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 2, 2005

 

Cephalon, Inc. (“Counterparty”)

145 Brandywine Parkway

West Chester, PA 19380

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

 

Dear Sir / Madam:

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

	
  General Terms:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Transaction
  Type:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Trade
  Date:

  	
   

  	
  June 2, 2005

  
	
   

  	
   

  	
   

  
	
  Settlement
  Date:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Seller:

  	
   

  	
  Deutsche

  
	
   

  	
   

  	
   

  
	
  Buyer:

  	
   

  	
  Counterparty

  
	
   

  	
   

  	
   

  
	
  Calculation
  Agent:

  	
   

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

  

 

2

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  omissions in making any
  determination or calculation as provided herein.

  
	
   

  	
   

  	
   

  
	
  Reference
  Notes:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Conversion
  Event:

  	
   

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Conversion
  Event

  	
   

  	
   

  
	
  Settlement
  Date:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Note
  Indenture:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Shares:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Exchange:

  	
   

  	
  The Nasdaq National
  Market

  
	
   

  	
   

  	
   

  
	
  Clearance
  System:

  	
   

  	
  The Depository Trust
  Company

  
	
   

  	
   

  	
   

  
	
  Convertible Note Hedge
  Purchase Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Payment
  of Hedge Purchase Price:

  	
   

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

  

 

3

 

	
  Hedge
  Purchase Price

  	
   

  	
   

  
	
  Payment
  Date:

  	
   

  	
  June 7, 2005

  
	
   

  	
   

  	
   

  
	
  Hedge
  Purchase Price:

  	
   

  	
  $339,052,000

  
	
   

  	
   

  	
   

  
	
  Expiration of
  Convertible Note Hedge:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Expiration
  Time:

  	
   

  	
  The close of trading on
  the Exchange.

  
	
   

  	
   

  	
   

  
	
  Expiration
  Date:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Automatic
  Exercise:

  	
   

  	
  Not Applicable.

  
	
   

  	
   

  	
   

  
	
  Settlement upon a
  Conversion Event:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Settlement
  Terms:

  	
   

  	
  Net Share Settlement
  (as defined below).

  
	
   

  	
   

  	
   

  
	
  Net
  Share Settlement:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Share
  Equivalent Amount:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Failure
  to Deliver:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Disruption
  Event:

  	
   

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

  
	
   

  	
   

  	
   

  

 

4

 

	
  Adjustments:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Method
  of Adjustment:

  	
   

  	
  Not applicable.

  
	
   

  	
   

  	
   

  

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

4.             Additional Termination Events:

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

As used in this
Confirmation:

 

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

 

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

 

5.             Transfer:

 

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

 

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

 

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

 

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

 

7

 

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

 

6.             Staggered Settlement:

 

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

 

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

 

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

 

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

 

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

 

7.             Matters relating to the Agent:

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

9.             Account Details:

 

	
  Payments to Agent:

  	
   

  	
  To be advised

  
	
   

  	
   

  	
   

  
	
  Payments to Deutsche:

  	
   

  	
  To be advised

  
	
   

  	
   

  	
   

  
	
  Payments to
  Counterparty:

  	
   

  	
  To be advised

  
	
   

  	
   

  	
   

  
	
  Deliveries to
  Counterparty:

  	
   

  	
  To be advised

  
	
   

  	
   

  	
   

  

 

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

 

10

 

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

 

	
   

  	
  Yours faithfully,

  
	
   

  	
   

  
	
   

  	
  DEUTSCHE BANK AG, NEW
  YORK acting through its New York

  branch and solely in its capacity as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sunil Hariana

  	
   

  
	
   

  	
  Name:

  	
  Sunil Hariana

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ellen Gardner

  	
   

  
	
   

  	
  Name:

  	
  Ellen Gardner

  
	
   

  	
  Title:

  	
  Vice President

  

 

 

	
  Confirmed as of the
  date first written above:

  
	
   

  	
   

  
	
  CEPHALON, INC. (“Counterparty”)

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ J. Kevin Buchi

  	
   

  
	
  Name:

  	
  J. Kevin Buchi

  
	
  Title:

  	
  Senior Vice President
  and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  DEUTSCHE BANK AG,
  LONDON (“Deutsche”)

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Lee Frankenfield

  	
   

  
	
  Name:

  	
  Lee Frankenfield

  
	
  Title:

  	
  Director – Attorney in
  Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Stanley Rowe

  	
   

  
	
  Name:

  	
  Stanley Rowe

  
	
  Title:

  	
  Director – Attorney in
  FactExhibit 10.2

 

THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. COUNTERPARTY MAY REQUIRE AN
OPINION OF COUNSEL SATISFACTORY TO COUNTERPARTY THAT SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.

 

	
   

  	
  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 2, 2005

 

Cephalon, Inc.
(“Counterparty”)

145
Brandywine Parkway

West
Chester, PA 19380

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

 

Dear
Sirs / 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 (the “Transaction”). This Confirmation
constitutes a “Confirmation” as referred to in the Agreement specified below.
This Confirmation constitutes the entire agreement and understanding of the parties
with respect to the subject matter and terms of the 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 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).

