Document:

exv4w2

 

EXHIBIT
4.2

EXECUTION COPY

CITIBANK, N.A. | 390 GREENWICH STREET | NEW YORK, NEW YORK 100013 |TEL: (212)723-7357

	 	 	 
	To:

	 	Leap Wireless International, Inc.
	 

	 	10307 Pacific Center Court
	 

	 	San Diego, CA 92121
	 
	 	 
	From:

	 	Citibank, N.A.
	 
	 	 
	Re:

	 	Issuer Share Forward Sale Transaction
	 
	 	 
	Date:

	 	August 15, 2006

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 Citibank, N.A. (“Citibank”) and Leap Wireless International, Inc.
(“Counterparty”). This communication constitutes a “Confirmation” as referred to in the ISDA Form
specified below.

     1. This Confirmation is subject to, and incorporates, the 2000 ISDA Definitions (including the
Annex thereto) (the “2000 Definitions”) and 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. In the event of any inconsistency between the Definitions and this Confirmation, this
Confirmation will govern. For purposes of the Equity Definitions, this Transaction will be deemed
to be a Share Forward Transaction.

     This Confirmation evidences a complete and binding agreement between Citibank and Counterparty
as to the terms of this Transaction to which this Confirmation relates. In addition, this
Confirmation, together with all other documents referring to the 1992 ISDA Master Agreement
(Multicurrency-Cross Border) (the “ISDA Form” or the “Agreement”) confirming transactions (each, a
“Transaction”, and each such other document, a “Confirmation”) entered into between Citibank and
Counterparty (notwithstanding anything to the contrary in a Confirmation), shall supplement, form a
part of, and be subject to an agreement (which shall survive the termination of this Transaction)
in the form of the ISDA Form as if Citibank and Counterparty had executed an agreement in such form
effective as of the Trade Date of the first Transaction between Citibank and Counterparty (but
without any Schedule except for (i) the election of Loss and Second Method, New York law (without
regard to the conflicts of law principles) as the governing law and US Dollars (“USD”) as the
Termination Currency and (ii) the replacement of the word “third” in the last line of Section
5(a)(i) with the word “first”).

     2. The terms of the particular Transaction to which this Confirmation relates are as follows:

	 	 	 
	General Terms:	 	 
	 
	 	 
	Trade Date:

	 	August 15, 2006
	 
	 	 
	Effective Date:

	 	The Time of Delivery (as defined in the Registration Agreement dated the date hereof among
Counterparty, Goldman, Sachs & Co. (“GS&Co”), Goldman Sachs Financial Markets, L.P. (“GSFM”), Citigroup
Global Markets, Inc. and Citibank (the “Registration Agreement”)) of the Firm Shares (as defined in the
Registration Agreement).

 

 

	 	 	 
	 	 	 
	Buyer:

	 	Citibank
	 
	 	 
	Seller:

	 	Counterparty
	 
	 	 
	Shares:

	 	Common Stock, $.0001 par value, of Counterparty (Ticker: LEAP)
	 
	 	 
	Base Amount:

	 	Initially, 2,800,000 Shares; provided that Citibank on or prior to the Effective Date may reduce such
initial Base Amount to such lower number of Shares for which, in Citibank’s determination, the
condition set forth in clause (iv) of “Conditions to Effectiveness” may be satisfied and provided
further that the Base Amount shall be increased at the Time of Delivery of the Optional Shares (as
defined in the Registration Agreement) by the number of Optional Shares (as defined in the Registration
Agreement), if any, purchased from Citibank as the Forward Counterparty (as defined in the Registration
Agreement) pursuant to Section 3(b) of the Registration Agreement (such incremental increase, the
“Option Base Amount”) and at such time, the “Base Amount” hereunder shall mean the initial Base Amount
(as adjusted) plus the Option Base Amount. On each Physical Settlement Date or Unwind Period Starting
Date (as applicable), the Base Amount shall be reduced by the number of Settlement Shares specified in
the applicable Settlement Notice or in connection with an Acceleration Event as provided in Section 8
of this Confirmation. If any Unwind Period is terminated by Counterparty (as provided below in “Unwind
Period”) such that the Remaining Hedge Amount following the last day of such Unwind Period is greater
than zero, the Base Amount shall be increased by such Remaining Hedge Amount on the day immediately
following such Unwind Period.
	 
	 	 
	Maturity Date:

	 	August 21, 2007
	 
	 	 
	Settlement Currency:

	 	USD
	 
	 	 
	Exchange:

	 	The NASDAQ Stock Market, Inc.
	 
	 	 
	Related Exchange:

	 	All Exchanges
	 
	 	 
	Clearance System:

	 	DTC
	 
	 	 
	Prepayment:

	 	Not Applicable
	 
	 	 
	Variable Obligation:

	 	Not Applicable
	 
	 	 
	Forward Price:

	 	On the Effective Date, USD $40.11 per Share (the “Initial Forward Price”). On any other day, the
Forward Price as of the immediately preceding calendar day multiplied by the sum of (i) 1 plus (ii) the
Daily Rate for the immediately preceding calendar day.
	 
	 	 
	Daily Rate:

	 	For any day, (i)(A) USD-Federal Funds Rate for such day minus (B) the Spread (ii) divided by 360.
	 
	 	 
	USD-Federal Funds Rate:

	 	For any day, the rate set forth for such day opposite the caption “Federal funds”, as such rate is
displayed on the page “FedsOpen <Index> <GO>” on the BLOOMBERG Professional Service, or any
successor page; provided that if no rate appears for any day on such

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	 	page, the rate for the immediately preceding day for which a
rate does so appear shall be used for such day.
	 
	 	 
	Spread:
	 	1% 
	 
	 	 
	Conditions to Effectiveness:

	 	Unless waived by Citibank, the effectiveness of this Confirmation on the
Effective Date (and, if applicable, the effectiveness of this
Confirmation solely with respect to the Option Base Amount at the Time
of Delivery of the Optional Shares) shall be subject to (i) the
condition that the representations and warranties of Counterparty
contained in this Agreement and in the Registration Agreement and any
certificate delivered pursuant thereto by Counterparty be true and
correct on the Effective Date (or the Time of Delivery of the Optional
Shares, as the case may be) as if made as of such date, (ii) the
condition that Counterparty shall have performed all of the obligations
required to be performed by it under the Registration Agreement on or
prior to the Effective Date (or the Time of Delivery of the Optional
Shares, as the case may be), (iii) the satisfaction of all of the
conditions set forth in Section 7 of the Registration Agreement and (iv)
the condition that in Citibank’s commercially reasonable judgment, it is
able to borrow and deliver for sale a number of Shares equal to the Base
Amount at a stock loan cost of not more than 100 basis points per annum
with respect to such Shares; provided, that if the condition in this
clause (iv) is satisfied with respect to some but not all of such
Shares, this Confirmation shall be effective, but the Base Amount for
this Transaction shall be the number of Shares that Citibank is able to
borrow at a stock loan cost of not more than 100 basis points per annum.
	 
	 	 
	Settlement Terms:
	 	 
	 
	 	 
	Settlement Method:

	 	Physical Settlement, Cash Settlement or Net Stock Settlement at the
election of Counterparty as set forth in a written notice delivered to
Citibank (the “Settlement Notice”) that satisfies the Settlement Notice
Requirements; provided that Physical Settlement shall apply (i) if no
Settlement Method is selected or (ii) as provided in Section 8 of this
Confirmation; provided further that Counterparty shall not have the
right to elect Net Stock Settlement if (x) at any time during the five
Exchange Business Day period preceding the date the Settlement Notice is
delivered to Citibank the price per Share on the Exchange is less than
or equal to $35 or (y) the ADTV (as defined in Rule 10b-18 (“Rule
10b-18”) under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) of the Shares for the calendar week in which such
Settlement Notice is delivered is less than 200,000 Shares (as adjusted
for stock splits and similar events).
	 
	 	 
	Settlement Notice Requirements:

	 	Counterparty may deliver a Settlement Notice on no more than five (5)
occasions (other than any Settlement Notice in respect of the Maturity
Date). For the avoidance of doubt, any resumption of Share delivery as
described under “Limitation on Receipt of Shares” shall not constitute
the delivery of an additional Settlement Notice for purposes of the
foregoing limitation. Notwithstanding any other provisions hereof, a
Settlement Notice delivered by Counterparty that specifies Cash
Settlement or Net Stock Settlement will not be effective to establish an
Unwind Period Starting Date unless Counterparty delivers to Citibank
with such Settlement Notice a representation signed by Counterparty

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	 	substantially in the form: “as of the date of this Settlement Notice, Leap
Wireless International, Inc. is not aware of any material nonpublic information
concerning itself or the Shares, and is designating the date contained herein
as the Unwind Period Starting Date in good faith and not as part of a plan or
scheme to evade compliance with the federal securities laws.”
	 
	 	 
	Settlement Shares:

	 	With respect to any Physical Settlement Date
or Unwind Period Starting Date, a number of
Shares, not to exceed the Base Amount,
designated as such by Counterparty in the
related Settlement Notice; provided that, on
the Maturity Date the number of Settlement
Shares shall be equal to the Base Amount on
such date.
	 
	 	 
	Suspension Day:

	 	Any day on which Citibank determines in its
sole discretion, based on the advice of
counsel, that it is appropriate with respect
to any legal, regulatory or self-regulatory
requirements or related policies and
procedures (whether or not such requirements,
policies or procedures are imposed by law or
have been voluntarily adopted by Citibank
generally in connection with its business)
for Citibank or its affiliates to refrain
from engaging in transactions in the Shares;
provided that Citibank may exercise this
right to suspend only in good faith in
relation to events or circumstances that are
unknown to it or any of its affiliates at the
Trade Date of this Transaction and are not
the result of deliberate actions of it or any
of its affiliates with the intent to avoid
its obligations under the terms of this
Transaction. Citibank shall notify
Counterparty if it makes such a determination
in respect of any day or number of days;
provided that such notice shall not specify,
and Citibank shall not otherwise communicate
to Counterparty, the reason for Citibank’s
determination.
	 
	 	 
	Physical Settlement Date:

	 	Any Exchange Business Day following the
Effective Date up to and including the
Maturity Date, (A) as designated by
Counterparty in a Settlement Notice electing
Physical Settlement that satisfies the
Settlement Notice Requirements and is
delivered to Citibank at least three (3)
Scheduled Trading Days prior to such Physical
Settlement Date or (B) as provided by Section
8 of this Confirmation; provided that if no
such notice is delivered, and the Base Amount
is at such time greater than zero (0), the
Maturity Date shall be the Physical
Settlement Date; provided further that if the
Physical Settlement Date so designated or the
Maturity Date is a Suspension Day, the
Physical Settlement Date shall be deferred
until the first succeeding Clearance System
Business Day that is an Exchange Business Day
and is not a Suspension Day.
	 
