Document:

Exhibit 10.4

 

Deutsche Bank 

 

EXECUTION VERSION

Deutsche
Bank AG, London Branch

Winchester
House

1
Great Winchester St, London

EC2N
2DB

Telephone:  44 20 7545 8000

 

c/o
Deutsche Bank Securities Inc.

60
Wall Street

New
York, NY 10005

Telephone:
212-250-2500

 

	
   

  	
  September 16, 2010

  

 

	
  To:

  	
  American
  Equity Investment Life Holding Company

  
	
   

  	
  6000
  Westown Parkway

  
	
   

  	
  West
  Des Moines, IA 50266

  
	
   

  	
  Attention:

  	
  Treasurer

  
	
   

  	
  Telephone
  No.:

  	
  (515)
  221-0002

  
	
   

  	
  Facsimile
  No.:

  	
  (515)
  221-9947

  

 

Re:                             Call Option
Transaction

 

Internal
Reference Nr.: 400999

 

DEUTSCHE BANK AG IS NOT REGISTERED AS A BROKER DEALER UNDER
THE U.S. SECURITIES EXCHANGE ACT OF 1934. 
DEUTSCHE BANK SECURITIES INC. (“DBSI”) HAS ACTED SOLELY AS AGENT IN
CONNECTION WITH THIS TRANSACTION AND HAS NO OBLIGATION, BY WAY OF ISSUANCE,
ENDORSEMENT, GUARANTEE OR OTHERWISE WITH RESPECT TO THE PERFORMANCE OF EITHER
PARTY UNDER THE TRANSACTION.  AS SUCH,
ALL DELIVERY OF FUNDS, ASSETS, NOTICES, DEMANDS AND COMMUNICATIONS OF ANY KIND
RELATING TO THIS TRANSACTION BETWEEN PARTY A AND PARTY B SHALL BE TRANSMITTED
THROUGH DBSI.  DEUTSCHE BANK AG ACTING
THROUGH ITS LONDON BRANCH IS NOT A MEMBER OF THE SECURITIES INVESTOR PROTECTION
CORPORATION (SIPC).

 

The
purpose of this letter agreement (this “Confirmation”)
is to confirm the terms and conditions of the call option transaction entered
into between Deutsche Bank AG, London Branch (“Dealer”)
and  American Equity Investment Life
Holding Company  (“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 16, 2010 (the “Offering
Memorandum”) relating to the 3.50% Convertible Senior Notes due September 15,
2015 (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 170,000,000 (as increased by up to an
aggregate principal amount of USD 30,000,000 if and to the extent that the
Initial Purchasers (as defined herein) exercise their option to purchase
additional 

 

	
  Chairman
  of the Supervisory Board:  Clemens Börsig
 Board of Managing Directors: Hermann-Josef Lamberti, Josef Ackermann,
  Dr. Hugo Banziger,
  Anthony DiIorio

  	
   

  	
  Deutsche
  Bank AG is regulated by the FSA for the conduct of designated investment
  business in the UK, is a member of the London Stock Exchange and is a limited
  liability company incorporated in the Federal Republic of Germany HRB
  No. 30 000 District Court of Frankfurt am Main; Branch Registration
  No. in England and Wales BR000005, Registered address: Winchester House,
  1 Great Winchester Street, London EC2N 2DB.

  

 

 

Convertible
Notes pursuant to the Purchase Agreement (as defined herein)) pursuant to an
Indenture to be dated September 22, 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 16,
  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 1.00 per share (Exchange symbol
  “AEL”).

  
	
   

  	
   

  	
   

  
	
  Number
  of Options:

  	
   

  	
  170,000.  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:

  	
   

  	
  The
  fraction, expressed as a percentage, (i) the numerator of which is 60
  and (ii) the denominator of which is 170.

  

 

2

 

	
  Option
  Entitlement:

  	
   

  	
  A
  number equal to the product of the Applicable Percentage and 80.0000.

  
	
   

  	
   

  	
   

  
	
  Strike
  Price:

  	
   

  	
  USD
  12.5000

  
	
   

  	
   

  	
   

  
	
  Premium:
  

  	
   

  	
  USD
  11,100,000.00

  
	
   

  	
   

  	
   

  
	
  Premium
  Payment Date: 

  	
   

  	
  September 22,
  2010

  
	
   

  	
   

  	
   

  
	
  Exchange:
  

  	
   

  	
  The
  New York Stock Exchange

  
	
   

  	
   

  	
   

  
	
  Related
  Exchange(s): 

  	
   

  	
  All
  Exchanges

  
	
   

  	
   

  	
   

  
	
  Excluded
  Provisions:

  	
   

  	
  Section 14.03
  and Section 14.04(g) of the Indenture.

  
	
   

  	
   

  	
   

  
	
  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; provided
  that in no event shall a Conversion Date be deemed to occur hereunder (and no
  Option shall be exercised or deemed to be exercised hereunder) with respect
  to any Convertible Note surrendered for conversion in respect of which
  Counterparty has elected to designate (and such designation is accepted) a
  financial institution for exchange in lieu of conversion of such Convertible
  Note pursuant to Section 14.13 of the Indenture (regardless of whether
  such financial institution delivers any amounts due in respect of such
  Convertible Note, or whether such Convertible Note is resubmitted to
  Counterparty for conversion following a failure by such financial institution
  to deliver any such amounts or otherwise).

  
	
   

  	
   

  	
   

  
	
  Final
  Settlement Method Election Date:

  	
   

  	
  March 15,
  2015

  
	
   

  	
   

  	
   

  
	
  Expiration
  Time: 

  	
   

  	
  The
  Valuation Time

  
	
   

  	
   

  	
   

  
	
  Expiration
  Date: 

  	
   

  	
  September 15,
  2015, 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.

  

 

3

 

	
  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 (i) 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 or
  (ii) before 5:00 p.m. (New York City time) on the fifth Scheduled
  Valid Day immediately following the scheduled first day of the Settlement
  Averaging Period for the Options being exercised (in which 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 as appropriate to reflect the additional
  costs (including, but not limited to, hedging mismatches and market losses)
  and reasonable expenses incurred by Dealer in connection with its hedging activities
  (including the unwinding of any Hedge Position)  due to such notification occurring after
  the time specified in the immediately preceding clause (i)) of:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (A)         the number of such Options
  (without regard to any adjustments by the Calculation Agent in accordance
  with the immediately preceding clause (ii));

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (B)           in respect of any Options
  relating to Convertible Notes with a Conversion Date occurring prior to the
  Final Settlement Method Election Date, (I) the scheduled first day of
  the Settlement Averaging Period and the scheduled Settlement Date,
  (II) whether the condition set forth in Section 14.01(b)(i)(A) of
  the Indenture (the “Trading Price Condition”)
  was satisfied on such Conversion Date, (III) whether an Option
  Counterparty Reorganization Event (as defined below) has occurred as of the
  close of business on the Valid Day immediately following such Conversion
  Date, (IV) if either the Trading Price Condition was so satisfied or an
  Option Counterparty Reorganization Event has so occurred, the Relevant
  Settlement Method for such Options, (V) if the Relevant Settlement
  Method for such Options is Combination Settlement (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 Dollar Amount”),
  and (VI) if the Relevant Settlement Method for such Options is not Cash
  Settlement, such notice shall also include the information, representations,
  acknowledgements and agreements required pursuant to “Settlement Method
  Election Conditions” below;

  

 

4

 

	
   

  	
   

  	
  provided that,
  notwithstanding the immediately preceding clause (i), in respect of any
  Options relating to Convertible Notes with a Conversion Date occurring on or
  after the Final Settlement Method Election Date, such notice may be given on
  or prior to the Scheduled Valid Day immediately preceding the Expiration
  Date.

  
	
   

  	
   

  	
   

  
	
  Notice
  of Final Settlement Method:

  	
   

  	
  Notwithstanding
  anything to the contrary in the Equity Definitions or under “Automatic
  Exercise” above, in order to exercise any Options with a Conversion Date
  occurring on or after the Final Settlement Method Election Date in respect of
  which an the Option Counterparty Reorganization Event has occurred as of the
  close of business on the Final Settlement Method Election Date, Counterparty
  must notify Dealer in writing before 9:00 a.m. (New York City time) on
  the Final Settlement Method Election Date specifying:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)                that an Option
  Counterparty Reorganization Event has occurred as of the close of business on
  the Final Settlement Method Election Date;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)             the Relevant Settlement
  Method for such Options;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iii)          if the Relevant Settlement
  Method for such Options is Combination Settlement (as defined below), the
  Specified Dollar Amount for all Convertible Notes with Conversion Dates
  occurring on or after the Final Settlement Method Election Date; and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iv)         if the Relevant Settlement
  Method for such Options is not Cash Settlement, such notice shall also
  include the information, representations, acknowledgements and agreements
  required pursuant to “Settlement Method Election Conditions” below.

  
	
   

  	
   

  	
   

  
	
  Option
  Counterparty Reorganization Event:

  	
   

  	
  Either
  (i) Dealer or JPMorgan Chase Bank, National Association, or one or more
  “significant subsidiaries” (as defined in Article 1, Rule 1-02 of
  Regulation S-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of one or more of the foregoing (each such
  named party or significant subsidiary, an “Option
  Counterparty”) shall commence a voluntary case or other proceeding
  seeking liquidation, reorganization or other relief with respect to such
  Option Counterparty or its debts under any bankruptcy, insolvency or other
  similar law now or hereafter in effect or seeking the appointment of a
  trustee, receiver, liquidator, custodian or other similar official of such
  Option Counterparty or any substantial part of its property, or shall consent
  to any such relief or to the appointment of or taking possession by any such
  official in an involuntary case or other proceeding commenced against it, or
  shall make a general assignment for the benefit of creditors, or shall fail
  generally to pay its debts as they become due, or (ii) an involuntary
  case or other proceeding shall be commenced

  

 

5

 

	
   

  	
   

  	
  against
  one or more of the Option Counterparties seeking liquidation, reorganization
  or other relief with respect to such Option Counterparty or its debts under
  any bankruptcy, insolvency or other similar law now or hereafter in effect or
  seeking the appointment of a trustee, receiver, liquidator, custodian or
  other similar official of such Option Counterparty or any substantial part of
  its property, and such involuntary case or other proceeding shall remain
  undismissed and unstayed for a period of 30 consecutive days.

  
	
   

  	
   

  	
   

  
	
  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 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, contracts or future contracts
  relating to the Shares.”

  
	
   

  	
   

  	
   

  
	
  Settlement Terms.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Settlement
  Method:

  	
   

  	
  For
  any Option, Cash Settlement. Notwithstanding the forgoing:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)                in respect of any Option
  relating to a Convertible Note with a Conversion Date occurring prior to the
  Final Settlement Method Election Date, if (A) Counterparty has notified
  Dealer in the Notice of Exercise for such Option that either the Trading
  Price Condition was satisfied on such Conversion Date or an Option
  Counterparty Reorganization Event has occurred as of the close of business on
  the Valid Day immediately following such Conversion Date, and (B) the
  Settlement Method Election Conditions have been satisfied with respect to
  such Option, then the Settlement Method shall be the Relevant Settlement
  Method elected by Counterparty for such Option in such Notice of Exercise;
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)             in respect of any Option
  relating to a Convertible Note with a Conversion Date occurring on or after
  the Final Settlement Method Election Date, if (A) Counterparty has
  timely delivered a Notice of Final

  

 

6

 

	
   

  	
   

  	
  Settlement
  Method to Dealer stating that an Option Counterparty Reorganization Event has
  occurred as of the close of business on the Final Settlement Method Election
  Date, and (B) the Settlement Method Election Conditions have been
  satisfied with respect to such Option, then the Settlement Method shall be
  the Relevant Settlement Method elected by Counterparty for such Option in
  such Notice of Final Settlement Method;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  provided
  that if Counterparty fails to specify in such Notice of Exercise or
  Notice of Final Settlement Method the Relevant Settlement Method, Cash
  Settlement shall apply; provided further
  that if Counterparty elects Combination Settlement in such Notice of Exercise
  or Notice of Final Settlement Method, but fails to specify in such Notice of
  Exercise or Notice of Final Settlement Method the Specified Dollar Amount,
  the Settlement Method shall be Net Share Settlement.