 

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

 

1

 

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 a “Transaction” shall be deemed to be references to a “Share
Option Transaction” for the purposes of the Equity Definitions and to a “Swap
Transaction” for the purposes of the Swap Definitions. For purposes of this
Transaction, “Warrant Style”, “Warrant Type”, “Number of Warrants” and “Warrant
Entitlement” (each as defined below) shall be used herein as if such terms were
referred to as “Option Style”, “Option Type”, “Number of Options” and “Option
Entitlement”, respectively, in the 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.

 

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:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Trade
  Date:

  	
   

  	
  June
  2, 2005

  
	
   

  	
   

  	
   

  
	
  Warrant
  Style:

  	
   

  	
  European

  
	
   

  	
   

  	
   

  
	
  Warrant
  Type:

  	
   

  	
  Call

  
	
   

  	
   

  	
   

  
	
  Seller:

  	
   

  	
  Counterparty

  
	
   

  	
   

  	
   

  
	
  Buyer:

  	
   

  	
  Deutsche

  
	
   

  	
   

  	
   

  
	
  Shares:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Number
  of Warrants:

  	
   

  	
  17,130,621

  
	
   

  	
   

  	
   

  
	
  Warrant
  Entitlement:

  	
   

  	
  One
  (1) Share per Warrant

  
	
   

  	
   

  	
   

  
	
  Strike
  Price:

  	
   

  	
  $67.92

  
	
   

  	
   

  	
   

  
	
  Premium:

  	
   

  	
  $194,047,000

  

 

2

 

	
  Premium
  Payment Date:

  	
   

  	
  June
  7, 2005

  
	
   

  	
   

  	
   

  
	
  Exchange:

  	
   

  	
  The
  Nasdaq National Market

  
	
   

  	
   

  	
   

  
	
  Clearance
  System:

  	
   

  	
  The
  Depository Trust Company

  
	
   

  	
   

  	
   

  
	
  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.

  
	
  Procedure
  for Exercise:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Expiration Time:

  	
   

  	
  The
  close of trading on the Exchange.

  
	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
  September
  4, 2015

  
	
   

  	
   

  	
   

  
	
  Automatic Exercise:

  	
   

  	
  Applicable,
  subject to Section 3(a) below.

  
	
   

  	
   

  	
   

  
	
  Settlement Terms:

  	
   

  	
  Net
  Share Settlement, unless Counterparty elects Net Cash Settlement (as defined
  below).

  
	
   

  	
   

  	
   

  
	
  Net Share Settlement:

  	
   

  	
  Subject
  to Section 4 below, unless Net Cash Settlement applies, on the Settlement
  Date Counterparty shall deliver to Deutsche, through the Agent, a number of
  Shares equal to the Final Settlement Amount.

  
	
   

  	
   

  	
   

  
	
  Net Cash Settlement Election:

  	
   

  	
  Counterparty
  may elect, by notice in writing to Deutsche (given through the Agent), that
  Net Cash Settlement applies, in which case the Net Share Settlement terms set
  out above shall not apply. Such notice shall be given by Counterparty no
  later than five (5) Exchange Business Days prior to the Expiration Time on
  the Expiration Date.

  
	
   

  	
   

  	
   

  
	
  Net Cash Settlement:

  	
   

  	
  If
  Counterparty elects Net Cash Settlement, then on the Settlement Date
  Counterparty shall pay to Deutsche, through the Agent, the Net Settlement
  Amount.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Settlement Date:

  	
   

  	
  The
  sixtieth (60th) Exchange Business Day following the Expiration
  Date, unless otherwise provided by Section 3(a) below.

  
	
   

  	
   

  	
   

  
	
  Reference Price Period:

  	
   

  	
  The
  period of forty (40) consecutive Valid Days commencing on the third Exchange
  Business Day following the Expiration Date, provided
  that if the Reference Price Period otherwise would exceed fifty
  (50) Exchange Business Days then such Reference Price Period shall end on
  such fiftieth (50th) Exchange Business Day.

  
	
   

  	
   

  	
   

  
	
  Valid Day:

  	
   

  	
  An
  Exchange Business Day on which there is no Disruption Event with respect to
  the Shares.

  
	
   

  	
   

  	
   

  
	
  Disruption Event:

  	
   

  	
  A
  Market Disruption Event as specified in Section 

  

 

3

 

	
   

  	
   

  	
  4.3(a)(ii)
  of the Equity Definitions (determined as if this Transaction were a
  Cash-settled Share Option 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 Option Transaction).

  
	
   

  	
   

  	
   

  
	
  Final Settlement Amount:

  	
   

  	
  The
  number of Shares, rounded up to the nearest whole Share, determined by the
  Calculation Agent to be equal to the quotient of (x) the related Net
  Settlement Amount divided by (y) the related Reference Price.

  
	
   

  	
   

  	
   

  
	
  Net Settlement Amount:

  	
   

  	
  The
  product of (x) the number of Warrants expiring on the Expiration Date
  multiplied by (y) the related Final Price Differential.

