Document:

Exhibit 10.1

 

	
   

  	
  Deutsche Bank 

  
	
   

  	
   

  
	
   

  	
  Deutsche Bank AG London

  
	
   

  	
  Winchester
  House

  
	
   

  	
  1
  Great Winchester St.

  
	
   

  	
  London
  EC2N 2DB

  
	
   

  	
  Telephone: 44 20 7545 8000

  
	
   

  	
   

  
	
   

  	
  c/o Deutsche Bank AG
  New York

  
	
   

  	
  60 Wall Street

  
	
   

  	
  New York, NY 10005

  
	
   

  	
  Telephone: 212-250-5977

  
	
   

  	
  Facsimile: 212-797-8826

  

 

June 28, 2005

 

Cephalon, Inc. (“Counterparty”)

41 Moores Road

Frazer, PA 19355

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

 

 

Dear Sirs / Madam:

 

Reference is made to the
Confirmation (the “Confirmation”)
dated as of June 2, 2005 between Deutsche Bank AG acting through its
London Branch (“Deutsche”) and Cephalon, Inc.
(“Counterparty”), which sets forth
the terms and conditions of a convertible note hedge transaction (the “Transaction”) entered into between Deutsche and
Counterparty.  Terms used herein and not
defined herein have the meanings set forth in the Confirmation.  For purposes of this Amendment and the
Confirmation, unless the context otherwise requires, all references herein and
therein to “the Confirmation”, and “the Transaction”, shall be deemed
references to the Confirmation as amended hereby, and the Transaction as
governed by such amended Confirmation, respectively.

 

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

 

In connection with the
exercise of the option granted by Counterparty to the Underwriters (as such
term is defined in the Underwriting Agreement) to purchase additional Reference
Notes pursuant to the Underwriting Agreement (the “Option
Exercise”), and as provided for in Section 3(e) of the
Confirmation, Deutsche and the Counterparty intend to enter into this letter
agreement (this “Amendment”) to amend the
Confirmation in the manner set forth below. 
In consideration of such premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Deutsche and the Counterparty hereby agree that:

 

(a)                 In
Section 2 of the Confirmation, the provision opposite the caption “Reference
Notes” is deleted and replaced with the following language:

 

 

“$920,000,000 principal
amount of Convertible Senior Notes due June 1,
2015 (the “Maturity Date”), $800,000,000
of which were issued by Cephalon, Inc. (the “Issuer”)
on June 7, 2005, and $120,000,000 of which were issued by the Issuer on July 1,
2005, in each case pursuant to the Note Indenture (as defined below).”

 

(b)                 In
Section 2 of the Confirmation, the following new provision shall be
inserted immediately after the provision opposite the caption “Share Equivalent
Amount”:

 

“Limitation
on Delivery Shares:             Notwithstanding anything to the contrary herein, in
the Agreement or in any other agreement between the parties hereto, in no event
shall Deutsche be required to deliver Shares to Counterparty pursuant to this
Confirmation in connection with any Conversion Event to the extent the aggregate
Conversion Amount for such Conversion Event and all prior Conversion Events is
greater than $800,000,000 (such amount subject to reduction in connection with
any Repayment Event by the principal amount of Reference Notes subject to such
Repayment Event).”

 

(c)                 Section 4(b) of
the Confirmation is amended and restated in its entirety to read as follows:

 

“A
Repayment Event occurs, in which case this Transaction shall be subject to
termination only in respect of the principal amount of Reference Notes that
cease to be outstanding in connection with or as a result of such Repayment
Event.  For the avoidance of doubt, if
the aggregate principal amount of Reference Notes subject to one or more
Repayment Events is less than $800,000,000, then the terms of this Transaction
shall continue to apply, subject to the terms and conditions set forth herein.  However, if the aggregate principal amount of
Reference Notes subject to one or more Repayment Events equals or exceeds, at
any time, $800,000,000, the entirety of this Transaction shall terminate
automatically.”

