Exhibit 10.2
THE SECURITIES REPRESENTED HEREBY (THE “WARRANTS”) WERE ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND THE WARRANTS MAY NOT BE OFFERED,
SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
THEREOF.
[INSERT DEALER NAME] [INSERT DEALER ADDRESS] | TEL: [INSERT DEALER TELEPHONE
NUMBER]
Opening Transaction

     
To:
  NetApp, Inc.
 
  495 East Java Drive
 
  Sunnyvale, CA 94089
 
   
A/C:
  [Insert Account Number]
 
   
From:
  [Insert Dealer Name]
 
   
Re:
  Issuer Warrant Transaction
 
   
Ref. No:
  [Insert Reference Number]
 
   
Date:
  June 4, 2008

Dear Sir(s):
     The purpose of this communication (this “Confirmation”) is to set forth the
terms and conditions of the above-referenced transaction entered into on the
Trade Date specified below (the “Transaction”) between [      ] (“Dealer”) and
NetApp, Inc. (“Issuer”). This communication constitutes a “Confirmation” as
referred to in the ISDA Master Agreement specified below.
     1. This Confirmation is subject to, and incorporates, the definitions and
provisions of the 2000 ISDA Definitions (including the Annex thereto) (the “2000
Definitions”) and the definitions and provisions of the 2002 ISDA Equity
Derivatives Definitions (the “Equity Definitions”, and together with the 2000
Definitions, the “Definitions”), in each case as published by the International
Swaps and Derivatives Association, Inc. (“ISDA”). In the event of any
inconsistency between the 2000 Definitions and the Equity Definitions, the
Equity Definitions will govern. For purposes of the Equity Definitions, each
reference herein to a Warrant shall be deemed to be a reference to a Call Option
or an Option, as context requires.
     Each party is hereby advised, and each such party acknowledges, that the
other party has engaged in, or refrained from engaging in, substantial financial
transactions and has taken other material actions in reliance upon the parties’
entry into the Transaction to which this Confirmation relates on the terms and
conditions set forth below.
     This Confirmation evidences a complete and binding agreement between Dealer
and Issuer as to the terms of the Transaction to which this Confirmation
relates. This Confirmation shall be subject to an agreement (the “Agreement”) in
the form of the 1992 ISDA Master Agreement (Multicurrency—Cross Border) as if
Dealer and Issuer had executed an agreement in such form on the date hereof (but
without any Schedule except for (i) the election of Loss and Second Method, New
York law (without reference to its choice of laws doctrine, other than Title 14
of the New York General Obligations Law) as the governing law and US Dollars
(“USD”) as the Termination Currency, (ii) the replacement of the word “third” in
the last line of Section 5(a)(i) of the Agreement with the word “second,”
(iii) the election that the “Cross Default” provisions of Section 5(a)(vi) of
the Agreement shall apply to Issuer with a “Threshold Amount”

 

--------------------------------------------------------------------------------

 

of USD50 million and (iv) the deletion of the phrase “, or becoming capable at
such time of being declared,” in the seventh line of Section 5(a)(vi) of the
Agreement).
     All provisions contained in, or incorporated by reference to, the Agreement
will govern this Confirmation except as expressly modified herein. In the event
of any inconsistency between this Confirmation and either the Definitions or the
Agreement, this Confirmation shall govern.
     The Transaction hereunder shall be the sole Transaction under the
Agreement. If there exists any ISDA Master Agreement between Dealer and Issuer
or any confirmation or other agreement between Dealer and Issuer pursuant to
which an ISDA Master Agreement is deemed to exist between Dealer and Issuer,
then notwithstanding anything to the contrary in such ISDA Master Agreement,
such confirmation or agreement or any other agreement to which Dealer and Issuer
are parties, the Transaction shall not be considered a Transaction under, or
otherwise governed by, such existing or deemed ISDA Master Agreement.
     2. The Transaction is a Warrant Transaction, which shall be considered a
Share Option Transaction for purposes of the Equity Definitions. The terms of
the particular Transaction to which this Confirmation relates are as follows:
General Terms:

         
 
  Trade Date:   June 4, 2008
 
       
 
  Effective Date:   June 10, 2008, or such other date as agreed between the
parties, subject to Section 8(k) below.
 
       
 
  Components:   The Transaction will be divided into individual Components, each
with the terms set forth in this Confirmation, and, in particular, with the
Number of Warrants and Expiration Date set forth in this Confirmation. The
payments and deliveries to be made upon settlement of the Transaction will be
determined separately for each Component as if each Component were a separate
Transaction under the Agreement.
 
       
 
  Warrant Style:   European
 
       
 
  Warrant Type:   Call
 
       
 
  Seller:   Issuer
 
       
 
  Buyer:   Dealer
 
       
 
  Shares:   The Common Stock of Issuer, par value USD0.001 (Ticker Symbol:
“NTAP”).
 
       
 
  Number of Warrants:   For each Component, as provided in Annex A to this
Confirmation.
 
       
 
  Warrant Entitlement:   One Share per Warrant
 
       
 
  Strike Price:   USD41.28
 
       
 
  Premium:   USD[       ]
 
       
 
  Premium Payment Date:   The Effective Date
 
       
 
  Exchange:   NASDAQ Global Select Market
 
       
 
  Related Exchange:   All Exchanges located in the United States.

2

--------------------------------------------------------------------------------

 

Procedures for Exercise:
     In respect of any Component:

         
 
  Expiration Time:   Valuation Time
 
       
 
  Expiration Date:   As provided in Annex A to this Confirmation (or, if such
date is not a Scheduled Trading Day, the next following Scheduled Trading Day
that is not already an Expiration Date for another Component); provided that if
that date is a Disrupted Day, the Expiration Date for such Component shall be
the first succeeding Scheduled Trading Day that is not a Disrupted Day and is
not or is not deemed to be an Expiration Date in respect of any other Component
of the Transaction hereunder; and provided further that if the Expiration Date
has not occurred pursuant to the preceding proviso as of the Final Disruption
Date, the Calculation Agent shall have the right to elect, in its reasonable
discretion, that the Final Disruption Date shall be the Expiration Date
(irrespective of whether such date is an Expiration Date in respect of any other
Component for the Transaction). “Final Disruption Date” means November 12, 2013.
Notwithstanding the foregoing and anything to the contrary in the Equity
Definitions, if a Market Disruption Event occurs on any Expiration Date, the
Calculation Agent may reasonably determine that such Expiration Date is a
Disrupted Day only in part, in which case the Calculation Agent shall make
adjustments to the Number of Warrants for the relevant Component for which such
day shall be the Expiration Date and shall designate the Scheduled Trading Day
determined in the manner described in the immediately preceding sentence as the
Expiration Date for the remaining Warrants for such Component. Section 6.6 of
the Equity Definitions shall not apply to any Valuation Date occurring on an
Expiration Date.
 
       
 
  Market Disruption Event:   Section 6.3(a) of the Equity Definitions is hereby
amended by deleting the words “during the one hour period that ends at the
relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or
Knock-out Valuation Time, as the case may be,” in clause (ii) thereof.
 
       
 
  Automatic Exercise:   Applicable; and means that the Number of Warrants for
the corresponding Expiration Date will be deemed to be automatically exercised
at the Expiration Time on such Expiration Date unless Dealer notifies Seller (by
telephone or in writing) prior to the Expiration Time on such Expiration Date
that it does not wish Automatic Exercise to occur, in which case Automatic
Exercise will not apply to such Expiration Date.
 
