Document:

Exhibit 10.2

 

 

From:               Bank of America, N.A.

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

One Bryant Park
 New York, NY 10036

Attn: Robert Stewart, Assistant General Counsel

Telephone:  646-855-0711

Facsimile:  646-822-5618

 

	
 
    	
November 12, 2018
    

 

To:                             KBR, Inc. 
 601 Jefferson Street, Suite 3400

Houston, Texas 77002
 Attention:                                         Natasha Frausto, Vice President & Treasurer
 Telephone No.:             713-753-2280
 Facsimile No.:                   713-753-2517

 

Re:                             Base 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 Bank of America, N.A. (“Dealer”) and KBR, Inc. (“Counterparty”) as of the Trade Date specified below (the “Transaction”).  This letter agreement constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below.  Each party further agrees that this Confirmation together with the Agreement evidence a complete binding agreement between Counterparty and Dealer as to the subject matter and terms of the Transaction to which this Confirmation relates, and shall supersede all prior or contemporaneous written or oral communications with respect thereto.

 

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 November 12, 2018 (the “Offering Memorandum”) relating to the 2.50% Convertible Senior Notes due 2023 (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 350,000,000 (as increased by up to an aggregate principal amount of USD 52,500,000 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 November 15, 2018 between Counterparty and Citibank, N.A., 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 or supplemented following such date (other than any amendment or supplement (x) pursuant to Section 10.01(h) of the Indenture that, as determined by the Calculation Agent, conforms the Indenture to the description of Convertible Notes in the Offering Memorandum or (y) pursuant to Section 14.07 of the Indenture, subject, in the case of this clause (y), to the second paragraph under “Method of Adjustment” in Section 3), any such amendment or supplement will be disregarded for purposes of this Confirmation (other than as provided in Section 9(h)(ii) below) unless the parties agree otherwise in writing.

 

 

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

 

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

 

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

 

General Terms.

 

	
Trade Date:
    	
 
    	
November 12, 2018
    
	
 
    	
 
    	
 
    
	
Effective Date:
    	
 
    	
The second Exchange Business Day immediately prior   to the Premium Payment Date
    
	
 
    	
 
    	
 
    
	
Option Style:
    	
 
    	
“Modified American”, as described under “Procedures   for Exercise” below
    
	
 
    	
 
    	
 
    
	
Option Type:
    	
 
    	
Call
    
	
 
    	
 
    	
 
    
	
Buyer:
    	
 
    	
Counterparty
    
	
 
    	
 
    	
 
    
	
Seller:
    	
 
    	
Dealer
    
	
 
    	
 
    	
 
    
	
Shares:
    	
 
    	
The common stock of Counterparty, par value USD   0.001 per share (Exchange symbol “KBR”).
    
	
 
    	
 
    	
 
    
	
Number of Options:
    	
 
    	
350,000. For the avoidance of doubt, the Number of   Options shall be reduced by any Options exercised by Counterparty. In no   event will the Number of Options be less than zero.
    
	
 
    	
 
    	
 
    
	
Applicable Percentage:
    	
 
    	
50%
    
	
 
    	
 
    	
 
    
	
Option Entitlement:
    	
 
    	
A number equal to the product of the Applicable   Percentage and 39.1961.
    
	
 
    	
 
    	
 
    
	
Strike Price:
    	
 
    	
USD 25.5127
    
	
 
    	
 
    	
 
    
	
Premium:
    	
 
    	
USD 31,115,000
    
	
 
    	
 
    	
 
    
	
Premium Payment Date:
    	
 
    	
November 15, 2018
    
	
 
    	
 
    	
 
    
	
Exchange:
    	
 
    	
The New York Stock Exchange
    
	
 
    	
 
    	
 
    
	
Related Exchange(s):
    	
 
    	
All Exchanges
    
	
 
    	
 
    	
 
    
	
Excluded Provisions:
    	
 
    	
Section 14.03 and Section 14.04(h) of   the Indenture.
    
	
 
    	
 
    	
 
    
	
Procedures for Exercise.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Conversion Date:
    	
 
    	
With respect to any conversion of a Convertible   Note, the date on which the Holder (as such term is defined in the
    

 

 

	
 
    	
 
    	
Indenture) of such Convertible Note satisfies all of   the requirements for conversion thereof as set forth in   Section 14.02(b) of the Indenture.
    
	
 
    	
 
    	
 
    
	
Free Convertibility   Date:
    	
 
    	
May 1, 2023
    
	
 
    	
 
    	
 
    
	
Expiration Time:
    	
 
    	
The Valuation Time
    
	
 
    	
 
    	
 
    
	
Expiration Date:
    	
 
    	
November 1, 2023, 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 in respect of which a Notice of   Conversion that is effective as to Counterparty has been delivered by the   relevant converting Holder, a number of Options equal to the number of Convertible   Notes in denominations of USD 1,000 as to which such Conversion Date has   occurred shall be deemed to be automatically exercised; provided that   such Options shall be exercised or deemed exercised only if Counterparty has   provided a Notice of Exercise to Dealer in accordance with “Notice of   Exercise” below.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Notwithstanding the foregoing, in no event shall the   number of Options that are exercised or deemed exercised hereunder exceed the   Number of Options.
    
	
 
    	
 
    	
 
    
	
Notice of Exercise:
    	
 
    	
Notwithstanding anything to the contrary in the   Equity Definitions or under “Automatic Exercise” above, in order to exercise   any Options, Counterparty must notify Dealer in writing before 5:00   p.m. (New York City time) on the Scheduled Valid Day immediately preceding   the scheduled first day of the Settlement Averaging Period for the Options   being exercised of (i) the number of such Options, (ii) the   scheduled first day of the Settlement Averaging Period and the scheduled   Settlement Date, (iii) the Relevant Settlement Method for such Options,   and (iv) if the settlement method for the related Convertible Notes is   not Settlement in Shares or Settlement in Cash (each as defined below), the   fixed amount of cash per Convertible Note that Counterparty has elected to deliver   to Holders (as such term is defined in the Indenture) of the related   Convertible Notes (the “Specified Cash Amount”);   provided that in respect of any   Options relating to Convertible Notes with a Conversion Date occurring on or   after the Free Convertibility Date, (A) such notice may be given on or   prior to the second Scheduled Valid Day immediately preceding the Expiration   Date and need only specify the information required in clause (i) above,   and (B) if the Relevant Settlement Method for such Options is (x) Net   Share Settlement and the Specified Cash Amount is not USD 1,000,   (y) Cash Settlement or (z) Combination Settlement, Dealer shall   have received a separate notice (the “Notice of Final   Settlement Method”) in respect of all such Convertible Notes   before 5:00 p.m. (New York City time) 
    

 

 

	
 
    	
 
    	
on the Free Convertibility Date specifying the   information required in clauses (iii) and (iv) above. Counterparty   acknowledges its responsibilities under applicable securities laws, and in   particular Section 9 and Section 10(b) of the Exchange Act (as   defined below) and the rules and regulations thereunder, in respect of   any election of a settlement method with respect to the Convertible Notes.
    
	
 
    	
 
    	
 
    
	
Valuation Time:
    	
 
    	
At the close of trading of the regular trading   session on the Exchange; provided that   if the principal trading session is extended, the Calculation Agent shall   determine the Valuation Time in its reasonable discretion.
    
	
 
    	
 
    	
 
    
	
Market Disruption   Event:
    	
 
    	
Section 6.3(a) of the Equity Definitions is   hereby replaced in its entirety by the following:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
“‘Market Disruption Event’ means, in respect of a   Share, (i) a failure by the primary United States national or regional   securities exchange or market on which the Shares are listed or admitted for   trading to open for trading during its regular trading session or   (ii) the occurrence or existence prior to 1:00 p.m. (New York City   time) on any Scheduled Valid Day for the Shares for more than one half-hour   period in the aggregate during regular trading hours of any suspension or   limitation imposed on trading (by reason of movements in price exceeding   limits permitted by the relevant stock exchange or otherwise) in the Shares   or in any options contracts or futures contracts relating to the Shares.”
    
	
 
    	
 
    	
 
    
	
Settlement Terms.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Settlement Method:
    	
 
    	
For any Option, Net Share Settlement; provided that if the Relevant Settlement Method set forth   below for such Option is not Net Share Settlement, then the Settlement Method   for such Option shall be such Relevant Settlement Method, but only if   Counterparty shall have notified Dealer of the Relevant Settlement Method in   the Notice of Exercise or Notice of Final Settlement Method, as applicable,   for such Option.
    
	
 
    	
 
    	
 
    
	
Relevant Settlement   Method:
    	
 
    	
In respect of any Option:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)    if Counterparty has   elected to settle its conversion obligations in respect of the related   Convertible Note (A) entirely in Shares pursuant to   Section 14.02(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 Cash   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 Cash 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 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 Cash   Amount greater than USD 1,000, then the Relevant Settlement Method for such   Option shall be Combination Settlement; and
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(iii)  if Counterparty has elected to   settle its conversion obligations in respect of the related Convertible Note   entirely in cash pursuant to Section 14.02(a)(iv)(B) of the   Indenture (such settlement method, “Settlement in Cash”),   then the Relevant Settlement Method for such Option shall be Cash Settlement.
    
	
 
    	
 
    	
 
    
	
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) (a) the Daily Option Value for such Valid   Day, divided by (b) the Relevant Price   on such Valid Day, divided by   (ii) 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 pay cash in lieu of delivering any   fractional Shares to be delivered with respect to any Net Share Settlement   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 pay or deliver,   as the case may be, to Counterparty, on the relevant Settlement Date for each   such Option:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)                           cash   (the “Combination Settlement Cash Amount”)   equal to the sum, for each Valid Day during the Settlement Averaging Period   for such Option, of (A) an amount (the “Daily   Combination Settlement Cash Amount”) equal to the lesser of   (1) the product of (x) the Applicable Percentage and (y) the   Specified Cash Amount minus USD   1,000 and (2) the Daily Option Value, divided by   (B) the number of Valid Days in the Settlement Averaging Period; provided that if the calculation in clause (A) above   results in zero or a negative number for any Valid Day, the Daily Combination   Settlement Cash Amount for such Valid Day shall be deemed to be zero; and
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(ii)                        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) (1) the Daily   Option Value on such Valid Day minus the   Daily Combination Settlement Cash Amount for such Valid Day, divided by (2) the Relevant Price on such Valid Day, divided by (B) the number of Valid Days in the   Settlement Averaging Period; provided that   if the calculation in sub-clause (A)(1) 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 pay cash in lieu of delivering any   fractional Shares to be delivered with respect to any Combination Settlement   Share Amount valued at the Relevant Price for the last Valid Day of the   Settlement Averaging Period.
    
	
 
    	
 
    	
 
    
	
Cash Settlement:
    	
 
    	
If Cash Settlement is applicable to any Option   exercised or deemed exercised hereunder, in lieu of Section 8.1 of the   Equity Definitions, Dealer will pay to Counterparty, on the relevant   Settlement Date for each such Option, an amount of cash (the “Cash Settlement Amount”) equal to the sum, for each Valid   Day during the Settlement Averaging Period for such Option, of (i) the   Daily Option Value for such Valid Day, divided by   (ii) the number of Valid Days in the Settlement Averaging Period.
    
	
 
    	
 
    	
 
    
	
Daily Option Value:
    	
 
    	
For any Valid Day, an amount equal to (i) the   Option Entitlement on such Valid Day, multiplied by   (ii) the Relevant Price on such Valid Day less   the Strike Price on such Valid Day; provided that   if the calculation contained in clause (ii) above results in a negative   number, the Daily Option Value for such Valid Day shall be deemed to be zero.   In no event will the Daily Option Value be less than zero.
    
	
 
    	
 
    	
 
    
	
Applicable Limit:
    	
 
    	
For any Option, an amount of cash equal to the   Applicable Percentage multiplied by the   excess of (i) the aggregate of (A) the amount of cash, if any, paid   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 KBR <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 or regional securities exchange on   which the Shares are then listed or, if the Shares are not then listed on a   United States national or regional securities exchange, on the principal   other market on which the Shares are then listed or admitted for trading. If   the Shares are not so listed or admitted for trading, “Valid Day” means a   Business Day.
    
	
 
    	
 
    	
 
    
	
Scheduled Valid Day:
    	
 
    	
A day that is scheduled to be a Valid Day on the   principal United States national or regional securities exchange or market on   which the Shares are listed or admitted for trading. If the Shares are not so   listed or admitted for trading, “Scheduled Valid Day” means a Business Day.
    
	
 
    	
 
    	
 
    
	
Business Day:
    	
 
    	
Any day other than a Saturday, a Sunday or a day on   which the Federal Reserve Bank of New York is authorized or required by law   or executive order to close or be closed.
    