  
	
   

  	
   

  	
   

  
	
  Relevant
  Settlement Method:

  	
   

  	
  In
  respect of any Option, subject to the Settlement Method Election Conditions:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)                if Counterparty has, in
  accordance with Section 14.02(a) of the Indenture, elected to
  settle its conversion obligations in respect of the related Convertible Note
  (A) entirely in Shares pursuant to Section 14.02(a)(iv)(A) 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)(iv)(C) of the Indenture with a Specified Dollar
  Amount less than USD 1,000 (such settlement method, “Low Cash
  Combination Settlement”) or (C) in a combination of cash and
  Shares pursuant to Section 14.02(a)(iv)(C) of the Indenture with a
  Specified Dollar Amount equal to USD 1,000, then, in each case, the
  Relevant Settlement Method for such Option shall be Net Share Settlement;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)             if Counterparty has, in
  accordance with Section 14.02(a) of the Indenture, 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)(iv)(C) of
  the Indenture with a Specified Dollar Amount greater than USD 1,000, then the
  Relevant Settlement Method for such Option shall be Combination Settlement;
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iii)          if Counterparty has, in
  accordance with Section 14.02(a) of the Indenture, elected to
  settle its conversion obligations in respect of the related Convertible Note
  entirely in cash pursuant to Section 14.02(a)(iv)(B) of the
  Indenture, then the Relevant Settlement Method for such Option shall be Cash
  Settlement.

  

 

7

 

 

	
  Settlement
  Method Election Conditions:

  	
   

  	
  In
  respect of any Option, for any Relevant Settlement Method other than Cash
  Settlement, such Relevant Settlement Method shall apply to such Option only
  if the Notice of Exercise or Notice of Final Settlement Method, as
  applicable, for such Option 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
  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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (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.

  
	
   

  	
   

  	
   

  
	
  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.

  
	
   

  	
   

  	
   

  
	
  Net
  Share Settlement:

  	
   

  	
  If
  Net Share Settlement is applicable to any Option exercised or deemed
  exercised hereunder, Dealer will

  

 

8

 

	
   

  	
   

  	
  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 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 an
  amount of cash for such Valid Day (the “Daily Combination
  Settlement Cash Amount”) equal to (A) the lesser of
  (1) the product of (x) the Applicable Percentage and (y) the
  Specified Dollar 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, 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;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  provided that in no
  event shall the sum of (x) the Combination Settlement Cash Amount for
  any Option and (y) the Combination Settlement Share Amount for such

  

 

9

 

	
   

  	
   

  	
  Option,
  multiplied by the Applicable Limit
  Price on the Settlement Date for such Option, exceed the Applicable Limit for
  such Option.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  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.

  
	
   

  	
   

  	
   

  
	
  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 AEL <equity> (or any successor thereto).

  
	
   

  	
   

  	
   

  
	
  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 securities exchange on which the Shares are then listed or,
  if the Shares are not then listed on a United States national 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 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 AEL <equity> AQR
  (or its

  

 

10

 

	
   

  	
   

  	
  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 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, regardless of the Settlement Method applicable to such Option:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)                if the related Conversion Date occurs prior to the Final Settlement Method
  Election Date, the 40 consecutive Valid Days commencing on,
  and including, the second Valid Day following such Conversion Date; provided that if the Notice of
  Exercise for such Option specifies that (A) the Trading Price Condition was satisfied
  on the Conversion Date for such related Convertible Note or an Option Counterparty
  Reorganization Event has occurred as of the close of business on the Valid
  Day immediately following such Conversion Date, and (B) 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 Final Settlement Method
  Election Date,  the 40 consecutive Valid Days
  commencing on, and including, the 42nd Scheduled Valid Day
  immediately prior to the Expiration Date; provided that if Counterparty has timely delivered
  a Notice of Final Settlement Method for such Option specifying that (A) an Option
  Counterparty Reorganization Event has occurred as of the close of business on
  the Final Settlement Method Election Date, and (B) 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 82nd Scheduled
  Valid Day immediately prior to the Expiration Date.

  
	
   

  	
   

  	
   

  
	
  Settlement
  Date:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Settlement
  Currency:

  	
   

  	
  USD

  

 

11

 

	
  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
  anything to the contrary in Equity Definitions (including, but not limited
  to, Section 9.11 thereof), the parties acknowledge that (i) 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, (ii) Dealer may deliver any
  Shares required to be delivered hereunder in certificated form in lieu of
  delivery through the Clearance System and (iii) any Shares delivered to
  Counterparty may be “restricted securities” (as defined in Rule 144
  under the Securities Act of 1933, as amended (the “Securities Act”)).

  
	
   

  	
   

  	
   

  
	
  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, 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 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

  

 

12

 

	
   

  	
   

  	
  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 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 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

  

 

13

 

	
   

  	
   

  	
  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:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  Hedging
  Disruption:

  	
   

  	
  Applicable;
  provided that:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)                Section 12.9(a)(v) of the Equity
  Definitions is hereby amended by inserting the following two phrases at the
  end of such Section:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “For
  the avoidance of doubt, the term “equity price risk” shall be deemed to
  include, but shall not be limited to, stock price and volatility risk. And,
  for the further avoidance of doubt, any such transactions or assets referred
  to in phrases (A) or (B) above must be available on commercially
  reasonable pricing terms.”; and

  
	
   

  	
   

  	
   

  
	
   

  	
   

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

  
	
   

  	
   

  	
   

  
	
  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 Acknowledgements Regarding Hedging Activities:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  Additional
  Acknowledgments:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  4.                                    Calculation
  Agent. 

  	
   

  	
  Dealer,
  whose judgments, determinations and calculations shall be made in good faith
  and in a commercially reasonable manner. Following any calculation by the
  Calculation Agent hereunder and a prior written request by Counterparty, the
  Calculation Agent shall provide Counterparty a written explanation of any
  calculation or adjustment made by it including, where applicable, a
  description of the methodology and the basis for such calculation or
  adjustment in reasonable detail, it being understood that the Calculation
  Agent shall not be obligated to disclose any proprietary models used by it
  for such calculation.

  

 

14

 

 

	
  5.

  	
  Account
  Details.

  
	
   

  	
   

  
	
   

  	
  (a)

  	
  Account
  for payments to Counterparty:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Bank:

  	
  West
  Bank

  
	
   

  	
   

  	
  ABA#:

  	
  073903354

  
	
   

  	
   

  	
  Acct No.:

  	
  905432

  
	
   

  	
   

  	
  Beneficiary:

  	
  American
  Equity Investment Life Holding Company

  
	
   

  	
   

  	
  Ref:

  	
  Derivatives

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Account
  for delivery of Shares to Counterparty:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DTC
  50108

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Account
  for payments to Dealer:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Deutsche Bank AG,
  London Branch

  
	
   

  	
   

  	
  The Bank of New York

  
	
   

  	
   

  	
  Bank Routing:
  021-000-018

  
	
   

  	
   

  	
  Account Name:
  Deutsche Bank Securities, Inc.

  
	
   

  	
   

  	
  Account No.:
  8900327634

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Account
  for delivery of Shares from Dealer:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  To
  be provided by Dealer

  
	
   

  	
   

  	
   

  
	
  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: London

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Deutsche Bank AG, London Branch

  
	
   

  	
   

  	
  Winchester house

  
	
   

  	
   

  	
  1 Great Winchester St, London

  
	
   

  	
   

  	
  EC2N 2DB

  
	
   

  	
   

  
	
  7.

  	
  Notices.

  
	
   

  	
   

  
	
   

  	
  (a)

  	
  Address
  for notices or communications to Counterparty:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  American
  Equity Investment Life Holding Company

  
	
   

  	
   

  	
  6000
  Westown Parkway

  
	
   

  	
   

  	
  West
  Des Moines, IA 50266

  
	
   

  	
   

  	
  Attention:

  	
  Treasurer

  
	
   

  	
   

  	
  Telephone
  No.:

  	
  (515)
  221-0002

  
	
   

  	
   

  	
  Facsimile
  No.:

  	
  (515)
  221-9947

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Address
  for notices or communications to Dealer:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Deutsche Bank AG,
  London Branch

  
	
   

  	
   

  	
  c/o Deutsche Bank
  Securities Inc.

  
	
   

  	
   

  	
  60 Wall Street

  
	
   

  	
   

  	
  New York, NY 10005

  
	
   

  	
   

  	
  Attention: Andrew
  Yaeger and Paul Stowell

  
	
   

  	
   

  	
  Telephone No:

  	
  212-250-6270

  
					

 

15

 

	
   

  	
   

  	
  Facsimile No:

  	
  212-797-8974

  
	
   

  	
   

  	
  Email:
  andrew.yaeger@db.com

  
	
   

  	
   

  	
  Email: paul.stowell@db.com

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Deutsche Bank AG,
  London Branch

  
	
   

  	
   

  	
  c/o Deutsche Bank
  Securities Inc.

  
	
   

  	
   

  	
  60 Wall Street

  
	
   

  	
   

  	
  New York, NY 10005

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Lars Kestner

  
	
   

  	
   

  	
  Telephone:

  	
  212-250-6043

  
	
   

  	
   

  	
  Facsimile:

  	
  646-593-8200

  
	
   

  	
   

  	
  Email: lars.kestner@db.com

  

 

8.                                      Representations
and Warranties of Counterparty.

 

Counterparty
hereby represents and warrants to Dealer on the date hereof and on and as of
the Premium Payment Date that:

 

(a)                                  Counterparty
has all necessary corporate power and authority to execute, deliver and perform
its obligations in respect of the Transaction; such execution, delivery and
performance have been duly authorized by all necessary corporate action on
Counterparty’s part; and this Confirmation has been duly and validly executed
and delivered by Counterparty and constitutes its valid and binding obligation,
enforceable against Counterparty in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity) and except that rights to indemnification and contribution hereunder
may be limited by federal or state securities laws or public policy relating
thereto.

 

(b)                                 Neither the
execution and delivery of this Confirmation nor the incurrence or performance
of obligations of Counterparty hereunder will conflict with or result in a
breach of the certificate of incorporation or by-laws (or any equivalent
documents) of Counterparty, or any applicable law or regulation, or any order,
writ, injunction or decree of any court or governmental authority or agency, or
any agreement or instrument filed as exhibits to Counterparty’s Annual Report
on Form 10-K for the year ended December 31, 2009, as updated by any
subsequent filings, 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
Counterparty or any of its subsidiaries is subject, or constitute a default
under, or result in the creation of any lien under, any such agreement or
instrument, in each case which would have a material adverse effect on the
Transaction or Dealer’s rights or obligations relating to the Transaction.

