Exhibit 10.6


	
 

	
 

	
 


	
 

	
December 12, 2007


	
 

	
 


	
To:

	
The Great Atlantic and Pacific Tea Company, Inc.


	
 

	
2 Paragon Drive


	
 

	
 Montvale, NJ
 07645


	
 

	
Attn: Brenda Galgano, Senior Vice President and
 Chief Financial Officer


	
 

	
Telephone: 201-573-4363


	
 

	
Facsimile:   201-937-8715


	
 

	
 


	
From:

	
Bank of America, N.A.


	
 

	
c/o Banc of America Securities LLC


	
 

	
9 West 57th Street


	
 

	
New York, NY 10019


	
 

	
Attn:

	
John Servidio


	
 

	
Telephone:

	
212-847-6527


	
 

	
Facsimile:

	
212-230-8610


	
 

	
 

	
 


	
Re:

	
Convertible
 Bond Hedge Transaction (2012)


	
 

	
(Transaction
 Reference Number: NY-32867)





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 Bank of America, N.A.
(“Dealer”)
and The Great Atlantic and Pacific Tea Company, Inc. (“Counterparty”). This
communication constitutes a “Confirmation” as referred to in the ISDA Master
Agreement specified below. 


          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. Certain defined terms used
herein have the meanings assigned to them in the Indenture to be dated as of
December 18, 2007 between Counterparty and Wilmington Trust Company, as trustee
and the second supplemental indenture to such indenture to be dated as of
December 18, 2007 (such indenture, together with such supplemental indenture,
the “Supplemental
Indenture”) relating to the USD 230 million principal amount of
6.75% convertible senior notes due 2012 (the “Convertible Securities”). In
the event of any inconsistency between the terms defined in the Supplemental
Indenture and this Confirmation, this Confirmation shall govern. For the
avoidance of doubt, references herein to sections of the Supplemental Indenture
are based on the draft of the Supplemental Indenture most recently reviewed by
the parties at the time of execution of this Confirmation. If any relevant
sections of the Supplemental Indenture are changed, added or renumbered
following execution of this Confirmation but prior to the execution of the
Supplemental Indenture, the parties will amend this Confirmation in good faith
to preserve the economic intent of the parties. The parties further acknowledge
that references to the Supplemental Indenture herein are references to the
Supplemental Indenture as in effect on the date of its execution and, if the
Supplemental Indenture is amended following its execution, any such amendment
will be disregarded for purposes of this Confirmation unless the parties agree
otherwise in writing. 


          This
Confirmation evidences a complete and binding agreement and supersedes any
prior agreements, written or oral, between Dealer and Counterparty 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
Counterparty 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 constitutes 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:

	
 

	
The closing date of the offering of the Convertible
 Securities. 


	
 

	
 

	
 

	
 


	
 

	
Option Type:

	
 

	
Call


	
 

	
 

	
 

	
 


	
 

	
Seller:

	
 

	
Dealer


	
 

	
 

	
 

	
 


	
 

	
Buyer:

	
 

	
Counterparty


	
 

	
 

	
 

	
 


	
 

	
Shares:

	
 

	
The Common Stock of Counterparty, par value USD 1.00
 per share (Ticker Symbol: “GAP”).


	
 

	
 

	
 

	
 


	
 

	
Number of Options:

	
 

	
The number of Convertible Securities in
 denominations of USD 1,000 principal amount issued by Counterparty on the
 closing date for the initial issuance of the Convertible Securities; provided that
 the Number of Options shall be automatically increased as of the date of
 exercise by Banc of America Securities LLC, and Lehman Brothers Inc., as
 Representatives of the Underwriters (as defined in the Underwriting
 Agreement), of their option pursuant to Section 2(b) of the Underwriting
 Agreement dated as of December 12, 2007, between the Counterparty and Banc of
 America Securities LLC, Lehman Brothers Inc. and Friedman, Billings, Ramsay & Co., as a
 “qualified independent underwriter,” (the “Underwriting Agreement”),
 by the number of Convertible Securities in denominations of USD 1,000
 principal amount issued pursuant to such exercise (such Convertible
 Securities, the “Additional Convertible Securities”).


	
 

	
 

	
 

	
 


	
 

	
Applicable Percentage:

	
 

	
50%


	
 

	
 

	
 

	
 


	
 

	
Number of Shares:

	
 

	
As of any date, the product of the Number of Options
 and the Option Entitlement.


	
 

	
 

	
 

	
 


	
 

	
Option Entitlement:

	
 

	
As of any date, a number equal to the product of the
 Conversion Rate as of such date and the Applicable Percentage.


	
 

	
 

	
 

	
 


	
 

	
Strike Price:

	
 

	
USD 37.80


	
 

	
 

	
 

	
 


	
 

	
Conversion Rate:

	
 

	
As of any date, the Conversion Rate, as defined in
 the Supplemental Indenture, but without regard to any adjustments to the
 Conversion Rate pursuant to the Conversion Rate Adjustment Sections (as
 defined in the Supplemental Indenture) (except as set forth under the
 “Delivery Obligation”).


	
 

	
 

	
 

	
 


	
 

	
Premium:

	
 

	
USD 21,045,000.00 (Premium per Option USD 6.9174); provided that
 if the Number of Options is increased pursuant to the proviso to the
 definition of “Number of Options” above, an additional Premium equal to the
 product of the number of Options by which the Number of Options is so
 increased and the Premium per Option shall be paid on the Additional Premium
 Payment Date.


	
 

	
 

	
 

	
 


	
 

	
Premium Payment Date:

	
 

	
The Effective Date





2






	
 

	
 

	
 

	
 


	
 

	
Additional Premium Payment Date:

	
 

	
The closing date for the purchase and sale of the
 Additional Convertible Securities.