	
 
    	
 
    	
 
    
	
Relevant Price:
    	
 
    	
On any Valid Day, the per Share volume-weighted   average price as displayed under the heading “Bloomberg VWAP” on Bloomberg   page KBR <equity> AQR (or its equivalent successor if such   page is not available) in respect of the period from the scheduled   opening time of the Exchange to the Scheduled Closing Time of the Exchange on   such Valid Day (or if such volume-weighted average price is unavailable at   such time, the market value of one Share on such Valid Day, as determined by   the Calculation Agent using, if practicable, a volume-weighted average   method). The Relevant Price will be determined without regard to after-hours   trading or any other trading outside of the regular trading session trading   hours.
    
	
 
    	
 
    	
 
    
	
Settlement Averaging   Period:
    	
 
    	
For any Option:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)                                     if   the related Conversion Date occurs prior to the Free Convertibility 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 Settlement in Shares   or Low Cash Combination Settlement applies to the related Convertible Note,   the Settlement Averaging Period shall be the 80 consecutive Valid Day period   commencing on, and including, the second Valid Day immediately following such   Conversion Date; or
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(ii)                                  if   the related Conversion Date occurs on or following the Free Convertibility   Date, the 40 consecutive Valid Days commencing on, and including, the 41st Scheduled Valid Day immediately prior to the   Expiration Date; provided that   if the Notice of Exercise or Notice of Final 
    

 

 

	
 
    	
 
    	
Settlement Method, as   applicable, for such Option specifies that Settlement in Shares or Low Cash   Combination Settlement applies to the related Convertible Note, the   Settlement Averaging Period shall be the 80 consecutive Valid Days commencing   on, and including, the 81st Scheduled Valid   Day immediately prior to the Expiration Date.
    
	
 
    	
 
    	
 
    
	
Settlement Date:
    	
 
    	
For any Option, the second 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 and 9.11   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 the   Equity Definitions (including, but not limited to, Section 9.11   thereof), the parties acknowledge that (i) any Shares delivered to   Counterparty shall be, upon delivery, subject to restrictions and limitations   arising from Counterparty’s status as issuer of the Shares under applicable   securities laws, (ii) Dealer may deliver any Shares required to be   delivered hereunder in certificated form in lieu of delivery through the   Clearance System and (iii) any Shares delivered to Counterparty may be   “restricted securities” (as defined in Rule 144 under the Securities Act   of 1933, as amended (the “Securities Act”)).
    
	
 
    	
 
    	
 
    

 

3.                                      Additional Terms applicable to the Transaction.

 

	
Adjustments applicable to the Transaction:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Potential Adjustment   Events:
    	
 
    	
Notwithstanding Section 11.2(e) of the   Equity Definitions, a “Potential Adjustment Event” means an occurrence of any   event or condition, as set forth in any Dilution Adjustment Provision, that   would result in an adjustment under the Indenture to the “Conversion Rate” or   the composition of a “unit of Reference Property” or to any “Last Reported   Sale Price”, “Daily VWAP,” “Daily Conversion Value” or “Daily Settlement   Amount” (each as defined in the Indenture). For the avoidance of doubt,   Dealer shall not have any delivery or payment obligation hereunder, and no   adjustment shall be made to the terms of the Transaction, on account of   (x) any distribution of cash, property or securities by Counterparty to   holders of the Convertible Notes (upon conversion or otherwise) or   (y) any other transaction in which holders of the Convertible Notes are   entitled to participate, in each case, in lieu of an adjustment under the   Indenture of the type referred to in the immediately preceding sentence   (including, without limitation, pursuant to the fourth 
    

 

 

	
 
    	
 
    	
sentence of Section 14.04(c) of the   Indenture or the fifth sentence of Section 14.04(d) of the   Indenture).
    
	
 
    	
 
    	
 
    
	
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.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Notwithstanding the foregoing and “Consequences of   Merger Events / Tender Offers” below:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)                                     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, Section 14.07(a) of the   Indenture or any supplemental indenture entered into thereunder 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   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 in a commercially reasonable   manner, to the terms hereof in order to account for such Potential Adjustment   Event;
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(ii)                                  in   connection with any Potential Adjustment Event as a result of an event or   condition set forth in Section 14.04(b) of the Indenture or   Section 14.04(c) of the Indenture where, in either case, the period   for determining “Y” (as such term is used in Section 14.04(b) of   the Indenture) or “SP0”   (as such term is used in Section 14.04(c) of the Indenture), as the   case may be, begins before Counterparty has publicly announced the event or   condition giving rise to such Potential Adjustment Event, then the   Calculation Agent shall have the right to adjust any variable relevant to the   exercise, settlement or payment for the Transaction in a 
    

 

 

	
 
    	
 
    	
commercially reasonable   manner as appropriate to reflect the costs (including, but not limited to,   hedging mismatches and market losses) and expenses incurred by a counterparty   establishing and maintaining a commercially reasonable hedge position in   connection with its hedging activities as a result of such event or condition   not having been publicly announced prior to the beginning of such period; and
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(iii)                               if   any Potential Adjustment Event is declared and (a) the event or   condition giving rise to such Potential Adjustment Event is subsequently amended,   modified, cancelled or abandoned, (b) the “Conversion Rate” (as defined   in the Indenture) is otherwise not adjusted at the time or in the manner   contemplated by the relevant Dilution Adjustment Provision based on such   declaration or (c) the “Conversion Rate” (as defined in the Indenture)   is adjusted as a result of such Potential Adjustment Event and subsequently   re-adjusted (each of clauses (a), (b) and (c), a “Potential   Adjustment Event Change”) then, in each case, the Calculation   Agent shall have the right to adjust any variable relevant to the exercise,   settlement or payment for the Transaction in a commercially reasonable manner   as appropriate to reflect the costs (including, but not limited to, hedging   mismatches and market losses) and expenses incurred by a counterparty   establishing and maintaining a commercially reasonable hedge position in   connection with its hedging activities as a result of such Potential   Adjustment Event Change.
    
	
 
    	
 
    	
 
    
	
Dilution Adjustment   Provisions:
    	
 
    	
Sections 14.04(a), (b), (c), (d) and   (e) and Section 14.05 of the Indenture.
    
	
 
    	
 
    	
 
    
	
Extraordinary   Events applicable to the Transaction:
    
	
 
    	
 
    	
 
    
	
Merger Events:
    	
 
    	
Applicable; provided that   notwithstanding Section 12.1(b) of the Equity Definitions, a   “Merger Event” means the occurrence of any event or condition set forth in   the definition of “Merger Event” in Section 14.07(a) of the   Indenture.
    
	
 
    	
 
    	
 
    
	
Tender Offers:
    	
 
    	
Applicable; provided that   notwithstanding Section 12.1(d) of the Equity Definitions, a   “Tender Offer” means the occurrence of any event or condition set forth in   Section 14.04(e) of the Indenture.
    
	
 
    	
 
    	
 
    
	
Consequences 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   commercially reasonable 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, subject to the second paragraph   under “Method of Adjustment”; 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 that is not a corporation or is 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 a corporation organized under the   laws of the United States, any State thereof or the District of Columbia,   then, in either case, Cancellation and Payment (Calculation Agent   Determination) may apply at Dealer’s sole election.
    
	
 
    	
 
    	
 
    
	
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) of the Equity Definitions is hereby amended by   (i) replacing the phrase “the interpretation” in the third line thereof   with the phrase “, or public announcement of, the formal or informal   interpretation”, (ii) replacing the word “Shares” where it appears in   clause (X) thereof with the words “Hedge Position” and   (iii) replacing the parenthetical beginning after the word “regulation”   in the second line thereof the words “(including, for the avoidance of doubt   and without limitation, (x) any tax law or (y) adoption,   effectiveness or promulgation of new regulations authorized or mandated by   existing statute)”.
    
	
 
    	
 
    	
 
    
	
Failure to Deliver:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Hedging Disruption:
    	
 
    	
Applicable; provided   that:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)                                     Section 12.9(a)(v) of   the Equity Definitions is hereby amended by (a) inserting the following   words at the end of clause (A) thereof: “in the 
    

 

 

	
 
    	
 
    	
manner contemplated by   the Hedging Party on the Trade Date” and (b) 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; provided, however, that all   calculations, adjustments, specifications, choices and determinations by   Dealer acting in its capacity as the Hedging Party shall be made in good   faith and in a commercially reasonable manner (it being understood that   Hedging Party will be subject to the requirements of the second paragraph   under “Calculation Agent” below).
    
	
 
    	
 
    	
 
    
	
Determining Party:
    	
 
    	
For all applicable Extraordinary Events, Dealer; provided, however, that all calculations, adjustments,   specifications, choices and determinations by Dealer acting in its capacity   as the Determining Party shall be made in good faith and in a commercially   reasonable manner (it being understood that Determining Party will be subject   to the requirements of the second paragraph under “Calculation Agent” below).
    
	
 
    	
 
    	
 
    
	
Non-Reliance:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Agreements and Acknowledgments Regarding Hedging   Activities:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Additional Acknowledgments:
    	
 
    	
Applicable
    

 

	
4.                                      Calculation Agent.
    	
 
    	
Dealer; provided, however,   that all calculations, adjustments, specifications, choices and   determinations by the Calculation Agent shall be made in good faith and in a   commercially reasonable manner. The parties agree that they will work   reasonably to resolve any disputes as set forth in the immediately following   paragraph. In the case of any calculation, adjustment or determination by the   Hedging Party, the Determining Party or the Calculation Agent, following any   written request from Counterparty, the Hedging Party, the Determining Party   or the Calculation Agent, as the case may be, shall promptly provide to   Counterparty a written explanation describing in reasonable detail the basis   for such 
    

 

 

	
 
    	
 
    	
calculation, adjustment or determination (including   any quotation, market data or information from internal or external sources   used in making such calculation, adjustment or determination, but without   disclosing any proprietary models or other information that may be   proprietary or confidential) and shall use commercially reasonable efforts to   provide such written explanation within five (5) Exchange Business Days   from the receipt of such request. If Counterparty promptly disputes such   calculation, adjustment or determination in writing and provides reasonable detail   as to the basis for such dispute, the Calculation Agent shall, to the extent   permitted by applicable law, discuss the dispute with Counterparty in good   faith.
    

 

5.                                      Account Details.

 

(a)                                 Account for payments to Counterparty:

 

Bank of America, N.A.
 New York, NY

Acct No.: 4427187942
 Bank Routing: 026-009-593

 

Account for delivery of Shares to Counterparty:

 

To be provided by Counterparty

 

(b)                                 Account for payments to Dealer:

 

Bank of America, N.A.

New York, NY

SWIFT: BOFAUS3N

Bank Routing: 026-009-593

Account Name: Bank of America

Account No. : 0012334-61892

 

Account for delivery of Shares from Dealer:

 

DTC#: 0161

 

6.                                      Offices.

 

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

 

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

 

Bank of America, N.A.
 c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
 One Bryant Park
 New York, NY 10036

 

7.                                      Notices.

 

(a)                                 Address for notices or communications to Counterparty:

 

KBR, Inc.

601 Jefferson Street, Suite 3400

 

 

Houston, Texas 77002

	
Attention:
    	
Natasha Frausto, Vice   President & Treasurer
    
	
Telephone No.:
    	
713-753-2280
    
	
Facsimile No.:
    	
713-753-2517
    

 

With a copy to:

 

Mayer Brown LLP
 700 Louisiana, Suite 3400
 Houston, Texas 77002

	
Attention:
    	
Jeff M. Dobbs
    
	
Telephone No.:
    	
713-238-2697
    
	
Facsimile No.:
    	
713-238-4697
    
	
Email:
    	
jdobbs@mayerbrown.com
    

 

(b)                                 Address for notices or communications to Dealer:

 

Bank of America, N.A.

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

One Bryant Park

New York, NY 10036

Attn:       Robert Stewart, Assistant General Counsel

	
Telephone:
    	
646-855-0711
    
	
Facsimile:
    	
646-822-5618
    

 

8.                                      Representations and Warranties of Counterparty.

 

Each of the representations and warranties of Counterparty set forth in Section 1 of the Purchase Agreement (the “Purchase Agreement”) dated as of November 12, 2018, between Counterparty and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the Initial Purchasers party thereto (the “Initial Purchasers”), are true and correct and are hereby deemed to be repeated to Dealer as if set forth herein except to the extent that such representation and warranties if not true or correct, would not have a material adverse effect on the power or ability of Counterparty to execute and deliver this Confirmation or to perform their obligations hereunder.  Counterparty hereby further represents and warrants to Dealer on the date hereof and on and as of the Premium Payment Date that:

 

(a)                                 This Confirmation has been duly authorized, executed and delivered by Counterparty and is enforceable against Counterparty in accordance with its terms, except, in each case, as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors’ rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law).

