Document:

exv4w5

Exhibit
4.5

JPMorgan Chase Bank, National Association

P.O. Box 161

60 Victoria Embankment

London EC4Y 0JP

England

September 15, 2010

	 	 	 

	To:

	 	Tower Group, Inc.

120 Broadway, 31st Floor

New York, NY 10271

Attention: Treasurer

Telephone No.: (212) 655-2000

Facsimile No.: (212) 655-2199
	 
	 	 
	Re:

	 	Additional Call Option Transaction

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

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

JPMorgan Chase Bank, National Association

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

Main Office 1111 Polaris Parkway, Columbus, Ohio 43271

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

Registered Branch Office 125 London Wall, London EC2Y 5AJ

Authorised and regulated by the Financial Services Authority

 

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

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

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

	 	 	 

	General Terms.
	 	 
	 
	 	 
	Trade Date:

	 	September 15, 2010
	 
	 	 
	Effective Date:

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

	 	“Modified American”, as described under “Procedures for Exercise” below
	 
	 	 
	Option Type:

	 	Call
	 
	 	 
	Buyer:

	 	Counterparty
	 
	 	 
	Seller:

	 	Dealer
	 
	 	 
	Shares:

	 	The common stock of Counterparty, par value USD 0.01 per share (Exchange symbol
“TWGP”).
	 
	 	 
	Number of Options:

	 	15,000. For the avoidance of doubt, the Number of Options shall be
reduced by any Options exercised by Counterparty. In no event will the Number of
Options be less than zero.
	 
	 	 
	Applicable Percentage:

	 	50%
	 
	 	 
	Option Entitlement:

	 	A number equal to the product of the Applicable Percentage and
36.3782.
	 
	 	 
	Strike Price:

	 	USD 27.4890
	 
	 	 
	Premium:

	 	USD 765,000.00
	 
	 	 
	Premium Payment Date:

	 	September 20, 2010
	 
	 	 
	Exchange:

	 	The NASDAQ Global Select Market
	 
	 	 
	Related Exchange(s):

	 	All Exchanges
	 
	 	 
	Excluded Provisions:

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

2

 

	 	 	 

	Procedures for Exercise.
	 	 
	 
	 	 
	Conversion Date:

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

	 	March 15, 2014
	 
	 	 
	Expiration Time:

	 	The Valuation Time
	 
	 	 
	Expiration Date:

	 	September 15, 2014, subject to earlier exercise.
	 
	 	 
	Multiple Exercise:

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

	 	Notwithstanding Section 3.4 of the Equity Definitions, on each
Conversion Date, a number of Options equal to (i) the number of Convertible Notes
in denominations of USD 1,000 as to which such Conversion Date has occurred minus
(ii) the number of Options that are or are deemed to be automatically exercised on
such Conversion Date under the Base Call Option Transaction Confirmation letter
agreement dated September 14, 2010 between Dealer and Counterparty (the “Base Call
Option Confirmation”), shall be deemed to be automatically exercised; provided that
such Options shall be exercised or deemed exercised only if Counterparty has
provided a Notice of Exercise to Dealer in accordance with “Notice of Exercise”
below.
	 
	 	 
	 

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

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

3

 

	 	 	 

	 

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

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

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

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

	 	For any Option, Net Share Settlement; provided that if the Relevant
Settlement Method set forth below for such Option is not Net Share Settlement, then
the Settlement Method for such Option shall be such Relevant Settlement Method, but
only if the Settlement Method Election Conditions have been satisfied and
Counterparty shall have notified Dealer of the Relevant Settlement Method in the
Notice of Exercise or Notice of Final Settlement Method, as applicable, for such
Option.
	 
	 	 
	Relevant Settlement Method:

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

	 	(i) if Counterparty has elected to settle its
conversion obligations in respect of the related
Convertible Note (A) entirely in Shares pursuant
to Section 14.02(v) of the Indenture (together
with cash in lieu of fractional Shares)

4

 

	 	 	 

	 

	 	(such settlement method, “Settlement in Shares”), (B)
in a combination of cash and Shares pursuant to
Section 14.02(a)(vii) of the Indenture with a
Specified Cash Amount less than USD 1,000 (such
settlement method, “Low Cash Combination
Settlement”), or (C) in a combination of cash and
Shares pursuant to Section 14.02(a)(vii) of the
Indenture with a Specified Cash Amount equal to
USD 1,000 (such settlement method, “Par Cash
Combination Settlement”), then, in each
case, the Relevant Settlement Method for such
Option shall be Net Share Settlement;
	 
	 	 
	 

	 	(ii) if Counterparty has elected to settle its
conversion obligations in respect of the related
Convertible Note in a combination of cash and
Shares pursuant to Section 14.02(a)(vii) of the
Indenture with a Specified Cash Amount greater
than USD 1,000, then the Relevant Settlement
Method for such Option shall be Combination
Settlement; and
	 
	 	 
	 

	 	(iii) if Counterparty has elected to settle its
conversion obligations in respect of the related
Convertible Note entirely in cash pursuant to
Section 14.02(a)(vi) of the Indenture (such
settlement method, “Settlement in Cash”), then
the Relevant Settlement Method for such Option
shall be Cash Settlement.
	 
	 	 
	Settlement Method Election Conditions:

	 	 For any Relevant Settlement Method other than Net
Share Settlement, such Relevant Settlement Method shall apply to an Option only if
the Notice of Exercise or Notice of Final Settlement Method, as applicable,
contains:
	 
	 	 
	 

	 	(i) a representation that, on the date of such
Notice of Exercise or Notice of Final Settlement
Method, as applicable, Counterparty is not in
possession of any material non-public information
with respect to Counterparty or the Shares;
	 
	 	 
	 

	 	(ii) a representation that Counterparty is
electing the settlement method for the related
Convertible Note and such Relevant Settlement
Method in good faith and not as part of a plan or
scheme to evade the prohibitions of Rule 10b-5
under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”);
	 
	 	 
	 

	 	(iii) a representation that Counterparty has not
entered into or altered any hedging transaction
relating to the Shares corresponding to or
offsetting the Transaction;
	 
	 	 
	 

	 	(iv) a representation that Counterparty is not
electing the settlement method for the related
Convertible Note and such Relevant Settlement
Method to create actual or apparent trading
activity in the Shares (or any security
convertible into or exchangeable for the Shares)
or to raise or depress or otherwise manipulate
the price of the

5

 

	 	 	 

	 

	 	Shares (or any security
convertible into or exchangeable for the Shares);
and
	 
	 	 
	 

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

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

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

	 	If Combination Settlement is applicable to any Option exercised
or deemed exercised hereunder, Dealer will deliver to Counterparty, on the relevant
Settlement Date for each such Option:
	 
	 	 
	 

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

6

 

	 	 	 

	 

	 	(ii) a number of Shares (the “Combination
Settlement Share Amount”) equal to the sum, for
each Valid Day during the Settlement Averaging
Period for such Option, of a number of Shares for
such Valid Day (the “Daily Combination Settlement
Share Amount”) equal to (A) the Daily Option
Value on such Valid Day minus the Daily
Combination Settlement Cash Amount for such Valid
Day, divided by (B) the Relevant Price on such
Valid Day, divided by (C) the number of Valid
Days in the Settlement Averaging Period; provided
that if the calculation in clause (A) above
results in zero or a negative number for any
Valid Day, the Daily Combination Settlement Share
Amount for such Valid Day shall be deemed to be
zero.
	 
	 	 
	 

	 	Dealer will deliver cash in lieu of any
fractional Shares to be delivered with respect to
any Combination Settlement Share Amount valued at
the Relevant Price for the last Valid Day of the
Settlement Averaging Period.
	 
	 	 
	Cash Settlement:

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

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

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

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

	 	A day on which (i) there is no Market Disruption Event and (ii)
trading in the Shares generally occurs on the Exchange or, if the Shares are not
then listed on the 

7

 

	 	 	 

	 

	 	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 TWGP.UQ
<equity> AQR (or its equivalent successor if such page is not available) in
respect of the period from the scheduled open of trading until the scheduled close
of trading of the primary trading session on such Valid Day (or if such
volume-weighted average price is unavailable, the market value of one Share on such
Valid Day, as determined by the Calculation Agent using a volume-weighted average
method). The Relevant Price will be determined without regard to after hours
trading or any other trading outside of the regular trading session trading hours.
	 
