Document:

Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made by and between COLLEGIUM PHARMACEUTICAL, INC. (the “Company”) and BARRY S. DUKE (the “Executive”).

 

WHEREAS, the Company desires to continue to employ Executive on at at-will basis, and the Executives wishes to continue to be employed by the Company on at-will basis, on the terms and conditions set forth herein.

 

WHEREAS, the Company and the Executive are parties to a Confidential Offer Letter dated March 23, 2015 (the “Existing Agreement”); and

 

WHEREAS, the parties wish to enter into this Agreement to memorialize the terms of Executive’s continued employment by the Company.

 

NOW, THEREFORE, in consideration of the foregoing and intending to be bound hereby, the parties agree as follows:

 

1.            Duration of Agreement.  This Agreement is effective on the date it is fully executed (the “Effective Date”) and has no specific expiration date.  Unless terminated by agreement of the parties, this Agreement will govern Executive’s continued employment by the Company until that employment ceases.

 

2.             Title; Duties.  Executive will be employed as the Company’s Chief Commercial Officer, reporting directly to the Company’s Chief Executive Officer.  Executive will devote his best efforts and substantially all of his business time and services to the Company and its affiliates to perform such duties as may be customarily incident to his position and as may reasonably be assigned to him from time to time.  Executive will not, in any capacity, engage in other business activities or perform services for any other individual, firm or corporation without the prior written consent of the Company; provided, however, that without such consent, Executive may engage in charitable, non-profit and public service activities, so long as such activities do not in any respect interfere or conflict with Executive’s performance of his duties and obligations to the Company.

 

3.            Place of Performance.  Executive will perform his services hereunder at the principal executive offices of the Company in Canton, Massachusetts; provided, however, that Executive may be required to travel from time to time for business purposes.

 

4.            Compensation and Indemnification.

 

4.1.         Base Salary.  Executive’s annual salary will be $325,000 (the “Base Salary”), paid in accordance with the Company’s payroll practices as in effect from time to time.  The Base Salary will be reviewed annually by the Compensation Committee of the Company’s Board of Directors (the “Committee”).

 

4.2.         Annual Bonuses.

 

4.2.1.      For each fiscal year ending during his employment, Executive will be eligible to earn an annual bonus.  The target amount of that bonus will be 40% percent of Executive’s Base Salary for the applicable fiscal year.  The actual bonus payable with respect to a particular year will be determined by the Committee, based on the achievement of corporate and /or individual performance objectives established by the Committee.  Any bonus payable under this paragraph will be paid during the calendar year immediately following the fiscal year in respect of which the bonus is payable and, except 

 

 

as otherwise provided in Section 5.1.1, will only be paid if Executive remains continuously employed by the Company through the actual bonus payment date.

 

4.2.2.      For purposes of determining any bonus payable to Executive, the measurement of corporate and individual performance will be performed by the Committee in good faith.  From time to time, the Committee may, in its sole discretion, make adjustments to corporate or individual performance goals, so that required departures from the Company’s operating budget, changes in accounting principles, acquisitions, dispositions, mergers, consolidations and other corporate transactions, and other factors influencing the achievement or calculation of such goals do not affect the operation of this provision in a manner inconsistent with its intended purposes.

 

4.3.         Employee Benefits.  During Executive’s employment, Executive will be eligible to participate in all employee benefit plans and programs made available by the Company from time to time to employees generally, subject to applicable plan terms and policies.  The Company periodically reviews its benefits, policies, benefits providers and practices and may terminate, alter or change them at its discretion from time to time.

 

4.4.         Reimbursement of Expenses.  The Executive will be reimbursed by the Company for all reasonable business expenses incurred by Executive in accordance with the Company’s customary expense reimbursement policies as in effect from time to time.  Notwithstanding anything herein to the contrary, to the extent any expense, reimbursement or in-kind benefit provided to the Executive constitutes a “deferral of compensation” within the meaning of Section 409A of the Internal Revenue Code (the “Code”) (i) the amount of expenses eligible for reimbursement or in-kind benefits provided to the Executive must be incurred during the Executive’s term of employment; (ii) the amount of expenses eligible for reimbursement or in-kind benefits provided to the Executive during any calendar year will not affect the amount of expenses eligible for reimbursement or in-kind benefits provided to the Executive in any other calendar year, (iii) the reimbursements for expenses for which the Executive is entitled to be reimbursed shall be made on or before the last day of the calendar year following the calendar year in which the applicable expense is incurred and (iv) the right to payment or reimbursement or in-kind benefits hereunder may not be liquidated or exchanged for any other benefit.

 

5.             Termination.  Executive’s employment with the Company may be terminated by the Company or Executive at any time and for any reason.  Upon any cessation of his employment with the Company, Executive will be entitled only to such compensation and benefits as described in this Section 5.  Upon any cessation of his employment for any reason, unless otherwise requested by the Company, Executive agrees to resign immediately from all officer and director positions he then holds with the Company and its affiliates.

 

5.1.         Termination without Cause or for Good Reason.  If Executive’s employment by the Company ceases due to a termination by the Company without Cause (as defined below) or a resignation by Executive for Good Reason (as defined below), Executive will be entitled to:

 

5.1.1.      payment of any annual bonus otherwise payable (but for the cessation of Executive’s employment) with respect to a year ended prior to the cessation of Executive’s employment;

 

5.1.2.      continuation of Executive’s Base Salary for a period equal to 9 months, payable in accordance with the Company’s standard payroll practices; and

 

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5.1.3.      waiver of the applicable premium otherwise payable for COBRA continuation coverage for Executive (and, to the extent covered immediately prior to the date of such cessation, his eligible dependents) for a period equal to 9 months.

 

Except as otherwise provided in this Section 5.1, and except for payment of all (i) accrued and unpaid Base Salary through the date of such cessation, (ii) any expense reimbursements to be paid in accordance with Company policy and (iii) payments for any accrued but unused paid time off in accordance with the Company’s policies and applicable law, all compensation and benefits will cease at the time of such cessation and the Company will have no further liability or obligation by reason of such cessation.  The payments and benefits described in this Section 5.1 are in lieu of, and not in addition to, any other severance arrangement maintained by the Company.  Notwithstanding any provision of this Agreement, the payments and benefits described in Section 5.1 are conditioned on: (a) the Executive’s execution and delivery to the Company and the expiration of all applicable statutory revocation periods, by the 45th day following the effective date of his cessation of employment, of a general release of claims against the Company and its affiliates in a form reasonably prescribed by the Company (the “Release”); and (b) the Executive’s continued compliance with the Restrictive Covenants (as defined below).  Subject to Section 5.4, below, the benefits described in Section 5.1 will be paid or provided (or begin to be paid or provided) as soon as administratively practicable [(or determinable in the case of the benefits described in Section 5.1.1)] after the Release becomes irrevocable, provided that if the 45 day period described above begins in one taxable year and ends in a second taxable year such payments or benefits shall not commence until the second taxable year.

 

5.2.         Termination Following a Change in Control.  For cessations of employment described in Section 5.1 that occur during the twelve (12) month period immediately following the occurrence of a Change in Control (as defined below), the Executive will receive the payments and benefits described in Section 5.1 above, subject to the following modifications:

 

5.2.1.      the references in Sections 5.1.2 and 5.1.3 to “9 months” will each be replaced with a reference to “12 months”; and

 

5.2.2.      all unvested restricted stock, stock options and other equity incentives awarded to Executive by the Company will become immediately and automatically fully vested and exercisable (as applicable).

 

5.3.         Other Terminations.  If Executive’s employment with the Company ceases for any reason other than as described in Section 5.1, above (including but not limited to termination (i) by the Company for Cause, (ii) as a result of Executive’s death, (iii) as a result of Executive’s Disability or (d) by Executive without Good Reason, then the Company’s obligation to Executive will be limited solely to (a) accrued and unpaid Base Salary through the date of such cessation, (b) any expense reimbursements to be paid in accordance with Company policy and (c) payments for any accrued but unused paid time off in accordance with the Company’s policies and applicable law.  All compensation and benefits will cease at the time of such cessation and, except as otherwise provided by COBRA or this Section 5.3, the Company will have no further liability or obligation by reason of such termination.  The foregoing will not be construed to limit Executive’s right to payment or reimbursement for claims incurred prior to the date of such termination under any insurance contract funding an employee benefit plan, policy or arrangement of the Company in accordance with the terms of such insurance contract.

 

5.4.         Compliance with Section 409A.  If the termination giving rise to the payments described in Section 5.1 is not a “Separation from Service” within the meaning of Treas. Reg. § 1.409A-1(h)(1) (or any successor provision), then the amounts otherwise payable pursuant to that section will instead be deferred without interest and will not be paid until Executive experiences a Separation from

 

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Service.  To the maximum extent permitted under Section 409A of the Code and its corresponding regulations, the cash severance benefits payable under this Agreement are intended to meet the requirements of the short-term deferral exemption under Section 409A of the Code and the “separation pay exception” under Treas. Reg. §1.409A-1(b)(9)(iii).  To the extent compliance with the requirements of Treas. Reg. § 1.409A-3(i)(2) (or any successor provision) is necessary to avoid the application of an additional tax under Section 409A of the Internal Revenue Code to payments due to Executive upon or following his Separation from Service, then notwithstanding any other provision of this Agreement (or any otherwise applicable plan, policy, agreement or arrangement), any such payments that are otherwise due within six months following Executive’s Separation from Service (taking into account the preceding sentence of this paragraph) will be deferred without interest and paid to Executive in a lump sum immediately following that six month period.  For purposes of the application of Treas. Reg. § 1.409A-1(b)(4)(or any successor provision), each payment in a series of payments will be deemed a separate payment.

 

5.5.         PPACA.  Notwithstanding anything in this Agreement to the contrary, the waiver in respect of COBRA premiums pursuant to this Sections 5.1 and 5.2 shall cease to the extent required to avoid adverse consequences to the Company under the Patient Protection and Affordable Care Act of 2010 and regulations thereunder.

 

5.6.         Section 280G.  If any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement or the lapse or termination of any restriction on or the vesting or exercisability of any payment or benefit (each a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law (such tax or taxes are hereafter collectively referred to as the “Excise Tax”), then the aggregate amount of Payments payable to Executive shall be reduced to the aggregate amount of Payments that may be made to the Executive without incurring an excise tax (the “Safe-Harbor Amount”) in accordance with the immediately following sentence; provided that such reduction shall only be imposed if the aggregate after-tax value of the Payments retained by Executive (after giving effect to such reduction) is equal to or greater than the aggregate after-tax value (after giving effect to the Excise Tax) of the Payments to Executive without any such reduction.  Any such reduction shall be made in the following order: (i) first, any future cash payments (if any) shall be reduced (if necessary, to zero); (ii) second, any current cash payments shall be reduced (if necessary, to zero); (iii) third, all non-cash payments (other than equity or equity derivative related payments) shall be reduced (if necessary, to zero); and (iv) fourth, all equity or equity derivative payments shall be reduced.