 

(b)                                 The execution, delivery and performance of this Confirmation and the consummation of the Transaction contemplated hereby have been duly authorized by all necessary corporate action by Counterparty and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined in the Purchase Agreement) under, or result in the creation or imposition of any lien, charge or encumbrance upon any properties or assets of Counterparty or any subsidiary thereof pursuant to the Agreements and Instruments (as defined in the Purchase Agreement), except for such conflicts, breaches, defaults or Repayment Events (as defined in the Purchase Agreement) or liens, charges or encumbrances that would not, singly or in the aggregate, result in a Material Adverse Effect (as defined in the Purchase Agreement), nor will such action result in any violation of (a) the provisions of the charter, by-laws or similar organizational document of Counterparty or any of its subsidiaries or (b) any law, statute, rule, regulation, judgment, order, writ or decree of any Governmental Entity (as defined in the Purchase Agreement),  except, in the case of  clause (b)

 

above, for such violations that would not, singly or in the aggregate, result in a Material Adverse Effect (as defined in the Purchase Agreement).

 

(c)                                  No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any Governmental Entity (as defined in the Purchase Agreement) is necessary or required for the performance by Counterparty of its obligations hereunder or the consummation of the Transaction contemplated by this Confirmation or for the due execution, delivery and performance of this Confirmation, except such as have been already obtained and excluding any filing, authorization, approval, consent, license, order, registration, qualification or decree the failure of which to obtain or make would not have a Material Adverse Effect (as defined in the Purchase Agreement).

 

(d)                                 Counterparty is not and, after consummation of the transactions contemplated hereby, 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(18) of the Commodity Exchange Act, as amended, other than a person that is an eligible contract participant under Section 1a(18)(C) of the Commodity Exchange Act).

 

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

 

(g)                                  No state or local (including any non-U.S. jurisdiction’s) law, rule, regulation or regulatory order applicable to the Shares would give rise to any reporting, consent, registration or other requirement (including without limitation a requirement to obtain prior approval from any person or entity) as a result of Dealer or its affiliates owning or holding (however defined) Shares.

 

(h)                                 Counterparty (A) is capable of evaluating investment risks independently, both in general and with regard to all transactions and investment strategies involving a security or securities; (B) will exercise independent judgment in evaluating the recommendations of any broker-dealer or its associated persons, unless it has otherwise notified the broker-dealer in writing; and (C) has total assets of at least USD 50 million.

 

(i)                                     The assets of Counterparty do not constitute “plan assets” under the Employee Retirement Income Security Act of 1974, as amended, the Department of Labor Regulations promulgated thereunder or similar law.

 

(j)                                    Counterparty is not “insolvent” (as such term is defined under Section 101(32) of the Bankruptcy Code (as hereinafter defined), and Counterparty would be able to purchase a number of Shares equal to the product of the Number of Options, and the Option Entitlement in compliance with the laws of the jurisdiction of Counterparty’s incorporation.

 

9.                                      Other Provisions.

 

(a)                                 Opinions.  Counterparty shall deliver to Dealer an opinion of counsel, dated as of the Trade Date, with respect to the matters set forth in Sections 8(a) through (c) of this Confirmation which shall be deemed delivered to Dealer hereunder if such opinion is delivered to Dealer under the Purchase Agreement.  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 129.3 million (in the case of the first such notice) or (ii) thereafter more than 9.8 million less than the number of Shares included in the immediately preceding Repurchase Notice.  Counterparty agrees to indemnify and hold harmless Dealer and its affiliates and their respective officers, directors, employees, affiliates, advisors, agents and 

 

 

controlling persons (each, an “Indemnified Person”) from and against any and all losses (including losses relating to Dealer’s hedging activities as a consequence of becoming, or of the risk of becoming, a Section 16 “insider”, including without limitation, any forbearance from hedging activities or cessation of hedging activities and any losses in connection therewith with respect to the Transaction), claims, damages, judgments, liabilities and expenses (including reasonable attorney’s fees), joint or several, which an Indemnified Person may become subject to, as a result of Counterparty’s failure to provide Dealer with a Repurchase Notice on the day and in the manner specified in this paragraph, and to reimburse, within 30 days, upon written request, each of such Indemnified Persons for any reasonable legal or other expenses incurred in connection with investigating, preparing for, providing testimony or other evidence in connection with or defending any of the foregoing.  If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against the Indemnified Person as a result of Counterparty’s failure to provide Dealer with a Repurchase Notice in accordance with this paragraph, such Indemnified Person shall promptly notify Counterparty in writing, and Counterparty, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others Counterparty may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding.  Counterparty shall not be liable for any settlement of any proceeding contemplated by this paragraph that is effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, Counterparty agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment.  Counterparty shall not, without the prior written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding contemplated by this paragraph that is in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such proceeding on terms reasonably satisfactory to such Indemnified Person.  If the indemnification provided for in this paragraph is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then Counterparty hereunder, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”), of any securities of Counterparty, other than a distribution meeting the requirements of the exception set forth in Rules 101(b)(10) and 102(b)(7) of Regulation M.  Counterparty shall not, until the second Scheduled Trading Day immediately following the Effective Date, engage in any such distribution.

 

(d)                                 No Manipulation.  Counterparty is not entering into the Transaction to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for the Shares) or otherwise in violation of the Exchange Act.

 

(e)                                  Transfer or Assignment.

 

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

 

 

(A)                               With respect to any Transfer Options, Counterparty shall not be released from its notice and indemnification obligations pursuant to Section 9(b) or any obligations under Section 9(m) or 9(r) 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 (A) to any affiliate of Dealer (1) that has a long-term issuer rating 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 provided, in each case, Counterparty 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 Counterparty would have been required to pay to Dealer in the absence of such transfer and assignment or (B) to any other third party with a long-term issuer rating equal to or better than the lesser of (1) the credit rating of Dealer at the time of the transfer and (2) A- by Standard and Poor’s Rating Group, Inc. or its successor (“S&P”), or A3 by Moody’s Investor Service, Inc. (“Moody’s”) or, if either S&P or Moody’s ceases to rate such debt, at least an equivalent rating or better by a substitute rating agency mutually agreed by Counterparty and Dealer; provided that (a) Counterparty 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 Counterparty would have been required to pay to Dealer in the absence of such transfer and assignment, (b) Dealer shall cause the transferee to make such Payee Tax Representations and to provide such tax documentation as may be reasonably requested by Counterparty to permit Counterparty to determine that results described in clause (a) will not occur upon or after such transfer and assignment and (c) an Event of Default, Potential Event of Default or Termination Event will not occur as a result of such transfer and assignment; provided 

 

 

further, that Dealer shall provide written notice to Counterparty following any such Transfer.  If at any time at which (A) the Section 16 Percentage exceeds 7.5%, (B) the Option Equity Percentage exceeds 14.5%, or (C) the Share Amount exceeds the Applicable Share Limit (if any applies) (any such condition described in clauses (A), (B) or (C), an “Excess Ownership Position”), Dealer is unable after using its commercially reasonable efforts to effect a transfer or assignment of Options 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 portion of the Transaction, a payment shall be made pursuant to Section 6 of the Agreement as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to the Transaction and a Number of Options equal to the number of Options underlying the Terminated Portion, (2) Counterparty were the sole Affected Party with respect to such partial termination and (3) the Terminated Portion were the sole Affected Transaction (and, for the avoidance of doubt, the provisions of Section 9(k) 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 any of its affiliates or any other person subject to aggregation with Dealer for purposes of the “beneficial ownership” test under Section 13 of the Exchange Act, or any “group” (within the meaning of Section 13 of the Exchange Act) of which Dealer is or may be deemed to be a part beneficially owns (within the meaning of Section 13 of the Exchange Act), without duplication, on such day (or, to the extent that for any reason the equivalent calculation under Section 16 of the Exchange Act and the rules and regulations thereunder results in a higher number, such higher number) and (B) the denominator of which is the number of Shares outstanding on such day.  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 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)                                   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 any Settlement Date for the Transaction, Dealer may, by notice to Counterparty on or prior to any Settlement Date (a “Nominal Settlement Date”), elect to deliver the Shares on two or more dates (each, a “Staggered Settlement Date”) as follows:

 

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

 

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

 

(iii)                               if the Net Share Settlement terms or the Combination Settlement terms set forth above were to apply on the Nominal Settlement Date, then the Net Share Settlement terms or the Combination Settlement terms, as the case may be, will apply on each Staggered Settlement Date, except that the Shares otherwise deliverable on such Nominal Settlement Date will be allocated among such Staggered Settlement Dates as specified by Dealer in the notice referred to in clause (i) above.

 

(g)                                  Dividends.  If at any time during the period from and including the Effective Date, to but excluding the Expiration Date, (i) an ex-dividend date for a regular quarterly cash dividend occurs with respect to the Shares (an “Ex-Dividend Date”), and that dividend is less than the Regular Dividend on a per Share basis or (ii) if no Ex-Dividend Date for a regular quarterly cash dividend occurs with respect to the Shares in any quarterly dividend period of Counterparty, then the Calculation Agent will make a corresponding adjustment to any one or more of the Strike Price, Number of Options, Option Entitlement and/or any other variable relevant to the exercise, settlement or payment for the Transaction to preserve the fair value of the Options to Dealer after taking into account such dividend or lack thereof.  “Regular Dividend” shall mean USD 0.08 per Share per quarter.  Upon any adjustment to the Initial Dividend Threshold (as defined in the Indenture) for the Convertible Notes pursuant to the Indenture, the Calculation Agent will make a corresponding adjustment to the Regular Dividend for the Transaction.

 

(h)                                 Additional Termination Events.

 

(i)                                     Notwithstanding anything to the contrary in this Confirmation if an event of default with respect to Counterparty occurs under the terms of the Convertible Notes as set forth in Section 6.01 of the Indenture, 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 be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement.

 

(ii)                                  Notwithstanding anything to the contrary in this Confirmation, the occurrence of an Amendment Event shall constitute an Additional Termination Event applicable to the Transaction and, with respect to such Additional Termination Event, (A) Counterparty shall be deemed to be the sole Affected Party, (B) the Transaction shall be the sole Affected Transaction and (C) Dealer shall be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement. “Amendment Event” means that Counterparty amends, modifies, supplements, waives or obtains a waiver in respect of any term of the Indenture or the Convertible Notes governing the principal amount, coupon, maturity, repurchase obligation of Counterparty, any term relating to conversion of the Convertible Notes (including changes to the conversion rate, conversion rate adjustment provisions, conversion settlement dates or conversion 

 

 

conditions), or any term that would require consent of the holders of not less than 100% of the principal amount of the Convertible Notes to amend (other than, in each case, any amendment or supplement (x) pursuant to Section 10.01(h) of the Indenture that, as determined by the Calculation Agent, conforms the Indenture to the description of Convertible Notes in the Offering Memorandum or (y) pursuant to Section 14.07 of the Indenture), in each case, without the consent of Dealer.

 

(iii)                               Notwithstanding anything to the contrary in this Confirmation, the receipt by Dealer from Counterparty, within the applicable time period set forth opposite “Notice of Exercise” in Section 2, of any Notice of Exercise in respect of Options that relate to Convertible Notes as to which additional Shares would be added to the Conversion Rate (as defined in the Indenture) pursuant to Section 14.03 of the Indenture in connection with a “Make-Whole Fundamental Change” (as defined in the Indenture) shall constitute an Additional Termination Event as provided in this Section 9(h)(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 in no event be earlier than the related settlement date for such Convertible Notes) as an Early Termination Date with respect to the portion of the 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 the 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 (as defined in the Indenture) pursuant to Section 14.03 of the Indenture); provided that the amount of cash payable 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 (as defined in the Indenture, and after taking into account any applicable adjustments to the Conversion Rate pursuant to Section 14.03 of the Indenture), multiplied by (3) a market price per Share determined by the Calculation Agent in a commercially reasonable manner over (II) the aggregate principal amount of such Convertible Notes, as determined by the Calculation Agent in a commercially reasonable manner.

 

(i)                                     Amendments to Equity Definitions.

 

(i)                                     Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (1) inserting “(1)” immediately following the word “means” in the first line thereof and (2) inserting immediately prior to the semi-colon at the end of subsection (B) thereof the following words: “or (2) 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.

 

(iii)                               Section 12.9(b)(vi) of the Equity Definitions is hereby amended by (1) adding the word “or” immediately before subsection “(B)”, (2) deleting the comma at the end of subsection (A), (3) deleting subsection (C) in its entirety, (4) deleting the word “or”

 

 

immediately preceding subsection (C) and (5) replacing the words “either party” in the last sentence of such Section with “Dealer”.

 

(j)                                    Setoff.  Obligations under the Transaction shall not be set off by any party against any other obligations of the parties, whether arising under the Agreement, this Confirmation, under any other agreement between the parties hereto, by operation of law or otherwise. For the avoidance of doubt, in the event of bankruptcy or liquidation of Counterparty or Dealer, no party shall have the right to set off any obligation that it may have to the other parties under the Transaction against any obligation such other parties may have to it, whether arising under the Agreement, this Confirmation or any other agreement between the parties hereto, by operation of law or otherwise.