	 	 
	Physical Settlement:

	 	If Physical Settlement applies, on each
Physical Settlement Date Counterparty shall
deliver to Citibank a number of Shares equal
to the Settlement Shares for such Physical
Settlement Date, and Citibank shall deliver
to Counterparty, by wire transfer of
immediately available funds to an account
designated by Counterparty, an amount in cash
equal to the Physical Settlement Amount for
such Physical Settlement Date, on a delivery
versus payment basis.
	 
	 	 
	Physical Settlement Amount:

	 	For any Physical Settlement Date, an amount
in cash equal to the product of the Forward
Price on such Physical Settlement Date and
the number of Settlement Shares for such
Physical Settlement Date.

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	Unwind Period Starting Date:

	 	Any Scheduled Trading Day, which is not a
Disrupted Day, following the Effective Date
up to and including the Maturity Date, as
designated by Counterparty in a Settlement
Notice electing Cash Settlement or Net Stock
Settlement that satisfies the Settlement
Notice Requirements and is delivered to
Citibank at least three (3) Scheduled Trading
Days prior to such Unwind Period Starting
Date.
	 
	 	 
	Unwind Period:

	 	The period from and including the Unwind
Period Starting Date through the Scheduled
Trading Day on which the Remaining Hedge
Amount is reduced to zero; provided that
Counterparty may terminate an Unwind Period
by designating a Scheduled Trading Day as the
final day of such Unwind Period on at least
three (3) Scheduled Trading Days’ prior
notice to Citibank; provided further that no
such termination shall be effective if the
Scheduled Trading Day so designated is on or
after the Maturity Date.
	 
	 	 
	Unwind Daily Share Amount:

	 	In respect of each Exchange Business Day
during the Unwind Period, other than a
Suspension Day or a Disrupted Day or as
described below under “Other Forward,” a
number of Shares equal to the actual number
of Shares purchased by Citibank (or its
affiliate) on such day in order to (i) close
out Citibank’s open borrow position in
respect of this Transaction (taking into
account the obligations, if any, of
Counterparty hereunder to deliver Shares to
Citibank under “Net Stock Settlement” below),
and (ii) if applicable, deliver to
Counterparty in satisfaction of any
obligation of Citibank hereunder to deliver
Shares to Counterparty (including, without
limitation, obligations under “Net Stock
Settlement” below). Citibank agrees to use
its reasonable good faith efforts (x) to
effect the purchases of such Shares in
accordance with Rule 10b-18(b)(2), (3) and
(4) as if those sections applied to Citibank
(or its affiliate), taking into account any
applicable Securities and Exchange Commission
no-action letters as appropriate and subject
to any delays between the execution and
reporting of a trade of the Shares on the
Exchange and other circumstances beyond its
control and (y) to complete the Unwind Period
in a commercially reasonable number of days,
subject to the limitations imposed by clause
(x) and, if applicable, the Maximum Purchase
Price (defined below). If a maximum purchase
price per Share is specified by Counterparty
in a Settlement Notice electing Cash
Settlement (each such specified price, a
“Maximum Purchase Price”), the Unwind Daily
Share Amount in respect of each Exchange
Business Day during the Unwind Period
corresponding to such Settlement Notice shall
not include any purchases of Shares effected
at a price per Share in excess of the Maximum
Purchase Price.
	 
	 	 
	Other Forward:

	 	Citibank acknowledges that Counterparty has
entered into a forward transaction for its
Shares on the date hereof (the “Other
Forward”) with an affiliate of GS & Co.
Citibank and Counterparty agree that, in
order to facilitate compliance with the
provisions of Rule 10b-18, if Counterparty
designates an Unwind Period with respect to
the Other Forward and such Unwind Period for
the Other Forward coincides for any period of
time with any Unwind Period for this
Transaction (the “Overlap Unwind Period”),
Counterparty shall notify Citibank prior to
the commencement of such Overlap Unwind
Period and Citibank shall only be permitted
to purchase Shares in respect of this
Transaction on the Scheduled Trading Day
specified by Counterparty in such notice and
on every other Scheduled Trading Day
thereafter during such Overlap Unwind Period
(which, in each case, shall be a day with

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	 	respect to which Counterparty shall have instructed, and obtained the agreement
of, the Other Forward counterparty to refrain from purchasing Shares); provided
that such Scheduled Trading Day specified by Counterparty in such notice must
be either the first or the second Scheduled Trading Day during such Overlap
Unwind Period. Following consultation with either of GSFM or Citibank,
Counterparty may direct such party to effect a block purchase in accordance
with Rule 10b-18(b)(4) on a day on which such party is permitted to purchase
Shares pursuant to this paragraph; provided that Counterparty shall notify the
other of GSFM or Citibank of the amount and date of such block purchase.
	 
	 	 
	Remaining Hedge Amount:

	 	In respect of an Unwind Period, on the
Unwind Period Starting Date for such Unwind
Period, the Settlement Shares specified in
the Settlement Notice relating to such
Unwind Period. Thereafter, the Remaining
Hedge Amount shall be reduced following the
close of trading on each Exchange Business
Day during the Unwind Period by the Daily
Hedge Reduction Amount for such day.
	 
	 	 
	Daily Hedge Reduction Amount:

	 	In respect of each Exchange Business Day
during the Unwind Period, the Unwind Daily
Share Amount for such day (x) decreased, if
Net Stock Settlement is applicable, by the
Net Stock Settlement Daily Shares for such
day, if such amount is positive, or (y)
increased, if Net Stock Settlement is
applicable, by the absolute value of the Net
Stock Settlement Daily Shares for such day,
if such amount is negative.
	 
	 	 
	Settlement Period:

	 	In respect of any Unwind Period, a period
comprising the Scheduled Trading Days in any
calendar week during such Unwind Period;
provided that, for the avoidance of doubt,
(a) the initial Settlement Period will
commence on, and include, the Unwind Period
Starting Date and (b) the final Settlement
Period will end on, and include, the last
day of such Unwind Period.
	 
	 	 
	Cash Settlement:

	 	If Cash Settlement applies, if the Cash
Settlement Daily Amount is a positive
number, Citibank will owe the Cash
Settlement Daily Amount to Counterparty. If
the Cash Settlement Daily Amount is a
negative number, Counterparty will owe the
absolute value of the Cash Settlement Daily
Amount to Citibank. The Cash Settlement
Daily Amounts owed in respect of all
Exchange Business Days within a Settlement
Period shall be paid (as a single net
payment in accordance with Section 2(c) of
the Agreement) by Counterparty or Citibank,
as the case may be, on the third Clearance
System Business Day following the last
Scheduled Trading Day of such Settlement
Period.
	 
	 	 
	Cash Settlement Daily Amount:

	 	In respect of each Exchange Business Day
during the Unwind Period on which there is
an Unwind Daily Share Amount, an amount
calculated by the Calculation Agent equal
to: (i)(A) the Forward Price as of such day
minus (B) the Execution Price for such day
multiplied by (ii) the Unwind Daily Share
Amount for such day.
	 
	 	 
	Execution Price:

	 	For each Exchange Business Day during the
Unwind Period on which there is an Unwind
Daily Share Amount, the volume weighted
average execution price of purchases by
Citibank (or its affiliate) on such Exchange
Business Day of a number of Shares equal to
such Unwind Daily Share Amount, as
calculated by the Calculation Agent. For
the avoidance of doubt, during any Unwind
Period for which Counterparty

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	 	has elected Cash Settlement and specified a Maximum Purchase Price in the
related Settlement Notice, such average shall not include any purchases of
Shares for which the execution price per Share exceeds the Maximum Purchase
Price.
	 
	 	 
	Net Stock Settlement:

	 	If Net Stock Settlement applies, if the
number of Net Stock Settlement Daily
Shares is (i) a positive number, then
Citibank shall owe a number of Shares
to Counterparty equal to the Net Stock
Settlement Daily Shares, or (ii) a
negative number, then Counterparty
shall owe a number of Shares to
Citibank (or its designee) equal to the
absolute value of the Net Stock
Settlement Daily Shares. The Net Stock
Settlement Daily Shares owed in respect
of all Exchange Business Days within a
Settlement Period shall be delivered
(as a single net delivery in accordance
with “Netting of Share Deliveries”
below) by Counterparty or Citibank, as
the case may be, on the third Clearance
System Business Day following the last
Scheduled Trading Day of such
Settlement Period.
	 
	 	 
	Net Stock Settlement Daily Shares:

	 	In respect of each Exchange Business
Day during the Unwind Period on which
there is an Unwind Daily Share Amount,
an amount calculated by the Calculation
Agent equal to: (i)(A) the Forward
Price as of such day minus (B) the
Execution Price for such day multiplied
by (ii) the Daily Hedge Reduction
Amount for such day divided by (iii)
the Execution Price for such day.
	 
	 	 
	Settlement Date:

	 	For the avoidance of doubt, (i) the
Physical Settlement Date and each day
on which a payment or delivery is
required under “Net Stock Settlement”
shall be a Settlement Date for purposes
of this Confirmation and the Equity
Definitions and the provisions of
Section 9.4 of the Equity Definitions
shall apply and (ii) each day on which
a payment is required under “Cash
Settlement” shall be a Cash Settlement
Payment Date for purposes of this
Confirmation and the Equity Definitions
and the provisions of Section 8.8 of
the Equity Definitions shall apply.
	 
	 	 
	Netting of Share Deliveries:

	 	With respect to this Confirmation, any
obligation to deliver Shares for
settlement on the same date by
Citibank, on the one hand, and
Counterparty, on the other hand, shall
be netted. The resulting Share
delivery obligation of a party upon
such netting shall be rounded down to
the nearest number of whole Shares,
such that neither party shall be
required to deliver any fractional
number of Shares.
	 
