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EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
by and among
ENDO PHARMACEUTICALS HOLDINGS INC.,
ENDO INC.
and
ALGOS PHARMACEUTICAL CORPORATION
----------------
Dated as of March 3, 2000
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
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Section 1.1 The Merger.................................................. 9
Section 1.2 Effective Time.............................................. 9
Section 1.3 Effects of the Merger....................................... 9
Section 1.4 Directors of the Surviving Corporation...................... 9
Section 1.5 Officers of the Surviving Corporation....................... 9
Section 1.6 Charter and By-Laws......................................... 9
Section 1.7 Conversion of Securities.................................... 9
Section 1.8 Parent to Make Certificates Available....................... 10
Section 1.9 Dividends; Transfer Taxes; Withholding...................... 10
Section 1.10 Dissenting Shares........................................... 11
Section 1.11 Return of Exchange Fund..................................... 11
Section 1.12 Adjustment of Conversion Number............................. 11
Section 1.13 No Further Ownership Rights in Company Common Stock......... 12
Section 1.14 Closing of Company Transfer Books........................... 12
Section 1.15 Lost Certificates........................................... 12
Section 1.16 Affiliates.................................................. 12
Section 1.17 Further Assurances.......................................... 12
Section 1.18 Closing..................................................... 12
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 2.1 Organization, Standing and Power............................ 13
Section 2.2 Capital Structure........................................... 13
Section 2.3 Authority................................................... 14
Section 2.4 Consents and Approvals; No Violation........................ 15
Section 2.5 Financial Statements........................................ 15
Section 2.6 Registration Statement and Proxy Statement.................. 16
Section 2.7 Absence of Certain Changes or Events........................ 16
Section 2.8 Permits and Compliance...................................... 16
Section 2.9 Tax Matters................................................. 17
Section 2.10 Actions and Proceedings..................................... 18
Section 2.11 Certain Agreements.......................................... 19
Section 2.12 ERISA....................................................... 19
Section 2.13 Compliance with Certain Laws................................ 20
Section 2.14 Liabilities................................................. 22
Section 2.15 Labor Matters............................................... 22
Section 2.16 Intellectual Property....................................... 23
Section 2.17 Ownership of Shares......................................... 25
Section 2.18 Operations of Sub........................................... 25
Section 2.19 Brokers..................................................... 25
Section 2.20 State Takeover Statutes..................................... 25
Section 2.21 Year 2000................................................... 26
Section 2.22 Accuracy of Information Furnished........................... 26
Section 2.23 Required Vote of Parent and Sub Stockholders................ 26
Section 2.24 Interests in Other Entities................................. 26
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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Section 3.1 Organization, Standing and Power............................ 27
Section 3.2 Capital Structure; Subsidiaries............................. 27
Section 3.3 Authority................................................... 27
Section 3.4 Consents and Approvals; No Violation........................ 28
Section 3.5 SEC Documents and Other Reports............................. 29
Section 3.6 Registration Statement and Proxy Statement.................. 29
Section 3.7 Absence of Certain Changes or Events........................ 30
Section 3.8 Permits and Compliance...................................... 30
Section 3.9 Tax Matters................................................. 31
Section 3.10 Actions and Proceedings..................................... 32
Section 3.11 Certain Agreements.......................................... 32
Section 3.12 ERISA....................................................... 32
Section 3.13 Compliance with Certain Laws................................ 33
Section 3.14 Liabilities................................................. 35
Section 3.15 Labor Matters............................................... 35
Section 3.16 Intellectual Property....................................... 36
Section 3.17 Opinion of Financial Advisor................................ 38
Section 3.18 Required Vote of Company Stockholders....................... 38
Section 3.19 Ownership of Shares......................................... 38
Section 3.20 Brokers..................................................... 38
Section 3.21 State Takeover Statutes..................................... 38
Section 3.22 Year 2000................................................... 39
Section 3.23 Interests in Other Entities................................. 39
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger...................... 40
Section 4.2 No Solicitation............................................. 42
Section 4.3 Tax Representation Letters.................................. 43
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meeting......................................... 44
Section 5.2 Preparation of the Registration Statement and the Proxy
Statement................................................... 44
Section 5.3 Access to Information; Regulatory Communications............ 44
Section 5.4 Compliance with the Securities Act.......................... 45
Section 5.5 Designation of Directors.................................... 45
Section 5.6 NASDAQ Listing.............................................. 46
Section 5.7 Fees and Expenses........................................... 46
Section 5.8 Company Stock Options....................................... 46
Section 5.9 Parent Options.............................................. 46
Section 5.10 Reasonable Efforts.......................................... 46
Section 5.11 Public Announcements........................................ 47
Section 5.12 State Takeover Laws......................................... 47
Section 5.13 Indemnification; Directors and Officers Insurance........... 47
Section 5.14 Notification of Certain Matters............................. 47
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Section 5.15 Employee Matters......................................... 48
Section 5.16 Tax Treatment............................................ 48
Section 5.17 Conveyance Taxes......................................... 48
Section 5.18 Ownership of Shares...................................... 48
Section 5.19 Additional Agreements.................................... 48
Section 5.20 Issuance of Warrants to Parent........................... 49
Section 5.21 Formation of Parent LLC.................................. 49
Section 5.22 Effect of Parent Recapitalization........................ 50
Section 5.23 Appraisal Demands........................................ 51
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the
Merger................................................... 52
Section 6.2 Conditions to Obligation of the Company to Effect the
Merger................................................... 52
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger................................................... 53
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination.............................................. 54
Section 7.2 Effect of Termination.................................... 55
Section 7.3 Amendment................................................ 55
Section 7.4 Waiver................................................... 55
Section 7.5 Procedure for Termination, Amendment, Extension or
Waiver................................................... 55
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties........... 56
Section 8.2 Notices.................................................. 56
Section 8.3 Interpretation........................................... 57
Section 8.4 Counterparts............................................. 57
Section 8.5 Entire Agreement; No Third-Party Beneficiaries........... 57
Section 8.6 Governing Law............................................ 57
Section 8.7 Assignment............................................... 57
Section 8.8 Severability............................................. 57
Section 8.9 Enforcement of this Agreement............................ 57
List of Exhibits
Exhibit 1 Form of Amended and Restated Certificate of Incorporation
of Parent................................................ 60
Exhibit 2 Summary of Parent Recapitalization....................... 63
Exhibit B Form of Company Voting Agreement......................... 64
Exhibit C Form of Algos Warrant.................................... 75
Exhibit D-1 Parent's Year 2000 Representation........................ 104
Exhibit D-2 Company's Year 2000 Representation....................... 105
Exhibit E-1 Form of Representation Letter (Parent's)................. 106
Exhibit E-2 Form of Representation Letter (the Company's)............ 109
Exhibit F Form of Affiliate Letter (the Company's)................. 112
Exhibit G Form of Tax Sharing Agreement............................ 114
Exhibit H Form of Lyle Employment Agreement........................ 118
Exhibit I Form of Endo Warrant..................................... 127
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Index of Defined Terms
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Adjustment Event........................................................... 49
Affiliates................................................................. 45
Agreement.................................................................. 8
Applicable Laws............................................................ 20
Cash Cost of Sales......................................................... 49
Cash Gross Profit of Parent................................................ 49
Certificate of Merger...................................................... 9
Certificates............................................................... 10
Change in the Company Recommendation....................................... 44
Charter Amendment.......................................................... 8
Closing.................................................................... 13
Closing Date............................................................... 12
COBRA...................................................................... 19
Code....................................................................... 8
Company.................................................................... 8
Company Business Personnel................................................. 8
Company By-Laws............................................................ 27
Company Charter............................................................ 27
Company Common Stock....................................................... 8
Company Copyrights......................................................... 36
Company Designees.......................................................... 45
Company Disclosure Schedule................................................ 28
Company Intellectual Property.............................................. 27
Company License Agreements................................................. 36
Company Multiemployer Plan................................................. 32
Company Patents............................................................ 36
Company Permits............................................................ 30
Company Plan............................................................... 34
Company Preferred Stock.................................................... 27
Company SEC Documents...................................................... 29
Company Software........................................................... 36
Company Stock Options...................................................... 27
Company Stock Plans........................................................ 27
Company Stockholder Approval............................................... 28
Company Takeover Proposal.................................................. 43
Company Technology......................................................... 36
Company Trademarks......................................................... 36
Constituent Corporations................................................... 8
Conversion Number.......................................................... 9
Credit Agreement........................................................... 41
Current Endo Options....................................................... 46
D&O Insurance.............................................................. 47
DEA........................................................................ 13
DGCL....................................................................... 9
Dissenting Shares.......................................................... 53
Effective Time............................................................. 9
Endo Products.............................................................. 9
Endo Warrant Agreement..................................................... 49
Endo Warrants.............................................................. 49
Environmental Laws......................................................... 20
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ERISA...................................................................... 19
Exchange Act............................................................... 15
Exchange Agent............................................................. 9
Exchange Fund.............................................................. 9
FDA........................................................................ 13
FDCA....................................................................... 21
GAAP....................................................................... 15
Governmental Entity........................................................ 15
Hazardous materials........................................................ 20
HSR Act.................................................................... 15
IND........................................................................ 16
Independent Accounting Firm................................................ 50
IRS........................................................................ 19
Knowledge of Parent........................................................ 17
Knowledge of the Company................................................... 30
Lyle Agreement............................................................. 48
Material Adverse Change.................................................... 13
Material Adverse Effect.................................................... 13
Merger..................................................................... 8
Merger Consideration....................................................... 9
MorphiDex(R) Application................................................... 34
NASDAQ..................................................................... 15
NDA........................................................................ 16
Net Sales.................................................................. 49
NOLs....................................................................... 31
Non-Transferable Warrants.................................................. 9
Parent..................................................................... 8
Parent Business Personnel.................................................. 22
Parent By-Laws............................................................. 13
Parent Charter............................................................. 13
Parent Class A Common Stock................................................ 13
Parent Common Stock........................................................ 8
Parent Copyrights.......................................................... 23
Parent Disclosure Schedule................................................. 14
Parent Financial Statements................................................ 15
Parent Incentive Plans..................................................... 13
Parent Intellectual Property............................................... 23
Parent License Agreements.................................................. 23
Parent LLC................................................................. 49
Parent LLC Agreement....................................................... 49
Parent Material Contracts.................................................. 17
Parent Multiemployer Plan.................................................. 20
Parent Patents............................................................. 23
Parent Permits............................................................. 16
Parent Plan................................................................ 20
Parent Preferred Stock..................................................... 13
Parent Recapitalization.................................................... 8
Parent Software............................................................ 23
Parent Stock Options....................................................... 13
Parent Stock Plans......................................................... 13
Parent Stock Purchase Plan................................................. 13
Parent Technology.......................................................... 23
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Parent Trademarks.......................................................... 23
Permits.................................................................... 16
Person..................................................................... 9
Position Paper............................................................. 49
Proxy Statement............................................................ 15
Registration Statement..................................................... 16
SEC........................................................................ 14
Securities Act............................................................. 12
State Takeover Approvals................................................... 15
Stockholder Meeting........................................................ 44
Stockholder Voting Agreement............................................... 8
Stockholder Voting Agreements.............................................. 8
Sub........................................................................ 8
Subsidiary................................................................. 13
Superior Company Proposal.................................................. 44
Surviving Corporation...................................................... 9
Tax Representation Letters................................................. 43
Tax Returns................................................................ 18
Tax Sharing Agreement...................................................... 48
Taxes...................................................................... 18
Termination Date........................................................... 54
Transaction Agreements..................................................... 8
Warrant Agreement.......................................................... 9
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of March 3, 2000
(this "Agreement"), by and among ENDO PHARMACEUTICALS HOLDINGS INC., a Delaware
corporation ("Parent"), ENDO INC., a Delaware corporation and a newly-formed
wholly-owned subsidiary of Parent ("Sub"), and ALGOS PHARMACEUTICAL
CORPORATION, a Delaware corporation (the "Company") (Sub and the Company being
hereinafter collectively referred to as the "Constituent Corporations").
WITNESSETH:
WHEREAS, Parent, Sub and the Company entered into an agreement and plan of
merger, dated as of November 26, 1999, and the parties wish to amend and
restate such agreement;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have each determined that the Merger is advisable and in the best interest of
their respective stockholders and is in furtherance of and consistent with
their respective long-term business strategies;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have each (a) approved and declared advisable the merger of the Company with
and into Sub (the "Merger"), upon the terms and subject to the conditions set
forth herein, whereby each issued and outstanding share of common stock, par
value $.01 per share, of the Company ("Company Common Stock") not owned
directly or indirectly by Parent or the Company (and other than Dissenting
Shares (as defined in Section 1.10 hereof)) will be converted into the Merger
Consideration (as defined in Section 1.7(c) hereof) and (b) approved this
Agreement upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of Parent has approved this Agreement and
the Merger and, in its capacity as the sole stockholder of Sub, has approved
this Agreement upon the terms and subject to the conditions set forth herein;
WHEREAS, following the execution of this Agreement and prior to the Closing
(as defined in Section 1.18 hereof), Parent will (a) duly adopt and declare
advisable an amendment and restatement of the Certificate of Incorporation of
Parent substantially in the form attached hereto as Exhibit A-1 (the "Charter
Amendment") and (b) declare and pay a stock dividend to the then current
holders of shares of common stock, par value $.01 per share, of Parent ("Parent
Common Stock") or effect some other form of recapitalization, the results of
which are substantially set forth on Exhibit A-2 attached hereto (the "Parent
Recapitalization");
WHEREAS, simultaneous with the execution and delivery of this Agreement,
Parent and each stockholder of the Company listed on Annex I attached hereto
have each entered into an agreement substantially in the form of Exhibit B
hereto (each, a "Stockholder Voting Agreement" and collectively, "Stockholder
Voting Agreements") pursuant to which such stockholder has agreed to vote the
shares of Company Common Stock beneficially owned by such stockholder in favor
of the Merger (the Stockholder Voting Agreements, the Warrant Agreement (as
defined in Section 1.7(c) hereof) and this Agreement are collectively referred
to herein as the "Transaction Agreements");
WHEREAS, following the execution of this Agreement and prior to the Closing,
Parent and certain stockholders of Parent shall enter into a registration
rights agreement pursuant to which Parent will grant certain rights to such
Persons regarding the registration of Parent Common Stock owned by them
following the Merger;
WHEREAS, for U.S. federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code") and that this
Agreement shall be, and hereby is, adopted as a plan of reorganization for
purposes of Section 368 of the Code;
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties hereto agree as
follows:
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ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the Delaware General Corporation Law (the
"DGCL"), the Company shall be merged with and into Sub at the Effective Time
(as hereinafter defined). Following the Merger, the separate corporate
existence of the Company shall cease and Sub shall (i) continue as the
surviving corporation (sometimes referred to herein as the "Surviving
Corporation"), (ii) succeed to and assume all the rights and obligations of the
Company in accordance with the DGCL, (iii) continue to be governed by the laws
of the State of Delaware and (iv) continue under the name "Endo Inc."
Section 1.2 Effective Time. The Merger shall become effective when a
Certificate of Merger (the "Certificate of Merger"), duly executed in
accordance with the relevant provisions of the DGCL, is filed with the
Secretary of State of the State of Delaware; provided, however, that, upon
mutual consent of the Constituent Corporations, the Certificate of Merger may
provide for a later date or time of effectiveness of the Merger. When used in
this Agreement, the term "Effective Time" shall mean the later of the date and
time at which the Certificate of Merger is filed or such later date and time
established by the Certificate of Merger. The filing of the Certificate of
Merger in accordance with the DGCL shall be made on the date of the Closing, or
as promptly thereafter as practicable.
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
Section 1.4 Directors of the Surviving Corporation. The directors of Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation as of the Effective Time and shall hold office until their
successors are duly appointed or elected in accordance with applicable law and
the Certificate of Incorporation and By-laws of the Surviving Corporation.
Section 1.5 Officers of the Surviving Corporation. The officers of Sub
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation as of the Effective Time and shall hold office until their
successors are duly appointed or elected in accordance with applicable law and
the certificate of incorporation and by-laws of the Surviving Corporation.
Section 1.6 Charter and By-Laws. The Certificate of Incorporation of Sub in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law. The By-laws of Sub as in effect
immediately prior to the Effective Time shall be the By-laws of the Surviving
Corporation until thereafter changed or amended as provided therein or by the
certificate of incorporation of the Surviving Corporation or by applicable law.
Section 1.7 Conversion of Securities. As of the Effective Time, by virtue of
the Merger and without any action on the part of Sub, the Company or the
holders of any securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock of Sub shall
remain outstanding as one validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation.
(b) All shares of Company Common Stock that are held in the treasury of
the Company and any shares of Company Common Stock owned by Parent or Sub
shall be canceled and no capital stock of Parent or other consideration
shall be delivered in respect thereof.
(c) Subject to the provisions of Section 1.12 hereof, each share of
Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares to be canceled in accordance with Section
1.7(b) hereof and Dissenting Shares) shall be converted into (i) one (the
"Conversion Number") validly issued, fully paid and nonassessable share of
Parent Common Stock and (ii) one warrant which shall be subject to the
terms and conditions of a warrant agreement (the "Warrant Agreement")
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substantially in the form attached hereto as Exhibit C (an "Algos Warrant"
and, together with the shares of Parent Common Stock referred to in clause
(i), the "Merger Consideration"). All such shares of Company Common Stock,
when so converted, shall no longer be outstanding and shall automatically
be canceled and retired and each holder of a certificate formerly
representing any such shares shall cease to have any rights with respect
thereto, except for the right to receive any dividends and other
distributions in accordance with Section 1.9 hereof, certificates
representing the shares of Parent Common Stock and Algos Warrants into
which such shares are converted upon surrender of such certificates in
accordance with Section 1.8 hereof. Each certificate shall, from and after
the Effective Time until surrendered in exchange for Parent Common Stock
and Algos Warrants, for all purposes be deemed to represent the shares of
Parent Common Stock and Algos Warrants into which such Company Common Stock
was converted in the Merger.
Section 1.8 Parent to Make Certificates Available.
(a) Exchange of Certificates. Parent shall authorize a commercial bank
reasonably acceptable to the Company (or such other Person (as defined in
Section 1.8(a) hereof) or Persons as shall be reasonably acceptable to Parent
and the Company) to act as Exchange Agent hereunder (the "Exchange Agent"). As
soon as practicable after the Effective Time, Parent shall deposit with the
Exchange Agent, in trust for the holders of shares of Company Common Stock
converted in the Merger, certificates representing the shares of Parent Common
Stock and certificates representing the Algos Warrants, including certificates
representing Algos Warrants subject to the transfer restrictions set forth in
the Warrant Agreement (the "Non-Transferable Warrants"), each issuable pursuant
to Section 1.7(c) hereof in exchange for outstanding certificates representing
shares of Company Common Stock (such shares of Parent Common Stock and Algos
Warrants, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund"). Except as contemplated
by this Section 1.8, and Section 1.11 hereof, the Exchange Fund shall not be
used for any other purpose. For purposes of determining the Exchange Fund so
deposited, Parent shall assume that no holder of shares of Company Common Stock
will perfect his or her appraisal rights under the DGCL. For purposes of this
Agreement, "Person" means any natural person, firm, individual, corporation,
limited liability company, partnership, association, joint venture, company,
business trust, trust or any other entity or organization, whether incorporated
or unincorporated, including a government or political subdivision or any
agency or instrumentality thereof.
(b) Exchange Procedures. As soon as practicable after the Effective Time,
Parent shall cause the Exchange Agent to mail to each record holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock converted in the Merger
(the "Certificates") a letter of transmittal (in customary form), which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon actual delivery of the Certificates to the
Exchange Agent, and shall contain instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Parent Common Stock, certificates representing Algos Warrants. Upon
surrender to the Exchange Agent for cancellation of a Certificate, together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor (i) a certificate
representing that number of whole shares of Parent Common Stock into which the
shares of Company Common Stock represented by the surrendered Certificate shall
have been converted at the Effective Time pursuant to this Article I, (ii) a
certificate representing that number of Algos Warrants (or, if requested, Non-
Transferable Warrants) into which the shares of Company Common Stock
represented by the surrendered Certificate shall have been converted at the
Effective Time pursuant to this Article I and (iii) any dividends and other
distributions payable in accordance with Section 1.9 hereof, and any
Certificate so surrendered shall forthwith be canceled.
Section 1.9 Dividends; Transfer Taxes; Withholding.
(a) No dividends or other distributions that are declared on or after the
Effective Time on Parent Common Stock, or are payable to the holders of record
thereof on or after the Effective Time, will be paid to any Person entitled by
reason of the Merger to receive a certificate representing Parent Common Stock
and a certificate representing Algos Warrants, until such Person surrenders
such certificates in accordance with Section 1.8
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hereof. Subject to the effect of applicable law, there shall be paid to each
record holder of a new certificate representing such Parent Common Stock: (i)
at the time of such surrender or as promptly as practicable thereafter, the
amount of any dividends or other distributions theretofore paid with respect to
the shares of Parent Common Stock represented by such new certificate and
having a record date on or after the Effective Time and a payment date prior to
such surrender; (ii) at the appropriate payment date or as promptly as
practicable thereafter, the amount of any dividends or other distributions
payable with respect to such shares of Parent Common Stock and having a record
date on or after the Effective Time, but prior to such surrender and a payment
date on or subsequent to such surrender. In no event shall (1) the Person
entitled to receive such dividends or other distributions be entitled to
receive interest on such dividends or other distributions and (2) any dividends
or distributions be payable on the Algos Warrants or to the holders of record
thereof unless and until such Algos Warrants are exercised in accordance with
the terms of the Warrant Agreement.
(b) If any cash or certificates representing shares of Parent Common Stock
or Algos Warrants are to be paid to or issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it shall
be a condition of such exchange that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer, subject to the
limitations set forth in Section 1.8 hereof and in the Warrant Agreement with
respect to Non-Transferable Warrants, and that the Person requesting such
exchange shall pay to the Exchange Agent any transfer or other Taxes (as
defined in Section 2.9 hereof) required by reason of the issuance of
certificates representing such shares of Parent Common Stock or such Algos
Warrants in a name other than that of the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Exchange Agent that
such Tax has been paid or is not applicable. Except as otherwise provided in
Section 5.17 hereof, Parent or the Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of Company Common Stock such amounts as
Parent or the Exchange Agent are required to deduct and withhold with respect
to the making of such payment under the Code or under any provision of state,
local or foreign Tax law. To the extent that amounts are so withheld by Parent
or the Exchange Agent, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the Company Common Stock
in respect of which such deduction and withholding were made by Parent or the
Exchange Agent.
Section 1.10 Dissenting Shares. Notwithstanding Section 1.7 hereof or any
other provision of this Agreement, shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time and held by a holder who
has properly exercised and perfected appraisal rights under Section 262 of the
DGCL (the "Dissenting Shares"), shall not be converted into the right to
receive the Merger Consideration, but the holders of Dissenting Shares shall be
entitled to receive such consideration as shall be determined pursuant to
Section 262 of the DGCL; provided, however, that if any such holder shall have
failed to perfect or shall effectively withdraw or lose his or her right to
appraisal and payment under the DGCL, such holder's shares shall thereupon be
deemed to have been converted as of the Effective Time into the right to
receive the Merger Consideration, without any interest thereon, and such shares
shall no longer be Dissenting Shares. Dissenting Shares shall be canceled and
any holder thereof shall cease to have any rights with respect thereto,
including as a stockholder of the Surviving Corporation, Parent or the Company.
Section 1.11 Return of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the former stockholders of the Company for six months
after the Effective Time shall be delivered to Parent, upon demand of Parent,
and any such former stockholders who have not theretofore complied with this
Article I shall thereafter look only to Parent for payment of their claim for
Parent Common Stock, Algos Warrants and any dividends or distributions with
respect to Parent Common Stock. Any portion of the Exchange Fund relating to
shares of Company Common Stock for which appraisal rights have been perfected
and not thereafter withdrawn or rescinded shall be returned to Parent upon
demand. Neither Parent nor either Constituent Corporation shall be liable to
any former holder of Company Common Stock for any such shares of Parent Common
Stock, Algos Warrants, cash and dividends and distributions held in the
Exchange Fund which are delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
Section 1.12 Adjustment of Conversion Number. In the event of any
reclassification, recapitalization, stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock) or subdivision with respect to Parent Common Stock, any
change or conversion of
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Parent Common Stock into other securities, any other dividend or distribution
with respect to the Parent Common Stock as the same may be adjusted from time
to time pursuant to the terms of this Agreement (or if a record date with
respect to any of the foregoing should occur), prior to the Effective Time,
appropriate and proportionate adjustments shall be made to the Conversion
Number, and all references to the Conversion Number in this Agreement shall be
deemed to be to the Conversion Number as so adjusted; provided that in no event
shall any such adjustment occur on account of the Charter Amendment or the
Parent Recapitalization.
Section 1.13 No Further Ownership Rights in Company Common Stock. All shares
of Parent Common Stock and all Algos Warrants issued pursuant to the terms
hereof (including any cash paid pursuant to Section 1.10 hereof) shall be
deemed to have been issued in full satisfaction of all rights pertaining to the
shares of Company Common Stock represented by such Certificates.
Section 1.14 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares
of Company Common Stock outstanding prior to the Effective Time shall
thereafter be made on the records of the Company. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, the Exchange Agent or
Parent, such Certificates shall be canceled and exchanged as provided in this
Article I.
Section 1.15 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if reasonably
required by the Surviving Corporation, the posting by such Person of a bond, in
such reasonable amount as the Surviving Corporation may direct, as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Parent Common Stock, the Algos Warrants and any
dividends or other distributions to which the holder thereof is entitled
pursuant to Section 1.9 hereof.
Section 1.16 Affiliates. Certificates surrendered for exchange by each
Affiliate (as defined in Section 5.4 hereof) of the Company for purposes of
Rule 145(c) under the Securities Act of 1933 and the rules and regulations
promulgated thereunder (the "Securities Act") that has been identified and
required to provide an Affiliate letter pursuant to Section 5.4 hereof shall
not be exchanged until Parent has received such Affiliate letter from such
Person as provided in Section 5.4 hereof.
Section 1.17 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations or (ii) otherwise to carry out the purposes of
this Agreement, the Surviving Corporation and its proper officers and directors
or their designees shall be authorized to execute and deliver, in the name and
on behalf of either of the Constituent Corporations, all such deeds, bills of
sale, assignments and assurances and to do, in the name and on behalf of either
Constituent Corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such Constituent Corporation and otherwise
to carry out the purposes of this Agreement.
Section 1.18 Closing. Subject to the satisfaction or waiver of the
conditions set forth in Article VI hereof, the closing of the transactions
contemplated by this Agreement (the "Closing") and all actions specified in
this Agreement to occur at the Closing shall take place at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP in New York, New York at 10:00 a.m.
(New York time) on a date to be specified by the parties hereto, but no later
than the business day immediately following the satisfaction or waiver of the
conditions set forth in Section 6.1(a), (b), (c) and (d) hereof or at such
other time, date or place as Parent and the Company shall agree. The date on
which the Closing occurs is referred to herein as the "Closing Date."
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the Company as
follows:
Section 2.1 Organization, Standing and Power. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power and
authority to carry on its business as now being conducted and to enter into and
perform this Agreement and the other Transaction Agreements and the
transactions contemplated hereby and thereby. Each Subsidiary (as hereinafter
defined) of Parent (other than Sub) is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized and
has the requisite corporate or other power and authority to carry on its
business as now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power or authority would not,
individually or in the aggregate, have a Material Adverse Effect (as
hereinafter defined) on Parent. Each of Parent and its Subsidiaries is duly
qualified to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on Parent. For purposes of this Agreement, (a) each of "Material
Adverse Change" or "Material Adverse Effect" means, when used with respect to
Parent, Sub or the Company, as the case may be, any change or effect that is
materially adverse to the business, assets, liabilities, results of operation
or condition (financial or otherwise) of Parent and its Subsidiaries, taken as
a whole, or the Company, as the case may be, excluding, in either case, any
changes, circumstances or effects resulting from or related to changes or
developments in the economy, financial markets or regulatory or political
climate generally, any changes in conditions or developments generally
applicable to the industries in which Parent and Subsidiaries of Parent or the
Company, as the case may be, are involved, any changes or developments related
to the general relationship of Parent and Subsidiaries of Parent or the
Company, as the case may be, with the U.S. Food and Drug Administration ("FDA")
or the U.S. Drug Enforcement Administration ("DEA") and in the case of the
Company, any change or development relating to MorphiDex(R) or any other of the
Company's products under development (including the FDA or DEA approval process
relating thereto) and except for any such changes or effects resulting from
this Agreement, the transactions contemplated hereby or the announcement
thereof and (b) "Subsidiary" means any corporation, partnership, joint venture
or other legal entity of which Parent or the Company, as the case may be
(either alone or through or together with any other Subsidiary), owns, directly
or indirectly, 50% or more of the stock or other equity interests the holders
of which generally are entitled to vote for the election of the board of
directors or other governing body of such corporation, partnership, joint
venture or other legal entity. Parent has heretofore delivered to the Company
complete and correct copies of Parent's certificate of incorporation ("Parent
Charter") and by-laws ("Parent By-Laws") and Sub's certificate of incorporation
and by-laws, each as in effect on the date of this Agreement.
Section 2.2 Capital Structure. As of the date of this Agreement, the
authorized capital stock of Parent consists of (i) 2,000,000 shares of Parent
Common Stock, (ii) 200,000 shares of class A common stock, par value $.01 per
share, of Parent ("Parent Class A Common Stock") and (iii) 500,000 shares of
preferred stock, par value $.01 per share, of Parent (the "Parent Preferred
Stock"). At the close of business on November 15, 1999, (i) 929,950 shares of
Parent Common Stock were issued and outstanding, all of which were validly
issued, fully paid and nonassessable and free of preemptive rights; (ii)
174,560 shares of Parent Class A Common Stock were issued and outstanding, all
of which were validly issued, fully paid and nonassessable and free of
preemptive rights, and 290 of which are held in the treasury of the Parent;
(iii) 618,750 shares of Parent Common Stock were reserved for future issuance
pursuant to Parent's 1997 Executive Stock Option Plan and Parent's 1997
Employee Stock Option Plan (collectively, the "Parent Stock Plans"); (iv) 6,000
shares of Parent Common Stock were reserved for future issuance pursuant to
Parent's 1997 Employee Stock Purchase Plan (the "Parent Stock Purchase Plan"
and, together with the Parent Stock Plans, the "Parent Incentive Plans"); and
(v) no shares of Parent Preferred Stock were issued or outstanding. All of the
shares of Parent Common Stock and all of the Algos Warrants issuable in
exchange for Company Common Stock at the Effective Time in accordance with this
Agreement will be, when so issued, duly authorized, validly issued, free of
preemptive rights and, in the case of the shares of the Parent Common Stock,
fully paid and nonassessable. Each share of Parent Common Stock issuable upon
exercise of the Algos Warrants will be fully paid and nonassessable at the
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time of exercise. As of the date of this Agreement, except for (a) this
Agreement, (b) stock options covering not in excess of 618,750 shares of Parent
Common Stock (collectively, the "Parent Stock Options") and (c) the Parent
Stock Purchase Plan, there are no options, warrants, calls, rights or
agreements to which Parent or any of its Subsidiaries is a party or by which
any of them is bound obligating Parent or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of Parent or any of its Subsidiaries, or securities convertible
into or exchangeable for such capital stock, or obligating Parent or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right or agreement. Since November 15, 1999, Parent has not issued any shares
of its capital stock, or securities convertible into or exchangeable for such
capital stock, other than shares issued in the ordinary course pursuant to the
Parent Stock Plans. Except as set forth in Schedule 2.2 of that separate
disclosure letter delivered by Parent to the Company at or prior to the
execution and delivery by Parent of this Agreement (the "Parent Disclosure
Schedule"), there are no outstanding contractual obligations of Parent or any
of Parent's Subsidiaries (i) restricting the transfer of, (ii) affecting the
voting rights of, (iii) requiring the repurchase, redemption or disposition of,
(iv) requiring the registration for sale of, or (v) granting any preemptive or
antidilutive right with respect to, any shares of Parent Common Stock, Parent
Class A Common Stock, Parent Preferred Stock or any capital stock of any
Subsidiary of Parent. The execution and delivery of the Transaction Agreements
do not, and the consummation of the transactions contemplated hereby and
thereby and the compliance with the provisions hereof and thereof will not,
except as set forth in such Transaction Agreements, give rise to any preemptive
right or antidilutive right of any Person with respect to any shares of Parent
Common Stock, Parent Class A Common Stock, Parent Preferred Stock or any
capital stock of any Subsidiary of Parent. Each outstanding share of capital
stock or other equity interests of each Subsidiary of Parent is duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights, and each such share is owned by Parent or another Subsidiary of Parent,
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on voting rights, charges and
other encumbrances of any nature whatsoever.
Section 2.3 Authority. Each of Parent and Sub has all requisite corporate
power and authority to enter into the Transaction Agreements to which it is a
party and to consummate the transactions contemplated hereby and thereby. On or
prior to the date of this Agreement, the respective Boards of Directors of
Parent and Sub have each declared the Merger advisable and in the best interest
of their respective stockholders and have each approved execution and delivery
of this Agreement in accordance with applicable law; the Board of Directors of
Sub has recommended to Parent, as the sole stockholder of Sub, that it approve
this Agreement in accordance with the DGCL; the Board of Directors of Parent
has authorized that it approve this Agreement in its capacity as the sole
stockholder of Sub in accordance with the DGCL; and concurrently with the
execution of this Agreement, Parent is approving this Agreement as the sole
stockholder of Sub in accordance with the DGCL. On or prior to the date of this
Agreement, the stockholders of Parent, in accordance with the DGCL and the
Parent Charter, shall have approved the Charter Amendment. The execution and
delivery by each of Parent and Sub of the Transaction Agreements to which it is
a party and the consummation by Parent and Sub of the transactions contemplated
hereby and thereby, including the Share Issuance, have been duly authorized by
all necessary corporate action on the part of Parent and Sub, subject to the
filing of the Certificate of Merger pursuant to the DGCL. Each of Parent and
Sub have duly executed and delivered the Transaction Agreements to which it is
a party and (assuming the valid authorization, execution and delivery thereof
by the other parties thereto) each such Transaction Agreement constitutes the
valid and binding obligation of Parent and Sub enforceable against each of them
in accordance with their terms, except as the enforceability hereof and thereof
may be limited by (1) applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect that affect the enforcement of
creditors rights generally or (2) general principals of equity, whether
considered in a proceeding at law or in equity. Prior to the filing thereof,
the filing of a registration statement on Form S-4 with the Securities and
Exchange Commission ("SEC") by Parent under the Securities Act for the purpose
of registering the shares of Parent Common Stock and the Algos Warrants to be
issued in the Merger and the shares of Parent Common Stock to be issued upon
exercise of the Algos Warrants (together with any amendments or supplements
thereto, whether prior to or after the effective date thereof, the
"Registration Statement") and the taking of all actions in connection therewith
will have been duly authorized by Parent's Board of Directors.
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Section 2.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in the second
sentence of this Section 2.4 have been obtained and all filings and obligations
described in the second sentence of this Section 2.4 have been made, the
execution and delivery of the Transaction Agreements do not, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the provisions hereof and thereof will not, conflict with, result in any
violation of, or breach or default (with or without due notice or lapse of
time, or both) under, or give to others a right of termination, cancellation or
acceleration of any obligation or the loss of any benefit under, or result in
the creation of any lien, security interest, charge or encumbrance upon any of
the properties or assets of Parent or any of its Subsidiaries under, any
provision of (i) the Parent Charter or Parent By-Laws, (ii) any provision of
the comparable charter or organization documents of any of Parent's
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage, lease,
indenture, or other contract, agreement, instrument, permit, concession,
franchise or license applicable to Parent or any of its Subsidiaries, (iv) any
license, permit or other instrument, contract or agreement granted by, or
entered into with, the FDA or the DEA or (v) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, other than, in
the case of clauses (ii), (iii), (iv) or (v), any such conflicts, violations,
breaches, defaults, rights, liens, security interests, charges or encumbrances
that, individually or in the aggregate, would not have a Material Adverse
Effect on Parent, or prevent or materially delay the consummation of any of the
transactions contemplated hereby or thereby. No filing, notification or
registration with, or authorization, consent or approval of, any domestic
(federal and state), or foreign court, commission, governmental body,
regulatory or administrative agency, authority or tribunal (a "Governmental
Entity") is required by or with respect to Parent or any of its Subsidiaries in
connection with the execution, delivery and performance of the Transaction
Agreements by Parent or Sub or is necessary for the consummation of the Merger
and the other transactions contemplated by the Transaction Agreements, except
for (i) in connection, or in compliance, with the provisions of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the
Securities Act and the Securities Exchange Act of 1934, as amended (together
with the rules and regulations promulgated thereunder, the "Exchange Act"),
(ii) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware and the filing of the appropriate documents with the relevant
authorities of other states in which Parent or any of its Subsidiaries is
qualified to do business, each of which is set forth in Schedule 2.4 of the
Parent Disclosure Schedule, (iii) such filings and consents as may be required
under any environmental, health or safety law or regulation (including any
rules and regulations of the FDA and the DEA ) pertaining to any notification,
disclosure or required approval triggered by the Merger or by the transactions
contemplated by the Transaction Agreements, each of which is set forth in
Schedule 2.4 of the Parent Disclosure Schedule, (iv) such filings,
authorizations, orders and approvals as may be required by state takeover laws
(the "State Takeover Approvals"), each of which is set forth in Schedule 2.4 of
the Parent Disclosure Schedule, (v) applicable requirements, if any, of "blue
sky" laws and the NASDAQ National Market (the "NASDAQ") and (vi) such other
consents, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, or prevent or materially
delay the consummation of any of the transactions contemplated by the
Transaction Agreements. The execution and delivery of the Transaction
Agreements do not, and the consummation of the transactions contemplated hereby
and thereby and compliance with the provisions hereof and thereof will not,
conflict with, result in any violation of, or breach or default (with or
without due notice or lapse of time, or both) under, or give to others a right
of termination, cancellation or acceleration of any obligation or the loss of
any benefit under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Parent or any of
its Subsidiaries under, any of the license agreements to which it is a party,
except for such conflicts, violations, breaches, defaults, rights or liens as
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent. All material license agreements of Parent or any of its Subsidiaries
are listed in Schedule 2.4 of the Parent Disclosure Schedule.
Section 2.5 Financial Statements. Parent has previously provided the Company
with true and accurate copies of (x) Parent's audited financial statements for
the years ended December 31, 1997 and December 31, 1998, and (y) Parent's
unaudited financial statements for the six-month periods ended June 30, 1998
and June 30, 1999 (collectively, the "Parent Financial Statements"). The Parent
Financial Statements, as of their respective dates, fairly present in all
material respects in accordance with generally accepted accounting
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principles ("GAAP") the consolidated financial position of Parent and its
consolidated Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to any
other adjustments described therein and normal year-end audit adjustments and
to any other adjustments described therein). Except as required by GAAP, Parent
has not, since December 31, 1998, made any change in the accounting practices
or policies applied in the preparation of the financial statements. The books
and records of Parent and its Subsidiaries have been, and are being, maintained
in all material respects in accordance with GAAP and other applicable legal and
accounting requirements.
Section 2.6 Registration Statement and Proxy Statement. None of the
information to be supplied by Parent or Sub for inclusion or incorporation by
reference in the Registration Statement or the proxy statement/prospectus
included therein (together with any amendments or supplements thereto, the
"Proxy Statement") relating to the Stockholder Meeting (as hereinafter defined)
will (i) in the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading or (ii) in the case of the Proxy Statement,
at the time of the mailing of the Proxy Statement, the time of the Stockholder
Meeting and at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If, at any time prior
to the Effective Time, any event with respect to Parent, its officers and
directors or any of its Subsidiaries shall occur which is required to be
described in the Proxy Statement or the Registration Statement, such event
shall be so described, and an appropriate amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
stockholders of the Company. The Registration Statement will comply (excluding
any matters relating to the Company, as to which Parent and Sub make no
representations) as to form in all material respects with the provisions of the
Securities Act.
Section 2.7 Absence of Certain Changes or Events. Except as disclosed in
Schedule 2.7 of the Parent Disclosure Schedule, since September 30, 1999, (A)
none of Parent or any of its Subsidiaries has incurred any liability or
obligation (indirect, direct or contingent), or entered into any oral or
written agreement or other transaction, that is not in the ordinary course of
business or that would, individually or in the aggregate, result in a Material
Adverse Effect on Parent, except for any such changes or effects resulting from
this Agreement, the transactions contemplated hereby or the announcement
thereof; (B) none of Parent or any of its Subsidiaries has sustained any loss
or interference with their business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance) that would,
individually or in the aggregate, have a Material Adverse Effect on Parent; (C)
there has been no action taken by Parent or any of its Subsidiaries that, if
taken during the period from the date of this Agreement through the Effective
Time, would constitute a material breach of Section 4.1(a) hereof; and (D)
there has been no event, circumstance or development that would, individually
or in the aggregate, have a Material Adverse Effect on Parent.
Section 2.8 Permits and Compliance.
(a) Each of Parent and its Subsidiaries is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental Entity
("Permits") necessary for it to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "Parent Permits"),
except where the failure to have any of the Parent Permits would not,
individually or in the aggregate, have a Material Adverse Effect on Parent,
and, as of the date of this Agreement, no suspension or cancellation of any of
the Parent Permits is pending or, to the Knowledge of Parent (as hereinafter
defined), threatened, except where the suspension or cancellation of any of the
Parent Permits would not, individually or in the aggregate, have a Material
Adverse Effect on Parent; provided that no representation is being made by the
Company in this sentence with respect to any investigational new drug
application (an "IND") or new drug application (an "NDA") of Parent filed with
the FDA (which are the subject of Section 2.13 hereof). None of Parent or any
of its Subsidiaries is in violation of (A) its charter, by-laws or other
organizational documents, (B) any applicable law, ordinance, administrative or
governmental rule or regulation or (C) any order, decree or judgment of any
Governmental Entity having jurisdiction over Parent or any of its Subsidiaries,
except, in the case of clauses (B) and (C), for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent.
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(b) Schedule 2.8(b) of the Parent Disclosure Schedule contains a true and
complete list of all written agreements (i) that would be required to be listed
as exhibits to a registration statement of Parent on Form S-1 under the rules
and regulations of the SEC if such registration statement were filed on the
date of this Agreement, (ii) relating to indebtedness for money borrowed by
Parent or any of its Subsidiaries, which, individually or in the aggregate,
represent an amount greater than $1.0 million, excluding trade credit or
payables arising in the ordinary course of business, (iii) creating any
guarantee arrangement or other agreement to be liable for the obligations of a
Person other than Parent or any of its wholly owned Subsidiaries, (iv)
providing for payment or the receipt of payment or the sale of purchase or
exchange of goods worth in excess of $20.0 million, (v) with any distributor or
sales contractor for Parent's products, (vi) providing for any joint venture or
partnership, (vii) with E.I. du Pont de Nemours and Company or The Dupont Merck
Pharmaceutical Company or any of its Subsidiaries or (viii) containing any
provision or covenant materially limiting the ability of Parent or its
Subsidiaries or any of its or their Affiliates to sell any products of or to
any other Person, engage in any line of business or compete with or to obtain
products or services from any Person or materially limiting the ability of any
Person to provide products or services to Parent or any of its Subsidiaries or
Affiliates (collectively, the "Parent Material Contracts"). Parent has
previously provided the Company with true and correct copies of each of the
Parent Material Contracts, as in effect on the date of this Agreement. Except
as disclosed in Schedule 2.8(b) of the Parent Disclosure Schedule, the
execution and delivery of the Transaction Agreements do not, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the provisions hereof and thereof will not, conflict with, result in any
violation of, or breach or default (with or without due notice or lapse of
time, or both) under, or give to others a right of termination, cancellation or
acceleration of any obligation or the loss of any benefit under, or result in
the creation of any lien, security interest, charge or encumbrance upon any of
the properties or assets of Parent or any of its Subsidiaries under, any
indenture, mortgage, loan agreement, note or other agreement or instrument for
borrowed money, any guarantee of any agreement or instrument for borrowed money
or any lease, contractual license or other contract, agreement or instrument to
which Parent or any of its Subsidiaries is a party or by which Parent or any of
its Subsidiaries is bound or to which any of the properties, assets or
operations of Parent or any of its Subsidiaries is subject, other than such
conflicts, violations, breaches, defaults, rights or liens as would not,
individually or in the aggregate, have a Material Adverse Effect on Parent. As
used in this Agreement, "Knowledge of Parent" means the actual knowledge of any
of the Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, General Counsel of Parent or Senior Vice President-Research and
Development.
Section 2.9 Tax Matters.
Except as set forth in Schedule 2.9 of the Parent Disclosure Schedule:
(a) All federal, state, local and foreign Tax Returns required to be
filed (taking into account extensions) by or on behalf of Parent and each
of its Subsidiaries (i) have been timely filed, except for such Tax Returns
that the failure by Parent or such Subsidiary to timely file would not,
individually or in the aggregate, have a Material Adverse Effect on Parent,
and (ii) are true, complete and correct in all material respects.
(b) All Taxes payable by or with respect to Parent and any of its
Subsidiaries have been timely paid, or adequately reserved for (in
accordance with GAAP) in the most recent Parent Financial Statements,
except for Taxes that the failure of which to pay would not, individually
or in the aggregate, have a Material Adverse Effect on Parent.
(c) No deficiencies for any Taxes have been proposed, asserted or
assessed either orally or in writing against Parent or any of its
Subsidiaries that are not adequately reserved for (in accordance with GAAP)
in the most recent Parent Financial Statements, except for such
deficiencies as would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. All assessments for Taxes due and owing
by or with respect to Parent or any of its Subsidiaries with respect to
completed and settled examinations or concluded Litigation have been paid.
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(d) No examinations have been completed or are presently being conducted
with respect to the Parent or any of its Subsidiaries' federal or material
state income Tax Returns.