	 	 
	Settlement Averaging Period:

	 	For any Option and regardless of the Settlement Method
applicable to such Option:
	 
	 	 
	 

	 	(i)    if the related Conversion Date occurs prior
to the Free Convertibility Date, the 40
consecutive Valid Days commencing on, and
including, the third Valid Day following
such Conversion Date; provided that if the
Notice of Exercise for such Option specifies
that Settlement in Shares or Low Cash
Combination Settlement applies to the
related Convertible Note, the Settlement
Averaging Period shall be the 80 consecutive
Valid Day period commencing on, and
including, the second Valid Day immediately
following such Conversion Date; or

	 
	 	 
	 

	 	(ii)    if the related Conversion Date occurs on or
following the Free Convertibility Date, the
40 consecutive Valid Days commencing on, and
including, the 42nd Scheduled
Valid Day immediately prior to the
Expiration Date; provided that if the Notice
of Exercise or Notice of Final Settlement
Method, as applicable, for such Option

8

 

	 	 	 

	 

	 	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
82nd Scheduled Valid Day
immediately prior to the Expiration Date.

	 
	 	 
	Settlement Date:

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

	 	USD
	 
	 	 
	Other Applicable Provisions:

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

	 
	Representation and Agreement:

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

3.  Additional Terms applicable to the Transaction.

	 
	 	 	 Adjustments applicable to the Transaction:

	 	 	 

	Potential Adjustment Events:

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

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

9

 

	 	 	 

	 

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

	 	Section 14.04(a), (b), (c), (d) and (e) and Section
14.05 of the Indenture.
	 
	 	 
	Extraordinary Events applicable to the Transaction:
	 
	 	 
	Merger Events:

	 	Applicable; provided that notwithstanding Section 12.1(b) of the Equity
Definitions, a “Merger Event” means the
occurrence of any event or condition set forth in
the definition of “Merger Event” in Section
14.07(a) of the Indenture.
	 
	 	 
	Tender Offers:

	 	Applicable; provided that notwithstanding Section 12.1(d) of the Equity
Definitions, a “Tender Offer” means the occurrence of any event or condition set
forth in Section 14.04(e) of the Indenture.
	 
	 	 
	Consequence of Merger Events / Tender Offers:

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

10

 

	 	 	 

	 

	 	and Payment (Calculation Agent Determination) shall
apply.
	 
	 	 
	Nationalization, Insolvency or Delisting:

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

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

	 	Not Applicable
	 
	 	 
	Hedging Disruption:

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

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

	 	For all applicable Extraordinary Events, Dealer.
	 
	 	 
	Non-Reliance:

	 	Applicable
	 
	 	 
	Agreements and Acknowledgements
	 	 
	 
	 	 
	Regarding Hedging Activities:

	 	Applicable
	 
	 	 
	Additional Acknowledgments:

	 	Applicable
	 
	 	 
	4. Calculation Agent.

	 	Dealer
	 
	 	 
	5. Account Details.
	 	 

	 	 	 	 	 	 

	 	(a)	 	Account for payments to Counterparty:

	 	 	 	 	 	 
	 	 	 	Bank: State Street Trust Bank
	 	 
	 	 	 	ABA#: 011000028
	 	 
	 	 	 	Acct No.: 00153577
	 	 
	 	 	 	Beneficiary: Tower Group Inc./4RAX
	 	 
	 	 	 	Ref: Tower Group Inc./4RAX
	 	 
	 	 	 	 	 	 

11

 

	 	 	 	 	 	 	 

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

	 	 	 	Bank:
JPMorgan Chase Bank, N.A.
	 

	 	 	 	ABA#:

021000021
	 

	 	 	 	Acct No.:
099997979
	 

	 	 	 	Beneficiary:
JPMorgan Chase Bank, N.A. New York
	 

	 	 	 	Ref:
Derivatives
	 
	 	 	 	 	 	 
	 	 	 	 	Account for delivery of Shares from Dealer:
	 
	 	 	 	 	 	 
	 

	 	 	 	DTC 0060	 	 
	 
	 	 	 	 	 	 
	6.	 	Offices.
	 	 
	 
	 	 	 	 	 	 
	 	 	(a)	 	The Office of Counterparty for the Transaction is: Inapplicable, Counterparty
is not a Multibranch Party.
	 
	 	 	 	 	 	 
	 	 	(b)	 	The Office of Dealer for the Transaction is: London
	 
	 	 	 	 	 	 
	 	 	 	 	JPMorgan Chase Bank, National Association
	 	 	 	 	London Branch
	 	 	 	 	P.O. Box 161
	 	 	 	 	60 Victoria Embankment
	 	 	 	 	London EC4Y 0JP
	 	 	 	 	England
	 
	 	 	 	 	 	 
	7.	 	Notices.	 	 
	 
	 	 	 	 	 	 
	 	 	(a)	 	Address for notices or communications to Counterparty:
	 
	 	 	 	 	 	 
	 	 	 	 	Tower Group, Inc.
	 	 	 	 	120 Broadway, 31st Floor
	 	 	 	 	New York, NY 10271
	 

	 	 	 	Attention:
Treasurer
	 

	 	 	 	Telephone No.:
(212) 655-2000
	 

	 	 	 	Facsimile No.:
(212) 655-2199
	 
	 	 	 	 	 	 
	 	 	(b)	 	Address for notices or communications to Dealer:
	 
	 	 	 	 	 	 
	 	 	 	 	JPMorgan Chase Bank, National Association
	 	 	 	 	4 New York Plaza, Floor 18
	 	 	 	 	New York, NY 10004-2413
	 

	 	 	 	Attention:
Mariusz Kwasnik
	 

	 	 	 	Title:
Operations Analyst, EDG Corporate Marketing
	 

	 	 	 	Telephone No:
(212) 623-7223
	 

	 	 	 	Facsimile No:
(212) 623-7719

12

 

8.  Representations and Warranties of Counterparty.

	 	 	Each of the representations and warranties of Counterparty set forth in Section 3 of
the Purchase Agreement (the “Purchase Agreement”), dated as of September 14, 2010, between
Counterparty and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as representatives of the Initial Purchasers party thereto (the “Initial
Purchasers”), are true and correct and are hereby deemed to be repeated to Dealer as if set
forth herein. Counterparty hereby further represents and warrants to Dealer on the date
hereof and on and as of the Premium Payment Date that:

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

13

 

	 	(g)	 	Counterparty is an “eligible contract participant” (as such term is defined in
Section 1a(12) of the Commodity Exchange Act, as amended, other than a person that is
an eligible contract participant under Section 1a(12)(C) of the Commodity Exchange
Act).
	 
	 	(h)	 	Counterparty and each of its affiliates is not, on the date hereof, in
possession of any material non-public information with respect to Counterparty or the
Shares.

9. Other Provisions.

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

14

 

	 	 	 	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)
in violation of the Exchange Act.
	 
	 	(e)	 	Transfer or Assignment.

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

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

15

 