  
	
   

  	
   

  	
   

  
	
  Final Price Differential:

  	
   

  	
  An
  amount equal to the greater of (x) the excess of the related Reference
  Price over the Strike Price and (y) zero.

  
	
   

  	
   

  	
   

  
	
  Reference Price:

  	
   

  	
  The
  arithmetic average of the Volume Weighted Average Prices of the Shares on the
  Exchange for each Valid Day falling in the Reference Price Period, provided that if there are fewer than
  forty Valid Days within the Reference Price Period then the related Reference
  Price shall be the Calculation Agent’s reasonable, good faith estimate of the
  value of one (1) Share on the fiftieth Exchange Business Day of the
  Reference Price Period as if such day were a Valid Day.

  
	
   

  	
   

  	
   

  
	
  Volume Weighted Average Price:

  	
   

  	
  In
  respect of any Valid Day, the volume weighted average price per Share as
  displayed under the heading “Bloomberg VWAP” on Bloomberg Page CEPH
  <equity> AQR in respect of the period from 9:30 a.m. to
  4:00 p.m. (New York City time) on each such Valid Day, or if such Volume
  Weighted Average Price is not available, the Calculation Agent’s reasonable,
  good faith estimate of the volume weighted average price of the Shares on
  such Valid Day.

  
	
   

  	
   

  	
   

  
	
  Adjustments:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Method of Adjustment:

  	
   

  	
  Calculation
  Agent Adjustment. For the avoidance of doubt, any dividend paid with respect
  to the Shares shall be deemed an “extraordinary dividend” as such term is
  used in Section 9.1(e)(3) of the Equity Definitions.

  
	
  Extraordinary
  Events:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Consequences of Merger Events:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (a) Share-for-Share:

  	
   

  	
  Alternative
  Obligation; provided that
  notwithstanding the above, the Calculation Agent will determine if such
  Merger Event adjustment affects the theoretical

  

 

4

 

	
   

  	
   

  	
  value
  of this Transaction and if so, may in its sole discretion make the adjustment
  set forth in paragraph (A) under the definition of “Calculation Agent
  Adjustment” (as defined in the Equity Definitions) to the terms of this
  Transaction to reflect the characteristics (including without limitation, the
  volatility, dividend practice and policy, stock loan rate and liquidity) of
  the New Shares.

  
	
   

  	
   

  	
   

  
	
  (b) Share-for-Other:

  	
   

  	
  Cancellation
  and Payment, subject to the terms of Section 5 below.

  
	
   

  	
   

  	
   

  
	
  (c) Share-for-Combined:

  	
   

  	
  Cancellation
  and Payment, subject to the terms of Section 5 below.

  
	
   

  	
   

  	
   

  
	
  Nationalization or Insolvency:

  	
   

  	
  Cancellation
  and Payment, subject to the terms of Section 5 below.

  

 

3.     Excess Share Ownership
Provisions:

 

Excess Share Ownership Provisions. Notwithstanding any other provision hereof,
Deutsche may not receive Shares hereunder, whether in connection with the exercise
of any Warrant hereunder or otherwise, and Automatic Exercise shall not apply
with respect to any Warrant hereunder, if such receipt would cause Deutsche to
become, directly or indirectly, the beneficial owner of more than 9.0 percent
of the class of the Issuer’s equity securities that is comprised of the Shares
for purposes of Section 13 of the Exchange Act (in such case, an “Excess Share Owner”).

 

Deutsche
shall provide prior notice to Counterparty, through the Agent, if the receipt
of Shares hereunder would cause Deutsche to become directly or indirectly, an
Excess Share Owner; provided that
the failure of Deutsche to provide such notice shall not alter the
effectiveness of the provisions set forth in the preceding sentence and any
purported exercise in violation of such provisions shall be void and have no
effect.

 

If
Deutsche is not permitted to receive Shares hereunder because such receipt
would cause Deutsche to become, directly or indirectly, an Excess Share Owner,
and Deutsche thereafter disposes of Shares owned by it or any action is taken
that would then permit Deutsche to receive Shares hereunder without such receipt
causing it to become, directly or indirectly, an Excess Share Owner, then Deutsche
shall provide notice of the taking of such action to Counterparty, through the
Agent, and Deutsche shall be permitted to receive Shares hereunder to the
extent such receipt is otherwise permitted hereunder. If the foregoing
provisions of this Section 3 are applicable to the exercise of any Warrant
hereunder, the Expiration Date with respect to such Warrant shall be the date
on which Counterparty receives such notice from Deutsche, and the related
Settlement Date shall be as soon as reasonably practicable after receipt of
such notice but no more than three (3) Exchange Business Days thereafter
(but in no event shall the Settlement Date occur prior to the date on which it
would have otherwise occurred but for the provisions of this
paragraph (a)); provided
that the related Net Settlement Amount shall be the same as the Net Settlement
Amount but for the provisions of this Section 3.

