exv4w2




Exhibit
4.2


			
	 
	 	






Bank of America, N.A.

c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated

One Bryant Park

New York, NY 10036

Attn: John Servidio

Telephone: 646-855-8900

Facsimile: 704-208-2869




	 	 	 

	 

	 	September 14, 2010







			
	To:	 	Tower Group, Inc.

120 Broadway, 31st Floor

New York, NY 10271

Attention: Treasurer

Telephone No.: (212) 655-2000

Facsimile No.: (212) 655-2199






			
	Re:	 	Base Call Option Transaction

(Transaction Reference Number: NY-108281860)





     The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and
conditions of the call option transaction entered into between Bank of America, N.A. (“Dealer”) and
Tower Group, Inc. (“Counterparty”) as of the Trade Date specified below (the “Transaction”). This
letter agreement constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified
below. This Confirmation shall replace any previous agreements and serve as the final
documentation for the Transaction.



     The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the
“Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc.
(“ISDA”) are incorporated into this Confirmation. In the event of any inconsistency between the
Equity Definitions and this Confirmation, this Confirmation shall govern. Certain defined terms
used herein are based on terms that are defined in the Offering Memorandum dated September 14, 2010
(the “Offering Memorandum”) relating to the 5.00% Convertible Senior Notes due September 15, 2014
(as originally issued by Counterparty, the “Convertible Notes” and each USD 1,000 principal amount
of Convertible Notes, a “Convertible Note”) issued by Counterparty in an aggregate initial
principal amount of USD 135,000,000 (as increased by up to an aggregate principal amount of USD
15,000,000 if and to the extent that the Initial Purchasers (as defined herein) exercise their
option to purchase additional Convertible Notes pursuant to the Purchase Agreement (as defined
herein)) pursuant to an Indenture to be dated September 20, 2010 between Counterparty and U.S. Bank
National Association, as trustee (the “Indenture”). In the event of any inconsistency between the
terms defined in the Offering Memorandum, the Indenture and this Confirmation, this Confirmation
shall govern. The parties acknowledge that this Confirmation is entered into on the date hereof
with the understanding that (i) definitions set forth in the Indenture which are also defined
herein by reference to the Indenture and (ii) sections of the Indenture that are referred to herein
will conform to the descriptions thereof in the Offering Memorandum. If any such definitions in
the Indenture or any such sections of the Indenture differ from the descriptions thereof in the
Offering Memorandum, the descriptions thereof in the Offering Memorandum will govern for purposes
of this Confirmation. The parties further acknowledge that the Indenture section numbers used
herein are based on the draft of the Indenture last reviewed by Dealer as of the date of this
Confirmation, and if any such section numbers are changed in the Indenture as executed, the parties
will amend this Confirmation in good faith to preserve the intent of the parties. Subject to the
foregoing, references to the Indenture herein are references to the Indenture as in effect on the
date of its execution, and if the Indenture is amended following such date, any such amendment will
be disregarded for purposes of this Confirmation unless the parties agree otherwise in writing.



 









 






			
	 
	 	









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


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



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




          General Terms.




	 	 	 

	Trade Date:
	 	September 14, 2010
	 	 	 
	Effective Date:
	 	The third Exchange Business Day immediately prior to the
	 	 	Premium Payment Date
	 	 	 
	Option Style:
	 	“Modified American”, as
described under “Procedures for Exercise” below
	 	 	 
	Option Type:
	 	Call
	 	 	 
	Buyer:
	 	Counterparty
	 	 	 
	Seller:
	 	Dealer
	 
	 	 
	Shares:
	 	The common stock of Counterparty,
par value USD 0.01 per share (Exchange symbol “TWGP”).
	 	 	 
	Number of Options:
	 	135,000.  For the avoidance of doubt, the Number of Options
	 	 	shall be reduced by any Options exercised by Counterparty.  In
	 	 	no event will the Number of Options be less than zero.
	 	 	 
	Applicable Percentage:
	 	50%
	 	 	 
	Option Entitlement:
	 	A number equal to the product of the Applicable Percentage and
	 
	 	36.3782.
	 
	 	 
	Strike Price:
	 	USD 27.4890
	 
	 	 
	Premium:
	 	USD 6,885,000.00
	 
	 	 
	Premium Payment Date:
	 	September 20, 2010
	 
	 	 
	Exchange:
	 	The NASDAQ Global Select Market
	 
	 	 
	Related Exchange(s):
	 	All Exchanges
	 
	 	 
	Excluded Provisions:
	 	Section 14.03 and Section 14.04(h) of the Indenture.








2









 







			
	 
	 	






          Procedures
for Exercise.



	 	 	 	 

	 

	Conversion Date:
	 	With respect to any conversion of a Convertible Note, the date
on which the Holder (as such term is defined in the Indenture)
of such Convertible Note satisfies all of the requirements for
conversion thereof as set forth in Section 14.02(b) of the
Indenture.
	 
	 	 	 
	 

	Free Convertibility Date:
	 	March 15, 2014
	 
	 	 	 
	 

	Expiration Time:
	 	The Valuation Time
	 
	 	 	 
	 

	Expiration Date:
	 	September 15, 2014, subject to earlier exercise.
	 
	 	 	 
	 

	Multiple Exercise:
	 	Applicable, as described under “Automatic Exercise” below.
	 
	 	 	 
	 

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

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

	Notice of Exercise:
	 	Notwithstanding anything to the contrary in the Equity
Definitions or under “Automatic Exercise” above, in order to
exercise any Options, Counterparty must notify Dealer in
writing before 5:00 p.m. (New York City time) on the Scheduled
Valid Day immediately preceding the scheduled first day of the
Settlement Averaging Period for the Options being exercised of
(i) the number of such Options, (ii) the scheduled first day of
the Settlement Averaging Period and the scheduled Settlement
Date, (iii) the Relevant Settlement Method for such Options,
and (iv) if the Relevant Settlement Method for such Options is
not Net Share Settlement, Settlement in Shares or Settlement in
Cash (each as defined below), the fixed amount of cash per
Convertible Note that Counterparty has elected to deliver to
Holders (as such term is defined in the Indenture) of the
related Convertible Notes (the “Specified Cash Amount”), and
such notice shall also include the information,
representations, acknowledgements and agreements required
pursuant to “Settlement Method Election Conditions” below;
provided that in respect of any Options relating to Convertible
Notes with a Conversion Date occurring on or after the Free
Convertibility Date, (A) such notice may be given on or prior
to the second Scheduled Valid Day immediately preceding the
Expiration Date and need only specify the information required
in clause (i) above, and (B) if the Relevant Settlement Method
for such Options is






3









 






			
	 
	 	






	 	 	 

	 	 	not Net Share Settlement, Dealer shall have
received a separate notice (the “Notice of Final Settlement
Method”) in respect of all such Convertible Notes before 5:00
p.m. (New York City time) on or prior to the Free
Convertibility Date specifying the information required in
clauses (iii) and (iv) above, as well as the information,
representations, acknowledgements and agreements required
pursuant to “Settlement Method Election Conditions” below.
	 	 	 