	
 

	
 

	
 

	
 


	
 

	
Exchange:

	
 

	
New York Stock Exchange


	
 

	
Related Exchange:

	
 

	
All Exchanges


	
 

	
 

	
 

	
 


	
Procedures for Exercise:

	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
Potential Exercise Dates:

	
 

	
Each Conversion Date.


	
 

	
 

	
 

	
 


	
 

	
Conversion Date:

	
 

	
Each “Conversion Date” as defined in the
 Supplemental Indenture.


	
 

	
 

	
 

	
 


	
 

	
Required Exercise on

 Conversion Dates:

	
 

	
On each Conversion Date, a number of Options equal
 to the number of Convertible Securities in denominations of USD 1,000
 principal amount submitted for conversion on such Conversion Date in
 accordance with the terms of the Supplemental Indenture shall be
 automatically exercised, subject to “Notice of Exercise” below.


	
 

	
 

	
 

	
 


	
 

	
Expiration Date:

	
 

	
December 15, 2012


	
 

	
 

	
 

	
 


	
 

	
Automatic Exercise:

	
 

	
Not applicable (as provided above under “Required
 Exercise on Conversion Dates”).


	
 

	
 

	
 

	
 


	
 

	
Notice of Exercise:

	
 

	
Notwithstanding anything to the contrary in the
 Equity Definitions, in order to exercise any Options, Counterparty must notify
 Dealer in writing before 5:00 p.m. (New York City time) on the Scheduled
 Valid Day prior to the scheduled first day of the applicable Settlement
 Averaging Period for the Options, which notice shall specify (i) the number
 of Options being exercised and the scheduled Settlement Date, (ii) the
 scheduled first day of the applicable Settlement Averaging Period, (iii) the
 applicable Settlement Method and (iv) the applicable Specified Cash Amount
 (as defined in the Supplemental Indenture); provided that in respect
 of Options relating to Convertible Securities with a Conversion Date
 occurring on or after the Final Conversion Period, such notice (except for
 notice of the Settlement Method, which shall be provided as specified above)
 may be given on or prior to the second Scheduled Valid Day immediately
 preceding the Expiration Date and need only specify the number of such
 Options and the applicable Specified Cash Amount.


	
 

	
 

	
 

	
 


	
 

	
Final Conversion Period:

	
 

	
With respect to any Conversion Date occurring on or
 after the 32nd Scheduled Valid Day immediately preceding the
 Expiration Date, the 30 consecutive Valid Day period beginning on, and
 including, the 32nd Scheduled Valid Day immediately prior to the Expiration
 Date, subject to any extension due to a Market Disruption Event.


	
 

	
 

	
 

	
 


	
 

	
Specified Cash Amount:

	
 

	
“Specified Cash Amount” (defined in the Supplemental
 Indenture) applicable to such conversion.


	
 

	
 

	
 

	
 


	
 

	
Valuation Time:

	
 

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


	
 

	
 

	
 

	
 


	
 

	
Market Disruption Event:

	
 

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





3






	
 

	
 

	
 

	
 


	
 

	
 

	
 

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


	
 

	
 

	
 

	
 


	
Settlement Terms:

	
 

	
 


	
 

	
 

	
 


	
 

	
Settlement Method:

	
 

	
Net Share Extended Settlement, Net Share Regular
 Settlement, Combination Settlement or Cash Settlement consistent with the
 settlement method elected by Counterparty for the corresponding Convertible
 Securities; provided that, if Counterparty does not provide a notice
 of Settlement Method to Dealer pursuant to Notice of Exercise above, Net
 Share Extended Settlement shall be deemed to apply to the relevant Options.


	
 

	
 

	
 

	
 


	
 

	
Net Share Extended Settlement:

	
 

	
Net Share Extended Settlement shall apply if either
 (i) Counterparty has elected to deliver only Shares to satisfy the Conversion
 Obligation (as defined in the Supplemental Indenture) in connection with the
 conversion of the relevant Convertible Securities or (ii) Counterparty has
 elected to deliver a combination of Shares and cash to satisfy the Conversion
 Obligation in connection with the conversion of the relevant Convertible
 Securities and the Specified Cash Amount with respect to such conversion is
 less than $1,000.


	
 

	
 

	
 

	
 


	
 

	
Net Share Regular Settlement:

	
 

	
Net Share Regular Settlement shall apply if (i)
 Counterparty has elected to deliver a combination of Shares and cash to satisfy
 the Conversion Obligation in connection with the conversion of the relevant
 Convertible Securities and (ii) the Specified Cash Amount with respect to
 such conversion is equal to $1,000.


	
 

	
 

	
 

	
 


	
 

	
Combination Settlement:

	
 

	
Combination Settlement shall apply if (i)
 Counterparty has elected to deliver a combination of Shares and cash to
 satisfy the Conversion Obligation in connection with the conversion of the
 relevant Convertible Securities and (ii) the Specified Cash Amount with
 respect to such conversion is greater than $1,000.


	
 

	
 

	
 

	
 


	
 

	
Cash Settlement:

	
 

	
Cash Settlement shall apply if Counterparty has
 elected to deliver only cash to satisfy the Conversion Obligation in connection
 with the conversion of the relevant Convertible Securities.


	
 

	
 

	
 

	
 


	
 

	
Delivery Obligation:

	
 

	
Dealer will deliver to Counterparty, on the relevant
 Settlement Date, 


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
(a) if Net Share Extended Settlement applies, a
 number of Shares equal to the Net Shares (calculated based on a Settlement
 Averaging Period for a Net Share Extended Settlement) in respect 





4






	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
of any Option exercised or deemed exercised hereunder.1
 In no event will the Net Shares be less than zero.