 

(c)                                  No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required in
connection with the execution, delivery or performance by Counterparty of this
Confirmation, except such as have been obtained or made and such as may be
required under the Securities Act or state securities laws.

 

(d)                                 Counterparty is
not and will not be required to register as an “investment company” as such
term is defined in the Investment Company Act of 1940, as amended.

 

(e)                                  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).

 

16

 

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

 

(g)                                 All reports and
other documents filed by Counterparty with the Securities and Exchange
Commission pursuant to the Exchange Act when considered as a whole (with the
more recent such reports and documents deemed to amend inconsistent statements
contained in any earlier such reports and documents), do not contain any untrue
statement of a material fact or omit to state any 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.

 

9.                                      Other
Provisions.

 

(a)                                  Opinions.  Counterparty shall deliver to Dealer an
opinion of counsel, dated as of the Premium Payment Date, with respect to the
matters set forth in Sections 8(a) through (c) 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 56.7 million (in the case of the first such
notice) or (ii) thereafter more than 1.7 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 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 or could have
been a party and indemnity could have 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 

 

17

 

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.

 

(c)                                  Regulation
M.  Counterparty is not on the
Trade Date engaged in a distribution, as such term is used in Regulation M
under 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) or otherwise 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(o) 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

 

18

 

(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.

 

(ii)                                Dealer may,
without Counterparty’s consent, transfer or assign all or any part of its
rights or obligations under the Transaction to any affiliate of Dealer (1) that
has a rating for its long term, unsecured and unsubordinated indebtedness that
is equal to or better than Dealer’s credit rating at the time of such transfer
or assignment, or (2) 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 Deutsche Bank AG.  If at any time at which (A) the Section 16
Percentage exceeds 8.0%, (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 is unable after using
its commercially reasonable efforts to effect a transfer or assignment of
Options in accordance with the preceding sentence within a time period
reasonably acceptable to Dealer such that no Excess Ownership Position exists,
then Dealer may designate any Exchange Business Day as an Early Termination
Date with respect to a portion of the Transaction (the “Terminated Portion”), such that following
such partial termination no Excess Ownership Position exists.  In the event that Dealer so designates an
Early Termination Date with respect to a portion of the Transaction, a payment
shall be made 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(m) 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 

 

19

 

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 to the extent of any such performance.

 

(f)                                    Ratings
Decline.  If at any
time the long term, unsecured and unsubordinated indebtedness of Dealer is
rated Ba1 or lower by Moody’s or BB+ or lower by S&P (any such rating, a “Ratings Downgrade”), then Counterparty may, at any time
following the occurrence and during the continuation of such Ratings Downgrade,
provide written notice to Dealer specifying that it elects for this Section 9(f) to
apply (a “Trigger Notice”).  Upon receipt by Dealer of a Trigger Notice
from Counterparty, Dealer shall promptly elect that either (i) the parties
shall negotiate in good faith terms for collateral arrangements pursuant to
which Dealer is required to provide collateral (including, but not limited to,
equity or equity-linked securities issued by Counterparty) to Counterparty in
respect of the Transaction with a value equal to the full mark-to-market
exposure of Counterparty under the Transaction, or (ii) an Additional
Termination Event shall occur and, with respect to such Additional Termination
Event, (A) Counterparty shall be deemed to be the sole Affected Party, and
(B) the Transaction shall be the sole Affected Transaction.

 

(g)                                 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;

 

(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)                             the Settlement
Method applicable on the Nominal Settlement Date will apply on each Staggered
Settlement Date, except that the cash and/or Shares deliverable to Counterparty
will be allocated among such Staggered Settlement Dates as specified by Dealer
in the notice referred to in clause (i) above.

 

(h)                                 Method of Delivery.  Whenever
delivery of funds or other assets is required hereunder by or to Counterparty,
such delivery shall be effected through DBSI. 
In addition, all notices, demands and communications of any kind
relating to the Transaction between Dealer and Counterparty shall be
transmitted exclusively through DBSI.

 

(i)                                     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 annual 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 annual cash dividend occurs with respect to the
Shares in any annual 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 0.08 per Share per calendar year.  Upon any adjustment to the Initial Dividend
Threshold (as defined in the 

 

20

 

Indenture) for the Convertible Notes pursuant to
the Indenture, the Calculation Agent will make a corresponding adjustment to
the Regular Dividend for the Transaction.

 

(j)                                   Additional Termination Events.  Notwithstanding anything to
the contrary in this Confirmation:

 

(i)                                       If an event of
default with respect to Counterparty that results in an acceleration of the
Convertible Notes pursuant to the terms of the Indenture occurs under the terms
of the Convertible Notes as set forth in Section 6.01 of the Indenture,
then such event of default 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
designate, at its own election or at Counterparty’s request, an Exchange
Business Day (which Exchange Business Day shall be on or as promptly as
reasonably practicable after the occurrence of such acceleration) as an Early
Termination Date pursuant to Section 6(b) of the Agreement.

 

(ii)                                    Following any
repurchase of Convertible Notes (whether pursuant to Section 15.02 of the
Indenture in connection with a Fundamental Change (as defined in the Indenture)
or otherwise), Counterparty may notify Dealer of such repurchase and the aggregate
principal amount of Convertible Notes so repurchased and cancelled (any such
notice, a “Repurchase Notice”). 
The receipt by Dealer from Counterparty of any Repurchase Notice shall
constitute an Additional Termination Event as provided in this Section 9(j)(ii).
Upon receipt of any such Repurchase Notice, Dealer shall designate an Exchange
Business Day following receipt of such Repurchase Notice (which Exchange
Business Day shall be on or as promptly as reasonably practicable after the
related settlement date for the repurchase of such Convertible Notes) as an
Early Termination Date with respect to the portion of this Transaction
corresponding to a number of Options (the “Repurchase
Options”) equal to the lesser of (A) the aggregate principal
amount of such Convertible Notes specified in such Repurchase Notice, divided by USD 1,000 and (B) the Number of Options as
of the date Dealer designates such Early Termination Date and, as of such date,
the Number of Options shall be reduced by the number of Repurchase
Options.  Any payment hereunder with respect to such termination shall be
calculated 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 this Transaction and a Number of Options equal to the number of
Repurchase Options, (2) Counterparty were the sole Affected Party with
respect to such Additional Termination Event and (3) the terminated
portion of the Transaction were the sole Affected Transaction.

 

(iii)                                 The receipt by
Dealer from Counterparty, within the applicable time period set forth under “Notice
of Exercise” above, of any Notice of Exercise in respect of Options that
relates to Convertible Notes as to which additional Shares would be added to
the Conversion Rate pursuant to Section 14.03 of the Indenture in
connection with a “Fundamental Change” (as defined in the Indenture) shall
constitute an Additional Termination Event as provided in this Section 9(j)(iii). 
Upon receipt of any such Notice of Exercise, Dealer shall designate an Exchange
Business Day following such Additional Termination Event (which Exchange
Business Day shall be on or as promptly as reasonably practicable after the
related settlement date for such Convertible Notes) as an Early Termination
Date with respect to the portion of this Transaction corresponding to a number
of Options (the “Make-Whole Conversion
Options”) equal to the lesser of (A) the number of such Options
specified in such Notice of Exercise and (B) the Number of Options as of
the date Dealer designates such Early Termination Date and, as of such date,
the Number of Options shall be reduced by the number of Make-Whole Conversion
Options.  Any payment hereunder with respect to such termination (the “Make-Whole Unwind Payment”) shall be
calculated 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 this Transaction and a Number of Options equal to the number of
Make-

 

21

 

 

Whole
Conversion Options, (2) Counterparty were the sole Affected Party with
respect to such Additional Termination Event and (3) the terminated
portion of the Transaction were the sole Affected Transaction (and, for the
avoidance of doubt, in determining the amount payable pursuant to Section 6
of the Agreement, the Calculation Agent shall not take into account any
adjustments to the Option Entitlement that result from corresponding
adjustments to the Conversion Rate pursuant to Section 14.03 of the Indenture);
provided that the amount of cash
deliverable in respect of such early termination by Dealer to Counterparty
shall not be greater than the product of (x) the Applicable Percentage and
(y) the excess of (I) (1) the number of Make-Whole Conversion Options
multiplied by (2) the
Conversion Rate (after taking into account any applicable adjustments to the
Conversion Rate pursuant to Section 14.03 of the Indenture) multiplied by (3) a price per Share
determined by the Calculation Agent over (II) the aggregate principal
amount of such Convertible Notes, as determined by the Calculation Agent in a commercially
reasonable manner.  Counterparty may
irrevocably elect, if so designated in its Notice of Exercise to Dealer as set
forth above, to receive the Make-Whole Unwind Payment in Shares, in which case,
in lieu of making such Make-Whole Unwind Payment as set forth above, Dealer
shall deliver to Counterparty, within a commercially reasonable period of time
after such designation as determined by Dealer (taking into account existing
liquidity conditions and Dealer’s hedging and hedge unwind activity or
settlement activity in connection with such delivery) a number of Shares equal
to such Make-Whole Unwind Payment divided by
a price per Share determined by the Calculation Agent in good faith and in a
commercially reasonable manner.

 

(k)                                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.

 

(l)                                   Setoff.  Each party waives any and all rights it may
have to set off obligations arising under the Agreement and the Transaction
against other obligations between the parties, whether arising under any other
agreement, applicable law or otherwise.

 

(m)                             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 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 

 

22

 

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
  applicable, Dealer shall deliver to Counterparty the Share Termination
  Delivery Property on, or within a commercially reasonable period of time
  after, the date when the relevant 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 such 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 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 and the provisions set
  forth opposite the caption “Representation and Agreement” in Section 2
  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

  

 

23

 

	
   

  	
  “Share
  Termination Delivery Units”.  “Share
  Termination Settled” in relation to the Transaction means that the Share
  Termination Alternative is applicable to the Transaction.

  

 

(n)                                 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.

 

(o)                                 Registration.  Counterparty hereby agrees that if, in the
good faith reasonable judgment of Dealer, 
based on the advice of outside counsel, 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, Counterparty shall, at
its election, either (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 and enter into an agreement, in form and
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 substance 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.

 

(p)                                 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.

 

(q)                                 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 reasonably
determines, in its discretion, 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.

 

(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) 

 

24

 

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 that the sale of
the “Underwritten Securities” (as defined in the Purchase Agreement (the “Purchase Agreement”), dated as of September 16, 2010,
between Counterparty and J.P. Morgan Securities LLC, as representative of the
Initial Purchasers party thereto (the “Initial Purchasers”))
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”), then 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 connection
with the Transaction either prior to or after the Early Unwind Date; provided that Counterparty shall, to the
extent permitted by the Credit
Agreement, dated as of November 20, 2006, among Counterparty, as Borrower,
the several lenders from time to time party thereto, Keybank National
Association, as Administrative Agent, Co-Lead Arranger, Sole Book Runner and
Swingline Lender, and LaSalle Bank National Association, as Co-Lead Arranger,
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.