	 	 
	Limitation on Receipt of Shares:

	 	 Notwithstanding anything to the
contrary in the Agreement, the Equity
Definitions or this Confirmation,
Citibank shall not be entitled to
receive, and Counterparty shall not be
entitled to require Citibank to accept,
Shares hereunder to the extent (but
only to the extent) that such receipt
would result directly or indirectly in
“beneficial ownership” (within the
meaning of Section 13(d) and Section 16
of the Exchange Act, except as provided
below) by Citibank, together with any
entities subject to aggregation with
Citibank, (collectively, “Citibank
entities”), equal to or in excess of
4.9% of the outstanding Shares. Any
purported delivery hereunder shall be
void and have no effect to the extent
(but only to the extent) that such
delivery would result in the Citibank
entities directly or indirectly so
beneficially owning 4.9% or more of the
outstanding Shares. If any delivery
owed to Citibank hereunder is not made,
in whole or in part, as a result of
this provision, neither

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	 	Counterparty’s obligation to make such delivery, nor Citibank’s obligation to
make payments in respect of such delivery, shall be extinguished and
Counterparty shall make such delivery, and Citibank shall make the
corresponding payments, as promptly as practicable after, but in no event later
than one Clearance System Business Day after, Citibank gives notice to
Counterparty that such delivery would not result in the Citibank entities
directly or indirectly so beneficially owning 4.9% or more of the outstanding
Shares; provided, however, that Citibank shall deliver to Counterparty the
requisite notices to permit Counterparty to deliver the full number of
Settlement Shares pursuant to each Physical Settlement not later than five (5)
Exchange Business Days following the Physical Settlement Date. For purposes of
the definition of “beneficial ownership” as used in this provision, no effect
shall be given to any provisions of Section 13(d) of the Exchange Act (or rules
thereunder) that would attribute to the Citibank entities any Shares owned by
GS&Co. or any of its affiliates (collectively, the “GS entities”), and vice
versa, to the extent such attribution would result from the participation of
the GS entities and the Citibank entities in the activities contemplated in the
Registration Agreement or as described above under “Other Forward” (it being
understood that nothing in this Agreement shall constitute a determination or
admission that such attribution is required).
	 
	 	 
	Share
Adjustments:
	 	 
	 
	 	 
	Method of Adjustment:

	 	Calculation Agent Adjustment; provided that the
definition of “Potential Adjustment Event” in
Section 11.2(e) of the Equity Definitions is
hereby amended by deleting Section 11.2(e)(iii)
thereof.
	 
	 	 
	Extraordinary Dividend:

	 	Any dividend amount per Share (declared by the
Issuer to holders of record of a Share where the
date on which the Shares commence trading
ex-dividend on the Exchange will occur prior to
the final Cash Settlement Payment Date or
Settlement Date, as the case may be).

	 	 	 	 	 
	Extraordinary Events:	 	 
	 
	 	 	 	 
	Consequences of Merger Event:	 	 
	 
	 	 	 	 
	 

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

	 	(b) Share-for-Other:
	 	Cancellation and Payment on that portion of the Other
Consideration that consists of cash; Modified Calculation Agent Adjustment on the
remainder of the Other Consideration.
	 
	 	 	 	 
	 

	 	(c) Share-for-Combined:
	 	Component Adjustment
	 
	 	 	 	 
	 

	 	Determining Party:
	 	Citibank
	 
	 	 	 	 
	Tender Offer:	 	Not Applicable
	 
	 	 	 	 
	Nationalization or Delisting:	 	Negotiated Close-out; 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 American Stock
Exchange or The NASDAQ

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	 	 	 	National 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 be deemed to be the Exchange; provided, further, that any announcement by the
Exchange that the Shares will cease to be listed, traded or publicly quoted on the Exchange
shall not constitute a Delisting during any applicable compliance period, accepted compliance
plan period or applicable cure period prior to the actual delisting of such Shares or during
any applicable hearing or appeal period which effects a stay of the actual delisting of the
Shares (including the applicable period during which an issuer may request such hearing or
appeal).
	 
	 	 	 	 
	Insolvency:	 	Subject to Section 12(a) of this Confirmation, Negotiated Close-out.

Notwithstanding anything to the contrary in the Equity Definitions, if, as a result of a Merger
Event, a Nationalization, a Delisting, Change in Law or Insolvency Filing, Cancellation and Payment
applies, an Additional Termination Event (with the Transaction being the sole Affected Transaction
and Counterparty being the sole Affected Party) shall be deemed to occur, and, in lieu of Sections
12.8 and 12.9 of the Equity Definitions, Section 6 of the Agreement shall apply.

	 	 	 
	Additional Disruption Events:
	 
	 	 
	Only the following Additional Disruption Events shall apply to this Transaction:
	 
	 	 
	(i) Change in Law: 

	 	 Applicable; provided that Section 12.9(a)(ii) of the Definitions
is hereby amended by adding the phrase “in the manner contemplated by the Hedging Party
on the Trade Date” immediately following the word “Transaction” in clause (X) thereof,
and deleting clause (Y) thereof.
	 
	 	 
	(ii) Failure to Deliver: 

	 	 Applicable
	 
	 	 
	(iii) Insolvency Filing:  

	 	Applicable, subject to Section 12(a) of this Confirmation.
	 
	 	 
	Hedging Party: 

	 	 Citibank
	 
	 	 
	Determining Party: 

	 	 Citibank
	 
	 	 
	Non-Reliance:
	 	 Applicable
	 
	 	 
	Agreements and Acknowledgments
Regarding Hedging Activities: 
	 	 Applicable
	 
	 	 
	Additional Acknowledgments: 
	 	 Applicable
	 
	 	 
	Transfer: 
	 	 Citibank has the right to assign any or all of its rights and obligations under the
Transaction to deliver or accept delivery of Shares to any of its affiliates; provided that
such assignment shall only occur in respect of the Transaction when it has become obligatory
that the Transaction be settled by the transfer of Shares; and provided, further, that
Counterparty shall have recourse to Citibank in the event of failure by the assignee to
perform any of such obligations hereunder. Notwithstanding the foregoing, the recourse to
Citibank shall be limited to recoupment of Counterparty’s monetary damages and Counterparty
hereby waives any right to seek specific performance by Citibank of its

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	 	obligations hereunder. Such failure after any applicable
grace period shall be deemed to be an Additional
Termination Event, such Transaction shall be the only
Affected Transaction and Citibank shall be the only
Affected Party.

     3. Calculation Agent. Citibank

     4. Additional Mutual Representations and Warranties. In addition to the
representations and warranties in the Agreement and those contained herein, each party represents
and warrants to the other party that it is an “eligible contract participant”, as defined in the
U.S. Commodity Exchange Act (as amended), and an “accredited investor” as defined in Section
2(a)(15)(ii) of the Securities Act of 1933 (as amended) (the “Securities Act”), and is entering
into this Transaction hereunder as principal and not for the benefit of any third party.

     5. Additional Acknowledgments and Covenants of Counterparty. In addition to the
representations, warranties and covenants in the Agreement and those contained herein, Counterparty
acknowledges and covenants to Citibank (which covenants shall remain in effect at all times until
the termination of this Transaction) as follows:

          (a) without limiting the generality of Section 13.1 of the Equity Definitions, it
acknowledges that Citibank is not making any representations or warranties with respect to the
treatment of this Transaction under FASB Statements 149 or 150, EITF 00-19 (or any successor
issue statements) or under FASB’s Liabilities & Equity Project;

          (b) it shall not take any action to reduce or decrease the number of authorized and
unissued Shares below the sum of (i) the Base Amount at such time plus (ii) the maximum total
number of Shares that it is obligated to issue upon settlement (whether by net share settlement
or otherwise) of any other transaction or agreement to which it is a party;

          (c) it understands that Citibank has no obligation or intention to register the
Transaction under the Securities Act or any state securities law or other applicable federal
securities law;

          (d) it understands that no obligations of Citibank to it hereunder will be entitled to the
benefit of deposit insurance and that such obligations will not be guaranteed by any affiliate
of Citibank or any governmental agency;

          (e) prior to any Settlement Date, the Shares to be delivered by Counterparty on such date
shall have been approved for listing or quotation on the Exchange, subject to official notice
of issuance, and such Shares shall have been registered under the Exchange Act;

          (f) it will not repurchase any Shares if, immediately following such repurchase, the Base
Amount would be equal to or greater than 6.5% of the number of then-outstanding Shares and it
will notify Citibank immediately upon the announcement or consummation of any repurchase of
Shares in an amount greater than 1.0% of the number of then-outstanding Shares;

          (g) it will not engage in any “distribution” (as defined in Regulation M promulgated under
the Exchange Act (“Regulation M”) during any Unwind Period;

          (h) it will notify Citibank immediately upon (i) becoming aware that it is the subject of
a tender offer made under Section 14(d)(1) of the Exchange Act or (ii) the announcement of an
issuer tender offer (within the meaning of Rule 13e-4 under the Exchange Act);

          (i) IT UNDERSTANDS THAT THE TRANSACTION IS SUBJECT TO COMPLEX RISKS WHICH MAY ARISE
WITHOUT WARNING AND MAY AT TIMES BE VOLATILE AND THAT LOSSES MAY OCCUR QUICKLY AND IN
UNANTICIPATED MAGNITUDE AND IS WILLING TO ACCEPT SUCH TERMS AND CONDITIONS AND ASSUME
(FINANCIALLY AND OTHERWISE) SUCH RISKS;

-10-

 

          (j) during any Unwind Period, except with the prior written consent of Citibank or as
provided above under “Other Forward,” it will not, and will cause its affiliated purchasers (as
defined in Rule 10b-18) not to, directly or indirectly (including, without limitation, by means
of a derivative instrument) purchase, offer to purchase, place any bid or limit order that
would effect a purchase of, or announce or commence any tender offer relating to, any Shares
(or 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 for the
Shares, other than purchases by or from Counterparty relating to Counterparty’s equity-based
compensation plans or purchases by Counterparty as a result of “net issuance” exercises of
outstanding warrants that, in each case, do not constitute Rule 10b-18 purchases within the
meaning of Rule 10b-18;

          (k) during any Unwind Period it will not be subject to any “restricted period” (as such
term is defined in Regulation M) in respect of the Shares or any “reference security” (as such
term is defined in Regulation M) with respect to the Shares; and

          (l) notwithstanding anything to the contrary herein or in the Equity Definitions,
Counterparty shall:

          (i) prior to the opening of trading in the Shares on any day during any Unwind
Period on which Counterparty makes, or expects to be made, any public announcement (as
defined in Rule 165(f) under the Securities Act) of any Merger Transaction, notify
Citibank of such public announcement;.

          (ii) promptly notify Citibank following any such announcement that such announcement
has been made; and

          (iii) promptly provide Citibank with written notice specifying (A) Counterparty’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 Citibank or its affiliates and (B) 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 Counterparty to Citibank that such information is true and correct. In
addition, Counterparty shall promptly notify Citibank 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.