 

4.     Delivery of Shares:

 

Subject
to Section 9 below, if Counterparty is obligated to deliver Shares to Deutsche
pursuant to the terms of this Confirmation (including, for the avoidance of
doubt, pursuant to Section 5 hereof), Counterparty may elect to deliver such
Shares in accordance with any of the following:

 

(a)                                  If, in the sole determination of Deutsche,
such Shares can be delivered such that they will be freely tradable in the
hands of Deutsche, then Counterparty may deliver such Shares to Deutsche
without compliance with the procedures set forth on Appendix A or Appendix B
hereto; provided, however,
that, if in Deutsche’s sole determination such Shares would 

 

5

 

not
be freely tradable in the hands of Deutsche, then Counterparty shall deliver
such Shares in accordance with paragraph (b) or (c) below;

 

(b)                                 Counterparty may register such Shares and
otherwise satisfy each of the terms and procedures set forth on Appendix A
hereto (a “Registered Offering”)
and deliver such Shares pursuant to such Registered Offering; provided that if no such Registered
Offering is effected, Counterparty shall deliver such Shares in accordance with
the procedures set forth on Appendix B hereto; or

 

(c)                                  Counterparty may, or if Counterparty is
unable to deliver such Shares pursuant to the terms of paragraphs (a) and (b) above,
shall, deliver such Shares pursuant to an offering that is exempt from the
registration requirements of the Securities Act, and that shall otherwise
comply with the terms and procedures (including the obligation, if applicable,
to deliver additional Shares) set forth on Appendix B hereto (an “Exempt Offering”).

 

5.     Discharge of certain payment
obligations:

 

Subject
to Section 9 below:

 

(a)                                  For the purposes of this Section 5 the terms
of Section 9.7 of the Equity Definitions shall be deemed to apply to this
Transaction.

 

(b)                                 If Counterparty shall owe Deutsche any amount
pursuant to Section 9.7 of the Equity Definitions (except in the event of a
Nationalization, an Insolvency or a Merger Event in which the merger
consideration to be paid to holders of Shares consists solely of cash) or
pursuant to Section 6 of the Agreement (except in the event of an Event of
Default, other than by virtue of Bankruptcy, with respect to which Counterparty
is the Defaulting Party) (in any such case, such amount owed shall be a “Payment Obligation”), then Counterparty may
elect to satisfy such Payment Obligation by delivering to Deutsche, through the
Agent, Shares. If Counterparty fails to communicate such election to Deutsche
by such time, it shall be deemed that Counterparty did not make such election
and the terms of Section 9.7 of the Equity Definitions or of Section 6 of the
Agreement, as the case might be, will apply.

 

(c)                                  If Counterparty makes such election, then
Shares with a value (determined by the Calculation Agent acting to maximize the
proceeds of the sale thereof (net of any fees and commissions, including
without limitation, underwriting or placement fees at the time of such sale))
equal to the amount of the Payment Obligation described in paragraph (b) above
shall be delivered in accordance with Section 4 of this Confirmation (and, if
applicable, the terms set forth on Appendix A or Appendix B hereto, as
applicable, shall apply mutatis mutandis);
provided that for purposes of
such application (i) any deliveries in respect thereof shall be made on the
date of payment or delivery required by Section 9.7 of the Equity Definitions
or Section 6 of the Agreement, as the case may be; and (ii) the Final Resale
Date, in the case of an Exempt Offering, shall be the second Exchange Business
Day immediately following such date of delivery.  For the avoidance of doubt, Section 6 of this
Confirmation shall apply to any discharge of a Payment Obligation pursuant to
this Section 5.

 

6.     Maximum Number of Shares to
be Delivered:

 

Subject
to Section 9 below, the maximum number of Shares that Counterparty shall be
required to deliver to Deutsche in relation to this Transaction shall be equal
to two times the total Number of Warrants covered by this Transaction (the “Maximum Number of Shares to be Delivered”).

 

7.     Additional Agreements of the
Parties:

 

Subject
to Section 9 below:

 

6

 

(a)                                  In the event of the bankruptcy of Counterparty
(if it is the Issuer), Deutsche agrees that (1) Deutsche shall not have
rights or assert a claim in respect of this Transaction that is senior in
priority to the rights and claims available to the shareholders of the common
stock of Counterparty, and (2) Deutsche shall not set off any claim in
respect of this Transaction against any amounts owing by Deutsche to Counterparty
under any other transaction between the parties.

 

(b)                                 The parties acknowledge that this Transaction
is not secured by any collateral that would otherwise secure the obligations of
Counterparty herein pursuant to the Agreement. Without limiting the generality
of the foregoing, this Transaction will not be considered to create obligations
covered by any collateral credit support annex to the Agreement and will be
disregarded for the purposes of calculating any exposures pursuant to any such
annex.

 

8.     Transfer:

 

(a)                                  Notwithstanding Section 7 of the Agreement, Deutsche
may transfer its rights and obligations under this Transaction at any time in
its sole discretion (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 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 credit approval and compliance
processes (including, without limitation, the execution and delivery by the
transferee, if required by Deutsche, of a Credit Support Annex containing terms
acceptable to Deutsche).

 

9.     Applicability and
Inapplicability of Certain Provisions:

 

(a)                                  Sections 10(a) and (b) and Appendices A and B
shall continue to apply to the Issuer, notwithstanding any transfer of its
rights or other obligations in accordance with Section 8 above.

