organized under the laws of Germany (“Tengelmann”),
(2) each Affiliate of Tengelmann, (3) each partner of Tengelmann and the
respective members of their immediate families and (4) any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding a majority or more controlling interest of which
consist of any one or more of the Persons described in the preceding clauses
(1), (2) and (3).



14






          (m)
Netting
and Set-off. 



	
 

	
 

	
 


	
 

	
          (i)
If on any date cash would otherwise be payable or Shares or other property
would otherwise be deliverable hereunder or pursuant to the Agreement or
pursuant to any other agreement between the parties by Issuer to Dealer and
cash would otherwise be payable or Shares or other property would otherwise be
deliverable hereunder or pursuant to the Agreement or pursuant to any other agreement
between the parties by Dealer to Issuer and the type of property required to be
paid or delivered by each such party on such date is the same, then, on such
date, each such party’s obligation to make such payment or delivery will be
automatically satisfied and discharged and, if the aggregate amount that would
otherwise have been payable or deliverable by one such party exceeds the
aggregate amount that would otherwise have been payable or deliverable by the
other such party, replaced by an obligation of the party by whom the larger
aggregate amount would have been payable or deliverable to pay or deliver to
the other party the excess of the larger aggregate amount over the smaller
aggregate amount.


	
 

	
 


	
 

	
          (ii)
In addition to and without limiting any rights of set-off that a party hereto
may have as a matter of law, pursuant to contract or otherwise, upon the
occurrence of an Early Termination Date, Dealer shall have the right to
terminate, liquidate and otherwise close out the Transaction and to set off any
obligation or right that Dealer or any affiliate of Dealer may have to or
against Issuer hereunder or under the Agreement against any right or obligation
Dealer or any of its affiliates may have against or to Issuer, including
without limitation any right to receive a payment or delivery pursuant to any
provision of the Agreement or hereunder. In the case of a set-off of any
obligation to release, deliver or pay assets against any right to receive
assets of the same type, such obligation and right shall be set off in kind. In
the case of a set-off of any obligation to release, deliver or pay assets
against any right to receive assets of any other type, the value of each of
such obligation and such right shall be determined by the Calculation Agent and
the result of such set-off shall be that the net obligor shall pay or deliver
to the other party an amount of cash or assets, at the net obligor’s option,
with a value (determined, in the case of a delivery of assets, by the
Calculation Agent) equal to that of the net obligation. In determining the
value of any obligation to release or deliver Shares or any right to receive
Shares, the value at any time of such obligation or right shall be determined
by reference to the market value of the Shares at such time, as determined in
good faith by the Calculation Agent. If an obligation or right is unascertained
at the time of any such set-off, the Calculation Agent may in good faith
estimate the amount or value of such obligation or right, in which case set-off
will be effected in respect of that estimate, and the relevant party shall
account to the other party at the time such obligation or right is ascertained.


	
 

	
 


	
 

	
          (iii)
Issuer shall not net or set off its obligations, if any, under the Transaction
against its rights against Dealer under any other transaction or instrument.
Dealer shall not net or set off its obligations, if any, under the Transaction
against its rights against Issuer under any other transaction or instrument.















          (n)
Effectiveness. If, prior to the
Effective Date, Dealer reasonably determines that it is advisable to cancel the
Transaction because of concerns that Dealer’s related hedging activities could
be viewed as not complying with applicable securities laws, rules or
regulations, the Transaction shall be cancelled and shall not become effective,
and neither party shall have any obligation to the other party in respect of
the Transaction.


          (o)
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 ISSUER OR DEALER OR THEIR
RESPECTIVE AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.


          (p)
Governing
Law. 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.


15







          Issuer
hereby agrees (a) to check this Confirmation carefully and promptly 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 promptly returning an
executed copy to us at facsimile number 646-885-9545 (United States of
America), Attention: Documentation.


	
 

	
 

	
 


	
 

	
Yours faithfully,


	
 

	
 

	
 


	
 

	
LEHMAN BROTHERS OTC
 DERIVATIVES INC.


	
 

	
 


	
 

	
 


	
 

	
By: 

	
/s Anatoly Kozlov 


	
 

	
 

	



	
 

	
 

	
Name: Anatoly Kozlov


	
 

	
 

	
Authorized Signatory





Agreed and Accepted By:


THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.


	
 

	
 


	
By: 

	
/s/ William Moss 


	
 

	


	
 


	
 

	
Name: William Moss


	
 

