FOIA CONFIDENTIAL TREATMENT REQUESTED BY
REINSURANCE GROUP OF AMERICA, INCORPORATED
Reference Number: Account Number:
(MORGAN STANLEY LOGO) MORGAN STANLEY & CO. INCORPORATED
1585 BROADWAY
NEW YORK, NY 10036-8293
(212) 761-4000
December 12, 2005
Repurchase Transaction
Reinsurance Group of America, Incorporated
1370 Timberlake Manor Parkway
Chesterfield, Missouri 63017
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Dear Sir/Madam:
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the Transaction entered into between Morgan Stanley &
Co. Incorporated ("MSCO") and Reinsurance Group of America, Incorporated, a
Missouri corporation (the "Issuer") on the Trade Date specified below (the
"Transaction"). This confirmation constitutes a "Confirmation" as referred to in
the ISDA Master Agreement specified below.
The definitions and provisions contained in the 2002 ISDA Equity Derivatives
Definitions (as published by the International Swaps and Derivatives
Association, Inc. ("ISDA")) (the "Equity Definitions") are incorporated into
this Confirmation.
1. All provisions contained in or incorporated by reference in the form of the
1992 ISDA Master Agreement (Multicurrency-Cross Border) (the "ISDA Form" or the
"Agreement"), will govern this Confirmation except as expressly modified below.
This Confirmation, together with all other documents referring to the Agreement
confirming Transactions entered into between MSCO and Issuer shall supplement,
form a part of, and be subject to the ISDA Form as if MSCO and Issuer had
executed the Agreement (but without any Schedule except for (i) the election of
Loss and Second Method, New York law (without regard to the conflicts of law
principles) as the governing law and US Dollars ("USD") as the Termination
Currency, (ii) the election that subparagraph (ii) of Section 2(c) will not
apply to this Transaction, and (iii) the replacement of clause (1) in Section
6(d)(i) with the clause "(1) showing in reasonable detail such calculations and
specifying any amount payable under Section 6(e) (including, without limitation,
providing all relevant quotations and assumptions and specifying the
methodologies used in sufficient detail so as to enable the other party to
replicate the calculation)".
All provisions contained in the Agreement shall govern this Confirmation except
as expressly modified below. With respect to this Transaction, the Agreement and
this Confirmation shall represent the entire agreement and understanding of the
parties with respect to the subject matter and terms of this Transaction and
shall supersede prior or contemporaneous written or oral communications with
respect thereto.
If, in relation to this Confirmation , there is any inconsistency between the
Agreement, this Confirmation and the Equity Definitions that are incorporated
into this Confirmation, the following will prevail for purposes of such
Transaction in the order of precedence indicated: (i) this Confirmation; (ii)
the Equity Definitions; and (iii) the Agreement.
FOIA CONFIDENTIAL TREATMENT REQUESTED BY
REINSURANCE GROUP OF AMERICA, INCORPORATED
Reference Number: Account Number: Page 2
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
GENERAL TERMS:
<Table>
Trade Date: As specified in Schedule I
Buyer: Issuer
Seller: MSCO
Shares: Common Stock of Issuer, par value $.01 per share (Ticker:
RGA)
Calculation Agent MSCO, whose determinations and calculations in its capacity
as Calculation Agent, as well as any determinations or
calculations by MSCO in any other capacity, pursuant to this
Confirmation, the Agreement and the Equity Definitions shall
be made in good faith and in a commercially reasonable
manner, including, without limitation, with respect to
calculations and determinations that are made in its sole
discretion or otherwise. In the event the Calculation Agent
or MSCO makes any calculations or determinations pursuant to
this Confirmation, the Agreement or the Equity Definitions,
the Calculation Agent or MSCO shall promptly provide an
explanation in reasonable detail of the basis for and
determination of any determinations or calculations if
requested by the Issuer.
Daily Forward Amount For each Trading Day during the Calculation Period, an amount
equal to (i) a price per Share (as determined by the
Calculation Agent) equal to the 10b-18 VWAP for such Trading
Day multiplied by (ii) the number of Shares (as determined by
the Calculation Agent) purchased on such Trading Day in
accordance with the parameters of Schedule I; provided that
on each Trading Day in the Calculation Period MSCO shall
provide daily reports, on a daily and cumulative basis, to
Issuer specifying the 10b-18 VWAP for such Trading Day and
the number of Shares purchased by MSCO on each such Trading
Day (the "Daily Reports")
Initial Price: As specified in Schedule I
10b-18 VWAP: For each Trading Day during the Calculation Period, a price
per share (as determined by the Calculation Agent) equal to
the volume-weighted average price of the Rule 10b-18 eligible
trades in the Shares for the entirety of such Trading Day as
determined by reference to the screen entitled "RGA.N Equity
AQR SEC" as reported by Bloomberg L.P. ("Bloomberg") (without
regard to pre-open or after hours trading outside of any
regular trading session for such Trading Day), or if such
price is not reported by Bloomberg, then as reported by
another recognized source selected by the Calculation Agent
on such Trading Day.
FOIA CONFIDENTIAL TREATMENT REQUESTED BY
REINSURANCE GROUP OF AMERICA, INCORPORATED
Reference Number: Account Number: Page 3
Calculation Period: The period from and including the second Exchange
Business Day after the Trade Date to and including the
Valuation Date. On each Trading Day in the Calculation Period
MSCO shall purchase a number of Shares in accordance with the
parameters of Schedule I.
Trading Day: Any Exchange Business Day that is not a Disrupted Day
Initial Shares: As specified in Schedule I
Initial Share Delivery Date: Three Exchange Business Days after the Trade Date. On the
Initial Share Delivery Date, MSCO shall deliver a number of
shares equal to the Initial Shares to Issuer in accordance
with Section 9.4 of the Equity Definitions, with the Initial
Share Delivery Date deemed to be a "Settlement Date" for
purposes of such Section 9.4.
Prepayment: Applicable
Prepayment Amount: As specified in Schedule I
Commission Amount: As specified in Schedule I
Prepayment Date: Three Exchange Business Days after Trade Date. On the
Prepayment Date, Issuer shall pay to MSCO the Prepayment
Amount and the Commission Amount.
Exchange: The New York Stock Exchange
Related Exchange: The primary exchange on which options or futures on the
relevant Shares are traded.
Market Disruption Event: The definition of "Market Disruption Event" in Section 6.3(a)
of the Equity Definitions is hereby amended by inserting the
words "at any time on any Scheduled Trading Day during the
Calculation Period or" after the word "material," in the third
line thereof.
Notwithstanding anything to the contrary in the Equity
Definitions, if any Scheduled Trading Day in the
Calculation Period is a Disrupted Day, the Calculation
Agent shall have the option in its good faith commercially
reasonable judgment either (i) to determine the weighting
of each Rule 10b-18 eligible transaction in the Shares on
the relevant Disrupted Day using its commercially reasonable
judgment for purposes of calculating the Forward Price, as
applicable, (ii) to elect to extend the Calculation Period by
a number of Scheduled Trading Days equal to the number of
Disrupted Days during the Calculation Period or (iii) to
suspend the Calculation Period, as appropriate, until the
circumstances giving rise to such suspension have ceased.
For the avoidance of doubt, if Calculation Agent elects the
option described in clause (i) above, then such Disrupted
Day shall be deemed to be a Trading Day for purposes of
calculating the Settlement Amount (as defined below).
FOIA CONFIDENTIAL TREATMENT REQUESTED BY
REINSURANCE GROUP OF AMERICA, INCORPORATED
Reference Number: Account Number: Page 4
VALUATION:
Valuation Time: The Scheduled Closing Time on the relevant Exchange
Valuation Date: The earlier of (i) the Scheduled Valuation Date (as specified
in Schedule I) and (ii) the date specified by MSCO to Issuer
as the Valuation Date, subject to extension in accordance
with "Market Disruption Event" above. On the Valuation Date,
Calculation Agent shall calculate the Settlement Amount.