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
(b) if Net Share Regular Settlement applies, a
 number of Shares equal to the Net Shares (calculated based on a Settlement
 Averaging Period for a Net Share Regular Settlement) in respect of any Option
 exercised or deemed exercised hereunder. In no event will the Net Shares be
 less than zero.


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
(c) if Combination Settlement applies, an amount of
 cash and a number of Shares, if any, equal to the Combination Amount.


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
(d) if Cash Settlement applies, an amount of cash
 equal to the Conversion Value in excess of $1,000.


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
If such exercise relates to the conversion of
 Convertible Securities in connection with which holders thereof are entitled
 to receive additional Shares and/or cash pursuant to the adjustments to the
 Conversion Rate pursuant to Section 5.20 of the Supplemental Indenture, then,
 notwithstanding the foregoing, the Delivery Obligation shall include such
 additional Shares and/or cash, except that the Delivery Obligation shall be
 capped so that the value of the Delivery Obligation per Option (with the
 value of any Shares included in the Delivery Obligation determined by the
 Calculation Agent using the VWAP Price on the last day of the relevant
 Settlement Averaging Period) does not exceed the amount as determined by the
 Calculation Agent that would be payable by Dealer pursuant to Section 6 of
 the Agreement if such Conversion Date were an Early Termination Date resulting
 from an Additional Termination Event with respect to which the Transaction
 (except that, for purposes of determining such amount (x) the Number of
 Options shall be deemed to be equal to the number of Options exercised on
 such Exercise Date and (y) such amount payable will be determined as if
 Section 5.20 of the Supplemental Indenture were deleted) was the sole
 Affected Transaction and Counterparty was the sole Affected Party (determined
 without regard to Section 8(b) of this Confirmation).


	
 

	
 

	
 

	
 


	
 

	
 

	
 

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


	
 

	
 

	
 

	
 


	
 

	
Net Shares:

	
 

	
In respect of any Option exercised or deemed exercised,
 a number of Shares equal to (i) the Option Entitlement on the Conversion Date
 multiplied
 by (ii) the sum of the quotients, for each Valid Day during the
 applicable Settlement Averaging Period for such Option, of (A) the VWAP Price
 on such Valid Day less the Strike Price, divided by
 (B) such VWAP Price, divided by (iii) the number of Valid
 Days in such Settlement Averaging Period; provided, however, that if the calculation
 contained in clause (A) above results in a negative number, such number shall
 be replaced with the number “zero”.





5






	
 

	
 

	
 

	
 


	
 

	
Valid Day:

	
 

	
A day on which (i) trading in the Shares generally
 occurs on the Exchange or, if the Shares are not then listed on the Exchange,
 on the principal other U.S. national or regional securities exchange on which
 the Shares are then listed or, if the Shares are not then listed on a U.S.
 national or regional securities exchange, in the principal other market on
 which the Shares are then traded and (ii) there is no Market Disruption Event.


	
 

	
 

	
 

	
 


	
 

	
Scheduled Valid Day:

	
 

	
A day on which trading in the Shares is scheduled to
 occur on the principal U.S. national or regional securities exchange or
 market on which the Shares are listed or admitted for trading. If the Shares
 are not so listed or admitted for trading, “Scheduled Valid Day” means a
 “Business Day.”


	
 

	
 

	
 

	
 


	
 

	
VWAP Price:

	
 

	
On any Valid Day, the per Share volume-weighted
 average price as displayed under the heading “Bloomberg VWAP” on Bloomberg
 page GAP <equity> VAP (or any successor thereto) in respect of the
 period from 9:30 a.m. to 4:00 p.m. (New York City time) on such Valid Day (or
 if such volume-weighted average price is unavailable, the market value of one
 Share on such Valid Day, as determined by the Calculation Agent using a volume-weighted
 method).


	
 

	
 

	
 

	
 


	
 

	
Settlement Averaging Period:

	
 

	
For any Option, (x) if Counterparty has, on or prior
 to the first Valid Day
 of the Final Conversion Period, delivered a Notice of Exercise to
 Dealer with respect to such Option with a Conversion Date occurring prior to
 the first Valid Day of the Final Conversion Period, (i) if Net Share Extended
 Settlement applies, the ninety (90) consecutive Valid Days commencing on and
 including the second Valid Day following such Conversion Date or (ii) if Net
 Share Regular Settlement, Combination Settlement or Cash Settlement applies,
 the thirty (30) consecutive Valid Days commencing on and including the second
 Valid Day following such Conversion Date, or 


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
(y) if Counterparty has, on or following the first
 Valid Day of the Final Conversion Period, delivered a Notice of Exercise to
 Dealer with respect to such Option with a Conversion Date occurring on or
 following the first Valid Day of the Final Conversion Period, (i) if Net
 Share Extended Settlement applies, the ninety (90) consecutive Valid Days
 commencing on, and including, the ninety second (92nd) Scheduled Valid Day
 immediately prior the Expiration Date or (ii) if Net Share Regular Settlement,
 Combination Settlement or Cash Settlement applies, the thirty (30)
 consecutive Valid Days commencing on, and including, the thirty second (32nd)
 Scheduled Valid Day immediately prior to the Expiration Date.


	
 

	
 

	
 

	
 


	
 

	
Combination Amount:

	
 

	
In respect of any Option exercised or deemed
 exercised, (A) an amount of cash equal to the difference between (i) the
 lesser of (x) the Specified Cash Amount and (y) the Conversion Value and (ii)
 $1,000, and (B) to the extent the Conversion Value exceeds the Specified Cash
 Amount, a number of Shares equal to the sum of the Daily Share Amounts for
 each of the Valid Days during the applicable Settlement Averaging Period; provided,
 however,
 that if 





6






	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
the calculation contained in clause (A) above
 results in a negative number, such number shall be replaced with the number
 “zero”.


