Exhibit 10.1
EXECUTION COPY
Opening Transaction
|
|
|
|
|
|
|
|
To:
|
|
ViroPharma
Incorporated, 397 Eagleview Boulevard, Exton, Pennsylvania
19341
|
|
|
|
|
A/C:
|
|
[Insert
Account Number]
|
|
|
|
|
From:
|
|
Credit Suisse International
One Cabot Square
London E14 4QJ
England
|
|
|
|
|
Re:
|
|
Convertible
Bond Hedge Transaction
|
|
|
|
|
Ref. No:
|
|
[Insert
Reference Number]
|
|
|
|
|
Date:
|
|
March 20,
2007
|
Dear Sir(s):
The purpose of this communication
(this “ Confirmation ”) is to set forth the
terms and conditions of the above-referenced transaction entered
into on the Trade Date specified below (the “
Transaction ”) between Credit Suisse International
(“ Dealer ”) represented by Credit Suisse, New
York branch (“ Agent ”) as its agent, and
ViroPharma Incorporated (“ Counterparty ”). This
communication constitutes a “Confirmation” as referred
to in the ISDA Master Agreement specified below.
1. This Confirmation is subject to,
and incorporates, the definitions and provisions of the 2000 ISDA
Definitions (including the Annex thereto) (the “ 2000
Definitions ”) and the definitions and provisions of the
2002 ISDA Equity Derivatives Definitions (the “ Equity
Definitions ”, and together with the 2000 Definitions,
the “ Definitions ”), in each case as published
by the International Swaps and Derivatives Association, Inc.
(“ ISDA ”). In the event of any inconsistency
between the 2000 Definitions and the Equity Definitions, the Equity
Definitions will govern. Certain defined terms used herein have the
meanings assigned to them in the First Supplemental Indenture to be
dated as of March 26, 2007 between Counterparty and Wilmington
Trust Company, as trustee (the “ Indenture ”)
relating to the USD225,000,000 principal amount of 2.00%
convertible senior notes due 2017 (the “ Convertible
Notes ”). In the event of any inconsistency between the
terms defined in the Indenture and this Confirmation, this
Confirmation shall govern. For the avoidance of doubt, (i) the
Transaction shall be the only transaction under the Agreement and
(ii) references herein to sections of the Indenture are based
on the draft of the Indenture most recently reviewed by the parties
at the time of execution of this Confirmation. If any relevant
sections of the Indenture are changed, added or renumbered between
the execution of this Confirmation and the execution of the
Indenture, the parties will amend this Confirmation in good faith
to preserve the economic intent of the parties. The parties further
acknowledge that 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. The Transaction is
subject to early unwind if the closing of the Convertible Notes is
not consummated for any reason, as set forth below in
Section 8(m).
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.
This Confirmation evidences a
complete and binding agreement between Dealer and Counterparty as
to the terms of the Transaction to which this Confirmation relates.
This Confirmation shall be subject to an agreement (the “
Agreement ”) in the form of the 1992 ISDA Master
Agreement as if Dealer and Counterparty had executed an agreement
in such form on the date hereof (but without any Schedule except
for (i) the election of Loss and Second Method and US Dollars
(“ USD ”) as the Termination Currency,
(ii) the replacement of the word “third” in the
last line of Section 5(a)(i) with the word
“first”, and (iii) the election that the
“Cross Default” provisions of Section 5(a)(vi)
shall apply to Counterparty with a “Threshold Amount”
of USD 10 million).
All provisions contained in, or
incorporated by reference to, the Agreement will govern this
Confirmation except as expressly modified herein. In the event of
any inconsistency between this Confirmation and either the
Definitions or the Agreement, this Confirmation shall
govern.
2. The Transaction constitutes a
Share Option Transaction for purposes of the Equity Definitions.