 

(b)                                 Sections 4, 5, 6 and 7 of this Confirmation
shall not be applicable to Counterparty if Counterparty is not the Issuer or
any of its affiliates.

 

10.   Additional Agreements, Representations
and Covenants, Etc.:

 

(a)                                  Counterparty hereby represents and warrants
to Deutsche, on each day from the Trade Date to and including the date that is
the earlier of (i) the date by which Deutsche is able to initially
complete a hedge of its position created by this Transaction and (ii) the
date that is three (3) Exchange Business Days following the expiration of
the period in which the Initial Purchaser is permitted to exercise its right to
receive additional Convertible Senior Notes due 2015 of Counterparty issued on
or about June 7, 2005 with an original principal amount of $800,000,000 (the “Reference Notes”) pursuant to the Initial
Purchaser’s option to purchase additional Reference Notes, that:

 

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

 

(2)                                  it has publicly disclosed all material
information necessary for it 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).

 

(b)                                 Counterparty hereby agrees that from the
Trade Date through to and including the Settlement Date, it will comply in all
material respects with all corporate or, if applicable, 

 

7

 

similar
laws affecting its ability to perform its obligations under this Transaction,
including any such requirements of the 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)                                 If the Initial Purchaser party to the Underwriting
Agreement (as defined below) exercises its right to receive additional
Reference Notes pursuant to the Initial Purchaser’s option to purchase
additional Reference Notes, then Deutsche and Counterparty will (i) enter
into a confirmation for a Warrant on substantially identical terms,
including pricing as reflected on the pricing grid provided by Deutsche to
Counterparty on the date hereof, to
this Confirmation with respect to such additional Reference Notes or
(ii) amend this Confirmation to provide for such increase in Reference
Notes (such additional confirmation or amendment to this Confirmation to
provide for the payment by Deutsche to Counterparty of the additional premium
related thereto).

 

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 any 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 Securities Act, or an “accredited investor”
as defined under the Securities Act; and

 

(iv)                              the assets
used in this 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 the 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

 

8

 

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

 

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

 

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

 

(ii)                                  Counterparty will immediately provide notice to Deutsche upon obtaining knowledge
of the occurrence of any event that would constitute an Event of Default, a
Potential Event of Default, a Termination Event or a Merger Event; provided, however, that should Counterparty be in possession
of material non-public information regarding the Issuer, Counterparty will not
communicate such information to Deutsche.

 

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

 

Shares Reserved for Issuance.  Counterparty shall maintain a
number of authorized but unissued Shares that are free from preemptive rights
that at all times exceeds the sum of (x) the Maximum Number of Shares to be Delivered,
plus (y) the aggregate number of Shares
expressly reserved for any other use (including, without limitation, Shares
reserved for issuance upon the exercise of options or convertible debt),
whether expressed as caps or as numbers of Shares reserved or otherwise, and,
notwithstanding the provisions of Section 5(a)(ii) of the Agreement, in the
event of a failure by Counterparty to comply with the agreement set forth in
this clause (v), there shall be no grace period for remedy of such failure.

 

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 Warrant
Equity Percentage as determined on such day is greater by 1.00% than the
Warrant Equity Percentage included in the immediately preceding Repurchase
Notice (or, in the case of the first such Repurchase Notice, greater than the
Warrant Equity Percentage as of the Trade Date).  The “Warrant Equity Percentage”
as of any day is the fraction (A) the numerator of which is the number of
Shares underlying this Transaction on such day and (B) the denominator of which
is the number of Shares outstanding on such day.

 

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

 

11.   Additional Termination Event:

 

The
occurrence of each of the following events 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):

 

9

 

(a)                                  the transactions contemplated by the Underwriting
Agreement among the Issuer and Deutsche Bank Securities Inc., as Initial
Purchaser, dated as of June 2, 2005 (the “Underwriting
Agreement”) relating to the purchase of the Reference Notes shall
fail to close as a result of any breach by the Issuer of its obligations
thereunder, in which case the entirety of this Transaction shall terminate
automatically (and, for purposes of determining Loss in relation to any such
Additional Termination Event, it shall be assumed that all conditions to the
exercise of the Warrants have occurred);

 

(b)                                 the occurrence of a Termination of Trading;
and

 

(c)                                  the inability
of Deutsche or any material increase in costs to Deutsche due to market
conditions, illiquidity, illegality (including with respect to the Transaction
hedge), 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 the Transaction (a “Hedge Event”); provided, however, that the occurrence of any Hedge Event shall be an Additional
Termination Event solely with respect to the number of Warrants with respect to
which such Hedge Event occurs (it being understood that if such number is less
than the number of Warrants hereunder at the time such Hedge Event occurs, the
Transaction shall continue on a number of Warrants with respect to which no Hedge
Event and resulting termination has previously occurred).  “Material increase”
as used herein shall mean (x) with respect to any Shares that Deutsche deems
necessary or advisable to borrow to hedge the price and market risk of entering
into and performing under the Transaction, an increase in the cost of borrowing
such Shares on any day to an amount in excess of 100 basis points per annum, as
determined by Deutsche and (y) with respect to any other hedging activity, a
material increase as determined by Deutsche in its reasonable discretion.

