exv10w2






Exhibit 10.2



THE SECURITIES REPRESENTED HEREBY (THE “WARRANTS”) WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND THE WARRANTS MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS THEREOF.




[INSERT DEALER NAME]  [INSERT DEALER ADDRESS] | TEL: [INSERT DEALER TELEPHONE NUMBER]




Opening Transaction




	 	 	 
	To:

	 	NetApp, Inc.
	 

	 	495 East Java Drive
	 

	 	Sunnyvale, CA 94089
	 
	 	 
	A/C:

	 	[Insert Account Number]
	 
	 	 
	From:

	 	[Insert Dealer Name]
	 
	 	 
	Re:

	 	Issuer Warrant Transaction
	 
	 	 
	Ref. No:

	 	[Insert Reference Number]
	 
	 	 
	Date:

	 	June 4, 2008





Dear Sir(s):




     The purpose of this communication (this “Confirmation”) is to set forth the terms and
conditions of the above-referenced transaction entered into on the Trade Date specified below (the
“Transaction”) between [      ] (“Dealer”) and NetApp, Inc. (“Issuer”). This communication
constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below.



     1. This Confirmation is subject to, and incorporates, the definitions and provisions of the
2000 ISDA Definitions (including the Annex thereto) (the “2000 Definitions”) and the definitions
and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”, and
together with the 2000 Definitions, the “Definitions”), in each case as published by the
International Swaps and Derivatives Association, Inc. (“ISDA”). In the event of any inconsistency
between the 2000 Definitions and the Equity Definitions, the Equity Definitions will govern. For
purposes of the Equity Definitions, each reference herein to a Warrant shall be deemed to be a
reference to a Call Option or an Option, as context requires.



     Each party is hereby advised, and each such party acknowledges, that the other party has
engaged in, or refrained from engaging in, substantial financial transactions and has taken other
material actions in reliance upon the parties’ entry into the Transaction to which this
Confirmation relates on the terms and conditions set forth below.



     This Confirmation evidences a complete and binding agreement between Dealer and Issuer as to
the terms of the Transaction to which this Confirmation relates. This Confirmation shall be
subject to an agreement (the “Agreement”) in the form of the 1992 ISDA Master Agreement
(Multicurrency—Cross Border) as if Dealer and Issuer had executed an agreement in such form on the
date hereof (but without any Schedule except for (i) the election of Loss and Second Method, New
York law (without reference to its choice of laws doctrine, other than Title 14 of the New York
General Obligations Law) as the governing law and US Dollars (“USD”) as the Termination Currency,
(ii) the replacement of the word “third” in the last line of Section 5(a)(i) of the Agreement with
the word “second,” (iii) the election that the “Cross Default” provisions of Section 5(a)(vi) of
the Agreement shall apply to Issuer with a “Threshold Amount”



 









 







of USD50 million and (iv) the deletion of the phrase “, or becoming capable at such time of
being declared,” in the seventh line of Section 5(a)(vi) of the Agreement).



     All provisions contained in, or incorporated by reference to, the Agreement will govern this
Confirmation except as expressly modified herein. In the event of any inconsistency between this
Confirmation and either the Definitions or the Agreement, this Confirmation shall govern.



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



     2. The Transaction is a Warrant Transaction, which shall be considered a Share Option
Transaction for purposes of the Equity Definitions. The terms of the particular Transaction to
which this Confirmation relates are as follows:


General Terms:




	 	 	 	 	 
	 

	 	Trade Date:
	 	June 4, 2008
	 
	 	 	 	 
	 

	 	Effective Date:
	 	June 10, 2008, or such other date as agreed
between the parties, subject to Section 8(k) below.
	 
	 	 	 	 
	 

	 	Components:
	 	The Transaction will be divided into individual
Components, each with the terms set forth in this
Confirmation, and, in particular, with the Number of
Warrants and Expiration Date set forth in this
Confirmation. The payments and deliveries to be
made upon settlement of the Transaction will be
determined separately for each Component as if each
Component were a separate Transaction under the
Agreement.
	 
	 	 	 	 
	 

	 	Warrant Style:
	 	European
	 
	 	 	 	 
	 

	 	Warrant Type:
	 	Call
	 
	 	 	 	 
	 

	 	Seller:
	 	Issuer
	 
	 	 	 	 
	 

	 	Buyer:
	 	Dealer
	 
	 	 	 	 
	 

	 	Shares:
	 	The Common Stock of Issuer, par value USD0.001
(Ticker Symbol: “NTAP”).
	 
	 	 	 	 
	 

	 	Number of Warrants:
	 	For each Component, as provided in Annex A to this
Confirmation.
	 
	 	 	 	 
	 

	 	Warrant Entitlement:
	 	One Share per Warrant
	 
	 	 	 	 
	 

	 	Strike Price:
	 	USD41.28
	 
	 	 	 	 
	 

	 	Premium:
	 	USD[       ]
	 
	 	 	 	 
	 

	 	Premium Payment Date:
	 	The Effective Date
	 
	 	 	 	 
	 

	 	Exchange:
	 	NASDAQ Global Select Market
	 
	 	 	 	 
	 

	 	Related Exchange:
	 	All Exchanges located in the United States.






2









 




Procedures for Exercise:




     In respect of any Component:



	 	 	 	 	 
	 

	 	Expiration Time:
	 	Valuation Time
	 
	 	 	 	 
	 

	 	Expiration Date:
	 	As provided in Annex A to this Confirmation (or,
if such date is not a Scheduled Trading Day, the
next following Scheduled Trading Day that is not
already an Expiration Date for another
Component); provided that if that date is a
Disrupted Day, the Expiration Date for such
Component shall be the first succeeding Scheduled
Trading Day that is not a Disrupted Day and is
not or is not deemed to be an Expiration Date in
respect of any other Component of the Transaction
hereunder; and provided further that if the
Expiration Date has not occurred pursuant to the
preceding proviso as of the Final Disruption
Date, the Calculation Agent shall have the right
to elect, in its reasonable discretion, that the
Final Disruption Date shall be the Expiration
Date (irrespective of whether such date is an
Expiration Date in respect of any other Component
for the Transaction). “Final Disruption Date”
means November 12, 2013. Notwithstanding the
foregoing and anything to the contrary in the
Equity Definitions, if a Market Disruption Event
occurs on any Expiration Date, the Calculation
Agent may reasonably determine that such
Expiration Date is a Disrupted Day only in part,
in which case the Calculation Agent shall make
adjustments to the Number of Warrants for the
relevant Component for which such day shall be
the Expiration Date and shall designate the
Scheduled Trading Day determined in the manner
described in the immediately preceding sentence
as the Expiration Date for the remaining Warrants
for such Component. Section 6.6 of the Equity
Definitions shall not apply to any Valuation Date
occurring on an Expiration Date.
	 