	
 

	
 

	
 

	
 


	
 

	
Daily Share Amount:

	
 

	
Means, for each Valid Day during the applicable
 Settlement Averaging Period, (A) the greater of (i) zero and (ii) the Option
 Entitlement on the Conversion Date minus
 the quotient of (x) the product of (1) the Applicable Percentage and (2) the
 Specified Cash Amount divided by (y) the VWAP Price on such Valid Day divided by
 (B) 30.


	
 

	
 

	
 

	
 


	
 

	
Conversion Value:

	
 

	
Means the product of (i) the Option Entitlement on
 the Conversion Date and (ii) the average of the VWAP Prices on each of the
 Valid Days during the applicable Settlement Averaging Period.


	
 

	
 

	
 

	
 


	
 

	
Settlement Date:

	
 

	
For any Option, the date Shares will be delivered
 with respect to the Convertible Securities related to such Options, under the
 terms of the Supplemental Indenture; provided that if Net Share Extended
 Settlement applies, the Settlement Date shall be the date Shares and/or cash
 would have been required to be delivered if Combination Settlement or Cash
 Settlement applied to the settlement of such Relevant Convertible Securities.
 Other Applicable Provisions: To the extent Dealer is obligated to deliver
 Shares hereunder, 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 arising as a result of the fact that
 Counterparty is the issuer of the Shares) and 9.12 of the Equity Definitions
 will be applicable as if “Physical Settlement” applied to the Transaction.


	
 

	
 

	
 

	
 


	
 

	
Restricted Certificated Shares:

	
 

	
Notwithstanding anything to the contrary in the
 Equity Definitions, Dealer may, in whole or in part, deliver Shares in certificated
 form representing the Number of Shares to be Delivered to Counterparty in
 lieu of delivery through the Clearance System. With respect to such
 certificated Shares, the Representation and Agreement contained in Section
 9.11 of the Equity Definitions shall be modified by deleting the remainder of
 the provision after the word “encumbrance” in the fourth line thereof. 


	
 

	
 

	
 

	
 


	
Share Adjustments:

	
 

	
 


	
 

	
 

	
 


	
 

	
Method of Adjustment:

	
 

	
Notwithstanding Section 11.2 of the Equity
 Definitions, upon the occurrence of any event or condition set forth in the
 Dilution Adjustment Sections (as defined in the Supplemental Indenture), the
 Calculation Agent shall make a corresponding adjustment, if necessary, to the
 terms relevant to the exercise, settlement or payment of the Transaction,
 subject to the definition of Conversion Rate. Promptly (but in no event later
 than the close of business on the following New York Business Day) upon the
 occurrence of any “Adjustment Event” (as defined in the Supplemental
 Indenture) Counterparty shall notify the Calculation Agent of such Adjustment
 Event; and once the adjustments to be made to the terms of the Supplemental
 Indenture and the Convertible Securities in respect of such Adjustment Event
 have been determined, Counterparty shall promptly (but in no event later than
 the close of





7






	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
business on the following New York Business Day)
 notify the Calculation Agent in writing of the details of such adjustment
 necessary to make such corresponding adjustment hereunder.


	
 

	
 

	
 

	
 

	
 


	
Extraordinary Events:

	
 

	
 


	
 

	
 

	
 


	
 

	
Merger Events:

	
 

	
Notwithstanding Section 12.1(b) of the Equity
 Definitions, a “Merger Event” means the occurrence of any event or condition
 set forth in the Consequences of Merger Section (as defined in the
 Supplemental Indenture).


	
 

	
 

	
 

	
 


	
 

	
Tender Offer:

	
 

	
Applicable. Notwithstanding Section 12.1(d) of the
 Equity Definitions, a “Tender Offer” means the occurrence of any event or
 condition set forth in the Consequences of Tender Offer Section (as defined
 in the Supplemental Indenture).


	
 

	
 

	
 

	
 


	
 

	
Consequences of Merger Events and

	
 

	
 


	
 

	
Tender Offers:

	
 

	
Notwithstanding Sections 12.2 and 12.3 of the Equity
 Definitions, upon the occurrence of a Merger Event or Tender Offer, the
 Calculation Agent shall make the corresponding adjustment in respect of any
 adjustment under the Supplemental Indenture to any one or more of the nature
 of the Shares, the Number of Options, the Option Entitlement and any other
 variable relevant to the exercise, settlement or payment for the Transaction;
 provided that such adjustment
 shall be made without regard to any adjustment to the Conversion Rate
 pursuant the Conversion Rate Adjustment Sections and the election, if any, by
 Counterparty to adjust the Conversion Rate; and provided further that the Calculation Agent may limit or
 alter any such adjustment referenced in this paragraph so that the fair value
 of the Transaction to Dealer is not reduced as a result of such adjustment.


	
 

	
 

	
 

	
 


	
 

	
Notice of Merger Consideration:

	
 

	
Upon the occurrence of a Merger Event that causes
 the Shares to be converted into the right to receive more than a single type
 of consideration (determined based in part upon any form of stockholder
 election), Counterparty shall reasonably promptly (but, in any event prior to
 the Merger Date) notify the Calculation Agent of (i) the weighted average of
 the types and amounts of consideration received by the holders of Shares
 entitled to receive cash, securities or other property or assets with respect
 to or in exchange for such Shares in any Merger Event who affirmatively make
 such an election and (ii) the details of the adjustment made under the
 Supplemental Indenture in respect of such Merger Event.


