Exhibit 10.1

 

 

Deutsche Bank  [g104021kcimage002.gif]

 

 

 

Deutsche Bank AG London

 

Winchester House

 

1 Great Winchester St.

 

London EC2N 2DB

 

Telephone: 44 20 7545 8000

 

 

 

c/o Deutsche Bank AG New York

 

60 Wall Street

 

New York, NY 10005

 

Telephone: 212-250-5977

 

Facsimile: 212-797-8826

 

June 2, 2005

 

Cephalon, Inc. (“Counterparty”)

145 Brandywine Parkway

West Chester, PA 19380

Attention: Kevin Buchi, Senior Vice President & Chief Financial Officer

 

Dear Sir / Madam:

 

The purpose of this facsimile agreement (this “Confirmation”) is to confirm the
terms and conditions of the transaction entered into between Deutsche Bank AG
acting through its London branch (“Deutsche”) and Counterparty on the Trade Date
specified below (this “Transaction”). This Confirmation constitutes a
“Confirmation” as referred to in the ISDA Master Agreement specified below. This
Confirmation constitutes the entire agreement and understanding of the parties
with respect to the subject matter and terms of this Transaction and supersedes
all prior or contemporaneous written and oral communications with respect
thereto.

 

DEUTSCHE BANK AG IS NOT REGISTERED AS A BROKER DEALER UNDER THE U.S. SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE “EXCHANGE ACT”).  DEUTSCHE BANK AG, NEW
YORK BRANCH  (“DBNY” or “AGENT”) HAS ACTED SOLELY AS AGENT IN CONNECTION WITH
THIS TRANSACTION AND HAS NO OBLIGATION, BY WAY OF ISSUANCE, ENDORSEMENT,
GUARANTEE OR OTHERWISE WITH RESPECT TO THE PERFORMANCE OF EITHER PARTY UNDER THE
TRANSACTION. DEUTSCHE BANK AG, LONDON BRANCH IS NOT A MEMBER OF THE SECURITIES
INVESTOR PROTECTION CORPORATION (SIPC).

 

1.             The definitions and provisions contained in the 1996 ISDA Equity
Derivatives Definitions (the “Equity Definitions”) and in the 2000 ISDA
Definitions (the “Swap Definitions” and, together with the Equity Definitions,
the “Definitions”) (in each case as published by the International Swaps and
Derivatives Association, Inc.) are incorporated into this Confirmation.  In the
event of any inconsistency between the Equity Definitions and the Swap
Definitions, the Equity Definitions will govern, and between the Definitions and
this Confirmation, this Confirmation will prevail.  References herein to the
“Transaction” shall be deemed to be references to a “Share Option Transaction”
for purposes of the Equity Definitions and a “Swap Transaction” for the purposes
of the Swap Definitions.

 

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This Confirmation together with all other Confirmations of Share Transactions
between Deutsche and Counterparty with respect to Shares of the Issuer
contemporaneously or previously entered into between them, notwithstanding
anything to the contrary therein, shall supplement, form a part of, and be
subject to an ISDA 1992 Master Agreement (Multicurrency – Cross Border) (the
“Agreement”), as if, on the Trade Date of the first such Transaction between
Deutsche and Counterparty, they had executed the Agreement (without any Schedule
thereto) and specified that (1) the Automatic Early Termination provisions
contained in Section 6(a) of such Agreement would apply, (2) Second Method and
Loss would apply and (3) such Agreement would cover only Share Transactions with
respect to Shares of the Issuer referred to herein.