	 	(ii)	 	Dealer may, without Counterparty’s consent, transfer or assign
all or any part of its rights or obligations under the Transaction at any time
to any affiliate of Dealer (A) that has a rating for its long term, unsecured
and unsubordinated indebtedness that is equal to or better than the best of
Dealer’s credit rating and the credit rating of any guarantor of Dealer’s
obligations hereunder, in each case, at the time of the transfer or assignment,
or (B) whose obligations hereunder will be guaranteed, pursuant to the terms of
a customary guarantee in a form used by Dealer generally for similar
transactions, by Dealer or any parent of Dealer that has a credit rating that
is equal to or better than the best of Dealer’s credit rating and the credit
rating of any guarantor of Dealer’s obligations hereunder, in each case, at the
time of the transfer or assignment; provided that any such transfer or
assignment shall be subject to the conditions that (I) following such transfer
or assignment, the terms and conditions of the Agreement as so transferred or
assigned (the “Transferred Agreement”) shall be substantially the same as the
terms and conditions of the Agreement immediately prior to such transfer or
assignment, (II) Counterparty will not be required to pay to the transferee an
amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) of the
Transferred Agreement greater than the amount in respect of which Counterparty
would have been required to pay to Dealer under Section 2(d)(i)(4) in the
absence of the transfer, (III) Counterparty will not receive any payment under
the Transferred Agreement from which an amount is required to be withheld or
deducted for or on account of a Tax with respect to which no additional amount
is required to be paid by the transferee under Section 2(d)(i)(4) of the
Transferred Agreement (other than by reason of Section 2(d)(i)(4)(A) or (B)
thereof), (IV) neither an Event of Default with respect to which Dealer is the
Defaulting Party nor a Termination Event with respect to which Dealer is the
sole Affected Party shall have occurred and be continuing at the time of the
transfer, and neither an Event of Default nor a Termination Event shall occur
as a result of the transfer, (V) each of Dealer and the transferee is a dealer
in “notional principal contracts” within the meaning of Section
1.446-3(c)(4)(iii) of the U.S. Treasury Regulations and in other derivatives,
and (VI) Dealer has used its good faith efforts to provide prior notice to
Counterparty of such transfer and the proposed date of such transfer, and
Dealer shall provide written notice to Counterparty reasonably promptly
following such transfer. In addition, if at any time (A) the Section 16
Percentage exceeds 7.5%, (B) the Option Equity Percentage exceeds 14.5%, or (C)
the Share Amount exceeds the Applicable Share Limit (if any applies) (any such
condition described in clauses (A), (B) or (C), an “Excess Ownership
Position”), Dealer may, without Counterparty’s consent, transfer or assign all
or any part of its rights or obligations under the Transaction to any third
party who is a dealer in “notional principal contracts” within the meaning of
Section 1.446-3(c)(4)(iii) of the U.S. Treasury Regulations and in other
derivatives, and with a rating for its long term, unsecured and unsubordinated
indebtedness equal to or better than the lesser of (x) the credit rating of
Dealer at the time of the transfer and (y) A- by Standard and Poor’s Rating
Group, Inc. or its successor (“S&P”), or A3 by Moody’s Investor Service, Inc.
(“Moody’s”) or, if either S&P or Moody’s ceases to rate such debt, at least an
equivalent rating or better by a substitute rating agency mutually agreed by
Counterparty and Dealer. If at any time an Excess Ownership Position exists,
Dealer may designate any Exchange Business Day as an Early Termination Date
with respect to all or a portion of the Transaction (the “Terminated Portion”)
such that following such termination no Excess Ownership Position exists;
provided that Dealer may only designate an Early Termination Date pursuant to
this Section 9(e)(ii) if Dealer has used its good faith efforts to notify
Counterparty of such Excess Ownership Position, and Dealer is unable, acting in
good faith and after using its commercially reasonable efforts, to effect a
transfer or assignment of Options to a third party in accordance with this
Section 9(e)(ii) on pricing terms
reasonably acceptable to Dealer and within a time period reasonably
acceptable Dealer such that no Excess Ownership Position exists. In the
event that Dealer so designates an Early Termination Date with respect to a
Terminated Portion, a payment shall be made pursuant to Section 6 of the
Agreement as if (1) an Early Termination Date had been

16

 

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

	 	(iii)	 	Notwithstanding any other provision in this Confirmation to
the contrary requiring or allowing Dealer to purchase, sell, receive or deliver
any Shares or other securities, or make or receive any payment in cash, to or
from Counterparty, Dealer may designate any of its affiliates to purchase,
sell, receive or deliver such Shares or other securities, or to make or receive
such payment in cash, and otherwise to perform Dealer’s obligations in respect
of the Transaction and any such designee may assume such obligations. Dealer
shall be discharged of its obligations to Counterparty only to the extent of
any such performance.

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

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

17

 

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

	 	(g)	 	Role of Agent. Each party agrees and acknowledges that (i) J.P. Morgan
Securities LLC, an affiliate of JPMorgan (“JPMS”), has acted solely as agent and not as
principal with respect to the Transaction and (ii) JPMS has no obligation or liability,
by way of guaranty, endorsement or otherwise, in any manner in respect of the
Transaction (including, if applicable, in respect of the settlement thereof). Each
party agrees it will look solely to the other party (or any guarantor in respect
thereof) for performance of such other party’s obligations under the Transaction.
	 
	 	(h)	 	Dividends. If at any time during the period from and including the
Effective Date, to but excluding the Expiration Date, (i) an ex-dividend date for a
regular quarterly cash dividend occurs with respect to the Shares (an “Ex-Dividend
Date”), and that dividend is less than the Regular Dividend on a per Share basis or
(ii) if no Ex-Dividend Date for a regular quarterly cash dividend occurs with respect
to the Shares in any quarterly dividend period of Counterparty, then the Calculation
Agent will make a corresponding adjustment to any one or more of the Strike Price,
Number of Options, Option Entitlement and/or any other variable relevant to the
exercise, settlement or payment for the Transaction to preserve the fair value of the
Options to Dealer after taking into account such dividend or lack thereof. “Regular
Dividend” shall mean USD 0.125 per Share per quarter. Upon any adjustment to the
Initial Dividend Threshold (as defined in the Indenture) for the Convertible Notes
pursuant to the Indenture, the Calculation Agent will make a corresponding adjustment
to the Regular Dividend for the Transaction.
	 
	 	(i)	 	Additional Termination Events. Notwithstanding anything to the
contrary in this Confirmation if an event of default with respect to Counterparty
occurs under the terms of the Convertible Notes as set forth in Section 6.01 of the
Indenture and results in the Convertible Notes becoming due and payable pursuant to the
terms of the Indenture before they would otherwise have been due and payable, then the
occurrence of such event shall constitute an Additional Termination Event applicable to
the Transaction and, with respect to such Additional Termination Event, (A)
Counterparty shall be deemed to be the sole Affected Party, (B) the Transaction shall
be the sole Affected Transaction and (C) Dealer shall be the party entitled to
designate an Early Termination Date pursuant to Section 6(b) of the Agreement.
	 
	 	(j)	 	Amendments to Equity Definitions.

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

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

18

 

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

	 	 	 	 	 

	 

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

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

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

	 	Share Termination Delivery Unit:
	 	One Share or, if a Merger Event has
occurred and a corresponding adjustment to the Transaction has been made, a
unit consisting of the number or amount of

19

 

	 	 	 	 	 

	 

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

	 	Failure to Deliver:
	 	Applicable
	 
	 	 	 	 
	 

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

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

20

 

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

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

	 	(t)	 	Early Unwind. In the event the sale of the “Option 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; provided that

21

 

	 	 	 	Counterparty shall purchase from
Dealer on the Early Unwind Date all Shares purchased by Dealer or one or more of its
affiliates in connection with the Transaction at the then prevailing market price.
Each of Dealer and Counterparty represent and acknowledge to the other that, subject
to the proviso included in this Section 9(t), upon an Early Unwind, all obligations
with respect to the Transaction shall be deemed fully and finally discharged.

	 	(u)	 	Payment by Counterparty. In the event that (i) an Early Termination
Date occurs or is designated with respect to the Transaction as a result of a
Termination Event or an Event of Default (other than an Event of Default arising under
Section 5(a)(ii) or 5(a)(iv) of the Agreement) and, as a result, Counterparty owes to
Dealer an amount calculated under Section 6(e) of the Agreement, or (ii) Counterparty
owes to Dealer, pursuant to Section 12.7 or Section 12.9 of the Equity Definitions, an
amount calculated under Section 12.8 of the Equity Definitions, such amount shall be
deemed to be zero.

22

 

     Please confirm that the foregoing correctly sets forth the terms of our agreement by executing
this Confirmation and returning it to EDG Confirmation Group, J.P. Morgan Securities LLC, 277 Park
Avenue, 11th Floor, New York, NY 10172-3401, or by fax to (212) 622 8519. 

Very
truly yours,

	 	 	 	 	 
	 	

J.P. Morgan Securities LLC, as agent for

JPMorgan Chase Bank, National Association

 	 
	 	By:  	/s/ Santosh Sreenivasan
 	 
	 	 	Authorized Signatory 	 
	 	 	Name: Santosh Sreenivasan 	 
	 

Accepted and confirmed

as of the Trade Date:

Tower Group, Inc.

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

JPMorgan Chase Bank, National Association

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

Main Office 1111 Polaris Parkway, Columbus, Ohio 43271

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

Registered Branch Office 125 London Wall, London EC2Y 5AJ

Authorised and regulated by the Financial Services Authorityexv4w6

Exhibit
4.6

Bank of America, N.A.

