Document:

Exhibit 10.1

 

JPMorgan Chase Bank, National Association

London Branch
 25 Bank Street
 Canary Wharf
 London E14 5JP
 England

 

	
 
    	
June 10, 2015
    

 

To:                             Ironwood Pharmaceuticals, Inc.
 301 Binney Street, Cambridge, Massachusetts, 02142
 Attention:  Chief Legal Officer

Telephone No.:  (617) 621-7722

 

Re:                             Base Call Option Transaction

 

The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the call option transaction entered into between JPMorgan Chase Bank, National Association, London Branch (“Dealer”) and Ironwood Pharmaceuticals, Inc. (“Counterparty”) as of the Trade Date specified below (the “Transaction”).  This letter agreement constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below.  This Confirmation shall replace any previous agreements with respect to the Transaction and serve as the final documentation for the Transaction.

 

The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc. (“ISDA”) are incorporated into this Confirmation.  In the event of any inconsistency between the Equity Definitions and this Confirmation, this Confirmation shall govern.  Certain defined terms used herein are based on terms that are defined in the Offering Memorandum dated June 9, 2015 (the “Offering Memorandum”) relating to the 2.25% Convertible Senior Notes due 2022 (as originally issued by Counterparty, the “Convertible Notes” and each USD 1,000 principal amount of Convertible Notes, a “Convertible Note”) issued by Counterparty in an aggregate initial principal amount of USD 300,000,000 (as increased by up to an aggregate principal amount of USD 45,000,000 if and to the extent that the Initial Purchasers (as defined herein) exercise their option to purchase additional Convertible Notes pursuant to the Purchase Agreement (as defined herein)) pursuant to an Indenture to be dated June 15, 2015 between Counterparty and U.S. Bank National Association, as trustee (the “Indenture”).  In the event of any inconsistency between the terms defined in the Offering Memorandum, the Indenture and this Confirmation, this Confirmation shall govern.  The parties acknowledge that this Confirmation is entered into on the date hereof with the understanding that (i) definitions set forth in the Indenture which are also defined herein by reference to the Indenture and (ii) sections of the Indenture that are referred to herein will conform to the descriptions thereof in the Offering Memorandum.  If any such definitions in the Indenture or any such sections of the Indenture differ from the descriptions thereof in the Offering Memorandum, the descriptions thereof in the Offering Memorandum will govern for purposes of this Confirmation.  The parties further acknowledge that the Indenture section numbers used herein are based on the draft of the Indenture last reviewed by Dealer as of the date of this Confirmation, and if any such section numbers are changed in the Indenture as executed, the parties will amend this Confirmation in good faith to preserve the intent of the parties.  Subject to the foregoing, references to the Indenture herein are references to the Indenture as in effect on the date hereof and on the date of its execution, respectively, and if the Indenture is amended or supplemented following such date (other than any amendment or supplement (x) pursuant to Section 10.01(h) of the Indenture that, as determined by the Calculation Agent, conforms the Indenture to the description of Convertible Notes in the Offering Memorandum or (y) pursuant to Section 4.07(a) of the Indenture, subject, in the case of this clause (y), to the second paragraph under “Method of Adjustment” in Section 3), any such amendment or supplement will be disregarded for purposes of this Confirmation unless the parties agree otherwise in writing.

 

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

 

1.                                      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 supplement, form a part of, and be subject to an agreement in the form of the 2002 ISDA Master Agreement (the “Agreement”) as if Dealer and

 

 

Counterparty had executed an agreement in such form (but without any Schedule except for (i) the election of US Dollars (“USD”) as the Termination Currency, (ii) the election of the laws of the State of New York as the governing law (without reference to choice of law doctrine), (iii) the election that following the payment of the Premium, the condition precedent in Section 2(a)(iii)(1) of the Agreement with respect to an Event of Default or Potential Event of Default (other than an Event of Default arising under Section 5(a)(ii) or 5(a)(iv) of the Agreement) shall not apply to a payment or delivery owing by Dealer to Counterparty, and (iv) the election that the “Cross Default” provisions of Section 5(a)(vi) of the Agreement shall apply to Dealer with a “Threshold Amount” of 3% of Dealer’s ultimate parent’s shareholders’ equity (provided that (a) the phrase “, or becoming capable at such time of being declared,” shall be deleted from clause (1) of such Section 5(a)(vi) of the Agreement, (b) “Specified Indebtedness” shall have the meaning specified in Section 14 of the Agreement, except that such term shall not include obligations in respect of deposits received in the ordinary course of Dealer’s banking business and (c) the following sentence shall be added to the end of Section 5(a)(vi) of the Agreement: “Notwithstanding the foregoing, a default under subsection (2) hereof shall not constitute an Event of Default if (x) the default was caused solely by error or omission of an administrative or operational nature; (y) funds were available to enable the relevant party to make the payment when due; and (z) the payment is made within two Local Business Days of such party’s receipt of written notice of its failure to pay.”).  In the event of any inconsistency between provisions of the Agreement and this Confirmation, this Confirmation will prevail for the purpose of the Transaction to which this Confirmation relates.  The parties hereby agree that no transaction other than the Transaction to which this Confirmation relates shall be governed by the Agreement.  The parties acknowledge that the Transaction to which this Confirmation relates is not governed by, and shall not be treated as a transaction under, any other ISDA Master Agreement entered into between the parties from time to time. In the event of any inconsistency between this Confirmation and 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:

 

	
General Terms.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Trade Date:
    	
 
    	
June 10, 2015
    
	
 
    	
 
    	
 
    
	
Effective Date:
    	
 
    	
The third Exchange Business Day immediately prior to   the Premium Payment Date
    
	
 
    	
 
    	
 
    
	
Option Style:
    	
 
    	
“Modified American”, as described under “Procedures   for Exercise” below
    
	
 
    	
 
    	
 
    
	
Option Type:
    	
 
    	
Call
    
	
 
    	
 
    	
 
    
	
Buyer:
    	
 
    	
Counterparty
    
	
 
    	
 
    	
 
    
	
Seller:
    	
 
    	
Dealer
    
	
 
    	
 
    	
 
    
	
Shares:
    	
 
    	
The common stock of Counterparty, par value USD   0.001 per Share (Exchange symbol “IRWD”).
    
	
 
    	
 
    	
 
    
	
Number of Options:
    	
 
    	
300,000. For the avoidance of doubt, the Number of   Options shall be reduced by any Options exercised by Counterparty. In no   event will the Number of Options be less than zero.
    
	
 
    	
 
    	
 
    
	
Applicable Percentage:
    	
 
    	
40.0%
    
	
 
    	
 
    	
 
    
	
Option Entitlement:
    	
 
    	
A number equal to the product of the Applicable   Percentage and 60.3209.
    
	
 
    	
 
    	
 
    
	
Strike Price:
    	
 
    	
USD 16.5780
    
	
 
    	
 
    	
 
    
	
Premium:
    	
 
    	
USD 32,856,000.00
    

 

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Premium Payment Date:
    	
 
    	
June 15, 2015
    
	
 
    	
 
    	
 
    
	
Exchange:
    	
 
    	
The NASDAQ Global Select Market
    
	
 
    	
 
    	
 
    
	
Related Exchange(s):
    	
 
    	
All Exchanges
    
	
 
    	
 
    	
 
    
	
Excluded Provisions:
    	
 
    	
Section 4.05(h) and Section 4.04 of   the Indenture.
    
	
 
    	
 
    	
 
    
	
Procedures for Exercise.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Conversion Date:
    	
 
    	
With respect to any conversion of a Convertible   Note, the date on which the Holder (as such term is defined in the Indenture)   of such Convertible Note satisfies all of the requirements for conversion   thereof as set forth in Section 4.02(b) of the Indenture; provided that if Counterparty has not delivered to Dealer   a related Notice of Exercise, then in no event shall a Conversion Date be   deemed to occur hereunder (and no Option shall be exercised or deemed to be   exercised hereunder) with respect to any surrender of a Convertible Note for   conversion in respect of which Counterparty has elected to designate a   financial institution for exchange in lieu of conversion of such Convertible   Note pursuant to Section 4.11 of the Indenture.
    
	
 
    	
 
    	
 
    
	
Expiration Time:
    	
 
    	
The Valuation Time
    
	
 
    	
 
    	
 
    
	
Expiration Date:
    	
 
    	
June 15, 2022, subject to earlier exercise.
    
	
 
    	
 
    	
 
    
	
Multiple Exercise:
    	
 
    	
Applicable, as described under “Automatic Exercise”   below.
    
	
 
    	
 
    	
 
    
	
Automatic Exercise:
    	
 
    	
Notwithstanding Section 3.4 of the Equity   Definitions, on each Conversion Date in respect of which a Notice of   Conversion that is effective as to Counterparty has been delivered by the   relevant converting Holder, a number of Options equal to the number of   Convertible Notes in denominations of USD 1,000 as to which such Conversion   Date has occurred shall be deemed to be automatically exercised; provided that such Options shall be exercised or deemed   exercised only if Counterparty has provided a Notice of Exercise to Dealer in   accordance with “Notice of Exercise” below.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Notwithstanding the foregoing, in no event shall the   number of Options that are exercised or deemed exercised hereunder exceed the   Number of Options.
    
	
 
    	
 
    	
 
    
	
Notice of Exercise:
    	
 
    	
Notwithstanding anything to the contrary in the   Equity Definitions or under “Automatic Exercise” above, in order to exercise   any Options, Counterparty must notify Dealer in writing, including by email,   before 5:00 p.m. (New York City time) on the Scheduled Valid Day immediately   preceding the scheduled first day of the Settlement Averaging Period for the   Options being exercised of (i) the number of such Options (including, if   applicable, whether all or any portion of such exercise relates to the conversion   of the Convertible Notes in 
    

 

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connection with which   holders thereof are entitled to receive additional shares and/or cash pursuant   to the adjustment of the Conversion Rate set forth in Section 4.04 of   the Indenture), (ii) the scheduled first day of the Settlement Averaging   Period and the scheduled Settlement Date, (iii) the Relevant Settlement   Method for such Options, and (iv) if the settlement method for the   related Convertible Notes is not Settlement in Shares or Settlement in Cash   (each as defined below), the fixed amount of cash per Convertible Note that   Counterparty has elected to deliver to Holders (as such term is defined in   the Indenture) of the related Convertible Notes (the “Specified   Cash Amount”); provided that   in respect of any Options relating to Convertible Notes with a Conversion   Date occurring on or after the 65th Scheduled Valid Day preceding June 15,   2022, (A) such notice may be given on or prior to the second Scheduled   Valid Day immediately preceding the Expiration Date and need only specify the   information required in clause (i) above, and (B) if the Relevant   Settlement Method for such Options is (x) Net Share Settlement and the   Specified Cash Amount is not USD 1,000, (y) Cash Settlement or   (z) Combination Settlement, Dealer shall have received a separate notice   (the “Notice of Final Settlement Method”)   in respect of all such Convertible Notes before 5:00 p.m. (New York City   time) on or prior to December 15, 2021 specifying the information   required in clauses (iii) and (iv) above. Counterparty acknowledges   its responsibilities under applicable securities laws, and in particular   Section 9 and Section 10(b) of the Exchange Act (as defined   below) and the rules and regulations thereunder, in respect of any   election of a settlement method with respect to the Convertible Notes.
    
	
 
    	
 
    	
 
    
	
Valuation Time:
    	
 
    	
At the close of trading of the regular trading   session on the Exchange; provided that   if the principal trading session is extended, the Calculation Agent shall   determine the Valuation Time in good faith and in its commercially reasonable   discretion.
    
	
 
    	
 
    	
 
    
	
Market Disruption   Event:
    	
 
    	
Section 6.3(a) of the Equity Definitions   is hereby replaced in its entirety by the following:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
“‘Market Disruption Event’ means, in respect of a   Share, (i) a failure by the primary United States national or regional   securities exchange or market on which the Shares are listed or admitted for   trading to open for trading during its regular trading session or   (ii) the occurrence or existence prior to 1:00 p.m. (New York City time)   on any Scheduled Valid Day for the Shares for more than one half-hour period   in the aggregate during regular trading hours of any suspension or limitation   imposed on trading (by reason of movements in price exceeding limits   permitted by the relevant stock exchange or otherwise) in the Shares or in   any options contracts or futures contracts relating to the Shares.”
    

 

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Settlement Terms.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Settlement Method:
    	
 
    	
For any Option, Net Share Settlement; provided that if the Relevant Settlement Method set forth   below for such Option is not Net Share Settlement, then the Settlement Method   for such Option shall be such Relevant Settlement Method, but only if   Counterparty shall have notified Dealer of the Relevant Settlement Method in   the Notice of Exercise or Notice of Final Settlement Method, as applicable,   for such Option.
    
	
 
    	
 
    	
 
    
	
Relevant Settlement   Method:
    	
 
    	
In respect of any Option:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)             if Counterparty has elected to settle   its conversion obligations in respect of the related Convertible Note   (A) entirely in Shares pursuant to Section 4.02(a)(ii)(A) of   the Indenture (together with cash in lieu of fractional Shares) (such   settlement method, “Settlement in Shares”),   (B) in a combination of cash and Shares pursuant to   Section 4.02(a)(ii)(C) of the Indenture with a Specified Cash   Amount less than USD 1,000 (such settlement method, “Low Cash   Combination Settlement”) or (C) in a combination of cash and   Shares pursuant to Section 4.02(a)(ii)(C) of the Indenture with a   Specified Cash Amount equal to USD 1,000, then, in each case, the   Relevant Settlement Method for such Option shall be Net Share Settlement;
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(ii)          if Counterparty has elected to settle its   conversion obligations in respect of the related Convertible Note in a   combination of cash and Shares pursuant to   Section 4.02(a)(ii)(C) of the Indenture with a Specified Cash   Amount greater than USD 1,000, then the Relevant Settlement Method for such   Option shall be Combination Settlement; and
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(iii)       if Counterparty has elected to settle its   conversion obligations in respect of the related Convertible Note entirely in   cash pursuant to Section 4.02(a)(ii)(B) of the Indenture (such   settlement method, “Settlement in Cash”),   then the Relevant Settlement Method for such Option shall be Cash Settlement.
    
	
 
    	
 
    	
 
    
	
Net Share Settlement:
    	
 
    	
If Net Share Settlement is applicable to any Option   exercised or deemed exercised hereunder, Dealer will deliver to Counterparty,   on the relevant Settlement Date for each such Option, a number of Shares (the   “Net Share Settlement Amount”) equal   to the sum, for each Valid Day during the Settlement Averaging Period for   each such Option, of (i) (a) the Daily Option Value for such Valid   Day, divided by (b) the Relevant Price   on such Valid Day, divided by   (ii) the number of Valid Days in the Settlement Averaging Period; provided that in no event shall the Net Share Settlement   Amount for any Option exceed a number of Shares equal to the Applicable Limit   for such Option divided by the Applicable Limit   Price on the Settlement Date for such Option.
    

 

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Dealer will pay cash in lieu of delivering any   fractional Shares to be delivered with respect to any Net Share Settlement   Share Amount valued at the Relevant Price for the last Valid Day of the   Settlement Averaging Period.
    
	
 
    	
 
    	
 
    
	
Combination Settlement:
    	
 
    	
If Combination Settlement is applicable to any   Option exercised or deemed exercised hereunder, Dealer will pay or deliver,   as the case may be, to Counterparty, on the relevant Settlement Date for each   such Option:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)             cash (the “Combination Settlement Cash Amount”) equal to the sum, for   each Valid Day during the Settlement Averaging Period for such Option, of   (A) an amount (the “Daily Combination   Settlement Cash Amount”) equal to the lesser of (1) the   product of (x) the Applicable Percentage and (y) the Specified Cash   Amount minus USD 1,000 and (2) the Daily   Option Value, divided by (B) the number   of Valid Days in the Settlement Averaging Period; provided   that if the calculation in clause (A) above results in zero or a   negative number for any Valid Day, the Daily Combination Settlement Cash   Amount for such Valid Day shall be deemed to be zero; and
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(ii)          Shares (the “Combination Settlement Share Amount”) equal to the sum,   for each Valid Day during the Settlement Averaging Period for such Option, of   a number of Shares for such Valid Day (the “Daily   Combination Settlement Share Amount”) equal to   (A) (1) the Daily Option Value on such Valid Day minus the Daily Combination Settlement Cash Amount for   such Valid Day, divided by (2) the   Relevant Price on such Valid Day, divided by   (B) the number of Valid Days in the Settlement Averaging Period; provided that if the calculation in sub-clause   (A)(1) above results in zero or a negative number for any Valid Day, the   Daily Combination Settlement Share Amount for such Valid Day shall be deemed   to be zero;
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
provided that in no event shall   the sum of (x) the Combination Settlement Cash Amount for any Option and   (y) the Combination Settlement Share Amount for such Option multiplied by the Applicable Limit Price on the Settlement   Date for such Option, exceed the Applicable Limit for such Option.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Dealer will pay cash in lieu of delivering any   fractional Shares to be delivered with respect to any Combination Settlement   Share Amount valued at the Relevant Price for the last Valid Day of the   Settlement Averaging Period.
    