 

Obligations under the Transaction shall not be set off against any other
obligations of the parties, whether arising under the Agreement, this
Confirmation, or 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 the Transaction, whether arising under the Agreement,
this Confirmation, or 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, (1) separate amounts
shall be calculated as set forth in such Section 6(e) with respect to (i) the
Transaction and (ii) all other transactions between the parties hereto, and (2)
such separate amounts shall be payable pursuant to Section 6(d)(ii) of the
Agreement.  Notwithstanding the foregoing or anything to the contrary herein,
the parties hereto agree and acknowledge that Deutsche and its affiliates may
set-off payment of the Hedge Purchase Price by Counterparty to Deutsche
hereunder against any amount payable by Deutsche or its affiliates to
Counterparty with respect to the purchase of the Reference Notes by the
Underwriters (as such term is defined in the Underwriting Agreement).

 

The Agreement and each Confirmation thereunder will be governed by and construed
in accordance with New York law without reference to choice of law doctrine, and
each party hereby submits to the jurisdiction of the Courts of the State of New
York.

 

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

 

General Terms:

 

 

 

 

 

Transaction Type:

 

Convertible Note Hedge. Upon the occurrence of a Conversion Event (as defined
below), Deutsche shall deliver to Counterparty the number of Shares (as defined
below), calculated exclusive of (a) any Make Whole Premium (as defined in the
Note Indenture) and (b) any additional Shares paid by Counterparty to holders in
connection with an election by the Issuer to increase the Conversion Rate (as
such term is defined in the Note Indenture) pursuant to Section 5.08 or Section
5.13 of the Note Indenture, that Counterparty is obligated to deliver to the
holders of the Reference Notes (as defined below) with respect to such
Conversion Event.

 

 

 

Trade Date:

 

June 2, 2005

 

 

 

Settlement Date:

 

For each Conversion Event, subject to the provisions of Section 6 below, the
related Conversion Event Settlement Date.

 

 

 

Seller:

 

Deutsche

 

 

 

Buyer:

 

Counterparty

 

 

 

Calculation Agent:

 

Deutsche, whose determinations and calculations shall be binding in the absence
of manifest error. The Calculation Agent will have no responsibility for good
faith errors or

 

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omissions in making any determination or calculation as provided herein.

 

 

 

Reference Notes:

 

$800,000,000 original principal amount of Convertible Senior Notes due June 1,
2015 (the “Maturity Date”) to be issued by Cephalon, Inc. (the “Issuer”) on or
about June 7, 2005 pursuant to the Note Indenture (as defined below).

 

 

 

Conversion Event:

 

Each conversion of any Reference Note pursuant to the terms of the Note
Indenture (the principal amount of Reference Notes so converted, the “Conversion
Amount” with respect to such Conversion Event).

 

 

 

 

 

If the Conversion Amount for any Conversion Event is less than the principal
amount of Reference Notes then Outstanding (as defined in the Note Indenture),
then the terms of this Transaction shall continue to apply, subject to the terms
and conditions set forth herein.

 

 

 

Conversion Event

 

 

Settlement Date:

 

In respect of each Conversion Event, so long as the Conversion Notice is timely
delivered to Deutsche in accordance with Section 3(d) below, and Counterparty
provides Deutsche with at least one Exchange Business Day’s notice of the
occurrence of the date that the Company delivers Shares pursuant to the terms of
the Note Indenture to the holders of the Reference Notes so converted (each, an
“Indenture Delivery Date”), the Indenture Delivery Date. If, however, the
Conversion Notice is not timely delivered to Deutsche in accordance with Section
3(d) below, or Counterparty does not provide Deutsche with at least one Exchange
Business Day’s notice of the occurrence of the relevant Indenture Delivery Date,
the Conversion Event Settlement Sate shall be the date twenty-one Trading Days
(as such term is defined in the Note Indenture) immediately following the date
on which the relevant Conversion Notice is delivered to Deutsche.

 

 

 

Note Indenture:

 

The indenture, to be dated on or about June 7, 2005, between the Issuer and U.S.
Bank National Association, as trustee, as the same may be amended, modified or
supplemented and in effect from time to time.

 

 

 

Shares:

 

The shares of common stock of the Issuer, par value $0.01 per Share (Bloomberg
ticker CEPH, ISIN US1567081096).

