Exhibit 10.1

 

Opening Transaction

 

To:

Twilio Inc.

 

375 Beale Street, Suite 300

 

San Francisco, CA 94105

 

 

A/C:

[Insert Account Number]

 

 

From:

[Dealer]

 

 

Re:

[Base]1 [Additional]2 Call Option Transaction

 

 

Ref. No:

[Insert Reference Number]

 

 

Date:

May [     ], 2018

 

Dear Ladies and Gentlemen:

 

The purpose of this communication (this “Confirmation”) is to set forth the
terms and conditions of the call option transaction entered into on the Trade
Date specified below (the “Transaction”) between [Dealer] (“Dealer”) and Twilio
Inc. (“Counterparty”).  This communication constitutes a “Confirmation” as
referred to in the Agreement specified below.

 

1.                                      This Confirmation is subject to, and
incorporates, the definitions and provisions of the 2006 ISDA Definitions (the
“2006 Definitions”) and the definitions and provisions of the 2002 ISDA Equity
Derivatives Definitions (the “Equity Definitions”, and together with the 2006
Definitions, the “Definitions”), in each case as published by the International
Swaps and Derivatives Association, Inc. (“ISDA”).  Certain defined terms used
herein have the meanings assigned to them in the Offering Memorandum dated
May [  ], 2018 (as so supplemented, the “Offering Memorandum”) relating to the
USD 400,000,000 principal amount of [          ]% Convertible Senior Notes due
2023 (the “Base Convertible Securities”) issued by Counterparty (as increased by
up to an additional USD 60,000,000 principal amount of [     ]% Convertible
Senior Notes due 2023 [that may be]3 issued pursuant to the option to purchase
additional convertible securities [exercised on the date hereof]4 (the “Optional
Convertible Securities” and, together with the Base Convertible Securities, the
“Convertible Securities”)) pursuant to an Indenture [to be] dated May [     ],
2018 between Counterparty and Wilmington Trust, National Association, as trustee
(the “Indenture”).  In the event of any inconsistency between the terms defined
in the Indenture and this Confirmation, this Confirmation shall govern.  The
parties acknowledge that this Confirmation is entered into on the date hereof
with the understanding that (i) definitions set forth in the Indenture that are
also defined herein by reference to the Indenture and (ii) sections of the
Indenture that are referred to herein, in each case, will conform to the
descriptions thereof in the Offering Memorandum.  If any such definitions in the
Indenture or any such sections of the Indenture differ from the descriptions
thereof in the Offering Memorandum, the descriptions thereof in the Offering
Memorandum will govern for purposes of this Confirmation.  [For the avoidance of
doubt, subject to the foregoing, references herein to sections of the Indenture
are based on the draft of the Indenture most recently reviewed by the parties at
the time of execution of this Confirmation.  If any relevant sections of the
Indenture are changed, added or renumbered between the execution of this
Confirmation and the execution of the Indenture, the parties will amend this
Confirmation in good faith and in a commercially reasonable manner to preserve
the economic intent of the parties as evidenced by such draft of the Indenture. 
In addition,

 

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1                                           Include for base capped call.

 

2                                           Include for additional capped call.

 

3                                           Include for base capped call.

 

4                                           Include for additional capped call.

 

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subject to the foregoing, the]5 [The]6 parties acknowledge that references to
the Indenture herein are references to the Indenture as in effect on the date
hereof and if the Indenture is, or the Convertible Securities are, amended,
modified or supplemented following the date hereof or the date of their
execution, respectively, any such amendment, modification or supplement (other
than any amendment, modification or supplement (i) pursuant to
Section [14.07]7 of the Indenture, subject to the provisions opposite the
caption “Discretionary Adjustments” in Section 2 hereof, or (ii) pursuant to
Section [10.01(n)]8 of the Indenture that, as determined by the Calculation
Agent in good faith and in a commercially reasonable manner, conforms the
Indenture to the description of Convertible Securities in the Offering
Memorandum) will be disregarded for purposes of this Confirmation unless the
parties agree otherwise in writing.

 

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
Counterparty 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 2002 ISDA Master Agreement as if Dealer and Counterparty had
executed an agreement in such form on the date hereof (but without any Schedule
except for (i) the election of US Dollars (“USD”) as the Termination Currency,
(ii) the election of the laws of the State of New York as the governing law
(without reference to choice of law doctrine)[, (iii) the election of an
executed guarantee of [           ] (“Guarantor”) dated as of the Trade Date in
customary form as a Credit Support Document, (iv) the election of Guarantor as
Credit Support Provider in relation to Dealer]9 and [v][(iii)] (A) the election
that the “Cross Default” provisions of Section 5(a)(vi) of the Agreement shall
apply to Dealer with a “Threshold Amount” of three percent of Dealer’s parent’s
shareholders’ equity; provided that “Specified Indebtedness” shall not include
obligations in respect of deposits received in the ordinary course of Dealer’s
banking business, (B) the phrase “or becoming capable at such time of being
declared” shall be deleted from clause (1) of such Section 5(a)(vi) and (C) the
following language shall be added to the end thereof “Notwithstanding the
foregoing, a default under subsection (2) hereof shall not constitute an Event
of Default if (x) the default was caused solely by error or omission of an
administrative or operational nature; (y) funds were available to enable the
party to make the payment when due; and (z) the payment is made within two Local
Business Days of such party’s receipt of written notice of its failure to
pay.”).

 

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 among this Confirmation, the Equity Definitions, the 2006
Definitions or the Agreement, the following shall prevail in the order of
precedence indicated:  (i) this Confirmation; (ii) the Equity Definitions;
(iii) the 2006 Definitions; and (iv) the Agreement.  For the avoidance of doubt,
except to the extent of an express conflict, the application of any provision of
this Confirmation, the Agreement, the Equity Definitions or the 2006 Definitions
shall not be construed to exclude or limit any other provision of this
Confirmation, the Agreement, the Equity Definitions or the 2006 Definitions.

 

The Transaction hereunder shall be the sole Transaction under the Agreement.  If
there exists any ISDA Master Agreement between Dealer and Counterparty or any
confirmation or other agreement between Dealer and Counterparty pursuant to
which an ISDA Master Agreement is deemed to exist between Dealer and
Counterparty, then notwithstanding anything to the contrary in such ISDA Master
Agreement, such confirmation or agreement or any other agreement to which Dealer
and Counterparty are parties, the Transaction shall not be considered a
Transaction under, or otherwise governed by, such existing or deemed ISDA Master
Agreement.

 

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5                                           Include for base capped call

 

6                                           Include if Indenture has been
executed at time of execution of this Confirmation

 

7                                           Include cross reference to the
Indenture section relating to Merger Events.

 

8                                           Include cross reference to Indenture
section permitting amendments without holder consent to conform the Indenture to
the Description of Notes.

 

9                                           To be included for dealers without a
long term debt rating.

 

2

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2.                                      The Transaction constitutes 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:

 

[          ], 2018

 

 

 

Effective Date:

 

The closing date of the [initial]10 issuance of the Convertible Securities
[issued pursuant to the option to purchase additional Convertible Securities
exercised on the date hereof]11.

 

 

 

Option Style:

 

Modified American, as described under “Procedures for Exercise” below.

 

 

 

Option Type:

 

Call

 

 

 

Seller:

 

Dealer

 

 

 

Buyer:

 

Counterparty

 

 

 

Shares:

 

The class A Common Stock of Counterparty, par value USD 0.001 (Ticker Symbol: 
“TWLO”).

 

 

 

Number of Options:

 

[The number of Base Convertible Securities in denominations of USD 1,000
principal amount issued by Counterparty on the closing date for the initial
issuance of the Convertible Securities.]12  [The number of Optional Convertible
Securities in denominations of USD 1,000 principal amount purchased by the
Initial Purchasers (as defined in the Purchase Agreement), at their option
pursuant to Section [2] of the Purchase Agreement (as defined below).]13  For
the avoidance of doubt, the Number of Options outstanding shall be reduced by
each exercise of Options hereunder.  In no event will the Number of Options be
less than zero.

 

 

 

Applicable Percentage:

 

[  ]%14

 

 

 

Option Entitlement:

 

A number equal to the product of the Applicable Percentage and [     ]15

 

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10                                      Include for base capped call.

 

11                                      Include for additional capped call.

 

12                                      Include for base capped call.

 

13                                      Include for additional capped call.

 

14                                      To be Dealer’s percentage of the overall
capped call transaction.

 

15                                      To be the initial “Conversion Rate.”

 

3

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Make-Whole Adjustment:

 

Any adjustment to the Conversion Rate pursuant to Section [14.03]16 of the
Indenture.

 

 

 

Discretionary Adjustment:

 

Any adjustment to the Conversion Rate pursuant to Section [14.04(h)]17 of the
Indenture.

 

 

 

Strike Price:

 

USD[     ]18

 

 

 

Cap Price:

 

USD[     ]

 

 

 

Rounding of Strike Price/Cap

Price/Option Entitlement:

 

In connection with any adjustment to the Option Entitlement or Strike Price, the
Option Entitlement or Strike Price, as the case may be, shall be rounded by the
Calculation Agent in accordance with the provisions of the Indenture relating to
rounding of the “Conversion Price” or the “Conversion Rate”, as applicable (each
as defined in the Indenture).  In connection with any adjustment to the Cap
Price hereunder, the Calculation Agent will round the adjusted Cap Price to the
nearest USD 0.0001.

 

 

 

Number of Shares:

 

As of any date, a number of Shares equal to the product of the Number of Options
and the Option Entitlement.

 

 

 

Premium:

 

USD [     ]

 

 

 

Premium Payment Date:

 

The Effective Date

 

 

 

Exchange:

 

The New York Stock Exchange

 

 

 

Related Exchange:

 

All Exchanges

 

 

 

Procedures for Exercise:

 

 

 

 

 

Exercise Dates:

 

Each Conversion Date.

 

 

 

Conversion Date:

 

[With respect to any conversion of a Convertible Security (other than (x) any
conversion of Convertible Securities with a “Conversion Date” (as defined in the
Indenture) occurring prior to the Free Convertibility Date or (y) any conversion
of Convertible Securities in respect of which holder(s) of such Convertible
Securities would be entitled to an increase in the Conversion Rate pursuant to a
Make-Whole Adjustment and the scheduled settlement date for such conversion
would occur prior to June

 

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16                                      Insert cross references to sections of
the Indenture addressing “make whole fundamental change” adjustments to the
Conversion Rate.

 

17                                      Insert cross reference to sections of
the Indenture permitting discretionary adjustments to the Conversion Rate by
Counterparty.