 

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

 

“Termination of Trading” means that the Shares are neither
listed for trading on a U.S. national securities exchange nor approved for
listing on Nasdaq or any similar U.S. system of automated dissemination of
quotations of securities prices.

 

In
calculating the amount payable by Counterparty to Deutsche in connection with
any Additional Termination Event described above, the Calculation Agent shall
make such calculation in good faith and in a commercially reasonable manner.

 

12.   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 

 

10

 

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 to be provided.

 

(d)                                 The date and time of the Transaction
evidenced hereby will be furnished by the Agent to Deutsche and Counterparty.

 

(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 the Transaction
evidenced hereby.

 

(f)                                    Deutsche and Counterparty each represents and
agrees that this Transaction is suitable for it in the light of such party’s
financial situation, investment objectives and needs.

 

13.   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
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, acting through

  its New York branch and solely in its

  capacity as Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Sunil Hariani

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Sunil
  Hariani

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ellen Gardner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Ellen
  Gardner

  
	
   

  	
  Title:

  	
  Vice
  President

  

 

	
  Confirmed
  as of the date first written above:

  
	
   

  
	
  CEPHALON,
  INC. (“Counterparty”)

  
	
   

  
	
   

  
	
  By:

  	
  /s/
  J. Kevin Buchi

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  J.
  Kevin Buchi

  
	
  Title:

  	
  Senior
  Vice President and Chief Financial

  Officer

  
	
   

  	
   

  
	
  DEUTSCHE
  BANK AG, LONDON

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Lee Frakenfield

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  Lee
  Frankenfield

  
	
  Title:

  	
  Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Stanley Rowe

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  Stanley
  Rowe

  
	
  Title:

  	
  Attorney-in-Fact

  

 

 

WARRANT

 

APPENDIX A

to the

CONFIRMATION

of a

TRANSACTION

between

DEUTSCHE BANK AG, LONDON

and

CEPHALON, INC.

 

Terms and Procedures Relating to a Registered Offering

 

The
terms and procedures relating to a Registered Offering are as follows:

 

(a)           Prior to the beginning of the relevant
Reference Price Period, Counterparty shall file with the United States
Securities and Exchange Commission (the “Commission”)
pursuant to the Securities Act of 1933, as amended, (the “Securities
Act”) a registration statement on Form S-3 (or any successor
form thereto) or such other form as is acceptable to Deutsche, in respect of a
number of Shares equal to the Maximum Number of Shares to be Delivered; such
registration statement shall have been declared effective with respect to such
Shares (the “Registration Statement”)
and no stop order suspending the effectiveness of the Registration Statement
shall be in effect, and no proceedings for such purpose shall be pending before
or threatened by the Commission.

 

(b)           To the extent required to effect such
Registered Offering, Deutsche will use reasonable efforts, and shall use reasonable
efforts to cause any Selling Agent engaged by Deutsche and any underwriter(s),
to cooperate with Counterparty in order to comply in all material respects with
the Registration Procedures. “Selling Agent”
shall mean a broker dealer registered with the Commission under Section 15 of
the Exchange Act, and for purposes of this Transaction, the Selling Agent may
also be an underwriter.

 

(c)           Counterparty shall have reserved and have
available, free from pre-emptive rights, out of its authorized but unissued
capital stock the number of Shares of Capital Stock that would be issuable with
respect to such payment, for the purpose of effecting the delivery of any
amount of Shares due from Counterparty as provided in the Confirmation.

 

(d)           Counterparty, at the request of Deutsche,
shall deliver an underwriting agreement reasonably acceptable to Deutsche,
naming Deutsche, or its designee, as underwriter, together with such other
agreements, certificates and instruments as Deutsche may reasonably require
either pursuant to such underwriting agreement or as are customarily provided
together with such underwriting agreement.

 

(e)           Counterparty shall have registered and
qualified such Shares under such securities or “blue sky” laws of such States
and other jurisdictions in the United States of America and Puerto Rico as Deutsche
or any underwriter shall have reasonably requested, and shall have done any and
all other acts and things as may be reasonably necessary to be done by Counterparty
to enable Deutsche or any underwriter to consummate the disposition in such
jurisdictions of the Shares covered by the Registration Statement; provided that Counterparty shall not be
required to make any filing or take any action as a result of this
paragraph (e) that would require Counterparty to qualify as a foreign
corporation or file a general consent to service of process in any
jurisdiction.

 

(f)            Counterparty shall have caused such Shares
and the issuance thereof to be registered with or approved by such other
governmental agencies or authorities in the United States of America as may be

 

reasonably
necessary to be done by Counterparty to enable Deutsche or any underwriter to
consummate the disposition of such Shares.