	 	 	 	 
	 

	 	Market Disruption Event:
	 	Section 6.3(a) of the Equity Definitions is
hereby amended by deleting the words “during the
one hour period that ends at the relevant
Valuation Time, Latest Exercise Time, Knock-in
Valuation Time or Knock-out Valuation Time, as
the case may be,” in clause (ii) thereof.
	 
	 	 	 	 
	 

	 	Automatic Exercise:
	 	Applicable; and means that the Number of Warrants
for the corresponding Expiration Date will be
deemed to be automatically exercised at the
Expiration Time on such Expiration Date unless
Dealer notifies Seller (by telephone or in
writing) prior to the Expiration Time on such
Expiration Date that it does not wish Automatic
Exercise to occur, in which case Automatic
Exercise will not apply to such Expiration Date.
	 
	 	 	 	 
	 

	 	Issuer’s Telephone Number
and Telex and/or Facsimile
Number 	 	 






3









 






	 	 	 	 	 
	 

	 	and Contact Details for
purpose of Giving Notice:	 	 






	 	 	 	 	 	 	 
	 

	 	 	 	To:	 	NetApp, Inc.
	 

	 	 	 	 	 	495 East Java Drive
	 

	 	 	 	 	 	Sunnyvale, CA 94089
	 

	 	 	 	Attn:
	 	Treasurer
	 

	 	 	 	Telephone:
	 	(408) 822-6000
	 

	 	 	 	Facsimile:
	 	(408) 822-4501
	 
	 	 	 	 	 	 
	 

	 	 	 	With a copy to:	 	NetApp, Inc.
	 

	 	 	 	 	 	495 East Java Drive
	 

	 	 	 	 	 	Sunnyvale, CA 94089
	 

	 	 	 	Attn:
	 	General Counsel
	 

	 	 	 	Telephone:
	 	(408) 822-6000
	 

	 	 	 	Facsimile:
	 	(408) 822-4501





Settlement Terms:




     In respect of any Component:



	 	 	 	 	 
	 

	 	Settlement Currency:
	 	USD
	 
	 	 	 	 
	 

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






4









 






	 	 	 	 	 
	 

	 	Electing Party:
	 	Issuer
	 
	 	 	 	 
	 

	 	Settlement Method Election Date:
	 	The third Scheduled Trading Day
immediately preceding the
Expiration Date for the Component
with the earliest Expiration
Date.
	 
	 	 	 	 
	 

	 	Default Settlement Method:
	 	Net Share Settlement
	 
	 	 	 	 
	 

	 	Net Share Settlement:
	 	On each Settlement Date, Issuer
shall deliver to Dealer a number
of Shares equal to the Number of
Shares to be Delivered for such
Settlement Date to the account
specified by Dealer and cash in
lieu of any fractional Share
valued at the Relevant Price on
the Valuation Date corresponding
to such Settlement Date. If, in
the reasonable judgment of Issuer
or Dealer, based on advice of
counsel, for any reason, the
Shares deliverable upon Net Share
Settlement would not be
immediately freely transferable
by Dealer under Rule 144 under
the Securities Act of 1933, as
amended (the “Securities Act”),
then Dealer may elect to either
(x) accept delivery of such
Shares notwithstanding any
restriction on transfer or (y)
have the provisions set forth in
Section 8(b) below apply.
	 
	 	 	 	 
	 

	 	 	 	The Number of Shares to be
Delivered shall be delivered by
Issuer to Dealer no later than
12:00 noon (local time in New
York City) on the relevant
Settlement Date.
	 
	 	 	 	 
	 

	 	Number of Shares to be Delivered:
	 	In respect of any Exercise Date,
subject to the last sentence of
Section 9.5 of the Equity
Definitions, the product of (i)
the number of Warrants exercised
or deemed exercised on such
Exercise Date, (ii) the Warrant
Entitlement and (iii) (A) the
excess of the VWAP Price on the
Valuation Date occurring on such
Exercise Date over the Strike
Price (or, if there is no such
excess, zero) divided by (B) such
VWAP Price.
	 
	 	 	 	 
	 

	 	VWAP Price:
	 	For any Exchange Business Day, as
reasonably determined by the
Calculation Agent based on NASDAQ
Volume Weighted Average Price per
Share for the regular trading
session (including any extensions
thereof) of the Exchange on such
Exchange Business Day (without
regard to pre-open or after hours
trading outside of such regular
trading session), as published by
Bloomberg at 4:15 P.M., New York
City time (or 15 minutes
following the end of any
extension of the regular trading
session), on such Exchange
Business Day, on Bloomberg page
“NTAP.UQ <Equity> AQR” (or
any successor thereto) (or if
such published volume weighted
average price is unavailable or
is manifestly incorrect, the
market value of one Share on such
Exchange Business Day, as
reasonably determined by the
Calculation Agent using a volume
weighted method).






5









 






	 	 	 	 	 
	 

	 	Option Cash Settlement Amount:
	 	In respect of any Exercise Date,
the product of (i) the number of
Warrants exercised or deemed
exercised on such Exercise Date,
(ii) the Warrant Entitlement and
(iii) (A) the excess of the VWAP
Price on the Valuation Date
occurring on such Exercise Date
over the Strike Price (or, if
there is no such excess, zero).
	 
	 	 	 	 
	 

	 	Other Applicable Provisions:
	 	The provisions of Sections
9.1(c), 9.8, 9.9, 9.10, 9.11 and
9.12 of the Equity Definitions
will be applicable as if
“Physical Settlement” applied to
the Transaction; provided that
the Representation and Agreement
contained in Section 9.11 of the
Equity Definitions shall be
modified by excluding any
representations therein relating
to restrictions, obligations,
limitations or requirements under
applicable securities laws that
exist as a result of the fact
that Issuer is the issuer of the
Shares.





Adjustments:




     In respect of any Component:



	 	 	 	 	 
	 

	 	Method of Adjustment:
	 	Calculation Agent Adjustment;
provided that in respect of an
Extraordinary Dividend,
“Calculation Agent Adjustment”
shall be as described under
“Extraordinary Dividend
Adjustment” below; and provided
further that the parties agree
that open market Share repurchases
at prevailing market prices or
accelerated share repurchases,
forward contracts or similar
transactions on customary terms
(including without limitation any
discount to average VWAP prices)
shall not be considered Potential
Adjustment Events. For the
avoidance of doubt, Calculation
Agent Adjustment (including,
without limitation, in respect of
Extraordinary Dividends) shall
continue to apply until the
obligations of the parties
(including any obligations of
Issuer pursuant to Section 8(e)
below) under the Transaction have
been satisfied in full.
	 
	 	 	 	 
	 

	 	Extraordinary Dividend:
	 	Any cash dividend or distribution
on the Shares with an ex-dividend
date occurring on or after the
Trade Date and on or prior to the
Expiration Date (or, if any
Deficit Shares are owed pursuant
to Section 8(e) below, such later
date on which Issuer’s obligations
under this Transaction have been
satisfied in full).
	 