	
 

	
 

	
 

	
 


	
 

	
Nationalization, Insolvency

	
 

	
 


	
 

	
or Delisting:

	
 

	
Cancellation and Payment (Calculation Agent
 Determination); provided that,
 in addition to the provisions of Section 12.6(a)(iii) of the Equity
 Definitions, it will also constitute a Delisting if the Exchange is located
 in the United States and the Shares are not immediately re-listed, re-traded
 or re-quoted on any of the New York Stock Exchange, the American Stock
 Exchange the NASDAQ Global Select Market or the NASDAQ Global Market (or
 their respective successors); if the Shares are immediately re-listed,
 re-traded or re-quoted on any such exchange or quotation system, such exchange
 or quotation system shall thereafter be deemed to be the Exchange.


	
 

	
 

	
 

	
 


	
 

	
Additional Disruption Events:

	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
     (a) Change in Law:

	
 

	
Applicable





8






	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(b) Failure to Deliver:

	
 

	
Applicable


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(c) Insolvency Filing:

	
 

	
Applicable


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(d) Hedging Disruption:

	
 

	
Applicable


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(e) Increased Cost of Hedging:

	
 

	
Applicable


	
 

	
 

	
 

	
 

	
 


	
 

	
Hedging Party:

	
 

	
For all applicable Additional Disruption Events,
 Dealer


	
 

	
 

	
 

	
 

	
 


	
 

	
Determining Party:

	
 

	
For all applicable Extraordinary Events, Dealer


	
 

	
 

	
 

	
 

	
 


	
 

	
Non-Reliance:

	
 

	
Applicable


	
 

	
 

	
 

	
 

	
 


	
 

	
Agreements and Acknowledgments

	
 

	
 


	
 

	
Regarding Hedging Activities:

	
 

	
Applicable


	
 

	
 

	
 

	
 

	
 


	
 

	
Additional Acknowledgments:

	
 

	
Applicable


	
 

	
 

	
 

	
 

	
 


	
 

	
3.

	
Calculation Agent:

	
 

	
Dealer, which shall at all times act in good faith
 and in a commercially reasonable manner. In addition, Dealer shall use
 commercially reasonable efforts under the circumstances to consult with
 Counterparty on decisions it makes in its capacity as Calculation Agent; provided that Dealer shall not be
 required to take into account or be bound by any considerations raised by
 Counterparty.


	
 

	
 

	
 

	
 

	
 


	
 

	
4.

	
Account Details:

	
 

	
 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
Dealer Payment Instructions:

	
 

	
Bank of America


	
 

	
 

	
 

	
 

	
New York, NY


	
 

	
 

	
 

	
 

	
SWIFT: BOFAUS65


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
Bank Routing: 026-009-593


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
Account Name: Bank of America


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
Account No. : 0012333-34172


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
Counterparty Payment Instructions:

	
 

	
          To
 be provided by Counterparty.








	
 

	
 

	
 

	
 

	
 


	
 

	
5.

	
Offices:

	
 


	
 

	
 

	
 

	
 


	
 

	
 

	
The Office of Dealer for the Transaction is: New
 York


	
 

	
 

	
 


	
 

	
 

	
 

	
Bank of America, N.A.


	
 

	
 

	
 

	
c/o Banc of America Securities LLC


	
 

	
 

	
 

	
9 West 57th Street, 40th
 Floor


	
 

	
 

	
 

	
New York, NY 10019


	
 

	
 

	
 

	
Attention:

	
John Servidio


	
 

	
 

	
 

	
Telephone:

	
212-847-6527


	
 

	
 

	
 

	
Facsimile: 

	
212-230-8610


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
The Office of Counterparty for the Transaction is:
 Not applicable


	
 

	
 

	
 


	
 

	
6.

	
Notices: For purposes of this
 Confirmation:


	
 

	
 

	
 


	
 

	
 

	
(a)

	
Address for notices or communications to
 Counterparty:


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
To:

	
The Great Atlantic & Pacific Tea Company


	
 

	
 

	
 

	
 

	
2 Paragon Drive


	
 

	
 

	
 

	
 

	
Montvale, New Jersey 07645


	
 

	
 

	
 

	
Attn: 

	
Brenda Galgano, Senior Vice President & Chief
 Financial Officer


	
 

	
 

	
 

	
Telephone: 

	
201-571-4363


	
 

	
 

	
 

	
Facsimile: 

	
201-571-8715





9






	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(b)

	
Address for notices or communications to Dealer:


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
To:

	
Bank of America, N.A.


	
 

	
 

	
 

	
 

	
c/o Banc of America Securities LLC


	
 

	
 

	
 

	
 

	
9 West 57th Street, 40th
 Floor


	
 

	
 

	
 

	
 

	
New York, NY 10019


	
 

	
 

	
 

	
Attn:

	
John Servidio


	
 

	
 

	
 

	
Telephone:

	
212-847-6527


	
 

	
 

	
 

	
Facsimile:

	
212-230-8610








	
 

	
 


	
 

	
7. Representations, Warranties and Agreements:


	
 

	
 


	
          (a)
 In addition to the representations and warranties in the Agreement and those
 contained elsewhere herein, Counterparty represents and warrants to and for
 the benefit of, and agrees with, Dealer as follows:


	
 

	
 


	
 

	
          (i)
 On the Trade Date, (A) none of Counterparty and its officers and directors is
 aware of any material nonpublic information regarding Counterparty or the
 Shares and (B) all reports and other documents filed by Counterparty 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)
 (A) On the Trade Date, the Shares or securities that are convertible into, or
 exchangeable or exercisable for Shares, are not, and shall not be, subject to
 a “restricted period,” as such term is defined in Regulation M under the
 Exchange Act (“Regulation M”) and (B) Counterparty 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 Trade Date.