 

(g)           Counterparty shall have (i) given Deutsche
and its underwriter(s), if any, and their respective counsel and accountants,
the opportunity to participate in the preparation of all materials filed or 

 

A-1

 

to be filed with the Commission pursuant to
the requirements of either the Securities Act or the Exchange Act or any other
governmental agency (the “Filed Materials”)
on or after the first day of a sale period (a “Sale Period”), (ii) furnished to each of them copies of
all such Filed Materials (and all documents incorporated therein by reference)
sufficiently in advance of filing to provide them with a reasonable opportunity
to review such documents and comment thereon, (iii) given each of them
such access to its books and records and such opportunities to discuss the
business of Counterparty with its officers and the independent public
accountants who have issued a report on its financial statement as shall be
reasonably necessary, in the opinion of Deutsche and such underwriter(s) or
their respective counsel, to conduct a reasonable investigation (within the
meaning of the Securities Act) with respect to such Filed Materials,
(iv) delivered to Deutsche and its underwriter(s), if any, the financial
statements of Counterparty filed with the Commission, (v) included in such
Filed Materials material, furnished to Counterparty in writing, which in the
reasonable judgment of Deutsche or its underwriter(s), if any, subject to the
consent of Counterparty (which shall not be unreasonably withheld), should be
included with respect to Deutsche, Deutsche’s underwriter(s) and the “Plan of
Distribution”, including, without limitation, language to the effect that the
holding by Deutsche of the Shares is not to be construed as a recommendation by
Deutsche of the investment quality thereof and (vi) if requested by Deutsche,
deleted from such Filed Materials any reference to Deutsche by name or
otherwise if in the written opinion of counsel to Deutsche, acceptable in form
and substance to Counterparty, such reference to Deutsche by name or otherwise
is not required by the Securities Act or any similar Federal statute or
applicable law then in force.

 

(h)           Counterparty shall have furnished to Deutsche
and any underwriter, addressed to Deutsche and any such underwriter and dated
the first day of the Sale Period, (i) an opinion of counsel for Counterparty
(which opinion may be from internal counsel for Counterparty) and
(ii) a “cold comfort” letter signed by the independent public accountants
who have issued a report on Counterparty’s financial statements included in
such Registration Statement, each in form and substance satisfactory to Deutsche
and any such underwriter and their respective counsel covering substantially
the same matters with respect to such Shares and the offering, sale and issuance
thereof and the financial statements of Counterparty as are customarily covered
in opinions of issuer’s counsel and in accountants’ letters delivered to
underwriter(s) in underwritten public offerings of securities and, in the case
of the accountants’ letter, such other financial matters as Deutsche may have
reasonably requested.

 

(i)            Counterparty shall have complied with all
applicable provisions of the Securities Act and the Exchange Act, all
applicable rules of the Commission and all other applicable laws, rules and
regulations of any governmental or regulatory authority with respect to such
Filed Materials and such Shares and the offering, sale and issuance thereof.

 

(j)            Counterparty shall have caused all such
Shares to be listed on the Exchange and on each securities exchange on which
similar securities issued by Counterparty are then listed.

 

(k)           Counterparty shall have provided a transfer
agent and registrar for such Shares.

 

(l)            Counterparty shall have taken such other
actions as Deutsche or any underwriter of such Shares shall have reasonably
requested in order to expedite or facilitate the disposition of such Shares.

 

(m)          Counterparty shall provide Deutsche and its
underwriter(s), if any, with indemnity and contribution in form and substance acceptable
to Deutsche covering such matters relating to the Shares, the Filed Materials,
and such other matters as Deutsche shall reasonably request.

 

(n)           Counterparty shall have paid all customary
costs and expenses reasonably incurred in connection with the foregoing,
including, but without limitation, all underwriting fees relating to the sale
of the Shares.

 

(o)           Counterparty shall deliver all such
registered Shares through the Clearance System.

 

(p)           If Counterparty is not the Issuer, then
references above in this Appendix A to Counterparty shall be deemed to be
references to the Issuer as necessary, and Counterparty agrees to use its best
efforts to comply with the Registration Procedures set forth above.

 

A-2

 

WARRANT

 

APPENDIX B

to the

CONFIRMATION

of a

TRANSACTION

between

DEUTSCHE BANK AG, LONDON

and

CEPHALON, INC.

 

Terms and Procedures Relating to an Exempt Offering

 

The
terms and procedures relating to an Exempt Offering are as follows:

 

(a)           The Calculation Agent shall determine the Net
Settlement Amount with respect to the related Expiration Date in accordance
with the Settlement Terms set forth in the Confirmation.

 

(b)           On the Exchange Business Day following the
end of the Reference Price Period, Counterparty shall deliver to Deutsche, in
accordance with the other provisions of this Appendix B, the number of
shares that the Calculation Agent reasonably estimates to be the number of
Shares that will produce Net Proceeds (as defined below) at least equal to such
Net Settlement Amount.

 

(c)           Deutsche, through the Selling Agent or any
underwriter(s), shall sell all, or such lesser portion as may be required
hereunder, of such Shares.

 

The
proceeds of each sale in accordance with this Appendix B, net of any fees
and commissions (including, without limitation, underwriting or placement fees)
customary for similar transactions under the circumstances at the time of such
sale, together with carrying charges and expenses incurred in connection with
such offer and sale of the Shares (including, but without limitation to, the
covering of any over-allotment or short position (syndicate or otherwise)) are
referred to the “Net Proceeds” of
such sale.