       
 
  Issuer’s Telephone Number and Telex and/or Facsimile Number    

3

--------------------------------------------------------------------------------

 

         
 
  and Contact Details for purpose of Giving Notice:    

             
 
      To:   NetApp, Inc.
 
          495 East Java Drive
 
          Sunnyvale, CA 94089
 
      Attn:   Treasurer
 
      Telephone:   (408) 822-6000
 
      Facsimile:   (408) 822-4501
 
           
 
      With a copy to:   NetApp, Inc.
 
          495 East Java Drive
 
          Sunnyvale, CA 94089
 
      Attn:   General Counsel
 
      Telephone:   (408) 822-6000
 
      Facsimile:   (408) 822-4501

Settlement Terms:
     In respect of any Component:

         
 
  Settlement Currency:   USD
 
       
 
  Settlement Method Election:   Applicable; provided that (i) Issuer may elect
Cash Settlement only if Issuer represents and warrants to Dealer in writing on
the date of such election that, as of such date, (A) none of Issuer and its
executive officers is aware of any material nonpublic information regarding
Issuer or the Shares, (B) Issuer is electing Cash Settlement in good faith and
not as part of a plan or scheme to evade compliance with the federal securities
laws, (C) the assets of Issuer at their fair valuation exceed the liabilities of
Issuer, including contingent liabilities, (D) the capital of Issuer is adequate
to conduct the business of Issuer, (E) Issuer has the ability to pay its debts
and obligations as such debts mature and does not intend to, or does not believe
that it will, incur debt beyond its ability to pay as such debts mature, (F) it
would be able to purchase the Number of Shares in compliance with the laws of
Issuer’s jurisdiction or organization, (G) it has the power to make such
election and to execute and deliver any documentation relating to such election
that it is required by this Confirmation to deliver and to perform its
obligations under this Confirmation and has taken all necessary action to
authorize such election, execution, delivery and performance, and (H) such
election and performance of its obligations under this Confirmation do not
violate or conflict with any law applicable to it, any provision of its
constitutional documents, any order or judgment of any court or other agency of
government applicable to it or any of its assets or any contractual restriction
binding on or affecting it or any of its assets; and (ii) any election of
settlement method shall apply to all Components. At any time prior to making a
Settlement Method Election, Issuer may, without the consent of Dealer, amend
this Confirmation by notice to Dealer to eliminate Issuer’s right to elect Cash
Settlement.

4

--------------------------------------------------------------------------------

 

         
 
  Electing Party:   Issuer
 
       
 
  Settlement Method Election Date:   The third Scheduled Trading Day immediately
preceding the Expiration Date for the Component with the earliest Expiration
Date.
 
       
 
  Default Settlement Method:   Net Share Settlement
 
       
 
  Net Share Settlement:   On each Settlement Date, Issuer shall deliver to
Dealer a number of Shares equal to the Number of Shares to be Delivered for such
Settlement Date to the account specified by Dealer and cash in lieu of any
fractional Share valued at the Relevant Price on the Valuation Date
corresponding to such Settlement Date. If, in the reasonable judgment of Issuer
or Dealer, based on advice of counsel, for any reason, the Shares deliverable
upon Net Share Settlement would not be immediately freely transferable by Dealer
under Rule 144 under the Securities Act of 1933, as amended (the “Securities
Act”), then Dealer may elect to either (x) accept delivery of such Shares
notwithstanding any restriction on transfer or (y) have the provisions set forth
in Section 8(b) below apply.
 
       
 
      The Number of Shares to be Delivered shall be delivered by Issuer to
Dealer no later than 12:00 noon (local time in New York City) on the relevant
Settlement Date.
 
       
 
  Number of Shares to be Delivered:   In respect of any Exercise Date, subject
to the last sentence of Section 9.5 of the Equity Definitions, the product of
(i) the number of Warrants exercised or deemed exercised on such Exercise Date,
(ii) the Warrant Entitlement and (iii) (A) the excess of the VWAP Price on the
Valuation Date occurring on such Exercise Date over the Strike Price (or, if
there is no such excess, zero) divided by (B) such VWAP Price.
 
       
 
  VWAP Price:   For any Exchange Business Day, as reasonably determined by the
Calculation Agent based on NASDAQ Volume Weighted Average Price per Share for
the regular trading session (including any extensions thereof) of the Exchange
on such Exchange Business Day (without regard to pre-open or after hours trading
outside of such regular trading session), as published by Bloomberg at 4:15
P.M., New York City time (or 15 minutes following the end of any extension of
the regular trading session), on such Exchange Business Day, on Bloomberg page
“NTAP.UQ <Equity> AQR” (or any successor thereto) (or if such published volume
weighted average price is unavailable or is manifestly incorrect, the market
value of one Share on such Exchange Business Day, as reasonably determined by
the Calculation Agent using a volume weighted method).

5

--------------------------------------------------------------------------------

 

         
 
  Option Cash Settlement Amount:   In respect of any Exercise Date, the product
of (i) the number of Warrants exercised or deemed exercised on such Exercise
Date, (ii) the Warrant Entitlement and (iii) (A) the excess of the VWAP Price on
the Valuation Date occurring on such Exercise Date over the Strike Price (or, if
there is no such excess, zero).
 
       
 
  Other Applicable Provisions:   The provisions of Sections 9.1(c), 9.8, 9.9,
9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if “Physical
Settlement” applied to the Transaction; provided that the Representation and
Agreement contained in Section 9.11 of the Equity Definitions shall be modified
by excluding any representations therein relating to restrictions, obligations,
limitations or requirements under applicable securities laws that exist as a
result of the fact that Issuer is the issuer of the Shares.

Adjustments:
     In respect of any Component:

         
 
  Method of Adjustment:   Calculation Agent Adjustment; provided that in respect
of an Extraordinary Dividend, “Calculation Agent Adjustment” shall be as
described under “Extraordinary Dividend Adjustment” below; and provided further
that the parties agree that open market Share repurchases at prevailing market
prices or accelerated share repurchases, forward contracts or similar
transactions on customary terms (including without limitation any discount to
average VWAP prices) shall not be considered Potential Adjustment Events. For
the avoidance of doubt, Calculation Agent Adjustment (including, without
limitation, in respect of Extraordinary Dividends) shall continue to apply until
the obligations of the parties (including any obligations of Issuer pursuant to
Section 8(e) below) under the Transaction have been satisfied in full.
 
       
 
  Extraordinary Dividend:   Any cash dividend or distribution on the Shares with
an ex-dividend date occurring on or after the Trade Date and on or prior to the
Expiration Date (or, if any Deficit Shares are owed pursuant to Section 8(e)
below, such later date on which Issuer’s obligations under this Transaction have
been satisfied in full).
 
       
 
  Extraordinary Dividend Adjustment:   If at any time during the period from and
including the Trade Date, to but excluding the Expiration Date for the Component
with the latest Expiration Date (or, if any Deficit Shares are owed pursuant to
Section 8(e) below, such later date on which Issuer’s obligations under this
Transaction have been satisfied in full), an ex-dividend date for an
Extraordinary Dividend occurs, then the Calculation Agent will make adjustments
to any one or more of the Strike Price, the Number of Warrants, the Warrant
Entitlement and/or any other variable relevant to the

6

--------------------------------------------------------------------------------

 

         
 
      exercise, settlement, payment or other terms of the Transaction as it
reasonably determines appropriate to account for the economic effect on the
Transaction of such Extraordinary Dividend (and, for the avoidance of doubt,
adjustments may be made to account solely for changes in volatility, expected
dividends, stock loan rate or liquidity relative to the relevant Shares).