 

25

 

Please confirm that the foregoing correctly
sets forth the terms of our agreement by sending to us a letter or telex
substantially similar to this facsimile, which letter or telex sets forth the
material terms of the Transaction to which this Confirmation relates and
indicates your agreement to those terms. Dealer will make the time of execution
of the Transaction available upon request.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Dealer
  is regulated by the Financial Services Authority.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Deutsche
  Bank AG, London Branch

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Lars Kestner

  
	
   

  	
   

  	
  Name:

  	
  Lars
  Kestner

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Natalie Horton

  
	
   

  	
   

  	
  Name:

  	
  Natalie
  Horton

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Deutsche
  Bank Securities Inc., acting solely as Agent in connection with the
  Transaction

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Lars Kestner

  
	
   

  	
   

  	
  Name:

  	
  Lars
  Kestner

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Natalie Horton

  
	
   

  	
   

  	
  Name:

  	
  Natalie
  Horton

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Accepted and confirmed

  	
   

  	
   

  	
   

  
	
  as of the Trade Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  American Equity Investment Life
  Holding Company

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  John M. Matovina

  	
   

  	
   

  	
   

  
	
  Authorized Signatory

  	
   

  	
   

  	
   

  
	
  Name:

  	
  John
  M. Matovina

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Chief
  Financial Officer & Treasurer

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Chairman
  of the Supervisory Board:  Clemens Börsig
 Board of Managing Directors: Hermann-Josef Lamberti, Josef Ackermann,
  Dr. Hugo Banziger,
  Anthony DiIorio

  	
   

  	
  Deutsche
  Bank AG is regulated by the FSA for the conduct of designated investment
  business in the UK, is a member of the London Stock Exchange and is a limited
  liability company incorporated in the Federal Republic of Germany HRB
  No. 30 000 District Court of Frankfurt am Main; Branch Registration
  No. in England and Wales BR000005, Registered address: Winchester House,
  1 Great Winchester Street, London EC2N 2DB.Exhibit
10.5

 

Deutsche Bank 

 

EXECUTION VERSION

 

Deutsche
Bank AG, London Branch

Winchester
House

1
Great Winchester St, London

EC2N
2DB

Telephone:  44 20 7545 8000

 

c/o
Deutsche Bank Securities Inc.

60
Wall Street

New
York, NY 10005

Telephone:
212-250-2500

 

September 16,
2010

 

To:                           American
Equity Investment Life Holding Company

6000 Westown Parkway

West Des Moines, IA 50266

Attention:                                       Treasurer

Telephone No.:           (515) 221-0002

Facsimile No.:                   (515) 221-9947

 

Re:
                          Base Warrants

 

Internal
Reference Nr.: 401000

 

DEUTSCHE BANK AG IS NOT REGISTERED AS A BROKER DEALER UNDER
THE U.S. SECURITIES EXCHANGE ACT OF 1934. 
DEUTSCHE BANK SECURITIES INC. (“DBSI”) HAS ACTED SOLELY AS AGENT IN
CONNECTION WITH THIS TRANSACTION AND HAS NO OBLIGATION, BY WAY OF ISSUANCE,
ENDORSEMENT, GUARANTEE OR OTHERWISE WITH RESPECT TO THE PERFORMANCE OF EITHER
PARTY UNDER THE TRANSACTION.  AS SUCH,
ALL DELIVERY OF FUNDS, ASSETS, NOTICES, DEMANDS AND COMMUNICATIONS OF ANY KIND
RELATING TO THIS TRANSACTION BETWEEN PARTY A AND PARTY B SHALL BE TRANSMITTED
THROUGH DBSI.  DEUTSCHE BANK AG ACTING
THROUGH ITS LONDON BRANCH IS NOT A MEMBER OF THE SECURITIES INVESTOR PROTECTION
CORPORATION (SIPC).

 

The
purpose of this letter agreement (this “Confirmation”)
is to confirm the terms and conditions of the Warrants issued by American
Equity Investment Life Holding Company  (“Company”) to Deutsche Bank AG, London Branch (“Dealer”) 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.  The Transaction shall be deemed to be a Share
Option Transaction within the meaning set forth in the Equity Definitions.

 

	
  Chairman
  of the Supervisory Board:  Clemens Börsig Board of Managing Directors:
  Hermann-Josef Lamberti, Josef Ackermann, Dr. Hugo Banziger, Anthony DiIorio

  	
   

  	
  Deutsche
  Bank AG is regulated by the FSA for the conduct of designated investment
  business in the UK, is a member of the London Stock Exchange and is a limited
  liability company incorporated in the Federal Republic of Germany HRB
  No. 30 000 District Court of Frankfurt am Main; Branch Registration
  No. in England and Wales BR000005, Registered address: Winchester House,
  1 Great Winchester Street, London EC2N 2DB.

  

 

 

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

 

	
  General Terms.

  	
   

  
	
   

  	
   

  
	
  Trade
  Date:

  	
  September 16,
  2010

  
	
   

  	
   

  
	
  Effective
  Date:

  	
  The
  third Exchange Business Day immediately prior to the Premium Payment Date

  
	
   

  	
   

  
	
  Warrants:

  	
  Equity
  call warrants, each giving the holder the right to purchase a number of
  Shares equal to the Warrant Entitlement at a price per Share equal to the
  Strike Price, subject to the terms set forth under the caption “Settlement
  Terms” below. For the purposes of the Equity Definitions, each reference to a
  Warrant herein shall be deemed to be a reference to a Call Option.

  
	
   

  	
   

  
	
  Warrant
  Style:

  	
  European

  
	
   

  	
   

  
	
  Seller:

  	
  Company

  
	
   

  	
   

  
	
  Buyer:

  	
  Dealer

  
	
   

  	
   

  
	
  Shares:

  	
  The
  common stock of Company, par value USD 1.00 per Share (Exchange symbol “AEL”)

  
	
   

  	
   

  
	
  Number
  of Warrants:

  	
  4,800,000.
  For the avoidance of doubt, the Number of Warrants shall be reduced by any
  Warrants exercised or deemed exercised hereunder. In no event will the Number
  of Warrants be less than zero.

  
	
   

  	
   

  
	
  Warrant
  Entitlement:

  	
  One
  Share per Warrant

  
	
   

  	
   

  
	
  Maximum
  Number of Shares:

  	
  For
  any day, 4,116,628 Shares, minus the
  aggregate number of Shares delivered prior to such day pursuant to
  (i) this Confirmation and (ii) any other substantially similar
  confirmation for Warrants sold by Company to Dealer with a trade date within
  13 days of the Trade Date and with expiration dates the same as the
  Expiration Dates.

  
	
   

  	
   

  
	
   

  	
  Notwithstanding anything
  to the contrary in the Agreement, this Confirmation or the Equity
  Definitions,

  

 

2

 

	
   

  	
  in
  no event shall the Maximum Number of Shares be subject to adjustment, except
  for any adjustment pursuant to the terms of this Confirmation and the Equity
  Definitions in connection with a Potential Adjustment Event (as defined in
  Section 11.2(e)(i) to (vi) of the Equity Definitions, but
  excluding events specified in Section 11.2(e)(vii) of the Equity
  Definitions, and without any amendment to such Sections pursuant to the terms
  of this Confirmation).

  
	
   

  	
   

  
	
  Strike
  Price:

  	
  USD 16.0000

  
	
   

  	
   

  
	
  Premium:

  	
  USD
  4,680,000.00

  
	
   

  	
   

  
	
  Premium
  Payment Date:

  	
  September 22,
  2010

  
	
   

  	
   

  
	
  Exchange:

  	
  The
  New York Stock Exchange

  
	
   

  	
   

  
	
  Related
  Exchange(s):

  	
  All
  Exchanges

  
	
   

  	
   

  
	
  Procedures for Exercise.

  	
   

  
	
   

  	
   

  
	
  Expiration
  Time:

  	
  The
  Valuation Time

  
	
   

  	
   

  
	
  Expiration
  Dates:

  	
  Each
  Scheduled Trading Day during the period from, and including, the First
  Expiration Date to, but excluding, the 120th Scheduled Trading Day following the First
  Expiration Date shall be an “Expiration Date” for a number of Warrants equal
  to the Daily Number of Warrants on such date; provided that, notwithstanding anything to the contrary in
  the Equity Definitions, if any such date is a Disrupted Day, the Calculation
  Agent shall make adjustments, if applicable, to the Daily Number of Warrants
  or shall reduce such Daily Number of Warrants to zero for which such day
  shall be an Expiration Date and shall designate a Scheduled Trading Day or a
  number of Scheduled Trading Days as the Expiration Date(s) for the remaining
  Daily Number of Warrants or a portion thereof for the originally scheduled
  Expiration Date; and provided  further that if such Expiration Date has not occurred
  pursuant to this clause as of the eighth Scheduled Trading Day following the
  last scheduled Expiration Date under the Transaction, the Calculation Agent
  shall have the right to declare such Scheduled Trading Day to be the final
  Expiration Date and the Calculation Agent shall determine its good faith
  estimate of the fair market value for the Shares as of the Valuation Time on
  that eighth Scheduled Trading Day or on any subsequent Scheduled Trading Day,
  as the Calculation Agent shall determine using commercially reasonable means.

  
	
   

  	
   

  
	
  First
  Expiration Date:

  	
  December 14,
  2015 (or if such day is not a Scheduled Trading Day, the next following
  Scheduled Trading Day), subject to Market Disruption Event below.

  
	
   

  	
   

  
	
  Daily
  Number of Warrants:

  	
  For
  any Expiration Date, the Number of Warrants that have not expired or been
  exercised as of such day, divided

  

 

3

 

	
   

  	
  by
  the remaining number of Expiration Dates (including such day), rounded down
  to the nearest whole number, subject to adjustment pursuant to the provisos
  to “Expiration Dates”.

  
	
   

  	
   

  
	
  Automatic
  Exercise:

  	
  Applicable;
  and means that for each Expiration Date, a number of Warrants equal to the
  Daily Number of Warrants for such Expiration Date will be deemed to be
  automatically exercised at the Expiration Time on such Expiration Date.

  
	
   

  	
   

  
	
  Market
  Disruption Event:

  	
  Section 6.3(a)(ii) of
  the Equity Definitions is hereby amended by replacing clause (ii) in its
  entirety with “(ii) an Exchange Disruption, or” and inserting
  immediately following clause (iii) the phrase “; in each case that the
  Calculation Agent determines is material.”

  
	
   

  	
   

  
	
  Valuation Terms.

  	
   

  
	
   

  	
   

  
	
  Valuation
  Time:

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

  
	
   

  	
   

  
	
  Valuation
  Date:

  	
  Each
  Exercise Date.

  
	
   

  	
   

  
	
  Settlement Terms.

  	
   

  
	
   

  	
   

  
	
  Settlement
  Method Election:

  	
  Applicable;
  provided that (i) references to
  “Physical Settlement” in Section 7.1 of the Equity Definitions shall be
  replaced by references to “Net Share Settlement”; (ii) Company may elect
  Cash Settlement only if Company represents and warrants to Dealer in writing
  on the date of such election that (A) Company is not in possession of
  any material non-public information regarding Company or the Shares,
  (B) Company is electing Cash Settlement in good faith and not as part of
  a plan or scheme to evade compliance with the federal securities laws, and
  (C) the assets of Company at their fair valuation exceed the liabilities
  of Company (including contingent liabilities), the capital of Company is adequate
  to conduct the business of Company, and Company has the ability to pay its
  debts and obligations as such debts mature and does not intend to, or does
  not believe that it will, incur debt beyond its ability to pay as such debts
  mature; and (iii) the same election of settlement method shall apply to
  all Expiration Dates hereunder.