 

5.7.         Definitions.  For purposes of this Agreement:

 

5.7.1.      “Cause” means (a) commission or conviction of any felony or any crime involving dishonesty; (b) commission of any fraud against the Company; (c) intentional and material damage to any material property of the Company; (d) Executive’s material breach of any agreement with or duty owed to the Company or any of its affiliates (including, without limitation, Executive’s material breach of any of the Restrictive Covenants, as defined below); or (e) refusal to perform the lawful, reasonable and material directives of the Company’s Board of Directors (the “Board”) or the Company’s Chief Executive Officer.  Before “Cause” under clause (c), (d) or (e) has been deemed to have occurred, the Board must provide the Executive with written notice detailing why the Board has determined that Cause has occurred and the actions required to cure the same, to the extent reasonably subject to cure.  The Executive shall then, where the grounds for Cause are reasonably subject to cure within such time, have thirty (30) days after the Executive’s receipt of written notice to cure the item cited in the written

 

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notice so that “Cause” will have not formally occurred with respect to the event in question until such period, where applicable, shall have expired.

 

5.7.2.      “Change in Control” means the first to occur of any of the events described in Section 1(g) of the Company’s Amended and Restated 2014 Stock Incentive Plan (or any successor provision).

 

5.7.3.      “Disability” means a condition entitling the Executive to benefits under the Company’s long term disability plan, policy or arrangement; provided, however, that if no such plan, policy or arrangement is then maintained by the Company and applicable to the Executive, “Disability” will mean the Executive’s inability to perform his duties under this Agreement due to a mental or physical condition that can be expected to result in death or that can be expected to last (or has already lasted) for a continuous period of 90 days or more, or for 120 days in any 180 consecutive day period.  Termination as a result of a Disability will not be construed as a termination by the Company “without Cause.”

 

5.7.4.      “Good Reason” means any of the following, without the Executive’s prior consent: (a) a material diminution of the Executive’s duties or authority with the Company, reporting relationships or the assignment of duties and responsibilities inconsistent with Executive’s status at the Company; (b) a reduction in Base Salary; or (c) the relocation of the Executive’s primary place of employment to a location that is (i) more than 50 miles from the location of the Executive’s permanent primary place of employment prior to such relocation and (ii) more than 50 miles from the location of the Executive’s residence. However, none of the foregoing events or conditions will constitute Good Reason unless the Executive provides the Company with written objection to the event or condition within 30 days following the occurrence thereof, the Company does not reverse or otherwise cure the event or condition within 30 days of receiving that written objection, and the Executive resigns Executive’s employment within 30 days following the expiration of that cure period.

 

6.            Restrictive Covenants.  To induce the Company to enter into this Agreement and in recognition of the compensation to be paid to the Executive pursuant to Sections 4 and 5 of this Agreement, the Executive agrees to be bound by the provisions of this Section 6 (the “Restrictive Covenants”). These Restrictive Covenants will apply without regard to whether any termination or cessation of the Executive’s employment is initiated by the Company or the Executive, and without regard to the reason for that termination or cessation.

 

6.1.         Covenant Not To Compete.  The Executive covenants that, during his employment by the Company and for a period of 9 months following immediately thereafter (the “Restricted Period”), the Executive will not (except in his capacity as an employee or director of the Company) do any of the following, directly or indirectly:

 

6.1.1.      engage or participate in any Competing Business (as defined below) wherever the Company or its affiliates do business, do or plan to do business or sell or market their products or services;

 

6.1.2.      become interested in (as owner, stockholder, lender, partner, co-venturer, director, officer, employee, agent or consultant) any person, firm, corporation, association or other entity engaged in a Competing Business.  Notwithstanding the foregoing, the Executive may hold up to 1% of the outstanding securities of any class of any publicly-traded securities of any company;

 

6.1.3.      influence or attempt to influence any employee, consultant, supplier, licensor, licensee, contractor, agent, strategic partner, distributor, customer or other person to terminate or modify any written or oral agreement, arrangement or course of dealing with the Company or any of its affiliates; or

 

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6.1.4.      solicit for employment or retention as an independent contractor (or arrange to have any other person or entity solicit for employment or retention) any person employed or retained by the Company or any of its affiliates.

 

6.2.         Confidentiality.  The Executive recognizes and acknowledges that the Proprietary Information (as defined in below) is a valuable, special and unique asset of the business of the Company and its affiliates.  As a result, both during the Term and thereafter, the Executive will not, without the prior written consent of the Company, for any reason divulge to any third-party or use for his own benefit, or for any purpose other than the exclusive benefit of the Company and its affiliates, any Proprietary Information.  Notwithstanding the foregoing, if the Executive is compelled to disclose Proprietary Information by court order or other legal or regulatory process, to the extent permitted by applicable law, he shall promptly so notify the Company so that it may seek a protective order or other assurance that confidential treatment of such Proprietary Information shall be afforded, and the Executive shall reasonably cooperate with the Company and its affiliates in connection therewith.  If the Executive is so obligated by court order or other legal process to disclose Proprietary Information it will disclose only the minimum amount of such Proprietary Information as is necessary for the Executive to comply with such court order or other legal process.

 

6.3.         Property of the Company.

 

6.3.1.      Proprietary Information. All right, title and interest in and to Proprietary Information will be and remain the sole and exclusive property of the Company and its affiliates.  The Executive will not remove from the Company’s or its affiliates’ offices or premises any documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or containing Proprietary Information, or other materials or property of any kind belonging to the Company or its affiliates unless necessary or appropriate in the performance of his duties to the Company and its affiliates.  If the Executive removes such materials or property in the performance of his duties, he will return such materials or property promptly after the removal has served its purpose.  The Executive will not make, retain, remove and/or distribute any copies of any such materials or property, or divulge to any third person the nature of and/or contents of such materials or property, except to the extent necessary to satisfy contractual obligations of the Company or its affiliates or to perform his duties on behalf of the Company and its affiliates.  Upon termination of the Executive’s employment with the Company, he will leave with the Company and its affiliates or promptly return to the Company and its affiliates all originals and copies of such materials or property then in his possession.

 

6.3.2.      Intellectual Property.  The Executive agrees that all the Intellectual Property (as defined below) will be considered “works made for hire” as that term is defined in Section 101 of the Copyright Act (17 U.S.C. § 101) and that all right, title and interest in such Intellectual Property will be the sole and exclusive property of the Company and its affiliates.  To the extent that any of the Intellectual Property may not by law be considered a work made for hire, or to the extent that, notwithstanding the foregoing, the Executive retains any interest in the Intellectual Property, the Executive hereby irrevocably assigns and transfers to the Company and its affiliates any and all right, title, or interest that the Executive may now or in the future have in the Intellectual Property under patent, copyright, trade secret, trademark  or other law, in perpetuity or for the longest period otherwise permitted by law, without the necessity of further consideration.  The Company and its affiliates will be entitled to obtain and hold in its own name all copyrights, patents, trade secrets, trademarks and other similar registrations with respect to such Intellectual Property.  The Executive further agrees to execute any and all documents and provide any further cooperation or assistance reasonably required by the Company, at the Company’s expense,  to perfect, maintain or otherwise protect its rights in the Intellectual Property.  If the Company or its affiliates, as applicable, are unable after reasonable efforts to secure the Executive’s signature, cooperation or assistance in accordance with the preceding sentence, whether because of the

 

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Executive’s incapacity or any other reason whatsoever, the Executive hereby designates and appoints the Company, the appropriate affiliate, or their respective designee as the Executive’s agent and attorney-in-fact, to act on his behalf, to execute and file documents and to do all other lawfully permitted acts necessary or desirable to perfect, maintain or otherwise protect the Company’s or its affiliates’ rights in the Intellectual Property.  The Executive acknowledges and agrees that such appointment is coupled with an interest and is therefore irrevocable.

 

6.4.         Definitions.  For purposes of this Agreement:

 

6.4.1.      “Competing Business” means any person, firm, corporation, partnership, association or other entity engaged in developing, manufacturing, marketing, distributing or selling, directly or indirectly, pharmaceutical abuse-deterrent products or any other product for pain indications that directly competes with a product developed, manufactured, marketed, distributed or sold by the Company.  A division, subsidiary or similar business unit of an entity that does not engage in the business activities described in this definition will not be considered a Competing Business even if another separate division, subsidiary or similar business unit does engage in such activities.

 

6.4.2.      “Intellectual Property” means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents and patent applications claiming such inventions, (b) all trademarks, service marks, trade dress, logos, trade names, fictitious names, brand names, brand marks and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets (including research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, methodologies, technical data, designs, drawings and specifications), (f) all computer software (including data, source and object codes and related documentation), (g) all other proprietary rights, (h) all copies and tangible embodiments thereof (in whatever form or medium), or (i) similar intangible personal property which have been or are developed or created in whole or in part by the Executive (1) at any time and at any place while the Executive is employed by Company and which, in the case of any or all of the foregoing, are related to and used in connection with the business of the Company or its affiliates, or (2) as a result of tasks assigned to the Executive by the Company or its affiliates.

 

6.4.3.      “Proprietary Information” means any and all proprietary information developed or acquired by the Company or any of its subsidiaries or affiliates that has not been specifically authorized to be disclosed.  Such Proprietary Information shall include, but shall not be limited to, the following items and information relating to the following items: (a) all intellectual property and proprietary rights of the Company (including, without limitation, the Intellectual Property), (b) computer codes and instructions, processing systems and techniques, inputs and outputs (regardless of the media on which stored or located) and hardware and software configurations, designs, architecture and interfaces, (c) business research, studies, procedures and costs, (d) financial data, (e) distribution methods, (f) marketing data, methods, plans and efforts, (g) the identities of actual and prospective suppliers, (h) the terms of contracts and agreements with, the needs and requirements of, and the Company’s or its affiliates’ course of dealing with, actual or prospective suppliers, (i) personnel information, (j) customer and vendor credit information, and (k) information received from third parties subject to obligations of non-disclosure or non-use.  Failure by the Company or its affiliates to mark any of the Proprietary Information as confidential or proprietary shall not affect its status as Proprietary Information.

 

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6.5.         Acknowledgements.  The Executive acknowledges that the Restrictive Covenants are reasonable and necessary to protect the legitimate interests of the Company and its affiliates, that the duration and geographic scope of the Restrictive Covenants are reasonable given the nature of this Agreement and the position the Executive holds within the Company, and that the Company would not enter into this Agreement or otherwise employ or continue to employ the Executive unless the Executive agrees to be bound by the Restrictive Covenants set forth in this Section 6.