Extraordinary Events:
     Consequences of Merger Events:

         
 
       (a) Share-for-Share:   Modified Calculation Agent Adjustment
 
       
 
       (b) Share-for-Other:   Cancellation and Payment (Calculation Agent
Determination)
 
       
 
       (c) Share-for-Combined:   Cancellation and Payment (Calculation Agent
Determination); provided that the Calculation Agent may elect Component
Adjustment for all or part of the Transaction.
 
       
 
  Tender Offer:   Applicable; provided that for the purposes of Section
12.3(d)(ii) of the Equity Definitions, references in the definition of Tender
Offer under the Equity Definitions to 10% shall be replaced with 20%.
 
       
 
  Consequences of Tender Offers:    
 
       
 
       (a) Share-for-Share:   Modified Calculation Agent Adjustment
 
       
 
       (b) Share-for-Other:   Modified Calculation Agent Adjustment
 
       
 
       (c) Share-for-Combined:   Modified Calculation Agent Adjustment

         
 
  Modified Calculation
Agent Adjustment:   Upon the occurrence of any Merger Event pursuant to which
the holders of Issuer’s Shares would be entitled to receive cash, securities or
other property for their Shares and for which Modified Calculation Agent
Adjustment would apply, if, as a result of such Merger Event, Issuer would be
different from the issuer of the Shares under this Confirmation, then, on or
prior to the effective date of such Merger Event, the Issuer and the issuer of
the Shares under this Confirmation will enter into a supplemental confirmation
as a condition precedent to the adjustments contemplated in Section 12.2(e)(i)
of the Equity Definitions, with such supplemental confirmation containing
representations, warranties and agreements relating to securities law and other
issues as reasonably requested by Dealer that Dealer has determined, in its
reasonable discretion, to be reasonably necessary or appropriate to allow Dealer
to continue as a party to the Transaction, as adjusted under Section 12.2(e)(i)
of the Equity Definitions, and to preserve its hedging or hedge unwind
activities in connection with the Transaction in a manner compliant with
applicable legal, regulatory or self-regulatory requirements, or with related
policies

7

--------------------------------------------------------------------------------

 

         
 
      and procedures applicable to Dealer, and if such conditions are not met in
all material respects or if the Calculation Agent determines that no adjustment
that it could make under Section 12.2(e)(i) of the Equity Definitions will
produce a commercially reasonable result, then the consequences set forth in
Section 12.2(e)(ii) of the Equity Definitions shall apply.
 
       
 
  Nationalization, Insolvency
or Delisting:   Cancellation and Payment (Calculation Agent Determination);
provided that in addition to the provisions of Section 12.6(a)(iii) of the
Equity Definitions, it shall also constitute a Delisting if the Exchange is
located in the United States and the Shares are not immediately re-listed,
re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global
Select Market or The NASDAQ Global Market (or their respective successors); if
the Shares are immediately re-listed, re-traded or re-quoted on any such
exchange or quotation system, such exchange or quotation system shall thereafter
be deemed to be the Exchange.

         
 
  Additional Disruption Events:    
 
       
 
       (a) Change in Law:   Applicable; provided that Section 12.9(a)(ii) of the
Equity Definitions is hereby amended by (i) replacing the phrase “the
interpretation” in the third line thereof with the phrase “or announcement or
statement of the formal or informal interpretation” and (ii) immediately
following the word “Transaction” in clause (X) thereof, adding the phrase “in
the manner contemplated by Hedging Party on the Trade Date.”
 
       
 
       (b) Failure to Deliver:   Applicable
 
       
 
       (c) Insolvency Filing:   Applicable
 
       
 
       (d) Hedging Disruption:   Applicable
 
       
 
       (e) Loss of Stock Borrow:   Applicable
 
       
 
            Maximum Stock Loan Rate:   2.00% per annum
 
       
 
       (f) Increased Cost of Stock Borrow:   Applicable
 
       
 
            Initial Stock Loan Rate:   0.25% per annum

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

8

--------------------------------------------------------------------------------

 

         
 
  3. Calculation Agent:   Dealer. All determinations made by the Calculation
Agent shall be made in good faith and in a commercially reasonable manner.
Following any calculation by the Calculation Agent hereunder, upon a prior
written request by Issuer, the Calculation Agent will provide to Issuer by
e-mail to the e-mail address provided by Issuer in such prior written request a
report (in a commonly used file format for the storage and manipulation of
financial data) displaying in reasonable detail the basis for such calculation.
No transferee of Dealer with respect to any Options in accordance with the terms
of this Confirmation shall act as Calculation Agent with respect to such
transferred Options without the prior consent of Issuer, such consent not to be
unreasonably withheld.

     4. Account Details:
          Dealer Payment Instructions:
               [       ]
          Account for delivery of Shares to Dealer:
               To be provided by Dealer
          Issuer Payment Instructions:
                To be provided by Issuer.
     5. Offices:
          The Office of Dealer for the Transaction is:
                [       ]
          The Office of Issuer for the Transaction is:
                [       ]
     6. Notices: For purposes of this Confirmation:
     (a) Address for notices or communications to Issuer:

         
 
  To:   NetApp, Inc.
 
      495 East Java Drive
 
      Sunnyvale, CA 94089
 
  Attn:   Treasurer
 
  Telephone:   (408) 822-6000
 
  Facsimile:   (408) 822-4501
 
       
 
  With a copy to:   NetApp, Inc.
 
      495 East Java Drive
 
      Sunnyvale, CA 94089
 
  Attn:   General Counsel
 
  Telephone:   (408) 822-6000
 
  Facsimile:   (408) 822-4501

     (b) Address for notices or communications to Dealer:

         
 
  To:    
 
  Attn:   [       ]
 
      [       ]

9

--------------------------------------------------------------------------------

 

         
 
  Telephone:   [       ]
 
  Facsimile:   [       ]
 
       
 
  With a copy to:    
 
       
 
  Attn:   [       ]
 
      [       ]
 
  Telephone:   [       ]
 
  Facsimile:   [       ]

     7. Representations, Warranties and Agreements:
     (a) In addition to the representations and warranties in the Agreement and
those contained elsewhere herein, Issuer represents and warrants to and for the
benefit of, and agrees with, Dealer as follows:
     (i) On the Trade Date, (A) none of Issuer and its executive officers and
directors is aware of any material nonpublic information regarding Issuer or the
Shares and (B) all reports and other documents filed by Issuer with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended (the “Exchange Act”), when considered as a whole (with the more
recent such reports and documents deemed to amend inconsistent statements
contained in any earlier such reports and documents), do not contain any untrue
statement of a material fact or any omission of a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading.
     (ii) Without limiting the generality of Section 13.1 of the Equity
Definitions, Issuer acknowledges that neither Dealer nor any of its affiliates
is making any representations or warranties or taking a position or expressing
any view with respect to the treatment of the Transaction under any accounting
standards, including FASB Statements 128, 133 (as amended), 149 or 150, EITF
Issue No. 00-19, 01-6, 03-6 or 07-5 (or any successor issue statements) or under
the FASB’s Liabilities & Equity Project..
     (iii) Prior to the Trade Date, Issuer shall deliver to Dealer a resolution
of Issuer’s board of directors authorizing the Transaction and such other
certificate or certificates as Dealer shall reasonably request.
     (iv) Issuer 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 otherwise manipulate the price of the Shares (or
any security convertible into or exchangeable for Shares) or otherwise in
violation of the Exchange Act.
     (v) Issuer 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.
     (vi) On the Trade Date and the Premium Payment Date (A) the assets of
Issuer at their fair valuation exceed the liabilities of Issuer, including
contingent liabilities, (B) the capital of Issuer is adequate to conduct the
business of Issuer and (C) Issuer has the ability to pay its debts and
obligations as such debts mature and does not intend to, or does not believe
that it will, incur debt beyond its ability to pay as such debts mature.
     (vii) Issuer shall not take any action to decrease the number of Available
Shares below the Capped Number (each as defined below).
     (viii) Issuer understands no obligations of Dealer to it hereunder will be
entitled to the benefit of deposit insurance and that such obligations will not
be guaranteed by any affiliate of Dealer or any governmental agency.
     (ix) (A) During the period starting on the first Expiration Date and ending
on the last Expiration Date (the “Settlement Period”), the Shares or securities
that are convertible into, or exchangeable or exercisable for Shares, are not,
and shall not be, subject to a “restricted period,”