 

(k)                                 Alternative Calculations and Payment on Early Termination and on Certain  Extraordinary Events.  If (a) an Early Termination Date (whether as a result of an Event of Default or a Termination Event) occurs or is designated with respect to the Transaction or (b) the Transaction is cancelled or terminated upon the occurrence of an Extraordinary Event (except as a result of (i) a Nationalization, Insolvency or Merger Event in which the consideration to be paid to all 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 if Dealer would owe any amount to Counterparty pursuant to Section 6(d)(ii) of the Agreement or any Cancellation Amount pursuant to Article 12 of the Equity Definitions (any such amount, a “Payment Obligation”), then Dealer shall satisfy the Payment Obligation by the Share Termination Alternative (as defined below), unless (a) Counterparty gives 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, of its election that the Share Termination Alternative shall not apply, (b) Counterparty remakes the representation set forth in Section 8(f) as of the date of such election and (c) Dealer agrees, in its commercially reasonable discretion, to such election, in which case the provisions of Section 12.7 or Section 12.9 of the Equity Definitions, or the provisions of Section 6(d)(ii) of the Agreement, as the case may be, shall apply.

 

	
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, in satisfaction of such Payment Obligation in the   manner reasonably requested by Counterparty free of payment.
    
	
 
    	
 
    	
 
    
	
Share Termination Delivery Property:
    	
 
    	
A number of Share Termination Delivery Units, as   calculated by the Calculation Agent, equal to the Payment Obligation divided   by the Share Termination Unit Price. The Calculation Agent shall adjust the   Share Termination Delivery Property by replacing any fractional portion of a   security therein with an amount of cash equal to the value of such fractional   security based on the values used to calculate the Share Termination Unit   Price.
    
	
 
    	
 
    	
 
    
	
Share Termination Unit Price:
    	
 
    	
The value to Dealer of property contained in one   Share Termination Delivery Unit, as determined by the Calculation Agent in   its discretion by
    

 

 

	
 
    	
 
    	
commercially reasonable means and notified by the   Calculation Agent to Dealer at the time of notification of the Payment   Obligation. For the avoidance of doubt, the parties agree that in determining   the Share Termination Delivery Unit Price the Calculation Agent may consider,   if commercially reasonable, the purchase price paid in connection with the   purchase of Share Termination Delivery Property.
    
	
 
    	
 
    	
 
    
	
Share Termination Delivery Unit:
    	
 
    	
One Share or, if the Shares have changed into cash   or any other property or the right to receive cash or any other property as   the result of a Nationalization, Insolvency or Merger Event (any such   cash or other property, the “Exchange Property”),   a unit consisting of the type and amount of such Exchange Property received   by a holder of one Share (without consideration of any requirement to pay   cash or other consideration in lieu of fractional amounts of any securities)   in such Nationalization, Insolvency or 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 and 9.11 (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 Share Termination   Alternative is applicable to the Transaction.
    

 

(l)                                     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.

 

(m)                             Registration.  Counterparty hereby agrees that if, in the good faith reasonable judgment of Dealer, the Shares (“Hedge Shares”) acquired by Dealer for the purpose of hedging its obligations pursuant to the Transaction cannot be sold in the public market by Dealer without registration under the Securities Act, Counterparty shall, at its election, either (i) in order to allow Dealer to sell the Hedge Shares in a registered offering, use its best efforts to make available to Dealer an effective registration statement under the Securities Act and enter into an agreement, in form and substance 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, Counterparty shall use its best efforts to enter into a private placement agreement substantially similar to private placement purchase agreements customary for private placements of equity securities, in form and substance satisfactory to Dealer (in which case, the Calculation Agent shall make any adjustments to the terms of the Transaction that are necessary, in its reasonable judgment, to compensate Dealer for any discount from the public market price of the Shares incurred on the sale of Hedge Shares in a private placement), or (iii) purchase the Hedge Shares from Dealer at the then-current market price on such Exchange Business Days, and in the amounts and at such time(s), requested by Dealer.

 

(n)                                 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.

 

(o)                                 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 and in good faith determines, based on advice of counsel, 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; provided that no such Valid Day or other date of valuation, payment or delivery may be postponed or added more than 40 Valid Days after the original Valid Day or date of valuation, payment or delivery, as the case may be.

 

(p)                                 Status of Claims in Bankruptcy.  Dealer acknowledges and agrees that this Confirmation is not intended to convey to Dealer rights against Counterparty with respect to the Transaction that are senior to the claims of common stockholders of Counterparty in any United States bankruptcy proceedings of Counterparty; provided that nothing herein shall limit or shall be deemed to limit Dealer’s right to pursue remedies in the event of a breach by Counterparty of its obligations and agreements with respect to the Transaction; provided further that nothing herein shall limit or shall be deemed to limit Dealer’s rights in respect of any transactions other than the Transaction.

 

(q)                                 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.

 

(r)                                    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 Merger Event, Counterparty shall give Dealer written notice of (x) the weighted average of the types and amounts of consideration received by holders of Shares upon consummation of such Merger Event or (y) if no holders of Shares affirmatively make such election, the types and amounts of consideration actually received by holders of Shares (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 Merger Event is consummated; and

 

 

(ii)                                  (A) Counterparty shall give Dealer commercially reasonable advance (but in no event less than one Exchange Business Day) written notice of the section or sections of the Indenture and, if applicable, the formula therein, pursuant to which any adjustment will be made to the Convertible Notes in connection with any Potential Adjustment Event, Merger Event or Tender Offer and (B) promptly following any such adjustment, Counterparty shall give Dealer written notice of the details of such adjustment.

 

(s)                                   Wall Street Transparency and Accountability Act.  In connection with Section 739 of the Wall Street Transparency and Accountability Act of 2010 (“WSTAA”), the parties hereby agree that neither the enactment of WSTAA or any regulation under the WSTAA, nor any requirement under WSTAA or an amendment made by WSTAA, shall limit or otherwise impair either party’s otherwise applicable rights to terminate, renegotiate, modify, amend or supplement this Confirmation or the Agreement, as applicable, arising from a termination event, force majeure, illegality, increased costs, regulatory change or similar event under this Confirmation, the Equity Definitions incorporated herein, or the Agreement (including, but not limited to, rights arising from Change in Law, Hedging Disruption, Increased Cost of Hedging, an Excess Ownership Position, or Illegality (as defined in the Agreement)).

 

(t)                                    Agreements and Acknowledgements Regarding Hedging. Counterparty understands, acknowledges and agrees that: (A) at any time on and prior to the Expiration Date, Dealer and its affiliates may buy or sell Shares or other securities or buy or sell options or futures contracts or enter into swaps or other derivative securities in order to adjust its hedge position with respect to the Transaction; (B) Dealer and its affiliates also may be active in the market for Shares other than in connection with hedging activities in relation to the Transaction; (C) Dealer shall make its own determination as to whether, when or in what manner any hedging or market activities in securities of Issuer shall be conducted and shall do so in a manner that it deems appropriate to hedge its price and market risk with respect to the Relevant Prices; and (D) any market activities of Dealer and its affiliates with respect to Shares may affect the market price and volatility of Shares, as well as the Relevant Prices, each in a manner that may be adverse to Counterparty.

 

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

 

(v)                                 Payment by Counterparty. In the event that, following payment of the Premium, (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.

 

(w)                               Tax Matters.

 

(i)                                     Withholding Tax imposed on payments to non-US counterparties under the United States Foreign Account Tax Compliance Act.  “Tax” and “Indemnifiable Tax”, each as defined in Section 14 of the Agreement, shall not include any U.S. federal withholding tax imposed or collected pursuant to Sections 1471 through 1474 of the U.S. Internal Revenue Code 

 

 

of 1986, as amended (the “Code”), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code (a “FATCA Withholding Tax”). For the avoidance of doubt, a FATCA Withholding Tax is a Tax the deduction or withholding of which is required by applicable law for the purposes of Section 2(d) of the Agreement.

 

(ii)                                  Tax Documentation. For the purpose of Section 4(a)(i) of the Agreement, (a) Counterparty shall provide to Dealer a valid U.S. Internal Revenue Service Form W-9, or any successor thereto, (i) on or before the date of execution of this Confirmation and (ii) promptly upon learning that any such tax form previously provided by Counterparty has become obsolete or incorrect; (b) Dealer shall provide Counterparty a valid U.S. Internal Revenue Service Form W-9, or any successor thereto, (i) on or before the date of execution of this Confirmation and (ii) promptly upon learning that any such tax form previously provided by Dealer has become obsolete or incorrect.

 

(iii)                               Tax Representations.  For the purpose of Section 3(f) of the Agreement, Counterparty represents that it is a corporation for U.S. federal income tax purposes and is organized under the laws of the State of Delaware.  Counterparty is a “U.S. person” (as that term is used in section 1.1441-4(a)(3)(ii) of United States Treasury Regulations) for U.S. federal income tax purposes and an exempt recipient under Treasury Regulation Section 1.6049-4(c)(1)(ii). For the purpose of Section 3(f) of the Agreement, Dealer is a “U.S. person” (as that term is used in section 1.1441-4(a)(3)(ii) of the United States Treasury Regulations) for United States federal income tax purposes. BofA is a bank organized in the United States and is an exempt recipient under section 1.6049-4(c)(1)(ii)(M) of the United States Treasury Regulations.

 

(iv)                              871(m).  The parties agree that the definitions and provisions contained in the 2015 Section 871(m) Protocol, as published by ISDA, are incorporated into and apply to the Agreement solely for purposes of this Confirmation as if set forth in full herein.

 

 

Counterparty hereby agrees (a) to check this Confirmation carefully and immediately upon receipt so that errors or discrepancies can be promptly identified and rectified and (b) to confirm that the foregoing (in the exact form provided by Dealer) correctly sets forth the terms of the agreement between Dealer and Counterparty with respect to the Transaction, by manually signing this Confirmation or this page hereof as evidence of agreement to such terms and providing the other information requested herein and immediately returning an executed copy to Dealer.

 

	
 
    	
Yours faithfully,
    
	
 
    	
 
    
	
 
    	
BANK OF AMERICA, N.A.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Christopher A.   Hutmaker
    
	
 
    	
 
    	
Name: 
    	
Christopher A. Hutmaker
    
	
 
    	
 
    	
Title: 
    	
Managing Director
    

 

Agreed and Accepted By:

 

	
KBR, INC.
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Stuart J. B. Bradie
    	
 
    	
 
    
	
 
    	
Name:
    	
Stuart J. B. Bradie
    	
 
    
	
 
    	
Title: 
    	
President and Chief   Executive Officer
    	
 
    
					

 

[Signature Page to Base Bond Hedge Confirmation — Bank of America, N.A.]Exhibit 10.3

 

From:               BNP Paribas

787 7th Avenue, 8th Floor

New York, NY 10019

 

November 12, 2018

 

To:                             KBR, Inc.

601 Jefferson Street, Suite 3400

Houston, Texas 77002

Attention:                                         Natasha Frausto, Vice President & Treasurer

Telephone No.:             713-753-2280

Facsimile No.:                   713-753-2517

 

Re:                             Base Call Option Transaction (Reference Code OP1219DR)

 

The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the call option transaction entered into between BNP Paribas (“Dealer”) and KBR, Inc. (“Counterparty”) as of the Trade Date specified below (the “Transaction”).  This letter agreement constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below.  Each party further agrees that this Confirmation together with the Agreement evidence a complete binding agreement between Counterparty and Dealer as to the subject matter and terms of the Transaction to which this Confirmation relates, and shall supersede all prior or contemporaneous written or oral communications with respect thereto.

 

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 November 12, 2018 (the “Offering Memorandum”) relating to the 2.50% Convertible Senior Notes due 2023 (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 350,000,000 (as increased by up to an aggregate principal amount of USD 52,500,000 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 November 15, 2018 between Counterparty and Citibank, N.A., 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 or supplemented following such date (other than any amendment or supplement (x) pursuant to Section 10.01(h) of the Indenture that, as determined by the Calculation Agent, conforms the Indenture to the description of Convertible Notes in the Offering Memorandum or (y) pursuant to Section 14.07 of the Indenture, subject, in the case of this clause (y), to the second paragraph under “Method of Adjustment” in Section 3), any such amendment or supplement will be disregarded for purposes of this Confirmation (other than as provided in Section 9(h)(ii) below) unless the parties agree otherwise in writing.

 

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

 

 

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

 

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

 

General Terms.

