-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E01UFJRgCHnx8UHtrD67XhSDf7aKNnXmGN4Gl8WkYsc0GMIzd2TSbWOpyNpdEuG9 cDejS41ru1ajVrObwmP+zw== /in/edgar/work/20000727/0000950130-00-004080/0000950130-00-004080.txt : 20000921 0000950130-00-004080.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950130-00-004080 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 20000727 GROUP MEMBERS: ALFRED C. ECKERT III GROUP MEMBERS: CITIGROUP INC. GROUP MEMBERS: DAVID I. WAHRHAFTIG GROUP MEMBERS: ENDO PHARMA LLC GROUP MEMBERS: FRANK K. BYNUM, JR. GROUP MEMBERS: FRANK T. NICKELL GROUP MEMBERS: GEORGE E. MATELICH GROUP MEMBERS: GREENWICH STREET CAPITAL OFFSHORE FUND, LTD. GROUP MEMBERS: GREENWICH STREET CAPITAL PARTNERS, INC. GROUP MEMBERS: GREENWICH STREET CAPITAL PARTNERS, L.P. GROUP MEMBERS: GREENWICH STREET INVESTMENTS L.P. GROUP MEMBERS: GREENWICH STREET INVESTMENTS, L.L.C. GROUP MEMBERS: JOSEPH S. SCHUCHERT GROUP MEMBERS: KEITH W. ABELL GROUP MEMBERS: KELSO EQUITY PARTNERS V, L.P. GROUP MEMBERS: KELSO INVESTMENT ASSOCIATES V, L.P. GROUP MEMBERS: KELSO PARTNERS V, L.P. GROUP MEMBERS: MICHAEL B. GOLDBERG GROUP MEMBERS: PHILIP E. BERNEY GROUP MEMBERS: SANJAY H. PATEL GROUP MEMBERS: THE TRAVELERS INSURANCE COMPANY GROUP MEMBERS: THE TRAVELERS LIFE AND ANNUITY COMPANY GROUP MEMBERS: THOMAS R. WALL, IV GROUP MEMBERS: TRV EMPLOYEES FUND, L.P. GROUP MEMBERS: TRV EMPLOYEES INVESTMENTS, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ENDO PHARMACEUTICALS HOLDINGS INC CENTRAL INDEX KEY: 0001100962 STANDARD INDUSTRIAL CLASSIFICATION: [2834 ] IRS NUMBER: 134022871 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-59365 FILM NUMBER: 680347 BUSINESS ADDRESS: STREET 1: 223 WILMINGTON-WEST CHESTER PIKE CITY: CHADDS FORD STATE: PA ZIP: 19317 BUSINESS PHONE: 6105589800 MAIL ADDRESS: STREET 1: 223 WILMINGTON-WEST CHESTER PIKE CITY: CHADDS FORD STATE: PA ZIP: 19317 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ENDO PHARMA LLC CENTRAL INDEX KEY: 0001120075 STANDARD INDUSTRIAL CLASSIFICATION: [ ] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 320 PARK AVE STREET 2: 24TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127513939 MAIL ADDRESS: STREET 1: 320 PARK AVE STREET 2: 24TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D 1 0001.txt SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 Endo Pharmaceuticals Holdings Inc. ------------------------------------------------------------ (Name of Issuer) Common Stock $.01 par value per share ------------------------------------------------------------ (Title of Class and Securities) 29264F 20 5 ------------------------------------------------------------ (CUSIP Number) James J. Connors, II Joseph B. Wollard Endo Pharma LLC Citigroup Inc. 320 Park Avenue 425 Park Avenue New York, New York 10022 New York, New York 10043 (212) 751-3939 (212) 793-7167 with a copy to: with a copy to: Eileen T. Nugent, Esq. Beth Pagel Serebransky Skadden, Arps, Slate, Meagher & Flom LLP Debevoise & Plimpton 4 Times Square 875 Third Avenue New York, New York 10036-6522 New York, New York 10022 (212) 735-3000 Direct Dial: (212) 909-6785 ------------------------------------------------------------ (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 17, 2000 ------------------------------------------------------------ (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rules 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. [ ] Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. Page 1 of 39 (Continued on following pages) SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Endo Pharma LLC Application for I.R.S. Identification Number is Pending ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS SC ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 70,938,030 SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY None EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON 70,938,030 WITH _____________________________________ 10. SHARED DISPOSITIVE POWER None ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 70,938,030 ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.562% ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON OO ------------------------------------------------------------------- Page 2 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Kelso Investment Associates V, L.P. 13-372-8774 ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 70,938,030 EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER 70,938,030 ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 70,938,030 ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.562% ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN ------------------------------------------------------------------- Page 3 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Kelso Equity Partners V, L.P. 13-3787708 ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 70,938,030 EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER 70,938,030 ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 70,938,030 ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.562% ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN ------------------------------------------------------------------- Page 4 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Kelso Partners V, L.P. 13-3728773 ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 70,938,030 EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER 70,938,030 ------------------------------------------------------------------ 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 70,938,030 ------------------------------------------------------------------ 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------ 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.562% ------------------------------------------------------------------ 14. TYPE OF REPORTING PERSON CO ------------------------------------------------------------------ Page 5 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Joseph S. Schuchert ###-##-#### ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 70,938,030 EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER 70,938,030 ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 70,938,030 ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.562% ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN ------------------------------------------------------------------- Page 6 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Frank T. Nickell ###-##-#### ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 70,938,030 EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER 70,938,030 ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 70,938,030 ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.562% ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN ------------------------------------------------------------------- Page 7 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Michael B. Goldberg ###-##-#### ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 70,938,030 EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER 70,938,030 ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 70,938,030 ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.562% ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN ------------------------------------------------------------------- Page 8 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) George E. Matelich ###-##-#### ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 70,938,030 EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER 70,938,030 ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 70,938,030 ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.562% ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN ------------------------------------------------------------------- Page 9 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Frank K. Bynum, Jr. ###-##-#### ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 70,938,030 EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER 70,938,030 ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 70,938,030 ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.562% ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN ------------------------------------------------------------------- Page 10 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Thomas R. Wall, IV ###-##-#### ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 70,938,030 EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER 70,938,030 ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 70,938,030 ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.562% ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN ------------------------------------------------------------------- Page 11 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) David I. Wahrhaftig ###-##-#### ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 70,938,030 EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER 70,938,030 ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 70,938,030 ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.562% ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN ------------------------------------------------------------------- Page 12 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Philip E. Berney ###-##-#### ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 70,938,030 EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER 70,938,030 ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 70,938,030 ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.562% ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN ------------------------------------------------------------------- Page 13 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Greenwich Street Capital Partners, L.P. 13-379-6268 ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY None EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER None ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON None ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 None ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN ------------------------------------------------------------------- Page 14 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Greenwich Street Capital Offshore Fund, Ltd. ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION British Virgin Islands ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY None EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER None ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON None ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 None ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO ------------------------------------------------------------------- Page 15 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) TRV Employees Fund, L.P. 13-379-6261 ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY None EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER None ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON None ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 None ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN ------------------------------------------------------------------- Page 16 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) The Travelers Insurance Company 06-0566090 ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Connecticut ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY None EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER None ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON None ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 None ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO ------------------------------------------------------------------- Page 17 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) The Travelers Life and Annuity Company 06-090-4249 ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Connecticut ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY None EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER None ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON None ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 None ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO ------------------------------------------------------------------- Page 18 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 ------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Greenwich Street Investments L.P. 13-379-6259 ------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) ------------------------------------------------------------------- 3. SEC USE ONLY ------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A ------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) ------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY None EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER None ------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON None ------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) ------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 None ------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN ------------------------------------------------------------------- Page 19 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 - --------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Citigroup Inc. 52-1568099 - --------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) - --------------------------------------------------------------------- 3. SEC USE ONLY - --------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A - --------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) - --------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 63,100 EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER 63,100 - --------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 63,100 - --------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) - --------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 Less than 1% - --------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - --------------------------------------------------------------------- Page 20 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 - --------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Greenwich Street Investments, L.L.C. - --------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) - --------------------------------------------------------------------- 3. SEC USE ONLY - --------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A - --------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) - --------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY None EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER None - --------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON None - --------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) - --------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 None - --------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - --------------------------------------------------------------------- Page 21 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 - --------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Greenwich Street Capital Partners, Inc. 06-139-3602 - --------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) - --------------------------------------------------------------------- 3. SEC USE ONLY - --------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A - --------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) - --------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY None EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER None - --------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON None - --------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) - --------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 None - --------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - --------------------------------------------------------------------- Page 22 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 - --------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) TRV Employees Investments, Inc. 13-379-6277 - --------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) - --------------------------------------------------------------------- 3. SEC USE ONLY - --------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A - --------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) - --------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY None EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER None - --------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON None - --------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) - --------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 None - --------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - --------------------------------------------------------------------- Page 23 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 - --------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Alfred C. Eckert III - --------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) - --------------------------------------------------------------------- 3. SEC USE ONLY - --------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A - --------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) - --------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. - --------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY None EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER None - --------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON None - --------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) - --------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 None - --------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - --------------------------------------------------------------------- Page 24 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 - --------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Keith W. Abell - --------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) - --------------------------------------------------------------------- 3. SEC USE ONLY - --------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A - --------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) - --------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. - --------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY None EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER None - --------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON None - --------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) - --------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 None - --------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - --------------------------------------------------------------------- Page 25 of 39 SCHEDULE 13D CUSIP No. 29264F 20 5 - --------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Sanjay H. Patel - --------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ( ) (b) (X) - --------------------------------------------------------------------- 3. SEC USE ONLY - --------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A - --------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) - --------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION India - --------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF None SHARES _____________________________________ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY None EACH _____________________________________ REPORTING 9. SOLE DISPOSITIVE POWER PERSON None WITH _____________________________________ 10. SHARED DISPOSITIVE POWER None - --------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON None - --------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES ( ) - --------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 None - --------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - --------------------------------------------------------------------- Page 26 of 39 Item 1. Security and Issuer. ------------------- This statement on Schedule 13D ("Schedule 13D") is being filed pursuant to Rule 13d-1 of the Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with respect to the common stock, par value $.01 per share (the "Common Stock"), of Endo Pharmaceuticals Holdings Inc. (the "Issuer" or "Endo"). The principal executive offices of the Issuer are located at 223 Wilmington-West Chester Pike, Chadds Ford, Pennsylvania 19317. Item 2. Identity and Background. ----------------------- (a) This Schedule 13D is being filed jointly by Endo Pharma LLC, a limited liability company organized under the laws of the State of Delaware ("Endo LLC"); Kelso Investment Associates V, L.P., a limited partnership organized under the laws of the State of Delaware ("KIA V"); Kelso Equity Partners V, L.P., a limited partnership organized under the laws of the State of Delaware ("KEP V"); Kelso Partners V, L.P., a limited partnership organized under the laws of the State of Delaware and the general partner of KIA V ("KP V"); Frank T. Nickell, Thomas R. Wall, IV, George E. Matelich, Michael B. Goldberg, David I. Wahrhaftig, Frank K. Bynum, Jr., Philip E. Berney and Joseph S. Schuchert, each of whom is a general partner of KP V and of KEP V (such individuals, collectively, the "Kelso General Partners"); Greenwich Street Capital Partners, L.P. a limited partnership organized under the laws of the State of Delaware ("GSCP"); Greenwich Street Capital Offshore Fund, Ltd., a British Virgin Islands international business company ("GSC Offshore"); TRV Employees Fund, L.P., a limited partnership organized under the laws of the State of Delaware ("TRV Fund" and together with GSCP and GSC Offshore, the "Greenwich Funds"); The Travelers Insurance Company, a Connecticut corporation ("TIC"); The Travelers Life and Annuity Company, a Connecticut corporation ("TLAC"); Greenwich Street Investments, L.P., a limited partnership organized under the laws of the State of Delaware ("GSI"); Citigroup Inc., a Delaware corporation ("Citigroup"); Greenwich Street Investments, L.L.C., a limited liability company organized under the laws of the State of Delaware("GSILLC"); Greenwich Street Capital Partners, Inc., a Delaware corporation ("GSCPI"); TRV Employees Investments, Inc., a Delaware corporation ("TRVEII"); and Alfred C. Eckert III, Keith W. Abell and Sanjay H. Patel (such individuals, collectively, the "GS Managing Members"). (Endo LLC, KIA V, KEP V, KP V, the Kelso General Partners, GSCP, GSC Offshore, TRV Fund, TIC, TLAC, GSI, Citigroup, GSILLC, GSCPI and the GS Managing Members, are referred to herein as the "Filing Persons"). The Filing Persons hereby disclaim beneficial ownership of any shares of the Common Stock that may be beneficially owned by Endo LLC, and the filing of this statement shall not be construed as an admission that the Filing Persons are, for purposes of Section 13(d) of the Exchange Act, the beneficial owners of any such shares of Common Stock. Information with respect to each Filing Person is given solely by such Filing Person and no Filing Person has responsibility for the accuracy or completeness of information supplied by any other Filing Person. (b) The principal business address for each of Endo LLC, KIA V, KEP V, KP V and the Kelso General Partners is c/o Kelso & Company, 320 Park Avenue, 24/th/ Floor, New York, New York 10022. The principal business address for each of GSCP, TRV Fund, GSI, GSILLC, GSCPI, TRVEII and the GS Managing Members is 388 Greenwich Street, New York, NY 10013. The principal business address for GSC Offshore is c/o Louise Chippendale Rawlinson & Hunter Ltd., Woodburne Hall, P.O. Page 27 of 39 Box 3162, Road Town, Tortola, British Virgin Islands. The principal business address for each of TIC and TLAC is One Tower Square, Hartford, Connecticut 06183. The principal business address for Citigroup is 399 Park Avenue, New York, New York 10043. (c) Endo LLC was formed for the purpose of acquiring and holding shares of the Common Stock of the Issuer in connection with the merger (the "Merger") of Algos Pharmaceutical Corporation, a Delaware corporation ("Algos"), with and into Endo Inc., a Delaware corporation and newly formed, wholly owned subsidiary of the Issuer ("Sub"), pursuant to an Agreement and Plan of Merger, dated as of November 26, 1999, by and among Endo, Sub and Algos (as may be amended and restated from time to time, the "Merger Agreement"). KIA V and KEP V are private investment vehicles formed for the purpose of investing in transactions arranged by Kelso & Company, a private investment firm specializing in acquisition transactions ("Kelso"). The present principal occupation of each of the Kelso General Partners is as follows: Mr. Schuchert is Chairman of Kelso; Mr. Nickell is President of Kelso; Mr. Goldberg is Managing Director of Kelso; Mr. Matelich is Managing Director of Kelso; Mr. Bynum is Managing Director of Kelso; Mr. Wall is Managing Director of Kelso; Mr. Wahrhaftig is Managing Director of Kelso and Mr. Berney is Managing Director of Kelso. GSCP, GSC Offshore, and TRV Fund are private investment funds. GSI is the general partner of GSCP and GSILLC is the managing general partner of GSI. GSCPI is the manager of GSC Offshore and GSCP. TRVEII is the general partner of TRV Fund. Each of Messrs. Eckert, Abell and Patel is a general partner of GSI and an executive employee of GSILLC, GSCPI and TRVEII. Citigroup is a diversified holding company whose businesses provide a broad range of financial services to consumer and corporate customers. TIC is an indirect wholly-owned subsidiary of Citigroup and is engaged in life insurance services. TLAC is a wholly-owned subsidiary of TIC and is engaged in life and annuity insurance services. (d)-(e) During the last five years, none of the Filing Persons and to the best of each of the Filing Persons' knowledge, any of their respective executive officers, controlling persons or directors has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction resulting in a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws. (f) All Filing Persons who are natural persons (other than Mr. Patel) are citizens of the United States. Mr. Patel is a citizen of India. Endo LLC, KIA V, KEP V, KP V, GSCP, TRV Fund, Citigroup, GSI, GSILLC, GSCPI and TRVEII are each organized under the laws of the State of Delaware. GSC Offshore is organized under the laws of the British Virgin Islands. TIC and TLAC are each organized under the laws of the State of Connecticut. Page 28 of 39 Item 3. Source and Amount of Funds or Other Consideration. ------------------------------------------------- Endo LLC acquired beneficial ownership of 70,938,030 shares of Common Stock (the "Shares") pursuant to certain exchange agreements, dated as of July 14, 2000 (the "Exchange Agreements"), by and between Endo LLC, KIA V, the Greenwich Funds, TIC and TLAC as well as certain other stockholders (all of such stockholders, the "Exchanging Stockholders") of the Issuer. Under the terms and subject to the conditions of the Exchange Agreements, the Exchanging Stockholders exchanged all of the equity securities of the Issuer previously owned by them for a number of membership interests ("Units") in Endo LLC. The above description herein of the Exchange