EXHIBIT 10.2
May 8, 2007
From: Citibank, N.A.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Equity Derivatives
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To: Chemed Corporation
2600 Chemed Center
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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 Citibank, N.A. ("Citibank") 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 Citibank 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 Citibank
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 Citibank 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:
General Terms:
Trade Date: May 8, 2007
Option Style: "Modified American", as described under
"Procedures for Exercise" below
Option Type: Call
Buyer: Counterparty
Seller: Citibank
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 X.X. Xxxxxx 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,
X.X. Xxxxxx 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.
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.
2
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 Citibank
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.
Expiration Time: The Valuation Time
3
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 Citibank.
Notice of Exercise: Notwithstanding anything to the contrary in
the Equity Definitions, in order to
exercise any Exercisable Options,
Counterparty must notify Citibank 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 Citibank
in connection with its hedging activities
(including the unwinding of any hedge
position) as a result of Citibank 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:
"'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."
4
Settlement Terms:
Settlement Method: Net Share Settlement
Net Share Settlement: Citibank 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".
Citibank 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).
5
Settlement Averaging Period: For any Exercisable Option, (x) if
Counterparty has, on or prior to March 1,
2014, delivered a Notice of Exercise to
Citibank 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
Citibank 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 Citibank
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.
Nationalization, Insolvency or Cancellation and Payment (Calculation Agent
Delisting: 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.
7
Additional Disruption Events:
Change in Law: Applicable
Insolvency Filing: Applicable
Failure to Deliver: Applicable
Hedging Party: For all applicable Additional Disruption
Events, Citibank
Determining Party: For all applicable Additional Disruption
Events, Citibank
Non-Reliance: Applicable
Agreements and Acknowledgements
Regarding Hedging Activities: Applicable
Additional Acknowledgments: Applicable
4. Calculation Agent: Citibank. 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:
XX Xxxxxx Xxxxx Bank
ABA# 000000000
Acct: Chemed Corporation
Acct No.: 94-13065
Account for delivery of Shares to Counterparty:
To be provided by Counterparty
(b) Account for payments to Citibank:
Citibank, N.A.
ABA #000000000
DDA 00167679
Ref: Equity Derivatives
Account for delivery of Shares from Citibank:
DTC 418
8
6. Offices:
The Office of Counterparty for the Transaction is: Inapplicable, Counterparty is
not a Multibranch Party.
The Office of Citibank for the Transaction is: 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx,
XX 00000
7. Notices: For purposes of this Confirmation:
(a) Address for notices or communications to Counterparty:
Chemed Corporation
2600 Chemed Center
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) Address for notices or communications to Citibank:
To: Citibank, N.A.
000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Equity Derivatives
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To: Citibank, N.A.
0000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: CIB Legal Group--Derivatives
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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
Citibank as if set forth herein. Counterparty hereby further represents and
warrants to Citibank 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.
9
(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
(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) Citibank represents that it is an "eligible contract participant" as
defined in Section 1a(12) of the CEA.
(b) Each of Citibank 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.
10
9. Other Provisions:
(a) Opinions. Counterparty shall deliver to Citibank 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 Citibank
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 1.60 million less than
the number of Shares included in the immediately preceding Repurchase
Notice. Counterparty agrees to indemnify and hold harmless Citibank
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 Citibank'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
Citibank 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 Citibank 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 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.
11
(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 Citibank 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 Citibank on the Early Unwind Date all
Shares purchased by Citibank or one or more of its affiliates and
reimburse Citibank 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 Citibank in its sole
good faith discretion. Citibank shall notify Counterparty of such
amount and Counterparty shall pay such amount in immediately available
funds on the Early Unwind Date. Citibank 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 Citibank. Citibank 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) Citibank'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
12
number of Counterparty's outstanding Shares (such quotient expressed
as a percentage, the "Option Equity Percentage") exceeds 14.5%,
Citibank 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 Citibank 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 Xxxxx'x 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 Citibank to reduce (i) Citibank'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 Citibank's commercially
reasonable efforts, Citibank is unable to effect a transfer or
assignment permitted by the proviso to the immediately preceding
sentence on pricing terms reasonably acceptable to Citibank and within
a time period reasonably acceptable to Citibank of a sufficient number
of Options Citibank 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
Citibank 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 Citibank 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
Citibank to purchase, sell, receive or deliver any shares or other
securities to or from Counterparty, Citibank may designate any of its
affiliates to purchase, sell, receive or deliver such shares or other
securities and otherwise to perform Citibank's obligations in respect
of this Transaction and any such designee may assume such obligations.