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

One Bryant Park

New York, NY 10036

Attn: John Servidio

Telephone: 646-855-8900

Facsimile: 704-208-2869

September 14, 2010

	To:  	 	Tower Group, Inc.

120 Broadway, 31st Floor

New York, NY 10271

Attention: Treasurer

Telephone No.:  (212) 655-2000

Facsimile No.:    (212) 655-2199

	Re:  	 	Base Warrants

(Transaction Reference Number: NY-108281861)

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

     The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the
“Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc.
(“ISDA”), are incorporated into this Confirmation. In the event of any inconsistency between the
Equity Definitions and this Confirmation, this Confirmation shall govern. The Transaction shall be
deemed to be a Share Option Transaction within the meaning set forth in the Equity Definitions.

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

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

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

 

 

	 	 	 

	General Terms.
	 	 
	 
	 	 
	Trade Date:

	 	September 14, 2010

	 	 	 

	Effective Date:

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

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

	 	European
	 
	 	 
	Seller:

	 	Company
	 
	 	 
	Buyer:

	 	Dealer
	 
	 	 
	Shares:

	 	The common stock of
Company, par value
USD 0.01 per share
(Exchange symbol
“TWGP”)
	 
	 	 
	Number of Warrants:

	 	2,455,529. For the
avoidance of doubt,
the Number of
Warrants shall be
reduced by any
Warrants exercised
or deemed exercised
hereunder. In no
event will the
Number of Warrants
be less than zero.
	 
	 	 
	Warrant Entitlement:

	 	One Share per Warrant
	 
	 	 
	Strike Price:

	 	USD 33.4180
	 
	 	 
	 

	 	Notwithstanding
anything to the
contrary in the
Agreement, this
Confirmation or the
Equity Definitions
(but without
limiting Dealer’s
right to adjust any
variable relevant
to the exercise,
settlement, payment
or other terms of
the Transaction,
other than the
Strike Price), in
no event shall the
Strike Price be
subject to
adjustment to the
extent that, after
giving effect to
such adjustment,
the Strike Price
would be less than
USD 24.81, except
for any adjustment
pursuant to the
terms of this
Confirmation and
the Equity
Definitions in
connection with
stock splits or
similar changes to
Company’s
capitalization.
	 
	 	 
	Premium:

	 	USD 1,710,000.00
	 
	 	 
	Premium Payment Date:

	 	September 20, 2010
	 
	 	 
	Exchange:

	 	The NASDAQ Global Select Market
	 
	 	 
	Related Exchange(s):

	 	All Exchanges
	 
	 	 
	Procedures for Exercise.
	 	 
	 
	 	 
	Expiration Time:

	 	The Valuation Time
	 
	 	 
	Expiration Dates:

	 	Each Scheduled
Trading Day during
the period from,
and including, the
First Expiration
Date to, but
excluding, the
120th
Scheduled Trading
Day following the
First

2

 

	 	 	 

	 

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

	 	December 14, 2014 (or if such day
is not a Scheduled Trading Day, the
next following Scheduled Trading
Day), subject to Market Disruption
Event below.
	 
	 	 
	Daily Number of Warrants:

	 	For any Expiration Date, the Number
of Warrants that have not expired
or been exercised as of such day,
divided by the remaining number of
Expiration Dates (including such
day), rounded down to the nearest
whole number, subject to adjustment
pursuant to the provisos to
“Expiration Dates”.
	 
	 	 
	Automatic Exercise:

	 	Applicable; and means that for each
Expiration Date, a number of
Warrants equal to the Daily Number
of Warrants (as adjusted pursuant
to the terms hereof) for such
Expiration Date will be deemed to
be automatically exercised. For
the avoidance of doubt, Warrants
are not exercisable, and shall not
be exercised or deemed exercised,
other than in accordance with the
preceding sentence.
	 
	 	 
	Market Disruption Event:

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

3

 

	 	 	 

	Valuation Terms.
	 	 
	 
	 	 
	Valuation Time:

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

	 	Each Exercise Date.
	 
	 	 
	Settlement Terms.
	 	 
	 
	 	 
	Settlement Method:

	 	Net Share Settlement.
	 
	 	 
	Net Share Settlement:

	 	On the relevant Settlement Date, Company shall deliver to Dealer
a number of Shares equal to the Share Delivery Quantity for such
Settlement Date to the account specified hereto free of payment
through the Clearance System.
	 
	 	 
	Share Delivery Quantity:

	 	For any Settlement Date, a number of Shares, as calculated by
the Calculation Agent, equal to the Net Share Settlement Amount
for such Settlement Date divided by the Settlement Price on the
Valuation Date in respect of such Settlement Date, rounded down
to the nearest whole number plus any Fractional Share Amount.
	 
	 	 
	Net Share Settlement Amount:

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

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

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

	 	The provisions of Sections 9.1(c), 9.8, 9.9, 9.11, 9.12 and 10.5
of the Equity Definitions will be applicable, except 

4

 

	 	 	 

	 

	 	that all
references in such provisions to “Physically-settled” shall be
read as references to “Net Share Settled.” “Net Share Settled”
in relation to any Warrant means that Net Share Settlement is
applicable to that Warrant.

	 
	 	 
	Representation and Agreement:

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

3. Additional Terms applicable to the Transaction.

	 	 	 

	Adjustments applicable to the Transaction:
	 	 
	 
	 	 
	Method of Adjustment:

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

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

	 	Applicable; provided that if an event occurs that constitutes both a Merger Event under
Section 12.1(b) of the Equity Definitions and an Additional Termination Event under
Section 9(h)(ii)(B) of this Confirmation, then (i) if such event does not result in
Cancellation and Payment under Section 12.2 of the Equity Definitions, Dealer may elect,
in its commercially reasonable judgment, whether the provisions of Section 12.1(b) of the
Equity Definitions or Section 9(h)(ii)(B) will apply, and (ii) otherwise, the provisions
of Section 9(h)(ii)(B) will apply.

5

 

	 	 	 

	Share-for-Share:

	 	Modified Calculation Agent Adjustment
	 
	 	 
	Share-for-Other:

	 	Cancellation and Payment (Calculation Agent Determination)
	 
	 	 
	Share-for-Combined:

	 	Cancellation and Payment (Calculation Agent Determination); provided that Dealer may elect, in its
commercially reasonable judgment, Component Adjustment (Calculation Agent Determination).
	 
	 	 
	Consequence of Tender Offers:
	 	 
	 
	 	 
	Tender Offer:

	 	Applicable; provided that if an event occurs that constitutes both a Tender Offer under Section
12.1(d) of the Equity Definitions and Additional Termination Event under Section 9(h)(ii)(A) of this
Confirmation, then (i) if such event does not result in Cancellation and Payment under Section 12.3
of the Equity Definitions, Dealer may elect, in its commercially reasonable judgment, whether the
provisions of Section 12.3 of the Equity Definitions or Section 9(h)(ii)(A) will apply, and (ii)
otherwise, the provisions of Section 9(h)(ii)(A) will apply.
	 
	 	 
	Share-for-Share:

	 	Modified Calculation Agent Adjustment
	 
	 	 
	Share-for-Other:

	 	Modified Calculation Agent Adjustment
	 
	 	 
	Share-for-Combined:

	 	Modified Calculation Agent Adjustment
	 
	 	 
	Nationalization, Insolvency or Delisting:

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

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

	 	Not Applicable
	 
	 	 
	Insolvency Filing:

	 	Applicable

6

 

	 	 	 

	Hedging Disruption:

	 	Applicable; provided that:
	 
	 	 
	 

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

	 
	 	 
	 

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

	 
	 	 
	 

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

	 
	 	 
	Increased Cost of Hedging:

	 	Not Applicable
	 
	 	 
	Loss of Stock Borrow:

	 	Applicable
	 
	 	 
	Maximum Stock Loan Rate:

	 	200 basis points
	 
	 	 
	Increased Cost of Stock Borrow:

	 	Applicable
	 
	 	 
	Initial Stock Loan Rate:

	 	25 basis points
	 
	 	 
	Hedging Party:

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

	 	For all applicable Extraordinary Events, Dealer.
	 