10

--------------------------------------------------------------------------------

 

as such term is defined in Regulation M under the Exchange Act (“Regulation M”)
and (B) Issuer shall not engage in any “distribution,” as such term is defined
in Regulation M, other than a distribution meeting the requirements of the
exceptions set forth in sections 101(b)(10) and 102(b)(7) of Regulation M, until
the second Exchange Business Day immediately following the Settlement Period.
     (x) During the Settlement Period, neither Issuer nor any “affiliate” or
“affiliated purchaser” (each as defined in Rule 10b-18 of the Exchange Act
(“Rule 10b-18”)) shall directly or indirectly (including, without limitation, by
means of any cash-settled or other derivative instrument) purchase, offer to
purchase, place any bid or limit order that would effect a purchase of, or
commence any tender offer relating to, any Shares (or an equivalent interest,
including a unit of beneficial interest in a trust or limited partnership or a
depository share) or any security convertible into or exchangeable or
exercisable for Shares, except through Dealer, except for purchases from its
employees that are not “Rule 10b-18 purchases” as defined in Rule 10b-18(a)(13).
     (xi) Issuer agrees that it (A) will not during the Settlement Period make,
or permit to be made, any public announcement (as defined in Rule 165(f) under
the Securities Act) of any Merger Transaction or potential Merger Transaction
unless such public announcement is made prior to the opening or after the close
of the regular trading session on the Exchange for the Shares; (B) shall
promptly (but in any event prior to the next opening of the regular trading
session on the Exchange) notify Dealer following any such announcement that such
announcement has been made; and (C) shall promptly (but in any event prior to
the next opening of the regular trading session on the Exchange) provide Dealer
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 Dealer or its
affiliates and (ii) the number of Shares purchased pursuant to the proviso in
Rule 10b-18(b)(4) under 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 Dealer that such information is true and correct. In
addition, Issuer shall promptly notify Dealer of the earlier to occur of the
completion of such transaction and the completion of the vote by target
shareholders. “Merger Transaction” means any merger, acquisition or similar
transaction involving a recapitalization as contemplated by
Rule 10b-18(a)(13)(iv) under the Exchange Act.
     (xii) Any Shares issued or delivered in connection with the Transaction
shall be duly authorized and validly issued, fully paid and non-assessable, and
the issuance or delivery thereof shall not be subject to any preemptive or
similar rights.
     (b) Each of Dealer and Issuer agrees and represents that it is an “eligible
contract participant” as defined in Section 1a(12) of the U.S. Commodity
Exchange Act, as amended.
     (c) Each of Dealer and Issuer acknowledges that the offer and sale of the
Transaction to it is intended to be exempt from registration under the
Securities Act, by virtue of Section 4(2) thereof. Accordingly, Dealer
represents and warrants to Issuer that (i) it has the financial ability to bear
the economic risk of its investment in the Transaction and is able to bear a
total loss of its investment and its investments in and liabilities in respect
of the Transaction, which it understands are not readily marketable, are not
disproportionate to its net worth, and it is able to bear any loss in connection
with the Transaction, including the loss of its entire investment in the
Transaction, (ii) it is an “accredited investor” as that term is defined in
Regulation D as promulgated under the Securities Act, (iii) it is entering into
the Transaction for its own account without a view to the distribution or resale
thereof, (iv) the assignment, transfer or other disposition of the Transaction
has not been and will not be registered under the Securities Act and is
restricted under this Confirmation, the Securities Act and state securities
laws, and (v) its financial condition is such that it has no need for liquidity
with respect to its investment in the Transaction and no need to dispose of any
portion thereof to satisfy any existing or contemplated undertaking or
indebtedness and is capable of assessing the merits of and understanding (on its
own behalf or through independent professional advice), and understands and
accepts, the terms, conditions and risks of the Transaction.
     (d) Each of Dealer and Issuer agrees and acknowledges that Dealer is a
“financial institution,” “swap participant” and “financial participant” within
the meaning of Sections 101(22),

11

--------------------------------------------------------------------------------

 

101(53C) and 101(22A) of Title 11 of the United States Code (the “Bankruptcy
Code”). The parties hereto further agree and acknowledge (A) that this
Confirmation is (i) a “securities contract,” as such term is defined in
Section 741(7) of Title 11 of the Bankruptcy Code, with respect to which each
payment and delivery hereunder is a “settlement payment,” as such term is
defined in Section 741(8) of the Bankruptcy Code, and (ii) a “swap agreement,”
as such term is defined in Section 101(53B) of the Bankruptcy Code, with respect
to which each payment and delivery hereunder is a “transfer,” as such term is
defined in Section 101(54) of the Bankruptcy Code, and (B) that Dealer is
entitled to the protections afforded by, among other sections, Sections
362(b)(6), 362(b)(17), 546(e), 546(g), 555 and 560 of the Bankruptcy Code.
     (e) Issuer shall deliver to Dealer (i) an incumbency certificate, dated as
of the Trade Date, of Issuer in customary form and (ii) an opinion of counsel,
dated as of the Trade Date and reasonably acceptable to Dealer in form and
substance, with respect to due incorporation, existence and good standing of the
Issuer in Delaware, its qualifications as a foreign corporation and good
standing in California, the due authorization, execution and delivery of the
Confirmation, and the absence of conflict of the execution and delivery of the
Confirmation with any material agreement required to be filed as any exhibit to
the Issuer’s Annual Report on Form 10-K and the Issuer’s charter documents
     (f) Issuer represents and warrants that it has received, read and
understands the OTC Options Risk Disclosure Statement and a copy of the most
recent disclosure pamphlet prepared by The Options Clearing Corporation entitled
“Characteristics and Risks of Standardized Options”.
     Each party acknowledges and agrees to be bound by the Conduct Rules of the
National Association of Securities Dealers, Inc. applicable to transactions in
options, and further agrees not to violate the position and exercise limits set
forth therein.
     8. Other Provisions:
     (a) Alternative Calculations and Payment on Early Termination and on
Certain Extraordinary Events. If Issuer shall owe Dealer any amount pursuant to
Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions (except in the
event of a Tender Offer, Merger Event, Insolvency or Nationalization, in each
case, in which the consideration or proceeds to be paid to holders of Shares
consists solely of cash) or pursuant to Section 6(d)(ii) of the Agreement
(except in the event of an Event of Default in which Issuer is the Defaulting
Party or a Termination Event in which Issuer is the Affected Party that resulted
from an event or events within Issuer’s control) (a “Payment Obligation”),
Issuer shall have the right, in its sole discretion, to satisfy any such Payment
Obligation by the Share Termination Alternative (as defined below) by giving
irrevocable telephonic notice to Dealer, confirmed in writing within one
Scheduled Trading Day, between the hours of 9:00 A.M. and 4:00 P.M., New York
City time, on the Merger Date, Tender Offer Date, Announcement Date or Early
Termination Date, as applicable (“Notice of Share Termination”). Upon such
Notice of Share Termination, the following provisions shall apply on the
Scheduled Trading Day immediately following the Merger Date, the Tender Offer
Date, Announcement Date or Early Termination Date, as applicable:

     
Share Termination Alternative:
  Applicable and means that Issuer shall deliver to Dealer the Share Termination
Delivery Property on the date on which the Payment Obligation would otherwise be
due pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions
or Section 6(d)(ii) of the Agreement, as applicable (the “Share Termination
Payment Date”), in satisfaction of the Payment Obligation.
 