 

 

 

Exchange:

 

The Nasdaq National Market

 

 

 

Clearance System:

 

The Depository Trust Company

 

 

 

Convertible Note Hedge Purchase Price:

 

 

 

 

 

Payment of Hedge Purchase Price:

 

On the Hedge Purchase Price Payment Date, Counterparty shall pay to Deutsche,
through the Agent, the Hedge Purchase Price.

 

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Hedge Purchase Price

 

 

Payment Date:

 

June 7, 2005

 

 

 

Hedge Purchase Price:

 

$339,052,000

 

 

 

Expiration of Convertible Note Hedge:

 

 

 

 

 

Expiration Time:

 

The close of trading on the Exchange.

 

 

 

Expiration Date:

 

June 1, 2015. For the avoidance of doubt, this Convertible Note Hedge shall
expire on the Expiration Date, with no further payments or deliveries required
hereunder (other than payments and deliveries owing hereunder with respect to
Conversion Events occurring, and as to which Deutsche has received notice, on or
prior to the Expiration Date), as if this Transaction were an Option Transaction
for purposes of the Equity Definitions.

 

 

 

Automatic Exercise:

 

Not Applicable.

 

 

 

Settlement upon a Conversion Event:

 

 

 

 

 

Settlement Terms:

 

Net Share Settlement (as defined below).

 

 

 

Net Share Settlement:

 

On each Settlement Date, Deutsche shall deliver to Counterparty, through the
Agent, the related Share Equivalent Amount.

 

 

 

Share Equivalent Amount:

 

With respect to each Conversion Event, the aggregate number of Shares
Counterparty is obligated to deliver to the holders of the Reference Notes that
are converted pursuant to such Conversion Event; provided that the Share
Equivalent Amount shall exclude (a) any Make Whole Premium, if any, paid to the
holders of the Reference Notes upon such Conversion Event and (b) any additional
Shares paid by Counterparty to holders in connection with an election by the
Issuer to increase the Conversion Rate (as such term is defined in the Note
Indenture) pursuant to Section 5.08 or Section 5.13 of the Note Indenture.

 

 

 

Failure to Deliver:

 

Applicable. For such purposes, Section 6.9 of the Equity Definitions shall apply
as if this Transaction were a Physically-settled Transaction, and references in
said Section 6.9 to “illiquidity in the market” shall be deemed to include, in
addition to “illiquidity in the market”, the occurrence of a Disruption Event
with respect to the Shares.

 

 

 

Disruption Event:

 

A Market Disruption Event as specified in Section 4.3(a)(ii) of the Equity
Definitions (determined as if this Transaction were a Cash-settled Share
Transaction) or a Settlement Disruption Event as specified in Section 6.5 of the
Equity Definitions (determined as if this Transaction were a Physically-settled
Share Transaction).

 

 

 

 

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Adjustments:

 

 

 

 

 

Method of Adjustment:

 

Not applicable.

 

 

 

 

3.             Additional Agreements, Representations and Covenants of
Counterparty, Etc.:

 

(a)           Counterparty hereby represents and warrants to Deutsche, on each
day from the Trade Date to and including the earlier of (i) the date by which
Deutsche is able to initially complete or adjust a hedge of its position created
by this Transaction and (ii) the date that is three (3) Exchange Business Days
following the expiration of the period in which the Initial Purchaser is
permitted to exercise its right to receive additional Reference Notes pursuant
to the Initial Purchaser’s option to purchase additional Reference Notes, that:

 

(1)           it will not, and will not permit any person or entity subject to
its control to, bid for or purchase Shares during such period;

 

(2)           Counterparty has publicly disclosed all material information
necessary for Counterparty to be able to purchase or sell Shares in compliance
with applicable federal securities laws and that it has publicly disclosed all
material information with respect to its condition (financial or otherwise); and

 

(3)           except as disclosed to Deutsche in writing prior to the Trade
Date, it has not made any purchases of blocks by or for itself or any of its
Affiliated Purchasers during each of the four calendar weeks preceding such date
(“Rule 10b-18 purchase,” “blocks” and “Affiliated Purchaser” each as defined in
Rule 10b-18 under the Exchange Act).