	 	 
	Non-Reliance:

	 	Applicable
	 
	 	 
	Agreements and Acknowledgments
	 	 
	Regarding Hedging Activities:

	 	Applicable
	 
	 	 
	Additional Acknowledgments:

	 	Applicable
	 
	 	 
	4. Calculation Agent.

	 	Dealer
	 
	 	 
	5. Account Details.
	 	 

	 	(a)	 	Account for payments to Company:
	 
	 	 	 	Bank: State Street Trust Bank

ABA#: 011000028

Acct No.: 00153577

Beneficiary: Tower Group Inc./4RAX

Ref: Tower Group Inc./4RAX

Account for delivery of Shares from Company:

To be provided by Company.

7

 

	 	(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 to Dealer:

DTC 0773

Acct Name: Bank of America NA

Acct #: 116-00777

	6.	 	Offices.

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

	 	(b)	 	The Office of Dealer for the Transaction is: New York
	 
	 	 	 	Bank of America, N.A.

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

Bank of America Tower at One Bryant Park

New York, NY 10036

	7.	 	Notices.

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

120 Broadway, 31st Floor

New York, NY 10271

Attention: Treasurer

Telephone No.: (212) 655-2000

Facsimile No.: (212) 655-2199

	 	(b)	 	Address for notices or communications to Dealer:
	 
	 	 	 	Bank of America, N.A.

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

Bank of America Tower at One Bryant Park

New York, NY 10036

Attn: John Servidio

Telephone: 646-855-7127

Facsimile: 704-208-2869

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

8

 

	 	repeated to Dealer as if set forth herein. Company hereby further represents
and warrants to Dealer on the date hereof, on and as of the Premium Payment Date and, in the
case of the representations in Section 8(f), at all times until termination of the
Transaction, that:

	 	(a)	 	Company is duly organized and validly existing and in good standing under the
laws of its jurisdiction of incorporation.

	 	(b)	 	Company has the corporate power and authority to execute and deliver this
Confirmation and to perform its obligations hereunder; and all action required to be
taken for the due and proper authorization, execution and delivery by it of this
Confirmation and the consummation by it of the transactions contemplated hereby has
been duly and validly taken.

	 	(c)	 	This Confirmation has been duly authorized by Company and, when duly executed
and delivered in accordance with its terms by each of the parties hereto, will
constitute a valid and legally binding agreement of Company enforceable against Company
in accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors’ rights generally or by
equitable principles relating to enforceability.

	 	(d)	 	The execution, delivery and performance by Company of this Confirmation and the
consummation of the transactions contemplated hereby will not (i) conflict with or
result in a breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of Company or any of its subsidiaries pursuant
to, any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which Company or any of its subsidiaries is a party or by which Company
or any of its subsidiaries is bound or to which any of the property or assets of
Company or any of its subsidiaries is subject, (ii) result in any violation of the
provisions of the charter or by-laws or similar organizational documents of Company or
any of its subsidiaries or (iii) result in the violation of any law or statute or any
judgment, order, rule or regulation of any court or arbitrator or governmental or
regulatory authority applicable to Company or any of its subsidiaries; except, in the
case of clauses (i) and (iii) above, for any such conflict, breach, default or
violation that would not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on the business, properties, management, financial
position, stockholders’ equity, results of operations or prospects of Company and its
subsidiaries taken as a whole or on the performance by Company of its obligations under
this Confirmation (“Material Adverse Effect”); provided that, in the case of clause (i)
above, such representation and warranty is based on the assumption that any cash
payment made by Company upon any termination, cancellation or early unwind of the
Transaction shall, at the time such cash payment is made, be made in compliance with
the terms and conditions of the Credit Agreement, dated as of May 14, 2010, among
Company, each lender from time to time party thereto and Bank of America, N.A., as
Administrative Agent, Fronting Bank and L/C Administrator, as amended by the First
Amendment to Credit Agreement, dated as of September 10, 2010, among Company, each
lender from time to time party thereto and Bank of America, N.A., as Administrative
Agent, Fronting Bank and L/C Administrator.

	 	(e)	 	No consent, approval, authorization, order, registration or qualification of or
with any court or arbitrator or governmental or regulatory authority is required for
the execution, delivery and performance by Company of this Confirmation and the
consummation of the transactions contemplated hereby, except for (i) such consents,
approvals, authorizations, orders and registrations or qualifications as may be
required under applicable state securities laws, (ii) as may be required and have been
or will be obtained under the rules of The NASDAQ Stock Market in connection with the
issuance of the Warrant Shares (as defined below) by Company or (iii) where the failure
to obtain or make any such consents, approvals, authorizations, orders and
registrations or qualifications would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect; provided that such failure to obtain or
make any such consents,
approvals, authorizations, orders and registrations or qualifications does not
prevent Company from performing its obligations under this Confirmation.

9

 

	 	(f)	 	A number of Shares equal to the Maximum Number of Shares (as defined below)
(the “Warrant Shares”) have been reserved for issuance by all required corporate action
of Company. The Warrant Shares reserved for issuance upon exercise of the Warrants
have been duly authorized and reserved and, when issued upon exercise of the Warrants
in accordance with the terms of the Warrants, will be validly issued, fully paid and
non-assessable, and the issuance of the Warrant Shares will not be subject to any
preemptive or similar rights.

	 	(g)	 	Company is not and, after giving effect to the transactions contemplated
hereby, will not be required to register as an “investment company” or an entity
“controlled” by an “investment company” within the meaning of the Investment Company
Act of 1940, as amended, and the rules and regulations of the Securities and Exchange
Commission thereunder.

	 	(h)	 	Company is an “eligible contract participant” (as such term is defined in
Section 1a(12) of the Commodity Exchange Act, as amended, other than a person that is
an eligible contract participant under Section 1a(12)(C) of the Commodity Exchange
Act).

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

	9.	 	Other Provisions.

	 	(a)	 	Opinions. Company 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
(f) of this Confirmation. Delivery of such opinion to Dealer shall be a condition
precedent for the purpose of Section 2(a)(iii) of the Agreement with respect to each
obligation of Dealer under Section 2(a)(i) of the Agreement.
	 
	 	(b)	 	Repurchase Notices. Company shall, on any day on which Company effects
any repurchase of Shares, promptly give Dealer a written notice of such repurchase (a
“Repurchase Notice”) on such day if following such repurchase, the number of
outstanding Shares on such day, subject to any adjustments provided herein, is (i) less
than 40.1 million (in the case of the first such notice) or (ii) thereafter more than
2.7 million less than the number of Shares included in the immediately preceding
Repurchase Notice. Company agrees to indemnify and hold harmless Dealer and its
affiliates and their respective officers, directors, employees, affiliates, advisors,
agents and controlling persons (each, an “Indemnified Person”) from and against any and
all losses (including losses relating to Dealer’s hedging activities as a consequence
of becoming, or of the risk of becoming, a Section 16 “insider”, including without
limitation, any forbearance from hedging activities or cessation of hedging activities
and any losses in connection therewith with respect to the Transaction), claims,
damages, judgments, liabilities and expenses (including reasonable attorney’s fees),
joint or several, which an Indemnified Person actually may become subject to, as a
result of Company’s failure to provide Dealer with a Repurchase Notice on the day and
in the manner specified in this paragraph, and to reimburse, within 30 days, upon
written request, each of such Indemnified Persons for any reasonable legal or other
expenses incurred in connection with investigating, preparing for, providing testimony
or other evidence in connection with or defending any of the foregoing. If any suit,
action, proceeding (including any governmental or regulatory investigation), claim or
demand shall be brought or asserted against the Indemnified Person, such Indemnified
Person shall promptly notify Company in writing, and Company, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified
Person to represent the Indemnified Person and any others Company may designate in such
proceeding and shall pay the reasonable out-of-pocket fees and expenses of such counsel
related to such proceeding. Company shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, Company agrees to indemnify any
Indemnified Person from and
against any loss or liability by reason of such settlement or judgment. Company
shall not, without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is a party and indemnity has

10

 

	 	 	 	been sought hereunder by such
Indemnified Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liability on claims that are the subject matter of such
proceeding on terms reasonably satisfactory to such Indemnified Person. If the
indemnification provided for in this paragraph is unavailable to an Indemnified
Person or insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then Company under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or liabilities.
The remedies provided for in this paragraph are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any Indemnified Person at
law or in equity. The indemnity and contribution agreements contained in this
paragraph shall remain operative and in full force and effect regardless of the
termination of the Transaction.