(e) Parent and each of its Subsidiaries have complied with all rules and
Treasury regulations relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to Sections
1441 and 1442 of the Code or similar provisions under any foreign Laws) and
have, within the time and in the manner required by law, withheld from
employee wages and paid over to the proper Governmental Entities all
amounts required to be so withheld and paid over under all Applicable Laws,
except where the failure to be in such compliance or to withhold and pay
over such amounts would not, individually or in the aggregate, have a
Material Adverse Effect on Parent.
(f) Parent and each of its Subsidiaries (i) have not waived any
statutory period of limitations in respect of its or their Taxes or Tax
Returns or (ii) are not a party to, not bound by, or have no obligation
under any agreement, contract or arrangement for the sharing, allocation,
or indemnification of Taxes (other than indemnification agreements where
Taxes incidental to the primary obligation so indemnified are also
indemnified).
(g) No property of Parent or any of its Subsidiaries is "tax-exempt use
property" (as such term is defined in Section 168 of the Code).
(h) Neither Parent nor any of its Subsidiaries has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a "Subsection (f) asset" (as such
term is defined in Section 341(f)(4) of the Code) owned by Parent or any of
its Subsidiaries.
(i) Parent is not, and has not been for the five years preceding the
Closing, a "United States real property holding company" (as such term is
defined in Section 897(c)(2) of the Code).
(j) Parent has no reason to believe that any condition exists, nor has
Parent, nor any of its Subsidiaries, taken any action or failed to take any
action, that could reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
For purposes of this Agreement the term (i) "Taxes" will mean any and all
federal, state, local, foreign, provincial, territorial or other taxes,
imposts, tariffs, fees, levies or other similar assessments or liabilities and
other charges of any kind, including income taxes, ad valorem taxes, excise
taxes, withholding taxes, stamp taxes or other taxes of or with respect to
gross receipts, premiums, real property, personal property, windfall profits,
sales, use, transfers, licensing, employment, social security, workers'
compensation, unemployment, payroll and franchises imposed by or under any Law;
and such terms will include any interest, fines, penalties, assessments or
additions to tax resulting from, attributable to or incurred in connection with
any such tax or any contest or dispute thereof and (ii) "Tax Returns" will mean
any declaration, return, report, schedule, certificate, statement or other
similar document (including relating or supporting information) required to be
filed with a Governmental Entity, or where none is required to be filed with a
Governmental Entity, the statement or other document issued by a Governmental
Entity in connection with any Tax, including, without limitation, any
information return, claim for refund, amended return or declaration of
estimated Tax.
Section 2.10 Actions and Proceedings. Except as set forth in Schedule 2.10
of the Parent Disclosure Schedule, (a) there are no outstanding orders,
judgments, injunctions, awards or decrees of any Governmental Entity against or
involving Parent or any of its Subsidiaries, against or involving any of the
present directors or officers of Parent or any of its Subsidiaries, as such, or
involving any of its or their properties, assets or business that, individually
or in the aggregate, would have a Material Adverse Effect on Parent and (b) as
of the date of this Agreement, there are no actions, suits or claims or legal,
administrative or arbitrative proceedings or investigations pending or, to the
Knowledge of Parent, threatened against or involving Parent or any of its
Subsidiaries against or involving any of the present directors or officers of
Parent or any of its Subsidiaries, as such, or involving any of its or their
properties, assets or business before any court or arbitration tribunal or
before any Governmental Entity that, individually or in the aggregate, would
have a Material Adverse Effect on Parent. As of the date of this Agreement,
there are no actions, suits, labor disputes
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or other litigation, legal or administrative proceedings or governmental
investigations pending, or, to the Knowledge of Parent, threatened against or
affecting Parent or any of its Subsidiaries or any of its or their present
directors or officers, as such, or any of its or their properties, assets or
business before any court or arbitration tribunal or before any Governmental
Entity relating to the transactions contemplated by the Transaction Agreements.
Section 2.11 Certain Agreements. Schedule 2.11 of the Parent Disclosure
Schedule sets forth each material oral or written stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan to which
Parent or any of its Subsidiaries is a party. Except as set forth in Schedule
2.11 of the Parent Disclosure Schedule, as of the date of this Agreement,
neither Parent nor any of its Subsidiaries is a party to any oral or written
agreement or plan, including any stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan, any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement. No holder
of any option to purchase shares of Parent Common Stock, or shares of Parent
Common Stock granted in connection with the performance of services for Parent
or its Subsidiaries, is or will be entitled to receive cash from Parent or any
Subsidiary in lieu of or in exchange for such option or shares as a result of
the transactions contemplated by this Agreement (other than in lieu of
fractional shares). Neither Parent nor any Subsidiary is a party to any
termination benefits agreement or severance agreement or employment agreement
which would be triggered by the consummation of the transactions contemplated
by this Agreement.
Section 2.12 ERISA.
(a) Schedule 2.12(a) of the Parent Disclosure Schedule lists each Parent
Plan (as hereinafter defined). With respect to each material Parent Plan,
Parent has made (or as soon as practicable will make) available to the Company
a true and correct copy of (i) the three most recent annual reports (Form 5500)
filed with the Internal Revenue Service (the "IRS"), (ii) such Parent Plan and
any amendments thereto, (iii) each trust agreement, insurance contract or
administration agreement relating to such Parent Plan and the latest financial
statements thereof, (iv) the most recent summary plan description of each
Parent Plan for which a summary plan description is required, (v) the most
recent actuarial report or valuation relating to a Parent Plan subject to Title
IV of ERISA, (vi) the most recent determination letter, if any, issued by the
IRS with respect to any Parent Plan intended to be qualified under section
401(a) of the Code and (vii) any written description that exists as of the date
of this Agreement of any unwritten Parent Plan. Except as would not,
individually or in the aggregate, have a Material Adverse Effect on Parent, (i)
each Parent Plan complies with all applicable statutes and governmental rules
and regulations, including but not limited to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), the Code and the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), and (ii) no
"reportable event" (within the meaning of Section 4043 of ERISA) has occurred
with respect to any Parent Plan for which the 30-day notice requirement has not
been waived, (iii) none of Parent or its Subsidiaries is or has been obligated
to contribute or otherwise may have any liability with respect to any Parent
Multiemployer Plan (as hereinafter defined), (iv) no action has been taken, or
is currently being considered, to terminate any Parent Plan subject to Title IV
of ERISA, (v) Parent has complied with the continued medical coverage
requirements of COBRA, (vi) no Parent Plan has engaged in a "prohibited
transaction" (as defined in Section 4975 of the Code or Section 406 of ERISA)
and (vii) no liability under Title IV or Section 302 of ERISA or Section 412 of
the Code has been incurred by Parent that has not been satisfied in full, and
no condition exists that presents a risk to Parent of incurring any such
liability. Except as would not, individually or in the aggregate, have a
Material Adverse Effect on Parent, no Parent Plan subject to Title IV of ERISA,
nor any trust created thereunder, has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived.
(b) With respect to any Parent Plan which is subject to Title IV of ERISA,
the present value of accrued benefit obligations, as determined in accordance
with FAS 87 in accordance with the actuarial assumptions used
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to prepare the most recent reports of such Parent Plan, did not exceed the fair
market value of the Plan assets as of the most recent valuation date for which
an actuarial report has been prepared and to the Knowledge of Parent, there has
not been any material adverse change to such status. All contributions required
to be made with respect to any Parent Plan on or prior to the Closing Date have
been timely made or are reflected on the most recent balance sheet of Parent.
With respect to the Parent Plans, no event has occurred in connection with
which Parent would be subject to any liability under the terms of such Parent
Plans, ERISA, the Code or any other applicable law which would have,
individually or in the aggregate, a Material Adverse Effect on Parent. With
respect to any current or former employee, director, officer, consultant or
contractor of Parent or its Subsidiaries, consummation of the transactions
contemplated by this Agreement shall not result in the payment or provision of
additional compensation or benefits or accelerate the vesting, payment or
funding of any compensation or benefits. No amounts payable by reason of this
transaction under the Parent Plans will fail to be deductible for federal
income tax purposes by virtue of either Section 280G or Section 162(m) of the
Code. All Parent Plans that are intended to be qualified under Section 401(a)
of the Code have been determined by the IRS to be so qualified or a timely
application for such determination is pending, and to the Knowledge of Parent,
there is no reason why any such Parent Plan is not so qualified in operation.
Parent does not have any liability or obligation under any welfare plan to
provide benefits after termination of employment to any employee or dependent
other than as required by ERISA or as disclosed in Schedule 2.12 of the Parent
Disclosure Schedule. There are no pending or, to the Knowledge of Parent,
threatened, claims, suits, audits or investigations related to any Parent Plan
other than claims for benefits in the ordinary course and other than claims,
suits, audits or investigations that would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. As used herein, (i)
"Parent Plan" means each deferred compensation and each bonus or other
incentive compensation, stock purchase, stock option and other equity
compensation or ownership plan, program, agreement or arrangement, each
severance or termination pay, medical, surgical, hospitalization, life
insurance and other "welfare" plan, fund or program (within the meaning of
Section 3(1) of the ERISA); each profit-sharing, stock bonus or other "pension"
plan, fund or program (within the meaning of Section 3(2) of ERISA); each
employment, retention, consulting, termination or severance agreement; and each
other employee benefit plan, fund, program, agreement or arrangement, in each
case, that is sponsored, maintained or contributed to or required to be
contributed to by Parent or its Subsidiaries, including any plan subject to
Title IV of ERISA maintained within the past five (5) years by Parent or any of
its Subsidiaries and (ii) "Parent Multiemployer Plan" means a "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA) to which Parent is or has
been obligated to contribute or otherwise may have any liability.
Section 2.13 Compliance with Certain Laws.
(a) Except as disclosed in Schedule 2.13(a) of the Parent Disclosure
Schedule, the properties, assets and operations of Parent and its Subsidiaries
are in compliance with all Applicable Laws, except for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent. Except as disclosed in Schedule 2.13(a) of the Parent Disclosure
Schedule, with respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations, there
are no past, present or reasonably anticipated future events, conditions,
circumstances, activities, practices, incidents, actions or plans of Parent or
any of its Subsidiaries that may interfere with or prevent compliance or
continued compliance with all Applicable Laws, other than any such interference
or prevention as would not, individually or in the aggregate with any such
other interference or prevention, have a Material Adverse Effect on Parent. For
purposes of this Agreement, "Applicable Laws" shall mean applicable federal,
state, local and foreign laws, rules and regulations, orders, decrees,
judgments, permits and licenses of all Governmental Entities (including, but
not limited to, those related to public and worker health and safety,
controlled substances and the protection and clean-up of the environment and
activities or conditions related thereto (including, without limitation, those
relating to the generation, handling, disposal, transportation or release of
hazardous materials) (collectively, "Environmental Laws")). The term "hazardous
materials" shall mean those substances that are regulated by or form the basis
for liability under any applicable Environmental Laws. Parent will make
available to the Company such certificates and environmental studies with
respect to such properties as Parent has available on the date of this
Agreement.
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(b) Each of Parent's and its Subsidiaries' manufacturing, distribution,
development and marketing practices are in compliance with all applicable
federal and state laws, rules, regulations, orders, licenses, judgments, writs,
injunctions, decrees or demands, including, without limitation, laws and
regulations administered by the FDA and the DEA, except where the failure to be
in such compliance would not, individually or in the aggregate, have a Material
Adverse Effect on Parent.
(c) Each of Parent and its Subsidiaries possesses FDA approval or allowance
of all material investigational or marketed product applications as are
currently legally required and are necessary for the conduct of its business as
now being conducted, a list of which is attached hereto as Schedule 2.13(c) of
the Parent Disclosure Schedule, true and correct copies of which have been
provided to the Company by Parent.
(d) Since December 1, 1997, none of Parent or any of its Subsidiaries has
used the services of any person debarred under the provisions of the Generic
Drug Enforcement Act of 1992, 21 U.S.C. (S) 335(a)(b). Since December 1, 1997,
none of Parent, its Subsidiaries, nor any of their respective officers,
employees, agents or affiliates, has been convicted of any crime or engaged in
any conduct for which debarment is mandated by 21 U.S.C. (S) 335a(a) or
authorized by 21 U.S.C. (S) 335a(b).
(e) Each of Parent and its Subsidiaries is in compliance with all (i)
federal and state laws applicable to the development, manufacture, processing,
packing, testing and sale of pharmaceutical products to the extent such laws
are applicable to it, (ii) rules and regulations of the FDA and the DEA to the
extent such rules and regulations are applicable to it, and (iii) product
applications (including INDs) has been approved by the FDA under which Parent
or any of its Subsidiaries has sold any product on or after November 1, 1999,
except in each case where the failure to be in such compliance would not,
individually or in the aggregate, have a Material Adverse Effect on Parent. All
manufacturing operations conducted by or for the benefit of Parent or any of
its Subsidiaries have been and are being conducted in compliance with the
current Good Manufacturing Practice regulations set forth in 21 C.F.R. Parts
210 and 211, except where the failure to be in such compliance would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
(f) As to each drug of Parent for which a product application has been
approved by, or an IND has been filed with, the FDA, the applicant and all
Persons performing operations covered by the application are in compliance with
the requirements of the Food, Drug and Cosmetics Act, as amended (the "FDCA"),
and the implementing regulations of the FDA, respectively, and all terms and
conditions of the application, except where the failure to be in such
compliance would not, individually or in the aggregate, have a Material Adverse
Effect on Parent.
(g) Each of Parent and its Subsidiaries is in material compliance with all
applicable registration and listing requirements set forth in 21 U.S.C. (S) 360
and 21 C.F.R. Part 207. To the extent required, each of Parent and its
Subsidiaries has obtained registrations from the DEA and are in material
compliance with all such registrations and all applicable regulations
promulgated by the DEA.
(h) Neither Parent, any of its Subsidiaries, nor their respective officers,
employees, or agents have made an untrue statement of material fact or
fraudulent statement to the FDA or the DEA, failed to disclose a material fact
required to be disclosed to the FDA or the DEA, or committed an act, made a
statement, or failed to make a statement that could reasonably be expected to
provide a basis for the FDA to invoke its policy respecting "Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities," set forth in 56
Fed. Reg. 46191 (September 10, 1991).
(i) Parent has made available to the Company copies of any and all notices
of inspectional observations (FD 483's), establishment inspection reports,
warning letters and any other documents received from or issued by the FDA or
the DEA within the last three years that indicate or suggest lack of compliance
with the FDA or the DEA regulatory requirements by Parent, any Subsidiary of
Parent, or Persons covered by product applications or otherwise performing
services for the benefit of Parent or any of its Subsidiaries with respect to
services or products provided to Parent or any of its Subsidiaries.
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(j) Neither Parent nor any of its Subsidiaries has received any written
notice that the FDA or the DEA has commenced or threatened to initiate (i) any
action to withdraw its approval or request the recall of any product of Parent
or any Subsidiary of Parent, (ii) any action to enjoin (A) production at any
facility owned or used by Parent, any of Parent's Subsidiaries or any Person on
behalf of Parent or any of Parent's Subsidiaries or (B) any facility (including
any clinical facility where testing and/or trials occur) owned or used by
Parent, any of Parent's Subsidiaries or any Person on behalf of Parent or any
of Parent's Subsidiaries, (iii) the withdrawal of approval of any product
application (including any IND), other than such withdrawals of approval that
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent, or (iv) any material civil penalty, injunction, seizure or criminal
action.
(k) To the Knowledge of Parent, as to each article of drug or consumer
product currently manufactured and/or distributed by Parent or any Subsidiary
of Parent, or by any Person on behalf of Parent or any Subsidiary of Parent,
such article is not adulterated or misbranded within the meaning of the FDCA,
21 U.S.C. (S)(S) 301 et seq. and not in violation of 21 U.S.C. (S) 355.
(l) As to each drug referred to in subsection (c) above, Parent, its
Subsidiaries and their respective officers, employees, agents and affiliates
have included or caused to be included in the application for such drug, where
required, the certification described in 21 U.S.C. (S) 335a(k)(1) and the list
described in 21 U.S.C. (S) 335a(k)(2), and such certification and such list was
in each case true and accurate when made and remained true and accurate
thereafter.
(m) All pre-clinical trials and clinical trials Parent or its Subsidiaries
has conducted or has had conducted for it by third parties, to the Knowledge of
Parent, complies in all material respects with the requirements of Good
Clinical Practice, Informed Consent, and all requirements relating to
protection of human subjects, found in 21 C.F.R. (S)(S) 50, 54 and 56 and that
all nonclinical laboratory testing complies with the requirements of 21 C.F.R.
(S) 58.
(n) As to each product application submitted to, but not approved by, the
FDA, and not withdrawn by Parent or one of its Subsidiaries, or applicants
acting on its behalf as of the date of this Agreement, each of Parent and its
Subsidiaries has complied in all material respects with the requirements of the
FDCA and implementing FDA regulations and has provided, or will provide, all
additional information and taken, or will take, all additional action that has
been deemed appropriate by Parent in connection with the application.
(o) Parent and each of its Subsidiaries represent and warrant that in
connection with the exportation of certain FDA regulated products, it is in
compliance with the requirements of 21 U.S.C. (S)(S) 381 and 382 of the FDCA.
Section 2.14 Liabilities. Except as fully reflected or reserved against in
the consolidated balance sheet of Parent and its Subsidiaries as of December
31, 1998 (included in the Parent Financial Statements) or as disclosed in
Schedule 2.14 of the Parent Disclosure Schedule, Parent and its Subsidiaries
have no liabilities (including, without limitation, tax liabilities) absolute
or contingent, that would be required to be reflected on a balance sheet or in
notes thereto prepared in accordance with GAAP, other than liabilities incurred
in the ordinary course of business or that, individually or in the aggregate,
would not have a Material Adverse Effect on Parent.
Section 2.15 Labor Matters. Except as set forth in Schedule 2.15 of the
Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is a
party to any collective bargaining agreement or labor contract. Neither Parent
nor any of its Subsidiaries has engaged in any unfair labor practice with
respect to any Persons employed by or otherwise performing services for Parent
or any of its Subsidiaries (the "Parent Business Personnel"), and there is no
unfair labor practice complaint or grievance against Parent or any of its
Subsidiaries by the National Labor Relations Board or any comparable state
agency pending or, to Parent's Knowledge, threatened in writing with respect to
the Parent Business Personnel, except where such unfair labor practices,
complaints or grievances would not, individually or in the aggregate, have a
Material Adverse Effect
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on Parent. There is no labor strike, dispute, slowdown or stoppage pending or,
to the Knowledge of Parent, threatened against or affecting Parent or any of
its Subsidiaries which may interfere with the respective business activities of
Parent or any of its Subsidiaries, except where such disputes, strikes or work
stoppages would not, individually in the aggregate, have a Material Adverse
Effect on Parent. Parent and its Subsidiaries are in compliance with all labor,
employment and wage payment-related laws, regulations and rules, except where
the failure to be in such compliance would not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
Section 2.16 Intellectual Property.
(a) Except as set forth in Schedule 2.16(a) of the Parent Disclosure
Schedule or as would not, individually or in the aggregate, have a Material
Adverse Effect on Parent, Parent and each of its Subsidiaries are the owners of
or have the valid and enforceable right to make, use, sell, offer to sell and
import all Parent Intellectual Property to the extent used in or necessary for
the conduct of Parent or any of its Subsidiaries' business, free and clear of
all liens, security interests, charges or encumbrances of any kind and, except
for the Parent License Agreements set forth in Schedule 2.16(b) of the Parent
Disclosure Schedule, free and clear of all licenses to third parties granting
any right to use or practice any rights under any Parent Intellectual Property.
As used in this Agreement, the term "Parent Intellectual Property" shall mean:
(i) Parent's or any of its Subsidiaries' registered and unregistered
trademarks, service marks (including registrations, recordings and applications
in the United States Patent and Trademark Office, any state of the United
States or any other Governmental Entity worldwide), slogans, trade names, logos
and trade dress (collectively, together with the good will symbolized thereby
or associated with each, "Parent Trademarks"); (ii) all of Parent's or any of
its Subsidiaries' national (including, but not limited to, the United States)
and multinational statutory invention registrations, patents, patent
registrations and patent applications (including, but not limited to, all
reissues, divisions, continuations, continuations-in-part, extensions and
reexaminations, and all rights therein provided by law, multinational treaties
or conventions) (collectively, "Parent Patents"); (iii) all of Parent's or any
of its Subsidiaries' national and multinational registered and material
unregistered copyrights, including, but not limited to, copyrights in software
programs and databases (collectively, "Parent Copyrights"); (iv) Parent's or
any of its Subsidiaries' software programs documentation and manuals used in
connection therewith and databases (together, "Parent Software"); (v) all of
Parent's or any of its Subsidiaries' (A) inventions, whether patentable or not
patentable, whether or not reduced to practice, and not yet made the subject of
a pending patent application or applications, (B) ideas and conceptions of
potentially patentable subject matter, including, without limitation, any
patent disclosures, whether or not reduced to practice and not yet made the
subject of a patent application, (C) trade secrets and confidential, technical
information (including ideas, formulas, compositions, inventions and
conceptions of inventions whether patentable or not patentable and whether or
not reduced to practice), (D) technology (including, without limitation, know-
how and show-how), manufacturing and production processes and techniques,
service and repair manuals, research and development information, drawings,
specifications, designs, plans, proposals, technical data and copyrightable
works, whether secret or confidential or not, and all proprietary or
confidential business information, (E) all rights to obtain and rights to apply
for patents, and to register trademarks and copyrights and (F) all records
(including, but not limited to, laboratory, research and testing notebooks) in
any accessible format (including, but not limited to, paper records,
photographs, audio and visual tape recordings and computer storage media and
other information storage media) pertaining to patentable or potentially
patentable subject matter and all technical manuals and documentation made or
used in connection with any of the foregoing (collectively, "Parent
Technology"); and (vi) agreements pursuant to which Parent or any of its
Subsidiaries has obtained or granted the right to use any of the foregoing
(collectively, and together with other agreements to which Parent or any of its
Subsidiaries are a party relating to the development, acquisition, use, sale,
offer for sale or importation of Parent Intellectual Property, "Parent License
Agreements").
(b) Schedule 2.16(b) of the Parent Disclosure Schedule sets forth a true,
complete and accurate list of the following Parent Intellectual Property items
owned by or under obligation of assignment to Parent or any of its
Subsidiaries: (i) all registrations of and applications to register Parent
Trademarks material to the business of
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Parent or any of its Subsidiaries as conducted on the date of this Agreement;
(ii) all unregistered Parent Trademarks which are material to the business of
Parent or any of its Subsidiaries as conducted on the date of this Agreement;
(iii) all Parent Patents; (iv) all registrations of and applications to
register any Parent Copyrights; (v) all Parent Software; and (vi) all Parent
License Agreements, other than off-the-shelf Parent Software licenses.
(c) Except as set forth in Schedule 2.16(c) of the Parent Disclosure
Schedule, either Parent or one of its Subsidiaries is the sole and exclusive
owner of Parent Intellectual Property items set forth in Schedule 2.16(b) of
the Parent Disclosure Schedule and Parent or one of its Subsidiaries, as
applicable, is listed in the records of the appropriate Governmental Entity as
the sole owner of record. Except as set forth in Schedule 2.16(c) of the Parent
Disclosure Schedule, there is no lien, security interest, charge or encumbrance
of any kind on the right of Parent or any of its Subsidiaries to transfer any
of Parent Intellectual Property. Except as otherwise indicated in Schedule
2.16(b) of the Parent Disclosure Schedule, (i) all issued patents set forth
thereon are valid and enforceable and (ii) (A) as of the date of this
Agreement, no such trademark registrations, trademark applications, issued
patents or patent applications set forth in Schedule 2.16(b) of the Parent
Disclosure Schedule are subject to any pending proceedings, including
opposition, cancellation, interference or similar adversarial proceeding by or
before any Governmental Entity and no such proceedings are threatened and (B)
at the Effective Time, no such trademark registrations, trademark applications,
issued patents or patent applications set forth in Schedule 2.16(b) of the
Parent Disclosure Schedule are subject to any pending proceedings, including
opposition, cancellation, interference or similar adversarial proceeding by or
before any Governmental Entity and no such proceedings are threatened, other
than such proceedings that would not, individually or in the aggregate, have a
Material Adverse Effect on Parent.
(d) There are no royalties, honoraria, fees or other payments payable by
Parent or any of its Subsidiaries in respect of the use or the right to use any
Parent Intellectual Property to any Person or Governmental Entity (excluding
Taxes, governmental or attorneys' fees required in the normal course of
obtaining patent, trademark or copyright rights and excluding governmental
maintenance fees), except as set forth in the Parent License Agreements listed
in Schedule 2.16(b) of the Parent Disclosure Schedule and pursuant to off-the-
shelf Parent Software licenses. The Parent License Agreements set forth in
Schedule 2.16(b) of the Parent Disclosure Schedule are valid and binding
obligations of the parties thereto, enforceable in accordance with their terms,
except as the enforceability thereof may be limited by (1) applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in effect
that affect the enforcement of creditors rights generally or (2) general
principals of equity, whether considered in a proceeding at law or in equity,
and there exists no event or condition which will result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default by Parent or any of its Subsidiaries (or, to the Knowledge of Parent
or any of its Subsidiaries, any other party thereto) under any Parent License
Agreement, except where such violations, breaches or defaults would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
(e) Except as disclosed in Schedule 2.16(e) of the Parent Disclosure
Schedule or as would not, individually or in the aggregate, have a Material
Adverse Effect on Parent, (i) none of the use by Parent or any of its
Subsidiaries of any Parent Intellectual Property, the exercise of rights
relating to Parent Patents, Parent Trademarks and Parent Copyrights contained
within Parent Intellectual Property or the conduct of the business of Parent or
any of its Subsidiaries infringes or otherwise violates any intellectual
property rights (either directly or indirectly, such as through contributory
infringement or inducement to infringe) of any third party and (ii) no such
claims have been asserted or, to the Knowledge of Parent, threatened against
Parent or any of its Subsidiaries which have not been resolved. Except as
disclosed in Schedule 2.16(e) of Parent Disclosure Schedule, (A) as of the date
of this Agreement, (i) to the Knowledge of Parent, no third party is infringing
or otherwise violating any Parent Intellectual Property rights of Parent or any
of its Subsidiaries and (ii) no such claims are pending or threatened by Parent
or any of its Subsidiaries against any third party and (B) at the Effective
Time, (i) to the Knowledge of Parent, no third party is infringing or otherwise
violating any Parent Intellectual Property rights of Parent that are material
to the business of Parent as conducted or proposed to be conducted on the date
of this Agreement and (ii) no such claims are pending or threatened by Parent
against
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any third party, which involve any Parent Intellectual Property that is
material to the business of Parent as conducted or proposed to be conducted on
the date of this Agreement.
(f) Except as disclosed in Schedule 2.16(f) of the Parent Disclosure
Schedule, (i) as of the date of this Agreement, there are no suits or any other
proceedings pending or, to the Knowledge of Parent, threatened before any
Governmental Entity to which Parent or any of its Subsidiaries is a party
challenging (A) Parent's or such Subsidiary's rights to own or use any Parent
Intellectual Property or (B) the validity, enforceability or scope of the
Parent Intellectual Property and (ii) at the Effective Time, there are no such
suits to which Parent or any of its Subsidiaries is a party challenging (A)
Parent's or such Subsidiary's rights to own or use any Parent Intellectual
Property that is material to the business of the Company as conducted or
proposed to be conducted on the date of this Agreement or (B) the validity,
enforceability or scope of the Parent Intellectual Property that is material to
the business of the Company as conducted or proposed to be conducted on the
date of this Agreement. There are no settlement agreements, consents,
judgments, orders, forebearances to sue or similar obligations which materially
restrict any rights of Parent or any of its Subsidiaries to (i) make, use,
sell, offer for sale, import or license under any Parent Intellectual Property
or (ii) conduct its business in order to accommodate a third party's
intellectual property rights.
(g) Parent and each of its Subsidiaries employ reasonable measures to
protect the confidentiality of the Parent Technology. Parent and each of its
Subsidiaries require employees with access to the Parent Technology to execute
a nondisclosure agreement substantially in accordance with the form(s)
previously provided by Parent to the Company. Except as set forth in Schedule
2.16(g) of the Parent Disclosure Schedule, none of the current or former
employees, officers or directors of Parent or any of its Subsidiaries (i) is
suspected to be in violation of any such agreement or (ii) is suspected of
having disclosed any Parent Technology to any third party except subject to an
appropriate confidentiality agreement or as required by a Governmental Entity.
(h) Except as set forth in Schedule 2.16(h) of the Parent Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not result in the loss or impairment of any rights of Parent or any of its
Subsidiaries to own, use or license any Parent Intellectual Property, except
where such losses or impairments would not, individually or in the aggregate,
have a Material Adverse Effect on Parent.
(i) Except as set forth in Schedule 2.16(i) of the Parent Disclosure
Schedule, since December 1, 1997, none of Parent or any of its Subsidiaries has
disposed of or permitted to lapse any rights to the use of any Parent
Intellectual Property, or disposed of or disclosed to any Person other than
representatives of the Company any Parent trade secret, formula, process or
know-how not theretofore a matter of public knowledge other than in the
ordinary course of business or pursuant to secrecy agreement.
Section 2.17 Ownership of Shares. As of the date of this Agreement, none of
Parent, any Person deemed acting in concert with Parent or any of its
Subsidiaries or any of Parent's Subsidiaries owns any shares of Company Common
Stock.
Section 2.18 Operations of Sub. Sub is a direct, wholly-owned subsidiary of
Parent, was formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
Section 2.19 Brokers. No broker, investment banker or other Person (other
than (a) Goldman, Sachs & Co. and Salomon Smith Barney, the fees and expenses
of which have been previously disclosed to the Company and will be paid by
Parent and (b) Kelso & Co. (or an Affiliate thereof) to whom a fee (in an
amount previously disclosed to the Company) will be paid in connection with the
transactions contemplated by this Agreement), is entitled to any broker's,
finder's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent.
Section 2.20 State Takeover Statutes. Assuming the accuracy of the Company's
representations and warranties contained in Section 3.19 hereof (Ownership of
Shares), as of the date of this Agreement, no state
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takeover statutes or other state statutes, including, without limitation, any
business combination act, with respect to Parent or Sub are applicable to the
Merger or the Transaction Agreements.
Section 2.21 Year 2000. With respect to year 2000, Parent and Sub represent
and warrant that the statement contained in Exhibit D-1 hereto is true and
accurate.
Section 2.22 Accuracy of Information Furnished. No representation or
warranty of Parent and Sub contained in this Agreement (taken together with the
other Transaction Agreements and the exhibits, schedules, certificates and
lists attached hereto or specifically referred to herein or delivered by or on
behalf of Parent or Sub pursuant to this Agreement) contains or will contain,
in light of the circumstances in which they were made, any untrue statement of
a material fact, or omits or will omit to state any material fact that is
necessary to make the statement contained herein or therein not misleading.
Section 2.23 Required Vote of Parent and Sub Stockholders. Under applicable
Delaware law and the Parent Charter and Parent By-laws and the certificate of
incorporation and by-laws of Sub, respectively, the affirmative vote of the
holder(s) of (A) not less than a majority of the outstanding shares of Parent
Common Stock and (B) not less than a majority of the outstanding shares of
common stock of Sub is in each case required to approve the Merger. Such votes
have been obtained as of the date of this Agreement. No other vote of the
stockholders of Parent or of Sub is required by law, the Parent Charter, the
Parent By-laws or the certificate of incorporation or by-laws of Sub or
otherwise for Parent and Sub to consummate the Merger and the transactions
contemplated hereby.
Section 2.24 Interests in Other Entities. As of the date of this Agreement,
none of Parent or its Subsidiaries, directly or indirectly, own or have the
right to acquire any equity interest in any other corporation, partnership,
joint venture or other business organization (other than any such equity
interest that is 1% or less of the equity interest of such a public
corporation). None of Parent or its Subsidiaries has made any material
investment in or advance of cash or other extension of credit to any Person, or
has any material commitment or obligation to do so.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted and to enter into and perform this
Agreement and the other Transaction Agreements and the transactions
contemplated hereby and thereby. The Company is duly qualified to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of their activities makes
such qualification necessary, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. The Company has heretofore delivered to Parent complete and correct
copies of the Company's Certificate of Incorporation ("Company Charter") and
by-laws ("Company By-Laws"), as in effect on the date of this Agreement.
Section 3.2 Capital Structure; Subsidiaries.
(a) The authorized capital stock of the Company consists of 50,000,000
shares of Company Common Stock, par value $.01 per share, and 10,000,000 shares
of Company preferred stock, par value $.01 per share (the "Company Preferred
Stock"). At the close of business on November 22, 1999, (i) 17,403,895 shares
of Company Common Stock were issued and outstanding, all of which were validly
issued, fully paid and nonassessable and free of preemptive rights, (ii) no
shares of Company Common Stock were held in the treasury of the Company, (iii)
not more than 23,240 and 1,146,100 shares of Company Common Stock were reserved
for future issuance pursuant to the Company's 1994 Stock Option Plan and the
Company's 1996 Stock Option Plan, respectively, (v) 283,000 shares of Company
Common Stock were reserved for issuance pursuant to the 1996 Non-Employee
Director Stock Option Plan (collectively with the Company's 1994 Stock Option
Plan and the Company's 1996 Stock Option Plan, the "Company Stock Plans") and
(vi) no shares of Company Preferred Stock were issued and outstanding. As of
the date of this Agreement, except for (a) stock options covering not in excess
of 767,315 shares of Company Common Stock issued under the Company Stock Plans
(collectively, the "Company Stock Options") and (b) warrants exercisable into
479,661 shares of Company Common Stock, there are no options, warrants, calls,
rights or agreements to which the Company is a party or by which any of them is
bound obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of the Company or
securities convertible into or exchangeable for such capital stock, or
obligating the Company to grant, extend or enter into any such option, warrant,
call, right or agreement. Except as disclosed in the Company SEC Documents (as
hereinafter defined) filed prior to the date of this Agreement, since November
15, 1999, the Company has not issued any shares of its capital stock, or
securities convertible into or exchangeable for such capital stock, other than
shares issued in the ordinary course pursuant to the Company Stock Plans.
Except as disclosed in the Company SEC Documents filed prior to the date of
this Agreement or as set forth in Schedule 3.2 of the disclosure letter
delivered by the Company to Parent at or prior to the execution of this
Agreement (the "Company Disclosure Schedule"), there are no outstanding
contractual obligations of the Company (i) restricting the transfer of, (ii)
affecting the voting rights of, (iii) requiring the repurchase, redemption or
disposition of, (iv) requiring the registration for sale of or (v) granting any
preemptive or antidilutive right with respect to, any shares of Company Common
Stock. The execution and delivery of the Transaction Documents do not, and the
consummation of the transactions contemplated hereby and thereby and the
compliance with the provisions hereof and thereof will not, give rise to any
preemptive right or antidilutive right of any Person with respect to any shares
of the Company Common Stock.
(b) The Company has no Subsidiaries.
Section 3.3 Authority. The Board of Directors of the Company has on or prior
to the date of this Agreement (a) declared the Merger advisable and in the best
interest of the Company and its stockholders and
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approved this Agreement in accordance with applicable law, (b) resolved to
recommend the approval of this Agreement by the Company's stockholders and (c)
directed that this Agreement be submitted to the Company's stockholders for
approval. The Company has all requisite corporate power and authority to enter
into the Transaction Agreements to which it is a party and, subject to approval
by the stockholders of the Company of this Agreement (which approval, for all
purposes in this Agreement, shall be deemed to include any necessary approval
of amendments to the Company's Stock Plans) (collectively, the "Company
Stockholder Approval"), to consummate the transactions contemplated hereby and
thereby. The execution and delivery of the Transaction Agreements to which it
is a party by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company, subject to (x) Company
Stockholder Approval and (y) the filing of the Certificate of Merger pursuant
to the DGCL. The Transaction Agreements to which it is a party have been duly
executed and delivered by the Company and (assuming the valid authorization,
execution and delivery thereof by the other parties thereto) each such
Transaction Agreement constitutes the valid and binding obligation of the
Company enforceable against the Company in accordance with their terms, except
as the enforceability thereof may be limited by (1) applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect that affect
the enforcement of creditors rights generally or (2) general principals of
equity, whether considered in a proceeding at law or in equity. Prior to the
filing thereof, the filing of the Proxy Statement with the SEC and the taking
of all actions in connection therewith will have been duly authorized by the
Company's Board of Directors.
Section 3.4 Consents and Approvals; No Violation. Assuming all consents,
approvals, authorizations and other actions described in the second sentence of
this Section 3.4 have been obtained and all filings and obligations described
in the second sentence of this Section 3.4 have been made and except as set
forth in Schedule 3.4 of the Company Disclosure Schedule, the execution and
delivery of the Transaction Agreements do not, and the consummation of the
transactions contemplated hereby and thereby and compliance with the provisions
hereof and thereof will not, conflict with, result in any violation of, or
breach or default (with or without due notice or lapse of time, or both) under,
or give to others a right of termination, cancellation or acceleration of any
obligation or the loss of any benefit under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company under, any provision of (a) the Company Charter or
Company By-Laws, (b) any loan or credit agreement, note, bond, mortgage, lease,
indenture or other contract, agreement, instrument, permit, concession,
franchise or license applicable to the Company, (c) any license, permit or
other instrument, contract or agreement granted by, or entered into with, the
FDA or the DEA or (d) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company or any of its properties or
assets, other than, in the case of clauses (b), (c) or (d), any such conflicts,
violations, breaches, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company, or prevent or materially delay the consummation
of any of the transactions contemplated hereby or thereby. No filing,
notification or registration with, or authorization, consent or approval of,
any Governmental Entity is required by or with respect to the Company in
connection with the execution, delivery and performance of the Transaction
Agreements by the Company or is necessary for the consummation of the Merger
and the other transactions contemplated by the Transaction Agreements, except
for (i) in connection, or in compliance, with the provisions of the HSR Act,
the Securities Act and the Exchange Act, (ii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and the filing of
appropriate documents with the relevant authorities of other states in which
the Company is qualified to do business, each of which is set forth in Schedule
3.4 of the Company Disclosure Schedule, (iii) such filings and consents as may
be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by
the Merger or by the transactions contemplated by the Transaction Agreements,
each of which is set forth in Schedule 3.4 of the Company Disclosure Schedule,
(iv) such filings, authorizations, orders and approvals as may be required to
obtain the State Takeover Approvals, each of which is set forth in Schedule 3.4
of the Company Disclosure Schedule, (v) applicable requirements, if any, of
"blue sky" laws and the NASDAQ Composite Index and (vi) such other consents,
orders, authorizations, registrations, declarations and filings the failure of
which to be obtained or made would not, individually or in the aggregate, have
a
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Material Adverse Effect on the Company or prevent or materially delay the
consummation of any of the transactions contemplated hereby or thereby or by
any other Transaction Agreement. The execution and delivery of the Transaction
Agreements do not, and the consummation of the transactions contemplated hereby
and thereby and compliance with the provisions hereof and thereof will not,
conflict with, result in any violation of, or breach or default (with or
without due notice or lapse of time, or both) under, or give to others a right
of termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company under, any of the license agreements to which it is a party, except for
such conflicts, violations, breaches, defaults, rights or liens as would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company. All license agreements of the Company are listed in Schedule 3.4 of
the Company Disclosure Schedule.
Section 3.5 SEC Documents and Other Reports. The Company has filed with the
SEC all documents required by the Exchange Act to be filed by the Company since
September 25, 1996 (the "Company SEC Documents"). As of their respective dates,
the Company SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and, at the respective times they were filed, none of the Company SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (except, to the extent that any Company SEC Documents were
subsequently amended or modified by a filing prior to the date of this
Agreement, such representation is given only with respect to such Company SEC
Document as so amended or modified as of the date of such amendment or
modification). The financial statements (including, in each case, any notes
thereto) of the Company included in the Company SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP (except, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly present in all material respects in accordance with GAAP the
financial position of the Company as at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the Company SEC Documents or as required by GAAP, the
Company has not, since December 31, 1998, made any change in the accounting
practices or policies applied in the preparation of its financial statements.
The books and records of the Company have been, and are being, maintained in
accordance with GAAP and other applicable legal and accounting requirements.
Section 3.6 Registration Statement and Proxy Statement. None of the
information to be supplied by the Company for inclusion or incorporation by
reference in the Registration Statement or the Proxy Statement will (i) in the
case of the Registration Statement, at the time it becomes effective, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading or include any statement that is materially different
from the representations and warranties of the Company contained in this
Agreement or the other Transaction Agreements or that discloses a liability,
condition or event that would constitute a Material Adverse Effect on the
Company, which liability, condition or event is not otherwise disclosed in the
representations and warranties of the Company contained in this Agreement or in
the Company Disclosure Schedule or (ii) in the case of the Proxy Statement, at
the time of the mailing of the Proxy Statement, the time of the Stockholder
Meeting and at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading or include any
statement that is materially different from the representations and warranties
of the Company contained in this Agreement or the other Transaction Agreements
or that discloses a liability, condition or event that would constitute a
Material Adverse Effect on the Company, which liability, condition or event is
not otherwise disclosed in the representations and warranties of the Company
contained in this Agreement or in the Company Disclosure Schedule. If, at any
time prior to the Effective Time, any event with respect to the
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Company, its officers or directors shall occur which is required to be
described in the Proxy Statement or the Registration Statement, such event
shall be so described, and an appropriate amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
stockholders of the Company. The Proxy Statement will comply (excluding any
matters relating to Parent and Sub, as to which the Company makes no
representations) as to form in all material respects with the provisions of the
Exchange Act.
Section 3.7 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents filed with the SEC prior to the date of this Agreement or
in Schedule 3.7 of the Company Disclosure Schedule, since December 31, 1998,
(A) the Company has not incurred any liability or obligation (indirect, direct
or contingent), or entered into any oral or written agreement or other
transaction, that is not in the ordinary course of business or that would,
individually or in the aggregate, result in a Material Adverse Effect on the
Company, except for any such changes or effects resulting from this Agreement,
the transactions contemplated hereby or the announcement thereof; (B) the
Company has not sustained any loss or interference with their business or
properties from fire, flood, windstorm, accident or other calamity (whether or
not covered by insurance) that would, individually or in the aggregate, have a
Material Adverse Effect on the Company; (C) there has been no action taken by
the Company, that, if taken during the period from the date of this Agreement
through the Effective Time, would constitute a material breach of Section
4.1(b) hereof; and (D) there has been no event, circumstance or development
that would have a Material Adverse Effect on the Company.
Section 3.8 Permits and Compliance.
(a) The Company is in possession of all Permits necessary for it to own,
lease and operate its properties or to carry on its business as it is now being
conducted (the "Company Permits"), except where the failure to have any of the
Company Permits would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, and, as of the date of this Agreement, no
suspension or cancellation of any of the Company Permits is pending or, to the
Knowledge of the Company (as hereinafter defined), threatened, except where the
suspension or cancellation of any of the Company Permits would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company; provided that no representation is being made by the Company in this
sentence with respect to any IND or NDA of the Company filed with the FDA
(which are the subject of Section 3.13 hereof). The Company is not in violation
of (A) the Company Charter or the Company By-Laws, (B) any applicable law,
ordinance, administrative or governmental rule or regulation or (C) any order,
decree or judgment of any Governmental Entity having jurisdiction over the
Company, except, in the case of clauses (B) and (C), for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
(b) Except as disclosed in the Company SEC Documents filed prior to the date
of this Agreement or in Schedule 3.8(a) of the Company Disclosure Schedule, as
of the date of this Agreement, there is no contract or agreement that is
material to the business, financial condition or results of operations of the
Company. Except as set forth in the Company SEC Documents filed prior to the
date of this Agreement or in Schedule 3.8(b) of the Company Disclosure
Schedule, the execution and delivery of the Transaction Agreements do not, and
the consummation of the transactions contemplated hereby and thereby and
compliance with the provisions hereof and thereof will not, conflict with,
result in any violation of, or breach or default (with or without due notice or
lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or the loss of any benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under, any
indenture, mortgage, loan agreement, note or other agreement or instrument for
borrowed money, any guarantee of any agreement or instrument for borrowed money
or any lease, contractual license or other contract, agreement or instrument to
which the Company is a party or by which the Company is bound or to which any
of the properties, assets or operations of the Company is subject, other than
such conflicts, violations, breaches, defaults, rights or liens as would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company. As used in this Agreement "Knowledge of the Company" means the actual
knowledge of any of the Chief Executive Officer,
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the Chief Financial Officer, the General Counsel of the Company or Executive
Vice President, Research and Development.
Section 3.9 Tax Matters.
Except as set forth in Schedule 3.9 of the Company Disclosure Schedule:
(a) All federal, state, local and foreign Tax Returns required to be
filed (taking into account extensions) by or on behalf of the Company (i)
have been timely filed, except for such Tax Returns that the failure by the
Company to timely file would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, and (ii) are true, complete and
correct in all material respects.
(b) All Taxes payable by or with respect to the Company have been timely
paid, or adequately reserved for (in accordance with GAAP) in the most
recent financial statements contained in the Company SEC Documents, except
for Taxes that the failure of which to pay would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
(c) No deficiencies for any Taxes have been proposed, asserted or
assessed either orally or in writing against the Company that are not
adequately reserved for (in accordance with GAAP) in the most recent
financial statements contained in the Company SEC Documents, except for
such deficiencies as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. All assessments for Taxes due and
owing by or with respect to the Company with respect to completed and
settled examinations or concluded Litigation have been paid.
(d) No examinations have been completed or are presently being conducted
with respect to the Company's federal or material state income Tax Returns.
(e) The Company has complied with all rules and Treasury regulations
relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441 and 1442 of the
Code or similar provisions under any foreign Laws) and have, within the
time and in the manner required by law, withheld from employee wages and
paid over to the proper Governmental Entities all amounts required to be so
withheld and paid over under all Applicable Laws, except where the failure
to be in such compliance or to withhold and pay over such amounts would
not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
(f) The Company (i) has not waived any statutory period of limitations
in respect of its or their Taxes or Tax Returns or (ii) is not a party to,
not bound by, or has no obligation under any agreement, contract or
arrangement for the sharing, allocation, or indemnification of Taxes (other
than indemnification agreements where Taxes incidental to the primary
obligation so indemnified are also indemnified).
