EXHIBIT 10.1
JPMorgan Chase Bank, National Association
P.O. Box 161
60 Victoria Embankment
London EC4Y 0JP
England
May 8, 2007
To: Chemed Corporation
2600 Chemed Center
255 East Fifth Street
Cincinnati, OH 45202
Attention: Chief Financial Officer
Telephone No.: (513) 762-6901
Facsimile No.: (513) 287-6713
Re: Call Option Transaction
The purpose of this letter agreement (this "Confirmation") is to
confirm the terms and conditions of the call option transaction entered into
between JPMorgan Chase Bank, National Association, London Branch ("JPMorgan")
and Chemed Corporation ("Counterparty") on the Trade Date specified below (the
"Transaction"). This letter agreement constitutes a "Confirmation" as referred
to in the ISDA Master Agreement specified below. This Confirmation shall replace
any previous agreements and serve as the final documentation for this
Transaction.
The definitions and provisions contained in the 2002 ISDA Equity
Derivatives Definitions (the "Equity Definitions"), as published by the
International Swaps and Derivatives Association, Inc. ("ISDA") are incorporated
into this Confirmation. In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation shall govern. This
Transaction shall constitute a Share Option Transaction within the meaning set
forth in the Equity Definitions. Certain defined terms used herein have the
meanings assigned to them in the Offering Memorandum dated May 8, 2007 (the
"Offering Memorandum") relating to the USD 180,000,000 principal amount of
1.875% Convertible Senior Notes due 2014, (the "Convertible Notes" and each USD
1,000 principal amount of Convertible Notes, a "Convertible Note") issued by
Counterparty pursuant to an Indenture to be dated May 14, 2007 between
Counterparty and LaSalle Bank, N.A., as trustee (the "Indenture"). In the event
of any inconsistency between the terms defined in the Offering Memorandum, the
Indenture and this Confirmation, this Confirmation shall govern. The parties
acknowledge that this Confirmation is entered into on the date hereof with the
understanding that (i) definitions set forth in the Indenture which are also
defined herein by reference to the Indenture and (ii) sections of the Indenture
that are referred to herein will conform to the descriptions thereof in the
Offering Memorandum. If any such definitions in the Indenture or any such
sections of the Indenture differ from the descriptions thereof in the Offering
Memorandum, the descriptions thereof in the Offering Memorandum will govern for
purposes of this Confirmation. The parties further acknowledge that the
Indenture section numbers used herein are based on the draft of the Indenture
last reviewed by JPMorgan as of the date of this Confirmation, and if any such
section numbers are changed in the Indenture as executed, the parties will amend
this Confirmation in good faith to preserve the intent of the parties. For the
avoidance of doubt, references to the Indenture herein are references to the
Indenture as in effect on the date of its execution and if the Indenture is
amended following its execution, any such amendment will be disregarded for
purposes of this Confirmation unless the parties agree otherwise in writing.
Each party is hereby advised, and each such party acknowledges, that
the other party has engaged in, or refrained from engaging in, substantial
financial transactions and has taken other material actions in reliance upon the
parties' entry into the Transaction to which this Confirmation relates on the
terms and conditions set forth below.
1. This Confirmation evidences a complete and binding agreement between JPMorgan
and Counterparty as to the terms of the Transaction to which this Confirmation
relates. This Confirmation shall supplement, form a part of, and be subject to
an agreement in the form of the 2002 ISDA Master Agreement (the "Agreement") as
if JPMorgan and Counterparty had executed an agreement in such form (but without
any Schedule except for the election of the laws of the State of New York as the
governing law) on the Trade Date. In the event of any inconsistency between
provisions of that Agreement and this Confirmation, this Confirmation will
prevail for the purpose of the Transaction to which this Confirmation relates.
The parties hereby agree that no Transaction other than the Transaction to which
this Confirmation relates shall be governed by the Agreement.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
Trade Date: May 8, 2007
Option Style: "Modified American", as described
under "Procedures for Exercise"
below
Option Type: Call
Buyer: Counterparty
Seller: JPMorgan
Shares: The capital stock of Counterparty,
par value USD 1 per Share
(Exchange symbol "CHE")
Number of Options: 90,000; provided that the Number of
Options shall be automatically
increased as of the date of
exercise (the "Greenshoe
Exercise") by J.P. Morgan
Securities Inc. and Citigroup
Global Markets Inc. as
representatives of the Initial
Purchasers (as defined in the
Purchase Agreement dated as of May
8, 2007 between Counterparty, J.P.
Morgan Securities Inc. and
Citigroup Global Markets Inc. as
representatives of the Initial
Purchasers party thereto (the
"Purchase Agreement")), of their
option pursuant to Section 1 of
the Purchase Agreement by the
number of additional Convertible
Notes in denominations of USD
1,000 principal amount issued
pursuant to such exercise (such
Convertible Notes, the "Additional
Convertible Notes") multiplied by
50% (the "Additional Options").
For the avoidance of doubt, the
Number of Options shall be reduced
by any Options exercised by
Counterparty. In no event will the
Number of Options be less than
zero.
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Option Entitlement: As of any date, a number equal to
the Conversion Rate as of such
date (as defined in the Indenture,
but without regard to any
adjustments to the Conversion Rate
pursuant to Section 11.02(h),
Section 11.02(i) or to Section
11.03 of the Indenture), for each
Convertible Note.
Strike Price: USD 80.7275
Premium: USD 24,702,300 (Premium per Option:
USD 274.4700); provided that if
the Number of Options is increased
pursuant to the proviso to the
definition of "Number of Options"
above, there shall be an
additional Premium equal to the
product of the number of
Additional Options and the Premium
per Option (the "Additional
Premium"), and such Additional
Premium shall be paid by
Counterparty to JPMorgan on the
Additional Premium Payment Date.