	 	 	 	 
	 

	 	Extraordinary Dividend Adjustment:
	 	If at any time during the period
from and including the Trade Date,
to but excluding the Expiration
Date for the Component with the
latest Expiration Date (or, if any
Deficit Shares are owed pursuant
to Section 8(e) below, such later
date on which Issuer’s obligations
under this Transaction have been
satisfied in full), an ex-dividend
date for an Extraordinary Dividend
occurs, then the Calculation Agent
will make adjustments to any one
or more of the Strike Price, the
Number of Warrants, the Warrant
Entitlement and/or any other
variable relevant to the






6









 






	 	 	 	 	 
	 

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





Extraordinary Events:




     Consequences of Merger Events:



	 	 	 	 	 
	 

	 	     (a) Share-for-Share:
	 	Modified Calculation Agent Adjustment
	 
	 	 	 	 
	 

	 	     (b) Share-for-Other:
	 	Cancellation and Payment (Calculation Agent Determination)
	 
	 	 	 	 
	 

	 	     (c) Share-for-Combined:
	 	Cancellation and Payment (Calculation Agent
Determination); provided that the Calculation Agent may
elect Component Adjustment for all or part of the
Transaction.
	 
	 	 	 	 
	 

	 	Tender Offer:
	 	Applicable; provided that for the purposes of Section
12.3(d)(ii) of the Equity Definitions, references in the
definition of Tender Offer under the Equity Definitions
to 10% shall be replaced with 20%.
	 
	 	 	 	 
	 

	 	Consequences of Tender Offers:	 	 
	 
	 	 	 	 
	 

	 	     (a) Share-for-Share:
	 	Modified Calculation Agent Adjustment
	 
	 	 	 	 
	 

	 	     (b) Share-for-Other:
	 	Modified Calculation Agent Adjustment
	 
	 	 	 	 
	 

	 	     (c) Share-for-Combined:
	 	Modified Calculation Agent Adjustment






	 	 	 	 	 
	 

	 	Modified Calculation

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






7









 






	 	 	 	 	 
	 

	 	 	 	and procedures
applicable to Dealer, and if such conditions
are not met in all material respects or if the
Calculation Agent determines that no
adjustment that it could make under Section
12.2(e)(i) of the Equity Definitions will
produce a commercially reasonable result, then
the consequences set forth in Section
12.2(e)(ii) of the Equity Definitions shall
apply.
	 
	 	 	 	 
	 

	 	Nationalization, Insolvency

or Delisting:
	 	Cancellation and Payment (Calculation Agent
Determination); provided that in addition to
the provisions of Section 12.6(a)(iii) of the
Equity Definitions, it shall also constitute a
Delisting if the Exchange is located in the
United States and the Shares are not
immediately re-listed, re-traded or re-quoted
on any of the New York Stock Exchange, The
NASDAQ Global Select Market or The NASDAQ
Global Market (or their respective
successors); if the Shares are immediately
re-listed, re-traded or re-quoted on any such
exchange or quotation system, such exchange or
quotation system shall thereafter be deemed to
be the Exchange.






	 	 	 	 	 
	 

	 	Additional Disruption Events:	 	 
	 
	 	 	 	 
	 

	 	     (a) Change in Law:
	 	Applicable; provided that
Section 12.9(a)(ii) of the
Equity Definitions is hereby
amended by (i) replacing the
phrase “the interpretation” in
the third line thereof with the
phrase “or announcement or
statement of the formal or
informal interpretation” and
(ii) immediately following the
word “Transaction” in clause
(X) thereof, adding the phrase
“in the manner contemplated by
Hedging Party on the Trade
Date.”
	 
	 	 	 	 
	 

	 	     (b) Failure to Deliver:
	 	Applicable
	 
	 	 	 	 
	 

	 	     (c) Insolvency Filing:
	 	Applicable
	 
	 	 	 	 
	 

	 	     (d) Hedging Disruption:
	 	Applicable
	 
	 	 	 	 
	 

	 	     (e) Loss of Stock Borrow:
	 	Applicable
	 
	 	 	 	 
	 

	 	          Maximum Stock Loan Rate:
	 	2.00% per annum
	 
	 	 	 	 
	 

	 	     (f) Increased Cost of Stock Borrow:
	 	Applicable
	 
	 	 	 	 
	 

	 	          Initial Stock Loan Rate:
	 	0.25% per annum






	 	 	 	 	 
	 

	 	Hedging Party:
	 	Dealer
	 
	 	 	 	 
	 

	 	Determining Party:
	 	Dealer
	 
	 	 	 	 
	 

	 	Non-Reliance:
	 	Applicable
	 
	 	 	 	 
	 

	 	Agreements and
Acknowledgments	 	 
	 

	 	Regarding Hedging
Activities:
	 	Applicable
	 
	 	 	 	 
	 

	 	Additional
Acknowledgments:
	 	Applicable






8









 





	 	 	 	 	 
	 

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






     4. Account Details:



          Dealer Payment Instructions:




               [       ]




          Account for delivery of Shares to Dealer:




               To be provided by Dealer




          Issuer Payment Instructions:




                To be provided by Issuer.




     5. Offices:



          The Office of Dealer for the Transaction is:




                [       ]




          The Office of Issuer for the Transaction is:




                [       ]




     6. Notices: For purposes of this Confirmation:



     (a) Address for notices or communications to Issuer:



	 	 	 	 	 
	 

	 	To:	 	NetApp, Inc.
	 

	 	 	 	495 East Java Drive
	 

	 	 	 	Sunnyvale, CA 94089
	 

	 	Attn:
	 	Treasurer
	 

	 	Telephone:
	 	(408) 822-6000
	 

	 	Facsimile:
	 	(408) 822-4501
	 
	 	 	 	 
	 

	 	With a copy to:	 	NetApp, Inc.
	 

	 	 	 	495 East Java Drive
	 

	 	 	 	Sunnyvale, CA 94089
	 

	 	Attn:	 	General Counsel
	 

	 	Telephone:	 	(408) 822-6000
	 

	 	Facsimile:	 	(408) 822-4501






     (b) Address for notices or communications to Dealer:



	 	 	 	 	 
	 

	 	To:	 	 
	 

	 	Attn:
	 	[       ]
	 

	 	 	 	[       ]






9









 






	 	 	 	 	 
	 

	 	Telephone:
	 	[       ]
	 

	 	Facsimile:
	 	[       ]
	 
	 	 	 	 
	 

	 	With a copy to:	 	 
	 
	 	 	 	 
	 

	 	Attn:
	 	[       ]
	 

	 	 	 	[       ]
	 

	 	Telephone:
	 	[       ]
	 

	 	Facsimile:
	 	[       ]






     7. Representations, Warranties and Agreements:



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




     (i) On the Trade Date, (A) none of Issuer and its executive officers and directors is
aware of any material nonpublic information regarding Issuer or the Shares and (B) all
reports and other documents filed by Issuer with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), when
considered as a whole (with the more recent such reports and documents deemed to amend
inconsistent statements contained in any earlier such reports and documents), do not
contain any untrue statement of a material fact or any omission of a material fact required
to be stated therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading.