 

(b)           Counterparty hereby agrees that, during the Term of this
Transaction, it will comply in all material respects with all corporate or, if
applicable, similar laws affecting its ability to perform its obligations under
this Transaction, including any such requirements of the United States
Securities and Exchange Commission or any applicable law.

 

(c)           Counterparty hereby represents and warrants to Deutsche that (1)
Counterparty has all necessary corporate power and authority to execute, deliver
and perform its obligations in respect of this Transaction; such execution,
delivery and performance have been duly authorized by all necessary corporate
action on Counterparty’s part; and this Confirmation has been duly and validly
executed and delivered by Counterparty and constitutes its legal, valid and
binding obligation, enforceable against Counterparty in accordance with its
terms; and (2) neither the execution and delivery of this Confirmation nor the
incurrence or performance of obligations of Counterparty hereunder will conflict
with or result in a breach of, or require any consent under, the certificate of
incorporation or by-laws (or any equivalent documents) of Counterparty, or any
applicable law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or any agreement or instrument to
which Counterparty or any of its subsidiaries is a party or by which
Counterparty or any of its subsidiaries is bound or to which Counterparty or any
of its subsidiaries is subject, or constitute a default under, or result in the
creation of any lien under, any such agreement or instrument.

 

(d)           The Issuer hereby agrees to promptly deliver to Deutsche a copy of
all notices and other communications required or permitted to be given to the
holders of any Reference Notes pursuant to the terms of the Note Indenture on
the dates so required or permitted in the Note Indenture.  The Issuer further
covenants to Deutsche that it shall provide written notice to Deutsche, through
the Agent, if it receives notice of (i) a conversion with respect to any
Reference Notes pursuant to the terms of the Note Indenture (identifying in such
notice (a “Conversion Notice”) the principal amount of Reference Notes being
converted, the CUSIP number of the Reference Notes being converted, the related
Conversion Date (as defined in the Note Indenture) and the date of the
commencement of the related Conversion Period (as defined in the Note
Indenture), (ii) an Amendment Event (including in such notice a detailed
description of any such amendment) or (iii) a Repayment Event (identifying in
such notice the nature of such Repayment Event and the

 

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principal amount of Reference Notes being paid).  The Issuer shall deliver each
Conversion Notice to Deutsche no later than the first Exchange Business Date
immediately following the related Conversion Date.  The Issuer shall deliver
notice of an Amendment Event or a Repayment Event to Deutsche within two
Exchange Business Days following the occurrence of any such event.  The Issuer
hereby acknowledges and agrees that its obligations under this Section 3(d)
shall continue as obligations of the Issuer notwithstanding any transfer by it
of any of its rights or obligations to any other person or entity in accordance
with Section 5 below.

 

(e)           If Deutsche Bank Securities Inc., as initial purchaser, under the
underwriting agreement between Counterparty and Deutsche Bank Securities Inc.
dated as of June 2, 2005 (the “Underwriting Agreement”) relating to the purchase
of the Reference Notes, exercises its option to purchase additional Reference
Notes thereunder, then Deutsche and Counterparty will (i) enter into a
confirmation for a Convertible Note Hedge on substantially identical terms,
including pricing as reflected on the pricing grid provided by Deutsche to
Counterparty on the date hereof, to this Confirmation with respect to such
additional Reference Notes or (ii) amend this Confirmation to provide for such
increase in Reference Notes (such additional confirmation or amendment to this
Confirmation to provide for the payment by Counterparty to Deutsche of the
additional hedge purchase price related thereto).