   
Share Termination Delivery Property:
  A number of Share Termination Delivery Units, as calculated by the Calculation
Agent, equal to the Payment Obligation divided by the Share Termination Unit
Price. The Calculation Agent shall adjust the Share Termination Delivery
Property by replacing any fractional portion of the aggregate amount of a
security therein with an amount of cash equal to the value of such fractional
security based on the values used to calculate the Share Termination Unit Price.
 
   
Share Termination Unit Price:
  The value of property contained in one Share Termination Delivery Unit, as
determined by the Calculation Agent in its discretion by

12

--------------------------------------------------------------------------------

 

     
 
  commercially reasonable means and notified by the Calculation Agent to Issuer
at the time of notification of the Payment Obligation.
 
   
Share Termination Delivery Unit:
  In the case of a Termination Event, Event of Default, Delisting or Additional
Disruption Event, one Share or, in the case of an Insolvency, Nationalization,
Merger Event or Tender Offer, a Share or 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,
Merger Event or Tender Offer. If such Insolvency, Nationalization, Merger Event
or Tender Offer involves a choice of consideration to be received by holders,
such holder shall be deemed to have elected to receive the maximum possible
amount of cash.
 
   
Failure to Deliver:
  Applicable
 
   
Other Applicable provisions:
  If Share Termination Alternative is applicable, the provisions of
Sections 9.8, 9.9, 9.11 and 9.12 of the Equity Definitions will be applicable as
if “Physical Settlement” applied to the Transaction, except that all references
to “Shares” shall be read as references to “Share Termination Delivery Units”;
provided that the Representation and Agreement contained in Section 9.11 of the
Equity Definitions shall be modified by excluding any representations therein
relating to restrictions, obligations, limitations or requirements under
applicable securities laws as a result of the fact that Issuer is the issuer of
any Share Termination Delivery Units (or any security forming a part thereof).
If, in the reasonable judgment of Issuer or Dealer, based on advice of counsel,
for any reason, any securities comprising the Share Termination Delivery Units
deliverable pursuant to this Section 8(a) would not be immediately freely
transferable by Dealer under Rule 144 under the Securities Act, then Dealer may
elect to either (x) permit delivery of such securities notwithstanding any
restriction on transfer or (y) have the provisions set forth in Section 8(b)
below apply.

     (b) Registration/Private Placement Procedures. (i) With respect to the
Transaction, the following provisions shall apply to the extent provided for
above opposite the caption “Net Share Settlement” in Section 2 or in paragraph
(a) of this Section 8. If so applicable, then, at the election of Issuer by
notice to Dealer within one Exchange Business Day after the relevant delivery
obligation arises, but in any event at least one Exchange Business Day prior to
the date on which such delivery obligation is due, either (A) all Shares or
Share Termination Delivery Units, as the case may be, delivered by Issuer to
Dealer shall be covered by an effective registration statement of Issuer for
immediate resale by Dealer (such registration statement and the corresponding
prospectus (the “Prospectus”) (including, without limitation, any sections
describing the plan of distribution) in form and content commercially reasonably
satisfactory to Dealer) or (B) Issuer shall deliver additional Shares or Share
Termination Delivery Units, as the case may be, so that the value of such Shares
or Share Termination Delivery Units, as determined by the Calculation Agent to
reflect an appropriate liquidity discount, equals the value of the number of
Shares or Share Termination Delivery Units that would otherwise be deliverable
if such Shares or Share Termination Delivery Units were freely tradeable
(without prospectus delivery) upon receipt by Dealer (such value, the “Freely
Tradeable Value”); provided that, if requested by Dealer, Issuer shall make the
election described in this clause (B) with respect to Shares delivered on all
Settlement Dates no later than one Exchange Business Day prior to the first
Exercise Date, and the applicable procedures described below shall apply to all
Shares delivered on the Settlement Dates on an aggregate basis. (For the
avoidance of doubt, as used in this paragraph (b) only, the term “Issuer” shall
mean the issuer of the relevant securities, as the context shall require.)
     (ii) If Issuer makes the election described in clause (b)(i)(A) above:

13

--------------------------------------------------------------------------------

 

     (A) Dealer (or an affiliate of Dealer designated by Dealer) shall be
afforded a reasonable opportunity to conduct a due diligence investigation with
respect to Issuer that is customary in scope for underwritten follow-on
offerings of equity securities of companies of comparable size, maturity and
lines of business and that yields results that are commercially reasonably
satisfactory to Dealer or such affiliate, as the case may be, in its discretion;
and
     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer
shall enter into an agreement (a “Registration Agreement”) on commercially
reasonable terms in connection with the public resale of such Shares or Share
Termination Delivery Units, as the case may be, by Dealer or such affiliate
substantially similar to underwriting agreements customary for underwritten
follow-on offerings of equity securities of companies of comparable size,
maturity and lines of business, in form and substance commercially reasonably
satisfactory to Dealer or such affiliate and Issuer, which Registration
Agreement shall include, without limitation, provisions substantially similar to
those contained in such underwriting agreements relating to the indemnification
of, and contribution in connection with the liability of, Dealer and its
affiliates and Issuer, shall provide for the payment by Issuer of all
registration expenses in connection with such resale, including all registration
costs and all fees and expenses of counsel for Dealer, and shall provide for the
delivery of accountants’ “comfort letters” to Dealer or such affiliate with
respect to the financial statements and certain financial information contained
in or incorporated by reference into the Prospectus as are customarily requested
in comfort letters covering follow-on offerings of equity securities of
companies of comparable size, maturity and lines of business.
     (iii) If Issuer makes the election described in clause (b)(i)(B) above:
     (A) Dealer (or an affiliate of Dealer designated by Dealer) and any
potential institutional purchaser of any such Shares or Share Termination
Delivery Units, as the case may be, from Dealer or such affiliate identified by
Dealer shall be afforded a commercially reasonable opportunity to conduct a due
diligence investigation in compliance with applicable law with respect to Issuer
customary in scope for private placements of equity securities of companies of
comparable size, maturity and lines of business (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), subject to execution by such recipients of customary
confidentiality agreements reasonably acceptable to Issuer;
     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer
shall enter into an agreement (a “Private Placement Agreement”) on commercially
reasonable terms in connection with the private placement of such Shares or
Share Termination Delivery Units, as the case may be, by Issuer to Dealer or
such affiliate and the private resale of such shares by Dealer or such
affiliate, substantially similar to private placement purchase agreements
customary for private placements of equity securities of companies of comparable
size, maturity and lines of business, in form and substance commercially
reasonably satisfactory to Dealer and Issuer, which Private Placement Agreement
shall include, without limitation, provisions substantially similar to those
contained in such private placement purchase agreements relating to the
indemnification of, and contribution in connection with the liability of, Dealer
and its affiliates and Issuer, shall provide for the payment by Issuer of all
expenses in connection with such resale, including all fees and expenses of
counsel for Dealer, shall contain representations, warranties and agreements of
Issuer reasonably necessary or advisable to establish and maintain the
availability of an exemption from the registration requirements of the
Securities Act for such resales, and shall use commercially reasonable efforts
to provide for the delivery of accountants’ “comfort letters” to Dealer or such
affiliate with respect to the financial statements and certain financial
information contained in or incorporated by reference into the offering
memorandum prepared for the resale of such Shares as are customarily requested
in comfort letters covering private placements of equity securities of companies
of comparable size, maturity and lines of business;
     (C) Issuer agrees that any Shares or Share Termination Delivery Units so
delivered to Dealer, (i) may be transferred by and among Dealer and its
affiliates, and Issuer shall effect such transfer without any further action by
Dealer and (ii) after the minimum “holding period” within the meaning of Rule
144(d) under the Securities Act has elapsed with respect to such

