In connection with this Confirmation and the Transaction, Dealer or its affiliate shall (A) hedge its exposure to the Transaction by selling a number of Shares equal to the Number of Shares pursuant to the registration statement as contemplated by the Underwriting Agreement and (B) use any Shares delivered by Counterparty to Dealer, in connection with the Transaction only to settle such sales or close out open Share borrowings created in the course of Dealer’s hedging activities related to its exposure under the Transaction.
If Counterparty has elected to deliver Registered Shares, Counterparty shall have afforded Dealer and its counsel and other advisers a reasonable opportunity to conduct a due diligence investigation of Counterparty customary in scope for underwritten equity offerings, and Counterparty and Dealer shall have executed an agreement containing such terms, covenants, conditions, representations, warranties and indemnities substantially similar to such provisions that are customary for underwriting agreements in underwritten equity offerings.
If Counterparty delivers any Restricted Shares in respect of the Transaction, Counterparty agrees that (A) such Shares may be transferred freely among Dealer and the wholly owned direct and indirect subsidiaries of Dealer’s ultimate parent entity and (B) after the minimum “holding period” within the meaning of Rule 144(d) under the Securities Act has elapsed, Counterparty 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 Dealer (or such affiliate of Dealer) to Counterparty or such transfer agent of seller’s and broker’s representation letters customarily delivered by Dealer 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 Dealer (or such affiliate of Dealer).
5.
Representations, Warranties and Covenants:
(a)
Each party to this Confirmation represents and warrants to the other party that:
(i)
it is an “accredited investor” as defined in Section 2(a)(15)(ii) of the Securities Act; and
(ii)
it is an “eligible contract participant” as defined in Section 1a(12) of the Commodity Exchange Act, as amended (the “CEA”), and this Confirmation and the Transaction hereunder are subject to individual negotiation by the parties and have not been executed or traded on a “trading facility” as defined in Section 1a(33) of the CEA.
(b)
Counterparty represents and warrants to, and agrees with, Dealer as of the date hereof (and, solely with respect to the representation and warranty set forth in clause (b)(i) below, as of (x) the date of any election by Seller pursuant to Section 3(a) or Section 3(b) above and (y) any date that Counterparty notifies Dealer that Net Share Settlement or Cash Settlement applies with respect to all or a portion of all Components) that:
(i)
each of its filings under the Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or other applicable securities laws that are required to be filed have been filed and that, as of the respective dates thereof and 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;
(ii)
it has reserved and will keep available, free from preemptive rights, out of its authorized but unissued Shares, solely for the purpose of delivery, upon settlement of the Transaction as herein provided, the maximum number of Shares as shall then be deliverable upon settlement of the Transaction;
(iii)
it is not entering into this Confirmation 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 convertible into or exchangeable for Shares);
(iv)
it is entering into this Confirmation and the Transaction in good faith, not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the Exchange Act, and it has not entered into or altered any hedging transaction relating to the Shares corresponding to or offsetting the Transaction;
(v)
it is not and, after giving effect to the transactions contemplated hereby, will not be required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended; and
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(vi)
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 Exchange Act.
(c)
In connection with this Confirmation and the Transaction, Counterparty agrees that:
(i)
it shall not enter into or alter any hedging transaction relating to the Shares corresponding to or offsetting the Transaction; and
(ii)
it shall use its best efforts, upon obtaining knowledge of the occurrence of any event that would, with the giving of notice, the passage of time or the satisfaction of any condition, constitute an Event of Default, a Potential Event of Default, a Termination Event in respect of which it is an Affected Party, a Potential Adjustment Event, an Extraordinary Event or an Additional Disruption Event, to notify Dealer within one Scheduled Trading Day of the occurrence of obtaining such knowledge;provided that (x) Counterparty shall have no duty or obligation to investigate, or inquire about, the occurrence of any such event; (y) any failure to so notify Dealer shall not itself result in any liability on the part of Counterparty nor shall it be, or deemed to be, a waiver by Counterparty of any of its rights hereunder; and (z) any failure to so notify Dealer shall not constitute an Event of Default.
(iii)
if Counterparty elects Cash Settlement or Net Share Settlement pursuant to the provisions under the heading “Settlement Terms,” in Section 2 above, it shall not engage in any “distribution” (as defined in Regulation M) during the period starting on the initial Valuation Date and ending on the Scheduled Trading Day following the final Valuation Date.
(d)
Counterparty represents and warrants to Dealer as of the date hereof, and as of any date on which Counterparty makes payment to Dealer in connection with any Cash Settlement hereunder, that it 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.
6.
Miscellaneous:
(a)
Early Termination. The parties agree that, notwithstanding the definition of Settlement Amount in the Agreement, for purposes of Section 6(e) of the Agreement, Second Method and Loss will apply to the Transaction. For purposes of this Confirmation, “Termination Currency” means United States Dollars.