Premium Payment Date: May 14, 2007
Additional Premium Payment Date: The closing date for the purchase
and sale of the Additional
Convertible Notes.
Exchange: The New York Stock Exchange
Related Exchange(s): All Exchanges
Procedures for Exercise:
Exercise Period(s): Notwithstanding anything to the
contrary in the Equity
Definitions, an Exercise Period
shall occur with respect to an
Option hereunder only if such
Option is an Exercisable Option
(as defined below) and the
Exercise Period shall be, in
respect of any Exercisable Option,
the period commencing on, and
including, the relevant Conversion
Date and ending on, and including,
the Scheduled Valid Day
immediately preceding the first
day of the relevant Settlement
Averaging Period in respect of
such Conversion Date; provided
that in respect of Exercisable
Options relating to Convertible
Notes for which the relevant
Conversion Date occurs on or after
March 1, 2014, the final day of
the Exercise Period shall be the
Scheduled Valid Day immediately
preceding the Expiration Date.
Conversion Date: With respect to any conversion of
Convertible Notes, the date on
which the Holder (as such term is
defined in the Indenture) of such
Convertible Notes satisfies all of
the requirements for conversion
thereof as set forth in Section
11.01(b) of the Indenture.
Exercisable Options: In respect of each Exercise Period,
a number of Options equal to 50%
of the number of USD 1,000
principal amount of Convertible
Notes surrendered to Counterparty
for conversion with respect to
such Exercise Period but no
greater than the Number of
Options.
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Expiration Time: The Valuation Time
Expiration Date: May 15, 2014, subject to earlier
exercise.
Multiple Exercise: Applicable, as described under
Exercisable Options above.
Automatic Exercise: Applicable; and means that in
respect of an Exercise Period, a
number of Options not previously
exercised hereunder equal to the
number of Exercisable Options
shall be deemed to be exercised on
the final day of such Exercise
Period for such Exercisable
Options; provided that such
Options shall be deemed exercised
only to the extent that
Counterparty has provided a Notice
of Exercise to JPMorgan.
Notice of Exercise: Notwithstanding anything to the
contrary in the Equity
Definitions, in order to exercise
any Exercisable Options,
Counterparty must notify JPMorgan
in writing before 5:00 p.m. (New
York City time) on the Scheduled
Valid Day prior to the scheduled
first day of the Settlement
Averaging Period for the
Exercisable Options being
exercised (the "Notice Deadline")
of (i) the number of such Options
and (ii) the scheduled first day
of the Settlement Averaging Period
and the scheduled Settlement Date;
provided that, notwithstanding the
foregoing, such notice (and the
related exercise of Exercisable
Options) shall be effective if
given after the Notice Deadline
but prior to 5:00 p.m. (New York
City time) on the fifth Scheduled
Valid Day after the Notice
Deadline, in which event the
Calculation Agent shall have the
right to adjust the number of Net
Shares as appropriate to reflect
the additional costs (including,
but not limited to, hedging
mismatches and market losses) and
expenses incurred by JPMorgan in
connection with its hedging
activities (including the
unwinding of any hedge position)
as a result of JPMorgan not having
received such notice prior to the
Notice Deadline; provided further
that in respect of Exercisable
Options relating to Convertible
Notes with a Conversion Date
occurring on or after March 1,
2014, such notice may be given on
or prior to the second Scheduled
Valid Day immediately preceding
the Expiration Date and need only
specify the number of such
Exercisable Options.
Valuation Time: At the close of trading of the
regular trading session on the
Exchange.
Market Disruption Event: Section 6.3(a) of the Equity
Definitions is hereby replaced in
its entirety by the following:
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"'Market Disruption Event' means in
respect of a Share, (i) a failure
by the primary United States
national or regional securities
exchange or market on which Shares
are listed or admitted to trading
to open for trading during its
regular trading session or (ii)
the occurrence or existence prior
to 1:00 p.m. (New York City time)
on any Scheduled Valid Day for the
Shares for an aggregate one half
hour period of any suspension or
limitation imposed on trading (by
reason of movements in price
exceeding limits permitted by the
relevant stock exchange or
otherwise) in the Shares or in any
options, contracts or future
contracts relating to the Shares."
Settlement Terms:
Settlement Method: Net Share Settlement
Net Share Settlement: JPMorgan will deliver to
Counterparty, on the relevant
Settlement Date, a number of
Shares equal to the Net Shares in
respect of any Exercisable Option
exercised or deemed exercised
hereunder. In no event will the
Net Shares be less than zero.
Net Shares: In respect of any Exercisable
Option exercised or deemed
exercised, a number of Shares
equal to (i) the Option
Entitlement multiplied by (ii) the
sum of the quotients, for each
Valid Day during the Settlement
Averaging Period for such
Exercisable Option, of (A) the
Relevant Price on such Valid Day
less the Strike Price, divided by
(B) such Relevant Price, divided
by (iii) the number of Valid Days
in the Settlement Averaging
Period; provided, however, that if
the calculation contained in
clause (A) above results in a
negative number, such number shall
be replaced with the number
"zero".
JPMorgan will deliver cash in lieu
of any fractional Shares to be
delivered with respect to any Net
Shares valued at the Relevant
Price for the last Valid Day of
the Settlement Averaging Period.
Valid Day: A day on which (i) trading in the
Shares generally occurs on the
Exchange or, if the Shares are not
then listed on the Exchange, on
the principal other U.S. national
or regional securities exchange on
which the Shares are then listed
or, if the Shares are not then
listed on a U.S. national or
regional securities exchange, on
the principal other market on
which the Shares are then traded
and (ii) there is no Market
Disruption Event.