	
 
    	
 
    	
 
    
	
Cash Settlement:
    	
 
    	
If Cash Settlement is applicable to any Option   exercised or deemed exercised hereunder, in lieu of Section 8.1 of the   Equity Definitions, Dealer will pay to Counterparty, on the relevant   Settlement Date for each such Option, an
    

 

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amount of cash (the “Cash   Settlement Amount”) equal to the sum, for each Valid Day during   the Settlement Averaging Period for such Option, of (i) the Daily Option   Value for such Valid Day, divided by   (ii) the number of Valid Days in the Settlement Averaging Period.
    
	
 
    	
 
    	
 
    
	
Daily Option Value:
    	
 
    	
For any Valid Day, an amount equal to (i) the   Option Entitlement on such Valid Day, multiplied by   (ii) the Relevant Price on such Valid Day less   the Strike Price on such Valid Day; provided that   if the calculation contained in clause (ii) above results in a negative   number, the Daily Option Value for such Valid Day shall be deemed to be zero.   In no event will the Daily Option Value be less than zero.
    
	
 
    	
 
    	
 
    
	
Applicable Limit:
    	
 
    	
For any Option, an amount of cash equal to the   Applicable Percentage multiplied by the   excess of (i) the aggregate of (A) the amount of cash, if any, paid   to the Holder of the related Convertible Note upon conversion of such   Convertible Note as determined pursuant to Section 4.02(a)(ii) of   the Indenture and (B) the number of Shares, if any, delivered to the   Holder of the related Convertible Note upon conversion of such Convertible   Note as determined pursuant to Section 4.02(a)(ii) of the Indenture   multiplied by the Applicable Limit   Price on the Settlement Date for such Option, over (ii) USD 1,000.
    
	
 
    	
 
    	
 
    
	
Applicable Limit Price:
    	
 
    	
On any day, the opening price as displayed under the   heading “Op” on Bloomberg page IRWD <equity> (or any successor   thereto).
    
	
 
    	
 
    	
 
    
	
Valid Day:
    	
 
    	
A day on which (i) there is no Market   Disruption Event and (ii) trading in the Shares generally occurs on the   Exchange or, if the Shares are not then listed on the Exchange, on the   principal other United States national or regional securities exchange on   which the Shares are then listed or, if the Shares are not then listed on a   United States national or regional securities exchange, on the principal   other market on which the Shares are then listed or admitted for trading. If   the Shares are not so listed or admitted for trading, “Valid Day” means a   Business Day.
    
	
 
    	
 
    	
 
    
	
Scheduled Valid Day:
    	
 
    	
A day that is scheduled to be a Valid Day on the   principal United States national or regional securities exchange or market on   which the Shares are listed or admitted for trading. If the Shares are not so   listed or admitted for trading, “Scheduled Valid Day” means a Business Day.
    
	
 
    	
 
    	
 
    
	
Business Day:
    	
 
    	
Any day other than a Saturday, a Sunday or a day on   which the Federal Reserve Bank of New York is authorized or required by law   or executive order to close or be closed.
    
	
 
    	
 
    	
 
    
	
Relevant Price:
    	
 
    	
On any Valid Day, the per Share volume-weighted   average price as displayed under the heading “Bloomberg VWAP” on Bloomberg   page IRWD <equity> AQR (or any successor thereto) (“Bloomberg   VWAP”) in respect 
    

 

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of the period from the scheduled opening time of the   Exchange to the Scheduled Closing Time of the Exchange on such Valid Day (or   if Bloomberg VWAP is unavailable at such time, the market value of one Share   on such Valid Day, as determined by the Calculation Agent using, if   practicable, a volume-weighted average method). The Relevant Price will be   determined without regard to after-hours trading or any other trading outside   of the regular trading session trading hours.
    
	
 
    	
 
    	
 
    
	
Settlement Averaging   Period:
    	
 
    	
For any Option and regardless of the Settlement   Method applicable to such Option:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)             if the related   Conversion Date occurs prior to the 65th Scheduled Valid   Day immediately preceding the Expiration Date, the 60 consecutive Valid Day   period commencing on, and including, the third Valid Day immediately   following such Conversion Date; or
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(ii)          if the related   Conversion Date occurs on or following the 65th Scheduled Valid Day   immediately preceding the Expiration Date, the 60 consecutive Valid Days   commencing on, and including, the 62nd Scheduled Valid Day immediately prior to the   Expiration Date.
    
	
 
    	
 
    	
 
    
	
Settlement Date:
    	
 
    	
For any Option, the third Business Day immediately   following the final Valid Day of the Settlement Averaging Period for such   Option.
    
	
 
    	
 
    	
 
    
	
Settlement Currency:
    	
 
    	
USD
    
	
 
    	
 
    	
 
    
	
Other Applicable   Provisions:
    	
 
    	
The provisions of Sections 9.1(c), 9.8, 9.9 and 9.11   of the Equity Definitions will be applicable, except that all references in   such provisions to “Physically-settled” shall be read as references to “Share   Settled”. “Share Settled” in relation to any Option means that Net Share   Settlement or Combination Settlement is applicable to that Option.
    
	
 
    	
 
    	
 
    
	
Representation and   Agreement:
    	
 
    	
Notwithstanding anything to the contrary in the   Equity Definitions (including, but not limited to, Section 9.11   thereof), the parties acknowledge that (i) any Shares delivered to   Counterparty may be, upon delivery, subject to restrictions and limitations   arising from Counterparty’s status as issuer of the Shares under applicable   securities laws, (ii) Dealer may deliver any Shares required to be   delivered hereunder in certificated form in lieu of delivery through the   Clearance System and (iii) any Shares delivered to Counterparty may be   “restricted securities” (as defined in Rule 144 under the Securities Act   of 1933, as amended (the “Securities Act”)).
    

 

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3.                                      Additional Terms applicable to the Transaction.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Adjustments applicable   to the Transaction:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Potential Adjustment   Events:
    	
 
    	
Notwithstanding Section 11.2(e) of the   Equity Definitions, a “Potential Adjustment Event” means an occurrence of any   event or condition, as set forth in any Dilution Adjustment Provision, that   would result in an adjustment under the Indenture to the “Conversion Rate” or   the composition of a “unit of Reference Property” or to any “Last Reported   Sale Price” , “Daily VWAP,” “Daily Conversion Value” or “Daily   Settlement Amount” (each as defined in the Indenture). For the avoidance of   doubt, Dealer shall not have any delivery or payment obligation hereunder in   respect of any “Distributed Property” delivered by Counterparty pursuant to   the fourth sentence of Section 4.05(c) of the Indenture or any   payment obligation in respect of any cash paid by Counterparty pursuant to   the fourth sentence of Section 4.05(d) of the Indenture   (collectively, the “Conversion Rate   Adjustment Fallback Provisions”), and no adjustment shall be made   to the terms of the Transaction, on account of (x) any event or   condition described in the Conversion Rate Adjustment Fallback Provisions or   (y) any other transaction in which holders of the Convertible Notes are   entitled to participate, in each case, in lieu of an adjustment under the   Indenture of the type referred to in the immediately preceding sentence   (including, without limitation, pursuant to the Conversion Rate Adjustment   Fallback Provisions).
    
	
 
    	
 
    	
 
    
	
Method of Adjustment:
    	
 
    	
Calculation Agent Adjustment, which means that,   notwithstanding Section 11.2(c) of the Equity Definitions, upon any   Potential Adjustment Event, the Calculation Agent shall make an adjustment   corresponding to the adjustment to be made pursuant to the Indenture to any   one or more of the Strike Price, Number of Options and/or Option Entitlement.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Notwithstanding the foregoing and “Consequences of   Merger Events / Tender Offers” below, if the Calculation Agent in good faith   disagrees with any adjustment to the Convertible Notes that involves an   exercise of discretion by Counterparty or its board of directors (including,   without limitation, pursuant to Section 4.06 of the Indenture,   Section 4.07(a) of the Indenture or any supplemental indenture   entered into thereunder or in connection with any proportional adjustment or   the determination of the fair value of any securities, property, rights or   other assets), then in each such case, the Calculation Agent will determine   the adjustment to be made to any one or more of the Strike Price, Number of   Options and/or Option Entitlement in a commercially reasonable manner, after   consultation with Counterparty; provided,   that, notwithstanding the foregoing, if any Potential Adjustment Event occurs   during the Settlement Averaging Period but no adjustment was made to any   Convertible Note under the Indenture because the relevant Holder (as such   term is defined in the Indenture) was deemed to be a record owner of the   underlying Shares on 
    

 

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the related Conversion Date, then the Calculation   Agent shall make an adjustment, as determined by it in a commercially   reasonable manner after consultation with Counterparty, to the terms hereof   in order to account for such Potential Adjustment Event.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
For the avoidance of doubt, whenever the Calculation   Agent, the Hedging Party, the Determining Party, or Dealer is called upon to   make an adjustment pursuant to the terms of this Transaction to take into   account the effect of an event, the Calculation Agent, the Hedging Party, the   Determining Party of Dealer, as applicable, shall make such adjustment by   reference to the effect of such event on the Hedging Party, assuming that the   Hedging Party maintains a commercially reasonable hedge position.
    
	
 
    	
 
    	
 
    
	
Dilution Adjustment   Provisions:
    	
 
    	
Sections 4.05(a), (b), (c), (d) and   (e) and Section 4.06 of the Indenture.
    
	
 
    	
 
    	
 
    
	
Extraordinary Events   applicable to the Transaction:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Merger Events:
    	
 
    	
Applicable; provided that   notwithstanding Section 12.1(b) of the Equity Definitions, a   “Merger Event” means the occurrence of any event or condition set forth in   the definition of “Merger Event” in Section 4.07(a) of the   Indenture.
    
	
 
    	
 
    	
 
    
	
Tender Offers:
    	
 
    	
Applicable; provided that   notwithstanding Section 12.1(d) of the Equity Definitions, a   “Tender Offer” means the occurrence of any event or condition set forth in   Section 4.05(e) of the Indenture.
    
	
 
    	
 
    	
 
    
	
Consequences of Merger   Events / Tender Offers:
    	
 
    	
Notwithstanding Section 12.2 and   Section 12.3 of the Equity Definitions, upon the occurrence of a Merger   Event or a Tender Offer that is required under the terms of the Indenture to   result in an adjustment to the terms of the Convertible Notes, the Calculation   Agent shall make an adjustment corresponding to the adjustment to be made   pursuant to the Indenture to any one or more of the nature of the Shares (in   the case of a Merger Event), Strike Price, Number of Options, Option   Entitlement, the definitions of “Exchange”, “Relevant Price”, “Settlement   Averaging Period”, “Valid Day”, “Scheduled Valid Day”, “Market Disruption   Event”, and/or the number of Share thresholds in   Section 9(b)(i) and 9(b)(ii) of this Confirmation, subject to   the second paragraph under “Method of Adjustment”; provided, however, that such adjustment shall be made without   regard to any adjustment to the Conversion Rate pursuant to any Excluded   Provision; provided further that if, with   respect to a Merger Event or a Tender Offer, (i) the consideration for   the Shares includes (or, at the option of a holder of Shares, may include)   shares of an entity or person that is not a corporation or is not organized   under the laws of the United States, any State thereof or the District of
    

 

10

 

	
 
    	
 
    	
Columbia or (ii) the Counterparty to the   Transaction following such Merger Event or Tender Offer will not be a   corporation, then, in either case, Cancellation and Payment (Calculation   Agent Determination) may apply at Dealer’s sole election.
    
	
 
    	
 
    	
 
    
	
Nationalization, Insolvency   or Delisting:
    	
 
    	
Cancellation and Payment (Calculation Agent   Determination); provided that, in addition to   the provisions of Section 12.6(a)(iii) of the Equity Definitions,   it will also constitute a Delisting if the Exchange is located in the United   States and the Shares are not immediately re-listed, re-traded or re-quoted   on any of the New York Stock Exchange, The NASDAQ Global Select Market or The   NASDAQ Global Market (or their respective successors); if the Shares are   immediately re-listed, re-traded or re-quoted on any of the New York Stock   Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or   their respective successors), such exchange or quotation system shall   thereafter be deemed to be the Exchange.
    
	
 
    	
 
    	
 
    
	
Additional Disruption   Events:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Change in Law:
    	
 
    	
Applicable; provided that   Section 12.9(a)(ii) of the Equity Definitions is hereby amended by   (i) replacing the word “Shares” with the phrase “Hedge Positions” in   clause (X) thereof and (ii) inserting the parenthetical   “(including, for the avoidance of doubt and without limitation, adoption or   promulgation of new regulations authorized or mandated by existing statute)”   at the end of clause (A) thereof.
    
	
 
    	
 
    	
 
    
	
Failure to Deliver:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Hedging Disruption:
    	
 
    	
Applicable; provided   that:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)             Section 12.9(a)(v) of   the Equity Definitions is hereby amended by (a) inserting the following   words at the end of clause (A) thereof: “in the manner contemplated by   the Hedging Party on the Trade Date” and (b) inserting the following   language at the end of such Section:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
“, provided that any   such inability that occurs solely due to the deterioration of the   creditworthiness of the Hedging Party shall not be deemed a Hedging   Disruption. For the avoidance of doubt, the term “equity price risk” shall be   deemed to include, but shall not be limited to, stock price and volatility   risk. And, for the further avoidance of doubt, any such transactions or   assets referred to in phrases (A) or (B) above must be available on   commercially reasonable pricing terms.”; and
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(ii)          Section 12.9(b)(iii) of   the Equity Definitions is hereby amended by inserting in the third line   thereof, after the words “to terminate the 
    

 

11

 

	
 
    	
 
    	
Transaction”, the words   “or a portion of the Transaction affected by such Hedging Disruption”.
    
	
 
    	
 
    	
 
    
	
Increased Cost of   Hedging:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Hedging Party:
    	
 
    	
For all applicable Additional Disruption Events,   Dealer; provided, however, that all   calculations, adjustments, specifications, choices and determinations by   Dealer acting in its capacity as the Hedging Party shall be made in good   faith and in a commercially reasonable manner and assuming that Dealer   maintains a commercially reasonable hedge position (it being understood that   Hedging Party will be subject to the requirements of the second paragraph   under “Calculation Agent” below).
    
	
 
    	
 
    	
 
    
	
Determining Party:
    	
 
    	
For all applicable Extraordinary Events, Dealer; provided, however, that all calculations, adjustments, specifications,   choices and determinations by Dealer acting in its capacity as the   Determining Party shall be made in good faith and in a commercially   reasonable manner and assuming that Dealer maintains a commercially   reasonable hedge position (it being understood that Determining Party will be   subject to the requirements of the second paragraph under “Calculation Agent”   below).
    
	
 
    	
 
    	
 
    
	
Non-Reliance:
    	
 
    	
Applicable.
    
	
 
    	
 
    	
 
    
	
Agreements and   Acknowledgments Regarding Hedging Activities:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Additional Acknowledgments:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
4.                                      Calculation Agent.
    	
 
    	
Dealer; provided, however,   that all calculations, adjustments, specifications, choices and   determinations by the Calculation Agent shall be made in good faith and in a   commercially reasonable manner. The parties agree that they will work   reasonably to resolve any disputes as set forth in the immediately following   paragraph.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
In the case of any calculation, adjustment or   determination by the Hedging Party, the Determining Party or the Calculation   Agent, following any written request from Counterparty, the Hedging Party,   the Determining Party or the Calculation Agent, as the case may be, shall   promptly provide to Counterparty a written explanation describing in   reasonable detail the basis for such calculation, adjustment or determination   (including any quotation, market data or information from internal or   external sources used in making such calculation, adjustment or   determination, but without disclosing any proprietary models or other   information that may be proprietary or confidential). If Counterparty   promptly disputes such calculation, adjustment or determination in writing   and provides reasonable detail as to the basis for such dispute, the   Calculation Agent shall, to the extent permitted by applicable law, discuss   the dispute with Counterparty in good faith, it being understood that 
    

 

12

 

	
 
    	
 
    	
notwithstanding such discussion, the Calculation   Agent’s calculation, adjustment or determination shall apply to the   Transaction and be binding on the parties provided that such calculation,   adjustment or determination was made in good faith and in a commercially   reasonable manner.
    