(g) The net operating losses ("NOLs") of the Company are not, as of the
date hereof, subject to Section 382 or 269 of the Code, Treasury regulation
Section 1.1502-21T(c), or any similar provisions or Treasury regulations
otherwise limiting the use of the NOLs of the Company.
(h) No property of the Company is "tax-exempt use property" (as such
term is defined in Section 168 of the Code).
(i) The Company has not filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a "Subsection (f) asset" (as such term is defined in Section
341(f)(4) of the Code) owned by the Company.
(j) The Company is not, and has not been for the five years preceding
the Closing, a "United States real property holding company" (as such term
is defined in Section 897(c)(2) of the Code).
(k) The Company has no reason to believe that any condition exists nor
has the Company taken any action or failed to take any action that could
reasonably be expected to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
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Section 3.10 Actions and Proceedings. Except as set forth in the Company SEC
Documents filed prior to the date of this Agreement or in Schedule 3.10 of the
Company Disclosure Schedule, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or involving
the Company, against or involving any of the present directors or officers of
the Company, as such, or involving any of its or their properties, assets or
business that, individually or in the aggregate, would have a Material Adverse
Effect on the Company. Except as set forth in the Company SEC Documents filed
prior to the date of this Agreement or in Schedule 3.10 of the Company
Disclosure Schedule, as of the date of this Agreement, there are no actions,
suits or claims or legal, administrative or arbitrative proceedings or
investigations pending or, to the Knowledge of the Company, threatened against
or involving the Company against or involving any of the present directors or
officers of the Company as such, or involving any of its or their properties,
assets or business before any court or arbitration tribunal or before any
Governmental Entity that, individually or in the aggregate, would have a
Material Adverse Effect on the Company. As of the date of this Agreement, there
are no actions, suits, labor disputes or other litigation, legal or
administrative proceedings or governmental investigations pending, or, to the
Knowledge of the Company, threatened against or affecting the Company or any of
its present directors or officers, as such, or any of its or their properties,
assets or business before any court or arbitration tribunal or before any
Governmental Entity relating to the transactions contemplated by the
Transaction Agreements.
Section 3.11 Certain Agreements. Schedule 3.11 of the Company Disclosure
Schedule sets forth each material oral or written stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan to which
the Company is a party. Except as set forth in Schedule 3.11 of the Company
Disclosure Schedule, as of the date of this Agreement, the Company is not a
party to any oral or written agreement or plan, including any stock option
plan, stock appreciation rights plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. No holder of any option to purchase shares of
Company Common Stock, or shares of Company Common Stock granted in connection
with the performance of services for the Company, is or will be entitled to
receive cash from the Company in lieu of or in exchange for such option or
shares as a result of the transactions contemplated by this Agreement (other
than in lieu of fractional shares). The Company is not a party to any
termination benefits agreement or severance agreement or employment agreement
which would be triggered by the consummation of the transactions contemplated
by this Agreement, except as set forth in Schedule 3.11 of the Company
Disclosure Schedule.
Section 3.12 ERISA.
(a) Schedule 3.12(a) of the Company Disclosure Schedule lists each Company
Plan (as hereinafter defined). With respect to each material Company Plan, the
Company has made (or as soon as practicable will make) available to Parent a
true and correct copy of (i) the three most recent annual reports (Form 5500)
filed with the IRS, (ii) such Company Plan and any amendments thereto, (iii)
each trust agreement, insurance contract or administration agreement relating
to such Company Plan and the latest financial statements thereof, (iv) the most
recent summary plan description of each Company Plan for which a summary plan
description is required, (v) the most recent actuarial report or valuation
relating to a Company Plan subject to Title IV of ERISA, (vi) the most recent
determination letter, if any, issued by the IRS with respect to any Company
Plan intended to be qualified under Section 401(a) of the Code and (vii) any
written description that exists as of the date of this Agreement of any
unwritten Company Plan. Except as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, (i) each Company Plan complies
with all applicable statutes and governmental rules and regulations, including
but not limited to ERISA, the Code and COBRA, (ii) no "reportable event"
(within the meaning of Section 4043 of ERISA) has occurred with respect to any
Company Plan for which the 30-day notice requirement has not been waived, (iii)
the Company is not or has not been obligated to contribute or otherwise may not
have any liability with respect to any Company Multiemployer Plan (as
hereinafter defined), (iv) no action has been taken, or is currently being
considered, to terminate any Company Plan subject to Title IV of ERISA, (v) the
Company has complied with the continued medical
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coverage requirements of COBRA, (vi) no Company Plan has engaged in a
"prohibited transaction" (as defined in Section 4975 of the Code and Section
406 of ERISA) and (vii) no liability under Title IV or Section 302 of ERISA or
Section 412 of the Code has been incurred by the Company that has not been
satisfied in full, and no condition exists that presents a risk to the Company
of incurring any such liability. Except as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, no Company Plan
subject to Title IV of ERISA, nor any trust created thereunder, has incurred
any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived.
(b) Except as disclosed in Schedule 3.12(b) of the Company Disclosure
Schedule, with respect to any Company Plan which is subject to Title IV of
ERISA, the present value of accrued benefit obligations, as determined in
accordance with FAS 87 in accordance with the actuarial assumptions used to
prepare the most recent reports of such Company Plan, did not exceed the fair
market value of the Plan assets as of the most recent valuation date for which
an actuarial report has been prepared, and to the Knowledge of the Company,
there has not been any material adverse change to such status. All
contributions required to be made with respect to any Company Plan on or prior
to the Closing Date have been made or are reflected on the most recent balance
sheet of the Company.
(c) With respect to the Company Plans, no event has occurred in connection
with which the Company would be subject to any liability under the terms of
such Company Plans, ERISA, the Code or any other applicable law which would
have, individually or in the aggregate, a Material Adverse Effect on the
Company. Except as disclosed in the Company SEC Documents or set forth in
Schedule 3.12(c) of the Company Disclosure Schedule, with respect to any
current or former employee, director, officer, consultant or contractor of the
Company, consummation of the transactions contemplated by this Agreement shall
not result in the payment or provision of additional compensation or benefits
or accelerate the vesting, payment or funding of any compensation or benefits.
Except as disclosed in the Company SEC Documents or set forth in Schedule
3.12(c) of the Company Disclosure Schedule, no amounts payable by reason of
this transaction under the Company Plans will fail to be deductible for federal
income tax purposes by virtue of either Section 280G or Section 162(m) of the
Code. Except as set forth in Schedule 3.12(c) of the Company Disclosure
Schedule, Company Plans that are intended to be qualified under Section 401(a)
of the Code have been determined by the IRS to be so qualified, or a timely
application for such determination is now pending, and to the Knowledge of the
Company, there is no reason why any Company Plan is not so qualified in
operation. Except as disclosed in the Company SEC Documents filed prior to the
date of this Agreement or set forth in Schedule 3.12(c) of the Company
Disclosure Schedule or as required by ERISA, the Company does not have any
liability or obligation under any welfare plan to provide benefits after
termination of employment to any employee or dependent. There are no pending,
or to the Knowledge of the Company, threatened, claims, suits, audits or
investigations related to any Company Plan other than claims for benefits in
the ordinary course and other than claims, suits, audits or investigations that
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. As used herein, (i) "Company Plan" means each deferred
compensation and each bonus or other incentive compensation, stock purchase,
stock option and other equity compensation or ownership plan, program,
agreement or arrangement, each severance or termination pay, medical, surgical,
hospitalization, life insurance and other "welfare" plan, fund or program
(within the meaning of Section 3(1) of the ERISA); each profit-sharing, stock
bonus or other "pension" plan, fund or program (within the meaning of Section
3(2) of ERISA); each employment, retention, consulting, termination or
severance agreement; and each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to by the Company, including any
plan subject to Title IV of ERISA maintained within the past five (5) years by
the Company and (ii) "Company Multiemployer Plan" means a "multiemployer plan"
(as defined in Section 4001(a)(3) of ERISA) to which the Company is or has been
obligated to contribute or otherwise may have any liability.
Section 3.13 Compliance with Certain Laws.
(a) Except as disclosed in Schedule 3.13(a) of the Company Disclosure
Schedule, the properties, assets and operations of the Company are in
compliance with all Applicable Laws, except for any violations that
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individually or in the aggregate would not have a Material Adverse Effect on
the Company. Except as disclosed in Schedule 3.13(a) of the Company Disclosure
Schedule, with respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations, there
are no past, present or reasonably anticipated future events, conditions,
circumstances, activities, practices, incidents, actions or plans of the
Company that may interfere with or prevent compliance or continued compliance
with all Applicable Laws, other than interference or prevention that would not
individually or in the aggregate with any other such interference or prevention
have a Material Adverse Effect on the Company. The Company will make available
to Parent such certificates and environmental studies with respect to such
properties as the Company has available on the date of this Agreement.
(b) The Company's manufacturing, distribution, development and marketing
practices are in compliance with all applicable federal and state laws, rules,
regulations, orders, licenses, judgments, writs, injunctions, decrees or
demands, including, without limitation, laws and regulations administered by
the FDA and the DEA, except where the failure to be in such compliance would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
(c) The Company has filed an NDA for MorphiDex(R) with the FDA (the
"MorphiDex(R) Application"), and on August 2, 1999, the Company received
notification from the FDA that such application was not approvable. The
MorphiDex(R) Application is the only NDA of the Company on file with the FDA.
Schedule 3.13(c) of the Company Disclosure Schedule sets forth all INDs and
license agreements of the Company.
(d) The Company has not used the services of any person debarred under the
provisions of the Generic Drug Enforcement Act of 1992, 21 U.S.C. (S)
335(a)(b). Neither the Company nor any of its officers, employees, agents or
affiliates, has been convicted of any crime or engaged in any conduct for which
debarment is mandated by 21 U.S.C. (S) 335a(a) or authorized by 21 U.S.C. (S)
335a(b).
(e) The Company is in compliance with all (i) federal and state laws
applicable to the development, manufacture, processing, packing, testing and
sale of pharmaceutical products to the extent such laws are applicable to it,
(ii) rules and regulations of the FDA and the DEA to the extent such rules and
regulations are applicable to it, and (iii) product applications (including
INDs) in which the Company has sold any product on or after November 1, 1999,
except in each case where the failure to be in such compliance would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company. All manufacturing operations conducted by or for the benefit of the
Company have been and are being conducted in substantial compliance with the
current Good Manufacturing Practice regulations set forth in 21 C.F.R. Parts
210 and 211.
(f) As to each drug of the Company for which a product application has been
approved by, or any IND has been filed with, the FDA, which drugs are described
in Schedule 3.13(f) of the Company Disclosure Schedule, the applicant and all
Persons performing operations covered by the application are in compliance with
the requirements of the FDCA and the implementing regulations of the FDA,
respectively, and all terms and conditions of the application, except where the
failure to be in such compliance would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(g) The Company is in material compliance with all applicable registration
and listing requirements set forth in 21 U.S.C. (S) 360 and 21 C.F.R. Part 207.
To the extent required, the Company has obtained registrations from the DEA and
is in material compliance with all such registrations and all applicable
regulations promulgated by the DEA.
(h) None of the Company or any of its officers, employees, or agents has
made an untrue statement of material fact or fraudulent statement to the FDA or
the DEA, failed to disclose a material fact required to be disclosed to the FDA
or the DEA, or committed an act, made a statement, or failed to make a
statement that could reasonably be expected to provide a basis for the FDA to
invoke its policy respecting "Fraud, Untrue Statements of Material Facts,
Bribery, and Illegal Gratuities," set forth in 56 Fed. Reg 46191 (September 10,
1991).
(i) The Company has made available to Parent copies of any and all notices
of inspectional observations (FD 483's), establishment inspection reports,
warning letters and any other documents received from or issued
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by the FDA or the DEA within the last three years that indicate or suggest lack
of compliance with the FDA or the DEA regulatory requirements by the Company or
Persons covered by product applications or otherwise performing services for
the benefit of the Company with respect to services or products provided to the
Company.
(j) The Company has not received any written notice that the FDA or the DEA
has commenced or threatened to initiate (i) any action to withdraw its approval
or request the recall of any product of the Company, or (ii) any action to
enjoin (A) production at any facility (including any clinical facility where
testing and/or trials occur) owned or used by the Company or any Person on
behalf of the Company or (B) any facility (including any clinical facility
where testing and/or trials occur) owned or used by the Company or any Person
on behalf of the Company, (iii) the withdrawal of approval of any product
application (including any IND), other than such withdrawals of approval that
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company, or (iv) any material civil penalty, injunction, seizure or
criminal action.
(k) To the Knowledge of the Company, as to each article of drug or consumer
product currently manufactured and/or distributed by the Company, which
products are described in Schedule 3.13(k) of the Company Disclosure Schedule,
or by any Person on behalf of the Company, such article is not adulterated or
misbranded within the meaning of the FDCA, 21 U.S.C. (S)(S) 301 et seq. and not
in violation of 21 U.S.C. (S) 355.
(l) As to each drug referred to in subsection (c) above, the Company and its
officers, employees, agents and affiliates have included or caused to be
included in the application for such drug, where required, the certification
described in 21 U.S.C. (S) 335a(k)(1) and the list described in 21 U.S.C. (S)
335a(k)(2), and such certification and such list was in each case true and
accurate when made and remained true and accurate thereafter.
(m) Except as set forth in Schedule 3.13(m) of the Company Disclosure
Schedule, all pre-clinical trials and clinical trials the Company has conducted
or has had conducted for it by third parties, to the Knowledge of the Company,
complies in all material respects with the requirements of Good Clinical
Practice, Informed Consent, and all requirements relating to protection of
human subjects, found in 21 C.F.R. (S)(S) 50, 54 and 56 and that all
nonclinical laboratory testing complies with the requirements of 21 C.F.R. (S)
58.
(n) Except as set forth in Schedule 3.13(n) of the Company Disclosure
Schedule, as to each product application submitted to, but not approved by, the
FDA, and not withdrawn by the Company or applicants acting on its behalf as of
the date of this Agreement, the Company has complied in all material respects
with the requirements of the FDCA and implementing FDA regulations and has
provided, or will provide, all additional information and taken, or will take,
all additional action either that has been deemed appropriate by both the
Company and Parent in connection with the application.
(o) The Company exports no FDA regulated products.
Section 3.14 Liabilities. Except as fully reflected or reserved against in
the balance sheet of the Company as of December 31, 1998 (included in the
Company SEC Documents) or as reflected in the Company SEC Documents filed prior
to the date of this Agreement, or set forth in Schedule 3.14 of the Company
Disclosure Schedule, the Company has no liabilities (including, without
limitation, tax liabilities) absolute or contingent, that would be required to
be reflected on a balance sheet or in notes thereto prepared in accordance with
GAAP, other than liabilities incurred in the ordinary course of business or
that, individually or in the aggregate, would not have a Material Adverse
Effect on the Company.
Section 3.15 Labor Matters. Except as set forth in Schedule 3.15 of the
Company Disclosure Schedule or in the Company SEC Documents filed prior to the
date of this Agreement, the Company is not a party to any collective bargaining
agreement or labor contract. The Company has not engaged in any unfair labor
practice with respect to any Persons employed by or otherwise performing
services primarily for the Company (the "Company Business Personnel"), and
there is no unfair labor practice complaint or grievance against the Company by
the National Labor Relations Board or any comparable state agency pending or
threatened in
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writing with respect to the Company Business Personnel, except where such
unfair labor practices, complaints or grievances would not, individually or in
the aggregate, have a Material Adverse Effect on the Company. There is no labor
strike, dispute, slowdown or stoppage pending or, to the Knowledge of the
Company, threatened against or affecting the Company which may interfere with
the business activities of the Company, except where such disputes, strikes or
work stoppages would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. The Company is in compliance with all labor,
employment and wage payment-related laws, regulations and rules, except where
the failure to be in such compliance would not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
Section 3.16 Intellectual Property.
(a) Except as set forth in Schedule 3.16(a) of the Company Disclosure
Schedule or as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, the Company is the owner of or has the valid and
enforceable right to make, use, sell, offer to sell and import all Company
Intellectual Property to the extent used in or necessary for the conduct of the
Company's business, free and clear of all liens, security interests, charges or
encumbrances of any kind and, except for the Company License Agreements set
forth in Schedule 3.16(b) of the Company Disclosure Schedule, free and clear of
all licenses to third parties granting any right to use or practice any rights
under any Company Intellectual Property. As used in this Agreement, the term
"Company Intellectual Property" shall mean: (i) the Company's registered and
material unregistered trademarks, service marks (including registrations,
recordings and applications in the United States Patent and Trademark Office,
any state of the United States or any other Governmental Entity worldwide),
slogans, trade names, logos and trade dress (collectively, together with the
good will symbolized thereby or associated with each, "Company Trademarks");
(ii) all of the Company's national (including, but not limited to, the United
States) and multinational statutory invention registrations, patents, patent
registrations and patent applications (including, but not limited to, all
reissues, divisions, continuations, continuations-in-part, extensions and
reexaminations, and all rights therein provided by law, multinational treaties
or conventions) (collectively, "Company Patents"); (iii) all of the Company's
national and multinational registered and material unregistered copyrights,
including, but not limited to, copyrights in software programs and databases
(collectively, "Company Copyrights"); (iv) the Company's software programs
documentation and manuals used in connection therewith and databases (together,
"Company Software"); (v) all of the Company's (A) inventions, whether
patentable or not patentable, whether or not reduced to practice, and not yet
made the subject of a pending patent application or applications, (B) ideas and
conceptions of potentially patentable subject matter, including, without
limitation, any patent disclosures, whether or not reduced to practice and not
yet made the subject of a patent application, (C) trade secrets and
confidential, technical information (including ideas, formulas, compositions,
inventions and conceptions of inventions whether patentable or not patentable
and whether or not reduced to practice), (D) technology (including, without
limitation, know-how and show-how), manufacturing and production processes and
techniques, service and repair manuals, research and development information,
drawings, specifications, designs, plans, proposals, technical data and
copyrightable works, whether secret or confidential or not, and all proprietary
or confidential business information, (E) all rights to obtain and rights to
apply for patents, and to register trademarks and copyrights and (F) all
records (including, but not limited to, laboratory, research and testing
notebooks) in any accessible format (including, but not limited to, paper
records, photographs, audio and visual tape recordings and computer storage
media and other information storage media) pertaining to patentable or
potentially patentable subject matter and all technical manuals and
documentation made or used in connection with any of the foregoing
(collectively, "Company Technology"); and (vi) agreements pursuant to which the
Company has obtained or granted the right to use any of the foregoing
(collectively, and together with other agreements to which the Company is a
party relating to the development, acquisition, use, sale, offer for sale or
importation of Company Intellectual Property, "Company License Agreements").
(b) Schedule 3.16(b) of the Company Disclosure Schedule sets forth a true,
complete and accurate list of the following Company Intellectual Property items
owned by or under obligation of assignment to the Company: (i) all
registrations of and applications to register Company Trademarks material to
the Company;
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(ii) all unregistered Company Trademarks which are material to the Company;
(iii) all Company Patents; (iv) all registrations of and applications to
register any Company Copyrights; (v) all Company Software; and (vi) all Company
License Agreements, other than off-the-shelf Company Software licenses.
(c) Except as set forth in Schedule 3.16(b) of the Company Disclosure
Schedule, the Company is the sole and exclusive owner of the Company
Intellectual Property items set forth in Schedule 3.16(b) of the Company
Disclosure Schedule and the Company is listed in the records of the
Governmental Entities set forth in Schedule 3.16(b) of the Company Disclosure
Schedule as the sole owner of record. Except as set forth in Schedule 3.16(c)
of the Company Disclosure Schedule, there is no lien, security interest, charge
or encumbrance of any kind on the right of the Company to transfer to the
Surviving Corporation any of the Company Intellectual Property, as contemplated
by this Agreement. Except as otherwise indicated in Schedule 3.16(b) of the
Company Disclosure Schedule, (i) all issued patents set forth thereon are valid
and enforceable and (ii) (A) as of the date of this Agreement, no such
trademark registrations, trademark applications, issued patents or patent
applications set forth in Schedule 3.16(b) of the Company Disclosure Schedule
are subject to any pending proceedings, including opposition, cancellation,
interference or similar adversarial proceeding by or before any Governmental
Entity and no such proceedings are threatened and (B) at the Effective Time, no
such trademark registrations, trademark applications, issued patents or patent
applications set forth in Schedule 3.16(b) of the Company Disclosure Schedule
are subject to any pending proceedings, including opposition, cancellation,
interference or similar adversarial proceeding by or before any Governmental
Entity and no such proceedings are threatened, other than such proceedings that
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
(d) There are no royalties, honoraria, fees or other payments payable by the
Company in respect of the use or the right to use any of the Company
Intellectual Property to any Person or Governmental Entity (excluding Taxes,
governmental or attorneys' fees required in the normal course of obtaining
patent, trademark or copyright rights and excluding governmental maintenance
fees), except as set forth in the Company License Agreements listed in Schedule
3.16(b) of the Company Disclosure Schedule and pursuant to off-the-shelf
Company Software licenses. The Company License Agreements set forth in Schedule
3.16(b) of the Company Disclosure Schedule are valid and binding obligations of
the parties thereto, enforceable in accordance with their terms, except as the
enforceability thereof may be limited by (a) applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect that affect the
enforcement of creditors rights generally or (b) general principals of equity,
whether considered in a proceeding at law or in equity, and there exists no
event or condition which will result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default by the Company
(or, to the Knowledge of the Company, any other party thereto) under any
Company License Agreement, except where such violations, breaches or defaults
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. Except as set forth in Schedule 3.16(d) of the Company Disclosure
Schedule, no consent is required to be obtained in connection with the right of
the Company to transfer any Company License Agreement to Parent or Sub pursuant
to the Merger.
(e) Except as disclosed in Schedule 3.16(e) of the Company Disclosure
Schedule or as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, (i) none of the use by the Company of any
Company Intellectual Property, the exercise of rights relating to Company
Patents, Company Trademarks and Company Copyrights contained within the Company
Intellectual Property or the conduct of the business of the Company infringes
or otherwise violates any intellectual property rights (either directly or
indirectly, such as through contributory infringement or inducement to
infringe) of any third party and (ii) no such claims have been asserted or, to
the Knowledge of the Company, threatened against the Company which have not
been resolved. Except as disclosed in Schedule 3.16(e) of the Company
Disclosure Schedule, (A) as of the date of this Agreement, (i) to the Knowledge
of the Company, no third party is infringing or otherwise violating any Company
Intellectual Property rights of the Company and (ii) no such claims are pending
or threatened by the Company against any third party and (B) at the Effective
Time, (i) to the Knowledge of the Company, no third party is infringing or
otherwise violating any Company Intellectual Property rights of the Company
that are material to the business of the Company as conducted or proposed to be
conducted on the
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date of this Agreement and (ii) no such claims are pending or threatened by
the Company against any third party, which involve any Company Intellectual
Property that is material to the business of the Company as conducted or
proposed to be conducted on the date of this Agreement.
(f) Except as disclosed in Schedule 3.16(f) of the Company Disclosure
Schedule, (i) as of the date of this Agreement, there are no suits or any
other proceedings pending or, to the Knowledge of the Company, threatened
before any Governmental Entity to which the Company is a party challenging (A)
the Company's rights to own or use any Company Intellectual Property or (B)
the validity, enforceability or scope of the Company Intellectual Property and
(ii) at the Effective Time, there are no such suits to which the Company is a
party challenging (A) the Company's rights to own or use any Company
Intellectual Property that is material to the business of the Company as
conducted or proposed to be conducted on the date of this Agreement or (B) the
validity, enforceability or scope of the Company Intellectual Property that is
material to the business of the Company as conducted or proposed to be
conducted on the date of this Agreement. There are no settlement agreements,
consents, judgments, orders, forebearances to sue or similar obligations which
materially restrict any rights of the Company to (i) make, use, sell, offer
for sale, import or license under any Company Intellectual Property or (ii)
conduct its business in order to accommodate a third party's intellectual
property rights.
(g) The Company employs reasonable measures to protect the confidentiality
of the Company Technology. The Company requires employees with access to the
Company Technology to execute a nondisclosure agreement substantially in
accordance with the form(s) previously provided by the Company to Parent.
Except as set forth in Schedule 3.16(g) of the Company Disclosure Schedule,
none of the current or former employees, officers or directors of the Company
(i) is suspected to be in violation of any such agreement or (ii) is suspected
of having disclosed any Company Technology to any third party except subject
to an appropriate confidentiality agreement or as required by a Governmental
Entity.
(h) Except as set forth in Schedule 3.16(h) of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not result in the loss or impairment of any rights of the Company to own,
use or license any Company Intellectual Property, except where such losses or
impairments would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(i) Except as set forth in Schedule 3.16(i) of the Company Disclosure
Schedule, since September 25, 1996, the Company has not disposed of or
permitted to lapse any rights to the use of any Company Intellectual Property,
or disposed of or disclosed to any Person other than representatives of Parent
any Company trade secret, formula, process or know-how not theretofore a
matter of public knowledge other than in the ordinary course of business or
pursuant to secrecy agreement.
Section 3.17 Opinion of Financial Advisor. The Company has received the
written opinion of Credit Suisse First Boston dated the date hereof, to the
effect that, as of the date hereof, the Merger Consideration is fair to the
Company's stockholders from a financial point of view, a copy of which opinion
will be made available to Parent promptly after the date of this Agreement.
Section 3.18 Required Vote of Company Stockholders. Under applicable
Delaware law and the Company Charter and Company By-laws, the affirmative vote
of the holders of not less than a majority of the outstanding shares of
Company Common Stock is required to approve the Merger. No other vote of the
stockholders of the Company is required by law, the Company Charter or Company
By-Laws or otherwise for the Company to consummate the Merger and the
transactions contemplated hereby.
Section 3.19 Ownership of Shares. The Company does not own any Shares of
Parent Common Stock.
Section 3.20 Brokers. No broker, investment banker or other Person, other
than Credit Suisse First Boston, the fees and expenses of which will be paid
by the Company (and are reflected in agreements between Credit Suisse First
Boston and the Company, copies of which have been furnished to Parent), is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
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Section 3.21 State Takeover Statutes. Assuming the accuracy of Parent's
representations and warranties contained in Section 2.17 hereof (Ownership of
Shares), the Board of Directors of the Company has taken all action so that,
prior to the execution hereof, the Board of Directors has approved both
pursuant to Section 203 of the DGCL and Article VIII of the Company Charter (a)
the Merger, this Agreement and each Stockholder Voting Agreement and the
transactions contemplated hereby and thereby prior to the execution hereof and
thereof, (b) a fee (in an amount previously disclosed to the Company) paid to
Kelso & Co. (or an Affiliate thereof) in connection with the transactions
contemplated by this Agreement and (c) the possible purchase by an Affiliate of
Parent (other than Parent and so long as such purchase would not be treated for
U.S. federal income tax purposes as a purchase, in whole or in part, by a
Person who is related to Parent within the meaning of Treasury Regulation
Section 1.368-1(e)(3)) of shares of Company Common Stock from John W. Lyle and
Frank S. Caruso pursuant to that certain side letter dated of even date
herewith between each of such executives and Parent. Prior to the execution of
this Agreement, the Company has delivered to Parent a true and accurate copy of
the resolutions of the Board of Directors of the Company approving such
transactions. As of the date of this Agreement, no other state takeover
statutes, including without limitation, any business combination act or
supermajority Company Charter provisions are applicable to the Merger or the
Transaction Agreements.
Section 3.22 Year 2000. With respect to year 2000, the Company represents
and warrants that the statement contained in Exhibit D-2 hereto is true and
accurate.
Section 3.23 Interests in Other Entities. Except as set forth in Schedule
3.23 of the Company Disclosure Schedule, the Company does not, directly or
indirectly, own or have the right to acquire any equity interest in any other
corporation, partnership, joint venture or other business organization (other
than any such equity interest that is 1% or less of the equity interest such
public corporation). The Company has not made any investment in or advance of
cash or other extension of credit to any Person, or has any commitment or
obligation to do so.
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ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.
(a) Actions by Parent. Notwithstanding anything herein to the contrary, (1)
prior to the Effective Time, the Parent Recapitalization shall occur and (2)
contemporaneously with the Closing, Parent shall duly adopt and declare
advisable the Charter Amendment. During the period from the date of this
Agreement through the Effective Time, Parent shall, and shall cause each of its
Subsidiaries to, in all material respects carry on its business in the ordinary
course as currently conducted and, to the extent consistent therewith, use
reasonable best efforts to preserve intact its current business organizations,
keep available the services of its current officers and employees and preserve
its relationships with customers, suppliers and others having business dealings
with it. Without limiting the generality of the foregoing, and except as
otherwise contemplated by this Agreement (including the Parent Recapitalization
as consummated in accordance with the terms set forth on Exhibit A-2 hereto),
from the date of this Agreement to the Effective Time, Parent, shall not, and
shall not permit any of its Subsidiaries to, without the prior written consent
of the Company:
(i) (w) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their
capacity as such (other than dividends and other distributions by
Subsidiaries), (x) other than in the case of any Subsidiary, split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, (y) other than pursuant to any existing
stockholders agreement (copies of which have been previously provided to
the Company), purchase, redeem or otherwise acquire any shares of capital
stock of Parent or any other securities thereof or the capital stock of any
Subsidiary or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities or (z) institute or
amend any share repurchase program;
(ii) issue, deliver, sell, pledge, dispose of, grant, transfer or
otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible or
exchangeable into, or exercisable for, or any rights, warrants or options
to acquire any such shares, voting securities, equity equivalent or
convertible securities, other than (A) subject to Section 4.3 hereof, the
issuance of stock options and shares of Parent Common Stock to employees of
Parent or any of its Subsidiaries under the Parent Incentive Plans and in
the ordinary course of business consistent with past practice between the
date hereof and the Effective Date, (B) the issuance by any wholly-owned
Subsidiary of Parent of its capital stock to Parent or another wholly-owned
Subsidiary of Parent and (C) as set forth in Schedule 4.1(a)(ii) of the
Parent Disclosure Schedule;
(iii) amend its charter or by-laws;
(iv) except for inventory, merchandise, finished goods and accounts
receivable acquired in the ordinary course of business, acquire or agree to
acquire by merging or consolidating with, or by purchasing a portion of the
assets of or equity in, or by making an investment in or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets, other than acquisitions of assets in the ordinary
course of business consistent with past practice in an amount not to exceed
$20 million;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its rights or other assets, other than (A)
sales of inventory, merchandise and finished goods in the ordinary course
of business and (B)transactions that are in the ordinary course of business
consistent with past practice and that, individually or in the aggregate,
are not material to Parent and its Subsidiaries taken as a whole;
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other Person, other than (A) indebtedness
incurred in the ordinary course of business consistent with past practice
in an amount not to exceed $20 million, (B) indebtedness, loans, advances,
capital contributions and investments between Parent and any
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of its wholly-owned Subsidiaries or between any of such wholly-owned
Subsidiaries, (C) such indebtedness as may be necessary to fund actions
allowed under Section 4.1(a)(iv) hereof and (D) in connection with a
refinancing of the Credit Agreement, dated as of August 26, 1997 (the
"Credit Agreement"), among Endo Pharmaceuticals Inc., the lenders party
thereto and The Chase Manhattan Bank (provided that such indebtedness
incurred in connection with such a refinancing does not exceed indebtedness
allowed under the Credit Agreement);
(vii) knowingly violate or knowingly fail to perform any material
obligation or duty imposed upon it or any Subsidiary by any applicable
federal, state or local law, rule, regulation, guideline or ordinance;
(viii) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures and other than actions required to be
taken by GAAP; or
(ix) enter into any contract, agreement, commitment or arrangement to
take any action prohibited by this Section 4.1(a).
(b) Actions by the Company. During the period from the date of this
Agreement through the Effective Time, the Company shall, in all material
respects, carry on its business in the ordinary course as currently conducted
and, to the extent consistent therewith, use reasonable best efforts to
preserve intact its current business organizations, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement, from the date of this Agreement to the
Effective Time, the Company shall not, without the prior written consent of
Parent:
(i) (w) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their
capacity as such, (x) split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, (y)
purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities or (z) institute or amend
any share repurchase program;
(ii) issue, deliver, sell, pledge, dispose of, grant, transfer or
otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible or
exchangeable into, or exercisable for, or any rights, warrants or options
to acquire any such shares, voting securities, equity equivalent or
convertible securities, other than the issuance of shares of Company Common
Stock upon the exercise of Company Stock Options outstanding on the date of
this Agreement in accordance with their current terms;
(iii) amend the Company Charter or Company By-Laws;
(iv) except for inventory, merchandise, finished goods and accounts
receivable acquired in the ordinary course of business, acquire or agree to
acquire by merging or consolidating with, or by purchasing a portion of the
assets of or equity in, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets other
than acquisitions of assets in the ordinary course of business consistent
with past practice, the value of which do not exceed $500,000 in the
aggregate;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its rights or other assets other than (A)
sales of inventory, merchandise and finished goods in the ordinary course
of business and (B) transactions that are in the ordinary course of
business consistent with past practice, not material to the Company and in
an aggregate amount greater than $250,000;
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in (other than investments in accordance with clause (iv)
above), any other Person, other than indebtedness incurred in the ordinary
course of business consistent with past practice in an amount not to exceed
$50,000 in the aggregate;
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(vii) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of the
Company other than as a result of the trading of the Company Common Stock
on the NASDAQ;
(viii) enter into or adopt, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any Company Plan or
employment or consulting agreement, other than (A) as required by
applicable law, (B) as expressly contemplated by this Agreement or (C) stay
bonuses as reasonably approved by Parent;
(ix) increase the compensation payable or to become payable to its
officers, employees or directors except for increases in the ordinary
course of business consistent with past practice in salaries or wages of
employees of the Company who are not officers of the Company, or grant any
additional rights to severance or termination pay to, or enter into any
employment or severance agreement with, any director or officer of the
Company, or establish, adopt, enter into, or, except as set forth in
Schedule 4.1(b)(ix) of the Company Disclosure Schedule or as may be
required to comply with applicable law, amend or take action in any such
case in a manner so as to enhance or accelerate any rights or benefits
under, any labor, collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer
or employee;
(x) knowingly violate or knowingly fail to perform any material
obligation or duty imposed upon it by any applicable federal, state or
local law, rule, regulation, guideline or ordinance;
(xi) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures (other than actions required to be taken
by GAAP);
(xii) make any Tax election, change its method of accounting, or settle
or compromise any material federal, state, local or foreign income Tax
liability or refund;
(xiii) except as set forth in Schedule 4.1(b)(xiii) of the Company
Disclosure Schedule, enter into any contract that cannot be canceled on 30
days' notice pursuant to which it is obligated in an amount in excess of
$500,000;
(xiv) make any capital expenditure in the aggregate in excess of
$100,000, other than expenditures (and contracts for such expenditures) set
forth in the Company's current capital budget included as Schedule
4.1(b)(xiv) of the Company Disclosure Schedule;
(xv) enter into any agreement, arrangement or contract that provides for
the allocation, sharing or indemnification for Taxes; or
(xvi) enter into any contract, agreement, commitment or arrangement to
take any action prohibited by this Section 4.1(b).
(c) Other Actions. The Company and Parent shall not, and Parent shall not
permit any of its Subsidiaries to, take any action that would, or that could
reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement that is qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that is not so qualified becoming untrue in any material respect or (iii)
except as otherwise permitted by Section 4.2 hereof with regard to the Company,
any condition to the Merger set forth in Article VI hereof not being satisfied.
Section 4.2 No Solicitation.
(a) The Company shall not, and it will use its best efforts to cause its
officers, directors, employees, investment bankers, consultants, attorneys,
accountants, agents, advisors or representatives not to, directly or
indirectly, (i) take any action to solicit, initiate, encourage or facilitate
any Company Takeover Proposal (as hereinafter defined) or any inquiry with
respect thereto, (ii) enter into or approve any agreement or agreement-in-
principle providing for or with respect to any Company Takeover Proposal or
(iii) participate or engage in any
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discussions or negotiations regarding, or furnish to any Person any information
with respect to or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Company Takeover Proposal, including affording access to the Company's
properties, books or records; provided, however, that prior to the approval of
this Agreement by the stockholders of the Company, to the extent required by
the fiduciary obligations of the Board of Directors of the Company, as
determined in good faith by it after consultation with outside counsel, the
Company may, in response to a Company Takeover Proposal that was not solicited
by the Company and that did not otherwise result from a breach or a deemed
breach of this Section 4.2(a), and subject to compliance with the provisions of
this Agreement, (x) furnish information with respect to the Company to any
Person pursuant to a customary confidentiality agreement and (y) if the Company
is in compliance with Section 4.2(b) hereof, participate or engage in
discussions or negotiations with such Person regarding any Company Takeover
Proposal. Without limiting the foregoing, it is agreed that any violation of
the restrictions set forth in the preceding sentence by any executive officer
of the Company or any director or investment banker, attorney or other advisor
or representative of the Company, whether or not such Person is purporting to
act on behalf of the Company or otherwise, shall be deemed to be a breach of
this Section 4.2(a) by the Company. For purposes of this Agreement, "Company
Takeover Proposal" means any proposal for a merger or other business
combination involving the Company or the acquisition or purchase of more than
25% of any class of equity securities of the Company, or any tender offer
(including self-tenders) or exchange offer that, if consummated, would result
in any Person beneficially owning more than 25% of any class of equity
securities of the Company, or a majority of the assets of the Company, other
than the transactions contemplated by this Agreement. Nothing contained in this
Section 4.2 shall prohibit the Company or the Company's Board of Directors from
(i) taking and disclosing to the Company's stockholders a position with respect
to a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-
2(a) promulgated under the Exchange Act or (ii) making any disclosure required
by applicable law.
(b) The Company promptly shall advise Parent orally and in writing of its
receipt of any public or private Company Takeover Proposal or any inquiry with
respect to or that could reasonably be expected to lead to any Company Takeover
Proposal, the identity of the Person making any such Company Takeover Proposal
or inquiry and the material terms of any such Company Takeover Proposal. The
Company shall (i) keep Parent fully informed of the status, including any
change to the terms and conditions of, any such Company Takeover Proposal or
inquiry and (ii) provide to Parent as soon as practicable after receipt or
delivery thereof with copies of all correspondence and other written material
sent or provided to the Company from any third party in connection with any
Company Takeover Proposal or sent or provided by the Company to any third party
in connection with any Company Takeover Proposal.
Section 4.3 Tax Representation Letters. For purposes of the tax opinions
described in Sections 6.2(b) and 6.3(c) hereof, Parent and the Company shall
provide representation letters reasonably customary in scope and substance,
substantially in the respective forms of Exhibits E-1 and E-2 attached hereto
(the "Tax Representation Letters"), dated as of the date that is two business
days prior to the date the Proxy Statement is mailed to stockholders of the
Company and reissued as of the date of Closing.
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ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meeting. The Company shall call a meeting of its
stockholders to be held as promptly as practicable after the date on which the
Registration Statement becomes effective for the purpose of considering the
approval of this Agreement (such meeting and any adjournments or postponements
thereto, the " Stockholder Meeting"). Neither the Board of Directors of the
Company nor any committee thereof shall withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or Sub, the approval or
recommendation by the Board of Directors of the Company or any such committee
thereof of this Agreement or the Merger, or approve or recommend, or propose to
approve or recommend, any Company Takeover Proposal (each, a "Change in the
Company Recommendation"), unless such proposal is a Superior Company Proposal.
For purposes of this Agreement, a "Superior Company Proposal" means any
proposal made by a third party to acquire a majority of the equity securities
or assets of the Company, pursuant to a tender or exchange offer, a merger, a
sale of all or substantially all its assets or otherwise, on terms which the
Company Board of Directors determines in its good faith judgment to be superior
from a financial point of view to the holders of Company Common Stock (based on
the written opinion, with only customary qualifications, of the Company's
independent financial advisor), taking into account all the terms and
conditions of such proposal and this Agreement. Notwithstanding any Change in
the Company Recommendation, a proposal to approve the Merger and adopt this
Agreement shall be submitted to the stockholders of the Company at the
Stockholder Meeting in order to give the Company's stockholders the opportunity
to vote on the Merger and this Agreement in order to obtain the requisite
approval of the Company's stockholders and nothing contained in this Agreement
shall be deemed to relieve the Company of such obligation.
Section 5.2 Preparation of the Registration Statement and the Proxy
Statement. The Company and Parent shall promptly prepare the Proxy Statement
and the Registration Statement in which the Proxy Statement will be included,
and thereafter the Company shall promptly file with the SEC the Proxy Statement
and Parent shall promptly file with the SEC such Registration Statement. The
Company and Parent shall cooperate with each other in connection with the
preparation of the foregoing documents (including, without limitation,
providing each other any information that is necessary to be included in such
documents). Each of Parent and the Company shall use its reasonable best
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing. As promptly as
practicable after the Registration Statement shall have become effective, the
Company shall mail the Proxy Statement to its stockholders. Parent shall also
take any action (other than qualifying to do business in any jurisdiction in
which it is now not so qualified) required to be taken under any applicable
state securities laws in connection with the issuance of Parent Common Stock
and Algos Warrants in the Merger and the issuance of Parent Common Stock upon
the exercise of the Algos Warrants, and the Company shall furnish all
information concerning the Company and the holders of Company Common Stock as
may be reasonably requested in connection with any such action. No amendment or
supplement to the Proxy Statement or the Registration Statement will be made by
Parent or the Company without the prior approval of the other party. Parent and
the Company each will advise the other, promptly after it receives notice
thereof, of the time when the Registration Statement has become effective or
any supplement or amendment has been filed, of the issuance of any stop order,
of the suspension of the qualification of the Parent Common Stock or Algos
Warrants issuable in connection with the Merger or the Parent Common Stock
issuable upon the exercise of the Algos Warrants for offering or sale in any
jurisdiction, or of any request by the SEC for amendment of the Proxy Statement
or the Registration Statement or comments thereon and responses thereto or
requests by the SEC for additional information.
Section 5.3 Access to Information; Regulatory Communications.
(a) Subject to currently existing contractual and legal restrictions
applicable to the Company or Parent or any of Parent's Subsidiaries, each of
Parent and the Company shall, and Parent shall cause each of its Subsidiaries
to, afford to the accountants, counsel, financial advisors and other
representatives of the other party hereto reasonable access to, and permit them
to make such inspections as they may reasonably require of,
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during normal business hours during the period from the date of this Agreement
through the Effective Time, all their respective properties, books, contracts,
commitments and records (including, without limitation, the work papers of
independent accountants, if available and subject to the consent of such
independent accountants) and, during such period, Parent and the Company shall,
and Parent shall cause each of its Subsidiaries to, furnish promptly to the
other (i) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of federal
or state securities laws and (ii) all other information concerning its
business, properties and personnel as the other may reasonably request. No
investigation pursuant to this Section 5.3(a) shall affect any representation
or warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto. Notwithstanding the foregoing, the Company
agrees to fully cooperate with Parent and its advisors in their investigation
and evaluation of the Company Intellectual Property and the Company further
agrees that such cooperation shall include, but not be limited to, the Company
making available to Parent and its advisors those documents requested by Parent
as well as scientific personnel of the Company who are familiar with the
Company Intellectual Property.
(b) The Company (i) shall keep Parent promptly informed of (A) any
communication (written or oral) with or from the FDA or the DEA and (B) any
communications (written or oral) received from any Person relating to the
Company Intellectual Property and (ii) shall not make any submissions to, or
have discussions with, the FDA or the DEA without either the prior consultation
or the inclusion of Parent; provided, however, that in the event the Company
(i) is verbally contacted by the FDA and (ii) has made a good faith effort to
include representatives of Parent in such discussion without success, then the
Company shall be allowed to participate in such discussions without Parent and
shall promptly inform Parent of the content of such discussions. Parent shall
keep the Company promptly informed of any communications from the FDA or DEA
relating to any of the drugs set forth in Schedule 5.3(b) of the Parent
Disclosure Schedule.
Section 5.4 Compliance with the Securities Act. Prior to mailing the Proxy
Statement, the Company shall deliver to Parent a list of names and addresses of
those Persons who, in the opinion of the Company, may, at the time of the
Stockholder Meeting, be deemed to be "affiliates" of the Company within the
meaning of Rule 145 under the Securities Act ("Affiliates"). The Company shall
provide to Parent such information and documents as each shall reasonably
request for purposes of reviewing such lists. There shall be added to such
lists the names and addresses of any other Person that the Company reasonably
identifies (by written notice to the other party within ten business days after
receipt of such list) as being a Person who may be deemed to be an Affiliate of
the Company. Except as set forth in Schedule 5.4 of the Company Disclosure
Schedule, the Company shall exercise all reasonable efforts to deliver or cause
to be delivered to Parent, not later than 30 days prior to the Effective Time,
from each of such Affiliates of the Company identified on the foregoing list,
an affiliate letter in the form attached hereto as Exhibit F.
Section 5.5 Designation of Directors. At the Effective Time, Parent shall
take all actions necessary to cause (a) three (3) designees of the Company
(each of whom shall be satisfactory to Parent) to be appointed to its Board of
Directors (such person and any subsequent designees thereof, the "Company
Designees"), to serve until their terms expire or until their successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Parent Charter or Parent By-laws
and (b) John W. Lyle to be appointed a Non-Executive Chairman of Parent's Board
of Directors. During the three-year period from and including the Effective
Date, (A) Parent shall use its reasonable best efforts to cause at least three
(3) Company Designees to be on the Board of Directors of Parent at all times,
(B) at any meeting of stockholders for the purpose of electing the members of
Parent's Board of Directors, Parent shall cause to be nominated for election
the Company Designees, (C) the Parent LLC (as defined in Section 5.21) shall
vote the shares of Parent Common Stock owned by it in favor of the Company
Designees, (D) the Parent Charter or the Parent By-Laws shall provide that any
vacancies created by any Company Designee upon such Company Designee's death,
resignation or removal that are not filled pursuant to a Parent stockholder
vote shall be filled by a nominee of the remaining Company Designees and (E)
one Company Designee shall be appointed as a member of any compensation
committee of Parent's Board of Directors or any other committee of such Board
having the responsibility or power with respect to the granting of employee
stock options.