Scheduled Valid Day: A day on which trading in the
Shares is scheduled to occur on
the principal U.S. national or
regional securities exchange or
market on which the Shares are
listed or admitted for trading.
Relevant Price: On any Valid Day, the per Share
volume-weighted average price as
displayed under the heading
"Bloomberg VWAP" on Bloomberg page
CHE.N (equity) AQR (or any
successor thereto) in respect of
the period from the scheduled
opening time of the Exchange to
the Scheduled Closing Time of the
Exchange on such Valid Day (or if
such volume-weighted average price
is unavailable, the market value
of one Share on such Valid Day, as
determined by the Calculation
Agent using a volume-weighted
method).
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Settlement Averaging Period: For any Exercisable Option, (x) if
Counterparty has, on or prior to
March 1, 2014, delivered a Notice
of Exercise to JPMorgan with
respect to such Exercisable Option
with a Conversion Date occurring
prior to March 1, 2014, the forty
(40) consecutive Valid Days
commencing on and including the
second Scheduled Valid Day
following such Conversion Date, or
(y) if Counterparty has, on or
following March 1, 2014, delivered
a Notice of Exercise to JPMorgan
with respect to such Exercisable
Option with a Conversion Date
occurring on or following March 1,
2014, the forty (40) consecutive
Valid Days commencing on, and
including, the forty second (42nd)
Scheduled Valid Day immediately
prior to the Expiration Date.
Settlement Date: For any Exercisable Option, the
date Shares will be delivered with
respect to the Convertible Notes
related to such Exercisable
Options, under the terms of the
Indenture.
Settlement Currency: USD
Failure to Deliver: Applicable
Other Applicable Provisions: The provisions of Sections 9.1(c),
9.8, 9.9, 9.11, 9.12 and 10.5 of
the Equity Definitions will be
applicable, except that all
references in such provisions to
"Physically-settled" shall be read
as references to "Net Share
Settled". "Net Share Settled" in
relation to any Option means that
Net Share Settlement is applicable
to that Option.
Representation and Agreement: Notwithstanding Section 9.11 of the
Equity Definitions, the parties
acknowledge that any Shares
delivered to Counterparty shall
be, upon delivery, subject to
restrictions and limitations
arising from Counterparty's status
as issuer of the Shares under
applicable securities laws.
3. Additional Terms applicable to the Transaction:
Adjustments applicable to the Transaction:
Potential Adjustment Events: Notwithstanding Section 11.2(e) of
the Equity Definitions, a
"Potential Adjustment Event" means
an occurrence of any event or
condition, as set forth in Section
11.02 of the Indenture that would
result in an adjustment to the
Conversion Rate of the Convertible
Notes; provided that in no event
shall there be any adjustment
hereunder as a result of an
adjustment to the Conversion Rate
pursuant to Section 11.02(h),
Section 11.02(i) or Section 11.03
of the Indenture.
6
Method of Adjustment: Calculation Agent Adjustment, and
means that, notwithstanding
Section 11.2(c) of the Equity
Definitions, upon any adjustment
to the Conversion Rate of the
Convertible Notes pursuant to the
Indenture (other than Section
11.02(h), Section 11.02(i) and
Section 11.03 of the Indenture),
the Calculation Agent will make a
corresponding adjustment to any
one or more of the Strike Price,
Number of Options, the Option
Entitlement and any other variable
relevant to the exercise,
settlement or payment for the
Transaction. The Calculation Agent
shall promptly thereafter notify
JPMorgan and Counterparty of any
such corresponding adjustment.
Extraordinary Events applicable to the Transaction:
Merger Events: Notwithstanding Section 12.1(b) of
the Equity Definitions, a "Merger
Event" means the occurrence of any
event or condition set forth in
clause (2) of the definition of
Fundamental Change in Section 1.01
of the Indenture.
Tender Offers: Applicable; provided that
notwithstanding Section 12.1(d) of
the Equity Definitions, a "Tender
Offer" means the occurrence of any
event or condition set forth in
clause (1) of the definition of
Fundamental Change in Section 1.01
of the Indenture.
Consequence of Merger Events/
Tender Offers: Notwithstanding Section 12.2 and
Section 12.3 of the Equity
Definitions, upon the occurrence
of a Merger Event or a Tender
Offer, the Calculation Agent shall
make a corresponding adjustment in
respect of any adjustment under
the Indenture to any one or more
of the nature of the Shares,
Strike Price, Number of Options,
the Option Entitlement and any
other variable relevant to the
exercise, settlement or payment
for the Transaction; provided,
however, that such adjustment
shall be made without regard to
any adjustment to the Conversion
Rate for the issuance of
additional shares as set forth in
Section 11.03 of the Indenture;
provided further that if, with
respect to a Merger Event or a
Tender Offer, the consideration
for the Shares includes (or, at
the option of a holder of Shares,
may include) shares of an entity
or person not organized under the
laws of the United States, any
State thereof or the District of
Columbia," Cancellation and
Payment shall apply.
7
Nationalization, Insolvency or Delisting: Cancellation and Payment
(Calculation Agent Determination);
provided that, in addition to the
provisions of Section 12.6(a)(iii)
of the Equity Definitions, it will
also constitute a Delisting if the
Exchange is located in the United
States and the Shares are not
immediately re-listed, re-traded
or re-quoted on any of the New
York Stock Exchange, the American
Stock Exchange, The NASDAQ Global
Select Market or The NASDAQ Global
Market (or their respective
successors); if the Shares are
immediately re-listed, re-traded
or re-quoted on any of the New
York Stock Exchange, the American
Stock Exchange, The NASDAQ Global
Select Market or The NASDAQ Global
Market (or their respective
successors), such exchange or
quotation system shall thereafter
be deemed to be the Exchange.