The terms of the particular Transaction to which this Confirmation
relates are as follows:
General Terms:
|
|
|
|
|
Trade
Date:
|
|
March 20,
2007
|
|
|
|
|
Effective
Date:
|
|
March 26,
2007
|
|
|
|
|
Option
Style:
|
|
Modified
American, as described under “Procedures for Exercise”
below.
|
|
|
|
|
Option
Type:
|
|
Call
|
|
|
|
|
Seller:
|
|
Dealer
|
|
|
|
|
Buyer:
|
|
Counterparty
|
|
|
|
|
Shares:
|
|
The Common
Stock of Counterparty, par value USD0.002 per share (Ticker Symbol:
“VPHM”).
|
|
|
|
|
Number of
Options:
|
|
The number of
Convertible Notes in denominations of USD1,000 principal amount
issued by Counterparty on the closing date for the initial issuance
of the Convertible Notes; provided that the Number of
Options shall be automatically increased as of the date of exercise
by Goldman, Sachs & Co. (“ GS&Co. ”), as
representative of the Underwriters (as defined in the Underwriting
Agreement), of their option pursuant to Section 2 of the
Underwriting Agreement dated as of March 20, 2007 between
Counterparty and GS&Co., as representative of the Underwriters
party thereto (the “ Underwriting Agreement ”)
by the number of Convertible Notes in denominations of USD1,000
principal amount issued pursuant to such exercise (such Convertible
Notes, the “ Additional Convertible Notes ”).
For the avoidance of doubt, the Number of Options outstanding shall
be reduced by each exercise of Options hereunder.
|
|
|
|
|
Option
Entitlement:
|
|
As of any date,
a number of Shares per Option equal to the Applicable Conversion
Rate (as defined in the
|
2
|
|
|
|
|
|
|
Indenture, but
without regard to any adjustments to the Applicable Conversion Rate
pursuant to Sections 12.01(f) or 12.04(f) of the Indenture) as of
such date.
|
|
|
|
|
Strike
Price:
|
|
As of any date,
an amount in USD, rounded to the nearest cent (with 0.5 cents being
rounded upwards), equal to USD1,000 divided by the Option
Entitlement as of such date.
|
|
|
|
|
Number of
Shares:
|
|
The product of
the Number of Options, the Option Entitlement and the Applicable
Percentage.
|
|
|
|
|
Applicable
Percentage:
|
|
75%
|
|
|
|
|
Premium:
|
|
USD61,695,000.00 (Premium per Option USD274.20);
provided that if the Number of Options is increased pursuant
to the proviso to the definition of “Number of Options”
above, an additional Premium equal to the product of the number of
Options by which the Number of Options is so increased and the
Premium per Option shall be paid on the Additional Premium Payment
Date.
|
|
|
|
|
Premium Payment
Date:
|
|
The Effective
Date
|
|
|
|
|
Additional
Premium Payment Date:
|
|
The closing
date for the purchase and sale of the Additional Convertible
Notes.
|
|
|
|
|
Exchange:
|
|
The NASDAQ
Global Select Market
|
|
|
|
|
Related
Exchange:
|
|
All
Exchanges
|
Procedures for Exercise:
|
|
|
|
|
Exercise
Date:
|
|
Each Conversion
Date.
|
|
|
|
|
Conversion
Date:
|
|
Each
“Conversion Date”, as defined in the Indenture,
occurring during the Exercise Period for Convertible Notes other
than Convertible Notes with respect to which Counterparty makes the
direction described in Section 12.02(c) of the Indenture and the
financial institution designated by Counterparty accepts such
Convertible Notes in accordance with Section 12.02(c) of the
Indenture (such Convertible Notes, other than those excluded above
(each in denominations of USD1,000 principal amount), the “
Relevant Convertible Notes ” for such Conversion
Date). For the avoidance of doubt, Convertible Notes are
“accepted” for purposes of the foregoing upon the
earlier of the declaration of the designated financial
institution’s agreement to exchange such Convertible Notes or
delivery of such Convertible Notes to such financial institution
for purposes of such exchange.