Citibank shall be discharged of its obligations to Counterparty to the
extent of any such performance.
(h) Staggered Settlement. If upon advice of counsel with respect to
applicable legal and regulatory requirements, including any
requirements relating to Citibank's hedging activities hereunder,
Citibank 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 Citibank on the Settlement Date for the
Transaction, Citibank 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, Citibank 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 Citibank will deliver to
Counterparty hereunder on all such Staggered Settlement Dates
will equal the number of Shares that Citibank would otherwise be
required to deliver on such Nominal Settlement Date; and
13
(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 Citibank in the notice referred to in
clause (a) above.
(i) Reserved
(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)
Citibank 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 Citibank's option, the occurrence of any of the events
specified in Section 5(a)(vii) (1) through (9) of the ISDA Master
Agreement with respect to that Issuer."
(ii) Section 12.9(b)(i) of the Equity Definitions is hereby amended by
(1) replacing "either party may elect" with "Citibank 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, Citibank
(and only Citibank) 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 Citibank under any other agreement between
Citibank 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, Citibank 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.
14
(n) Alternative Calculations and Payment on Early Termination and on
Certain Extraordinary Events. If in respect of this Transaction, an
amount is payable by Citibank 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 Citibank 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 Citibank, 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
Citibank to satisfy its Payment Obligation by the Share Termination
Alternative, Citibank 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.
Share Termination Alternative: If Applicable, Citibank 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.
15
Share Termination Unit Price: The value to Citibank 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 Citibank 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.
(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 Citibank, the Shares ("Hedge Shares") acquired
by Citibank for the purpose of hedging its obligations pursuant to
this Transaction cannot be sold in the public market by Citibank
without registration under the Securities Act, Counterparty shall, at
its election, either (i) in order to allow Citibank to sell the Hedge
Shares in a registered offering, make available to Citibank an
effective registration statement under the Securities Act and enter
into an agreement, in form and substance satisfactory to Citibank,
substantially in the form of an underwriting agreement for a
registered secondary offering; provided, however, that if Citibank, 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
16
referred to above, then clause (ii) or clause (iii) of this paragraph
shall apply at the election of Counterparty, (ii) in order to allow
Citibank 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 Citibank (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 Citibank 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 Citibank at the
Relevant Price on such Exchange Business Days, and in the amounts,
requested by Citibank.
(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. Citibank may delay any Settlement Date or any other
date of delivery by Citibank, with respect to some or all of the
Options hereunder, if Citibank reasonably determines, in its
discretion, that such extension is reasonably necessary to enable
Citibank to effect purchases of Shares in connection with its hedging
activity or settlement activity hereunder in a manner that would, if
Citibank were Counterparty or an affiliated purchaser of Counterparty,
be in compliance with applicable legal and regulatory requirements.
(t) Status of Claims in Bankruptcy. Citibank acknowledges and agrees that
this Confirmation is not intended to convey to Citibank 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 Citibank'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 Citibank'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
Citibank 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]
17
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning an executed copy to
Equity Derivatives, Citibank, N.A., 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Facsimile No. (000) 000-0000.
Very truly yours,
CITIBANK, N.A.
/s/ Xxxxxxx Xxxxxx
----------------------
Authorized Signatory
Accepted and confirmed
as of the Trade Date:
CHEMED CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Authorized Signatory
Name: Xxxxx X. Xxxxxxxx