 

(f)            Notwithstanding anything to the contrary herein, if any event
occurs that, pursuant to the terms of the Note Indenture, alters the nature of
property that the holders of the Reference Notes will be entitled to receive
upon conversion, then the Calculation Agent shall make such adjustments to the
terms of this Transaction as it deems necessary to preserve the hedge provided
by this Transaction and, in such connection, the Calculation Agent may adjust
(1) the definition of “Shares” herein to reflect the property into which the
Reference Notes are convertible after giving effect to such event, and (2)
Deutsche’s obligations to deliver Shares (or to pay amounts determined by
reference to the value of Shares) hereunder so that Deutsche will instead be
obligated to deliver such property (or to pay the equivalent value thereof as
reasonably determined by the Calculation Agent).

 

4.             Additional Termination Events:

 

The occurrence of any of the following shall be an Additional Termination Event
with respect to Counterparty (which shall be the sole Affected Party and this
Transaction shall be the sole Affected Transaction):

 

(a)    An Amendment Event occurs, in which case the entirety of this Transaction
shall be subject to termination.

 

(b)   A Repayment Event occurs, in which case this Transaction shall be subject
to termination only in respect of the principal amount of Reference Notes that
cease to be outstanding in connection with or as a result of such Repayment
Event (and, for the avoidance of doubt, if the principal amount of Reference
Notes that cease to be outstanding is less than the total principal amount
outstanding of Reference Notes, then the terms of this Transaction shall
continue to apply, subject to the terms and conditions set forth herein).

 

(c)   The transactions contemplated by the Underwriting Agreement shall fail to
close as a result of any breach by Counterparty of its obligations thereunder,
in which case the entirety of this Transaction shall terminate automatically.

 

(d)   If at any time all, or any portion, of the securities, property or other
assets into which (or for which) the Reference Notes are convertible (or
exchangeable) consists of securities, property or other assets other than
ordinary or common shares that are publicly quoted, traded or listed on the New
York Stock Exchange, the American Stock Exchange or the NASDAQ National Market
System (or their respective successors), the inability of Deutsche due to market
conditions, illiquidity, illegality, lack of availability of market participants
or otherwise, to establish, re-establish, unwind or maintain any

 

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hedging transaction necessary or desirable in the normal course of Deutsche’s
business of hedging the price and market risk of entering into and performing
under this Transaction, in which case the entirety of this Transaction shall be
subject to termination.

 

Notwithstanding anything to the contrary in the Agreement or the Definitions,
Counterparty may require, by written notice to Deutsche, any amount owed by
Deutsche to Counterparty in connection with termination of the Transaction to be
paid in the type of securities, property or other assets into which (or for
which) the Reference Notes are convertible (or exchangeable) at the time of such
termination (the value of such securities, property or other assets to be based
on their fair market value on the date the Transaction is terminated as
determined by the Calculation Agent in good faith and in a commercially
reasonable manner).

 

In addition if the transactions contemplated by the Underwriting Agreement shall
fail to close for any reason other than those set forth in clause (c) above,
then the entirety of this Transaction shall terminate automatically and no
payments or deliveries shall be required hereunder.

 

As used in this Confirmation:

 

“Amendment Event” means that the Issuer amends, modifies, supplements or waives
any term of the Note Indenture or the Reference Notes if such amendment,
modification, supplement or waiver has a material effect on this Transaction or
Deutsche’s ability to hedge all or a portion of this Transaction, with such
materiality determination to be made in the sole discretion of the Calculation
Agent.  For the avoidance of doubt, the Issuer electing to increase the
Conversion Rate pursuant to Section 5.08 or Section 5.13 of the Note Indenture
shall not constitute an Amendment Event.