	
 

	
 


	
 

	
          (iii)
 On the Trade Date, neither Counterparty nor any “affiliate” or “affiliated
 purchaser” (each as defined in Rule 10b-18 of the Exchange Act) 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.


	
 

	
 


	
 

	
          (iv)
 Without limiting the generality of Section 13.1 of the Equity Definitions,
 Counterparty 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. 


	
 

	
 


	
 

	
          (v)
 Without limiting the generality of Section 3(a)(iii) of the Agreement, the
 Transaction will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.


	
 

	
 


	
 

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


	
 

	
 


	
 

	
          (vii)
 Counterparty 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. 


	
 

	
 


	
 

	
          (viii)
 Counterparty 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.


	
 

	
 


	
 

	
          (ix)
 On each of the Trade Date, the Premium Payment Date and the Additional
 Premium Payment Date, if any, Counterparty would be able to purchase the
 Shares hereunder in compliance with the laws of the jurisdiction of its
 incorporation.





10






	
 

	
 


	
 

	
          (x)
 The representations and warranties of Counterparty set forth in Section 3 of
 the Agreement and Sections 1 and 3 of the Underwriting Agreement are true and
 correct and are hereby deemed to be repeated to Dealer as if set forth
 herein.


	
 

	
 


	
 

	
          (xi)
 Counterparty 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.


	
 

	
 


	
          (b)
 Each of Dealer and Counterparty 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 Counterparty 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, Counterparty represents and warrants to Dealer
 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 and 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 Counterparty agrees and acknowledges that Dealer is a
 “financial institution,” “swap participant” and “financial participant”
 within the meaning of Sections 101(22), 101(53C) and 101(22A) of Title 11 of
 the United States Code (the “Bankruptcy Code”). The parties hereto
 further agree and acknowledge (A) that this Confirmation is (i) intended to
 be 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 intended to be
 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.


	
 

	
 


	
          (e)
 Counterparty 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.


	
 

	
 


	
 

	
8. Other Provisions:


	
 

	
 


	
          (a)
 Additional
 Termination Events. The occurrence of (i) an event of default with
 respect to Counterparty under the terms of the Convertible Securities as set
 forth in the Default Events (as defined in the Supplemental Indenture), (ii)
 an Amendment Event, (iii) a Repayment Event, or (iv) a Redemption Event and
 shall be an Additional Termination Event with respect to which the
 Transaction is the sole Affected Transaction and Counterparty is the sole
 Affected Party and Dealer shall be the party entitled to designate an Early
 Termination Date pursuant to Section 6(a) of the Agreement; provided
 that in the case of a Repayment Event the Transaction shall be subject to
 termination only in respect of the number of Convertible Securities that
 cease to be outstanding in connection with or as a result of such Repayment
 Event; provided further that in
 the case of a Redemption Event the Transaction shall be subject to
 termination only in respect of the number of Convertible Securities in
 respect of which the Counterparty has delivered a redemption notice.


	
 

	
 


	
 

	
          “Amendment
 Event” means that Counterparty amends, modifies, supplements or
 waives any term of the Supplemental Indenture or the Convertible Securities
 governing the principal amount, coupon, maturity, repurchase obligation of
 Counterparty, redemption right of Counterparty, any term relating to conversion
 of the Convertible Securities (including changes to the conversion price,
 conversion settlement dates or conversion conditions), or any term that would
 require consent of the holders of not less than 100% of the principal amount
 of the Convertible Securities to amend.


	
 

	
 


	
 

	
          “Repayment
 Event” means that (A) any Convertible Securities are repurchased
 (whether in connection with or as a result of a change of control, howsoever
 defined, or for any other reason) by Counterparty or any of its subsidiaries,
 (B) any Convertible Securities are delivered to Counterparty in exchange for
 delivery of any property or assets of Counterparty or any of its subsidiaries
 (howsoever described), (C) any principal of any of the Convertible Securities
 is repaid prior to the final maturity date of the Convertible Securities
 (whether following acceleration of the Convertible Securities or otherwise),
 or (D) any 





11






	
 

	
 


	
 

	
Convertible Securities are exchanged by or for the
 benefit of the holders thereof for any other securities of Counterparty or
 any of its affiliates (or any other property, or any combination thereof)
 pursuant to any exchange offer or similar transaction; provided that, in the case of clause
 (B) and clause (D), conversions of the Convertible Securities pursuant to the
 terms of the Supplemental Indenture as in effect on the date hereof shall not
 be Repayment Events.


	
 

	
 


	
 

	
          “Redemption
 Event” means that the Counterparty (i) notifies the trustee under
 the Supplemental Indenture of the redemption date and of the principal amount
 of Convertible Securities to be redeemed or (ii) makes a public announcement
 of its intention to redeem a specified principal amount of Convertible
 Securities on a particular redemption date.


	
 

	
 


	
          (b)
 Alternative
 Calculations and Payment on Early Termination and on Certain Extraordinary
 Events. If, subject to Section 8(k) below, Dealer shall owe
 Counterparty any amount pursuant to Section 12.2 or 12.3 of the Equity
 Definitions and “Consequences of Merger Events and Tender Offers” above, or
 Sections 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 Counterparty is the
 Defaulting Party or a Termination Event in which Counterparty is the Affected
 Party, that resulted from an event or events within Counterparty’s control)
 (a “Payment
 Obligation”), Counterparty shall have the right, in its sole
 discretion, to require Dealer 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 Dealer shall deliver to
 Counterparty 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 Dealer 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,





12






	
 

	
 


	
 

	
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
 arising as a result of the fact that Counterparty is the issuer of the
 Shares) and 9.12 of the Equity Definitions will be applicable as if “Physical
 Settlement” applied to the Transaction, except that all references to
 “Shares” shall be read as references to “Share Termination Delivery Units.”