Additional Disruption Events:
Change in Law: Applicable
Insolvency Filing: Applicable
Failure to Deliver: Applicable
Hedging Party: For all applicable Additional
Disruption Events, JPMorgan
Determining Party: For all applicable Additional
Disruption Events, JPMorgan
Non-Reliance: Applicable
Agreements and Acknowledgements
Regarding Hedging Activities: Applicable
Additional Acknowledgments: Applicable
4. Calculation Agent: JPMorgan. The Calculation Agent
shall, upon request by the
Counterparty, provide a written
explanation of any calculation
made by it including, where
applicable, a description of the
methodology and data applied.
5. Account Details:
(a) Account for payments to Counterparty:
JP Morgan Chase Bank
ABA# 021000021
Acct: Chemed Corporation
Acct No.: 94-13065
Account for delivery of Shares to Counterparty:
To be provided by Counterparty
8
(b) Account for payments to JPMorgan:
JPMorgan Chase Bank, National Association, New York
ABA: 021 000 021
Favour: JPMorgan Chase Bank, National Association - London
A/C: 0010962009 CHASUS33
Account for delivery of Shares from JPMorgan:
DTC 0060
6. Offices:
The Office of Counterparty for the Transaction is: Inapplicable, Counterparty is
not a Multibranch Party.
The Office of JPMorgan for the Transaction is: London
JPMorgan Chase Bank, National Association
London Branch
P.O. Box 161
60 Victoria Embankment
London EC4Y 0JP
England
7. Notices: For purposes of this Confirmation:
(a) Address for notices or communications to Counterparty:
Chemed Corporation
2600 Chemed Center
255 East Fifth Street
Cincinnati, OH 45202
Attention: Chief Financial Officer
Telephone No.: (513) 762-6901
Facsimile No.: (513) 287-6713
(b) Address for notices or communications to JPMorgan:
JPMorgan Chase Bank, National Association
277 Park Avenue, 11th Floor
New York, NY 10172
Attention: Eric Stefanik
Title: Operations Analyst
EDG Corporate Marketing
Telephone No: (212) 622-5814
Facsimile No: (212) 622-8534
9
8. Representations and Warranties
(i) Representations and Warranties of Counterparty
The representations and warranties of Counterparty set forth in Section 3 of the
Purchase Agreement are true and correct and are hereby deemed to be repeated to
JPMorgan as if set forth herein. Counterparty hereby further represents and
warrants to JPMorgan that:
(a) 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 valid and binding obligation, enforceable against
Counterparty in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and
remedies generally, and to general principles of equity,
including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity) and except that rights to
indemnification and contribution hereunder may be limited by
federal or state securities laws or public policy relating
thereto.
(b) Neither the execution and delivery of this Confirmation nor the
incurrence or performance of obligations of Counterparty
hereunder will (i) conflict with or result in a breach of the
certificate of incorporation or by-laws (or any equivalent
documents) of Counterparty, or any applicable law or regulation,
or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument
to which Counterparty or any of its subsidiaries is a party or by
which Counterparty or any of its subsidiaries is bound or to
which Counterparty or any of its subsidiaries is subject
(including, but not limited to, any agreements and contracts of
Counterparty or any of its subsidiaries filed as exhibits to
Counterparty's Annual Report on Form 10-K for the year ended
December 31, 2006, incorporated by reference in the Offering
Memorandum), or (ii) constitute a default under, or result in the
creation of any lien under, any such agreement or instrument.
(c) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required in
connection with the execution, delivery or performance by
Counterparty of this Confirmation, except such as have been
obtained or made and such as may be required under the Securities
Act of 1933, as amended (the "Securities Act") or state
securities laws.
(d) It is an "eligible contract participant" (as such term is defined
in Section 1a(12) of the Commodity Exchange Act, as amended (the
"CEA")) because one or more of the following is true:
Counterparty is a corporation, partnership, proprietorship,
organization, trust or other entity and:
(A) Counterparty has total assets in excess of USD 10,000,000;
(B) the obligations of Counterparty hereunder are guaranteed, or
otherwise supported by a letter of credit or keepwell,
support or other agreement, by an entity of the type
described in Section 1a(12)(A)(i) through (iv),
1a(12)(A)(v)(I), 1a(12)(A)(vii) or 1a(12)(C) of the CEA; or
10
(C) Counterparty has a net worth in excess of USD 1,000,000 and
has entered into this Agreement in connection with the
conduct of Counterparty's business or to manage the risk
associated with an asset or liability owned or incurred or
reasonably likely to be owned or incurred by Counterparty in
the conduct of Counterparty's business.
(e) Each of it and its controlled affiliates is not, on the date
hereof, in possession of any material non-public information with
respect to Counterparty.
(ii) Additional representations and warranties
(a) JPMorgan represents that it is an "eligible contract participant"
as defined in Section 1a(12) of the CEA.
(b) Each of JPMorgan and Counterparty acknowledges that the offer and
sale of the Transaction to it is intended to be exempt from
registration under the Securities Act, by virtue of Section 4(2)
thereof.
9. Other Provisions:
(a) Opinions. Counterparty shall deliver to JPMorgan an opinion of
counsel, dated as of the Trade Date, with respect to the matters
set forth in Sections 8(i)(a) through (c) of this Confirmation.