 

“Repayment Event” means that (a) any Reference Notes are repurchased (in
connection with or as a result of a change of control, howsoever defined, or for
any other reason) by the Issuer, (b) any Reference Notes are delivered to the
Issuer in exchange for delivery of any property or assets of the Issuer or any
of its affiliates (howsoever described), (c) any principal of any of the
Reference Notes is repaid prior to the Maturity Date (whether following
acceleration of the Reference Notes or otherwise), or (d) any Reference Notes
are exchanged by or for the benefit of the holders thereof for any other
securities of the Issuer or any of its affiliates (or any other property, or any
combination thereof) pursuant to any exchange offer or similar transaction.  For
the avoidance of doubt, any cash payment to holders of the Reference Notes in
connection with conversion of the Reference Notes shall not constitute a
Repayment Event.

 

5.             Transfer:

 

(a)           Notwithstanding Section 7 of the Agreement, Deutsche may transfer
its rights and obligations under this Transaction:

 

(1)           without the consent of Counterparty to any person or entity,
provided (x) that the rating by Moody’s Investors Service Inc. or Standard and
Poor’s Ratings Services of the long-term, senior unsecured indebtedness of the
transferee (or any Credit Support Provider for such transferee) shall be at
least equal to the rating by such rating agency of the long-term, senior
unsecured indebtedness of Deutsche as at the date of such transfer and (y) in
Counterparty’s reasonable judgment, such transfer will not have a material
adverse tax consequence on Counterparty; or

 

(2)           to any other person or entity with Counterparty’s consent (such
consent not to be unreasonably withheld),

 

in each case subject to any applicable federal or state laws, regulations or
other requirements.

 

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(b)           Notwithstanding Section 7 of the Agreement, Counterparty may
transfer its rights and obligations (other than, if Counterparty is the Issuer,
those under Section 3(d) above) under this Transaction with the consent of
Deutsche (such consent not to be unreasonably withheld), subject to any
applicable federal or state laws, regulations or other requirements, and subject
in all cases to Deutsche’s standard compliance processes.

 

6.             Staggered Settlement:

 

If Deutsche determines reasonably and in good faith that the number of Shares
required to be delivered to Counterparty hereunder on any Settlement Date would
exceed 9.0% of all outstanding Shares, then Deutsche may, by notice to
Counterparty on or prior to such Settlement Date (a “Nominal Settlement Date”),
elect to deliver the Shares comprising the related Share Equivalent Amount on
two or more dates (each, a “Staggered Settlement Date”) as follows:

 

(a)           in such notice, Deutsche will specify to Counterparty the related
Staggered Settlement Dates (the first of which will be such Nominal Settlement
Date and the last of which will be no later than the twentieth (20th) Exchange
Business Day following such Nominal Settlement Date; provided that Deutsche
shall use its commercially reasonable efforts to deliver all of such Shares as
soon as possible following such Nominal Settlement Date) and the number of
Shares that it will deliver on each Staggered Settlement Date;

 

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

 

(c)           the Net Share Settlement terms set forth above will apply on each
Staggered Settlement Date, except that the Shares comprising the Share
Equivalent Amount will be allocated among such Staggered Settlement Dates as
specified by Deutsche in the notice referred to in clause (a) above.

 

Notwithstanding anything herein to the contrary, Deutsche shall be entitled to
deliver Shares to Counterparty from time to time prior to the date on which
Deutsche would be obligated to deliver them to Counterparty pursuant to the Net
Share Settlement terms set forth above, and Counterparty agrees to credit all
such early deliveries against Deutsche’s obligations hereunder in the direct
order in which such obligations arise.  No such early delivery of Shares will
accelerate or otherwise affect any of Counterparty’s obligations to Deutsche
hereunder.  To the extent Deutsche receives or is entitled to receive any
distribution or payment in respect of Shares by reason of Deutsche’s being a
holder of record of such Shares on any date after the Nominal Settlement Date
which Deutsche would have delivered to Counterparty on such Nominal Settlement
Date but for the provisions of this Section 6, Deutsche shall deliver such
distribution or payment to Counterparty at the time Deutsche delivers the
related Shares to Counterparty in accordance with this Section 6, if such
distribution or payment has already been received by Deutsche at such time, or
within a reasonable period of time following Deutsche’s receipt of the
distribution or payment, if such distribution or payment has not already been
received by Deutsche at the time Deutsche delivers the related Shares to
Counterparty in accordance with this Section 6.