Agreements does not purport to be complete and is qualified in their entirety by reference to the form of Exchange Agreement, a copy of which is attached hereto as Exhibit 1. Item 4. Purpose of Transaction. ---------------------- Endo LLC acquired the shares of Common Stock in connection with the Merger and to fulfill certain obligations of the Issuer contained in the Merger Agreement. Specifically, as described in Endo's Registration Statement on Form S-4, Endo LLC acquired the shares of Common Stock prior to the Merger in order to ensure that (i) the employee stock options of the Issuer that were outstanding immediately prior to the Merger will only affect those holders of the Common Stock who held such shares prior to the Merger and (ii) the Algos stockholders' percentage ownership of Endo will increase by an additional five percentage points in the event Endo does not achieve a cash gross profit (based on pre-Merger Endo products and future non-Algos related products internally developed and sold or marketed by Endo) for fiscal year 2000 of at least $147.4 million. Endo LLC entered into the agreements described in Item 6 hereof in order to effect these transactions. In connection with the Merger, with respect to each share of Common Stock that it owns, Endo issued to Endo LLC one warrant (the "Endo Warrant") to purchase up to 29,557,513 additional shares of Common Stock in the event that the Food and Drug Administration does not approve MorphiDex(R) prior to December 31, 2002. The exercise price of the Endo Warrant is $.01 per share. There can be no assurance that Endo LLC will acquire additional shares of Common Stock pursuant to the exercise of the Endo Warrant. This description of the Endo Warrant does not purport to be complete and is qualified in its entirety by reference to (1) the warrant agreement, dated as of July 17, 2000 (the "Pre-Merger Warrant Agreement"), by and between Endo and United States Trust Company of New York, as warrant agent, and (2) the Endo Warrant, copies of which are attached hereto as Exhibits 2 and 3, respectively. Other than as set forth above, the Filing Persons do not currently have any plans or proposals, other than those described in Item 4 and Item 6 of this Schedule 13D, which relate to or would result in any of the actions or transactions in clauses (a) through (j) of Item 4 of Schedule 13D. The Filing Persons may from time to time discuss among themselves and with other persons market conditions and other factors concerning their investment in the Issuer, as well as specific actions that might be taken in light of prevailing circumstances with respect to such interests. Page 29 of 39 The Filing Persons reserve the right from time to time to acquire or dispose of the Shares or the Endo Warrant, or to formulate other purposes, plans or proposals regarding the Issuer or the Shares or the Endo Warrant held by the Filing Persons to the extent deemed advisable in light of general investment policies, market conditions and other factors. Item 5. Interest in Securities of the Issuer. ------------------------------------ (a)-(b) Endo LLC -------- As of July 26, 2000, the aggregate number of shares of the Common Stock that Endo LLC has the sole power to vote or to direct the vote of (and as a result, may, under Rule 13d-3 under the Exchange Act, be deemed the beneficial owner of) is 70,938,030. This number represents approximately 79.562% of the 89,160,530 shares of such Common Stock outstanding as of July 26, 2000. Endo LLC hereby disclaims beneficial ownership of the securities reported herein. All Other Filing Persons ------------------------ Because of their direct or indirect ownership of the majority of the Units of Endo LLC, KIA V, KEP V, KP V and the Kelso General Partners may be deemed as possessing the shared power to vote or to direct the vote (and as a result, may under Rule 13d-3 under the Exchange Act, be deemed the beneficial owner of) an aggregate of 70,938,030 shares of Common Stock. This number of shares represent approximately 79.562% of the 89,160,530 shares of such Common Stock outstanding as of July 24, 2000. However, all such Filing Persons (including Endo LLC) disclaim beneficial ownership of such shares of Common Stock. Certain subsidiaries of Citigroup beneficially own 63,100 shares of Common Stock as of July 24, 2000. (c) Except as set forth in Item 5, to the best knowledge of each Filing Person, none of the Filing Persons and no other person described in Item 2 hereof has beneficial ownership of, or has engaged in any transaction during the past 60 days in, any shares of Common Stock. (d) None of the Filing Persons, to the best knowledge of each Filing Person, has the right to receive or to the power to direct the receipt of dividends from, or the proceeds from the sale of, the Shares. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships -------------------------------------------------------- With Respect to Securities of the Issuer. ---------------------------------------- Except as set forth in this Statement, to the best knowledge of the Filing Persons, there are no other contracts, arrangements, understandings or Page 30 of 39 relationships (legal or otherwise) among the persons named in Item 2 and between such persons and any person with respect to any securities of the Issuer, including, but not limited to, transfers or voting of any securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. On November 26, 1999, Algos, KIA V, KEP V and Endo entered into a letter agreement (the "Letter Agreement"), pursuant to which, in order to induce Algos to enter into the Merger Agreement, KIA V and KEP V agreed that, for a period of two years from the effective time of the Merger, they will not, and will cause any of its affiliates to which either of KIA V or KEP V has transferred any shares of Common Stock (other than Endo and any of Endo's subsidiaries) not to, engage in certain transactions with respect to Endo. On July 14, 2000, the Exchanging Stockholders entered into a limited liability company agreement of Endo LLC (the "LLC Agreement"). The LLC Agreement governs the operation of the Issuer. On July 14, 2000, Endo LLC adopted the (i) Amended and Restated 1997 Employee Stock Option Plan (the "Amended 1997 Employee Plan") and (ii) Amended and Restated 1997 Executive Stock Option Plan (the "Amended 1997 Executive Plan") to provide, among other things, that the stock options granted pursuant to these plans will be exercisable solely into shares of Common Stock held by Endo LLC, (iii) 2000 Supplemental Employee Stock Option Plan (the "2000 Employee Plan") and (iv) 2000 Supplemental Executive Stock Option Plan (the "2000 Executive Plan" and together with the Amended 1997 Employee Plan, the Amended 1997 Executive Plan and the 2000 Supplemental Employee Plan, the "LLC Plans"), pursuant to which Endo LLC will grant options to purchase shares of Common Stock held by it to certain executives and employees, respectively, of Endo and its subsidiaries. Endo, Endo LLC, KIA V, KEP V and the Management Stockholders (as defined therein) entered into an amended and restated executive stockholders agreement as of July 14, 2000 (the "Executive Stockholders Agreement"). Endo, Endo LLC, KIA V, KEP V and the Employee Stockholders (as defined therein) entered into an amended and restated employee stockholders agreement as of July 14, 2000 (the "Employee Stockholders Agreement"). On July 17, 2000, Endo, Sub and Endo LLC entered into a tax sharing agreement (the "Tax Sharing Agreement"), pursuant to which, in general, Endo will pay to Endo LLC the amount of the tax benefits Endo receives as a result of the exercise of employee stock options granted under the LLC Plans to employees of Endo. On July 17, 2000, Endo and Endo LLC entered into an agreement (the "Treasury Agreement"), pursuant to which Endo LLC agreed to comply with Section 5.21 of the Merger Agreement and return a number of shares of Common Stock it owns to Endo's treasury in the event that the cash gross profit of Endo for fiscal year 2000 is less than $147.4 million thereby increasing the Algos stockholders ownership in Endo by five percentage points. On July 17, 2000, Endo and Endo LLC entered into a registration rights agreement (the "Registration Rights Agreement"), which provides Endo LLC with registration rights with respect to the shares of Common Stock owned by it. The Registration Rights Agreement provides, among other things, for the registration with the Securities and Exchange Commission of the shares of Common Stock it Page 31 of 39 owns. Pursuant to the terms of the Registration Rights Agreement, Endo LLC shall be entitled to six "demand registrations." The Registration Rights Agreement further provides that Endo LLC shall have "piggyback" registration rights with respect to any registration of Common Stock, subject to customary "black-out" and "hold-back" provisions. The descriptions herein of each of the Letter Agreement, LLC Agreement, Amended Executive Stockholders Agreement, Amended Employee