Exhibit 10.3


	
 

	
 

	
 

	
 


	
 

	
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 (2011)


	
 

	
(Global ID: 3534790)





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 46.20


	
 

	
 

	
 

	
 


	
 

	
Premium:

	
 

	
USD 5,992,500.00 


	
 

	
 

	
 

	
 


	
 

	
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 January 24, 2012. 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


	
 

	
 

	
Attn:

	
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); or


	
 

	
 


	
 

	
          (vi)
 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).


	
 

	
 


	
 

	
(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
 





14







	
 

	
 


	
 

	
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. 	 	22,893.00 	 	Thu-15-Sep-2011 
	2. 	 	22,893.00 	 	Fri-16-Sep-2011 
	3. 	 	22,893.00 	 	Mon-19-Sep-2011 
	4. 	 	22,893.00 	 	Tue-20-Sep-2011 
	5. 	 	22,893.00 	 	Wed-21-Sep-2011 
	6. 	 	22,893.00 	 	Thu-22-Sep-2011 
	7. 	 	22,893.00 	 	Fri-23-Sep-2011 
	8. 	 	22,893.00 	 	Mon-26-Sep-2011 
	9. 	 	22,893.00 	 	Tue-27-Sep-2011 
	10. 	 	22,893.00 	 	Wed-28-Sep-2011 
	11. 	 	22,893.00 	 	Thu-29-Sep-2011 
	12. 	 	22,893.00 	 	Fri-30-Sep-2011 
	13. 	 	22,893.00 	 	Mon-3-Oct-2011 
	14. 	 	22,893.00 	 	Tue-4-Oct-2011 
	15. 	 	22,893.00 	 	Wed-5-Oct-2011 
	16. 	 	22,893.00 	 	Thu-6-Oct-2011 
	17. 	 	22,893.00 	 	Fri-7-Oct-2011 
	18. 	 	22,893.00 	 	Mon-10-Oct-2011 
	19. 	 	22,893.00 	 	Tue-11-Oct-2011 
	20. 	 	22,893.00 	 	Wed-12-Oct-2011 
	21. 	 	22,893.00 	 	Thu-13-Oct-2011 
	22. 	 	22,893.00 	 	Fri-14-Oct-2011 
	23. 	 	22,893.00 	 	Mon-17-Oct-2011 
	24. 	 	22,893.00 	 	Tue-18-Oct-2011 
	25. 	 	22,893.00 	 	Wed-19-Oct-2011 
	26. 	 	22,893.00 	 	Thu-20-Oct-2011 
	27. 	 	22,893.00 	 	Fri-21-Oct-2011 
	28. 	 	22,893.00 	 	Mon-24-Oct-2011 
	29. 	 	22,893.00 	 	Tue-25-Oct-2011 
	30. 	 	22,893.00 	 	Wed-26-Oct-2011 
	31. 	 	22,893.00 	 	Thu-27-Oct-2011 
	32. 	 	22,893.00 	 	Fri-28-Oct-2011 
	33. 	 	22,893.00 	 	Mon-31-Oct-2011 
	34. 	 	22,893.00 	 	Tue-1-Nov-2011 
	35. 	 	22,893.00 	 	Wed-2-Nov-2011 
	36. 	 	22,893.00 	 	Thu-3-Nov-2011 
	37. 	 	22,893.00 	 	Fri-4-Nov-2011 
	38. 	 	22,893.00 	 	Mon-7-Nov-2011 
	39. 	 	22,893.00 	 	Tue-8-Nov-2011 
	40. 	 	22,893.00 	 	Wed-9-Nov-2011 
	41. 	 	22,893.00 	 	Thu-10-Nov-2011 
	42. 	 	22,893.00 	 	Fri-11-Nov-2011 
	43. 	 	22,893.00 	 	Mon-14-Nov-2011 
	44. 	 	22,893.00 	 	Tue-15-Nov-2011 
	45. 	 	22,893.00 	 	Wed-16-Nov-2011 
	46. 	 	22,893.00 	 	Thu-17-Nov-2011 
	47. 	 	22,893.00 	 	Fri-18-Nov-2011 
	48. 	 	22,893.00 	 	Mon-21-Nov-2011 
	49. 	 	22,893.00 	 	Tue-22-Nov-2011 
	50. 	 	22,893.00 	 	Wed-23-Nov-2011 
	51. 	 	22,893.00 	 	Fri-25-Nov-2011 
	52. 	 	22,893.00 	 	Mon-28-Nov-2011 
	53. 	 	22,893.00 	 	Tue-29-Nov-2011 
	54. 	 	22,893.00 	 	Wed-30-Nov-2011 
	55. 	 	22,893.00 	 	Thu-1-Dec-2011 
	56. 	 	22,893.00 	 	Fri-2-Dec-2011 






17







	57. 
	22,893.00 
	Mon-5-Dec-2011 
	58. 
	22,893.00 
	Tue-6-Dec-2011 
	59. 
	22,893.00 
	Wed-7-Dec-2011 
	60. 
	22,893.00 
	Thu-8-Dec-2011 
	61. 
	22,893.00 
	Fri-9-Dec-2011 
	62. 
	22,893.00 
	Mon-12-Dec-2011 
	63. 
	22,893.00 
	Tue-13-Dec-2011 
	64. 
	22,893.00 
	Wed-14-Dec-2011 
	65. 
	22,893.00 
	Thu-15-Dec-2011 
	66. 
	22,893.00 
	Fri-16-Dec-2011 
	67. 
	22,893.00 
	Mon-19-Dec-2011 
	68. 
	22,893.00 
	Tue-20-Dec-2011 
	69. 
	22,893.00 
	Wed-21-Dec-2011 
	70. 
	22,893.00 
	Thu-22-Dec-2011 
	71. 
	22,893.00 
	Fri-23-Dec-2011 
	72. 
	22,893.00 
	Tue-27-Dec-2011 
	73. 
	22,893.00 
	Wed-28-Dec-2011 
	74. 
	22,893.00 
	Thu-29-Dec-2011 
	75. 
	22,893.00 
	Fri-30-Dec-2011 
	76. 
	22,893.00 
	Tue-3-Jan-2012 
	77. 
	22,893.00 
	Wed-4-Jan-2012 
	78. 
	22,893.00 
	Thu-5-Jan-2012 
	79. 
	22,893.00 
	Fri-6-Jan-2012 
	80. 
	22,893.00 
	Mon-9-Jan-2012 
	81. 
	22,893.00 
	Tue-10-Jan-2012 
	82. 
	22,893.00 
	Wed-11-Jan-2012 
	83. 
	22,893.00 
	Thu-12-Jan-2012 
	84. 
	22,893.00 
	Fri-13-Jan-2012 
	85. 
	22,893.00 
	Tue-17-Jan-2012 
	86. 
	22,893.00 
	Wed-18-Jan-2012 
	87. 
	22,893.00 
	Thu-19-Jan-2012 
	88. 
	22,893.00 
	Fri-20-Jan-2012 
	89. 
	22,893.00 
	Mon-23-Jan-2012 
	90. 
	22,961.00 
	Tue-24-Jan-2012 




  18