 

5.                                      Account Details.

 

(a)                                 Account for payments to Counterparty:

 

Bank: U.S. Bank N.A.
 Bank Address: 101 E.5th Street, St. Paul, MN, 55101-1860
 Routing #: 091-000-022 
 Acct No.: 173103198383
 Beneficiary: U.S. Bank Trust Services
 Beneficiary Address: 101 E.5th Street, St. Paul, MN, 55101-1860
 Int’l Wires/SWIFT: USBKUS44IMT

 

Account for delivery of Shares to Counterparty:

 

To be provided by Counterparty

 

(b)                                 Account for payments to Dealer:

 

Bank:                                          JPMorgan Chase Bank, N.A.

ABA#:                                      021000021

Acct No.:                         099997979

Beneficiary:         JPMorgan Chase Bank, N.A. New York

Ref:                                                    Derivatives

 

Account for delivery of Shares from Dealer:

 

DTC 0060

 

6.                                      Offices.

 

(a)                                 The Office of Counterparty for the Transaction is:  Inapplicable, Counterparty is not a Multibranch Party.

 

(b)                                 The Office of Dealer for the Transaction is: London

 

JPMorgan Chase Bank, National Association

London Branch

25 Bank Street

Canary Wharf

London E14 5JP

England

 

7.                                      Notices.

 

(a)                                 Address for notices or communications to Counterparty:

 

Ironwood Pharmaceuticals, Inc. 
 301 Binney Street, Cambridge, Massachusetts, 02142
 Attention:  Chief Legal Officer
 Telephone No.:  (617) 621-7722

 

13

 

With a copy to:

 

Ropes & Gray LLP
 Attention: Isabel Dische, Esq. and Thomas Holden, Esq.
 Telephone No: (212) 596-9000

Facsimile No: (212) 596-9090
 Email: isabel.dische@ropesgray.com & thomas.holden@ropesgray.com

 

(b)                                 Address for notices or communications to Dealer:

 

JPMorgan Chase Bank, National Association
 EDG Marketing Support
 Email:                                                            edg_notices@jpmorgan.com
                                                                                                  edg_ny_corporate_sales_support@jpmorgan.com
 Facsimile No:                      1-866-886-4506

 

J.P. Morgan Securities LLC,
 383 Madison Ave,
 New York, NY 10179

 

With a copy to:

 

Attention:                                         Santosh Sreenivasan
 Title:                                                                    Managing Director, Head of US Equity-Linked Capital Markets
 Telephone No:                212-622-5604
 Email:                                                            santosh.sreenivasan@jpmorgan.com

 

8.                                      Representations and Warranties of Counterparty.

 

Each of the representations and warranties of Counterparty set forth in Section 3 of the Purchase Agreement (the “Purchase Agreement”), dated as of June 9, 2015, between Counterparty and J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC, as representatives of the Initial Purchasers party thereto (the “Initial Purchasers”), are true and correct and are hereby deemed to be repeated to Dealer as if set forth herein.  Counterparty hereby further represents and warrants to Dealer on the date hereof and on and as of the Premium Payment Date that:

 

(a)                                 Counterparty has all necessary corporate power and authority to execute, deliver and perform its obligations in respect of the 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 valid and binding obligation, enforceable against Counterparty in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except that rights to indemnification and contribution hereunder may be limited by federal or state securities laws or public policy relating thereto.

 

(b)                                 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 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.

 

14

 

(c)                                  No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required in connection with the execution, delivery or performance by Counterparty of this Confirmation, except such as have been obtained or made and such as may be required under the Securities Act of 1933, as amended (the “Securities Act”) or state securities laws.

 

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

 

(e)                                  Counterparty is an “eligible contract participant” (as such term is defined in Section 1a(18) of the Commodity Exchange Act, as amended, other than a person that is an eligible contract participant under Section 1a(18)(C) of the Commodity Exchange Act).

 

(f)                                   Each of it and its affiliates is not, on the date hereof, in possession of any material non-public information with respect to Counterparty or the Shares.

 

(g)                                  No state or local (including any non-U.S. jurisdiction’s) law, rule, regulation or regulatory order applicable to the Shares would give rise to any reporting, consent, registration or other requirement (including without limitation a requirement to obtain prior approval from any person or entity) as a result of Dealer or its affiliates owning or holding (however defined) Shares.

 

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

 

9.                                      Other Provisions.

 

(a)                                 [Reserved]

 

(b)                                 Repurchase Notices.  Counterparty shall, on any day on which Counterparty effects any repurchase of Shares, promptly give Dealer a written notice of such repurchase (a “Repurchase Notice”) on such day if following such repurchase, the number of outstanding Shares as determined on such day is (i) less than 117,056,262 (in the case of the first such notice) or (ii) thereafter more than 7,689,583 less than the number of Shares included in the immediately preceding Repurchase Notice.  Counterparty agrees to indemnify and hold harmless Dealer and its affiliates and their respective officers, directors, employees, affiliates, advisors, agents and controlling persons (each, an “Indemnified Person”) from and against any and all losses (including losses relating to Dealer’s hedging activities as a consequence of becoming, or of the risk of becoming, a Section 16 “insider”, including without limitation, any forbearance from hedging activities or cessation of hedging activities and any losses in connection therewith with respect to the Transaction), claims, damages, judgments, liabilities and reasonable expenses (including reasonable attorney’s fees), joint or several, which an Indemnified Person may become subject to, as a result of Counterparty’s failure to provide Dealer with a Repurchase Notice on the day and in the manner specified in this paragraph, and to reimburse, within 30 days, upon written request, each of such Indemnified Persons for any reasonable legal or other expenses incurred in connection with investigating, preparing for, providing testimony or other evidence in connection with or defending any of the foregoing.  If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against the Indemnified Person as a result of Counterparty’s failure to provide Dealer with a Repurchase Notice in accordance with this paragraph, such Indemnified Person shall promptly notify Counterparty in writing, and Counterparty, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others Counterparty may designate in such proceeding and shall pay the commercially reasonable fees and expenses of such counsel related to such proceeding.  Counterparty shall not be liable for any settlement of any proceeding contemplated by this paragraph that is effected

 

15

 

without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, Counterparty agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment.  Counterparty shall not, without the prior written consent of the Indemnified Person (such consent not to be unreasonably withheld, conditioned or delayed), effect any settlement of any pending or threatened proceeding contemplated by this paragraph that is in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such proceeding on terms reasonably satisfactory to such Indemnified Person.  If the indemnification provided for in this paragraph is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then Counterparty hereunder, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities.  The remedies provided for in this paragraph (b) are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Person at law or in equity.  The indemnity and contribution agreements contained in this paragraph shall remain operative and in full force and effect regardless of the termination of the Transaction.

 

(c)                                  Regulation M.  Counterparty is not on the Trade Date engaged in a distribution, as such term is used in Regulation M under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of any securities of Counterparty, other than a distribution meeting the requirements of the exception set forth in Rules 101(b)(10) and 102(b)(7) of Regulation M.  Counterparty shall not, until the second Scheduled Trading Day immediately following the Effective Date, engage in any such distribution.

 

(d)                                 No Manipulation.  Counterparty is not entering into the Transaction to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for the Shares) or otherwise in violation of the Exchange Act.

 

(e)                                  Transfer or Assignment.

 

(i)                                     Counterparty shall have the right to transfer or assign its rights and obligations hereunder with respect to all, but not less than all, of the Options hereunder (such Options, the “Transfer Options”); provided that such transfer or assignment shall be subject to reasonable conditions that Dealer may impose, including but not limited, to the following conditions:

 

(A)                               With respect to any Transfer Options, Counterparty shall not be released from its notice and indemnification obligations pursuant to Section 9(b) or any obligations under Section 9(o) or 9(t) of this Confirmation;

 

(B)                               Any Transfer Options shall only be transferred or assigned to a third party that is a United States person (as defined in the Internal Revenue Code of 1986, as amended);

 

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

 

16

 

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

 

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

 

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

 

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

 

(ii)                                  Dealer may, without Counterparty’s consent, transfer or assign all or any part of its rights or obligations under the Transaction (A) to any affiliate of Dealer (1) that has a rating for its long term, unsecured and unsubordinated indebtedness that is equal to or better than Dealer’s credit rating at the time of such transfer or assignment, or (2) whose obligations hereunder will be guaranteed, pursuant to the terms of a customary guarantee in a form used by Dealer generally for similar transactions, by Dealer or JPMorgan Chase & Co., or (B) to any other third party with a rating for its long term, unsecured and unsubordinated indebtedness equal to or better than the lesser of (1) the credit rating of Dealer at the time of the transfer and (2) A- by Standard and Poor’s Rating Group, Inc. or its successor (“S&P”), or A3 by Moody’s Investor Service, Inc. (“Moody’s”) or, if either S&P or Moody’s ceases to rate such debt, at least an equivalent rating or better by a substitute rating agency mutually agreed by Counterparty and Dealer.  If at any time at which (A) the Section 16 Percentage exceeds 7.5%, (B) the Option Equity Percentage exceeds 14.5%, or (C) the Share Amount exceeds the Applicable Share Limit (if any applies) (any such condition described in clauses (A), (B) or (C), an “Excess Ownership Position”), Dealer is unable after using its good faith and commercially reasonable efforts to effect a transfer or assignment of Options to a third party on pricing terms reasonably acceptable to Dealer and within a time period reasonably acceptable to Dealer such that no Excess Ownership Position exists, then Dealer may designate any Exchange Business Day as an Early Termination Date with respect to a portion of the Transaction (the “Terminated Portion”), such that following such partial termination no Excess Ownership Position exists.  In the event that Dealer so designates an Early Termination Date with respect to a portion of the Transaction, a payment shall be made pursuant to Section 6 of the Agreement as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to the Transaction and a Number of Options equal to the number of Options underlying the Terminated Portion, (2) Counterparty were the sole Affected Party with respect to such partial termination and (3) the Terminated Portion were the sole Affected Transaction (and, for the avoidance of doubt, the provisions of Section 9(m) shall apply to any amount that is payable by Dealer to Counterparty pursuant to this sentence as if Counterparty was not the Affected Party).  The “Section 16 Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the number of Shares that Dealer and each person subject to aggregation of Shares with Dealer under Section 13 or Section 16 of the Exchange Act and rules promulgated thereunder directly or indirectly beneficially own (as defined under Section 13 or Section 16 of the Exchange Act and rules promulgated thereunder) and (B) the denominator of which is the number of Shares outstanding.  The “Option Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the sum of (1) the product of the Number of Options and the Option Entitlement and (2) the aggregate number of Shares underlying any other call option

 

17

 

transaction sold by Dealer to Counterparty, and (B) the denominator of which is the number of Shares outstanding.  The “Share Amount” as of any day is the number of Shares that Dealer and any person whose ownership position would be aggregated with that of Dealer (Dealer or any such person, a “Dealer Person”) under any law, rule, regulation, regulatory order or organizational documents or contracts of Counterparty that are, in each case, applicable to ownership of Shares (“Applicable Restrictions”), owns, beneficially owns, constructively owns, controls, holds the power to vote or otherwise meets a relevant definition of ownership under any Applicable Restriction, as determined by Dealer in good faith and in its reasonable discretion.  The “Applicable Share Limit” means a number of Shares equal to (A) the minimum number of Shares that could give rise to reporting or registration obligations or other requirements (including obtaining prior approval from any person or entity) of a Dealer Person, or could result in an adverse effect on a Dealer Person, under any Applicable Restriction, as determined by Dealer in good faith and in its reasonable discretion, minus (B) 1% of the number of Shares outstanding.

 

(iii)                               Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities, or make or receive any payment in cash, to or from Counterparty, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities, or to make or receive such payment in cash, and otherwise to perform Dealer’s obligations in respect of the Transaction and any such designee may assume such obligations.  Dealer shall be discharged of its obligations to Counterparty to the extent of any such Dealer affiliate’s performance to Counterparty.

 

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

 

(i)                                     in such notice, Dealer will specify to Counterparty the related Staggered Settlement Dates (each of which shall be on or prior to such Nominal Settlement Date) and the number of Shares that it will deliver on each Staggered Settlement Date;

 

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

 

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

 

(g)                                  Role of Agent.  Each party agrees and acknowledges that (i) J.P. Morgan Securities LLC, an affiliate of Dealer (“JPMS”), has acted solely as agent for Dealer (and not as agent for Counterparty) and not as principal with respect to the Transaction and (ii) JPMS has no obligation or liability, by way of guaranty, endorsement or otherwise, in any manner in respect of the Transaction (including, if applicable, in respect of the settlement thereof). Each party agrees it will look solely to the other party (or any guarantor in respect thereof) for performance of such other party’s obligations under the Transaction. For the avoidance of doubt, any performance by Dealer of its obligations hereunder solely to JPMS shall not relieve Dealer of such obligations. Any performance by Counterparty of its obligations (including notice obligations) through or by means

 

18

 

of JPMS’ agency for Dealer shall constitute good performance of Counterparty’s obligations hereunder to Dealer.

 

(h)                                 Additional Termination Events.

 

(i)                                     Notwithstanding anything to the contrary in this Confirmation if an event of default occurs under the terms of the Convertible Notes as set forth in Section 7.01 of the Indenture, then such event of default shall constitute an Additional Termination Event applicable to the Transaction and, with respect to such Additional Termination Event, (A) Counterparty shall be deemed to be the sole Affected Party, (B) the Transaction shall be the sole Affected Transaction and (C) Dealer shall be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement.

 

(ii)                                  Notwithstanding anything to the contrary in this Confirmation, the receipt by Dealer from Counterparty, within the applicable time period set forth under “Notice of Exercise” of any Notice of Exercise in respect of Options that relate to Convertible Notes as to which additional Shares would be added to the Conversion Rate pursuant to Section 4.04 of the Indenture in connection with a “Make-Whole Fundamental Change” (as defined in the Indenture) (such Convertible Notes, “Make-Whole Convertible Notes”) shall constitute an Additional Termination Event as provided in this Section 1.  Upon receipt of any such Notice of Exercise, Dealer shall designate an Exchange Business Day following such Additional Termination Event (which Exchange Business Day shall in no event be earlier than the related settlement date for such Convertible Notes) as an Early Termination Date with respect to the portion of this Transaction corresponding to a number of Options (the “Make-Whole Conversion Options”) equal to the lesser of (A) the number of such Options specified in such Notice of Exercise and (B) the Number of Options as of the date Dealer designates such Early Termination Date (prior to giving effect to a reduction thereto on such date pursuant to the immediately following sentence).  As of any such Early Termination Date, the Number of Options shall be reduced by the applicable number of Make-Whole Conversion Options.  Any payment hereunder with respect to such termination of the Make-Whole Conversion Options shall be calculated pursuant to Section 6 of the Agreement (but using a volatility input that is equal to the Relevant Volatility Input) as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to this Transaction and a Number of Options equal to the number of Make-Whole Conversion Options, (2) Counterparty were the sole Affected Party with respect to such Additional Termination Event and (3) the terminated portion of the Transaction were the sole Affected Transaction (and, for the avoidance of doubt, in determining the amount payable pursuant to Section 6 of the Agreement, the Calculation Agent shall not take into account any adjustments to the Option Entitlement that result from corresponding adjustments to the Conversion Rate pursuant to Section 4.04 of the Indenture); provided that the amount of cash deliverable in respect of such early termination by Dealer to Counterparty shall not be greater than the product of (x) the Applicable Percentage, (y) the number of Make-Whole Conversion Options and (z) the excess of (I) (1) the Conversion Rate (after taking into account any applicable adjustments to the Conversion Rate pursuant to Section 4.04 of the Indenture) multiplied by (2) a price per Share determined by the Calculation Agent over (II) the principal amount per Make-Whole Convertible Note, as determined by the Calculation Agent. “Relevant Volatility Input” means a volatility input that is determined by Dealer in good faith and in a commercially reasonable manner and which, without limitation, may be based on implied volatility levels for options on the Shares with strike prices approximate to the Strike Price of the Transaction or approximate to the strike price of over-the-counter equity options on the Shares that are included in its commercially reasonable Hedge Positions with respect to the Transaction, in each case, as determined by Dealer in good faith and a commercially reasonable manner; provided that, if (i) Dealer (whether in its capacity as “Calculation Agent”, “Determining Party”, “Hedging Party” or otherwise) is required to determine a volatility input under any over-the-counter equity option transaction to which Dealer is a party and to which Counterparty (or, if

 

19

 

different, Issuer) is party relating to the Shares (such equity option transactions, “Relevant Positions”) and (ii) Dealer determines that such Relevant Positions (or a portion thereof) are terminated, cancelled, offset or otherwise unwound at approximately the same time (as determined by Dealer in good faith and commercially reasonably) as the Transaction (or portion thereof) is terminated, cancelled, offset or otherwise unwound, Dealer shall use a Relevant Volatility Input that is no less than such volatility input for such Relevant Positions. For the avoidance of doubt, a Relevant Volatility Input that is equal to the volatility input for any Relevant Positions shall, in no event, be deemed to be commercially unreasonable.