|
|
|
|
|
Exercise
Period:
|
|
The period from
and excluding the Trade Date to and including the Expiration
Date.
|
|
|
|
|
Expiration
Date:
|
|
The earlier of
(i) the last day on which any Convertible Notes remain outstanding
and (ii) the third “Scheduled Trading Day”, as defined
in the Indenture, immediately preceding the “Maturity
Date”, as defined in the Indenture.
|
3
|
|
|
|
|
Automatic
Exercise on Conversion Dates:
|
|
On each
Conversion Date, a number of Options equal to the number of
Relevant Convertible Notes for such Conversion Date in
denominations of USD1,000 principal amount shall be automatically
exercised, subject to “Notice of Exercise”
below.
|
|
|
|
|
Notice
Deadline:
|
|
In respect of
any exercise of Options hereunder, the Scheduled Trading Day
following the relevant Conversion Date; provided that if
such exercise is a Net Share Exercise, the Notice Deadline shall be
the Scheduled Trading Day immediately preceding the first Scheduled
Trading Day of the relevant “Observation Period”, as
defined in the Indenture, subject to “Notice of
Exercise” below.
|
|
|
|
|
Net Share
Exercise:
|
|
Any exercise of
Options that relates to the Relevant Convertible Notes for any
Conversion Date (i) following the date on which Counterparty has
made the irrevocable election to satisfy its conversion obligation
by paying principal in cash and any excess of the conversion
obligation over the principal amount in Shares in accordance with
Section 12.02(b) of the Indenture (such election, the “
Net Share Conversion Election ,” and any such Relevant
Convertible Notes, “ Net Share Settled Relevant
Convertible Notes ”), or (ii) not following the date on
which Counterparty has made the Net Share Conversion Election and
(a) occurring prior to the period starting on the 30th Scheduled
Trading Day immediately preceding the Maturity Date and ending on
the Maturity Date (such period, the “ Final Conversion
Period ”) or (b) occurring during the Final Conversion
Period if the Settlement Method Reference Price is greater than 90%
of the Strike Price as of the last Settlement Method Reference Date
and less than 110% of such Strike Price. In the case of clause
(ii), the Relevant Convertible Notes for the relevant Conversion
Date shall be considered Net Share Settled Relevant Convertible
Notes for purposes hereof, and the Observation Period for such
Relevant Convertible Notes shall be deemed to be the Observation
Period for such Relevant Convertible Notes that would apply if
Counterparty had made the Net Share Conversion Election.
|
|
|
|
|
Settlement
Method Reference Price:
|
|
For any
Settlement Method Reference Date, the arithmetic average of the
“Daily VWAP”, as defined in the Indenture, for all of
the Settlement Method Reference Dates as if each such date were a
“VWAP Trading Day,” as defined in the Indenture,
occurring during an Observation Period.
|
|
|
|
|
Settlement
Method Reference Dates:
|
|
The ten
consecutive VWAP Trading Days ending on
|
4
|
|
|
|
|
|
|
the first day
of the Final Conversion Period (or, if such day is not a VWAP
Trading Day, ending on the immediately preceding VWAP Trading
Day).
|
|
|
|
|
Notice of
Exercise:
|
|
Notwithstanding
anything to the contrary in the Equity Definitions, Dealer shall
have no obligation to make any payment or delivery in respect of
any exercise of Options hereunder unless Counterparty notifies
Dealer in writing prior to 5:00 PM, New York City time, on the
Notice Deadline in respect of such exercise of (i) the number of
Options being exercised on such Exercise Date, (ii) the scheduled
settlement date under the Indenture for the Relevant Convertible
Notes for the related Conversion Date, (iii) whether such Relevant
Convertible Notes are Net Share Settled Relevant Convertible Notes
and (iv) if such exercise is a Net Share Exercise, the first
Scheduled Trading Day of the relevant Observation Period.