 

(d)                 The
first paragraph of Section 6 of the Confirmation is amended and restated
in its entirety to read as follows:

 

“If Deutsche determines
reasonably and in good faith that the number of Shares required to be delivered
to Counterparty hereunder on any Settlement Date pursuant to this Confirmation,
the Confirmation dated as of June 28, 2005 between Deutsche and
Counterparty (the ‘New Confirmation’),
which sets forth the terms and conditions of a convertible note hedge
transaction entered into between Deutsche and Counterparty, or the combination
thereof would exceed 9.0% of all outstanding Shares, then Deutsche may, by
notice to Counterparty on or prior to such Settlement Date (a ‘Nominal Settlement Date’), elect to deliver the Shares
comprising the Share Equivalent Amount required to be delivered pursuant to
this Confirmation on two or more dates (each, a ‘Staggered
Settlement Date’) as follows:”

 

(e)                The
definition of “Hedge Equity Percentage” in Section 8 of the Confirmation
is amended and restated in its entirety to read as follows:

 

“‘Hedge Equity
Percentage’ as of any day is the fraction (A) the numerator of
which is the sum of the number of Shares underlying this Transaction and the number of Shares underlying the transaction entered
into pursuant to the New Confirmation on such day and (B) the denominator
of which is the number of Shares outstanding on such day.”

 

(f)                  In
addition, by executing and delivering this Amendment, Counterparty, or
Counterparty and Deutsche, as the case may be, shall be deemed to have made, on
the date hereof, the representations and warranties set forth in Section 3(c) of
the Confirmation, in clauses (i) through (v) under the heading “Mutual
Representations” of Section 8 of the Confirmation and in clauses (i) and
(ii) under the heading “Additional Counterparty Representations” of Section 8
of the 

 

2

 

Confirmation; provided that (w) each reference in each such Section or
clause to “the Confirmation” shall be deemed to be a reference to the Confirmation
as amended by this Amendment, (x) each reference in each such Section or
clause to “the Transaction” shall be deemed to be a reference to the
Transaction as governed by such amended Confirmation, (y) each reference in
each such Section or clause to “the Trade Date” shall be deemed to be a
reference to the date hereof and (z) each reference in each such Section or
clause to “hereof”, “hereunder”, “herein”, “hereby” or any other similar
reference shall be deemed to be a reference to the Confirmation as amended by
this Amendment.

 

If the Option Exercise
fails to close for any reason, then the entirety of this Amendment shall
terminate automatically and no payments or deliveries shall be required in
connection herewith.

 

This Amendment may be
executed by the parties hereto in counterparts, each of which shall be deemed
to be an original and all of which, taken together, shall constitute one and
the same instrument.

 

This Amendment shall be
governed by and construed in accordance with New York law without reference to
choice of law doctrine and each party hereby submits to the jurisdiction of the
Courts of the State of New York.

 

[Remainder of page intentionally
left blank]

 

3

 

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

 

 

	
   

  	
   

  	
  Yours faithfully,

  
	
   

  	
   

  	
   

  
	
   

  	
   

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

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Dirvin

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  David Dirvin

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark Haas

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Mark Haas

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
  Confirmed as of the
  date first written above:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CEPHALON, INC. (“Counterparty”)

  	
   

  	
   

  
	
   

  
	
   

  
	
   By:

  	
  /s/ John E. Osborn

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  John E. Osborn

  	
   

  
	
  Title:

  	
  Senior Vice President,
  General Counsel and Secretary

  	
   

  
	
   

  	
   entered into on this 30th day of June, 2005

  	
   

  
	
   

  	
   

  	
   

  
	
  DEUTSCHE BANK AG,
  LONDON

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   By:

  	
  /s/ Noreddine Sebti

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Noreddine Sebti

  	
   

  
	
  Title:

  	
  Attorney-in-Fact

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   By:

  	
  /s/ Jill Rathjen

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Jill Rathjen

  	
   

  
	
  Title:

  	
  Attorney-in-FactExhibit 10.2

 

	
   

  	
  Deutsche Bank 

  
	
   

  	
   

  
	
   

  	
  Deutsche Bank AG London

  
	
   