 

6.6.         Remedies and Enforcement Upon Breach.

 

6.6.1.      Specific Enforcement. The Executive acknowledges that any breach by him, willfully or otherwise, of the Restrictive Covenants will cause continuing and irreparable injury to the Company or its affiliates for which monetary damages would not be an adequate remedy.  The Executive shall not, in any action or proceeding to enforce any of the provisions of this Agreement, assert the claim or defense that such an adequate remedy at law exists.  In the event of any such breach or threatened breach by the Executive of any of the Restrictive Covenants, the Company or its affiliates, as applicable, shall be entitled to injunctive or other similar equitable relief in any court, without any requirement that a bond or other security be posted, and this Agreement shall not in any way limit remedies of law or in equity otherwise available to the Company and its affiliates.

 

6.6.2.      Judicial Modification.  If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, such court shall have the power to modify such provision and, in its modified form, such provision shall then be enforceable.

 

6.6.3.      Enforceability.  If any court holds the Restrictive Covenants unenforceable by reason of their breadth or scope or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the right of the Company and its affiliates to the relief provided above in the courts of any other jurisdiction within the geographic scope of such Restrictive Covenants.

 

6.6.4.      Disclosure of Restrictive Covenants.  The Executive agrees to disclose the existence and terms of the Restrictive Covenants to any employer that the Executive may work for during the Restricted Period.

 

6.6.5.      Extension of Restricted Period.  If the Executive breaches Section 6.1 in any respect, the restrictions contained in that section will be extended for a period equal to the period that the Executive was in breach.

 

7.            Miscellaneous.

 

7.1.         Other Agreements.  Executive represents and warrants to the Company that there are no restrictions, agreements or understandings whatsoever to which he is a party that would prevent or make unlawful his execution of this Agreement, that would be inconsistent or in conflict with this Agreement or Executive’s obligations hereunder, or that would otherwise prevent, limit or impair the performance by Executive of his duties under this Agreement.

 

7.2.         Successors and Assigns.  The Company may assign this Agreement to any successor to its assets and business by means of liquidation, dissolution, sale of assets or otherwise.  The duties of Executive hereunder are personal to Executive and may not be assigned by him.

 

7.3.         Governing Law and Enforcement.  This Agreement will be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to the 

 

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principles of conflicts of laws.  Any legal proceeding arising out of or relating to this Agreement will be instituted in a state or federal court in the Commonwealth of Massachusetts, and Executive and the Company hereby consent to the personal and exclusive jurisdiction of such court(s) and hereby waive any objection(s) that they may have to personal jurisdiction, the laying of venue of any such proceeding and any claim or defense of inconvenient forum.

 

7.4.         Waivers.  The waiver by either party of any right hereunder or of any breach by the other party will not be deemed a waiver of any other right hereunder or of any other breach by the other party.  No waiver will be deemed to have occurred unless set forth in a writing.  No waiver will constitute a continuing waiver unless specifically stated, and any waiver will operate only as to the specific term or condition waived.

 

7.5.         Severability.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law.  However, if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision, and this Agreement will be reformed, construed and enforced as though the invalid, illegal or unenforceable provision had never been herein contained.

 

7.6.         Survival.  This Agreement will survive the cessation of Executive’s employment to the extent necessary to fulfill the purposes and intent the Agreement.

 

7.7.         Notices.  Any notice or communication required or permitted under this Agreement will be made in writing and (a) sent by overnight courier, (b) mailed by overnight U.S. express mail, return receipt requested or (c) sent by telecopier.  Any notice or communication to Executive will be sent to the address contained in his personnel file.  Any notice or communication to the Company will be sent to the Company’s principal executive offices, to the attention of its Chief Executive Officer.  Notwithstanding the foregoing, either party may change the address for notices or communications hereunder by providing written notice to the other in the manner specified in this paragraph.

 

7.8.         Entire Agreement; Amendments.  This Agreement contains the entire agreement and understanding of the parties hereto relating to the subject matter hereof, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to that subject matter (including, without limitation, the Existing Agreement).  This Agreement may not be changed or modified, except by an agreement in writing signed by each of the parties hereto.

 

7.9.         Withholding.  All payments (or transfers of property) to Executive will be subject to tax withholding to the extent required by applicable law.

 

7.10.       Section Headings.  The headings of sections and paragraphs of this Agreement are inserted for convenience only and will not in any way affect the meaning or construction of any provision of this Agreement.

 

7.11.       Counterparts; Facsimile.  This Agreement may be executed in multiple counterparts (including by facsimile signature), each of which will be deemed to be an original, but all of which together will constitute but one and the same instrument.  Counterparts may be delivered via facsimile, electronic mail (including pdf) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and Executive has executed this Agreement, on the date(s) indicated below.

 

 

	
 
    	
COLLEGIUM   PHARMACEUTICAL, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Paul Brannelly
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Paul Brannelly
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
Date:
    	
August 4, 2015
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BARRY S. DUKE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Barry S. Duke
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Date:
    	
August 3, 2015
    
				

 

Signature Page to Employment AgreementExhibit 10.1

 

CONFIRMATION

 

August 6, 2015

 

To:                                                     American Equity Investment Life Holding Company

6000 Westown Parkway

West Des Moines, IA 50266

 

From:                                       Royal Bank of Canada

 

Dear Sirs and Madams,

 

The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the transaction entered into between us on the Trade Date specified below (this “Transaction”).  This Confirmation constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below. This Confirmation constitutes the entire agreement and understanding of the parties with respect to the subject matter and terms of this Transaction and supersedes all prior or contemporaneous written and oral communications with respect thereto.

 

1.                                      The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions, as published by the International Swaps and Derivatives Association, Inc. (the “2002 Definitions”) are incorporated into this Confirmation.  In the event of any inconsistency between the 2002 Definitions and this Confirmation, this Confirmation will govern.

 

This Confirmation evidences a complete and binding agreement between Party A and Party B as to the terms of this 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 1992 ISDA Master Agreement (the “Agreement”) as if Party A and Party B had executed an agreement in such form on the Trade Date (but without any Schedule except for the election of the laws of the State of New York as the governing law and Second Method and Loss as applying to this Transaction for purposes of Section 6(e) of the Agreement). In the event of any inconsistency between provisions of that Agreement and this Confirmation, this Confirmation will prevail for the purpose of this Transaction to which this Confirmation relates. The parties hereby agree that no Transaction other than this Transaction to which this Confirmation relates shall be governed by the Agreement.  The parties also acknowledge that this Transaction to which this Confirmation relates is not governed by, and shall not be treated as a Transaction 

 

1

 

under, any other ISDA. The parties For purposes of the 2002 Definitions, this Transaction is a Share Forward Transaction.

 

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

 

General Terms:

 

	
Party A:
    	
 
    	
Royal Bank of   Canada 
    
	
 
    	
 
    	
 
    
	
Party B:
    	
 
    	
American Equity   Investment Life Holding Company 
    
	
 
    	
 
    	
 
    
	
Trade Date:
    	
 
    	
August 6,   2015
    
	
 
    	
 
    	
 
    
	
Effective Date:
    	
 
    	
August 12,   2015
    
	
 
    	
 
    	
 
    
	
Number of   Shares:
    	
 
    	
Initially,   4,300,000 Shares, subject to reduction by the number of Settlement Shares for   each settlement of this Transaction. 
    
	
 
    	
 
    	
 
    
	
Maturity Date:
    	
 
    	
The earlier to   occur of (i) August 11, 2016 (or, if such date is not a Scheduled   Trading Day, the next following Scheduled Trading Day) and (ii) the date   on which the Number of Shares is reduced to zero.
    
	
 
    	
 
    	
 
    
	
Forward Price:
    	
 
    	
On the Effective   Date, the Initial Forward Price, and on any other day, the Forward Price as   of the immediately preceding calendar day multiplied by   the sum of (i) 1 and   (ii) the Daily Rate for such day (the resulting product being the “Accreted   Forward Price”); provided   that on each Forward Price Reduction Date, the Forward Price in effect on   such date shall be the Accreted Forward Price otherwise in effect on such   date minus the Forward Price Reduction Amount for such Forward Price   Reduction Date. 
    
	
 
    	
 
    	
 
    
	
Initial Forward Price:
    	
 
    	
USD $24.303125   per Share.
    
	
 
    	
 
    	
 
    
	
Daily Rate:
    	
 
    	
For any day,   (i)(A) USD-Federal Funds Rate for such day minus (B) the Spread divided by (ii) 365.
    
	
 
    	
 
    	
 
    
	
USD-Federal   Funds Rate:
    	
 
    	
For any day, the rate set forth for such day   opposite the caption “Federal funds”, as such rate is displayed on the   page “FedsOpen <Index> <GO>“ on the BLOOMBERG Professional   Service, or any successor page; provided   that if no rate appears for 
    

 

2

 

	
 
    	
 
    	
any day on such   page, the Calculation Agent shall determine the rate in a commercially   reasonable manner from any publicly available source (including any Federal   Reserve Bank).
    
	
 
    	
 
    	
 
    
	
Spread:
    	
 
    	
0.25%
    
	
 
    	
 
    	
 
    
	
Forward Price   Reduction Dates:
    	
 
    	
As set forth in   Schedule I. 
    
	
 
    	
 
    	
 
    
	
Forward Price   Reduction Amount:
    	
 
    	
For each Forward   Price Reduction Date, the Forward Price Reduction Amount set forth opposite   such date on Schedule I. 
    
	
 
    	
 
    	
 
    
	
Shares:
    	
 
    	
Common Stock, $1   par value per share, of Party B (also referred to herein as the “Issuer”)   (Exchange identifier: “AEL”).
    
	
 
    	
 
    	
 
    
	
Prepayment:
    	
 
    	
Not applicable.
    
	
 
    	
 
    	
 
    
	
Variable   Obligation:
    	
 
    	
Not applicable. 
    
	
 
    	
 
    	
 
    
	
Exchange:  
    	
 
    	
The New York   Stock Exchange.
    
	
 
    	
 
    	
 
    
	
Related   Exchange(s):
    	
 
    	
All Exchanges.
    
	
 
    	
 
    	
 
    
	
Clearance   System:
    	
 
    	
DTC.
    
	
 
    	
 
    	
 
    
	
Calculation   Agent:
    	
 
    	
Party A.   Whenever Party A, in its capacity as the Calculation Agent or otherwise, is   required to act or to exercise judgment in any way with respect to any   Transaction hereunder, including, without limitation, with respect to   calculations, adjustments and determinations that are made in its sole   discretion or otherwise, it will do so in good faith and in a commercially   reasonable manner. In the event that Party A, in its capacity as the   Calculation Agent or otherwise,  makes   any calculations, adjustments or determinations pursuant to this   Confirmation, the Agreement or the Equity Definitions, it shall promptly   provide an explanation in reasonable detail of the basis for and   determination of any determinations or calculations if requested by Party B   (including any quotations, market data or information from external sources   used in making such calculation, adjustment or determination, as the case may   be, but without disclosing any proprietary models or other information of   Party A that is subject to contractual, 
    

 

3

 

	
 
    	
 
    	
legal or   regulatory obligations to not disclose such information).