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

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

	 	(e)	 	Transfer or Assignment. Company may not transfer any of its rights or
obligations under the Transaction without the prior written consent of Dealer. Dealer
may, without Company’s consent, transfer or assign all or any part of its rights or
obligations under the Transaction at any time to any affiliate of Dealer (A) that has a
rating for its long term, unsecured and unsubordinated indebtedness that is equal to or
better than the best of Dealer’s credit rating and the credit rating of any guarantor
of Dealer’s obligations hereunder, in each case, at the time of the transfer or
assignment, or (B) whose obligations hereunder will be guaranteed, pursuant to the
terms of a customary guarantee in a form used by Dealer generally for similar
transactions, by Dealer or any parent of Dealer that has a credit rating that is equal
to or better than the best of Dealer’s credit rating and the credit rating of any
guarantor of Dealer’s obligations hereunder, in each case, at the time of the transfer
or assignment; provided that any such transfer or assignment shall be subject to the
conditions that (I) following such transfer or assignment, the terms and conditions of
the Agreement as so transferred or assigned (the “Transferred Agreement”) shall be
substantially the same as the terms and conditions of the Agreement immediately prior
to such transfer or assignment, (II) Company will not be required to pay to the
transferee an amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) of the
Transferred Agreement greater than the amount in respect of which Company would have
been required to pay to Dealer under Section 2(d)(i)(4) in the absence of the transfer,
(III) Company will not receive any payment under the Transferred Agreement from which
an amount is required to be withheld or deducted for or on account of a Tax with
respect to which no additional amount is required to be paid by the transferee under
Section 2(d)(i)(4) of the Transferred Agreement (other than by reason of Section
2(d)(i)(4)(A) or (B) thereof), (IV) neither an Event of Default with respect to which
Dealer is the Defaulting Party nor a Termination Event with respect to which Dealer is
the sole Affected Party has occurred and is continuing at the time of the transfer, and
neither an Event of Default nor a Termination Event shall occur as a result of the
transfer, (V) each of Dealer and the transferee is a dealer in “notional principal
contracts” within the meaning of Section 1.446-3(c)(4)(iii) of the U.S. Treasury
Regulations and in other derivatives, and (VI) Dealer has used its good faith efforts
to provide
prior notice to Company of such transfer and the proposed date of such transfer, and
shall provide written notice to Company reasonably promptly following such transfer.
In addition, if at any time (A) the Section 16 Percentage exceeds 7.5%, (B) the
Warrant Equity Percentage exceeds

11

 

	 	 	 	14.5%, or (C) the Share Amount exceeds the
Applicable Share Limit (if any applies) (any such condition described in clauses
(A), (B) or (C), an “Excess Ownership Position”), Dealer may, without Company’s
consent, transfer or assign all or any part of its rights or obligations under the
Transaction to any third party who is a dealer in “notional principal contracts”
within the meaning of Section 1.446-3(c)(4)(iii) of the U.S. Treasury Regulations
and in other derivatives. If at any time an Excess Ownership Positions exists,
Dealer may designate any Exchange Business Day as an Early Termination Date with
respect to all or a portion of the Transaction (the “Terminated Portion”) such that
following such termination no Excess Ownership Position exists; provided that Dealer
may only designate an Early Termination Date pursuant to this Section 9(e) if Dealer
has used its good faith efforts to notify Counterparty of the existence of such
Excess Ownership Position, and Dealer is unable, acting in good faith and after
using its commercially reasonable efforts, to effect a transfer or assignment of
Warrants to a third party in accordance with this Section 9(e) on pricing terms
reasonably acceptable to Dealer and within a time period reasonably acceptable to
Dealer such that no Excess Ownership Position exists. In the event that Dealer so
designates an Early Termination Date with respect to a Terminated Portion, a payment
shall be made pursuant to Section 6 of the Agreement as if (1) an Early Termination
Date had been designated in respect of a Transaction having terms identical to the
Transaction and a Number of Warrants equal to the number of Warrants underlying the
Terminated Portion, (2) Company were the sole Affected Party with respect to such
partial termination and (3) the Terminated Portion were the sole Affected
Transaction (and, for the avoidance of doubt, the provisions of Section 9(j) shall
apply to any amount that is payable by Company to Dealer pursuant to this sentence
as if Company was not the Affected Party). The “Section 16 Percentage” as of any
day is the fraction, expressed as a percentage, (A) the numerator of which is the
number of Shares that Dealer and each person subject to aggregation of Shares with
Dealer under Section 13 or Section 16 of the Exchange Act and rules promulgated
thereunder directly or indirectly beneficially own (as defined under Section 13 or
Section 16 of the Exchange Act and rules promulgated thereunder) and (B) the
denominator of which is the number of Shares outstanding. The “Warrant Equity
Percentage” as of any day is the fraction, expressed as a percentage, (A) the
numerator of which is the sum of (1) the product of the Number of Warrants and the
Warrant Entitlement and (2) the aggregate number of Shares underlying any other
warrants purchased by Dealer from Company, and (B) the denominator of which is the
number of Shares outstanding. The “Share Amount” as of any day is the number of
Shares that Dealer and any person whose ownership position would be aggregated with
that of Dealer (Dealer or any such person, a “Dealer Person”) under any insurance or
other law, rule, regulation, regulatory order or organizational documents or
contracts of Company that are, in each case, applicable to ownership of Shares
(“Applicable Restrictions”), owns, beneficially owns, constructively owns, controls,
holds the power to vote or otherwise meets a relevant definition of ownership under
any Applicable Restriction, as determined by Dealer in its reasonable discretion.
The “Applicable Share Limit” means a number of Shares equal to (A) the minimum
number of Shares that could give rise to reporting or registration obligations or
other requirements (including obtaining prior approval from any person or entity) of
a Dealer Person, or could result in an adverse effect on a Dealer Person, under any
Applicable Restriction, as determined by Dealer in its reasonable discretion, minus
(B) 1% of the number of Shares outstanding. Notwithstanding any other provision in
this Confirmation to the contrary requiring or allowing Dealer to purchase, sell,
receive or deliver any Shares or other securities, or make or receive any payment in
cash, to or from Company, Dealer may designate any of its affiliates to purchase,
sell, receive or deliver such Shares or other securities, or make or receive such
payment in cash, and otherwise to perform Dealer’s obligations in respect of the
Transaction and any such designee may assume such obligations. Dealer shall be
discharged of its obligations to Company only to the extent of any such performance.

	 	(f)	 	Dividends. If at any time during the period from and including the
Effective Date, to and including the last Expiration Date, (i) an ex-dividend date for
a cash dividend occurs with respect to the Shares (an “Ex-Dividend Date”), and that
dividend differs from the Regular Dividend on a per Share basis or (ii) if no
Ex-Dividend Date for a cash dividend occurs with respect to the Shares

12

 

	 	 	 	in any quarterly
dividend period of Company, then the Calculation Agent will adjust any of the Strike
Price, Number of Warrants and/or Daily Number of Warrants to preserve the fair value of
the Warrants to Dealer after taking into account such dividend or lack thereof.
“Regular Dividend” shall mean for any calendar quarter, USD 0.125 for the first cash
dividend or distribution on the Shares for which the Ex-Dividend Date falls within such
calendar quarter, and zero for any subsequent dividend or distribution on the Shares
for which the Ex-Dividend Date falls within the same calendar quarter.

	 	(g)	 	[Reserved.]

	 	(h)	 	Additional Provisions.

	 	(i)	 	Amendments to the Equity Definitions:

	 	(A)	 	Section 11.2(a) of the Equity Definitions is
hereby amended by deleting the words “a diluting or concentrative” and
replacing them with the words “a material”; and adding the phrase “or
Warrants” at the end of the sentence.
	 
	 	(B)	 	Section 11.2(c) of the Equity Definitions is
hereby amended by (x) replacing the words “a diluting or concentrative”
with “a material”, (y) adding the phrase “or Warrants” after the words
“the relevant Shares” in the same sentence and (z) deleting the phrase
“(provided that no adjustments will be made to account solely for
changes in volatility, expected dividends, stock loan rate or liquidity
relative to the relevant Shares)” and replacing it with the phrase
“(and, for the avoidance of doubt, adjustments may be made to account
solely for changes in volatility, expected dividends, stock loan rate
or liquidity relative to the relevant Shares).”
	 