Notwithstanding the foregoing, in the case of any Net Share
Exercise of Options hereunder in connection with the conversion of
any Relevant Convertible Notes for any Conversion Dates occurring
during the Final Conversion Period, (a) the Notice Deadline shall
be 12:00 p.m. (New York City time) on the Scheduled Trading Day
immediately following the relevant Exercise Date and the content of
such notice shall be as set forth in clauses (i), (ii) and (iii)
above. For the avoidance of doubt, if Counterparty fails to give
such notice when due in respect of any exercise of Options
hereunder, Dealer’s obligation to make any payment or
delivery in respect of such exercise shall be permanently
extinguished, and late notice shall not cure such failure;
provided that, in the case of any Net Share Exercise
hereunder, notwithstanding the foregoing, such notice (and the
related automatic exercise of Options) shall be effective if given
after the relevant Notice Deadline but prior to 5:00 PM New York
City time, on the fifth Exchange Business Day of the relevant
Observation Period, in which event the Calculation Agent shall have
the right to adjust the Delivery Obligation (as defined below) as
appropriate to reflect the additional costs (including, but not
limited to, hedging mismatches and market losses) and expenses
incurred by Dealer or any of its affiliates in connection with its
hedging activities (including the unwinding of any hedge position)
as a result of its not having received such notice prior to the
applicable Notice Deadline.
|
|
|
|
|
Dealer’s Telephone Number
and Telex and/or Facsimile Number
and Contact Details for purpose of
Giving Notice:
|
|
To: Credit
Suisse, New York branch
|
|
|
|
|
|
Eleven
Madison Avenue
New
York, NY 10010-3629
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
Telephone:
(212) 325 8676 / (212) 538 5306
|
|
|
|
Facsimile: (212) 325 8173
|
Settlement Terms:
|
|
|
|
|
Settlement
Date:
|
|
For any
Exercise Date, the settlement date for the Shares to be delivered
in respect of the Convertible Notes for the relevant Conversion
Date under the terms of the Indenture; provided that the
Settlement Date shall not be prior to the latest of (i) the date
one Settlement Cycle following such Conversion Date (or, in the
case of a Net Share Exercise, the final day of the relevant
Observation Period), (ii) the Exchange Business Day immediately
following the date on which Counterparty gives notice to Dealer of
such Settlement Date prior to 5:00 PM, New York City time, and
(iii) the Exchange Business Day immediately following the date
Counterparty provides the Notice of Delivery Obligation prior to
5:00 PM, New York City time.
|
|
|
|
|
Delivery
Obligation:
|
|
In lieu of the
obligations set forth in Sections 8.1 and 9.1 of the Equity
Definitions, and subject to “Notice of Exercise” above,
in respect of any Exercise Date, Dealer will deliver to
Counterparty on the related Settlement Date a number of Shares
equal to the product of (x) the Applicable Percentage and (y) the
aggregate number of Shares, if any, that Counterparty is obligated
to deliver to the holder(s) of the Relevant Convertible Notes for
such Conversion Date pursuant to Section 12.02(a) of the Indenture
or, if the exercise of Options hereunder occurring on such Exercise
Date is a Net Share Exercise, pursuant to Section 12.02(b) of the
Indenture (except that such aggregate number of Shares shall be
determined without taking into consideration any rounding pursuant
to Section 12.02(a) or 12.02(b), as the case may be, of the
Indenture and shall be rounded down to the nearest whole number)
and cash in lieu of fractional shares, if any, resulting from such
rounding (such Shares and cash, if any, in lieu of fractional
Shares collectively, the “ Convertible Obligation
”); provided that the Convertible Obligation shall be
determined excluding any Shares (and cash in lieu of fractional
Shares, if any) that Counterparty is obligated to deliver to
holder(s) of the Relevant Convertible Notes as a direct or indirect
result of any adjustments to the Conversion Rate pursuant to
Sections 12.01(f) or 12.04(f) of the Indenture and any interest
payment that the Counterparty is (or would have been) obligated to