 

Following the   occurrence and during the continuation of an Event of Default pursuant to   Section 5(a)(vii) of the Agreement with respect to which Party A is   the sole Defaulting Party, Party B shall have the right to select a leading   dealer in the market for U.S. corporate equity derivatives to replace Party A   as Calculation Agent, subject to Party A’s consent to the identity of the   replacement Calculation Agent (which consent shall not be unreasonably   withheld or delayed), and the parties shall work in good faith to execute any   appropriate documentation required by such replacement Calculation   Agent.  
    
	
 
    	
 
    	
 
    
	
Settlement   Terms:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Settlement:
    	
 
    	
This Transaction   may be settled in part or in whole on one or more Settlement Dates as set   forth below.
    
	
 
    	
 
    	
 
    
	
Settlement Date:
    	
 
    	
(a) Any   Scheduled Trading Day following the Effective Date and up to and including   the Maturity Date, (i) as designated by Party A pursuant to “Termination   Settlement” below or (ii) as designated by Party B in a written notice   (a “Settlement Notice”) that is delivered to Party A no later than   10:00 a.m. (New York City time) on the Scheduled Trading Day that is at   least (y) three Scheduled Trading Days prior to such Settlement Date if   Physical Settlement applies, and (z) 100 Scheduled Trading Days prior to   such Settlement Date if Cash Settlement or Net Share Settlement applies, and   (b) the Maturity Date if the Number of Shares as of such date has not   been reduced to zero pursuant to earlier settlements of this Transaction; provided that (w) if Physical   Settlement applies and a Settlement Date specified above (including a   Settlement Date occurring on the Maturity Date) is not a Clearance System   Business Day, the Settlement Date shall be the next following Clearance   System Business Day, (x) Party B may not designate a Settlement   Date hereunder to which Cash Settlement or Net Share Settlement applies if   the related Unwind Period would overlap in any
    

 

4

 

	
 
    	
 
    	
respect with any   other Unwind Period hereunder or any Unwind Period under any other Share   Forward Transaction between the parties, (y) if Cash Settlement or Net   Share Settlement applies and Party A shall have fully unwound its hedge   during an Unwind Period by a date that is more than three Scheduled Trading   Days prior to a Settlement Date specified above, Party A shall notify Party B   in writing (which, for the avoidance of doubt, may be in the form of an   e-mail) of such date, and the Settlement Date shall be accelerated to a date   that is one Settlement Cycle immediately following such date, and (z) if   Cash Settlement or Net Share Settlement applies, and the related Unwind   Period is extended due to the occurrence of a Disrupted Date, the Settlement   Date shall be postponed to a date that is one Settlement Cycle immediately   following the last day of such Unwind Period.
    
	
 
    	
 
    	
 
    
	
Settlement   Shares:
    	
 
    	
With respect to   any Settlement Date, a number of Shares, not to exceed the Number of Shares,   (a) designated as such by Party B in the related Settlement Notice or   (b) designated by Party A pursuant to “Termination Settlement” below; provided that on the Maturity Date the   number of Settlement Shares shall be equal to the Number of Shares on such   date.
    
	
 
    	
 
    	
 
    
	
Settlement   Method:
    	
 
    	
(a) In   connection with any Settlement Date designated by Party A, Physical   Settlement, and (b) in connection with any Settlement Date designated by   Party B, Physical Settlement, Cash Settlement or Net Share Settlement, at the   election of Party B as set forth in a Settlement Notice; provided   that if Party B elects Cash Settlement or Net Share Settlement, such election   shall not be effective unless Party B has included in such Settlement Notice   and repeated and reaffirmed as of the date of such Settlement Notice Party   B’s representations, warrants, agreements contained in Sections 3(e) and   3(j) of this Confirmation; provided further   that Physical Settlement shall apply (i) if no Settlement Method is   validly selected, (ii) with respect to any Settlement Shares in respect   of which Party A is unable, in its judgment, to unwind its hedge by the end   of the relevant Unwind Period (after giving effect to any permitted extension   under “Unwind
    

 

5

 

	
 

 

 

 

Unwind Period:
    	
 
    	
Period” below),   (iii) to any Termination Settlement Date (as defined below under   “Termination Settlement”) or (iv) if the Maturity Date is a Settlement   Date, in respect of such Settlement Date.

 

Each Scheduled   Trading Day during the period from and including the first Scheduled Trading   Day following the date Party B validly elects Cash Settlement or Net Share   Settlement in respect of a Settlement Date through the third Scheduled   Trading Day preceding such Settlement Date; subject to “Settlement Date”   above and “Termination Settlement” below.    If any Scheduled Trading Day during an Unwind Period is a Disrupted   Day, the Calculation Agent may extend the Unwind Period by one Scheduled   Trading Day, but by no more than ten Scheduled Trading Days in the aggregate   for any Unwind Period.  
    
	
 
    	
 
    	
 
    
	
Market   Disruption Event:
    	
 
    	
Section 6.3(a)(ii) of   the 2002 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 “, or (iv) a   Liquidity Event; in each case that the Calculation Agent determines is   material”
    
	
 
    	
 
    	
 
    
	
Early Closure:
    	
 
    	
Section 6.3(d) of   the Equity Definitions is hereby amended by deleting the remainder of the   provision following the term “Scheduled Closing Time” in the fourth line   thereof.
    
	
 
    	
 
    	
 
    
	
Regulatory   Disruption:
    	
 
    	
Any event that   Party A, in its good faith commercially reasonable discretion based on the   advice of counsel, determines makes it advisable with respect to any legal,   regulatory or self-regulatory requirements or related policies and procedures   (whether or not such requirements or related policies and procedures are   imposed by law or have been voluntarily adopted by Party A), that apply   generally to all transactions of a nature and kind similar to this   Transaction, for it to refrain from or decrease any unwind activity during   the Unwind Period on any Scheduled Trading Day, may by written notice to   Party B be deemed by Party A to be a Market Disruption Event, which has   occurred and will be continuing on such Scheduled 
    

 

6

 

	
 
    	
 
    	
Trading Day. 
    
	
 
    	
 
    	
 
    
	
Liquidity Event:
    	
 
    	
A “Liquidity   Event” shall occur if Party A determines on any day that the trading   volume or liquidity of trading in the Shares is materially reduced from the   average daily trading volume of the Shares for the thirty consecutive   Exchange Business Days ending on but excluding the Trade Date.
    
	
 
    	
 
    	
 
    
	
Unwind   Activities:
    	
 
    	
During each   Unwind Period, Party A (or its agent or affiliate) may purchase Shares with   respect to its hedge of this Transaction. Subject to its obligations under   Section 3(g) of this Confirmation, the times, prices and quantities   at which Party A (or its agent or affiliate) purchases any Shares during any   Unwind Period and the manner in which such purchases are effected shall be at   Party A’s sole discretion (it being understood that Party A may exercise such   discretion after considering whether and in what quantity or manner   purchasing Shares would be permitted or appropriate under applicable   securities laws). 
    
	
 
    	
 
    	
 
    
	
Physical   Settlement:
    	
 
    	
On any   Settlement Date in respect of which Physical Settlement applies, Party B   shall deliver to Party A through the Clearance System the Settlement Shares   for such Settlement Date, and Party A shall deliver to Party B, by wire   transfer of immediately available funds to an account designated by Party B,   an amount in cash equal to the Physical Settlement Cash Amount for such   Settlement Date, on a delivery versus payment basis.  If, on any   Settlement Date, the Shares to be delivered by Party B to Party A hereunder   are not so delivered (the “Deferred Shares”), and a Forward Price   Reduction Date occurs during the period from, and including, such Settlement   Date to, but excluding, the date such Shares are actually delivered to Party   A, then for the avoidance of doubt the portion of the Physical Settlement   Cash Amount payable by Party A to Party B in respect of the Deferred Shares   shall be reduced by an amount equal to the Forward Price Reduction Amount for   such Forward Price Reduction Date, multiplied   by the number of Deferred Shares.  
    

 

7

 

	
Physical   Settlement Cash Amount:
    	
 
    	
For any   Settlement Date in respect of which Physical Settlement applies, an amount in   cash equal to the product of (i) the Forward Price on such Settlement   Date (but calculated using an Accreted Forward Price determined as of the   date immediately preceding the Settlement Date) and   (ii) the number of Settlement Shares for such Settlement Date.
    
	
 
    	
 
    	
 
    
	
Cash Settlement:
    	
 
    	
On any   Settlement Date in respect of which Cash Settlement applies, if the Cash   Settlement Amount for such Settlement Date is a positive number, Party A will   pay such Cash Settlement Amount to Party B.  If the Cash Settlement   Amount is a negative number, Party B will pay the absolute value of such Cash   Settlement Amount to Party A.  
    
	
 
    	
 
    	
 
    
	
Cash Settlement   Amount:
    	
 
    	
For any   Settlement Date in respect of which Cash Settlement applies, an amount   determined by the Calculation Agent equal to the product of   (i) (A) the volume weighted average (weighted based on the number   of Settlement Shares with respect to which Party A or its affiliate unwinds   its hedge position on each relevant day) of the Forward Prices (calculated on   each day using the Accreted Forward Price for the date immediately preceding   such day) for each day of the applicable Unwind Period, minus (B) the volume weighted   average price (the “Unwind Purchase Price”) at which Party A or its   affiliates purchases Shares during the Unwind Period to unwind its hedge with   respect to the relevant Settlement Shares during the Unwind Period   (including, for the avoidance of doubt, purchases on any Disrupted Day), and (ii) the number of Settlement   Shares for such Settlement Date.
    
	
 
    	
 
    	
 
    
	
Net Share   Settlement:
    	
 
    	
On any   Settlement Date in respect of which Net Share Settlement applies, if the   number of Net Share Settlement Shares is a (i) negative number, Party A   shall deliver a number of Shares to Party B equal to the absolute value of   the Net Share Settlement Shares, or (ii) positive number, Party B shall   deliver to Party A the Net Share Settlement Shares; provided that if Party A determines in   its good faith judgment that it would be required to deliver Net Share   Settlement Shares to Party B, Party A may elect to deliver a portion of such   Net 
    

 

8

 

	
 
    	
 
    	
Share Settlement   Shares on one or more dates prior to the applicable Settlement Date. 
    
	
 
    	
 
    	
 
    
	
Net Share   Settlement Shares:
    	
 
    	
For any   Settlement Date in respect of which Net Share Settlement applies, a number of   Shares equal to the Cash Settlement Amount divided by   the Unwind Purchase Price for the relevant Unwind Period.
    