     (ii) Without limiting the generality of Section 13.1 of the Equity Definitions, Issuer
acknowledges that neither Dealer nor any of its affiliates is making any representations or
warranties or taking a position or expressing any view with respect to the treatment of the
Transaction under any accounting standards, including FASB Statements 128, 133 (as
amended), 149 or 150, EITF Issue No. 00-19, 01-6, 03-6 or 07-5 (or any successor issue
statements) or under the FASB’s Liabilities & Equity Project..




     (iii) Prior to the Trade Date, Issuer shall deliver to Dealer a resolution of Issuer’s
board of directors authorizing the Transaction and such other certificate or certificates
as Dealer shall reasonably request.




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




     (v) Issuer is not, and after giving effect to the transactions contemplated hereby
will not be, required to register as an “investment company” as such term is defined in the
Investment Company Act of 1940, as amended.




     (vi) On the Trade Date and the Premium Payment Date (A) the assets of Issuer at their
fair valuation exceed the liabilities of Issuer, including contingent liabilities, (B) the
capital of Issuer is adequate to conduct the business of Issuer and (C) Issuer has the
ability to pay its debts and obligations as such debts mature and does not intend to, or
does not believe that it will, incur debt beyond its ability to pay as such debts mature.




     (vii) Issuer shall not take any action to decrease the number of Available Shares
below the Capped Number (each as defined below).




     (viii) Issuer understands no obligations of Dealer to it hereunder will be entitled to
the benefit of deposit insurance and that such obligations will not be guaranteed by any
affiliate of Dealer or any governmental agency.




     (ix) (A) During the period starting on the first Expiration Date and ending on the
last Expiration Date (the “Settlement Period”), the Shares or securities that are
convertible into, or exchangeable or exercisable for Shares, are not, and shall not be,
subject to a “restricted period,”



10









 







as such term is defined in Regulation M under the
Exchange Act (“Regulation M”) and (B) Issuer shall not engage in any “distribution,” as
such term is defined in Regulation M, other than a distribution meeting the requirements of
the exceptions set forth in sections 101(b)(10) and 102(b)(7) of Regulation M, until the
second Exchange Business Day immediately following the Settlement Period.




     (x) During the Settlement Period, neither Issuer nor any “affiliate” or “affiliated
purchaser” (each as defined in Rule 10b-18 of the Exchange Act (“Rule 10b-18”)) shall
directly or indirectly (including, without limitation, by means of any cash-settled or
other derivative instrument) purchase, offer to purchase, place any bid or limit order that
would effect a purchase of, or commence any tender offer relating to, any Shares (or an
equivalent interest, including a unit of beneficial interest in a trust or limited
partnership or a depository share) or any security convertible into or exchangeable or
exercisable for Shares, except through Dealer, except for purchases from its employees that
are not “Rule 10b-18 purchases” as defined in Rule 10b-18(a)(13).




     (xi) Issuer agrees that it (A) will not during the Settlement Period make, or permit
to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of
any Merger Transaction or potential Merger Transaction unless such public announcement is
made prior to the opening or after the close of the regular trading session on the Exchange
for the Shares; (B) shall promptly (but in any event prior to the next opening of the
regular trading session on the Exchange) notify Dealer following any such announcement that
such announcement has been made; and (C) shall promptly (but in any event prior to the next
opening of the regular trading session on the Exchange) provide Dealer with written notice
specifying (i) Issuer’s average daily Rule 10b-18 Purchases (as defined in Rule 10b-18)
during the three full calendar months immediately preceding the announcement date that were
not effected through Dealer or its affiliates and (ii) the number of Shares purchased
pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full
calendar months preceding the announcement date. Such written notice shall be deemed to be
a certification by Issuer to Dealer that such information is true and correct. In
addition, Issuer shall promptly notify Dealer of the earlier to occur of the completion of
such transaction and the completion of the vote by target shareholders. “Merger
Transaction” means any merger, acquisition or similar transaction involving a
recapitalization as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act.




     (xii) Any Shares issued or delivered in connection with the Transaction shall be duly
authorized and validly issued, fully paid and non-assessable, and the issuance or delivery
thereof shall not be subject to any preemptive or similar rights.



     (b) Each of Dealer and Issuer agrees and represents that it is an “eligible contract
participant” as defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended.



     (c) Each of Dealer and Issuer acknowledges that the offer and sale of the Transaction to it is
intended to be exempt from registration under the Securities Act, by virtue of Section 4(2)
thereof. Accordingly, Dealer represents and warrants to Issuer that (i) it has the financial
ability to bear the economic risk of its investment in the Transaction and is able to bear a total
loss of its investment and its investments in and liabilities in respect of the Transaction, which
it understands are not readily marketable, are not disproportionate to its net worth, and it is
able to bear any loss in connection with the Transaction, including the loss of its entire
investment in the Transaction, (ii) it is an “accredited investor” as that term is defined in
Regulation D as promulgated under the Securities Act, (iii) it is entering into the Transaction for
its own account without a view to the distribution or resale thereof, (iv) the assignment, transfer
or other disposition of the Transaction has not been and will not be registered under the
Securities Act and is restricted under this Confirmation, the Securities Act and state securities
laws, and (v) its financial condition is such that it has no need for liquidity with respect to its
investment in the Transaction and no need to dispose of any portion thereof to satisfy any existing
or contemplated undertaking or indebtedness and is capable of assessing the merits of and
understanding (on its own behalf or through independent professional advice), and understands and
accepts, the terms, conditions and risks of the Transaction.



     (d) Each of Dealer and Issuer agrees and acknowledges that Dealer is a “financial
institution,” “swap participant” and “financial participant” within the meaning of Sections
101(22),



11









 







101(53C) and 101(22A) of Title 11 of the United States Code (the “Bankruptcy Code”). The
parties hereto further agree and acknowledge (A) that this Confirmation is (i) a “securities
contract,” as such term is defined in Section 741(7) of Title 11 of the Bankruptcy Code, with
respect to which each payment and delivery hereunder is a “settlement payment,” as such term is
defined in Section 741(8) of the Bankruptcy Code, and (ii) a “swap agreement,” as such term is
defined in Section 101(53B) of the Bankruptcy Code, with respect to which each payment and delivery
hereunder is a “transfer,” as such term is defined in Section 101(54) of the Bankruptcy Code, and
(B) that Dealer is entitled to the protections afforded by, among other sections, Sections
362(b)(6), 362(b)(17), 546(e), 546(g), 555 and 560 of the Bankruptcy Code.