 

18                                      To be the initial “Conversion Price.”

 

4

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1, 2023 (any such conversion described in clause (x) or clause (y), an “Early
Conversion”), to which the provisions of Section 8(b)(iii) of this Confirmation
shall apply), the “Conversion Date” (as defined in the Indenture), provided
that, no Conversion Date shall be deemed to have occurred with respect to
Exchanged Securities (such Convertible Securities, other than Exchanged
Securities, the “Relevant Convertible Securities” for such Conversion Date).]19

 

[With respect to any conversion of a Convertible Security (other than (x) any
conversion of Convertible Securities with a “Conversion Date” (as defined in the
Indenture) occurring prior to the Free Convertibility Date or (y) any conversion
of Convertible Securities in respect of which holder(s) of such Convertible
Securities would be entitled to an increase in the Conversion Rate pursuant to a
Make-Whole Adjustment and the scheduled settlement date for such conversion
would occur prior to June 1, 2023 (any such conversion described in clause
(x) or clause (y), an “Early Conversion”), to which the provisions of
Section 8(b)(iii) of this Confirmation shall apply), the “Conversion Date” (as
defined in the Indenture) for Convertible Securities that are not “Relevant
Convertible Securities” under (and as defined in) the confirmation between the
parties hereto regarding the Base Call Option Transaction dated May [  ], 2018
[(Transaction Ref. No. [  ])] (the “Base Call Option Transaction Confirmation”),
provided that, no Conversion Date shall be deemed to have occurred with respect
to Exchanged Securities (such Convertible Securities, other than Exchanged
Securities, the “Relevant Convertible Securities” for such Conversion Date). 
For the purposes of determining whether any Convertible Securities will be
Relevant Convertible Securities hereunder or “Relevant Convertible Securities”
under the Base Call Option Transaction Confirmation, Convertible Securities that
are converted pursuant to the Indenture shall be allocated first to the Base
Call Option Transaction Confirmation until all Options thereunder are exercised
or terminated.]20

 

 

 

Free Convertibility Date:

 

March 1, 2023

 

 

 

Exchanged Securities:

 

With respect to any Conversion Date, any Convertible Securities with respect to
which Counterparty makes the election described in Section 14.1221 of the
Indenture and the financial institution designated by Counterparty accepts such
Convertible Securities in accordance with Section 14.1222 of the Indenture, as
long as Counterparty does not submit a Notice of Exercise in respect thereof.

 

 

 

Expiration Date:

 

[The earlier of (i) the last day on which any Convertible Securities remain
outstanding and (ii) June 1, 2023, subject to earlier exercise.]23

 

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19                                      Include for base capped call

 

20                                      Include for additional capped call.

 

21                                      Insert cross references to sections of
the Indenture providing for exchange in lieu of conversion

 

22                                      Insert cross references to sections of
the Indenture providing for exchange in lieu of conversion

 

23                                      Under review by tax advisors to
Counterparty.

 

5

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Automatic Exercise on Conversion Dates:

 

Applicable, which means that on each Conversion Date occurring on or after the
Free Convertibility Date, a number of Options equal to the number of Relevant
Convertible Securities for such Conversion Date in denominations of USD 1,000
principal amount shall be automatically exercised, subject to “Notice of
Exercise” below.

 

 

 

Notice Deadline:

 

In respect of any exercise of Options hereunder on any Conversion Date on or
after the Free Convertibility Date, 5:00 P.M., New York City time, on the
“Scheduled Trading Day” (as defined in the Indenture) immediately preceding the
“Maturity Date” (as defined in the Indenture).

 

 

 

Notice of Exercise:

 

Counterparty shall notify Dealer in writing prior to the Notice Deadline of the
number of Relevant Convertible Securities being converted on the related
Conversion Date[; provided, that any “Notice of Exercise” delivered to Dealer
pursuant to the Base Call Option Transaction Confirmation shall be deemed to be
a Notice of Exercise pursuant to this Confirmation and the terms of such Notice
of Exercise shall apply, mutatis mutandis, to this Confirmation]24.  For the
avoidance of doubt, if Counterparty fails to give such notice when due in
respect of any exercise of Options hereunder with a Conversion Date occurring on
or after the Free Convertibility Date, Automatic Exercise shall apply and the
Conversion Date shall be deemed to be the Notice Deadline.

 

 

 

Notice of Final Convertible Security Settlement Method:

 

In addition, Counterparty shall notify Dealer in writing before 5:00 P.M., New
York City time, on the “Scheduled Trading Day” (as defined in the Indenture)
immediately preceding the 35th “Scheduled Trading Day” (as defined in the
Indenture) immediately preceding the “Maturity Date” (as defined in the
Indenture) of the settlement method (and, if applicable, the “Specified Dollar
Amount” (as defined in the Indenture)) elected (or deemed to be elected) with
respect to Relevant Convertible Securities with a Conversion Date occurring on
or after the 35th “Scheduled Trading Day” (as defined in the Indenture)
immediately preceding the “Maturity Date” (as defined in the Indenture) (any
such notice, a “Notice of Final Convertible Security Settlement Method”);
provided, that if Counterparty does not timely deliver the Notice of Final
Convertible Security Settlement Method then the Notice of Final Convertible
Security Settlement Method shall be deemed timely given and the Applicable
Settlement Method shall be a Cash Election with a “Specified Dollar Amount” (as
defined in the Indenture) of USD 1,000.  Counterparty acknowledges its
responsibilities under applicable securities laws, and in particular Section 9
and Section 10 (b) of the Exchange Act and the rules and regulations thereunder,
in respect of any such settlement method election as set forth in the proviso in
the immediately preceding sentence.

 

 

 

Dealer’s Telephone Number and Telex and/or Facsimile Number and Contact Details
for purpose of Giving Notice:

 

As specified in Section 6(b) below.

 

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24                                      Include for additional capped call
confirmation only.

 

6

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Settlement Terms:

 

 

 

 

 

Settlement Date:

 

For any Exercise Date, the date one Settlement Cycle following the final day of
the Cash Settlement Averaging Period; provided that the Settlement Date shall
not be prior to the Exchange Business Day immediately following the date
Counterparty provides the Notice of Delivery Obligation prior to 5:00 P.M., New
York City time.

 

 

 

Delivery Obligation:

 

In lieu of the obligations set forth in Sections 8.1 and 9.1 of the Equity
Definitions, and subject to “Notice of Exercise” above and “Method of
Adjustment”, “Discretionary Adjustments”, “Consequences of Merger Events/Tender
Offers”, “Consequences of Announcement Events” and Section 8(l) below, in
respect of an Exercise Date, Dealer will deliver to Counterparty on the related
Settlement Date (the “Delivery Obligation”), (i) a number of Shares equal to the
product of the Applicable Percentage and the aggregate number of Shares, if any,
that Counterparty would be obligated to deliver to the holder(s) of the Relevant
Convertible Securities for such Conversion Date pursuant to
Section [14.02(a)(iv)]25 of the Indenture (except that such number of Shares
shall be rounded down to the nearest whole number) and cash in lieu of any
fractional Share resulting from such rounding and/or (ii) the product of the
Applicable Percentage and the aggregate amount of cash, if any, in excess of the
principal amount of the Relevant Convertible Securities that Counterparty would
be obligated to deliver to holder(s) of the Relevant Convertible Securities for
such Conversion Date pursuant to Section [14.02(a)(iv)]26 of the Indenture,
determined, for each of clauses (i) and (ii), by the Calculation Agent in a
commercially reasonable manner by reference to such Sections of the Indenture as
if Counterparty had elected to satisfy its conversion obligation in respect of
such Relevant Convertible Securities by the Applicable Settlement Method,
notwithstanding any different actual election by Counterparty with respect to
the settlement of such Relevant Convertible Securities; provided that if the
“Daily VWAP” (as defined in the Indenture) for any “Trading Day” (as defined in
the Indenture pursuant to the second proviso in such definition) during the Cash
Settlement Averaging Period is greater than the Cap Price, then clause (b) of
the relevant “Daily Conversion Value” (as defined in the Indenture) for such
“Trading Day” shall be determined as if such “Daily VWAP” for such “Trading Day”
were deemed to equal the Cap Price; provided further that the Delivery
Obligation shall be determined excluding any Shares and/or cash that
Counterparty is obligated to deliver to holder(s) of the Relevant Convertible
Securities as a direct or indirect result of any adjustments to the Conversion
Rate pursuant to a Discretionary Adjustment and any interest payment that
Counterparty is (or would have been) obligated to deliver to holder(s) of the
Relevant Convertible Securities for such Conversion Date.  Notwithstanding the
foregoing, if, in respect of any Exercise Date, (x)(I) the number of Shares
included in the Delivery Obligation multiplied by the Share Obligation Value
Price plus (II) the amount of cash included in the Delivery Obligation, would
otherwise exceed (y) the product of the Applicable Percentage and the

 

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25                                      Insert cross references to sections of
the Indenture defining the share delivery obligation

 

26                                      Insert cross references to sections of
the Indenture defining the cash delivery obligation

 

7

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relevant Net Convertible Share Obligation Value, such number of Shares and such
amount of cash shall be proportionately reduced to the extent necessary to
eliminate such excess.

 

 

 

Applicable Settlement Method:

 

For any Relevant Convertible Securities, if Counterparty has notified Dealer in
the Notice of Final Convertible Security Settlement Method that it has elected,
or is deemed to have elected, to satisfy its conversion obligation in respect of
such Relevant Convertible Securities in cash or in a combination of cash and
Shares in accordance with Section [14.02(a)]27 of the Indenture (a “Cash
Election”) with a “Specified Dollar Amount” (as defined in the Indenture) of at
least USD 1,000, the Applicable Settlement Method shall be the settlement method
actually so elected, or deemed to be elected, by Counterparty in respect of such
Relevant Convertible Securities (the “Convertible Securities Settlement
Method”); otherwise, the Applicable Settlement Method shall assume Counterparty
had made a Cash Election with respect to such Relevant Convertible Securities (a
“Deemed Cash Election”) with a “Specified Dollar Amount” (as defined in the
Indenture) of USD 1,000 per Relevant Convertible Security and the Delivery
Obligation shall be determined by the Calculation Agent pursuant to
Section [14.02(a)(iv)(C)]28 of the Indenture as if the relevant “Observation
Period” (as defined in the Indenture) were the Cash Settlement Averaging Period.

 

 

 

Cash Settlement Averaging Period:

 

The 30 “Trading Days” (as defined in the Indenture pursuant to the second
proviso in such definition) commencing on the 31st “Scheduled Trading Day” (as
defined in the Indenture) prior to the “Maturity Date” (as defined in the
Indenture).

 

 

 

Notice of Delivery Obligation:

 

No later than the Exchange Business Day immediately following the last day of
the Cash Settlement Averaging Period, Counterparty shall give Dealer notice of
the aggregate number of Shares and/or amount of cash included in the Total
Convertible Share Obligation Value (as defined below) for all Exercise Dates (it
being understood, for the avoidance of doubt, that the requirement of
Counterparty to deliver such notice shall not limit Counterparty’s obligations
with respect to a Notice of Exercise or Notice of Final Convertible Security
Settlement Method, as the case may be, as set forth above, in any way).