Stockholders Agreement, Amended 1997 Employee Stock Option Plan, Amended 1997 Executive Stock Option Plan, 2000 Employee Stock Option Plan, 2000 Executive Stock Option Plan, Tax Sharing Agreement, Treasury Agreement and Registration Rights Agreement do not purport to be complete and are qualified in their entirety by reference to each of the Letter Agreement, LLC Agreement, Amended Executive Stockholders Agreement, Amended Employee Stockholders Agreement, Amended 1997 Employee Stock Option Plan, Amended 1997 Executive Stock Option Plan, 2000 Employee Stock Option Plan, 2000 Executive Stock Option Plan, Tax Sharing Agreement, Treasury Agreement and Registration Rights Agreement, copies of which are attached hereto as Exhibits 4-14, respectively and are incorporated herein by reference. Item 7. Materials to be Filed as Exhibits. ---------------------------------- Exhibit Description ------- ----------- 1. Form of Exchange Agreement, by and between Endo Pharmaceuticals Holdings Inc. ("Endo") and the stockholders party thereto 2. Endo Warrant, dated as of July 17, 2000, issued by Endo to Endo Pharma LLC ("Endo LLC") 3. Pre-Merger Warrant Agreement, dated as of July 17, 2000, by and between Endo and United States Trust Company of New York, as warrant agent 4. Letter Agreement, dated as of November 26, 1999, by and among Algos Pharmaceutical Corporation, Endo, Kelso Investment Associates V, L.P. ("KIA V") and Kelso Equity Partners V, L.P. ("KEP V") 5. Limited Liability Company Agreement of Endo LLC ("Endo LLC"), dated as of July 14, 2000, by and among the persons party thereto and Page 32 of 39 each of their Permitted Transferees (as defined therein) 6. Amended and Restated Executive Stockholders Agreement, dated as of July 14, 2000, by and among Endo, Endo LLC, KIA V, KEP V and the Management Stockholders (as defined therein) 7. Amended and Restated Employee Stockholders Agreement, dated as of July 14, 2000, by and among Endo, Endo LLC, KIA V, KEP V and the Employee Stockholders (as defined therein) 8. Endo LLC Amended and Restated 1997 Employee Stock Option Plan 9. Endo LLC Amended and Restated 1997 Executive Stock Option Plan 10. Endo LLC 2000 Supplemental Employee Option Plan 11. Endo LLC 2000 Supplemental Executive Option Plan 12. Tax Sharing Agreement, dated as of July 17, 2000, by and among Endo, Endo Inc. and Endo LLC 13. Treasury Agreement, dated as of July 17, 2000, by and between Endo and Endo LLC 14. Registration Rights Agreement, dated as of July 17, 2000, by and between Endo and Endo LLC 15. Joint Filing Agreement, dated as of July 26, 2000 16. Powers of Attorney Page 33 of 39 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 27, 2000 ENDO PHARMA LLC By:/s/ Jeffrey R. Black --------------------------------- Name: Jeffrey R. Black Title: Chief Financial Officer KELSO INVESTMENT ASSOCIATES V, L.P. By: Kelso Partners V, L.P., its General Partner By:/s/ Michael B. Goldberg --------------------------------- KELSO EQUITY PARTNERS V, L.P. By:/s/ Michael B. Goldberg --------------------------------- KELSO PARTNERS V, L.P. By:/s/ Michael B. Goldberg --------------------------------- * ------------------------------------ Joseph S. Schuchert * ------------------------------------ Frank T. Nickell * ------------------------------------ George E. Matelich Page 34 of 39 * ---------------------------------------- Thomas R. Wall, IV * ---------------------------------------- Frank K. Bynum, Jr. * ---------------------------------------- Michael B. Goldberg * ---------------------------------------- David I. Wahrhaftig * ---------------------------------------- Philip E. Berney GREENWICH STREET CAPITAL PARTNERS, L.P. By: Greenwich Street Investments, L.P., its general partner By: Greenwich Street Investments, L.L.C., General Partner By:/s/ Eric S. Bomze ------------------------------------- Name: Eric S. Bomze Title: Assistant Vice President GREENWICH STREET CAPITAL OFFSHORE FUND, LTD. By: Greenwich Street Capital Partners, Inc., as Manager By:/s/ Eric S. Bomze ------------------------------------- Name: Eric S. Bomze Title: Assistant Vice President TRV EMPLOYEES FUND, L.P. By: TRV Employees Investments, Inc. its general partner By:/s/ Eric S. Bomze ------------------------------------- Name: Eric S. Bomze Title: Assistant Vice President Page 35 of 39 THE TRAVELERS INSURANCE COMPANY By: /s/ Millie Kim ------------------------------------- Name: Millie Kim Title: Assistant Secretary THE TRAVELERS LIFE AND ANNUITY COMPANY By: /s/ Millie Kim ------------------------------------- Name: Millie Kim Title: Assistant Secretary CITIGROUP INC. By:/s/ Joseph B. Wollard ------------------------------------ Name: Joseph B. Wollard Title: Assistant Secretary GREENWICH STREET INVESTMENTS, L.P. By: Greenwich Street Investments, L.L.C., General Partner By:/s/ Eric S. Bomze ------------------------------------ Name: Eric S. Bomze Title: Assistant Vice President GREENWICH STREET INVESTMENTS, L.L.C. By:/s/ Eric S. Bomze ------------------------------------ Name: Eric S. Bomze Title: Assistant Vice President GREENWICH STREET CAPITAL PARTNERS, INC. By:/s/ Eric S. Bomze ------------------------------------ Name: Eric S. Bomze Title: Assistant Vice President TRV EMPLOYEES INVESTMENTS, INC. By:/s/ Eric S. Bomze ------------------------------------ Name: Eric S. Bomze Title: Assistant Vice President /s/ Alfred C. Eckert III ---------------------------------------- Alfred C. Eckert III Page 36 of 39 /s/ Keith W. Abell ---------------------------------------- Keith W. Abell /s/ Sanjay H. Patel ---------------------------------------- Sanjay H. Patel * The undersigned, by signing his name hereto, executes this Schedule pursuant to the Power of Attorney executed on behalf of the above-named entities and individuals and filed herewith. By: /s/ Stanley de J. Osborne ------------------------------------ Attorney-in-Fact Page 37 of 39 EXHIBIT INDEX Exhibit Description - ------- ----------- 1. Form of Exchange Agreement, by and between Endo Pharmaceuticals Holdings Inc. ("Endo") and the stockholders party thereto 2. Endo Warrant, dated as of July 17, 2000, issued by Endo to Endo Pharma LLC ("Endo LLC") 3. Pre-Merger Warrant Agreement, dated as of July 17, 2000, by and between Endo and United States Trust Company of New York, as warrant agent 4. Letter Agreement, dated as of November 26, 1999, by and among Algos Pharmaceutical Corporation, Endo, Kelso Investment Associates V, L.P. ("KIA V") and Kelso Equity Partners V, L.P. ("KEP V") 5. Limited Liability Company Agreement of Endo LLC ("Endo LLC"), dated as of July 14, 2000, by and among the persons party thereto and each of their Permitted Transferees (as defined therein) 6. Amended and Restated Executive Stockholders Agreement, dated as of July 14, 2000, by and among Endo, Endo LLC, KIA V, KEP V and the Management Stockholders (as defined therein) 7. Amended and Restated Employee Stockholders Agreement, dated as of July 14, 2000, by and among Endo, Endo LLC, KIA V, KEP V and the Employee Stockholders (as defined therein) 8. Endo LLC Amended and Restated 1997 Employee Stock Option Plan 9. Endo LLC Amended and Restated 1997 Executive Stock Option Plan 10. Endo LLC 2000 Supplemental Employee Option Plan Page 38 of 39 11. Endo LLC 2000 Supplemental Executive Option Plan 12. Tax Sharing Agreement, dated as of July 17, 2000, by and among Endo, Endo Inc. and Endo LLC 13. Treasury Agreement, dated as of July 17, 2000, by and between Endo and Endo LLC 14. Registration Rights Agreement, dated as of July 17, 2000, by and between Endo and Endo LLC 15. Joint Filing Agreement, dated as of July 26, 2000 16. Powers of Attorney Page 39 of 39 EX-99.1 2 0002.txt EXCHANGE AGREEMENT EXHIBIT 1 EXCHANGE AGREEMENT This Exchange Agreement (this "Agreement") is made and entered into as --------- of July 14, 2000, by and between Endo Pharma LLC, a limited liability company formed under the laws of the State of Delaware (the "Company"), and each ------- investor listed on the signature page hereto (the "Investor," and together with -------- other investors, the "Investors"). --------- WHEREAS, each Investor owns the number of shares of (i) class A common stock, par value $.01 per share (the "Endo Class A Common Stock"), of Endo ------------------------- Pharmaceuticals Holdings Inc., a Delaware corporation ("Endo Holdings"), or (ii) ------------- common stock, par value $.01 per share (the "Endo Common Stock") of Endo ----------------- Holdings, set forth on Annex A attached hereto (the "Endo Securities"); --------------- WHEREAS, Endo Holdings 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"), by and among Endo Holdings, Endo Inc., a newly ---------------- formed and wholly owned subsidiary of Endo Holdings ("Sub"), and Algos --- Pharmaceutical Corporation ("Algos"), whereby Algos will merge with and into Sub ----- (the "Merger"); ------ WHEREAS, the Company has been formed to effect certain of the transactions contemplated by the Merger Agreement; WHEREAS, upon the terms and subject to the conditions set forth herein, each Investor