	Valuation Time: 

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

	 	Section 6.3(a) of the Equity Definitions is hereby replaced in
its entirety by the following:
	 	 	 
	 	 	“‘Market Disruption Event’ means, in respect of a Share, (i) a
failure by the primary United States national or regional
securities exchange or market on which the Shares are listed or
admitted for trading to open for trading during its regular
trading session or (ii) the occurrence or existence prior to
1:00 p.m. (New York City time) on any Scheduled Valid Day for
the Shares for more than one half-hour period in the aggregate
during regular trading hours of any suspension or limitation
imposed on trading (by reason of movements in price exceeding
limits permitted by the relevant stock exchange or otherwise)
in the Shares or in any options or futures contracts relating
to the Shares.”






     Settlement Terms.




	 	 	 	 

	 	Settlement Method:
	 	For any Option, Net Share Settlement; provided that if the
Relevant Settlement Method set forth below for such Option is
not Net Share Settlement, then the Settlement Method for such
Option shall be such Relevant Settlement Method, but only if
the Settlement Method Election Conditions have been satisfied
and Counterparty shall have notified Dealer of the Relevant
Settlement Method in the Notice of Exercise or Notice of Final
Settlement Method, as applicable, for such Option.
	 	 	 	 
	 	Relevant Settlement Method:
	 	In respect of any Option, subject to the Settlement Method
Election Conditions:
	 	 	 	 
	 	 	 	(i) if Counterparty has elected to settle its conversion
obligations in respect of the related Convertible Note (A)
entirely in Shares pursuant to Section 14.02(v) of the
Indenture (together with cash in lieu of fractional Shares)
(such settlement method,
“Settlement in Shares”), (B) in a
combination of cash and Shares pursuant to Section
14.02(a)(vii) of the Indenture with a Specified Cash Amount
less than USD 1,000 (such settlement method,






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	 	 	 	“Low Cash Combination Settlement”), or (C) in a combination of cash and
Shares pursuant to Section 14.02(a)(vii) of the Indenture with
a Specified Cash Amount equal to USD 1,000 (such settlement
method, “Par Cash Combination Settlement”), then, in each case,
the Relevant Settlement Method for such Option shall be Net
Share Settlement;
	 	 	 	 
	 	 	 	(ii) if Counterparty has elected to settle its conversion
obligations in respect of the related Convertible Note in a
combination of cash and Shares pursuant to Section
14.02(a)(vii) of the Indenture with a Specified Cash Amount
greater than USD 1,000, then the Relevant Settlement Method for
such Option shall be Combination Settlement; and
	 	 	 	 
	 	 	 	(iii) if Counterparty has elected to settle its conversion
obligations in respect of the related Convertible Note entirely
in cash pursuant to Section 14.02(a)(vi) of the Indenture (such
settlement method, “Settlement in Cash”), then the Relevant
Settlement Method for such Option shall be Cash Settlement.
	 	 	 	 
	 	Settlement Method Election Conditions:
	 	For any Relevant Settlement Method other than Net Share
Settlement, such Relevant Settlement Method shall apply to an
Option only if the Notice of Exercise or Notice of Final
Settlement Method, as applicable, contains:
	 	 	 	 
	 	 	 	(i) a representation that, on the date of such Notice of
Exercise or Notice of Final Settlement Method, as applicable,
Counterparty is not in possession of any material non-public
information with respect to Counterparty or the Shares;
	 	 	 	 
	 	 	 	(ii) a representation that Counterparty is electing the
settlement method for the related Convertible Note and such
Relevant Settlement Method in good faith and not as part of a
plan or scheme to evade the prohibitions of Rule 10b-5 under
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”);
	 	 	 	 
	 	 	 	(iii) a representation that Counterparty has not entered into
or altered any hedging transaction relating to the Shares
corresponding to or offsetting the Transaction;
	 	 	 	 
	 	 	 	(iv) a representation that Counterparty is not electing the
settlement method for the related Convertible Note and such
Relevant Settlement Method to create actual or apparent trading
activity in the Shares (or any security convertible into or
exchangeable for the Shares) or to raise or depress or
otherwise manipulate the price of the Shares (or any security
convertible into or exchangeable for the Shares); and






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

	 	If Net Share Settlement is applicable to any Option exercised
or deemed exercised hereunder, Dealer will deliver to
Counterparty, on the relevant Settlement Date for each such
Option, a number of Shares (the “Net Share Settlement Amount”)
equal to the sum, for each Valid Day during the Settlement
Averaging Period for each such Option, of (i) the Daily Option
Value for such Valid Day, divided by (ii) the Relevant Price on
such Valid Day, divided by (iii) the number of Valid Days in
the Settlement Averaging Period; provided that, except in the
case of Par Cash Combination Settlement, in no event shall the
Net Share Settlement Amount for any Option exceed a number of
Shares equal to the Applicable Limit for such Option divided by
the Applicable Limit Price on the Settlement Date for such
Option.
	 	 	 	 
	 	 	 	Dealer will deliver cash in lieu of any fractional Shares to be
delivered with respect to any Net Share Settlement Share Amount
valued at the Relevant Price for the last Valid Day of the
Settlement Averaging Period.
	 	 	 	 