14

--------------------------------------------------------------------------------

 

Shares or any securities issued by Issuer comprising such Share Termination
Delivery Units, Issuer shall promptly remove, or cause the transfer agent for
such Shares or securities to remove, any legends referring to any such
restrictions or requirements from such Shares or securities upon delivery by
Dealer (or such affiliate of Dealer) to Issuer or such transfer agent of
seller’s and broker’s representation letters customarily delivered by Dealer in
connection with resales of restricted securities pursuant to Rule 144 under the
Securities Act, 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); and
     (D) Issuer shall not take, or cause to be taken, any action that would make
unavailable either the exemption pursuant to Section 4(2) of the Securities Act
for the sale by Issuer to Dealer (or any affiliate designated by Dealer) of the
Shares or Share Termination Delivery Units, as the case may be, or the exemption
pursuant to Section 4(1) or Section 4(3) of the Securities Act for resales of
the Shares or Share Termination Delivery Units, as the case may be, by Dealer
(or any such affiliate of Dealer).
     (c) Make-whole Shares. If Issuer makes the election described in clause
(i)(B) of paragraph (b) of this Section 8, then Dealer or its affiliates may
sell (which sale shall be made in a commercially reasonable manner) such Shares
or Share Termination Delivery Units, as the case may be, during a period (the
“Resale Period”) commencing on the Exchange Business Day following delivery of
such Shares or Share Termination Delivery Units, as the case may be, and ending
on the Exchange Business Day on which Dealer or its affiliates completes the
sale of all such Shares or Share Termination Delivery Units, as the case may be,
or a sufficient number of Shares or Share Termination Delivery Units, as the
case may be, so that the realized net proceeds of such sales exceed the Freely
Tradeable Value. If any of such delivered Shares or Share Termination Delivery
Units remain after such realized net proceeds exceed the Freely Tradeable Value,
Dealer shall return such remaining Shares or Share Termination Delivery Units to
Issuer. If the Freely Tradeable Value exceeds the realized net proceeds from
such resale, Issuer shall transfer to Dealer by the open of the regular trading
session on the Exchange on the Exchange Trading Day immediately following the
last day of the Resale Period the amount of such excess (the “Additional
Amount”) in cash or in a number of additional Shares (“Make-whole Shares”) in an
amount that, based on the Relevant Price on the last day of the Resale Period
(as if such day was the “Valuation Date” for purposes of computing such Relevant
Price), has a dollar value equal to the Additional Amount. The Resale Period
shall continue to enable the sale of the Make-whole Shares in the manner
contemplated by this Section 8(c). This provision shall be applied successively
until the Additional Amount is equal to zero, subject to Section 8(e).
     (d) 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, immediately upon giving effect to
such receipt of such Shares, (i) the “beneficial ownership” (within the meaning
of Section 13 of the Exchange Act and the rules promulgated thereunder) of
Shares by Dealer, any of its affiliates subject to aggregation with Dealer for
purposes of the “beneficial ownership” test under Section 13 of the Exchange Act
and all persons who may form a “group” (within the meaning of Rule 13d-5(b)(1)
under the Exchange Act) with Dealer with respect to “beneficial ownership” of
any Shares (collectively, “Dealer Group”) would be equal to or greater than 8.5%
or more of the outstanding Shares or (ii) Dealer, Dealer Group or any person
whose ownership position would be aggregated with that of Dealer or Dealer Group
(Dealer, Dealer Group or any such person, a “Dealer Person”) under Section 203
of the Delaware General Corporation Law (the “DGCL Takeover Statute”) or other
federal, state or local regulations or regulatory orders applicable to ownership
of Shares (“Applicable Laws”), would own, beneficially own, constructively own,
control, hold the power to vote or otherwise meet a relevant definition of
ownership in excess of a number of Shares equal to (x) the number of Shares that
would give rise to reporting or registration obligations or other requirements
(including obtaining prior approval by a state or federal regulator) of a Dealer
Person under Applicable Laws (including, without limitation, “interested
stockholder” or “acquiring person” status under the DGCL Takeover Statute) and
with respect to which such requirements have not been met or the relevant
approval has not been received minus (y) 1.0% of the number of Shares
outstanding on the date of determination (either such condition described in
clause (i) or (ii), an “Excess Ownership Position”). If any delivery owed to
Dealer hereunder is not made,

15

--------------------------------------------------------------------------------

 