  
	
   

  	
   

  
	
  Electing
  Party:

  	
  Company

  
	
   

  	
   

  
	
  Settlement
  Method Election Date:

  	
  The
  third Scheduled Trading Day immediately preceding the First Expiration Date.

  
	
   

  	
   

  
	
  Default
  Settlement Method:

  	
  Net
  Share Settlement

  
	
   

  	
   

  
	
  Net
  Share Settlement:

  	
  If
  Net Share Settlement is applicable, then on the relevant Settlement Date,
  Company shall deliver to Dealer a number of Shares equal to the Share
  Delivery Quantity for such Settlement Date to the account specified hereto
  free of payment through the Clearance System.

  

 

4

 

	
  Share
  Delivery Quantity:

  	
  For
  any Settlement Date, a number of Shares, as calculated by the Calculation
  Agent, equal to the Net Share Settlement Amount for such Settlement Date divided by the Settlement Price on the Valuation Date for
  such Settlement Date, rounded down to the nearest whole number plus any Fractional Share Amount; provided
  that in no event shall the Share Delivery Quantity for any Settlement Date
  exceed the Maximum Number of Shares for such Settlement Date.

  
	
   

  	
   

  
	
  Net
  Share Settlement Amount:

  	
  For
  any Settlement Date, an amount equal to the product of (i) the Number of
  Warrants exercised or deemed exercised on the relevant Exercise Date, (ii) the Strike Price Differential for the relevant
  Valuation Date and (iii) the Warrant Entitlement.

  
	
   

  	
   

  
	
  Cash
  Settlement:

  	
  If
  Cash Settlement is applicable, on the relevant Settlement Date, Company shall
  pay to Dealer an amount of cash in USD equal to the Net Share Settlement
  Amount for such Settlement Date.

  
	
   

  	
   

  
	
  Settlement
  Price:

  	
  For
  any Valuation Date, the per Share volume-weighted average price as displayed
  under the heading “Bloomberg VWAP” on Bloomberg page AEL <equity>
  AQR (or any successor thereto) in respect of the period from the scheduled
  opening time of the Exchange to the Scheduled Closing Time on such Valuation
  Date (or if such volume-weighted average price is unavailable, the market
  value of one Share on such Valuation Date, as determined by the Calculation
  Agent). Notwithstanding the foregoing, if (i) any Expiration Date is a
  Disrupted Day and (ii) the Calculation Agent determines that such
  Expiration Date shall be an Expiration Date for fewer than the Daily Number
  of Warrants, as described above, then the Settlement Price for the relevant
  Valuation Date shall be the volume-weighted average price per Share on such
  Valuation Date on the Exchange, as determined by the Calculation Agent based
  on such sources as it deems appropriate using a volume-weighted methodology,
  for the portion of such Valuation Date for which the Calculation Agent
  determines there is no Market Disruption Event.

  
	
   

  	
   

  
	
  Settlement
  Dates:

  	
  As
  determined pursuant to Section 9.4 of the Equity Definitions, subject to
  Section 9(k)(i) hereof.

  
	
   

  	
   

  
	
  Other
  Applicable Provisions:

  	
  If
  Net Share Settlement is applicable, 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 “Net Share Settled.” “Net Share Settled” in relation to any
  Warrant means that Net Share Settlement is applicable to that Warrant.

  
	
   

  	
   

  
	
  Representation
  and Agreement:

  	
  Notwithstanding
  Section 9.11 of the Equity Definitions, the parties acknowledge that any
  Shares delivered to Dealer may be, upon delivery, subject to restrictions and

  

 

5

 

	
   

  	
  limitations
  arising from Company’s status as issuer of the Shares under applicable
  securities laws.

  

 

3.                                      Additional
Terms applicable to the Transaction.

 

	
  Adjustments
  applicable to the Transaction:

  	
   

  
	
   

  	
   

  
	
  Method
  of Adjustment:

  	
  Calculation
  Agent Adjustment. For the avoidance of doubt, in making any adjustments under
  the Equity Definitions, the Calculation Agent may make adjustments, if any,
  to any one or more of the Strike Price, the Number of Warrants, the Daily
  Number of Warrants and the Warrant Entitlement. Notwithstanding the
  foregoing, any cash dividends or distributions on the Shares, whether or not
  extraordinary, shall be governed by Section 9(f) of this
  Confirmation in lieu of Article 10 or Section 11.2(c) of the
  Equity Definitions.

  
	
   

  	
   

  
	
  Extraordinary Events applicable to the
  Transaction:

  
	
   

  	
   

  
	
  New
  Shares:

  	
  Section 12.1(i) of
  the Equity Definitions is hereby amended (a) by deleting the text in
  clause (i) thereof in its entirety (including the word “and” following
  clause (i)) and replacing it with the phrase “publicly quoted, traded or
  listed (or whose related depositary receipts are publicly quoted, traded or
  listed) on any of the New York Stock Exchange, The NASDAQ Global Select
  Market or The NASDAQ Global Market (or their respective successors)” and
  (b) by inserting immediately prior to the period the phrase “and
  (iii) of an entity or person organized under the laws of the United
  States, any State thereof or the District of Columbia that also becomes
  Company under the Transaction following such Merger Event or Tender Offer”.

  
	
   

  	
   

  
	
  Consequence
  of Merger Events:

  	
   

  
	
   

  	
   

  
	
  Merger
  Event:

  	
  Applicable; provided that if an event
  occurs that constitutes both a Merger Event under
  Section 12.1(b) of the Equity Definitions and an Additional
  Termination Event under Section 9(h)(ii)(B) of this Confirmation, Dealer may elect, in its
  commercially reasonable judgment, whether the provisions of
  Section 12.1(b) of the Equity Definitions or
  Section 9(h)(ii)(B) will apply.

  
	
   

  	
   

  
	
  Share-for-Share:

  	
  Modified
  Calculation Agent Adjustment

  
	
   

  	
   

  
	
  Share-for-Other:

  	
  Cancellation
  and Payment (Calculation Agent Determination)

  
	
   

  	
   

  
	
  Share-for-Combined:

  	
  Component
  Adjustment (Calculation Agent Determination).

  
	
   

  	
   

  
	
  Consequence
  of Tender Offers:

  	
   

  
	
   

  	
   

  
	
  Tender
  Offer:

  	
  Applicable;
  provided that if an event occurs that
  constitutes both a Tender Offer under Section 12.1(d) of the Equity
  Definitions and Additional Termination Event

  

 

6

 

	
   

  	
  under
  Section 9(h)(ii)(A) of this Confirmation, Dealer may elect, in its
  commercially reasonable judgment, whether the provisions of Section 12.3
  of the Equity Definitions or Section 9(h)(ii)(A) will apply.

  
	
   

  	
   

  
	
  Share-for-Share:

  	
  Modified
  Calculation Agent Adjustment

  
	
   

  	
   

  
	
  Share-for-Other:

  	
  Modified
  Calculation Agent Adjustment

  
	
   

  	
   

  
	
  Share-for-Combined:

  	
  Modified
  Calculation Agent Adjustment

  
	
   

  	
   

  
	
  Announcement
  Event:

  	
  If
  an Announcement Date occurs in respect of a Merger Event or Tender Offer
  (such occurrence, an “Announcement Event”),
  provided that no adjustments had previously been made to account for such
  events (including pursuant to Sections 12.2 and 12.3 of the Equity
  Definitions), then on the earliest of the Expiration Date, Early Termination
  Date or other date of cancellation (the “Announcement Event
  Adjustment Date”) in respect of each Warrant, the Calculation
  Agent will determine the economic effect on such Warrant of the Announcement
  Event (regardless of whether the Announcement Event actually results in a
  Merger Event or Tender Offer, and taking into account such factors as the
  Calculation Agent may determine, including, without limitation, changes in
  volatility, expected dividends, stock loan rate or liquidity relevant to the
  Shares or the Transaction whether prior to or after the Announcement Event or
  for any period of time, including, without limitation, the period from the
  Announcement Event to the relevant Announcement Event Adjustment Date). If
  the Calculation Agent determines that such economic effect on any Warrant is
  material, then on the Announcement Event Adjustment Date for such Warrant,
  the Calculation Agent shall make adjustments to account for such economic
  effect, which may include adjustment to the exercise, settlement, payment or
  any other terms of such Warrant as the Calculation Agent determines
  appropriate to account for such economic effect, which adjustment shall be
  effective immediately prior to the exercise, termination or cancellation of
  such Warrant, as the case may be.

  
	
   

  	
   

  
	
  Announcement
  Date:

  	
  The
  definition of “Announcement Date” in Section 12.1 of the Equity
  Definitions is hereby amended by (i) replacing the words “a firm” with
  the word “any” in the second and fourth lines thereof, (ii) replacing
  the word “leads to the” with the words “, if completed, would lead to a” in
  the third and the fifth lines thereof, (iii) replacing the words “voting
  shares” with the word “Shares” in the fifth line thereof, and (iv) inserting
  the words “by any entity” after the word “announcement” in the second and the
  fourth lines thereof.

  
	
   

  	
   

  
	
  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

  

 

7

 

	
   

  	
  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

  
	
   

  	
   

  
	
  Insolvency
  Filing:

  	
  Applicable

  
	
   

  	
   

  
	
  Hedging
  Disruption:

  	
  Applicable;
  provided that:

  
	
   

  	
   

  
	
   

  	
  (i)                                   Section 12.9(a)(v) of
  the Equity Definitions is hereby amended by inserting the following two
  phrases at the end of such Section:

  
	
   

  	
   

  
	
   

  	
  “For
  the avoidance of doubt, the term “equity price risk” shall be deemed to
  include, but shall not be limited to, stock price and volatility risk. And,
  for the further avoidance of doubt, any such transactions or assets referred
  to in phrases (A) or (B) above must be available on commercially
  reasonable pricing terms.”; and

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
  Increased
  Cost of Hedging:

  	
  Applicable

  
	
   

  	
   

  
	
  Loss
  of Stock Borrow:

  	
  Applicable

  
	
   

  	
   

  
	
  Maximum
  Stock Loan Rate:

  	
  200
  basis points

  
	
   

  	
   

  
	
  Increased
  Cost of Stock Borrow:

  	
  Applicable

  
	
   

  	
   

  
	
  Initial
  Stock Loan Rate:

  	
  50
  basis points

  
	
   

  	
   

  
	
  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

  

 

8

 

	
  4.                                      Calculation
  Agent.

  	
  Dealer,
  whose judgments, determinations and calculations shall be made in good faith
  and in a commercially reasonable manner. Following any calculation by the
  Calculation Agent hereunder and a prior written request by Company, the
  Calculation Agent shall provide Company a written explanation of any
  calculation or adjustment made by it including, where applicable, a
  description of the methodology and the basis for such calculation or
  adjustment in reasonable detail, it being understood that the Calculation
  Agent shall not be obligated to disclose any proprietary models used by it
  for such calculation.

  

 

5.                                      Account
Details.

 

(a)                                 Account for
payments to Company:

 

Bank:                                      West Bank

ABA#:                                073903354

Acct No.:                   905432

Beneficiary:     American Equity
Investment Life Holding Company

Ref:                                                Derivatives

 

Account
for delivery of Shares from Company:

 

DTC
50108

 

(b)                                 Account for
payments to Dealer:

 

Deutsche Bank AG, London
Branch

The Bank of New York

Bank Routing: 021-000-018

Account Name:  Deutsche Bank Securities, Inc.