(b) Reserved
(c) Repurchase Notices. Counterparty shall, on any day on which
Counterparty effects any repurchase of Shares, promptly give
JPMorgan a written notice of such repurchase (a "Repurchase
Notice") on such day if following such repurchase, the number of
outstanding Shares as determined on such day is (i) less than 21
million (in the case of the first such notice) or (ii) thereafter
more than 1.6 million less than the number of Shares included in
the immediately preceding Repurchase Notice. Counterparty agrees
to indemnify and hold harmless JPMorgan and its affiliates and
their respective officers, directors, employees, affiliates,
advisors, agents and controlling persons (each, an "Indemnified
Person") from and against any and all losses (including losses
relating to JPMorgan's hedging activities as a consequence of
becoming, or of the risk of becoming, a Section 16 "insider",
including without limitation, any forbearance from hedging
activities or cessation of hedging activities and any losses in
connection therewith with respect to this Transaction), claims,
damages, judgments, liabilities and expenses (including
reasonable attorney's fees), joint or several, which an
Indemnified Person may become subject to, as a result of
Counterparty's failure to provide JPMorgan with a Repurchase
Notice on the day and in the manner specified in this paragraph,
and to reimburse, within 30 days, upon written request, each of
such Indemnified Persons for any reasonable legal or other
expenses incurred in connection with investigating, preparing
for, providing testimony or other evidence in connection with or
defending any of the foregoing. If any suit, action, proceeding
(including any governmental or regulatory investigation), claim
or demand shall be brought or asserted against the Indemnified
Person as a result of Counterparty's failure to provide JPMorgan
with a Repurchase Notice in accordance with this paragraph, such
Indemnified Person shall promptly notify Counterparty in writing,
and Counterparty, upon request of the Indemnified Person, shall
retain counsel reasonably satisfactory to the Indemnified Person
to represent the Indemnified Person and any others Counterparty
may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. Counterparty
shall not be liable for any settlement of any proceeding
contemplated by this paragraph that is effected without its
written consent, but if settled with such consent or if there be
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a final judgment for the plaintiff, Counterparty agrees to
indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Counterparty
shall not, without the prior written consent of the Indemnified
Person, effect any settlement of any pending or threatened
proceeding contemplated by this paragraph that is in respect of
which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement (x) includes an unconditional
release of such Indemnified Person, in form and substance
reasonably satisfactory to such Indemnified Person, from all
liability on claims that are the subject matter of such
proceeding and (y) does not include any statement as to or any
admission of fault, culpability or a failure to act by or on
behalf of any Indemnified Person. If the indemnification provided
for in this paragraph is unavailable to an Indemnified Person or
insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then Counterparty hereunder, in
lieu of indemnifying such Indemnified Person thereunder, shall
contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or
liabilities. The remedies provided for in this paragraph (c) are
not exclusive and shall not limit any rights or remedies which
may otherwise be available to any Indemnified Party at law or in
equity. The indemnity and contribution agreements contained in
this paragraph shall remain operative and in full force and
effect regardless of the termination of this Transaction.
(d) Regulation M. Counterparty is not on the date hereof engaged in a
distribution, as such term is used in Regulation M under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
of any securities of Counterparty, other than (i) a distribution
meeting the requirements of the exception set forth in Rules
101(b)(10) and 102(b)(7) of Regulation M and (ii) the
distribution of the Convertible Notes. Counterparty shall not,
until the second Scheduled Trading Day immediately following the
Trade Date, engage in any such distribution.
(e) No Manipulation. Counterparty is not entering into this
Transaction to create actual or apparent trading activity in the
Shares (or any security convertible into or exchangeable for the
Shares) or to raise or depress or otherwise manipulate the price
of the Shares (or any security convertible into or exchangeable
for the Shares) or otherwise in violation of the Exchange Act.
(f) Early Unwind. In the event the sale of Convertible Notes (or, in
respect of the Greenshoe Exercise, the Additional Convertible
Notes) is not consummated with the Initial Purchasers for any
reason by the close of business in New York on May 14, 2007 (or,
in respect of the Greenshoe Exercise, the third Clearance System
Business Day following the date of the Greenshoe Exercise (the
"Additional Closing Date")) (or such later date as agreed upon by
the parties) (May 14, 2007 or such later date as agreed upon
being or, in respect of the Greenshoe Exercise, the Additional
Closing Date, the "Early Unwind Date"), this Transaction (or, in
respect of the Greenshoe Exercise, the Additional Options) shall
automatically terminate (the "Early Unwind"), on the Early Unwind
Date and (i) the Transaction (or, in respect of the Greenshoe
Exercise, the Additional Options) and all of the respective
rights and obligations of JPMorgan and Counterparty under the
Transaction (or, in respect of the Greenshoe Exercise, the
Additional Options) shall be cancelled and terminated and (ii)
each party shall be released and discharged by the other party
from and agrees not to make any claim against the other party
with respect to any obligations or liabilities of the other party
arising out of and to be performed in connection with the
Transaction (or, in respect of the Greenshoe Exercise, the
Additional Options) either prior to or after the Early Unwind
Date; provided that, unless the sale of the Convertible Notes or
the Additional Convertible Notes, as applicable, is not
consummated due to a breach of the Purchase Agreement by the
Initial Purchasers, Counterparty shall purchase from JPMorgan on
the Early Unwind Date all Shares purchased by JPMorgan or one or
12
more of its affiliates and reimburse JPMorgan for any
commercially reasonable costs or expenses (including market
losses) relating to the unwinding of its hedging activities in
connection with the Transaction (or, in respect of the Greenshoe
Exercise, the Additional Options) (including any loss or cost
incurred as a result of its terminating, liquidating, obtaining
or reestablishing any hedge or related trading position). The
amount of any such reimbursement shall be determined by JPMorgan
in its sole good faith discretion. JPMorgan shall notify
Counterparty of such amount and Counterparty shall pay such
amount in immediately available funds on the Early Unwind Date.
JPMorgan and Counterparty represent and acknowledge to the other
that, subject to the proviso included in this paragraph, upon an
Early Unwind, all obligations with respect to the Transaction
shall be deemed fully and finally discharged.