Settlement Amount: The Prepayment Amount minus the Forward Amount minus the
Aggregate Dividend Amount plus the Aggregate Daily Adjustment
Amount
Aggregate Dividend Amount: The sum of all Dividend Amounts that have been calculated
with respect to this Transaction pursuant to Section 5(a)(i)
below.
Forward Amount: The sum of the Daily Forward Amounts
Daily Rate: An amount equal to (i) (A) USD Federal Funds target rate
(Bloomberg ticker "FDTR") minus (B) 0.60% divided by (ii) 365.
Uncovered Shares: For any Exchange Business Day, a number of shares equal to
the difference between (A) Initial Shares less (B) the
aggregate number of shares Seller has purchased during the
Calculation Period as of the close of the Exchange Business
Day immediately preceding such Exchange Business Day.
Daily Adjustment Amount: For any day, the product of (i) number of Uncovered Shares
two Exchange Business Days prior to that day, multiplied by
(ii) Daily Rate, multiplied by (iii) Initial Price.
Aggregate Daily Adjustment Amount: The sum of the Daily Adjustment Amounts for all calendar days
from and including the third Exchange Business Day after the
Trade Date, to and including the second Exchange Business Day
after the last day of the Calculation Period.
SETTLEMENT TERMS:
Physical Settlement: Applicable. On the Settlement Date, if the Settlement Amount
(as defined above) is greater than zero, then MSCO shall make
a cash payment to Issuer in an amount equal to the Settlement
Amount; provided, however, that Issuer may deliver to MSCO a
notice by no later than 4:00 p.m. on the Exchange Business
Day immediately preceding the Settlement Date electing for
MSCO to deliver the requisite number of Refund Shares (as
defined below) in lieu of payment of the Settlement Amount.
The delivery of any Refund Shares shall be effected in
accordance with "Delivery of Refund Shares" below.
FOIA CONFIDENTIAL TREATMENT REQUESTED BY
REINSURANCE GROUP OF AMERICA, INCORPORATED
Reference Number: Account Number: Page 5
On the Settlement Date, if the Settlement Amount is less
than zero, then Issuer shall make a cash payment to MSCO in
an amount equal to the absolute value of the Settlement
Amount; provided, however, that Issuer may deliver to MSCO
a notice by no later than 4:00 p.m. on the Exchange Business
Day immediately preceding the Settlement Date electing (i) to
deliver the requisite number of Payment Shares (as defined
below) in lieu of payment of the Settlement Amount and (ii)
whether such delivery shall be effected by means of a
registered offering or by means of a private placement. The
delivery of any Refund Shares shall be effected in accordance
with "Delivery of Payment Shares" below.
If MSCO suspends the Calculation Period pursuant to this
Confirmation, the suspension shall be treated as a Potential
Adjustment Event subject to Calculation Agent Adjustment. In
the case of a suspension pursuant to Section 10, the Calculation
Agent shall make such adjustments prior to the period of
suspension, if it is practical to do so. Otherwise, and in all
cases of a suspension as contemplated under "Market Disruption
Event" above, the Calculation Agent shall make such adjustments
promptly following the period of suspension.
Settlement Currency: USD
Settlement Date: Three Exchange Business Days after the Valuation Date, or if
such date is not a Clearance System Business Day or if there
is a Settlement Disruption Event on such day, the immediately
succeeding Clearance System Business Day on which there is no
Settlement Disruption Event.
PROCEDURE FOR DELIVERY OF SHARES:
Delivery of Refund Shares: If Issuer elects for MSCO to satisfy its payment obligation
of the Settlement Amount by delivering Refund Shares, then on
the Valuation Date, a Settlement Balance shall be established
with an initial balance equal to the Settlement Amount. On a
Trading Day after the Settlement Date chosen by MSCO in good
faith and in a commercially reasonable manner, MSCO shall
commence purchasing Shares for delivery to Issuer (such
Shares, "Refund Shares") which transactions shall be in
compliance with Rule 10b-18 under the Exchange Act. At the
end of each Trading Day on which MSCO purchases Refund
Shares, MSCO shall reduce the Settlement Balance by the
aggregate market value of the Shares purchased on such
Trading Day. MSCO shall deliver the Refund Shares for each
Trading Day to Issuer on the third Exchange Business Day
after the relevant Trading Day. MSCO shall continue
purchasing Refund Shares (in compliance with Rule 10b-18
under the Exchange Act) until the Settlement Balance has been
reduced to zero.
FOIA CONFIDENTIAL TREATMENT REQUESTED BY
REINSURANCE GROUP OF AMERICA, INCORPORATED
Reference Number: Account Number: Page 6
Delivery of Payment Shares: If Issuer elects to satisfy its payment obligation of the
Settlement Amount by delivering Payment Shares, then on the
Valuation Date a Settlement Balance shall be created with an
initial balance equal to the absolute value of the Settlement
Amount. On the Settlement Date (as adjusted pursuant to
Section 6(a) or (b) as may be the case), Issuer shall deliver
to MSCO a number of shares (such shares, "Payment Shares")
rounded up to the nearest whole number equal to the absolute
value of the Settlement Balance divided by either (i) the
Private Placement Value, as defined below (if such shares are
to be sold by means of a private placement) or (ii) a price
per Share as determined by the Calculation Agent on the
Trading Day immediately preceding the Settlement Date (if
such shares are to be sold by means of a registered
offering). Following the delivery of Payment Shares or any
Make-Whole Payment Shares (as defined below), MSCO shall sell
all such Payment Shares or Make-Whole Payment Shares in a
commercially reasonable manner. At the end of each Trading
Day upon which sales have been made, the Settlement Balance
shall be reduced by an amount equal to the aggregate proceeds
received by MSCO upon the sale of such Payment Shares or
Make-Whole Payment Shares. If, on any Trading Day, all
Payment Shares and Make-Whole Payment Shares have been sold
and the Settlement Balance has not been reduced to zero, the
Company shall (i) deliver to MSCO or as directed by MSCO on
the third Exchange Business Day after such Trading Day an
additional number of Shares (the "Make-Whole Payment Shares,"
which once delivered, shall be considered to be Payment
Shares) equal to (x) the Settlement Balance as of such
Trading Day divided by (y) either (i) the Private Placement
Value (if such shares are to be sold by means of a private
placement) or (ii) a price per Share as determined by the
Calculation Agent on the Trading Day immediately preceding
the Settlement Date (if such shares are to be sold by means
of a registered offering) or (ii) promptly deliver to MSCO
cash in an amount equal to the then remaining Settlement
Balance. This provision shall be applied successively until
either the Settlement Balance is reduced to zero or the
aggregate number of Payment Shares and Make-Whole Payment
Shares equals the Share Cap (as defined below). MSCO can
only elect to deliver Payment Shares or Make-Whole Payment
Shares if the Conditions to Delivery of Payment Shares are
met on each day during the period from and including the
Valuation Date to and including the date upon which the
relevant Settlement Balance is reduced to zero. If the
Settlement Balance is zero and not all the Payment Shares or
Make-Whole Payment Shares have been sold to satisfy the
Settlement Balance, then MSCO shall promptly return the
remaining Payment Shares and/or Make-Whole Payment Shares to
Issuer.