 

(iii)                               In addition, notwithstanding anything to the contrary in this Confirmation:

 

(A)                               Promptly following any Repayment Event (as defined below) (but, in any event, within 5 Scheduled Valid Days following settlement thereof), Counterparty may notify Dealer of such Repayment Event and the aggregate principal amount of Convertible Notes subject to such Repayment Event (the “Repayment Convertible Notes”) (any such notice, a “Repayment Notice”). The receipt by Dealer from Counterparty of any Repayment Notice shall constitute an Additional Termination Event as provided in this Section 9(h).

 

(B)                               Upon receipt of any such Repayment Notice, Dealer shall designate an Exchange Business Day following receipt of such Repayment Notice (which Exchange Business Day shall be on or as promptly as reasonably practicable after the related settlement date for the relevant Repayment Event) as an Early Termination Date with respect to a portion (the “Repayment Terminated Portion”) of the Transaction consisting of a number of Options (the “Repayment Options”) equal to the lesser of (A) the number of Repayment Convertible Notes in denominations of USD1,000 that are subject to the relevant Repayment Event and (B) the Number of Options as of the date Dealer designates such Early Termination Date (prior to giving effect to a reduction thereto on such date pursuant to the immediately following sentence).  As of any such Early Termination Date, the Number of Options shall be reduced by the applicable number of Repayment Options.

 

(C)                               Any payment or delivery in respect of such termination of the Repayment Terminated Portion of the Transaction shall be made pursuant to Section 6 of the Agreement as if an Early Termination Date had been designated in respect of a Transaction having terms identical to the Transaction and a Number of Options equal to the number of Repayment Options.  Counterparty shall be the sole Affected Party with respect to such Additional Termination Event and the Repayment Terminated Portion of the Transaction shall be the sole Affected Transaction. “Repayment Event” means that (i) any Convertible Notes are repurchased by Counterparty or any of its subsidiaries, (ii) any Convertible Notes are delivered to Counterparty in exchange for delivery of any property or assets of Counterparty or any of its subsidiaries (howsoever described), (iii) any principal of any of the Convertible Notes is repaid prior to the final maturity date of the Convertible Notes (other than upon an event of default under the Convertible Notes described in the first paragraph of this Section 9(h)), or (iv) any Convertible Notes are exchanged by or for the benefit of the Holders (as defined in the Indenture) thereof for any other securities of Counterparty or any of its Affiliates (as defined in the Indenture) (or any other property, or any combination thereof) pursuant to any exchange offer or similar transaction; provided that (x) no conversion of Convertible Notes pursuant to the terms of the Indenture shall constitute a Repayment Event and (y) no surrender of a Convertible Note for repurchase in respect of which Counterparty has elected to designate a financial institution for exchange in lieu of repurchase pursuant to Section 4.11 of the Indenture shall constitute a Repayment Event.  Counterparty

 

20

 

acknowledges its responsibilities under applicable securities laws, and in particular Section 9 and Section 10(b) of the Exchange Act and the rules and regulations thereunder, in respect of any action taken by Counterparty or any of its Affiliates (as defined in the Indenture) in respect of a Repayment Event, including, without limitation, the delivery of a Repayment Notice.

 

(D)                               Counterparty shall cause any Convertible Notes subject to a Repayment Event to be promptly cancelled or no longer outstanding and acknowledges and agrees that, except to the extent provided above in this Section 9(h), all such Convertible Notes subject to a Repayment Event will be deemed for all purposes under the Transaction to be permanently extinguished or no longer outstanding.

 

(i)                                     Amendments to the Equity Definitions.

 

(i)                                     Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (1) deleting from the fourth line thereof the word “or” after the word “official” and inserting a comma therefor, and (2) deleting the semi-colon at the end of subsection (B) thereof and inserting the following words therefor “or (C) at Dealer’s option, the occurrence of any of the events specified in Section 5(a)(vii)(1) through (9) of the ISDA Master Agreement with respect to that Issuer.”

 

(ii)                                  Section 12.9(b)(i) of the Equity Definitions is hereby amended by (1) replacing “either party may elect” and (2) replacing “notice to the other party” with “notice to Counterparty” in the first sentence of such section.

 

(j)                                    Setoff.  Obligations under the Transaction shall not be set off by either party 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.  For the avoidance of doubt, in the event of bankruptcy or liquidation of either Counterparty or Dealer neither party shall have the right to set off any obligation that it may have to the other party under the Transaction against any obligation such other party may have to it, whether arising under the Agreement, this Confirmation or any other agreement between the parties hereto, by operation of law or otherwise.

 

(k)                                 Alternative Calculations and Payment on Early Termination and on Certain  Extraordinary Events.  If in respect of the Transaction, an amount is payable by Dealer to Counterparty (i) pursuant to Section 12.7 or Section 12.9 of the Equity Definitions or (ii) pursuant to Section 6(d)(ii) of the Agreement (any such amount, a “Payment Obligation”), then Dealer shall satisfy the Payment Obligation by the Share Termination Alternative (as defined below), unless (a) Counterparty gives irrevocable telephonic notice to Dealer, confirmed in writing within one Scheduled Trading Day, no later than 12:00 p.m. (New York City time) on the Merger Date, Tender Offer Date, Announcement Date (in the case of a Nationalization, Insolvency or Delisting), Early Termination Date or date of cancellation, as applicable, of its election that the Share Termination Alternative shall not apply, (b) Counterparty remakes the representation set forth in Section 8(f) as of the date of such election and (c) Dealer agrees, in good faith and in its reasonable discretion, to such election, in which case the provisions of Section 12.7 or Section 12.9 of the Equity Definitions, or the provisions of Section 6(d)(ii) of the Agreement, as the case may be, shall apply.

 

	
Share Termination Alternative:
    	
 
    	
If applicable, Dealer shall deliver to Counterparty   the Share Termination Delivery Property on, or within a commercially   reasonable period of time after, the date when the relevant Payment   Obligation would otherwise be due pursuant to Section 12.7 or 12.9 of   the Equity Definitions or Section 6(d)(ii) and 6(e) of the   Agreement, as applicable, in satisfaction of such 
    

 

21

 

	
 
    	
 
    	
Payment Obligation in the manner reasonably   requested by Counterparty free of payment.
    
	
 
    	
 
    	
 
    
	
Share Termination Delivery Property:
    	
 
    	
A number of Share Termination Delivery Units, as   calculated by the Calculation Agent, equal to the Payment Obligation divided   by the Share Termination Unit Price. The Calculation Agent shall adjust the Share   Termination Delivery Property by replacing any fractional portion of a   security therein with an amount of cash equal to the value of such fractional   security based on the values used to calculate the Share Termination Unit   Price.
    
	
 
    	
 
    	
 
    
	
Share Termination Unit Price:
    	
 
    	
The value of property contained in one Share   Termination Delivery Unit, as determined by the Calculation Agent in its   discretion by commercially reasonable means and notified by the Calculation   Agent to Dealer at the time of notification of the Payment Obligation. For   the avoidance of doubt, the parties agree that in determining the Share   Termination Delivery Unit Price the Calculation Agent may consider, if   commercially reasonable, the purchase price paid in connection with the   purchase of Share Termination Delivery Property.
    
	
 
    	
 
    	
 
    
	
Share Termination Delivery Unit:
    	
 
    	
One Share or, if the Shares have changed into cash   or any other property or the right to receive cash or any other property as   the result of a Nationalization, Insolvency or Merger Event (any such   cash or other property, the “Exchange Property”),   a unit consisting of the type and amount of such Exchange Property received   by a holder of one Share (without consideration of any requirement to pay   cash or other consideration in lieu of fractional amounts of any securities)   in such Nationalization, Insolvency or Merger Event, as determined by   the Calculation Agent.
    
	
 
    	
 
    	
 
    
	
Failure to Deliver:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Other applicable provisions:
    	
 
    	
If Share Termination Alternative is applicable, the provisions   of Sections 9.8, 9.9 and 9.11 (as modified above) of the Equity Definitions   and the provisions set forth opposite the caption “Representation and   Agreement” in Section 2 will be applicable, except that all references   in such provisions to “Physically-settled” shall be read as references to   “Share Termination Settled” and all references to “Shares” shall be read as   references to “Share Termination Delivery Units”. “Share Termination Settled”   in relation to the Transaction means that the Share Termination Alternative   is applicable to the Transaction.
    

 

(l)                                     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 the Transaction.  Each party (i) certifies that no representative, agent or attorney of either party has

 

22

 

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 the Transaction, as applicable, by, among other things, the mutual waivers and certifications provided herein.

 

(m)                             Registration.  Counterparty hereby agrees that if, in the good faith reasonable judgment of Dealer based on the advice of counsel, the Shares (“Hedge Shares”) acquired by Dealer for the purpose of hedging its obligations pursuant to the Transaction cannot be sold in the public market by Dealer without registration under the Securities Act, Counterparty shall, at its election, either (i) in order to allow Dealer to sell the Hedge Shares in a registered offering, make available to Dealer an effective registration statement under the Securities Act and enter into an agreement, in form and substance satisfactory to Dealer, substantially in the form of an underwriting agreement for a registered secondary offering of similar size; provided, however, that if Dealer, in its sole reasonable discretion, is not satisfied with access to due diligence materials, the results of its due diligence investigation, or the procedures and documentation for the registered offering referred to above, then clause (ii) or clause (iii) of this paragraph shall apply at the election of Counterparty, (ii) in order to allow Dealer to sell the Hedge Shares in a private placement, enter into a private placement agreement substantially similar to private placement purchase agreements customary for private placements of equity securities of similar size, in form and substance satisfactory to Dealer (in which case, the Calculation Agent shall make any adjustments to the terms of the Transaction that are necessary, in its commercially reasonable judgment, to compensate Dealer for any discount from the public market price of the Shares incurred on the sale of Hedge Shares in a private placement), or (iii) purchase the Hedge Shares from Dealer at the Relevant Price on such Exchange Business Days, and in the amounts, requested by Dealer.

 

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

 

(o)                                 Right to Extend.  Dealer may postpone or add, in whole or in part, any Valid Day or Valid Days during the Settlement Averaging Period or any other date of valuation, payment or delivery by Dealer, with respect to some or all of the Options hereunder, if Dealer reasonably and in good faith determines, based on the advice of counsel in the case of the immediately following clause (ii) that such action is reasonably necessary or appropriate (i) to preserve a commercially reasonable hedging or hedge unwind activity hereunder in light of existing liquidity conditions or (ii) to enable Dealer to effect transactions with respect to Shares in connection with a commercially reasonable hedging, hedge unwind or settlement activity hereunder in a manner that would, if Dealer were Issuer or an affiliated purchaser of Issuer, be in compliance with applicable legal, regulatory or self-regulatory organization requirements, or with related policies and procedures applicable to Dealer.

 

(p)                                 Status of Claims in Bankruptcy.  Dealer acknowledges and agrees that this Confirmation is not intended to convey to Dealer rights against Counterparty with respect to the Transaction that are senior to the claims of common stockholders of Counterparty in any United States bankruptcy proceedings of Counterparty; provided that nothing herein shall limit or shall be deemed to limit Dealer’s right to pursue remedies in the event of a breach by Counterparty of its obligations and agreements with respect to the Transaction; provided, further, that nothing herein shall limit or shall be deemed to limit Dealer’s rights in respect of any transactions other than the Transaction.

 

(q)                                 Securities Contract; Swap Agreement.  The parties hereto intend for (i) the Transaction to be a “securities contract” and a “swap agreement” as defined in the Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”), and the parties hereto to be entitled to the protections afforded by, among other Sections, Sections 362(b)(6), 362(b)(17), 546(e), 546(g), 555 and 560 of the Bankruptcy Code, (ii) a party’s right to liquidate the Transaction and to exercise any other remedies upon the occurrence of any Event of Default under the Agreement with respect

 

23

 

to the other party to constitute a “contractual right” as described in the Bankruptcy Code, and (iii) each payment and delivery of cash, securities or other property hereunder to constitute a “margin payment” or “settlement payment” and a “transfer” as defined in the Bankruptcy Code.

 

(r)                                    Notice of Certain Other Events. Counterparty covenants and agrees that:

 

(i)                                     promptly following the public announcement of the results of any election by the holders of Shares with respect to the consideration due upon consummation of any Merger Event, Counterparty shall give Dealer written notice of the types and amounts of consideration that holders of Shares have elected to receive upon consummation of such Merger Event (the date of such notification, the “Consideration Notification Date”); provided that in no event shall the Consideration Notification Date be later than the date on which such Merger Event is consummated; and

 

(ii)                                  promptly following any adjustment to the Convertible Notes in connection with any Potential Adjustment Event, Merger Event or Tender Offer, Counterparty shall give Dealer written notice of the details of such adjustment.

 

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

 

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

 

(u)                                 Early Unwind. In the event the sale of the “Option Securities” (as defined in the Purchase Agreement) is not consummated with the Initial Purchasers for any reason by 5:00 p.m. (New York City time) on the Premium Payment Date, or such later date as agreed upon by the parties (the Premium Payment Date or such later date, the “Early Unwind Date”), the Transaction shall automatically terminate (the “Early Unwind”) on the Early Unwind Date and (i) the Transaction and all of the respective rights and obligations of Dealer and Counterparty under the Transaction shall be cancelled and terminated and (ii) each party shall be released and discharged by the other party from and agrees not to make any claim against the other party with respect to any obligations or liabilities of the other party arising out of and to be performed as Hedging Positions in respect of this Transaction either prior to or after the Early Unwind Date.  Each of Dealer and Counterparty represents and acknowledges to the other that, upon an Early Unwind, all obligations with respect to the Transaction shall be deemed fully and finally discharged.

 

(v)                                 Payment by Counterparty. In the event that, following payment of the Premium, (i) an Early Termination Date occurs or is designated with respect to the Transaction as a result of a Termination Event or an Event of Default (other than an Event of Default arising under Section 

 

24

 

5(a)(ii) or 5(a)(iv) of the Agreement) and, as a result, Counterparty owes to Dealer an amount calculated under Section 6(e) of the Agreement, or (ii) Counterparty owes to Dealer, pursuant to Section 12.7 or Section 12.9 of the Equity Definitions, an amount calculated under Section 12.8 of the Equity Definitions, such amount shall be deemed to be zero.

 

(w)                               Designation of Dealer.  Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to or from Issuer, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to perform Dealer’s obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Counterparty to the extent of any such performance.

 

(x)                                 Tax Forms.  Counterparty shall provide to Dealer a valid U.S. Internal Revenue Service (“IRS”) Form W-9 on or before the date of execution of this Confirmation and will promptly tender an updated IRS Form W-9 or applicable IRS Form W-8 if the previously tendered IRS Form W-9 becomes incorrect as a result of a change in facts.  Dealer shall provide Counterparty a valid IRS Form W-9 or applicable IRS Form W-8 on or before the date of execution of this Confirmation and will promptly tender an updated IRS Form W-9 or applicable IRS Form W-8 if the previously tendered IRS Form W-9 or applicable IRS Form W-8  becomes incorrect as a result of a change in facts.

 

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

 

25

 

Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Confirmation and returning it to J.P. Morgan Securities LLC, 383 Madison Ave, New York, NY 10179, and by email to EDG_Notices@jpmorgan.com and EDG_NY_Corporate_Sales_Support@jpmorgan.com.

 

Very truly yours,

 

 

	
 
    	
J.P.   Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Yun Xie
    
	
 
    	
Authorized Signatory
    
	
 
    	
Name:
    	
Yun Xie
    

 

 

Accepted and confirmed
 as of the Trade Date:

 

Ironwood Pharmaceuticals, Inc.

 

 

	
By:
    	
/s/ Thomas Graney
    	
 
    
	
Authorized   Signatory
    	
 
    
	
Name:
    	
Thomas Graney, Chief   Financial Officer & Senior Vice President of Finance and Corporate   StrategyExhibit 10.2

 

Credit Suisse Capital LLC
 c/o Credit Suisse Securities (USA) LLC
 Eleven Madison Avenue
 New York, NY 10010-3629

 

	
 
    	
June 10, 2015
    

 

To:                             Ironwood Pharmaceuticals, Inc.
 301 Binney Street, Cambridge, Massachusetts, 02142
 Attention:  Chief Legal Officer

Telephone No.:  (617) 621-7722

 

Re:                             Base Call Option Transaction

 

The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the call option transaction entered into between Credit Suisse Capital LLC (“Dealer”), represented by Credit Suisse Securities (USA) LLC (“Agent”) as its agent, and Ironwood Pharmaceuticals, Inc. (“Counterparty”) as of the Trade Date specified below (the “Transaction”).  This letter agreement constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below.  This Confirmation shall replace any previous agreements with respect to the Transaction and serve as the final documentation for the Transaction.