(g) Transfer or Assignment. Counterparty may not transfer any of its
rights or obligations under this Transaction without the prior
written consent of JPMorgan. JPMorgan may not, without
Counterparty's consent, transfer or assign all or any part of its
rights or obligations under the Transaction; provided that if (i)
JPMorgan's "beneficial ownership" (within the meaning of Section
13 of the Exchange Act and rules promulgated thereunder) exceeds
7.5% of Counterparty's outstanding Shares or (ii) the quotient of
(x) the product of (a) the Number of Options and (b) the Option
Entitlement divided by (y) the number of Counterparty's
outstanding Shares (such quotient expressed as a percentage, the
"Option Equity Percentage") exceeds 14.5%, JPMorgan may assign or
transfer a portion of the Transaction without Counterparty's
consent to any third party with a rating for its long term,
unsecured and unsubordinated indebtedness equal to or better than
the lesser of (i) the credit rating of JPMorgan at the time of
the transfer and (ii) A- by Standard and Poor's Rating Group,
Inc. or its successor ("S&P"), or A3 by Moody's Investor Service,
Inc. ("Moody's") or, if either S&P or Moody's ceases to rate such
debt, at least an equivalent rating or better by a substitute
agency rating mutually agreed by Counterparty and JPMorgan to
reduce (i) JPMorgan's "beneficial ownership" (within the meaning
of Section 13 of the Exchange Act and rules promulgated
thereunder) to 7.5% of Counterparty's outstanding Shares or less
or (ii) the Option Equity Percentage to 14.5% or less. If after
JPMorgan's commercially reasonable efforts, JPMorgan is unable to
effect a transfer or assignment permitted by the proviso to the
immediately preceding sentence on pricing terms reasonably
acceptable to JPMorgan and within a time period reasonably
acceptable to JPMorgan of a sufficient number of Options JPMorgan
may designate any Exchange Business Day as an Early Termination
Date with respect to a portion (the "Terminated Portion") of this
Transaction, such that (i) its "beneficial ownership" following
such partial termination will be equal to or less than 7.5% or
(ii) the Option Equity Percentage following such partial
termination will be equal to or less than 14.5%. In the event
that JPMorgan so designates an Early Termination Date with
respect to a portion of this Transaction, a payment shall be made
pursuant to Section 6 of the Agreement as if (i) an Early
Termination Date had been designated in respect of a Transaction
having terms identical to this Transaction and a Number of
Options equal to the Terminated Portion, (ii) Counterparty shall
be the sole Affected Party with respect to such partial
termination and (iii) such Transaction shall be the only
Terminated Transaction (and, for the avoidance of doubt, the
provisions of Section 9(n) shall apply to any amount that is
payable by JPMorgan to Counterparty pursuant to this sentence as
if Counterparty was not the Affected Party). Notwithstanding any
other provision in this Confirmation to the contrary requiring or
allowing JPMorgan to purchase, sell, receive or deliver any
shares or other securities to or from Counterparty, JPMorgan may
designate any of its affiliates to purchase, sell, receive or
deliver such shares or other securities and otherwise to perform
JPMorgan's obligations in respect of this Transaction and any
such designee may assume such obligations. JPMorgan shall be
discharged of its obligations to Counterparty to the extent of
any such performance.
13
(h) Staggered Settlement. If upon advice of counsel with respect to
applicable legal and regulatory requirements, including any
requirements relating to JPMorgan's hedging activities hereunder,
JPMorgan reasonably determines that it would not be practicable
or advisable to deliver, or to acquire Shares to deliver, any or
all of the Shares to be delivered by JPMorgan on the Settlement
Date for the Transaction, JPMorgan may, by notice to Counterparty
on or prior to any Settlement Date (a "Nominal Settlement Date"),
elect to deliver the Shares on two or more dates (each, a
"Staggered Settlement Date") as follows:
(a) in such notice, JPMorgan 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) and the number of
Shares that it will deliver on each Staggered Settlement
Date;
(b) the aggregate number of Shares that JPMorgan will deliver to
Counterparty hereunder on all such Staggered Settlement
Dates will equal the number of Shares that JPMorgan would
otherwise be required to deliver on such Nominal Settlement
Date; and
(c) if the Net Share Settlement terms set forth above were to
apply on the Nominal Settlement Date, then the Net Share
Settlement terms will apply on each Staggered Settlement
Date, except that the Net Shares will be allocated among
such Staggered Settlement Dates as specified by JPMorgan in
the notice referred to in clause (a) above.
(i) Role of Agent. Each party agrees and acknowledges that (i) J.P.
Morgan Securities Inc., an affiliate of JPMorgan ("JPMSI"), has
acted solely as agent and not as principal with respect to this
Transaction and (ii) JPMSI has no obligation or liability, by way
of guaranty, endorsement or otherwise, in any manner in respect
of this Transaction (including, if applicable, in respect of the
settlement thereof). Each party agrees it will look solely to the
other party (or any guarantor in respect thereof) for performance
of such other party's obligations under this Transaction.
(j) Reserved
(k) Additional Termination Events. Notwithstanding anything to the
contrary in this Confirmation if an event of default with respect
to Counterparty shall occur under the terms of the Convertible
Notes as set forth in Section 5.01 of the Indenture and such
event of default results in the declaration of any principal and
interest immediately due and payable pursuant to Section 5.02 of
the Indenture, then such event of default shall constitute an
Additional Termination Event applicable to the Transaction and,
with respect to such event of default (A) Counterparty shall be
deemed to be the sole Affected Party and the Transaction shall be
the sole Affected Transaction and (B) JPMorgan shall be the party
entitled to designate an Early Termination Date pursuant to
Section 6(b) of the Agreement.