	 	Combination Settlement: 

	 	If Combination Settlement is applicable to any Option exercised
or deemed exercised hereunder, Dealer will deliver to
Counterparty, on the relevant Settlement Date for each such
Option:
	 	 	 	 
	 	 	 	(i) an amount of cash (the “Combination Settlement Cash
Amount”) equal to the sum, for each Valid Day during the
Settlement Averaging Period for such Option, of (A) an amount
(the “Daily Combination Settlement Cash Amount”) equal to the
lesser of (1) the product of (x) the Applicable Percentage and
(y) the Specified Cash Amount minus USD 1,000 and (2) the Daily
Option Value, divided by (B) the number of Valid Days in the
Settlement Averaging Period; provided that if the calculation
in clause (A) above results in zero or a negative number for
any Valid Day, the Daily Combination Settlement Cash Amount for
such Valid Day shall be deemed to be zero; and
	 	 	 	 
	 	 	 	(ii) a number of Shares (the “Combination Settlement Share
Amount”) equal to the sum, for each Valid Day during the
Settlement Averaging Period for such Option,






6









 






			
	 
	 	






	 	 	 	 

	 	 	 	of a number of Shares for such Valid Day (the “Daily Combination Settlement
Share Amount”) equal to (A) the Daily Option Value on such
Valid Day minus the Daily Combination Settlement Cash Amount
for such Valid Day, divided by (B) the Relevant Price on such
Valid Day, divided by (C) the number of Valid Days in the
Settlement Averaging Period; provided that if the calculation
in clause (A) above results in zero or a negative number for
any Valid Day, the Daily Combination Settlement Share Amount
for such Valid Day shall be deemed to be zero.
	 	 	 	 
	 	 	 	Dealer will deliver cash in lieu of any fractional Shares to be
delivered with respect to any Combination Settlement Share
Amount valued at the Relevant Price for the last Valid Day of
the Settlement Averaging Period.
	 	 	 	 
	 	Cash Settlement:

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

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

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

	 	On any day, the opening price as displayed under the heading
“Op” on Bloomberg page TWGP.UQ <equity> (or its
equivalent successor if such page is not available).
	 	 	 	 
	 	Valid Day:

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






7









 






			
	 
	 	






	 	 	 	 	 
	 	 	 	 	 
	 	 	 	listed or, if the Shares
are not then listed on a United States national or regional
securities exchange, on the principal other market on which the
Shares are then listed or admitted for trading. If the Shares
are not so listed or admitted for trading, “Valid Day” means a
Business Day.	 
	 	 	 	 	 	 	 
	 	Scheduled Valid Day:
	 	A day that is scheduled to be a Valid Day on the principal
United States national 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.	 
	 	 	 	 	 	 	 
	 	Business Day:
	 	Any day other than a Saturday, a Sunday or a day on which the
Federal Reserve Bank of New York is authorized or required by
law or executive order to close or be closed.	 
	 	 	 	 	 	 	 
	 	Relevant Price:
	 	On any Valid Day, the per Share volume-weighted average price
as displayed under the heading “Bloomberg VWAP” on Bloomberg
page TWGP.UQ <equity> AQR (or its equivalent successor if
such page is not available) in respect of the period from the
scheduled open of trading until the scheduled close of trading
of the primary trading session on such Valid Day (or if such
volume-weighted average price is unavailable, the market value
of one Share on such Valid Day, as determined by the
Calculation Agent using a volume-weighted average method). The
Relevant Price will be determined without regard to after hours
trading or any other trading outside of the regular trading
session trading hours.	 
	 	 	 	 	 	 	 
	 	Settlement Averaging Period:
	 	For any Option and regardless of the Settlement Method
applicable to such Option:	 
	 	 	 	 	 	 	 
	 	 
	 	(i)
	 	if the related Conversion Date occurs prior to the
Free Convertibility Date, the 40 consecutive Valid
Days commencing on, and including, the third Valid
Day following such Conversion Date; provided
that if the Notice of Exercise for such Option
specifies that Settlement in Shares or Low Cash
Combination Settlement applies to the related
Convertible Note, the Settlement Averaging Period
shall be the 80 consecutive Valid Day period commencing
on, and including, the second Valid Day immediately
following such Conversion Date; or	 
	 	 	 	 	 	 	 
	 	 
	 	(ii)
	 	if the related Conversion Date occurs on or following
the Free Convertibility Date, the 40 consecutive
Valid Days commencing on, and including, the
42nd Scheduled Valid Day immediately prior
to the Expiration Date; provided that if the Notice
of Exercise or Notice of Final Settlement Method, as
applicable, for such Option specifies that Settlement in
Shares or Low Cash	 






8









 






			
	 
	 	






	 	 	 	 	 	 	 

	 

	 	 
	 	 
	 	Combination Settlement
applies to the related Convertible Note, the
Settlement Averaging Period shall be the 80 consecutive
Valid Days commencing on, and including, the
82nd Scheduled Valid Day immediately prior
to the Expiration Date.






	 	 	 	 

	 	Settlement Date:

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

	 	USD
	 	 	 	 
	 	Other Applicable Provisions:

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

	 	Notwithstanding Section 9.11 of the Equity Definitions, the
parties acknowledge that any Shares delivered to Counterparty
shall be, upon delivery, subject to restrictions and
limitations arising from Counterparty’s status as issuer of the
Shares under applicable securities laws.







	3.
Additional Terms applicable to the Transaction.
	 
	Adjustments applicable to the Transaction: 






	 	 	 	 

	 	Potential Adjustment Events:

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

	 	Calculation Agent Adjustment, which means that, notwithstanding
Section 11.2(c) of the Equity Definitions, upon any Potential
Adjustment Event that results in an adjustment to the
Conversion Rate (as defined in the Indenture) of the
Convertible Notes, the Calculation Agent shall make a
corresponding adjustment to any one or more of the Strike
Price, Number of Options, Option Entitlement and any other
variable relevant to the exercise, settlement or payment for
the Transaction; provided that, notwithstanding the foregoing,
if the Calculation Agent in good faith disagrees with any
adjustment to the Convertible Notes that involves an exercise
of discretion by Counterparty or its board of directors
(including, without limitation, pursuant to Section 14.05 of
the Indenture or in connection with any proportional adjustment
or the determination of the fair






9









 






			
	 
	 	






	 	 	 	 

	 	 	 	value of any securities,
property, rights or other assets), then in each such case, the
Calculation Agent will determine the adjustment to be made to
any one or more of the Strike Price, Number of Options, Option
Entitlement and any other variable relevant to the exercise,
settlement or payment for the Transaction in a commercially
reasonable manner; provided, further, that, notwithstanding the
foregoing, if any Potential Adjustment Event occurs during the
Settlement Averaging Period but no adjustment was made to any
Convertible Note under the Indenture because the relevant
Holder (as such term is defined in the Indenture) was deemed to
be a record owner of the underlying Shares on the related
Conversion Date, then the Calculation Agent shall make an
adjustment, as determined by it, to the terms hereof in order
to account for such Potential Adjustment Event.
	 	 	 	 
	 	Dilution Adjustment Provisions:
	 	Section 14.04(a), (b), (c), (d) and (e) and Section 14.05 of
the Indenture.