          (c)
Disposition
of Hedge Shares. Counterparty hereby agrees that if, in the good
faith reasonable judgment of Dealer, any Shares (the “Hedge Shares”) acquired by
Dealer for the purpose of hedging its obligations pursuant to the Transaction
cannot be sold in the public market by Dealer without registration under the
Securities Act, Counterparty shall, at its election: (i) in order to allow
Dealer to sell the Hedge Shares in a registered offering, make available to
Dealer an effective registration statement under the Securities Act to cover
the resale of such Hedge Shares and (A) enter into an agreement, in form and
substance commercially reasonably satisfactory to Dealer and Counterparty,
substantially in the form of an underwriting agreement for a registered
offering, (B) provide accountant’s “comfort” letters in customary form for
registered offerings of equity securities, (C) provide disclosure opinions of
nationally recognized outside counsel to Counterparty reasonably acceptable to
Dealer, (D) provide other customary opinions, certificates and closing
documents customary in form for registered offerings of equity securities and
(E) afford Dealer a reasonable opportunity to conduct a “due diligence”
investigation with respect to Counterparty customary in scope for underwritten
offerings of equity securities; provided, however, that if Dealer, in its sole
reasonable discretion, is not satisfied with access to due diligence materials,
the results of its due diligence investigation, or the procedures and
documentation for the registered offering referred to above, then clause (ii)
or clause (iii) of this Section 8(c) shall apply at the election of
Counterparty; (ii) in order to allow Dealer to sell the Hedge Shares in a
private placement, enter into a private placement agreement substantially
similar to private placement purchase agreements customary for private
placements of equity securities, in form and substance commercially reasonably
satisfactory to Dealer and Counterparty, including customary representations,
covenants, blue sky and other governmental filings and/or registrations,
indemnities to Dealer, due diligence rights (for Dealer or any designated buyer
of the Hedge Shares from Dealer), opinions and certificates and such other
documentation as is customary for private placements agreements, all reasonably
acceptable to Dealer (in which case, the Calculation Agent shall make any
adjustments to the terms of the Transaction that are necessary, in its
reasonable judgment, to compensate Dealer for any discount from the public
market price of the Shares incurred on the sale of Hedge Shares in a private
placement); or (iii) purchase the Hedge Shares from Dealer at the VWAP Price on
such Exchange Business Days, and in the amounts, requested by Dealer. For the
avoidance of doubt, unless Counterparty elects to purchase Hedge Shares from
Dealer pursuant to clause (iii) above, under no circumstances shall
Counterparty be required to pay cash to purchase Hedge Shares from Dealer.


          (d)
Amendment to Equity Definitions.
The following amendment shall be made to the Equity Definitions:


	
 

	
 


	
 

	
          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.”


	
 

	
 


	
 

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





          (e)
Repurchase
Notices. Counterparty shall, on any day on which Counterparty
effects any repurchase of Shares, promptly give Dealer a written notice of such
repurchase (a “Repurchase Notice”) on such day if, following such repurchase,
the Notice Percentage as determined on such day is (i) greater than 6% and (ii)
greater by 0.5% than the Notice Percentage included in the immediately
preceding Repurchase Notice (or, in the case of the first such Repurchase
Notice, greater than the Notice Percentage as of the date hereof). The “Notice Percentage”
as of any day is the fraction, expressed as a percentage, the numerator of
which is the Number of Shares and the denominator of which is the number of
Shares outstanding on such day. In the event that Counterparty fails to provide
Dealer with a Repurchase Notice when and in the manner specified in this
Section 8(e) then Counterparty agrees to indemnify and hold harmless Dealer,
its affiliates and their respective directors, officers, employees, agents and
controlling persons (Dealer and each such person being an “Indemnified Party”) from and
against any and all losses, claims, damages and liabilities (or actions in
respect thereof), joint or several, to which such Indemnified Party may become
subject under applicable securities laws,


13






including without limitation, Section 16 of the
Exchange Act, solely relating to or arising out of such failure. If for any
reason the foregoing indemnification is unavailable to any Indemnified Party or
insufficient to hold harmless any Indemnified Party, then Counterparty shall
contribute, to the maximum extent permitted by law, to the amount paid or
payable by the Indemnified Party as a result of such loss, claim, damage or
liability. In addition, Counterparty will reimburse any Indemnified Party for
all reasonable expenses (including reasonable counsel fees and expenses) as
they are incurred (after notice to Counterparty) in connection with the
investigation of, preparation for or defense or settlement of any pending or
threatened claim or any action, suit or proceeding arising therefrom, whether
or not such Indemnified Party is a party thereto and whether or not such claim,
action, suit or proceeding is initiated or brought by or on behalf of
Counterparty. This indemnity shall survive the completion of the Transaction
contemplated by this Confirmation and any assignment and delegation of the
Transaction made pursuant to this Confirmation or the Agreement shall inure to
the benefit of any permitted assignee of Dealer. 