 

 

 

Net Convertible Share Obligation Value:

 

With respect to Relevant Convertible Securities as to a Conversion Date, (i) the
Total Convertible Share Obligation Value of such Relevant Convertible Securities
for such Conversion Date minus (ii) the aggregate principal amount of such
Relevant Convertible Securities for such Conversion Date.

 

 

 

Total Convertible Share Obligation Value:

 

With respect to Relevant Convertible Securities with respect to a Conversion
Date, (i) (A) the number of Shares equal to the aggregate number of Shares that
Counterparty is obligated to deliver to the

 

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27                                      Include as applicable.

 

28                                      Include for additional capped call.

 

8

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holder(s) of Relevant Convertible Securities for such Conversion Date pursuant
to the Indenture multiplied by (B) the Share Obligation Value Price plus (ii) an
amount of cash equal to the aggregate amount of cash that Counterparty is
obligated to deliver to the holder(s) of Relevant Convertible Securities for
such Conversion Date pursuant to the Indenture (including, for the avoidance of
doubt, any cash payable by Counterparty in lieu of fractional Shares); provided
that the Total Convertible Share Obligation Value shall be determined excluding
any Shares and/or cash that Counterparty is obligated to deliver to holder(s) of
the Relevant Convertible Securities as a direct or indirect result of any
adjustments to the Conversion Rate pursuant to a Discretionary Adjustment and
any interest payment that Counterparty is (or would have been) obligated to
deliver to holder(s) of the Relevant Convertible Securities for such Conversion
Date.

 

 

 

Share Obligation Value Price:

 

The opening price as displayed under the heading “Op” on Bloomberg page “TWLO.N
<Equity>“ (or its equivalent successor if such page is not available) on the
applicable Settlement Date or other date of delivery.

 

 

 

Other Applicable Provisions:

 

To the extent Dealer is obligated to deliver Shares hereunder, the provisions of
Sections 9.8, 9.9 and 9.11 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 Counterparty is the
issuer of the Shares.

 

 

 

Restricted Certificated Shares:

 

Notwithstanding anything to the contrary in the Equity Definitions, Dealer may,
in whole or in part, deliver Shares required to be delivered to Counterparty
hereunder in certificated form in lieu of delivery through the Clearance
System.  With respect to such certificated Shares, the Representation and
Agreement contained in Section 9.11 of the Equity Definitions shall be modified
by deleting the remainder of the provision after the word “encumbrance” in the
fourth line thereof.

 

 

 

Adjustments:

 

 

 

 

 

Method of Adjustment:

 

Notwithstanding Section 11.2 of the Equity Definitions, upon the occurrence of
any event or condition set forth in the Dilution Adjustment Provisions (a
“Potential Adjustment Event”) that requires an adjustment under the Indenture,
the Calculation Agent shall, in good faith and in a commercially reasonable
manner, make a corresponding adjustment in respect of any one or more of the
Strike Price, the Number of Options, the Option Entitlement and any other term
relevant to the exercise, settlement or payment of the Transaction, to the
extent an analogous adjustment is required under the Indenture, subject to
“Discretionary Adjustments” below.  Immediately upon the occurrence of any
Potential Adjustment Event, Counterparty shall notify the Calculation Agent of
such Potential Adjustment Event.

 

9

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Notwithstanding anything to the contrary herein or in the Equity Definitions:

 

(i) in connection with any Potential Adjustment Event as a result of an event or
condition set forth in Section [14.04(b)]29 of the Indenture or
Section [14.04(c)]30 of the Indenture where, in either case, the period for
determining “Y” (as such term is used in Section [14.04(b)]31 of the Indenture)
or “SPO” (as such term is used in Section [14.04(c)]32 of the Indenture), as the
case may be, begins before Counterparty has publicly announced the event or
condition giving rise to such Potential Adjustment Event, then the Calculation
Agent shall, in good faith and in a commercially reasonable manner, have the
right to adjust any variable relevant to the exercise, settlement or payment for
the Transaction as appropriate to reflect the reasonable costs (including, but
not limited to, hedging mismatches and market losses) and commercially
reasonable out-of-pocket expenses incurred by Dealer in connection with its
commercially reasonable hedging activities as a result of such event or
condition not having been publicly announced prior to the beginning of such
period; and

 

(ii) if any Potential Adjustment Event is declared and (a) the event or
condition giving rise to such Potential Adjustment Event is subsequently
amended, modified, cancelled or abandoned, (b) the “Conversion Rate” (as defined
in the Indenture) is otherwise not adjusted at the time or in the manner
contemplated by the relevant Dilution Adjustment Provision based on such
declaration or (c) the “Conversion Rate” (as defined in the Indenture) is
adjusted as a result of such Potential Adjustment Event and subsequently
re-adjusted (each of clauses (a), (b) and (c), a “Potential Adjustment Event
Change”) then, in each case, the Calculation Agent shall, in good faith and in a
commercially reasonable manner, have the right to adjust any variable relevant
to the exercise, settlement or payment for the Transaction as appropriate to
reflect the reasonable costs (including, but not limited to, hedging mismatches
and market losses) and commercially reasonable out-of-pocket expenses incurred
by Dealer in connection with its commercially reasonable hedging activities as a
result of such Potential Adjustment Event Change.

 

For the avoidance of doubt, Dealer shall not have any payment or delivery
obligation hereunder in respect of, and no adjustment shall be made to the terms
of the Transaction on account of, (x) any distribution of cash, property or
securities by Counterparty to the holders of Convertible Securities (upon
conversion or otherwise) or (y) any other transaction in which holders of
Convertible Securities are entitled to participate, in each case, in lieu of an
adjustment under the Indenture in

 

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29                                      Include cross reference to section of
the Indenture providing for an adjustment to the Conversion Rate in connection
with a below market rights, options or warrants offering

 

30                                      Include cross reference to section of
the Indenture providing for an adjustment to the Conversion Rate in connection
with the distributions of Distributed Property

 

31                                      Include cross reference to section of
the Indenture providing for an adjustment to the Conversion Rate in connection
with a below market rights, options or warrants offering

 

32                                      Include cross reference to section of
the Indenture providing for an adjustment to the Conversion Rate in connection
with the distributions of Distributed Property

 

10

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respect of a Potential Adjustment Event (including, without limitation, under
the fifth sentence of Section [14.04(c)] of the Indenture or the fourth sentence
of Section [14.04(d)] of the Indenture).33

 

 

 

Dilution Adjustment Provisions:

 

Sections [14.04(a), (b), (c), (d) and (e)]34 and Section [14.05]35 of the
Indenture

 

 

 

Discretionary Adjustments:

 

Notwithstanding anything to the contrary herein or in the Equity Definitions, if
the Calculation Agent in good faith disagrees with any adjustment under the
Indenture that is the basis of any adjustment hereunder and that involves an
exercise of discretion by Counterparty, its board of directors or a committee of
its board of directors (including, without limitation, pursuant to
Section [14.05]36 of the Indenture or pursuant to Section [14.07]37 of the
Indenture or any supplemental indenture entered into thereunder or in connection
with the determination of the fair value of any securities, property, rights or
other assets), then the Calculation Agent will determine the corresponding
adjustment to be made to any one or more of the Strike Price, Number of Options,
Option Entitlement and any other variable relevant to the exercise, settlement
or payment of or under the Transaction in good faith and in a commercially
reasonable manner consistent with the methodology set forth in the Indenture. 
In addition, notwithstanding the foregoing, if any Potential Adjustment Event
occurs during the Cash Settlement Averaging Period but no adjustment was made to
any Convertible Security under the Indenture because the relevant holder of such
Convertible Security was deemed to be a record owner of the underlying Shares on
the related Conversion Date, then the Calculation Agent shall, in good faith and
in a commercially reasonable manner, make an adjustment, consistent with the
methodology set forth in the Indenture as determined by it, to the terms hereof
in order to account for such Potential Adjustment Event.  For the avoidance of
doubt, the Delivery Obligation shall be calculated on the basis of such
adjustments by the Calculation Agent.

 

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33                                      Include references to provisions of the
Indenture providing for pass through of cash or distributed property in lieu of
conversion rate adjustments.

 

34                                      Include references to provisions of the
Indenture providing for pass through of cash or distributed property in lieu of
conversion rate adjustments.

 

35                                      Include cross references to specific
paragraphs of the section of the Indenture containing anti-dilution adjustments
to the Conversion Rate

 

36                                      Include reference to provision of
Indenture providing for adjustments by board of directors in the case of
adjustment events that occur during an averaging period

 

37                                      Include reference to Merger Event
provision

 

11

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Extraordinary Events:

 

 

 

 

 

Merger Events:

 

Notwithstanding Section 12.1(b) of the Equity Definitions, “Merger Event” shall
have the meaning set forth in Section [14.07]38 of the Indenture.

 

 

 

Consequences of Merger Events/Tender Offers:

 

Notwithstanding Section 12.2 of the Equity Definitions, upon the occurrence of a
Merger Event, the Calculation Agent, acting in good faith and commercially
reasonably, shall make a corresponding adjustment in respect of any adjustment
under the Indenture to any one or more of the nature of the Shares, the Number
of Options, the Option Entitlement, composition of the “Shares” hereunder and
any other variable relevant to the exercise, settlement or payment for the
Transaction, to the extent an analogous adjustment is required under
Section [14.07]39 of the Indenture in respect of such Merger Event, as
determined in good faith and in a commercially reasonable manner by the
Calculation Agent by reference to such Section, subject to “Discretionary
Adjustments” above; provided that such adjustment shall be made without regard
to any adjustment to the Conversion Rate pursuant to a Make-Whole Adjustment or
a Discretionary Adjustment; provided further that in respect of any election by
the holders of Shares with respect to the consideration due upon consummation of
any Merger Event, the Calculation Agent shall have the right to adjust any
variable relevant to the exercise, settlement or payment for the Transaction as
appropriate to compensate Dealer for any losses (including, without limitation,
market losses customary for transactions similar to the Transaction with
counterparties similar to Counterparty) solely as a result of any mismatch on
its Hedge Position, assuming Dealer maintains a commercially reasonable Hedge
Position, and the type and amount of consideration actually paid or issued to
the holders of Shares in respect of such Merger Event; and provided further that
if, with respect to a Merger Event or a Tender Offer, (i) the consideration for
the Shares includes (or, at the option of a holder of Shares, may include)
securities issued by an entity that is not a corporation organized under the
laws of the United States, any state thereof or the District of Columbia or
(ii) the Counterparty to the Transaction, following such Merger Event, will not
be a corporation organized under the laws of the United States, any State
thereof or the District of Columbia or will not be the Issuer, Dealer may elect
in its commercially reasonable discretion that Cancellation and Payment
(Calculation Agent Determination) shall apply.  For the avoidance of doubt,
adjustments shall be made pursuant to the provisions set forth above regardless
of whether any Merger Event gives rise to an Early Conversion.  For purposes of
this paragraph, “Tender Offer” means the occurrence of any event or condition
set forth in Section [14.04(e)]40 of the Indenture.