     6. Additional Representations and Warranties of Counterparty. In addition to the
representations and warranties in the Agreement and those contained herein, Counterparty represents
and warrants to Citibank as of date hereof (which representations and warranties will be deemed to
be repeated by Counterparty at the Time of Delivery of the Optional Shares and, in the case of
subparagraphs (b) and (c), on the date of any Settlement Notice that specifies Net Stock Settlement
and at all times during the corresponding Unwind Period) that:

     (a) it satisfies the eligibility requirements to conduct a primary offering of Shares on
Form S-3;

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

     (c) the present fair market value (or present fair saleable value) of the assets of
Counterparty is not less than the total amount required to pay the liabilities of Counterparty,
including contingent liabilities, as they become absolute and matured; (ii) Counterparty is not
engaged in any business or transaction for which its property would constitute unreasonably
small capital after giving due consideration to the prevailing practice in the industry in
which Counterparty is engaged; and (iii) Counterparty has the ability to pay its debts and
other obligations as such obligations mature and become due in the normal course of business
and, assuming performance by Citibank of its obligations under this Transaction, is not
incurring debts or other obligations beyond its ability to pay as such obligations mature.

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     7. Omitted.

     8. Acceleration Events. An Acceleration Event shall occur if:

          (a) Notwithstanding any other provision hereof, if, in the commercially reasonable
judgment of the Calculation Agent, Citibank is unable to continue to hedge its exposure to the
Transaction because, notwithstanding Citibank’s exercise of its commercially reasonable
efforts, (i) sufficient Shares are not made available for Share borrowing by lenders or (ii)
Citibank would incur a stock loan cost to borrow Shares of more than 100 basis points per
annum, (each of (i) and (ii) a “Stock Borrow Event”), then Citibank shall have the right to
designate any Clearance System Business Day to be a Physical Settlement Date on at least three
(3) Scheduled Trading Days’ notice, and to select the number of Settlement Shares (which,
during any Unwind Period, may include any Remaining Hedge Amount) for such Physical Settlement
Date; provided that the number of Settlement Shares for any Physical Settlement Date so
designated by Citibank shall not exceed the number of Shares as to which such inability to
borrow or cost limitation exists.

          (b) Notwithstanding any other provision hereof, if the closing sale price per Share, or
the average of the closing bid and offer price per Share, on the Exchange for the regular
trading session on any Exchange Business Day occurring after the Trade Date is less than or
equal to $15, subject to any adjustment hereunder, then, unless waived in writing by Citibank,
the immediately following Clearance System Business Day shall be the Physical Settlement Date
for the entire Transaction (including, during any Unwind Period, the Remaining Hedge Amount);

          (c) Notwithstanding any other provision hereof, if the closing sale price per Share, or
the average of the closing bid and offer price per Share, on the Exchange for the regular
trading session on any Exchange Business Day during an Unwind Period for a Net Stock Settlement
is less than or equal to $35.00, subject to any adjustment hereunder, then Citibank shall have
the right to designate any Clearance System Business Day as the Physical Settlement Date with
respect to a number of Settlement Shares equal to the Remaining Hedge Amount for such Unwind
Period on at least five (5) Scheduled Trading Days’ notice; provided, that such Physical
Settlement Date shall be designated to occur promptly following the expiration of such notice
period;

          (d) Notwithstanding any other provision hereof, if the Unwind Period has not been
completed by the 45th Scheduled Trading Day following the Unwind Period Starting
Date, then Citibank shall have the right to designate any Clearance System Business Day as the
Physical Settlement Date with respect to a number of Settlement Shares equal to the Remaining
Hedge Amount for such Unwind Period on at least five (5) Scheduled Trading Days’ notice;
provided, that such Physical Settlement Date shall be designated to occur promptly following
the expiration of such notice period;

          (e) Notwithstanding any other provision hereof, if Counterparty declares an Extraordinary
Dividend, Citibank may designate any Clearance System Business Day as the Physical Settlement
Date for the entire Transaction (including, during any Unwind Period, the Remaining Hedge
Amount) on at least three (3) Scheduled Trading Days’ notice; provided, that such Physical
Settlement Date shall be designated to occur promptly following the expiration of such notice
period;

          (f) Notwithstanding any other provision hereof, if on any day occurring after the Trade
Date the board of directors of Counterparty votes to approve any transaction that, if
consummated, would constitute a Merger Event (as defined in the Equity Definitions), Citibank
shall have the right to designate any Clearance System Business Day to be the Physical
Settlement Date for the entire Transaction (including, during any Unwind Period, the Remaining
Hedge Amount) on at least three (3) Scheduled Trading Days’ notice (and Counterparty shall
notify Citibank of any such vote within one Scheduled Trading Day); provided, that such
Physical Settlement Date shall be designated to occur promptly following the expiration of such
notice period;

          (g) Notwithstanding any other provision hereof, Citibank may designate any Clearance
System Business Day on or following the date of commencement (as defined in Rule 13e-4(a)(4) or
Rule 14d-2(a)) of a tender offer (within the meaning of Section 14(d) of the Exchange Act) or
an issuer tender offer (within the meaning of Rule 13e-4 under the Exchange Act) as the
Physical Settlement Date for the entire Transaction (including, during any Unwind Period, the
Remaining Hedge Amount) on at least three (3) Scheduled Trading

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Days’ notice; provided, that such Physical Settlement Date shall be designated to occur
promptly following the expiration of such notice period;

          (h) Notwithstanding any other provisions hereof, if either Citibank or Counterparty has
the right to designate an Early Termination Date pursuant to Section 6 of the Agreement, such
party shall have the right to designate any Clearance System Business Day to be a Physical
Settlement Date for the entire Transaction (including, during any Unwind Period, the Remaining
Hedge Amount) on at least three (3) Scheduled Trading Days’ notice; provided, that such
Physical Settlement Date shall be designated to occur promptly following the expiration of such
notice period; or

          (i) Notwithstanding any other provisions hereof but subject to Section 12(a) of this
Confirmation, if a Nationalization, Insolvency, Insolvency Filing, Delisting or Change in Law
occurs, Citibank shall have the right to designate any Clearance System Business Day to be a
Physical Settlement Date for the entire Transaction (including, during any Unwind Period, the
Remaining Hedge Amount) on at least three (3) Scheduled Trading Days’ notice; provided, that
such Physical Settlement Date shall be designated to occur promptly following the expiration of
such notice period.

     9. Additional Termination Events. The following Additional Termination Event will
apply: A failure for any reason of the prospectus contemplated by the Registration Agreement to be
current and available for use, as provided in Section 4(a) of the Registration Agreement,
throughout the period from the Trade Date until the completion by Citibank or its affiliates of the
sale of the Firm Shares and, if applicable, the Optional Shares shall constitute an Additional
Termination Event, with Counterparty as the sole Affected Party and this Transaction (or the
terminated portion thereof) as the sole Affected Transaction; provided that such Additional
Termination Event shall only become effective if Counterparty has not prepared and filed such
amendments or supplements to the prospectus as may be necessary to cause the prospectus to be
current and available for use within five (5) Exchange Business Days after the earlier of (i)
Counterparty’s receipt of written notice from the Underwriters or (ii) the date on which
Counterparty is required under Section 4(a) of the Registration Agreement to notify the
Underwriters, that such prospectus is no longer current and available for use; provided further,
that the Transaction shall be subject to termination only in respect of the number of Shares
remaining unsold as of the time of such failure.

     10. Omitted.

     11. Rule 10b5-1. It is the intent of Citibank and Counterparty that the purchase of
Shares by Citibank during any Unwind Period comply with the requirements of Rule 10b5-1(c)(i)(B) of
the Exchange Act and that this Confirmation shall be interpreted to comply with the requirements of
Rule 10b5-1(c). Counterparty acknowledges that (i) during any Unwind Period Counterparty does not
have, and shall not attempt to exercise, any influence over how, when or whether to effect
purchases of Shares by Citibank (or its agent or affiliate) in connection with this Confirmation
and (ii) Counterparty is entering into the Agreement and this Confirmation in good faith and not as
part of a plan or scheme to evade compliance with federal securities laws including, without
limitation, Rule 10b-5 promulgated under the Exchange Act. For purposes of this Transaction,
“Material Non-Public Information” means information relating to Counterparty or the Shares that (a)
has not been widely disseminated by wire service, in one or more newspapers of general circulation,
by communication from Counterparty to its shareholders or in a press release, or contained in a
public filing made by Counterparty with the Securities and Exchange Commission and (b) a reasonable
investor might consider to be of importance in making an investment decision to buy, sell or hold
Shares. For the avoidance of doubt and solely by way of illustration, information should be
presumed “material” if it relates to such matters as dividend increases or decreases, earnings
estimates, changes in previously released earnings estimates, significant expansion or curtailment
of operations, a significant increase or decline of orders, significant merger or acquisition
proposals or agreements, significant new products or discoveries, extraordinary borrowing, major
litigation, liquidity problems, extraordinary management developments, or purchase or sale of
substantial assets.

     12. Acknowledgments. (a) The parties hereto agree, notwithstanding anything to the
contrary in the Agreement or the Equity Definitions, that this Transaction shall constitute a
contract to issue a security of Counterparty as contemplated by Section 365(c)(2) of the U.S.
Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”) and that this
Transaction and the obligations and rights of Counterparty and Citibank shall immediately
terminate, without the necessity of any notice, payment (whether directly, by netting or

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otherwise) or other action by Counterparty or Citibank, if on or prior to the final Settlement
Date, a proceeding commences with respect to Counterparty under the Bankruptcy Code (except for any
liability in respect of any breach of representation or covenant by a party under this Confirmation
prior to the date of such commencement).

          (b) Citibank acknowledges and agrees that this Confirmation is not intended to convey to
Citibank rights with respect to the transactions contemplated hereby that are senior to the
claims of common stockholders in any U.S. bankruptcy proceedings of Counterparty; provided,
however, that nothing herein shall limit or shall be deemed to limit Citibank’s right to pursue
remedies in the event of a breach by Counterparty of its obligations and agreements with
respect to this Confirmation and the Agreement; and, provided, further, that nothing herein
shall limit or shall be deemed to limit Citibank’s rights in respect of any transaction other
than the Transaction.