Private Placement Value: The per share value to MSCO of any Payment Share or
Make-Whole Payment Share, which value shall be determined by
MSCO in a good faith commercially reasonable manner and
FOIA CONFIDENTIAL TREATMENT REQUESTED BY
REINSURANCE GROUP OF AMERICA, INCORPORATED
Reference Number: Account Number: Page 7
may be based on indicative bids from institutional "accredited
investors" (as defined in Rule 501 under the Securities Act
of 1933, as amended (the "Securities Act")).
Share Adjustments:
Method of Adjustment: Calculation Agent Adjustment
EXTRAORDINARY EVENTS:
Consequences of Merger Events:
Share-for-Share: Modified Calculation Agent Adjustment
Share-for-Other: Cancellation and Payment on that portion of the Other
Consideration that consists of cash; Modified Calculation
Agent Adjustment on the remainder of the Other Consideration
Share-for-Combined: Component Adjustment
Determining Party: Calculation Agent
Tender Offer: Applicable
Consequences of Tender Offers:
Share-for-Share: Modified Calculation Agent Adjustment
Share-for-Other: Cancellation and Payment on that portion of the Other
Consideration that consists of cash; Modified Calculation
Agent Adjustment on the remainder of the Other Consideration
Share-for-Combined: Component Adjustment
Determining Party: Calculation Agent
For purposes of this Transaction, the definition of Merger Date in Section 12.1(c) shall be amended to read, "Merger
Date shall mean the Announcement Date." For purposes of this Transaction, the definition of Tender Offer Date in
Section 12.1(e) shall be amended to read, "Tender Offer Date shall mean the Announcement Date" and the number "10" in
the third line of Section 12.1(d) shall be replaced with the number "20."
Composition of Combined Consideration: Applicable
Nationalization, Insolvency or Delisting: Negotiated Close-out
Determining Party: Calculation Agent
Additional Disruption Events:
Change in Law: Applicable; provided, that Section 12.9(a)(ii)(Y) of the
Equity Definitions is deleted.
</Table>
FOIA CONFIDENTIAL TREATMENT REQUESTED BY
REINSURANCE GROUP OF AMERICA, INCORPORATED
Reference Number: Account Number: Page 8
<Table>
Failure to Deliver: Not Applicable
Insolvency Filing: Applicable
Hedging Disruption: Not Applicable
Increased Cost of Hedging: Not Applicable
Loss of Stock Borrow: Applicable; provided, that Issuer hereby agrees to pay MSCO
any out-of-pocket costs incurred by MSCO as a result of the
stock loan rate necessary to maintain a borrowing of Shares
by MSCO in connection with the Transaction exceeding 30 basis
points per annum; provided further that Issuer may, but shall
not be required to, pay MSCO any out-of-pocket costs incurred
by MSCO if the stock loan rate necessary to maintain a
borrowing of Shares by MSCO in connection with the
Transaction equals or exceeds the Maximum Stock Loan Rate,
but, for the avoidance of doubt, such failure to pay by
Issuer shall constitute an Additional Disruption Event due to
Loss of Stock Borrow. MSCO agrees that it will seek to
obtain a borrowing of Shares at the then-prevailing market
stock loan rate for the Shares.
Maximum Stock Loan Rate [***](1) basis points per annum
Increased Cost of Stock Borrow: Not Applicable
Initial Stock Loan Rate:
Determining Party: MSCO
Non-Reliance: Applicable
AGREEMENTS AND ACKNOWLEDGMENTS:
Regarding Hedging Activities: Applicable
Additional Acknowledgments: Applicable
3. [Reserved.]
4. [Reserved.]
5. (a) Dividends. (i) For any Ex-Dividend Date prior to the Settlement Date, the
"Dividend Amount" with respect to such Ex-Dividend Date shall be equal to the
product of (A) $0.09 multiplied by (B) Seller's Short Position as of the Trading
Day immediately preceding the relevant Ex-Dividend Date. "SELLER'S SHORT
POSITION" means, at any time before the settlement in whole of this Transaction,
the number of Shares constituting MSCO's net short position in relation to the
Transaction at such time, as determined by the Calculation Agent. "EX-DIVIDEND
DATE" shall mean February 3, May 3, August 3 or November 3 of any year,
- ----------
(1) [***] Indicates portions of this exhibit that have been omitted and filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
FOIA CONFIDENTIAL TREATMENT REQUESTED BY
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Reference Number: Account Number: Page 9
provided, however, that if Issuer declares a quarterly cash dividend that has an
ex-dividend date that is different than February 3, May 3, August 3 or November
3, then such different date shall be an Ex-Dividend Date; provided, further,
that if Issuer has not declared a quarterly cash dividend in the relevant
quarter, then one of February 3, May 3, August 3 or November 3, whichever date
falls within the quarter in question, shall be deemed an Ex-Dividend Date for
the purposes of this Transaction.
(ii) Any cash dividend declared by the issuer that either (A) is not a
regularly scheduled quarterly cash dividend or (B) is a regularly scheduled
quarterly cash dividend that exceeds $0.09 per Share shall constitute an
Additional Termination Event with this Transaction as the only "Affected
Transaction" and Issuer as the sole Affected Party.
(b) For the avoidance of doubt, this Transaction shall be deemed to be
a "Share Forward Transaction" for purposes of the Equity Definitions.
(c) The Issuer may elect in its sole discretion to terminate this
Transaction ("Optional Termination") at any time upon at least two Scheduled
Trading Days' notice to MSCO specifying the date of such termination, in which
event the Transaction will terminate and the Optional Termination shall
constitute an Additional Termination Event with this Transaction as the only
"Affected Transaction" and, notwithstanding Section 6(b) of the Agreement, the
Early Termination Date being the effective date of the notice delivered by
Issuer pursuant to this section 5(c). For purposes of Section 6(e) of the
Agreement, MSCO shall be the sole Affected Party.
6. Conditions to Delivery of Payment Shares.
Issuer may only deliver Payment Shares and Make-Whole Shares subject to
satisfaction of the following conditions:
(a) If Issuer timely elects to deliver Payment Shares and Make-Whole
Shares (the "Settlement Shares") by means of a registered offering, the
following provisions shall apply:
(i) On the later of (A) the Trading Day following the Issuer's
election to deliver Payment Shares and any Make-Whole Shares by means
of a registered offering (the "REGISTRATION NOTICE DATE"), and (B) the
date on which the Registration Statement is declared effective by the
SEC (the "REGISTERED SHARE DELIVERY DATE"), the Issuer shall deliver to
MSCO the Payment Shares on the Trading Day immediately prior to the
applicable Registered Share Delivery Date. For the avoidance of doubt,
the Registered Share Delivery Date shall be deemed to be the Settlement
Date if this Section 6(a) shall apply.
(ii) Promptly following the Registration Notice Date, the
Issuer shall file with the SEC a registration statement ("REGISTRATION
STATEMENT") covering the public resale by MSCO of the Payment Shares
and any Make-Whole Shares (collectively, the "REGISTERED SECURITIES")
on a continuous or delayed basis pursuant to Rule 415 (or any similar
or successor rule), if available, under the Securities Act; provided
that no such filing shall be required pursuant to this paragraph (ii)
if the Issuer shall have filed a similar registration statement with
unused capacity at least equal to the Settlement Amount and such
registration statement has been declared by the SEC on or prior to the
Registration Notice Date and no stop order is in effect with respect to
such registration statement as of the Registration Notice Date. The
Issuer shall use its reasonable best efforts to have such Registration
Statement declared effective by the SEC as promptly as possible. MSCO
shall provide, by a reasonable time in advance, such information
regarding MSCO and its affiliates as shall be required or reasonably
requested by Issuer in the Registration Statement or Prospectus.