(l) Amendments to Equity Definitions. (i) Section 12.6(a)(ii) of the
Equity Definitions is hereby amended by (1) deleting from the
fourth line thereof the word "or" after the word "official" and
inserting a comma therefor, and (2) deleting the semi-colon at
the end of subsection (B) thereof and inserting the following
words therefor "or (C) at JPMorgan's option, the occurrence of
any of the events specified in Section 5(a)(vii) (1) through (9)
of the ISDA Master Agreement with respect to that Issuer."
14
(ii) Section 12.9(b)(i) of the Equity Definitions is hereby
amended by (1) replacing "either party may elect" with
"JPMorgan may elect" and (2) replacing "notice to the other
party" with "notice to Counterparty" in the first sentence
of such section.
(m) Setoff. In addition to and without limiting any rights of set-off
that a party hereto may have as a matter of law, pursuant to
contract or otherwise, upon the occurrence of an Early
Termination Date, JPMorgan (and only JPMorgan) shall have the
right to set off any obligation that it may have to Counterparty
under this Confirmation, including without limitation any
obligation to make any payment of cash or delivery of Shares to
Counterparty, against any obligation Counterparty may have to
JPMorgan under any other agreement between JPMorgan and
Counterparty relating to Shares (each such contract or agreement,
a "Separate Agreement"), including without limitation any
obligation to make a payment of cash or a delivery of Shares or
any other property or securities. For this purpose, JPMorgan
shall be entitled to convert any obligation (or the relevant
portion of such obligation) denominated in one currency into
another currency at the rate of exchange at which it would be
able to purchase the relevant amount of such currency, and to
convert any obligation to deliver any non-cash property into an
obligation to deliver cash in an amount calculated by reference
to the market value of such property as of the Early Termination
Date, as determined by the Calculation Agent in its sole
discretion; provided that in the case of a set-off of any
obligation to release or deliver assets against any right to
receive fungible assets, such obligation and right shall be set
off in kind and; provided further that in determining the value
of any obligation to deliver Shares, the value at any time of
such obligation shall be determined by reference to the market
value of the Shares at such time, as determined in good faith by
the Calculation Agent. If an obligation is unascertained at the
time of any such set-off, the Calculation Agent may in good faith
estimate the amount or value of such obligation, in which case
set-off will be effected in respect of that estimate, and the
relevant party shall account to the other party at the time such
obligation or right is ascertained.
(n) Alternative Calculations and Payment on Early Termination and on
Certain Extraordinary Events. If in respect of this Transaction,
an amount is payable by JPMorgan to Counterparty (i) pursuant to
Section 12.7 or Section 12.9 of the Equity Definitions or (ii)
pursuant to Section 6(d)(ii) of the Agreement (a "Payment
Obligation"), Counterparty may request JPMorgan to satisfy any
such Payment Obligation by the Share Termination Alternative (as
defined below) (except that Counterparty shall not make such an
election in the event of a Nationalization, Insolvency, a Merger
Event or Tender Offer, in each case, in which the consideration
to be paid to holders of Shares consists solely of cash, or an
Event of Default in which Counterparty is the Defaulting Party or
a Termination Event in which Counterparty is the Affected Party,
other than an Event of Default of the type described in Section
5(a)(iii), (v), (vi), (vii) or (viii) of the Agreement or a
Termination Event of the type described in Section 5(b) of the
Agreement in each case that resulted from an event or events
outside Counterparty's control) and shall give irrevocable
telephonic notice to JPMorgan, confirmed in writing within one
Currency Business Day, no later than 12:00 p.m. New York local
time on the Merger Date, the Announcement Date (in the case of
Nationalization, Insolvency or Delisting), the Early Termination
Date or date of cancellation, as applicable; provided that if
Counterparty does not validly request JPMorgan to satisfy its
Payment Obligation by the Share Termination Alternative, JPMorgan
shall have the right, in its sole discretion, to satisfy its
Payment Obligation by the Share Termination Alternative,
notwithstanding Counterparty's election to the contrary. 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 Section 6(e)
with respect to (i) this Transaction and (ii) all other
Transactions, and (2) such separate amounts shall be payable
pursuant to Section 6(d)(ii) of the Agreement. For the avoidance
of doubt, the parties agree that in calculating the Payment
Obligation the Determining Party may consider the purchase price
paid in connection with the purchase of Share Termination
Delivery Property.
15
Share Termination Alternative: If Applicable, JPMorgan shall
deliver to Counterparty the Share
Termination Delivery Property on,
or within a commercially
reasonable period of time after,
the date when the Payment
Obligation would otherwise be due
pursuant to Section 12.7 or 12.9
of the Equity Definitions or
Section 6(d)(ii) and 6(e) of the
Agreement, as applicable (the
"Share Termination Payment Date"),
in satisfaction of the Payment
Obligation in the manner
reasonably requested by
Counterparty free of payment.
Share Termination Delivery Property: A number of Share Termination
Delivery Units, as calculated by
the Calculation Agent, equal to
the Payment Obligation divided by
the Share Termination Unit Price.
The Calculation Agent shall adjust
the Share Termination Delivery
Property by replacing any
fractional portion of a security
therein with an amount of cash
equal to the value of such
fractional security based on the
values used to calculate the Share
Termination Unit Price.
Share Termination Unit Price: The value to JPMorgan of property
contained in one Share Termination
Delivery Unit, as determined by
the Calculation Agent in its
discretion by commercially
reasonable means and notified by
the Calculation Agent to JPMorgan
at the time of notification of the
Payment Obligation.
Share Termination Delivery Unit: One Share or, if a Merger Event has
occurred and a corresponding
adjustment to this Transaction has
been made, a unit consisting of
the number or amount of each type
of property received by a holder
of one Share (without
consideration of any requirement
to pay cash or other consideration
in lieu of fractional amounts of
any securities) in such Merger
Event, as determined by the
Calculation Agent.