 

 

 

Notice of Merger Consideration:

 

Upon the occurrence of a Merger Event, Counterparty shall reasonably promptly
(but in any event prior to consummation of such Merger Event) notify the
Calculation Agent of, in the case of a Merger Event

 

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38                                      Include cross reference to sections of
the Indenture setting forth the list of merger and similar events

 

39                                      Include cross reference to sections of
the Indenture setting forth the list of merger and similar events

 

40                                      Include cross reference to sections of
the Indenture describing the consequences of above market tender offers

 

12

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that causes the Shares to be converted into the right to receive more than a
single type of consideration (determined based in part upon any form of
stockholder election), the weighted average of the types and amounts of
consideration actually received by holders of Shares upon consummation of such
Merger Event.

 

 

 

Consequences of Announcement Events:

 

Modified Calculation Agent Adjustment as set forth in Section 12.3(d) of the
Equity Definitions; provided that, in respect of an Announcement Event,
(x) references to “Tender Offer” shall be replaced by references to
“Announcement Event” and references to “Tender Offer Date” shall be replaced by
references to “date of such Announcement Event”, (y) the phrase “exercise,
settlement, payment or any other terms of the Transaction (including, without
limitation, the spread)” shall be replaced with the phrase “Cap Price (provided
that in no event shall the Cap Price be less than the Strike Price)” and the
words “whether within a commercially reasonable (as determined by the
Calculation Agent) period of time prior to or after the Announcement Event”
shall be inserted prior to the word “which” in the seventh line, and (z) for the
avoidance of doubt, the Calculation Agent shall, in good faith and in a
commercially reasonable manner, determine whether the relevant Announcement
Event has had an economic effect on the Transaction (the terms of which include,
among other terms, the Strike Price and Cap Price), and, if so, shall adjust the
Cap Price accordingly to take into account such economic effect on one or more
occasions on or after the date of the Announcement Event up to, and including,
the Expiration Date, any Early Termination Date and/or any other date of
cancellation, it being understood that any adjustment in respect of an
Announcement Event shall take into account any earlier adjustment relating to
the same Announcement Event.  An Announcement Event shall be an “Extraordinary
Event” for purposes of the Equity Definitions, to which Article 12 of the Equity
Definitions is applicable.

 

 

 

Announcement Event:

 

(i)                                     The public announcement by Issuer, any
subsidiary of Issuer, any affiliate of Issuer, any agent of Issuer or a relevant
and credible third entity of (x) any transaction or event that, if completed,
would constitute a Merger Event or Tender Offer, (y) any potential acquisition
by Issuer and/or its subsidiaries where the aggregate consideration exceeds 25%
of the market capitalization of Issuer as of the date of such announcement (a
“Transformative Transaction”) or (z) the intention to enter into a Merger Event
or Tender Offer or a Transformative Transaction, (ii) the public announcement by
Issuer of an intention to solicit or enter into, or to explore strategic
alternatives or other similar undertaking that may include, a Merger Event or
Tender Offer or a Transformative Transaction or (iii) any subsequent public
announcement by Issuer, any subsidiary of Issuer, any affiliate of Issuer, any
agent of Issuer or a relevant and credible third entity of a change to a
transaction or intention that is the subject of an announcement of the type
described in clause (i) or (ii) of this sentence (including, without limitation,
a new announcement, whether or not by the same party, relating to such a
transaction or intention or the announcement of a withdrawal from, or the
abandonment or discontinuation of, such a transaction or intention), as
determined by the Calculation Agent.  The parties hereto agree and acknowledge
that for purposes of this “Announcement Event” definition, in determining

 

13

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whether a third party is relevant and credible, the Calculation Agent may take
into consideration the effect of the relevant announcement by such third party
on the Shares and/or options relating to the Shares (and, for the avoidance of
doubt, if the Calculation Agent determines, in its commercially reasonable
discretion, the effect thereof on the Shares and/or options relating to the
Shares is material, such third party shall be deemed to be relevant and
credible).  For the avoidance of doubt, the occurrence of an Announcement Event
with respect to any transaction or intention shall not preclude the occurrence
of a later Announcement Event with respect to such transaction or intention. 
For purposes of this definition of “Announcement Event,” (A) “Merger Event”
shall mean such term as defined under Section 12.1(b) of the Equity Definitions
(but, for the avoidance of doubt, the remainder of the definition of “Merger
Event” in Section 12.1(b) of the Equity Definitions following the definition of
“Reverse Merger” therein shall be disregarded) and (B) “Tender Offer” shall mean
such term as defined under Section 12.1(d) of the Equity Definitions.

 

 

 

Nationalization, Insolvency or Delisting:

 

Cancellation and Payment (Calculation Agent Determination); provided that in
addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it
will also constitute a Delisting if the 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 Termination Event(s):

 

Notwithstanding anything to the contrary in the Equity Definitions, if, as a
result of an Extraordinary Event, the Transaction would be cancelled or
terminated (whether in whole or in part) pursuant to Article 12 of the Equity
Definitions, an Additional Termination Event (with the Transaction (or the
cancelled or terminated portion thereof) being the Affected Transaction and
Counterparty being the sole Affected Party) shall be deemed to occur, and, in
lieu of Sections 12.7, 12.8 and 12.9 of the Equity Definitions, Section 6 of the
Agreement shall apply to such Affected Transaction.

 

 

 

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 public announcement of, the formal or
informal interpretation”, (ii) by adding the phrase “and/or Hedge Position”
after the word “Shares” in clause (X) thereof and (iii) by immediately following
the word “Transaction” in clause (X) thereof, adding the phrase “in the manner
contemplated by the Hedging Party on the Trade Date”; and provided further that
Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing
the parenthetical beginning after the word “regulation” in the second line
thereof with the words “(including, for the avoidance of doubt and without
limitation, (x) any tax law or (y) adoption or promulgation of new regulations
authorized or mandated by existing statute)” and (ii) adding the words “, or
holding, acquiring or disposing of Shares or any Hedge Positions relating to,”
after the words “obligations under” in clause (Y) thereof.

 

14

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(b) Failure to Deliver:

 

Applicable

 

 

 

(c) Insolvency Filing:

 

Applicable

 

 

 

(d) Hedging Disruption:

 

Applicable; provided that:

 

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

 

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

 

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

 

 

 

(e) Increased Cost of Hedging:

 

Not Applicable

 

 

 

Hedging Party:

 

Dealer

 

 

 

Determining Party:

 

Dealer; provided that the Determining Party will promptly, upon written notice
from Counterparty, provide a statement displaying in reasonable detail the basis
for such determination, adjustment or calculation, as the case may be (including
any quotations, market data or information from internal or external sources
used in making such determination, adjustment or calculation, it being
understood that the Determining Party shall not be required to disclose any
confidential information or proprietary models used by it in connection with
such determination, adjustment or calculation, as the case may be).

 

 

 

Non-Reliance:

 

 

 

 

 

Agreements and Acknowledgments

 

Applicable

 

 

 

Regarding Hedging Activities:

 

Applicable

 

 

 

Additional Acknowledgments:

 

Applicable

 

 

 

Hedging Adjustment:

 

For the avoidance of doubt, whenever Dealer, Determining Party or the
Calculation Agent is permitted to make an adjustment pursuant to the terms of
this Confirmation or the Equity Definitions to take into account the effect of
any event (other than an adjustment made by reference to the Indenture), the
Calculation Agent, Determining Party or Dealer, as the case may be, shall make
such adjustment by reference to the effect of such event on Dealer assuming that
Dealer maintains a commercially reasonable hedge position.

 

15

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3.   Calculation Agent:

 

Dealer; provided that all calculations and determinations by the Calculation
Agent (other than calculations or determinations made by reference to the
Indenture) shall be made in good faith and in a commercially reasonable manner
and assuming for such purposes that Dealer is maintaining, establishing and/or
unwinding, as applicable, a commercially reasonable hedge position; provided
further that if an Event of Default of the type described in
Section 5(a)(vii) of the Agreement with respect to which Dealer is the sole
Defaulting Party occurs, Counterparty shall have the right to appoint a
successor calculation agent which shall be a nationally recognized third-party
dealer in over-the-counter corporate equity derivatives.  Calculation Agent
agrees that it will promptly, upon written notice from Counterparty, provide a
statement displaying in reasonable detail the basis for such determination,
adjustment or calculation, as the case may be (including any quotations, market
data or information from internal or external sources used in making such
determination, adjustment or calculation, it being understood that the
Calculation Agent shall not be required to disclose any confidential information
or proprietary models used by it in connection with such determination,
adjustment or calculation, as the case may be).

 

4.

 

Account Details:

 

 

 

 

 

Dealer Payment Instructions:

 

 

 

 

 

[             ]

 

 

 

 

 

Counterparty Payment Instructions:

 

 

 

 

 

[             ]

 

 

 

5.

 

Offices:

 

 

 

 

 

The Office of Dealer for the Transaction is: [               ]

 

 

 

 

 

The Office of Counterparty for the Transaction is:

 

 

 

 

 

Inapplicable, Counterparty is not a Multibranch Party

 

 

 

6.

 

Notices:

For purposes of this Confirmation:

 

 

 

 

 

(a)

Address for notices or communications to Counterparty:

 

 

 

 

 

To:

Twilio Inc.

 

 

 

375 Beale Street, Suite 300

 

 

 

San Francisco, CA 94105

 

 

Attn:

[            ]

 

 

Telephone:

[            ]

 

 

Email:

[            ]

 

 

 

 

 

 

with a copy to:

 

 

 

 

 

 

 

Goodwin Procter LLP

 

 

The New York Times Building

 

16

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620 Eighth Avenue

 

 

New York, NY 10018

 

 

Attn:

Yoel Kranz

 

 

Telephone:

(212) 813-8800

 

 

Email:

ykranz@goodwinlaw.com

 

 

 

 

 

 

(b)

Address for notices or communications to Dealer:

 

 

 

 

 

 

[Dealer Address]

 

7.                                      Representations, Warranties and
Agreements:

 

(a)                                 In addition to the representations and
warranties in the Agreement and those contained elsewhere herein, Counterparty
represents and warrants to and for the benefit of, and agrees with, Dealer as
follows:

 

(i)                                     On the Trade Date, (A) Counterparty is
not aware of any material nonpublic information regarding Counterparty or the
Shares and (B) all reports and other documents filed by Counterparty 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)                                  (A) On the Trade Date, the Shares or
securities that are convertible into, or exchangeable or exercisable for Shares,
are not subject to a “restricted period,” as such term is defined in Regulation
M under the Exchange Act (“Regulation M”) and (B) Counterparty 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 Trade Date.