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Section 5.6 NASDAQ Listing. Parent shall use its reasonable best efforts to
have authorized for listing on the NASDAQ, subject to official notice of
issuance, the shares of Parent Common Stock, the Algos Warrants to be issued in
connection with the Merger and the Endo Warrants (as defined in Section 5.20
hereof).
Section 5.7 Fees and Expenses.
(a) Except as provided in this Section 5.7, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby, including, without limitation, the
fees and disbursements of counsel, financial advisors and accountants, shall be
paid by the party incurring such costs and expenses; provided that all filing
fees and printing expenses for the Proxy Statement and Registration Statement
shall be shared equally by the Company and Parent.
(b) The Company shall reimburse Parent and Sub for all their out-of-pocket
expenses actually incurred in connection with this Agreement and the other
Transaction Agreements, the Merger and any other transactions contemplated
hereby and thereby if this Agreement is terminated pursuant to Section 7.1(e)
hereof, or terminated pursuant to Section 7.1(b) or (c) hereof based on a
breach of the Company. Such reimbursement shall be paid upon demand following
such termination.
(c) Parent and Sub shall reimburse the Company for all of its out-of-pocket
expenses actually incurred in connection with this Agreement and the other
Transaction Agreements, the Merger and any other transactions contemplated
hereby and thereby if this Agreement is terminated pursuant to Section 7.1(b)
or (c) hereby based on a breach of Parent or Sub. Such reimbursement shall be
paid upon demand following such termination.
Section 5.8 Company Stock Options. The Company shall cause each unexpired
and unexercised Company Stock Option under the Company Stock Plans to become
fully vested and exercisable for the thirty (30)-day period immediately prior
to the Effective Time. To the extent any Company Stock Option is unexpired and
unexercised at the end of such period, the Company shall cause such Company
Stock Option to terminate as of the Effective Time.
Section 5.9 Parent Options. Parent shall take all action necessary, and
shall use its reasonable best efforts to obtain as soon as practicable the
consent of option holders to provide that each Parent Stock Option (to purchase
shares of Parent Common Stock under the Parent Incentive Plans) which is
outstanding at the Effective Time (whether or not such Parent Stock Option is
then vested and exercisable) shall, subject to the following sentence, be
following the Effective Time exercisable solely into shares of Parent Common
Stock that are beneficially owned by certain holders of Parent Common Stock
immediately following the Parent Recapitalization and prior to the Effective
Time (the "Current Endo Options"). The parties hereto also agree and
acknowledge that following the date of this Agreement, current holders of
Parent Common Stock and current holders of Parent Stock Options will enter into
amendments to their current stockholders agreements, Parent Incentive Plans and
Parent Stock Options, as the case may be, in order to accomplish the foregoing.
Section 5.10 Reasonable Efforts.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, including, with regard to the Company, Section 4.2 hereof, each of
the parties agrees to use reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement, including, but not
limited to: (i) the obtaining of all necessary actions or nonactions, waivers,
consents and approvals from all Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities) and the taking of all reasonable steps as may be necessary to obtain
an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity (including those in connection with the HSR Act and State
Takeover Approvals), (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (iv) the execution and delivery of
any additional instruments necessary to consummate the transactions
contemplated by this Agreement. Parent and the Company shall cooperate with
each other in connection with the making of
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such filings, including providing copies of all such documents to the non-
filing party and its advisors prior to filing and, if requested, accepting all
reasonable suggestions in connection therewith.
(b) The parties hereto will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals made or submitted by or on behalf of any party hereto in
connection with proceedings under or relating to the HSR Act or any other
federal, state or foreign antitrust or fair trade law. Each party shall
promptly notify the other party of any communication to that party from any
Governmental Entity in connection with any required filing with, or approval or
review by, such Governmental Entity in connection with the Merger and permit
the other party to review in advance any such proposed communication to any
Governmental Entity. Neither party shall agree to participate in any meeting
with any Governmental Entity in respect of any such filings, investigation or
other inquiry unless it consults with the other party in advance and, to the
extent permitted by such Governmental Entity, gives the other party the
opportunity to attend and participate thereat.
(c) Each party shall use all reasonable efforts to not take any action, or
enter into any transaction, which would cause any of its representations or
warranties contained in this Agreement to be untrue or result in a breach of
any covenant made by it in this Agreement.
Section 5.11 Public Announcements. The initial press release shall be a
joint press release and thereafter the Company and Parent each shall obtain the
prior consent of the other prior to issuing any press releases or otherwise
making public announcements with respect to the Merger and the other
transactions contemplated by this Agreement and prior to making any filings
with any third party and/or any Governmental Entity (including any national
securities exchange or interdealer quotation service) with respect thereto,
except as may be required by law or by obligations pursuant to any listing
agreement with or rules of the NASDAQ.
Section 5.12 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby,
Parent and the Company and their respective Boards of Directors shall use their
reasonable best efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby.
Section 5.13 Indemnification; Directors and Officers Insurance. For not less
than six (6) years from and after the Effective Time, Parent agrees to, and to
cause the Surviving Corporation to, indemnify and hold harmless all past and
present directors, officers and employees of the Company to the same extent
such Persons are indemnified as of the date of this Agreement by the Company
pursuant to the Company Charter and Company By-Laws and indemnification
agreements, if any, in existence on the date of this Agreement with any
directors, officers and employees of the Company for acts or omissions
occurring at or prior to the Effective Time; provided, however, that Parent
agrees to, and to cause the Surviving Corporation to, indemnify and hold
harmless such Persons to the fullest extent permitted by law for acts or
omissions occurring in connection with the approval of this Agreement and the
consummation of the transactions contemplated hereby. Parent shall cause the
Surviving Corporation to provide, for an aggregate period of not less than six
(6) years from the Effective Time, the Company's current directors and officers
an insurance and indemnification policy that provides coverage for events
occurring prior to the Effective Time (the "D&O Insurance") that is no less
favorable than the Company's existing policy or, if substantially equivalent
insurance coverage is unavailable, the best available coverage; provided,
however, that the Surviving Corporation shall not be required to pay an annual
premium for the D&O Insurance in excess of 200 percent of the last annual
premium paid prior to the date of this Agreement, which premium the Company
represents and warrants to be approximately $195,740.
Section 5.14 Notification of Certain Matters. Parent shall use its
reasonable best efforts to give prompt notice to the Company, and the Company
shall use its reasonable best efforts to give prompt notice to Parent, of: (i)
the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which it is aware
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and which would be reasonably likely to cause (x) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect or (y) any covenant, condition or agreement contained in this Agreement
not to be complied with or satisfied in all material respects, (ii) any failure
of Parent or the Company, as the case may be, to comply in a timely manner with
or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder, (iii) any material litigation, any material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or (iv) any change or event which
would be reasonably likely to have a Material Adverse Effect on Parent or the
Company, as the case may be; provided, however, that the delivery of any notice
pursuant to this Section 5.14 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 5.15 Employee Matters. Except to the extent necessary to avoid the
duplication of benefits, Parent will, or will cause the Surviving Corporation
to, give Continuing Employees full credit for purposes of eligibility and
vesting under any employee benefit plans or arrangements maintained by Parent,
the Surviving Corporation or any Subsidiary of Parent in which such Continuing
Employee is eligible to participate for such Continuing Employees' service with
the Company to the same extent recognized by the Company immediately prior to
the Effective Time. Parent will, or will cause the Surviving Corporation to,
(i) waive all limitations as to preexisting conditions exclusions and waiting
periods with respect to participation and coverage requirements applicable to
the Continuing Employees under any welfare plan that such employees may be
eligible to participate in after the Effective Time, other than limitations or
waiting periods that are already in effect with respect to such employees and
that have not been satisfied as of the Effective Time under any welfare plan
maintained for the Continuing Employees immediately prior to the Effective
Time, and (ii) provide each Continuing Employee with credit for any co-payments
and deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Effective Time.
Section 5.16 Tax Treatment. Parent and the Company will each use reasonable
efforts before and after the Closing to cause the Merger to qualify as a
reorganization within the meaning of Section 368(a) of the Code, and will not
take or fail to take, and will use reasonable efforts to prevent any Affiliate
of such party from taking or failing to take, any actions which would
jeopardize the qualification of the Merger as such a reorganization, and will
take such action as is available and may be reasonably required to negate the
impact of any past actions or failures by such party or its respective
Affiliates which would reasonably be expected to adversely impact the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
Section 5.17 Conveyance Taxes. Parent and the Company shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications,
or other documents regarding (i) any real property transfer gains, sales, use,
transfer, value-added, stock transfer (subject to Section 1.9(b) hereof), and
stamp Taxes, (ii) any recording, registration and other fees and (iii) any
similar Taxes or fees that become payable in connection with the transactions
contemplated hereby. The Taxes described in clause (i) above shall be paid by
the Company, without deduction or withholding from any amounts payable to the
holders of Company Common Stock.
Section 5.18 Ownership of Shares. None of Parent, any Person deemed acting
in concert with Parent or any of its Subsidiaries or any of Parent's
Subsidiaries has acquired the beneficial ownership of any shares of Company
Common Stock other than in compliance with Section 3.21 hereof and any other
Applicable Law.
Section 5.19 Additional Agreements. At or before Closing, (a) each of Parent
and the Parent LLC shall enter into a tax sharing agreement in substantially
the form attached hereto as Exhibit G (the "Tax Sharing Agreement") and (b)
each of Parent and John W. Lyle shall enter into an agreement in substantially
the form attached hereto as Exhibit H (the "Lyle Agreement").
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Section 5.20 Issuance of Warrants to Parent. Immediately prior to Closing,
Parent shall issue one warrant (collectively, the "Endo Warrants") with respect
to each share of Parent Common Stock then outstanding, which warrant shall be
subject to the terms and conditions of a warrant agreement (the "Endo Warrant
Agreement") substantially in the form attached hereto as Exhibit I.
Section 5.21 Formation of Parent LLC.
(a) Immediately prior to the Effective Time, a limited liability company
(the "Parent LLC") shall be formed to which Parent shall use its reasonable
best efforts to cause each of the then current holders of Parent Common Stock
to contribute all of the shares of Parent Common Stock beneficially owned by it
in exchange for membership interests in such Parent LLC; provided that this
covenant shall be deemed to have occurred if holders of at least 85% of the
Parent Common Stock so contribute their shares of Parent Common Stock to the
Parent LLC.
(b) On March 31, 2001, Parent will determine the Cash Gross Profit of Parent
(as defined below) and the Adjustment Event (as defined below) shall be deemed
to have occurred or not occurred (as appropriate) on such date. Among other
things, the limited liability company agreement for the Parent LLC (the "Parent
LLC Agreement") will provide that (i) in the event (A) the Cash Gross Profit of
Parent (as defined below) for the fiscal year ended December 31, 2000 does not
equal or exceed $147.4 million and (B) the Exercisability Date (as defined in
the Algos Warrant) has occurred prior to March 31, 2001, then 13,769,573 shares
of Parent Common Stock that are then owned by the Parent LLC shall be
transferred for no consideration to Parent (which shall deposit the same in its
treasury) and (ii) in the event (A) the Cash Gross Profit of Parent for the
fiscal year ended December 31, 2000 does not equal or exceed $147.4 million and
(B) the Exercisability Date has not occurred prior to March 31, 2001, then
17,900,445 shares of Parent Common Stock that are then owned by the Parent LLC
shall be transferred for no consideration to Parent (which shall deposit the
same in its treasury) (the actions contemplated by clause (i) or clause (ii)
shall be adjustments to the Merger Consideration and shall be referred to as an
"Adjustment Event").
(c) The number of shares that are required to be transferred in the event of
an Adjustment Event shall be appropriately adjusted (i) such that, at the
Effective Time, the numbers in clauses (b)(i)(B) and (b)(ii)(B) of this Section
5.21 shall represent that number of shares of Parent Common Stock such that if
such shares were no longer outstanding at the Effective Time, the shares
issuable under the Algos Warrants in the aggregate (if such Algos Warrants were
then immediately exercisable), together with shares of Parent Common Stock
issued to the Company stockholders in the Merger would represent 40% of the
outstanding Parent Common Stock on a fully diluted basis (excluding the Endo
Warrants) and (ii) without duplicating clause (i) above, if Parent pays a
dividend or makes a distribution on the Parent Common Stock in shares of Parent
Common Stock or other capital stock of Parent or subdivides, splits, combines
or reclassifies its outstanding shares of Parent Common Stock into a different
number of securities of the same class, then the number of shares of Parent
Common Stock required to be transferred under this Section 5.21 shall be
appropriately adjusted to give the effect specified in clause (i) of this
sentence as if such events occurred immediately prior to the Effective Time.
(d) For such purposes, "Cash Gross Profit of Parent" shall mean the
difference between Net Sales (as defined below) and Cash Cost of Sales (as
defined below) for the fiscal year ended December 31, 2000. "Net Sales" shall
mean the gross invoice price of Endo Products (as defined below) sold to any
third party (excluding Affiliates of Parent) less (i) cash, trade, promotional,
or quantity discounts and/or rebates, and chargebacks, (ii) retroactive price
reductions, (iii) sales, use or other excise taxes and (iv) returns and
allowances, all as reflected on the audited statement of operations of Parent
attributable to the Endo Products determined in accordance with GAAP
consistently applied for the fiscal year ended December 31, 2000. "Cash Cost of
Sales" shall mean the Cost of Sales (determined in accordance with GAAP and
consistent with the past practices used by Parent in 1998 as previously
disclosed to the Company) as reflected on the audited statement of operations
of Parent for the fiscal year ended December 31, 2000 attributable to the Endo
Products less all non-recurring charges and non-cash charges included in Cost
of Sales (including, but not limited to, depreciation, amortization and other
non-cash manufacturing charges). "Endo Products" shall include current
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and future internally developed products sold or marketed by Parent or its
Subsidiaries (other than products developed or being developed by the Company)
to any third party (including products from which Parent has revenues on
account of royalties and license fees). The Parent LLC Agreement shall further
provide that the definition of the Cash Gross Profit of Parent shall be based
solely on the audited financial statements of Parent for the fiscal year ended
December 31, 2000. Any determinations regarding the satisfaction of such
obligation or any amendments, modifications or waivers of such provisions by
Parent shall be effective only if approved by a majority of the members of the
Board of Directors of Parent who do not then (by themselves or through an
Affiliate) have a financial interest in the Parent LLC. Any dispute relating to
the calculation of the Cash Gross Profit of Parent shall be resolved by the
Independent Accounting Firm (as defined below) acting as arbitrator, and such
determination shall be final and binding on the parties. The Parent LLC and
Parent (by a majority of the members of the Board of Directors of Parent who do
not then (by themselves or through an Affiliate) have a financial interest in
the Parent LLC) shall mutually select a nationally recognized firm of certified
public accountants then having no significant ongoing relationship with either
Parent or the Parent LLC or their respective Affiliates, but if the Parent LLC
and Parent cannot mutually agree on the identity of such firm, then the Parent
LLC and Parent shall each submit to the other party's independent auditor the
name of a national accounting firm other than any firm that has in the prior
two years provided services to the Parent LLC, Parent or any of their
respective Affiliates, and a firm shall be selected by lot from these two firms
by the independent auditors of the two parties. The accounting firm selected
pursuant to the foregoing procedures shall be referred to as the "Independent
Accounting Firm." (If no national accounting firm shall be willing to serve as
the Independent Accounting Firm, then an arbitrator qualified under the rules
of the American Arbitration Association shall be selected to serve as such,
such selection to be according to the above procedures.) Within five (5) days
of the submission of the dispute to the Independent Accounting Firm, each of
the Parent LLC and Parent (by a majority of the members of the Board of
Directors of Parent who do not then (by themselves or through an Affiliate)
have a financial interest in the Parent LLC) shall submit a written position
paper (the "Position Paper") to the Independent Accounting Firm outlining such
party's calculations and/or objections that are the subject of dispute. The
Independent Accounting Firm shall be instructed to use every reasonable effort
to perform its services within thirty (30) days of submission of the Position
Papers to it and, in any case, as promptly as practicable after such
submission. The determination of the Independent Accounting Firm shall be final
and binding on the parties without further right of appeal.
Section 5.22 Effect of Parent Recapitalization. Parent covenants that the
Parent Recapitalization shall have the effect of adjusting the outstanding
Parent Common Stock such that those Persons who had been holders of Company
Common Stock immediately prior to the Effective Time shall, following the
Parent Recapitalization and at the Effective Time, hold, in the aggregate, 20%
of the outstanding Parent Common Stock (on a fully diluted basis, excluding the
effect of the Algos Warrants and the Endo Warrants) and those Persons who had
been holders of Parent Common Stock immediately prior to the Effective Time
shall, following the Parent Recapitalization and at the Effective Time, hold,
in the aggregate, 80% of the outstanding Parent Common Stock (on a fully
diluted basis, excluding the effect of the Algos Warrants and the Endo
Warrants). For purposes of calculating this 20/80 split, (a) any repurchases by
Parent between the date of this Agreement and the Effective Time of any Parent
Common Stock or Parent Stock Options from current holders thereof pursuant to
any current stockholders or options agreements or plans and any issuances of
Parent Common Stock or Parent Stock Options between the date of this Agreement
and the Effective Time to any Parent employee shall be taken into account in
determining the 80% to be owned by holders of Parent Common Stock and the 20%
to be owned by holders of Company Common Stock and (b) the shares of Parent
Common Stock underlying any Parent Stock Options, the holders of which do not
consent to amend such Parent Stock Options pursuant to Section 5.9 hereof,
shall not be counted as part of the 80% to be owned by holders of Parent Common
Stock nor as part of the 20% to be owned by holders of Company Common Stock and
shall be treated as if such Parent Stock Options did not exist for purposes of
this calculation and in calculating the number of fully diluted shares;
provided, however, that such treatment will not apply to the shares underlying
the Parent Stock Options held by the six executives listed in Schedule 5.22 of
the Parent Disclosure Schedule, which Parent Stock Options shall be taken into
account in determining the 80% to be owned by the current holders of Parent
Common Stock if such Parent Stock Options are not amended pursuant
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to Section 5.9 hereof. If any of such executives fails to abide by the terms of
that certain side letter agreement between each of them and the Company,
mutually agreed upon arrangements will be made so that the Parent Stock Options
held by such Persons will only affect the 80% held at the Effective Time by the
current Parent stockholders. Each of the Algos Warrants and the Endo Warrants
shall be exercisable into a number of shares of Parent Common Stock that is
necessary to achieve the effect specified in the form of each such Warrant in
Section 7 of the Warrant Agreement and Section 7 of the Endo Warrant Agreement,
respectively.
Section 5.23 Appraisal Demands. Immediately prior to the taking of the vote
at the Stockholder Meeting, the Company will deliver to Parent copies of all
written demands received by the Company seeking an appraisal of shares of
Company Common Stock pursuant to Section 262 of the DGCL.
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ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the fulfillment or, to the extent permitted by applicable law, waiver at or
prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been duly approved by
the requisite vote of stockholders of the Company in accordance with applicable
law and the Company Charter and Company By-Laws.
(b) Listing on the NASDAQ. The Parent Common Stock issuable in the Merger
shall have been authorized for listing on the NASDAQ, subject to official
notice of issuance.
(c) HSR. The waiting period (and any extensions thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(d) Registration Statement. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have been
initiated or, to the Knowledge of Parent or the Knowledge of the Company,
threatened by the SEC. All necessary state securities or "blue sky"
authorizations (including State Takeover Approvals) shall have been received.
(e) No Governmental Action/Order. There shall not be pending any action,
suit or proceeding brought by any Governmental Entity which challenges or seeks
to enjoin the Merger or the other transactions contemplated hereby. No court or
other Governmental Entity having jurisdiction over the Company or Parent, or
any of Parent's Subsidiaries, shall have enacted, issued, promulgated, enforced
or entered any law, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is then in
effect and has the effect of making the Merger or any of the transactions
contemplated hereby illegal.
Section 6.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment or, to the extent permitted by applicable law, waiver at or
prior to the Effective Time of the following additional conditions:
(a) Performance of Obligations; Representations and Warranties. Each of
Parent and Sub shall have performed in all material respects each of its
covenants and agreements contained in this Agreement required to be performed
on or prior to the Effective Time, each of the representations and warranties
of Parent and Sub contained in this Agreement that is qualified by materiality
shall be true and correct on and as of the Effective Time as if made on and as
of such date (other than representations and warranties that address matters
only as of a certain date which shall be true and correct as of such certain
date) and each of the representations and warranties that is not so qualified
shall be true and correct in all material respects on and as of the Effective
Time as if made on and as of such date (other than representations and
warranties that address matters only as of a certain date which shall be true
and correct in all material respects as of such certain date), in each case
except as contemplated or permitted by this Agreement, and the Company shall
have received a certificate signed on behalf of each of Parent and Sub by its
Chief Executive Officer or its Chief Financial Officer to such effect.
(b) Tax Opinion. The Company shall have received an opinion of Latham &
Watkins in form and substance reasonably satisfactory to the Company, dated the
Effective Time, substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion (including as
provided in the Tax Representation Letters) which are consistent with the state
of facts existing as of the Effective Time, for U.S. federal income tax
purposes:
(i) the Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and the Company, Sub and Parent will each be a
party to that reorganization within the meaning of Section 368(b) of the
Code; and
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(ii) no gain or loss will be recognized by Parent or the Company as a
result of the Merger.
The issuance of such opinion shall be conditioned on the receipt by Latham &
Watkins of the Tax Representation Letters, upon which Latham & Watkins will
rely in rendering its opinion, from each of Parent, Sub and the Company, in
each case, in form and substance reasonably satisfactory to such tax counsel.
The specific provisions of each such representation letter shall be in form and
substance reasonably satisfactory to such tax counsel rendering such opinion,
and each such representation letter shall be dated on or before the date of
such opinion and shall not have been withdrawn or modified in any material
respect.
(c) Formation of Parent LLC. The formation of the Parent LLC in accordance
with Section 5.21 hereof shall have occurred.
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment or, to the extent permitted by applicable law, waiver at or
prior to the Effective Time of the following additional condition:
(a) Performance of Obligations; Representations and Warranties. The Company
shall have performed in all material respects each of its agreements contained
in this Agreement required to be performed on or prior to the Effective Time,
each of the representations and warranties of the Company contained in this
Agreement that is qualified by materiality shall be true and correct on and as
of the Effective Time as if made on and as of such date (other than
representations and warranties that address matters only as of a certain date
which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects on and as of the Effective Time as if made on
and as of such date (other than representations and warranties that address
matters only as of a certain date which shall be true and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by this Agreement, and Parent shall have received a certificate
signed on behalf of the Company by its Chief Executive Officer or its Chief
Financial Officer to such effect.
(b) Affiliate Letters. The letters from Affiliates required by Section 5.4
hereof shall have been executed and delivered.
(c) Tax Opinion. Parent shall have received an opinion of Skadden, Arps,
Slate, Meagher & Flom LLP in form and substance reasonably satisfactory to
Parent, dated the Effective Time substantially to the effect that on the basis
of facts, representations and assumptions set forth in such opinion (including
as provided in the Tax Representation Letters) which are consistent with the
state of facts existing as of the Effective Time, for U.S. federal income tax
purposes:
(i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and that the Company, Sub and Parent will each
be a party to that reorganization within the meaning of Section 368(b) of
the Code; and
(ii) no gain or loss will be recognized by Parent or the Company as a
result of the Merger.
The issuance of such opinion shall be conditioned on the receipt by Skadden,
Arps, Slate, Meagher & Flom LLP of the Tax Representation Letters, upon which
Skadden, Arps, Slate, Meagher & Flom LLP will rely in rendering its opinion,
from each of Parent, Sub, and the Company, in each case, in form and substance
reasonably satisfactory to such tax counsel. The specific provisions of each
such representation letter shall be in form and substance reasonably
satisfactory to such tax counsel rendering such opinion, and each such
representation letter shall be dated on or before the date of such opinion and
shall not have been withdrawn or modified in any material respect.
(d) Dissenting Shares. The Company shall not have received before the taking
of the vote at the Stockholder Meeting written demands in accordance with
Section 262 of the DGCL seeking an appraisal of more than 12% of the shares of
Company Common Stock outstanding at such time, which demands have not been
rescinded or abandoned by written notice thereof to the Company.
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company (provided such party is not then in
material breach) if the other party shall have failed to comply in any material
respect with any of its covenants or agreements contained in this Agreement
required to be complied with prior to the date of such termination, which
failure to comply has not been cured within ten business days following receipt
by such other party of written notice of such failure to comply; provided,
however, that if any such breach is curable by the breaching party through the
exercise of the breaching party's best efforts and for so long as the breaching
party shall be so using its best efforts to cure such breach, the non-breaching
party may not terminate this Agreement pursuant to this paragraph;
(c) by either Parent or the Company (provided such party is not then in
material breach) if there has been (i) a breach by the other party (in the case
of Parent, including any breach by Sub) of any representation or warranty that
is not qualified as to materiality which has the effect of making such
representation or warranty not true and correct in all material respects or
(ii) a breach by the other party (in the case of Parent, including any breach
by Sub) of any representation or warranty that is qualified as to materiality,
in each case which breach has not been cured within ten business days following
receipt by the breaching party of written notice of the breach; provided,
however, that if any such breach is curable by the breaching party through the
exercise of the breaching party's best efforts and for so long as the breaching
party shall be so using its best efforts to cure such breach, the non-breaching
party may not terminate this Agreement pursuant to this paragraph;
(d) by Parent or the Company:
(i) if any Governmental Entity issues an order, decree or ruling or
takes any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree or ruling shall have become
final and nonappealable;
(ii) if any condition to the obligation of such party to consummate the
Merger set forth in Article VI hereof becomes incapable of satisfaction
prior to the Termination Date (as hereinafter defined) (provided that the
terminating party is not then in material breach of any representation,
warranty or covenant contained in this Agreement); or
(iii) if the Merger has not been effected on or prior to the close of
business on June 30, 2000 (the "Termination Date"); provided, however, that
the right to terminate this Agreement pursuant to this Section 7.1(d)(iii)
shall not be available to any party whose failure to fulfill any of its
obligations contained in this Agreement has been the cause of, or resulted
in, the failure of the Merger to have occurred on or prior to the aforesaid
date;
(e) by Parent or the Company if the stockholders of the Company do not
approve this Agreement at the Stockholder Meeting or any adjournment or
postponement thereof (so long as Parent and its Affiliates have voted the
proxies that they are entitled to vote in favor of this Agreement); and
(f) by Parent, if Parent, in its good faith, on or before January 25, 2000,
determines that any representation set forth in Section 3.16 of the Merger
Agreement is inaccurate or untrue (other than solely by reason of the Company's
act of disclosing information to Parent after November 26, 1999 and prior to
December 17, 1999), provided further that such representation must be
materially inaccurate or untrue if not qualified by materiality therein.
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The right of any party hereto to terminate this Agreement pursuant to this
Section 7.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any Person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company as provided in Section 7.1 hereof,
this Agreement shall forthwith terminate and there shall be no liability
hereunder on the part of the Company, Parent, Sub or their respective officers
or directors (except for Section 5.7 and Article VIII hereof which shall
survive the termination); provided, however, that nothing contained in this
Section 7.2 shall relieve any party hereto from any liability for any willful
breach of a representation or warranty contained in this Agreement or the
breach of any covenant contained in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties hereto
at any time before or after approval of the matters presented in connection
with the Merger by the stockholders of the Company; provided, however, after
any such approval, no amendment shall be made which by law requires further
approval by such stockholders without such further approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) subject to the proviso of Section 7.3 hereof, waive
compliance with any of the agreements or conditions contained herein which may
legally be waived. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
Section 7.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1 hereof, an amendment of
this Agreement pursuant to Section 7.3 hereof or an extension or waiver
pursuant to Section 7.4 hereof shall, to be effective, require in the case of
Parent, Sub or the Company, action by its Board of Directors or the duly
authorized designee of its Board of Directors.
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ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Effective Time or, subject to
Section 7.2 hereof, upon the termination of this Agreement pursuant to Section
7.1 hereof.
Section 8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a confirmatory
copy sent by overnight courier) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Endo Pharmaceuticals Holdings Inc.
223 Wilmington-West Chester Pike
Chadds Ford, PA 19317
Attn.: Carol A. Ammon
Fax No.: (610) 558-9683
with copies to:
Kelso & Company
320 Park Avenue, 24th Floor
New York, New York 10022
Attn.: James J. Connors, II
Fax No.: (212) 223-2379
and
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, NY 10036
Attn.: Eileen Nugent
Fax No.: (212) 735-2000
(b) if to the Company, to:
Algos Pharmaceuticals Corporation
1333 Campus Parkway
Neptune, NJ 07753-6815
Attn.: General Counsel
Fax No.: (732) 938-2825
with copies to:
Latham & Watkins
885 Third Avenue
Suite 1000
New York, NY 10022
Attn.: Raymond Y. Lin
Fax No.: (212) 751-4864
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Section 8.3 Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation."
Section 8.4 Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. Except for the
Mutual Confidentiality and Non-Disclosure Agreement between the parties dated
October 21, 1998, this Agreement (together with the Company Disclosure
Schedule, the Parent Disclosure Schedule, the Stockholder Voting Agreements and
the exhibits and annexes attached hereto and thereto) constitute the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof. In the event of any conflict between this Agreement and any of the
Company Disclosure Schedule, the Parent Disclosure Schedule, the Stockholder
Voting Agreements and the exhibits and annexes attached hereto and thereto,
this Agreement shall control. Other than Sections 5.5, 5.8, 5.9, 5.13, 5.15 and
5.21(c) hereof and the obligation of the Parent LLC to transfer shares of
Parent Common Stock pursuant to Section 5.21(b) hereof (taking into account
Section 5.21(d) hereof), this Agreement is not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
Section 8.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ITS RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, THE COMPANY, OR SUB IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
Section 8.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.
Section 8.8 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
may be consummated as originally contemplated to the fullest extent possible.
Section 8.9 Enforcement of this Agreement.
(a) The parties acknowledge and agree that any payment made pursuant to
Section 5.7 hereof does not relieve either party from any liability it
otherwise may have for breach of this Agreement.
(b) The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, such remedy being in addition to any other remedy to which
any party is entitled at law or in equity. Each party hereto hereby irrevocably
and unconditionally consents to submit to the exclusive
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jurisdiction of the United States District Court located in the State of
Delaware (unless such courts assert no jurisdiction, in which case the parties
hereto consent to the exclusive jurisdiction of the courts of the State of
Delaware) for any actions, suits or proceedings arising out of or relating to
this Agreement and the transactions contemplated hereby (and each party hereto
agrees not to commence any action, suit or proceeding relating thereto except
in such courts), and further agrees that service of any process, summons,
notice or document by U.S. registered mail to the addresses set forth herein
shall be effective service of process for any such action, suit or proceeding
brought against each party in such court. Each party hereto hereby irrevocably
and unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby, in the United States District Courts located in the State
of Delaware (unless such courts assert no jurisdiction, in which case each
party consents to the exclusive jurisdiction of the courts of the State of
Delaware). Each party hereby further irrevocably and unconditionally waives and
agrees not to plead or to claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
Each of the parties hereto also agrees that any final and unappealable judgment
against a party hereto in connection with any action, suit or other proceeding
shall be conclusive and binding on such party and that such award or judgment
may be enforced in any court of competent jurisdiction, either within or
outside of the United States. A certified or exemplified copy of such award or
judgment shall be conclusive evidence of the fact and amount of such award or
judgment.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized all as of the
date first written above.
ENDO PHARMACEUTICALS HOLDINGS INC.
/s/ Carol A. Ammon
By: _________________________________
Name:Carol A. Ammon
Title:President & Chief Executive
Officer
ENDO INC.
/s/ Carol A. Ammon
By: _________________________________
Name:Carol A. Ammon
Title:President & Chief Executive
Officer
ALGOS PHARMACEUTICAL CORPORATION
/s/ John W. Lyle
By: _________________________________
Name:John W. Lyle
Title:President
58
<PAGE>
Annex I
COMPANY STOCKHOLDERS ENTERING INTO A STOCKHOLDER VOTING AGREEMENT
<TABLE>
<CAPTION>
Number of Shares
Subject to Stockholder
Registered Holder Voting Agreements
----------------- ----------------------
<S> <C>
Karen B. Lyle....................................... 1,344,416
Michael Hyatt (N.B. does not include shares owned by
the Kimmel Trusts listed below).................... 829,551
Trust Under the Will of Inez Kimmel................. 657,193
Todd Kimmel Trust................................... 171,530
Melissa Kimmel Trust................................ 155,000
Anita Hyatt Family Trust............................ 20,750
Frank S. Caruso..................................... 370,200
John W. Lyle........................................ 224,100
Hyatt Family Trust.................................. 221,332
Roger H. Kimmel (N.B. does not include shares owned
by the Hyatt Trusts listed above).................. 30,000
Frank S. Caruso Irrevocable Trust................... 24,900
James R. Ledley..................................... 109,450
Donald G. Drapkin................................... 8,300
Donald Drapkin...................................... 8,300
Patricia Caruso..................................... 1,000
---------
Total............................................. 4,176,022
=========
</TABLE>
59
<PAGE>
Exhibit A-1 to the Agreement and Plan of Merger
FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ENDO PHARMACEUTICALS HOLDINGS INC.
FIRST: The name of the Corporation is Endo Pharmaceuticals Holdings Inc.
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at that address is the Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the
"GCL").
FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is 175,078,160 shares, consisting of (i)
142,656,279 shares of Common Stock, par value $.01 per share (the "Common
Stock") and (ii) 32,421,881 shares of Preferred Stock, par value $.01 per share
(the "Preferred Stock").
A. Common Stock. Except as otherwise provided in this Article FOURTH or as
otherwise required by law, shares of Common Stock shall be identical and shall
entitle the holders thereof to the same rights and privileges, subject to the
same qualifications, limitations and restrictions.
1. Voting Rights. Except as otherwise required by applicable law, the
holders of Common Stock will be entitled to one vote per share on all
matters to be voted on by the Corporation's Common Stockholders.
2. Dividends. When and as dividends are declared thereon, whether
payable in cash, property or securities of the Corporation, the holders of
Common Stock will be entitled to share equally, share for share, in such
dividends.
B. Preferred Stock. The Board of Directors is expressly authorized to
provide for the issuance of all or any shares of the Preferred Stock in one or
more classes or series, and to fix for each such class or series such voting
powers, full or limited, or no voting powers, and such distinctive
designations, preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions adopted by the
Board of Directors providing for the issuance of such class or series and as
may be permitted by the GCL, including, without limitation, the authority to
provide that any such class or series may be (i) subject to such mandatory or
optional redemption at such time or times and at such price or prices, or, if
appropriate, not subject to such mandatory or optional redemption, (ii)
entitled to receive dividends (which may be cumulative or non-cumulative) at
such rates, on such conditions, and at such times, and payable in preference
to, or in such relation to, the dividends payable on any other class or classes
or any other series, (iii) entitled to such rights upon the dissolution of, or
upon any distribution of the assets of, the Corporation, or (iv) convertible
into, or exchangeable for, shares of any other class or classes of stock, or of
any other series of the same or any other class or classes of stock, of the
Corporation at such price or prices or at such rates of exchange and with such
adjustments, all as may be stated in such resolution or resolutions.
60
<PAGE>
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the By-Laws of the
Corporation, as amended and restated from time to time (the "By- Laws").
(3) The number of directors of the Corporation shall not be less than
seven (7) nor more than eleven (11), the exact number of directors to be
fixed from time to time by, or in the manner provided in, the By-Laws of
the Corporation. The number of directors constituting the Board of
Directors shall be fixed at nine (9) as of the date hereof. Election of
directors need not be by written ballot unless the By-Laws so provide.
(4) No director shall be personally liable to the Corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for any
transaction from which the director derived an improper personal benefit.
Any repeal or modification of this Article FIFTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such
repeal or modification.
(5) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the directors
which would have been valid if such By-Laws had not been adopted.
SIXTH: The name and mailing address of the Sole Incorporator is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
</TABLE>
SEVENTH: The Corporation shall indemnify its directors and officers to the
fullest extent authorized or permitted by law, as now or hereafter in effect,
and such right to indemnification shall continue as to a person who has ceased
to be a director or officer of the Corporation and shall inure to the benefit
of his or her heirs, executors and personal and legal representatives;
provided, however, that, except for proceedings to enforce rights to
indemnification, the Corporation shall not be obligated to indemnify any
director or officer (or his or her heirs, executors or personal or legal
representatives) in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or
consented to by the Board of Directors. The right to indemnification conferred
by this Article SEVENTH shall include the right to be paid by the Corporation
the expenses incurred in defending or otherwise participating in any proceeding
in advance of its final disposition.
The Corporation may, to the extent authorized from time to time by the Board
of Directors, provide rights to indemnification and to the advancement of
expenses to employees and agents of the Corporation similar to those conferred
in this Article SEVENTH to directors and officers of the Corporation.
61
<PAGE>
The rights to indemnification and to the advance of expenses conferred in
this Article SEVENTH shall not be exclusive of any other right which any person
may have or hereafter acquire under this Certificate of Incorporation, the By-
Laws, any statute, agreement, vote of stockholders or disinterested directors
or otherwise.
Any repeal or modification of this Article SEVENTH by the stockholders of
the Corporation shall not adversely affect any rights to indemnification and to
the advancement of expenses of a director or officer of the Corporation
existing at the time of such repeal or modification with respect to any acts or
omissions occurring prior to such repeal or modification.
EIGHTH: Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the GCL) outside the State of Delaware
at such place or places as may be designated from time to time by the Board of
Directors or in the By-Laws.
NINTH: The Corporation hereby elects not to be governed by Section 203 of
the GCL pursuant to Section 203(b)(3) therein.
TENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the GCL, do make this Certificate,
hereby declaring and certifying that this is my act and deed and the facts
herein stated are true, and accordingly have hereunto set my hand this day of
, .
_____________________________________
Deborah M. Reusch
Sole Incorporator
62
<PAGE>
Exhibit A-2--Summary of Parent Recapitalization
ENDO PHARMACEUTICALS HOLDINGS INC.
SHARE RECAPITALIZATION SCHEDULE
<TABLE>
<CAPTION>
Authorized Issued Treasury Outstanding
----------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Common Stock
Shares........................... 2,000,000 929,950 -- 929,950
Exchange Class A to Common
Stock........................... 200,000 174,560 (290) 174,270
----------- ---------- ------- ----------
Adjusted Shares................ 2,200,000 1,104,510 (290) 1,104,220
Recapitalization Ratio........... 64.844x 64.844x 64.844x 64.844x
----------- ---------- ------- ----------
Total Post-Recapitalization
Shares........................ 142,656,279 71,620,585 (18,805) 71,601,780
=========== ========== ======= ==========
Class A Common Stock
Shares........................... 200,000 174,560 (290) 174,270
Exchange Class A to Common
Stock........................... (200,000) (174,560) 290 (174,270)
----------- ---------- ------- ----------
Adjusted Shares................ -- -- -- --
Recapitalization Ratio........... 64.844x 64.844x 64.844x 64.844x
----------- ---------- ------- ----------
Total Post-Recapitalization
Shares........................ -- -- -- --
=========== ========== ======= ==========
Preferred Stock
Shares........................... 500,000 -- -- --
Exchange Preferred to Common
Stock........................... -- -- -- --
----------- ---------- ------- ----------
Adjusted Shares................ 500,000 -- -- --
Recapitalization Ratio........... 64.844x 64.844x 64.844x 64.844x
----------- ---------- ------- ----------
Total Post-Recapitalization
Shares........................ 32,421,882 -- -- --
=========== ========== ======= ==========
Totals
Total Pre-Recapitalization
Shares.......................... 2,700,000 1,104,510 (290) 1,104,220
Recapitalization Ratio........... 64.844x 64.844x 64.844x 64.844x
----------- ---------- ------- ----------
Total Post-Recapitalization
Shares.......................... 175,078,160 71,620,585 (18,805) 71,601,780
=========== ========== ======= ==========
</TABLE>
--------
Note: The numbers set forth in this exhibit A-2 assume Algos has 17,900,445
fully diluted shares outstanding and are subject to adjustment after the
date of the Merger Agreement to the extent necessary to give effect to
the requirements set forth in Section 5.22 of the Merger Agreement.
63
<PAGE>
Exhibit B--Form of Company Voting Agreement
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement"), dated as of November , 1999, by and
among ENDO PHARMACEUTICALS HOLDINGS INC., a Delaware corporation ("Parent"),
ENDO INC., a Delaware corporation and a newly-formed wholly-owned subsidiary of
Parent ("Sub"), and the stockholder party hereto (the "Stockholder").
W I T N E S S E T H :
WHEREAS, concurrently with the execution and delivery of this Agreement, an
Agreement and Plan of Merger (as such agreement may be amended from time to
time, the "Merger Agreement") is being entered into by and among Parent, Sub
and ALGOS PHARMACEUTICAL CORPORATION, a Delaware corporation (the "Company"),
pursuant to which Company has agreed to merge with and into Sub, with Sub
continuing as the surviving corporation (the "Merger"); and
WHEREAS, as a condition to, and in consideration for, Parent's and Sub's
willingness to enter into the Merger Agreement and to consummate the
transactions contemplated thereby, Parent and Sub have required that the
Stockholder enter into this Agreement and certain other stockholders to enter
into similar agreements.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement:
"Company Securities" shall mean the Company's common stock, par value $.01
per share.
"Stockholder Shares" shall mean (i) the Existing Securities (as defined in
Section 5(a)(i) hereof) set forth on Schedule I hereto, (ii) any shares of
Company Securities distributed prior to the termination of this Agreement in
respect of the Stockholder Shares by reason of a stock dividend, split-up,
recapitalization, reclassification, combination, merger, exchange of shares or
otherwise and (iii) any other shares of the Company Securities of which the
Stockholder acquires ownership, either directly or indirectly, after the date
of this Agreement and prior to the Effective Time.
"Person" shall mean an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to them in the Merger Agreement.
2. Agreement to Vote Shares. The Stockholder shall, at any meeting of the
holders of any class or classes of Company Securities, however such meeting is
called and regardless of whether such meeting is a special or annual meeting of
the stockholders of the Company, or in connection with any written consent of
the stockholders of the Company, vote (or cause to be voted) the Stockholder
Shares, (i) in favor of the Merger, the execution and delivery by the Company
of the Merger Agreement and the approval of the terms thereof and each of the
other actions contemplated by the Merger Agreement and this Agreement and any
actions required in furtherance thereof and hereof and (ii) against the
following actions (other than the Merger and the transactions contemplated by
the Merger Agreement): (1) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company; (2)
a sale, lease or transfer of a material amount of assets of the Company or a
reorganization, recapitalization, dissolution or liquidation of the
64
<PAGE>
Company; (3) (a) any change in the majority of the board of directors of the
Company; (b) any material change in the present capitalization of the Company
or any amendment of the certificate of incorporation or similar governing
document of the Company; (c) any other material change in the corporate
structure or business of the Company; or (d) any other action, which, in the
case of each of the matters referred to in clauses (a), (b) and (c) above, is
intended, or could reasonably be expected, to impede, interfere with, delay,
postpone, discourage or materially adversely affect the contemplated economic
benefits to Parent or Sub of the Merger or the transactions contemplated by the
Merger Agreement or this Agreement.
3. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) The Stockholder hereby irrevocably grants to, and appoints, Carol Ammon,
Jeffrey Black and Osagie Imasogie, or any one of them, in their respective
capacities as officers of Parent, and any individual who shall hereafter
succeed to any such office of Parent, and each of them individually, the
Stockholder's proxy and attorney-in-fact (with full power of substitution), for
and in the name, place and stead of the Stockholder, to vote the Stockholder
Shares held at the time of the relevant stockholder vote as set forth in
Section 2 hereof. The Stockholder will cause any record holder of Stockholder
Shares to grant substantially similar proxies as requested in accordance with
Section 8(e) hereof.
(b) The Stockholder represents that any proxies heretofore given in respect
of the Stockholder Shares are not irrevocable, and that any such proxies are
hereby revoked.
(c) The Stockholder understands and acknowledges that Parent and Sub are
entering into the Merger Agreement in reliance upon the Stockholder's execution
and delivery of this Agreement. The Stockholder hereby affirms that the
irrevocable proxy set forth in this Section 3 is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is given to
secure the performance of the duties of the Stockholder under this Agreement.
The Stockholder hereby further affirms that the irrevocable proxy is coupled
with an interest and may under no circumstances be revoked. Such irrevocable
proxy is executed and intended to be irrevocable in accordance with the
provisions of Section 212(e) of the Delaware General Corporation Law.
4. Covenants of the Stockholders. The Stockholder hereby agrees and
covenants that:
(a) Restriction on Transfers. Except as may otherwise be agreed by Parent in
writing and as contemplated by those agreements or understandings set forth on
Schedule II hereto, the Stockholder shall not (i) transfer (which term shall
include, without limitation, any sale, gift, pledge or other disposition), or
consent to any transfer of, any or all of the Stockholder Shares, or any
interest therein if such transfer would result in the Stockholder no longer
having the power to vote or cause to be voted the Stockholder Shares or (ii)
enter into any contract, option or other agreement or understanding with
respect to any such transfer of any or all of the Stockholder Shares, or any
interest therein.
(b) Restrictions on Proxies and Voting Arrangements. Except as otherwise
provided herein, the Stockholder shall not (i) grant any proxy, power-of-
attorney or other authorization in or with respect to the Stockholder Shares or
(ii) deposit the Stockholder Shares into a voting trust or enter into a voting
agreement or arrangement with respect to the Stockholder Shares.
(c) Stop Transfer. The Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Stockholder's Existing
Securities (as defined in Section 6(a)(i) hereof), unless such transfer is made
in compliance with this Agreement. In the event of any dividend or
distribution, or any change in the capital structure of the Company by reason
of any non-cash dividend, split-up, recapitalization, combination, exchange of
securities or the like, the term "Existing Securities" shall refer to and
include the Existing Securities as well as all such dividends and distributions
of securities and any securities into which or for which any or all of the
Existing Securities may be changed, exchanged or converted.