 

The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc. (“ISDA”) are incorporated into this Confirmation.  In the event of any inconsistency between the Equity Definitions and this Confirmation, this Confirmation shall govern.  Certain defined terms used herein are based on terms that are defined in the Offering Memorandum dated June 9, 2015 (the “Offering Memorandum”) relating to the 2.25% Convertible Senior Notes due 2022 (as originally issued by Counterparty, the “Convertible Notes” and each USD 1,000 principal amount of Convertible Notes, a “Convertible Note”) issued by Counterparty in an aggregate initial principal amount of USD 300,000,000 (as increased by up to an aggregate principal amount of USD 45,000,000 if and to the extent that the Initial Purchasers (as defined herein) exercise their option to purchase additional Convertible Notes pursuant to the Purchase Agreement (as defined herein)) pursuant to an Indenture to be dated June 15, 2015 between Counterparty and U.S. Bank National Association, as trustee (the “Indenture”).  In the event of any inconsistency between the terms defined in the Offering Memorandum, the Indenture and this Confirmation, this Confirmation shall govern.  The parties acknowledge that this Confirmation is entered into on the date hereof with the understanding that (i) definitions set forth in the Indenture which are also defined herein by reference to the Indenture and (ii) sections of the Indenture that are referred to herein will conform to the descriptions thereof in the Offering Memorandum.  If any such definitions in the Indenture or any such sections of the Indenture differ from the descriptions thereof in the Offering Memorandum, the descriptions thereof in the Offering Memorandum will govern for purposes of this Confirmation.  The parties further acknowledge that the Indenture section numbers used herein are based on the draft of the Indenture last reviewed by Dealer as of the date of this Confirmation, and if any such section numbers are changed in the Indenture as executed, the parties will amend this Confirmation in good faith to preserve the intent of the parties.  Subject to the foregoing, references to the Indenture herein are references to the Indenture as in effect on the date hereof and on the date of its execution, respectively, and if the Indenture is amended or supplemented following such date (other than any amendment or supplement (x) pursuant to Section 10.01(h) of the Indenture that, as determined by the Calculation Agent, conforms the Indenture to the description of Convertible Notes in the Offering Memorandum or (y) pursuant to Section 4.07(a) of the Indenture, subject, in the case of this clause (y), to the second paragraph under “Method of Adjustment” in Section 3), any such amendment or supplement will be disregarded for purposes of this Confirmation unless the parties agree otherwise in writing.

 

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

 

1.                                      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 supplement, form a part of, and be subject to an agreement in the form of the 2002 ISDA Master Agreement (the “Agreement”) as if Dealer and Counterparty had executed an agreement in such form (but without any Schedule except for (i) the election of US

 

 

Dollars (“USD”) as the Termination Currency, (ii) the election of the laws of the State of New York as the governing law (without reference to choice of law doctrine), (iii) the election that following the payment of the Premium, the condition precedent in Section 2(a)(iii)(1) of the Agreement with respect to an Event of Default or Potential Event of Default (other than an Event of Default arising under Section 5(a)(ii) or 5(a)(iv) of the Agreement) shall not apply to a payment or delivery owing by Dealer to Counterparty, (iv) the election that the “Cross Default” provisions of Section 5(a)(vi) of the Agreement shall apply to Dealer with a “Threshold Amount” of 3% of Dealer’s ultimate parent’s shareholders’ equity (provided that (a) the phrase “, or becoming capable at such time of being declared,” shall be deleted from clause (1) of such Section 5(a)(vi) of the Agreement, (b) “Specified Indebtedness” shall have the meaning specified in Section 14 of the Agreement, except that such term shall not include obligations in respect of deposits received in the ordinary course of Dealer’s banking business and (c) the following sentence shall be added to the end of Section 5(a)(vi) of the Agreement: “Notwithstanding the foregoing, a default under subsection (2) hereof shall not constitute an Event of Default if (x) the default was caused solely by error or omission of an administrative or operational nature; (y) funds were available to enable the relevant party to make the payment when due; and (z) the payment is made within two Local Business Days of such party’s receipt of written notice of its failure to pay.”) and (v) the election of an executed guarantee of Credit Suisse (USA), Inc. (f/k/a Credit Suisse First Boston (USA), Inc.) (“Guarantor”) substantially in the form provided to Counterparty on or prior to the Trade Date as a Credit Support Document and the designation of Guarantor as Credit Support Provider in relation to Dealer (f/k/a Credit Suisse First Boston Capital LLC).  In the event of any inconsistency between provisions of the Agreement and this Confirmation, this Confirmation will prevail for the purpose of the Transaction to which this Confirmation relates.  The parties hereby agree that no transaction other than the Transaction to which this Confirmation relates shall be governed by the Agreement.  The parties acknowledge that the Transaction to which this Confirmation relates is not governed by, and shall not be treated as a transaction under, any other ISDA Master Agreement entered into between the parties from time to time. In the event of any inconsistency between this Confirmation and 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:

 

	
General Terms.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Trade Date:
    	
 
    	
June 10, 2015
    
	
 
    	
 
    	
 
    
	
Effective Date:
    	
 
    	
The third Exchange Business Day immediately prior to   the Premium Payment Date
    
	
 
    	
 
    	
 
    
	
Option Style:
    	
 
    	
“Modified American”, as described under “Procedures   for Exercise” below
    
	
 
    	
 
    	
 
    
	
Option Type:
    	
 
    	
Call
    
	
 
    	
 
    	
 
    
	
Buyer:
    	
 
    	
Counterparty
    
	
 
    	
 
    	
 
    
	
Seller:
    	
 
    	
Dealer
    
	
 
    	
 
    	
 
    
	
Shares:
    	
 
    	
The common stock of Counterparty, par value USD   0.001 per Share (Exchange symbol “IRWD”).
    
	
 
    	
 
    	
 
    
	
Number of Options:
    	
 
    	
300,000. For the avoidance of doubt, the Number of   Options shall be reduced by any Options exercised by Counterparty. In no   event will the Number of Options be less than zero.
    
	
 
    	
 
    	
 
    
	
Applicable Percentage:
    	
 
    	
60.0%
    
	
 
    	
 
    	
 
    
	
Option Entitlement:
    	
 
    	
A number equal to the product of the Applicable   Percentage and 60.3209.
    
	
 
    	
 
    	
 
    
	
Strike Price:
    	
 
    	
USD 16.5780
    

 

2

 

	
Premium:
    	
 
    	
USD 49,284,000.00
    
	
 
    	
 
    	
 
    
	
Premium Payment Date:
    	
 
    	
June 15, 2015
    
	
 
    	
 
    	
 
    
	
Exchange:
    	
 
    	
The NASDAQ Global Select Market
    
	
 
    	
 
    	
 
    
	
Related Exchange(s):
    	
 
    	
All Exchanges
    
	
 
    	
 
    	
 
    
	
Excluded Provisions:
    	
 
    	
Section 4.05(h) and Section 4.04 of   the Indenture.
    
	
 
    	
 
    	
 
    
	
Procedures for Exercise.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Conversion Date:
    	
 
    	
With respect to any conversion of a Convertible   Note, the date on which the Holder (as such term is defined in the Indenture)   of such Convertible Note satisfies all of the requirements for conversion   thereof as set forth in Section 4.02(b) of the Indenture; provided that if Counterparty has not delivered to Dealer   a related Notice of Exercise, then in no event shall a Conversion Date be   deemed to occur hereunder (and no Option shall be exercised or deemed to be   exercised hereunder) with respect to any surrender of a Convertible Note for   conversion in respect of which Counterparty has elected to designate a   financial institution for exchange in lieu of conversion of such Convertible   Note pursuant to Section 4.11 of the Indenture.
    
	
 
    	
 
    	
 
    
	
Expiration Time:
    	
 
    	
The Valuation Time
    
	
 
    	
 
    	
 
    
	
Expiration Date:
    	
 
    	
June 15, 2022, subject to earlier exercise.
    
	
 
    	
 
    	
 
    
	
Multiple Exercise:
    	
 
    	
Applicable, as described under “Automatic Exercise”   below.
    
	
 
    	
 
    	
 
    
	
Automatic Exercise:
    	
 
    	
Notwithstanding Section 3.4 of the Equity   Definitions, on each Conversion Date in respect of which a Notice of   Conversion that is effective as to Counterparty has been delivered by the   relevant converting Holder, a number of Options equal to the number of Convertible   Notes in denominations of USD 1,000 as to which such Conversion Date has   occurred shall be deemed to be automatically exercised; provided that   such Options shall be exercised or deemed exercised only if Counterparty has   provided a Notice of Exercise to Dealer in accordance with “Notice of   Exercise” below.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Notwithstanding the foregoing, in no event shall the   number of Options that are exercised or deemed exercised hereunder exceed the   Number of Options.
    
	
 
    	
 
    	
 
    
	
Notice of Exercise:
    	
 
    	
Notwithstanding anything to the contrary in the   Equity Definitions or under “Automatic Exercise” above, in order to exercise   any Options, Counterparty must notify Dealer in writing, including by email,   before 5:00 p.m. (New York City time) on the Scheduled Valid Day   immediately preceding the scheduled first day of the Settlement Averaging   Period for the Options being exercised of (i) the number of such Options   (including, if applicable, whether all or any portion of such exercise 
    

 

3

 

	
 
    	
 
    	
relates to the conversion of the Convertible Notes   in connection with which holders thereof are entitled to receive additional   shares and/or cash pursuant to the adjustment of the Conversion Rate set   forth in Section 4.04 of the Indenture), (ii) the scheduled first   day of the Settlement Averaging Period and the scheduled Settlement Date,   (iii) the Relevant Settlement Method for such Options, and (iv) if   the settlement method for the related Convertible Notes is not Settlement in   Shares or Settlement in Cash (each as defined below), the fixed amount of   cash per Convertible Note that Counterparty has elected to deliver to Holders   (as such term is defined in the Indenture) of the related Convertible Notes   (the “Specified Cash Amount”); provided that in respect of any Options relating to   Convertible Notes with a Conversion Date occurring on or after the 65th Scheduled Valid Day preceding June 15,   2022, (A) such notice may be given on or prior to the second Scheduled   Valid Day immediately preceding the Expiration Date and need only specify the   information required in clause (i) above, and (B) if the Relevant   Settlement Method for such Options is (x) Net Share Settlement and the   Specified Cash Amount is not USD 1,000, (y) Cash Settlement or   (z) Combination Settlement, Dealer shall have received a separate notice   (the “Notice of Final Settlement Method”)   in respect of all such Convertible Notes before 5:00 p.m. (New York City   time) on or prior to December 15, 2021 specifying the information   required in clauses (iii) and (iv) above. Counterparty acknowledges   its responsibilities under applicable securities laws, and in particular   Section 9 and Section 10(b) of the Exchange Act (as defined   below) and the rules and regulations thereunder, in respect of any   election of a settlement method with respect to the Convertible Notes.
    
	
 
    	
 
    	
 
    
	
Valuation Time:
    	
 
    	
At the close of trading of the regular trading   session on the Exchange; provided that   if the principal trading session is extended, the Calculation Agent shall   determine the Valuation Time in good faith and in its commercially reasonable   discretion.
    
	
 
    	
 
    	
 
    
	
Market Disruption   Event:
    	
 
    	
Section 6.3(a) of the Equity Definitions   is hereby replaced in its entirety by the following:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
“‘Market Disruption Event’ means, in respect of a   Share, (i) a failure by the primary United States national or regional   securities exchange or market on which the Shares are listed or admitted for   trading to open for trading during its regular trading session or   (ii) the occurrence or existence prior to 1:00 p.m. (New York City   time) on any Scheduled Valid Day for the Shares for more than one half-hour   period in the aggregate during regular trading hours of any suspension or   limitation imposed on trading (by reason of movements in price exceeding   limits permitted by the relevant stock exchange or otherwise) in the Shares   or in any options contracts or futures contracts relating to the Shares.”
    

 

4

 

	
Settlement Terms.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Settlement Method:
    	
 
    	
For any Option, Net Share Settlement; provided that if the Relevant Settlement Method set forth   below for such Option is not Net Share Settlement, then the Settlement Method   for such Option shall be such Relevant Settlement Method, but only if   Counterparty shall have notified Dealer of the Relevant Settlement Method in   the Notice of Exercise or Notice of Final Settlement Method, as applicable,   for such Option.
    
	
 
    	
 
    	
 
    
	
Relevant Settlement   Method:
    	
 
    	
In respect of any Option:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i) if Counterparty has elected to settle its   conversion obligations in respect of the related Convertible Note   (A) entirely in Shares pursuant to Section 4.02(a)(ii)(A) of   the Indenture (together with cash in lieu of fractional Shares) (such   settlement method, “Settlement in Shares”),   (B) in a combination of cash and Shares pursuant to Section 4.02(a)(ii)(C)   of the Indenture with a Specified Cash Amount less than USD 1,000 (such   settlement method, “Low Cash Combination   Settlement”) or (C) in a combination of cash and Shares   pursuant to Section 4.02(a)(ii)(C) of the Indenture with a   Specified Cash Amount equal to USD 1,000, then, in each case, the   Relevant Settlement Method for such Option shall be Net Share Settlement;
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(ii) if Counterparty has elected to settle its   conversion obligations in respect of the related Convertible Note in a   combination of cash and Shares pursuant to   Section 4.02(a)(ii)(C) of the Indenture with a Specified Cash   Amount greater than USD 1,000, then the Relevant Settlement Method for such   Option shall be Combination Settlement; and
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(iii) if Counterparty has elected to settle its   conversion obligations in respect of the related Convertible Note entirely in   cash pursuant to Section 4.02(a)(ii)(B) of the Indenture (such   settlement method, “Settlement in Cash”),   then the Relevant Settlement Method for such Option shall be Cash Settlement.
    
	
 
    	
 
    	
 
    
	
Net Share Settlement:
    	
 
    	
If Net Share Settlement is applicable to any Option   exercised or deemed exercised hereunder, Dealer will deliver to Counterparty,   on the relevant Settlement Date for each such Option, a number of Shares (the   “Net Share Settlement Amount”) equal   to the sum, for each Valid Day during the Settlement Averaging Period for   each such Option, of (i) (a) the Daily Option Value for such Valid   Day, divided by (b) the Relevant Price   on such Valid Day, divided by   (ii) the number of Valid Days in the Settlement Averaging Period; provided that in no event shall the Net Share Settlement   Amount for any Option exceed a number of Shares equal to the Applicable Limit   for such Option divided by the Applicable Limit   Price on the Settlement Date for such Option.
    

 

5

 

	
 
    	
 
    	
Dealer will pay cash in lieu of delivering any   fractional Shares to be delivered with respect to any Net Share Settlement   Share Amount valued at the Relevant Price for the last Valid Day of the   Settlement Averaging Period.
    
	
 
    	
 
    	
 
    
	
Combination Settlement:
    	
 
    	
If Combination Settlement is applicable to any   Option exercised or deemed exercised hereunder, Dealer will pay or deliver,   as the case may be, to Counterparty, on the relevant Settlement Date for each   such Option:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)
    	
cash (the “Combination Settlement   Cash Amount”) equal to the sum, for each Valid Day during the   Settlement Averaging Period for such Option, of (A) an amount (the “Daily Combination Settlement Cash Amount”) equal to the   lesser of (1) the product of (x) the Applicable Percentage and   (y) the Specified Cash Amount minus USD   1,000 and (2) the Daily Option Value, divided by   (B) the number of Valid Days in the Settlement Averaging Period; provided that if the calculation in clause (A) above   results in zero or a negative number for any Valid Day, the Daily Combination   Settlement Cash Amount for such Valid Day shall be deemed to be zero; and
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
(ii)
    	
Shares (the “Combination Settlement   Share Amount”) equal to the sum, for each Valid Day during the   Settlement Averaging Period for such Option, of a number of Shares for such   Valid Day (the “Daily Combination   Settlement Share Amount”) equal to (A) (1) the Daily   Option Value on such Valid Day minus the   Daily Combination Settlement Cash Amount for such Valid Day, divided by (2) the Relevant Price on such Valid Day, divided by (B) the number of Valid Days in the   Settlement Averaging Period; provided that   if the calculation in sub-clause (A)(1) above results in zero or a   negative number for any Valid Day, the Daily Combination Settlement Share   Amount for such Valid Day shall be deemed to be zero;
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
provided that in no event shall   the sum of (x) the Combination Settlement Cash Amount for any Option and   (y) the Combination Settlement Share Amount for such Option multiplied by the Applicable Limit Price on the Settlement   Date for such Option, exceed the Applicable Limit for such Option.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Dealer will pay cash in lieu of delivering any   fractional Shares to be delivered with respect to any Combination Settlement   Share Amount valued at the Relevant Price for the last Valid Day of the   Settlement Averaging Period.
    