 

(iii)                               Without limiting the generality of
Section 13.1 of the Equity Definitions, Counterparty acknowledges that neither
Dealer nor any of its affiliates is making any representations or warranties or
taking any position or expressing any view with respect to the treatment of the
Transaction under any accounting standards including ASC Topic 260, Earnings Per
Share, ASC Topic 815, Derivatives and Hedging, or ASC Topic 480, Distinguishing
Liabilities from Equity and ASC 815-40, Derivatives and Hedging - Contracts in
Entity’s Own Equity (or any successor issue statements).

 

(iv)                              Without limiting the generality of
Section 3(a)(iii) of the Agreement, the Transaction will not violate Rule 13e-1
or Rule 13e-4 under the Exchange Act.

 

(v)                                 Prior to the Trade Date, Counterparty shall
deliver to Dealer a resolution of Counterparty’s board of directors authorizing
the Transaction.

 

(vi)                              Counterparty is not entering into this
Confirmation to create actual or apparent trading activity in the Shares (or any
security convertible into or exchangeable for Shares) or to raise or depress or
otherwise manipulate the price of the Shares (or any security convertible into
or exchangeable for Shares) or otherwise in violation of the Exchange Act.

 

(vii)                           Counterparty 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.

 

17

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(viii)                        On each of the Trade Date and the Premium Payment
Date, Counterparty is not “insolvent” (as such term is defined under
Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States Code)
(the “Bankruptcy Code”)) and Counterparty would be able to purchase the Number
of Shares in compliance with the laws of the jurisdiction of Counterparty’s
incorporation.

 

(ix)                              The representations and warranties of
Counterparty set forth in Section 3 of the Agreement and Section [1] of the
Purchase Agreement, dated as of May [ ], 2018, between Counterparty and [Goldman
Sachs & Co. LLC] as representative[s] of the initial purchasers party thereto
(the “Purchase Agreement”) are true and correct as of the Trade Date and the
Effective Date and are hereby deemed to be repeated to Dealer as if set forth
herein.

 

(x)                                 To the knowledge of Counterparty, no state
or local (including non-U.S. jurisdictions) law, rule, regulation or regulatory
order applicable to the Shares would give rise to any reporting, consent,
registration or other requirement (including without limitation a requirement to
obtain prior approval from any person or entity) as a result of Dealer or its
affiliates owning or holding (however defined) Shares; provided that
Counterparty makes no representation or warranty regarding any such requirement
that is applicable generally to the ownership of equity securities by Dealer or
any of its affiliates solely as a result of it or any of such affiliates being
financial institutions or broker-dealers.

 

(xi)                              Counterparty (A) is capable of evaluating
investment risks independently, both in general and with regard to all
transactions and investment strategies involving a security or securities;
(B) will exercise independent judgment in evaluating the recommendations of any
broker-dealer or its associated persons, unless it has otherwise notified the
broker-dealer in writing; and (C) has total assets of at least USD 50 million.

 

(b)                                 Each of Dealer and Counterparty agrees and
represents that it is an “eligible contract participant” as defined in
Section 1a(18) of the U.S. Commodity Exchange Act, as amended, and is entering
into the Transaction as principal (and not as agent or in any other capacity,
fiduciary or otherwise) and not for the benefit of any third party.

 

(c)                                  Each of Dealer and Counterparty
acknowledges that the offer and sale of the Transaction to it is intended to be
exempt from registration under the Securities Act of 1933, as amended (the
“Securities Act”), by virtue of Section 4(a)(2) thereof.  Accordingly,
Counterparty represents and warrants to Dealer 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 and 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 Counterparty agrees and
acknowledges that Dealer is a “financial institution” and “financial
participant” within the meaning of Sections 101(22) and 101(22A) of the
Bankruptcy Code.  The parties hereto further agree and acknowledge (A) that this
Confirmation is a “securities contract,” as such term is defined in
Section 741(7) of the Bankruptcy Code, with respect to which each payment and
delivery hereunder or in connection herewith is a “termination value,” “payment
amount” or “other transfer obligation” within the meaning of Section 362 of the
Bankruptcy Code and a “settlement payment” within the meaning of Section 546 of
the Bankruptcy Code, and (B) that Dealer is entitled to the protections afforded
by, among other sections, Sections 362(b)(6), 362(b)(27), 362(o), 546(e),
546(j), 548(d)(2), 555 and 561 of the Bankruptcy Code.

 

18

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(e)                                  As a condition to the effectiveness of the
Transaction, Counterparty shall deliver to Dealer an opinion of counsel, dated
as of the Premium Payment Date and reasonably acceptable to Dealer in form and
substance, with respect to the matters set forth in Section 3(a) of the
Agreement and Section 7(a)(vii) hereof; provided that any such opinion of
counsel may contain customary exceptions and qualifications, including, without
limitation, exceptions and qualifications relating to indemnification
provisions.

 

(f)                                   Counterparty understands that
notwithstanding any other relationship between Counterparty and Dealer and its
affiliates, in connection with this Transaction and any other over-the-counter
derivative transactions between Counterparty and Dealer or its affiliates,
Dealer or its affiliates is acting as principal and is not a fiduciary or
advisor in respect of any such transaction, including any entry, exercise,
amendment, unwind or termination thereof.

 

(g)                                  Counterparty 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”.

 

(h)                                 Each party acknowledges and agrees to be
bound by the Conduct Rules of the Financial Industry Regulatory Authority, Inc.
applicable to transactions in options, and further agrees not to violate the
position and exercise limits set forth therein, in each case, to the extent such
rules are applicable to such party.

 

8.                                      Other Provisions:

 

(a)                                 Right to Extend.  Dealer may postpone or
add, in whole or in part, any Exercise Date or Settlement Date or any other date
of valuation, payment or delivery by Dealer, with respect to some or all of the
relevant Options (in which event the Calculation Agent, in good faith and in a
commercially reasonable manner, shall make appropriate adjustments to the
Delivery Obligation), if Dealer determines, in good faith and in a commercially
reasonable manner, and, in respect of clause (ii) below, based on the advice of
counsel, that such extension is reasonably necessary or appropriate (i) to
preserve Dealer’s commercially reasonable hedging or hedge unwind activity
hereunder in light of existing liquidity conditions in the cash market, the
stock borrow market or other relevant market (but only if there is a material
decrease in liquidity relative to Dealer’s expectations on the Trade Date), or
(ii) to enable Dealer to effect purchases or sales of Shares or Share
Termination Delivery Units in connection with its commercially reasonable
hedging, hedge unwind or settlement activity hereunder in a manner that would
(assuming, in the case of purchases, Dealer were Counterparty or an affiliated
purchaser of Counterparty) be in compliance with applicable legal, regulatory or
self-regulatory requirements, or with related policies and procedures (whether
or not such requirements, policies or procedures are imposed by law or have been
voluntarily adopted by Dealer and, in the case of policies or procedures, so
long as such policies or procedures are consistently applied to transactions
similar to the Transaction); provided that no such Exercise Date, Settlement
Date or other date of valuation, payment or delivery may be postponed or added
more than 30 Trading Days after the original Exercise Date, Settlement Date or
other date of valuation, payment or delivery, as the case may be.

 

(b)                                 Additional Termination Events.

 

(i)                                     The occurrence of an event of default
with respect to Counterparty under the terms of the Convertible Securities as
set forth in Section [6.01]41 of the Indenture, which default has resulted in
the Convertible Securities becoming due and payable under the terms thereof,
shall

 

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41                                      Insert cross reference to section of the
Indenture setting forth Events of Default

 

19

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constitute an Additional Termination Event with respect to which the Transaction
is the sole Affected Transaction and Counterparty is 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.

 

(ii)                                  As promptly as practicable (but in any
event within five Scheduled Trading Days) following any Repurchase Event (as
defined below), Counterparty may notify Dealer in writing of such Repurchase
Event and the number of Convertible Securities subject to such Repurchase Event
(any such notice, a “Convertible Securities Repurchase Notice”) [; provided that
any “Convertible Securities Repurchase Notice” delivered to Dealer pursuant to
the Base Call Option Transaction Confirmation shall be deemed to be a
Convertible Securities Repurchase Notice pursuant to this Confirmation and the
terms of such Convertible Securities Repurchase Notice shall apply, mutatis
mutandis, to this Confirmation]42.  Notwithstanding anything to the contrary in
this Confirmation, the receipt by Dealer from Counterparty of (x) any
Convertible Securities Repurchase Notice, and (y) a written representation and
warranty by Counterparty that, as of the date of such Convertible Securities
Repurchase Notice, Counterparty is not in possession of any material nonpublic
information regarding Counterparty or the Shares and that such Repurchase Event
and the delivery of such Convertible Securities Repurchase Notice are each being
made in good faith and not as part of a plan or scheme to evade compliance with
federal securities laws, within the applicable time period set forth in the
preceding sentence, shall constitute an Additional Termination Event as provided
in this Section 8(b)(ii).  Upon receipt of any such Convertible Securities
Repurchase Notice and the related written representation and warranty, Dealer
shall promptly designate an Exchange Business Day following receipt of such
Convertible Securities Repurchase Notice (which in no event shall be earlier
than the related repurchase date for such Convertible Securities) as an Early
Termination Date with respect to the portion of this Transaction corresponding
to a number of Options (the “Repurchase Options”) equal to the lesser of (A) the
number of such Convertible Securities specified in such Convertible Securities
Repurchase Notice [minus the number of Repurchase Options (as defined in the
Base Call Option Transaction Confirmation), if any, that relate to such
Convertible Securities (and for purposes of determining whether any Options
under this Confirmation or under the Base Call Option Transaction Confirmation
will be among the Repurchase Options hereunder or under, and as defined in, the
Base Call Option Transaction Confirmation, the Convertible Securities specified
in such Convertible Securities Repurchase Notice shall be allocated first to the
Base Call Option Transaction Confirmation until all Options thereunder are
exercised or terminated)]43 and (B) the Number of Options as of the date Dealer
designates such Early Termination Date and, as of such date, the Number of
Options shall be reduced by the number of Repurchase Options.  Any payment
hereunder with respect to such termination shall be calculated pursuant to
Section 6 of the Agreement as if (1) an Early Termination Date had been
designated in respect of a Transaction having terms identical to this
Transaction and a Number of Options equal to the number of Repurchase Options,
(2) Counterparty were the sole Affected Party with respect to such Additional
Termination Event and (3) the terminated portion of the Transaction were the
sole Affected Transaction.  “Repurchase Event” means that (i) any Convertible
Securities are repurchased or redeemed (whether pursuant to Section [15.02]44 or
Section [   ]45 of the Indenture or otherwise) by Counterparty or any of its
subsidiaries (including in connection with, or as a result of, a Fundamental
Change (as defined in the Indenture), a tender offer, exchange offer or similar
transaction or for any other reason), (ii) any Convertible Securities are
delivered to Counterparty in exchange for delivery of any property or assets of
Counterparty or any of its subsidiaries (howsoever described), (iii) any
principal of any of the Convertible Securities is repaid prior to the final
maturity date of the Convertible Securities, or (iv) any Convertible

 

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42                                      Include for additional capped call.