 

	
Trade Date:
    	
 
    	
November 12, 2018
    
	
 
    	
 
    	
 
    
	
Effective Date:
    	
 
    	
The second Exchange Business Day immediately prior   to the Premium Payment Date
    
	
 
    	
 
    	
 
    
	
Option Style:
    	
 
    	
“Modified American”, as described under “Procedures   for Exercise” below
    
	
 
    	
 
    	
 
    
	
Option Type:
    	
 
    	
Call
    
	
 
    	
 
    	
 
    
	
Buyer:
    	
 
    	
Counterparty
    
	
 
    	
 
    	
 
    
	
Seller:
    	
 
    	
Dealer
    
	
 
    	
 
    	
 
    
	
Shares:
    	
 
    	
The common stock of Counterparty, par value USD   0.001 per share (Exchange symbol “KBR”).
    
	
 
    	
 
    	
 
    
	
Number of Options:
    	
 
    	
350,000. 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:
    	
 
    	
20%
    
	
 
    	
 
    	
 
    
	
Option Entitlement:
    	
 
    	
A number equal to the product of the Applicable   Percentage and 39.1961.
    
	
 
    	
 
    	
 
    
	
Strike Price:
    	
 
    	
USD 25.5127
    
	
 
    	
 
    	
 
    
	
Premium:
    	
 
    	
USD 12,446,000
    
	
 
    	
 
    	
 
    
	
Premium Payment Date:
    	
 
    	
November 15, 2018
    
	
 
    	
 
    	
 
    
	
Exchange:
    	
 
    	
The New York Stock Exchange
    
	
 
    	
 
    	
 
    
	
Related Exchange(s):
    	
 
    	
All Exchanges
    
	
 
    	
 
    	
 
    
	
Excluded Provisions:
    	
 
    	
Section 14.03 and Section 14.04(h) of   the Indenture.
    
	
 
    	
 
    	
 
    
	
Procedures for Exercise.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Conversion Date:
    	
 
    	
With respect to any conversion of a Convertible   Note, the date on which the Holder (as such term is defined in the Indenture)   of such Convertible Note satisfies all of the requirements for conversion   thereof as set forth in Section 14.02(b) of the Indenture.
    

 

2

 

	
Free Convertibility   Date:
    	
 
    	
May 1, 2023
    
	
 
    	
 
    	
 
    
	
Expiration Time:
    	
 
    	
The Valuation Time
    
	
 
    	
 
    	
 
    
	
Expiration Date:
    	
 
    	
November 1, 2023, 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 in respect of which a Notice of   Conversion that is effective as to Counterparty has been delivered by the   relevant converting Holder, a number of Options equal to the number of   Convertible Notes in denominations of USD 1,000 as to which such Conversion   Date has occurred shall be deemed to be automatically exercised; provided that such Options shall be exercised or deemed   exercised only if Counterparty has provided a Notice of Exercise to Dealer in   accordance with “Notice of Exercise” below.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Notwithstanding the foregoing, in no event shall the   number of Options that are exercised or deemed exercised hereunder exceed the   Number of Options.
    
	
 
    	
 
    	
 
    
	
Notice of Exercise:
    	
 
    	
Notwithstanding anything to the contrary in the   Equity Definitions or under “Automatic Exercise” above, in order to exercise   any Options, Counterparty must notify Dealer in writing before 5:00   p.m. (New York City time) on the Scheduled Valid Day immediately   preceding the scheduled first day of the Settlement Averaging Period for the   Options being exercised of (i) the number of such Options, (ii) the   scheduled first day of the Settlement Averaging Period and the scheduled   Settlement Date, (iii) the Relevant Settlement Method for such Options,   and (iv) if the settlement method for the related Convertible Notes is   not Settlement in Shares or Settlement in Cash (each as defined below), the   fixed amount of cash per Convertible Note that Counterparty has elected to   deliver to Holders (as such term is defined in the Indenture) of the related   Convertible Notes (the “Specified Cash Amount”);   provided that in respect of any   Options relating to Convertible Notes with a Conversion Date occurring on or   after the Free Convertibility Date, (A) such notice may be given on or   prior to the second Scheduled Valid Day immediately preceding the Expiration   Date and need only specify the information required in clause (i) above,   and (B) if the Relevant Settlement Method for such Options is   (x) Net Share Settlement and the Specified Cash Amount is not USD 1,000,   (y) Cash Settlement or (z) Combination Settlement, Dealer shall   have received a separate notice (the “Notice of Final   Settlement Method”) in respect of all such Convertible Notes   before 5:00 p.m. (New York City time) on the Free Convertibility Date   specifying the information required in clauses (iii) and   (iv) above. Counterparty acknowledges its responsibilities under applicable   
    

 

3

 

	
 
    	
 
    	
securities laws, and in particular Section 9   and Section 10(b) of the Exchange Act (as defined below) and the   rules and regulations thereunder, in respect of any election of a   settlement method with respect to the Convertible Notes.
    
	
 
    	
 
    	
 
    
	
Valuation Time:
    	
 
    	
At the close of trading of the regular trading   session on the Exchange; provided that   if the principal trading session is extended, the Calculation Agent shall   determine the Valuation Time in its reasonable discretion.
    
	
 
    	
 
    	
 
    
	
Market Disruption   Event:
    	
 
    	
Section 6.3(a) of the Equity Definitions   is hereby replaced in its entirety by the following:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
“‘Market Disruption Event’ means, in respect of a   Share, (i) a failure by the primary United States national or regional   securities exchange or market on which the Shares are listed or admitted for   trading to open for trading during its regular trading session or   (ii) the occurrence or existence prior to 1:00 p.m. (New York City   time) on any Scheduled Valid Day for the Shares for more than one half-hour   period in the aggregate during regular trading hours of any suspension or   limitation imposed on trading (by reason of movements in price exceeding   limits permitted by the relevant stock exchange or otherwise) in the Shares   or in any options contracts or futures contracts relating to the Shares.”
    
	
 
    	
 
    	
 
    
	
Settlement Terms.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Settlement Method:
    	
 
    	
For any Option, Net Share Settlement; provided that if the Relevant Settlement Method set forth   below for such Option is not Net Share Settlement, then the Settlement Method   for such Option shall be such Relevant Settlement Method, but only if   Counterparty shall have notified Dealer of the Relevant Settlement Method in   the Notice of Exercise or Notice of Final Settlement Method, as applicable,   for such Option.
    
	
 
    	
 
    	
 
    
	
Relevant Settlement   Method:
    	
 
    	
In respect of any Option:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)  if   Counterparty has elected to settle its conversion obligations in respect of   the related Convertible Note (A) entirely in Shares pursuant to   Section 14.02(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 Cash   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 Cash Amount equal to USD 1,000, then, in each case, the   Relevant Settlement Method for such Option shall be Net Share Settlement;
    

 

4

 

	
 
    	
 
    	
(ii)  if   Counterparty has elected to settle its conversion obligations in respect of   the related Convertible Note in a combination of cash and Shares pursuant to   Section 14.02(a)(iv)(C) of the Indenture with a Specified Cash   Amount greater than USD 1,000, then the Relevant Settlement Method for such   Option shall be Combination Settlement; and
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(iii)  if   Counterparty has elected to settle its conversion obligations in respect of   the related Convertible Note entirely in cash pursuant to   Section 14.02(a)(iv)(B) of the Indenture (such settlement method, “Settlement in Cash”), then the Relevant Settlement Method   for such Option shall be Cash Settlement.
    
	
 
    	
 
    	
 
    
	
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) (a) the Daily Option Value for such Valid   Day, divided by (b) the Relevant Price   on such Valid Day, divided by   (ii) 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 pay cash in lieu of delivering any   fractional Shares to be delivered with respect to any Net Share Settlement   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 pay or deliver,   as the case may be, to Counterparty, on the relevant Settlement Date for each   such Option:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)                                     cash   (the “Combination Settlement Cash Amount”)   equal to the sum, for each Valid Day during the Settlement Averaging Period   for such Option, of (A) an amount (the “Daily   Combination Settlement Cash Amount”) equal to the lesser of   (1) the product of (x) the Applicable Percentage and (y) the   Specified Cash Amount minus USD   1,000 and (2) the Daily Option Value, divided by   (B) the number of Valid Days in the Settlement Averaging Period; provided that if the calculation in clause (A) above   results in zero or a negative number for any Valid Day, the Daily Combination   Settlement Cash Amount for such Valid Day shall be deemed to be zero; and
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(ii)                                  Shares   (the “Combination Settlement Share Amount”)   equal to the sum, for each Valid Day
    

 

5

 

	
 
    	
 
    	
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) (1) the Daily Option Value on such Valid Day minus the Daily Combination Settlement Cash Amount for   such Valid Day, divided by (2) the   Relevant Price on such Valid Day, divided by   (B) the number of Valid Days in the Settlement Averaging Period; provided that if the calculation in sub-clause   (A)(1) 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 pay cash in lieu of delivering any   fractional Shares to be delivered with respect to any Combination Settlement   Share Amount valued at the Relevant Price for the last Valid Day of the   Settlement Averaging Period.
    
	
 
    	
 
    	
 
    
	
Cash Settlement:
    	
 
    	
If Cash Settlement is applicable to any Option   exercised or deemed exercised hereunder, in lieu of Section 8.1 of the   Equity Definitions, Dealer will pay to Counterparty, on the relevant   Settlement Date for each such Option, an amount of cash (the “Cash Settlement Amount”) equal to the sum, for each Valid   Day during the Settlement Averaging Period for such Option, of (i) the   Daily Option Value for such Valid Day, divided by   (ii) the number of Valid Days in the Settlement Averaging Period.
    
	
 
    	
 
    	
 
    
	
Daily Option Value:
    	
 
    	
For any Valid Day, an amount equal to (i) the   Option Entitlement on such Valid Day, multiplied by   (ii) the Relevant Price on such Valid Day less   the Strike Price on such Valid Day; provided that   if the calculation contained in clause (ii) above results in a negative   number, the Daily Option Value for such Valid Day shall be deemed to be zero.   In no event will the Daily Option Value be less than zero.
    
	
 
    	
 
    	
 
    
	
Applicable Limit:
    	
 
    	
For any Option, an amount of cash equal to the   Applicable Percentage multiplied by the   excess of (i) the aggregate of (A) the amount of cash, if any, paid   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.
    

 

6

 

	
Applicable Limit Price:
    	
 
    	
On any day, the opening price as displayed under the   heading “Op” on Bloomberg page KBR <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 or regional securities exchange on   which the Shares are then listed or, if the Shares are not then listed on a   United States national or regional securities exchange, on the principal   other market on which the Shares are then listed or admitted for trading. If   the Shares are not so listed or admitted for trading, “Valid Day” means a   Business Day.
    
	
 
    	
 
    	
 
    
	
Scheduled Valid Day:
    	
 
    	
A day that is scheduled to be a Valid Day on the   principal United States national or regional securities exchange or market on   which the Shares are listed or admitted for trading. If the Shares are not so   listed or admitted for trading, “Scheduled Valid Day” means a Business Day.
    
	
 
    	
 
    	
 
    
	
Business Day:
    	
 
    	
Any day other than a Saturday, a Sunday or a day on   which the Federal Reserve Bank of New York is authorized or required by law   or executive order to close or be closed.
    
	
 
    	
 
    	
 
    
	
Relevant Price:
    	
 
    	
On any Valid Day, the per Share volume-weighted   average price as displayed under the heading “Bloomberg VWAP” on Bloomberg   page KBR <equity> AQR (or its equivalent successor if such   page is not available) in respect of the period from the scheduled   opening time of the Exchange to the Scheduled Closing Time of the Exchange on   such Valid Day (or if such volume-weighted average price is unavailable at   such time, the market value of one Share on such Valid Day, as determined by   the Calculation Agent using, if practicable, a volume-weighted average   method). The Relevant Price will be determined without regard to after-hours   trading or any other trading outside of the regular trading session trading   hours.
    
	
 
    	
 
    	
 
    
	
Settlement Averaging   Period:
    	
 
    	
For any Option:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)                                     if   the related Conversion Date occurs prior to the Free Convertibility 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 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
    

 

7

 

	
 
    	
 
    	
(ii)                                  if   the related Conversion Date occurs on or following the Free Convertibility   Date, the 40 consecutive Valid Days commencing on, and including, the 41st Scheduled Valid Day immediately prior to the   Expiration Date; provided that   if the Notice of Exercise or Notice of Final Settlement Method, as   applicable, for such Option specifies that Settlement in Shares or Low Cash   Combination Settlement applies to the related Convertible Note, the   Settlement Averaging Period shall be the 80 consecutive Valid Days commencing   on, and including, the 81st Scheduled Valid Day immediately prior to the   Expiration Date.
    
	
 
    	
 
    	
 
    
	
Settlement Date:
    	
 
    	
For any Option, the second 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 and 9.11   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 the   Equity Definitions (including, but not limited to, Section 9.11   thereof), the parties acknowledge that (i) any Shares delivered to   Counterparty shall be, upon delivery, subject to restrictions and limitations   arising from Counterparty’s status as issuer of the Shares under applicable   securities laws, (ii) Dealer may deliver any Shares required to be delivered   hereunder in certificated form in lieu of delivery through the Clearance   System and (iii) any Shares delivered to Counterparty may be “restricted   securities” (as defined in Rule 144 under the Securities Act of 1933, as   amended (the “Securities Act”)).
    