     (e) Issuer shall deliver to Dealer (i) an incumbency certificate, dated as of the Trade Date,
of Issuer in customary form and (ii) an opinion of counsel, dated as of the Trade Date and
reasonably acceptable to Dealer in form and substance, with respect to due incorporation, existence
and good standing of the Issuer in Delaware, its qualifications as a foreign corporation and good
standing in California, the due authorization, execution and delivery of the Confirmation, and the
absence of conflict of the execution and delivery of the Confirmation with any material agreement
required to be filed as any exhibit to the Issuer’s Annual Report on Form 10-K and the Issuer’s
charter documents



     (f) Issuer represents and warrants that it has received, read and understands the OTC Options
Risk Disclosure Statement and a copy of the most recent disclosure pamphlet prepared by The Options
Clearing Corporation entitled “Characteristics and Risks of Standardized Options”.



     Each party acknowledges and agrees to be bound by the Conduct Rules of the National
Association of Securities Dealers, Inc. applicable to transactions in options, and further agrees
not to violate the position and exercise limits set forth therein.



     8. Other Provisions:



     (a) Alternative Calculations and Payment on Early Termination and on Certain Extraordinary
Events. If Issuer shall owe Dealer any amount pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9
of the Equity Definitions (except in the event of a Tender Offer, Merger Event, Insolvency or
Nationalization, in each case, in which the consideration or proceeds to be paid to holders of
Shares consists solely of cash) or pursuant to Section 6(d)(ii) of the Agreement (except in the
event of an Event of Default in which Issuer is the Defaulting Party or a Termination Event in
which Issuer is the Affected Party that resulted from an event or events within Issuer’s control)
(a “Payment Obligation”), Issuer shall have the right, in its sole discretion, to satisfy any such
Payment Obligation by the Share Termination
Alternative (as defined below) by giving irrevocable telephonic notice to Dealer, confirmed in
writing within one Scheduled Trading Day, between the hours of 9:00 A.M. and 4:00 P.M., New York
City time, on the Merger Date, Tender Offer Date, Announcement Date or Early Termination Date, as
applicable (“Notice of Share Termination”). Upon such Notice of Share Termination, the following
provisions shall apply on the Scheduled Trading Day immediately following the Merger Date, the
Tender Offer Date, Announcement Date or Early Termination Date, as applicable:



	 	 	 
	Share Termination Alternative:

	 	Applicable and means that Issuer
shall deliver to Dealer the Share
Termination Delivery Property on the
date on which the Payment Obligation
would otherwise be due pursuant to
Section 12.2, 12.3, 12.6, 12.7 or
12.9 of the Equity Definitions or
Section 6(d)(ii) of the Agreement,
as applicable (the “Share
Termination Payment Date”), in
satisfaction of the Payment
Obligation.
	 
	 	 
	Share Termination Delivery
Property:

	 	A number of Share Termination
Delivery Units, as calculated by the
Calculation Agent, equal to the
Payment Obligation divided by the
Share Termination Unit Price. The
Calculation Agent shall adjust the
Share Termination Delivery Property
by replacing any fractional portion
of the aggregate amount of a
security therein with an amount of
cash equal to the value of such
fractional security based on the
values used to calculate the Share
Termination Unit Price.
	 
	 	 
	Share Termination Unit Price:

	 	The value of property contained in
one Share Termination Delivery Unit,
as determined by the Calculation
Agent in its discretion by






12









 






	 	 	 
	 

	 	commercially reasonable means and
notified by the Calculation Agent to
Issuer at the time of notification
of the Payment Obligation.
	 
	 	 
	Share Termination Delivery Unit:

	 	In the case of a Termination Event,
Event of Default, Delisting or
Additional Disruption Event, one
Share or, in the case of an
Insolvency, Nationalization, Merger
Event or Tender Offer, a Share or a
unit consisting of the number or
amount of each type of property
received by a holder of one Share
(without consideration of any
requirement to pay cash or other
consideration in lieu of fractional
amounts of any securities) in such
Insolvency, Nationalization, Merger
Event or Tender Offer. If such
Insolvency, Nationalization, Merger
Event or Tender Offer involves a
choice of consideration to be
received by holders, such holder
shall be deemed to have elected to
receive the maximum possible amount
of cash.
	 
	 	 
	Failure to Deliver:

	 	Applicable
	 
	 	 
	Other Applicable provisions:

	 	If Share Termination Alternative is
applicable, the provisions of
Sections 9.8, 9.9, 9.11 and 9.12 of
the Equity Definitions will be
applicable as if “Physical
Settlement” applied to the
Transaction, except that all
references to “Shares” shall be read
as references to “Share Termination
Delivery Units”; provided that the
Representation and Agreement
contained in Section 9.11 of the
Equity Definitions shall be modified
by excluding any representations
therein relating to restrictions,
obligations, limitations or
requirements under applicable
securities laws as a result of the
fact that Issuer is the issuer of
any Share Termination Delivery Units
(or any security forming a part
thereof). If, in the reasonable
judgment of Issuer or Dealer, based
on advice of counsel, for any
reason, any securities comprising
the Share Termination Delivery Units
deliverable pursuant to this Section
8(a) would not be immediately freely
transferable by Dealer under Rule
144 under the Securities Act, then
Dealer may elect to either (x)
permit delivery of such securities
notwithstanding any restriction on
transfer or (y) have the provisions
set forth in Section 8(b) below
apply.






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



     (ii) If Issuer makes the election described in clause (b)(i)(A) above:



13









 






     (A) Dealer (or an affiliate of Dealer designated by Dealer) shall be afforded a
reasonable opportunity to conduct a due diligence investigation with respect to Issuer that
is customary in scope for underwritten follow-on offerings of equity securities of
companies of comparable size, maturity and lines of business and that yields results that
are commercially reasonably satisfactory to Dealer or such affiliate, as the case may be,
in its discretion; and




     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer shall enter
into an agreement (a “Registration Agreement”) on commercially reasonable terms in
connection with the public resale of such Shares or Share Termination Delivery Units, as
the case may be, by Dealer or such affiliate substantially similar to underwriting
agreements customary for underwritten follow-on offerings of equity securities of companies
of comparable size, maturity and lines of business, in form and substance commercially
reasonably satisfactory to Dealer or such affiliate and Issuer, which Registration
Agreement shall include, without limitation, provisions substantially similar to those
contained in such underwriting agreements relating to the indemnification of, and
contribution in connection with the liability of, Dealer and its affiliates and Issuer,
shall provide for the payment by Issuer of all registration expenses in connection with
such resale, including all registration costs and all fees and expenses of counsel for
Dealer, and shall provide for the delivery of accountants’ “comfort letters” to Dealer or
such affiliate with respect to the financial statements and certain financial information
contained in or incorporated by reference into the Prospectus as are customarily requested
in comfort letters covering follow-on offerings of equity securities of companies of
comparable size, maturity and lines of business.