	Extraordinary Events applicable to the Transaction:





	 	 	 	 

	 	Merger Events:
	 	Applicable; provided that notwithstanding Section 12.1(b) of
the Equity Definitions, a “Merger Event” means the occurrence
of any event or condition set forth in the definition of
“Merger Event” in Section 14.07(a) of the Indenture.
	 	 	 	 
	 	Tender Offers:
	 	Applicable; provided that notwithstanding Section 12.1(d) of
the Equity Definitions, a “Tender Offer” means the occurrence
of any event or condition set forth in Section 14.04(e) of the
Indenture.
	 	 	 	 
	 	Consequence of Merger Events /Tender
Offers:
	 	Notwithstanding Section 12.2 and Section 12.3 of the Equity
Definitions, upon the occurrence of a Merger Event or a Tender
Offer, the Calculation Agent shall make a corresponding
adjustment in respect of any adjustment under the Indenture to
any one or more of the nature of the Shares (in the case of a
Merger Event), Strike Price, Number of Options, Option
Entitlement and any other variable relevant to the exercise,
settlement or payment for the Transaction; provided, however,
that such adjustment shall be made without regard to any
adjustment to the Conversion Rate pursuant to any Excluded
Provision; provided further that if, with respect to a Merger
Event or a Tender Offer, (i) the consideration for the Shares
includes (or, at the option of a holder of Shares, may include)
shares of an entity or person not organized under the laws of
the United States, any State thereof or the District of
Columbia or (ii) the Counterparty to the Transaction following
such Merger Event or Tender Offer, will not be the Issuer
following such Merger Event or Tender Offer, then Cancellation






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	 	 	 	and Payment (Calculation Agent Determination) shall apply.
	 
	 	 	 	 
	 

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

	 	Additional Disruption Events:	 	 
	 
	 	 	 	 
	 

	 	Change in Law:

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

	 	Failure to Deliver:

	 	Not Applicable
	 
	 	 	 	 
	 

	 	Hedging Disruption:

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






	 	 	 	 	 

	 

	 	Hedging Party:
	 	For all applicable Additional Disruption Events, Dealer.
	 
	 	 	 	 
	 

	 	Determining Party:
	 	For all applicable Extraordinary Events, Dealer.
	 
	 	 	 	 
	 

	 	Non-Reliance:
	 	Applicable
	 
	 	 	 	 
	 

	 	Agreements and Acknowledgements	 	 
	 
	 	 	 	 
	 

	 	Regarding Hedging Activities:
	 	Applicable
	 
	 	 	 	 
	 

	 	Additional Acknowledgments:
	 	Applicable
	 
	4.   Calculation Agent. 	 	Dealer







	 
	5.	 	Account Details.






	 	(a)	 	Account for payments to Counterparty:


Bank: State Street Trust Bank

ABA#: 011000028

Acct No.: 00153577

Beneficiary: Tower Group Inc./4RAX

Ref: Tower Group Inc./4RAX




11









 











			
	 
	 	







	 	 	 	Account for delivery of Shares to Counterparty:
	 
	 	 	 	To be provided by Counterparty.
	 
	 	(b)	 	Account for payments to Dealer:


Bank of America, N.A.

New York, NY

SWIFT: BOFAUS3N

Bank Routing: 026-009-593

Account Name: Bank of America

Account No. : 0012334-61892
	 
	 	 	 	Account for delivery of Shares from Dealer:
	 
	 	 	 	DTC 0773

Acct Name: Bank of America NA

Acct #: 116-00777






	6.	 	Offices.






	 	(a)	 	The Office of Counterparty for the Transaction is: Inapplicable, Counterparty
is not a Multibranch Party.
	 
	 	(b)	 	The Office of Dealer for the Transaction is: New York
	 
	 	 	 	Bank of America, N.A.

c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated

Bank of America Tower at One Bryant Park

New York, NY 10036






	7.	 	Notices.






	 	(a)	 	Address for notices or communications to Counterparty:
	 
	 	 	 	Tower Group, Inc.

120 Broadway, 31st Floor

New York, NY 10271

Attention: Treasurer

Telephone No.: (212) 655-2000

Facsimile No.: (212) 655-2199
	 
	 	(b)	 	Address for notices or communications to Dealer:
	 
	 	 	 	Bank of America, N.A.

c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated

Bank of America Tower at One Bryant Park

New York, NY 10036

Attn: John Servidio

Telephone: 646-855-7127

Facsimile: 704-208-2869






	8.	 	Representations and Warranties of Counterparty.
	 
	 	 	Each of the representations and warranties of Counterparty set forth in Section 3 of the
Purchase Agreement (the “Purchase Agreement”), dated as of September 14, 2010, between
Counterparty and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as representatives of the Initial Purchasers party thereto (the “Initial
Purchasers”), are true and correct and are hereby deemed to be




12









 











			
	 
	 	







	 	 	repeated to Dealer as if set
forth herein. Counterparty hereby further represents and warrants to Dealer on the date
hereof and on and as of the Premium Payment Date that:






	 	(a)	 	Counterparty is duly organized and validly existing and in good standing under
the laws of its jurisdiction of incorporation.
	 
	 	(b)	 	Counterparty has the corporate power and authority to execute and deliver this
Confirmation and to perform its obligations hereunder; and all action required to be
taken for the due and proper authorization, execution and delivery by it of this
Confirmation and the consummation by it of the transactions contemplated hereby has
been duly and validly taken.
	 
	 	(c)	 	This Confirmation has been duly authorized by Counterparty and, when duly
executed and delivered in accordance with its terms by each of the parties hereto, will
constitute a valid and legally binding agreement of Counterparty enforceable against
Counterparty in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally
or by equitable principles relating to enforceability.
	 
	 	(d)	 	The execution, delivery and performance by Counterparty of this Confirmation
and the consummation of the transactions contemplated hereby will not (i) conflict with
or result in a breach or violation of any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of Counterparty or any of its subsidiaries
pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which Counterparty or any of its subsidiaries is a party or by which
Counterparty or any of its subsidiaries is bound or to which any of the property or
assets of Counterparty or any of its subsidiaries is subject, (ii) result in any
violation of the provisions of the charter or by-laws or similar organizational
documents of Counterparty or any of its subsidiaries
or (iii) result in the violation of any law or statute or any judgment, order, rule
or regulation of any court or arbitrator or governmental or regulatory authority
applicable to Counterparty or any of its subsidiaries; except, in the case of
clauses (i) and (iii) above, for any such conflict, breach, default or violation
that would not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the business, properties, management, financial position,
stockholders’ equity, results of operations or prospects of Counterparty and its
subsidiaries taken as a whole or on the performance by Counterparty of its
obligations under this Confirmation (“Material Adverse Effect”).
	 