(iii) Promptly following the Registration Notice Date, and
provided that Morgan Stanley shall execute and delivery an appropriate
confidentiality agreement that is reasonably satisfactory to the
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Reference Number: Account Number: Page 10
Issuer, the Issuer shall afford MSCO a reasonable opportunity to
conduct a due diligence investigation with respect to the Issuer
customary in scope for underwritten offerings of equity securities
(including, without limitation, the availability of senior management
to respond to questions regarding the business and financial condition
of the Issuer and the right to have made available to MSCO for
inspection all financial and other records, pertinent corporate
documents and other information reasonably requested by MSCO), and MSCO
shall be reasonably satisfied in all material respects with the results
of such due diligence investigation of the Issuer. For the avoidance of
doubt, the Issuer shall not have the right to deliver Shares pursuant
to Section 6(a)(i) above (and the conditions to delivery of Payment
Shares specified in this Section 6 shall not be satisfied) until MSCO
is satisfied in all material respects with the results of such due
diligence investigation of the Issuer.
(iv) From, the effectiveness of the Registration Statement
until all Registered Securities have been sold by MSCO (but in no
event, for more than two years from the date of this Confirmation), the
Issuer shall, at the request of MSCO, make available to MSCO a printed
prospectus relating to the Registered Securities in form and substance
(including, without limitation, any sections describing the plan of
distribution) reasonably satisfactory to MSCO (a "PROSPECTUS", which
term shall include any prospectus supplement thereto), in such
quantities as Morgan shall reasonably request.
(v) The Issuer shall use its reasonable best efforts to
prevent the issuance of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending the
use of any Prospectus and, if any such order is issued, to obtain the
lifting thereof as soon thereafter as is possible. If the Issuer
concludes that the Registration Statement, the Prospectus or any
document incorporated therein by reference contains a misstatement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make any statement therein not misleading, the
Issuer shall as promptly as practicable file any required document and
prepare and furnish to MSCO a reasonable number of copies of such
supplement or amendment thereto as may be necessary so that the
Prospectus, as thereafter delivered to the purchasers of the Registered
Securities will not contain a misstatement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make any statement therein not misleading; provided, that the Issuer
may suspend the effectiveness of the Registration Statement and use of
the Prospectus by written notice to MSCO for such periods as it deems
necessary or appropriate, in its good faith judgment (each such period,
a "Suspension Period") if an event occurs and is continuing as a result
of which the Registration Statement may, in the Issuer's good faith
judgment, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or if the board of
directors of the Issuer determines in good faith that a Suspension
Period is in the best interests of the Issuer.
(vi) On or prior to the Registered Share Delivery Date, the
Issuer shall enter into an agreement (a "TRANSFER AGREEMENT") with MSCO
(or any affiliate of MSCO designated by MSCO) in connection with the
public resale of the Registered Securities, substantially similar to
underwriting agreements customary for underwritten offerings of equity
securities, in form and substance reasonably satisfactory to MSCO (or
such affiliate), which Transfer Agreement shall (without limitation of
the foregoing):
(A) contain provisions substantially similar to those
contained in such underwriting agreements relating to the
indemnification of, and contribution in connection with the
liability of, MSCO and its affiliates,
(B) provide for delivery to MSCO (or such affiliate)
of customary opinions (including, without limitation,
accounting comfort letters, opinions or beliefs relating to
the due authorization, valid issuance and fully paid and
non-assessable nature of the Registered Securities and the
lack of material misstatements and omissions in the
Registration Statement, the Prospectus and the Issuer's
filings under the Exchange Act); and
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(C) provide for the payment by the Issuer of all fees
and expenses in connection with such resale customarily borne
by an issuer, including all registration costs and all
reasonable fees and expenses of counsel for MSCO (or such
affiliate), excluding underwriting or brokerage discounts and
commissions.
(vii) If the number of Shares covered by the Registration
Statement is less than the number of Registered Securities required to
be delivered pursuant to this Section 6(a) and the provisions of
"Delivery of Payment Shares" in Section 2 above, the Issuer shall, at
the request of MSCO, file additional registration statement(s) to
register the sale of all Registered Securities required to be delivered
to MSCO.
(viii) The Issuer shall cooperate with MSCO and use its
reasonable best efforts to take any other action necessary to effect
the intent of the provisions set forth in this Section 6(a).
(b) If Issuer timely elects to deliver Settlement Shares by means of a
private placement, the following provisions shall apply:
(i) all Settlement Shares shall be delivered to MSCO (or
any affiliate of MSCO designated by MSCO) pursuant to the exemption
from the registration requirements of the Securities Act provided by
Section 4(2) thereof;
(ii) MSCO and any potential purchaser of any such shares
from MSCO (or any affiliate of MSCO designated by MSCO) identified by
MSCO shall have been afforded a reasonable opportunity to conduct a due
diligence investigation with respect to Issuer customary in scope for
private placements of equity securities (including, without limitation,
the right to have made available to them for inspection all financial
and other records, pertinent corporate documents and other information
reasonably requested by them), and Issuer shall not disclose material
non-public information in connection with such due diligence
investigation; and
(iii) an agreement (a "PRIVATE PLACEMENT AGREEMENT") shall
have been entered into between Issuer and MSCO (or any affiliate of
MSCO designated by MSCO) in connection with the private placement of
such Settlement Shares by Issuer to MSCO (or any such affiliate) and
the private resale of such shares by MSCO (or any such affiliate),
substantially similar to private placement purchase agreements
customary for private placements of equity securities, in form and
substance reasonably satisfactory to MSCO and the Issuer, which Private
Placement Agreement shall include, without limitation, provisions
substantially similar to those contained in such private placement
purchase agreements relating to the eligibility of the placement of
such Settlement Shares for an exemption from registration under the
Securities Act, including, without limitation, appropriate
representations, warranties, covenants and agreements of MSCO, the
indemnification of, and contribution in connection with the liability
of, MSCO and its affiliates, and shall provide for the payment by
Issuer of all fees and expenses in connection with such resale,
including all reasonable fees and expenses of one counsel for MSCO but
not including any underwriter or broker discounts and commissions, and
shall contain representations, warranties and agreements of Issuer and
MSCO reasonably necessary or advisable to establish and maintain the
availability of an exemption from the registration requirements of the
Securities Act for such resales.
(iv) If Issuer elects to deliver Payment Shares to satisfy
its payment obligation of the Settlement Amount, neither Issuer nor
MSCO shall take or cause to be taken any action that would make
unavailable either (i) the exemption set forth in Section 4(2) of the
Securities Act for the sale of any Payment Shares or Make-Whole Payment
Shares by Issuer to MSCO or (ii) an exemption from the registration
requirements of the Securities Act reasonably acceptable to MSCO for
resale of Settlement Shares by MSCO.
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(c) The provisions of Section 6(b) shall apply to any then-current
Settlement Balance if (i) on any given day, Issuer cannot satisfy any of the
conditions of Section 6(a) or (ii) for a period of at least ten (10) consecutive
Exchange Business Days, MSCO has been reasonably advised by its counsel that it
is inadvisable to effect sales of Registered Securities.
(d) If the Settlement Amount is less than zero and Issuer elects to
deliver Payment Shares to satisfy its payment obligation of the Settlement
Amount, then, if necessary, Issuer shall use its commercially reasonable efforts
to cause the number of authorized but unissued shares of Common Stock to be
increased to an amount sufficient to permit Issuer to fulfill its obligations
"Delivery of Payment Shares" above.
(e) If Issuer elects to deliver Settlement Shares, MSCO agrees to
uses commercially reasonable efforts to effect sales of such Shares pursuant to
a registered offering or private placement, as applicable, pursuant to Section
6(a) or 6(b) at commercially reasonable prices in light of the market conditions
and circumstances of Issuer at the time of such sale.