	
 
    	
 
    	
 
    
	
Settlement   Currency:
    	
 
    	
USD.
    
	
 
    	
 
    	
 
    
	
Failure to   Deliver:
    	
 
    	
Applicable only   if the Settlement Method is Net Share Settlement and the Cash Settlement   Amount is a negative number.
    
	
 
    	
 
    	
 
    
	
Adjustments:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Method of   Adjustment:
    	
 
    	
Calculation   Agent Adjustment; notwithstanding anything in the 2002 Definitions to the   contrary, the Calculation Agent may make an adjustment pursuant to   Calculation Agent Adjustment to any one or more of the Number of Shares, the   Forward Price and any other variable relevant to the settlement or payment   terms of this Transaction.
    
	
 
    	
 
    	
 
    
	
Additional   Adjustment:
    	
 
    	
If, in Party A’s   commercially reasonable judgment, the actual cost to Party A, over any one   month period, of borrowing a number of Shares equal to the Number of Shares   to hedge its exposure to this Transaction exceeds a weighted average rate   equal to 25 basis points per annum, the Calculation Agent shall reduce the   Forward Price in order to compensate Party A for the amount by which such   cost exceeded a weighted average rate equal to 25 basis points per annum   during such period.  The Calculation Agent shall notify Party B   prior to making any such adjustment to the Forward Price and shall provide   reasonable details of its stock loan costs for the applicable one month   period.
    
	
 
    	
 
    	
 
    
	
Agreement Regarding Dividends:
    	
 
    	
Notwithstanding any other provision of   this Confirmation, the Definitions or the Agreement to the contrary, in   calculating any adjustment pursuant to Article 11 of the Equity   Definitions or any amount payable in respect of any termination or   cancellation of the Transaction pursuant to Article 12 of the Equity   Definitions or Section 6 of the 
    

 

9

 

	
 
    	
 
    	
Agreement, the Calculation Agent shall   not take into account changes to any dividends since the Trade Date. For the   avoidance of doubt, if an Early Termination Date occurs in respect of the   Transaction, the amount payable pursuant to Section 6 of the Agreement   in respect of such Early Termination Date shall be determined without regard   to the difference between actual dividends declared (including Extraordinary   Dividends) and expected dividends as of the Trade Date.
    
	
 
    	
 
    	
 
    
	
Extraordinary   Events:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
New Shares:
    	
 
    	
In the   definition of New Shares in Section 12.1(i) of the Definitions, the   text in (i) shall be deleted in its entirety and replaced with “publicly   quoted, traded or listed on any of the New York Stock Exchange, The NASDAQ   Global Market or the NASDAQ Global Select Market (or their respective   successors)”.
    
	
 
    	
 
    	
 
    
	
Consequences of   Merger Events:
    	
 
    	
Calculation   Agent Adjustment; notwithstanding anything in the 2002 Definitions to the   contrary, the Calculation Agent may make a commercially reasonable adjustment   pursuant to Calculation Agent Adjustment to any one or more of the Number of   Shares, the Forward Price and only other variables relevant to the settlement   or payment terms of this Transaction, which are considered an input into a   fixed-for-fixed forward or option on equity shares.
    
	
 
    	
 
    	
 
    
	
(a) Share-for-Share:
    	
 
    	
Calculation   Agent Adjustment
    
	
 
    	
 
    	
 
    
	
(b) Share-for-Other:
    	
 
    	
Cancellation and   Payment
    
	
 
    	
 
    	
 
    
	
(c) Share-for-Combined:
    	
 
    	
Component   Adjustment
    
	
 
    	
 
    	
 
    
	
Tender Offer:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Consequences of   Tender Offers:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(a) Share-for-Share:
    	
 
    	
Calculation   Agent Adjustment
    
	
 
    	
 
    	
 
    
	
(b) Share-for-Other:
    	
 
    	
Calculation   Agent Adjustment
    
	
 
    	
 
    	
 
    
	
(c) Share-for-Combined:
    	
 
    	
Calculation   Agent Adjustment
    

 

10

 

	
Composition of   Combined Consideration:
    	
 
    	
As reasonably   determined by the Calculation Agent.
    
	
 
    	
 
    	
 
    
	
Nationalization, Insolvency   or

 

 

Delisting:
    	
 
    	
Subject to   “Insolvency Filing” below, Cancellation and Payment

 

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 such exchange or   quotation system, such exchange or quotation system shall be deemed to be the   Exchange.
    
	
 
    	
 
    	
 
    
	
Determining   Party:
    	
 
    	
For all   applicable Extraordinary Events, Party A.
    
	
 
    	
 
    	
 
    
	
Additional   Disruption Events:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Change in Law:
    	
 
    	
Applicable;   provided that Section 12.9(a)(ii) of the Equity Definitions is   hereby amended by (i) replacing the phrase “the interpretation” in the   third line thereof with the phrase “or announcement or statement of the   formal or informal interpretation”, (ii) immediately following the words   “taxing authority)” in clause (A) thereof, adding the phrase “, in each   case, the application of which directly or indirectly affects this   Transaction or equity derivative transactions with substantially similar   characteristics” and (iii) replacing the word “Shares” with “Hedge   Positions” in clause (X) thereof.

 

The parties   agree that any determination as to whether (i) the adoption of or any   change in any applicable law or regulation (including, without limitation,   any tax law) or (ii) the promulgation of or any change in or   announcement or statement of the formal or informal interpretation by any   court, tribunal or regulatory authority with competent jurisdiction of any   applicable law or regulation 
    

 

11

 

	
 
    	
 
    	
(including any   action taken by a taxing authority, in each case, the application of which   directly or indirectly affects this Transaction or equity derivative   transactions with substantially similar characteristics), in each case,   constitutes a “Change in Law” shall be made without regard to   Section 739 of the Dodd-Frank Wall Street Reform and Consumer Protection   Act of 2010 or any similar legal certainty provision in any legislation   enacted, or rule or regulation promulgated, on or after the Trade Date.
    
	
 
    	
 
    	
 
    
	
Hedging   Disruption:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Increased Cost   of Hedging:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Hedging Party:
    	
 
    	
For all   applicable Additional Disruption Events, Party A.
    
	
 
    	
 
    	
 
    
	
Determining   Party:
    	
 
    	
For all   applicable Additional Disruption Events, Party A.
    
	
 
    	
 
    	
 
    
	
Account Details:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Payments to   Party A:
    	
 
    	
ABA: 021000021

JP Morgan Chase NY   (CHASUS33)

A/C Royal Bank   of Canada, NY Branch (ROYCUS3X)

A/C#   920-1-033363

FFC A/C Name:   RBC US Transit

FFC A/C #:   012692041499

Reference: AEL
    
	
 
    	
 
    	
 
    
	
Payments to   Party B:
    	
 
    	
To be advised in   a separate notice.
    
	
 
    	
 
    	
 
    
	
Delivery of   Shares to
   Party A:
    	
 
    	
To be advised.
    
	
 
    	
 
    	
 
    
	
Delivery of   Shares to
   Party B:
    	
 
    	
To be advised.
    

 

3.                                      Other Provisions:

 

(a)                                 Conditions to Effectiveness:

 

The effectiveness of this Confirmation on the Effective Date shall be subject to (i) the condition that Party B has delivered to Party A an opinion of counsel dated as 

 

12

 

of the Effective Date with respect to matters set forth in Section 3(a) of the Agreement, (ii) all of the conditions set forth in Section 6 of the Underwriting Agreement dated the date hereof among Party B, RBC Capital Markets, LLC, in its capacity as agent for Party A, and RBC Capital Markets, LLC and J.P. Morgan Securities LLC, as Representatives of the several Underwriters, as such terms are defined in the Underwriting Agreement (the “Underwriting Agreement”) have been either satisfied or waived by Party A and the underwriters thereunder, (iii) the condition that the Underwriting Agreement has not been terminated pursuant to Section 6 thereof, (iv) the condition that no Extraordinary Event, Termination Event, Event of Default or Potential Event of Default has occurred, and (v) the condition that neither of the following has occurred (A) Party A is unable to borrow and deliver for sale a number of Shares equal to the Number of Shares, or (B) in Party A’s commercially reasonable judgment either it is impracticable to do so or Party A would incur a stock loan cost of more than a rate equal to 200 basis points per annum to do so (in which event this Confirmation shall be effective but the Number of Shares for this Transaction shall be the number of Shares Party A is required to deliver in accordance with Section 1(a) of the Underwriting Agreement).

 

(b)                                 Interpretive Letter:

 

Party A and Party B each acknowledges and agrees that this Transaction is being entered into in accordance with the October 9, 2003 interpretive letter from the staff of the U.S. Securities and Exchange Commission (“SEC”) to Goldman, Sachs & Co. (the “Interpretive Letter”) and Party B represents to Party A that, with respect to the foregoing, Party B has filed a registration statement on Form S-3 with respect to the “maximum number of shares” (as such term is described in the Interpretive Letter) and appropriate undertakings under Rule 415 under the U.S. Securities Act of 1933, as amended (the “Securities Act”), including, but not limited to, Rule 415(a)(4). In addition, Party B represents that it is eligible to conduct a primary offering of Shares on Form S-3, the offering contemplated by the Underwriting Agreement complies with Rule 415 under the Securities Act, and the Shares are “actively traded” as defined in Rule 101(c)(1) of Regulation M (“Regulation M”) promulgated under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

(c)                                  Underwriting Agreement Representations, Warranties and Covenants:

 

On the Trade Date and on each date on which Party A or its affiliates delivers a prospectus supplement in connection with a sale to hedge this Transaction, Party B repeats and reaffirms as of such date all of the representations and warranties contained in Section 3(a)(v) of the Underwriting Agreement.  Party B hereby agrees to comply with its covenants contained in Section 4(g) of the Underwriting Agreement as if such covenants were made in favor of Party A.

 

(d)                                 Representations, Warranties and Agreements of Party B:

 

13

 

Party B hereby represents and warrants to Party A as of the date hereof and as of the Effective Date, and agrees with Party A, that:

 

(i)                                     Party B (i) has such knowledge and experience in financial and business affairs as to be capable of evaluating the merits and risks of entering into this Transaction; (ii) has consulted with its own legal, financial, accounting and tax advisors in connection with this Transaction; and (iii) is entering into this Transaction for a bona fide business purpose.

 

(ii)                                  Party B is not and has not been the subject of any civil proceeding of a judicial or administrative body of competent jurisdiction that could reasonably be expected to impair materially Party B’s ability to perform its obligations hereunder.