	
 
    	
 
    	
 
    
	
Cash Settlement:
    	
 
    	
If Cash Settlement is applicable to any Option   exercised or deemed exercised hereunder, in lieu of Section 8.1 of the   Equity Definitions, Dealer will pay to Counterparty, on the relevant   Settlement Date for each such Option, an amount of cash (the “Cash Settlement Amount”) equal 
    

 

6

 

	
 
    	
 
    	
to the sum, for each Valid Day during the Settlement   Averaging Period for such Option, of (i) the Daily Option Value for such   Valid Day, divided by (ii) the number   of Valid Days in the Settlement Averaging Period.
    
	
 
    	
 
    	
 
    
	
Daily Option Value:
    	
 
    	
For any Valid Day, an amount equal to (i) the   Option Entitlement on such Valid Day, multiplied by   (ii) the Relevant Price on such Valid Day less   the Strike Price on such Valid Day; provided that   if the calculation contained in clause (ii) above results in a negative   number, the Daily Option Value for such Valid Day shall be deemed to be zero.   In no event will the Daily Option Value be less than zero.
    
	
 
    	
 
    	
 
    
	
Applicable Limit:
    	
 
    	
For any Option, an amount of cash equal to the   Applicable Percentage multiplied by the   excess of (i) the aggregate of (A) the amount of cash, if any, paid   to the Holder of the related Convertible Note upon conversion of such   Convertible Note as determined pursuant to Section 4.02(a)(ii) of   the Indenture and (B) the number of Shares, if any, delivered to the   Holder of the related Convertible Note upon conversion of such Convertible   Note as determined pursuant to Section 4.02(a)(ii) of the Indenture   multiplied by the Applicable Limit   Price on the Settlement Date for such Option, over (ii) USD 1,000.
    
	
 
    	
 
    	
 
    
	
Applicable Limit Price:
    	
 
    	
On any day, the opening price as displayed under the   heading “Op” on Bloomberg page IRWD <equity> (or any successor   thereto).
    
	
 
    	
 
    	
 
    
	
Valid Day:
    	
 
    	
A day on which (i) there is no Market   Disruption Event and (ii) trading in the Shares generally occurs on the   Exchange or, if the Shares are not then listed on the Exchange, on the   principal other United States national or regional securities exchange on   which the Shares are then listed or, if the Shares are not then listed on a   United States national or regional securities exchange, on the principal   other market on which the Shares are then listed or admitted for trading. If   the Shares are not so listed or admitted for trading, “Valid Day” means a   Business Day.
    
	
 
    	
 
    	
 
    
	
Scheduled Valid Day:
    	
 
    	
A day that is scheduled to be a Valid Day on the   principal United States national or regional securities exchange or market on   which the Shares are listed or admitted for trading. If the Shares are not so   listed or admitted for trading, “Scheduled Valid Day” means a Business Day.
    
	
 
    	
 
    	
 
    
	
Business Day:
    	
 
    	
Any day other than a Saturday, a Sunday or a day on   which the Federal Reserve Bank of New York is authorized or required by law   or executive order to close or be closed.
    
	
 
    	
 
    	
 
    
	
Relevant Price:
    	
 
    	
On any Valid Day, the per Share volume-weighted   average price as displayed under the heading “Bloomberg VWAP” on Bloomberg   page IRWD <equity> AQR (or any successor thereto) (“Bloomberg   VWAP”) in respect of the period from the scheduled opening time of the Exchange   to the Scheduled Closing Time of the Exchange 
    

 

7

 

	
 
    	
 
    	
on such Valid Day (or if Bloomberg VWAP is   unavailable at such time, the market value of one Share on such Valid Day, as   determined by the Calculation Agent using, if practicable, a volume-weighted   average method). The Relevant Price will be determined without regard to   after-hours trading or any other trading outside of the regular trading   session trading hours.
    
	
 
    	
 
    	
 
    
	
Settlement Averaging   Period:
    	
 
    	
For any Option and regardless of the Settlement   Method applicable to such Option:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)
    	
if the related Conversion Date occurs prior to the   65th Scheduled Valid Day immediately preceding   the Expiration Date, the 60 consecutive Valid Day period commencing on, and   including, the third Valid Day immediately following such Conversion Date; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
(ii)
    	
if the related Conversion Date occurs on or   following the 65th Scheduled Valid Day immediately preceding the Expiration   Date, the 60 consecutive Valid Days commencing on, and including, the 62nd Scheduled Valid Day immediately prior to the   Expiration Date.
    
	
 
    	
 
    	
 
    
	
Settlement Date:
    	
 
    	
For any Option, the third Business Day immediately   following the final Valid Day of the Settlement Averaging Period for such   Option.
    
	
 
    	
 
    	
 
    
	
Settlement Currency:
    	
 
    	
USD
    
	
 
    	
 
    	
 
    
	
Other Applicable   Provisions:
    	
 
    	
The provisions of Sections 9.1(c), 9.8, 9.9 and 9.11   of the Equity Definitions will be applicable, except that all references in   such provisions to “Physically-settled” shall be read as references to “Share   Settled”. “Share Settled” in relation to any Option means that Net Share   Settlement or Combination Settlement is applicable to that Option.
    
	
 
    	
 
    	
 
    
	
Representation and   Agreement:
    	
 
    	
Notwithstanding anything to the contrary in the   Equity Definitions (including, but not limited to, Section 9.11   thereof), the parties acknowledge that (i) any Shares delivered to   Counterparty may be, upon delivery, subject to restrictions and limitations   arising from Counterparty’s status as issuer of the Shares under applicable   securities laws, (ii) Dealer may deliver any Shares required to be   delivered hereunder in certificated form in lieu of delivery through the   Clearance System and (iii) any Shares delivered to Counterparty may be   “restricted securities” (as defined in Rule 144 under the Securities Act   of 1933, as amended (the “Securities Act”)).
    
	
 
    	
 
    	
 
    
	
3.                                      Additional Terms applicable to the Transaction.
    
	
 
    	
 
    	
 
    
	
Adjustments applicable   to the Transaction:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Potential Adjustment   Events:
    	
 
    	
Notwithstanding Section 11.2(e) of the   Equity Definitions, a “Potential Adjustment Event” means an occurrence of any   event or condition, as set forth in any 
    

 

8

 

	
 
    	
 
    	
Dilution Adjustment Provision, that would result in   an adjustment under the Indenture to the “Conversion Rate” or the composition   of a “unit of Reference Property” or to any “Last Reported Sale Price” , “Daily   VWAP,” “Daily Conversion Value” or “Daily Settlement Amount” (each as defined   in the Indenture). For the avoidance of doubt, Dealer shall not have any   delivery or payment obligation hereunder in respect of any “Distributed   Property” delivered by Counterparty pursuant to the fourth sentence of   Section 4.05(c) of the Indenture or any payment obligation in   respect of any cash paid by Counterparty pursuant to the fourth sentence of   Section 4.05(d) of the Indenture (collectively, the “Conversion Rate Adjustment Fallback Provisions”), and no   adjustment shall be made to the terms of the Transaction, on account of   (x) any event or condition described in the Conversion Rate Adjustment   Fallback Provisions or (y) any other transaction in which holders of the   Convertible Notes are entitled to participate, in each case, in lieu of an   adjustment under the Indenture of the type referred to in the immediately   preceding sentence (including, without limitation, pursuant to the Conversion   Rate Adjustment Fallback Provisions).
    
	
 
    	
 
    	
 
    
	
Method of Adjustment:
    	
 
    	
Calculation Agent Adjustment, which means that,   notwithstanding Section 11.2(c) of the Equity Definitions, upon any   Potential Adjustment Event, the Calculation Agent shall make an adjustment   corresponding to the adjustment to be made pursuant to the Indenture to any   one or more of the Strike Price, Number of Options and/or Option Entitlement.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Notwithstanding the foregoing and “Consequences of   Merger Events / Tender Offers” below, if the Calculation Agent in good faith   disagrees with any adjustment to the Convertible Notes that involves an exercise   of discretion by Counterparty or its board of directors (including, without   limitation, pursuant to Section 4.06 of the Indenture,   Section 4.07(a) of the Indenture or any supplemental indenture   entered into thereunder or in connection with any proportional adjustment or   the determination of the fair value of any securities, property, rights or   other assets), then in each such case, the Calculation Agent will determine   the adjustment to be made to any one or more of the Strike Price, Number of   Options and/or Option Entitlement in a commercially reasonable manner, after   consultation with Counterparty; provided,   that, notwithstanding the foregoing, if any Potential Adjustment Event occurs   during the Settlement Averaging Period but no adjustment was made to any   Convertible Note under the Indenture because the relevant Holder (as such   term is defined in the Indenture) was deemed to be a record owner of the   underlying Shares on the related Conversion Date, then the Calculation Agent   shall make an adjustment, as determined by it in a commercially reasonable   manner after consultation with 
    

 

9

 

	
 
    	
 
    	
Counterparty, to the terms hereof in order to   account for such Potential Adjustment Event.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
For the avoidance of doubt, whenever the Calculation   Agent, the Hedging Party, the Determining Party, or Dealer is called upon to   make an adjustment pursuant to the terms of this Transaction to take into   account the effect of an event, the Calculation Agent, the Hedging Party, the   Determining Party of Dealer, as applicable, shall make such adjustment by   reference to the effect of such event on the Hedging Party, assuming that the   Hedging Party maintains a commercially reasonable hedge position.
    
	
 
    	
 
    	
 
    
	
Dilution Adjustment   Provisions:
    	
 
    	
Sections 4.05(a), (b), (c), (d) and   (e) and Section 4.06 of the Indenture.
    
	
 
    	
 
    	
 
    
	
Extraordinary   Events applicable to the Transaction:
    
	
 
    	
 
    	
 
    
	
Merger Events:
    	
 
    	
Applicable; provided that   notwithstanding Section 12.1(b) of the Equity Definitions, a   “Merger Event” means the occurrence of any event or condition set forth in   the definition of “Merger Event” in Section 4.07(a) of the   Indenture.
    
	
 
    	
 
    	
 
    
	
Tender Offers:
    	
 
    	
Applicable; provided that   notwithstanding Section 12.1(d) of the Equity Definitions, a   “Tender Offer” means the occurrence of any event or condition set forth in   Section 4.05(e) of the Indenture.
    
	
 
    	
 
    	
 
    
	
Consequences of Merger   Events / Tender Offers:
    	
 
    	
Notwithstanding Section 12.2 and   Section 12.3 of the Equity Definitions, upon the occurrence of a Merger   Event or a Tender Offer that is required under the terms of the Indenture to   result in an adjustment to the terms of the Convertible Notes, the   Calculation Agent shall make an adjustment corresponding to the adjustment to   be made pursuant to the Indenture to any one or more of the nature of the   Shares (in the case of a Merger Event), Strike Price, Number of Options,   Option Entitlement, the definitions of “Exchange”, “Relevant Price”,   “Settlement Averaging Period”, “Valid Day”, “Scheduled Valid Day”, “Market   Disruption Event”, and/or the number of Share thresholds in   Section 9(b)(i) and 9(b)(ii) of this Confirmation, subject to   the second paragraph under “Method of Adjustment”; provided, however, that such adjustment shall be made without   regard to any adjustment to the Conversion Rate pursuant to any Excluded   Provision; provided further that if, with   respect to a Merger Event or a Tender Offer, (i) the consideration for   the Shares includes (or, at the option of a holder of Shares, may include)   shares of an entity or person that is not a corporation or is not organized   under the laws of the United States, any State thereof or the District of   Columbia or (ii) the Counterparty to the Transaction following such   Merger Event or Tender Offer will not be a corporation, then, in either case,   Cancellation and
    

 

10

 

	
 
    	
 
    	
Payment (Calculation Agent Determination) may apply   at Dealer’s sole election.
    
	
 
    	
 
    	
 
    
	
Nationalization, Insolvency   or Delisting:
    	
 
    	
Cancellation and Payment (Calculation Agent   Determination); provided that, in addition to   the provisions of Section 12.6(a)(iii) of the Equity Definitions,   it will also constitute a Delisting if the Exchange is located in the United   States and the Shares are not immediately re-listed, re-traded or re-quoted   on any of the New York Stock Exchange, The NASDAQ Global Select Market or The   NASDAQ Global Market (or their respective successors); if the Shares are   immediately re-listed, re-traded or re-quoted on any of the New York Stock   Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or   their respective successors), such exchange or quotation system shall   thereafter be deemed to be the Exchange.
    
	
 
    	
 
    	
 
    
	
Additional Disruption   Events:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Change in Law:
    	
 
    	
Applicable; provided that   Section 12.9(a)(ii) of the Equity Definitions is hereby amended by   (i) replacing the word “Shares” with the phrase “Hedge Positions” in   clause (X) thereof and (ii) inserting the parenthetical   “(including, for the avoidance of doubt and without limitation, adoption or   promulgation of new regulations authorized or mandated by existing statute)”   at the end of clause (A) thereof.
    
	
 
    	
 
    	
 
    
	
Failure to Deliver:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Hedging Disruption:
    	
 
    	
Applicable; provided   that:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(i)
    	
Section 12.9(a)(v) of the Equity   Definitions is hereby amended by (a) inserting the following words at   the end of clause (A) thereof: “in the manner contemplated by the   Hedging Party on the Trade Date” and (b) inserting the following   language at the end of such Section:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
“, provided that any such inability that occurs   solely due to the deterioration of the creditworthiness of the Hedging Party   shall not be deemed a Hedging Disruption. For the avoidance of doubt, the   term “equity price risk” shall be deemed to include, but shall not be limited   to, stock price and volatility risk. And, for the further avoidance of doubt,   any such transactions or assets referred to in phrases (A) or   (B) above must be available on commercially reasonable pricing terms.”;   and
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
(ii)
    	
Section 12.9(b)(iii) of the Equity   Definitions is hereby amended by inserting in the third line thereof, after   the words “to terminate the Transaction”, the words “or a portion of the   Transaction affected by such Hedging Disruption”.
    
	
 
    	
 
    	
 
    
	
Increased Cost of   Hedging:
    	
 
    	
Applicable
    

 

11

 

	
Hedging Party:
    	
 
    	
For all applicable Additional Disruption Events,   Dealer; provided, however, that all   calculations, adjustments, specifications, choices and determinations by   Dealer acting in its capacity as the Hedging Party shall be made in good   faith and in a commercially reasonable manner and assuming that Dealer   maintains a commercially reasonable hedge position (it being understood that   Hedging Party will be subject to the requirements of the second paragraph   under “Calculation Agent” below).
    
	
 
    	
 
    	
 
    
	
Determining Party:
    	
 
    	
For all applicable Extraordinary Events, Dealer; provided, however, that all calculations, adjustments, specifications,   choices and determinations by Dealer acting in its capacity as the   Determining Party shall be made in good faith and in a commercially   reasonable manner and assuming that Dealer maintains a commercially   reasonable hedge position (it being understood that Determining Party will be   subject to the requirements of the second paragraph under “Calculation Agent”   below).
    
	
 
    	
 
    	
 
    
	
Non-Reliance:
    	
 
    	
Applicable.
    
	
 
    	
 
    	
 
    
	
Agreements and   Acknowledgments Regarding Hedging Activities:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Additional Acknowledgments:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
4.                                      Calculation Agent.
    	
 
    	
Dealer; provided, however,   that all calculations, adjustments, specifications, choices and   determinations by the Calculation Agent shall be made in good faith and in a   commercially reasonable manner. The parties agree that they will work   reasonably to resolve any disputes as set forth in the immediately following   paragraph.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
In the case of any calculation, adjustment or   determination by the Hedging Party, the Determining Party or the Calculation   Agent, following any written request from Counterparty, the Hedging Party,   the Determining Party or the Calculation Agent, as the case may be, shall   promptly provide to Counterparty a written explanation describing in   reasonable detail the basis for such calculation, adjustment or determination   (including any quotation, market data or information from internal or   external sources used in making such calculation, adjustment or   determination, but without disclosing any proprietary models or other   information that may be proprietary or confidential). If Counterparty   promptly disputes such calculation, adjustment or determination in writing   and provides reasonable detail as to the basis for such dispute, the   Calculation Agent shall, to the extent permitted by applicable law, discuss   the dispute with Counterparty in good faith, it being understood that   notwithstanding such discussion, the Calculation Agent’s calculation,   adjustment or determination shall apply to the Transaction and be binding on   the parties provided that such calculation, adjustment or determination was   made in good faith and in a commercially reasonable manner.
    