(f) Notwithstanding anything to the contrary contained herein,
Issuer shall have the right cancel its election to satisfy its payment
obligation of the Settlement Amount (or the then remaining balance thereof) by
delivering Payment Shares or Make-Whole Payment Shares at any time before the
Settlement Balance has been reduced to zero (such right, the "Issuer Settlement
Cancellation Right") by delivering notice to MSCO on any Scheduled Trading Day.
If Issuer exercises the Issuer Settlement Cancellation Right, (i) MSCO shall
sell any Payment Shares or Make-Whole Payment Shares (if any) that it has an
obligation to sell as of the time of receiving notice of Issuer's exercise of
its Issuer Settlement Cancellation Right, (ii) MSCO shall reduce the Settlement
Balance by the amount realized in such sale of such Payment Shares or Make-Whole
Payment Shares and (iii) Issuer shall make a cash payment to MSCO in an amount
equal to remaining Settlement Balance.
7. Certain Payments and Deliveries by MSCO. Notwithstanding anything to the
contrary herein, or in the Equity Definitions, if at any time:
(i) an Early Termination Date occurs and MSCO would be required to make
a payment pursuant to Sections 6(d) and 6(e) of the Agreement,
(ii) a Tender Offer occurs and MSCO would be required to make a payment
pursuant to Sections 12.3 and 12.7 of the Equity Definitions,
(iii) a Merger Event occurs and MSCO would be required to make a
payment pursuant to Sections 12.2 and 12.7 of the Equity Definitions,
(iv) an Additional Disruption Event occurs and MSCO would be required
to make a payment pursuant to Sections 12.8 and 12.9 of the Equity
Definitions, or
(v) a Nationalization, Insolvency or Delisting occurs and MSCO would
be required to make a payment pursuant to Section 12.6 of the Equity
Definitions,
then in lieu of such payment, MSCO shall deliver to Issuer, at the time such
payment would have been due and in the manner provided under "Physical
Settlement" in the Equity Definitions, a number of Shares (or, in the case of a
Merger Event, common equity securities of the surviving entity) equal to the
quotient obtained by dividing (A) the amount that would have been so payable by
(B) the fair market value per Share (or per unit of such common equity security)
of the Shares (or units) so delivered, as determined by the Calculation Agent in
a commercially reasonable manner. The Calculation Agent hereby agrees to provide
the parties with a reasonably detailed statement of its calculation hereunder.
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8. Certain Payments and Deliveries by Issuer. Notwithstanding anything to the
contrary herein, or in the Equity Definitions, if at any time:
(i) an Early Termination Date occurs and Issuer would be required to
make a payment pursuant to Sections 6(d) and 6(e) of the Agreement,
(ii) a Tender Offer occurs and Issuer would be required to make a
payment pursuant to Sections 12.3 and 12.7 of the Equity Definitions,
(iii) a Merger Event occurs and Issuer would be required to make a
payment pursuant to Sections 12.2 and 12.7 of the Equity Definitions,
(iv) an Additional Disruption Event occurs and Issuer would be required
to make a payment pursuant to Sections 12.8 and 12.9 of the Equity
Definitions, or
(v) a Nationalization, Insolvency or Delisting occurs and Issuer would
be required to make a payment pursuant to Section 12.6 of the Equity
Definitions (any such payment described in Sections 8(i), (ii), (iii),
(iv) or (v) above, an "Early Settlement Payment"),
then Issuer shall have the option, in lieu of making such cash payment, to
settle its payment obligations under Sections 8(i), (ii), (iii), (iv) or (v)
above in Shares (such Shares, the "Early Settlement Shares"). The provisions of
"Delivery of Payment Shares" in Section 2 above shall apply to the delivery of
Early Settlement Shares as if the relevant Early Settlement Amount was the
"Settlement Amount" and the Early Settlement Shares were "Payment Shares." In
order to elect to deliver Early Settlement Shares, (i) Issuer must notify MSCO
of its election by no later than 4 p.m. on the date that is three Exchange
Business Days before the date that the Early Settlement Payment is due, (ii)
must specify whether such Early Settlement Shares are to be sold by means of a
registered offering or by means of a private placement and (iii) the conditions
described in Section 6 above must be satisfied as if the Early Settlement Shares
were "Payment Shares" and any additional Shares Issuer delivers to reduce the
settlement balance to zero in connection with this Section 8 were "Make-Whole
Payment Shares".
9. Special Provisions for Merger Events. Notwithstanding anything to the
contrary herein or in the Equity Definitions, to the extent that an Announcement
Date for a potential Merger Transaction occurs during the term of this
Transaction and such Announcement Date does not cause this Transaction to
terminate in whole under the provisions of "Extraordinary Event" in paragraph 2
above:
(a) As soon as practicable following the public announcement of such
potential Merger Transaction, Issuer shall provide MSCO with written notice of
such announcement;
(b) Promptly after request from MSCO, Issuer shall provide MSCO with
written notice specifying (i) Issuer's average daily Rule 10b-18 Purchases (as
defined in Rule 10b-18) during the three full calendar months immediately
preceding the Announcement Date that were not effected through MSCO or its
affiliates and (ii) the number of Shares purchased pursuant to the proviso in
Rule 10b-18(b)(4) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") for the three full calendar months preceding the Announcement
Date. Such written notice shall be deemed to be a certification by Issuer to
MSCO that such information is true and correct. Issuer understands that MSCO
will use this information in calculating the trading volume for purposes of Rule
10b-18; and
(c) MSCO in its good faith commercially reasonable judgment may extend
the Calculation Period to account for any reduction in the number of Shares that
could be purchased on each day during the Calculation Period in compliance with
Rule 10b-18 following the Announcement Date.
"Merger Transaction" means any merger, acquisition or similar transaction
involving a recapitalization of Issuer as contemplated by Rule 10b-18(a)(13)(iv)
under the Exchange Act.
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10. MSCO Adjustments. In the event that MSCO reasonably determines in good faith
that it is appropriate with regard to any legal, regulatory or self-regulatory
requirements or related policies and procedures (whether or not such
requirements, policies or procedures are imposed by law or have been voluntarily
adopted by MSCO, and including, without limitation, Rule 10b-18, Rule 10b-5,
Regulation M and Regulation 14E under the Exchange Act, collectively, the
"Requirements"), for MSCO to refrain from purchasing Shares or to purchase fewer
than the number of Shares MSCO would otherwise purchase on any Trading Day
during the duration of this Transaction, then MSCO may determine that the
Calculation Period be suspended and, if appropriate, extended with regard to any
Requirements. MSCO shall notify the Issuer upon the exercise of MSCO's rights
pursuant to this Section 10 and shall subsequently notify the Issuer on the day
MSCO reasonably believes that the circumstances giving rise to such exercise
have changed; provided, however, that MSCO's notice shall not specify, and MSCO
shall not otherwise communicate to the Issuer, the reason for MSCO's election to
suspend the Calculation Period. If the Calculation Period is suspended pursuant
to this Section 10, at the end of such suspension MSCO shall determine the
number of Trading Days remaining in the Calculation Period, as appropriate, and
the terms of this Transaction shall be equitably adjusted as set forth above
under "Physical Settlement."