deliver to holder(s) of the Relevant Convertible Notes for such
Conversion Date; and provided further , that, if the
exercise of Options hereunder occurring on such Exercise Date is a
Net Share Exercise of the type described in clause (ii)
of
|
6
|
|
|
|
|
|
|
the definition
of Net Share Exercise, the Delivery Obligation shall be
determined
as if Counterparty had made the Net Share Conversion Election,
except that, if
such Exercise Date occurs during the Final Conversion Period and
the Delivery
Obligation Value would otherwise exceed the Convertible Obligation
Value, the
number of Shares comprising the Delivery Obligation shall be
reduced (and the
amount of cash in respect of fractional Shares shall be adjusted)
so that the
resulting Delivery Obligation Value equals the Convertible
Obligation Value; and
provided further that if such exercise relates to the conversion of
Relevant
Convertible Bonds in connection with which holders thereof are
entitled to receive
additional Shares pursuant to the adjustments to the Applicable
Conversion Rate
set forth in Section 12.01(f) of the Indenture, then,
notwithstanding the foregoing,
the Delivery Obligation shall include such additional Shares,
except that the
Delivery Obligation shall be capped so that the value of the
Delivery Obligation
(as determined by the Calculation Agent using the VWAP Price on the
relevant
Obligation Value Date) does not exceed (A) if such exercise is not
a Net Share
Exercise, the sum of (x) the amount as determined by the
Calculation Agent using
the VWAP Price on the relevant Obligation Value Date that would be
payable by
Dealer pursuant to Section 6 of the Agreement if such Conversion
Date were an
Early Termination Date resulting from an Additional Termination
Event with
respect to which the Transaction (except that, for purposes of
determining such
amount, the Number of Options shall be deemed to be equal to the
number of
Options exercised on such Exercise Date) was the sole Affected
Transaction and
Counterparty was the sole Affected Party (determined without regard
to Section
8(c) of this Confirmation) (the “Unwind Value”) and (y)
the aggregate principal
amount of such Relevant Convertible Bonds, or (B) if such exercise
is a Net Share
Exercise, the Unwind Value. For the avoidance of doubt, in the case
of any Net
Share Exercise hereunder, if the “Daily Conversion
Value”, as defined in the
Indenture, for each of the VWAP Trading Days occurring in the
relevant
Observation Period is less than or equal to USD40, Dealer will have
no delivery
obligation hereunder in respect of the related Exercise Date. For
the avoidance of
doubt, Dealer’s obligations set forth in this paragraph are
conditioned on
Counterparty’s satisfaction of its obligations, if any, set
forth below under
“Counterparty Payment Obligation On Certain Settlement
Dates”.
|
|
|
|
|
Delivery
Obligation Value:
|
|
The value of
the Delivery Obligation (determined without regard to the exception
at the end of the first
|
7
|
|
|
|
|
|
|
further proviso
to the first sentence of “Delivery Obligation” above),
as
determined by the Calculation Agent using a per Share value for any
Shares
comprising the Delivery Obligations equal to the Relevant Price on
the Obligation
Value Date as if such date were a Valuation Date (the
“Obligation Value Price” ).
|
|
|
|
|
Convertible
Obligation Value:
|
|
The Applicable
Percentage of the difference of (i) the value of the Convertible
Obligation, as determined by the Calculation Agent using a per
Share value for any Shares comprising the Convertible Obligation
equal to the Obligation Value Price, minus (ii) the
principal amount of the Relevant Convertible Notes for the related
Conversion Date. For the avoidance of doubt, the Convertible
Obligation Value shall be determined based on the actual
Convertible Obligation, and Counterparty shall not be deemed to
have made the Net Share Conversion Election, and the Relevant
Convertible Notes shall not be deemed to be Net Share Settled
Relevant Convertible Notes, for purposes of such
determination.
|
|
|
|
|
Obligation
Value Date:
|
|
The second
Exchange Business Day immediately preceding the relevant Settlement
Date.