	 	(e)	 	No consent, approval, authorization, order, registration or qualification of or
with any court or arbitrator or governmental or regulatory authority is required for
the execution, delivery and performance by Counterparty of this Confirmation and the
consummation of the transactions contemplated hereby, except for (i) such consents,
approvals, authorizations, orders and registrations or qualifications as may be
required under applicable state securities laws or (ii) where the failure to obtain or
make any such consents, approvals, authorizations, orders and registrations or
qualifications would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect, provided that such failure to obtain or make any such
consents, approvals, authorizations, orders and registrations or qualifications does
not prevent Counterparty from performing its obligations under this Confirmation.
	 
	 	(f)	 	Counterparty is not and, after giving effect to the transactions contemplated
hereby, will not be required to register as an “investment company” or an entity
“controlled” by an “investment company” within the meaning of the Investment Company
Act of 1940, as amended, and the rules and regulations of the Securities and Exchange
Commission thereunder.
	 
	 	(g)	 	Counterparty is an “eligible contract participant” (as such term is defined in
Section 1a(12) of the Commodity Exchange Act, as amended, other than a person that is
an eligible contract participant under Section 1a(12)(C) of the Commodity Exchange
Act).




13









 











			
	 
	 	







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






	9.	 	Other Provisions.






	 	(a)	 	Opinions. Counterparty shall deliver to Dealer an opinion of counsel,
dated as of the Trade Date, with respect to the matters set forth in Sections 8(a)
through (e) of this Confirmation. Delivery of such opinion to Dealer shall be a
condition precedent for the purpose of Section 2(a)(iii) of the Agreement with respect
to each obligation of Dealer under Section 2(a)(i) of the Agreement.
	 
	 	(b)	 	Repurchase Notices. Counterparty shall, on any day on which
Counterparty effects any repurchase of Shares, promptly give Dealer a written notice of
such repurchase (a “Repurchase Notice”) on such day if following such repurchase, the
number of outstanding Shares as determined on such day is (i) less than 40.1 million
(in the case of the first such notice) or (ii) thereafter more than 2.7 million less
than the number of Shares included in the immediately preceding Repurchase Notice.
Counterparty agrees to indemnify and hold harmless Dealer and its affiliates and their
respective officers, directors, employees, affiliates, advisors, agents and controlling
persons (each, an “Indemnified Person”) from and against any and all losses (including
losses relating to Dealer’s hedging activities as a consequence of becoming, or of the
risk of becoming, a Section 16 “insider”, including without limitation, any forbearance
from hedging activities or cessation of hedging activities and any losses in connection
therewith with respect to the Transaction), claims, damages, judgments, liabilities and
expenses (including reasonable attorney’s fees), joint or several, which an Indemnified
Person may become subject to, as a result of Counterparty’s failure to provide Dealer
with a Repurchase Notice on the day and in the manner specified in this paragraph, and
to reimburse, within 30 days, upon written request, each of such Indemnified Persons
for any reasonable legal or other expenses incurred in
connection with investigating, preparing for, providing testimony or other evidence
in connection with or defending any of the foregoing. If any suit, action,
proceeding (including any governmental or regulatory investigation), claim or demand
shall be brought or asserted against the Indemnified Person as a result of
Counterparty’s failure to provide Dealer with a Repurchase Notice in accordance with
this paragraph, such Indemnified Person shall promptly notify Counterparty in
writing, and Counterparty, upon request of the Indemnified Person, shall retain
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others Counterparty may designate in such proceeding and
shall pay the reasonable out-of-pocket fees and expenses of such counsel related to
such proceeding. Counterparty shall not be liable for any settlement of any
proceeding contemplated by this paragraph that is effected without its written
consent, but if settled with such consent or if there be a final judgment for the
plaintiff, Counterparty agrees to indemnify any Indemnified Person from and against
any loss or liability by reason of such settlement or judgment. Counterparty shall
not, without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding contemplated by this paragraph
that is in respect of which any Indemnified Person is a party and indemnity has been
sought hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on claims that
are the subject matter of such proceeding on terms reasonably satisfactory to such
Indemnified Person. If the indemnification provided for in this paragraph is
unavailable to an Indemnified Person or insufficient in respect of any losses,
claims, damages or liabilities referred to therein, then Counterparty hereunder, in
lieu of indemnifying such Indemnified Person thereunder, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities. The remedies provided for in this paragraph (b) are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any Indemnified Person at law or in equity. The indemnity and
contribution agreements contained in this paragraph shall remain operative and in
full force and effect regardless of the termination of the Transaction.




14









 











			
	 
	 	







	 	(c)	 	Regulation M. Counterparty is not on the Trade Date engaged in a
distribution, as such term is used in Regulation M under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), of any securities of Counterparty, other than a
distribution meeting the requirements of the exception set forth in Rules 101(b)(10)
and 102(b)(7) of Regulation M. Counterparty shall not, until the second Scheduled
Trading Day immediately following the Effective Date, engage in any such distribution.
	 
	 	(d)	 	No Manipulation. Counterparty is not entering into the Transaction to
create actual or apparent trading activity in the Shares (or any security convertible
into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the
price of the Shares (or any security convertible into or exchangeable for the Shares)
in violation of the Exchange Act.
	 
	 	(e)	 	Transfer or Assignment.






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






	 	(A)	 	With respect to any Transfer Options,
Counterparty shall not be released from its notice and indemnification
obligations pursuant to Section 9(b) or any obligations under Section
9(n) or 9(s) of this Confirmation;
	 
	 	(B)	 	Any Transfer Options shall only be transferred
or assigned to a third party that is a United States person (as defined
in the Internal Revenue Code of 1986, as amended);
	 
	 	(C)	 	Such transfer or assignment shall be effected
on terms, including any reasonable undertakings by such third party
(including, but not limited to, an undertaking with respect to
compliance with applicable securities laws in a manner that, in the
reasonable judgment of Dealer, will not expose Dealer to material risks
under applicable securities laws) and execution of any documentation
and delivery of legal opinions with respect to securities laws and
other matters by such third party and Counterparty, as are requested
and reasonably satisfactory to Dealer;
	 
	 	(D)	 	Dealer will not, as a result of such transfer
and assignment, be required to pay the transferee on any payment date
an amount under Section 2(d)(i)(4) of the Agreement greater than an
amount that Dealer would have been required to pay to Counterparty in
the absence of such transfer and assignment;
	 
	 	(E)	 	An Event of Default, Potential Event of Default
or Termination Event will not occur as a result of such transfer and
assignment;
	 
	 	(F)	 	Without limiting the generality of clause (B),
Counterparty shall cause the transferee to make such Payee Tax
Representations and to provide such tax documentation as may be
reasonably requested by Dealer to permit Dealer to determine that
results described in clauses (D) and (E) will not occur upon or after
such transfer and assignment; and
	 
	 	(G)	 	Counterparty shall be responsible for all
reasonable costs and expenses, including reasonable counsel fees,
incurred by Dealer in connection with such transfer or assignment.




