Document:

Exhibit 10.2

 

 

EXECUTION VERSION

JPMorgan
Chase Bank, National Association

P.O. Box
161

60
Victoria Embankment

London
EC4Y 0JP

England

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

 

The
purpose of this letter agreement (this “Confirmation”)
is to confirm the terms and conditions of the call option transaction entered
into between JPMorgan Chase Bank, National Association, 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
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.

 

JPMorgan
Chase Bank, National Association

Organised
under the laws of the United States as a National Banking Association

Main
Office 1111 Polaris Parkway, Columbus, Ohio 43271

Registered
as a branch in England & Wales branch No. BR000746

Registered
Branch Office 125 London Wall, London EC2Y 5AJ

Authorised
and regulated by the Financial Services Authority

 

 

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 110
  and (ii) the denominator of which is 170.

  
	
   

  	
   

  	
   

  
	
  Option
  Entitlement:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Strike
  Price:

  	
   

  	
  USD
  12.5000

  
	
   

  	
   

  	
   

  
	
  Premium:

  	
   

  	
  USD
  20,350,000.00

  
	
   

  	
   

  	
   

  
	
  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.

  

 

2

 

Procedures for Exercise.

 

	
  Conversion
  Date:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  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

  

 

3

 

	
   

  	
   

  	
  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;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  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 

  

 

4

 

	
   

  	
   

  	
  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 Deutsche Bank AG, 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 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.

  

 

5

 

	
  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 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 

  

 

6

 

	
   

  	
   

  	
  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.

  
	
   

  	
   

  	
   

  
	
  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

  

 

7

 

	
   

  	
   

  	
   

  	
  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 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

  

 

8

 

 

 

	
   

  	
   

  	
  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
  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

  

 

9

 

	
   

  	
   

  	
  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 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:

  

 

10

 

	
   

  	
   

  	
  (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

  
	
   

  	
   

  	
   

  
	
  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

  

 

11

 

	
   

  	
   

  	
  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 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 

  

 

12

 

	
   

  	
   

  	
  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 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:

  

 

13

 

	
   

  	
   

  	
  (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.

  
	
   

  	
   

  	
   

  
	
  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.

  
					

 

14

 

 

(b)           Account for payments to
Dealer:

 

	
  Bank:

  	
  JPMorgan
  Chase Bank, N.A.

  
	
  ABA#:

  	
  021000021

  
	
  Acct No.:

  	
  099997979

  
	
  Beneficiary:

  	
  JPMorgan
  Chase Bank, N.A. New York

  
	
  Ref:

  	
  Derivatives

  

 

Account
for delivery of Shares from Dealer:

 

DTC
0060

 

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

 

JPMorgan
Chase Bank, National Association

London
Branch

P.O. Box
161

60
Victoria Embankment

London
EC4Y 0JP

England

 

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:

 

	
  JPMorgan Chase Bank, National Association

  
	
  4 New York Plaza, Floor 18

  
	
  New York, NY 10004-2413

  
	
  Attention:

  	
  Mariusz Kwasnik

  
	
  Title:

  	
  Operations
  Analyst, EDG Corporate Marketing

  
	
  Telephone
  No:

  	
  (212)
  623-7223

  
	
  Facsimile
  No:

  	
  (212)
  623-7719

  

 

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 

 

15

 

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).

 

(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 

 

16

 

(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 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:

 

17

 

 

 

(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

 

(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 JPMorgan Chase &
Co.  If at any time at which (A) the
Section 16 Percentage exceeds 8.0%, (B) the Option Equity Percentage
exceeds 15.5%, 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 

 

18

 

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 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:

 

19

 

(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)           Role  of Agent.  Each party agrees and acknowledges that (i) J.P. Morgan Securities LLC, an affiliate of Dealer (“JPMS”), has
acted solely as agent and not as principal with respect to the Transaction and (ii) JPMS has no obligation or liability, by way of
guaranty, endorsement or otherwise, in any manner in respect of the Transaction (including, if applicable, in respect of the
settlement thereof). Each party agrees it will look solely to the other party
(or any guarantor in respect thereof) for performance of such other party’s
obligations under the Transaction.

 

(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 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 

 

20

 

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-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.

 

21

 

(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 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.

 

22

 

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 “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 

 

23

 

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) 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 

 

24

 

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 executing this Confirmation and
returning it to EDG Confirmation Group, J.P. Morgan Securities LLC, 277 Park
Avenue, 11th Floor, New York, NY 10172-3401, or by fax to (212) 622
8519.

 

Very
truly yours,

 

 

	
   

  	
  J.P. Morgan Securities LLC, as agent for JPMorgan Chase
  Bank, National Association

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Santosh Sreenivasan

  
	
   

  	
  Authorized
  Signatory

  
	
   

  	
  Name:

  	
  Santosh
  Sreenivasan

  
	
   

  	
  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

  	
   

  

 

JPMorgan
Chase Bank, National Association

Organised
under the laws of the United States as a National Banking Association

Main
Office 1111 Polaris Parkway, Columbus, Ohio 43271

Registered
as a branch in England & Wales branch No. BR000746

Registered
Branch Office 125 London Wall, London EC2Y 5AJ

Authorised
and regulated by the Financial Services AuthorityExhibit
10.3

 

 

EXECUTION VERSION

 

JPMorgan
Chase Bank, National Association

P.O. Box 161

60 Victoria Embankment

London EC4Y 0JP

England

 

	
   

  	
   

  	
  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

 

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 JPMorgan  Chase Bank,
National Association, 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.