     (iii) If Issuer makes the election described in clause (b)(i)(B) above:




     (A) Dealer (or an affiliate of Dealer designated by Dealer) and any potential
institutional purchaser of any such Shares or Share Termination Delivery Units, as the case
may be, from Dealer or such affiliate identified by Dealer shall be afforded a commercially
reasonable opportunity to conduct a due diligence investigation in compliance with
applicable law with respect to Issuer customary in scope for private placements of equity
securities of companies of comparable size, maturity and lines of business (including,
without limitation, the right to have made available to them for inspection all financial
and other records, pertinent corporate documents and other information reasonably requested
by them), subject to execution by such recipients of customary confidentiality agreements
reasonably acceptable to Issuer;




     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer shall enter
into an agreement (a “Private Placement Agreement”) on commercially reasonable terms in
connection with the private placement of such Shares or Share Termination Delivery
Units, as the case may be, by Issuer to Dealer or such affiliate and the private resale of
such shares by Dealer or such affiliate, substantially similar to private placement
purchase agreements customary for private placements of equity securities of companies of
comparable size, maturity and lines of business, in form and substance commercially
reasonably satisfactory to Dealer and Issuer, which Private Placement Agreement shall
include, without limitation, provisions substantially similar to those contained in such
private placement purchase agreements relating to the indemnification of, and contribution
in connection with the liability of, Dealer and its affiliates and Issuer, shall provide
for the payment by Issuer of all expenses in connection with such resale, including all
fees and expenses of counsel for Dealer, shall contain representations, warranties and
agreements of Issuer reasonably necessary or advisable to establish and maintain the
availability of an exemption from the registration requirements of the Securities Act for
such resales, and shall use commercially reasonable efforts to provide for the delivery of
accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial
statements and certain financial information contained in or incorporated by reference into
the offering memorandum prepared for the resale of such Shares as are customarily requested
in comfort letters covering private placements of equity securities of companies of
comparable size, maturity and lines of business;




     (C) Issuer agrees that any Shares or Share Termination Delivery Units so delivered to
Dealer, (i) may be transferred by and among Dealer and its affiliates, and Issuer shall
effect such transfer without any further action by Dealer and (ii) after the minimum
“holding period” within the meaning of Rule 144(d) under the Securities Act has elapsed
with respect to such



14









 







Shares or any securities issued by Issuer comprising such Share
Termination Delivery Units, Issuer shall promptly remove, or cause the transfer agent for
such Shares or securities to remove, any legends referring to any such restrictions or
requirements from such Shares or securities upon delivery by Dealer (or such affiliate of
Dealer) to Issuer or such transfer agent of seller’s and broker’s representation letters
customarily delivered by Dealer in connection with resales of restricted securities
pursuant to Rule 144 under the Securities Act, without any further requirement for the
delivery of any certificate, consent, agreement, opinion of counsel, notice or any other
document, any transfer tax stamps or payment of any other amount or any other action by
Dealer (or such affiliate of Dealer); and




     (D) Issuer shall not take, or cause to be taken, any action that would make
unavailable either the exemption pursuant to Section 4(2) of the Securities Act for the
sale by Issuer to Dealer (or any affiliate designated by Dealer) of the Shares or Share
Termination Delivery Units, as the case may be, or the exemption pursuant to Section 4(1)
or Section 4(3) of the Securities Act for resales of the Shares or Share Termination
Delivery Units, as the case may be, by Dealer (or any such affiliate of Dealer).



     (c) Make-whole Shares. If Issuer makes the election described in clause (i)(B) of paragraph
(b) of this Section 8, then Dealer or its affiliates may sell (which sale shall be made in a
commercially reasonable manner) such Shares or Share Termination Delivery Units, as the case may
be, during a period (the “Resale Period”) commencing on the Exchange Business Day following
delivery of such Shares or Share Termination Delivery Units, as the case may be, and ending on the
Exchange Business Day on which Dealer or its affiliates completes the sale of all such Shares or
Share Termination Delivery Units, as the case may be, or a sufficient number of Shares or Share
Termination Delivery Units, as the case may be, so that the realized net proceeds of such sales
exceed the Freely Tradeable Value. If any of such delivered Shares or Share Termination Delivery
Units remain after such realized net proceeds exceed the Freely Tradeable Value, Dealer shall
return such remaining Shares or Share Termination Delivery Units to Issuer. If the Freely
Tradeable Value exceeds the realized net proceeds from such resale, Issuer shall transfer to Dealer
by the open of the regular trading session on the Exchange on the Exchange Trading Day immediately
following the last day of the Resale Period the amount of such excess (the “Additional Amount”) in
cash or in a number of additional Shares (“Make-whole Shares”) in an amount that, based on the
Relevant Price on the last day of the Resale Period (as if such day was the “Valuation Date” for
purposes of computing such Relevant Price), has a dollar value equal to the Additional Amount. The
Resale Period shall continue to enable the sale of the Make-whole Shares in the manner contemplated
by
this Section 8(c). This provision shall be applied successively until the Additional Amount
is equal to zero, subject to Section 8(e).



     (d) Beneficial Ownership. Notwithstanding anything to the contrary in the Agreement or this
Confirmation, in no event shall Dealer be entitled to receive, or shall be deemed to receive, any
Shares if, immediately upon giving effect to such receipt of such Shares, (i) the “beneficial
ownership” (within the meaning of Section 13 of the Exchange Act and the rules promulgated
thereunder) of Shares by Dealer, any of its affiliates subject to aggregation with Dealer for
purposes of the “beneficial ownership” test under Section 13 of the Exchange Act and all persons
who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) with Dealer
with respect to “beneficial ownership” of any Shares (collectively, “Dealer Group”) would be equal
to or greater than 8.5% or more of the outstanding Shares or (ii) Dealer, Dealer Group or any
person whose ownership position would be aggregated with that of Dealer or Dealer Group (Dealer,
Dealer Group or any such person, a “Dealer Person”) under Section 203 of the Delaware General
Corporation Law (the “DGCL Takeover Statute”) or other federal, state or local regulations or
regulatory orders applicable to ownership of Shares (“Applicable Laws”), would own, beneficially
own, constructively own, control, hold the power to vote or otherwise meet a relevant definition of
ownership in excess of a number of Shares equal to (x) the number of Shares that would give rise to
reporting or registration obligations or other requirements (including obtaining prior approval by
a state or federal regulator) of a Dealer Person under Applicable Laws (including, without
limitation, “interested stockholder” or “acquiring person” status under the DGCL Takeover Statute)
and with respect to which such requirements have not been met or the relevant approval has not been
received minus (y) 1.0% of the number of Shares outstanding on the date of determination (either
such condition described in clause (i) or (ii), an “Excess Ownership Position”). If any delivery
owed to Dealer hereunder is not made,



15









 







in whole or in part, as a result of this provision, Issuer’s
obligation to make such delivery shall not be extinguished and Issuer shall make such delivery as
promptly as practicable after, but in no event later than one Exchange Business Day after, Dealer
gives notice to Issuer that such delivery would not result in the existence of an Excess Ownership
Position.