|
|
|
|
|
Notice of
Delivery Obligation:
|
|
No later than
the Exchange Business Day immediately following the Conversion Date
(or, in the case of a Net Share Exercise, the last day of the
relevant Observation Period), Counterparty shall give Dealer notice
of the final number of Shares (and cash in lieu of fractional
Shares, if any) comprising the relevant Convertible Obligation;
provided that, with respect to any Exercise Date for a Net
Share Exercise occurring during the Final Conversion Period,
Counterparty may provide Dealer with a single notice of the
aggregate number of Shares (and cash in lieu of fractional Shares,
if any) comprising the Convertible Obligations for all Exercise
Dates occurring during such period (it being understood, for the
avoidance of doubt, that the requirement of Counterparty to deliver
such notice shall not limit Counterparty’s obligations with
respect to Notice of Exercise or Dealer’s obligations with
respect to Delivery Obligation, each as set forth above, in any
way).
|
|
|
|
|
Counterparty
Payment On Certain
|
|
|
|
Settlement
Dates:
|
|
In the case of
any exercise of Options hereunder other than a Net Share Exercise,
in lieu of the obligations set forth in Sections 8.1 and 9.1 of the
Equity Definitions, Counterparty shall pay to Dealer on the related
Settlement Date in immediately available funds an amount in cash
equal to the product of the number of Options being exercised on
such Exercise Date and USD1,000.
|
8
|
|
|
|
|
Other
Applicable Provisions:
|
|
To the extent
Dealer is obligated to deliver Shares hereunder, the provisions of
Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity
Definitions will be applicable as if “Physical
Settlement” applied to the Transaction; provided that
the Representation and Agreement contained in Section 9.11 of the
Equity Definitions shall be modified by excluding any
representations therein relating to restrictions, obligations,
limitations or requirements under applicable securities laws that
exist as a result of the fact that Buyer is the issuer of the
Shares.
|
|
|
|
|
Restricted
Certificated Shares:
|
|
Notwithstanding
anything to the contrary in the Equity Definitions, Dealer may, in
whole or in part, deliver Shares in certificated form representing
the Number of Shares to be Delivered to Counterparty in lieu of
delivery through the Clearance System.
|
Adjustments:
|
|
|
|
|
Method of
Adjustment:
|
|
Notwithstanding
Section 11.2 of the Equity Definitions, upon the occurrence of any
event or condition set forth in Sections 12.04(a), (b), (c), (d)
and (e) of the Indenture, the Calculation Agent shall make the
corresponding adjustment in respect of any one or more of the
Number of Options, the Option Entitlement and any other variable
relevant to the exercise, settlement or payment of the Transaction,
to the extent an analogous adjustment is made under the Indenture.
Immediately upon the occurrence of any “Adjustment
Event”, as defined in the Indenture, Counterparty shall
notify the Calculation Agent of such Adjustment Event; and once the
adjustments to be made to the terms of the Indenture and the
Convertible Notes in respect of such Adjustment Event have been
determined, Counterparty shall immediately notify the Calculation
Agent in writing of the details of such adjustments.
|
Extraordinary Events:
|
|
|
|
|
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 Section 12.10 of the Indenture.
|
|
|
|
|
Consequences of
Merger Events:
|
|
Notwithstanding
Section 12.2 of the Equity Definitions, upon the occurrence of a
Merger Event, the Calculation Agent shall make the corresponding
adjustment in respect of any adjustment under the Indenture to any
one or more of the nature of the Shares, the Number of Options, the
Option Entitlement and any other variable relevant to the exercise,
settlement or payment for the Transaction, to the extent an
analogous adjustment is made under the Indenture in respect of such
Merger Event; provided 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
|
9
|
|
|
|
|
|
|
Sections
12.01(f) or 12.04(f) of the Indenture.
|
|
|
|
|
Notice of
Merger Consideration:
|
|
Upon the
occurrence of a Merger Event that causes the Shares to be converted
into the right to receive more than a single type of consideration
(determined based in part upon any form of stockholder election),
Counterparty shall reasonably p
|
|