Failure to Deliver: Applicable
Other applicable provisions: If Share Termination Alternative is
applicable, the provisions of
Sections 9.8, 9.9, 9.11, 9.12 and
10.5 (as modified above) of the
Equity Definitions will be
applicable, except that all
references in such provisions to
"Physically-settled" shall be read
as references to "Share
Termination Settled" and all
references to "Shares" shall be
read as references to "Share
Termination Delivery Units".
"Share Termination Settled" in
relation to this Transaction means
that Share Termination Alternative
is applicable to this Transaction.
16
(o) Governing Law. New York law (without reference to choice of law
doctrine).
(p) 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.
(q) Registration. Counterparty hereby agrees that if, in the good
faith reasonable judgment of JPMorgan, the Shares ("Hedge
Shares") acquired by JPMorgan for the purpose of hedging its
obligations pursuant to this Transaction cannot be sold in the
public market by JPMorgan without registration under the
Securities Act, Counterparty shall, at its election, either (i)
in order to allow JPMorgan to sell the Hedge Shares in a
registered offering, make available to JPMorgan an effective
registration statement under the Securities Act and enter into an
agreement, in form and substance satisfactory to JPMorgan,
substantially in the form of an underwriting agreement for a
registered secondary offering; provided, however, that if
JPMorgan, in its reasonable discretion, is not satisfied with
access to due diligence materials, the results of its due
diligence investigation, or the procedures and documentation for
the registered offering referred to above, then clause (ii) or
clause (iii) of this paragraph shall apply at the election of
Counterparty, (ii) in order to allow JPMorgan to sell the Hedge
Shares in a private placement, enter into a private placement
agreement substantially similar to private placement purchase
agreements customary for private placements of equity securities,
in form and substance satisfactory to JPMorgan (in which case,
the Calculation Agent shall make any adjustments to the terms of
this Transaction that are necessary, in its reasonable judgment,
to compensate JPMorgan for any discount from the public market
price of the Shares incurred on the sale of Hedge Shares in a
private placement), or (iii) purchase the Hedge Shares from
JPMorgan at the Relevant Price on such Exchange Business Days,
and in the amounts, requested by JPMorgan.
(r) Tax Disclosure. Effective from the date of commencement of
discussions concerning the Transaction, Counterparty and each of
its employees, representatives, or other agents may disclose to
any and all persons, without limitation of any kind, the tax
treatment and tax structure of the Transaction and all materials
of any kind (including opinions or other tax analyses) that are
provided to Counterparty relating to such tax treatment and tax
structure.
(s) Right to Extend. JPMorgan may delay any Settlement Date or any
other date of delivery by JPMorgan, with respect to some or all
of the Options hereunder, if JPMorgan reasonably determines, in
its discretion, that such extension is reasonably necessary to
enable JPMorgan to effect purchases of Shares in connection with
its hedging activity or settlement activity hereunder in a manner
that would, if JPMorgan were Counterparty or an affiliated
purchaser of Counterparty, be in compliance with applicable legal
and regulatory requirements.
17
(t) Status of Claims in Bankruptcy. JPMorgan acknowledges and agrees
that this Confirmation is not intended to convey to JPMorgan
rights against Counterparty with respect to the Transaction that
are senior to the claims of common stockholders of Counterparty
in any U.S. bankruptcy proceedings of Counterparty; provided that
nothing herein shall limit or shall be deemed to limit JPMorgan's
right to pursue remedies in the event of a breach by Counterparty
of its obligations and agreements with respect to the
Transaction; provided, further, that nothing herein shall limit
or shall be deemed to limit JPMorgan's rights in respect of any
transactions other than the Transaction.
(u) Securities Contract; Swap Agreement. The parties hereto intend
for: (a) the Transaction to be a "securities contract" and a
"swap agreement" as defined in the Bankruptcy Code (Title 11 of
the United States Code) (the "Bankruptcy Code"), and the parties
hereto to be entitled to the protections afforded by, among other
Sections, Sections 362(b)(6), 362(b)(17), 546(e), 546(g), 555 and
560 of the Bankruptcy Code; (b) a party's right to liquidate the
Transaction and to exercise any other remedies upon the
occurrence of any Event of Default under the Agreement with
respect to the other party to constitute a "contractual right" as
described in the Bankruptcy Code; and (c) each payment and
delivery of cash, securities or other property hereunder to
constitute a "margin payment" or "settlement payment" and a
"transfer" as defined in the Bankruptcy Code.
(v) Additional Provisions. Counterparty covenants and agrees that, as
promptly as practicable following the public announcement of any
consolidation, merger and binding share exchange to which
Counterparty is a party, or any sale of all or substantially all
of Counterparty's assets, in each case pursuant to which the
Shares will be converted into cash, securities or other property,
Counterparty shall notify JPMorgan in writing of the types and
amounts of consideration that holders of Shares have elected to
receive upon consummation of such transaction or event (the date
of such notification, the "Consideration Notification Date");
provided that in no event shall the Consideration Notification
Date be later than the date on which such transaction or event is
consummated.
[signature page follows]
18
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning it to EDG Confirmation
Group, J.P. Morgan Securities Inc., 277 Park Avenue, 11th Floor, New York, NY
10172-3401, or by fax to (212) 622 8519.
Very truly yours,
J.P. Morgan Securities Inc., as agent for
JPMorgan Chase Bank, National
Association
By: /s/ Sudheer Tegulapalle
----------------------------------------
Authorized Signatory
Name: Sudheer Tegulapalle
Accepted and confirmed
as of the Trade Date:
Chemed Corporation
By: David P. Williams
---------------------------------------
Authorized Signatory
Name: David P. Williams