 

43                                      Include for additional capped call

 

44                                      Insert cross-reference to section of the
Indenture relating to fundamental change repurchase.

 

45                                      Insert cross-reference to section of the
Indenture relating to optional redemption.

 

20

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Securities are exchanged by or for the benefit of the “Holders” (as such term is
defined in the Indenture) thereof for any other securities of Counterparty or
any of its affiliates (or any other property, or any combination thereof)
pursuant to any exchange offer or similar transaction.  For the avoidance of
doubt, any conversion of Convertible Securities (whether into cash, Shares,
“Reference Property” (as defined in the Indenture) or any combination thereof)
pursuant to the terms of the Indenture shall not constitute a Repurchase Event.
Counterparty acknowledges and agrees that if an Additional Termination Event has
occurred under this Section 8(b)(ii) that any related Convertible Securities
subject to a Repurchase Event will be deemed to be cancelled and disregarded and
no longer outstanding for all purposes hereunder.

 

(iii)                               Notwithstanding anything to the contrary in
this Confirmation, upon any Early Conversion in respect of which the relevant
converting Holder has satisfied the requirements to conversion set forth in
Section [14.02(b)]46 of the Indenture:

 

(A)                               Counterparty shall, as promptly as practicable
(but in any event within five Scheduled Trading Days of the “Conversion Date”
(as defined in the Indenture) for such Early Conversion), provide written notice
(an “Early Conversion Notice”) to Dealer specifying the number of Convertible
Securities surrendered for conversion on such Conversion Date (such Convertible
Securities, the “Affected Convertible Securities”), and the giving of such Early
Conversion Notice shall constitute an Additional Termination Event as provided
in this Section 8(b)(iii); provided that any such Early Conversion Notice shall
contain a written acknowledgement by Counterparty of its responsibilities under
applicable securities laws, and in particular Section 9 and Section 10(b) of the
Exchange Act and the rules and regulations thereunder, in respect of the
delivery of such Early Conversion Notice.

 

(B)                               upon receipt of any such Early Conversion
Notice, within a commercially reasonable period of time thereafter, Dealer shall
designate an Exchange Business Day as an Early Termination Date (which Exchange
Business Day shall be on or as promptly as reasonably practicable after the
related settlement date for such Affected Convertible Securities) with respect
to the portion of the Transaction corresponding to a number of Options (the
“Affected Number of Options”) equal to the lesser of (x) the number of Affected
Convertible Securities [minus the “Affected Number of Options” (as defined in
the Base Call Option Transaction Confirmation) (and for purposes of determining
whether any Options under this Confirmation or under the Base Call Option
Transaction Confirmation will be among the Affected Number of Options hereunder
or under, and as defined in, the Base Call Option Transaction Confirmation, the
Affected Convertible Securities specified in such Early Conversion Notice shall
be allocated first to the Base Call Option Transaction Confirmation until all
options thereunder are exercised or terminated)]47 and (y) the Number of Options
as of the “Conversion Date” (as defined in the Indenture) for such Early
Conversion;

 

(C)                               any payment hereunder with respect to such
termination shall be calculated pursuant to Section 6 of the Agreement as if
(x) an Early Termination Date had been designated in respect of a Transaction
having terms identical to the Transaction and a Number of Options equal to the
Affected Number of Options, (y) Counterparty were the sole Affected Party with
respect to such Additional Termination Event and (z) the terminated portion of
the Transaction were the

 

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

46                                      Insert cross reference to section of the
Indenture setting forth requirements for conversion

 

47                                      Include for additional capped call.

 

21

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sole Affected Transaction; provided that the amount payable with respect to such
termination shall not be greater than (1) the Applicable Percentage, multiplied
by (2) the Affected Number of Options, multiplied by (3) (x) the sum of (i) the
amount of cash paid (if any) and (ii) the number of Shares delivered (if any) to
the Holder (as such term is defined in the Indenture) of an Affected Convertible
Security upon conversion of such Affected Convertible Security (in each case,
including any cash and/or Shares payable and/or deliverable as the result of a
Make-Whole Adjustment (if any)), multiplied by the fair market value of one
Share as determined by the Calculation Agent in good faith and in a commercially
reasonable manner, minus (y) USD 1,000;

 

(D)                               for the avoidance of doubt, in determining the
amount payable in respect of such Affected Transaction pursuant to Section 6 of
the Agreement, the Calculation Agent shall assume that (x) the relevant Early
Conversion and any conversions, adjustments, agreements, payments, deliveries or
acquisitions by or on behalf of Counterparty leading thereto had not occurred,
(y) no adjustment to the conversion rate for the Convertible Securities has
occurred pursuant to any Make-Whole Adjustment or Discretionary Adjustment and
(z) the corresponding Convertible Securities remain outstanding; and

 

(E)                                the Transaction shall remain in full force
and effect, except that, as of the “Conversion Date”(as defined in the
Indenture) for such Early Conversion, the Number of Options shall be reduced by
the Affected Number of Options.

 

(c)                                  Alternative Calculations and Payment on
Early Termination and on Certain Extraordinary Events.  If (a) 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 (b) the
Transaction is cancelled or terminated upon the occurrence of an Extraordinary
Event (except as a result of (i) a Nationalization, Insolvency or Merger Event
in which the consideration to be paid to all holders of Shares consists solely
of cash, (ii) a Merger Event or Tender Offer that is within Counterparty’s
control, or (iii) an Event of Default in which Counterparty is the Defaulting
Party or a Termination Event in which Counterparty is the Affected Party other
than an Event of Default of the type described in Section 5(a)(iii), (v), (vi),
(vii) or (viii) of the Agreement or a Termination Event of the type described in
Section 5(b) of the Agreement, in each case that resulted from an event or
events outside Counterparty’s control), and if Dealer would owe any amount to
Counterparty pursuant to Section 6(d)(ii) and 6(e) of the Agreement (any such
amount, a “Payment Obligation”), then Dealer shall satisfy the Payment
Obligation by the Share Termination Alternative (as defined below) unless
(a) Counterparty gives irrevocable telephonic notice to Dealer, confirmed in
writing within one Scheduled Trading Day, no later than 12:00 p.m. (New York
City time) on the Merger Date, Tender Offer Date, Announcement Date (in the case
of a Nationalization, Insolvency or Delisting), Early Termination Date or date
of cancellation, as applicable, of its election that the Share Termination
Alternative shall not apply, (b) as of the date of such election, Counterparty
represents that is not in possession of any material non-public information
regarding Counterparty or the Shares, and that such election is being made in
good faith and not as part of a plan or scheme to evade compliance with the
federal securities laws, and (c) Dealer agrees, in its sole discretion, to such
election, in which case the provisions of Section 6(d)(ii) and 6(e) of the
Agreement, as the case may be, shall apply.

 

Share Termination Alternative:

 

If applicable, means that Dealer shall deliver to Counterparty the Share
Termination Delivery Property on the date on which the Payment Obligation would
otherwise be due pursuant to Section 6(d)(ii) of the Agreement or such later
date or dates as Dealer may commercially reasonably determine (the “Share
Termination Payment Date”) taking into account commercially reasonable hedging
or hedge unwind activity, in satisfaction of the Payment Obligation.

 

22

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Share Termination Delivery

 

 

 

 

 

Property:

 

A number of Share Termination Delivery Units, as calculated by the Calculation
Agent in good faith and in a commercially reasonable manner, equal to the
Payment Obligation divided by the Share Termination Unit Price. The Calculation
Agent shall, in good faith and in a commercially reasonable manner, 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 on the
date such Share Termination Delivery Units are to be delivered as Share
Termination Delivery Property, as determined by the Calculation Agent in a
commercially reasonable manner and notified by the Calculation Agent to Dealer
at the time of notification of the Payment Obligation.

 

 

 

Share Termination Delivery Unit:

 

In the case of a Termination Event (other than on account of an Insolvency,
Nationalization or Merger Event), Event of Default, Delisting or Additional
Disruption Event, one Share or, in the case of an Insolvency, Nationalization or
Merger Event, one 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 or Merger Event, as
applicable. If such Insolvency, Nationalization or Merger Event involves a
choice of consideration to be received by holders, such holder shall be deemed
to have elected to receive the maximum possible amount of cash.

 

 

 

Failure to Deliver:

 

Applicable

 

 

 

Other Applicable Provisions:

 

If Share Termination Alternative is applicable, the provisions of Sections 9.8,
9.9 and 9.11 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 Counterparty is the issuer of any
Share Termination Delivery Units (or any part thereof).

 

(d)                                 Disposition of Hedge Shares.  Counterparty
hereby agrees that if, in the good faith reasonable judgment of Dealer, based on
the advice of counsel, the Shares (the “Hedge Shares”) acquired by Dealer for
the purpose of hedging its obligations pursuant to the Transaction in a
commercially reasonable manner cannot be sold in the U.S. public market by
Dealer without registration under the Securities Act, Counterparty shall, at its
election:  (i) in order to allow Dealer to sell the Hedge Shares in a registered
offering, make available to Dealer an effective registration statement under the
Securities Act to cover the resale of such Hedge Shares and (A) enter into an
agreement, in form and substance reasonably satisfactory to Dealer,
substantially in the form of an underwriting agreement for a registered
offering, (B) provide accountant’s “comfort” letters in customary form for
registered offerings of equity securities, (C) provide disclosure opinions of
nationally recognized outside counsel to Counterparty reasonably acceptable to
Dealer, (D) provide other customary opinions, certificates and closing documents
customary in form for registered offerings of equity securities and (E) afford
Dealer a reasonable opportunity to conduct a “due diligence” investigation with
respect to Counterparty customary in scope for underwritten offerings of

 

23

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equity securities (in all cases of (A)-(E) above, as would be usual and
customary for offerings for companies of similar size and industry); provided
that if Counterparty elects clause (i) above but the items referred to therein
are not completed in a timely manner, or if Dealer, in its sole reasonable
discretion, is not satisfied with access to due diligence materials, the results
of its due diligence investigation, or the procedures and documentation for the
registered offering referred to above, then clause (ii) or clause (iii) of this
Section 8(d) shall apply at the election of Counterparty; (ii) in order to allow
Dealer to sell the Hedge Shares in a private placement, enter into a private
placement agreement substantially similar to private placement purchase
agreements customary for private placements of equity securities of similar size
and industry, in form and substance commercially reasonably satisfactory to
Dealer, including using reasonable efforts to include customary representations,
covenants, blue sky and other governmental filings and/or registrations,
indemnities to Dealer, due diligence rights (for Dealer or any designated buyer
of the Hedge Shares from Dealer), and best efforts obligations to provide
opinions and certificates and such other documentation as is customary for
private placements agreements for transactions of similar size and type, as is
commercially reasonably acceptable to Dealer (in which case, the Calculation
Agent shall make any adjustments to the terms of the Transaction that are
necessary, in its good faith, commercially reasonable judgment, to compensate
Dealer for any commercially reasonable discount from the public market price of
the Shares incurred on the sale of Hedge Shares in a private placement); or
(iii) purchase the Hedge Shares from Dealer at the then-current market price on
such Exchange Business Days, and in the amounts and at such time(s),
commercially reasonably requested by Dealer.  This Section 8(d) shall survive
the termination, expiration or early unwind of the Transaction.