  	
  Winchester
  House

  
	
   

  	
  1
  Great Winchester St.

  
	
   

  	
  London
  EC2N 2DB

  
	
   

  	
  Telephone: 44 20 7545 8000

  
	
   

  	
   

  
	
   

  	
  c/o Deutsche Bank AG
  New York

  
	
   

  	
  60 Wall Street

  
	
   

  	
  New York, NY 10005

  
	
   

  	
  Telephone: 212-250-5977

  
	
   

  	
  Facsimile: 212-797-8826

  

 

June 28, 2005

 

Cephalon, Inc. (“Counterparty”)

41 Moores Road

Frazer, PA 19355

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

 

Dear Sir / Madam:

 

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

 

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

 

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

 

This Confirmation together
with all other Confirmations of Share Transactions between Deutsche and Counterparty
with respect to Shares of the Issuer contemporaneously or previously entered
into between them, notwithstanding anything to the contrary therein, shall
supplement, form a part of, and be subject to

 

 

an ISDA 1992 Master
Agreement (Multicurrency – Cross Border) (the “Agreement”), as if, on the Trade Date of the first such
Transaction between Deutsche and Counterparty, they had executed the Agreement
(without any Schedule thereto) and specified that (1) the Automatic
Early Termination provisions contained in Section 6(a) of such
Agreement would apply, (2) Second Method and Loss would apply and (3) such
Agreement would cover only Share Transactions with respect to Shares of the
Issuer referred to herein.

 

Obligations
under the Transaction shall not be set off against any other obligations of the
parties, whether arising under the Agreement, this Confirmation, or any other
agreement between the parties hereto, by operation of law or otherwise, and no
other obligations of the parties shall be set off against obligations under the
Transaction, whether arising under the Agreement, this Confirmation, or any
other agreement between the parties hereto, by operation of law or otherwise,
and each party hereby waives any such right of setoff.  In calculating any amounts under Section 6(e) of
the Agreement, notwithstanding anything to the contrary in the Agreement, (1) separate
amounts shall be calculated as set forth in such Section 6(e) with
respect to (i) the Transaction and (ii) all other transactions
between the parties hereto, and (2) such separate amounts shall be payable
pursuant to Section 6(d)(ii) of the Agreement.  Notwithstanding the foregoing or anything to
the contrary herein, the parties hereto agree and acknowledge that Deutsche and
its affiliates may set-off payment of the Hedge Purchase Price by Counterparty
to Deutsche hereunder against any amount payable by Deutsche or its affiliates
to Counterparty with respect to the purchase of the additional Reference Notes
by the Underwriters (as such term is defined in the Underwriting Agreement) in
connection with the exercise of the option granted by Counterparty to the
Underwriters to purchase additional Reference Notes pursuant to the
Underwriting Agreement (the “Option Exercise”).

 

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

 

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

 

General Terms:

 

	
  Transaction
  Type:

  	
   

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notwithstanding
  anything to the contrary herein, in the Agreement or in any other agreement
  between the parties hereto, in no event shall Deutsche be required to deliver
  Shares to Counterparty pursuant to this Confirmation in connection with any
  Conversion Event to the extent that Deutsche (or a permitted transferee or
  assignee of Deutsche under the Pre-Existing Confirmation (as defined below))
  is required to deliver Shares to Counterparty in connection with such
  Conversion Event pursuant to the terms of the Confirmation (the “Pre-Existing Confirmation”) dated as of June 2, 2005
  between Deutsche and Counterparty, which sets forth the terms and conditions
  of a convertible note hedge transaction entered into between Deutsche and
  Counterparty.

  

 

2

 

	
  Trade Date:

  	
   

  	
  June 28, 2005

  
	
   

  	
   

  	
   

  
	
  Settlement Date:

  	
   

  	
  Subject in all events
  to the second paragraph opposite the caption “Transaction Type” above and the
  provisions of Section 6 below, for each Conversion Event, the related
  Conversion Event Settlement Date.