Account No.: 8900327634

 

Account
for delivery of Shares to Dealer:

 

To
be provided by Dealer

 

6.                                      Offices.

 

(a)                                 The Office of
Company for the Transaction is: 
Inapplicable, Company is not a Multibranch Party.

 

(b)                                 The Office of
Dealer for the Transaction is: London

 

Deutsche Bank AG, London Branch

Winchester house

1 Great Winchester St, London 

EC2N 2DB

 

7.                                      Notices.

 

(a)                                 Address for
notices or communications to Company:

 

American
Equity Investment Life Holding Company

6000 Westown Parkway

West
Des Moines, IA 50266

 

9

 

Attention:
                                      Treasurer

Telephone No.:             (515) 221-0002

Facsimile No.:     (515) 221-9947

 

(b)                                 Address for
notices or communications to Dealer:

 

Deutsche Bank AG, London
Branch 

c/o Deutsche Bank Securities Inc. 

60 Wall Street 

New York, NY 10005

Attention: Andrew Yaeger and Paul Stowell

Telephone No:                212-250-6270

Facsimile No:                    212-797-8974

Email: andrew.yaeger@db.com

Email: paul.stowell@db.com

 

With a copy to:

 

Deutsche Bank AG, London
Branch 

c/o Deutsche Bank Securities Inc. 

60 Wall Street 

New York, NY 10005

 

Attention: Lars Kestner 

Telephone:                                 212-250-6043 

Facsimile:                                       646-593-8200 

Email: lars.kestner@db.com

 

8.                                      Representations
and Warranties of Company.

 

Company
hereby represents and warrants to Dealer on the date hereof, on and as of the
Premium Payment Date and, in the case of the representations in Section 8(d),
at all times until termination of the Transaction, that:

 

(a)                                 Company has all
necessary corporate power and authority to execute, deliver and perform its
obligations in respect of the Transaction; such execution, delivery and
performance have been duly authorized by all necessary corporate action on
Company’s part; and this Confirmation has been duly and validly executed and
delivered by Company and constitutes its valid and binding obligation,
enforceable against Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies generally, and subject,
as to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except that
rights to indemnification and contribution hereunder may be limited by federal
or state securities laws or public policy relating thereto.

 

(b)                                 Neither the
execution and delivery of this Confirmation nor the incurrence or performance
of obligations of Company hereunder will conflict with or result in a breach of
the certificate of incorporation or by-laws (or any equivalent documents) of
Company, or any applicable law or regulation, or any order, writ, injunction or
decree of any court or governmental authority or agency, or any agreement or
instrument filed as exhibits to Company’s Annual Report on Form 10-K for
the year ended December 31, 2009, as updated by any subsequent filings, to
which Company or any of its subsidiaries is a party or by which Company or any
of its subsidiaries is bound or to which Company or any of its subsidiaries is
subject, or constitute a default under, or result in the creation of any lien
under, any such agreement or instrument.

 

(c)                                  No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required in
connection with the execution, delivery or performance by Company of 

 

10

 

 

this Confirmation, except
such as have been obtained or made and such as may be required under the
Securities Act of 1933, as amended (the “Securities Act”)
or state securities laws.

 

(d)                                 A number of Shares equal to the Maximum Number of Shares (the “Warrant Shares”) have been reserved for issuance pursuant to
the Transaction by all required corporate action of Company.  The Warrant Shares have been duly authorized
and, when delivered against payment therefor (which may include Net Share
Settlement in lieu of cash) and otherwise as contemplated by the terms of the
Warrants following the exercise of the Warrants in accordance with the terms
and conditions of the Warrants, will be validly issued, fully-paid and
non-assessable, and the issuance of the Warrant Shares will not be subject to
any preemptive or similar rights, in each case which would have a material
adverse effect on the Transaction or Dealer’s rights or obligations relating to
the Transaction.

 

(e)                                  Company is not
and will not be required to register as an “investment company” as such term is
defined in the Investment Company Act of 1940, as amended.

 

(f)                                   Company 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).

 

(g)                                  Company is not,
on the date hereof, in possession of any material non-public information with
respect to Company.

 

(h)                                 All reports and
other documents filed by Company 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 omit to state any 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.

 

9.                                      Other
Provisions.

 

(a)                                 Opinions.  Company shall deliver to Dealer an opinion of
counsel, dated as of the Premium Payment Date, with respect to the matters set
forth in Sections 8(a) through (d) 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.  Company
shall, on any day on which Company 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 on such day, subject to any adjustments provided herein, is (i) less
than 56.7 million (in the case of the first such notice) or (ii) thereafter
more than 1.7 million less than the number of Shares included in the
immediately preceding Repurchase Notice. 
Company 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 actually may become
subject to, as a result of Company’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 

 

11

 

governmental or regulatory investigation), claim or demand shall be
brought or asserted against the Indemnified Person, such Indemnified Person
shall promptly notify Company in writing, and Company, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others Company
may designate in such proceeding and shall pay the reasonable fees and expenses
of such counsel related to such proceeding. 
Company shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, Company agrees to indemnify any
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment.  Company shall
not, without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have 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 Company under such paragraph, 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 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.

 

(c)                                  Regulation
M.  Company is not on the Trade
Date engaged in a distribution, as such term is used in Regulation M under the
Exchange Act, of any securities of Company, other than a distribution meeting
the requirements of the exception set forth in Rules 101(b)(10) and
102(b)(7) of Regulation M.  Company
shall not, until the second Scheduled Trading Day immediately following the
Effective Date, engage in any such distribution.

 

(d)                                 No
Manipulation.  Company 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) or otherwise in
violation of the Exchange Act.

 

(e)                                  Transfer
or Assignment.  Company may
not transfer any of its rights or obligations under the Transaction without the
prior written consent of Dealer.  Dealer
may, without Company’s consent, transfer or assign all or any part of its
rights or obligations under the Transaction to any third party.  If at any time at which (A) the Section 16
Percentage exceeds 8.0%, (B) the Warrant 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 is unable after using
its commercially reasonable efforts to effect a transfer or assignment of
Warrants to a third party on pricing terms reasonably acceptable to Dealer and
within a time period reasonably acceptable to Dealer such that no Excess
Ownership Position exists, then Dealer may designate any Exchange Business Day
as an Early Termination Date with respect to a portion of the Transaction (the “Terminated Portion”), such that following
such partial termination 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 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 Warrants equal to the number of
Warrants underlying the Terminated Portion, (2) Company 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(j) shall apply to any amount
that is payable by Company to Dealer pursuant to this sentence as if Company
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 

 

12

 

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 “Warrant 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 Warrants
and the Warrant Entitlement and (2) the aggregate number of Shares
underlying any other warrants purchased by Dealer from Company, 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 Company that are, in each case, applicable to
ownership of Shares (including, without limitation, state insurance
regulations) (“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.  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 Company, Dealer may designate any of
its affiliates to purchase, sell, receive or deliver such Shares or other
securities, or 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 Company to the extent of any such performance.

 

(f)                                   Dividends.  If at any time during the
period from and including the Effective Date, to and including the last
Expiration Date, (i) an ex-dividend date for a cash dividend occurs with
respect to the Shares (an “Ex-Dividend Date”),
and that dividend differs from the Regular Dividend on a per Share basis or (ii) if
no Ex-Dividend Date for a cash dividend occurs with respect to the Shares in
any annual dividend period of Company, then the Calculation Agent will adjust
any of the Strike Price, Number of Warrants
and/or Daily Number of Warrants to preserve the fair value of the
Warrants to Dealer after taking into account such dividend or lack
thereof.  “Regular
Dividend” shall mean for any calendar year, USD 0.08 for the sum of
any cash dividends or distributions on the Shares for which the Ex-Dividend
Date falls within such calendar year. For the avoidance of doubt, if at any
time within a calendar year the sum of any cash dividends or distributions on
the Shares for which the Ex-Dividend Date falls within a calendar year exceeds
USD 0.08, the Calculation Agent will, at such time, make the relevant
adjustments as set forth in this Section 9(f), and the Regular Dividend shall
be deemed to be zero for any subsequent dividend or distribution on the Shares
for which the Ex-Dividend Date falls within the same calendar year.

 

(g)                                  Method of Delivery.  Whenever
delivery of funds or other assets is required hereunder by or to Counterparty,
such delivery shall be effected through DBSI. 
In addition, all notices, demands and communications of any kind
relating to the Transaction between Dealer and Counterparty shall be
transmitted exclusively through DBSI.

 

(h)                                 Additional Provisions.

 

(i)                                     Amendments to the Equity
Definitions:

 

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

 

(B)                               Section 11.2(c) of
the Equity Definitions is hereby amended by (x) replacing the words “a
diluting or concentrative” with “a material”, (y) adding the phrase “or 

 

13

 

Warrants” after the words “the relevant Shares” in the same sentence and (z) deleting
the phrase “(provided that no adjustments will be made to account solely for
changes in volatility, expected dividends, stock loan rate or liquidity
relative to the relevant Shares)” and replacing it with the phrase “(and, for
the avoidance of doubt, adjustments may be made to account solely for changes
in volatility, expected dividends, stock loan rate or liquidity relative to the
relevant Shares).”

 

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

 

(D)                               [Reserved]

 

(E)                                Section 12.9(b)(iv) of
the Equity Definitions is hereby amended by:

 

(x)                                 deleting (1) subsection (A) in
its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the
phrase “in each case” in subsection (B); and

 

(y)                                 deleting the phrase “neither
the Non-Hedging Party nor the Lending Party lends Shares in the amount of the
Hedging Shares or” in the penultimate sentence.

 

(F)                                 Section 12.9(b)(v) of
the Equity Definitions is hereby amended by:

 

(x)                                 adding the word “or”
immediately before subsection “(B)” and deleting the comma at the end of
subsection (A); and

 

(y)                                 (1) deleting subsection (C) in
its entirety, (2) deleting the word “or” immediately preceding subsection (C) and
(3) deleting the penultimate sentence in its entirety and replacing it
with the sentence “The Hedging Party will determine the Cancellation Amount
payable by one party to the other.”

 

(ii)                                  Notwithstanding anything to
the contrary in this Confirmation, upon the occurrence of one of the following
events, with respect to the Transaction, (1) Dealer shall have the right
to designate such event an Additional Termination Event and designate an Early
Termination Date pursuant to Section 6(b) of the Agreement, (2) Company
shall be deemed the sole Affected Party with respect to such Additional
Termination Event and (3) the Transaction shall be deemed the sole Affected
Transaction:

 

(A)                               A “person” or “group” within
the meaning of Section 13(d) of the Exchange Act, other than Company,
its subsidiaries and its and their employee benefit plans, has become the
direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the
Exchange Act, of Company’s common equity representing more than 50% of the
voting power of Company’s common equity.

 

(B)                               The consummation of (I) any
recapitalization, reclassification or change of the Shares (other than changes
resulting from a subdivision or combination) as a result of which the Shares
would be converted into, or exchanged for, stock, other securities, other
property or assets, (II) any share exchange, consolidation or merger of
Company pursuant to which the Shares will be converted into cash, securities or
other property, or (III) any sale, lease or other transfer in one
transaction or a series of transactions of all or substantially all of the
consolidated assets of Company and its subsidiaries, taken as a whole, to any
person other than one of Company’s subsidiaries (excluding a pledge of
securities issued by any of Company’s subsidiaries); provided
that a transaction 

 

14

 

described in clause (II) in which the holders of all classes of
Company’s common equity immediately prior to such transaction own, directly or
indirectly, more than 50% of all classes of common equity of the continuing or
surviving corporation immediately after such transaction in substantially the
same proportions as such ownership (subject to adjustment for any transaction
in which Company’s stockholders have the right to elect to receive more than a
single type of consideration) immediately prior to such transaction shall not
be an Additional Termination Event pursuant to this clause (B).