(b)
Payment on Early Termination and on Certain Extraordinary Events.
If, subject to Section 6(c) below, one party owes the other party any amount in connection with the Transaction pursuant to Section 12.7 or 12.9 of the 2002 Definitions (except in the case of an Extraordinary Event in which the consideration or proceeds to be paid to holders of Shares as a result of such event consists solely of cash) or pursuant to Section 6(d)(ii) of the Agreement (a “Payment Obligation”), then, in lieu of either party fulfilling such Payment Obligation, Issuer shall have the right, in its sole discretion, to satisfy any such Payment Obligation, or to require Dealer satisfy any such Payment Obligation, as the case may be, by delivering a number of Termination Delivery Units (as defined below) having a cash value equal to the amount of such Payment Obligation (such number of Termination Delivery Units to be delivered to be determined by the Calculation Agent as the number of
13
whole Termination Delivery Units that could be sold or purchased, as the case may be, over a commercially reasonable period of time to generate proceeds equal to the cash equivalent of such Payment Obligation or with the cash equivalent of such Payment Obligation, as the case may be). Such delivery shall be made on the third Scheduled Trading Day (or, if such day is not both a Clearance System Business Day and a Currency Business Day, the next following Scheduled Trading Day that is both such days) immediately following the date on which such Payment Obligation would have been due. Notwithstanding anything to the contrary in the Agreement, for purpose of determining the Payment Obligation, the Transaction shall be deemed to be the only Transaction under the Agreement.
“Termination Delivery Unit” means (A) in the case of a Termination Event, an Event of Default or an Extraordinary Event (other than an Insolvency, Nationalization or Merger Event), one Share or (B) in the case of an Insolvency, Nationalization or Merger Event, a unit consisting of the number or amount of each type of property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional amounts of any securities) in such Insolvency, Nationalization or Merger Event. If a Termination Delivery Unit consists of property other than cash or New Shares and Counterparty provides irrevocable written notice to the Calculation Agent on or prior to the Closing Date that it elects to deliver cash, New Shares or a combination thereof (in such proportion as Counterparty designates) in lieu of such other property, the Calculation Agent will replace such property with cash, New Shares or a combination thereof as components of a Termination Delivery Unit in such amounts, as determined by the Calculation Agent, as shall have a value equal to the value of the property so replaced. If such Insolvency, Nationalization or Merger Event involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash.
(c)
Set-Off and Netting. Each party waives any and all rights it may have to set-off or net delivery or payment obligations it owes to the other party under the Agreement against any delivery or payment obligation owed to it by the other party, whether arising under any other agreement between the parties, by operation or law or otherwise, it being understood that this provision shall not in any event limit the parties' rights to set off or net obligations under the Agreement against other obligations under the Agreement.
(d)
Maximum Share Delivery. Notwithstanding any other provision of this Confirmation, in no event will Counterparty be required to deliver, whether pursuant to Physical Settlement, Net Share Settlement, Private Placement Settlement or otherwise, more than two times the Number of Shares to Dealer in the aggregate.
(e)
Status of Claims in Bankruptcy. Dealer acknowledges and agrees that this Confirmation is not intended to convey to Dealer rights with respect to the transactions contemplated hereby that are senior to the claims of common shareholders in a winding up of Counterparty;provided, however, that nothing herein shall limit or shall be deemed to limit Dealer’s right to pursue remedies in the event of a breach by Counterparty of its obligations and agreements with respect to this Confirmation and the Agreement.
(f)
No Collateral. Notwithstanding any provision of this Confirmation or the Agreement, or any other agreement between the parties, to the contrary, the obligations of Counterparty under the Transaction is not secured by any collateral. Without limiting the generality of the foregoing, if the Agreement or any other agreement between the parties includes an ISDA Credit Support Annex or other agreement pursuant to which Counterparty collateralizes obligations to Dealer, then the obligations of Counterparty hereunder will not be considered to be obligations under such Credit Support Annex or other agreement pursuant to which Counterparty collateralizes obligations to Dealer, and the Transaction shall be disregarded for purposes of calculating any Exposure or similar term thereunder.