in whole or in part, as a result of this provision, Issuer’s obligation to make
such delivery shall not be extinguished and Issuer shall make such delivery as
promptly as practicable after, but in no event later than one Exchange Business
Day after, Dealer gives notice to Issuer that such delivery would not result in
the existence of an Excess Ownership Position.
     (e) Limitations on Settlement by Issuer. Notwithstanding anything herein or
in the Agreement to the contrary, in no event shall Issuer be required to
deliver Shares in connection with the Transaction in excess of the product of
two, the aggregate Number of Warrants for all Components at the time of delivery
and the Warrant Entitlement at the time of delivery (such product, the “Capped
Number”); provided that, solely for purposes of determining the Capped Number,
the Number of Warrants for a Component and the Warrant Entitlement at the time
of delivery shall take into account only adjustments made in accordance with the
provisions of this Confirmation as a result of any Potential Adjustment Event or
Extraordinary Event or other event, in each case, that was initiated by, and
effectuated under the control of, Issuer (it being understood, for the avoidance
of doubt, that an event initiated by Issuer shall not be deemed to be
effectuated outside of the control of Issuer merely because effectuating such
event requires approvals that are outside of Issuer’s control). Issuer
represents and warrants to Dealer (which representation and warranty shall be
deemed to be repeated on each day that the Transaction is outstanding) that the
Capped Number is equal to or less than the number of authorized but unissued
Shares of the Issuer that are not reserved for future issuance in connection
with transactions in the Shares (other than the Transaction) on the date of the
determination of the Capped Number (such Shares, the “Available Shares”). In the
event Issuer shall not have delivered the full number of Shares otherwise
deliverable as a result of this Section 8(e) (the resulting deficit, the
“Deficit Shares”), Issuer shall be continually obligated to deliver Shares, from
time to time until the full number of Deficit Shares have been delivered
pursuant to this paragraph, when, and to the extent, that (A) Shares are
repurchased, acquired or otherwise received by Issuer or any of its subsidiaries
after the Trade Date (whether or not in exchange for cash, fair value or any
other consideration), (B) authorized and unissued Shares reserved for issuance
in respect of other transactions prior to such date which prior to the relevant
date become no longer so reserved and (C) Issuer additionally authorizes any
unissued Shares that are not reserved for other transactions (such events as set
forth in clauses (A), (B) and (C) above, collectively, the “Share Issuance
Events”). Issuer shall promptly notify Dealer of the occurrence of any of the
Share Issuance Events (including the number of Shares subject to clause (A),
(B) or (C) and the corresponding number of Shares to be delivered) and, as
promptly as reasonably practicable, deliver such Shares thereafter. Issuer shall
not, until Issuer’s obligations under the Transaction have been satisfied in
full, use any Shares that become available for potential delivery to Dealer as a
result of any Share Issuance Event for the settlement or satisfaction of any
transaction or obligation other than the Transaction or reserve any such Shares
for future issuance for any purpose other than to satisfy Issuer’s obligations
to Dealer under the Transaction.
     (f) Equity Rights. Dealer acknowledges and agrees that this Confirmation is
not intended to convey to it rights with respect to the Transaction that are
senior to the claims of common stockholders in the event of Issuer’s bankruptcy.
For the avoidance of doubt, the parties agree that the preceding sentence shall
not apply at any time other than during Issuer’s bankruptcy to any claim arising
as a result of a breach by Issuer of any of its obligations under this
Confirmation or the Agreement. For the avoidance of doubt, the parties
acknowledge that the obligations of Issuer under this Confirmation are not
secured by any collateral that would otherwise secure the obligations of Issuer
herein under or pursuant to any other agreement.
     (g) Amendments to Equity Definitions. The following amendments shall be
made to the Equity Definitions:
     (i) For the purposes of any adjustment under Section 11.2(c) of the Equity
Definitions in respect of a Potential Adjustment Event described in
Section 11.2(e)(ii), (v) and (vi) thereof only, the first sentence of
Section 11.2(c) of the Equity Definitions, prior to clause (A) thereof, is
hereby amended to read as follows: ‘(c) If “Calculation Agent Adjustment” is
specified as the Method of Adjustment in the related Confirmation of a Share
Option Transaction, then following the announcement or occurrence of any
Potential Adjustment Event, the Calculation Agent will determine whether such
Potential Adjustment Event has a material effect on the theoretical value of the
relevant Shares or options on the Shares and, if so, will (i) make

16

--------------------------------------------------------------------------------

 

appropriate adjustment(s), if any, to any one or more of:’ and, the portion of
such sentence immediately preceding clause (ii) thereof is hereby amended by
deleting the words “diluting or concentrative” and the words “(provided that no
adjustments will be made to account solely for changes in volatility, expected
dividends, stock loan rate or liquidity relative to the relevant Shares)” and
replacing such latter phrase with the words “(and, for the avoidance of doubt,
adjustments may be made to account solely for changes in volatility, expected
dividends, stock loan rate or liquidity relative to the relevant Shares)”; and
     (ii) Section 11.2(e)(vii) of the Equity Definitions is hereby amended by
inserting at the end of the Section the phrase “or a material effect on the
theoretical value of the Warrants.”
     (h) Transfer and Assignment. Dealer may transfer or assign its rights and
obligations hereunder and under the Agreement, in whole or in part, at any time
without the consent of Issuer, subject to the restrictions set forth in the
legend appearing at the top of this Confirmation. Dealer shall as soon as
reasonably practicable notify Issuer of such transfer or assignment.
     (i) Disclosure. Effective from the date of commencement of discussions
concerning the Transaction, 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
Issuer relating to such tax treatment and tax structure.
     (j) Additional Termination Events. The occurrence of any of the following
shall constitute an Additional Termination Event with respect to which the
Transaction shall be the sole Affected Transaction and Issuer shall be the sole
Affected Party and Dealer shall be the party entitled to designate an Early
Termination Date pursuant to Section 6(b) of the Agreement and to determine the
amount payable pursuant to Section 6(e) of the Agreement; provided that with
respect to any Additional Termination Event, Dealer may choose to treat part of
the Transaction as the sole Affected Transaction, and, upon the termination of
the Affected Transaction, a Transaction with terms identical to those set forth
herein except with a Number of Warrants equal to the unaffected number of
Warrants shall be treated for all purposes as the Transaction, which shall
remain in full force and effect:
     (i) Dealer reasonably determines that it is advisable to terminate a
portion of the Transaction so that Dealer’s related hedging activities will
comply with applicable securities laws, rules or regulations or related policies
and procedures of Dealer (whether or not such requirements, policies or
procedures are imposed by law or have been voluntarily adopted by Dealer), or
Dealer, despite using commercially reasonable efforts, is unable or reasonably
determines that it is impractical or illegal to hedge its obligations pursuant
to this Transaction in the public market without registration under the
Securities Act or as a result of any legal, regulatory or self-regulatory
requirements;
     (ii) at any time at which any Excess Ownership Position (as defined above)
occurs, Dealer, in its discretion, is unable to effect a transfer or assignment
to a third party of the Transaction or any other transaction between the parties
after using its commercially reasonable efforts on pricing terms reasonably
acceptable to Dealer such that an Excess Ownership Position no longer exists;
provided that Dealer shall treat only that portion of the Transaction as the
Affected Transaction as necessary so that such Excess Ownership Position no
longer exists;
     (iii) any Person (as defined below) other than Issuer files a Schedule TO
or any other schedule, form or report under the Exchange Act disclosing, or
Issuer otherwise becomes aware, that such Person has acquired beneficial
ownership (determined in accordance with Rule 13d-3 under the Exchange Act),
directly or indirectly, through a purchase, merger or other acquisition
transaction or series of transactions, of shares of Issuer’s capital stock
entitling the Person to exercise 50% or more of the total voting power of all
shares of Issuer’s capital stock entitled to vote generally in elections of
directors;

17

--------------------------------------------------------------------------------

 

     (iv) Issuer merges or consolidates with or into any other Person, other
than a subsidiary, another Person merges with or into Issuer, or Issuer conveys,
sells, transfers or leases all or substantially all of its assets to another
Person, other than any merger or consolidation:

  (A)   that does not result in a reclassification, conversion, exchange or
cancellation of the outstanding Shares and pursuant to which the consideration
received by holders of Shares immediately prior to the transaction entitles such
holders to exercise, directly or indirectly, 50% or more of the voting power of
all shares of capital stock entitled to vote generally in the election of
directors of the continuing or surviving corporation immediately after such
transaction in substantially the same proportions as their respective ownership
of our voting securities immediately prior to the transaction; or     (B)  
which is effected solely to change Issuer’s jurisdiction of incorporation and
results in a reclassification, conversion or exchange of outstanding Shares
solely into shares of common stock of the surviving entity; or