  
	
   

  	
   

  	
   

  
	
  Seller:

  	
   

  	
  Deutsche

  
	
   

  	
   

  	
   

  
	
  Buyer:

  	
   

  	
  Counterparty

  
	
   

  	
   

  	
   

  
	
  Calculation
  Agent:

  	
   

  	
  Deutsche, whose
  determinations and calculations shall be binding in the absence of manifest
  error. The Calculation Agent will have no responsibility for good faith
  errors or omissions in making any determination or calculation as provided
  herein.

  
	
   

  	
   

  	
   

  
	
  Reference Notes:

  	
   

  	
  $920,000,000 principal
  amount of Convertible Senior Notes due June 1, 2015 (the “Maturity Date”), $800,000,000 of which were issued by
  Cephalon, Inc. (the “Issuer”) on
  June 7, 2005, and $120,000,000 of which were issued by the Issuer on
  July 1, 2005, in each case pursuant to the Note Indenture (as defined
  below).

  
	
   

  	
   

  	
   

  
	
  Conversion
  Event:

  	
   

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If the sum of
  (a) the Conversion Amount for any Conversion Event, and (b) the
  aggregate Conversion Amount for all prior Conversion Events is less than or
  equal to $800,000,000 (such amount subject to reduction in connection with
  any Repayment Event by the principal amount of Reference Notes subject to
  such Repayment Event), then no deliveries shall be required to made hereunder
  by Deutsche. However, if the sum of (a) the Conversion Amount for any
  Conversion Event, and (b) the aggregate Conversion Amount for all prior
  Conversion Events is greater than $800,000,000 (such amount subject to
  reduction in connection with any Repayment Event by the principal amount of
  Reference Notes subject to such Repayment Event), in connection with such
  Conversion Event and each subsequent Conversion Event, Deutsche shall be
  required to make delivery hereunder as described under the heading
  “Settlement upon a Conversion Event” below in connection with such Conversion
  Event.

  
	
   

  	
   

  	
   

  
	
  Conversion Event

  	
   

  	
   

  
	
  Settlement Date:

  	
   

  	
  Subject in all events
  to the second paragraph opposite the caption “Transaction Type” above, in
  respect of each Conversion Event:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)

  	
   

  	
  so long as the
  Conversion Notice is timely delivered to Deutsche in accordance with
  Section 3(d) below, and Counterparty provides Deutsche 

  

 

3

 

	
   

  	
   

  	
   

  	
   

  	
  with at least one
  Exchange Business Day’s notice of the occurrence of the date that the Company
  delivers Shares pursuant to the terms of the Note Indenture to the holders of
  the Reference Notes so converted (each, an “Indenture
  Delivery Date”), the Indenture Delivery Date;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)

  	
   

  	
  if, however, the
  Conversion Notice is not timely delivered to Deutsche in accordance with
  Section 3(d) below, or Counterparty does not provide Deutsche with
  at least one Exchange Business Day’s notice of the occurrence of the relevant
  Indenture Delivery Date, the Conversion Event Settlement Sate shall be the
  date twenty-one Trading Days (as such term is defined in the Note Indenture)
  immediately following the date on which the relevant Conversion Notice is
  delivered to Deutsche.

  
	
   

  	
   

  	
   

  
	
  Note Indenture:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Shares:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Exchange:

  	
   

  	
  The Nasdaq National
  Market

  
	
   

  	
   

  	
   

  
	
  Clearance
  System:

  	
   

  	
  The Depository Trust
  Company

  
	
   

  	
   

  	
   

  
	
  Convertible Note Hedge
  Purchase Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Payment of Hedge
  

  	
   

  	
   

  
	
  Purchase Price:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Hedge Purchase
  Price

  	
   

  	
   

  
	
  Payment Date:

  	
   

  	
  July 1, 2005

  
	
   

  	
   

  	
   

  
	
  Hedge Purchase
  Price:

  	
   

  	
  $43,209,420

  
	
   

  	
   

  	
   

  
	
  Expiration of
  Convertible Note Hedge:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Expiration Time:

  	
   

  	
  The close of trading on
  the Exchange.