 

3.                                      Additional Terms applicable to the Transaction.

 

	
Adjustments applicable to the Transaction:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Potential Adjustment   Events:
    	
 
    	
Notwithstanding Section 11.2(e) of the   Equity Definitions, a “Potential Adjustment Event” means an occurrence of any   event or condition, as set forth in any Dilution Adjustment Provision, that   would result in an adjustment under the Indenture to the “Conversion Rate” or   the composition of a “unit of Reference Property” or to any “Last Reported   Sale Price”, “Daily VWAP,” “Daily Conversion Value” or “Daily Settlement   Amount” (each as defined in the Indenture). For the avoidance of doubt,   Dealer shall not have any delivery or payment obligation hereunder, and no   adjustment shall be made to the terms of the Transaction, on account of (x) any   distribution of 
    

 

8

 

	
 
    	
 
    	
cash, property or securities by Counterparty to   holders of the Convertible Notes (upon conversion or otherwise) or   (y) any other transaction in which holders of the Convertible Notes are   entitled to participate, in each case, in lieu of an adjustment under the   Indenture of the type referred to in the immediately preceding sentence   (including, without limitation, pursuant to the fourth sentence of   Section 14.04(c) of the Indenture or the fifth sentence of   Section 14.04(d) of the Indenture).
    
	
 
    	
 
    	
 
    
	
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.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Notwithstanding the foregoing and “Consequences of   Merger Events / Tender Offers” below:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)                                     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, Section 14.07(a) of the   Indenture or any supplemental indenture entered into thereunder 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   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 in a commercially reasonable   manner, to the terms hereof in order to account for such Potential Adjustment   Event;
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(ii)                                  in   connection with any Potential Adjustment Event as a result of an event or   condition set forth in Section 14.04(b) of the Indenture or   Section 14.04(c) of the Indenture where, in either case, the period   for determining “Y” (as such term is used in Section 14.04(b) of   the Indenture) 
    

 

9

 

	
 
    	
 
    	
or “SP0” (as such term is used in   Section 14.04(c) of the Indenture), as the case may be, begins before   Counterparty has publicly announced the event or condition giving rise to   such Potential Adjustment Event, then the Calculation Agent shall have the   right to adjust any variable relevant to the exercise, settlement or payment   for the Transaction in a commercially reasonable manner as appropriate to   reflect the costs (including, but not limited to, hedging mismatches and   market losses) and expenses incurred by a counterparty establishing and   maintaining a commercially reasonable hedge position in connection with its   hedging activities as a result of such event or condition not having been   publicly announced prior to the beginning of such period; and
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(iii)                               if   any Potential Adjustment Event is declared and (a) the event or   condition giving rise to such Potential Adjustment Event is subsequently   amended, modified, cancelled or abandoned, (b) the “Conversion Rate” (as   defined in the Indenture) is otherwise not adjusted at the time or in the   manner contemplated by the relevant Dilution Adjustment Provision based on   such declaration or (c) the “Conversion Rate” (as defined in the   Indenture) is adjusted as a result of such Potential Adjustment Event and   subsequently re-adjusted (each of clauses (a), (b) and (c), a “Potential Adjustment Event Change”) then, in each case,   the Calculation Agent shall have the right to adjust any variable relevant to   the exercise, settlement or payment for the Transaction in a commercially   reasonable manner as appropriate to reflect the costs (including, but not   limited to, hedging mismatches and market losses) and expenses incurred by a   counterparty establishing and maintaining a commercially reasonable hedge   position in connection with its hedging activities as a result of such   Potential Adjustment Event Change.
    
	
 
    	
 
    	
 
    
	
Dilution Adjustment   Provisions:
    	
 
    	
Sections 14.04(a), (b), (c), (d) and   (e) and Section 14.05 of the Indenture.
    
	
 
    	
 
    	
 
    
	
Extraordinary   Events applicable to the Transaction:
    
	
 
    	
 
    	
 
    
	
Merger Events:
    	
 
    	
Applicable; provided that   notwithstanding Section 12.1(b) of the Equity Definitions, a   “Merger Event” means the occurrence of any event or condition set forth in   the definition of “Merger Event” in Section 14.07(a) of the   Indenture.
    
	
 
    	
 
    	
 
    
	
Tender Offers:
    	
 
    	
Applicable; provided that   notwithstanding Section 12.1(d) of the Equity Definitions, a   “Tender Offer” means the 
    

 

10

 

	
 
    	
 
    	
occurrence of any event or condition set forth in   Section 14.04(e) of the Indenture.
    
	
 
    	
 
    	
 
    
	
Consequences 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   commercially reasonable 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, subject to the second paragraph under “Method of Adjustment”; 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 that is not a   corporation or is 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 a   corporation organized under the laws of the United States, any State thereof   or the District of Columbia, then, in either case, Cancellation and Payment   (Calculation Agent Determination) may apply at Dealer’s sole election.
    
	
 
    	
 
    	
 
    
	
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) of the Equity Definitions is hereby amended by   (i) replacing the phrase “the interpretation” in the third line thereof   with the phrase “, or public announcement of, the formal or informal   interpretation”, (ii) replacing the word “Shares” where it appears in   clause (X) thereof with the words “Hedge Position” and   (iii) replacing the parenthetical beginning after the word “regulation”   in the second line thereof the words “(including, for the avoidance of doubt   and without limitation, (x) any tax law or (y) adoption, 
    

 

11

 

	
 
    	
 
    	
effectiveness or promulgation of new regulations   authorized or mandated by existing statute)”.
    
	
 
    	
 
    	
 
    
	
Failure to Deliver:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Hedging Disruption:
    	
 
    	
Applicable; provided   that:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)                                     Section 12.9(a)(v) of   the Equity Definitions is hereby amended by (a) inserting the following   words at the end of clause (A) thereof: “in the manner contemplated by   the Hedging Party on the Trade Date” and (b) 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; provided, however, that all   calculations, adjustments, specifications, choices and determinations by   Dealer acting in its capacity as the Hedging Party shall be made in good   faith and in a commercially reasonable manner (it being understood that   Hedging Party will be subject to the requirements of the second paragraph   under “Calculation Agent” below).
    
	
 
    	
 
    	
 
    
	
Determining Party:
    	
 
    	
For all applicable Extraordinary Events, Dealer; provided, however, that all calculations, adjustments,   specifications, choices and determinations by Dealer acting in its capacity   as the Determining Party shall be made in good faith and in a commercially   reasonable manner (it being understood that Determining Party will be subject   to the requirements of the second paragraph under “Calculation Agent” below).
    
	
 
    	
 
    	
 
    
	
Non-Reliance:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Agreements and Acknowledgments
    	
 
    	
 
    
	
Regarding Hedging Activities:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Additional Acknowledgments:
    	
 
    	
Applicable
    

 

	
4.                                      Calculation Agent.
    	
 
    	
Dealer; provided, however,   that all calculations, adjustments, specifications, choices and   determinations by the Calculation Agent shall be made in good faith and
    

 

12

 

	
 
    	
 
    	
 in a   commercially reasonable manner. The parties agree that they will work   reasonably to resolve any disputes as set forth in the immediately following   paragraph. In the case of any calculation, adjustment or determination by the   Hedging Party, the Determining Party or the Calculation Agent, following any   written request from Counterparty, the Hedging Party, the Determining Party   or the Calculation Agent, as the case may be, shall promptly provide to   Counterparty a written explanation describing in reasonable detail the basis   for such calculation, adjustment or determination (including any quotation,   market data or information from internal or external sources used in making   such calculation, adjustment or determination, but without disclosing any   proprietary models or other information that may be proprietary or   confidential) and shall use commercially reasonable efforts to provide such   written explanation within five (5) Exchange Business Days from the   receipt of such request. If Counterparty promptly disputes such calculation,   adjustment or determination in writing and provides reasonable detail as to   the basis for such dispute, the Calculation Agent shall, to the extent   permitted by applicable law, discuss the dispute with Counterparty in good   faith.
    

 

5.                                      Account Details.

 

(a)                                 Account for payments to Counterparty:

 

Bank of America, N.A.

New York, NY

Acct No.: 4427187942

Bank Routing: 026-009-593

 

Account for delivery of Shares to Counterparty:

 

To be provided by Counterparty

 

(b)                                 Account for payments to Dealer:

 

BNP Paribas, New York

ABA: 026007689

SWIFT: BNPAUS3N

Favor: BNP Paribas Paris (swift code: BNPAFRPP)

A/C: 020019409300136

 

Account for delivery of Shares from Dealer:

 

To be provided by Dealer

 

6.                                      Offices.

 

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

 

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

 

13

 

7.                                      Notices.

 

(a)                                 Address for notices or communications to Counterparty:

 

	
KBR, Inc.
    
	
601   Jefferson Street, Suite 3400
    
	
Houston,   Texas 77002
    
	
Attention:
    	
Natasha Frausto, Vice   President & Treasurer
    
	
Telephone   No.:
    	
713-753-2280
    
	
Facsimile   No.:
    	
713-753-2517
    

 

With a copy to:

 

	
Mayer   Brown LLP
    
	
700   Louisiana, Suite 3400
    
	
Houston,   Texas 77002
    
	
Attention:
    	
Jeff M. Dobbs
    
	
Telephone   No.:
    	
713-238-2697
    
	
Facsimile   No.:
    	
713-238-4697
    
	
Email:
    	
jdobbs@mayerbrown.com
    

 

(b)                                 Address for notices or communications to Dealer:

 

BNP Paribas

787 7th Avenue
 New York, NY 10019

Attn: Damir Tanovic

Telephone:  212-841-2504

Email:  NYK_STE@americas.bnpparibas.com

 

With a copy to:

 

BNP Paribas

787 7th Avenue, 8th Floor
 New York, NY 10019

Attn: Nicholas Gao

Telephone:  212-841-2504

Email:  nick.gao@us.bnpparibas.com

 

8.                                      Representations and Warranties of Counterparty.

 

Each of the representations and warranties of Counterparty set forth in Section 1 of the Purchase Agreement (the “Purchase Agreement”) dated as of November 12, 2018, between Counterparty and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the Initial Purchasers party thereto (the “Initial Purchasers”), are true and correct and are hereby deemed to be repeated to Dealer as if set forth herein except to the extent that such representation and warranties if not true or correct, would not have a material adverse effect on the power or ability of Counterparty to execute and deliver this Confirmation or to perform their obligations hereunder.  Counterparty hereby further represents and warrants to Dealer on the date hereof and on and as of the Premium Payment Date that:

 

(a)                                 This Confirmation has been duly authorized, executed and delivered by Counterparty and is enforceable against Counterparty in accordance with its terms, except, in each case, as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors’ rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law).

 

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(b)                                 The execution, delivery and performance of this Confirmation and the consummation of the Transaction contemplated hereby have been duly authorized by all necessary corporate action by Counterparty and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined in the Purchase Agreement) under, or result in the creation or imposition of any lien, charge or encumbrance upon any properties or assets of Counterparty or any subsidiary thereof pursuant to the Agreements and Instruments (as defined in the Purchase Agreement), except for such conflicts, breaches, defaults or Repayment Events (as defined in the Purchase Agreement) or liens, charges or encumbrances that would not, singly or in the aggregate, result in a Material Adverse Effect (as defined in the Purchase Agreement), nor will such action result in any violation of (a) the provisions of the charter, by-laws or similar organizational document of Counterparty or any of its subsidiaries or (b) any law, statute, rule, regulation, judgment, order, writ or decree of any Governmental Entity (as defined in the Purchase Agreement),  except, in the case of  clause (b) above, for such violations that would not, singly or in the aggregate, result in a Material Adverse Effect (as defined in the Purchase Agreement).

 

(c)                                  No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any Governmental Entity (as defined in the Purchase Agreement) is necessary or required for the performance by Counterparty of its obligations hereunder or the consummation of the Transaction contemplated by this Confirmation or for the due execution, delivery and performance of this Confirmation, except such as have been already obtained and excluding any filing, authorization, approval, consent, license, order, registration, qualification or decree the failure of which to obtain or make would not have a Material Adverse Effect (as defined in the Purchase Agreement).

 

(d)                                 Counterparty is not and, after consummation of the transactions contemplated hereby, 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(18) of the Commodity Exchange Act, as amended, other than a person that is an eligible contract participant under Section 1a(18)(C) of the Commodity Exchange Act).

 

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

 

(g)                                  No state or local (including any non-U.S. jurisdiction’s) law, rule, regulation or regulatory order applicable to the Shares would give rise to any reporting, consent, registration or other requirement (including without limitation a requirement to obtain prior approval from any person or entity) as a result of Dealer or its affiliates owning or holding (however defined) Shares.