 

(C)                               Default by Company or any of
its subsidiaries with respect to any mortgage, agreement or other instrument
under which there was originally outstanding, or by which there was originally
secured or evidenced, indebtedness for money borrowed in excess of $120 million
in the aggregate of Company and/or any such subsidiary, whether such
indebtedness now exists or shall hereafter be created (I) resulting in
such indebtedness becoming or being declared due and payable or (II) constituting
a failure to pay the principal or interest of any such indebtedness when due
and payable at its stated maturity, upon required repurchase, upon declaration
of acceleration or otherwise.

 

(D)                               A final judgment for the
payment of $10 million or more (excluding any amounts covered by insurance)
rendered against Company or any of its significant subsidiaries (as defined in Article 1,
Rule 1-02 of Regulation S-X), which judgment is not discharged or stayed within
60 days after (I) the date on which the right to appeal thereof has expired if
no such appeal has commenced, or (II) the date on which all rights to appeal
have been extinguished.

 

(E)                                Dealer, despite using
commercially reasonable efforts, is unable or reasonably determines, in good
faith based on the advice of outside counsel, that it is impractical or
illegal, to hedge its exposure with respect to the Transaction in the public
market without registration under the Securities Act or as a result of any
legal, regulatory or self-regulatory requirements or related policies and
procedures (whether or not such requirements, policies or procedures are imposed
by law or have been voluntarily adopted by Dealer).

 

(F)                                 At any time on any day during
the period from and including the Trade Date, to and including the final
Expiration Date, (I) the Share Delivery Quantity that would be deliverable
(determined as if such time were the Valuation Time, such date were the
Exercise Date and Valuation Date for a number of Warrants equal to the Number
of Warrants as of such date, and Net Share Settlement applied) exceeds a number
of Shares equal to 66% of the Maximum Number of Shares, or (II) Company
makes a public announcement of any transaction or event that, in the reasonable
opinion of Dealer would, upon consummation of such transaction or upon the
occurrence of such event, as applicable, and after giving effect to any
applicable adjustments hereunder, cause the Share Delivery Quantity immediately
following the consummation of such transaction or the occurrence of such event
(determined as if the time immediately following the consummation of such
transaction or the occurrence of such event were the Valuation Time, the date
upon which such transaction is consummated or such event occurs were the
Exercise Date and Valuation Date for a number of Warrants equal to the Number
of Warrants as of such Date, and Net Share Settlement applied) to exceed a
number of Shares equal to 66% of the Maximum Number of Shares.

 

For purposes of determining an
Additional Termination Event, any transaction or event that constitutes an
Additional Termination Event under both clauses (A) and (B) above
will be deemed to be an Additional Termination Event solely under clause (B).

 

15

 

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

 

(i)                                     No
Collateral or Setoff.  Each party
waives any and all rights it may have to set off obligations arising under the
Agreement and the Transaction against other obligations between the parties,
whether arising under any other agreement, applicable law or otherwise.

 

(j)                                    Alternative
Calculations and Payment on Early Termination and on Certain Extraordinary
Events.

 

(i)                                     If, in respect of the Transaction,
an amount is payable by Company to Dealer, (A) pursuant to Section 12.7
or Section 12.9 of the Equity Definitions or (B) pursuant to Section 6(d)(ii) of the
Agreement (any such amount, a “Payment Obligation”),
Company shall have the right, in its sole discretion, to satisfy the Payment
Obligation by the Share Termination Alternative (as defined below) (except that
Company shall not have the right to make such an election in the event of (I) a
Nationalization, Insolvency, Merger Event or Tender Offer 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 Company’s control, or (III) an
Event of Default in which Company is the Defaulting Party or a Termination
Event in which Company 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
Company’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, Tender Offer Date, Announcement Date (in the case of a
Nationalization, Insolvency or Delisting), Early Termination Date or date
of cancellation, as applicable; provided that
if Company does not validly elect to satisfy the Payment Obligation by the Share Termination Alternative,
Dealer shall have the right to require Company to satisfy its Payment
Obligation by the Share Termination Alternative.

 

Share Termination Alternative:                      If applicable,
Company shall deliver to Dealer the Share Termination Delivery Property on the
date (the “Share Termination Payment Date”)
on which the Payment Obligation would otherwise be due pursuant to Section 12.7
or Section 12.9 of the Equity Definitions or Section 6(d)(ii) of the
Agreement, as applicable, subject to Section 9(k)(i) below, in
satisfaction, subject to Section 9(k)(ii) below, of the relevant
Payment Obligation, in the manner reasonably requested by Dealer free of
payment.

 

Share Termination Delivery

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

 

16

 

value
of such fractional security based on the values used to calculate the Share
Termination Unit Price (without giving effect to any discount pursuant to Section 9(k)(i)).

 

Share Termination Unit Price:                              The value to
Dealer 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.  In the
case of a Private Placement of Share Termination Delivery Units that are
Restricted Shares (as defined below), as set forth in Section 9(k)(i) below,
the Share Termination Unit Price shall be determined by the discounted price
applicable to such Share Termination Delivery Units.  In the case of a Registration Settlement of
Share Termination Delivery Units that are Restricted Shares (as defined below)
as set forth in Section 9(k)(ii) below, the Share Termination Unit
Price shall be the Settlement Price on the Merger Date, Tender Offer Date, Announcement Date (in the case of a
Nationalization, Insolvency or Delisting), Early Termination Date or date
of cancellation, as applicable.  The
Calculation Agent shall notify Company of the Share Termination Unit Price at
the time of notification of such Payment Obligation to Company or, if
applicable, at the time the discounted price applicable to the relevant Share
Termination Units is determined pursuant to Section 9(k)(i).

 

Share Termination Delivery Unit:           In the case of
a Termination Event, Event of Default Additional Disruption Event or Delisting,
one Share or, in the case of Nationalization, Insolvency, Tender Offer or
Merger Event, 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 Nationalization, Insolvency, Tender Offer or
Merger Event.  If such Nationalization, Insolvency,
Tender Offer or Merger Event 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:                                                                                              Inapplicable

 

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 

 

17

 

Termination
Settled” in relation to the Transaction means that the Share Termination
Alternative is applicable to the Transaction.

 

(ii)                                  Any deliveries
under Section 9(j)(i) shall be limited to the Maximum Number of
Shares as defined in Section 2.

 

(k)                                 Registration/Private
Placement Procedures.  If,
in the commercially reasonable opinion of Dealer, based on the advice of
outside counsel, following any delivery of Shares or Share Termination Delivery
Property to Dealer hereunder, such Shares or Share Termination Delivery
Property would be in the hands of Dealer subject to any applicable restrictions
with respect to any registration or qualification requirement or prospectus
delivery requirement for such Shares or Share Termination Delivery Property
pursuant to any applicable federal or state securities law (including, without
limitation, any such requirement arising under Section 5 of the Securities
Act as a result of such Shares or Share Termination Delivery Property being “restricted
securities”, as such term is defined in Rule 144 under the Securities Act,
or as a result of the sale of such Shares or Share Termination Delivery
Property being subject to paragraph (c) of Rule 145 under the
Securities Act) (such Shares or Share Termination Delivery Property, “Restricted Shares”), then delivery of such Restricted Shares
shall be effected pursuant to either clause (i) or (ii) below at the
election of Company, unless Dealer waives the need for registration/private
placement procedures set forth in (i) and (ii) below.  Notwithstanding the foregoing, solely in
respect of any Daily Number of Warrants exercised or deemed exercised on any
Expiration Date, Company shall elect, prior to the first Settlement Date for
the First Expiration Date, a Private Placement Settlement or Registration
Settlement for all deliveries of Restricted Shares for all such Expiration
Dates which election shall be applicable to all Settlement Dates for such
Warrants and the procedures in clause (i) or clause (ii) below shall
apply for all such delivered Restricted Shares on an aggregate basis commencing
after the final Settlement Date for such Warrants.  The Calculation Agent shall make reasonable
adjustments to settlement terms and provisions under this Confirmation to
reflect a single Private Placement or Registration Settlement for such
aggregate Restricted Shares delivered hereunder.

 

(i)                                     If Company
elects to settle the Transaction pursuant to this clause (i) (a “Private Placement Settlement”), then delivery of Restricted
Shares by Company shall be effected in customary private placement procedures
with respect to such Restricted Shares reasonably acceptable to Dealer; provided that Company may not elect a Private Placement
Settlement if, on the date of its election, it has taken, or caused to be
taken, any action that would make unavailable either the exemption pursuant to Section 4(2) of
the Securities Act for the sale by Company to Dealer (or any affiliate
designated by Dealer) of the Restricted Shares or the exemption pursuant to Section 4(1) or
Section 4(3) of the Securities Act for resales of the Restricted
Shares by Dealer (or any such affiliate of Dealer).  The Private Placement Settlement of such
Restricted Shares shall include 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 Restricted Shares
by Dealer), opinions and certificates, and such other documentation as is
customary for private placement agreements, all reasonably acceptable to
Dealer.  In the case of a Private
Placement Settlement, Dealer shall determine the appropriate discount to the
Share Termination Unit Price (in the case of settlement of Share Termination
Delivery Units pursuant to Section 9(j) above) or any Settlement
Price (in the case of settlement of Shares pursuant to Section 2 above)
applicable to such Restricted Shares in a commercially reasonable manner and
appropriately adjust the number of such Restricted Shares to be delivered to
Dealer hereunder.  Notwithstanding  the Agreement or this Confirmation, the date
of delivery of such Restricted Shares shall be the Exchange Business Day following
notice by Dealer to Company, of such applicable discount and the number of
Restricted Shares to be delivered pursuant to this clause (i).  For the avoidance of doubt, delivery of
Restricted Shares shall be due as set forth in the previous sentence and not be
due on the Share Termination Payment Date (in the case of settlement of Share
Termination Delivery Units 

 

18

 

pursuant to Section 9(j) above) or on the Settlement Date for
such Restricted Shares (in the case of settlement in Shares pursuant to Section 2
above).