 

(iii)                               No filing with, or approval, authorization, consent, license registration, qualification, order or decree of, any court or governmental authority or agency, domestic or foreign, is necessary or required for the execution, delivery and performance by Party B of this Confirmation and the consummation of this Transaction (including, without limitation, the issuance and delivery of Shares on any Settlement Date) except (i) such as have been obtained under the Securities Act, and (ii) as may be required to be obtained under state securities laws.

 

(iv)                              All Shares, when issued and delivered in accordance with the terms of this Transaction, shall be newly issued (unless mutually agreed otherwise by the parties), will be duly and validly authorized, issued and outstanding, fully paid and nonassessable, free of any lien, charge, claim or other encumbrance and not subject to any preemptive or similar rights and shall, upon such issuance, be accepted for listing or quotation on the Exchange.

 

(v)                                 Party B has reserved and will keep available at all times, free from preemptive rights, out of its authorized but unissued Shares, solely for the purpose of issuance upon settlement of this Transaction as herein provided, the Maximum Number of Shares.  All Shares so issuable shall, upon such issuance, be accepted for listing or quotation on the Exchange.

 

(vi)                              Party B shall provide Party A at least 10 days’ written notice (an “Issuer Repurchase Notice”) prior to executing any new authorization for repurchase of Shares by Party B or any of its subsidiaries, whether out of profits or capital or whether the consideration for such repurchase is cash, securities or otherwise (an “Issuer Repurchase”), and prior to executing (or entering into any contract that would require, or give the option to, Party B or any of its subsidiaries, to purchase or repurchase Shares) any Issuer Repurchase that alone or in the aggregate would result in the Number of Shares Percentage (as defined below) being  (i) equal to or greater than 8.0% of the outstanding Shares or (ii) greater by 0.5% or more than the Number of Shares Percentage at the time of the immediately 

 

14

 

preceding Issuer Repurchase Notice (or in the case of the first such Issuer Repurchase Notice regarding a repurchase of Shares, greater than the Number of Shares Percentage as of the later of the date hereof or the immediately preceding Settlement Date, if any). The “Number of Shares Percentage” as of any day is the fraction (1) the numerator of which is the Number of Shares plus the Number of Shares for any other Share Forward Transaction between the parties relating to the same Shares and (2) the denominator of which is the number of Shares outstanding on such day.

 

(vii)                           Party B shall not make any Issuer Repurchase if, immediately following such Issuer Repurchase, the Number of Shares Percentage would be equal to or greater than 8.0%.

 

(viii)                        Party B is an “eligible contract participant” (as such term is defined in Section 1a(18) of the U.S. Commodity Exchange Act, as amended).

 

(e)                                  Additional Representations, Warranties and Agreements of Party B:

 

Party B hereby represents and warrants to Party A as of the date hereof and as of the Effective Date, and agrees with Party A, that:

 

(i)                                     On the Trade Date and on any date that Party B notifies Party A that Cash Settlement or Net Share Settlement applies to this Transaction, (a) each of Party B’s filings under the Securities Act, the Exchange Act or other applicable securities laws that are required to be filed have been filed and that, as of the date of this representation, there is no misstatement of material fact contained therein or omission of a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; and (b) it has not directly or indirectly violated any applicable law (including, without limitation, the Securities Act and the Exchange Act) in connection with this Transaction.  In addition to any other requirement set forth herein, Party B agrees not to designate any Settlement Date or elect Cash Settlement or Net Share Settlement if it has been advised by its own counsel or been notified by Party A that Party A has determined in its reasonable discretion based on the advice of counsel that settlement in respect of such date or such settlement election or Party A’s related market activity would result in a violation of any applicable federal or state law or regulation, including the U.S. federal securities laws.

 

(ii)                                  Party B shall, at least one day prior to the first day of any Unwind Period, notify Party A of the total number of Shares purchased in Rule 10b-18 purchases of blocks pursuant to the once-a-week block exception contained in Rule 10b-18(b)(4) by or for Party B or any of its affiliated purchasers during each of the four calendar weeks preceding the first day of such Unwind Period and during the calendar week in which the first 

 

15

 

day of such Unwind Period occurs (“Rule 10b-18 purchase”, “blocks” and “affiliated purchaser” each being used as defined in Rule 10b-18).

 

(iii)                               During any Unwind Period, Party B shall (a) notify Party A prior to the opening of trading in the Shares on any day on which Party B makes, or expects to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any merger, acquisition, or similar transaction involving a recapitalization relating to Party B (other than any such transaction in which the consideration consists solely of cash and there is no valuation period), (b) promptly notify Party A following any such announcement that such announcement has been made, and (c) promptly deliver to Party A following the making of any such announcement information indicating (1) Party B’s average daily Rule 10b-18 purchases (as defined in Rule 10b-18) during the three full calendar months preceding the date of the announcement of such transaction and (2) Party B’s block purchases (as defined in Rule 10b-18) effected pursuant to paragraph (b)(4) of Rule 10b-18 during the three full calendar months preceding the date of the announcement of such transaction.  In addition, during any Unwind Period, Party B shall promptly notify Party A of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders.

 

(iv)                              Party B (or any “affiliated purchaser” as defined in Rule 10b-18 under the Exchange Act) shall not, without the prior written consent of Party A, directly or indirectly purchase any Shares (including by means of a derivative instrument), listed contracts on the Shares or securities that are convertible into, or exchangeable or exercisable for Shares (including, without limitation, any Rule 10b-18 purchases of blocks (as defined in Rule 10b-18 under the Exchange Act)) during any Unwind Period for this Transaction or for any other Share Forward Transactions between the parties, except through Party A (or its agent or affiliate) or in connection with its employee stock ownership plans. Party B agrees that neither it nor any of its affiliates shall take any action that would cause any purchases of Shares by Party (or its agent or affiliate) in connection with any Cash Settlement or Net Share Settlement of this Transaction not to meet the requirements of the safe harbor provided by Rule 10b-18 under the Exchange Act if such purchases were effected by Party B.

 

(v)                                 Party B shall not engage in any “distribution” (as defined in Regulation M) that would cause a “restricted period” (as defined in Regulation M) to occur during any Unwind Period.

 

(vi)                              Party B is not entering into this Confirmation or making any election hereunder to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security 

 

16

 

convertible into or exchangeable for Shares) in violation of the Exchange Act.

 

(vii)                           Counterparty is not and, after giving effect to the Transaction, will not be an “investment company” as such term is defined in the U.S. Investment Company Act of 1940, as amended.

 

(viii)                        Party B will as soon as practicable (x) upon obtaining knowledge of the occurrence of a Potential Adjustment Event (not giving effect to, solely for purposes of this Subsection (e)(viii)(x), clause (vii) of the definition of “Potential Adjustment Event” in the 2002 Definitions), an Extraordinary Event, an Event of Default or a Termination Event, in each case within Party B’s control, notify Party A of such knowledge, provided that Party B will, as soon as it is practicable and no later than the date it declares an Extraordinary Dividend, notify Party A of such declaration or (y) upon obtaining notification from a third-party of the occurrence of an Event of Default in respect of which Party B is a Defaulting Party, a Termination Event in respect of which Party B is an Affected Party, a Potential Adjustment Event or an Extraordinary Event, notify Party A of such notification; provided, however, that should Party B be in possession of Material Non-Public Information (as defined below) regarding itself or the Shares, Party B shall not communicate such Material Non-Public Information to Party A in connection with this Transaction.

 

(ix)                              Party B will not be rendered insolvent as a result of this Transaction, and as of the date hereof, and as of any date on which Party B elects Cash Settlement or Net Share Settlement or makes payment to Party A in connection with any settlement hereunder, Party B is solvent and able to pay its debts as they come due, with assets having a fair value greater than liabilities and with capital sufficient to carry on the business in which it engages.

 

(f)                                   Covenant of Party B:

 

Party B acknowledges and agrees that any Shares delivered by Party B to Party A on any Settlement Date will be (i) newly issued, (ii) approved for listing or quotation on the Exchange, subject to official notice of issuance, and (iii) except where the provisions of Section 3(n) “Private Placement Procedures” below applied, registered under the Exchange Act, and, when delivered by Party A (or an affiliate of Party A) to securities lenders from whom Party A (or an affiliate of Party A) borrowed Shares in connection with hedging its exposure to this Transaction, will be freely saleable without further registration or other restrictions under the Securities Act in the hands of those securities lenders, irrespective of whether any such stock loan is effected by Party A or an affiliate of Party A. Accordingly, except where the provisions of Section 3(n) “Private Placement Procedures” below applied, Party B agrees that any Shares so delivered will not bear a restrictive legend and will be deposited in, and the delivery thereof

 

17

 

shall be effected through the facilities of, the Clearance System. In addition, Party B represents and agrees that any such Shares shall be, upon such delivery, duly and validly authorized, issued and outstanding, fully paid and nonassessable, free of any lien, charge, claim or other encumbrance.

 

(g)                                  Covenants of Party A:

 

(i)                                     Unless the provisions set forth below under “Private Placement Procedures” shall be applicable, Party A shall use any Shares delivered by Party B to Party A on any Settlement Date to return to securities lenders to close out open securities loans with respect to Shares.

 

(ii)                                  In connection with purchases of Shares in connection with any Cash Settlement or Net Share Settlement of this Transaction, Party A shall use its good faith efforts to conduct its activities, or cause its affiliates to conduct their activities, in a manner so as not to on any single day purchase a number of Shares in excess of 20% of the average daily trading volume for the Shares during the twenty consecutive Exchange Business Days leading up to but excluding such day.

 

(h)                                 Additional covenants of Party A and Party B:

 

For the purpose of Sections 4(a)(i) and 4(a)(ii) of the Agreement:

 

(i)                                     Party A agrees to deliver a U.S. Internal Revenue Service Form W-8ECI (or any successor of such Form), completed accurately and in a manner reasonably acceptable to Party B and, in particular, with the “corporation” box checked on line 4 thereof. Such Form shall be delivered (1) upon execution of this Confirmation, (2) promptly upon reasonable demand by Party B, and (3) promptly upon learning that the information on any such previously delivered Form is inaccurate or incorrect.

 

(ii)                                  Party B agrees to deliver a U.S. Internal Revenue Service Form W-9 (or any successor of such Form), completed accurately and in a manner reasonably acceptable to Party A. Such Form shall be delivered (1) upon execution of this Confirmation, (2) promptly upon reasonable demand by Party A, and (3) promptly upon learning that the information on any such previously delivered Form is inaccurate or incorrect.

 

(iii)                               Party A and Party B shall further deliver any other form or document, accurately completed and in a manner reasonably satisfactory to the other party, that may be required or reasonably requested in order to allow the other party to make a payment under this Confirmation, including any Credit Support Document, without any deduction or withholding for or on account of any Tax or with such deduction at a reduced rate. Such other form or document shall be delivered promptly upon the reasonable 

 

18

 

demand of such other party.