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(g)
Additional Share Issuance. If at any time Counterparty shall be required to pay any amount in cash to Dealer pursuant to any provision hereunder or under the Agreement (other than pursuant to Section 12.7 or 12.9 of the 2002 Definitions or Section 6(d)(ii) of the Agreement), Counterparty may, upon prior written notice to Dealer, in lieu of making such cash payment to Dealer, deliver a number of Shares (“Additional Shares”) with an aggregate value, as determined by the Calculation Agent based on the closing price of the Shares on the Exchange on the immediately preceding Exchange Business Day, equal to the amount of such cash payment. The parties acknowledge that any Additional Shares so delivered will not be registered for resale under applicable securities laws, and as a result the value thereof so determined by the Calculation Agent will reflect a commercially reasonable illiquidity discount. If, after using commer cially reasonable efforts, Dealer cannot sell the Additional Shares so received from Counterparty so as to generate proceeds to Dealer in an amount equal to the amount of the cash payment otherwise owed by Counterparty, Counterparty shall, upon request, deliver Additional Shares to Dealer from time to time, until such time as the aggregate proceeds from sales effected by Dealer in a commercially reasonable manner of all Additional Shares equals the amount of such cash payment. Dealer agrees that upon so generating an aggregate amount in proceeds from sales of Additional Shares equal to the amount of such cash payment, Dealer shall promptly pay to Counterparty any amount of such proceeds in excess of such amount, and return to Counterparty any unsold Additional Shares.
(h)
Assignment. The rights and duties under this Confirmation may not be assigned or transferred by any party hereto without the prior written consent of the other parties hereto, such consent not to be unreasonably withheld;provided that Dealer may assign or transfer any of its rights or duties hereunder to Dealer’s ultimate parent entity or any directly or indirectly wholly-owned subsidiary of Dealer’s ultimate parent entity (a “Permitted Transferee”) without the prior written consent of Counterparty, so long as the senior unsecured debt rating (“Credit Rating”) of such Permitted Transferee (or any guarantor of its obligations under the Transaction) is equal to or greater than the Credit Rating of Dealer, as specified by each of Standard and Poor’s Ratings Services and Moody’s Investors Service, Inc. (or their respective successors), at the time of such assignment or transfe r. In connection with any assignment or transfer pursuant to the first proviso to the immediately preceding sentence, the guarantee of any guarantor of the relevant transferee’s obligations under the Transaction shall constitute a Credit Support Document under Agreement.
(i)
Designation by Dealer. Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to or from Counterparty, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to perform Dealer’s obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Counterparty to the extent of any such performance.
(j)
Severability; Illegality. If compliance by either party with any provision of the 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 the transactions contemplated hereby and (ii) the other provisions of the Transaction shall not be invalidated, but shall remain in full force and effect.
(k)
Waiver of 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 (a) 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 (b) acknowledges that it and the other party have been induced to enter into this Confirmation by, among other things, the mutual waivers and certifications in this Section.
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(l)
Governing Law; Submission to Jurisdiction.THE AGREEMENT AND THIS CONFIRMATION AND ALL DISPUTES ARISING THEREFROM AND RELATED THERETO WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE. EACH PARTY HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF U.S. FEDERAL AND NEW YORK STATE COURTS SITTING IN THE BOROUGH OF MANHATTAN, NEW YORK CITY IN CONNECTION WITH ALL PROCEEDINGS ARISING OUT OF OR RELATING TO THE AGREEMENT AND THIS CONFIRMATION. FOR PURPOSES OF SECTION 13(C) OF THE AGREEMENT, THE COMPANY APPOINTS CT CORPORATION SYSTEM IN NEW YORK CITY AS ITS PROCESS AGENT.
(m)
Third Party Rights. This Confirmation is not intended and shall not be construed to create any rights in any person other than Counterparty, Dealer and their respective successors and assigns and no other person shall assert any rights as third-party beneficiary hereunder. Whenever any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party. All the covenants and agreements herein contained by or on behalf of Counterparty and Dealer shall bind, and inure to the benefit of, their respective successors and assigns whether so expressed or not.
(n)
Waiver of Rights. Any provision of this Confirmation may be waived if, and only if, such waiver is in writing and signed by the party against whom the waiver is to be effective.
(o)
10b5-1. The parties intend for any settlement hereof to comply with the requirements of Rule 10b5-1(c)(1)(i)(A) under the Exchange Act and this Confirmation to constitute a binding contract or instruction satisfying the requirements of 10b5-1(c) and to be interpreted to comply with the requirements of Rule 10b5-1(c).
(p)
Beneficial Ownership. Notwithstanding anything to the contrary in the Agreement or this Confirmation, in no event shall Dealer be entitled to receive, or shall be deemed to receive, any Shares if, upon such receipt of such Shares by Dealer, the "beneficial ownership" (within the meaning of Section 16 of the Exchange Act and the rules promulgated thereunder) of Dealer's ultimate parent entity would be equal to or greater than 9% or more of the issued and outstanding Shares. If any delivery owed to Dealer hereunder is not made, in whole or in part, as a result of this provision, Counterparty's obligation to effect such delivery shall not be extinguished and Counterparty shall effect such delivery as promptly as practicable after, but in no event later than one Exchange Business Day after, Dealer gives notice to Counterparty that such delivery would not result in Dealer's ultimate parent entity directly or indirectly so beneficially owning in excess of 9% of the issued and outstanding Shares.