 

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

  

 

JPMorgan
Chase Bank, National Association 

Organised under the laws of the United States as a National Banking Association

Main Office 1111 Polaris Parkway, Columbus, Ohio 43271

Registered as a branch in England & Wales branch No. BR000746

Registered Branch Office 125 London Wall, London EC2Y 5AJ

Authorised and regulated by the Financial Services Authority

 

 

	
  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:

  	
   

  	
  8,800,000.
  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, 7,547,152 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, 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
  8,580,000.00

  
	
   

  	
   

  	
   

  
	
  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

  

 

2

 

	
  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 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.

  

 

3

 

	
  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.

  
	
   

  	
   

  	
   

  
	
  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

  

 

4

 

	
   

  	
   

  	
  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
  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

  
				

 

5

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  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 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

  

 

6

 

	
   

  	
   

  	
  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 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:

  

 

7

 

	
   

  	
   

  	
   

  	
  “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

  
	
   

  	
   

  	
   

  
	
  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:

  
								

 

8

 

	
   

  	
   

  	
  DTC
  50108

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Account
  for payments to Dealer:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Bank:

  	
  JPMorgan
  Chase Bank, N.A.

  	
   

  	
   

  
	
   

  	
   

  	
  ABA#:

  	
  021000021

  	
   

  	
   

  
	
   

  	
   

  	
  Acct No.:

  	
  099997979

  	
   

  	
   

  
	
   

  	
   

  	
  Beneficiary:

  	
  JPMorgan
  Chase Bank, N.A. New York

  
	
   

  	
   

  	
  Ref:

  	
  Derivatives

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Account
  for delivery of Shares to Dealer:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DTC
  0060

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  JPMorgan
  Chase Bank, National Association

  	
   

  	
   

  
	
   

  	
   

  	
  London
  Branch

  	
   

  	
   

  
	
   

  	
   

  	
  P.O. Box
  161

  	
   

  	
   

  
	
   

  	
   

  	
  60
  Victoria Embankment

  	
   

  	
   

  
	
   

  	
   

  	
  London
  EC4Y 0JP

  	
   

  	
   

  
	
   

  	
   

  	
  England

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Notices.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Address
  for notices or communications to Company:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  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:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  JPMorgan Chase Bank,
  National Association

  
	
   

  	
   

  	
  4 New York Plaza, Floor 18

  
	
   

  	
   

  	
  New York, NY 10004-2413

  
	
   

  	
   

  	
  Attention:

  	
  Mariusz Kwasnik

  
	
   

  	
   

  	
  Title:

  	
  Operations Analyst, EDG
  Corporate Marketing

  
	
   

  	
   

  	
  Telephone No:

  	
  (212) 623-7223

  
	
   

  	
   

  	
  Facsimile No:

  	
  (212) 623-7719

  
							

 

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

 

9

 

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 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.

 

10

 

(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 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 

 

11

 

Percentage exceeds 15.5%, 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 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 

 

12

 

dividend or distribution on the Shares for which the Ex-Dividend Date
falls within the same calendar year.

 

(g)                                 Role of Agent.  Each party agrees and acknowledges that (i) J.P. Morgan Securities LLC, an affiliate of Dealer (“JPMS”), has
acted solely as agent and not as principal with respect to the Transaction and (ii) JPMS has no obligation or liability, by way of
guaranty, endorsement or otherwise, in any manner in respect of the Transaction (including, if applicable, in respect of the settlement
thereof). Each party agrees it will look solely to the other party (or any
guarantor in respect thereof) for performance of such other party’s obligations
under the Transaction.

 

(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
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 

 

13

 

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 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 

 

14

 

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).

 

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.

 

15

 

	
  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 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

  

 

16

 

	
   

  	
   

  	
  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 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 

 

17

 

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 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 

 

18

 

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).

 

(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 

 

19

 

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 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).

 

20

 

(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 9(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 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 

 

21

 

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 executing this Confirmation and
returning it to EDG Confirmation Group, J.P. Morgan Securities LLC, 277 Park
Avenue, 11th Floor, New York, NY 10172-3401, or by fax to (212) 622
8519.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  J.P.
  Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Santosh
  Sreenivasan

  
	
   

  	
  Authorized
  Signatory

  
	
   

  	
  Name:

  	
  Santosh
  Sreenivasan

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  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

  	
   

  	
   

  
						

 

JPMorgan
Chase Bank, National Association 

Organised
under the laws of the United States as a National Banking Association

Main
Office 1111 Polaris Parkway, Columbus, Ohio 43271

Registered
as a branch in England & Wales branch No. BR000746

Registered
Branch Office 125 London Wall, London EC2Y 5AJ

Authorised
and regulated by the Financial Services Authority

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