          (f)
Transfer
and Assignment. Either party may transfer any of its rights or
obligations under the Transaction with the prior written consent of the
non-transferring party, such consent not to be unreasonably withheld. In
addition, Dealer may transfer or assign without any consent of the Counterparty
its rights and obligations hereunder and under the Agreement, in whole or in
part, to (i) any of its affiliates, (ii) any entities sponsored or organized
by, or on behalf of or for the benefit of Dealer, or (iii) any person of credit
quality equivalent to Dealer; provided further that at any time at which
the Equity Percentage exceeds 8.5% (an “Excess Ownership Position”) or a Hedging
Disruption has occurred and is continuing, if Dealer, in its commercially
reasonable discretion, is unable to effect a transfer or assignment to a third
party in accordance with the requirements set forth above after using its
commercially reasonable efforts on pricing terms commercially reasonably
acceptable to Dealer such that an Excess Ownership Position or a Hedging Disruption,
as the case may be, no longer exists, Dealer may designate any Scheduled
Trading Day as an Early Termination Date with respect to a portion (the “Terminated
Portion”) of the Transaction, such that such Excess Ownership
Position or Hedging Disruption, as the case may be, no longer exists. In the
event that Dealer so designates an Early Termination Date with respect to a
portion of the Transaction, a payment or delivery shall be made pursuant to
Section 6 of the Agreement and Section 8(b) of this Confirmation as if (i) an
Early Termination Date had been designated in respect of a Transaction having
terms identical to the Terminated Portion of the Transaction, (ii) Counterparty
shall be the sole Affected Party with respect to such partial termination and
(iii) such portion of the Transaction shall be the only Terminated Transaction.
The “Equity
Percentage” as of any day is the fraction, expressed as a
percentage, (A) the numerator of which is the number of Shares that Dealer and
any of its affiliates or any other person subject to aggregation with Dealer,
for purposes of the “beneficial ownership” test under Section 13 of the
Exchange Act (collectively, “Dealer Group”), beneficially own (within
the meaning of Section 13 of the Exchange Act) on such day and (B) the
denominator of which is the number of Shares outstanding on such day.


          (g)
Staggered Settlement. Dealer may,
by notice to Counterparty prior to any Settlement Date (a “Nominal Settlement Date”),
elect to deliver the Shares on two or more dates (each, a “Staggered Settlement Date”)
or at two or more times on the Nominal Settlement Date as follows:


	
 

	
 


	
 

	
          (i)
 in such notice, Dealer will specify to Counterparty the related Staggered
 Settlement Dates (each of which will be on or prior to such Nominal
 Settlement Date, but not prior to the beginning of the related Conversion
 Reference Period (as defined in the Supplemental Indenture) or delivery times
 and how it will allocate the Shares it is required to deliver under “Delivery
 Obligation” (above) among the Staggered Settlement Dates or delivery times;
 and


	
 

	
 


	
 

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





          (h)
Right to
Extend. Dealer may postpone any Potential Exercise Date or any other
date of valuation or delivery by Dealer, with respect to some or all of the
relevant Options (in which event the Calculation Agent shall make appropriate
adjustments to the Delivery Obligation), 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
Counterparty or an affiliated purchaser of Counterparty, be in compliance with
applicable legal, regulatory or self-regulatory requirements, or with related
policies and procedures applicable to Dealer.


          (i)
Disclosure.
Effective from the date of commencement of discussions concerning the
Transaction, Counterparty and each of its employees, representatives, or other
agents may disclose to any and all persons, without


14






limitation of any kind, the tax treatment and tax
structure of the Transaction and all materials of any kind (including opinions
or other tax analyses) that are provided to Counterparty relating to such tax
treatment and tax structure.


          (j)
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 Counterparty, 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 Counterparty to the extent of
any such performance.


          (k)
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 Counterparty 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 Counterparty 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 Counterparty hereunder or under the Agreement against any right or
 obligation Dealer or any of its affiliates may have against or to
 Counterparty, 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)
 Counterparty 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 Counterparty under any other
 transaction or instrument.





          (l)
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 Counterparty’s bankruptcy.
For the avoidance of doubt, the parties agree that the preceding sentence shall
not apply at any time other than during Counterparty’s bankruptcy to any claim
arising as a result of a breach by Counterparty of any of its obligations under
this Confirmation or the Agreement. 


          (m)
Early
Unwind. In the event the sale by Counterparty of the Convertible
Securities is not consummated with the underwriters pursuant to the
Underwriting Agreement for any reason by the close of business in New York on
December 18, 2007 (or such later date as agreed upon by the parties, which in
no event shall be later than December 28, 2007) (December 18, 2007 or such
later date being the “Early Unwind Date”), the Transaction shall
automatically terminate (the “Early Unwind”) on the Early Unwind Date and
(i) the Transaction and all of the respective rights and obligations of Dealer
and Counterparty thereunder shall be cancelled and terminated and (ii)
Counterparty shall pay to Dealer an amount in cash equal to the aggregate
amount of the reasonable costs and expenses relating to the unwinding


15






of Dealer’s hedging activities in respect of the
Transaction (including market losses incurred in reselling any Shares purchased
by Dealer or its affiliates in connection with such hedging activities).
Following such termination, cancellation and payment, each party shall be
released and discharged by the other party from and agrees not to make any
claim against the other party with respect to any obligations or liabilities of
either party arising out of and to be performed in connection with the
Transaction either prior to or after the Early Unwind Date. Dealer and
Counterparty represent and acknowledge to the other that upon an Early Unwind
and following the payment referred to above, all obligations with respect to
the Transaction shall be deemed fully and finally discharged.


          (n)
Waiver of
Trial by Jury. EACH OF COUNTERPARTY 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 COUNTERPARTY OR DEALER OR
THEIR RESPECTIVE AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT
HEREOF.


          (o)
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.


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          Counterparty
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 Counterparty 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 John Servidio, Facsimile No. 212-230-8610.


	
 

	
 

	
 

	
 


	
 

	
 

	
Yours faithfully,


	
 

	
 

	
 


	
 

	
 

	
BANK OF AMERICA, N.A.


	
 

	
 

	
 


	
 

	
 

	
By: 

	
/s/ Michael Voris


	
 

	
 

	
 

	



	
 

	
 

	
 

	
Name: Michael Voris


	
 

	
 

	
 

	
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

	
 

	
 





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