65
<PAGE>
(d) Waiver of Appraisal Rights. The Stockholder hereby waives any rights of
appraisal or rights to dissent from the Merger that the Stockholder may have.
(e) No Inconsistent Arrangements. The Stockholder shall not take any other
action that would in any way restrict, limit or interfere with the performance
of the Stockholder's obligations hereunder or the transactions contemplated
hereby or by the Merger Agreement.
5. Representations and Warranties.
(a) The Stockholder hereby represents and warrants to Parent and Sub as
follows:
(i) Ownership of Securities. On the date hereof, the Stockholder owns,
directly or indirectly, or has the power to direct the voting of, the
Company Securities set forth next to the Stockholder's name on Schedule I
hereto (the "Existing Securities"), and the Existing Securities are owned
of record by the Stockholder or certain of the Stockholder's subsidiaries
or nominees (together, the "Record Holders"). On the date hereof, the
Existing Securities constitute all of the shares of voting capital stock of
the Company owned of record or otherwise by such Stockholder or as to which
such Stockholder has the power to direct the voting of the shares. Each
Record Holder has sole voting power and sole power to issue instructions
with respect to the matters set forth in Section 2 hereof, sole power of
disposition, sole power of conversion, sole power (if any) to demand
appraisal rights and sole power to agree to all of the matters set forth in
this Agreement, in each case with respect to all of such Record Holder's
Existing Securities with no limitations, qualifications or restrictions on
such rights, subject to applicable securities laws and the terms of this
Agreement.
(ii) Power; Binding Agreement. The Stockholder has the power (or, if
applicable, corporate power) and authority to enter into and perform all of
the Stockholder's obligations under this Agreement. The execution, delivery
and performance of this Agreement by the Stockholder will not violate any
other agreement to which the Stockholder is a party including, without
limitation, any voting agreement, proxy arrangement, pledge agreement,
shareholders agreement, voting trust or trust agreement. This Agreement has
been duly and validly executed and delivered by the Stockholder and
constitutes a valid and binding agreement of the Stockholder, enforceable
against the Stockholder in accordance with its terms, except as the
enforceability thereof may be limited by (a) applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect that
affect the enforcement of creditors rights generally or (b) general
principles of equity, whether considered in a proceeding at law or in
equity. There is no beneficiary or holder of a voting trust certificate or
other interest of any trust of which the Stockholder is a trustee whose
consent is required for the execution and delivery of this Agreement or the
compliance by the Stockholder with the terms hereof.
(iii) No Conflicts. No filing with, and no permit, authorization,
consent or approval of, any Governmental Entity is required for the
execution of this Agreement by the Stockholder and the consummation by the
Stockholder of the transactions contemplated hereby, except in connection,
or in compliance, with the provisions of (i) Section 16 and Section 13D or
13G of the Exchange Act and (ii) the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), none of the execution
and delivery of this Agreement by the Stockholder, the consummation by the
Stockholder of the transactions contemplated hereby or compliance by the
Stockholder with any of the provisions hereof shall (A) conflict with, or
result in any breach of, any organizational documents applicable to the
Stockholder, (B) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
loan agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind to which the Stockholder is a party or by which the Stockholder or
any of the Stockholder's properties or assets may be bound, or (C) violate
any order, writ, injunction, decree, judgment, order, statute, arbitration
award, rule or regulation applicable to the Stockholder or any of the
Stockholder's properties or assets.
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<PAGE>
(iv) No Liens. Except as established hereby, the Existing Securities are
now and, at all times during the term hereof, will be held by the
Stockholder, or by a nominee or custodian for the benefit of the
Stockholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever.
(v) No Solicitation. The Stockholder hereby agrees, in the Stockholder's
capacity as stockholder of the Company, that neither the Stockholder nor
any of the Stockholder's subsidiaries, if applicable, shall (and the
Stockholder shall use best efforts to cause the Stockholder's officers,
directors, employees, investment bankers, consultants, attorneys,
accountants, agents, advisors or representatives not to), directly or
indirectly, take any action to solicit, initiate, encourage, facilitate,
participate in or initiate discussions or negotiations with, or provide any
information to, any Person (other than Parent, Sub or any of their
Affiliates or representatives) concerning any Company Takeover Proposal;
provided that nothing contained in this Section 5(a)(v) shall restrict any
officer, director or employee of the Stockholder or the Stockholder's
subsidiaries, if applicable, from taking any action in his or her capacity
as a director, officer or employee of the Company which is permitted to be
taken pursuant to Section 4.2 of the Merger Agreement.
(b) Parent and Sub jointly and severally hereby represent and warrant to the
Stockholder as follows:
(i) Power; Binding Agreement. Each of Parent and Sub has the corporate
power and authority to enter into and perform all of its obligations under
this Agreement. The execution, delivery and performance of this Agreement
by each of Parent and Sub will not violate any material agreement to which
Parent or Sub, as the case may be, is a party. This Agreement has been duly
and validly executed and delivered by each of Parent and Sub and
constitutes a valid and binding agreement of each of Parent and Sub,
enforceable against each of them in accordance with its terms, except as
the enforceability thereof may be limited by (a) applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect that
affect the enforcement of creditors rights generally or (b) general
principles of equity, whether considered in a proceeding at law or in
equity.
(ii) No Conflicts. No filing with, and no permit, authorization, consent
or approval of, any Governmental Entity is required for the execution of
this Agreement by each of Parent and Sub and the consummation by each of
them of the transactions contemplated hereby, except in connection, or in
compliance, with the provisions of (i) Section 16 and Section 13D or 13G of
the Exchange Act and (ii) the HSR Act, and none of the execution and
delivery of this Agreement by each of Parent and Sub, the consummation by
each of them of the transactions contemplated hereby or compliance by each
of them with any of the provisions hereof shall (A) conflict with or result
in any breach of any organizational documents applicable to Parent or Sub,
respectively, (B) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to
any third party right of termination, cancellation, material modification
or acceleration) under any of the terms, conditions or provisions of any
material note, loan agreement, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which Parent or Sub is a party or
by which Parent or Sub or any of their respective properties or assets may
be bound, or (C) violate any order, writ, injunction, decree, judgment,
order, statute, arbitration award, rule or regulation applicable to Parent
or Sub or any of their respective properties or assets.
6. Best Efforts. Subject to the terms and conditions of this Agreement, each
of the parties hereto agrees to use its best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement and the Merger
Agreement; provided that nothing contained in this Section 6 shall restrict any
officer, director or employee of the Stockholder or the Stockholder's
Subsidiaries from taking any action in his or her capacity as a director,
officer or employee of the Company which is permitted to be taken pursuant to
Section 4.2 of the Merger Agreement.
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<PAGE>
7. Termination. Other than Section 8 hereof (which shall survive in any
event), this Agreement and the covenants, representations and warranties,
agreements and irrevocable proxy or proxies contained herein or granted
pursuant hereto shall terminate upon the earlier to occur of (i) the
termination of the Merger Agreement in accordance with Article VII thereof and
(ii) the consummation of the transactions contemplated by the Merger Agreement.
Upon any termination of this Agreement, this Agreement shall thereupon become
void and of no further force and effect, and there shall be no liability in
respect of this Agreement or of any transactions contemplated hereby or by the
Merger Agreement on the part of any party hereto or any of its directors,
officers, partners, stockholders, employees, agents, advisors, representatives
or Affiliates; provided, however, that nothing herein shall relieve any party
from any liability for such party's willful breach of this Agreement; and
provided, further, that nothing herein shall limit, restrict, impair, amend or
otherwise modify the rights, remedies, obligations or liabilities of any person
under any other contract or agreement, including, without limitation, the
Merger Agreement.
8. Miscellaneous.
(a) Specific Performance. Each party hereto recognizes and agrees that if
for any reason any of the provisions of this Agreement are not performed by the
other parties in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be caused to the non-
breaching parties for which money damages would not be an adequate remedy.
Accordingly, the parties agree that, in addition to any other available
remedies, the non-breaching parties shall be entitled to an injunction
restraining any violation or threatened violation of the provisions of this
Agreement without the necessity of the non-breaching parties posting a bond or
other form of security. In the event that any action should be brought in
equity to enforce the provisions of this Agreement, the breaching party will
not allege, and the breaching party hereby waives the defense, that there is an
adequate remedy at law.
(b) Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. Without limiting the
foregoing, with respect to any provision of this Agreement, if it is determined
by a court of competent jurisdiction to be excessive as to duration or scope,
it is the parties' intention that such provision nevertheless be enforced to
the fullest extent which it may be enforced.
(c) Attorneys' Fees. If any action at law or equity, including an action for
declaratory relief, is brought by a party to this Agreement to enforce or
interpret any provision of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees and expenses from the other
party, which fees and expenses shall be in addition to any other relief which
may be awarded.
(d) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF PARENT, THE COMPANY, OR SUB IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
(e) Further Assurances. From time to time, at the request of Parent or Sub,
the Stockholder shall execute and deliver to Parent and Sub or cause other
Record Holders to execute and deliver to Parent and Sub such additional
instruments containing grants of proxy with respect to the Stockholder Shares
(which grants of proxy will be in substantially the form of Section 3(a)
hereof) as Parent or Sub may reasonably request in connection with the
Stockholder's obligations under this Agreement.
68
<PAGE>
(f) Entire Agreement. This Agreement constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, among the
parties or any of them with respect to the subject matter hereof.
(g) Consent to Jurisdiction, Etc. Each party hereto hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the United
States District Court located in the State of Delaware (unless such courts
assert no jurisdiction, in which case the parties hereto consent to the
exclusive jurisdiction of the courts of the State of Delaware) for any actions,
suits or proceedings arising out of or relating to this Agreement and the
transactions contemplated hereby (and each party hereto agrees not to commence
any action, suit or proceeding relating thereto except in such courts), and
further agrees that service of any process, summons, notice or document by U.S.
registered mail to the addresses set forth herein shall be effective service of
process for any such action, suit or proceeding brought against each party in
such court. Each party hereto hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby, in the United States
District Courts located in the State of Delaware (unless such courts assert no
jurisdiction, in which case each party consents to the exclusive jurisdiction
of the courts of the State of Delaware). Each party hereby further irrevocably
and unconditionally waives and agrees not to plead or to claim in any such
court that any such action, suit or proceeding brought in any such court has
been brought in an inconvenient forum. Each of the parties hereto also agrees
that any final and unappealable judgment against a party hereto in connection
with any action, suit or other proceeding shall be conclusive and binding on
such party and that such award or judgment may be enforced in any court of
competent jurisdiction, either within or outside of the United States. A
certified or exemplified copy of such award or judgment shall be conclusive
evidence of the fact and amount of such award or judgment.
(h) Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by overnight courier, by
facsimile (which is confirmed), or by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(a) if to the Stockholder, to the addresses set forth next to the
Stockholder's name on Schedule II hereto and
(b) if to Parent or Sub, to:
Endo Pharmaceuticals Holdings Inc.
223 Wilmington-West Chester Pike
Chadds Ford, PA 19317
Attn.: Carol A. Ammon
Fax No.: (610) 558-9683
with copies to:
Kelso & Company
320 Park Avenue, 24th Floor
New York, NY 10022
Attn.: James J. Connors, II
Fax No.: (212) 223-2379
69
<PAGE>
and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attn.: Eileen Nugent Simon, Esq.
Fax No.: (212) 735-2000
and
(c) if to the Company, to:
Algos Pharmaceuticals Corporation
1333 Campus Parkway
Neptune, NJ 07753-6815
Attn.: General Counsel
Fax No.: (732) 938-2825
with copies to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Attn.: Raymond Y. Lin, Esq.
Fax No.: (212) 751-4864
(i) Descriptive Headings; Interpretation. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(j) Assignment; Binding Agreement. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other party hereto;
provided, however, that Parent and Sub shall be permitted to assign, in whole
or in part, this Agreement or any of the rights, interests or obligations
hereunder to any of their Subsidiaries or Affiliates.
(k) Amendment, Modification and Waiver. This Agreement may not be amended,
modified or waived except by an instrument or instruments in writing signed and
delivered on behalf of the party hereto against whom such amendment,
modification or waiver is sought to be entered.
(l) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
70
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Stockholder have caused this
Agreement to be duly executed as of the day and year first above written.
ENDO Pharmaceuticals Holdings Inc.
By: _________________________________
Name:
Title:
ENDO Inc.
By: _________________________________
Name:
Title:
[Stockholder]
By: _________________________________
Name:
Title:
71
<PAGE>
SCHEDULE I
LIST OF EXISTING SECURITIES
STOCKHOLDERS' HOLDINGS OF COMPANY COMMON STOCK
<TABLE>
<CAPTION>
Number of
Registered Holder Shares Held
----------------- -----------
<S> <C>
Karen B. Lyle.................................................. 1,344,416
Michael Hyatt (N.B. does not include shares owned by the Kimmel
Trusts listed below).......................................... 829,551
Trust Under the Will of Inez Kimmel............................ 657,193
Todd Kimmel Trust.............................................. 171,530
Melissa Kimmel Trust........................................... 155,000
Anita Hyatt Family Trust....................................... 20,750
Frank S. Caruso................................................ 370,200
John W. Lyle................................................... 224,100
Hyatt Family Trust............................................. 221,332
Roger H. Kimmel (N.B. does not include shares owned by the
Hyatt Trusts listed above).................................... 30,000
Frank S. Caruso Irrevocable Trust.............................. 24,900
James R. Ledley................................................ 109,450
Donald G. Drapkin.............................................. 8,300
Donald Drapkin................................................. 8,300
Patricia Caruso................................................ 1,000
---------
Total........................................................ 4,176,022
=========
</TABLE>
72
<PAGE>
SCHEDULE II
NOTICES
<TABLE>
<CAPTION>
Stockholder Party Notice To: With A Copy To:
----------------- ---------- ---------------
<S> <C> <C>
Michael Hyatt Michael Hyatt Michael Hyatt
Bear Stearns & Co. Inc. Bear Stearns & Co. Inc.
245 Park Avenue 245 Park Avenue
New York, NY 10167 New York, NY 10167
Michael Hyatt as Michael Hyatt Michael Hyatt
Trustee for the Bear Stearns & Co. Inc. Bear Stearns & Co. Inc.
Trust Under the 245 Park Avenue 245 Park Avenue
Will of Inez L. New York, NY 10167 New York, NY 10167
Kimmel
Michael Hyatt as Michael Hyatt Michael Hyatt
Trustee for The Bear Stearns & Co. Inc. Bear Stearns & Co. Inc.
Todd Kimmel Trust 245 Park Avenue 245 Park Avenue
New York, NY 10167 New York, NY 10167
Michael Hyatt as Michael Hyatt Michael Hyatt
Trustee for Bear Stearns & Co. Inc. Bear Stearns & Co. Inc.
the Melissa 245 Park Avenue 245 Park Avenue
Kimmel Trust New York, NY 10167 New York, NY 10167
Michael Hyatt as Michael Hyatt Michael Hyatt
Trustee for Bear Stearns & Co. Inc. Bear Stearns & Co. Inc.
the Anita Hyatt 245 Park Avenue 245 Park Avenue
Family Trust New York, NY 10167 New York, NY 10167
Roger H. Kimmel Roger H. Kimmel Roger H. Kimmel
Latham & Watkins Latham & Watkins
885 Third Avenue, Suite 1000 885 Third Avenue, Suite 1000
New York, NY 10022 New York, NY 10022
Roger H. Kimmel as Roger H. Kimmel Roger H. Kimmel
Trustee for the Latham & Watkins Latham & Watkins
Hyatt 885 Third Avenue, Suite 1000 885 Third Avenue, Suite 1000
Family Trust New York, NY 10022 New York, NY 10022
James R. Ledley James R. Ledley James R. Ledley
26 Hardscrabble Hill 26 Hardscrabble Hill
Chappaqua, NY 10514 Chappaqua, NY 10514
Donald Drapkin Donald Drapkin Donald Drapkin
35 East 62nd 35 East 62nd
New York, NY 10021 New York, NY 10021
Donald G. Drapkin Donald Drapkin Donald Drapkin
35 East 62nd 35 East 62nd
New York, NY 10021 New York, NY 10021
John W. Lyle John Lyle John Lyle
28 Inlet Terrace 28 Inlet Terrace
Belmar, NJ 07719 Belmar, NJ 07719
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
Stockholder Party Notice To: With A Copy To:
----------------- ---------- ---------------
<S> <C> <C>
Karen B. Lyle Karen Lyle Karen Lyle
4 Dayna Lane 4 Dayna Lane
Lawrenceville, NJ 08648 Lawrenceville, NJ 08648
Frank S. Caruso Frank S. Caruso, Ph. D. Frank S. Caruso, Ph. D.
2 Bowling Green 2 Bowling Green
Colts Neck, NJ 07722 Colts Neck, NJ 07722
Frank S. Caruso, Jr. as Frank S. Caruso, Jr. Frank S. Caruso, Ph. D.
Trustee for the Frank S. USA Datanet 2 Bowling Green
Caruso Irrevocable Trust 318 South Clinton St. Colts Neck, NJ 07722
Suite 300
Syracuse, NY 13202
Patricia Caruso Patricia Caruso Patricia Caruso
2 Bowling Green 2 Bowling Green
Colts Neck, NJ 07722 Colts Neck, NJ 07722
</TABLE>
74
<PAGE>
Exhibit C--Form of Algos Warrant
FORM OF WARRANT AGREEMENT
by and between
ENDO PHARMACEUTICALS HOLDINGS INC.
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as
Warrant Agent
----------------
Dated as of , 2000
----------------
75
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Section 1. Appointment of Warrant Agent............................... 77
Section 2. Warrant Certificates....................................... 77
Section 3. Execution of Warrant Certificates.......................... 78
Section 4. Registration and Countersignature.......................... 78
Section 5. Transfer and Exchange of Warrants.......................... 78
Section 6. Registration of Transfers and Exchanges.................... 79
Section 7. Terms of Warrants; Exercise of Warrants.................... 81
Section 8. Payment of Taxes........................................... 84
Section 9. Mutilated or Missing Warrant Certificates.................. 84
Section 10. Reservation of Warrant Shares.............................. 84
Section 11. Obtaining Stock Exchange Listings.......................... 84
Adjustment of Exercise Price and Number of Warrant Shares
Section 12. Issuable................................................... 84
Section 13. Fractional Interests....................................... 89
Section 14. Notices to Warrant Holders; Reservation of Dividends....... 89
Section 15. Notices to the Company and Warrant Agent................... 90
Section 16. Supplements and Amendments; Actions........................ 91
Section 17. Concerning the Warrant Agent............................... 91
Section 18. Change of Warrant Agent.................................... 92
Section 19. Successors................................................. 93
Section 20. Termination................................................ 93
Section 21. GOVERNING LAW.............................................. 93
Section 22. Benefits of This Agreement................................. 93
Section 23. Counterparts............................................... 93
Section 24. Headings................................................... 93
Exhibit A. Form of Warrant Certificate................................ 95
Exhibit B. Certificate to be Delivered Upon Transfer.................. 99
</TABLE>
76
<PAGE>
WARRANT AGREEMENT (the "Agreement"), dated as of , 2000, by and between
Endo Pharmaceuticals Holdings Inc., a Delaware corporation (together with any
successors and assigns, the "Company"), and United States Trust Company of New
York, as Warrant Agent (the "Warrant Agent").
WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated as of
November 26, 1999 (as may be amended and restated from time to time, the
"Merger Agreement"), by and among the Company, Endo Inc., a Delaware
corporation and wholly owned subsidiary of the Company ("Sub"), and Algos
Pharmaceutical Corporation, a Delaware corporation ("Algos"), the Company
proposes to issue warrants (each a "Warrant," and collectively, the "Warrants")
for the purchase of an aggregate of up to 20,713,968/1/ shares of common stock,
par value $.01 per share, of the Company (the "Common Stock," and the shares of
Common Stock issuable upon exercise of the Warrants being referred to herein as
the "Warrant Shares");
WHEREAS, there shall be two classes of Warrants, Class A which shall be
transferable ("Class A Transferable Warrants") and Class B which shall not be
transferable ("Class B Non-Transferable Warrants") and each holder of shares of
common stock of Algos at the time of the stockholder vote relating to the
Merger Agreement may elect to receive all or a portion of such holder's
Warrants to be Class A Transferable Warrants or all or a portion of such
holder's Warrants to be Class B Non-Transferable Warrants and in the event any
such holder of shares of common stock of Algos does not make such an election,
then such holder shall be issued Class A Transferable Warrants. Such election,
once made, will be irrevocable;
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company and the Warrant Agent is willing to act in connection with the
issuance, transfer, exchange and exercise of Warrants as provided herein; and
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein, the Company and the Warrant Agent hereby agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints the
Warrant Agent to act as agent for the Company in accordance with the
instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.
Section 2. Warrant Certificates. The Class A Transferable Warrants will
initially be issued in global form (the "Global Warrants"), substantially in
the form of Exhibit A hereto. Any certificates evidencing the Global Warrants
to be delivered pursuant to this Agreement (the "Class A Warrant Certificates")
shall be substantially in the form set forth in Exhibit A hereto. Such Global
Warrants shall represent such of the outstanding Class A Transferable Warrants
as shall be specified therein and each shall provide that it shall represent
the aggregate amount of outstanding Class A Transferable Warrants from time to
time endorsed thereon and that the aggregate amount of outstanding Class A
Transferable Warrants represented thereby may from time to time be reduced or
increased, as appropriate. Any endorsement of a Global Warrant to reflect the
amount of any increase or decrease in the amount of outstanding Class A
Transferable Warrants represented thereby shall be made by the Warrant Agent
and the Depositary (as defined below) in accordance with instructions given by
the holder thereof. The Depository Trust Company shall act as the Depositary
with respect to the Global Warrants until a successor shall be appointed by the
Company. Upon written request, a Warrant holder who holds Class A Transferable
Warrants may receive from the Depositary and Warrant Agent Class A Transferable
Warrants in registered form as definitive Warrant Certificates (the "Definitive
Warrants") as set forth in Section 6 below. Class B Non-Transferable Warrants
will be issued in certificated form in the form of Exhibit B hereto, in the
name of and in the denomination as set forth in the applicable letter of
transmittal accompanying the shares of common stock of Algos surrendered by the
holder thereof in connection with the merger of Algos with and into Sub
pursuant to the Merger Agreement.
--------
(1) These numbers may be adjusted in the final Endo Warrant. See footnotes 2-5
below.
77
<PAGE>
Section 3. Execution of Warrant Certificates. Warrant Certificates shall be
signed on behalf of the Company by its Chairman of the Board, its President,
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer or
Treasurer or a Vice President and by its Secretary or an Assistant Secretary.
Each such signature upon the Warrant Certificates may be in the form of a
facsimile signature of the present or any future Chairman of the Board,
President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, Treasurer, Vice President, Secretary or Assistant Secretary and may be
imprinted or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board, President, Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer, Treasurer, a Vice President,
Secretary or an Assistant Secretary, notwithstanding the fact that at the time
the Warrant Certificates shall be countersigned and delivered or disposed of
such person shall have ceased to hold such office.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer before the Warrant Certificates so
signed shall have been countersigned by the Warrant Agent, or disposed of by
the Company, such Warrant Certificates nevertheless may be countersigned and
delivered or disposed of as though such person had not ceased to be such
officer of the Company; and any Warrant Certificate may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this Warrant
Agreement any such person was not such officer.
Warrant Certificates shall be dated the date of countersignature by the
Warrant Agent.
Section 4. Registration and Countersignature. The Warrants shall be numbered
and shall be registered on the books of the Company maintained at the principal
office of the Warrant Agent located at 114 West 47th Street, 25th Floor, New
York, New York, 10036, Attention: Corporate Trust Division (the "Warrant
Register") as they are issued.
Warrant Certificates shall be manually countersigned by the Warrant Agent
and shall not be valid for any purpose unless so countersigned. The Warrant
Agent shall, upon written instructions of the Chairman of the Board, the
President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, Treasurer, a Vice President, the Secretary or an Assistant Secretary
of the Company, initially countersign and deliver Warrants entitling the
holders thereof to purchase not more than the number of Warrant Shares referred
to above in the first recital hereof and shall thereafter countersign and
deliver Warrants as otherwise provided in this Agreement.
The Company and the Warrant Agent may deem and treat the registered holders
(the "Holders") of the Warrant Certificates as the absolute owners thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone) for all purposes, and neither the Company nor the Warrant Agent shall
be affected by any notice to the contrary.
Section 5. Transfer and Exchange of Warrants. The Warrant Agent shall from
time to time, subject to the limitations of Section 6 hereof, register the
transfer of any outstanding Warrants upon the records to be maintained by it
for that purpose, upon surrender thereof duly endorsed or accompanied (if so
required by it) by a written instrument or instruments of transfer in form
satisfactory to the Warrant Agent, duly executed by the registered Holder or
Holders thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney; provided that Class B Non-Transferable Warrants may
only be transferred (i) as the result or assignment by operation of law (such
as death or merger or otherwise) or (ii) as required by law or any court of
competent jurisdiction (such as in connection with divorce, bankruptcy or
liquidation). A request for a transfer of a Class B Non-Transferable Warrant
shall be accompanied by such documentation establishing satisfaction of the
conditions set forth in clause (i) or (ii) above, as applicable, as may be
reasonably requested by the Company (including opinions of counsel, if
appropriate). Upon receipt of documentation reasonably satisfactory to the
Company, the Company shall authorize the Warrant Agent to permit the transfer
of a Class B Non-Transferable Warrant. The Warrant Agent shall not permit the
transfer of a Class B Non-Transferable Warrant until it is so authorized by the
Company. Unless otherwise authorized by the Company, Class B
78
<PAGE>
Non-Transferable Warrant Certificate may only be transferred for another Class
B Non-Transferable Warrant Certificate. Subject to the terms of this Agreement,
each Warrant Certificate may be exchanged for another certificate or
certificates entitling the Holder thereof to purchase a like aggregate number
of Warrant Shares as the certificate or certificates surrendered then entitle
each Holder to purchase. Any Holder desiring to exchange a Warrant Certificate
or Certificates shall make such request in writing delivered to the Warrant
Agent, and shall surrender, duly endorsed or accompanied (if so required by the
Warrant Agent) by a written instrument or instruments of transfer in form
satisfactory to the Warrant Agent, the Warrant Certificate or Certificates to
be so exchanged.
Upon registration of transfer, the Warrant Agent shall countersign and
deliver by certified or first class mail a new Warrant Certificate or
Certificates to the persons entitled thereto. The Warrant Certificates may be
exchanged at the option of the Holder thereof, when surrendered at the office
or agency of the Company maintained for such purpose, which initially will be
the corporate trust office of the Warrant Agent located at 770 Broadway, 13th
Floor, New York, New York, 10003, Attention: Corporate Trust Services, for
another Warrant Certificate, or other Warrant Certificates of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares.
No service charge shall be made for any exchange or registration of transfer
of Warrant Certificates, but the Company may require payment of a sum
sufficient to cover any stamp or other tax or other governmental charge that is
imposed in connection with any such exchange or registration of transfer.
Section 6. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Definitive Warrants. When Definitive Warrants
are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number of
Definitive Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as requested
if its requirements under this Agreement are met; provided, however, that the
Definitive Warrants presented or surrendered for registration of transfer or
exchange shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Warrant Agent, duly executed by the Holder
thereof or by such Holder's attorney, duly authorized in writing; provided that
a transfer of Definitive Warrants that are Class B Non-Transferable Warrants
shall be subject to the requirements of Section 5 hereof.
(b) Restrictions on Transfer of a Definitive Warrant for a Beneficial
Interest in a Global Warrant. The Warrant Agent may exchange a Definitive
Warrant for a beneficial interest in a Global Warrant only if the Warrant Agent
has received such Definitive Warrant, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Warrant Agent,
together with written instructions directing the Warrant Agent to make, or to
direct the Depositary to make, an endorsement on the Global Warrant to reflect
an increase in the aggregate amount of the Warrants represented by the Global
Warrant. If such conditions have been satisfied, the Warrant Agent shall cancel
such Definitive Warrant and cause, or direct the Depositary to cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Warrant Agent, the number of Warrant Shares represented by
the Global Warrant to be increased accordingly. If no Global Warrant is then
outstanding, the Company shall issue and the Warrant Agent shall countersign a
new Global Warrant in the appropriate amount.
(c) Transfer and Exchange of Global Warrants. The transfer and exchange of
Global Warrants or beneficial interests therein shall be effected through the
Depositary, in accordance with this Warrant Agreement (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
79
<PAGE>
(d) Transfer of a Beneficial Interest in a Global Warrant for a Definitive
Warrant.
(i) Any person having a beneficial interest in a Global Warrant may upon
his, her or its request exchange such beneficial interest for a Definitive
Warrant. Upon receipt by the Warrant Agent of written instructions (or such
other form of instructions as is customary for the Depositary) from the
Depositary or its nominee on behalf of any person having a beneficial
interest in a Global Warrant and upon receipt by the Warrant Agent of a
written order or such other form of instructions as is customary for the
Depositary or the person designated by the Depositary as having such a
beneficial interest containing registration instructions, then the Warrant
Agent will cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the
aggregate amount of the Global Warrant to be reduced and, following such
reduction, the Company will execute and, upon receipt of a
countersignature, the Warrant Agent will countersign and deliver to the
transferee a Definitive Warrant. All such Warrants shall be Class A
Transferable Warrants.
(ii) Definitive Warrants issued in exchange for a beneficial interest in
a Global Warrant pursuant to this Section 6(d) shall be registered in such
names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Warrant Agent in writing, provided such designation is in
accordance with this Section 6(d). The Warrant Agent shall deliver such
Definitive Warrants to the persons in whose names such Definitive Warrants
are registered.
(e) Restrictions on Transfer and Exchange of Global
Warrants. Notwithstanding any other provisions of this Warrant Agreement (other
than the provisions set forth in subsection (f) of this Section 6), a Global
Warrant may not be transferred as a whole except by the Depositary to a nominee
of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Warrants in Absence of Depositary. If at
any time:
(i) the Depositary for the Global Warrants notifies the Company that the
Depositary is unwilling or unable to continue as Depositary for the Global
Warrant and a successor Depositary for the Global Warrant is not appointed
by the Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Warrant Agent in
writing that it elects to cause the issuance of Definitive Warrants under
this Warrant Agreement,
then the Company will execute, and the Warrant Agent, upon receipt of an
officers' certificate, signed by the President, Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer or a Vice President of the Company,
requesting the countersignature and delivery of Definitive Warrants, will
countersign and deliver Definitive Warrants, in an aggregate number equal to
the aggregate number of Warrants represented by the Global Warrant, in exchange
for such Global Warrant.
(g) Cancellation and/or Adjustment of a Global Warrant. At such time as all
beneficial interests in a Global Warrant have either been exchanged for
Definitive Warrants, redeemed, repurchased or cancelled, such Global Warrant
shall be returned to or retained and cancelled by the Warrant Agent. At any
time prior to such cancellation, if any beneficial interest in a Global Warrant
is exchanged for Definitive Warrants, redeemed, repurchased or cancelled, the
number of Warrants represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant, by the Warrant Agent to
reflect such reduction.
(h) Obligations with Respect to Transfers and Exchanges of Definitive
Warrants.
(i) To permit registrations of transfers and exchanges in accordance
with the terms of this Agreement, the Company shall execute, and the
Warrant Agent shall countersign Definitive Warrants and Global Warrants.
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<PAGE>
(ii) All Definitive Warrants and Global Warrants issued upon any
registration, transfer or exchange of Definitive Warrants or Global
Warrants shall be the valid obligations of the Company, entitled to the
same benefits under this Warrant Agreement as the Definitive Warrants or
Global Warrants surrendered upon the registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant, the Warrant Agent and the Company may deem and treat the person in
whose name any Warrant is registered as the absolute owner of such Warrant,
and neither the Warrant Agent nor the Company shall be affected by notice
to the contrary.
Section 7. Terms of Warrants; Exercise of Warrants. Subject to the terms of
this Agreement, each Warrant Holder shall have the right, which may be
exercised commencing on or after the Exercisability Date (as defined below) and
until 5:00 p.m., New York City time, on the six-month anniversary of the
Exercisability Date (the "Expiration Date"), to receive from the Company the
number of fully paid and nonassessable Warrant Shares which the Holder may at
the time be entitled to receive on exercise of such Warrants and payment of the
Exercise Price (as defined below) then in effect for such Warrant Shares
together, if applicable, with cash payable as provided in Section 13 hereof and
any dividends or distributions payable as provided in Section 14 hereof. If the
Exercisability Date is on or prior to March 31, 2002, the Holders shall then be
entitled to receive from the Company (on exercise of such Warrants and payment
of the Exercise Price then in effect for such Warrant Shares) (together, if
applicable, with cash payable as provided in Section 13 hereof and any
dividends or distributions payable as provided in Section 14 hereof) (a)
20,713,968 Warrant Shares (in the aggregate) (with each Warrant being
exercisable for 1.153846 Warrant Shares)/2/ in the event the Adjustment Event
(as defined in the Merger Agreement) has not occurred prior to the
Exercisability Date or (b) 17,952,106 Warrant Shares (in the aggregate) (with
each Warrant being exercisable for 1.000000 Warrant Shares)/3/ in the event the
Adjustment Event has occurred prior to the Exercisability Date. If the
Exercisability Date is after March 31, 2002 and on or prior to September 30,
2002, the Holder shall then be entitled to receive from the Company (on
exercise of such Warrants and payment of the Exercise Price then in effect for
such Warrant Shares) (together, if applicable, with cash payable as provided in
Section 13 hereof and any dividends or distributions payable as provided in
Section 14 hereof) (a) 11,378,095 Warrant Shares (in the aggregate) (with each
Warrant being exercisable for 0.633803 Warrant Shares)/4/ in the event the
Adjustment Event has not occurred prior to the Exercisability Date or (b)
9,792,058 Warrant Shares (in the aggregate) (with each
--------
(2) These numbers shall be adjusted in the final Agreement and Warrants in
order to reflect that at the Effective Time such aggregate number, when
taken together with the shares of Parent Common Stock issuable to holders
of Company Common Stock in the Merger, shall equal 35% of the shares of
Parent Common Stock on a fully diluted basis (excluding the effect of the
Algos Warrants as if no Adjustment Event had occurred).
(3) These numbers shall be adjusted in the final Agreement and Warrants in
order to reflect that at the Effective Time such aggregate number, when
taken together with the shares of Parent Common Stock issuable to holders
of Company Common Stock in the Merger, shall equal 40% of the shares of
Parent Common Stock on a fully diluted basis (excluding the effect of the
Algos Warrants and after giving effect to the Adjustment Event as if it had
occurred).
(4) These numbers shall be adjusted in the final Agreement and Warrants in
order to reflect that at the Effective Time such aggregate number, when
taken together with the shares of Parent Common Stock issuable to holders
of Company Common Stock in the Merger, shall equal 29% of the shares of
Parent Common Stock on a fully diluted basis (excluding the effect of the
Algos Warrants as if no Adjustment Event had occurred).
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Warrant being exercisable for 0.545455 Warrant Shares)/5/ in the event the
Adjustment Event has occurred prior to the Exercisability Date. If the
Exercisability Date is after September 30, 2002 and on or prior to March 31,
2003 (the "Ultimate Expiration Date"), the Holders shall then be entitled to
receive from the Company (on exercise of such Warrants and payment of the
Exercise Price then in effect for such Warrant Shares) (together, if
applicable, with cash payable as provided in Section 13 hereof and any
dividends or distributions payable as provided in Section 14 hereof) (a)
4,724,238 Warrant Shares (in the aggregate) (with each Warrant being
exercisable for 0.263158 Warrant Shares)/6/ the event the Adjustment Event has
not occurred prior to the Exercisability Date or (b) 4,045,545 Warrant Shares
(in the aggregate) (with each Warrant being exercisable for 0.225352 Warrant
Shares)/7/ in the event the Adjustment Event has occurred prior to the
Exercisability Date. Each Warrant not exercised prior to the Expiration Date
shall become void and all rights thereunder and all rights in respect thereof
under this Agreement shall cease as of the Expiration Date. Without limiting
the foregoing, in the event the Ultimate Expiration Date occurs before the
Exercisability Date, each Warrant shall become void and all rights thereunder
and all rights in respect thereof under this Agreement shall cease as of the
Ultimate Expiration Date. If applicable, dividends and other distributions will
be made upon exercise of the Warrants as set forth in Section 14 hereof.
"Exercisability Date" shall mean the fifth (5th) Business Day (as defined
below) following the date on which the Company (or any of its subsidiaries)
receives approval from the U.S. Food and Drug Administration (the "FDA") with
respect to its New Drug Application for MorphiDex(R) for the treatment of one
or more pain indications. In addition to the notices required by Section 14
hereof, the Company shall give prompt written notice to the Warrant Agent that
the Exercisability Date has occurred and shall cause the Warrant Agent, on
behalf of and at the expense of the Company, within 5 Business Days after such
notification is received by the Warrant Agent, to mail by first class mail,
postage prepaid, to each Holder a notice specifying that the Exercisability
Date has occurred and that the Warrant has become exercisable pursuant to its
terms and that the Warrant will expire at 5:00 p.m., New York City time, on the
Expiration Date. In addition, the Company shall post appropriate notices of the
Exercisability Date on its web pages and issue press releases to wire services.
A "Business Day" is a day that is not a Legal Holiday. A "Legal Holiday" is a
Saturday, a Sunday, a federally recognized holiday or a day on which banking
institutions are not required to be open in the State of New York.
From and after the Effective Time, Parent agrees to use its reasonable
efforts to continue to process the FDA application for MorphiDex(R) in a timely
fashion. The parties acknowledge that there are many variables in the process
of obtaining FDA approval in such a situation and many different approaches
which may be used by an applicant in order to obtain such approval; as a
result, the parties hereto agree that all determinations relating to such
process and all actions taken in connection with seeking such approval shall be
in the sole
--------
(5) These numbers shall be adjusted in the final Agreement and Warrants in
order to reflect that at the Effective Time such aggregate number, when
taken together with the shares of Parent Common Stock issuable to holders
of Company Common Stock in the Merger, shall equal 34% of the shares of
Parent Common Stock on a fully diluted basis (excluding the effect of the
Algos Warrants and after giving effect to the Adjustment Event as if it had
occurred).
(6) These numbers shall be adjusted in the final Agreement and Warrant in order
to reflect that at the Effective Time such aggregate number, when taken
together with the shares of Parent Common Stock issuable to holders of
Company Common Stock in the Merger, shall equal 24% of the shares of Parent
Common Stock on a fully diluted basis (excluding the effect of the Algos
Warrants as if no Adjustment Event had occurred).
(7) These numbers shall be adjusted in the final Agreement and Warrants in
order to reflect that at the Effective Time such aggregate number, when
taken together with the shares of Parent Common Stock issuable to holders
of Company Common Stock in the Merger, shall equal 29% of the shares of
Parent Common Stock on a fully diluted basis (excluding the effect of the
Algos Warrants and after giving effect to the Adjustment Event as if it had
occurred).
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discretion of Parent and shall be binding upon the parties for all purposes.
The parties further acknowledge that (i) on August 2, 1999, the Company
received notification from the FDA that such application was not approvable,
(ii) the failure to obtain such approval, either at all or on or before a
certain date, shall not be deemed a breach by Parent of the provisions hereof
and (iii) in any event Parent shall have no responsibility in connection with
the provisions of this paragraph, except for its willful breach hereof.
The initial price per share at which Warrant Shares shall be purchasable
upon exercise of Warrants (the "Exercise Price") shall equal $0.01. A Warrant
may be exercised upon surrender at the office or agency of the Company
maintained for such purpose, which initially will be the corporate trust office
of the Warrant Agent or its agents located at 114 West 47th Street, 25th Floor,
New York, New York, 10036, Attention: Corporate Trust Division, of the Warrant
Certificate(s) evidencing the Warrants to be exercised with the form of
election to purchase on the reverse thereof duly filled in and signed, which
signature shall be guaranteed by a participant in a recognized Signature
Guarantee Medallion Program, and upon payment to the Warrant Agent for the
account of the Company of the Exercise Price, as adjusted as herein provided,
for the number of Warrant Shares together, if applicable, with cash payable as
provided in Section 13 hereof and any dividends or distributions as provided in
Section 14 hereof in respect of which such Warrants are then exercised. Payment
of the Exercise Price may be made (a) in the form of cash or by certified or
official bank check payable to the order of the Company in New York Clearing
House Funds, (b) by delivering to the Company a written notice accompanying the
surrender of a Warrant to, at the time of exercise, apply to the payment of the
Exercise Price such number of Warrant Shares as shall be specified in such
notice, in which case an amount equal to the excess of the Current Market Value
(as defined in Section 12(d) hereof) of such Warrant Shares on the date of
exercise over the Exercise Price required for such exercise shall be deemed to
have been paid to the Company and the number of Warrant Shares issuable upon
such exercise shall be reduced by such specified number (a "Cashless Exercise")
or (c) any combination of (a) and (b) above.
Subject to the provisions of Section 6 hereof, upon such surrender of
Warrants and payment of the Exercise Price, the Company shall issue and cause
to be delivered with all reasonable dispatch to or upon the written order of
the Holder and in such name or names as the Warrant Holder may designate a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants together with cash as provided in Section 13
hereof. Such certificate or certificates shall be deemed to have been issued
and any person so named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrants
and payment of the Exercise Price.
On or after the Exercisability Date, the Warrants shall be exercisable, at
the election of the Holders thereof, either in full or from time to time in
part and, in the event that a certificate evidencing Warrants is exercised in
respect of fewer than all of the Warrant Shares issuable on such exercise at
any time prior to the Expiration Date, a new certificate evidencing the
remaining Warrant or Warrants will be issued, and the Warrant Agent is hereby
irrevocably authorized to countersign and to deliver the required new Warrant
Certificate or Certificates pursuant to the provisions of this Section 7 and of
Section 3 hereof, and the Company, whenever required by the Warrant Agent, will
promptly supply the Warrant Agent with Warrant Certificates duly executed on
behalf of the Company for such purpose.
All Warrant Certificates surrendered upon exercise of Warrants shall be
cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall then
be either delivered to the Company or disposed of by the Warrant Agent in a
manner consistent with the Warrant Agent's customary procedure for such
disposal and in a manner reasonably satisfactory to the Company. The Warrant
Agent shall account promptly to the Company with respect to Warrants exercised
and concurrently pay to the Company all monies received by the Warrant Agent
for the purchase of the Warrant Shares through the exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement available for
inspection by the Holders during normal business hours at its office. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Agreement as the Warrant Agent may request.
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Section 8. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the initial issuance of Warrant Shares upon the exercise
of Warrants; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in
the issue of any Warrant Certificates or any certificates for Warrant Shares in
a name other than that of the registered Holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
Section 9. Mutilated or Missing Warrant Certificates. In case any of the
Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company
may in its discretion issue and the Warrant Agent may countersign, in exchange
and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing
an equivalent number of Warrants, but only upon receipt of evidence
satisfactory to the Company and the Warrant Agent of such loss, theft or
destruction of such Warrant Certificate and indemnity, if requested, also
satisfactory to them. Applicants for such substitute Warrant Certificates shall
also comply with such other reasonable regulations and pay such other
reasonable charges as the Company or the Warrant Agent may prescribe.
Section 10. Reservation of Warrant Shares. The Company will at all times
reserve and keep available, free from preemptive rights, out of the aggregate
of its authorized but unissued Common Stock or its authorized and issued Common
Stock held in its treasury, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of Warrants, the maximum
number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company will keep a copy of this Agreement on file with the transfer
agent for the Common Stock (the "Transfer Agent") and with every subsequent
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the Warrants. The Warrant
Agent is hereby irrevocably authorized to requisition from time to time from
such Transfer Agent the stock certificates required to honor outstanding
warrants upon exercise thereof in accordance with the terms of this Agreement.
The Company will supply such Transfer Agent with duly executed certificates for
such purposes and will provide or otherwise make available any cash which may
be payable as provided in Section 13 hereof. The Company will furnish such
Transfer Agent a copy of all notices of adjustments and certificates related
thereto transmitted to each Holder pursuant to Section 14 hereof.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon payment of the Exercise Price therefor and
issue, be validly authorized and issued, fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issuance thereof. The Company will use its
reasonable best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this
Agreement.
Section 11. Obtaining Stock Exchange Listings. The Company will from time to
time take all action which may be necessary so that the Warrants and,
immediately upon their issuance upon exercise of the Warrants, the Warrant
Shares will be listed on the principal securities exchanges and markets within
the United States of America, if any, on which other shares of Common Stock are
then listed.
Section 12. Adjustment of Exercise Price and Number of Warrant Shares
Issuable.
(a) If the Company:
(i) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock or other capital stock of the Company; or
(ii) subdivides, splits, combines or reclassifies its outstanding shares
of Common Stock into a different number of securities of the same class,
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then the number of shares of Common Stock issuable upon the exercise of each
Warrant (the "Exercise Rate") in effect immediately prior to such action shall
be proportionately adjusted so that the Holder of any Warrant thereafter
exercised may receive the aggregate number and kind of shares of capital stock
of the Company which such Holder would have owned immediately following such
action if such Warrant had been exercised immediately prior to such action and
the Exercise Price in effect immediately prior to such action shall be adjusted
to a price determined by multiplying the Exercise Price in effect immediately
prior to such action by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding before giving effect to such action and
the denominator of which shall be the number of shares of Common Stock and/or
such other capital stock outstanding referred to in the foregoing clause (a)(1)
after giving effect to such action.
An adjustment pursuant to this Section 12(a) shall become effective
immediately after the record date in the case of a dividend or distribution and
immediately after the effective date in the case of a subdivision, combination
or reclassification.
If, after an adjustment pursuant to this Section 12(a), a Holder of a
Warrant upon exercise of it may receive shares of two or more classes of
capital stock of the Company, the board of directors of the Company shall
determine the allocation of the adjusted Exercise Price between the classes of
capital stock. After such allocation, the exercise privilege and the Exercise
Price of each class of capital stock shall thereafter be subject to adjustment
on terms comparable to those applicable to Common Stock in this Section 12.
