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AMERIGROUP
Corporation
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4425
Corporation Lane
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Virginia Beach,
VA 23462
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[Insert
Account Number]
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Wells Fargo
Bank, National Association
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Convertible
Bond Hedge Transaction
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[Insert
Reference Number]
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March 22, 2007
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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 Wells Fargo Bank,
National Association (“ Dealer ”) and AMERIGROUP
Corporation (“ Counterparty ”). This
communication constitutes a “Confirmation” as referred
to in the ISDA Master Agreement specified below.
1. This
Confirmation is subject to, and incorporates, the definitions and
provisions of the 2000 ISDA Definitions (including the Annex
thereto) (the “ 2000 Definitions ”) and the
definitions and provisions of the 2002 ISDA Equity Derivatives
Definitions (the “ Equity Definitions ”, and
together with the 2000 Definitions, the “ Definitions
”), in each case as published by the International Swaps and
Derivatives Association, Inc. (“ ISDA ”). In the
event of any inconsistency between the 2000 Definitions and the
Equity Definitions, the Equity Definitions will govern. Certain
defined terms used herein have the meanings assigned to them in the
Indenture to be dated as of March 28, 2007 between
Counterparty and The Bank of New York, N.A., as trustee (the
“Indenture”) relating to the USD240,000,000 principal
amount of the 2.00% convertible senior notes due 2012 (the
“Convertible Debentures”). In the event of any
inconsistency between the terms defined in the Indenture and this
Confirmation, this Confirmation shall govern. For the avoidance of
doubt, (i) the Transaction shall be the only transaction under
the Agreement and (ii) references herein to sections of the
Indenture are based on the draft of the Indenture most recently
reviewed by the parties at the time of execution of this
Confirmation. If any relevant sections of the Indenture are
changed, added or renumbered between the execution of this
Confirmation and the execution of the Indenture, the parties will
amend this Confirmation in good faith to preserve the economic
intent of the parties. Furthermore, for the avoidance of doubt,
even if all Convertible Debentures cease to be outstanding prior to
the Expiration Date (as set forth below), for purposes of the
references herein to sections of the Indenture, the Convertible
Debentures shall be deemed to remain outstanding. The parties
further acknowledge that references to the Indenture herein are
references to the Indenture as in effect on the date of its
execution and if the Indenture is amended following its execution,
any such amendment will be disregarded for purposes of this
Confirmation unless the parties agree otherwise in writing. The
Transaction is subject to early unwind if the closing of the
Convertible Debentures is not consummated for any reason, as set
forth below in Section 8(k).
Each party is
hereby advised, and each such party acknowledges, that the other
party has engaged in, or refrained from engaging in, substantial
financial transactions and has taken other material actions in
reliance upon the parties’ entry into the Transaction to
which this Confirmation relates on the terms and conditions set
forth below.
This Confirmation
evidences a complete and binding agreement between Dealer and
Counterparty as to the terms of the Transaction to which this
Confirmation relates. This Confirmation shall be subject to an
agreement (the “ Agreement ”) in the form of the
1992 ISDA Master Agreement as if Dealer and Counterparty had
executed an agreement in such form on the date hereof (but without
any Schedule except for (i) the election of Loss and Second
Method and US Dollars (“ USD ”) as the
Termination Currency, (ii) the replacement of the word
“third” in the last line of Section 5(a)(i) with
the word “first” and (iii) the election that the
“Cross Default” provisions of Section 5(a)(vi) shall
apply to Counterparty, with a “Threshold Amount” of
USD10 million).
All provisions
contained in, or incorporated by reference to, the Agreement will
govern this Confirmation except as expressly modified herein. In
the event of any inconsistency between this Confirmation and either
the Definitions or the Agreement, this Confirmation shall
govern.
2. The
Transaction constitutes a Share Option Transaction for purposes of
the Equity Definitions. The terms of the particular Transaction to
which this Confirmation relates are as follows:
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Trade
Date:
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March 22,
2007
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Effective
Date:
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March 28,
2007 or such other date as agreed by the parties.
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Option
Style:
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American
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Option
Type:
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Call
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Seller:
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Dealer
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Buyer:
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Counterparty
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Shares:
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The Common
Stock of Counterparty, par value USD0.01 per share (Ticker Symbol:
“AGP”).
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Number of
Options:
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The number of
Convertible Debentures in denominations of USD1,000 principal
amount issued by Counterparty on the closing date for the initial
issuance of the Convertible Debentures; provided that the
Number of Options shall be automatically increased as of the date
of exercise by Goldman, Sachs & Co. (“ GS &
Co. ”), as representative of the several Purchasers (as
defined in the Purchase Agreement), of its option pursuant to
Section 2 of the Purchase Agreement dated as of March 22,
2007 between Counterparty and GS & Co. as representative of the
several Purchasers party thereto (the “ Purchase
Agreement ”) by the number of Convertible Debentures in
denominations of USD1,000 principal amount issued pursuant to such
exercise (such Convertible Debentures, the “ Additional
Convertible Debentures ”). For the avoidance of doubt,
the Number of Options outstanding shall be reduced by each exercise
of Options hereunder.