     (v) Issuer is liquidated or dissolved or holders of Shares approve any plan
or proposal for Issuer’s liquidation or dissolution.
Notwithstanding the foregoing, a transaction set forth in clause (iii) or
(iv) above will not constitute an Additional Termination Event, in each case, if
at least 90% of the consideration received for the Shares (excluding cash
payments for fractional shares and cash payments made pursuant to dissenters’
appraisal rights and cash dividends) in connection with such event consists of
shares of capital stock traded or quoted on any of the New York Stock Exchange,
the NASDAQ Global Market or the NASDAQ Global Select Market (or any of their
respective successors) (or will be so traded or quoted immediately following the
completion of the merger or consolidation or such other transaction).
     “Person” includes any syndicate or group that would be deemed to be a
“person” under Section 13(d)(3) of the Exchange Act.
     (k) Effectiveness. If, on or prior to the Effective Date, Dealer reasonably
determines that it is advisable to cancel the Transaction because of concerns
that Dealer’s related hedging activities could be viewed as not complying with
applicable securities laws, rules or regulations, the Transaction shall be
cancelled and shall not become effective, and neither party shall have any
obligation to the other party in respect of the Transaction.
     (l) Extension of Settlement. Dealer may divide any Component into
additional Components and designate the Expiration Date and the Number of
Warrants for each such Component if Dealer determines, in its reasonable
discretion, that such further division is necessary or advisable to preserve
Dealer’s hedging activity hereunder in light of existing liquidity conditions in
the cash market or stock loan market or to enable Dealer to effect purchases of
Shares in connection with its hedging activity hereunder in a manner that would,
if Dealer were Issuer or an affiliated purchaser of Issuer, be compliance with
applicable legal and regulatory requirements.
     (m) No Netting and Set-off. The provisions of Section 2(c) of the Agreement
shall not apply to the Transaction. Each party waives any and all rights it may
have to set-off delivery or payment obligations it owes to the other party under
the Transaction against any delivery or payment obligations owed to it by the
other party, whether arising under the Agreement, under any other agreement
between parties hereto, by operation of law or otherwise.
     (n) Delivery of Cash. For the avoidance of doubt, nothing in this
Confirmation shall be interpreted as requiring the Issuer to deliver cash in
respect of the settlement of the Transaction, except in circumstances where the
required cash settlement thereof is permitted for classification of the contract
as equity by EITF 00-19 as in effect on the relevant Trade Date (including,
without limitation, where the Issuer so elects to deliver cash or fails timely
to elect to deliver Shares or Share Termination Delivery Property in respect of
such settlement).
     (o) Payments by Dealer upon Early Termination. The parties hereby agree
that, notwithstanding anything to the contrary herein, in the Definitions or in
the Agreement, following the

18

--------------------------------------------------------------------------------

 

payment of the Premium, in the event that an Early Termination Date (whether as
a result of an Event of Default or a Termination Event) occurs or is designated
with respect to the Transaction or the Transaction is terminated or cancelled
pursuant to Article 12 of the Equity Definitions and, as a result, Dealer would
owe to Issuer an amount calculated under Section 6(e) of the Agreement or
Article 12 of the Equity Definitions, such amount shall be deemed to be zero.
     (p) Governing Law. THE AGREEMENT, THIS CONFIRMATION AND ALL MATTERS ARISING
IN CONNECTION WITH THE AGREEMENT AND THIS CONFIRMATION SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT REFERENCE TO ITS CHOICE OF LAW DOCTRINE, OTHER THAN TITLE 14 OF THE NEW
YORK GENERAL OBLIGATIONS LAW).
     (q) Amendment. This Confirmation and the Agreement may not be modified,
amended or supplemented, except in a written instrument signed by Issuer and
Dealer. If Goldman, Sachs & Co. exercises the Initial Purchasers’ (as defined in
the Purchase Agreement) right under the Purchase Agreement to purchase
additional convertible notes as set forth therein, then Dealer and Issuer will
either enter into a new confirmation evidencing a corresponding number of
additional warrants to be issued by Issuer to Dealer or amend this Confirmation
(in each case on pricing terms acceptable Dealer and Issuer) (such additional
confirmation or amendment to this Confirmation to provide for the payment by
Dealer to Issuer of the additional premium related thereto in an amount to be
agreed between the parties).
     (r) Counterparts. This Confirmation may be executed in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
     9. Arbitration.
     (a) All parties to this Confirmation are giving up the right to sue each
other in court, including the right to a trial by jury, except as provided by
the rules of the arbitration forum in which a claim is filed.
     (b) Arbitration awards are generally final and binding; a party’s ability
to have a court reverse or modify an arbitration award is very limited.
     (c) The ability of the parties to obtain documents, witness statements and
other discovery is generally more limited in arbitration than in court
proceedings.
     (d) The arbitrators do not have to explain the reason(s) for their award.
     (e) The panel of arbitrators will typically include a minority of
arbitrators who were or are affiliated with the securities industry, unless
Issuer is a member of the organization sponsoring the arbitration facility, in
which case all arbitrators may be affiliated with the securities industry.
     (f) The rules of some arbitration forums may impose time limits for
bringing a claim in arbitration. In some cases, a claim that is ineligible for
arbitration may be brought in court.
     (g) The rules of the arbitration forum in which the claim is filed, and any
amendments thereto, shall be incorporated into this Confirmation.
     (h) Issuer agrees that any and all controversies that may arise between
Issuer and Dealer, including, but not limited to, those arising out of or
relating to the Agreement or the Transaction hereunder, shall be determined by
arbitration conducted before The New York Stock Exchange, Inc. (“NYSE”) or NASD
Dispute Resolution (“NASD-DR”), or, if the NYSE and NASD-DR decline to hear the
matter, before the American Arbitration Association, in accordance with their
arbitration rules then in force. The award of the arbitrator shall be final, and
judgment upon the award rendered may be entered in any court, state or federal,
having jurisdiction.

19

--------------------------------------------------------------------------------

 

     (i) No person shall bring a putative or certified class action to
arbitration, nor seek to enforce any pre-dispute arbitration agreement against
any person who has initiated in court a putative class action or who is a member
of a putative class who has not opted out of the class with respect to any
claims encompassed by the putative class action until: (i) the class
certification is denied; (ii) the class is decertified; or (iii) Issuer is
excluded from the class by the court.
     Such forbearance to enforce an agreement to arbitrate shall not constitute
a waiver of any rights under this Confirmation except to the extent stated
herein.

20

--------------------------------------------------------------------------------

 

     Issuer hereby agrees (a) to check this Confirmation carefully and
immediately upon receipt so that errors or discrepancies can be promptly
identified and rectified and (b) to confirm that the foregoing (in the exact
form provided by Dealer) correctly sets forth the terms of the agreement between
Dealer and Issuer with respect to the Transaction, by manually signing this
Confirmation or this page hereof as evidence of agreement to such terms and
providing the other information requested herein and immediately returning an
executed copy to [       ], Facsimile No. [      ].

            Yours faithfully,

[INSERT DEALER NAME]
      By:           Name:           Title:        

Agreed and Accepted By:
NETAPP, INC.
By:                                                                    
             
Name:
Title:

 

--------------------------------------------------------------------------------

 

Annex A
For each Component of the Transaction, the Number of Warrants and Expiration
Date is set forth below.

          Component Number   Number of Warrants   Expiration Date 1      
September 3, 2013 2       September 4, 2013 3       September 5, 2013 4      
September 6, 2013 5       September 9, 2013 6       September 10, 2013 7      
September 11, 2013 8       September 12, 2013 9       September 13, 2013 10    
  September 16, 2013 11       September 17, 2013 12       September 18, 2013 13
      September 19, 2013 14       September 20, 2013 15       September 23, 2013
16       September 24, 2013 17       September 25, 2013 18       September 26,
2013 19       September 27, 2013 20       September 30, 2013 21       October 1,
2013 22       October 2, 2013 23       October 3, 2013 24       October 4, 2013
25       October 7, 2013 26       October 8, 2013 27       October 9, 2013 28  
    October 10, 2013 29       October 11, 2013 30       October 14, 2013 31    
  October 15, 2013 32       October 16, 2013 33       October 17, 2013 34      
October 18, 2013 35       October 21, 2013 36       October 22, 2013 37      
October 23, 2013 38       October 24, 2013 39       October 25, 2013 40      
October 28, 2013