Such adjustment shall be made successively whenever any event listed above
shall occur.
(b) Adjustment for Certain Issuances of Common Stock. If the Company issues
or sells to any Affiliate (as defined in Section 12(d) hereof) of the Company
shares of its Common Stock or distributes to any Affiliate of the Company any
rights, options or warrants entitling them to purchase shares of Common Stock,
or securities convertible into or exchangeable for Common Stock, in each case,
at a price per share less than the Current Market Value on the record date for
determining entitlements of such Affiliates to participate in such issuance,
sale or distribution (the "Time of Determination") and prior to such issuance,
sale or distribution the Company did not first offer to issue, sell or
distribute such shares of its Common Stock or such rights, options or warrants
or such securities convertible into or exchangeable for Common Stock to all
holders of Common Stock on the same economic terms and on a pro rata basis with
the issuance, sale or distribution to the Affiliates of the Company, then the
Exercise Rate shall be adjusted in accordance with the formula:
E' = E x O + N
------
O + N x P
---
M
and the Exercise Price shall be adjusted in accordance with the following
formula:
EP' = EP x E
--
E'
where:
E' = the adjusted Exercise Rate.
E = the Exercise Rate immediately prior to the Time of Determination
for any such issuance, sale or distribution.
EP' = the Adjusted Exercise Price.
EP = the Exercise Price immediately prior to the Time of Determination
for any such issuance, sale or distribution.
O = the number of Fully Diluted Shares (as defined below) outstanding
immediately prior to the Time of Determination for any such
issuance, sale or distribution.
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N = the number of additional shares of Common Stock issued, sold or
issuable upon exercise of such rights, options or warrants.
P = the per share price received and receivable by the Company in the
case of any issuance or sale of Common Stock or rights, options
or warrants as to which such adjustment is being made, inclusive
of the exercise price per share of Common Stock payable upon
exercise of such rights, options or warrants.
M = the Current Market Value per share of Common Stock on the Time of
Determination for any such issuance, sale or distribution.
For purposes of this Section 12(b), the term "Fully Diluted Shares" shall
mean (i) the shares of Common Stock outstanding as of a specified date, and
(ii) the shares of Common Stock into or for which rights, options, warrants or
other securities of the Company outstanding as of such date are exercisable or
convertible (other than the Warrants).
Any adjustments shall be made successively whenever any such rights, options
or warrants are issued and shall become effective immediately after the
relevant Time of Determination. Notwithstanding the foregoing, the Exercise
Rate and the Exercise Price shall not be subject to adjustment in connection
with (i) the issuance of any shares of Common Stock upon exercise of any such
rights, options or warrants which have previously been the subject of an
adjustment under this Agreement for which the required adjustment has been made
and (ii) any exercise of the Warrants. If at the end of the period during which
any such rights, options or warrants are exercisable, not all rights, options
or warrants shall have been exercised, the Warrant shall be immediately
readjusted to what it would have been if "N" in each of the above formulas had
been the number of shares actually issued.
(c) When De Minimis Adjustment May Be Deferred. No adjustment in the
Exercise Rate need be made unless the adjustment would require an increase or
decrease of at least 1% in the Exercise Rate. Notwithstanding the foregoing,
any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment, provided that no such adjustment shall be
deferred beyond the date on which a Warrant is exercised.
All calculations under this Section 12 shall be made to the nearest cent or
to the nearest 1/100th of a share, as the case may be.
(d) Certain Definitions. "Current Market Value" per share of Common Stock or
of any other security (herein collectively referred to as a "Security") at any
date shall be:
(1) if the Security is not registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), (i) the value of the Security
determined in good faith by the board of directors of the Company and
certified in a board resolution, based on the most recently completed
arm's-length transaction between the Company and a person other than an
Affiliate of the Company and the closing of which occurs on such date or
shall have occurred within the six months preceding such date or (ii) if no
such transaction shall have occurred on such date or within such six-month
period, the value of the Security determined as of a date within 30 days
preceding such date by an Independent Financial Expert (as defined below),
or
(2) if the Security is registered under the Exchange Act, the average of
the daily closing bid prices of such Security for 30 consecutive Business
Days selected by the Company from the period of 45 Business Days preceding
such date, but only if such Security shall have been listed on a national
securities exchange or the Nasdaq National Market or traded through an
automated quotation system during such entire 45-Business Day period.
The "closing bid price" for any Security on each Business Day means the
closing price, regular way, on such day on the principal exchange on which such
Security is traded, or if no sale takes place on such day, the average of the
closing bid and asked prices on such day.
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"Independent Financial Expert" shall mean any nationally recognized
investment banking firm that is not an Affiliate of the Company. Any such
person may receive customary compensation and indemnification by the Company
for opinions or services it provides as an Independent Financial Expert.
"Affiliate" of any specified person means any other person which directly or
indirectly through one or more intermediaries controls or is controlled by, or
is under common control with, such specified person. For the purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling," "controlled by" and "under common control with") as used with
respect to any person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
person, whether through the ownership of voting securities, by agreement or
otherwise.
"Ordinary Cash Distribution" means any quarterly cash dividend on the Common
Stock to the extent that the aggregate cash dividend per share of Common Stock
in any calendar quarter does not exceed the greater of (x) the amount per share
of Common Stock of the next preceding quarterly cash dividend on the Common
Stock (as adjusted to reflect subdivisions or combinations of the Common Stock)
and (y) 3.0% of the average of the last reported sales prices of the Common
Stock during the ten trading days immediately prior to the date of declaration
of such dividend.
(e) When No Adjustment Required. If an adjustment is made upon the
establishment of a record date for an issuance, sale or distribution subject to
subsection (a) or (b) hereof and such issuance, sale or distribution is
subsequently cancelled or is not otherwise made, the Exercise Rate and Exercise
Price then in effect shall be readjusted, effective as of the date when the
board of directors of the Company determines to cancel such issuance, sale or
distribution or when it is otherwise evident that such issuance, sale or
distribution will not be so made, to that which would have been in effect if
such record date had not been fixed. If an adjustment would be required under
both subsections (a) and (b) above, such adjustments will be determined without
duplication.
To the extent the Warrants become convertible into cash, no adjustment need
be made thereafter as to the amount of cash into which such Warrants are
exercisable. Interest will not accrue on the cash.
(f) Notice of Adjustment. Whenever the Exercise Rate or Exercise Price is
adjusted, the Company shall provide the notices required by Section 14 hereof.
(g) Voluntary Reduction. The Company from time to time may increase the
Exercise Rate or reduce the Exercise Price by any amount for any period of time
(including, without limitation, permanently) if the period is at least 20
Business Days after the Company has given notice of such increase or reduction
in accordance with Section 14 hereof.
An increase of the Exercise Rate or reduction in the Exercise Price under
this subsection (g) (other than a permanent increase) does not change or adjust
the Exercise Rate otherwise in effect for purposes of subsection (a) and (b) of
this Section 12.
(h) When Issuance or Payment May Be Deferred. In any case in which this
Section 12 shall require that an adjustment in the Exercise Rate or Exercise
Price be made effective as of a record date for a specified event, the Company
may elect to defer until the occurrence of such event (i) issuing to the Holder
of any Warrant exercised after such record date the Warrant Shares and other
capital stock of the Company, if any, issuable upon such exercise over and
above the Warrant Shares and other capital stock of the Company, if any,
issuable upon such exercise on the basis of the Exercise Rate prior to such
adjustment, and (ii) paying to such Holder any amount in cash in lieu of a
fractional share pursuant to Section 13 hereof; provided, however, that the
Company shall deliver to the Warrant Agent and shall cause the Warrant Agent,
on behalf of and at the expense of the Company, to deliver to such Holder a due
bill or other appropriate instrument evidencing such Holder's right to receive
such additional Warrant Shares, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
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(i) Reorganizations. In case of (i) any capital reorganization, other than
in the cases referred to in Section 12(a) and (b) hereof and other than any
capital reorganization that does not result in any reclassification of the
outstanding shares of Common Stock into shares of other stock or other
securities or property, or (ii) the consolidation or merger of the Company with
or into another corporation (other than a merger or consolidation in which the
Company is the continuing corporation and which does not result in any
reclassification of the outstanding shares of Common Stock into shares of other
stock or other securities or property), or (iii) the sale of all or
substantially all of the assets of the Company (collectively such actions being
hereinafter referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of any Warrant in accordance with the terms hereof
(in lieu of the number of shares of Common Stock theretofore deliverable) the
number of shares of stock or other securities or property to which a holder of
the number of shares of Common Stock that would otherwise have been deliverable
upon the exercise of such Warrant would have been entitled upon such
Reorganization if the Exercisability Date had occurred and such Warrant had
been exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the
board of directors of the Company, whose determination shall be described in a
duly adopted resolution certified by the Company's Secretary or Assistant
Secretary, shall be made in the application of the provisions herein set forth
with respect to the rights and interests of Holders so that the provisions set
forth herein shall thereafter be applicable, as nearly as possible, in relation
to any such shares or other securities or property thereafter deliverable upon
exercise of Warrants.
The Company shall not effect any such Reorganization unless prior to or
simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such Reorganization or the corporation
or other entity purchasing such assets shall expressly assume, by a
supplemental warrant agreement or other acknowledgment executed and delivered
to the Warrant Agent, the obligation to deliver to the Warrant Agent and to
cause the Warrant Agent to deliver to each such Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase in accordance with the terms hereof upon the
occurrence of the Exercisability Date, and the due and punctual performance and
observance of each and every covenant, condition, obligation and liability
under this Agreement to be performed and observed by the Company in the manner
prescribed herein.
The foregoing provisions of this Section 12(i) shall apply to successive
Reorganization transactions.
(j) Form of Warrants. Irrespective of any adjustments in the number or kind
of shares purchasable upon the exercise of the Warrants, Warrants theretofore
or thereafter issued may continue to express the same price and number and kind
of shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
(k) Warrant Agent's Disclaimer. The Warrant Agent has no duty to determine
when an adjustment under this Section 12 should be made, how it should be made
or what it should be. The Warrant Agent has no duty to determine whether any
provisions of a supplemental warrant agreement under subsection (i) of this
Section 12 are correct. The Warrant Agent makes no representation as to the
validity or value of any securities or assets issued upon exercise of Warrants.
The Warrant Agent shall not be responsible for the Company's failure to comply
with this Section 12.
(l) Miscellaneous. For purpose of this Section 12 the term "shares of Common
Stock" shall mean (i) shares of the class of stock designated as the Common
Stock, par value $.01 per share, of the Company as of the date of this
Agreement, and (ii) shares of any other class of stock resulting from
successive changes or reclassification of such shares consisting solely of
changes in par value, or from par value to no par value, or from no par value
to par value. In the event that at any time, as a result of an adjustment made
pursuant to this Section 12, the Holders of Warrants shall become entitled to
purchase any securities of the Company other than, or in addition to, shares of
Common Stock, thereafter the number or amount of such other securities so
purchasable upon exercise of each Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the Warrant Shares contained in subsections (a)
through (l) of this Section 12, inclusive, and the provisions of Sections 7, 8,
10 and 13 with respect to the Warrant Shares or the Common Stock shall apply on
like terms to any such other securities.
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Section 13. Fractional Interests. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise in full at the same time by the same Holder,
the number of full Warrant Shares which shall be issuable upon the exercise
thereof shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of the Warrants so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section 13, be
issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the excess of the Current Market
Value of a Warrant Share over the Exercise Price on the day immediately
preceding the date the Warrant is presented for exercise, multiplied by such
fraction.
Section 14. Notices to Warrant Holders; Reservation of Dividends. No later
than April 6, 2001, the Company shall give written notice of the occurrence or
non-occurrence of the Adjustment Event to the Warrant Agent and shall cause the
Warrant Agent, on behalf of and at the expense of the Company, within 10 days
after such notification is received by the Warrant Agent, to mail by first
class mail, postage prepaid, to each Holder a notice of such occurrence or non-
occurrence of the Adjustment Event. Upon any adjustment pursuant to Section 12
hereof, the Company shall give prompt written notice of such adjustment to the
Warrant Agent and shall cause the Warrant Agent, on behalf of and at the
expense of the Company, within 10 days after notification is received by the
Warrant Agent of such adjustment, to mail by first class mail, postage prepaid,
to each Holder a notice of such adjustment(s) and shall deliver to the Warrant
Agent a certificate of the Chief Financial Officer of the Company, setting
forth in reasonable detail (i) the number of Warrant Shares purchasable upon
the exercise of each Warrant and the Exercise Price of such Warrant after such
adjustment(s), (ii) a brief statement of the facts requiring such adjustment(s)
and (iii) the computation by which such adjustment(s) was made. Where
appropriate, such notice may be given in advance and included as a part of the
notice required under the other provisions of this Section 14.
In case the Exercisability Date has occurred and:
(a) the Company shall authorize the issuance to all holders of shares of
Common Stock of rights, options or warrants to subscribe for or purchase
shares of Common Stock or of any other subscription rights or warrants; or
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets or cash;
or
(c) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other than a change in
par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or a tender offer
or exchange offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
(e) the Company proposes to take any action that would require an
adjustment to the Exercise Rate pursuant to Section 12 hereof;
then the Company shall give prompt written notice to the Warrant Agent and
shall cause the Warrant Agent, on behalf of and at the expense of the Company
to give to each of the registered holders of the Warrant Certificates at his,
her or its address appearing on the Warrant Register, at least 30 days (or 20
days in any case specified in clauses (a) or (b) above) prior to the applicable
record date hereinafter specified, or the date of the event in the case of
events for which there is no record date, by first-class mail, postage prepaid,
a written notice stating (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common
Stock, or (iii) the date on which any such consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up is expected to become
effective or consummated, and the date as of which it is expected that holders
of record of shares of Common
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Stock shall be entitled to exchange such shares for securities or other
property, if any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up. The
failure by the Company or the Warrant Agent to give such notice or any defect
therein shall not affect the legality or validity of any distribution, right,
option, warrant, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
The Company shall give prompt written notice to the Warrant Agent and shall
cause the Warrant Agent, on behalf of and at the expense of the Company to give
to each Holder written notice of any determination to make a distribution or
dividend to the holders of its Common Stock of any assets (including cash
(other than any Ordinary Cash Distribution)), debt securities, preferred stock,
or any rights or warrants to purchase debt securities, preferred stock, assets
or other securities (other than Common Stock, or rights, options, or warrants
to purchase Common Stock) of the Company, which notice shall state the nature
and amount of such planned dividend or distribution and the record date
therefor, and shall be given by the Company at least 20 days prior to such
record date therefor.
At any time prior to the date that is 30 Business Days after the
Exercisability Date, with respect to any distribution or dividend made by the
Company to all of the holders of its Common Stock for which notice to the
Holders of the Warrants under this Section 14 would be required had such
dividend or distribution occurred after the Exercisability Date and except for
such distributions or dividends as are provided for in Section 12 hereof, the
Company shall hold in reserve the amount of any such dividend or distribution
that would have been payable to the Holders in respect of their Warrant Shares
had the Holders exercised their Warrants immediately prior to such dividend or
distribution. The Company shall release to each Holder of Warrants his, her or
its pro rata share of such reserved dividends or distributions upon the
exercise of such Holder's Warrants pursuant to Section 7 hereof. Any notice
delivered to the Holders by the Company pursuant to this Section 14 shall state
the nature and amount of such dividend or distribution that shall be held in
reserve.
Nothing contained in this Agreement or in any Warrant Certificate shall be
construed as conferring upon the Holders the right to vote or to consent or to
receive notice as stockholders in respect of the meetings of stockholders or
the election of directors of the Company or any other matter, or any rights
whatsoever as stockholders of the Company.
Section 15. Notices to the Company and Warrant Agent. Any notice or demand
authorized by this Agreement to be given or made by the Warrant Agent or by any
Holder to or on the Company shall be sufficiently given or made when received
at the office of the Company expressly designated by the Company as its office
for purposes of this Agreement (until the Warrant Agent is otherwise notified
in accordance with this Section 15 by the Company), as follows:
Endo Pharmaceuticals Holdings Inc.
c/o Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10022
Attention: Managing Director
with a copy to General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Attention: Eileen T. Nugent, Esq.
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Any notice pursuant to this Agreement to be given by the Company or by any
Holder(s) to the Warrant Agent shall be sufficiently given when received by the
Warrant Agent at the address appearing below (until the Company is otherwise
notified in accordance with this Section by the Warrant Agent).
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036
Attention: Corporate Trust Division
Section 16. Supplements and Amendments; Actions. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Warrants in order to cure any ambiguity or to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not in any way
adversely affect the rights of any holder of Warrants hereunder. Any amendment
or supplement to this Agreement that has a material adverse effect on the
rights of holders hereunder shall require the written consent of registered
holders of a majority of the then outstanding Warrants, which consent shall
then be effective against all the Holders of Warrants hereunder. The consent of
each holder of a Warrant affected shall be required for any amendment pursuant
to which the Exercise Price would be increased or the number of Warrant Shares
purchasable upon exercise of Warrants would be decreased (not including
adjustments contemplated hereunder). The Warrant Agent shall be entitled to
receive and shall be fully protected in relying upon an officers' certificate
and opinion of counsel as conclusive evidence that any such amendment or
supplement is authorized or permitted hereunder, that it is not inconsistent
herewith, and that it will be valid and binding upon the Company in accordance
with its terms.
Any actions seeking enforcement of the rights of Holders hereunder
(including paragraph 3 of Section 7 hereof) may be brought either by the
Warrant Agent or the Holders of more than 50% of the Warrants issued hereunder
and then outstanding.
Section 17. Concerning the Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders, by their acceptance of
Warrants, shall be bound:
(a) The statements contained herein and in the Warrant Certificate shall
be taken as statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as
describe the Warrant Agent or any action taken by it. The Warrant Agent
assumes no responsibility with respect to the distribution of the Warrants
except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure of the
Company to comply with the covenants contained in this Agreement or in the
Warrants to be complied with by the Company.
(c) The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself
(through its employees) or by or through its attorneys or agents (which
shall not include its employees) and shall not be responsible for the
misconduct of any agent appointed with due care.
(d) The Warrant Agent may consult at any time with legal counsel
satisfactory to it (who may be counsel for the Company), and the Warrant
Agent shall incur no liability or responsibility to the Company or to any
Holder in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such
counsel.
(e) Whenever in the performance of its duties under this Agreement the
Warrant Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless such evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the Chairman of the
Board, the President, Chief Financial Officer, one of the Vice Presidents,
the Treasurer or the Secretary of the Company and delivered to the Warrant
Agent; and such certificate shall
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be full authorization to the Warrant Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon
such certificate.
(f) The Company agrees to pay the Warrant Agent reasonable compensation
for all services rendered by the Warrant Agent in the performance of its
duties under this Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind and
nature incurred by the Warrant Agent (including reasonable fees and
expenses of the Warrant Agent's counsel and agents) in the performance of
its duties under this Agreement, and to indemnify the Warrant Agent and
save it harmless against any and all liabilities, including judgments,
costs and counsel fees, for anything done or omitted by the Warrant Agent
in the performance of its duties under this Agreement, except as a result
of the Warrant Agent's negligence or bad faith.
(g) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Holders shall furnish the
Warrant Agent with reasonable security and indemnity satisfactory to the
Warrant Agent for any costs and expenses which may be incurred, but this
provision shall not affect the power of the Warrant Agent to take such
action as the Warrant Agent may consider proper, whether with or without
any such security or indemnity. All rights of action under this Agreement
or under any of the Warrants may be enforced by the Warrant Agent without
the possession of any of the Warrants or the production thereof at any
trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name as
Warrant Agent, and any recovery of judgment shall be for the ratable
benefit of the Holders, as their respective rights or interests may appear.
(h) The Warrant Agent and any stockholder, director, officer or employee
of the Warrant Agent may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any
transactions in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Warrant Agent under this Agreement or such director, officer or
employee. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity including,
without limitation, acting as Transfer Agent or as a lender to the Company
or an Affiliate thereof.
(i) The Warrant Agent shall act hereunder solely as agent, and its
duties shall be determined solely by the provisions hereof. The Warrant
Agent shall not be liable for anything which it may do or refrain from
doing in connection with this Agreement except for its own negligence or
bad faith.
(j) The Warrant Agent will not incur any liability or responsibility to
the Company or to any Holder for any action taken in reliance on any
notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument reasonably believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties.
(k) The Warrant Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant (except its countersignature thereof);
nor shall the Warrant Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Warrant Shares (or other stock) to be issued pursuant to this Agreement or
any Warrant, or as to whether any Warrant Shares (or other stock) will,
when issued, be validly issued, fully paid and nonassessable, or as to the
Exercise Price or the number or amount of Warrant Shares or other
securities or other property issuable upon exercise of any Warrant.
(l) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice President or the
Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and shall not be liable for any
action taken or suffered to be taken by it in good faith and without
negligence in accordance with instructions of any such officer or officers.
Section 18. Change of Warrant Agent. The Warrant Agent may resign at any
time and be discharged from its duties under this Agreement by giving to the
Company 30-days' notice in writing. The Warrant Agent
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may be removed by like notice to the Warrant Agent from the Company. If the
Warrant Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Warrant Agent. If the
Company shall fail to make such appointment within a period of 30 days after
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Warrant Agent or by any Holder
(who shall with such notice submit his, her or its Warrant for inspection by
the Company), then any Holder may apply to any court of competent jurisdiction
for the appointment of a successor to the Warrant Agent. Pending appointment of
a successor warrant agent, either by the Company or by such court, the duties
of the Warrant Agent shall be carried out by the Company. Any successor warrant
agent, whether appointed by the Company or such a court, shall be a bank or
trust company in good standing, incorporated under the laws of the United
States of America or any State thereof or the District of Columbia and having
at the time of its appointment as warrant agent a combined capital and surplus
of at least $10,000,000. After appointment, the successor warrant agent shall
be vested with the same powers, rights, duties and responsibilities as if it
had been originally named as Warrant Agent without further act or deed; but the
former Warrant Agent shall deliver and transfer to the successor warrant agent
any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for such purpose. Failure
to file any notice provided for in this Section 18, however, or any defect
therein, shall not affect the legality or validity of the resignation or
removal of the Warrant Agent or the appointment of the successor warrant agent,
as the case may be. In the event of such resignation or removal, the Company or
the successor warrant agent shall mail by first class mail, postage prepaid, to
each Holder, written notice of such removal or resignation and the name and
address of such successor warrant agent.
Section 19. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company, the Warrant Agent or any holder of
Warrants shall bind and inure to the benefit of their respective successors and
assigns hereunder.
Section 20. Termination. This Agreement shall terminate at 5:00 p.m., New
York City time, on the Expiration Date. Notwithstanding the foregoing, this
Agreement will terminate on any earlier date if all Warrants have been
exercised pursuant to this Agreement.
Section 21. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF SAID STATE, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
Section 22. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered Holders of the Warrant Certificates any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Warrant Agent
and the registered Holders of the Warrant Certificates.
Section 23. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 24. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
ENDO PHARMACEUTICALS HOLDINGS INC.
By: _________________________________
Name:
Title:
UNITED STATES TRUST
COMPANY OF NEW YORK,
as Warrant Agent
By: _________________________________
Name:
Title:
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EXHIBIT A
[Form of Warrant Certificate]
[Face]
THIS SECURITY IS A GLOBAL CERTIFICATE AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON
OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE WARRANT AGREEMENT, DATED AS OF , 2000, BY AND BETWEEN
THE COMPANY AND THE WARRANT AGENT (THE "WARRANT AGREEMENT"), AND NO TRANSFER OF
THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
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EXERCISABLE ON OR AFTER THE EXERCISABILITY DATE
AND ON OR BEFORE THE EXPIRATION DATE
No. _________ ___ Class A Transferable Warrants
Class A Transferable Warrant Certificate
ENDO PHARMACEUTICALS HOLDINGS INC.
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of Class A Transferable Warrants expiring on or before the
Expiration Date (the "Warrants") to purchase shares of Common Stock, par value
$.01 per share (the "Common Stock"), of Endo Pharmaceuticals Holdings Inc., a
Delaware corporation (the "Company"). Each Warrant entitles the holder upon
exercise to receive from the Company on or after the Exercisability Date and on
or before 5:00 p.m. New York City Time on the six-month anniversary of the
Exercisability Date (the "Expiration Date") a number of fully paid and
nonassessable shares of Common Stock (each such share, a "Warrant Share") as
determined in the following paragraph at the initial exercise price (the
"Exercise Price") equal to $0.01 payable upon surrender of this Warrant
Certificate and payment of the Exercise Price in the manner set forth in the
Warrant Agreement, subject only to the conditions set forth herein and in the
Warrant Agreement referred to on the reverse hereof.
If the Exercisability Date is on or prior to March 31, 2002, the Holder
shall then be entitled to receive from the Company (on exercise of such
Warrants and payment of the Exercise Price then in effect for such Warrant
Shares) (together, if applicable, with cash payable as provided in Section 13
hereof and any dividends or distributions payable as provided in Section 14
hereof) (a) 1.153846/8/ Warrant Shares in the event the Adjustment Event (as
defined in that certain Agreement and Plan of Merger, dated as of November 26,
1999, as may be amended and restated from time to time, by and among the
Company, Endo Inc., a Delaware corporation and wholly owned subsidiary of the
Company, and Algos Pharmaceutical Corporation, a Delaware corporation) has not
occurred prior to the Exercisability Date or (b) 1.000000/9/ Warrant Shares in
the event the Adjustment Event has occurred prior to the Exercisability Date.
If the Exercisability Date is after March 31, 2002 and on or prior to September
30, 2002, the Holder shall then be entitled to receive from the Company (on
exercise of such Warrants and payment of the Exercise Price then in effect for
such Warrant Shares) (together, if applicable, with cash payable as provided in
Section 13 hereof and any dividends or distributions payable as provided in
Section 14 hereof) (a) 0.633803/10/ Warrant Shares in the event the Adjustment
Event has not occurred prior to the Exercisability Date
--------
(8) This number shall be adjusted in the final Agreement and Warrants in order
to reflect that at the Effective Time the aggregate number on which it is
based, when taken together with the shares of Parent Common Stock issuable
to holders of Company Common Stock in the Merger, shall equal 35% of the
shares of Parent Common Stock on a fully diluted basis (excluding the
effect of the Algos Warrants as if no Adjustment Event had occurred).
(9) This number shall be adjusted in the final Agreements and Warrant in order
to reflect that at the Effective Time the aggregate number on which it is
based, when taken together with the shares of Parent Common Stock issuable
to holders of Company Common Stock in the Merger, shall equal 40% of the
shares of Parent Common Stock on a fully diluted basis (excluding the
effect of the Algos Warrants and after giving effect to the Adjustment
Event as if it had occurred).
(10) This number shall be adjusted in the final Agreement and Warrants in order
to reflect that at the Effective Time the aggregate number on which it is
based, when taken together with the shares of Parent Common Stock issuable
to holders of Company Common Stock in the Merger, shall equal 29% of the
shares of Parent Common Stock on a fully diluted basis (excluding the
effect of the Algos Warrants as if no Adjustment Event had occurred).
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or (b) 0.545455/11/ Warrant Shares in the event the Adjustment Event has
occurred prior to the Exercisability Date. If the Exercisability Date is after
September 30, 2002 and on or prior to March 31, 2003, the Holders shall then be
entitled to receive from the Company (on exercise of such Warrants and payment
of the Exercise Price then in effect for such Warrant Shares) (together, if
applicable, with cash payable as provided in Section 13 hereof and any
dividends or distributions payable as provided in Section 14 hereof) (a)
0.263158/12/ Warrant Shares in the event the Adjustment Event has not occurred
prior to the Exercisability Date or (b) 0.225352/13/ Warrant Shares in the
event the Adjustment Event has occurred prior to the Exercisability Date.
The Exercise Price and number of Warrant Shares issuable upon exercise of
the Warrants are subject to adjustment upon the occurrence of certain events as
set forth in the Warrant Agreement.
No Warrant may be exercised before the Exercisability Date or after 5:00
p.m., New York City Time, on the Expiration Date and to the extent not
exercised by such time such Warrants shall become void.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
--------
(11) This number shall be adjusted in the final Agreement and Warrants in order
to reflect that at the Effective Time the aggregate number on which it is
based, when taken together with the shares of Parent Common Stock issuable
to holders of Company Common Stock in the Merger, shall equal 34% of the
shares of Parent Common Stock on a fully diluted basis (excluding the
effect of the Algos Warrants and after giving effect to the Adjustment
Event as if it had occurred).
(12) This number shall be adjusted in the final Agreement and Warrants in order
to reflect that at the Effective Time the aggregate number on which it is
based, when taken together with the shares of Parent Common Stock issuable
to holders of Company Common Stock in the Merger, shall equal 24% of the
shares of Parent Common Stock on a fully diluted basis (excluding the
effect of the Algos Warrants as if no Adjustment Event had occurred).
(13) This number shall be adjusted in the final Agreement and Warrants in order
to reflect that at the Effective Time the aggregate number on which it is
based, when taken together with the shares of Parent Common Stock issuable
to holders of Company Common Stock in the Merger, shall equal 29% of the
shares of Parent Common Stock on a fully diluted basis (excluding the
effect of the Algos Warrants and after giving effect to the Adjustment
Event as if it had occurred).
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IN WITNESS WHEREOF, Endo Pharmaceuticals Holdings Inc. has caused this
Warrant Certificate to be signed by an officer and by its Secretary, each by a
facsimile of his or her signature, and has caused a facsimile of its corporate
seal to be affixed hereunto or imprinted hereon.
Dated: ,
ENDO PHARMACEUTICALS HOLDINGS INC.
By: _________________________________
Name:
Title:
By: _________________________________
Name:
Title:Secretary
Countersigned:
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Warrant Agent
By: _________________________________
Name:
Title:
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[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the "Expiration Date," entitling the
holder on exercise to receive shares of Common Stock, par value $.01 per share,
of the Company (the "Common Stock"), and are issued or to be issued pursuant to
a Warrant Agreement dated as of , 2000 (the "Warrant Agreement"), duly
executed and delivered by the Company to United States Trust Company of New
York, as warrant agent (the "Warrant Agent"), which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time on or after the "Exercisability Date"
and on or before the "Expiration Date." The holder of Warrants evidenced by
this Warrant Certificate may exercise them by surrendering this Warrant
Certificate, with the form of election to purchase set forth hereon properly
completed and executed, together with payment in the manner provided for in the
Warrant Agreement at the office of the Warrant Agent. In the event that upon
any exercise of Warrants evidenced hereby, the number of Warrants exercised
shall be less than the total number of Warrants evidenced hereby, there shall
be issued to the holder hereof or his, her or its assignee a new Warrant
Certificate evidencing the number of Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of certain events
the number of Warrants set forth on the face hereof and the Exercise Price may,
subject to certain conditions, be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Warrant Agent by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
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<PAGE>
[Form of Election to Purchase]
(To Be Executed upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented
by this Warrant Certificate, to receive shares of Common Stock and herewith
tenders payment for such shares to the order of Endo Pharmaceuticals Holdings
Inc. in the amount of $ payable in (select one or more: (i) cash and/or (ii)
pursuant to a Cashless Exercise) in accordance with the terms hereof and of the
Warrant Agreement. The undersigned requests that a certificate for such shares
be registered in the name of , whose address is and that such shares be
delivered to whose address is . If said number of shares is less than
all of the shares of Common Stock purchasable hereunder, the undersigned
requests that a new Warrant Certificate representing the remaining balance of
such shares be registered in the name of , whose address is , and that
such Warrant Certificate be delivered to , whose address is .
Signature:
Date:
Signature Guaranteed:
100
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS
The following exchanges of a part of this Global Warrant for certificated
Warrants have been made:
<TABLE>
<CAPTION>
Number of
Warrants of
Amount of Amount of this Global
decrease in increase in Warrant Signature of
Number of Number of following authorized
Date of Warrants of this Warrants of this such decrease officer of
Exchange Global Warrant Global Warrant (or increase) Warrant Agent
-------- ---------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
</TABLE>
101
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF
CLASS A TRANSFERABLE WARRANTS
Re: Class A Transferable Warrants to Purchase Common Stock (the "Warrants") of
Endo Pharmaceuticals Holdings Inc.
This Certificate relates to Warrants held in* book-entry or *
certificated form by (the "Transferor").
The Transferor:*
[_]has requested the Warrant Agent by written order to deliver in exchange
for its beneficial interest in the Global Warrant held by the depository
a Warrant or Warrants in definitive, registered form equal to its
beneficial interest in Warrants represented by such Global Warrant (or
the portion thereof indicated above); or
[_]has requested the Warrant Agent by written order to deliver in exchange
or register the transfer of a Warrant or Warrants.
_____________________________________
[INSERT NAME OF TRANSFEROR]
By: _________________________________
Date: ______________________
*Check applicable box.
102
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Affiliate.................................................................. 87
Agreement.................................................................. 77
Algos...................................................................... 77
Business Day............................................................... 82
Cashless Exercise.......................................................... 83
closing bid price.......................................................... 86
Common Stock............................................................... 77
Company.................................................................... 77
Current Market Value....................................................... 86
Definitive Warrants........................................................ 77
Exchange Act............................................................... 86
Exercisability Date........................................................ 82
Exercise Price............................................................. 83
Exercise Rate.............................................................. 85
Expiration Date............................................................ 81
FDA........................................................................ 82
Fully Diluted Shares....................................................... 86
Global Warrants............................................................ 77
Holders.................................................................... 78
Independent Financial Expert............................................... 87
Legal Holiday.............................................................. 82
Merger Agreement........................................................... 77
Ordinary Cash Distribution................................................. 87
Reorganizations............................................................ 88
Security................................................................... 86
shares of Common Stock..................................................... 88
Sub........................................................................ 77
Time of Determination...................................................... 85
Transfer Agent............................................................. 84
Ultimate Expiration Date................................................... 82
Warrant.................................................................... 77
Warrant Agent.............................................................. 77
Warrant Certificates....................................................... 77
Warrant Register........................................................... 78
Warrant Shares............................................................. 77
Warrants................................................................... 77
</TABLE>
103
<PAGE>
Exhibit D-1
Parent Year 2000 Plan
Parent has evaluated the impact of the Year 2000 Issue and completed
upgrading or modifying critical applications and systems to accommodate Year
2000 dating. This includes all computer systems, office machines, phone and
security systems, off-the-shelf systems and applications, custom software
applications, and accounting systems. Parent believes that the financial and
operational systems of Parent, as currently used, will function adequately with
respect to the Year 2000 Issue.
Parent has limited information concerning the compliance status of its
third-party contractors. Parent's current third party contractors generally
test Parent products and provide Parent with the results of those tests and
manufacture drug supplies. Parent has initiated formal communications with all
of its significant suppliers and vendors to determine the extent to which
Parent may be vulnerable if those third parties fail to remediate their own
Year 2000 issues. Parent is continually receiving and evaluating written
assurances from all significant suppliers and vendors that they have completed,
or are working on Year 2000 projects with deadlines well in advance of December
1999. To date, approximately all suppliers and vendors contacted, have reported
that they will be fully operational on January 1, 2000.
Parent is not significantly reliant on computer software applications and
systems during its developmental stage.
As part of the commercialization of products, Parent has third parties
manufacture and distribute its products. Parent places significant dependence
on such third parties' computer systems for purchasing, production, customer
order entry and invoicing and other related activities. A disruption in these
systems could result in lost revenue from inventory shortages, improper
execution of customer orders and/or delays in the resolution and collection of
outstanding invoices. Parent may make significant additions to and changes in
its existing computer software applications and systems and/or the use of such
systems. If Parent makes any such additions or changes, it would affect
Parent's exposure to the Year 2000 Issue since Parent would become more reliant
on its computer software applications and systems.
At this time, Parent does not expect that the cost of its Year 2000 Issue
compliance program will be material to its business, financial condition or
results of operations and does not currently anticipate any material disruption
in its operations.
104
<PAGE>
Exhibit D-2
Company Year 2000 Plan
The Company has evaluated the impact of the Year 2000 Issue and completed
upgrading or modifying critical applications and systems to accommodate Year
2000 dating. This includes all computer systems, office machines, phone and
security systems, off-the-shelf systems and applications, custom software
applications, and accounting systems. The Company believes that the financial
and operational systems of the Company, as currently used, will function
adequately with respect to the Year 2000 Issue.
The Company has limited information concerning the compliance status of its
third-party contractors. The Company's current third party contractors
generally test the Company products and provide the Company with the results of
those tests and manufacture drug supplies. The Company has initiated formal
communications with all of its significant suppliers and vendors to determine
the extent to which the Company may be vulnerable if those third parties fail
to remediate their own Year 2000 issues. The Company is continually receiving
and evaluating written assurances from all significant suppliers and vendors
that they have completed, or are working on Year 2000 projects with deadlines
well in advance of December 1999. To date, approximately all suppliers and
vendors contacted, have reported that they will be fully operational on January
1, 2000.
The Company is not significantly reliant on computer software applications
and systems during its developmental stage.
As part of the possible future commercialization of products, the Company
intends to have third parties manufacture and distribute its products. The
Company will place significant dependence on such third parties' computer
systems for purchasing, production, customer order entry and invoicing and
other related activities. A disruption in these systems could result in lost
revenue from inventory shortages, improper execution of customer orders and/or
delays in the resolution and collection of outstanding invoices. In preparation
for the possible future commercialization of products, the Company may make
significant additions to and changes in its existing computer software
applications and systems and/or the use of such systems. If the Company makes
any such additions or changes, it would affect the Company's exposure to the
Year 2000 Issue since the Company would become more reliant on its computer
software applications and systems.
At this time, the Company does not expect that the cost of its Year 2000
Issue compliance program will be material to its business, financial condition
or results of operations and does not currently anticipate any material
disruption in its operations.
105
<PAGE>
Exhibit E-1
Form of Representation Letter
CERTIFICATE OF ENDO PHARMACEUTICALS HOLDINGS, INC.
, 2000
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
Latham & Watkins
53rd at Third, Suite 1000
885 Third Avenue
New York, NY 10022-4802
Re: Merger pursuant to the Agreement and Plan of Merger dated as of
November 26, 1999 (as may be amended and restated from time to
time, the "Merger Agreement") by and among Endo Pharmaceuticals
Holdings, Inc., a Delaware corporation ("Parent"), Algos
Pharmaceutical Corporation, a Delaware corporation (the "Company")
and Endo Inc., a Delaware corporation ("Sub").
This certificate is supplied to you in connection with your rendering of
opinions regarding certain federal income tax consequences of the merger (the
"Merger") of the Company with and into Sub pursuant to the Merger Agreement.
Unless otherwise indicated, capitalized terms not defined herein have the
meanings set forth in the Merger Agreement.
A. Representations. After consulting with its counsel and auditors
regarding the meaning of and factual support for the following
representations, the undersigned hereby certifies and represents the following
facts will be true at the Effective Time:
1. Pursuant to the Merger Agreement, the Company will merge with and
into Sub, and Sub will acquire all of the assets and liabilities of the
Company;
2. Parent is participating in the Merger for good and valid business
reasons and not for tax purposes;
3. Except for cash paid in lieu of fractional shares of Parent Common
Stock and with respect to any shares of Company Common Stock as to which a
Company stockholder perfects appraisal rights, all shares of Company Common
Stock will be exchanged solely for Parent Common Stock and Parent Warrants.
In addition, no shares of Sub will be issued to any shareholder of the
Company in the Merger, and Parent will issue the Parent Common Stock and
Parent Warrants that are to be received by each Company Common shareholder
in the Merger;
4. The sum of the fair market value of the Parent Warrants and the fair
market value of Parent Common Stock to be received by each shareholder of
the Company pursuant to Section 1.7(c) of the Merger Agreement will be
approximately equal to the fair market value of Company Common Stock
surrendered in exchange therefor. In connection with the Merger no holder
of Company Common Stock will receive in exchange for Company Common Stock,
directly or indirectly, any consideration from Parent other than Parent
Common Stock, Parent Warrants, and cash in lieu of a fractional share of
Parent Common Stock;
5. Neither Parent nor any person related to Parent, as defined in Treas.
Reg. (S) 1.368-1(e)(3), (i) has acquired any stock of the Company or (ii)
has a plan or intention to redeem or otherwise reacquire any Parent Common
Stock issued in the Merger to the shareholders of the Company;
6. Prior to the Merger, Parent will be in control of Sub within the
meaning of Section 368(c) of the Internal Revenue Code of 1986, as amended
(the "Code");
7. At the time of the Merger, Sub will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire common stock in Sub
106
<PAGE>
that, if exercised or converted, would affect Parent's retention of control
of Sub within the meaning of Section 368(c) of the Code;
8. Following the Merger, Sub will not issue additional shares of its
stock that would result in Parent losing control of Sub within the meaning
of Section 368(c) of the Code;
9. As of the Effective Time, neither Parent nor any corporation
affiliated with Parent: (i) will be under any obligation, or will have
entered into any agreement to redeem or repurchase any shares of Parent
Common Stock issued in the Merger or to make any extraordinary
distributions in respect of Parent Common Stock; or (ii) will have any plan
or intention to reacquire shares of Parent Common Stock issued in the
Merger. After the Merger, no dividends or distributions will be made to the
former Company stockholders by Parent other than regular, normal dividends
or distributions made to all holders of Parent Common Stock;
10. Except for dispositions made in the ordinary course of business and
transfers described in Section 368(a)(2)(C) of the Code and Treas. Reg.
Section 1.368-2(k)(1), Parent has no plan or intention to cause Sub to sell
or otherwise dispose of the assets acquired from the Company in the Merger;
11. Following the Merger, Sub will continue the "historic business" of
the Company or use a "significant portion" of the Company's "historic
business assets" in a business, as each such term is used in Treas. Reg.
Section 1.368-1(d);
12. Parent, Sub, the Company and the shareholders of the Company will
each pay their respective expenses incurred in connection with the Merger,
provided that all filing fees and printing expenses for the Proxy Statement
and Registration Statement shall be shared equally by the Company and the
Parent. Neither Parent nor Sub has agreed to assume, nor will it directly
or indirectly assume, any expense or other liability, whether fixed or
contingent, of any holder of Company Common Stock;
13. Parent has no plan or intention: (i) to liquidate Sub, (ii) to merge
Sub with and into another corporation or (iii) to sell or otherwise dispose
of the stock of Sub;
14. There is no intercorporate indebtedness existing between the Company
and Parent that was issued, acquired, or will be settled at a discount as a
result of the Merger, and Parent will assume no liability of any
shareholder of the Company in connection with the Merger;
15. None of the compensation received by any shareholder-employee of the
Company will be separate consideration for, or allocable to, any of their
shares of Company Common Stock; none of the Parent Common Stock or the
Parent Warrants to be received by any shareholder-employee of the Company
will be separate consideration for, or allocable to, any employment
agreement; and the compensation to be paid to any such shareholder-employee
will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's-length for similar
services;
16. As of the Effective Time, neither Parent nor any corporation
affiliated with Parent will own, directly or indirectly, nor has Parent or
any such affiliated corporation owned during the past five years, directly
or indirectly, any shares of stock of the Company or securities, options,
warrants or instruments giving the holder thereof the right to acquire
Company stock or other securities issued by the Company;
17. Neither Parent nor Sub are investment companies as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code;
18. Parent is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code;
19. The fair market value of the assets of the Company to be transferred
to Sub in the Merger will equal or exceed the sum of the liabilities
assumed by Sub plus the amount of liabilities to which the transferred
assets are subject;
20. Parent will not assume any of the Company's liabilities in the
Merger;
21. The payment of cash in lieu of fractional shares of Parent Common
Stock is solely for the purpose of avoiding the expense and inconvenience
to Parent of issuing fractional shares and does not
107
<PAGE>
represent separately bargained for consideration. The total consideration
that will be paid in the Merger to the shareholders of the Company in lieu
of fractional shares of Parent Common Stock will not exceed one percent
(1%) of the total consideration that will be issued in the Merger to
shareholders of the Company in exchange for their Company Common Stock. The
fractional share interests of each shareholder of the Company will be
aggregated and no shareholder will receive cash in an amount greater than
the value of one full share of Parent Common Stock;
22. The Merger Agreement and the transactions contemplated therein
represent the full and complete agreement among Parent, Sub and the Company
regarding the Merger, and there are no other written or oral agreements
regarding the Merger and to which the Company is a party other than those
expressly referred to or contemplated in the Merger Agreement;
23. The terms of the Merger Agreement and all other agreements entered
into in connection therewith are the product of arm's-length negotiations;
24. To the best of the undersigned's knowledge and belief, the sum of
the fair market value of the Parent Warrants and the fair market value of
any consideration paid by the Company to persons who perfect their
appraisal rights will not exceed 60% of the total consideration that will
be paid in the Merger;
25. The facts relating to the Merger, as such facts are described in the
Form S-4 are, insofar as such pertain to Parent, true, complete and
accurate in all material respects and each of the representations made by
Parent in the Merger Agreement and other documents associated therewith is
true and accurate; and
26. Parent is authorized to make all of the representations set forth
herein.
B. Reliance by Latham & Watkins and Skadden, Arps, Slate, Meagher & Flom LLP
in Rendering Opinion: Limitation on the Opinion.
1. The undersigned recognizes and agrees that (i) the opinion of Latham
& Watkins and the opinion of Skadden, Arps, Slate, Meagher & Flom LLP (the
"Opinions") will be based on the representations set forth herein and will
assume that all of the representations and statements set forth herein are
true without regard to any qualification as to knowledge or belief and will
be based on the statements contained in the Merger Agreement and the
documents related thereto, (ii) the Opinions will be subject to certain
limitations and qualifications including that they may not be relied upon
if any such representations are not accurate in all material respects
without regard to any qualification as to knowledge or belief, and (iii)
notwithstanding any provisions of the Merger Agreement to the contrary, the
representations set forth in this letter shall survive without limitation.
2. The undersigned recognizes and agrees that the Opinions will not
address any tax consequences of the Merger or any action taken in
connection therewith except as expressly set forth in such opinion.