 

(h)                                 Counterparty (A) is capable of evaluating investment risks independently, both in general and with regard to all transactions and investment strategies involving a security or securities; (B) will exercise independent judgment in evaluating the recommendations of any broker-dealer or its associated persons, unless it has otherwise notified the broker-dealer in writing; and (C) has total assets of at least USD 50 million.

 

(i)                                     The assets of Counterparty do not constitute “plan assets” under the Employee Retirement Income Security Act of 1974, as amended, the Department of Labor Regulations promulgated thereunder or similar law.

 

(j)                                    Counterparty is not “insolvent” (as such term is defined under Section 101(32) of the Bankruptcy Code (as hereinafter defined), and Counterparty would be able to purchase a number of Shares equal to the product of the Number of Options, and the Option Entitlement in compliance with the laws of the jurisdiction of Counterparty’s incorporation.

 

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(k)                                 Counterparty has received and read the OTC Options Risk Disclosure Statement and a copy of the most recent disclosure pamphlet prepared by The Options Clearing Corporation entitled “Characteristics and Risks of Standardized Options”.

 

9.                                      Other Provisions.

 

(a)                                 Opinions.  Counterparty shall deliver to Dealer an opinion of counsel, dated as of the Trade Date, with respect to the matters set forth in Sections 8(a) through (c) of this Confirmation which shall be deemed delivered to Dealer hereunder if such opinion is delivered to Dealer under the Purchase Agreement.  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 129.3 million (in the case of the first such notice) or (ii) thereafter more than 9.8 million less than the number of Shares included in the immediately preceding Repurchase Notice.  Counterparty agrees to indemnify and hold harmless Dealer and its affiliates and their respective officers, directors, employees, affiliates, advisors, agents and controlling persons (each, an “Indemnified Person”) from and against any and all losses (including losses relating to Dealer’s hedging activities as a consequence of becoming, or of the risk of becoming, a Section 16 “insider”, including without limitation, any forbearance from hedging activities or cessation of hedging activities and any losses in connection therewith with respect to the Transaction), claims, damages, judgments, liabilities and expenses (including reasonable attorney’s fees), joint or several, which an Indemnified Person may become subject to, as a result of Counterparty’s failure to provide Dealer with a Repurchase Notice on the day and in the manner specified in this paragraph, and to reimburse, within 30 days, upon written request, each of such Indemnified Persons for any reasonable legal or other expenses incurred in connection with investigating, preparing for, providing testimony or other evidence in connection with or defending any of the foregoing.  If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against the Indemnified Person as a result of Counterparty’s failure to provide Dealer with a Repurchase Notice in accordance with this paragraph, such Indemnified Person shall promptly notify Counterparty in writing, and Counterparty, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others Counterparty may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding.  Counterparty shall not be liable for any settlement of any proceeding contemplated by this paragraph that is effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, Counterparty agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment.  Counterparty shall not, without the prior written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding contemplated by this paragraph that is in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such proceeding on terms reasonably satisfactory to such Indemnified Person.  If the indemnification provided for in this paragraph is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then Counterparty hereunder, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result 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.

 

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(c)                                  Regulation M.  Counterparty is not on the Trade Date engaged in a distribution, as such term is used in Regulation M under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of any securities of Counterparty, other than a distribution meeting the requirements of the exception set forth in Rules 101(b)(10) and 102(b)(7) of Regulation M.  Counterparty shall not, until the second Scheduled Trading Day immediately following the Effective Date, engage in any such distribution.

 

(d)                                 No Manipulation.  Counterparty is not entering into the Transaction to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for the Shares) or otherwise in violation of the Exchange Act.

 

(e)                                  Transfer or Assignment.

 

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

 

(A)                               With respect to any Transfer Options, Counterparty shall not be released from its notice and indemnification obligations pursuant to Section 9(b) or any obligations under Section 9(m) or 9(r) 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 (A) to any affiliate of Dealer (1) that has a long-term issuer rating that is equal to or better than Dealer’s credit rating at the time of such 

 

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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 provided, in each case, Counterparty 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 Counterparty would have been required to pay to Dealer in the absence of such transfer and assignment or (B) to any other third party with a long-term issuer rating equal to or better than the lesser of (1) the credit rating of Dealer at the time of the transfer and (2) A- by Standard and Poor’s Rating Group, Inc. or its successor (“S&P”), or A3 by Moody’s Investor Service, Inc. (“Moody’s”) or, if either S&P or Moody’s ceases to rate such debt, at least an equivalent rating or better by a substitute rating agency mutually agreed by Counterparty and Dealer; provided that (a) Counterparty 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 Counterparty would have been required to pay to Dealer in the absence of such transfer and assignment, (b) Dealer shall cause the transferee to make such Payee Tax Representations and to provide such tax documentation as may be reasonably requested by Counterparty to permit Counterparty to determine that results described in clause (a) will not occur upon or after such transfer and assignment and (c) an Event of Default, Potential Event of Default or Termination Event will not occur as a result of such transfer and assignment; provided further, that Dealer shall provide written notice to Counterparty following any such Transfer.  If at any time at which (A) the Section 16 Percentage exceeds 7.5%, (B) the Option Equity Percentage exceeds 14.5%, or (C) the Share Amount exceeds the Applicable Share Limit (if any applies) (any such condition described in clauses (A), (B) or (C), an “Excess Ownership Position”), Dealer is unable after using its commercially reasonable efforts to effect a transfer or assignment of Options 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 portion of the Transaction, a payment shall be made pursuant to Section 6 of the Agreement as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to the Transaction and a Number of Options equal to the number of Options underlying the Terminated Portion, (2) Counterparty were the sole Affected Party with respect to such partial termination and (3) the Terminated Portion were the sole Affected Transaction (and, for the avoidance of doubt, the provisions of Section 9(k) 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 any of its affiliates or any other person subject to aggregation with Dealer for purposes of the “beneficial ownership” test under Section 13 of the Exchange Act, or any “group” (within the meaning of Section 13 of the Exchange Act) of which Dealer is or may be deemed to be a part beneficially owns (within the meaning of Section 13 of the Exchange Act), without duplication, on such day (or, to the extent that for any reason the equivalent calculation under Section 16 of the Exchange Act and the rules and regulations thereunder results in a higher number, such higher number) and (B) the denominator of which is the number of Shares outstanding on such day.  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 law, rule, regulation, regulatory order or 

 

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

 

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

 

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

 

(iii)                               if the Net Share Settlement terms or the Combination Settlement terms set forth above were to apply on the Nominal Settlement Date, then the Net Share Settlement terms or the Combination Settlement terms, as the case may be, will apply on each Staggered Settlement Date, except that the Shares otherwise deliverable on such Nominal Settlement Date will be allocated among such Staggered Settlement Dates as specified by Dealer in the notice referred to in clause (i) above.

 

(g)                                  Dividends.  If at any time during the period from and including the Effective Date, to but excluding the Expiration Date, (i) an ex-dividend date for a regular quarterly cash dividend occurs with respect to the Shares (an “Ex-Dividend Date”), and that dividend is less than the Regular Dividend on a per Share basis or (ii) if no Ex-Dividend Date for a regular quarterly cash dividend occurs with respect to the Shares in any quarterly dividend period of Counterparty, then the Calculation Agent will make a corresponding adjustment to any one or more of the Strike Price, Number of Options, Option Entitlement and/or any other variable relevant to the exercise, settlement or payment for the Transaction to preserve the fair value of the Options to Dealer after taking into account such dividend or lack thereof.  “Regular Dividend” shall mean USD 0.08 per Share per quarter.  Upon any adjustment to the Initial Dividend Threshold (as defined in the Indenture) for the Convertible Notes pursuant to the Indenture, the Calculation Agent will make a corresponding adjustment to the Regular Dividend for the Transaction.

 

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(h)                                 Additional Termination Events.

 

(i)                                     Notwithstanding anything to the contrary in this Confirmation if an event of default with respect to Counterparty occurs under the terms of the Convertible Notes as set forth in Section 6.01 of the Indenture, 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 be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement.

 

(ii)                                  Notwithstanding anything to the contrary in this Confirmation, the occurrence of an Amendment Event shall constitute an Additional Termination Event applicable to the Transaction and, with respect to such Additional Termination Event, (A) Counterparty shall be deemed to be the sole Affected Party, (B) the Transaction shall be the sole Affected Transaction and (C) Dealer shall be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement. “Amendment Event” means that Counterparty amends, modifies, supplements, waives or obtains a waiver in respect of any term of the Indenture or the Convertible Notes governing the principal amount, coupon, maturity, repurchase obligation of Counterparty, any term relating to conversion of the Convertible Notes (including changes to the conversion rate, conversion rate adjustment provisions, conversion settlement dates or conversion conditions), or any term that would require consent of the holders of not less than 100% of the principal amount of the Convertible Notes to amend (other than, in each case, any amendment or supplement (x) pursuant to Section 10.01(h) of the Indenture that, as determined by the Calculation Agent, conforms the Indenture to the description of Convertible Notes in the Offering Memorandum or (y) pursuant to Section 14.07 of the Indenture), in each case, without the consent of Dealer.

 

(iii)                               Notwithstanding anything to the contrary in this Confirmation, the receipt by Dealer from Counterparty, within the applicable time period set forth opposite “Notice of Exercise” in Section 2, of any Notice of Exercise in respect of Options that relate to Convertible Notes as to which additional Shares would be added to the Conversion Rate (as defined in the Indenture) pursuant to Section 14.03 of the Indenture in connection with a “Make-Whole Fundamental Change” (as defined in the Indenture) shall constitute an Additional Termination Event as provided in this Section 9(h)(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 in no event be earlier than the related settlement date for such Convertible Notes) as an Early Termination Date with respect to the portion of the 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 the 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 (as defined in the Indenture) pursuant to Section 14.03 of the Indenture); provided that the amount of cash payable 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 

 

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Conversion Options, multiplied by (2) the Conversion Rate (as defined in the Indenture, and after taking into account any applicable adjustments to the Conversion Rate pursuant to Section 14.03 of the Indenture), multiplied by (3) a market price per Share determined by the Calculation Agent in a commercially reasonable manner over (II) the aggregate principal amount of such Convertible Notes, as determined by the Calculation Agent in a commercially reasonable manner.

 

(i)                                     Amendments to Equity Definitions.

 

(i)                                     Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (1) inserting “(1)” immediately following the word “means” in the first line thereof and (2) inserting immediately prior to the semi-colon at the end of subsection (B) thereof the following words: “or (2) 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.

 

(iii)                               Section 12.9(b)(vi) of the Equity Definitions is hereby amended by (1) adding the word “or” immediately before subsection “(B)”, (2) deleting the comma at the end of subsection (A), (3) deleting subsection (C) in its entirety, (4) deleting the word “or” immediately preceding subsection (C) and (5) replacing the words “either party” in the last sentence of such Section with “Dealer”.

 

(j)                                    Setoff.  Obligations under the Transaction shall not be set off by any party against any other obligations of the parties, whether arising under the Agreement, this Confirmation, under any other agreement between the parties hereto, by operation of law or otherwise. For the avoidance of doubt, in the event of bankruptcy or liquidation of Counterparty or Dealer, no party shall have the right to set off any obligation that it may have to the other parties under the Transaction against any obligation such other parties may have to it, whether arising under the Agreement, this Confirmation or any other agreement between the parties hereto, by operation of law or otherwise.

 

(k)                                 Alternative Calculations and Payment on Early Termination and on Certain  Extraordinary Events.  If (a) an Early Termination Date (whether as a result of an Event of Default or a Termination Event) occurs or is designated with respect to the Transaction or (b) the Transaction is cancelled or terminated upon the occurrence of an Extraordinary Event (except as a result of (i) a Nationalization, Insolvency or Merger Event in which the consideration to be paid to all 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 if Dealer would owe any amount to Counterparty pursuant to Section 6(d)(ii) of the Agreement or any Cancellation Amount pursuant to Article 12 of the Equity Definitions (any such amount, a “Payment Obligation”), then Dealer shall satisfy the Payment Obligation by the Share Termination Alternative (as defined below), unless (a) Counterparty gives 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, of its election that the Share Termination Alternative shall not apply, (b) Counterparty remakes the representation set forth in Section 8(f) as of the date of such election and (c) Dealer agrees, in its commercially reasonable discretion, to such election, in which case the provisions of Section 12.7 or Section 12.9 of the Equity Definitions, or the provisions of Section 6(d)(ii) of the Agreement, as the case may be, shall apply.

 

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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, in satisfaction of such Payment Obligation in the   manner reasonably requested by Counterparty free of payment.
    
	
 
    	
 
    	
 
    
	
Share Termination   Delivery Property:
    	
 
    	
A number of Share Termination Delivery Units, as   calculated by the Calculation Agent, equal to the Payment Obligation divided   by the Share Termination Unit Price. The Calculation Agent shall adjust the   Share Termination Delivery Property by replacing any fractional portion of a   security therein with an amount of cash equal to the value of such fractional   security based on the values used to calculate the Share Termination Unit   Price.
    