11. Covenants.
(a) The Issuer covenants and agrees:
(i)(a) that it will not treat this Transaction, any portion
hereof, or any obligation hereunder as giving rise to any interest income or
other inclusions of ordinary income; (b) it will not treat the delivery of any
portion of the Shares or cash to be delivered pursuant to this Transaction as
the payment of interest or ordinary income; (c) it will treat this Transaction
in its entirety as a forward contract for the delivery of such Shares or cash;
and (d) it will not take any action (including filing any tax return or form or
taking any position in any tax proceeding) that is inconsistent with the
obligations contained in (a) through (c). Notwithstanding the preceding
sentence, Issuer may take any action or position required by law, provided that
Issuer delivers to MSCO an opinion of counsel, nationally recognized as expert
in Federal tax matters and acceptable to Issuer, to that effect;
(ii) that during the term of this Confirmation, neither it nor any
of its affiliates (other than affiliates which do not constitute "affiliated
purchasers" within the meaning of Rule 10b-18 under the Exchange Act) shall
directly or indirectly (which shall be deemed to include the writing or purchase
of any cash-settled derivative instrument) purchase Shares (or any security
convertible into or exchangeable for Shares) without the prior written approval
of MSCO (except for any purchases which do not constitute "Rule 10b-18
purchases" within the meaning of the Exchange Act), which approval shall not be
unreasonably withheld or delayed, or take any other action that would cause the
purchase by MSCO of any Shares in connection with this Confirmation not to
comply with Rule 10b-18 under the Exchange Act (assuming for the purposes of
this paragraph that such Rule were otherwise applicable to such purchases);
(iii) to comply with all laws, rules and regulations applicable to
it (including, without limitation, the Securities Act and the Exchange Act) in
connection with the transactions contemplated by this Confirmation;
(iv) that it is not relying, and has not relied, upon MSCO or any
of its representatives or advisors with respect to the legal, accounting, tax or
other implications of this Confirmation and that it has conducted its own
analyses of the legal, accounting, tax and other implications of this
Confirmation. Issuer understands and acknowledges that MSCO and its affiliates
may from time to time effect transactions for their own account or the account
of customers and hold positions in securities or options on securities of the
Issuer and that MSCO and its affiliates may continue to conduct such
transactions during the term of this Confirmation, to the extent permitted by
applicable law or regulation; and
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(v) that if at any time the Issuer concludes that either it or any of its
affiliates will be taking any action that would cause Regulation M under the
Securities Exchange Act of 1934, as amended ("Regulation M"), to be applicable
to any purchases of Shares, during the Calculation Period , including any
offering by the Issuer or any of its affiliates of securities for which the
Issuer's common stock would constitute a "covered security" for purposes of
Regulation M (which may include an offering of shares of Common Stock (or a
security convertible or exercisable into or exchangeable for such shares or for
which the Shares are a reference security (as defined in Regulation M)), then
the Issuer agrees that it will, on not less than one Scheduled Trading Day's
written notice, direct MSCO not to purchase Shares in connection with this
Confirmation during the anticipated "restricted period" (as defined in
Regulation M) of such an offering (the "Suspension Period"); provided, that the
parties agree that such Suspension Period may, at the Issuer's direction,
include a period of up to ten days prior and five days subsequent to such
Suspension Period upon notice from the Issuer that the representations in
Section 12(a)(i) and Section 12(a)(ii) are accurate and complete as of such
date; and provided further, that MSCO shall keep any notice hereunder from the
Issuer confidential. If on any Scheduled Trading Day Issuer delivers such
written notice (and confirms by telephone) by 8:30 a.m. New York Time (the
"Notification Time"), then such notice shall be effective to suspend the
Calculation Period as of such Notification Time. In the event that Issuer
delivers notice and/or confirms by telephone after the Notification Time, then
the Calculation Period shall be suspended effective as of 8:30 a.m. New York
Time on the following Scheduled Trading Day or as otherwise required by law or
agreed between Issuer and MSCO. The Calculation Period shall be suspended in
accordance with, and MSCO shall have all of the rights under, Section 10 of this
Confirmation, including (for the avoidance of doubt), but not limited to, the
right to treat any suspension of the Calculation Period as a Potential
Adjustment Event subject to Calculation Agent Adjustment.
(b) MSCO covenants and agrees:
(i) with respect to the purchase of any Shares in connection with this
Confirmation to make any such purchase in a manner that, based on the
representations and warranties set forth herein and any other information
provided to MSCO by Issuer, would meet the requirements of the safe harbor under
the provisions of Rule 10b-18 as if such purchases were made by Issuer;
provided, however, that it is understood and agreed that MSCO will not be
obligated to comply with this paragraph if an Extraordinary Event or an
Additional Termination Event occurs that, in any such case, an Early Termination
Date occurs with respect to any portion of this Transaction; and
(ii) MSCO will comply with all laws, rules and regulations applicable to
it (including, without limitation, the Securities Act and the Exchange Act) in
connection with the transactions contemplated by this Confirmation.
(iii) MSCO will ensure that any employee of MSCO or any affiliate or agent
who is involved, directly or indirectly, in executing any purchases and sales of
Shares in connection with this Confirmation (the "Trading Employees") will not
communicate, directly or indirectly, with any employee or representative of the
Issuer at any time while this Confirmation is in effect, except for the required
Daily Reports.
(iv) MSCO agrees that it shall maintain reasonable policies and
procedures, taking into consideration the nature of its business, to ensure that
Trading Employees shall not be in possession of any material nonpublic
information regarding the Issuer or the Shares at all relevant times beginning
the date hereof through and including the Valuation Date.
12. Representations, Warranties and Acknowledgments.
(a) Issuer hereby represents and warrants to MSCO that:
(i) as of the date hereof, Issuer (A) is not in possession of any
material, non-public information with respect to Issuer or any of its
securities, and is entering into this Confirmation in good faith and not as part
of a plan or scheme to evade the prohibitions of Rule 10b5-1 of the Exchange Act
and (B) agrees not to alter or deviate from the terms of this Confirmation or
enter into or alter a corresponding or hedging transaction or
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position with respect to the Shares (including, without limitation, with respect
to any securities convertible or exchangeable into the Shares) during the term
of this Confirmation;
(ii) the transactions contemplated by this Confirmation have been duly
authorized by the board of directors of Issuer;
(iii) Issuer is not entering into this Confirmation to facilitate a
distribution of the Shares (or any security convertible into or exchangeable for
Shares) in a manner that would violate the Securities Act or the Exchange Act or
in connection with a future issuance of securities except that this shall not
apply to any issuance pursuant to any employee benefit or dividend reinvestment
plan, any existing exercisable, convertible or exchangeable securities, or to
any other publicly disclosed transaction;
(iv) Issuer is not entering into this Confirmation in order to create
actual or apparent trading activity in the Shares (or any security convertible
into or exchangeable for Shares) or to raise or depress the price of the Shares
(or any security convertible into or exchangeable for Shares); and
(v) Issuer is as of the date hereof, and after giving effect to the
transactions contemplated hereby will be, Solvent. As used in this paragraph,
the term "Solvent" means, with respect to a particular date, that on such date
(A) the present fair market value (or present fair saleable value) of the assets
of Issuer is not less than the total amount required to pay the liabilities of
Issuer on its total existing debts and liabilities (including contingent
liabilities) as they become absolute and matured, (B) Issuer is able to realize
upon its assets and pay its debts and other liabilities, contingent obligations
and commitments as they mature and become due in the normal course of business,
(C) assuming consummation of the transactions as contemplated by this
Confirmation, Issuer is not incurring debts or liabilities beyond its ability to
pay as such debts and liabilities mature, (D) Issuer is not engaged in any
business or transaction, and does not propose to engage in any business or
transaction, for which its property would constitute unreasonably small capital
after giving due consideration to the prevailing practice in the industry in
which the Issuer is engaged and (E) Issuer is not a defendant in any civil
action that could reasonably be expected to result in a judgment that Issuer is
or would become unable to satisfy.