          (c) The parties hereto intend for:

          (i) each Transaction hereunder to be a “securities contract” and a “swap agreement” as
defined in the Bankruptcy Code, and the parties hereto to be entitled to the protections
afforded by, among other Sections, Sections 362(b)(6), 555 and 560 of the Bankruptcy Code;

          (ii) the rights given to Citibank hereunder upon an Event of Default, Termination Event
or Early Termination Date to constitute “contractual rights” to cause the liquidation of a
“securities contract” or a “swap agreement” and to set off mutual debts and claims in
connection with a “securities contract” or a “swap agreement”, as such terms are used in
Sections 555 and 362(b)(6) of the Bankruptcy Code;

          (iii) any cash, securities or other property provided as performance assurance, credit
support or collateral with respect to a Transaction to constitute “margin payments” and
“transfers” under a “securities contract” or a “swap agreement” as defined in the Bankruptcy
Code;

          (iv) all payments for, under or in connection with a Transaction, all payments for the
Shares and the transfer of such Shares to constitute “settlement payments” and “transfers”
under a “securities contract” or a “swap agreement” as defined in the Bankruptcy Code; and

          (v) any or all obligations that either party has with respect to this Confirmation or
the Agreement to constitute property held by or due from such party to margin, guaranty or
settle obligations of the other party with respect to the transactions under the Agreement
(including any Transaction) or any other agreement between such parties.

          (d) Notwithstanding any other provision of the Agreement or this Confirmation, in no event
will Counterparty be required to deliver on any Settlement Date or other date on which Shares
are delivered in respect of any amount owed under this Agreement, whether pursuant to Physical
Settlement, Net Stock Settlement, Section 18(b) of this Confirmation or otherwise, a number of
Shares greater than 6,120,000 Shares (as adjusted for stock splits and similar events) to
Citibank, minus the aggregate amount of all Shares delivered by Counterparty to
Citibank on each prior Settlement Date or other date of delivery of Shares.

     13. Indemnification. Counterparty agrees to indemnify and hold harmless Citibank and
its affiliates and assignees and their respective directors, officers, employees, agents and
controlling persons (Citibank and each such person being an “Indemnified Party”) from and against
any and all losses, claims, damages and liabilities (or actions in respect thereof), joint or
several, to which such Indemnified Party may become subject, under the Securities Act, the Exchange
Act or otherwise, relating to or arising out of this Transaction. Counterparty will not be liable
under the foregoing indemnification provision to the extent that any loss, claim, damage, liability
or expense is found in a nonappealable judgment by a court of competent jurisdiction to have
resulted from Citibank’s willful misconduct, gross negligence or bad faith in performing the
services that are subject of this Transaction. 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 amount paid or payable by the Indemnified Party as a result of
such loss, claim, damage or liability relating to an indemnifiable event under this Agreement, in
such proportion as is fair and reasonable in light of all of the circumstances of the Transaction
and such indemnifiable

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event in order to reflect the relative benefits received (or anticipated to be received) by
the Counterparty and the Indemnified Party as a result of the Transaction and such indemnifiable
event and the relative fault of the Counterparty and the Indemnified Party in connection with such
indemnifiable event, and any other relevant equitable considerations. Counterparty and Citibank
agree that it would not be just and equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take account of the equitable
considerations referred to above. Counterparty will not be liable under the foregoing contribution
provision to the extent that any loss, claim, damage, or liability is found in a nonappealable
judgment by a court of competent jurisdiction to have resulted from Citibank’s willful misconduct,
gross negligence or bad faith in performing the services that are the subject of this Transaction.
In addition, Counterparty will reimburse any Indemnified Party for all reasonable 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. Counterparty will not be liable under the
foregoing reimbursement provisions to the extent that any claim, action, suit or proceeding giving
rise to reimbursement hereunder is found in a nonappealable judgment by a court of competent
jurisdiction to have resulted from Citibank’s willful misconduct, gross negligence or bad faith.
Counterparty also agrees that no Indemnified Party shall have any liability to Counterparty or any
person asserting claims on behalf of or in right of Counterparty in connection with or as a result
of any matter referred to in this Agreement except to the extent that any losses, claims, damages,
liabilities or expenses incurred by Counterparty result from the gross negligence, willful
misconduct or bad faith of the Indemnified Party. The provisions of this Section 13 shall survive
the completion of this Transaction contemplated by this Confirmation and, upon any assignment
and/or delegation of this Transaction made pursuant to the Agreement or this Confirmation, shall
inure to the benefit of any permitted assignee of Citibank.

     14. Agreements and Acknowledgments of Counterparty Regarding Shares.

          (a) Counterparty agrees and acknowledges that, in respect of any Shares delivered to
Citibank on the Physical Settlement Date (and any other date on which Shares are delivered to
Citibank pursuant to this Confirmation), such Shares shall be, upon such delivery, duly
authorized, validly issued and outstanding, fully paid and nonassessable and free of any lien,
charge, claim or other encumbrance, and the issuance thereof will not be subject to any
pre-emptive or similar rights. Counterparty further agrees and acknowledges that Citibank will
hedge its exposure to this Transaction by selling Shares borrowed from third party securities
lenders pursuant to a Registration Statement. Counterparty further agrees and acknowledges,
and (except in circumstances in which paragraph (c) applies) shall be deemed to represent to
Citibank on the Physical Settlement Date, that the Shares (up to the Base Amount, including any
Option Base Amount) delivered by Counterparty to Citibank in connection with any Physical
Settlement or Net Stock Settlement of this Transaction may be used by Citibank to return to
securities lenders without further registration under the Securities Act. Accordingly,
Counterparty agrees that the Shares that it delivers to Citibank on each Settlement Date will
not bear a restrictive legend and that such Shares will be deposited in, and the delivery
thereof shall be effected through the facilities of, the Clearance System.

          (b) Counterparty agrees to take all actions, and to omit to take any actions, reasonably
requested by Citibank (so long as such actions or omissions would not materially prejudice
Counterparty’s legal or commercial position) in order to allow Citibank and its affiliates to
unwind hedges and return Shares to securities lenders in compliance with the Securities Act and
other applicable laws;

          (c) Private Placement/Registration Procedures. (i) If Counterparty is unable to comply
with the provisions of, and make the representation set forth in, paragraph (a) above because
of a change in law or a change in the policy of the Securities and Exchange Commission or its
staff, or Citibank otherwise determines that in its reasonable opinion any Settlement Shares to
be delivered to Citibank by Counterparty may not be freely returned by Citibank to securities
lenders as described in paragraph (a) above, or if Counterparty delivers Shares to Citibank
pursuant to Section 18(b) of this Confirmation, then at the election of Counterparty by notice
to Citibank within three (3) Exchange Business Days after the relevant delivery obligation
arises, unless waived by Citibank, either (A) delivery of such Settlement Shares shall be
effected in accordance with customary private placement procedures reasonably acceptable to
Citibank (“Private Placement Settlement”) or (B) such Settlement Shares shall be covered by an
effective registration statement of Counterparty in form

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and content reasonably satisfactory to Citibank for immediate resale by a designated
affiliate of Citibank and delivery and resales of such Settlement Shares shall be effected in
accordance with customary offering procedures (“Registered Offering Settlement”);

          (ii) The Private Placement Settlement or Registered Offering Settlement of such
Settlement Shares shall include customary representations, covenants, blue sky and other
governmental filings and/or registrations, indemnities to Citibank, due diligence rights
(for Citibank or, in the case of a Private Placement Settlement, any buyer of the Settlement
Shares designated by Citibank), opinions, accountants’ comfort letters (if and to the extent
such letters may be obtained), certificates and such other documentation as is customary for
private placement agreements or registered offerings, as the case may be, all reasonably
acceptable to Citibank. In the case of a Private Placement Settlement, Citibank shall, in
its good faith discretion, adjust the amount of restricted Shares to be delivered to
Citibank hereunder in a commercially reasonable manner to reflect the fact that such
restricted Shares may not be freely returned to securities lenders by Citibank and may only
be saleable by Citibank at a discount to reflect the lack of liquidity in restricted Shares.

          (iii) If Counterparty elects a Private Placement Settlement in respect of any
Settlement Shares, Counterparty agrees that (A) such Shares may be transferred by and among
Citibank and its affiliates and (B) after the minimum “holding period” within the meaning of
Rule 144(d) under the Securities Act has elapsed after the applicable Physical Settlement
Date (or other date on which Shares are delivered), Counterparty shall promptly remove, or
cause the transfer agent for the Shares to remove, any legends referring to any transfer
restrictions from such Shares upon delivery by Citibank (or such affiliate of Citibank) to
Counterparty or such transfer agent of seller’s and broker’s representation letters
customarily delivered by Citibank or its affiliates in connection with resales of restricted
securities pursuant to Rule 144 under the Securities Act, each without any further
requirement for the delivery of any certificate, consent, agreement, opinion of counsel,
notice or any other document, any transfer tax stamps or payment of any other amount or any
other action by Citibank (or such affiliate of Citibank).

     15. Agreements and Acknowledgments of Citibank. Citibank acknowledges and agrees
that, except in the case of a Private Placement Settlement or Registered Offering Settlement,
Citibank shall use any Shares delivered by Counterparty to Citibank on any Settlement Date to
return to securities lenders to close out borrowings created by Citibank in connection with its
hedging activities related to exposure under this Transaction.

     16. Governing Law. Notwithstanding anything to the contrary in the Agreement, 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 (including Section 5-1401 and Section 5-1402 of the General Obligations Law but
otherwise without reference to its choice of laws doctrine).

     17. Miscellaneous.

          (a) Severability; Illegality. If compliance by either party with any provision
of the Transaction would be unenforceable or illegal, (i) the parties shall negotiate in good
faith to resolve such unenforceability or illegality in a manner that preserves the economic
benefits of the transactions contemplated hereby and (ii) the other provisions of the
Transaction shall not be invalidated, but shall remain in full force and effect.

          (b) Waiver of Trial by Jury. EACH OF COUNTERPARTY AND CITIBANK HEREBY
IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON
BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE
TRANSACTION OR THE ACTIONS OF CITIBANK OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR
ENFORCEMENT HEREOF.

          (c) Confidentiality. Citibank and Counterparty agree that (i) Counterparty is
not obligated to Citibank to keep confidential from any and all persons or otherwise limit
the use of any element of

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Citibank’s descriptions relating to tax aspects of the Transaction and any part of the
structure necessary to understand those tax aspects, and (ii) Citibank does not assert any
claim of proprietary ownership in respect of such descriptions contained herein of the use of
any entities, plans or arrangements to give rise to significant U.S. federal income tax
benefits for Counterparty.

          (d) Notices:

     Address for notices or communications to Citibank:

Citibank, N.A.