 

7.             Matters relating to the Agent:

 

(a)           Deutsche Bank AG, New York branch, in its capacity as Agent will
be responsible for (i) effecting this Transaction, (ii) issuing all required
confirmations and statements to Deutsche and Counterparty, (iii) maintaining
books and records relating to this Transaction in accordance with its standard
practices and procedures and in accordance with applicable law and (iv) unless
otherwise requested by Counterparty, receiving, delivering, and safeguarding
Counterparty’s funds and any securities in connection with this Transaction, in
accordance with its standard practices and procedures and in accordance with
applicable law.

 

(b)           Agent is acting in connection with this Transaction solely in its
capacity as Agent for Deutsche and Counterparty pursuant to instructions from
Deutsche and Counterparty.  Agent shall have no

 

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responsibility or personal liability to Deutsche or Counterparty arising from
any failure by Deutsche or Counterparty to pay or perform any obligations
hereunder, or to monitor or enforce compliance by Deutsche or Counterparty with
any obligation hereunder, including, without limitation, any obligations to
maintain collateral.  Each of Deutsche and Counterparty agrees to proceed solely
against the other to collect or recover any securities or monies owing to it in
connection with or as a result of this Transaction.  Agent shall otherwise have
no liability in respect of this Transaction, except for its gross negligence or
willful misconduct in performing its duties as Agent.

 

(c)           Any and all notices, demands, or communications of any kind
relating to this Transaction between Deutsche and Counterparty shall be
transmitted exclusively through Agent at the address provided.

 

(d)           The date and time of this Transaction will be furnished by the
Agent to Deutsche and Counterparty upon written request.

 

(e)           The Agent will furnish to Counterparty upon written request a
statement as to the source and amount of any remuneration received or to be
received by the Agent in connection with this Transaction.

 

(f)            Deutsche and Counterparty each represents to and agrees with the
other party that this Transaction is not unsuitable for it in the light of such
party’s financial situation, investment objectives and needs.

 

8.             Mutual Representations. Each of Deutsche and Counterparty
represents and warrants to the other party that:

 

(i)            notwithstanding anything provided herein or the Agreement, and
notwithstanding any express or implied claims of exclusivity or proprietary
rights, the parties (and each of their employees, representatives or other
agents) are authorized to disclose to any and all persons, beginning immediately
upon commencement of their discussions and without limitation of any kind, the
tax treatment and tax structure of this Transaction, and all materials of any
kind (including opinions or other tax analyses) that are provided by either
party to the other relating to such tax treatment and tax structure; and

 

(ii)           it is an “eligible contract participant” within the meaning of
Section 1a(12) of the U.S. Commodity Exchange Act, as amended (the “CEA”), this
Transaction has been subject to individual negotiation by the parties, and no
Transaction has been executed or traded on a “trading facility” as defined in
Section 1a(33) of the CEA; it has entered into such Transaction with the
expectation and intent that such Transaction shall be performed to its
termination date; and

 

(iii)          it is a “qualified institutional buyer” as defined in Rule 144A
under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or an
“accredited investor” as defined under the Securities Act; and

 

(iv)          the assets used in each Transaction (1) are not assets of any
“plan” (as such term is defined in Section 4975 of the Internal Revenue Code
(the “Code”)) subject to Section 4975 of the Code or any “employee benefit plan”
(as such term is defined in Section 3(3) of Employee Retirement Income Security
Act of 1974, as amended (“ERISA”)) subject to Title I of ERISA, and (2) do not
constitute “plan assets” within the meaning of Department of Labor Regulation
2510.3-101, 29 CFR Sec. 2510-3-101; and