	
Title: Vice President and Treasurer





16






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. 	 	33,803.00 	 	Mon-18-Mar-2013 
	2. 	 	33,803.00 	 	Tue-19-Mar-2013 
	3. 	 	33,803.00 	 	Wed-20-Mar-2013 
	4. 	 	33,803.00 	 	Thu-21-Mar-2013 
	5. 	 	33,803.00 	 	Fri-22-Mar-2013 
	6. 	 	33,803.00 	 	Mon-25-Mar-2013 
	7. 	 	33,803.00 	 	Tue-26-Mar-2013 
	8. 	 	33,803.00 	 	Wed-27-Mar-2013 
	9. 	 	33,803.00 	 	Thu-28-Mar-2013 
	10. 	 	33,803.00 	 	Mon-1-Apr-2013 
	11. 	 	33,803.00 	 	Tue-2-Apr-2013 
	12. 	 	33,803.00 	 	Wed-3-Apr-2013 
	13. 	 	33,803.00 	 	Thu-4-Apr-2013 
	14. 	 	33,803.00 	 	Fri-5-Apr-2013 
	15. 	 	33,803.00 	 	Mon-8-Apr-2013 
	16 	 	33,803.00 	 	Tue-9-Apr-2013 
	17. 	 	33,803.00 	 	Wed-10-Apr-2013 
	18. 	 	33,803.00 	 	Thu-11-Apr-2013 
	19. 	 	33,803.00 	 	Fri-12-Apr-2013 
	20. 	 	33,803.00 	 	Mon-15-Apr-2013 
	21. 	 	33,803.00 	 	Tue-16-Apr-2013 
	22. 	 	33,803.00 	 	Wed-17-Apr-2013 
	23. 	 	33,803.00 	 	Thu-18-Apr-2013 
	24. 	 	33,803.00 	 	Fri-19-Apr-2013 
	25. 	 	33,803.00 	 	Mon-22-Apr-2013 
	26. 	 	33,803.00 	 	Tue-23-Apr-2013 
	27. 	 	33,803.00 	 	Wed-24-Apr-2013 
	28. 	 	33,803.00 	 	Thu-25-Apr-2013 
	29. 	 	33,803.00 	 	Fri-26-Apr-2013 
	30. 	 	33,803.00 	 	Mon-29-Apr-2013 
	31. 	 	33,803.00 	 	Tue-30-Apr-2013 
	32. 	 	33,803.00 	 	Wed-1-May-2013 
	33. 	 	33,803.00 	 	Thu-2-May-2013 
	34. 	 	33,803.00 	 	Fri-3-May-2013 
	35. 	 	33,803.00 	 	Mon-6-May-2013 
	36. 	 	33,803.00 	 	Tue-7-May-2013 
	37. 	 	33,803.00 	 	Wed-8-May-2013 
	38. 	 	33,803.00 	 	Thu-9-May-2013 
	39. 	 	33,803.00 	 	Fri-10-May-2013 
	40. 	 	33,803.00 	 	Mon-13-May-2013 
	41. 	 	33,803.00 	 	Tue-14-May-2013 
	42. 	 	33,803.00 	 	Wed-15-May-2013 
	43. 	 	33,803.00 	 	Thu-16-May-2013 
	44. 	 	33,803.00 	 	Fri-17-May-2013 
	45. 	 	33,803.00 	 	Mon-20-May-2013 
	46. 	 	33,803.00 	 	Tue-21-May-2013 
	47. 	 	33,803.00 	 	Wed-22-May-2013 
	48. 	 	33,803.00 	 	Thu-23-May-2013 
	49. 	 	33,803.00 	 	Fri-24-May-2013 
	50. 	 	33,803.00 	 	Tue-28-May-2013 
	51. 	 	33,803.00 	 	Wed-29-May-2013 






17







	52. 
	33,803.00 
	Thu-30-May-2013 
	53. 
	33,803.00 
	Fri-31-May-2013 
	54. 
	33,803.00 
	Mon-3-Jun-2013 
	55. 
	33,803.00 
	Tue-4-Jun-2013 
	56. 
	33,803.00 
	Wed-5-Jun-2013 
	57. 
	33,803.00 
	Thu-6-Jun-2013 
	58. 
	33,803.00 
	Fri-7-Jun-2013 
	59. 
	33,803.00 
	Mon-10-Jun-2013 
	60. 
	33,803.00 
	Tue-11-Jun-2013 
	61. 
	33,803.00 
	Wed-12-Jun-2013 
	62. 
	33,803.00 
	Thu-13-Jun-2013 
	63. 
	33,803.00 
	Fri-14-Jun-2013 
	64. 
	33,803.00 
	Mon-17-Jun-2013 
	65. 
	33,803.00 
	Tue-18-Jun-2013 
	66. 
	33,803.00 
	Wed-19-Jun-2013 
	67. 
	33,803.00 
	Thu-20-Jun-2013 
	68. 
	33,803.00 
	Fri-21-Jun-2013 
	69. 
	33,803.00 
	Mon-24-Jun-2013 
	70. 
	33,803.00 
	Tue-25-Jun-2013 
	71. 
	33,803.00 
	Wed-26-Jun-2013 
	72. 
	33,803.00 
	Thu-27-Jun-2013 
	73. 
	33,803.00 
	Fri-28-Jun-2013 
	74. 
	33,803.00 
	Mon-1-Jul-2013 
	75. 
	33,803.00 
	Tue-2-Jul-2013 
	76. 
	33,803.00 
	Wed-3-Jul-2013 
	77. 
	33,803.00 
	Fri-5-Jul-2013 
	78. 
	33,803.00 
	Mon-8-Jul-2013 
	79. 
	33,803.00 
	Tue-9-Jul-2013 
	80. 
	33,803.00 
	Wed-10-Jul-2013 
	81. 
	33,803.00 
	Thu-11-Jul-2013 
	82. 
	33,803.00 
	Fri-12-Jul-2013 
	83. 
	33,803.00 
	Mon-15-Jul-2013 
	84. 
	33,803.00 
	Tue-16-Jul-2013 
	85. 
	33,803.00 
	Wed-17-Jul-2013 
	86. 
	33,803.00 
	Thu-18-Jul-2013 
	87. 
	33,803.00 
	Fri-19-Jul-2013 
	88. 
	33,803.00 
	Mon-22-Jul-2013 
	89. 
	33,803.00 
	Tue-23-Jul-2013 
	90. 
	33,858.00 
	Wed-24-Jul-2013 






18