390 Greenwich Street

New York, NY 10013

Attention:       Corporate Equity Derivatives

Facsimile:       (212) 723-8328

Telephone:       (212) 723-7357

     With a copy to:

Citibank, N.A.

250 West Street, 10th Floor

New York, NY 10013

Attention:      GCIB Legal
Group—Derivatives

Facsimile:       (212) 816-7772

Telephone:       (212) 816-2211

     Address for notices or communications to Counterparty:

Leap Wireless International, Inc.

10307 Pacific Center Court

San Diego, California 92121

Attn: Robert J. Irving, Jr., General Counsel

Facsimile: (858) 882-6040

Email: rirving@cricketcommunications.com

     With a copy (which shall not constitute notice) to:

Latham & Watkins, LLP

12636 High Bluff Drive

Suite 400

San Diego, California 92130-2071

Attention: Barry Clarkson, Esq.

Facsimile: (858) 523-5450

Email: barry.clarkson@lw.com

     18. Payment Date upon Early Termination. (a) Notwithstanding anything to the contrary
in Section 6(d)(ii) of the Agreement, all amounts calculated as being due in respect of an Early
Termination Date under Section 6(e) of the Agreement will be payable on the day that notice of the
amount payable is effective.

     (b) If due to the occurrence of an Extraordinary Event, Disruption Event, the designation
of an Early Termination Date or otherwise, Counterparty would be obligated to pay cash to
Citibank, or Citibank would be required to pay cash to Counterparty, pursuant to the terms of
the Agreement or this Confirmation for any reason without Counterparty having had the right
(other than pursuant to this paragraph) to elect to deliver (or require Citibank to deliver to
it) Shares in satisfaction of such payment obligation, then Counterparty may elect to deliver
to Citibank (or require Citibank to deliver to it) a number of Shares having a cash value equal
to the amount of such payment obligation (or, if less, a number of Shares equal to the maximum
number of Shares then specified in Section 12(d)), which shall constitute full payment and
satisfaction of such payment obligation (such number of Shares to be delivered to be determined
by the Calculation Agent acting in a commercially reasonable manner (i) in the case of share
deliveries to Citibank, by reference to the number of Shares that could be sold by Citibank
over a reasonable period of time to realize the cash equivalent of such

-17-

 

payment obligation taking into account any applicable discount (determined in a
commercially reasonable manner) to reflect any restrictions on transfer as well as the market
value of the Shares or (ii) in the case of share deliveries by Citibank, as the number of
Shares that Citibank, acting in a commercially reasonable manner, is able to purchase for an
aggregate price equal to such cash value over a reasonable period of time taking into account
available market liquidity, the occurrence of any Suspension Day or Disrupted Day and
applicable securities laws). Delivery of Shares pursuant to this paragraph shall be effected,
at the election of Counterparty, either in a Private Placement Settlement or a Registered
Offering Settlement in accordance with the provisions of Section 14(c) of this Confirmation.

     19. Calculations on Early Termination and Set-Off. Obligations under this Transaction
shall not be set off against any other obligations of the parties, whether arising under the
Agreement, this Confirmation, under any other agreement between the parties hereto, by operation of
law or otherwise, and no other obligations of the parties shall be set off against obligations
under this Transaction, whether arising under the Agreement, this Confirmation, under any other
agreement between the parties hereto, by operation of law or otherwise, and each party hereby
waives any such right of setoff. In calculating any amounts under Section 6(e) of the Agreement,
notwithstanding anything to the contrary in the Agreement, (a) separate amounts shall be calculated
as set forth in such Section 6(e) with respect to (i) this Transaction and (ii) all other
Transactions, and (b) such separate amounts shall be payable pursuant to Section 6(d)(ii) of the
Agreement, subject to the provisions of this Confirmation.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

-18-

 

     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 Citibank) correctly sets forth the terms of the
agreement between Citibank and Counterparty with respect to this 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 Confirmation Unit,
Facsimile No. 212-615-8985, and to Citibank, N.A., 333 West 34th Street, 2nd
Floor, New York , NY 10001, Attention: Confirmation Unit.

	 	 	 	 	 
	 	Yours faithfully,

CITIBANK, N.A.

 	 
	 	By:  	/s/ William Driner
 	 
	 	 	Name:  	William Driner 	 
	 	 	Title:  	Managing Director 	 
	 

Agreed and Accepted By:

LEAP WIRELESS INTERNATIONAL, INC.

	 	 	 
	By:

	 	/s/ S. D. Hutcheson
	 

	 	Name: S. D. Hutcheson

	 

	 	Title: CEO & President

-19-Exhibit 10.3

 

Exhibit 10.3

ILLUMINA, INC.

2000 EMPLOYEE STOCK PURCHASE PLAN

As Amended and Restated Through July 20, 2006

The following constitute the provisions of the 2000 Employee Stock Purchase Plan of Illumina, Inc.

     1. Purpose. The purpose of the Plan is to provide employees of the Company and its
Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through
accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an
“Employee Stock Purchase Plan” under Section 423 of the Internal Revenue Code of 1986, as amended.
The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation
in a manner consistent with the requirements of that section of the Code.

     2. Definitions.

          (a) “Board” shall mean the Board of Directors of the Company or any committee thereof
designated by the Board of Directors of the Company in accordance with Section 14 of the Plan.

          (b) “Code” shall mean the Internal Revenue Code of 1986, as amended.

          (c) “Common Stock” shall mean the common stock of the Company.

          (d) “Company” shall mean Illumina, Inc., a Delaware corporation and any Designated
Subsidiary of the Company.

          (e) “Compensation” shall mean all base straight time gross earnings, but exclusive of
commissions, payments for overtime, shift premium, incentive compensation, incentive payments,
bonuses and other compensation. Such Compensation shall be calculated before deduction of (i) any
income or employment tax withholdings or (ii) any contributions made by the participant to any Code
Section 401(k) salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by the Company or any of its Subsidiaries.

          (f) “Designated Subsidiary” shall mean any Subsidiary that has been designated by the
Board from time to time in its sole discretion as eligible to participate in the Plan.

          (g) “Employee” shall mean any individual who is an Employee of the Company for tax
purposes and whose customary employment with the Company is at least twenty (20) hours per week for
more than five (5) months in any calendar year.

          (h) “Enrollment Date” shall mean the first Trading Day of each Offering Period.

 

 

          (i) “Exercise Date” shall mean the first Trading Day in February and August of each
year.

          (j) “Fair Market Value” shall mean, as of any date, the value of Common Stock
determined as follows:

               (i) If the Common Stock is listed on any established stock exchange or a national market
system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of
The Nasdaq Stock Market, its Fair Market Value shall be the closing selling price per share for
such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on
the date of determination, as reported in The Wall Street Journal or such other source as the Board
deems reliable;

               (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked
prices for the Common Stock on the date of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable;

               (iii) In the absence of an established market for the Common Stock, the Fair Market Value
thereof shall be determined in good faith by the Board; or

               (iv) For purposes of the Enrollment Date of the first Offering Period under the Plan, the Fair
Market Value shall be the initial price per share at which the Common Stock was sold pursuant to
the underwriting agreement for the Company’s initial public offering of the Common Stock.

          (k) “Offering Periods” shall mean the periods of approximately twelve (12) months
during which an option granted pursuant to the Plan may be exercised, commencing on the first
Trading Day in February and August each year and terminating on the first Trading Day in February
or August which is approximately twelve months later; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the registration statement on Form S-1 filed with the
Securities and Exchange Commission for the initial public offering of the Common Stock (the
“Registration Statement”) effective and ending on the first Trading Day in August 2002. The
duration and timing of Offering Periods may be changed pursuant to Section 4 of this Plan.

          (l) “Plan” shall mean this 2000 Employee Stock Purchase Plan.

          (m) “Purchase Period” shall mean the approximately six month period commencing on one
Exercise Date and ending with the next Exercise Date, except that the first Purchase Period of any
Offering Period shall commence on the Enrollment Date and end on February 1, 2001.

          (n) “Purchase Price” shall mean 85% of the Fair Market Value of a share of Common
Stock on the Enrollment Date or on the Exercise Date, whichever is lower; provided, however, that
the Purchase Price may be adjusted by the Board pursuant to Section 20.

2

 

          (o) “Reserves” shall mean the number of shares of Common Stock covered by each option
under the Plan which have not yet been exercised and the number of shares of Common Stock which
have been authorized for issuance under the Plan but not yet placed under option.

          (p) “Subsidiary” shall mean a corporation, domestic or foreign, of which not less than
50% of the voting shares are held by the Company or a Subsidiary, whether or not such corporation
now exists or is hereafter organized or acquired by the Company or a Subsidiary.

          (q) “Trading Day” shall mean a day on which national stock exchanges and the Nasdaq
System are open for trading.

     3. Eligibility.

          (a) Any Employee who shall be employed by the Company on a given Enrollment Date shall be
eligible to participate in the Plan.

          (b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted
an option under the Plan (i) to the extent that, immediately after the grant, such Employee (or any
other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the
Code) would own capital stock of the Company and/or hold outstanding options to purchase such stock
possessing five percent (5%) or more of the total combined voting power or value of all classes of
the capital stock of the Company or of any Subsidiary, or (ii) to the extent that his or her rights
to purchase stock under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined
at the fair market value of the shares at the time such option is granted) for each calendar year
in which such option is outstanding at any time.

     4. Offering Periods. The Plan shall be implemented by consecutive, overlapping
Offering Periods with a new Offering Period commencing on the first Trading Day in February and
August each year, or on such other date as the Board shall determine, and continuing thereafter
until terminated in accordance with Section 20 hereof; provided, however that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the Registration Statement effective and ending on the
first Trading Day in August 2002. The Board shall have the power to change the duration of Offering
Periods (including the commencement dates thereof) with respect to future offerings without
stockholder approval if such change is announced at least five (5) days prior to the scheduled
beginning of the first Offering Period to be affected thereafter.

     5. Participation.

          (a) An eligible Employee may become a participant in the Plan by completing a subscription
agreement authorizing payroll deductions in the form of Exhibit A to this Plan and filing it with
the Company’s payroll office prior to the applicable Enrollment Date.

          (b) Once an eligible Employee becomes a participant in the Plan, such individual shall remain
a participant until he or she terminates such participation as provided in Section 10 hereof, the
Plan terminates or the participant loses his or her status as an Employee.

3

 

          (c) An eligible Employee may be enrolled in only one Offering Period at a time.