15









 











			
	 
	 	







	 	(ii)	 	Dealer may, without Counterparty’s consent, transfer or assign
all or any part of its rights or obligations under the Transaction at any time
to any affiliate of Dealer (A) that has a rating for its long term, unsecured
and unsubordinated indebtedness that is equal to or better than the best of
Dealer’s credit rating and the credit rating of any guarantor of Dealer’s
obligations hereunder, in each case, at the time of the transfer or assignment,
or (B) whose obligations hereunder will be guaranteed, pursuant to the terms of
a customary guarantee in a form used by Dealer generally for similar
transactions, by Dealer or any parent of Dealer that has a credit rating that
is equal to or better than the best of Dealer’s credit rating and the credit
rating of any guarantor of Dealer’s obligations hereunder, in each case, at the
time of the transfer or assignment; provided that any such transfer or
assignment shall be subject to the conditions that (I) following such transfer
or assignment, the terms and conditions of the Agreement as so transferred or
assigned (the “Transferred Agreement”) shall be substantially the same as the
terms and conditions of the Agreement immediately prior to such transfer or
assignment, (II) Counterparty will not be required to pay to the transferee an
amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) of the
Transferred Agreement greater than the amount in respect of which Counterparty
would have been required to pay to Dealer under Section 2(d)(i)(4) in the
absence of the transfer, (III) Counterparty will not receive any payment under
the Transferred Agreement from which an amount is required to be withheld or
deducted for or on account of a Tax with respect to which no additional amount
is required to be paid by the transferee under Section 2(d)(i)(4) of the
Transferred Agreement (other than by reason of Section 2(d)(i)(4)(A) or (B)
thereof), (IV) neither an Event of Default with respect to which Dealer is the
Defaulting Party nor a Termination Event with respect to which Dealer is the
sole Affected Party shall have occurred and be continuing at the time of the
transfer, and neither an Event of Default nor a Termination Event shall occur
as a result of the transfer, (V) each of Dealer and the transferee is a dealer
in “notional principal contracts” within the meaning of Section
1.446-3(c)(4)(iii) of the U.S. Treasury Regulations and in other derivatives,
and (VI) Dealer has used its
good faith efforts to provide prior notice to Counterparty of such transfer
and the proposed date of such transfer, and Dealer shall provide written
notice to Counterparty reasonably promptly following such transfer. In
addition, if at any time (A) the Section 16 Percentage exceeds 7.5%, (B) the
Option Equity Percentage exceeds 14.5%, or (C) the Share Amount exceeds the
Applicable Share Limit (if any applies) (any such condition described in
clauses (A), (B) or (C), an “Excess Ownership Position”), Dealer may,
without Counterparty’s consent, transfer or assign all or any part of its
rights or obligations under the Transaction to any third party who is a
dealer in “notional principal contracts” within the meaning of Section
1.446-3(c)(4)(iii) of the U.S. Treasury Regulations and in other
derivatives, and with a rating for its long term, unsecured and
unsubordinated indebtedness equal to or better than the lesser of (x) the
credit rating of Dealer at the time of the transfer and (y) A- by Standard
and Poor’s Rating Group, Inc. or its successor (“S&P”), or A3 by Moody’s
Investor Service, Inc. (“Moody’s”) or, if either S&P or Moody’s ceases to
rate such debt, at least an equivalent rating or better by a substitute
rating agency mutually agreed by Counterparty and Dealer. If at any time an
Excess Ownership Position exists, Dealer may designate any Exchange Business
Day as an Early Termination Date with respect to all or a portion of the
Transaction (the “Terminated Portion”) such that following such termination
no Excess Ownership Position exists; provided that Dealer may only designate
an Early Termination Date pursuant to this Section 9(e)(ii) if Dealer has
used its good faith efforts to notify Counterparty of such Excess Ownership
Position, and Dealer is unable, acting in good faith and after using its
commercially reasonable efforts, to effect a transfer or assignment of
Options to a third party in accordance with this Section 9(e)(ii) on pricing
terms reasonably acceptable to Dealer and within a time period reasonably
acceptable Dealer such that no Excess Ownership Position exists. In the
event that Dealer so designates an Early Termination Date with respect to a
Terminated Portion, a payment shall be made




16









 











			
	 
	 	







	 	 	 	pursuant to Section 6 of the
Agreement as if (1) an Early Termination Date had been designated in respect
of a Transaction having terms identical to the Transaction and a Number of
Options equal to the number of Options underlying the Terminated Portion,
(2) Counterparty were the sole Affected Party with respect to such partial
termination and (3) the Terminated Portion were the sole Affected
Transaction (and, for the avoidance of doubt, the provisions of Section 9(l)
shall apply to any amount that is payable by Dealer to Counterparty pursuant
to this sentence as if Counterparty was not the Affected Party). The
“Section 16 Percentage” as of any day is the fraction, expressed as a
percentage, (A) the numerator of which is the number of Shares that Dealer
and each person subject to aggregation of Shares with Dealer under Section
13 or Section 16 of the Exchange Act and rules promulgated thereunder
directly or indirectly beneficially own (as defined under Section 13 or
Section 16 of the Exchange Act and rules promulgated thereunder) and (B) the
denominator of which is the number of Shares outstanding. The “Option
Equity Percentage” as of any day is the fraction, expressed as a percentage,
(A) the numerator of which is the sum of (1) the product of the Number of
Options and the Option Entitlement and (2) the aggregate number of Shares
underlying any other call option transaction sold by Dealer to Counterparty,
and (B) the denominator of which is the number of Shares outstanding. The
“Share Amount” as of any day is the number of Shares that Dealer and any
person whose ownership position would be aggregated with that of Dealer
(Dealer or any such person, a “Dealer Person”) under any insurance or other
law, rule, regulation, regulatory order or organizational documents or
contracts of Counterparty that are, in each case, applicable to ownership of
Shares (“Applicable Restrictions”), owns, beneficially owns, constructively
owns, controls, holds the power to vote or otherwise meets a relevant
definition of ownership under any Applicable Restriction, as determined by
Dealer in its reasonable discretion. The “Applicable Share Limit” means a
number of Shares equal to (A) the minimum number of Shares that could give
rise to reporting or registration obligations or other requirements
(including obtaining prior approval from any person or entity) of a Dealer
Person, or could result in
an adverse effect on a Dealer Person, under any Applicable Restriction, as
determined by Dealer in its reasonable discretion, minus (B) 1% of the
number of Shares outstanding.
	 