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Option
Entitlement:
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As of any date,
a number of Shares per Option equal to the Conversion Rate (as
defined in the Indenture, but without regard to any adjustments to
the Conversion Rate pursuant to Section 12.01(e) or 12.05(f)
of the Indenture) as of such date.
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Strike
Price:
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As of any date,
an amount in USD, rounded to the nearest cent (with 0.5 cents being
rounded upwards), equal to USD1,000 divided by the Option
Entitlement as of such date.
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Number of
Shares:
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The product of
the Number of Options and the Option Entitlement.
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Premium:
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USD48,648,000.00 (Premium per Option USD202.70);
provided that if the Number of Options is increased pursuant
to the proviso to the definition of “Number of Options”
above, an additional Premium equal to the product of the number of
Options by which the Number of Options is so increased and the
Premium per Option shall be paid on the Additional Premium Payment
Date.
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Premium Payment
Date:
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The Effective
Date
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Additional
Premium Payment Date:
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The closing
date for the purchase and sale of the Additional Convertible
Debentures.
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Exchange:
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New York Stock
Exchange
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Related
Exchange:
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All
Exchanges
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Procedures for
Exercise:
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Independent
Threshold Date:
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The earlier to
occur of (x) any Conversion Date (as defined below) that is
not also an Exercise Date and (y) the first Exercise Date on
which Counterparty exercises a number of Options not equal to the
number of Relevant Convertible Debentures (as defined below) on
such date, if any.
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Conversion
Date:
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Each
“Conversion Date”, as defined in the Indenture,
occurring during the Exercise Period for Convertible Debentures
other than Convertible Debentures with respect to which
Counterparty makes the direction described in
Section 12.02(a)(3) of the Indenture and the financial
institution designated by Counterparty accepts such Convertible
Debentures in accordance with Section 12.02(a)(3) of the
Indenture (such Convertible Debentures, other than those excluded
above (each in denominations of USD1,000 principal amount), the
“ Relevant Convertible Debentures ” for such
Conversion Date). For the avoidance of doubt, Convertible
Debentures are “accepted” for purposes of the foregoing
upon the earlier of the declaration of the designated financial
institution’s agreement to exchange such Convertible
Debentures or delivery of such Convertible Debentures to such
financial institution for purposes of such exchange.
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Exercise
Period:
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The period from
and excluding the Trade Date to and including the Expiration
Date.
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Expiration
Date:
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The third
Scheduled Trading Day immediately preceding the “Maturity
Date”, as defined in the Indenture.
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Multiple
Exercise:
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Applicable
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3
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Minimum Number
of Options:
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Zero
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Maximum Number
of Options:
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Number of
Options
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Integral
Multiple:
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One
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Automatic
Exercise:
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Applicable;
subject to the provisions of “Notice of Exercise”
below.
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Notice of
Exercise:
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Notwithstanding
anything to the contrary in the Equity Definitions, (x) in order
for Counterparty to exercise any Options on any Exercise Date that
precedes the Independent Threshold Date, Counterparty or the
“Trustee”, as defined in the Indenture, must have
notified Dealer and the Calculation Agent in writing prior to 5:00
PM, New York City time, on the Scheduled Trading Day prior to the
first Scheduled Trading Day of the “Observation
Period”, as defined in the Indenture, relating to the
Convertible Debentures converted on the Conversion Date on which
such Exercise Date occurs (the “ Notice Deadline
”) of (i) the relevant Exercise Date, (ii) the
number of Options being exercised on such Exercise Date and, for
each holder of Convertible Debentures being converted on such
Exercise Date, the aggregate principal amount of the Relevant
Convertible Debentures held by such holder that will be so
converted, (iii) the scheduled settlement date under the
Indenture for the Convertible Debentures converted on the
Conversion Date on which such Exercise Date occurs, (iv) the
first day of the relevant Observation Period and (v) the
applicable Cash Percentage as defined in the Indenture;
provided that, notwithstanding the foregoing, such notice
shall be effective so long as it relates to an Exercise Date that
precedes the Independent Threshold Date and the notice is given
after the Notice Deadline but prior to 5:00 PM (New York City time)
on the fifth Exchange Business Day of such Observation Period and
prior to the Independent Threshold Date (it being understood that
such delayed notice does not itself cause the Independent Threshold
Date to occur), in which event the Calculation Agent shall have the
right to adjust the Delivery Obligation as appropriate to reflect
the additional costs (including, but not limited to, hedging
mismatches and market losses) and expenses incurred by Dealer or
Hedging Party or any of their respective affiliates in connection
with their hedging activities (including the unwinding of any hedge
position) as a result of their not having received such notice
prior to the Notice Deadline; and (y) in order to exercise any
Options on any Exercise Date that is or is following the
Independent Threshold Date, Counterparty must notify Dealer and the
Calculation Agent in writing prior to 5:00 PM, New York City time,
on the Exchange Business Day prior to the first Scheduled Trading
Day of the
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“Observation Period”, as defined in
the Indenture, determined as if the Exercise Date were a Conversion
Date, of (i) the relevant Exercise Date, (ii) the number
of Options being exercised on such Exercise Date, (iii) the
first day of the Observation Period (determined in accordance with
Section 1.01 of the Indenture for the Convertible Debentures
converted on the corresponding Conversion Date, if any, or, if such
Exercise Date did not occur on a Conversion Date, determined in
accordance with Section 1.01 of the Indenture as if such
Exercise Date were a Conversion Date) and (v) the applicable
Cash Percentage and, with respect to this clause (y) except in
relation to any Exercise Date occurring during the period from and
including the 25 th Scheduled Trading Day prior to the
“Maturity Date” to and including the Expiration Date
(the “ Final Conversion Period ”), Counterparty
shall also make in such notice written representations, warranties
and agreements set forth in Section 7(a)(i) hereof.