desires to assign, transfer and deliver to the Company all of the Investor's Endo Securities, and the Company desires to issue to each Investor an equity interest in the Company (the "Units") as set forth on Annex A ----- attached hereto in exchange for such Investor's Endo Securities. NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and warranties herein contained, each Investor and the Company agree hereby as follows: 1. Exchange of the Shares. ---------------------- Upon the terms and subject to all the conditions of this Agreement, and in reliance upon the representations and warranties contained herein, each Investor hereby agrees to assign, transfer and deliver to the Company the amount of Endo Securities, and the Company agrees to issue to each Investor the number of Units, each as set forth on Annex A attached hereto, free and clear of any liens, security interests, pledges, charges, claims, options, rights, demands and restrictions of every kind, character and description whatsoever (collectively, "Encumbrances"). Notwithstanding anything in this ------------ Agreement to the contrary, the Company shall have no obligation to issue any Units to any Person who is a resident of a jurisdiction in which the issuance of such Units to him, her or its would constitute a violation of the securities, "blue sky" or other similar laws of such jurisdiction. 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. 2. Closing. ------- (a) Time and Place. The closing of the transactions contemplated by -------------- this Agreement (the "Closing") shall be at the offices of Skadden, Arps, Slate, ------- Meagher & Flom LLP, Four Times Square, New York, New York 10036-6522 at 10:00 a.m., New York, New York, on July 14, 2000. (b) Delivery by the Investor. On or prior to the Closing, each ------------------------ Investor will deliver the certificates evidencing and representing such Investor's Endo Securities as set forth on Annex A attached hereto, duly endorsed in favor of the Company. (c) Delivery by the Company. At the Closing, the Company will ----------------------- deliver to each Investor a cross-receipt evidencing delivery by the Company, and receipt by such Investor, of the Units. 2 3. Representations and Warranties. ------------------------------ Each Investor represents and warrants as of the date hereof, and as of the Closing hereunder, as follows: (a) Authority. Such Investor has all requisite power and authority --------- to (i) enter into and perform all of such Investor's obligations under this Agreement; (ii) assign, transfer and deliver such Investor's Endo Securities and (iii) carry out the transactions contemplated hereby. (b) Due Execution and Delivery; Enforceability. The execution and ------------------------------------------ delivery of this Agreement has been duly and validly authorized by all required action on the part of such Investor and no other proceedings on the part of such Investor are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by such Investor and, assuming this Agreement has been duly executed and delivered by the Company, this Agreement constitutes a valid and binding agreement of such Investor, enforceable against such Investor in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting enforcement of creditors' rights generally and by general equitable principles. (c) Title and Encumbrances. Such Investor owns the number of shares ---------------------- of Endo Securities as set forth on Annex A attached hereto, beneficially and of record, free and clear of any Encumbrances, and such number of shares indicated on Annex A attached hereto sets forth all of the Endo Securities owned by such Investor. Upon the consummation of the transactions contemplated by this Agreement, the Company will acquire good, valid and marketable title to all of the Endo Securities held by such Investor, free of any Encumbrances. (d) Investment Intention. Such Investor is acquiring the Units -------------------- solely for such Investor's own account for investment and not with a view to, or for sale in connection with, any distribution or disposition thereof. (e) Federal Securities Laws Matters. Such Investor acknowledges ------------------------------- receipt of advice from the Company that (i) the Units have not been registered under the Securities Act of 1933 (the "Securities Act"); (ii) the Units must be -------------- held indefinitely and such Investor must continue to bear the economic risk of the investment in the Units, unless such Units are subsequently registered under the Securities Act, or 3 an exemption from such registration is available; (iii) it is not anticipated that there will be any public market for the Units in the foreseeable future; (iv) Rule 144 promulgated under the Securities Act is not presently available with respect to the sales of any securities of the Company, including the Units, and the Company has made no covenant to make such rule available and such rule is not anticipated to be available in the foreseeable future; (v) when and if the Units may be disposed of without registration in reliance upon Rule 144, such disposition can be made only in limited amounts and in accordance with the terms and conditions of such rule; (vi) if the exemption afforded by Rule 144 is not available, public sale of the Units without registration will require the availability of an exemption under the Securities Act; (vii) the Limited Liability Company Agreement, to be dated as of July 14, 2000, to be entered into by and among the parties thereto (the "LLC Agreement"), shall contain a ------------- restrictive legend, restricting transfer of the Units and (viii) a notation shall be made in the appropriate records of the Company indicating that the Units are subject to restrictions on transfer and, if the Company should in the future engage the services of a stock transfer agent, appropriate stop-transfer restrictions will be issued to such transfer agent with respect to the Units. (f) Investor Status. (i) Such Investor is an "accredited investor" --------------- as such term is defined in Rule 501(a) promulgated under the Securities Act; and (ii) (A) such Investor's financial situation is such that such Investor can afford to bear the economic risk of holding the Units for an indefinite period of time; (B) such Investor has adequate means for providing for such Investor's current needs and personal contingencies, and can afford to suffer the complete loss of such Investor's investment in the Units; (C) such Investor's knowledge and experience in financial and business matters are such that such Investor is capable of evaluating the merits and risks of such Investor's investment in the Units; (D) such Investor understands and has taken cognizance of all the risks relating to the purchase of the Units as well as the substantial restrictions on the transferability of the Units, and, on the Closing and for an indefinite period following the Closing, there will be no public market for the Units, and that, accordingly, it may not be possible for such Investor to liquidate such Investor's investment in case of emergency, if at all; (E) such Investor, and to the extent believed by such Investor, to be appropriate, such Investor's representatives, including such Investor's professional, financial, tax and other advisors, have carefully reviewed all documents furnished to them in connection with the investment in the Company; (F) in making such Investor's decision to invest hereunder, such Investor has relied upon independent investigations made by such Investor and, to the extent believed by such Investor to be appropriate, such Investor's representatives, including such Investor's own professional, financial, tax and other advisors in 4 addition to the representations and warranties and agreements of the Company contained herein; (G) such Investor and such Investor's representatives have been given the opportunity to examine all documents and to ask questions of, and to receive answers from, the Company and its representatives concerning the terms and conditions of the investment hereunder and to obtain any additional information which such Investor or such Investor's representatives deem necessary; (H) all information which such Investor has provided to the Company concerning such Investor, such Investor's investment intentions and such Investor's financial position is true, complete and correct; and (I) such Investor, and any persons acting on such Investor's behalf, have used no broker, finder or any investment bankers or incurred any liability for any brokerage fees, commissions, finders' fees or investment banking fees in connection with the transactions contemplated hereby. (g) Absence of General Solicitation. None of such Investor, such ------------------------------- Investor's Affiliates (as defined in Rule 501(b) of the Securities Act), or any person acting on any of their behalves, has engaged or will engage, in connection with the transactions contemplated by this Agreement, in any form