     6. Payroll Deductions.

          (a) At the time a participant files his or her subscription agreement, he or she shall elect
to have payroll deductions made on each pay day during the Offering Period in an amount not
exceeding fifteen percent (15%) of the Compensation which he or she receives on each pay day during
the Offering Period; provided, however that should a pay day occur on an Exercise Date, a
participant shall have the payroll deductions made on such day applied to his or her account under
the new Offering Period or Purchase Period, as the case may be.

          (b) All payroll deductions made for a participant shall be credited to his or her account
under the Plan and shall be withheld in whole percentages only. A participant may not make any
additional payments into such account.

          (c) A participant may discontinue his or her participation in the Plan as provided in Section
10 hereof, or may decrease the rate of his or her payroll deductions during the Offering Period by
completing or filing with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Company may, in its discretion, limit the nature and/or number of
participation rate changes during any Offering Period, and may establish such other conditions or
limitations as it deems appropriate for Plan administration. The change in rate shall be effective
with the first full payroll period following five (5) business days after the Company’s receipt of
the new subscription agreement unless the Company elects to process a given change in participation
more quickly. A participant’s subscription agreement shall remain in effect for successive
Offering Periods unless terminated as provided in Section 10 hereof.

          (d) If by reason of the limitations set forth in Sections 3(b), 7 and 13(a), any option of a
Participant does not accrue for a particular Purchase Period, then the payroll deductions that the
Participant made during that Purchase Period with respect to such option shall be promptly
refunded. In addition, to the extent necessary to comply with Section 423(b)(8) of the Code and
Section 3(b) hereof, a participant’s payroll deductions may be decreased to one percent (1%) at any
time during a Purchase Period. Payroll deductions shall recommence at the rate provided in such
participant’s subscription agreement at the beginning of the first Purchase Period which is
scheduled to end in the following calendar year, unless terminated by the participant as provided
in Section 10 hereof.

          (e) At the time the option is exercised, in whole or in part, or at the time some or all of
the Company’s Common Stock issued under the Plan is disposed of, the participant must make adequate
provision for the Company’s federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock. At any time, the
Company may, but shall not be obligated to, withhold from the participant’s compensation the amount
necessary for the Company to meet applicable withholding obligations, including any withholding
required to make available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by the Employee.

4

 

     7. Grant of Option. On the Enrollment Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to purchase on each
Exercise Date during such Offering Period (at the applicable Purchase Price) up to a number of
whole shares of the Company’s Common Stock determined by dividing such Employee’s payroll
deductions accumulated prior to such Exercise Date and retained in the Participant’s account as of
the Exercise Date by the applicable Purchase Price; provided that in no event shall an Employee be
permitted to purchase during each Purchase Period more than 25,000 shares of the Company’s Common
Stock (subject to any adjustment pursuant to Section 19), and provided further that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 13 hereof. The Board may, for
future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of
shares of the Company’s Common Stock an Employee may purchase during each Purchase Period of such
Offering Period. Exercise of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof. The option shall expire on the last day
of the Offering Period.

     8. Exercise of Option.

          (a) Unless a participant withdraws from the Plan as provided in Section 10 hereof, his or her
option for the purchase of shares shall be exercised automatically on the Exercise Date, and the
maximum number of full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her account. No
fractional shares shall be purchased; any payroll deductions accumulated in a participant’s account
which are not sufficient to purchase a full share shall be retained in the participant’s account
for the subsequent Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a participant’s
account after the Exercise Date shall be returned to the participant. During a participant’s
lifetime, a participant’s option to purchase shares hereunder is exercisable only by him or her.

          (b) If the Board determines that, on a given Exercise Date, the number of shares with respect
to which options are to be exercised may exceed (i) the number of shares of Common Stock that were
available for sale under the Plan on the Enrollment Date of the applicable Offering Period, or (ii)
the number of shares available for sale under the Plan on such Exercise Date, the Board may in its
sole discretion (x) provide that the Company shall make a pro rata allocation of the shares of
Common Stock available for purchase on such Enrollment Date or Exercise Date, as applicable, in as
uniform a manner as shall be practicable and as it shall determine in its sole discretion to be
equitable among all participants exercising options to purchase Common Stock on such Exercise Date,
and continue all Offering Periods then in effect, or (y) provide that the Company shall make a pro
rata allocation of the shares available for purchase on such Enrollment Date or Exercise Date, as
applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase Common Stock on
such Exercise Date, and terminate any or all Offering Periods then in effect pursuant to Section 20
hereof. The Company may make pro rata allocation of the shares available on the Enrollment Date of
any applicable Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company’s stockholders
subsequent to such Enrollment Date.

5

 

     9. Delivery. As promptly as practicable after each Exercise Date on which a purchase
of shares occurs, the Company shall arrange the delivery to each participant, as appropriate, of a
certificate representing the shares purchased upon exercise of his or her option.

     10. Withdrawal.

          (a) A participant may withdraw all but not less than all the payroll deductions credited to
his or her account and not yet used to exercise his or her option under the Plan at any time by
giving written notice to the Company in the form of Exhibit B to this Plan. All of the
participant’s payroll deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant’s option for the Offering
Period shall be automatically terminated, and no further payroll deductions for the purchase of
shares shall be made for such Offering Period. If a participant withdraws from an Offering Period,
payroll deductions shall not resume at the beginning of the succeeding Offering Period unless the
participant delivers to the Company a new subscription agreement.

          (b) A participant’s withdrawal from an Offering Period shall not have any effect upon his or
her eligibility to participate in any similar plan which may hereafter be adopted by the Company or
in succeeding Offering Periods which commence after the termination of the Offering Period from
which the participant withdraws.

     11. Termination of Option.

          (a) Upon a participant’s ceasing to be an Employee, for any reason, he or she shall be deemed
to have elected to withdraw from the Plan and the payroll deductions credited to such participant’s
account during the Offering Period but not yet used to exercise the option shall be returned to
such participant or, in the case of his or her death, to the person or persons entitled thereto
under Section 15 hereof, and such participant’s option shall be automatically terminated. The
preceding sentence notwithstanding, a participant who receives payment in lieu of notice of
termination of employment shall be treated as continuing to be an Employee for the participant’s
customary number of hours per week of employment during the period in which the participant is
subject to such payment in lieu of notice.

          (b) Should the participant cease to be an Employee by reason of an approved unpaid leave of
absence, then the participant shall have the right, exercisable up until the last business day of
the Purchase Period in which such leave commences, to (i) withdraw all the payroll deductions
collected to date on his or her behalf for that Purchase Period or (ii) have such funds held for
the purchase of shares on his or her behalf on the next scheduled Exercise Date. Upon the
participant’s return to active service (A) within ninety (90) days following the commencement of
such leave or (B) prior to the expiration of any longer period for which such participant’s right
to reemployment with the Company is guaranteed by statute or contract, his or her payroll
deductions under the Plan shall automatically resume at the rate in effect at the time the leave
began, unless the participant withdraws from the Plan prior to his or her return. An individual
who returns to active employment following a leave of absence that exceeds in duration the
applicable (A) or (B) time period will be treated as a new Employee for purposes of subsequent
participation in the Plan and must accordingly re-enroll in the Plan (by making a timely filing of
the prescribed enrollment forms) on or before the next Enrollment Date.

6

 

     12. Interest. No interest shall accrue on the payroll deductions of a participant in
the Plan.

     13. Stock.

          (a) Subject to adjustment upon changes in capitalization of the Company as provided in Section
19 hereof, the maximum number of shares of the Company’s Common Stock which shall be made available
for sale under the Plan shall be 1,458,946 shares, which consists of the (i) 500,000 shares
initially reserved under the Plan and (ii) the 958,946 share automatic increase for the fiscal year
2001. The Board determined that no automatic increase would take effect for the fiscal year 2002.

          (b) The share reserve shall increase annually on the first day of the Company’s fiscal year,
beginning in 2001, by the number of shares equal to the lesser of (i) 1,500,000 shares, (ii) 3% of
the outstanding shares of Common Stock on the last day of the immediately preceding fiscal year or
(iii) an amount determined by the Board.

          (c) The participant shall have no interest or voting right in shares covered by his option
until such option has been exercised.

          (d) Shares to be delivered to a participant under the Plan shall be registered in the name of
the participant or in the name of the participant and his or her spouse.

     14. Administration. The Plan shall be administered by the Board or a committee of
members of the Board appointed by the Board. The Board or its committee shall have full and
exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to
determine eligibility and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full extent permitted
by law, be final and binding upon all parties.

     15. Designation of Beneficiary.

          (a) A participant may file a written designation of a beneficiary who is to receive any shares
and cash, if any, from the participant’s account under the Plan in the event of such participant’s
death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a written designation of
a beneficiary who is to receive any cash from the participant’s account under the Plan in the event
of such participant’s death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for such designation to
be effective.

          (b) Such designation of beneficiary may be changed by the participant at any time by written
notice. In the event of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant’s death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of the Company), the
Company, in its discretion, may deliver such shares and/or cash to the spouse or to
any one or more dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may designate.

7

 

     16. Transferability. Neither payroll deductions credited to a participant’s account
nor any rights with regard to the exercise of an option or to receive shares under the Plan may be
assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of
descent and distribution or as provided in Section 15 hereof) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw funds from an Offering Period in accordance
with Section 10 hereof.

     17. Use of Funds. All payroll deductions received or held by the Company under the
Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated
to segregate such payroll deductions.

     18. Reports. Individual accounts shall be maintained for each participant in the
Plan. Statements of account shall be given to participating Employees at least annually, which
statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of
shares purchased and the remaining cash balance, if any.

     19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, Merger or Asset
Sale.

          (a) Changes in Capitalization. Subject to any required action by the stockholders of
the Company, the Reserves (including the number of shares automatically added annually to the Plan
pursuant to Section 13(a)(i)), the maximum number of shares each participant may purchase each
Purchase Period (pursuant to Section 7), as well as the price per share and the number of shares of
Common Stock covered by each option under the Plan which has not yet been exercised shall be
proportionately adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided, however that
conversion of any convertible securities of the Company shall not be deemed to have been “effected
without receipt of consideration.” Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to an option.

          (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Offering Period then in progress shall be shortened by setting a
new Exercise Date (the “New Exercise Date”), and shall terminate immediately prior to the
consummation of such proposed dissolution or liquidation, unless provided otherwise by the Board.
The New Exercise Date shall be before the date of the Company’s proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten (10) business days
prior to the New Exercise Date, that the Exercise Date for the participant’s option has been
changed to the New Exercise Date and that the participant’s option shall be exercised automatically
on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering
Period as provided in Section 10 hereof.