	 	(C)	 	Section 11.2(e)(vii) of the Equity Definitions
is hereby amended by deleting the words “a diluting or concentrative”
and replacing them with the words “a material”; and adding the phrase
“or Warrants” at the end of the sentence.
	 
	 	(D)	 	Section 12.6(a)(ii) of the Equity Definitions
is hereby amended by (1) deleting from the fourth line thereof the word
“or” after the word “official” and inserting a comma therefor, and (2)
deleting the semi-colon at the end of subsection (B) thereof and
inserting the following words therefor “or (C) at Dealer’s option, the
occurrence of any of the events specified in Section 5(a)(vii) (1)
through (9) of the ISDA Master Agreement with respect to that Issuer.”
	 
	 	(E)	 	Section 12.9(b)(iv) of the Equity Definitions
is hereby amended by:

	 	(x)	 	deleting (1) subsection (A) in
its entirety, (2) the phrase “or (B)” following subsection (A)
and (3) the phrase “in each case” in subsection (B); and
	 
	 	(y)	 	deleting the phrase “neither the
Non-Hedging Party nor the Lending Party lends Shares in the
amount of the Hedging Shares or” in the penultimate sentence.

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

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

	 	(y)	 	(1) deleting subsection (C) in
its entirety, (2) deleting the word “or” immediately preceding
subsection (C) and (3) deleting the penultimate

13

 

	 	 	 	sentence in its
entirety and replacing it with the sentence “The Hedging Party
will determine the Cancellation Amount payable by one party to
the other.”

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

	 	(A)	 	A “person” or “group” within the meaning of
Section 13(d) of the Exchange Act, other than Company, its subsidiaries
and its and their employee benefit plans, has become the “beneficial
owner,” as defined in Rule 13d-3 under the Exchange Act, of the common
equity of Company representing more than 50% of the voting power of
such common equity.
	 
	 	(B)	 	Consummation of (I) any recapitalization,
reclassification or change of the Shares (other than changes resulting
from a subdivision or combination or changes solely in par value) as a
result of which the Shares would be converted into, or exchanged for,
stock, other securities, other property or assets or (II) any share
exchange, consolidation or merger involving Company pursuant to which
the Shares will be converted into cash, securities or other property or
any sale, lease or other transfer in one transaction or a series of
transactions of all or substantially all of the consolidated assets of
Company and its subsidiaries, taken as a whole, to any person other
than one of Company’s subsidiaries; provided, however, that a
transaction where the holders of all classes of Company’s common equity
immediately prior to such transaction that is a share exchange,
consolidation or merger (each such holder, a “Pre-transaction Holder”)
own, directly or indirectly, more than 50% of all classes of common
equity of the continuing or surviving corporation or transferee or the
parent thereof immediately after such event shall not constitute an
Additional Termination Event, so long as the proportion of the
respective ownership of each Pre-transaction Holder does not
substantially change solely pursuant to the terms of such transaction.
Notwithstanding the foregoing, a transaction or transactions described
in this clause (B) shall not constitute an Additional Termination Event
if at least 90% of the consideration received or to be received by
holders of the Shares, excluding cash payments for fractional Shares in
connection with such transaction or transactions consists of shares of
common stock that are listed or quoted on any of The New York Stock
Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market
(or any of their respective successors) or will be so listed or quoted
when issued or exchanged in connection with such transaction or
transactions.
	 
	 	(C)	 	Default by Company or any of its subsidiaries
with respect to any mortgage, agreement or other instrument under which
there may be outstanding, or by which there may be secured or
evidenced, any indebtedness for money borrowed in excess of $20 million
in the aggregate of Company and/or of any such subsidiary, whether such
indebtedness now exists or shall hereafter be created (I) resulting in
such indebtedness becoming or being declared due and payable
(unless such declaration has been rescinded) or (II) constituting a
failure to pay the principal of or interest on any such indebtedness
when due and payable at its stated maturity, upon required
repurchase, upon declaration of acceleration or otherwise.

14

 

	 	(D)	 	A final judgment for the payment of $20 million
or more (excluding any amounts covered by insurance) rendered against
Company or any of its “significant subsidiaries” (as defined in Article
1, Rule 1-02 of Regulation S-X), which judgment is not discharged or
stayed within 60 days after (I) the date on which the right to appeal
thereof has expired if no such appeal has commenced, or (II) the date
on which all rights to appeal have been extinguished.
	 
	 	(E)	 	Dealer, despite using commercially reasonable
efforts, is unable or reasonably determines that it is impractical or
illegal, to hedge its exposure with respect to the Transaction in the
public market without registration under the Securities Act of 1933, as
amended (the “Securities Act”) or as a result of any legal, regulatory
or self-regulatory requirements or related policies and procedures
(whether or not such requirements, policies or procedures are imposed
by law or have been voluntarily adopted by Dealer).

	(i)	 	No Collateral or Setoff. Notwithstanding any provision of the
Agreement or any other agreement between the parties to the contrary, the obligations
of Company hereunder are not secured by any collateral. Neither party shall have the
right to set off any obligation that it may have to the other party under the
Transaction against any obligation such other party may have to it, whether arising
under the Agreement, this Confirmation or any other agreement between the parties
hereto, by operation of law or otherwise.

	(j)	 	Alternative Calculations and Payment on Early Termination and on Certain
Extraordinary Events.
	 
	 	 	If, in respect of the Transaction, an amount is payable by Company to Dealer, (A)
pursuant to Section 12.7 or Section 12.9 of the Equity Definitions or (B) pursuant
to Section 6(d)(ii) of the Agreement (any such amount, a “Payment Obligation”),
Company shall have the right, in its sole discretion, to satisfy the Payment
Obligation by the Share Termination Alternative (as defined below) (except that
Company shall not have the right to make such an election in the event of (I) a
Nationalization, Insolvency, Merger Event or Tender Offer in which the consideration
to be paid to holders of Shares consists solely of cash, (II) a Merger Event or
Tender Offer that is within Company’s control, or (III) an Event of Default in which
Company is the Defaulting Party or a Termination Event in which Company is the
Affected Party, other than an Event of Default of the type described in Section
5(a)(iii), (v), (vi), (vii) or (viii) of the Agreement or a Termination Event of the
type described in Section 5(b) of the Agreement, in each case that resulted from an
event or events outside Company’s control) and shall give irrevocable telephonic
notice to Dealer, confirmed in writing within one Scheduled Trading Day, no later
than 12:00 p.m. (New York City time) on the Merger Date, Tender Offer Date,
Announcement Date (in the case of a Nationalization, Insolvency or Delisting), Early
Termination Date or date of cancellation, as applicable; provided that if Company
does not validly elect to satisfy the Payment Obligation by the Share Termination
Alternative, Dealer shall have the right to require Company to satisfy its Payment
Obligation by the Share Termination Alternative.

	 	 	 

	Share Termination
Alternative:

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

15

 

	 	 	 

	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 amount of
Share Termination Delivery Property by replacing any fractional portion of a
security therein with an amount of cash equal to the value of such fractional
security based on the values used to calculate the Share Termination Unit
Price.
	 
	 	 
	Share Termination Unit Price:

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

	 	 In the case of a Termination Event, Event of
Default Additional Disruption Event or Delisting, one Share or, in the case of
Nationalization, Insolvency, Tender Offer or Merger Event, a unit consisting
of the number or amount of each type of property received by a holder of one
Share (without consideration of any requirement to pay cash or other
consideration in lieu of fractional amounts of any securities) in such
Nationalization, Insolvency, Tender Offer or Merger Event. If such
Nationalization, Insolvency, Tender Offer or Merger Event involves a choice of
consideration to be received by holders, such holder shall be deemed to have
elected to receive the maximum possible amount of cash.
	 