 

If
the aggregate Net Proceeds of all such sales is less than the Net Settlement
Amount for such Expiration Date, then:

 

(1)           on the date on which Deutsche determines that
there was a shortfall (the “Shortfall
Determination Date”) Deutsche shall notify Counterparty of the
amount of such shortfall;

 

(2)           on the Exchange Business Day next succeeding
the Shortfall Determination Date (the “Election
Date”), Counterparty shall deliver to Deutsche, through the Agent, a
notice of its election either to pay to Deutsche, through the Agent, an amount
in U.S. Dollars equal to such shortfall or to deliver to Deutsche, through the
Agent, additional Shares;

 

(3)           if Counterparty so elects to pay Deutsche
such shortfall, then on the Currency Business Day next succeeding the Election
Date Counterparty shall pay to Deutsche, through the Agent, an amount in U.S.
Dollars equal to such shortfall; and

 

(4)           if Counterparty so elects to deliver
additional Shares, then on the first Clearance System Business Day following
the Election Date Counterparty shall deliver to Deutsche, through the Agent,
additional Shares (meeting the conditions specified herein with respect to the
Shares initially delivered to Deutsche under paragraph (b) above) in such
number as the Calculation Agent reasonably estimates to be the number of Shares
that will produce Net Proceeds at least equal to such shortfall, and thereafter
Deutsche, through the Selling Agent or any underwriter(s), shall sell all, or
such lesser portion as may be required hereunder, of such Shares.

 

B-1

 

The
provisions of this paragraph (c) shall be repeated with respect to such
additional Shares until the aggregate Net Proceeds from the sales of all Shares
delivered by Counterparty under paragraph (b) above and this
paragraph (c) shall be at least equal to the Net Settlement Amount for
such Expiration Date (with the date on which the final sale of Shares occurs
being referred to herein as the “Final Resale
Date” for such Expiration Date),provided
that the aggregate number of Shares sold pursuant to this Appendix B with
respect to all Expiration Dates shall not exceed the Maximum Number of Shares
to be Delivered.

 

Deutsche shall retain all Net Proceeds of all such sales, provided that if the aggregate Net
Proceeds of all such sales exceeds the Net Settlement Amount for such
Expiration Date, then Deutsche will refund such excess to Counterparty in U.S.
Dollars on the date that is three (3) Currency Business Days following
such Final Resale Date. If any portion of the Shares delivered to Deutsche
remains unsold after the Final Resale Date, then Deutsche shall return such
unsold Shares to Counterparty on such Final Resale Date.

 

(d)           Counterparty agrees to comply with the
reasonable requests of Deutsche, the Selling Agent, any placement agent and any
purchaser of the Shares, and Deutsche agrees to use commercially reasonable
means to effect each offer and sale of Shares at commercially reasonable prices
in light of the market conditions and the circumstances of Counterparty at the
time of such offer and sale. Counterparty hereby acknowledges that any Shares
sold pursuant to an Exempt Offering may be sold at prices that are less than
the prices that may otherwise be available if such Shares were to be sold
pursuant to a registered public offering or at prices observed in the secondary
market.

 

(e)           Neither Deutsche nor the Selling Agent nor
any other party shall have any obligation to commence any offer and sale of any
Shares in respect of an Exempt Offering until such conditions as any purchasers
or the Selling Agent, or their respective counsel, may reasonably require are
satisfied.

 

(f)            For purposes of this Appendix B, the Net
Settlement Amount shall be deemed to be the Net Settlement Amount (determined
as provided in the Confirmation to which this Appendix B is attached) plus
an additional amount (determined from time to time by the Calculation Agent in
its commercially reasonable judgment) attributable to interest that would be
earned on such Net Settlement Amount (increased on a daily basis to reflect the
accrual of such interest and reduced from time to time by the amount of Net
Proceeds received by Deutsche as provided herein) at a rate equal to the open
Federal Funds Rate plus the Spread for the period from, and including, such
Settlement Date to, but excluding, the related Final Resale Date and calculated
on an Actual/360 basis. The foregoing provision shall be without prejudice to Deutsche’s
rights under the Agreement (including, without limitation, Sections 5 and 6
thereof).

 

As
used in this paragraph (f), “Spread”
means, with respect to any Net Settlement Amount, the credit spread over the
applicable overnight rate that would be imposed if Deutsche were to extend
credit to Counterparty in an amount equal to such Net Settlement Amount, all as
determined by the Calculation Agent using its commercially reasonable judgment
as of the related Settlement Date. Commercial reasonableness shall take in to
consideration all factors deemed relevant by the Calculation Agent, which are
expected to include, among other things, the credit quality of Counterparty
(and any relevant affiliates) in the then-prevailing market and the credit
spread of similar companies in the relevant industry and other companies having
a substantially similar credit quality.

 

(g)           If Counterparty is not the Issuer, references
above in this Appendix B to Counterparty shall be deemed to be references
to the Issuer as necessary, and Counterparty agrees to use its best efforts to
comply with the Registration Procedures set forth above.

 

B-2

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