     (e) Limitations on Settlement by Issuer. Notwithstanding anything herein or in the Agreement
to the contrary, in no event shall Issuer be required to deliver Shares in connection with the
Transaction in excess of the product of two, the aggregate Number of Warrants for all Components at
the time of delivery and the Warrant Entitlement at the time of delivery (such product, the “Capped
Number”); provided that, solely for purposes of determining the Capped Number, the Number of
Warrants for a Component and the Warrant Entitlement at the time of delivery shall take into
account only adjustments made in accordance with the provisions of this Confirmation as a result of
any Potential Adjustment Event or Extraordinary Event or other event, in each case, that was
initiated by, and effectuated under the control of, Issuer (it being understood, for the avoidance
of doubt, that an event initiated by Issuer shall not be deemed to be effectuated outside of the
control of Issuer merely because effectuating such event requires approvals that are outside of
Issuer’s control). Issuer represents and warrants to Dealer (which representation and warranty
shall be deemed to be repeated on each day that the Transaction is outstanding) that the Capped
Number is equal to or less than the number of authorized but unissued Shares of the Issuer that are
not reserved for future issuance in connection with transactions in the Shares (other than the
Transaction) on the date of the determination of the Capped Number (such Shares, the “Available
Shares”). In the event Issuer shall not have delivered the full number of Shares otherwise
deliverable as a result of this Section 8(e) (the resulting deficit, the “Deficit Shares”), Issuer
shall be continually obligated to deliver Shares, from time to time until the full number of
Deficit Shares have been delivered pursuant to this paragraph, when, and to the extent, that (A)
Shares are repurchased, acquired or otherwise received by Issuer or any of its subsidiaries after
the Trade Date (whether or not in exchange for cash, fair value or any other consideration), (B)
authorized and unissued Shares reserved for issuance in respect of other transactions prior to such
date which prior to the relevant date become no longer so reserved and (C) Issuer additionally
authorizes any unissued Shares that are not reserved for other transactions (such events as set
forth in clauses (A), (B) and (C) above, collectively, the “Share Issuance Events”). Issuer shall
promptly notify Dealer of the occurrence of any of the Share Issuance Events (including the number
of Shares subject to clause (A), (B) or (C) and the corresponding number of Shares to be delivered)
and, as promptly as reasonably practicable, deliver such Shares thereafter. Issuer shall not,
until Issuer’s obligations under the Transaction have been satisfied in full, use any Shares that
become available for potential delivery to Dealer as a result of any Share Issuance Event for the
settlement or satisfaction of any transaction or
obligation other than the Transaction or reserve any such Shares for future issuance for any
purpose other than to satisfy Issuer’s obligations to Dealer under the Transaction.



     (f) Equity Rights. Dealer acknowledges and agrees that this Confirmation is not intended to
convey to it rights with respect to the Transaction that are senior to the claims of common
stockholders in the event of Issuer’s bankruptcy. For the avoidance of doubt, the parties agree
that the preceding sentence shall not apply at any time other than during Issuer’s bankruptcy to
any claim arising as a result of a breach by Issuer of any of its obligations under this
Confirmation or the Agreement. For the avoidance of doubt, the parties acknowledge that the
obligations of Issuer under this Confirmation are not secured by any collateral that would
otherwise secure the obligations of Issuer herein under or pursuant to any other agreement.



     (g) Amendments to Equity Definitions. The following amendments shall be made to the Equity
Definitions:




     (i) For the purposes of any adjustment under Section 11.2(c) of the Equity Definitions
in respect of a Potential Adjustment Event described in Section 11.2(e)(ii), (v) and (vi)
thereof only, the first sentence of Section 11.2(c) of the Equity Definitions, prior to
clause (A) thereof, is hereby amended to read as follows: ‘(c) If “Calculation Agent
Adjustment” is specified as the Method of Adjustment in the related Confirmation of a Share
Option Transaction, then following the announcement or occurrence of any Potential
Adjustment Event, the Calculation Agent will determine whether such Potential Adjustment
Event has a material effect on the theoretical value of the relevant Shares or options on
the Shares and, if so, will (i) make



16









 







appropriate adjustment(s), if any, to any one or more
of:’ and, the portion of such sentence immediately preceding clause (ii) thereof is hereby
amended by deleting the words “diluting or concentrative” and the words “(provided that no
adjustments will be made to account solely for changes in volatility, expected dividends,
stock loan rate or liquidity relative to the relevant Shares)” and replacing such latter
phrase with the words “(and, for the avoidance of doubt, adjustments may be made to account
solely for changes in volatility, expected dividends, stock loan rate or liquidity relative
to the relevant Shares)”; and




     (ii) Section 11.2(e)(vii) of the Equity Definitions is hereby amended by inserting at
the end of the Section the phrase “or a material effect on the theoretical value of the
Warrants.”



     (h) Transfer and Assignment. Dealer may transfer or assign its rights and obligations
hereunder and under the Agreement, in whole or in part, at any time without the consent of Issuer,
subject to the restrictions set forth in the legend appearing at the top of this Confirmation.
Dealer shall as soon as reasonably practicable notify Issuer of such transfer or assignment.



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



     (j) Additional Termination Events. The occurrence of any of the following shall constitute an
Additional Termination Event with respect to which the Transaction shall be the sole Affected
Transaction and Issuer shall be the sole Affected Party and Dealer shall be the party entitled to
designate an Early Termination Date pursuant to Section 6(b) of the Agreement and to determine the
amount payable pursuant to Section 6(e) of the Agreement; provided that with respect to any
Additional Termination Event, Dealer may choose to treat part of the Transaction as the sole
Affected Transaction, and, upon the termination of the Affected Transaction, a Transaction with
terms identical to those set forth herein except with a Number of Warrants equal to the unaffected
number of Warrants shall be treated for all purposes as the Transaction, which shall remain in full
force and effect:




     (i) Dealer reasonably determines that it is advisable to terminate a portion of the
Transaction so that Dealer’s related hedging activities will comply with applicable
securities laws, rules or regulations or related policies and procedures of Dealer (whether
or not such requirements, policies or procedures are imposed by law or have been
voluntarily adopted by
Dealer), or Dealer, despite using commercially reasonable efforts, is unable or
reasonably determines that it is impractical or illegal to hedge its obligations pursuant
to this Transaction in the public market without registration under the Securities Act or
as a result of any legal, regulatory or self-regulatory requirements;




     (ii) at any time at which any Excess Ownership Position (as defined above) occurs,
Dealer, in its discretion, is unable to effect a transfer or assignment to a third party of
the Transaction or any other transaction between the parties after using its commercially
reasonable efforts on pricing terms reasonably acceptable to Dealer such that an Excess
Ownership Position no longer exists; provided that Dealer shall treat only that portion of
the Transaction as the Affected Transaction as necessary so that such Excess Ownership
Position no longer exists;




     (iii) any Person (as defined below) other than Issuer files a Schedule TO or any other
schedule, form or report under the Exchange Act disclosing, or Issuer otherwise becomes
aware, that such Person has acquired beneficial ownership (determined in accordance with
Rule 13d-3 under the Exchange Act), directly or indirectly, through a purchase, merger or
other acquisition transaction or series of transactions, of shares of Issuer’s capital
stock entitling the Person to exercise 50% or more of the total voting power of all shares
of Issuer’s capital stock entitled to vote generally in elections of directors;



17









 






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




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






     (v) Issuer is liquidated or dissolved or holders of Shares approve any plan or
proposal for Issuer’s liquidation or dissolution.