(b) MSCO hereby represents and warrants to, and covenants and agrees with,
Issuer that:
(i) MSCO is an "accredited investor" as that term is defined in Rule
501(a) of Regulation D under the Securities Act and a "qualified institutional
buyer" as that term is defined in Rule 144A(a) under the Securities Act as of
the date of this Confirmation and was not organized for the specific purpose of
acquiring the Securities;
(ii) With respect to any Payment Shares or Make-Whole Shares
(collectively, the "Settlement Shares"), MSCO would acquire such shares for its
own account and not with a view to or for distribution in a manner that would
violate the Securities Act; provided, however, that by making the
representations herein, MSCO does not agree to hold any such Shares for any
minimum or other specific term and reserves the right to dispose of the Shares
at any time (including pursuant to a registered offering, if effected pursuant
hereto); provided, further, that such disposition shall be in accordance with or
pursuant to a registration statement or an exemption under the Securities Act;
(iii) MSCO acknowledges that it (A) has been furnished with or has had
full access to all of the information that it considers necessary or appropriate
for deciding whether to purchase the Settlement Shares, (B) has had an
opportunity to ask questions and receive answers from the Issuer regarding the
terms and conditions of the Transaction, (C) has had access to information about
the Issuer and its respective financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to
evaluate its investment, (D) can bear the economic risk of a total loss of its
investment in the Settlement Shares and (E) has such knowledge and experience in
business and financial matters so as to enable it to understand the risks of and
form an investment decision with respect to its investment in the Settlement
Shares; provided, however, that the representation made by MSCO in this Section
12(b)(iii) shall not have any effect on whether
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Issuer has satisfied the conditions listed in Section 6(a)(iii) or Section
6(b)(iii) if Issuer elects to settle its payment obligation of the Settlement
Amount by delivering Payment Shares or Make-Whole Payment Shares (if any).
Neither such inquiries nor any other due diligence investigations conducted by
Seller or its advisors, if any, or its representatives shall limit, modify,
amend or affect the Issuer's representations and warranties contained in this
Confirmation and Seller's right to rely thereon;
(iv) Except to the extent any Settlement Shares are registered for resale
as contemplated hereby, MSCO understands that the Settlement Shares would be
offered and sold to it in reliance on specific exemptions from the registration
requirements of the United States federal and state securities laws and that the
Issuer is relying upon the truth and accuracy of, and MSCO's compliance with,
the representations, warranties, covenants, agreements, acknowledgments and
understandings of MSCO set forth herein in order to determine the availability
of such exemptions and the eligibility of MSCO to acquire the Settlement Shares;
(v) MSCO is not entering into this Confirmation to facilitate a
distribution of the Shares (or any security convertible into or exchangeable for
Shares) in a manner that would violate the Securities Act or the Exchange Act or
in connection with a future issuance of securities;
(vi) MSCO is not entering into this Confirmation in order to create actual
or apparent trading activity in the Shares (or any security convertible into or
exchangeable for Shares) or to raise or depress the price of the Shares (or any
security convertible into or exchangeable for Shares); however, as a result of
entering into this Confirmation, MSCO may engage in significant purchase
activity in the Shares;
(vii) MSCO has implemented reasonable policies and procedures, taking into
consideration the nature of its business, to ensure that individuals making
investment decisions would not violate laws prohibiting trading on the basis of
material nonpublic information. Such individuals shall not be in possession of
material nonpublic information at all relevant times beginning the date hereof
through and including the Valuation Date.
(viii) MSCO is as of the date hereof, and after giving effect to the
transactions contemplated hereby will be, Solvent. As used in this paragraph,
the term "Solvent" means, with respect to a particular date, that on such date
(A) the present fair market value (or present fair saleable value) of the assets
of MSCO is not less than the total amount required to pay the liabilities of
MSCO on its total existing debts and liabilities (including contingent
liabilities) as they become absolute and matured, (B) MSCO is able to realize
upon its assets and pay its debts and other liabilities, contingent obligations
and commitments as they mature and become due in the normal course of business,
(C) assuming consummation of the transactions as contemplated by this
Confirmation, MSCO is not incurring debts or liabilities beyond its ability to
pay as such debts and liabilities mature, (D) MSCO is not engaged in any
business or transaction, and does not propose to engage in any business or
transaction, for which its property would constitute unreasonably small capital
after giving due consideration to the prevailing practice in the industry in
which MSCO is engaged and (E) MSCO is not a defendant in any civil action that
could reasonably be expected to result in a judgment that MSCO is or would
become unable to satisfy.
(c) MSCO and Issuer each hereby acknowledges that any transactions by MSCO in
the Shares will be undertaken by MSCO, as the case may be, as principal for its
own account. All of the actions to be taken by MSCO in connection with this
Confirmation, shall be taken by MSCO independently and without any advance or
subsequent consultation with the Issuer.
13. Acknowledgements of Issuer Regarding Hedging and Market Activity.
(a) Issuer agrees, understands and acknowledges that:
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(i) MSCO and its affiliates also may be active in the
market for the Shares other than in connection with trading
activities in relation to the transactions contemplated by
this Confirmation; and
(ii) any market activities of MSCO and its affiliates
with respect to the Shares may affect the market price and
volatility of the Shares, as well as the 10b-18 VWAP, each in
a manner that may be adverse to Issuer; provided, that in
connection with the trading activities contemplated by this
Confirmation, MSCO shall use commercially reasonable efforts
to minimize impact on the market price of the Shares; however,
as a result of entering into this Confirmation, MSCO may
engage in significant purchase activity in the Shares.
14. Indemnification.
(a) Issuer will indemnify and hold MSCO harmless against any losses,
claims, damages, expenses or liabilities to which it may become subject in
connection with any matter referred to in this Confirmation, except to the
extent that any such loss, claim, damage, expense or liability results from (i)
the negligence, intentional misconduct or bad faith of MSCO in effecting the
transactions which are the subject of this Confirmation; (ii) MSCO's breach of
any covenant under this Confirmation; or (iii) the purchase of any Shares in
connection with this Confirmation unless the loss, claim, damage or liability in
connection therewith results from Issuer's breach of this Confirmation. The
indemnity obligations of Issuer under this Section 14 shall be in addition to
any liability which Issuer may otherwise have, shall extend upon the same terms
and conditions to any affiliate of MSCO and the partners, directors, officers,
agents, employees and controlling persons (if any), as the case may be, of MSCO
and any such affiliate and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of Issuer, MSCO, any
such affiliate and any such person. The foregoing provisions shall survive any
termination or completion of this Confirmation. For the purposes of this Section
14, the term "MSCO" shall include MSCO and its affiliates.
(b) Subject to Section 14(c), the indemnity obligations of Issuer under
Section 14(a) (each, an "OBLIGATION") shall be paid in cash.
(c) In connection with any Obligation, Issuer may elect to satisfy such
Obligation by delivering Shares to MSCO (such Shares, the "Indemnity Shares") by
notifying MSCO of such election within one Trading Day of being informed by MSCO
that such Obligation is due and payable. The provisions of "Delivery of Payment
Shares" in Section 2 above shall apply to such a share settlement of an
Obligation as if the relevant Obligation was the "Settlement Amount" and the
Indemnity Shares were "Payment Shares." In order to elect to deliver Indemnity
Shares, Issuer must (i) specify whether such Indemnity Shares are to be sold by
means of a registered offering or by means of a private placement and (ii) the
conditions described in Section 6 above must be satisfied as if the Indemnity
Shares were "Payment Shares" and any additional Shares Issuer delivers to reduce
the settlement balance to zero in connection with this Section 8 were
"Make-Whole Payment Shares".