 

12

 

5.                                      Account Details.

 

(a)                                 Account for payments to Counterparty:

 

Bank: U.S. Bank N.A.
 Bank Address: 101 E.5th Street, St. Paul, MN, 55101-1860

Routing #: 091-000-022 
 Acct No.: 173103198383
 Beneficiary: U.S. Bank Trust Services
 Beneficiary Address: 101 E.5th Street, St. Paul, MN, 55101-1860
 Int’l Wires/SWIFT: USBKUS44IMT

 

Account for delivery of Shares to Counterparty:

 

To be provided by Counterparty

 

(b)                                 Account for payments to Dealer:

 

Bank of New York

ABA: 021-000-018

SWIFT: IRVTUS3N

Account Name: Credit Suisse Capital LLC

Account No: 8901148822

BIC: CSFBUS3L

 

Account for delivery of Shares from Dealer:

To be provided by Dealer

 

6.                                      Offices.

 

(a)                                 The Office of Counterparty for the Transaction is:  Inapplicable, Counterparty is not a Multibranch Party.

 

(b)                                 The Office of Dealer for the Transaction is: New York

 

7.                                      Notices.

 

(a)                                 Address for notices or communications to Counterparty:

 

Ironwood Pharmaceuticals, Inc. 
 301 Binney Street, Cambridge, Massachusetts, 02142
 Attention:  Chief Legal Officer
 Telephone No.:  (617) 621-7722

 

With a copy to:

 

Ropes & Gray LLP
 Attention: Isabel Dische, Esq. and Thomas Holden, Esq.
 Telephone No: (212) 596-9000
 Facsimile No: (212) 596-9090
 Email: isabel.dische@ropesgray.com & thomas.holden@ropesgray.com

 

(b)                                 Address for notices or communications to Dealer:

 

As provided under Section 9(g)(v)

 

13

 

8.                                      Representations and Warranties of Counterparty.

 

Each of the representations and warranties of Counterparty set forth in Section 3 of the Purchase Agreement (the “Purchase Agreement”), dated as of June 9, 2015, between Counterparty and J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC, as representatives of the Initial Purchasers party thereto (the “Initial Purchasers”), are true and correct and are hereby deemed to be repeated to Dealer as if set forth herein.  Counterparty hereby further represents and warrants to Dealer on the date hereof and on and as of the Premium Payment Date that:

 

(a)                                 Counterparty has all necessary corporate power and authority to execute, deliver and perform its obligations in respect of the 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 valid and binding obligation, enforceable against Counterparty in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except that rights to indemnification and contribution hereunder may be limited by federal or state securities laws or public policy relating thereto.

 

(b)                                 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 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.

 

(c)                                  No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required in connection with the execution, delivery or performance by Counterparty of this Confirmation, except such as have been obtained or made and such as may be required under the Securities Act of 1933, as amended (the “Securities Act”) or state securities laws.

 

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

 

(e)                                  Counterparty is an “eligible contract participant” (as such term is defined in Section 1a(18) of the Commodity Exchange Act, as amended, other than a person that is an eligible contract participant under Section 1a(18)(C) of the Commodity Exchange Act).

 

(f)                                   Each of it and its affiliates is not, on the date hereof, in possession of any material non-public information with respect to Counterparty or the Shares.

 

(g)                                  No state or local (including any non-U.S. jurisdiction’s) law, rule, regulation or regulatory order applicable to the Shares would give rise to any reporting, consent, registration or other requirement (including without limitation a requirement to obtain prior approval from any person or entity) as a result of Dealer or its affiliates owning or holding (however defined) Shares.

 

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

 

9.                                      Other Provisions.

 

(a)                                 [Reserved]

 

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(b)                                 Repurchase Notices.  Counterparty shall, on any day on which Counterparty effects any repurchase of Shares, promptly give Dealer a written notice of such repurchase (a “Repurchase Notice”) on such day if following such repurchase, the number of outstanding Shares as determined on such day is (i) less than 119,865,515 (in the case of the first such notice) or (ii) thereafter more than 5,489,841 less than the number of Shares included in the immediately preceding Repurchase Notice.  Counterparty agrees to indemnify and hold harmless Dealer and its affiliates and their respective officers, directors, employees, affiliates, advisors, agents and controlling persons (each, an “Indemnified Person”) from and against any and all losses (including losses relating to Dealer’s hedging activities as a consequence of becoming, or of the risk of becoming, a Section 16 “insider”, including without limitation, any forbearance from hedging activities or cessation of hedging activities and any losses in connection therewith with respect to the Transaction), claims, damages, judgments, liabilities and reasonable expenses (including reasonable attorney’s fees), joint or several, which an Indemnified Person may become subject to, as a result of Counterparty’s failure to provide Dealer with a Repurchase Notice on the day and in the manner specified in this paragraph, and to reimburse, within 30 days, upon written request, each of such Indemnified Persons for any reasonable legal or other expenses incurred in connection with investigating, preparing for, providing testimony or other evidence in connection with or defending any of the foregoing.  If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against the Indemnified Person as a result of Counterparty’s failure to provide Dealer with a Repurchase Notice in accordance with this paragraph, such Indemnified Person shall promptly notify Counterparty in writing, and Counterparty, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others Counterparty may designate in such proceeding and shall pay the commercially reasonable fees and expenses of such counsel related to such proceeding.  Counterparty shall not be liable for any settlement of any proceeding contemplated by this paragraph that is effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, Counterparty agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment.  Counterparty shall not, without the prior written consent of the Indemnified Person (such consent not to be unreasonably withheld, conditioned or delayed), effect any settlement of any pending or threatened proceeding contemplated by this paragraph that is in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such proceeding on terms reasonably satisfactory to such Indemnified Person.  If the indemnification provided for in this paragraph is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then Counterparty hereunder, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities.  The remedies provided for in this paragraph (b) are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Person at law or in equity.  The indemnity and contribution agreements contained in this paragraph shall remain operative and in full force and effect regardless of the termination of the Transaction.

 

(c)                                  Regulation M.  Counterparty is not on the Trade Date engaged in a distribution, as such term is used in Regulation M under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of any securities of Counterparty, other than a distribution meeting the requirements of the exception set forth in Rules 101(b)(10) and 102(b)(7) of Regulation M.  Counterparty shall not, until the second Scheduled Trading Day immediately following the Effective Date, engage in any such distribution.

 

(d)                                 No Manipulation.  Counterparty is not entering into the Transaction to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for the Shares) or otherwise in violation of the Exchange Act.

 

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(e)                                  Transfer or Assignment.

 

(i)                                     Counterparty shall have the right to transfer or assign its rights and obligations hereunder with respect to all, but not less than all, of the Options hereunder (such Options, the “Transfer Options”); provided that such transfer or assignment shall be subject to reasonable conditions that Dealer may impose, including but not limited, to the following conditions:

 

(A)                               With respect to any Transfer Options, Counterparty shall not be released from its notice and indemnification obligations pursuant to Section 9(b) or any obligations under Section 9(o) or 9(t) of this Confirmation;

 

(B)                               Any Transfer Options shall only be transferred or assigned to a third party that is a United States person (as defined in the Internal Revenue Code of 1986, as amended);

 

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

 

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

 

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

 

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

 

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

 

(ii)                                  Dealer may, without Counterparty’s consent, transfer or assign all or any part of its rights or obligations under the Transaction (A) to any affiliate of Dealer (1) that has a rating for its long term, unsecured and unsubordinated indebtedness that is equal to or better than Dealer’s credit rating at the time of such transfer or assignment, or (2) whose obligations hereunder will be guaranteed, pursuant to the terms of a customary guarantee in a form used by Dealer generally for similar transactions, by Dealer or Guarantor, or (B) to any other third party with a rating for its long term, unsecured and unsubordinated indebtedness equal to or better than the lesser of (1) the credit rating of Dealer at the time of the transfer and (2) A- by Standard and Poor’s Rating Group, Inc. or its successor (“S&P”), or A3 by Moody’s Investor Service, Inc. (“Moody’s”) or, if either S&P or Moody’s ceases to rate such debt, at least an equivalent rating or better by a substitute rating agency mutually agreed by Counterparty and Dealer.  If at any time at which (A) the Section 16 Percentage exceeds 7.5%, (B) the Option Equity Percentage exceeds 14.5%, or (C) the Share Amount exceeds the Applicable Share Limit (if any applies) (any such condition described in clauses (A), (B) or (C), an “Excess Ownership Position”), 

 

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Dealer is unable after using its good faith and commercially reasonable efforts to effect a transfer or assignment of Options to a third party on pricing terms reasonably acceptable to Dealer and within a time period reasonably acceptable to Dealer such that no Excess Ownership Position exists, then Dealer may designate any Exchange Business Day as an Early Termination Date with respect to a portion of the Transaction (the “Terminated Portion”), such that following such partial termination no Excess Ownership Position exists.  In the event that Dealer so designates an Early Termination Date with respect to a portion of the Transaction, a payment shall be made pursuant to Section 6 of the Agreement as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to the Transaction and a Number of Options equal to the number of Options underlying the Terminated Portion, (2) Counterparty were the sole Affected Party with respect to such partial termination and (3) the Terminated Portion were the sole Affected Transaction (and, for the avoidance of doubt, the provisions of Section 9(m) shall apply to any amount that is payable by Dealer to Counterparty pursuant to this sentence as if Counterparty was not the Affected Party).   The “Section 16 Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the number of Shares that Dealer and each person subject to aggregation of Shares with Dealer under Section 13 or Section 16 of the Exchange Act and rules promulgated thereunder directly or indirectly beneficially own (as defined under Section 13 or Section 16 of the Exchange Act and rules promulgated thereunder) and (B) the denominator of which is the number of Shares outstanding.  The “Option Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the sum of (1) the product of the Number of Options and the Option Entitlement and (2) the aggregate number of Shares underlying any other call option transaction sold by Dealer to Counterparty, and (B) the denominator of which is the number of Shares outstanding.  The “Share Amount” as of any day is the number of Shares that Dealer and any person whose ownership position would be aggregated with that of Dealer (Dealer or any such person, a “Dealer Person”) under any law, rule, regulation, regulatory order or organizational documents or contracts of Counterparty that are, in each case, applicable to ownership of Shares (“Applicable Restrictions”), owns, beneficially owns, constructively owns, controls, holds the power to vote or otherwise meets a relevant definition of ownership under any Applicable Restriction, as determined by Dealer in good faith and in its reasonable discretion.  The “Applicable Share Limit” means a number of Shares equal to (A) the minimum number of Shares that could give rise to reporting or registration obligations or other requirements (including obtaining prior approval from any person or entity) of a Dealer Person, or could result in an adverse effect on a Dealer Person, under any Applicable Restriction, as determined by Dealer in good faith and in its reasonable discretion, minus (B) 1% of the number of Shares outstanding.

 

(iii)                             Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities, or make or receive any payment in cash, to or from Counterparty, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities, or to make or receive such payment in cash, and otherwise to perform Dealer’s obligations in respect of the Transaction and any such designee may assume such obligations.  Dealer shall be discharged of its obligations to Counterparty to the extent of any such Dealer affiliate’s performance to Counterparty.

 

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

 

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(i)                                   in such notice, Dealer will specify to Counterparty the related Staggered Settlement Dates (each of which shall be on or prior to such Nominal Settlement Date) and the number of Shares that it will deliver on each Staggered Settlement Date;

 

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

 

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

 

(g)                                  Matters Relating to Dealer and Agent

 

(i)                                     Credit Suisse Securities (USA) LLC (“CSS”), in its capacity as Agent solely for Dealer (and not as Agent for Counterparty) will be responsible for (A) effecting the Transaction, (B) issuing all required confirmations and statements to Dealer and Counterparty, (C) maintaining books and records relating to the Transaction in accordance with its standard practices and procedures and in accordance with applicable law and (D) unless otherwise requested by Counterparty, receiving, delivering, and safeguarding Counterparty’s funds and any securities in connection with the Transaction, in accordance with its standard practices and procedures and in accordance with applicable law.

 

(ii)                                  Agent is acting in connection with the Transaction solely in its capacity as Agent for Dealer (and not as Agent for Counterparty) pursuant to instructions from Dealer.  Agent shall have no responsibility or personal liability to Dealer or Counterparty arising from any failure by Dealer or Counterparty to pay or perform any obligations hereunder, or to monitor or enforce compliance by Dealer or Counterparty with any obligation hereunder, including, without limitation, any obligations to maintain collateral.  Each of Dealer 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 the Transaction.  Agent shall otherwise have no liability in respect of the Transaction, except for its gross negligence or willful misconduct in performing its duties as Agent. For the avoidance of doubt, any performance by Dealer of its obligations hereunder solely to CSS shall not relieve Dealer of such obligations. Any performance by Counterparty of its obligations (including notice obligations) through or by means of CSS’ agency for Dealer shall constitute good performance of Counterparty’s obligations hereunder to Dealer.

 

(iii)                               Dealer is an “OTC derivatives dealer” as such term is defined in the Exchange Act and is an affiliate of Agent.

 

(iv)                              Dealer is not a member of the Securities Investor Protection Corporation.

 

(v)                                 Any and all notices, demands, or communications of any kind relating to the Transaction between Dealer and Counterparty shall be transmitted exclusively through Agent at the following address:

 

Credit Suisse Securities (USA) LLC

Eleven Madison Avenue

New York, NY 10010-3629

 

For payments and deliveries:

Telephone No.: (212) 325-8678 / (212) 325-3213

Facsimile No.: (212) 325-8175

 

For all other communications:

 

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Telephone No.: (212) 538-6040

Facsimile No.: (917) 326-8603

 

(h)                                 Additional Termination Events.

 

(i)                                     Notwithstanding anything to the contrary in this Confirmation if an event of default occurs under the terms of the Convertible Notes as set forth in Section 7.01 of the Indenture, then such event of default shall constitute an Additional Termination Event applicable to the Transaction and, with respect to such Additional Termination Event, (A) Counterparty shall be deemed to be the sole Affected Party, (B) the Transaction shall be the sole Affected Transaction and (C) Dealer shall be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement.

 

(ii)                                  Notwithstanding anything to the contrary in this Confirmation, the receipt by Dealer from Counterparty, within the applicable time period set forth under “Notice of Exercise” of any Notice of Exercise in respect of Options that relate to Convertible Notes as to which additional Shares would be added to the Conversion Rate pursuant to Section 4.04 of the Indenture in connection with a “Make-Whole Fundamental Change” (as defined in the Indenture) (such Convertible Notes, “Make-Whole Convertible Notes”) shall constitute an Additional Termination Event as provided in this Section 1.  Upon receipt of any such Notice of Exercise, Dealer shall designate an Exchange Business Day following such Additional Termination Event (which Exchange Business Day shall in no event be earlier than the related settlement date for such Convertible Notes) as an Early Termination Date with respect to the portion of this Transaction corresponding to a number of Options (the “Make-Whole Conversion Options”) equal to the lesser of (A) the number of such Options specified in such Notice of Exercise and (B) the Number of Options as of the date Dealer designates such Early Termination Date (prior to giving effect to a reduction thereto on such date pursuant to the immediately following sentence).  As of any such Early Termination Date, the Number of Options shall be reduced by the applicable number of Make-Whole Conversion Options.  Any payment hereunder with respect to such termination of the Make-Whole Conversion Options shall be calculated pursuant to Section 6 of the Agreement (but using a volatility input that is equal to the Relevant Volatility Input) as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to this Transaction and a Number of Options equal to the number of Make-Whole Conversion Options, (2) Counterparty were the sole Affected Party with respect to such Additional Termination Event and (3) the terminated portion of the Transaction were the sole Affected Transaction (and, for the avoidance of doubt, in determining the amount payable pursuant to Section 6 of the Agreement, the Calculation Agent shall not take into account any adjustments to the Option Entitlement that result from corresponding adjustments to the Conversion Rate pursuant to Section 4.04 of the Indenture); provided that the amount of cash deliverable in respect of such early termination by Dealer to Counterparty shall not be greater than the product of (x) the Applicable Percentage, (y) the number of Make-Whole Conversion Options and (z) the excess of (I) (1) the Conversion Rate (after taking into account any applicable adjustments to the Conversion Rate pursuant to Section 4.04 of the Indenture) multiplied by (2) a price per Share determined by the Calculation Agent over (II) the principal amount per Make-Whole Convertible Note, as determined by the Calculation Agent. “Relevant Volatility Input” means a volatility input that is determined by Dealer in good faith and in a commercially reasonable manner and which, without limitation, may be based on implied volatility levels for options on the Shares with strike prices approximate to the Strike Price of the Transaction or approximate to the strike price of over-the-counter equity options on the Shares that are included in its commercially reasonable Hedge Positions with respect to the Transaction, in each case, as determined by Dealer in good faith and a commercially reasonable manner; provided that, if (i) Dealer (whether in its capacity as “Calculation Agent”, “Determining Party”, “Hedging Party” or otherwise) is required to determine a volatility input under any over-the-counter 

 

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equity option transaction to which Dealer is a party and to which Counterparty (or, if different, Issuer) is party relating to the Shares (such equity option transactions, “Relevant Positions”) and (ii) Dealer determines that such Relevant Positions (or a portion thereof) are terminated, cancelled, offset or otherwise unwound at approximately the same time (as determined by Dealer in good faith and commercially reasonably) as the Transaction (or portion thereof) is terminated, cancelled, offset or otherwise unwound, Dealer shall use a Relevant Volatility Input that is no less than such volatility input for such Relevant Positions. For the avoidance of doubt, a Relevant Volatility Input that is equal to the volatility input for any Relevant Positions shall, in no event, be deemed to be commercially unreasonable.