(q)
Method of Delivery. Whenever delivery of funds or other assets is required hereunder by or to Counterparty, such delivery shall be effected through Agent. In addition, all notices, demands and communications of any kind relating to the Transaction between Dealer and Counterparty shall be transmitted exclusively through Agent.
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7.
Addresses for Notice:
If to Dealer:
Deutsche Bank AG, London Branch
c/o Deutsche Bank Securities Inc.
60 Wall Street
New York, NY 10005
Attention: Documentation Department
If to Counterparty:
Endurance Specialty Holdings Ltd.
Wellesley House, 90 Pitts Bay Road
Pembroke HM 08, Bermuda
8.
Accounts for Payment:
To Dealer:
To Advise.
To Counterparty:
To Advise.
9.
Delivery Instructions:
Unless otherwise directed in writing, any Share to be delivered hereunder shall be delivered as follows:
To Dealer:
To be advised.
To Counterparty:
To be advised.
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We are very pleased to have executed the Transaction with you and we look forward to completing other transactions with you in the near future.
Yours sincerely,
DEUTSCHE BANK AG, LONDON BRANCH
By:
/s/ Sunil Hariani
Name: Sunil Hariani
Title: Director
By:
/s/ Andrea Leung
Name: Andrea Leung
Title: Managing Director
DEUTSCHE BANK SECURITIES INC.,
acting solely as Agent in connection with this Transaction
By:
/s/ Sunil Hariani
Name: Sunil Hariani
Title: Director
By:
/s/ Andrea Leung
Name: Andrea Leung
Title: Managing Director
Confirmed as of the date first above written:
ENDURANCE SPECIALTY HOLDINGS LTD.
By:
/s/ Michael J. McGuire
Name: Michael J. McGuire
Title: CFO
18
ANNEX A
For each Component of the Transaction, the Number of Shares, Scheduled Valuation Date and Periodic Payment Amounts are set forth below.
| | | |
Component Number | Number of Shares | Scheduled Valuation Date | Periodic Payment Amount |
1. | 119,670 | July 15, 2010 | USD 9,375 |
2. | 119,670 | July 16, 2010 | USD 9,375 |
3. | 119,670 | July 19, 2010 | USD 9,375 |
4. | 119,670 | July 20, 2010 | USD 9,375 |
5. | 119,670 | July 21, 2010 | USD 9,375 |
6. | 119,670 | July 22, 2010 | USD 9,375 |
7. | 119,670 | July 23, 2010 | USD 9,375 |
8. | 119,670 | July 26, 2010 | USD 9,375 |
9. | 119,670 | July 27, 2010 | USD 9,375 |
10. | 119,670 | July 28, 2010 | USD 9,375 |
11. | 119,670 | July 29, 2010 | USD 9,375 |
12. | 119,670 | July 30, 2010 | USD 9,375 |
13. | 119,670 | August 2, 2010 | USD 9,375 |
14. | 119,670 | August 3, 2010 | USD 9,375 |
15. | 119,670 | August 4, 2010 | USD 9,375 |
16. | 119,670 | August 5, 2010 | USD 9,375 |
17. | 119,670 | August 6, 2010 | USD 9,375 |
18. | 119,670 | August 9, 2010 | USD 9,375 |
19. | 119,670 | August 10, 2010 | USD 9,375 |
20. | 119,670 | August 11, 2010 | USD 9,375 |
21. | 119,670 | August 12, 2010 | USD 9,375 |
22. | 119,670 | August 13, 2010 | USD 9,375 |
23. | 119,670 | August 16, 2010 | USD 9,375 |
24. | 119,670 | August 17, 2010 | USD 9,375 |
25. | 119,670 | August 18, 2010 | USD 9,375 |
26. | 119,670 | August 19, 2010 | USD 9,375 |
27. | 119,670 | August 20, 2010 | USD 9,375 |
28. | 119,670 | August 23, 2010 | USD 9,375 |
29. | 119,670 | August 24, 2010 | USD 9,375 |
30. | 119,670 | August 25, 2010 | USD 9,375 |
31. | 119,670 | August 26, 2010 | USD 9,375 |
32. | 119,670 | August 27, 2010 | USD 9,375 |
33. | 119,670 | August 30, 2010 | USD 9,375 |
34. | 119,670 | August 31, 2010 | USD 9,375 |
35. | 119,670 | September 1, 2010 | USD 9,375 |
36. | 119,670 | September 2, 2010 | USD 9,375 |
37. | 119,670 | September 3, 2010 | USD 9,375 |
38. | 119,670 | September 7, 2010 | USD 9,375 |
39. | 119,670 | September 8, 2010 | USD 9,375 |
40. | 119,697 | September 9, 2010 | USD 9,375 |