  
	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

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

  

 

4

 

	
  Automatic
  Exercise:

  	
   

  	
  Not Applicable.

  
	
   

  	
   

  	
   

  
	
  Settlement upon a
  Conversion Event:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Settlement
  Terms:

  	
   

  	
  Net Share Settlement
  (as defined below).

  
	
   

  	
   

  	
   

  
	
  Net Share
  Settlement:

  	
   

  	
  Subject in all events
  to the second paragraph opposite the caption “Transaction Type” above, in
  respect of each Conversion Event, on each Settlement Date, Deutsche shall
  deliver to Counterparty, through the Agent, the related Share Equivalent
  Amount.

  
	
   

  	
   

  	
   

  
	
  Share Equivalent
  Amount:

  	
   

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For the avoidance of
  doubt, Deutsche shall be required to make deliveries hereunder with respect
  to any Conversion Event solely to the extent that the Conversion Amount for
  all prior Conversion Events and the Conversion Amount for such Conversion
  Event (or a portion thereof) exceeds, on an aggregate basis, $800,000,000
  (such amount subject to reduction in connection with any Repayment Event by
  the principal amount of Reference Notes subject to such Repayment Event).

  
	
   

  	
   

  	
   

  
	
  Failure to
  Deliver:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Disruption
  Event:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Adjustments:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Method
  of Adjustment:

  	
   

  	
  Not applicable.

  

 

5

 

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

 

(a)           Counterparty
hereby represents and warrants to Deutsche, on each day from the Trade Date to
and including the date by which Deutsche is able to initially complete or
adjust a hedge of its position created by this Transaction that:

 

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

 

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

 

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

 

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

 

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

 

(d)           The
Issuer hereby agrees to promptly deliver to Deutsche a copy of all notices and
other communications required or permitted to be given to the holders of any
Reference Notes pursuant to the terms of the Note Indenture on the dates so
required or permitted in the Note Indenture. 
The Issuer further covenants to Deutsche that it shall provide written
notice to Deutsche, through the Agent, if it receives notice of (i) a conversion
with respect to any Reference Notes pursuant to the terms of the Note Indenture
(identifying in such notice (a “Conversion
Notice”) the principal amount of Reference Notes being converted,
the CUSIP number of the Reference Notes being converted, the related Conversion
Date (as defined in the Note Indenture) and the date of the commencement of the
related Conversion Period (as defined in the Note Indenture), (ii) an Amendment
Event (including in such notice a detailed description of any such amendment) or
(iii) a Repayment Event (identifying in such notice the nature of such
Repayment Event and the principal amount of Reference Notes being paid).  The Issuer shall deliver each Conversion
Notice to Deutsche no later than the first Exchange Business Date immediately
following the related Conversion Date.  The
Issuer shall deliver notice of an Amendment Event or a Repayment Event to Deutsche
within two Exchange Business Days following the occurrence of any such
event.  The Issuer hereby acknowledges
and agrees that its obligations under this Section 3(d) shall
continue

 

6

 

as obligations of the
Issuer notwithstanding any transfer by it of any of its rights or obligations
to any other person or entity in accordance with Section 5 below.

 

(e)           [Reserved.]

 

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

 

4.             Additional Termination Events:

 

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

 

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

 

(b)   A
Repayment Event occurs, in which case this Transaction shall be subject to
termination only in respect of the principal amount of Reference Notes in
excess of $800,000,000 that cease to be outstanding in connection with or as a
result of such Repayment Event (and, for the avoidance of doubt, if the
principal amount of Reference Notes that cease to be outstanding is less than $920,000,000,
then the terms of this Transaction shall continue to apply, subject to the
terms and conditions set forth herein).

 

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

 

(d)   If
at any time all, or any portion, of the securities, property or other assets
into which (or for which) the Reference Notes are convertible (or exchangeable)
consists of securities, property or other assets other than ordinary or common
shares that are publicly quoted, traded or listed on the New York Stock
Exchange, the American Stock Exchange or the NASDAQ National Market System (or
their respective successors), the inability
of Deutsche due to market conditions, illiquidity, illegality, lack of
availability of market participants or otherwise, to establish, re-establish,
unwind or maintain any hedging transaction necessary or desirable in the normal
course of Deutsche’s business of hedging the price and market risk of entering
into and performing under this Transaction, in which case the entirety
of this Transaction shall be subject to termination.