 

(iii)                               In addition, notwithstanding anything to the contrary in this Confirmation:

 

(A)                               Promptly following any Repayment Event (as defined below) (but, in any event, within 5 Scheduled Valid Days following settlement thereof), Counterparty may notify Dealer of such Repayment Event and the aggregate principal amount of Convertible Notes subject to such Repayment Event (the “Repayment Convertible Notes”) (any such notice, a “Repayment Notice”). The receipt by Dealer from Counterparty of any Repayment Notice shall constitute an Additional Termination Event as provided in this Section 9(h).

 

(B)                               Upon receipt of any such Repayment Notice, Dealer shall designate an Exchange Business Day following receipt of such Repayment Notice (which Exchange Business Day shall be on or as promptly as reasonably practicable after the related settlement date for the relevant Repayment Event) as an Early Termination Date with respect to a portion (the “Repayment Terminated Portion”) of the Transaction consisting of a number of Options (the “Repayment Options”) equal to the lesser of (A) the number of Repayment Convertible Notes in denominations of USD1,000 that are subject to the relevant Repayment Event and (B) the Number of Options as of the date Dealer designates such Early Termination Date (prior to giving effect to a reduction thereto on such date pursuant to the immediately following sentence).  As of any such Early Termination Date, the Number of Options shall be reduced by the applicable number of Repayment Options.

 

(C)                               Any payment or delivery in respect of such termination of the Repayment Terminated Portion of the Transaction shall be made pursuant to Section 6 of the Agreement as if an Early Termination Date had been designated in respect of a Transaction having terms identical to the Transaction and a Number of Options equal to the number of Repayment Options.  Counterparty shall be the sole Affected Party with respect to such Additional Termination Event and the Repayment Terminated Portion of the Transaction shall be the sole Affected Transaction. “Repayment Event” means that (i) any Convertible Notes are repurchased by Counterparty or any of its subsidiaries, (ii) any Convertible Notes are delivered to Counterparty in exchange for delivery of any property or assets of Counterparty or any of its subsidiaries (howsoever described), (iii) any principal of any of the Convertible Notes is repaid prior to the final maturity date of the Convertible Notes (other than upon an event of default under the Convertible Notes described in the first paragraph of this Section 9(h)), or (iv) any Convertible Notes are exchanged by or for the benefit of the Holders (as defined in the Indenture) thereof for any other securities of Counterparty or any of its Affiliates (as defined in the Indenture) (or any other property, or any combination thereof) pursuant to any exchange offer or similar transaction; provided that (x) no conversion of Convertible Notes pursuant to the terms of the Indenture shall constitute a Repayment Event and (y) no surrender of a Convertible Note for repurchase in respect of which Counterparty has elected to designate a financial institution for exchange in lieu of repurchase pursuant to Section 4.11 of the Indenture shall constitute a Repayment Event.  Counterparty

 

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acknowledges its responsibilities under applicable securities laws, and in particular Section 9 and Section 10(b) of the Exchange Act and the rules and regulations thereunder, in respect of any action taken by Counterparty or any of its Affiliates (as defined in the Indenture) in respect of a Repayment Event, including, without limitation, the delivery of a Repayment Notice.

 

(D)                               Counterparty shall cause any Convertible Notes subject to a Repayment Event to be promptly cancelled or no longer outstanding and acknowledges and agrees that, except to the extent provided above in this Section 9(h), all such Convertible Notes subject to a Repayment Event will be deemed for all purposes under the Transaction to be permanently extinguished or no longer outstanding.

 

(i)                                     Amendments to the Equity Definitions.

 

(i)                                     Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (1) deleting from the fourth line thereof the word “or” after the word “official” and inserting a comma therefor, and (2) deleting the semi-colon at the end of subsection (B) thereof and inserting the following words therefor “or (C) at Dealer’s option, the occurrence of any of the events specified in Section 5(a)(vii)(1) through (9) of the ISDA Master Agreement with respect to that Issuer.”

 

(ii)                                  Section 12.9(b)(i) of the Equity Definitions is hereby amended by (1) replacing “either party may elect” and (2) replacing “notice to the other party” with “notice to Counterparty” in the first sentence of such section.

 

(j)                                    Setoff.  Obligations under the Transaction shall not be set off by either party 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.  For the avoidance of doubt, in the event of bankruptcy or liquidation of either Counterparty or Dealer neither party shall have the right to set off any obligation that it may have to the other party under the Transaction against any obligation such other party may have to it, whether arising under the Agreement, this Confirmation or any other agreement between the parties hereto, by operation of law or otherwise.

 

(k)                                 Alternative Calculations and Payment on Early Termination and on Certain  Extraordinary Events.  If in respect of the Transaction, an amount is payable by Dealer to Counterparty (i) pursuant to Section 12.7 or Section 12.9 of the Equity Definitions or (ii) pursuant to Section 6(d)(ii) of the Agreement (any such amount, a “Payment Obligation”), then Dealer shall satisfy the Payment Obligation by the Share Termination Alternative (as defined below), unless (a) Counterparty gives irrevocable telephonic notice to Dealer, confirmed in writing within one Scheduled Trading Day, no later than 12:00 p.m. (New York City time) on the Merger Date, Tender Offer Date, Announcement Date (in the case of a Nationalization, Insolvency or Delisting), Early Termination Date or date of cancellation, as applicable, of its election that the Share Termination Alternative shall not apply, (b) Counterparty remakes the representation set forth in Section 8(f) as of the date of such election and (c) Dealer agrees, in good faith and in its reasonable discretion, to such election, in which case the provisions of Section 12.7 or Section 12.9 of the Equity Definitions, or the provisions of Section 6(d)(ii) of the Agreement, as the case may be, shall apply.

 

	
Share Termination   Alternative:
    	
 
    	
If applicable, Dealer shall deliver to Counterparty   the Share Termination Delivery Property on, or within a commercially   reasonable period of time after, the date when the relevant Payment   Obligation would otherwise be due pursuant to Section 12.7 or 12.9 of   the Equity Definitions or Section 6(d)(ii) and 6(e) of the   Agreement, as applicable, in satisfaction of such Payment Obligation in the   manner reasonably requested by Counterparty free of payment.
    

 

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Share Termination   Delivery Property:
    	
 
    	
A number of Share Termination Delivery Units, as   calculated by the Calculation Agent, equal to the Payment Obligation divided   by the Share Termination Unit Price. The Calculation Agent shall adjust the   Share Termination Delivery Property by replacing any fractional portion of a   security therein with an amount of cash equal to the value of such fractional   security based on the values used to calculate the Share Termination Unit   Price.
    
	
 
    	
 
    	
 
    
	
Share Termination Unit Price:
    	
 
    	
The value of property contained in one Share   Termination Delivery Unit, as determined by the Calculation Agent in its   discretion by commercially reasonable means and notified by the Calculation   Agent to Dealer at the time of notification of the Payment Obligation. For   the avoidance of doubt, the parties agree that in determining the Share   Termination Delivery Unit Price the Calculation Agent may consider, if   commercially reasonable, the purchase price paid in connection with the   purchase of Share Termination Delivery Property.
    
	
 
    	
 
    	
 
    
	
Share Termination   Delivery Unit:
    	
 
    	
One Share or, if the Shares have changed into cash   or any other property or the right to receive cash or any other property as   the result of a Nationalization, Insolvency or Merger Event (any such   cash or other property, the “Exchange Property”),   a unit consisting of the type and amount of such Exchange Property received   by a holder of one Share (without consideration of any requirement to pay   cash or other consideration in lieu of fractional amounts of any securities)   in such Nationalization, Insolvency or Merger Event, as determined by   the Calculation Agent.
    
	
 
    	
 
    	
 
    
	
Failure to Deliver:
    	
 
    	
Applicable
    
	
 
    	
 
    	
 
    
	
Other applicable   provisions:
    	
 
    	
If Share Termination Alternative is applicable, the   provisions of Sections 9.8, 9.9 and 9.11 (as modified above) of the Equity   Definitions and the provisions set forth opposite the caption “Representation   and Agreement” in Section 2 will be applicable, except that all   references in such provisions to “Physically-settled” shall be read as   references to “Share Termination Settled” and all references to “Shares”   shall be read as references to “Share Termination Delivery Units”. “Share   Termination Settled” in relation to the Transaction means that the Share   Termination Alternative is applicable to the Transaction.
    

 

(l)                                     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 the 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 the Transaction, as applicable, by, among other things, the mutual waivers and certifications provided herein.

 

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(m)                             Registration.  Counterparty hereby agrees that if, in the good faith reasonable judgment of Dealer based on the advice of counsel, the Shares (“Hedge Shares”) acquired by Dealer for the purpose of hedging its obligations pursuant to the Transaction cannot be sold in the public market by Dealer without registration under the Securities Act, Counterparty shall, at its election, either (i) in order to allow Dealer to sell the Hedge Shares in a registered offering, make available to Dealer an effective registration statement under the Securities Act and enter into an agreement, in form and substance satisfactory to Dealer, substantially in the form of an underwriting agreement for a registered secondary offering of similar size; provided, however, that if Dealer, in its sole reasonable discretion, is not satisfied with access to due diligence materials, the results of its due diligence investigation, or the procedures and documentation for the registered offering referred to above, then clause (ii) or clause (iii) of this paragraph shall apply at the election of Counterparty, (ii) in order to allow Dealer to sell the Hedge Shares in a private placement, enter into a private placement agreement substantially similar to private placement purchase agreements customary for private placements of equity securities of similar size, in form and substance satisfactory to Dealer (in which case, the Calculation Agent shall make any adjustments to the terms of the Transaction that are necessary, in its commercially reasonable judgment, to compensate Dealer for any discount from the public market price of the Shares incurred on the sale of Hedge Shares in a private placement), or (iii) purchase the Hedge Shares from Dealer at the Relevant Price on such Exchange Business Days, and in the amounts, requested by Dealer.

 

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

 

(o)                                 Right to Extend.  Dealer may postpone or add, in whole or in part, any Valid Day or Valid Days during the Settlement Averaging Period or any other date of valuation, payment or delivery by Dealer, with respect to some or all of the Options hereunder, if Dealer reasonably and in good faith determines, based on the advice of counsel in the case of the immediately following clause (ii) that such action is reasonably necessary or appropriate (i) to preserve a commercially reasonable hedging or hedge unwind activity hereunder in light of existing liquidity conditions or (ii) to enable Dealer to effect transactions with respect to Shares in connection with a commercially reasonable hedging, hedge unwind or settlement activity hereunder in a manner that would, if Dealer were Issuer or an affiliated purchaser of Issuer, be in compliance with applicable legal, regulatory or self-regulatory organization requirements, or with related policies and procedures applicable to Dealer.

 

(p)                                 Status of Claims in Bankruptcy.  Dealer acknowledges and agrees that this Confirmation is not intended to convey to Dealer rights against Counterparty with respect to the Transaction that are senior to the claims of common stockholders of Counterparty in any United States bankruptcy proceedings of Counterparty; provided that nothing herein shall limit or shall be deemed to limit Dealer’s right to pursue remedies in the event of a breach by Counterparty of its obligations and agreements with respect to the Transaction; provided, further, that nothing herein shall limit or shall be deemed to limit Dealer’s rights in respect of any transactions other than the Transaction.

 

(q)                                 Securities Contract; Swap Agreement.  The parties hereto intend for (i) the Transaction to be a “securities contract” and a “swap agreement” as defined in the Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”), and the parties hereto to be entitled to the protections afforded by, among other Sections, Sections 362(b)(6), 362(b)(17), 546(e), 546(g), 555 and 560 of the Bankruptcy Code, (ii) a party’s right to liquidate the Transaction and to exercise any other remedies upon the occurrence of any Event of Default under the Agreement with respect to the other party to constitute a “contractual right” as described in the Bankruptcy Code, and (iii) each payment and delivery of cash, securities or other property hereunder to constitute a “margin payment” or “settlement payment” and a “transfer” as defined in the Bankruptcy Code.

 

(r)                                    Notice of Certain Other Events. Counterparty covenants and agrees that:

 

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(i)                                   promptly following the public announcement of the results of any election by the holders of Shares with respect to the consideration due upon consummation of any Merger Event, Counterparty shall give Dealer written notice of the types and amounts of consideration that holders of Shares have elected to receive upon consummation of such Merger Event (the date of such notification, the “Consideration Notification Date”); provided that in no event shall the Consideration Notification Date be later than the date on which such Merger Event is consummated; and

 

(ii)                                promptly following any adjustment to the Convertible Notes in connection with any Potential Adjustment Event, Merger Event or Tender Offer, Counterparty shall give Dealer written notice of the details of such adjustment.

 

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

 

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

 

(u)                                 Early Unwind. In the event the sale of the “Option Securities” (as defined in the Purchase Agreement) is not consummated with the Initial Purchasers for any reason by 5:00 p.m. (New York City time) on the Premium Payment Date, or such later date as agreed upon by the parties (the Premium Payment Date or such later date, the “Early Unwind Date”), the Transaction shall automatically terminate (the “Early Unwind”) on the Early Unwind Date and (i) the Transaction and all of the respective rights and obligations of Dealer and Counterparty under the Transaction shall be cancelled and terminated and (ii) each party shall be released and discharged by the other party from and agrees not to make any claim against the other party with respect to any obligations or liabilities of the other party arising out of and to be performed as Hedging Positions in respect of this Transaction either prior to or after the Early Unwind Date.  Each of Dealer and Counterparty represents and acknowledges to the other that, upon an Early Unwind, all obligations with respect to the Transaction shall be deemed fully and finally discharged.

 

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

 

(w)                               Designation of Dealer.  Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to 

 

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or from Issuer, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to perform Dealer’s obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Counterparty to the extent of any such performance.

 

(x)                                 Tax Forms.  Counterparty shall provide to Dealer a valid U.S. Internal Revenue Service (“IRS”) Form W-9 on or before the date of execution of this Confirmation and will promptly tender an updated IRS Form W-9 or applicable IRS Form W-8 if the previously tendered IRS Form W-9 becomes incorrect as a result of a change in facts.  Dealer shall provide Counterparty a valid IRS Form W-9 or applicable IRS Form W-8 on or before the date of execution of this Confirmation and will promptly tender an updated IRS Form W-9 or applicable IRS Form W-8 if the previously tendered IRS Form W-9 or applicable IRS Form W-8  becomes incorrect as a result of a change in facts.

 

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

 

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Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Confirmation and returning it to Dealer.

 

	
 
    	
Very truly yours,
    
	
 
    
	
 
    	
CREDIT   SUISSE CAPITAL LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Louis J.   Impellizeri
    
	
 
    	
Authorized Signatory
    
	
 
    	
Name: Louis J.   Impellizeri
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Barry Dixon
    
	
 
    	
Authorized Signatory
    
	
 
    	
Name: Barry Dixon
    
	
 
    	
 
    
	
 
    	
CREDIT   SUISSE SECURITIES (USA) LLC,
    
	
 
    	
acting solely as Agent   in connection with this Transaction
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Louis J.   Impellizeri
    
	
 
    	
Authorized Signatory
    
	
 
    	
Name: Louis J.   Impellizeri
    
				

 

 

	
Accepted and confirmed
    	
 
    
	
as of the Trade Date:
    	
 
    
	
 
    	
 
    
	
Ironwood   Pharmaceuticals, Inc.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Thomas Graney
    	
 
    	
 
    
	
Authorized Signatory
    	
 
    
	
Name:
    	
Thomas Graney, Chief   Financial Officer & Senior Vice President of Finance and Corporate   Strategy

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