 

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(v)           (A) it is entering into this Transaction as principal (and not as
agent or in any other capacity); (B) neither the other party nor any of its
agents are acting as a fiduciary for it; (C) it is not relying upon any
representations except those expressly set forth in the Agreement or this
Confirmation; (D) it has not relied on the other party for any legal,
regulatory, tax, business, investment, financial, and accounting advice, and it
has made its own investment, hedging, and trading decisions based upon its own
judgment and upon any view expressed by the other party or any of its agents;
and (E) it is entering into this Transaction with a full understanding of the
terms, conditions and risks thereof and it is capable of and willing to assume
those risks.

 

Additional Counterparty Representations. Counterparty represents, warrants,
acknowledges that:

 

(i)            Counterparty is not as of the Trade Date, and will not be after
giving effect to the transactions contemplated hereby, insolvent.

 

(ii)           Counterparty has not entered into this Transaction with the
intent of avoiding any regulatory filings.

 

Repurchase Notice.  Counterparty shall, on any day on which Counterparty effects
any repurchase of Shares, promptly give Deutsche a written notice of such
repurchase (a “Repurchase Notice”) on such day if following such repurchase, the
Hedge Equity Percentage as determined on such day is greater by 1.00% than the
Hedge Equity Percentage included in the immediately preceding Repurchase Notice
(or, in the case of the first such Repurchase Notice, greater than the Hedge
Equity Percentage as of the Trade Date).  The “Hedge Equity Percentage” as of
any day is the fraction (A) the numerator of which is the number of Shares
underlying this Transaction on such day and (B) the denominator of which is the
number of Shares outstanding on such day.

 

Waiver of Jury Trial.   Each party waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in respect of any suit,
action or proceeding relating to this Transaction.  Each party (i) certifies
that no representative, agent or attorney of either party has represented,
expressly or otherwise, that such other party would not, in the event of such a
suit, action or proceeding, seek to enforce the foregoing waiver and (ii)
acknowledges that it and the other party have been induced to enter into this
Transaction, as applicable, by, among other things, the mutual waivers and
certifications provided herein.

 

9.             Account Details:

 

Payments to Agent:

 

To be advised

 

 

 

Payments to Deutsche:

 

To be advised

 

 

 

Payments to Counterparty:

 

To be advised

 

 

 

Deliveries to Counterparty:

 

To be advised

 

 

 

 

Deutsche Bank AG, London is regulated by The Financial Services Authority and
has entered into this Transaction as principal.  The time at which this
Transaction was executed will be notified to Counterparty (through the Agent) on
request.

 

10

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Please confirm that the foregoing correctly sets forth the terms of your
agreement by signing and returning this Confirmation.

 

 

Yours faithfully,

 

 

 

DEUTSCHE BANK AG, NEW YORK acting through its New York
branch and solely in its capacity as Agent

 

 

 

 

 

By:

/s/ Sunil Hariana

 

 

Name:

Sunil Hariana

 

Title:

Director

 

 

 

 

 

 

 

By:

/s/ Ellen Gardner

 

 

Name:

Ellen Gardner

 

Title:

Vice President

 

 

Confirmed as of the date first written above:

 

 

CEPHALON, INC. (“Counterparty”)

 

 

 

 

By:

/s/ J. Kevin Buchi

 

Name:

J. Kevin Buchi

Title:

Senior Vice President and Chief Financial Officer

 

 

 

 

DEUTSCHE BANK AG, LONDON (“Deutsche”)

 

 

 

 

By:

/s/ Lee Frankenfield

 

Name:

Lee Frankenfield

Title:

Director – Attorney in Fact

 

 

 

 

By:

/s/ Stanley Rowe

 

Name:

Stanley Rowe

Title:

Director – Attorney in Fact

 

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