 

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

 

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

 

7

 

As used in this
Confirmation:

 

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

 

“Repayment Event” means that (a) Reference
Notes in aggregate principal amount in excess of $800,000,000 are repurchased
(in connection with or as a result of a change of control, howsoever defined,
or for any other reason) by the Issuer, (b) Reference Notes in aggregate principal
amount in excess of $800,000,000 are delivered to the Issuer in exchange for
delivery of any property or assets of the Issuer or any of its affiliates
(howsoever described), (c)  Reference Notes in aggregate principal amount
in excess of $800,000,000 are repaid prior to the Maturity Date (whether
following acceleration of the Reference Notes or otherwise), or (d) 
Reference Notes in aggregate principal amount in excess of $800,000,000 are
exchanged by or for the benefit of the holders thereof for any other securities
of the Issuer or any of its affiliates (or any other property, or any
combination thereof) pursuant to any exchange offer or similar transaction.  For the avoidance of doubt, any cash payment
to holders of the Reference Notes in connection with conversion of the
Reference Notes shall not constitute a Repayment Event.

 

5.             Transfer:

 

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

 

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

 

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

 

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

 

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

 

6.             Staggered Settlement:

 

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

 

8

 

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

 

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

 

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

 

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

 

7.             Matters relating to the Agent:

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

Repurchase
Notice.  Counterparty
shall, on any day on which Counterparty effects any repurchase of Shares, promptly
give Deutsche a written notice of such repurchase (a “Repurchase
Notice”) on such day if following such repurchase, the Hedge Equity
Percentage as determined on such day is greater by 1.00% than the Hedge Equity
Percentage included in the immediately preceding Repurchase Notice (or, in the
case of the first such Repurchase Notice, greater than the Hedge Equity
Percentage as of the June 2, 2005). 
The “Hedge Equity Percentage” as of any
day is the fraction (A) the numerator of which is the sum of the number of
Shares underlying this Transaction and the number
of Shares underlying the transaction entered into pursuant to the Pre-Existing
Confirmation on such day and (B) the denominator of which is the number of
Shares outstanding on such day.

 

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

 

9.             Account Details:

 

	
  Payments to
  Agent:

  	
   

  	
  To be advised

  
	
   

  	
   

  	
   

  
	
  Payments to
  Deutsche:

  	
   

  	
  To be advised

  
	
   

  	
   

  	
   

  
	
  Payments to
  Counterparty:

  	
   

  	
  To be advised

  
	
   

  	
   

  	
   

  
	
  Deliveries to
  Counterparty:

  	
   

  	
  To be advised

  

 

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

 

11

 

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

 

	
   

  	
  Yours faithfully,

  
	
   

  	
   

  
	
   

  	
  DEUTSCHE BANK AG, NEW
  YORK acting through its New York

  branch and solely in its capacity as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark Haas

  	
   

  
	
   

  	
  Name:

  	
  Mark Haas

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Dirvin

  	
   

  
	
   

  	
  Name:

  	
  David Dirvin

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
  Confirmed as of the
  date first written above:

  	
   

  
	
   

  	
   

  
	
  CEPHALON, INC. (“Counterparty”)

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John E. Osborn

  	
   

  
	
  Name:

  	
  John E. Osborn

  
	
  Title:

  	
  Senior Vice President,
  General Counsel and Secretary
  entered into on this 30th day of
  June, 2005

  
	
   

  	
   

  
	
   

  	
   

  
	
  DEUTSCHE BANK AG, LONDON (“Deutsche”)

  
	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Noreddine Sebti

  	
   

  
	
  Name:

  	
  Noreddine Sebti

  
	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Jill Rathjen

  	
   

  
	
  Name:

  	
  Jill Rathjen

  
	
  Title:

  	
  Director

  
						

 

12

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