	 	 
	Failure to Deliver:

	 	Inapplicable

16

 

	 	 	 

	Other applicable provisions:

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

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

	 	(i)	 	If Company elects to settle the Transaction pursuant to this
clause (i) (a “Private Placement Settlement”), then delivery of Restricted
Shares by Company shall be effected in customary private placement procedures
with respect to such Restricted Shares reasonably acceptable to Dealer;
provided that Company may not elect a Private Placement Settlement if, on the
date of its election, it has taken, or caused to be taken, any action that
would make unavailable either the exemption pursuant to Section 4(2) of the
Securities Act for the sale by Company to Dealer (or any affiliate designated
by Dealer) of the Restricted Shares or the exemption pursuant to Section 4(1)
or Section 4(3) of the Securities Act for resales of the Restricted Shares by
Dealer (or any such affiliate of Dealer). The Private Placement Settlement of
such Restricted Shares shall include customary representations, covenants, blue
sky and other governmental filings and/or registrations, indemnities to Dealer,
due diligence rights (for Dealer or any designated buyer of the Restricted
Shares by Dealer), opinions and certificates, and such other documentation as
is customary for private placement agreements, all reasonably acceptable to
Dealer. In the case of a Private Placement Settlement, Dealer shall determine the appropriate discount to the Share Termination Unit Price (in the case of settlement of Share Termination Delivery Units pursuant to Section 9(j) above) or any Settlement Price (in the case of settlement of Shares pursuant to Section 2 above) applicable to such Restricted Shares in a commercially reasonable manner and appropriately adjust the number of such Restricted Shares to be delivered to Dealer

17

 

	 	 	 	hereunder. Notwithstanding the Agreement or this
Confirmation, the date of delivery of such Restricted Shares shall be the Exchange Business Day following notice by Dealer to Company, of such applicable discount and the number of Restricted Shares to be delivered pursuant to this clause (i). For the avoidance of doubt, delivery of Restricted Shares shall be due as set forth in the previous sentence and not be due on the Share Termination Payment Date (in the case of settlement of Share Termination Delivery Units
pursuant to Section 9(j) above) or on the Settlement Date for such Restricted Shares (in the case of settlement in Shares pursuant to Section 2 above).

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

	 	(iii)	 	Without limiting the generality of the foregoing, Company
agrees that any Restricted Shares delivered to Dealer, as purchaser of such
Restricted Shares, (i) may be transferred by and among Dealer and its
affiliates and Company shall effect such transfer without any further action by
Dealer and (ii) after the period of 6 months from the Trade Date (or 1 year
from the Trade Date if, at such time, informational requirements of Rule 144(c)
are not satisfied with respect to Company) has elapsed after any Settlement
Date for such

18

 

	 	 	 	Restricted Shares, Company shall promptly remove, or cause the
transfer agent for such Restricted Shares to remove, any legends referring to
any such restrictions or requirements from such Restricted Shares upon request
by Dealer (or such affiliate of Dealer) to Company or such transfer agent,
without any requirement for the delivery of any certificate, consent,
agreement, opinion of counsel, notice or any other document, any transfer tax
stamps or payment of any other amount or any other action by Dealer (or such
affiliate of Dealer).

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

	 	(l)	 	Limit on Beneficial Ownership. Notwithstanding any other provisions
hereof, Dealer may not exercise any Warrant hereunder or be entitled to take delivery
of any Shares deliverable hereunder, and Automatic Exercise shall not apply with
respect to any Warrant hereunder, to the extent (but only to the extent) that, after
such receipt of any Shares upon the exercise of such Warrant or otherwise hereunder,
(i) the Section 16 Percentage would exceed 7.5%, or (ii) the Share Amount would exceed
the Applicable Share Limit. Any purported delivery hereunder shall be void and have no
effect to the extent (but only to the extent) that, after such delivery, (i) the
Section 16 Percentage would exceed 7.5%, or (ii) the Share Amount would exceed the
Applicable Share Limit. If any delivery owed to Dealer hereunder is not made, in whole
or in part, as a result of this provision, Company’s obligation to make such delivery
shall not be extinguished and Company shall make such delivery as promptly as
practicable after, but in no event later than one Business Day after, Dealer gives
notice to Company that, after such delivery, (i) the Section 16 Percentage would not
exceed 7.5%, and (ii) the Share Amount would not exceed the Applicable Share Limit.

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

19

 

	 	(n)	 	Waiver of Jury Trial. Each party waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by jury in respect of any
suit, action or proceeding relating to the Transaction. Each party (i) certifies that
no representative, agent or attorney of the other party has represented, expressly or
otherwise, that such other party would not, in the event of such a suit, action or
proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the
other party have been induced to enter into the Transaction, as applicable, by, among
other things, the mutual waivers and certifications provided herein.

	 	(o)	 	Tax Disclosure. Effective from the date of commencement of discussions
concerning the Transaction, Company and each of its employees, representatives, or
other agents may disclose to any and all persons, without limitation of any kind, the
tax treatment and tax structure of the Transaction and all materials of any kind
(including opinions or other tax analyses) that are provided to Company relating to
such tax treatment and tax structure.

	 	(p)	 	Maximum Share Delivery.

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

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

	 	(q)	 	Right to Extend. Dealer may postpone, in whole or in part, any
Expiration Date or any other date of valuation or delivery with respect to some or all
of the relevant Warrants (in which event the Calculation Agent shall make appropriate
adjustments to the Daily Number of Warrants with respect to one or more Expiration
Dates) if Dealer determines, in its commercially reasonable judgment, that such
extension is reasonably necessary or appropriate to preserve Dealer’s hedging or hedge
unwind activity hereunder in light of existing liquidity conditions or to enable Dealer
to effect purchases of Shares in connection with its hedging, hedge unwind or
settlement activity hereunder in a manner that would, if Dealer were Issuer or an
affiliated purchaser of Issuer, be in
compliance with applicable legal, regulatory or self-regulatory requirements, or
with related policies and procedures applicable to Dealer.

	 	(r)	 	Status of Claims in Bankruptcy. Dealer acknowledges and agrees that
this Confirmation is not intended to convey to Dealer rights against Company with
respect to the Transaction that are

20

 

	 	 	 	senior to the claims of common stockholders of
Company in any United States bankruptcy proceedings of Company; provided that nothing
herein shall limit or shall be deemed to limit Dealer’s right to pursue remedies in the
event of a breach by Company of its obligations and agreements with respect to the
Transaction; provided, further, that nothing herein shall limit or shall be deemed to
limit Dealer’s rights in respect of any transactions other than the Transaction.

	 	(s)	 	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.

	 	(t)	 	Early Unwind. In the event the sale of the “Initial Securities” (as
defined in the Purchase Agreement) is not consummated with the Initial Purchasers for
any reason, or Company fails to deliver to Dealer opinions of counsel as required
pursuant to Section 9(a), in each case by 5:00 p.m. (New York City time) on the Premium
Payment Date, or such later date as agreed upon by the parties (the Premium Payment
Date or such later date the “Early Unwind Date”), 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 Company under the
Transaction shall be cancelled and terminated and (ii) each party shall be released and
discharged by the other party from and agrees not to make any claim against the other
party with respect to any obligations or liabilities of the other party arising out of
and to be performed in connection with the Transaction either prior to or after the
Early Unwind Date; provided that Company shall purchase from Dealer on the Early Unwind
Date all Shares purchased by Dealer or one or more of its affiliates in connection with
the Transaction at the then prevailing market price. Each of Dealer and Company
represent and acknowledge to the other that, subject to the proviso included in this
Section 9(t), upon an Early Unwind, all obligations with respect to the Transaction
shall be deemed fully and finally discharged.

	 	(u)	 	Payment by Dealer. In the event that (i) an Early Termination Date
occurs or is designated with respect to the Transaction as a result of a Termination
Event or an Event of Default (other than an Event of Default arising under Section
5(a)(ii) or 5(a)(iv) of the Agreement) and, as a result, Dealer owes to Company an
amount calculated under Section 6(e) of the Agreement, or (ii) Dealer owes to Company,
pursuant to Section 12.7 or Section 12.9 of the Equity Definitions, an amount
calculated under Section 12.8 of the Equity Definitions, such amount shall be deemed to
be zero.

21

 

     Company 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 Company with respect to the Transaction, by manually signing this Confirmation
or this page hereof as evidence of agreement to such terms and providing the other information
requested herein and immediately returning an executed copy to Chris Hutmaker, Facsimile No.
212-326-9882.

Very truly yours,

	 	 	 	 	 
	 	Bank of America, N.A.

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

	 	 	 	 	 
	Accepted and confirmed

as of the Trade Date:

Tower Group, Inc.

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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00178-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00178-of-00352.parquet"}]]