	 	(iii)	 	Notwithstanding any other provision in this Confirmation to
the contrary requiring or allowing Dealer to purchase, sell, receive or deliver
any Shares or other securities, or make or receive any payment in cash, to or
from Counterparty, Dealer may designate any of its affiliates to purchase,
sell, receive or deliver such Shares or other securities, or to make or receive
such payment in cash, and otherwise to perform Dealer’s obligations in respect
of the Transaction and any such designee may assume such obligations. Dealer
shall be discharged of its obligations to Counterparty only to the extent of
any such performance.






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






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




17









 











			
	 
	 	







	 	(ii)	 	the aggregate number of Shares that Dealer will deliver to
Counterparty hereunder on all such Staggered Settlement Dates will equal the
number of Shares that Dealer would otherwise be required to deliver on such
Nominal Settlement Date; and
	 
	 	(iii)	 	if the Net Share Settlement terms set forth above were to
apply on the Nominal Settlement Date, then the Net Share Settlement terms will
apply on each Staggered Settlement Date, except that the Net Shares will be
allocated among such Staggered Settlement Dates as specified by Dealer in the
notice referred to in clause (i) above.






	 	(g)	 	[Reserved.]
	 
	 	(h)	 	Dividends. If at any time during the period from and including the
Effective Date, to but excluding the Expiration Date, (i) an ex-dividend date for a
regular quarterly cash dividend occurs with respect to the Shares (an “Ex-Dividend
Date”), and that dividend is less than the Regular Dividend on a per Share basis or
(ii) if no Ex-Dividend Date for a regular quarterly cash dividend occurs with respect
to the Shares in any quarterly dividend period of Counterparty, then the Calculation
Agent will make a corresponding adjustment to any one or more of the Strike Price,
Number of Options, Option Entitlement and/or any other variable relevant to the
exercise, settlement or payment for the Transaction to preserve the fair value of the
Options to Dealer after taking into account such dividend or lack thereof. “Regular
Dividend” shall mean USD 0.125 per Share per quarter. Upon any adjustment to the
Initial Dividend Threshold (as defined in the Indenture) for the Convertible Notes
pursuant to the Indenture, the Calculation Agent will make a corresponding adjustment
to the Regular Dividend for the Transaction.
	 
	 	(i)	 	Additional Termination Events. Notwithstanding anything to the
contrary in this Confirmation if an event of default with respect to Counterparty
occurs under the terms of the Convertible Notes as set forth in Section 6.01 of the
Indenture and results in the Convertible Notes becoming due and payable pursuant to the
terms of the Indenture before they would otherwise have been due and payable, then the
occurrence of such event shall constitute an Additional Termination Event
applicable to the Transaction and, with respect to such Additional Termination
Event, (A) Counterparty shall be deemed to be the sole Affected Party, (B) the
Transaction shall be the sole Affected Transaction and (C) Dealer shall be the party
entitled to designate an Early Termination Date pursuant to Section 6(b) of the
Agreement.
	 
	 	(j)	 	Amendments to Equity Definitions.






	 	(i)	 	Section 12.6(a)(ii) of the Equity Definitions is hereby amended
by (1) deleting from the fourth line thereof the word “or” after the word
“official” and inserting a comma therefor, and (2) deleting the semi-colon at
the end of subsection (B) thereof and inserting the following words therefor
“or (C) at Dealer’s option, the occurrence of any of the events specified in
Section 5(a)(vii)(1) through (9) of the ISDA Master Agreement with respect to
that Issuer.”
	 
	 	(ii)	 	Section 12.9(b)(i) of the Equity Definitions is hereby amended
by (1) replacing “either party may elect” with “Dealer may elect” and (2)
replacing “notice to the other party” with “notice to Counterparty” in the
first sentence of such section.






	 	(k)	 	No Setoff. Neither party shall have the right to set off any
obligation that it may have to the other party under the Transaction against any
obligation such other party may have to it, whether arising under the Agreement, this
Confirmation or any other agreement between the parties hereto, by operation of law or
otherwise.
	 
	 	(l)	 	Alternative Calculations and Payment on Early Termination and on Certain
Extraordinary Events. If in respect of the Transaction, an amount is payable by
Dealer to Counterparty (i) pursuant to Section 12.7 or Section 12.9 of the Equity
Definitions or (ii) pursuant to Section




18









 











			
	 
	 	







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





	 	 	 	 	 

	 

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

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

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

	 	Share Termination Delivery Unit:
	 	One Share or, if a Merger
Event has occurred and a
corresponding adjustment to
the Transaction has been






19









 





			
	 
	 	






	 	 	 	 	 

	 

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

	 	Failure to Deliver:
	 	Applicable
	 
	 	 	 	 
	 

	 	Other applicable provisions:
	 	If Share Termination
Alternative is applicable, the
provisions of Sections 9.8,
9.9, 9.11, 9.12 and 10.5 (as
modified above) of the Equity
Definitions will be
applicable, except that all
references in such provisions
to “Physically-settled” shall
be read as references to
“Share Termination Settled”
and all references to “Shares”
shall be read as references to
“Share Termination Delivery
Units”. “Share Termination
Settled” in relation to the
Transaction means that the
Share Termination Alternative
is applicable to the
Transaction.







	 	(m)	 	Waiver of Jury Trial. Each party waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by jury in respect of any
suit, action or proceeding relating to the Transaction. Each party (i) certifies that
no representative, agent or attorney of either party has represented, expressly or
otherwise, that such other party would not, in the event of such a suit, action or
proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the
other party have been induced to enter into the Transaction, as applicable, by, among
other things, the mutual waivers and certifications provided herein.
	 