 

(i)                                     Representation and Agreement of the Parties:

 

Notwithstanding Section 9.11 of the 2002 Definitions, the parties acknowledge that any Shares delivered to Party B will be subject to restrictions and limitations arising from Party B’s status under applicable securities laws.

 

(j)                                    Rule 10b5-1:

 

It is the intent of Party A and Party B that following any election of Cash Settlement or Net Share Settlement by Party B, the purchase of Shares by Party A during any Unwind Period comply with the requirements of Rule 10b5-1(c)(1)(i)(B) of the Exchange Act and that this Confirmation shall be interpreted to comply with the requirements of Rule 10b5-1(c).

 

Party B acknowledges that (i) during any Unwind Period Party B and its officers and directors do not have, and shall not attempt to exercise, any influence over how, when or whether to effect purchases of Shares by Party A (or its agent or affiliate) in connection with this Confirmation and (ii) Party B is entering into the Agreement and this Confirmation in good faith and not as part of a plan or scheme to evade compliance with federal securities laws including, without limitation, Rule 10b-5 promulgated under the Exchange Act.

 

Party B hereby agrees with Party A that during any Unwind Period Party B and any of its officers or directors shall not communicate, directly or indirectly, any Material Non-Public Information (as defined herein) to any Trading Personnel (as defined below).  For purposes of this Transaction, “Material Non-Public Information” means information relating to Party B or the Shares that (a) has not been widely disseminated by wire service, in one or more newspapers of general circulation, by communication from Party B to its shareholders or in a press release, or contained in a public filing made by Party B with the SEC and (b) a reasonable investor might consider to be of importance in making an investment decision to buy, sell or hold Shares.  For the avoidance of doubt and solely by way of illustration, information should be presumed “material” if it relates to such matters as dividend increases or decreases, earnings estimates, changes in previously released earnings estimates, significant expansion or curtailment of operations, a significant increase or decline of orders, significant merger or acquisition proposals or agreements, significant new products or discoveries, extraordinary borrowing, major litigation, liquidity problems, extraordinary management developments, purchase or sale of substantial assets, or other similar information. For purposes of this Transaction, “Trading Personnel” means any employee on the trading side of RBCCM, as defined below in “Matters Relating to Agent”.

 

19

 

(k)                                 Insolvency Filing:

 

Notwithstanding anything to the contrary herein, in the Agreement or in the 2002 Definitions, upon any Insolvency Filing or other proceeding under the U.S. Bankruptcy Code (Title 11 of the United States Code) in respect of the Issuer, this  Transaction shall automatically terminate on the date thereof without further liability of either party to this Confirmation to the other party (except for any liability in respect of any breach of representation or covenant by a party under this Confirmation prior to the date of such Insolvency Filing or other proceeding), it being understood that this Transaction is a contract for the issuance of Shares by the Issuer.

 

(l)                                     Acceleration Events:

 

The following events shall each constitute an “Acceleration Event”:

 

(i)                                     Stock Borrow Events.  In the commercially reasonable judgment of Party A, (A) Party A (or an affiliate of Party A) is unable to hedge Party A’s exposure to this Transaction because of the lack of sufficient Shares being made available for Share borrowing by lenders, or (B) Party A (or an affiliate of Party A) would incur a cost to borrow Shares to hedge its exposure to this Transaction that is greater than a rate equal to 200 basis points per annum (a “Stock Borrow Event”);

 

(ii)                                  Dividends and Other Distributions.  On any day occurring after the Trade Date and prior to the final settlement of this Transaction, Party B declares a distribution, issue or dividend to existing holders of the Shares (an “Extraordinary Dividend”) of (i) any cash dividend to the extent all cash dividends having an ex-dividend date during the period from and including the Trade Date to and including the Maturity Date exceeds, on a per Share basis, the Forward Price Reduction Amount set forth opposite the first date of such period or periods on Schedule I (and, for the avoidance of doubt, the actual declaration date, as opposed to the ex-dividend date, of any cash dividend shall not be used for purposes of determining the appropriate period to which a Forward Price Reduction Amount relates), (ii) share capital or securities of another issuer acquired or owned (directly or indirectly) by Party B as a result of a spin-off or other similar transaction or (iii) any other type of securities (other than Shares), rights or warrants or other assets, for payment (cash or other consideration) at less than the prevailing market price as determined by Party A;

 

(iii)                               ISDA Termination.  Party A has the right to (a) designate an Early Termination Date as the result of an Event of Default or Termination Event or (b) terminate this Transactions and determine an amount payable as a result of an Extraordinary Event, in each such case the provisions set 

 

20

 

forth under “Termination Settlement” shall apply in lieu of Section 6 of the Agreement;

 

(iv)                              Other ISDA Events.  The announcement of any event that if consummated, would result in an Extraordinary Event (and, for the avoidance of doubt, such event shall not constitute an “Extraordinary Event”); or

 

(v)                                 Ownership Event.  In the reasonable judgment of Party A, based on advice of counsel, on any day, the Share Amount for such day exceeds the Post-Effective Limit for such day (if any applies).

 

For purposes of clause (v) above, the “Share Amount” as of any day is the number of Shares that Party A and any person whose ownership position would be aggregated with that of Party A (Party A or any such person, a “Party A Person”) under any law, rule, regulation or regulatory order that for any reason becomes applicable to ownership of Shares after the Trade Date (“Applicable Laws”), owns, beneficially owns, constructively owns, controls, holds the power to vote or otherwise meets a relevant definition of ownership of under the Applicable Laws, as determined by Party A in its reasonable discretion. The “Post-Effective Limit” means (x) the minimum number of Shares that would give rise to reporting (other than pursuant to the requirement to file a Schedule 13D under the Exchange Act) or registration obligations or other requirements (including obtaining prior approval from any person or entity) of a Party A Person, or would result in an adverse effect on a Party A Person, under the Applicable Laws, as determined by Party A in its reasonable discretion, minus (y) 2.0% of the number of Shares outstanding.

 

(m)                             Termination Settlement:

 

Upon the occurrence of any Acceleration Event, Party A shall have the right to designate, upon at least one Scheduled Trading Days’ notice, any Scheduled Trading Day following such occurrence to be a Settlement Date hereunder or, in the case of an Extraordinary Dividend, a Settlement Date shall be automatically deemed to occur on the date such Extraordinary Dividend was declared by Party B (in each case, a “Termination Settlement Date”) to which Physical Settlement shall apply, and to select the number of Settlement Shares relating to such Termination Settlement Date or, in the case of an Extraordinary Dividend, the Number of Shares as of the declaration date thereof; provided that (i) in the case of an Acceleration Event arising out of an Ownership Event, the number of Settlement Shares so designated by Party A shall not exceed the number of Shares necessary to reduce the Share Amount to the Post-Effective Limit and (ii) in the case of an Acceleration Event arising out of a Stock Borrow Event the number of Settlement Shares so designated by Party A shall not exceed the number of Shares as to which such Stock Borrow Event exists.  If Party B fails to deliver the Settlement Shares relating to such Termination Settlement Date when due or otherwise fails to perform obligations within its control in respect of this Transaction, it shall be an Event of Default with respect to Party B and Section 6 

 

21

 

of the Agreement shall apply. If an Acceleration Event occurs during an Unwind Period relating to a number of Settlement Shares to which Cash Settlement or Net Share Settlement applies, then on the Termination Settlement Date relating to such Acceleration Event, notwithstanding any election to the contrary by Party B, Cash Settlement or Net Share Settlement shall apply to the portion of the Settlement Shares relating to such Unwind Period as to which Party A has unwound its hedge and Physical Settlement shall apply in respect of (x) the remainder (if any) of such Settlement Shares and  (y) the Settlement Shares designated by Party A in respect of such Termination Settlement Date.

 

(n)                                 Private Placement Procedures:

 

If Party B is unable to comply with the provisions of “Covenant of Party B” above because of a change in law or a change in the policy of the SEC or its staff, or Party A otherwise determines that in its reasonable opinion any Settlement Shares to be delivered to Party A by Party B may not be freely returned by Party A or its affiliates to securities lenders as described under “Covenant of Party B” above, then delivery of any such Settlement Shares (the “Restricted Shares”) shall be effected pursuant to Annex A hereto, unless waived by Party A (“Private Placement Settlement”).

 

(o)                              Maximum Share Delivery:

 

Notwithstanding any other provision of this Confirmation, in no event will Party B be required to deliver on any Settlement Date, whether pursuant to Physical Settlement, Net Share Settlement, Termination Settlement or any Private Placement Settlement, more than 8,600,000 Shares (the “Maximum Number of Shares”) to Party A in the aggregate, subject to reduction by the amount of any Shares delivered by Party B on any prior Settlement Date and to adjustment pursuant to the terms of this Confirmation and the 2002 Definitions in connection with a stock split.

 

(p)                                 Transfer and Assignment:

 

Party A may assign or transfer any of its rights or delegate any of its duties hereunder to any affiliate of Party A, any entity organized or sponsored by Party A or any third party, in each such case with a credit rating equal to or better than that of Party A without the prior written consent of Party B. Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Party A to purchase, sell, receive or deliver any Shares or other securities to or from Party B, Party A may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to perform Party A’s obligations in respect of this Transaction and any such designee may assume such obligations.  Party A shall be discharged of its obligations to Party B to the extent of any such performance.

 

22

 

(q)                                 Matters Relating to Agent:

 

Party A has appointed, as its agent, its indirect wholly-owned subsidiary, RBC Capital Markets, LLC (“RBCCM”), for purposes of conducting, on Party A’s behalf, a business in privately negotiated transactions in options and other derivatives. Party B hereby is advised that Party A, the principal and stated counterparty in such transactions, duly has authorized RBCCM to market, structure, negotiate, document, price, execute and hedge transactions in over-the-counter derivative products.

 

(r)                                    Indemnity:

 

Party B agrees to indemnify Party A and its affiliates and their respective directors, officers, agents and controlling parties (Party A and each such affiliate or person being an “Indemnified Party”) from and against any and all losses, claims, damages and liabilities, joint and several, incurred by or asserted against such Indemnified Party for the violation of federal or state securities laws and which arise out of, are in connection with, or relate to, any breach of any covenant or representation made by Party B in this Confirmation or the Agreement or the consummation of the transactions contemplated hereby and Party B will reimburse any Indemnified Party for all reasonable expenses (including reasonable legal fees and expenses) as they are incurred in connection with the investigation of, preparation for, or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party thereto. Party B will not be liable under this Indemnity paragraph to the extent that any such loss, claim, damage, liability or expense is found in a final and nonappealable judgment by a court to have resulted from Party A’s gross negligence or willful misconduct.  The aforementioned indemnity shall be subject to, and not in addition to, the indemnity provided in the Underwriting Agreement, and where applicable the indemnity provisions of the Underwriting Agreement will govern.