 

(e)                                  Repurchase and Conversion Rate Adjustment
Notices.  Counterparty shall, at least two Exchange Business Days prior to any
day on which Counterparty effects any repurchase of Shares or consummates or
otherwise engages in any transaction or event (a “Conversion Rate Adjustment
Event”) that could reasonably be expected to lead to an increase in the
“Conversion Rate” (as defined in the Indenture), give Dealer a written notice of
such repurchase or Conversion Rate Adjustment Event (a “Repurchase Notice”) if,
following such repurchase or Conversion Rate Adjustment Event, the Notice
Percentage would reasonably be expected to be (i) greater than [     ]48% and
(ii) greater by 0.5% than the Notice Percentage included in the immediately
preceding Repurchase Notice (or, in the case of the first such Repurchase
Notice, greater than the Notice Percentage as of the date hereof).  The “Notice
Percentage” as of any day is the fraction, expressed as a percentage, the
numerator of which is the Number of Shares plus the number of Shares underlying
any other convertible bond hedge transactions or similar call options sold by
Dealer to Counterparty and the denominator of which is the number of Shares
outstanding on such day.  In the event that Counterparty fails to provide Dealer
with a Repurchase Notice on the day and in the manner specified in this
Section 8(e) then Counterparty agrees to indemnify and hold harmless Dealer, its
affiliates and their respective directors, officers, employees, agents and
controlling persons (Dealer and each such person being an “Indemnified Party”)
from and against any and all losses (including losses relating to the Dealer’s
commercially reasonable hedging activities as a consequence of becoming, or of
the risk of becoming, a Section 16 “insider”, including without limitation, any
forbearance from hedging activities or cessation of hedging activities and any
losses in connection therewith with respect to this Transaction), claims,
damages and liabilities (or actions in respect thereof), joint or several, to
which such Indemnified Party may become subject under applicable securities
laws, including without limitation, Section 16 of the Exchange Act or under any
state or federal law, regulation or regulatory order, relating to or arising out
of such failure.  If for any reason the foregoing indemnification is unavailable
to any Indemnified Party or insufficient to hold harmless any Indemnified Party,
then Counterparty shall contribute, to the maximum extent permitted by law, to
the amount paid or payable by the Indemnified Party as a result of such loss,
claim, damage or liability.  In addition, Counterparty will reimburse any
Indemnified Party for all reasonable out-of-pocket expenses (including
reasonable counsel fees and expenses) as they are incurred (after notice to
Counterparty) in connection with the investigation of, preparation for or
defense or settlement of any pending or threatened claim or any action, suit or
proceeding arising therefrom, whether or not such Indemnified Party is a party
thereto and whether or not such claim, action, suit or proceeding is initiated
or brought by or on behalf of Counterparty.  This

 

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

48                                      To be 0.5% higher than the number of
Shares underlying the capped call (including any additional capped call) of the
Dealer with the highest Applicable Percentage.

 

24

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indemnity shall survive the completion of the Transaction contemplated by this
Confirmation and any assignment and delegation of the Transaction made pursuant
to this Confirmation or the Agreement and shall inure to the benefit of any
permitted assignee of Dealer.

 

(f)                                   Transfer and Assignment.  Either party may
transfer or assign any of its rights or obligations under the Transaction with
the prior written consent of the non-transferring party, such consent not to be
unreasonably withheld or delayed; provided that Dealer may transfer or assign
without any consent of Counterparty its rights and obligations hereunder, in
whole or in part, to any person, or any person whose obligations would be
guaranteed by a person, in either case, with a rating (i) for its long-term,
unsecured and unsubordinated indebtedness at least equivalent to Dealer’s (or
its ultimate parent’s) or (ii) that is no lower than A3 from Moody’s Investor
Service, Inc. (or its successor) or A- from Standard and Poor’s Rating
Group, Inc. (or its successor); provided further that, at the time of such
transfer or assignment either (i) both the Dealer and transferee in any such
transfer or assignment are a “dealer in securities” within the meaning of
Section 475(c) (1) of the Internal Revenue Code of 1986, as amended (the “Code”)
or (ii) the transfer or assignment does not result in a deemed exchange by
Counterparty within the meaning of Section 1001 of the Code.  If at any time at
which (1) the Equity Percentage exceeds 8.0% or (2) Dealer, Dealer Group (as
defined below) 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 or
other federal, state or local law, rule, regulation or regulatory order or
organizational documents or contracts of Counterparty applicable to ownership of
Shares (“Applicable Restrictions”), owns, beneficially owns, constructively
owns, controls, holds the power to vote or otherwise meets a relevant definition
of ownership in excess of a number of Shares equal to (x) the number of Shares
that would give rise to reporting, registration, filing or notification
obligations or other requirements (including obtaining prior approval by a state
or federal regulator, but excluding reporting obligations arising under
Section 13 of the Exchange Act) of a Dealer Person under Applicable Restrictions
and with respect to which such requirements have not been met or the relevant
approval has not been received, or that would have any other adverse effect on a
Dealer Person, under Applicable Restrictions minus (y) 1% of the number of
Shares outstanding on the date of determination (either such condition described
in clause (1) or (2), an “Excess Ownership Position”), Dealer, in its
discretion, is unable to effect a transfer or assignment to a third party after
its commercially reasonable efforts on pricing and terms and within a time
period reasonably acceptable to Dealer such that an Excess Ownership Position no
longer exists, Dealer may designate any Scheduled Trading Day as an Early
Termination Date with respect to a portion (the “Terminated Portion”) of the
Transaction, such that an Excess Ownership Position would no longer exist
following the resulting partial termination of the Transaction (after taking
into account commercially reasonable adjustments to Dealer’s commercially
reasonable Hedge Positions from such partial termination).  In the event that
Dealer so designates an Early Termination Date with respect to a portion of the
Transaction, a payment or delivery shall be made pursuant to Section 6 of the
Agreement or Section 8(c) of this Confirmation as if (i) an Early Termination
Date had been designated in respect of a Transaction having terms identical to
the Terminated Portion of the Transaction, (ii) Counterparty were the sole
Affected Party with respect to such partial termination, (iii) such portion of
the Transaction were the only Terminated Transaction and (iv) Dealer were 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.  The “Equity Percentage” as of any day is the
fraction, expressed as a percentage, (A) the numerator of which is the number of
Shares that Dealer and any of its affiliates or any other person subject to
aggregation with Dealer for purposes of the “beneficial ownership” test under
Section 13 of the Exchange Act, or any “group” (within the meaning of Section 13
of the Exchange Act) of which Dealer is or may be deemed to be a part
beneficially owns (within the meaning of Section 13 of the Exchange Act),
without duplication, on such day (or, to the extent that for any reason the
equivalent calculation under Section 16 of the Exchange Act and the rules and
regulations thereunder results in a higher number, such higher number) and
(B) the denominator of which is the number of Shares outstanding on such day. 
In the case of a transfer or assignment by Counterparty of its rights and
obligations hereunder and under the Agreement, in whole or in part (any such
Options so transferred or assigned, the “Transfer Options”), to any party,
withholding of such consent by Dealer shall not be considered unreasonable if
such transfer or assignment does not meet the reasonable conditions that Dealer
may impose including, but not limited, to the following conditions:

 

25

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(A)                               With respect to any Transfer Options,
Counterparty shall not be released from its notice and indemnification
obligations pursuant to Section 8(e) or any obligations under Section 2
(regarding Extraordinary Events) or 8(d) of this Confirmation;

 

(B)                               Any Transfer Options shall only be transferred
or assigned to a third party that is a United States person (as defined in the
Code);

 

(C)                               Such transfer or assignment shall be effected
on terms, including any reasonable undertakings by such third party (including,
but not limited to, undertakings with respect to compliance with applicable
securities laws in a manner that, in the reasonable judgment of Dealer, will not
expose Dealer to material risks under applicable securities laws) and execution
of any documentation and delivery of legal opinions with respect to securities
laws and other matters by such third party and Counterparty as are requested by,
and reasonably satisfactory to, Dealer;

 

(D)                               Dealer shall not, as a result of such transfer
and assignment, be required to pay the transferee on any payment date an amount
under Section 2(d)(i)(4) of the Agreement greater than an amount that Dealer
would have been required to pay to Counterparty in the absence of such transfer
and assignment;

 

(E)                                An Event of Default, Potential Event of
Default or Termination Event shall not occur as a result of such transfer and
assignment;

 

(F)                                 Without limiting the generality of clause
(B), Counterparty shall have caused the transferee to make such Payee Tax
Representations and to provide such tax documentation as may be reasonably
requested by Dealer to permit Dealer to determine that results described in
clauses (D) and (E) will not occur upon or after such transfer and assignment;
and

 

(G)                               Counterparty shall be responsible for all
reasonable costs and expenses, including reasonable counsel fees, incurred by
Dealer in connection with such transfer or assignment.

 

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

 

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

 

(ii)                                  the aggregate number of Shares that Dealer
will deliver to Counterparty hereunder on all such Staggered Settlement Dates
will equal the number of Shares that Dealer would otherwise be required to
deliver on such Nominal Settlement Date; and

 

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

 

26

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

 

(i)                                     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.

 

(j)                                    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 Counterparty’s bankruptcy.  For the avoidance of doubt, the
parties agree that the preceding sentence shall not apply at any time other than
during Counterparty’s bankruptcy to any claim arising as a result of a breach by
Counterparty of any of its obligations under this Confirmation or the
Agreement.  For the avoidance of doubt, the parties acknowledge that the
obligations of Counterparty under this Confirmation are not secured by any
collateral that would otherwise secure the obligations of Counterparty herein
under or pursuant to any other agreement.