3. The undersigned hereby undertakes to inform Latham & Watkins,
Skadden, Arps, Slate, Meagher & Flom LLP, and the Company immediately
should any of the statements or representations set forth in this letter
become untrue, incorrect or incomplete in any respect on or prior to the
Effective Time.
In witness whereof, Endo Pharmaceuticals Holdings, Inc. executed this
certificate as of the date and year first above-written.
ENDO PHARMACEUTICALS HOLDINGS INC.,
a Delaware corporation
By: _________________________________
Name:
Title:
108
<PAGE>
Exhibit E-2
Form of Representation Letter
CERTIFICATE OF ALGOS PHARMACEUTICAL CORPORATION
, 2000
Skadden, Arps, Slate, Meagher, & Flom LLP
Four Times Square
New York, NY 10036-6522
Latham & Watkins
53rd at Third, Suite 1000
885 Third Avenue
New York, NY 10022-4802
Re: Merger pursuant to the Amended and Restated Agreement and Plan of
Merger dated as of November 26, 1999 (as may be amended and
restated from time to time, the "Merger Agreement") by and among
Endo Pharmaceuticals Holdings, Inc., a Delaware corporation
("Parent"), Algos Pharmaceutical Corporation, a Delaware
corporation (the "Company") and Endo Inc., a Delaware corporation
("Sub").
This certificate is supplied to you in connection with your rendering of
opinions regarding certain federal income tax consequences of the merger (the
"Merger") of the Company with and into Sub pursuant to the Merger Agreement.
Unless otherwise indicated, capitalized terms not defined herein have the
meanings set forth in the Merger Agreement.
A. Representations. After consulting with its counsel and auditors regarding
the meaning of and factual support for the following representations, the
undersigned hereby certifies and represents the following facts will be true at
the Effective Time:
1. Pursuant to the Merger Agreement, the Company will merge with and
into Sub, and Sub will acquire all of the assets and liabilities of the
Company;
2. The Company is participating in the Merger for good and valid
business reasons and not for tax purposes;
3. Except for cash paid in lieu of fractional shares of Parent Common
Stock and with respect to any shares of Company Common Stock as to which a
Company stockholder perfects appraisal rights, all shares of Company Common
Stock will be exchanged solely for Parent Common Stock and Parent Warrants.
In addition, no shares of Sub will be issued to any shareholder of the
Company in the Merger;
4. The sum of the fair market value of the Parent Warrants and the fair
market value of Parent Common Stock to be received by each shareholder of
the Company pursuant to Section 1.7(c) of the Merger Agreement will be
approximately equal to the fair market value of Company Common Stock
surrendered in exchange therefor. In connection with the Merger no holder
of Company Common Stock will receive in exchange for Company Common Stock,
directly or indirectly, any consideration from Parent other than Parent
Common Stock, Parent Warrants, and cash in lieu of a fractional share of
Parent Common Stock;
5. Neither the Company nor any person related to the Company, as defined
in Treas. Reg. Section 1.368-1(e)(3), determined without regard to Treas.
Reg. Section 1.368-1(e)(3)(i)(A), has (i) redeemed or otherwise acquired
any stock of the Company with consideration other than stock of the Company
prior to the Merger or (ii) made any extraordinary distribution (within the
meaning of Treas. Reg. Section 1.368-1T(e)(1)(ii)(A)) with respect to any
stock of the Company;
6. The Company has made no transfer of its assets (including any
distribution of assets with respect to, or in redemption of, stock) in
contemplation of the Merger or during the period beginning with the
commencement of negotiations (whether formal or informal) with Parent or
Sub regarding the Merger and ending at the Effective Time other than (i) in
the ordinary course of business and (ii) payments made in connection with
the Merger;
109
<PAGE>
7. Parent, Sub, the Company and the shareholders of the Company will
each pay their respective expenses incurred in connection with the Merger,
provided that all filing fees and printing expenses for the Proxy Statement
and Registration Statement shall be shared equally by the Company and the
Parent. Neither Parent nor Sub has agreed to assume, nor will it directly
or indirectly assume, any expense or other liability, whether fixed or
contingent, of any holder of Company Common Stock;
8. There is no intercorporate indebtedness existing between the Company
and Parent or between the Company and Sub that was issued, acquired, or
will be settled at a discount as a result of the Merger, and Parent and Sub
will assume no liability of any shareholder of the Company in connection
with the Merger;
9. None of the compensation received by any shareholder-employee of the
Company will be separate consideration for, or allocable to, any of their
shares of Company Common Stock; none of the Parent Common Stock or the
Parent Warrants to be received by any shareholder-employee of the Company
will be separate consideration for, or allocable to, any employment
agreement; and the compensation to be paid to any such shareholder-employee
will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's-length for similar
services;
10. The business currently carried on by the Company is its "historic
business" within the meaning of Treas. Reg. Section 1.368-1(d) and no
assets of the Company have been sold, transferred or otherwise disposed of
which would prevent Sub from continuing the "historic business" of the
Company or from using a "significant portion" of the Company's "historic
business" assets in a business following the Merger, as such terms are used
in Treas. Reg. Section 1.368-1(d);
11. The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended
(the "Code");
12. The Company is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code;
13. The fair market value of the assets of the Company to be transferred
to Sub in the Merger will equal or exceed the sum of the liabilities
assumed by Sub plus the amount of liabilities to which the transferred
assets are subject. In addition, the liabilities of the Company assumed by
Sub and the liabilities to which the transferred assets of the Company are
subject were incurred by the Company in the ordinary course of its
business;
14. Parent will not assume any of the Company's liabilities in the
Merger;
15. At least 90 percent of the fair market value of the net assets and
at least 70 percent of the fair market value of the gross assets held by
the Company immediately prior to the Merger will be acquired by Sub in the
Merger. For purposes of determining the percentage of the Company's net and
gross assets to be acquired by Sub pursuant to the Merger, the following
assets will be treated as held by the Company immediately prior, but not
acquired by Sub pursuant to the Merger: (i) assets disposed of by the
Company prior to the Merger and in contemplation thereof (including,
without limitation, any asset disposed of by the Company, other than in the
ordinary course of business, pursuant to a plan or intention existing
during the period ending on the Effective Date and beginning with the
earlier of the commencement of negotiations (whether formal or informal)
with Parent or Sub regarding the Merger), (ii) assets used by the Company
to pay shareholders, if any, who perfect appraisal rights, (iii) assets
used by the Company to pay reorganization expenses or other liabilities
incurred in connection with the Merger and (iv) assets used to make
distributions, redemptions or other payments in respect of the Company's
stock (including payments treated as such for tax purposes) that are made
prior to the Merger and are part of the plan of the Merger;
16. The payment of cash in lieu of fractional shares of Parent Common
Stock is solely for the purpose of avoiding the expense and inconvenience
to Parent of issuing fractional shares and does not represent separately
bargained for consideration. The total consideration that will be paid in
the Merger to the shareholders of the Company in lieu of fractional shares
of Parent Common Stock will not exceed one percent (1%) of the total
consideration that will be issued in the Merger to shareholders of the
Company in exchange for their Company Common Stock. The fractional share
interests of each shareholder of the Company will be aggregated and no
shareholder will receive cash in an amount greater than the value of one
full share of Parent Common Stock;
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<PAGE>
17. The Merger Agreement and the transactions contemplated therein
represent the full and complete agreement among Parent, Sub and the Company
regarding the Merger, and there are no other written or oral agreements
regarding the Merger and to which the Company is party other than those
expressly referred to or contemplated in the Merger Agreement;
18. The terms of the Merger Agreement and all other agreements entered
into in connection therewith are the product of arm's-length negotiations;
19. The facts relating to the Merger, as such facts are described in the
Form S-4 are, insofar as such pertain to the Company, true, complete and
accurate in all material respects and each of the representations made by
the Company in the Merger Agreement and other documents associated
therewith is true and accurate;
20. To the best of the undersigned's knowledge and belief, the sum of
the fair market value of the Parent Warrants and the fair market value of
any consideration paid by the Company to persons who perfect their
appraisal rights will not exceed 60% of the total consideration that will
be paid in the Merger;
21. The Company is not currently, and during the five years preceding
the Effective Time will not have been, a "United States real property
holding corporation" within the meaning of Section 897(c)(2)of the Code;
and
22. The Company is authorized to make all of the representations set
forth herein.
B. Reliance by Latham & Watkins and Skadden, Arps, Slate, Meagher & Flom
LLP in Rendering Opinion: Limitation on the Opinion.
1. The undersigned recognizes and agrees that (i) the opinion of Latham
& Watkins and the opinion of Skadden, Arps, Slate, Meagher & Flom LLP (the
"Opinions") will be based on the representations set forth herein and will
assume that all of the representations and statements set forth herein are
true without regard to any qualification as to knowledge or belief and will
be based on the statements contained in the Merger Agreement and the
documents related thereto, (ii) the Opinions will be subject to certain
limitations and qualifications including that they may not be relied upon
if any such representations are not accurate in all material respects
without regard to any qualification as to knowledge or belief, and (iii)
notwithstanding any provisions of the Merger Agreement to the contrary, the
representations set forth in this letter shall survive without limitation.
2. The undersigned recognizes and agrees that the Opinions will not
address any tax consequences of the Merger or any action taken in
connection therewith except as expressly set forth in such opinion.
3. The undersigned hereby undertakes to inform Latham & Watkins,
Skadden, Arps, Slate, Meagher & Flom LLP, and Parent immediately should any
of the statements or representations set forth in this letter become
untrue, incorrect or incomplete in any respect on or prior to the Effective
Time.
In witness whereof, Algos Pharmaceutical Corporation executed this
certificate as of the date and year first above-written.
Algos Pharmaceutical Corporation,
a Delaware corporation
By: _________________________________
Name:
Title:
111
<PAGE>
EXHIBIT F
FORM OF AFFILIATE LETTER
-------------------------
-------------------------
-------------------------
Attention
------------------
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of Endo Pharmaceuticals Holdings Inc., a Delaware corporation
("Parent"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger, dated as of November 26, 1999 (as may be amended
and restated from time to time, the "Agreement"), by and among Parent, Endo
Inc., a newly-formed, wholly-owned subsidiary of Parent ("Sub"), and Algos
Pharmaceutical Corporation, a Delaware corporation (the "Company"), pursuant to
which the Company has agreed to merge with and into Sub, with Sub continuing as
the surviving corporation (the "Merger").
I represent, warrant and covenant to the Company that in the event I receive
shares of common stock, par value $.01, of Parent ("Parent Common Stock") as a
result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Parent Common Stock in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed the
requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of Parent Common Stock to
the extent I felt necessary, with my counsel or counsel for Parent.
C. I have been advised that the issuance of Parent Common Stock to me
pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, because at the time the Merger is submitted for a vote of the
stockholders of the Company, I may be deemed to be an affiliate of Parent,
I may not sell, transfer or otherwise dispose of Parent Common Stock issued
to me in the Merger unless (i) such sale, transfer or other disposition is
made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Act, (ii) such sale, transfer or
other disposition has been registered under the Act or (iii) in the opinion
of counsel reasonably acceptable to the Company, such sale, transfer or
other disposition is otherwise exempt from registration under the Act.
D. I understand that Parent is under no obligation to register the sale,
transfer or other disposition of the Parent Common Stock by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available solely as a
result of the Merger.
E. I also understand that there will be placed on the certificates for
the Parent Common Stock issued to me, or any substitutions therefor, a
legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN A REGISTERED PUBLIC OFFERING OR IN ACCORDANCE WITH THE
RESALE PROVISIONS OF RULE 145 PROMULGATED UNDER THE SECURITIES ACT."
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F. I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a registration
statement, Parent reserves the right to put the following legend on the
certificates issued to any transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E and F
above shall be removed by delivery of substitute certificates without such
legend after one year unless the provisions of Rule 145(d)(2) have been amended
to require a longer period than one year.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of Parent as described in the first paragraph of this
letter, as or a waiver of any rights I may have to object to any claim that I
am such an affiliate or on after the date of this letter.
Very truly yours,
By: _________________________________
Name:
Title:
Accepted this day of :
By: _________________________________
Name:
Title:
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Exhibit G
FORM OF TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT (the "Agreement") by and among Endo
Pharmaceuticals Holdings Inc., a Delaware corporation ("Endo"), Endo Inc., a
Delaware corporation and wholly owned subsidiary of Endo, and Endo Pharma LLC,
a Delaware limited liability company ("Endo LLC"), is effective as of this
day of , .
WHEREAS the members of Endo LLC have agreed to exchange the shares of common
stock, par value $.01 per share, of Endo ("Endo Common Stock") currently
beneficially owned by them for membership interests of Endo LLC;/1/
WHEREAS under the Parent Plan certain officers and employees of Endo have
been granted stock options exercisable against Endo to purchase newly issued
shares of Endo Common Stock in certain circumstances;
WHEREAS Endo and Sub entered into an Agreement and Plan of Merger with Algos
Pharmaceutical Corporation, a Delaware corporation, on November 26, 1999 (as
may be amended and restated from time to time, the "Merger Agreement");
WHEREAS, in connection with the Merger, employee stock options granted or to
be granted under the Parent Plan will be amended as provided in Section 5.9 of
the Merger Agreement in order to provide that such options will be exercisable
solely into shares of Parent Common Stock that are beneficially owned by
certain holders of Parent Common Stock immediately following the Parent
Recapitalization and prior to the Effective Time (such amended options, the
"Endo LLC Options");
WHEREAS the shares of Endo Common Stock to be delivered upon exercise of the
Endo LLC Options will be provided entirely by Endo LLC and not directly or
indirectly by Endo or any other Endo stockholder; and
WHEREAS under the Internal Revenue Code of 1986, as amended (the "Code") and
the Treasury Regulations, rulings and other interpretations thereunder,
deductible compensation expense resulting from the exercise of a Endo LLC
Option by an Endo officer or employee is treated for income tax purposes as a
deduction of Endo;
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
PAYMENTS
Section 1.1 Payments to Endo LLC.
(a) Upon the occurrence of a Liquidity Event, Endo (or any successor entity)
shall pay to Endo LLC or its designees by wire transfer in immediately
available funds in U.S. dollars the Tax Benefit Amount to the extent such Tax
Benefit Amount has not previously resulted in a payment under this Section 1.1.
(b) For purposes of this Agreement, "Liquidity Event" shall mean any
transaction or series of transactions resulting in (A) a sale of greater than
20% on a fully diluted basis of the common equity of Endo through (i) a
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primary offering by Endo, (ii) a secondary sale of Endo Common Stock by Endo
LLC or other holders of Endo Common Stock pursuant to a registration rights
agreement or (iii) a combination of primary and secondary offerings described
in clauses (i) and (ii) of this subsection, (B) a Change of Control or (C) a
sale of all or substantially all of the assets of Endo.
(c) For purposes of this Agreement, "Change of Control" shall mean (i) any
merger, consolidation or other business combination that requires the approval
of holder of Endo Common Stock, (ii) any transaction or series of transactions
resulting in an acquisition by any Person (or Persons acting in concert)
unrelated to Endo LLC or its Affiliates of greater than 50% of the equity of
Endo measured by vote or value on a fully diluted basis or (iii) the
consummation by Endo of a plan of complete liquidation or a dissolution of
Endo.
(d) For purposes of this Agreement, "Tax Benefit Amount" means the
cumulative excess (if any) of (A) the Taxes that would have been payable by
Endo and its Subsidiaries for all taxable periods or portions thereof after the
Effective Date if none of the Endo LLC Options had been exercised over (B) the
actual Taxes payable by Endo and its Subsidiaries for such periods. For the
avoidance of doubt and for purposes of this Section 1(d), in order to determine
the Tax Benefit Amount for any taxable period of Endo and its Subsidiaries in
which a net operating loss carryforward deduction ("NOL") is utilized, the
portion of the NOL attributable to deductions resulting from the exercise of
Endo LLC Options shall be treated as utilized last. By way of example, and
solely for the avoidance of doubt, if Endo has a loss for tax purposes in Year
1 of $100, consisting of $65 of deductions attributable to the exercise of Endo
LLC Options and $35 of deductions attributable to interest expense, and in Year
2 Endo has $40 of taxable income prior to application of the NOL, $35 of the
$40 NOL applied against Year 2 income will be deemed to be attributable to the
interest expense and $5 of the NOL will be deemed attributable to the exercise
of the Endo LLC Options. Therefore, the Tax Benefit Amount would be the Taxes
that would have been payable by Endo if its NOL in Year 2 had been only $35.
The NOL carryforward to Year 3 of $60 would then be treated as consisting
entirely of deductions resulting from the exercise of the Endo LLC Options.
(e) The parties hereby agree that no payments shall be made and no rights to
any payment shall accrue to Endo LLC under this Agreement until the occurrence
of a Liquidity Event, if any, and that Endo and its Subsidiaries shall not
credit to an account of Endo LLC or any other Person, set aside any funds or
assets, or otherwise make available to or subject to a claim of Endo LLC or any
other Person any amounts hereunder until such amounts become payable to Endo
LLC pursuant to Section 1.1(a) hereof.
(f) The parties hereby agree that, notwithstanding anything herein to the
contrary, (i) any payments made pursuant to this Section 1.1 shall be treated
as payments described in Section 302 of the Code and shall take no position
inconsistent with this treatment for any tax purpose and (ii) no amount shall
be payable hereunder, and Endo LLC shall not be entitled to any payment
hereunder, to the extent any such payment is not permitted under Endo's Senior
Credit Facility, unless or until such time as such payment is either permitted
under the Senior Credit Facility or the Senior Credit Facility is terminated.
For purposes hereof, "Senior Credit Facility" shall mean the Credit Agreement
dated as of August 26, 1997, by and between Endo Pharmaceuticals Inc. and The
Chase Manhattan Bank, as amended, restated, modified, renewed, refunded,
replaced, or refinanced, in whole or in part, from time to time.
ARTICLE II
GENERAL PROVISIONS
Section 2.1 Survival This Agreement shall survive until the later of (a) the
close of the last taxable period of Endo or any successor to Endo in which a
deduction may be allowable to Endo or its Subsidiaries or their successors as a
result of or attributable to the exercise of an Option or (b) the payment by
Endo of all amounts payable under Section 1.1 hereof.
Section 2.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when
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telecopied (with a confirmatory copy sent by overnight courier) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Endo or Sub, to:
Endo Pharmaceuticals Holdings Inc.
223 Wilmington-West Chester Pike
Chadds Ford, PA 19317
Attn.: Carol A. Ammon
Fax No.: (610) 558-9683
(b) if to Endo LLC or Kelso & Company:
Kelso & Company
320 Park Avenue, 24th Floor
New York, New York 10022
Attn.: James J. Connors, II, Esq.
Fax No.: (212) 223-2379
and with copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
Attn.: Eileen T. Nugent, Esq. and David Rievman, Esq.
Fax No.: (212) 735-2000
Section 2.3 Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation."
Section 2.4 Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Section 2.5 Entire Agreement; No Third-Party Beneficiaries. Except for the
Merger Agreement and the Mutual Confidentiality and Non-Disclosure Agreement
between the parties dated October 21, 1998, this Agreement is the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof. This
Agreement is not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
Section 2.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ITS RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF ENDO, ENDO LLC, OR SUB IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
Section 2.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
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Section 2.8 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
may be consummated as originally contemplated to the fullest extent possible.
Section 2.9 Modifications, Supplements and Amendment. This Agreement may be
modified, supplemented or amended from time to time by the parties hereto;
provided that any such modification, supplement or amendment must be approved
by a majority of the members of the Board of Directors of Endo who do not then
(by themselves or through an Affiliate) have a financial interest in the Parent
LLC or otherwise have a financial interest in any payments that may be made by
Parent or any successor to Parent hereunder).
Section 2.10 Definitions. Terms not otherwise defined herein have the
meaning given such terms in the Merger Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized all as of the
date first written above.
ENDO PHARMACEUTICALS HOLDINGS INC.
By: _________________________________
Name:
Title:
ENDO INC.
By: _________________________________
Name:
Title:
ENDO PHARMA LLC
By: _________________________________
Name:
Title:
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Exhibit H
FORM OF EMPLOYMENT AGREEMENT
Parties
This Employment Agreement (the "Agreement") made as of , 2000 is entered
into by and between Endo Pharmaceuticals Holdings Inc., with its principal
business address at 223 Wilmington-West Chester Pike, Chadds Ford, Pennsylvania
19317 (the "Company"), and John W. Lyle, residing at 28 Inlet Terrace, Belmar,
New Jersey 07719 ("Executive").
Recitals
A. The Company has entered into an Agreement and Plan of Merger, dated as of
November 26, 1999, (as may be amended and restated from time to time, the
"Merger Agreement"), among the Company, Endo Inc., a Delaware corporation and a
newly formed wholly owned subsidiary of the Company ("Sub"), and Algos
Pharmaceutical Corporation, a Delaware Corporation ("Algos"), pursuant to
which, among other things, Algos will merge with and into Sub.
B. The Company desires to retain Executive to provide the services
hereinafter set forth.
C. Executive is willing to continue to provide such services to the Company
on the terms and conditions hereinafter set forth.
Terms of Agreement
The parties agree as follows:
1. Employment.
1.1 The Company hereby retains Executive's employment (subject to the
provisions of Section 6) in a senior executive capacity with the Company. The
Executive shall perform such duties and services, consistent with his
positions, as may be assigned to him from time to time by the Board of
Directors of the Company or its designee. In furtherance of the foregoing, the
Executive hereby agrees to perform well and faithfully the aforesaid duties and
responsibilities and the other reasonable senior executive duties and
responsibilities assigned to him from time to time by the Board of Directors of
the Company or its designee. During the Employment Period, the Company shall
provide the Executive with an office, secretarial and other support services
comparable to those provided to other senior executive officers of the Company
at its headquarters and at the Company's facility at 1333 Campus Parkway,
Neptune, New Jersey 07753 for so long as the Company maintains such facility
and afterward at another facility of the Company convenient to the Executive to
be chosen at Executive's discretion.
1.2 Executive hereby accepts this employment on and subject to the terms and
conditions set forth in this Agreement, and shall use his reasonable best
efforts to promote the Company's interests.
2. Compensations Benefits.
2.1 Salary. During the Employment Period, as compensation for Executive's
performance of Executive's duties under this Agreement, the Company shall pay
Executive a Base Salary ("Base Salary") at the annual rate of $325,000 from the
date of this Agreement through December 31, 2000. Thereafter, the Base Salary
shall be subject to increase at the option and in the sole discretion of the
Board of Directors of the Company annually. The Base Salary shall be payable in
installments pursuant to the Company's executive payroll policies in force at
the time of payment (but not less frequently than monthly) for the month or
shorter pay period then ended, subject to applicable withholding for FICA,
income taxes and other required payroll deductions.
2.1.1 The Executive's Base Salary will be supplemented by payment of
performance bonuses at the option and in the sole discretion of the Board
of Directors of the Company annually.
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2.2 Expenses. During the Employment Period, to the extent such expenditures
meet the requirements and the policies of the Company for senior executives,
the Company shall reimburse Executive promptly for all reasonable travel,
entertainment, parking, business meeting and similar expenditures in pursuance
and furtherance of the Company's business, upon presentation of proper vouchers
or receipts therefor and in accordance with the Company's customary procedures.
During the Employment Period, the Company shall provide Executive with a mobile
phone, facsimile machine and photocopying machine for his home office, and the
Company shall reimburse Executive for expenses incurred in the use thereof by
Executive in pursuance and furtherance of the Company's business, upon
presentation of proper vouchers or receipts therefor and in accordance with the
Company's customary procedures.
2.3 Other Benefits. Executive shall be entitled to participate, at
Executive's option and as eligible, in any Company plans for the benefit of
officers and key employees as from time to time established, including, without
limitation, profit sharing, pension plan, stock option plans, performance bonus
plans, disability, medical and group life insurance. If the Company shall not
provide coverage for comprehensive family major medical, family dental,
disability and life insurance to Executive, he shall be reimbursed for the cost
of such coverage acquired by him elsewhere.
3. Employment Period; Termination.
3.1 Employment Period. Executive's employment term ("Employment Period")
shall terminate on the fifth anniversary of the date of this Agreement unless
earlier terminated pursuant to Section 3.2.
3.2 Termination.
3.2.1 Termination for Cause. The Company may, upon the approval of a
majority of the members of the Board of Directors of the Company, discharge
Executive and terminate the Employment Period for cause. Discharge for
cause shall be effective ten (10) days after Executive's receipt of written
notice of discharge or at such later date as may be specified in that
notice, provided such notice contains the specific reasons and the specific
events upon which discharge is predicated. If Executive is discharged for
cause, Executive shall only be entitled to Base Salary through the
effective date of the discharge or termination. As used in this paragraph,
"cause" shall mean any or all of the following:
(i) Willful and grossly negligent action taken by Executive which
materially harms, or can reasonably be expected to harm, the Company;
(ii) Commission of a fraud, misappropriation, embezzlement, or
criminal misconduct that would constitute a felony or adversely affect
the reputation of the Company or any of its affiliates (for purposes of
this Employment Agreement the term "affiliates" shall be deemed to
include, but not necessarily be limited to the corporation to which the
Company assigns its rights to the name, "Endo Pharmaceuticals" or any
variation thereof); or
(iii) If Executive shall be in breach of, or in default under, any
material provision, term or covenant of Article 4 of this Agreement
(other than a breach or default described in clauses (i) and (ii)) and
shall fail to cure such breach or default within a reasonable time
after written notice describing such breach or default in particular by
the Company; provided, however, that the Company need not give such
notice of, and Executive shall not have such opportunity to cure, any
material breach or default of any provision, term or covenant of
Article 4 of this Agreement if Executive had previously committed such
material breach or default and received notice thereof pursuant to this
clause (iii). The Employment Agreement shall only be terminable by the
Company with cause; provided, however, that "cause" shall in no event
include failure by Executive to perform services under this Agreement
because the Company and Executive have failed to agree on the nature,
amount, scope or timing of his services.
3.2.2 Termination for other than Cause. During the Employment Period, the
Company may terminate Executive's employment at any time for other than cause
on 30 days' written notice to Executive. Such termination shall be deemed
effective 30 days after Executive's receipt of the written notice of
termination or at such later date as may be specified in such notice.
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3.2.3 Involuntary Termination. If, during the Employment Period, Executive
becomes ill, disabled or otherwise incapacitated so as to be unable regularly
to perform his usual duties for a period in excess of 120 consecutive days, or
more than 150 days in any consecutive twelve-month period (such condition being
hereinafter referred to as "Disability"), the Company shall have the right,
with the approval of a majority of the members of the Board of Directors, to
terminate Executive's employment on 30 days' written notice to Executive (such
termination, or Executive's death, being herein referred to as "Involuntary
Termination"). If the Executive dies during the Employment Period, his
employment hereunder shall be deemed to have ceased as of the date of his
death.
3.2.4 Voluntary Termination. Any termination of the employment of the
Executive hereunder effectuated by the Executive shall be deemed to be a
"Voluntary Termination." A Voluntary Termination shall be deemed to be
effective immediately upon such termination.
3.3 Effect of Termination of Employment.
3.3.1 Upon the termination of the Executive's employment hereunder
pursuant to a Voluntary Termination or a Termination for Cause, neither the
Executive nor his beneficiary or estate shall have any further rights or
claims against the Company under this Agreement except to receive:
(i) the unpaid portion of the Base Salary provided for in Section
2.1, computed on a pro rata basis to the date of termination; and
(ii) reimbursement for any expenses for which the Executive shall
not have theretofore been reimbursed as provided in Section 2.2.
3.3.2 Upon the termination of the Executive's employment hereunder
pursuant to an Involuntary Termination or a Termination for other than
Cause, neither the Executive nor his beneficiary or estate shall have any
further rights or claims against the Company under this Agreement except to
receive:
(i) the unpaid portion of the Base Salary provided for in Section
2.1, to the fifth anniversary of the date of this Agreement;
(ii) reimbursement for any expenses for which the Executive shall
not have theretofore been reimbursed as provided in Section 2.2; and
(iii) the continuation of the benefits afforded pursuant to Section
2.3(i) through the fifth anniversary of the date of this Agreement.
4. Executive's Covenants.
4.1 Executive agrees that he will not from and after the date hereof through
the fifth anniversary of the termination of the Employment Period (for whatever
reason), directly or indirectly, through any other person, firm or corporation,
solicit, raid, entice, induce or encourage any employee, sales representative,
agent or consultant of or for the Company or its affiliates, to (i) cease his
or her association with or leave the employ of the Company or its affiliates,
(ii) solicit customers or suppliers of the Company or its affiliates for
Executive's or any other person's or entity's benefit or (iii) otherwise act in
violation of that person's obligations to the Company or its affiliates, and
Executive shall not authorize or knowingly approve the taking of such actions
by any other person.
4.2 Executive acknowledges that, by reason of his employment with the
Company, he will obtain confidential or non-public proprietary knowledge or
information pertaining to the business and policies of the Company and its
affiliates. Executive agrees that during and after the term of this Agreement,
he shall not disclose, without the prior written consent of the Board of
Directors of the Company or the Chairman of the Board, any confidential or non-
public proprietary knowledge or information pertaining to the Company and its
affiliates ("Confidential Information"), including, but not limited to (1)
trade secrets concerning the business and affairs of the Company and its
affiliates, product specifications, data, know-how, formulae, compositions,
processes, designs, sketches, photographs, graphs, drawings, samples,
inventions and ideas, past, current and
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planned research and development, current and planned manufacturing or
distribution methods and processes, customer lists, information regarding
customers of the Company (including such customers' requirements), price lists,
market studies, business plans, computer software and programs (including
object code and source code), computer software and database technologies,
systems, structures, and architectures (and related formulae, compositions,
processes, improvements, devices, know-how, inventions, discoveries, designs,
methods and information); (2) information concerning the business and affairs
of the Company and its affiliates (which includes historical financial
statements, financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key personnel,
personnel training and techniques and material) however documented; and (3)
notes, analyses, compilations, studies, summaries and other materials prepared
by or for the Company and its affiliates containing or based, in whole or in
part, on any information included in the foregoing. Confidential Information
shall not include information that: (a) was known to Executive prior to his
first employment with the Company or its affiliates, or (b) is public
knowledge, or becomes public knowledge other than by action (or omission) of
(i) Executive or persons obtaining access to such information directly or
indirectly from Executive or (ii) other persons disclosing such information in
breach of obligations to the Company.
4.3 Executive acknowledges and agrees that all memoranda, notes, reports,
records and other documents made or compiled by Executive, or made available to
Executive prior to or during the term of this Agreement concerning the
Company's and its affiliates, business, shall be the Company's or its
affiliates' property and shall be delivered to the Company on the termination
of this Agreement or at any other time on request by the Board of Directors or
Chairman of the Board of the Company.
4.4 Executive agrees that he will not, from and after the date hereof
through the fifth anniversary of the termination of the Employment Period (for
whatever reason), (i) directly or indirectly engage in, represent in any way,
or be connected with, any business or activity (such business or activity being
hereinafter called a "Competing Business"), which engages in pain management,
generic pharmaceuticals or such other activities that (during Executive's
Employment Period) the Company engages in or intends to engage in and is set
forth in a detailed written business plan that has been submitted to the
Company's Board of Directors prior to the termination of the Executive's
Employment Period, within any state in which the Company or its affiliates
transact business, whether such engagement shall be as an officer, director,
owner, employee, partner, affiliate or other participant in any Competing
Business; or (ii) assist others in engaging in any Competing Business in the
manner described in the foregoing clause (i); provided, however, that it shall
not be a violation of this Section 4.4 for Executive (a) to be the registered
or beneficial owner of up to twelve percent (12%) of any class of capital stock
of U.S. Dermatalogics, Inc., and the amount and percentage ownership of shares
beneficially owned by Executive, as of the date of this Agreement is set forth
on Schedule 4.4 hereto, (b) to be the registered or beneficial owner of shares
of any class of capital stock of a Competing Business that Executive owns as of
the date of this Agreement, the amounts and percentage ownership of which is
set forth on Schedule 4.4 hereto or (c) to become the registered or beneficial
owner of up to five percent (5%) of any class of the capital stock of a
Competing Business, provided that in the case of each of clauses (a), (b) and
(c) Executive does not actively participate in the business of such Competing
Business until such time as this covenant expires. The Executive acknowledges
and understands that the foregoing restrictions may limit his ability to earn a
livelihood in a business similar to the business of the Company, but he
nevertheless believes that he has received and will receive sufficient
consideration and other benefits in connection with the Company's issuance of
certain stock to the Executive, as an employee of the Company and as otherwise
provided hereunder to clearly justify such restrictions which, in any event
(given his education, skills and ability), the Executive does not believe would
prevent him from earning a living; provided, however, that the Executive may
actively engage in a Competing Business during the term of the covenant set
forth in this Section 4.4 if the Executive provides written notice to the
Company prior to engaging in any such Competing Business and the Executive
thereafter receives the written consent of the Board of Directors of the
Company to engage in such Competing Business. Notwithstanding the foregoing,
during the period from and after the date of this Agreement through the fifth
anniversary of the termination of the Employment Period, the Executive shall
keep the Board of Directors apprised of his business activities.
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4.5 The Executive shall promptly disclose, grant and assign to the Company
for its sole use and benefit any and all inventions, improvements, technical
information and suggestions relating in any way to the business of the Company,
which he may develop or acquire during the Employment Period (whether or not
during usual working hours), together with all patent applications, letters
patent, copyrights and reissues thereof that may at any time be granted for or
upon any such invention, improvement or technical information. In connection
therewith:
(i) The Executive shall without charge, but at the expense of the
Company, promptly at all times hereafter execute and deliver such
applications, assignments, descriptions and other instruments as may be
reasonably necessary or proper in the reasonable opinion of the Company to
vest title to any such inventions, improvements, technical information,
patent applications, patents, copyrights or reissues thereof in the Company
and to enable it to obtain and maintain the entire right and title thereto
throughout the world; and
(ii) The Executive shall render to the Company at its expense (including
a reasonable payment for the time involved in case he is not then in its
employ) all such assistance as it may reasonably require in the prosecution
of applications for said patents, copyrights or reissues thereof, in the
prosecution or defense of interferences which may be declared involving any
said applications, patents or copyrights and in any litigation in which the
Company may be involved relating to any such patents, inventions,
improvements or technical information.
4.6 The provisions of this paragraph 4 shall survive the termination or
expiration of this Agreement irrespective of the reason therefor.
4.7 Executive acknowledges that the services to be rendered by him are of a
special, unique and extraordinary character and, in connection with such
services, he will have access to Confidential Information vital to the
Company's business. By reason of this, Executive consents and agrees that if he
violates any of the provisions of this Agreement with respect to the diversion
of the Company's or its affiliates' employees or confidentiality, the Company
or its affiliates would sustain irreparable harm and, therefore, in addition to
any other remedies which the Company may have under this Agreement or
otherwise, the Company shall be entitled to apply to any court of competent
jurisdiction for an injunction restraining Executive from committing or
continuing any such violation of this Agreement, and Executive shall not object
to any such application.
5. Indemnification. The Company agrees to indemnify and hold harmless
Executive on the terms set forth in the Company's Bylaws and Certificate of
Incorporation as they exist on the date of this Agreement and in any event to
the same extent that the Company provides indemnification for its other
executive employees.
6. Conflicting Duties. The Company acknowledges that during his tenure
pursuant to this Employment Agreement, Executive shall not be required to work
"full-time" for the Company and shall work on an as-needed basis, the dates and
times of which to be mutually agreed upon by the Company and Executive. In
addition, the Company acknowledges that during the Employment Period Executive
shall retain the right to pursue and/or fulfill other business opportunities,
commitments and obligations so long as such opportunities, commitments and
obligations would not constitute a breach by Executive of his obligations under
Section 4 of this Employment Agreement.
7. Miscellaneous.
7.1 Notices. Any notice or communication given by either party hereto to the
other party shall be in writing and shall be deemed duly given (i) when
personally delivered, or (ii) when five days have elapsed after its
transmittal, by registered or certified mail, return receipt requested, postage
prepaid, or (iii) if transmitted by telecopy, when sent, or (iv) if transmitted
by telex (or equivalent service), when the sender's receiving apparatus has
printed the answerback of the addressee on a copy of the telex message. Notices
shall be addressed as follows:
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If to the Company:
Endo Pharmaceutical Holdings Inc.
223 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
Telecopier No.: 610-558-9683
Attention: Chief Executive Officer
If to Executive:
Mr. John W. Lyle
28 Inlet Terrace
Belmar, New Jersey 07719
With copies in each case to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Telecopier No.: 212-986-8866
Attention: James R. Ledley, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Telecopier No.: 212-735-2000
Attention: Eileen T. Nugent Esq.
Any person entitled to receive notice (or a copy thereof) may designate in
writing, by notice to the others, such other address to which notices to such
person shall thereafter be sent.
7.2 Entire Agreement; Amendment; Waiver. This Agreement contains the entire
understanding of the parties covering its subject matter and supersedes all
prior agreements between the parties. This Agreement may be amended or waived
only by a writing signed by both parties. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be construed as
a waiver of any other breach of that provision nor as a waiver of any breach of
another provision.
7.3 Headings. The headings of the paragraphs of this Agreement are inserted
for convenience only and shall not be considered a part of or be referred to in
interpreting this Agreement.
7.4 Governing Law; Interpretation; Service of Process. This Agreement shall
be construed in accordance with and governed for all purposes by the laws and
public policies of the State of New Jersey applicable to contracts executed and
to be wholly performed in that State. Service of process in any dispute shall
be effective: (a) upon the Company, if service is made on any officer of the
Company; and (b) upon Executive, if service is made to Executive's residence
last known to the Company with an information copy to Executive at any other
residence, or care of a subsequent employer, of which the Company may be aware.
7.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but all of which
together shall constitute one and the same instrument.
7.6 Assignment. Assignment of the rights and obligations of this Agreement
shall bind and enure to the benefit of any successor of the Company by
reorganization, merger or consolidation, or any assignee of all or
substantially all of the Company's business and properties, provided that the
successor shall assume the obligations of the Company under this Agreement.
Executive's rights or obligations under this Agreement may not be assigned by
Executive.
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7.7 Further Assurances. Each of the parties agrees to execute, acknowledge,
deliver and perform, and/or cause to be executed, acknowledged, delivered and
performed, at any time and/or from time to time, as the case may be, all such
further acts, deeds, assignments, transfers, conveyances, powers-of-attorney
and/or assurances as may be necessary and/or proper to carry out the provisions
and/or intent of this Agreement.
7.8 Severability. If any one or more of the terms, provisions, covenants or
restrictions of this Agreement shall be determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated,
unless the parties hereto would not have entered into this Agreement without
said invalid, void or unenforceable term, provision, covenant or restriction.
If, moreover, any one or more of the provisions contained in this Agreement
shall for any reason be determined by a court of competent jurisdiction to be
excessively broad as to duration, geographical scope, activity or subject, it
shall be construed by limiting or reducing it, so as to be enforceable to the
extent compatible with then applicable law.
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Execution
The parties have duly executed this Agreement as of the date first above
written whereupon this Agreement enters into full force and effect in
accordance with its terms.
ATTEST: ENDO PHARMACEUTICALS HOLDINGS INC.,
a Delaware Corporation
By: _________________________________ By: _________________________________
Name: Name:
Title: Title:
-------------------------------------
John W. Lyle
125
<PAGE>
Schedule 4.4
<TABLE>
<S> <C> <C>
<CAPTION>
Competing Business Shares Beneficially Owned Percentage Ownership
------------------ -------------------------- -----------------------
<S> <C> <C>
U.S. Dermatalogics, Inc. 970,250 shares of common 7.9%, fully diluted for
stock the exercise of the
options and issuance
23,944 shares of common the issuance of the
issuable under a 23,944 shares issuable
convertible note shares issuable upon
conversion of the note
Options to purchase 25,000
shares of common stock
Warner Lambert Less than 500 shares Less than 1.0%
American Home Products Less than 500 shares Less than 1.0%
</TABLE>
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Exhibit I
FORM OF WARRANT AGREEMENT
by and between
ENDO PHARMACEUTICALS HOLDINGS INC.
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as
Warrant Agent
----------------
Dated as of , 2000
----------------
127
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<C> <S> <C>
Section 1. Appointment of Warrant Agent.............................. 129
Section 2. Warrant Certificates...................................... 129
Section 3. Execution of Warrant Certificates......................... 129
Section 4. Registration and Countersignature......................... 130
Section 5. Transfer and Exchange of Warrants......................... 130
Section 6. Registration of Transfers and Exchanges................... 130
Section 7. Terms of Warrants; Exercise of Warrants................... 132
Section 8. Payment of Taxes.......................................... 134
Section 9. Mutilated or Missing Warrant Certificates................. 134
Section 10. Reservation of Warrant Shares............................. 134
Section 11. Obtaining Stock Exchange Listings......................... 134
Adjustment of Exercise Price and Number of Warrant Shares
Section 12. Issuable.................................................. 135
Section 13. Fractional Interests...................................... 139
Section 14. Notices to Warrant Holders; Reservation of Dividends...... 139
Section 15. Notices to the Company and Warrant Agent.................. 140
Section 16. Supplements and Amendments................................ 141
Section 17. Concerning the Warrant Agent.............................. 141
Section 18. Change of Warrant Agent................................... 143
Section 19. Successors................................................ 143
Section 20. Termination............................................... 143
Section 21. Governing Law............................................. 143
Section 22. Benefits of This Agreement................................ 143
Section 23. Counterparts.............................................. 143
Section 24. Headings.................................................. 143
Exhibit A. Form of Warrant Certificate............................... 145
Exhibit B. Certificate to be Delivered Upon Transfer................. 151
</TABLE>
128
<PAGE>
WARRANT AGREEMENT (the "Agreement"), dated as of , 2000, by and between
Endo Pharmaceuticals Holdings Inc., a Delaware corporation (together with any
successors and assigns, the "Company"), and United States Trust Company of New
York, as Warrant Agent (the "Warrant Agent").
WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated as of
November 26, 1999 (as may be amended and restated from time to time, the
"Merger Agreement"), by and among the Company, Endo Inc., a Delaware
corporation and wholly owned subsidiary of the Company ("Sub"), and Algos
Pharmaceutical Corporation, a Delaware corporation ("Algos"), the Company
proposes to issue warrants (each a "Warrant," and collectively, the "Warrants")
for the purchase of an aggregate of 29,920,177/1/ shares of common stock, par
value $.01 per share, of the Company (the "Common Stock," and the shares of
Common Stock issuable upon exercise of the Warrants being referred to herein as
the "Warrant Shares");
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company and the Warrant Agent is willing to act in connection with the
issuance, transfer, exchange and exercise of Warrants as provided herein; and
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein, the Company and the Warrant Agent hereby agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints the
Warrant Agent to act as agent for the Company in accordance with the
instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.
Section 2. Warrant Certificates. The Warrants will initially be issued in
global form (the "Global Warrants"), substantially in the form of Exhibit A
hereto. Any certificates evidencing the Global Warrants to be delivered
pursuant to this Agreement (the "Warrant Certificates") shall be substantially
in the form set forth in Exhibit A hereto. Such Global Warrants shall represent
such of the outstanding Warrants as shall be specified therein and each shall
provide that it shall represent the aggregate amount of outstanding Warrants
from time to time endorsed thereon and that the aggregate amount of outstanding
Warrants represented thereby may from time to time be reduced or increased, as
appropriate. Any endorsement of a Global Warrant to reflect the amount of any
increase or decrease in the amount of outstanding Warrants represented thereby
shall be made by the Warrant Agent and the Depositary (as defined below) in
accordance with instructions given by the holder thereof. The Depository Trust
Company shall act as the Depositary with respect to the Global Warrants until a
successor shall be appointed by the Company. Upon written request, a Warrant
holder who holds Warrants may receive from the Depositary and Warrant Agent
Warrants in registered form as definitive Warrant Certificates (the "Definitive
Warrants") as set forth in Section 6 below.
Section 3. Execution of Warrant Certificates. Warrant Certificates shall be
signed on behalf of the Company by its Chairman of the Board, its President,
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer or
Treasurer or a Vice President and by its Secretary or an Assistant Secretary.
Each such signature upon the Warrant Certificates may be in the form of a
facsimile signature of the present or any future Chairman of the Board,
President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, Treasurer, Vice President, Secretary or Assistant Secretary and may be
imprinted or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board, President, Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer, Treasurer, a Vice President,
Secretary or an Assistant Secretary, notwithstanding the fact that at the time
the Warrant Certificates shall be countersigned and delivered or disposed of
such person shall have ceased to hold such office.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer before the Warrant Certificates so
signed shall have been countersigned by the Warrant Agent, or disposed of by
the Company, such Warrant Certificates nevertheless may be countersigned and
delivered or
--------
(1) These numbers shall be adjusted in the final Endo Warrant. See footnotes 2-
5 below.
129
<PAGE>
disposed of as though such person had not ceased to be such officer of the
Company; and any Warrant Certificate may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Warrant
Certificate, shall be a proper officer of the Company to sign such Warrant
Certificate, although at the date of the execution of this Warrant Agreement
any such person was not such officer.
Warrant Certificates shall be dated the date of countersignature by the
Warrant Agent.
Section 4. Registration and Countersignature. The Warrants shall be numbered
and shall be registered on the books of the Company maintained at the principal
office of the Warrant Agent located at 114 West 47th Street, 25th Floor, New
York, New York, 10036, Attention: Corporate Trust Division (the "Warrant
Register") as they are issued.
Warrant Certificates shall be manually countersigned by the Warrant Agent
and shall not be valid for any purpose unless so countersigned. The Warrant
Agent shall, upon written instructions of the Chairman of the Board, the
President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, Treasurer, a Vice President, the Secretary or an Assistant Secretary
of the Company, initially countersign and deliver Warrants entitling the
holders thereof to purchase not more than the number of Warrant Shares referred
to above in the first recital hereof and shall thereafter countersign and
deliver Warrants as otherwise provided in this Agreement.
The Company and the Warrant Agent may deem and treat the registered holders
(the "Holders") of the Warrant Certificates as the absolute owners thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone) for all purposes, and neither the Company nor the Warrant Agent shall
be affected by any notice to the contrary.