 

(s)                                   Notice:

 

	
Non-Reliance:
    	
Applicable
    
	
 
    	
 
    
	
Additional   Acknowledgments:
    	
Applicable
    
	
 
    	
 
    
	
Agreements and   Acknowledgments Regarding Hedging Activities:
    	
Applicable
    

 

4.                                      The Agreement is further supplemented by the following provisions:

 

(a)                                 No Collateral:

 

Notwithstanding any other agreement between the parties to the contrary, the obligations of Party B under this Transaction are not secured by any collateral. 

 

23

 

Without limiting the generality of the foregoing, this Transaction will not be considered to create obligations covered by any collateral credit support annex to the Agreement and will be disregarded for the purposes of calculating any exposures pursuant to any such annex.

 

(b)                                 Netting and Set-off:

 

Except with respect to obligations under Equity Contracts, obligations under this Transaction shall not be set-off or netted against any other obligations of the parties, whether arising under the Agreement, this Confirmation, under any other agreement between the parties hereto, by operation of law or otherwise, and no other obligations of the parties shall be set-off or netted against obligations under this Transaction, whether arising under the Agreement, this Confirmation, under any other agreement between the parties hereto, by operation of law or otherwise, and each party hereby waives any such right of setoff.  In calculating any amounts under Section 6(e) of the Agreement, notwithstanding anything to the contrary in the Agreement, (a) separate amounts shall be calculated as set forth in such Section 6(e) with respect to (i) this Transaction and (ii) all other Transactions, except with respect to obligations under Equity Contracts, and (b) such separate amounts shall be payable pursuant to Section 6(d)(ii) of the Agreement. For purposes of this provision, “Equity Contract” means any transaction or instrument that does not convey to Party A rights, or the ability to assert claims, that are senior to the rights and claims of common stockholders in the event of Party B’s bankruptcy, and is classified as equity under U.S. GAAP on Party B’s financial statements.

 

(c)                                  Delivery of Cash:

 

For the avoidance of doubt, nothing in this Confirmation shall be interpreted as requiring Party B to deliver cash in respect of the settlement of this Transaction, except in circumstances where the required cash settlement thereof is permitted for classification of the contract as equity by ASC Topic 815, Derivatives and Hedging as in effect on the Trade Date (including, without limitation, where Party B so elects to deliver cash or fails timely to elect to deliver Shares in respect of such settlement).

 

(d)                                 Status of Claims in Bankruptcy:

 

Party A acknowledges and agrees that this confirmation is not intended to convey to Party A rights with respect to the transactions contemplated hereby that are senior to the claims of common stockholders in any U.S. bankruptcy proceedings of Party B; provided, however, that nothing herein shall limit or shall be deemed to limit Party A’s right to pursue remedies in the event of a breach by Party B of its obligations and agreements with respect to this Confirmation and the Agreement; and provided further, that nothing herein shall limit or shall be deemed to limit Party A’s rights in respect of any transaction other than this Transaction.

 

24

 

(e)                                  Limit on Beneficial Ownership:

 

Notwithstanding any other provisions hereof, Party A shall not be obligated to receive Shares hereunder (whether in connection with the purchase of Shares on any Settlement Date or any Termination Settlement Date, any Private Placement Settlement or otherwise), to the extent (but only to the extent) that, after such receipt of any Shares hereunder, (i) the Share Amount would exceed the Post-Effective Limit, (ii) Party A’s ultimate parent entity would directly or indirectly “beneficially own” (as such term is defined under Section 13 and Section 16 of the Exchange Act and rule promulgated thereunder) (“beneficially own”) at any time on the relevant date in excess of 8.0% of the outstanding Shares or (iii) Party A and each person subject to aggregation of Shares with Party A under Section 13 or Section 16 of the Exchange Act and rules promulgated thereunder (the “Party A Group”) would directly or indirectly beneficially own in excess of 8.0% of the then outstanding Shares (the “Threshold Number of Shares”). 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 Share Amount would exceed the Post-Effective Limit, (ii) Party A’s ultimate parent entity would directly or indirectly beneficially own in excess of 8.0% of the outstanding Shares or (iii) Party A Group would directly or indirectly so beneficially own in excess of the Threshold Number of Shares. If any delivery owed to Party A hereunder is not made, in whole or in part, as a result of this provision, Party B’s obligation to make such delivery shall not be extinguished and Party B shall make such delivery (versus payment) as promptly as practicable after, but in no event later than one Exchange Business Day after, Party A gives notice to Party B that, after such delivery, (i) the Share Amount would not exceed the Post-Effective Limit, (ii) Party A’s ultimate parent entity would not directly or indirectly beneficially own in excess of 8.0% of the outstanding Shares and (iii) Party A Group would not directly or indirectly so beneficially own in excess of the Threshold Number of Shares.

 

(f)                                   Addresses for Notices:

 

For the purpose of Section 12(a) of the Agreement:

 

Address for notices or communications to Party A:

 

For Purposes of Giving Notice:

 

	
Address:
    	
RBC   Capital Markets, LLC
    
	
 
    	
Brookfield   Place
    
	
 
    	
200   Vesey Street
    
	
 
    	
New   York, NY 10281
    
	
 
    	
 
    
	
Attention:
    	
ECM
    
	
Email:
    	
RBCECMCorporateEquityLinkedDocumentation@rbc.com
    

 

25

 

For Trade Affirmations and Settlements:

 

	
Address:
    	
RBC Capital   Markets, LLC
    
	
 
    	
Brookfield Place
    
	
 
    	
200 Vesey Street
    
	
 
    	
New York, NY   10281
    
	
 
    	
 
    
	
Attention:
    	
Back Office
    
	
Email:
    	
geda@rbccm.com
    

 

For Trade Confirmations:

 

	
Address:
    	
RBC Capital   Markets, LLC
    
	
 
    	
Brookfield Place
    
	
 
    	
200 Vesey Street
    
	
 
    	
New York, NY   10281
    
	
 
    	
 
    
	
Attention:
    	
Structured   Derivatives Documentation
    
	
Email:
    	
seddoc@rbccm.com
    

 

Address for notices or communications to Party B:

 

	
Address:
    	
American Equity   Investment Life Holding Company
    
	
 
    	
6000 Westown   Parkway
    
	
 
    	
West Des   Moines, IA 50266
    
	
 
    	
 
    
	
 
    	
Attention: Ted   Johnson, Chief Financial Officer
    
	
 
    	
Telephone No.:   515-457-1980
    
	
 
    	
Facsimile No.:   515-440-2715
    
	
 
    	
Email:   tjohnson@american-equity.com
    

 

(g)                                  Waiver of Right to Trial by Jury:

 

Waiver of Right to Trial by Jury.  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 this Confirmation.  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 this Confirmation by, among other things, the mutual waivers and certifications herein.

 

(h)                                 Severability, Illegality:

 

If compliance by either party with any provision of this Transaction would be unenforceable or illegal, (i) the parties shall negotiate in good faith to resolve such unenforceability or illegality in a manner that preserves the economic benefits of 

 

26

 

the transactions contemplated hereby and (ii) the other provisions of this Transaction shall not be invalidated, but shall remain in full force and effect.

 

[Remainder of page intentionally left blank]

 

27

 

Please confirm that the foregoing correctly sets forth the terms of our agreement by signing and returning this Confirmation.

 

	
 
    	
Yours   faithfully,
    
	
 
    	
 
    
	
 
    	
RBC CAPITAL MARKETS, LLC,

as agent for   Royal Bank of Canada
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Amy Disbrow 
    
	
 
    	
 
    	
Name:
    	
Amy Disbrow
    
	
 
    	
 
    	
Title:
    	
Associate   Director
    

 

 

	
Confirmed as of the date first written above:
    
	
 
    
	
AMERICAN EQUITY INVESTMENT   LIFE HOLDING COMPANY
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ John M.   Matovina
    	
 
    
	
 
    	
Name:
    	
John M. Matovina
    
	
 
    	
Title:
    	
Chief Executive   Officer and President
    
				

 

 

ANNEX A

 

PRIVATE PLACEMENT PROCEDURES

 

1.                                      If Private Placement Settlement applies, then delivery of Restricted Shares by Party B shall be effected in customary private placement procedures with respect to such Restricted Shares reasonably acceptable to Party A; provided that if, on or before the date that a Private Placement Settlement would occur, Party B has taken, or caused to be taken, any action that would make unavailable either the exemption pursuant to Section 4(a)(2) of the Securities Act for the sale by Party B to Party A (or any affiliate designated by Party A) of the Restricted Shares or the exemption pursuant to Section 4(a)(1) or Section 4(a)(3) of the Securities Act for resales of the Restricted Shares by Party A (or any such affiliate of Party A) or Party B fails to deliver the Restricted Shares when due or otherwise fails to perform obligations within its control in respect of a Private Placement Settlement, it shall be an Event of Default with respect to Party B and Section 6 of the Agreement shall apply.  In the Private Placement Settlement of such Restricted Shares, Party B shall use its commercially reasonable best efforts in including customary representations, covenants, blue sky and other governmental filings and/or registrations, indemnities to Party A, due diligence rights (for Party A or any designated buyer of the Restricted Shares by Party A), opinions and certificates, and such other documentation as is customary for private placement agreements, all reasonably acceptable to Party A.  In the case of a Private Placement Settlement, Party A shall, in its good faith discretion, adjust the amount of Restricted Shares to be delivered to Party A hereunder in a commercially reasonable manner to reflect the fact that such Restricted Shares may not be freely returned to securities lenders by Party A and may only be saleable by Party A at a discount to reflect the lack of liquidity in Restricted Shares.  Notwithstanding the Agreement or this Confirmation, the date of delivery of such Restricted Shares shall be the Clearance System Business Day following notice by Party A to Party B of 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 Settlement Date or Termination Settlement Date that would otherwise be applicable; provided that in no event will Party B be required to deliver to Party A a number in excess of the number specified in “Maximum Share Delivery” above minus the aggregate number of Shares delivered by Party B to Party A under this Transaction prior to such date of delivery .

 

2.                                      If Party B delivers any Restricted Shares in respect of this Transaction, Party B agrees that (i) such Shares may be transferred by and among Party A and its affiliates and (ii) after the minimum “holding period” within the meaning of Rule 144(d) under the Securities Act has elapsed after the applicable Settlement Date, Party B shall promptly remove, or cause the transfer agent for the Shares to remove, any legends referring to any transfer restrictions from such Shares upon delivery by Party A (or such affiliate of Party A) to Party B or such transfer agent 

 

1

 

of seller’s and broker’s representation letters customarily delivered by Party A or its affiliates in connection with resales of restricted securities pursuant to Rule 144 under the Securities Act, each without any further 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 Party A (or such affiliate of Party A).

 

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