8

 

          (c) Merger or Asset Sale. In the event of a proposed sale of all or substantially all
of the assets of the Company, or the merger of the Company with or into another corporation, each
outstanding option shall be assumed or an equivalent option substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the option, any Purchase Periods then in
progress shall be shortened by setting a new Exercise Date (the “New Exercise Date”) and any
Offering Periods then in progress shall end on the New Exercise Date. The New Exercise Date shall
be before the date of the Company’s proposed sale or merger. The Board shall notify each
participant in writing, at least ten (10) business days prior to the New Exercise Date, that the
Exercise Date for the participant’s option has been changed to the New Exercise Date and that the
participant’s option shall be exercised automatically on the New Exercise Date, unless prior to
such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof.

     20. Amendment or Termination.

          (a) The Board of Directors of the Company may at any time and for any reason terminate or
amend the Plan. Except as provided in Section 19 hereof, no such termination can affect options
previously granted, provided that an Offering Period may be terminated by the Board of Directors
immediately following any Exercise Date if the Board determines that the termination of the
Offering Period or the Plan is in the best interests of the Company and its stockholders. Except
as provided in Section 19 and this Section 20 hereof, no amendment may make any change in any
option theretofore granted which adversely affects the rights of any participant. To the extent
necessary to comply with Section 423 of the Code (or any successor rule or provision or any other
applicable law, regulation or stock exchange rule), the Company shall obtain stockholder approval
in such a manner and to such a degree as required.

          (b) Without stockholder consent and without regard to whether any participant rights may be
considered to have been “adversely affected,” the Board (or its committee) shall be entitled to
change the Offering Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by
a participant in order to adjust for delays or mistakes in the Company’s processing of properly
completed withholding elections, establish reasonable waiting and adjustment periods and/or
accounting and crediting procedures to ensure that amounts applied toward the purchase of Common
Stock for each participant properly correspond with amounts withheld from the participant’s
Compensation, and establish such other limitations or procedures as the Board (or its committee)
determines in its sole discretion advisable which are consistent with the Plan.

          (c) In the event the Board determines that the ongoing operation of the Plan may result in
unfavorable financial accounting consequences, the Board may, in its discretion and, to the extent
necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence
including, but not limited to:

9

 

               (i) altering the Purchase Price for any Offering Period including an Offering Period underway
at the time of the change in Purchase Price;

               (ii) shortening any Offering Period so that Offering Period ends on a new Exercise Date,
including an Offering Period underway at the time of the Board action; and

               (iii) allocating shares.

     Such modifications or amendments shall not require stockholder approval or the consent of any
Plan participants.

     21. Notices. All notices or other communications by a participant to the Company
under or in connection with the Plan shall be deemed to have been duly given when received in the
form specified by the Company at the location, or by the person, designated by the Company for the
receipt thereof.

     22. Conditions Upon Issuance of Shares. Shares shall not be issued with respect to an
option unless the exercise of such option and the issuance and delivery of such shares pursuant
thereto shall comply with all applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

     As a condition to the exercise of an option, the Company may require the person exercising
such option to represent and warrant at the time of any such exercise that the shares are being
purchased only for investment and without any present intention to sell or distribute such shares
if, in the opinion of counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.

     23. Term of Plan. The Plan shall become effective on the effective date of the
Registration Statement. Unless sooner terminated by the Board, the Plan shall terminate upon the
earliest to occur of (a) the purchase of shares on the Exercise Date coincidental with the first
Trading Day in August 2010, (ii) the date on which all shares available for issuance under the Plan
shall have been sold pursuant to options exercised under the Plan or (iii) the date on which all
options are exercised in connection with a dissolution or liquidation pursuant to Section 19(b)
hereof or a merger or asset sale pursuant to Section 19(c) hereof. No further options shall be
granted or exercised, and no further payroll deductions shall be collected, under the Plan
following such termination.

     24. Automatic Transfer to Low Price Offering Period. To the extent permitted by any
applicable laws, regulations, or stock exchange rules if the Fair Market Value of the Common Stock
on any Exercise Date in an Offering Period is lower than the Fair Market Value of the Common Stock
on the Enrollment Date for that Offering Period, then all participants in such Offering Period
shall be automatically withdrawn from such Offering Period immediately after the exercise of their
option on such Exercise Date and automatically enrolled in the new Offering Period beginning
coincident with such Exercise Date.

     25. At Will Employment. Nothing in the Plan shall confer upon the participant any
right to continue in the employ of the Company or any Subsidiary for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the Company (or any
Subsidiary employing such person) or of the participant, which rights are hereby expressly reserved
by each, to terminate such person’s employment at any time for any reason, with or without cause.

10

 

EXHIBIT A

ILLUMINA, INC.

2000 EMPLOYEE STOCK PURCHASE PLAN

SUBSCRIPTION AGREEMENT

	 	 	 
	 

	 	Original Application      Enrollment Date:                     
	 

	 	Change in Payroll Deduction Rate 
	 

	 	Change of Beneficiary(ies) 

     1.                                          hereby elects to participate in the Illumina, Inc. 2000
Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”) and subscribes to purchase
shares of the Company’s Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.

     2. I hereby authorize payroll deductions from each paycheck in the amount of                     % of
my Compensation on each payday (from 1 to 15%) in accordance with the Employee Stock
Purchase Plan. (Please note that no fractional percentages are permitted.)

     3. I understand that said payroll deductions shall be accumulated for the purchase of
shares of Common Stock at the applicable Purchase Price determined in accordance with the
Employee Stock Purchase Plan. I understand that if I do not withdraw from an Offering
Period and I do not lose eligibility to participate in the Employee Stock Purchase Plan, any
accumulated payroll deductions will be used to automatically exercise my option.

     4. I understand that the purchase of Common Stock on my behalf will be limited to: (a)
$25,000 worth of Common Stock for each calendar year my option remains outstanding and (b)
25,000 shares of Common Stock per six (6)-month Purchase Period. I understand that there
are other limitations to purchases contained in the Employee Stock Purchase Plan.

     5. I have received a copy of the complete Employee Stock Purchase Plan. I understand
that my participation in the Employee Stock Purchase Plan is in all respects subject to the
terms of the Plan.

     6. Shares purchased for me under the Employee Stock Purchase Plan should be issued in
the name(s) of                                          (Employee or Employee and Spouse only).

     7. I understand that I may withdraw from the Employee Stock Purchase Plan at any time
prior to the last business day of the Purchase Period and the Company will refund all my
payroll deductions for that Purchase Period. However, I may not rejoin that

 

 

particular Offering Period at any later date. Upon the termination of my employment
for any reason (including death or disability) or my loss of eligibility to participate in
the Employee Stock Purchase Plan, my participation in the Employee Stock Purchase Plan will
immediately cease, and all my payroll deductions for the Purchase Period in which my
employment terminates or my loss of eligibility occurs will immediately be refunded.

     8. I understand that if I take an unpaid leave of absence, my payroll deductions will
immediately cease, and any payroll deductions for the Purchase Period in which my leave
begins will, at my election, either be refunded or applied to the purchase of shares of
Common Stock at the end of that Purchase Period. If my re-employment is guaranteed by
either law or contract, or if I return to active service within ninety (90) days, then upon
my return my payroll deductions will automatically resume at the rate in effect when my
leave begins.

     9. I understand that the Company has the right, exercisable in its sole discretion, to
amend or terminate all outstanding options under the Employee Stock Purchase Plan at any
time, with such amendment or termination to become effective immediately following the end
of any Purchase Period. Upon any such termination, I will cease to have any further rights
to purchase shares of Common Stock under this Subscription Agreement.

     10. I understand that if I dispose of any shares received by me pursuant to the Plan
within 2 years after the Enrollment Date (the first day of the Offering Period during which
I purchased such shares) or one year after the Exercise Date for those shares, I will be
treated for federal income tax purposes as having received ordinary income at the time of
such disposition in an amount equal to the excess of the fair market value of the shares at
the time such shares were purchased by me over the price which I paid for the shares. I
hereby agree to notify the Company in writing within 30 days after the date of any
disposition of my shares and I will make adequate provision for Federal, state or other tax
withholding obligations, if any, which arise upon the disposition of the Common Stock.
The Company may, but will not be obligated to, withhold from my compensation the amount
necessary to meet any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by me. If I dispose of such shares at any time after the
expiration of the 2-year and 1-year holding periods, I understand that I will be treated for
federal income tax purposes as having received income only at the time of such disposition,
and that such income will be taxed as ordinary income only to the extent of an amount equal
to the lesser of (1) the excess of the fair market value of the shares at the time of such
disposition over the purchase price which I paid for the shares, or (2) 15% of the fair
market value of the shares on the first day of the Offering Period. The remainder of the
gain, if any, recognized on such disposition will be taxed as capital gain.

     11. I hereby agree to be bound by the terms of the Employee Stock Purchase Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility to participate
in the Employee Stock Purchase Plan.

2

 

     12. In the event of my death, I hereby designate the following as my beneficiary(ies)
to receive all payments and shares due me under the Employee Stock Purchase Plan:

	 	 	 	 	 	 	 	 	 
	 

	 	Beneficiary(ies) Name:	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	          (Please print)
	 	(First)
	 	(Middle)
	 	 (Last)

	 	 	 	 	 	 	 
	 

	 	Relationship:	 	 	 	 
	 

	 	Address:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	Employee’s Social	 	 	 	 
	 

	 	Security Number:	 	 	 	 
	 

	 	Employee’s Address:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	 

	 	 

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE OFFERING
PERIODS UNLESS TERMINATED BY ME.

	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 

	 	 	 	 	 	Signature of Employee
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Spouse’s Signature
	 

	 	 	 	 	 	(If beneficiary is other than spouse)

3

 

EXHIBIT B

ILLUMINA, INC.

2000 EMPLOYEE STOCK PURCHASE PLAN

NOTICE OF WITHDRAWAL

     The undersigned participant in the Offering Period of the Illumina, Inc. 2000 Employee Stock
Purchase Plan which began on                     ,                      (the “Enrollment Date”) hereby notifies the
Company that he or she hereby withdraws from participation in the Plan. He or she hereby directs
the Company to pay to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account. The undersigned understands and agrees that his or her option for
the current Offering Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in the current Offering
Period and the undersigned shall be eligible to participate in succeeding Offering Periods only by
delivering to the Company a new Subscription Agreement.

	 	 	 	 	 
	 	 	Name and Address of Participant:
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 

	 	Signature:	 	 
	 

	 	 	 	 
	 

	 	Date:

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