 

(ii)                                  If Company
elects to settle the Transaction pursuant to this clause (ii) (a “Registration Settlement”), then Company shall promptly (but
in any event no later than the beginning of the Resale Period) file and use its
reasonable efforts to make effective under the Securities Act a registration
statement or supplement or amend an outstanding registration statement in form
and substance reasonably satisfactory to Dealer, to cover the resale of such
Restricted Shares in accordance with customary resale registration procedures,
including covenants, conditions, representations, underwriting discounts (if
applicable), commissions (if applicable), indemnities due diligence rights,
opinions and certificates, and such other documentation as is customary for
equity resale underwriting agreements, all reasonably acceptable to
Dealer.  If Dealer, in its sole
reasonable discretion, is not satisfied with such procedures and documentation
Private Placement Settlement shall apply. 
If Dealer is satisfied with such procedures and documentation, it shall
sell the Restricted Shares pursuant to such registration statement during a
period (the “Resale Period”) commencing on the
Exchange Business Day following delivery of such Restricted Shares (which, for
the avoidance of doubt, shall be (x) the Share Termination Payment Date in
case of settlement in Share Termination Delivery Units pursuant to Section 9(j) above
or (y) the Settlement Date in respect of the final Expiration Date for all
Daily Number of Warrants) and ending on the earliest of (i) the Exchange
Business Day on which Dealer completes the sale of all Restricted Shares or, in
the case of settlement of Share Termination Delivery Units, a sufficient number
of Restricted Shares so that the realized net proceeds of such sales equals or
exceeds the Payment Obligation (as defined above), (ii) the date upon
which all Restricted Shares have been sold or transferred pursuant to Rule 144
(or similar provisions then in force) or Rule 145(d)(2) (or any
similar provision then in force) under the Securities Act and (iii) the
date upon which all Restricted Shares may be sold or transferred by a
non-affiliate pursuant to Rule 144 (or any similar provision then in
force) or Rule 145(d)(2) (or any similar provision then in force)
under the Securities Act.  If the Payment
Obligation exceeds the realized net proceeds from such resale, Company shall
transfer to Dealer by the open of the regular trading session on the Exchange
on the Exchange Trading Day immediately following the last day of the Resale Period
the amount of such excess (the “Additional Amount”)
in cash or in a number of Shares (“Make-whole Shares”)
in an amount that, based on the Settlement Price on the last day of the Resale
Period (as if such day was the “Valuation Date” for purposes of computing such
Settlement Price), has a dollar value equal to the Additional Amount.  The Resale Period shall continue to enable
the sale of the Make-whole Shares.  If
Company elects to pay the Additional Amount in Shares, the requirements and
provisions for Registration Settlement shall apply.  This provision shall be applied successively
until the Additional Amount is equal to zero. 
In no event shall Company deliver a number of Restricted Shares greater
than the Maximum Number of Shares.

 

(iii)                               Without limiting
the generality of the foregoing, Company agrees that any Restricted Shares
delivered to Dealer, as purchaser of such Restricted Shares, (A) may be
transferred by and among Dealer and its affiliates and Company shall effect
such transfer without any further action by Dealer and (B) after the
period of 6 months from the Trade Date (or 1 year from the Trade Date if, at
such time, informational requirements of Rule 144(c) under the
Securities Act are not satisfied with respect to Company) has elapsed after any
Settlement Date or Share Termination Payment Date, as applicable, for such
Restricted Shares, Company shall promptly remove, or cause the transfer agent
for such Restricted Shares to remove, any legends referring to any such
restrictions or requirements from such Restricted Shares upon request by Dealer
(or such affiliate of Dealer) to Company or such transfer agent, without any
requirement for the delivery of any certificate, consent, agreement, opinion of
counsel, notice or any other document, any transfer tax stamps or payment of
any other amount or any other action by Dealer (or such affiliate of Dealer).

 

19

 

 

(iv)                              If the Private
Placement Settlement or the Registration Settlement shall not be effected as
set forth in clauses (i) or (ii), as applicable, then failure to effect such
Private Placement Settlement or such Registration Settlement shall constitute
an Event of Default with respect to which Company shall be the Defaulting
Party.

 

(l)                                     Limit
on Beneficial Ownership.  Notwithstanding any other provisions hereof,
Dealer may not exercise any
Warrant hereunder or be entitled to take delivery of any Shares deliverable
hereunder, and Automatic Exercise
shall not apply with respect to any Warrant hereunder, to the extent
(but only to the extent) that, after such receipt of any Shares upon the
exercise of such Warrant or otherwise hereunder, (i) the Section 16
Percentage would exceed 8.0%, or (ii) the Share Amount would exceed the
Applicable Share Limit.  Any purported
delivery hereunder shall be void and have no effect to the extent (but only to
the extent) that, after such delivery, (i) the Section 16 Percentage
would exceed 8.0%, or (ii) the Share Amount would exceed the Applicable
Share Limit. If any delivery owed to Dealer hereunder is not made, in whole or
in part, as a result of this provision, Company’s obligation to make such
delivery shall not be extinguished and Company shall make such delivery as
promptly as practicable after, but in no event later than one Business Day
after, Dealer gives notice to Company that, after such delivery, (i) the Section 16
Percentage would not exceed 8.0%, and (ii) the Share Amount would not
exceed the Applicable Share Limit.

 

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

 

(n)                                 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 the other 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.

 

(o)                                 Tax
Disclosure.  Effective
from the date of commencement of discussions concerning the Transaction,
Company 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 

 

20

 

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

 

(p)                                 Maximum
Share Delivery.

 

(i)                                   Notwithstanding
any other provision of this Confirmation, the Agreement or the Equity
Definitions, in no event will Company at any time be required to deliver a
number of Shares greater than the Maximum Number of Shares to Dealer in
connection with the Transaction.

 

(ii)                                In the event
Company shall not have delivered to Dealer the full number of Shares or
Restricted Shares otherwise deliverable by Company to Dealer pursuant to the
terms of the Transaction because Company has insufficient authorized but
unissued Shares (such deficit, the “Deficit Shares”),
Company shall be continually obligated to deliver, from time to time, Shares or
Restricted Shares, as the case may be, to Dealer until the full number of Deficit
Shares have been delivered pursuant to this Section 9(p)(ii), when, and to
the extent that, (A) Shares are repurchased, acquired or otherwise
received by Company or any of its subsidiaries after the Trade Date (whether or
not in exchange for cash, fair value or any other consideration), (B) authorized
and unissued Shares reserved for issuance in respect of other transactions
prior to such date that prior to the relevant date become no longer so reserved
or (C) Company additionally authorizes any unissued Shares that are not
reserved for other transactions; provided that
in no event shall Company deliver any Shares or Restricted Shares to Dealer
pursuant to this Section 9(p)(ii) to the extent that such delivery
would cause the aggregate number of Shares and Restricted Shares delivered to
Dealer to exceed the Maximum Number of Shares. 
Company shall immediately notify Dealer of the occurrence of any of the
foregoing events (including the number of Shares subject to clause (A), (B) or
(C) and the corresponding number of Shares or Restricted Shares, as the
case may be, to be delivered) and promptly deliver such Shares or Restricted
Shares, as the case may be, thereafter.

 

(iii)                             Notwithstanding
anything to the contrary in this Confirmation, any amount payable by Company to Dealer in respect of the Transaction  (A) pursuant to Section 12.7 or Section 12.9 of the Equity
Definitions or (B) pursuant to Section 6(d)(ii) of
the Agreement shall, for all purposes, be calculated as if the Maximum
Number of Shares were equal to 2.0 times the Number of Shares (without regard
to the limitations on adjustment set forth in the second paragraph opposite the
caption “Maximum Number of Shares” in Section 2).

 

(q)                                 Shareholder Approval. Company shall use its commercially reasonable
efforts to seek approval from its shareholders, in accordance with the
requirements of Rule 312.03(c) of The New York Stock Exchange Listed
Company Manual or any successor rule, for the issuance pursuant to the
Transaction of a number of Shares equal to 1.75 times the Number of Shares
(without regard to the limitations on adjustment set forth in the second
paragraph opposite the caption “Maximum Number of Shares” in Section 2). 
If Company succeeds in obtaining such approval, then upon such approval
and without any further action by either party, (i) the two paragraphs set forth opposite the caption
“Maximum Number of Shares” in Section 2 shall be deemed to be replaced in
their entirety with the phrase “A number of Shares equal to 1.75 times the
Number of Shares” and (ii) the Additional Termination Event set forth in Section (h)(ii)(F) shall
no longer be applicable.

 

(r)                                    Right to Extend.  Dealer may
postpone, in whole or in part, any Expiration Date or any other date of
valuation or delivery with respect to some or all of the relevant Warrants (in
which event the Calculation Agent shall make appropriate adjustments to the
Daily Number of Warrants with respect to one or more Expiration Dates) if
Dealer determines, in its commercially reasonable judgment, that such extension
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 Issuer or an affiliated purchaser of Issuer, be in 

 

21

 

compliance with applicable legal, regulatory or self-regulatory
requirements, or with related policies and procedures applicable to Dealer.

 

(s)                                   Status of Claims in Bankruptcy.   Dealer acknowledges and
agrees that this Confirmation is not intended to convey to Dealer rights
against Company with respect to the Transaction that are senior to the claims
of common stockholders of Company in any United States bankruptcy proceedings
of Company; 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 Company 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.

 

(t)                                    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.

 

(u)                                 Early
Unwind. 
In the event that the sale of the “Underwritten Securities” (as defined
in the Purchase Agreement (the “Purchase Agreement”),
dated as of September 16, 2010, between Company and J.P. Morgan Securities
LLC, as representative of the Initial Purchasers party thereto (the “Initial Purchasers”)) is not consummated with the Initial
Purchasers for any reason, or Company 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”), then the Transaction shall automatically terminate
(the “Early
Unwind”),  on the
Early Unwind Date and (A) the Transaction and all of the respective rights
and obligations of Dealer and Company under the Transaction shall be cancelled
and terminated and (B) 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 connection with the Transaction either prior to or after the
Early Unwind Date; provided that
Company 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 Company represent and
acknowledge to the other that, subject to the proviso included in this Section 9(u),
upon an Early Unwind, all obligations with respect to the Transaction shall be
deemed fully and finally discharged.

 

(v)                                 Payment
by Dealer. 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, Dealer owes to Company an amount calculated under Section 6(e) of
the Agreement, or (ii) Dealer owes to Company, 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

 

Please confirm that the foregoing correctly
sets forth the terms of our agreement by sending to us a letter or telex
substantially similar to this facsimile, which letter or telex sets forth the
material terms of the Transaction to which this Confirmation relates and
indicates your agreement to those terms. Dealer will make the time of execution
of the Transaction available upon request.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Dealer is regulated
  by the Financial Services Authority.  

  
	
   

  	
   

  
	
   

  	
  Deutsche Bank AG, London
  Branch

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lars Kestner

  
	
   

  	
  Name:

  	
  Lars Kestner

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Natalie Horton

  
	
   

  	
  Name:

  	
  Natalie Horton

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Deutsche Bank Securities
  Inc., acting solely as Agent in connection with the Transaction

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lars Kestner

  
	
   

  	
  Name:

  	
  Lars Kestner

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Natalie Horton

  
	
   

  	
  Name:

  	
  Natalie Horton

  
	
   

  	
  Title:

  	
  Managing Director

  
				

 

 

Accepted
and confirmed

as of the Trade Date:

 

	
  American
  Equity Investment Life Holding Company

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John M.
  Matovina

  	
   

  
	
  Authorized
  Signatory

  	
   

  
	
  Name:

  	
  John M. Matovina

  	
   

  
	
  Title:

  	
  Chief Financial
  Officer & Treasurer

  	
   

  

 

	
  Chairman
  of the Supervisory Board:  Clemens Börsig Board of Managing Directors:
  Hermann-Josef Lamberti, Josef Ackermann, Dr. Hugo Banziger, Anthony DiIorio

  	
   

  	
  Deutsche
  Bank AG is regulated by the FSA for the conduct of designated investment
  business in the UK, is a member of the London Stock Exchange and is a limited
  liability company incorporated in the Federal Republic of Germany HRB
  No. 30 000 District Court of Frankfurt am Main; Branch Registration
  No. in England and Wales BR000005, Registered address: Winchester House,
  1 Great Winchester Street, London EC2N 2DB.

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