Notwithstanding the foregoing, a transaction set forth in clause (iii) or (iv) above will not
constitute an Additional Termination Event, in each case, if at least 90% of the consideration
received for the Shares (excluding cash payments for fractional shares and cash payments made
pursuant to dissenters’ appraisal rights and cash dividends) in connection with such event consists
of shares of capital stock traded or quoted on any of the New York Stock Exchange, the NASDAQ
Global Market or the NASDAQ Global Select Market (or any of their respective successors) (or will
be so traded or quoted immediately following the completion of the merger or consolidation or such
other transaction).




     “Person” includes any syndicate or group that would be deemed to be a “person” under Section
13(d)(3) of the Exchange Act.



     (k) Effectiveness. If, on or prior to the Effective Date, Dealer reasonably determines that
it is advisable to cancel the Transaction because of concerns that Dealer’s related hedging
activities could be viewed as not complying with applicable securities laws, rules or regulations,
the Transaction shall be cancelled and shall not become effective, and neither party shall have any
obligation to the other party in respect of the Transaction.



     (l) Extension of Settlement. Dealer may divide any Component into additional Components and
designate the Expiration Date and the Number of Warrants for each such Component if Dealer
determines, in its reasonable discretion, that such further division is necessary or advisable
to preserve Dealer’s hedging activity hereunder in light of existing liquidity conditions in the
cash market or stock loan market or to enable Dealer to effect purchases of Shares in connection
with its hedging activity hereunder in a manner that would, if Dealer were Issuer or an affiliated
purchaser of Issuer, be compliance with applicable legal and regulatory requirements.



     (m) No Netting and Set-off. The provisions of Section 2(c) of the Agreement shall not apply
to the Transaction. Each party waives any and all rights it may have to set-off delivery or
payment obligations it owes to the other party under the Transaction against any delivery or
payment obligations owed to it by the other party, whether arising under the Agreement, under any
other agreement between parties hereto, by operation of law or otherwise.



     (n) Delivery of Cash. For the avoidance of doubt, nothing in this Confirmation shall be
interpreted as requiring the Issuer to deliver cash in respect of the settlement of the
Transaction, except in circumstances where the required cash settlement thereof is permitted for
classification of the contract as equity by EITF 00-19 as in effect on the relevant Trade Date
(including, without limitation, where the Issuer so elects to deliver cash or fails timely to elect
to deliver Shares or Share Termination Delivery Property in respect of such settlement).



     (o) Payments by Dealer upon Early Termination. The parties hereby agree that, notwithstanding
anything to the contrary herein, in the Definitions or in the Agreement, following the



18









 







payment of
the Premium, in the event that an Early Termination Date (whether as a result of an Event of
Default or a Termination Event) occurs or is designated with respect to the Transaction or the
Transaction is terminated or cancelled pursuant to Article 12 of the Equity Definitions and, as a
result, Dealer would owe to Issuer an amount calculated under Section 6(e) of the Agreement or
Article 12 of the Equity Definitions, such amount shall be deemed to be zero.



     (p) Governing Law. THE AGREEMENT, THIS CONFIRMATION AND ALL MATTERS ARISING IN CONNECTION
WITH THE AGREEMENT AND THIS CONFIRMATION SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO ITS CHOICE OF LAW
DOCTRINE, OTHER THAN TITLE 14 OF THE NEW YORK GENERAL OBLIGATIONS LAW).



     (q) Amendment. This Confirmation and the Agreement may not be modified, amended or
supplemented, except in a written instrument signed by Issuer and Dealer. If Goldman, Sachs & Co.
exercises the Initial Purchasers’ (as defined in the Purchase Agreement) right under the Purchase
Agreement to purchase additional convertible notes as set forth therein, then Dealer and Issuer
will either enter into a new confirmation evidencing a corresponding number of additional warrants
to be issued by Issuer to Dealer or amend this Confirmation (in each case on pricing terms
acceptable Dealer and Issuer) (such additional confirmation or amendment to this Confirmation to
provide for the payment by Dealer to Issuer of the additional premium related thereto in an amount
to be agreed between the parties).



     (r) Counterparts. This Confirmation may be executed in several counterparts, each of which
shall be deemed an original but all of which together shall constitute one and the same instrument.



     9. Arbitration.



     (a) All parties to this Confirmation are giving up the right to sue each other in court,
including the right to a trial by jury, except as provided by the rules of the arbitration forum in
which a claim is filed.



     (b) Arbitration awards are generally final and binding; a party’s ability to have a court
reverse or modify an arbitration award is very limited.



     (c) The ability of the parties to obtain documents, witness statements and other discovery is
generally more limited in arbitration than in court proceedings.



     (d) The arbitrators do not have to explain the reason(s) for their award.



     (e) The panel of arbitrators will typically include a minority of arbitrators who were or are
affiliated with the securities industry, unless Issuer is a member of the organization sponsoring
the arbitration facility, in which case all arbitrators may be affiliated with the securities
industry.



     (f) The rules of some arbitration forums may impose time limits for bringing a claim in
arbitration. In some cases, a claim that is ineligible for arbitration may be brought in court.



     (g) The rules of the arbitration forum in which the claim is filed, and any amendments
thereto, shall be incorporated into this Confirmation.



     (h) Issuer agrees that any and all controversies that may arise between Issuer and Dealer,
including, but not limited to, those arising out of or relating to the Agreement or the Transaction
hereunder, shall be determined by arbitration conducted before The New York Stock Exchange, Inc.
(“NYSE”) or NASD Dispute Resolution (“NASD-DR”), or, if the NYSE and NASD-DR decline to hear the
matter, before the American Arbitration Association, in accordance with their arbitration rules
then in force. The award of the arbitrator shall be final, and judgment upon the award rendered
may be entered in any court, state or federal, having jurisdiction.



19









 





     (i) No person shall bring a putative or certified class action to arbitration, nor seek to
enforce any pre-dispute arbitration agreement against any person who has initiated in court a
putative class action or who is a member of a putative class who has not opted out of the class
with respect to any claims encompassed by the putative class action until: (i) the class
certification is denied; (ii) the class is decertified; or (iii) Issuer is excluded from the class
by the court.



     Such forbearance to enforce an agreement to arbitrate shall not constitute a waiver of any
rights under this Confirmation except to the extent stated herein.




20









 








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



	 	 	 	 	 
	 	Yours faithfully,





[INSERT DEALER NAME]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



Agreed and Accepted By:




NETAPP, INC.




By:                                                                    
             



Name:

Title:







 









 








Annex A



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




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