Section 5. Transfer and Exchange of Warrants. The Warrant Agent shall from
time to time, subject to the limitations of Section 6 hereof, register the
transfer of any outstanding Warrants upon the records to be maintained by it
for that purpose, upon surrender thereof duly endorsed or accompanied (if so
required by it) by a written instrument or instruments of transfer in form
satisfactory to the Warrant Agent, duly executed by the registered Holder or
Holders thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney. Subject to the terms of this Agreement, each Warrant
Certificate may be exchanged for another certificate or certificates entitling
the Holder thereof to purchase a like aggregate number of Warrant Shares as the
certificate or certificates surrendered then entitle each Holder to purchase.
Any Holder desiring to exchange a Warrant Certificate or Certificates shall
make such request in writing delivered to the Warrant Agent, and shall
surrender, duly endorsed or accompanied (if so required by the Warrant Agent)
by a written instrument or instruments of transfer in form satisfactory to the
Warrant Agent, the Warrant Certificate or Certificates to be so exchanged.
Upon registration of transfer, the Warrant Agent shall countersign and
deliver by certified or first class mail a new Warrant Certificate or
Certificates to the persons entitled thereto. The Warrant Certificates may be
exchanged at the option of the Holder thereof, when surrendered at the office
or agency of the Company maintained for such purpose, which initially will be
the corporate trust office of the Warrant Agent located at 770 Broadway, 13th
Floor, New York, New York, 10003, Attention: Corporate Trust Services, for
another Warrant Certificate, or other Warrant Certificates of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares.
No service charge shall be made for any exchange or registration of transfer
of Warrant Certificates, but the Company may require payment of a sum
sufficient to cover any stamp or other tax or other governmental charge that is
imposed in connection with any such exchange or registration of transfer.
Section 6. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Definitive Warrants. When Definitive Warrants
are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number of
Definitive Warrants of other authorized denominations, the Warrant Agent
shall register the transfer or make the exchange as requested
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if its requirements under this Agreement are met; provided, however, that
the Definitive Warrants presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Warrant Agent, duly
executed by the Holder thereof or by such Holder's attorney, duly
authorized in writing.
(b) Restrictions on Transfer of a Definitive Warrant for a Beneficial
Interest in a Global Warrant. The Warrant Agent may exchange a Definitive
Warrant for a beneficial interest in a Global Warrant only if the Warrant Agent
has received such Definitive Warrant, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Warrant Agent,
together with written instructions directing the Warrant Agent to make, or to
direct the Depositary to make, an endorsement on the Global Warrant to reflect
an increase in the aggregate amount of the Warrants represented by the Global
Warrant. If such conditions have been satisfied, the Warrant Agent shall cancel
such Definitive Warrant and cause, or direct the Depositary to cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Warrant Agent, the number of Warrant Shares represented by
the Global Warrant to be increased accordingly. If no Global Warrant is then
outstanding, the Company shall issue and the Warrant Agent shall countersign a
new Global Warrant in the appropriate amount.
(c) Transfer and Exchange of Global Warrants. The transfer and exchange of
Global Warrants or beneficial interests therein shall be effected through the
Depositary, in accordance with this Warrant Agreement (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
(d) Transfer of a Beneficial Interest in a Global Warrant for a Definitive
Warrant.
(i) Any person having a beneficial interest in a Global Warrant may upon
his, her or its request exchange such beneficial interest for a Definitive
Warrant. Upon receipt by the Warrant Agent of written instructions (or such
other form of instructions as is customary for the Depositary) from the
Depositary or its nominee on behalf of any person having a beneficial
interest in a Global Warrant and upon receipt by the Warrant Agent of a
written order or such other form of instructions as is customary for the
Depositary or the person designated by the Depositary as having such a
beneficial interest containing registration instructions, then the Warrant
Agent will cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the
aggregate amount of the Global Warrant to be reduced and, following such
reduction, the Company will execute and, upon receipt of a
countersignature, the Warrant Agent will countersign and deliver to the
transferee a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial interest in
a Global Warrant pursuant to this Section 6(d) shall be registered in such
names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Warrant Agent in writing, provided such designation is in
accordance with this Section 6(d). The Warrant Agent shall deliver such
Definitive Warrants to the persons in whose names such Definitive Warrants
are registered.
(e) Restrictions on Transfer and Exchange of Global
Warrants. Notwithstanding any other provisions of this Warrant Agreement (other
than the provisions set forth in subsection (f) of this Section 6), a Global
Warrant may not be transferred as a whole except by the Depositary to a nominee
of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Warrants in Absence of Depositary. If at
any time:
(i) the Depositary for the Global Warrants notifies the Company that the
Depositary is unwilling or unable to continue as Depositary for the Global
Warrant and a successor Depositary for the Global Warrant is not appointed
by the Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Warrant Agent in
writing that it elects to cause the issuance of Definitive Warrants under
this Warrant Agreement, then the Company will execute, and the
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Warrant Agent, upon receipt of an officers' certificate, signed by the
President, Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer or a Vice President of the Company, requesting the
countersignature and delivery of Definitive Warrants, will countersign and
deliver Definitive Warrants, in an aggregate number equal to the aggregate
number of Warrants represented by the Global Warrant, in exchange for such
Global Warrant.
(g) Cancellation and/or Adjustment of a Global Warrant. At such time as all
beneficial interests in a Global Warrant have either been exchanged for
Definitive Warrants, redeemed, repurchased or cancelled, such Global Warrant
shall be returned to or retained and cancelled by the Warrant Agent. At any
time prior to such cancellation, if any beneficial interest in a Global Warrant
is exchanged for Definitive Warrants, redeemed, repurchased or cancelled, the
number of Warrants represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant, by the Warrant Agent to
reflect such reduction.
(h) Obligations with Respect to Transfers and Exchanges of Definitive
Warrants.
(i) To permit registrations of transfers and exchanges in accordance
with the terms of this Agreement, the Company shall execute, and the
Warrant Agent shall countersign Definitive Warrants and Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued upon any
registration, transfer or exchange of Definitive Warrants or Global
Warrants shall be the valid obligations of the Company, entitled to the
same benefits under this Warrant Agreement as the Definitive Warrants or
Global Warrants surrendered upon the registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant, the Warrant Agent and the Company may deem and treat the person in
whose name any Warrant is registered as the absolute owner of such Warrant,
and neither the Warrant Agent nor the Company shall be affected by notice
to the contrary.
Section 7. Terms of Warrants; Exercise of Warrants. Subject to the terms of
this Agreement, the Warrant Holders shall have the right, which may be
exercised commencing on or after the Exercisability Date (as defined below) and
until 5:00 p.m., New York City time, on July 7, 2003 (the six-month anniversary
of the Exercisability Date) (the "Expiration Date"), to receive from the
Company (on exercise of such Warrants and payment of the Exercise Price then in
effect for such Warrant Shares) (together, if applicable, with cash payable as
provided in Section 13 hereof and any dividends or distributions payable as
provided in Section 14 hereof) (a) 29,920,177 Warrant Shares (in the aggregate)
(with each Warrant being exercisable for 0.416667 Warrant Shares)/2/ in the
event the Adjustment Event has not occurred prior to such time or (b)
17,952,106 Warrant Shares (in the aggregate) (with each Warrant being
exercisable for 0.250000 Warrant Shares)/3/ in the event the Adjustment Event
has occurred prior to such time. Each Warrant not exercised prior to the
Expiration Date shall become void and all rights thereunder and all rights in
respect thereof under this Agreement shall cease as of the Expiration Date. If
applicable, dividends and other distributions will be made upon exercise of the
Warrants as set forth in Section 14 hereof.
--------
(2) These numbers shall be adjusted in the final Agreement and Warrants in
order to reflect that at the Effective Time such aggregate number, when
taken together with the shares of Parent Common Stock held by Persons who
had been holders of Parent Common Stock immediately prior to the Effective
Time, shall equal 85% of the shares of Parent Common Stock on a fully
diluted basis (excluding the effect of the Algos Warrants as if no
Adjustment Event had occurred).
(3) These numbers shall be adjusted in the final Agreement and Warrants in
order to reflect that at the Effective Time such aggregate number, when
taken together with the shares of Parent Common Stock held by Persons who
had been holders of Parent Common Stock immediately prior to the Effective
Time, shall equal 80% of the shares of Parent Common Stock on a fully
diluted basis (excluding the effect of the Algos Warrants and after giving
effect to the Adjustment Event as if it had occurred).
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"Exercisability Date" shall mean the fifth (5th) Business Day (as defined
below) following December 31, 2002 if the Company (or any of its subsidiaries)
has not received approval from the U.S. Food and Drug Administration (the
"FDA") with respect to its New Drug Application for MorphiDex(R) for the
treatment of any pain prior to December 31, 2002.
In addition to the notices required by Section 14 hereof, the Company shall
give prompt written notice to the Warrant Agent that the Exercisability Date
has occurred and shall cause the Warrant Agent, on behalf of and at the expense
of the Company, within 5 Business Days after such notification is received by
the Warrant Agent, to mail by first class mail, postage prepaid, to each Holder
a notice specifying that the Exercisability Date has occurred and that the
Warrant has become exercisable pursuant to its terms and that the Warrant will
expire at 5:00 p.m., New York City time, on the Expiration Date. In addition,
the Company shall post appropriate notices of the Exercisability Date on its
web pages and issue press releases to wire services. A "Business Day" is a day
that is not a Legal Holiday. A "Legal Holiday" is a Saturday, a Sunday, a
federally recognized holiday or a day on which banking institutions are not
required to be open in the State of New York.
The initial price per share at which Warrant Shares shall be purchasable
upon exercise of Warrants (the "Exercise Price") shall equal $0.01. A Warrant
may be exercised upon surrender at the office or agency of the Company
maintained for such purpose, which initially will be the corporate trust office
of the Warrant Agent or its agents located at 114 West 47th Street, 25th Floor,
New York, New York, 10036, Attention: Corporate Trust Division, of the Warrant
Certificate(s) evidencing the Warrants to be exercised with the form of
election to purchase on the reverse thereof duly filled in and signed, which
signature shall be guaranteed by a participant in a recognized Signature
Guarantee Medallion Program, and upon payment to the Warrant Agent for the
account of the Company of the Exercise Price, as adjusted as herein provided,
for the number of Warrant Shares together, if applicable, with cash payable as
provided in Section 13 hereof and any dividends or distributions as provided in
Section 14 hereof in respect of which such Warrants are then exercised. Payment
of the Exercise Price may be made (a) in the form of cash or by certified or
official bank check payable to the order of the Company in New York Clearing
House Funds, (b) by delivering to the Company a written notice accompanying the
surrender of a Warrant to, at the time of exercise, apply to the payment of the
Exercise Price such number of Warrant Shares as shall be specified in such
notice, in which case an amount equal to the excess of the Current Market Value
(as defined in Section 12(d) hereof) of such Warrant Shares on the date of
exercise over the Exercise Price required for such exercise shall be deemed to
have been paid to the Company and the number of Warrant Shares issuable upon
such exercise shall be reduced by such specified number (a "Cashless Exercise")
or (c) any combination of (a) and (b) above.
Subject to the provisions of Section 6 hereof, upon such surrender of
Warrants and payment of the Exercise Price, the Company shall issue and cause
to be delivered with all reasonable dispatch to or upon the written order of
the Holder and in such name or names as the Warrant Holder may designate a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants together with cash as provided in Section 13
hereof. Such certificate or certificates shall be deemed to have been issued
and any person so named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrants
and payment of the Exercise Price.
On or after the Exercisability Date, the Warrants shall be exercisable, at
the election of the Holders thereof, either in full or from time to time in
part and, in the event that a certificate evidencing Warrants is exercised in
respect of fewer than all of the Warrant Shares issuable on such exercise at
any time prior to the Expiration Date, a new certificate evidencing the
remaining Warrant or Warrants will be issued, and the Warrant Agent is hereby
irrevocably authorized to countersign and to deliver the required new Warrant
Certificate or Certificates pursuant to the provisions of this Section 7 and of
Section 3 hereof, and the Company, whenever required by the Warrant Agent, will
promptly supply the Warrant Agent with Warrant Certificates duly executed on
behalf of the Company for such purpose.
All Warrant Certificates surrendered upon exercise of Warrants shall be
cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall then
be either delivered to the Company or disposed of by the
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Warrant Agent in a manner consistent with the Warrant Agent's customary
procedure for such disposal and in a manner reasonably satisfactory to the
Company. The Warrant Agent shall account promptly to the Company with respect
to Warrants exercised and concurrently pay to the Company all monies received
by the Warrant Agent for the purchase of the Warrant Shares through the
exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement available for
inspection by the Holders during normal business hours at its office. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Agreement as the Warrant Agent may request.
Section 8. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the initial issuance of Warrant Shares upon the exercise
of Warrants; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in
the issue of any Warrant Certificates or any certificates for Warrant Shares in
a name other than that of the registered Holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
Section 9. Mutilated or Missing Warrant Certificates. In case any of the
Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company
may in its discretion issue and the Warrant Agent may countersign, in exchange
and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing
an equivalent number of Warrants, but only upon receipt of evidence
satisfactory to the Company and the Warrant Agent of such loss, theft or
destruction of such Warrant Certificate and indemnity, if requested, also
satisfactory to them. Applicants for such substitute Warrant Certificates shall
also comply with such other reasonable regulations and pay such other
reasonable charges as the Company or the Warrant Agent may prescribe.
Section 10. Reservation of Warrant Shares. The Company will at all times
reserve and keep available, free from preemptive rights, out of the aggregate
of its authorized but unissued Common Stock or its authorized and issued Common
Stock held in its treasury, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of Warrants, the maximum
number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company will keep a copy of this Agreement on file with the transfer
agent for the Common Stock (the "Transfer Agent") and with every subsequent
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the Warrants. The Warrant
Agent is hereby irrevocably authorized to requisition from time to time from
such Transfer Agent the stock certificates required to honor outstanding
warrants upon exercise thereof in accordance with the terms of this Agreement.
The Company will supply such Transfer Agent with duly executed certificates for
such purposes and will provide or otherwise make available any cash which may
be payable as provided in Section 13 hereof. The Company will furnish such
Transfer Agent a copy of all notices of adjustments and certificates related
thereto transmitted to each Holder pursuant to Section 14 hereof.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon payment of the Exercise Price therefor and
issue, be validly authorized and issued, fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issuance thereof. The Company will use its
reasonable best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this
Agreement.
Section 11. Obtaining Stock Exchange Listings. The Company will from time to
time take all action which may be necessary so that the Warrants and,
immediately upon their issuance upon exercise of the
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Warrants, the Warrant Shares will be listed on the principal securities
exchanges and markets within the United States of America, if any, on which
other shares of Common Stock are then listed.
Section 12. Adjustment of Exercise Price and Number of Warrant Shares
Issuable.
(a) If the Company:
(i) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock or other capital stock of the Company; or
(ii) subdivides, splits, combines or reclassifies its outstanding shares
of Common Stock into a different number of securities of the same class,
then the number of shares of Common Stock issuable upon the exercise of each
Warrant (the "Exercise Rate") in effect immediately prior to such action shall
be proportionately adjusted so that the Holder of any Warrant thereafter
exercised may receive the aggregate number and kind of shares of capital stock
of the Company which such Holder would have owned immediately following such
action if such Warrant had been exercised immediately prior to such action and
the Exercise Price in effect immediately prior to such action shall be adjusted
to a price determined by multiplying the Exercise Price in effect immediately
prior to such action by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding before giving effect to such action and
the denominator of which shall be the number of shares of Common Stock and/or
such other capital stock outstanding referred to in the foregoing clause (a)(1)
after giving effect to such action.
An adjustment pursuant to this Section 12(a) shall become effective
immediately after the record date in the case of a dividend or distribution and
immediately after the effective date in the case of a subdivision, combination
or reclassification.
If, after an adjustment pursuant to this Section 12(a), a Holder of a
Warrant upon exercise of it may receive shares of two or more classes of
capital stock of the Company, the board of directors of the Company shall
determine the allocation of the adjusted Exercise Price between the classes of
capital stock. After such allocation, the exercise privilege and the Exercise
Price of each class of capital stock shall thereafter be subject to adjustment
on terms comparable to those applicable to Common Stock in this Section 12.
Such adjustment shall be made successively whenever any event listed above
shall occur.
(b) Adjustment for Certain Issuances of Common Stock. If the Company issues
or sells to any Affiliate (as defined in Section 12(d) hereof) of the Company
(other than KIA V, L.P. and KEP V, L.P.) shares of its Common Stock or
distributes to any Affiliate of the Company (other than KIA V, L.P. and KEP V,
L.P.) any rights, options or warrants entitling them to purchase shares of
Common Stock, or securities convertible into or exchangeable for Common Stock,
in each case, at a price per share less than the Current Market Value on the
record date for determining entitlements of such Affiliates to participate in
such issuance, sale or distribution (the "Time of Determination") and prior to
such issuance, sale or distribution the Company did not first offer to issue,
sell or distribute such shares of its Common Stock or such rights, options or
warrants or such securities convertible into or exchangeable for Common Stock
to all holders of Common Stock on the same economic terms and on a pro rata
basis with the issuance, sale or distribution to such Affiliates of the
Company, then the Exercise Rate shall be adjusted in accordance with the
formula:
E' = E x O + N
--------
O + N x P
----
M
and the Exercise Price shall be adjusted in accordance with the following
formula:
EP' = EP x E
----
E'
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where:
E' = the adjusted Exercise Rate.
E = the Exercise Rate immediately prior to the Time of Determination for
any such issuance, sale or distribution.
EP'= the Adjusted Exercise Price.
EP = the Exercise Price immediately prior to the Time of Determination for
any such issuance, sale or distribution.
O = the number of Fully Diluted Shares (as defined below) outstanding
immediately prior to the Time of Determination for any such issuance,
sale or distribution.
N = the number of additional shares of Common Stock issued, sold or
issuable upon exercise of such rights, options or warrants.
P = the per share price received and receivable by the Company in the case
of any issuance or sale of Common Stock or rights, options or warrants
as to which such adjustment is being made, inclusive of the exercise
price per share of Common Stock payable upon exercise of such rights,
options or warrants.
M = the Current Market Value per share of Common Stock on the Time of
Determination for any such issuance, sale or distribution.
For purposes of this Section 12(b), the term "Fully Diluted Shares" shall
mean (i) the shares of Common Stock outstanding as of a specified date, and
(ii) the shares of Common Stock into or for which rights, options, warrants or
other securities of the Company outstanding as of such date are exercisable or
convertible (other than the Warrants).
Any adjustments shall be made successively whenever any such rights, options
or warrants are issued and shall become effective immediately after the
relevant Time of Determination. Notwithstanding the foregoing, the Exercise
Rate and the Exercise Price shall not be subject to adjustment in connection
with (i) the issuance of any shares of Common Stock upon exercise of any such
rights, options or warrants which have previously been the subject of an
adjustment under this Agreement for which the required adjustment has been made
and (ii) any exercise of the Warrants. If at the end of the period during which
any such rights, options or warrants are exercisable, not all rights, options
or warrants shall have been exercised, the Warrant shall be immediately
readjusted to what it would have been if "N" in each of the above formulas had
been the number of shares actually issued.
(c) When De Minimis Adjustment May Be Deferred. No adjustment in the
Exercise Rate need be made unless the adjustment would require an increase or
decrease of at least 1% in the Exercise Rate. Notwithstanding the foregoing,
any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment, provided that no such adjustment shall be
deferred beyond the date on which a Warrant is exercised.
All calculations under this Section 12 shall be made to the nearest cent or
to the nearest 1/100th of a share, as the case may be.
(d) Certain Definitions. "Current Market Value" per share of Common Stock or
of any other security (herein collectively referred to as a "Security") at any
date shall be:
(1) if the Security is not registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), (i) the value of the Security
determined in good faith by the board of directors of the Company and
certified in a board resolution, based on the most recently completed
arm's-length transaction between the Company and a person other than an
Affiliate of the Company and the closing of which occurs on such date or
shall have occurred within the six months preceding such date or (ii) if no
such transaction shall have occurred on such date or within such six-month
period, the value of the
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Security determined as of a date within 30 days preceding such date by an
Independent Financial Expert (as defined below), or
(2) if the Security is registered under the Exchange Act, the average of
the daily closing bid prices of such Security for 30 consecutive Business
Days selected by the Company from the period of 45 Business Days preceding
such date, but only if such Security shall have been listed on a national
securities exchange or the Nasdaq National Market or traded through an
automated quotation system during such entire 45-Business Day period.
The "closing bid price" for any Security on each Business Day means the
closing price, regular way, on such day on the principal exchange on which such
Security is traded, or if no sale takes place on such day, the average of the
closing bid and asked prices on such day.
"Independent Financial Expert" shall mean any nationally recognized
investment banking firm that is not an Affiliate of the Company. Any such
person may receive customary compensation and indemnification by the Company
for opinions or services it provides as an Independent Financial Expert.
"Affiliate" of any specified person means any other person which directly or
indirectly through one or more intermediaries controls or is controlled by, or
is under common control with, such specified person. For the purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling," "controlled by" and "under common control with") as used with
respect to any person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
person, whether through the ownership of voting securities, by agreement or
otherwise.
"Ordinary Cash Distribution" means any quarterly cash dividend on the Common
Stock to the extent that the aggregate cash dividend per share of Common Stock
in any calendar quarter does not exceed the greater of (x) the amount per share
of Common Stock of the next preceding quarterly cash dividend on the Common
Stock (as adjusted to reflect subdivisions or combinations of the Common Stock)
and (y) 3.0% of the average of the last reported sales prices of the Common
Stock during the ten trading days immediately prior to the date of declaration
of such dividend.
(e) When No Adjustment Required. If an adjustment is made upon the
establishment of a record date for an issuance, sale or distribution subject to
subsection (a) or (b) hereof and such issuance, sale or distribution is
subsequently cancelled or is not otherwise made, the Exercise Rate and Exercise
Price then in effect shall be readjusted, effective as of the date when the
board of directors of the Company determines to cancel such issuance, sale or
distribution or when it is otherwise evident that such issuance, sale or
distribution will not be so made, to that which would have been in effect if
such record date had not been fixed. If an adjustment would be required under
both subsections (a) and (b) above, such adjustments will be determined without
duplication.
To the extent the Warrants become convertible into cash, no adjustment need
be made thereafter as to the amount of cash into which such Warrants are
exercisable. Interest will not accrue on the cash.
(f) Notice of Adjustment. Whenever the Exercise Rate or Exercise Price is
adjusted, the Company shall provide the notices required by Section 14 hereof.
(g) Voluntary Reduction. The Company from time to time may increase the
Exercise Rate or reduce the Exercise Price by any amount for any period of time
(including, without limitation, permanently) if the period is at least 20
Business Days and the Company has given notice of such increase or reduction in
accordance with Section 14 hereof.
An increase of the Exercise Rate or reduction in the Exercise Price under
this subsection (g) (other than a permanent increase) does not change or adjust
the Exercise Rate otherwise in effect for purposes of subsection (a) and (b) of
this Section 12.
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(h) When Issuance or Payment May Be Deferred. In any case in which this
Section 12 shall require that an adjustment in the Exercise Rate or Exercise
Price be made effective as of a record date for a specified event, the Company
may elect to defer until the occurrence of such event (i) issuing to the Holder
of any Warrant exercised after such record date the Warrant Shares and other
capital stock of the Company, if any, issuable upon such exercise over and
above the Warrant Shares and other capital stock of the Company, if any,
issuable upon such exercise on the basis of the Exercise Rate prior to such
adjustment, and (ii) paying to such Holder any amount in cash in lieu of a
fractional share pursuant to Section 13 hereof; provided, however, that the
Company shall deliver to the Warrant Agent and shall cause the Warrant Agent,
on behalf of and at the expense of the Company, to deliver to such Holder a due
bill or other appropriate instrument evidencing such Holder's right to receive
such additional Warrant Shares, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
(i) Reorganizations. In case of (i) any capital reorganization, other than
in the cases referred to in Section 12(a) and (b) hereof and other than any
capital reorganization that does not result in any reclassification of the
outstanding shares of Common Stock into shares of other stock or other
securities or property, or (ii) the consolidation or merger of the Company with
or into another corporation (other than a merger or consolidation in which the
Company is the continuing corporation and which does not result in any
reclassification of the outstanding shares of Common Stock into shares of other
stock or other securities or property), or (iii) the sale of all or
substantially all of the assets of the Company (collectively such actions being
hereinafter referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of any Warrant in accordance with the terms hereof
(in lieu of the number of shares of Common Stock theretofore deliverable) the
number of shares of stock or other securities or property to which a holder of
the number of shares of Common Stock that would otherwise have been deliverable
upon the exercise of such Warrant would have been entitled upon such
Reorganization if the Exercisability Date had occurred and such Warrant had
been exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the
board of directors of the Company, whose determination shall be described in a
duly adopted resolution certified by the Company's Secretary or Assistant
Secretary, shall be made in the application of the provisions herein set forth
with respect to the rights and interests of Holders so that the provisions set
forth herein shall thereafter be applicable, as nearly as possible, in relation
to any such shares or other securities or property thereafter deliverable upon
exercise of Warrants.
The Company shall not effect any such Reorganization unless prior to or
simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such Reorganization or the corporation
or other entity purchasing such assets shall expressly assume, by a
supplemental warrant agreement or other acknowledgment executed and delivered
to the Warrant Agent, the obligation to deliver to the Warrant Agent and to
cause the Warrant Agent to deliver to each such Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase in accordance with the terms hereof upon the
occurrence of the Exercisability Date, and the due and punctual performance and
observance of each and every covenant, condition, obligation and liability
under this Agreement to be performed and observed by the Company in the manner
prescribed herein.
The foregoing provisions of this Section 12(i) shall apply to successive
Reorganization transactions.
(j) Form of Warrants. Irrespective of any adjustments in the number or kind
of shares purchasable upon the exercise of the Warrants, Warrants theretofore
or thereafter issued may continue to express the same price and number and kind
of shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
(k) Warrant Agent's Disclaimer. The Warrant Agent has no duty to determine
when an adjustment under this Section 12 should be made, how it should be made
or what it should be. The Warrant Agent has no duty to determine whether any
provisions of a supplemental warrant agreement under subsection (i) of this
Section 12 are correct. The Warrant Agent makes no representation as to the
validity or value of any securities or assets issued upon exercise of Warrants.
The Warrant Agent shall not be responsible for the Company's failure to comply
with this Section 12.
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(l) Miscellaneous. For purpose of this Section 12 the term "shares of Common
Stock" shall mean (i) shares of the class of stock designated as the Common
Stock, par value $.01 per share, of the Company as of the date of this
Agreement, and (ii) shares of any other class of stock resulting from
successive changes or reclassification of such shares consisting solely of
changes in par value, or from par value to no par value, or from no par value
to par value. In the event that at any time, as a result of an adjustment made
pursuant to this Section 12, the Holders of Warrants shall become entitled to
purchase any securities of the Company other than, or in addition to, shares of
Common Stock, thereafter the number or amount of such other securities so
purchasable upon exercise of each Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the Warrant Shares contained in subsections (a)
through (l) of this Section 12, inclusive, and the provisions of Sections 7, 8,
10 and 13 with respect to the Warrant Shares or the Common Stock shall apply on
like terms to any such other securities.
Section 13. Fractional Interests. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise in full at the same time by the same Holder,
the number of full Warrant Shares which shall be issuable upon the exercise
thereof shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of the Warrants so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section 13, be
issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the excess of the Current Market
Value of a Warrant Share over the Exercise Price on the day immediately
preceding the date the Warrant is presented for exercise, multiplied by such
fraction.
Section 14. Notices to Warrant Holders; Reservation of Dividends. Upon any
adjustment pursuant to Section 12 hereof, the Company shall give prompt written
notice of such adjustment to the Warrant Agent and shall cause the Warrant
Agent, on behalf of and at the expense of the Company, within 10 days after
notification is received by the Warrant Agent of such adjustment, to mail by
first class mail, postage prepaid, to each Holder a notice of such
adjustment(s) and shall deliver to the Warrant Agent a certificate of the Chief
Financial Officer of the Company, setting forth in reasonable detail (i) the
number of Warrant Shares purchasable upon the exercise of each Warrant and the
Exercise Price of such Warrant after such adjustment(s), (ii) a brief statement
of the facts requiring such adjustment(s) and (iii) the computation by which
such adjustment(s) was made. Where appropriate, such notice may be given in
advance and included as a part of the notice required under the other
provisions of this Section 14.
In case the Exercisability Date has occurred and:
(a) the Company shall authorize the issuance to all holders of shares of
Common Stock of rights, options or warrants to subscribe for or purchase
shares of Common Stock or of any other subscription rights or warrants; or
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets or cash;
or
(c) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other than a change in
par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or a tender offer
or exchange offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
(e) the Company proposes to take any action that would require an
adjustment to the Exercise Rate pursuant to Section 12 hereof;
then the Company shall give prompt written notice to the Warrant Agent and
shall cause the Warrant Agent, on behalf of and at the expense of the Company
to give to each of the registered holders of the Warrant Certificates at his,
her or its address appearing on the Warrant Register, at least 30 days (or 20
days in any case
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specified in clauses (a) or (b) above) prior to the applicable record date
hereinafter specified, or the date of the event in the case of events for which
there is no record date, by first-class mail, postage prepaid, a written notice
stating (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such rights, options, warrants or
distribution are to be determined, or (ii) the initial expiration date set
forth in any tender offer or exchange offer for shares of Common Stock, or
(iii) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up. The failure by the Company or the Warrant Agent to give such notice
or any defect therein shall not affect the legality or validity of any
distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.
The Company shall give prompt written notice to the Warrant Agent and shall
cause the Warrant Agent, on behalf of and at the expense of the Company to give
to each Holder written notice of any determination to make a distribution or
dividend to the holders of its Common Stock of any assets (including cash
(other than any Ordinary Cash Distribution)), debt securities, preferred stock,
or any rights or warrants to purchase debt securities, preferred stock, assets
or other securities (other than Common Stock, or rights, options, or warrants
to purchase Common Stock) of the Company, which notice shall state the nature
and amount of such planned dividend or distribution and the record date
therefor, and shall be given by the Company at least 20 days prior to such
record date therefor.
At any time prior to the date that is 30 Business Days after the
Exercisability Date, with respect to any distribution or dividend made by the
Company to all of the holders of its Common Stock for which notice to the
Holders of the Warrants under this Section 14 would be required had such
dividend or distribution occurred after the Exercisability Date and except for
such distributions or dividends as are provided for in Section 12 hereof, the
Company shall hold in reserve the amount of any such dividend or distribution
that would have been payable to the Holders in respect of their Warrant Shares
had the Holders exercised their Warrants immediately prior to such dividend or
distribution. The Company shall release to each Holder of Warrants his, her or
its pro rata share of such reserved dividends or distributions upon the
exercise of such Holder's Warrants pursuant to Section 7 hereof. Any notice
delivered to the Holders by the Company pursuant to this Section 14 shall state
the nature and amount of such dividend or distribution that shall be held in
reserve.
Nothing contained in this Agreement or in any Warrant Certificate shall be
construed as conferring upon the Holders the right to vote or to consent or to
receive notice as stockholders in respect of the meetings of stockholders or
the election of directors of the Company or any other matter, or any rights
whatsoever as stockholders of the Company.
Section 15. Notices to the Company and Warrant Agent. Any notice or demand
authorized by this Agreement to be given or made by the Warrant Agent or by any
Holder to or on the Company shall be sufficiently given or made when received
at the office of the Company expressly designated by the Company as its office
for purposes of this Agreement (until the Warrant Agent is otherwise notified
in accordance with this Section 15 by the Company), as follows:
Endo Pharmaceuticals Holdings Inc.
c/o Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10022
Attention: Managing Director
with a copy to General Counsel
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with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Attention: Eileen T. Nugent, Esq.
Any notice pursuant to this Agreement to be given by the Company or by any
Holder(s) to the Warrant Agent shall be sufficiently given when received by the
Warrant Agent at the address appearing below (until the Company is otherwise
notified in accordance with this Section by the Warrant Agent).
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036
Attention: Corporate Trust Division
Section 16. Supplements and Amendments. The Company and the Warrant Agent
may from time to time supplement or amend this Agreement without the approval
of any holders of Warrants in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not in any way
adversely affect the rights of any holder of Warrants hereunder. Any amendment
or supplement to this Agreement that has a material adverse effect on the
rights of holders hereunder shall require the written consent of registered
holders of a majority of the then outstanding Warrants, which consent shall
then be effective against all the Holders of Warrants hereunder. The consent of
each holder of a Warrant affected shall be required for any amendment pursuant
to which the Exercise Price would be increased or the number of Warrant Shares
purchasable upon exercise of Warrants would be decreased (not including
adjustments contemplated hereunder). The Warrant Agent shall be entitled to
receive and shall be fully protected in relying upon an officers' certificate
and opinion of counsel as conclusive evidence that any such amendment or
supplement is authorized or permitted hereunder, that it is not inconsistent
herewith, and that it will be valid and binding upon the Company in accordance
with its terms.
Section 17. Concerning the Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders, by their acceptance of
Warrants, shall be bound:
(a) The statements contained herein and in the Warrant Certificate shall
be taken as statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as
describe the Warrant Agent or any action taken by it. The Warrant Agent
assumes no responsibility with respect to the distribution of the Warrants
except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure of the
Company to comply with the covenants contained in this Agreement or in the
Warrants to be complied with by the Company.
(c) The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself
(through its employees) or by or through its attorneys or agents (which
shall not include its employees) and shall not be responsible for the
misconduct of any agent appointed with due care.
(d) The Warrant Agent may consult at any time with legal counsel
satisfactory to it (who may be counsel for the Company), and the Warrant
Agent shall incur no liability or responsibility to the Company or to any
Holder in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such
counsel.
(e) Whenever in the performance of its duties under this Agreement the
Warrant Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless such evidence in respect
thereof be herein
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<PAGE>
specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the
President, Chief Financial Officer, one of the Vice Presidents, the
Treasurer or the Secretary of the Company and delivered to the Warrant
Agent; and such certificate shall be full authorization to the Warrant
Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(f) The Company agrees to pay the Warrant Agent reasonable compensation
for all services rendered by the Warrant Agent in the performance of its
duties under this Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind and
nature incurred by the Warrant Agent (including reasonable fees and
expenses of the Warrant Agent's counsel and agents) in the performance of
its duties under this Agreement, and to indemnify the Warrant Agent and
save it harmless against any and all liabilities, including judgments,
costs and counsel fees, for anything done or omitted by the Warrant Agent
in the performance of its duties under this Agreement, except as a result
of the Warrant Agent's negligence or bad faith.
(g) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Holders shall furnish the
Warrant Agent with reasonable security and indemnity satisfactory to the
Warrant Agent for any costs and expenses which may be incurred, but this
provision shall not affect the power of the Warrant Agent to take such
action as the Warrant Agent may consider proper, whether with or without
any such security or indemnity. All rights of action under this Agreement
or under any of the Warrants may be enforced by the Warrant Agent without
the possession of any of the Warrants or the production thereof at any
trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name as
Warrant Agent, and any recovery of judgment shall be for the ratable
benefit of the Holders, as their respective rights or interests may appear.
(h) The Warrant Agent and any stockholder, director, officer or employee
of the Warrant Agent may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any
transactions in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Warrant Agent under this Agreement or such director, officer or
employee. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity including,
without limitation, acting as Transfer Agent or as a lender to the Company
or an Affiliate thereof.
(i) The Warrant Agent shall act hereunder solely as agent, and its
duties shall be determined solely by the provisions hereof. The Warrant
Agent shall not be liable for anything which it may do or refrain from
doing in connection with this Agreement except for its own negligence or
bad faith.
(j) The Warrant Agent will not incur any liability or responsibility to
the Company or to any Holder for any action taken in reliance on any
notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument reasonably believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties.
(k) The Warrant Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant (except its countersignature thereof);
nor shall the Warrant Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Warrant Shares (or other stock) to be issued pursuant to this Agreement or
any Warrant, or as to whether any Warrant Shares (or other stock) will,
when issued, be validly issued, fully paid and nonassessable, or as to the
Exercise Price or the number or amount of Warrant Shares or other
securities or other property issuable upon exercise of any Warrant.
(l) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice President or the
Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and shall not be liable for any
action taken or suffered to be taken by it in good faith and without
negligence in accordance with instructions of any such officer or officers.
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Section 18. Change of Warrant Agent. The Warrant Agent may resign at any
time and be discharged from its duties under this Agreement by giving to the
Company 30-days' notice in writing. The Warrant Agent may be removed by like
notice to the Warrant Agent from the Company. If the Warrant Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Warrant Agent. If the Company shall fail to make
such appointment within a period of 30 days after such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by any Holder (who shall with such notice submit
his, her or its Warrant for inspection by the Company), then any Holder may
apply to any court of competent jurisdiction for the appointment of a successor
to the Warrant Agent. Pending appointment of a successor warrant agent, either
by the Company or by such court, the duties of the Warrant Agent shall be
carried out by the Company. Any successor warrant agent, whether appointed by
the Company or such a court, shall be a bank or trust company in good standing,
incorporated under the laws of the United States of America or any State
thereof or the District of Columbia and having at the time of its appointment
as warrant agent a combined capital and surplus of at least $10,000,000. After
appointment, the successor warrant agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the former Warrant Agent shall
deliver and transfer to the successor warrant agent any property at the time
held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for such purpose. Failure to file any notice
provided for in this Section 18, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor warrant agent, as the case may be. In
the event of such resignation or removal, the Company or the successor warrant
agent shall mail by first class mail, postage prepaid, to each Holder, written
notice of such removal or resignation and the name and address of such
successor warrant agent.
Section 19. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company, the Warrant Agent or any holder of
Warrants shall bind and inure to the benefit of their respective successors and
assigns hereunder.
Section 20. Termination. This Agreement shall terminate at 5:00 p.m., New
York City time, on the Expiration Date. Notwithstanding the foregoing, this
Agreement will terminate on any earlier date if all Warrants have been
exercised pursuant to this Agreement.
Section 21. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF SAID STATE, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
Section 22. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered Holders of the Warrant Certificates any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Warrant Agent
and the registered Holders of the Warrant Certificates.
Section 23. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 24. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
ENDO PHARMACEUTICALS HOLDINGS INC.
By: _________________________________
Name:
Title:
UNITED STATES TRUST
COMPANY OF NEW YORK,
as Warrant Agent
By: _________________________________
Name:
Title:
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<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
[Face]
THIS SECURITY IS A GLOBAL CERTIFICATE AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON
OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE WARRANT AGREEMENT, DATED AS OF , 2000, BY AND BETWEEN THE
COMPANY AND THE WARRANT AGENT (THE "WARRANT AGREEMENT"), AND NO TRANSFER OF
THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
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<PAGE>
EXERCISABLE ON OR AFTER THE EXERCISABILITY DATE
AND ON OR BEFORE JULY 7, 2003
No. Warrants
Warrant Certificate
ENDO PHARMACEUTICALS HOLDINGS INC.
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of Warrants expiring on or before July 7, 2003 (the
"Warrants") to purchase shares of Common Stock, par value $.01 per share (the
"Common Stock"), of Endo Pharmaceuticals Holdings Inc., a Delaware corporation
(the "Company"). Each Warrant entitles the holder upon exercise to receive from
the Company on or after the Exercisability Date and on or before 5:00 p.m. New
York City Time on July 7, 2003 (the six-month anniversary of the Exercisability
Date), (a) 0.416667/4/ fully paid and nonassessable shares of Common Stock
(each such share, a "Warrant Share") in the event the Adjustment Event (as
defined in that certain Agreement and Plan of Merger, dated as of November 26,
1999, as may be amended and restated from time to time, by and among the
Company, Endo Inc., a Delaware corporation and wholly owned subsidiary of the
Company, and Algos Pharmaceutical Corporation, a Delaware corporation) has not
occurred prior to such time or (b) 0.250000/5/ Warrant Shares in the event the
Adjustment Event has occurred prior to such time, in either case, at the
initial exercise price (the "Exercise Price") equal to $0.01 payable upon
surrender of this Warrant Certificate and payment of the Exercise Price in the
manner set forth in the Warrant Agreement, subject only to the conditions set
forth herein and in the Warrant Agreement referred to on the reverse hereof.
The Exercise Price and number of Warrant Shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events as set
forth in the Warrant Agreement.
No Warrant may be exercised before the Exercisability Date or after 5:00
p.m., New York City Time, on July 7, 2003 and to the extent not exercised by
such time such Warrants shall become void.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
--------
(4) This number shall be adjusted in the final Agreement and Warrants in order
to reflect that at the Effective Time the aggregate number on which it is
based, when taken together with the shares of Parent Common Stock held by
Persons who had been holders of Parent Common Stock immediately prior to
the Effective Time, shall equal 85% of the shares of Parent Common Stock on
a fully diluted basis (excluding the effect of the Algos Warrants as if no
Adjustment Event had occurred).
(5) This number shall be adjusted in the final Agreement and Warrants in order
to reflect that at the Effective Time the aggregate number on which it is
based, when taken together with the shares of Parent Common Stock held by
Persons who had been holders of Parent Common Stock immediately prior to
the Effective Time, shall equal 80% of the shares of Parent Common Stock on
a fully diluted basis (excluding the effect of the Algos Warrants and after
giving effect to the Adjustment Event as if it had occurred).
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<PAGE>
IN WITNESS WHEREOF, Endo Pharmaceuticals Holdings Inc. has caused this
Warrant Certificate to be signed by an officer and by its Secretary, each by a
facsimile of his or her signature, and has caused a facsimile of its corporate
seal to be affixed hereunto or imprinted hereon.
Dated: ,
ENDO PHARMACEUTICALS HOLDINGS INC.
By: _________________________________
Name:
Title:
By: _________________________________
Name:
Title: Secretary
Countersigned:
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Warrant Agent
By: _________________________________
Name:
Title:
147
<PAGE>
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring July 7, 2003, entitling the holder on
exercise to receive shares of Common Stock, par value $.01 per share, of the
Company (the "Common Stock"), and are issued or to be issued pursuant to a
Warrant Agreement dated as of , 2000 (the "Warrant Agreement"), duly
executed and delivered by the Company to United States Trust Company of New
York, as warrant agent (the "Warrant Agent"), which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time on or after the "Exercisability Date"
and on or before July 7, 2003. The holder of Warrants evidenced by this Warrant
Certificate may exercise them by surrendering this Warrant Certificate, with
the form of election to purchase set forth hereon properly completed and
executed, together with payment in the manner provided for in the Warrant
Agreement at the office of the Warrant Agent. In the event that upon any
exercise of Warrants evidenced hereby, the number of Warrants exercised shall
be less than the total number of Warrants evidenced hereby, there shall be
issued to the holder hereof or his, her or its assignee a new Warrant
Certificate evidencing the number of Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of certain events
the number of Warrants set forth on the face hereof and the Exercise Price may,
subject to certain conditions, be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Warrant Agent by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
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<PAGE>
[Form of Election to Purchase]
(To Be Executed upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented
by this Warrant Certificate, to receive shares of Common Stock and herewith
tenders payment for such shares to the order of Endo Pharmaceuticals Holdings
Inc. in the amount of $ payable in (select one or more: (i) cash and/or (ii)
pursuant to a Cashless Exercise) in accordance with the terms hereof and of the
Warrant Agreement. The undersigned requests that a certificate for such shares
be registered in the name of , whose address is and that such shares
be delivered to whose address is . If said number of shares is less
than all of the shares of Common Stock purchasable hereunder, the undersigned
requests that a new Warrant Certificate representing the remaining balance of
such shares be registered in the name of , whose address is , and that
such Warrant Certificate be delivered to , whose address is .
Signature:
Date:
Signature Guaranteed:
149
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS
The following exchanges of a part of this Global Warrant for certificated
Warrants have been made:
<TABLE>
<CAPTION>
Number of
Warrants of
Amount of Amount of this Global
decrease in increase in Warrant Signature of
Number of Number of following authorized
Date of Warrants of this Warrants of this such decrease officer of
Exchange Global Warrant Global Warrant (or increase) Warrant Agent
-------- ---------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
</TABLE>
150
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of Endo Pharmaceuticals
Holdings Inc.
This Certificate relates to Warrants held in * book-entry or *
certificated form by (the "Transferor").
The Transferor:*
[_]has requested the Warrant Agent by written order to deliver in exchange for
its beneficial interest in the Global Warrant held by the depository a
Warrant or Warrants in definitive, registered form equal to its beneficial
interest in Warrants represented by such Global Warrant (or the portion
thereof indicated above); or
[_]has requested the Warrant Agent by written order to exchange or register the
transfer of a Warrant or Warrants.
_____________________________________
[INSERT NAME OF TRANSFEROR]
By: _________________________________
Date: _______________________
*Check applicable box.
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<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Affiliate................................................................. 137
Agreement................................................................. 129
Algos..................................................................... 129
Business Day.............................................................. 133
Cashless Exercise......................................................... 133
closing bid price......................................................... 137
Common Stock.............................................................. 129
Company................................................................... 129
Current Market Value...................................................... 136
Definitive Warrants....................................................... 129
Exchange Act.............................................................. 136
Exercisability Date....................................................... 133
Exercise Price............................................................ 133
Exercise Rate............................................................. 135
Expiration Date........................................................... 132
FDA....................................................................... 133
Fully Diluted Shares...................................................... 136
Global Warrants........................................................... 129
Holders................................................................... 130
Independent Financial Expert.............................................. 137
Legal Holiday............................................................. 133
Merger Agreement.......................................................... 129
Ordinary Cash Distribution................................................ 137
Reorganizations........................................................... 138
Security.................................................................. 136
shares of Common Stock.................................................... 129
Sub....................................................................... 129
Time of Determination..................................................... 135
Transfer Agent............................................................ 134
Warrant................................................................... 129
Warrant Agent............................................................. 129
Warrant Certificates...................................................... 129
Warrant Register.......................................................... 130
Warrant Shares............................................................ 129
Warrants.................................................................. 129
</TABLE>
152