Notwithstanding the foregoing, in respect of Options with an
Exercise Date occurring during the Final Conversion Period,
(a) the Notice Deadline shall be 12:00 p.m. (New York
City time) on the Scheduled Trading Day immediately following the
relevant Exercise Date and the content of such notice shall be as
set forth in clauses (x)(i) and (x)(ii) or (y)(i) and (y)(ii)
above, as applicable, and (b) Counterparty shall notify Dealer
and the Calculation Agent of the applicable Cash Percentage on the
date it notifies the Trustee (as defined in the Indenture) thereof,
but in no event later than the Scheduled Trading Day immediately
preceding the first day of the Final Conversion Period. For the
avoidance of doubt, if an exercise of Options is in connection with
a conversion of Convertible Debentures, Counterparty shall
designate the Exercise Date in its Notice of Exercise as the
corresponding Conversion Date.
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Dealer’s
Telephone Number and Telex and/or Facsimile Number and Contact
Details for purpose of Giving Notice:
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To:
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Wells Fargo
Bank, N.A.
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550 California
Street
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14th
Floor
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San Francisco,
CA 94104
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Attn:
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Financial
Products Documentation Group
Equities Trading Manager
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Telephone:
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(415)
396-3962
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Facsimile:
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(415)
646-9208
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With a copy
to:
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Attn:
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Michele
Beasley
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Facsimile:
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(415)
646-9208
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Calculation
Agent’s Telephone Number and Telex and/or Facsimile Number
and Contact Details for purpose of
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Giving
Notice:
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All
communications relating to the Transaction or the Agreement shall
be transmitted exclusively:
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Through:
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Goldman, Sachs
& Co.
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One New York
Plaza
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New York, NY
10004
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Attn:
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Equity
Operations:
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Options and
Derivatives
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Telephone:
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(212)
902-1981
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Facsimile:
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(212)
428-1980/1983
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With a copy
to:
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Attn:
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Tracey
McCabe
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Equity Capital
Markets
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Telephone:
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(212)
357-0428
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Facsimile:
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(212)
902-3000
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Settlement
Terms:
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Settlement
Date:
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In respect of
an Exercise Date occurring on a Conversion Date, the settlement
date for the Shares to be delivered in respect of the Convertible
Debentures being converted on such Conversion Date under the terms
of the Indenture. In respect of any other Exercise Date, the date
one Settlement Cycle immediately following the last day of the
relevant Observation Period, determined as if such Exercise Date
were a Conversion Date.
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Delivery
Obligation:
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In lieu of the
obligations set forth in Sections 8.1 and 9.1 of the Equity
Definitions, and subject to “Notice of Exercise” above,
in respect of an Exercise Date, Dealer will deliver to
Counterparty, on the related Settlement Date, a number of Shares
and/or an amount of cash, determined by the Calculation Agent, to
be equal to (i) a number of Shares equal to the aggregate
number of Shares that Counterparty is (or would have been)
obligated to deliver to the holder(s) of the Relevant Convertible
Debentures for such Conversion Date pursuant to Section 12.02
of the Indenture (rounded down to the nearest whole number);
(ii) an amount of cash, if any, in USD in lieu of any
fractional Share resulting from rounding of such aggregate number
of Shares valued at the “Daily VWAP” (as defined in the
Indenture) on the last day of the relevant Observation Period;
and/or (iii) the aggregate amount of cash that Counterparty is
(or would have been) obligated to deliver in lieu of
“Deliverable Shares”, as defined in the
Indenture
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(other than any
cash owed in lieu of fractional Shares under clause
(ii) above) to the holder(s) of the Relevant Convertible
Debentures for such Conversion Date pursuant to the election
described in Section 12.02(a)(2) of the Indenture (and, if
such Exercise Date does not occur on a Conversion Date or, if the
number of Options being exercised on such Exercise Date differs
from the number of the Relevant Convertible Debentures for the
Conversion Date that coincides with such Exercise Date, in each
case as determined by the Calculation Agent pursuant to
Section 12.02 of the Indenture as if
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