 

(k)                                 Early Unwind.  In the event the sale by
Counterparty of the [Base Convertible Securities]49[Optional Convertible
Securities]50 is not consummated pursuant to the Purchase Agreement for any
reason by the close of business in New York on [          ], 201851 (or such
later date as agreed upon by the parties) ([          ], 2018 or such later date
being the “Early Unwind Date”), the Transaction shall automatically terminate
(the “Early Unwind”) on the Early Unwind Date and the Transaction and all of the
respective rights and obligations of Dealer and Counterparty hereunder shall be
cancelled and terminated.  Following such termination and cancellation, each
party shall be released and discharged by the other party from, and agrees not
to make any claim against the other party with respect to, any obligations or
liabilities of either party arising out of, and to be performed in connection
with, the Transaction either prior to or after the Early Unwind Date.  Dealer
and Counterparty represent and acknowledge to the other that upon an Early
Unwind, all obligations with respect to the Transaction shall be deemed fully
and finally discharged.

 

(l)                                     Agreements and Acknowledgements
Regarding Hedging.  Counterparty understands, acknowledges and agrees that: 
(A) at any time on and prior to the Expiration Date, Dealer and its affiliates
may buy or sell Shares or other securities or buy or sell options or futures
contracts or enter into swaps or other derivative securities in order to adjust
its hedge position with respect to the Transaction; (B) Dealer and its
affiliates also may be active in the market for Shares other than in connection
with hedging activities in relation to the Transaction; (C) Dealer shall make
its own determination as to whether, when or in what manner any hedging or
market activities in securities of Issuer shall be conducted and shall do so in
a manner that it deems appropriate to hedge its price and market risk with
respect to the “Daily VWAP” (as defined in the Indenture); (D) any market
activities of Dealer and its affiliates with respect to Shares may affect the
market price and volatility of Shares, as well as the “Daily VWAP” (as defined
in the Indenture),

 

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49                                      Include for base capped call.

 

50                                      Include for additional capped call.

 

51                                      For the base capped call, to be the
scheduled closing date for the Base Convertible Securities. For the additional
capped call, to be the scheduled closing date for the Additional Convertible
Securities.

 

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each in a manner that may be adverse to Counterparty; and (E) the Transaction is
a derivatives transaction in which it has granted Dealer an option, and Dealer
may purchase shares for its own account at an average price that may be greater
than, or less than, the price paid by Counterparty under the terms of the
Transaction.

 

(m)                             Wall Street Transparency and Accountability
Act.  In connection with Section 739 of the Wall Street Transparency and
Accountability Act of 2010 (the “WSTAA”), the parties hereby agree that neither
the enactment of the WSTAA (or any statute containing any legal certainty
provision similar to Section 739 of the WSTAA) or any regulation under the WSTAA
(or any such statute), nor any requirement under the WSTAA (or any statute
containing any legal certainty provision similar to Section 739 of the WSTAA) or
an amendment made by the WSTAA (or any such statute), shall limit or otherwise
impair either party’s otherwise applicable rights to terminate, renegotiate,
modify, amend or supplement this Confirmation or the Agreement, as applicable,
arising from a termination event, force majeure, illegality, increased costs,
regulatory change or similar event under this Confirmation, the Equity
Definitions incorporated herein, or the Agreement (including, but not limited
to, rights arising from Change in Law, Hedging Disruption, Increased Cost of
Hedging or Illegality).

 

(n)                                 Governing Law; Exclusive Jurisdiction;
Waiver of Jury.

 

(i)                                     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 ARTICLE 5 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

 

(ii)                                  Section 13(b) of the Agreement is deleted
in its entirety and replaced by the following:

 

“Each party hereby irrevocably and unconditionally submits for itself and its
property in any suit, legal action or proceeding relating to this Confirmation
or the Agreement, or for recognition and enforcement of any judgment in respect
thereof, (each, “Proceedings”) to the exclusive jurisdiction of the Supreme
Court of the State of New York, sitting in New York County, the courts of the
United States of America for the Southern District of New York and appellate
courts from any thereof.  Nothing in this Confirmation or the Agreement
precludes either party from bringing Proceedings in any other jurisdiction if
(A) the courts of the State of New York or the United States of America for the
Southern District of New York lack jurisdiction over the parties or the subject
matter of the Proceedings or decline to accept the Proceedings on the grounds of
lacking such jurisdiction; (B) the Proceedings are commenced by a party for the
purpose of enforcing against the other party’s property, assets or estate any
decision or judgment rendered by any court in which Proceedings may be brought
as provided hereunder; (C) the Proceedings are commenced to appeal any such
court’s decision or judgment to any higher court with competent appellate
jurisdiction over that court’s decisions or judgments if that higher court is
located outside the State of New York or Borough of Manhattan, such as a federal
court of appeals or the U.S. Supreme Court; or (D) any suit, action or
proceeding has been commenced in another jurisdiction by or against the other
party or against its property, assets or estate and, in order to exercise or
protect its rights, interests or remedies under this Confirmation or the
Agreement, the party (1) joins, files a claim, or takes any other action, in any
such suit, action or proceeding, or (2) otherwise commences any Proceeding in
that other jurisdiction as the result of that other suit, action or proceeding
having commenced in that other jurisdiction.”

 

(iii)                               EACH OF COUNTERPARTY AND DEALER HEREBY
IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL

 

28

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BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS CONFIRMATION OR THE
AGREEMENT.

 

(o)                                 Amendment.  This Confirmation and the
Agreement may not be modified, amended or supplemented, except in a written
instrument signed by Counterparty and Dealer.

 

(p)                                 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.

 

(q)                                 Tax Matters.  For purposes of Sections
4(a)(i) and (ii) of the Agreement, Counterparty agrees to deliver to Dealer,
upon request, one duly executed and completed United States Internal Revenue
Service Form W-9 (or successor thereto).  Dealer shall provide to Counterparty
one duly executed and completed United States Internal Revenue Service
Form [W-9][W-8BEN]52 (or successor thereto), upon reasonable request of
Counterparty.

 

(r)                                    Withholding Tax with Respect to Non-US
Counterparties.”  Indemnifiable Tax” as defined in Section 14 of the Agreement
shall not include (i) any U.S. federal withholding tax imposed or collected
pursuant to Sections 1471 through 1474 of the Code, any current or future
regulations or official interpretations thereof, any agreement entered into
pursuant to Section 1471(b) of the Code, or any fiscal or regulatory
legislation, rules or practices adopted pursuant to any intergovernmental
agreement entered into in connection with the implementation of such Sections of
the Code (a “FATCA Withholding Tax”) or (ii) any U.S. federal withholding tax
imposed on amounts treated as dividends from sources within the United States
under Section 871(m) of the Code (or any Treasury regulations or other guidance
issued thereunder).  For the avoidance of doubt, a FATCA Withholding Tax is a
Tax the deduction or withholding of which is required by applicable law for the
purposes of Section 2(d) of the Agreement.

 

(s)                                   Amendment to Equity Definitions.

 

(i)                                     Solely in respect of adjustments to the
Cap Price pursuant to Section 8(t), Section 11.2(e)(vii) of the Equity
Definitions is hereby amended by deleting the words “that may have a diluting or
concentrative effect on the theoretical value of the relevant Shares” and
replacing them with the words “that is the result of a corporate event involving
the Issuer or its securities that has, in the commercially reasonable judgment
of the Calculation Agent, a material economic effect on the Shares or options on
the Shares; provided that such event is not based on (a) an observable market,
other than the market for the Company’s own stock or (b) an observable index,
other than an index calculated and measured solely by reference to Company’s own
operations.”.

 

(ii)                                  Section 12.9(b)(i) of the Equity
Definitions is hereby amended by (1) replacing “either party may elect” with
“Dealer may elect or, if Counterparty represents to Dealer in writing at the
time of such election that (i) it is not aware of any material nonpublic
information with respect to Counterparty or the Shares and (ii) it is not making
such election as part of a plan or scheme to evade compliance with the U.S.
federal securities laws, Counterparty may elect”.

 

(t)                                    Other Adjustments Pursuant to the Equity
Definitions.  Notwithstanding anything to the contrary in the Agreement, the
Equity Definitions or this Confirmation, upon the occurrence of a Merger Date,
the occurrence of a Tender Offer Date, or declaration by Counterparty of the
terms of any Potential Adjustment Event, the Calculation Agent shall determine
in good faith and in a commercially reasonable manner whether such occurrence or
declaration, as applicable, has had a material economic effect on the
Transaction and, if so, shall, in its good faith and commercially reasonable
discretion, adjust the Cap Price to preserve the fair value of the Options
taking into account, for the avoidance of doubt, such economic

 

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52                                      Insert as applicable.

 

29

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effect on both the Strike Price and Cap Price (provided that in no event shall
the Cap Price be less than the Strike Price; provided further that any
adjustment to the Cap Price made pursuant to this Section 8(t) shall be made
without duplication of any other adjustment hereunder).  Solely for purposes of
this Section 8(t), the terms “Potential Adjustment Event,” “Merger Event,” and
“Tender Offer” shall each have the meanings assigned to each such term in the
Equity Definitions (as amended by Section 8 (s)(i)).

 

(u)                                 Notice of Certain Other Events. 
(A) Counterparty shall give Dealer commercially reasonable advance (but in no
event less than one Exchange Business Day) written notice of the section or
sections of the Indenture and, if applicable, the formula therein, pursuant to
which any adjustment will be made to the Convertible Securities in connection
with any Potential Adjustment Event, Merger Event or Tender Offer and
(B) promptly following any such adjustment, Counterparty shall give Dealer
written notice of the details of such adjustment.

 

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

 

(w)                               Payee Tax Representations.  For the purpose of
Section 3(f) of the Agreement, Dealer makes the representations below:

 

(i)                                     [Dealer is organized under the laws of
the United States and its U.S. taxpayer identification number is [     ].  It is
“exempt” within the meaning of Treasury Regulation sections 1.6041-3(p) and
1.6049-4(c) from information reporting on IRS Form 1099 and backup withholding.]

 

OR

 

(ii)                                  [[Dealer Parent] is a [corporation]
established under the laws of [ ] and is classified as a corporation for U.S.
federal income tax purposes.  No income received or to be received under this
Agreement will be effectively connected with the conduct of a trade or business
by [Dealer Parent] in the United States.  [Dealer Parent] is a “non-U.S. branch
of a foreign person” as that term is used in Section 1.1441-4(a)(3)(ii) of the
Regulations, and it is a “foreign person” as that term is used in
Section 1.6041-4(a)(4) of the Regulations.]53

 

Counterparty 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 Counterparty 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 required herein and immediately returning an
executed copy to Dealer.

 

 

 

Yours faithfully,

 

 

 

[DEALER]

 

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53                                      Insert as applicable depending on tax
status of dealer.

 

30

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By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

Agreed and Accepted By:

 

 

 

 

 

TWILIO INC.

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

31

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