15. The parties hereto agree and acknowledge that MSCO is a "financial
participant" within the meaning of Section 101(22) of Title 11 of the United
States Code (the "Bankruptcy Code"). The parties hereto further agree and
acknowledge that this Transaction is either (i) a "securities contract" as such
term is defined in Section 741(7) of the Bankruptcy Code, in which case each
payment and delivery made pursuant to this Transaction is a "settlement
payment", as such term is defined in Section 741(8) of the Bankruptcy Code, and
that MSCO is entitled to the protections afforded by, among other sections,
Sections 362(b)(6), 546(e) and 555 of the Bankruptcy Code, or (ii) a "swap
agreement", as such term is defined in Section 101(53B) of the Bankruptcy Code,
in which case each party is a "swap participant", as such term is defined in
Section 101(53C) of the Bankruptcy Code, and that MSCO is entitled to the
protections afforded by, among other sections, Sections 362(b)(17), 546(g) and
560 of the Bankruptcy Code.
16. Except as required by law or judicial or administrative process, or as
requested by a regulatory authority or self-regulatory organization, each party
hereto agrees to keep this Confirmation, and the transactions contemplated
hereby and thereby confidential. In the event disclosure is permitted pursuant
to the preceding
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sentence, the disclosing party shall (i) provide prior notice of such disclosure
to the other party, (ii) use reasonable efforts to minimize the extent of such
disclosure and (iii) comply with all reasonable requests of the other party to
minimize the extent of such disclosure. Notwithstanding the foregoing, effective
from the date of commencement of discussions concerning the Transaction, the
Issuer and each of its employees, representatives, or other agents may disclose
to any and all persons, without limitation of any kind, the tax treatment and
tax structure of the Transaction and all materials of any kind (including
opinions or other tax analyses) that are provided to the Issuer relating to such
tax treatment and tax structure.
17. Treatment in Bankruptcy; No Setoff; No Collateral.
(a) In the event Issuer becomes the subject of proceedings ("BANKRUPTCY
PROCEEDINGS") under the U.S. Bankruptcy Code or any other applicable bankruptcy
or insolvency statute from time to time in effect, any rights or claims of MSCO
hereunder in respect of this transaction shall rank for all purposes no higher
than, but on a parity with, the rights or claims of holders of Shares, and MSCO
hereby agrees that its rights and claims hereunder shall be subordinated to
those of all parties with claims or rights against Issuer (other than common
stockholders) to the extent necessary to assure such ranking. Without limiting
the generality of the foregoing, after the commencement of Bankruptcy
Proceedings, the claims of MSCO hereunder shall for all purposes have rights
equivalent to the rights of a holder of a percentage of the Shares equal to the
aggregate amount of such claims (the "CLAIM AMOUNT") taken as a percentage of
the sum of (i) the Claim Amount and (ii) the aggregate fair market value of all
outstanding Shares on the record date for distributions made to the holders of
such Shares in the related Bankruptcy Proceedings. Notwithstanding any right it
might otherwise have to assert a higher priority claim in any such Bankruptcy
Proceedings, MSCO shall be entitled to receive a distribution solely to the
extent and only in the form that a holder of such percentage of the Shares would
be entitled to receive in such Bankruptcy Proceedings, and, from and after the
commencement of such Bankruptcy Proceedings, MSCO expressly waives (i) any other
rights or distributions to which it might otherwise be entitled in such
Bankruptcy Proceedings in respect of its rights and claims hereunder and (ii)
any rights of setoff it might otherwise be entitled to assert in respect of such
rights and claims.
(b) Notwithstanding any provision of this Confirmation or any other
agreement between the parties to the contrary, neither the obligations of Issuer
nor the obligations of MSCO hereunder are secured by any collateral, security
interest, pledge or lien.
18. Share Cap. Notwithstanding any other provision of this Confirmation to the
contrary, in no event shall Issuer be required to deliver to MSCO a number of
Shares that exceeds the Share Cap (as specified in Schedule I), subject to
reduction by the number of Shares delivered hereunder by the Issuer on any prior
date.
19. 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 party hereto.
20. Account Details:
<Table>
Account for Payments to MSCO: Citibank, NY
ABA #021-000-089 A/C Morgan Stanley, NY
A/C 388-90774
For further credit to Customer Account 3315851
Account for Payments to Issuer: To be provided by Issuer
</Table>
FOIA CONFIDENTIAL TREATMENT REQUESTED BY
REINSURANCE GROUP OF AMERICA, INCORPORATED
Reference Number: Account Number: Page 20
21. Governing law: The laws of the state of New York.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning it to us by facsimile to
the number provided on the attached facsimile cover page.
Confirmed as of the date first written above:
<Table>
REINSURANCE GROUP OF AMERICA, INCORPORATED MORGAN STANLEY & CO. INCORPORATED
By: /s/ TODD C. LARSON By: /s/ JOHN ROBERTS
------------------------------ ------------------------------
Name: Todd C. Larson Name: John Roberts
Title: Senior Vice President, Title: Managing Director
Controller & Treasurer
</Table>
FOIA CONFIDENTIAL TREATMENT REQUESTED BY
REINSURANCE GROUP OF AMERICA, INCORPORATED
Reference Number: Account Number: Page 21
Schedule I
This Schedule I, dated December 12, 2005, may be amended and/or superseded from
time to time by both mutual agreement of both parties.
1. On each Trading Day during the Calculation Period, MSCO shall use
commercially reasonable efforts to purchase Shares, using ordinary principles of
best execution (and using commercially reasonable means to minimize impact on
the market price of the Shares; however, the Issuer acknowledges that as a
result of entering into this Confirmation, MSCO may engage in significant
purchase activity in the Shares, subject to the terms hereof), in accordance
with the following instructions:
<Table>
<Caption>
OPENING REPORTED MARKET TRANSACTION IN THE SHARES DAILY REPURCHASE AMOUNT
(THE "OPENING PRICE")
[***](2) [***](2)
[***](2) [***](2)
</Table>
On any day, if the Issuer notifies MSCO that the representations in Section
12(a)(i) and Section 12(a)(ii) are accurate and complete as of such date, it
may, in its sole discretion, amend or modify the foregoing table by written
notice to MSCO from time to time, in which event such table, as so amended or
modified, shall immediately take effect and supplant and replace the previous
such table; provided, that the parties agree that the Issuer shall not have and
shall not exercise any authority, influence or control over any purchases of
Shares by MSCO pursuant to this Confirmation, except as otherwise provided in
this Schedule I.
2. For the purposes of this Transaction, the following terms shall have the
following values/meanings:
(a) The Trade Date shall be December 12, 2005
(b) The Initial Price equals $47.43
(c) The Initial Shares equal 1,600,000
(d) The Prepayment Amount equals USD 75,888,000
(e) The Commission Amount equals [***](2) multiplied by the Initial Shares
(f) The Scheduled Valuation Date shall be April 25, 2006
(g) The Share Cap shall mean the number of authorized but unissued shares of the
Issuer that are not reserved for future issuance on the date of this Schedule I
minus the maximum number of Shares required to be delivered to third parties if
Issuer elected to settle all of its obligations in connection with all
transactions in the Shares (other than Transactions in the Shares under this
Confirmation) with all third parties that are then currently outstanding and
unexercised.
- ----------
(2) [***] Indicates portions of this exhibit that have been omitted and filed
separately with the Securities and Exchange Commission pursuant to a
request for confidential treatment.
FOIA CONFIDENTIAL TREATMENT REQUESTED BY
REINSURANCE GROUP OF AMERICA, INCORPORATED
Reference Number: Account Number: Page 22
AGREED AND ACKNOWLEDGED (as of the date listed above)
REINSURANCE GROUP OF AMERICA, INCORPORATED
/s/ Todd C. Larson
- --------------------------------------
Name: Todd C. Larson
Title Senior Vice President, Controller & Treasurer
MORGAN STANLEY & CO. INC.
/s/ John Roberts
- --------------------------------------
Name: John Roberts
Title Managing Director