	 	(n)	 	Registration. Counterparty hereby agrees that if, in the good faith
reasonable judgment of Dealer, the Shares (“Hedge Shares”) acquired by Dealer for the
purpose of hedging its obligations pursuant to the Transaction cannot be sold in the
public market by Dealer without registration
under the Securities Act of 1933, as amended (the “Securities Act”), Counterparty
shall, at its election, either (i) in order to allow Dealer to sell the Hedge Shares
in a registered offering, use commercially reasonable efforts to make available to
Dealer an effective registration statement under the Securities Act and enter into
an agreement, in customary form and in substance reasonably satisfactory to Dealer,
substantially in the form of an underwriting agreement for a registered secondary
offering; provided, however, that if Dealer, in its sole reasonable discretion, is
not satisfied with access to due diligence materials, the results of its due
diligence investigation, or the procedures and documentation for the registered
offering referred to above, then clause (ii) or clause (iii) of this paragraph shall
apply at the election of Counterparty, (ii) in order to allow Dealer to sell the
Hedge Shares in a private placement, enter into a private placement agreement
substantially similar to private placement purchase agreements customary for private
placements of equity securities, in form and in substance reasonably satisfactory to
Dealer (in which case, the Calculation Agent shall make any adjustments to the terms
of the Transaction that are necessary, in its reasonable judgment, to compensate
Dealer for any discount from the public market price of the Shares incurred on the
sale of Hedge Shares in a private placement), or (iii) purchase the Hedge Shares
from Dealer at the Relevant Price on such Exchange Business Days, and in the
amounts, requested by Dealer.
	 
	 	(o)	 	Tax Disclosure. Effective from the date of commencement of discussions
concerning the Transaction, Counterparty and each of its employees, representatives, or
other agents may disclose to any and all persons, without limitation of any kind, the
tax treatment and tax structure of the Transaction and all materials of any kind
(including opinions or other tax analyses) that are provided to Counterparty relating
to such tax treatment and tax structure.




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	 	(p)	 	Right to Extend. Dealer may postpone or add, in whole or in part, any
Valid Day or Valid Days during the Settlement Averaging Period or any other date of
valuation, payment or delivery by Dealer, with respect to some or all of the Options
hereunder, if Dealer determines, in its commercially reasonable judgment, that such
action is reasonably necessary or appropriate to preserve Dealer’s hedging or hedge
unwind activity hereunder in light of existing liquidity conditions or to enable Dealer
to effect purchases of Shares in connection with its hedging, hedge unwind or
settlement activity hereunder in a manner that would, if Dealer were Counterparty or an
affiliated purchaser of Counterparty, be in compliance with applicable legal,
regulatory or self-regulatory requirements, or with related policies and procedures
applicable to Dealer.
	 
	 	(q)	 	Status of Claims in Bankruptcy. Dealer acknowledges and agrees that
this Confirmation is not intended to convey to Dealer rights against Counterparty with
respect to the Transaction that are senior to the claims of common stockholders of
Counterparty in any United States bankruptcy proceedings of Counterparty; provided that
nothing herein shall limit or shall be deemed to limit Dealer’s right to pursue
remedies in the event of a breach by Counterparty of its obligations and agreements
with respect to the Transaction; provided, further, that nothing herein shall limit or
shall be deemed to limit Dealer’s rights in respect of any transactions other than the
Transaction.
	 
	 	(r)	 	Securities Contract; Swap Agreement. The parties hereto intend for (i)
the Transaction to be a “securities contract” and a “swap agreement” as defined in the
Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”), and the
parties hereto to be entitled to the protections afforded by, among other Sections,
Sections 362(b)(6), 362(b)(17), 546(e), 546(g), 555 and 560 of the Bankruptcy Code,
(ii) a party’s right to liquidate the Transaction and to exercise any other remedies
upon the occurrence of any Event of Default under the Agreement with respect to the
other party to constitute a “contractual right” as described in the Bankruptcy Code,
and (iii) each payment and delivery of cash, securities or other property hereunder to
constitute a “margin payment” or “settlement payment” and a “transfer” as defined in
the Bankruptcy Code.
	 
	 	(s)	 	Notice of Certain Other Events. Counterparty covenants and agrees that:






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






	 	(t)	 	Early Unwind. In the event the sale of the “Initial Securities” (as
defined in the Purchase Agreement) is not consummated with the Initial Purchasers for
any reason, or Counterparty fails to deliver to Dealer opinions of counsel as required
pursuant to Section 9(a), in each case by 5:00 p.m. (New York City time) on the Premium
Payment Date, or such later date as agreed upon by the parties (the Premium Payment
Date or such later date, the “Early Unwind Date”), the Transaction shall automatically
terminate (the “Early Unwind”) on the Early Unwind Date and (i) the Transaction and all
of the respective rights and obligations of Dealer and Counterparty under the
Transaction shall be cancelled and terminated and (ii) each party shall be released and
discharged by the other party from and agrees not to make any claim against the other
party with respect to any obligations or liabilities of the other party arising out of
and to be performed in




21









 











			
	 
	 	







	 	 	 	connection with the Transaction either prior to or after the
Early Unwind Date; provided that Counterparty shall purchase from Dealer on the Early
Unwind Date all Shares purchased by Dealer or one or more of its affiliates in
connection with the Transaction at the then prevailing market price. Each of Dealer
and Counterparty represent and acknowledge to the other that, subject to the proviso
included in this Section 9(t), upon an Early Unwind, all obligations with respect to
the Transaction shall be deemed fully and finally discharged.
	 
	 	(u)	 	Payment by Counterparty. In the event that (i) an Early Termination
Date occurs or is designated with respect to the Transaction as a result of a
Termination Event or an Event of Default (other than an Event of Default arising under
Section 5(a)(ii) or 5(a)(iv) of the Agreement) and, as a result, Counterparty owes to
Dealer an amount calculated under Section 6(e) of the Agreement, or (ii) Counterparty
owes to Dealer, pursuant to Section 12.7 or Section 12.9 of the Equity Definitions, an
amount calculated under Section 12.8 of the Equity Definitions, such amount shall be
deemed to be zero.




22









 











			
	 
	 	






     Counterparty hereby agrees (a) to check this Confirmation carefully and immediately upon
receipt so that errors or discrepancies can be promptly identified and rectified and (b) to confirm
that the foregoing (in the exact form provided by Dealer) correctly sets forth the terms of the
agreement between Dealer and 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 immediately returning an executed copy to Chris Hutmaker,
Facsimile No. 212-326-9882.





	 	 	 	 	 
	 	Very truly yours,



Bank of America, N.A.

 	 
	 	By:  	/s/ Christopher A. Hutmaker
 	 
	 	 	Authorized Signatory 	 
	 	 	Name: Christopher A. Hutmaker 	 
	 



Accepted and confirmed

as of the Trade Date:




	 	 	 	 
	Tower Group, Inc.

 	 
	By:  	/s/ William E. Hitselberger
 	 
	 	Authorized Signatory 	 
	 	Name: William E. Hitselberger