	
 
    	
 
    	
 
    
	
Share Termination Unit   Price:
    	
 
    	
The value to Dealer of property contained in one   Share Termination Delivery Unit, as determined by the Calculation Agent in   its discretion by commercially reasonable means and notified by the Calculation   Agent to Dealer at the time of notification of the Payment Obligation. For   the avoidance of doubt, the parties agree that in determining the Share   Termination Delivery Unit Price the Calculation Agent may consider, if   commercially reasonable, the purchase price paid in connection with the   purchase of Share Termination Delivery Property.
    
	
 
    	
 
    	
 
    
	
Share Termination   Delivery Unit:
    	
 
    	
One Share or, if the Shares have changed into cash   or any other property or the right to receive cash or any other property as   the result of a Nationalization, Insolvency or Merger Event (any such   cash or other property, the “Exchange Property”),   a unit consisting of the type and amount of such Exchange Property received   by a holder of one Share (without consideration of any requirement to pay   cash or other consideration in lieu of fractional amounts of any securities)   in such Nationalization, Insolvency or 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 and 9.11 (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 
    

 

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

 

(l)                                     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.

 

(m)                             Registration.  Counterparty hereby agrees that if, in the good faith reasonable judgment of Dealer, the Shares (“Hedge Shares”) acquired by Dealer for the purpose of hedging its obligations pursuant to the Transaction cannot be sold in the public market by Dealer without registration under the Securities Act, Counterparty shall, at its election, either (i) in order to allow Dealer to sell the Hedge Shares in a registered offering, use its best efforts to make available to Dealer an effective registration statement under the Securities Act and enter into an agreement, in form and substance 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, Counterparty shall use its best efforts to enter into a private placement agreement substantially similar to private placement purchase agreements customary for private placements of equity securities, in form and substance satisfactory to Dealer (in which case, the Calculation Agent shall make any adjustments to the terms of the Transaction that are necessary, in its reasonable judgment, to compensate Dealer for any discount from the public market price of the Shares incurred on the sale of Hedge Shares in a private placement), or (iii) purchase the Hedge Shares from Dealer at the then-current market price on such Exchange Business Days, and in the amounts and at such time(s), requested by Dealer.

 

(n)                                 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.

 

(o)                                 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 and in good faith determines, based on advice of counsel, 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; provided that no such Valid Day or other date of valuation, payment or delivery may be postponed or added more than 40 Valid Days after the original Valid Day or date of valuation, payment or delivery, as the case may be.

 

(p)                                 Status of Claims in Bankruptcy.  Dealer acknowledges and agrees that this Confirmation is not intended to convey to Dealer rights against Counterparty with respect to the Transaction that are senior to the claims of common stockholders of Counterparty in any United States bankruptcy proceedings of Counterparty; provided that nothing herein shall limit or shall be deemed to limit Dealer’s right to pursue remedies in the event of a breach by Counterparty of its obligations and 

 

23

 

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.

 

(q)                                 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.

 

(r)                                    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 Merger Event, Counterparty shall give Dealer written notice of (x) the weighted average of the types and amounts of consideration received by holders of Shares upon consummation of such Merger Event or (y) if no holders of Shares affirmatively make such election, the types and amounts of consideration actually received by holders of Shares (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 Merger Event is consummated; and

 

(ii)                                  (A) Counterparty shall give Dealer commercially reasonable advance (but in no event less than one Exchange Business Day) written notice of the section or sections of the Indenture and, if applicable, the formula therein, pursuant to which any adjustment will be made to the Convertible Notes in connection with any Potential Adjustment Event, Merger Event or Tender Offer and (B) promptly following any such adjustment, Counterparty shall give Dealer written notice of the details of such adjustment.

 

(s)                                   Wall Street Transparency and Accountability Act.  In connection with Section 739 of the Wall Street Transparency and Accountability Act of 2010 (“WSTAA”), the parties hereby agree that neither the enactment of WSTAA or any regulation under the WSTAA, nor any requirement under WSTAA or an amendment made by WSTAA, shall limit or otherwise impair either party’s otherwise applicable rights to terminate, renegotiate, modify, amend or supplement this Confirmation or the Agreement, as applicable, arising from a termination event, force majeure, illegality, increased costs, regulatory change or similar event under this Confirmation, the Equity Definitions incorporated herein, or the Agreement (including, but not limited to, rights arising from Change in Law, Hedging Disruption, Increased Cost of Hedging, an Excess Ownership Position, or Illegality (as defined in the Agreement)).

 

(t)                                    Agreements and Acknowledgements Regarding Hedging. Counterparty understands, acknowledges and agrees that: (A) at any time on and prior to the Expiration Date, Dealer and its affiliates may buy or sell Shares or other securities or buy or sell options or futures contracts or enter into swaps or other derivative securities in order to adjust its hedge position with respect to the Transaction; (B) Dealer and its affiliates also may be active in the market for Shares other than in connection with hedging activities in relation to the Transaction; (C) Dealer shall make its own determination as to whether, when or in what manner any hedging or market activities in securities of Issuer shall be conducted and shall do so in a manner that it deems appropriate to hedge its price and market risk with respect to the Relevant Prices; and (D) any market activities of Dealer and its affiliates with respect to Shares may affect the market price and volatility of Shares, as well as the Relevant Prices, each in a manner that may be adverse to Counterparty.

 

(u)                                 Early Unwind. In the event the sale of the “Initial Securities” (as defined in the Purchase Agreement) is not consummated with the Initial Purchasers for any reason, or Counterparty fails to 

 

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deliver to Dealer opinions of counsel as required pursuant to Section 9(a), in each case by 5:00 p.m. (New York City time) on the Premium Payment Date, or such later date as agreed upon by the parties (the Premium Payment Date or such later date, the “Early Unwind Date”), the Transaction shall automatically terminate (the “Early Unwind”) on the Early Unwind Date and (i) the Transaction and all of the respective rights and obligations of Dealer and Counterparty under the Transaction shall be cancelled and terminated and (ii) each party shall be released and discharged by the other party from and agrees not to make any claim against the other party with respect to any obligations or liabilities of the other party arising out of and to be performed in connection with the Transaction either prior to or after the Early Unwind Date.  Each of Dealer and Counterparty represents and acknowledges to the other that upon an Early Unwind, all obligations with respect to the Transaction shall be deemed fully and finally discharged.

 

(v)                                 Payment by Counterparty. In the event that, following payment of the Premium, (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.

 

(w)                               Conduct Rules.  Each party acknowledges and agrees to be bound by the Conduct Rules of the Financial Industry Regulatory Authority, Inc. applicable to transactions in options, and further agrees not to violate the position and exercise limits set forth therein.

 

(x)                                 Role of Agent.  Counterparty agrees and acknowledges that (i) BNP Paribas Securities Corp. (“BNPPSC”), an affiliate of Dealer, has acted solely as agent and not as principal with respect to the Transaction and (ii) BNPPSC 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.  For the avoidance of doubt, any performance by Dealer of its obligations to Counterparty hereunder solely to BNPPSC shall not relieve Dealer of such obligations. Any performance by Counterparty of its obligations (including notice obligations) through or by means of BNPPSC’s agency for Dealer shall constitute good performance of Counterparty’s obligations hereunder to Dealer.

 

(y)                                 ISDA 2016 Bail-in Article 55 BRRD Protocol.  The parties agree that the terms of the Attachment to the ISDA 2016 Bail-in Article 55 BRRD Protocol published by the International Swaps and Derivatives Association, Inc. (“BRRD Protocol”) apply to the Agreement (which shall, for these purposes, be deemed to be a “Protocol Covered Agreement”) as if the parties had each adhered to the BRRD Protocol without amendment, with an Implementation Date of 1st January, 2016.

 

(z)                                  2013 EMIR Portfolio Reconciliation, Dispute Resolution and Disclosure Protocol.  The parties agree that the terms of the 2013 EMIR Portfolio Reconciliation, Dispute Resolution and Disclosure Protocol published by the International Swaps and Derivatives Association, Inc. (“Protocol”) apply to the Agreement as if the parties had adhered to the Protocol without amendment. For these purposes:

 

(i)                                     Dealer is a Portfolio Data Sending Entity and Counterparty is a Portfolio Data Receiving Entity;

 

(ii)                                  Dealer and Counterparty may use a Third Party Service Provider, and the other party (in each case) consents to such use including the communication of the relevant data in relation to that other party to such Third Party Service Provider for the purposes of the reconciliation services provided by such entity;

 

(iii)                               The Local Business Days for such purposes in relation to Dealer are London and Brussels, and in relation to Counterparty is New York.

 

25

 

(iv)                              The following are the applicable email addresses:

 

	
Portfolio Data:
    	
Dealer:
    	
portfoliorec.eu@uk.bnpparibas.com
    
	
 
    	
 
    
	
 
    	
Counterparty:
    	
adam.kramer@kbr.com
    
	
 
    	
 
    
	
Notice of discrepancy:
    	
Dealer:
    	
portfoliorec.eu@uk.bnpparibas.com
    
	
 
    	
 
    
	
 
    	
Counterparty:
    	
adam.kramer@kbr.com
    
	
 
    	
 
    
	
Dispute Notice:
    	
Dealer:
    	
portfoliorec.eu@uk.bnpparibas.com
    
	
 
    	
 
    
	
 
    	
Counterparty:
    	
adam.kramer@kbr.com
    
				

 

 

(aa)                          Certain Tax Considerations.

 

(i)                                     Dealer makes the following representations to Counterparty: it is a “foreign person” (as that term is used in section 1.6041-4(a)(4) of the United States Treasury Regulations) for United States federal income tax purposes and each payment received or to be received by it in connection with this Confirmation is effectively connected with its conduct of a trade or business in the United States.

 

(ii)                                  Dealer agrees to deliver to Counterparty a valid, accurate and complete U.S. Internal Revenue Service Form W-8ECI (or any successor form) and any required attachments thereto (A) upon execution of this Confirmation, (B) promptly upon reasonable demand by Counterparty and (C) promptly upon learning that any Form W-8ECI (or any successor thereto) previously provided by Dealer has become obsolete, invalid or incorrect.

 

(iii)                               Dealer makes the following representation to Counterparty: it is a “dealer” within the meaning of Section 1.1001-4(b)(1) of the United States Treasury Regulations.

 

(iv)                              Counterparty makes the following representation to Dealer: it is a corporation established under the laws of the State of Delaware and is a “United States person” (as that term is defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended). Counterparty agrees to deliver to Dealer a valid, accurate and complete U.S. Internal Revenue Service Form W-9 (or any successor form) and any required attachments thereto (A) upon execution of this Confirmation, (B) promptly upon reasonable demand by Dealer and (C) promptly upon learning that any Form W-9 (or any successor thereto) previously provided by Counterparty has become obsolete, invalid or incorrect.

 

(bb)                          Withholding Tax imposed on payments to non-U.S. counterparties under the United States Foreign Account Tax Compliance Act.  “Indemnifiable Tax” as defined in Section 14 of the Agreement shall not include any U.S. federal withholding tax imposed or collected pursuant to Sections 1471 through 1474 of the Code, any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code (a “FATCA Withholding Tax”).  For the avoidance of doubt, a FATCA Withholding Tax is a Tax the deduction or withholding of which is required by applicable law for the purposes of Section 2(d) of the Agreement.

 

26

 

(cc)                            871(m).  The parties agree that the definitions and provisions contained in the 2015 Section 871(m) Protocol, as published by ISDA, are incorporated into and apply to the Agreement solely for purposes of this Confirmation as if set forth in full herein.

 

27

 

Please confirm that the foregoing correctly sets forth the terms of the agreement between Dealer and Counterparty with respect to the Transaction, by manually signing this Confirmation or this page hereof as evidence of agreement to such terms and providing the other information requested herein and returning an executed copy to us.

 

	
 
    	
Yours faithfully,
    
	
 
    	
 
    
	
 
    	
BNP PARIBAS
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Frederick J. Fiddle
    
	
 
    	
 
    	
Name: 
    	
Frederick J. Fiddle
    
	
 
    	
 
    	
Title: 
    	
Managing Director
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Stephan B. Nawrocki
    
	
 
    	
 
    	
Name: 
    	
Stephen B. Nawrocki
    
	
 
    	
 
    	
Title: 
    	
Managing Director
    
	
 
    	
 
    
	
Agreed and Accepted By:
    	
 
    
	
 
    	
 
    
	
KBR, INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Stuart J. B. Bradie
    	
 
    
	
 
    	
Name: 
    	
Stuart J. B. Bradie
    	
 
    
	
 
    	
Title:
    	
President and Chief   Executive Officer
    	
 
    

 

[Signature Page to Base Bond Hedge Confirmation – BNP Paribas]

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