of general solicitation or general advertising. (h) No Conflicts. None of the execution, delivery or performance ------------ by such Investor of this Agreement to which such Investor is a party will conflict with or result in any material breach of any terms or provisions of, or constitute a material default under, any material contract, agreement, will, power of attorney, decree, order, or other instrument to which such Investor is a party or by which such Investor is bound. (i) Absence of Court Orders, Decrees, Etc. There is no pending or, ------------------------------------- to the knowledge of such Investor, threatened claim, suit, action or proceeding or any order, writ, injunction, or decree of any court, governmental agency, or arbitration tribunal relating to or arising out of such Investor's Endo Securities. (j) Consents. Such Investor is not aware of any consent, approval, -------- authorization, or order of, or registration, qualification, or filing with, any court, regulatory authority, or other governmental body required to be obtained by such Investor in connection with the execution, delivery and performance by such Investor of this Agreement, nor is such Investor aware of any consent of any other party required to be obtained by such Investor in connection with the execution, delivery, and performance by such Investor of this Agreement. 5 4. Representations and Warranties of the Company. --------------------------------------------- The Company represents and warrants to each Investor as of the date hereof, and as of the Closing hereunder, as follows: (a) Organization, Standing. The Company is a limited liability ---------------------- company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted. (b) Corporate Authority. The Company has all requisite corporate ------------------- power and authority to (i) enter into and perform all of its obligations under this Agreement; (ii) issue the Units and (iii) carry out the transactions contemplated hereby. The Units, when issued, delivered and paid for in accordance with the terms hereof, will be duly and validly issued, fully paid and nonassessable. (c) Actions Authorized. The Company has taken all corporate actions ------------------ necessary to authorize it to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. (d) Due Execution and Delivery; Enforceability. The execution and ------------------------------------------ delivery of this Agreement has been duly and validly authorized by all required action on the part of the Company and no other proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and, assuming this Agreement has been duly executed and delivered by the Investor, this Agreement constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting enforcement of creditors' rights generally and by general equitable principles. (e) Required Filings and Approvals. The execution and delivery of ------------------------------ this Agreement by the Company and the consummation of the transactions contemplated hereby by the Company do not require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of the Company, other than the filings, registrations or qualifications that may be required under (i) Section 4(2) of the Securities Act and (ii) the state securities laws or "blue sky" laws of any state of the United States of America that may be 6 required to be made or obtained, all of which the Company will comply with prior to the date of the Closing. (f) Absence of General Solicitation. None of the Company, its ------------------------------- Affiliates or any person acting on any of their behalves, has engaged or will engage, in connection with the transactions contemplated by this Agreement, in any form of general solicitation or general advertising. (g) No Conflicts. None of the execution, delivery or performance of ------------ this Agreement by the Company will conflict with the Certificate of Formation of the Company or the LLC Agreement, in each case as in effect as of the Closing or result in any material breach of, or constitute a material default under any material contract, agreement or instrument to which the Company is a party or by which it or any of its assets is bound. (h) Absence of Court Orders, Decrees, Etc. There is no pending or, ------------------------------------- to the knowledge of the Company, threatened claim, suit, action or proceeding or any order, writ, injunction, or decree of any court, governmental agency, or arbitration tribunal relating to or arising out of the Units. (i) Consents. The Company is not aware of any consent, approval, -------- authorization, or order of, or registration, qualification, or filing with, any court, regulatory authority, or other governmental body required to be obtained by the Company in connection with the execution, delivery and performance by the Company of this Agreement, nor is the Company aware of any consent of any other party required to be obtained by the Company in connection with the execution, delivery, and performance by the Company of this Agreement. 5. Conditions. ---------- The obligation of each Investor under this Agreement to assign, transfer and deliver such Investor's Endo Securities to the Company, and the obligation of the Company under this Agreement to issue the Units to each Investor, are subject to the satisfaction or written waiver, at or prior to the Closing, of the following conditions: (a) Representations and Warranties. The representations and ------------------------------ warranties of the other party made in this Agreement shall be true and correct in all material respects, as of the date of this Agreement and as of the Closing, with the 7 same effect as if made at and as of the Closing, and the other party shall have performed in all material respects its agreements hereunder. (b) No Injunctions. There shall be no effective injunction, writ, -------------- or preliminary restraining order of a court of competent jurisdiction directing that the transactions provided for herein not be consummated. (c) Formation of the Company. The Company shall have been formed in ------------------------ accordance with the laws of the State of Delaware. 6. Reasonable Best Efforts; Cooperation. ------------------------------------ Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be done, and to assist and cooperate with the other parties hereto in doing, all things necessary, proper or advisable under applicable laws and regulations to ensure that the conditions set forth herein are satisfied and to consummate and make effective, in the most expeditious manner practicable the transactions contemplated by this Agreement including, without limitation, cooperation in the preparation and filing of all documents with relevant governmental agencies and the execution of any additional instruments necessary to consummate the transactions contemplated hereby. In case at any time after the date hereof any further action is necessary or desirable to carry out the purposes of this Agreement, the proper persons for each party hereto shall take all such necessary action. 7. Termination. ----------- (a) This Agreement may be terminated at any time prior to the Closing with respect to a particular Investor: (i) by mutual consent in writing of such Investor and the Company; or (ii) by such Investor or the Company if any court of competent jurisdiction in the United States or foreign country or other United States or foreign governmental body shall have issued an order, decree, or ruling or taken any other action restraining, enjoining, or otherwise prohibiting the consummation of the transactions contemplated hereby and such order, decree, ruling, or other action shall have become final and nonappealable. 8 (b) In the event of the termination of this Agreement pursuant to Section 7(a)(i), this Agreement shall forthwith become void and have no effect, without any liability on the part of the Company or such Investor or their respective directors, officers, or stockholders (or partners or members, as the case may be), other than the provisions of Section 8(h) hereof. Notwithstanding the foregoing, nothing contained in this Section 7 shall relieve any party from liability for any breach of this Agreement. 8. Miscellaneous. ------------- (a) Entire Agreement. This Agreement (including the attachments ---------------- hereto) constitutes the entire agreement among the parties 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. (b) Validity. The invalidity or unenforceability of any provision -------- of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, each of which shall remain in full force and effect. (c) Survival. The representations and warranties contained in this -------- Agreement shall not survive the Closing. (d) Assignment. This Agreement and the rights hereunder shall not be ---------- assignable or transferable by either party (except by operation of law in connection with a merger, consolidation, or sale of all or substantially all the assets of such party) without the prior written consent of the other party. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and permitted assigns. (e) Amendment and Modification. This Agreement may be amended, -------------------------- modified, or supplemented at any time only by an instrument in writing signed on behalf of the parties hereto. (f) Extension; Waiver. At any time prior to the Closing, the ----------------- parties hereto entitled to the benefits of the respective term or provision 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, certificate, or writing delivered pursuant hereto 9 or (iii) waive compliance with any obligation, covenant, agreement, or condition contained herein. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the parties hereto. (g) Effect of Waiver. No waiver by any party of the performance of ---------------- any provision, condition, or requirement herein shall be (i) deemed to be a waiver of, or in any manner release the other party from, performance of any other provision, condition, or requirement herein; nor (ii) deemed to be a waiver of, or in any manner release the other party from, future performance of the same provision, condition, or requirement. Nor shall any delay or omission by any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (h) Expenses. Whether or not the transactions contemplated hereby -------- are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs or expenses. (i) Specific Performance. The parties hereto agree that if any of -------------------- the provisions of this Agreement were not performed in accordance with its specific terms or were otherwise breached, irreparable damage would occur, no adequate remedy at law would exist, and damages would be difficult to determine, and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. (j) Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. (k) Descriptive Headings. 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. (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. 10 (m) No Third-Party Beneficiaries. Nothing contained in this Agreement ---------------------------- shall be construed to give any person other than the Investors and the Company, and their successors and assigns, any legal or equitable right, remedy, or claim under or with respect to this Agreement. [SIGNATURE PAGES FOLLOW] 11 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day first above written. ENDO PHARMA LLC By: /s/ Jeffrey R. Black ------------------------------------ Name: Jeffrey R. Black Title: Chief Financial Officer KELSO INVESTMENT ASSOCIATES V, L.P. By: Kelso Partners V, L.P., General Partner By: /s/ David I. Wahrhaftig ------------------------------------- General Partner KELSO EQUITY PARTNERS V, L.P. By: /s/ David I. Wahrhaftig ------------------------------------- General Partner GREENWICH STREET CAPITAL PARTNERS, L.P. By: Greenwich Street Investments L.P. Inc., its general partner By: Greenwich Street Investments Inc., General Partner By: /s/ Eric S. Bomze ---------------------------------- Name: Eric S. Bomze Title: Assistant Vice President GREENWICH STREET CAPITAL OFFSHORE FUND, LTD. By: Greenwich Street Capital Partners Inc., as Manager By: /s/ Eric S. Bomze ---------------------------------- Name: Eric S. Bomze Title: Assistant Vice President TRV EMPLOYEES FUND, L.P. By: TRV Employees Investments, Inc., its general partner By: /s/ Eric S. Bomze ---------------------------------- Name: Eric S. Bomze Title: Assistant Vice President THE TRAVELERS INSURANCE COMPANY By: /s/ F. Denney Voss ----------------------------------- Name: F. Denney Voss Title: Senior Vice President THE TRAVELERS LIFE AND ANNUITY COMPANY By: /s/ F. Denney Voss ----------------------------------- Name: F. Denney Voss Title: Senior Vice President /s/ Carol A. Ammon ----------------------------------- CAROL A. AMMON /s/ Jeffrey R. Black ----------------------------------- JEFFREY R. BLACK /s/ Mariann T. MacDonald ----------------------------------- MARIANN T. MACDONALD /s/ David A. Lee ----------------------------------- DAVID A. LEE CAROL A. AMMON, TRUSTEE REVOCABLE TRUST U/A, DATED 6/13/97 By: /s/ Carol A. Ammon ----------------------------------- Carol A. Ammon /s/ Margaret S. Cyert ----------------------------------- MARGARET S. CYERT /s/ U. Bertram Ellis ----------------------------------- U. BERTRAM ELLIS /s/ Linda Fairstein ----------------------------------- LINDA FAIRSTEIN /s/ Patricia Kelso ----------------------------------- LOUIS & PATRICIA KELSO TRUST DATED 2/1/88 By: Patricia Kelso, as Sole Trustee /s/ William Marquard ----------------------------------- WILLIAM MARQUARD /s/ John McGillicuddy ----------------------------------- JOHN MCGILLICUDDY /s/ John E. Tinder ----------------------------------- By: Fleet National Bank, Trustee By: John E. Tinder Vice President /s/ Michel Rapoport ------------------------------------ MICHEL RAPOPORT /s/ David Roderick ------------------------------------ DAVID RODERICK /s/ Dr. John Rutledge I.R.A. ------------------------------------ DR. JOHN RUTLEDGE I.R.A. /s/ George L. Shinn ------------------------------------ GEORGE L. SHINN /s/ Alan C. Snyder ------------------------------------ ALAN C. SNYDER Annex A ENDO SECURITIES AND UNITS TO BE EXCHANGED
Name and Address of Investor Endo Securities Number of Units ---------- --------------- --------------- Kelso Investment Associates V, L.P. 847,028 shares of Common Stock 847,028 c/o Kelso & Co. 320 Park Avenue New York, NY 10022 Kelso Equity Partners V, L.P. 71,272 shares of Common Stock 71,272 c/o Kelso & Co. 320 Park Avenue New York, NY 10022 Greenwich Street Capital 108,531.1634 shares of Class A 108,531.1634 Partners, L.P. Common Stock 388 Greenwich Street, 36th Floor New York, NY 10013 Attn: Robert Hamwee Greenwich Street Capital 6,736.2383 shares of Class A 6,736.2383 Offshore Fund, Ltd. Common Stock 388 Greenwich Street, 36th Floor New York, NY 10013 Attn: Robert Hamwee TRV Employees Fund, L.P. 26,375.9097 shares of Class A 26,375.9097 388 Greenwich Street, 36th Floor Common Stock New York, NY 10013 Attn: Robert Hamwee The Travelers Insurance Company 5,598.9813 shares of Class A 5,598.9813 388 Greenwich Street, 36th Floor Common Stock New York, NY 10013 Attn: Robert Hamwee The Travelers Life and Annuity Company 2,757.7073 shares of Class A 2,757.7073 388 Greenwich Street, 36th Floor Common Stock New York, NY 10013 Attn: Robert Hamwee
Name and Address of Investor Endo Securities Number of Units ---------- --------------- --------------- Carol A. Ammon 4,000 shares of Common Stock (all __ 223 Wilmington West Chester Pike held in trust described below) Chadds Ford, PA 19317 Jeffrey R. Black 500 shares of Common Stock 500 223 Wilmington West Chester Pike Chadds Ford, PA 19317 Mariann T. Macdonald 3,000 shares of Common Stock 3,000 5 Chesterton Road Landenberg, PA 19350 David Allen Harvey Lee, MD, Ph D. 250 shares of Common Stock 250 3209 Swarthmore Road Wilmington, DE 19807 Carol A. Ammon, Trustee 4,000 shares of Common Stock 4,000 Revocable Trust U/A, Dated 6/13/97 223 Wilmington West Chester Pike Chadds Ford, PA 19317 Margaret S. Cyert 1,000 shares of Class A Common 1,000 12 Edgewood Road Stock Pittsburgh, PA 15215 U. Bertram Ellis 1,000 shares of Common Stock 1,000 IXL Holdings, Inc. 1888 Emery Street, N.W. 3rd Floor Atlanta, GA 30318 Linda Fairstein 500 shares of Common Stock 500 Deputy Chief, Trial Division District Attorney's Office County of New York 1 Hogan Place, Room 836 New York, NY 10013 Louis & Patricia Kelso Trust 2,000 shares of Common Stock 2,000 dated 2/1/88 c/o Kelso Institute 872 North Point San Francisco, CA 94109
Name and Address of Investor Endo Securities Number of Units ---------- --------------- --------------- William Marquard 500 shares of Common Stock 500 Eaglestone Farm, Inc. 2199 Maysville Road Carlisle, KY 40311 John McGillicuddy 500 shares of Common Stock 500 Chase Manhattan Bank, N.A. 270 Park Avenue New York, NY 10017-2070 Frank T. Nickell I.R.A. 10,000 shares of Common Stock 10,000 c/o Ms. Linda Romaniello Fleet Investment Services 240 Greenwich Avenue Greenwich, CT 06830 Attn: IRA Account No. 011 649 40 Michel Rapoport (Affiliate) 2,000 shares of Common Stock 2,000 Mosler Inc. 8509 Berk Boulevard Hamilton, OH 45015 David Roderick 2,000 shares of Common Stock 2,000 USX Corporation 600 Grant Street Pittsburgh, PA 15219-4776 Dr. John Rutledge I.R.A. 2,000 shares of Common Stock 2,000 Rutledge and Company, Inc. One Greenwich Office Park 51 Weaver Street Greenwich, CT 06831 George Shinn 200 shares of Common Stock 200 55 Pippin's Way Morristown, NJ 07960 Alan C. Snyder 500 shares of Common Stock 500 Shinnecock Partners, L.P. 15910 Venture Boulevard 14th Floor Encino, CA 91436
EX-99.2 3 0003.txt PRE MERGER ENDO WARRANT EXHIBIT 2 Pre-Merger Endo Warrant ----------------------- THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR THE APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS (SUCH FEDERAL AND STATE LAWS, THE "SECURITIES LAWS"). THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND CERTAIN OTHER CONDITIONS, AS SPECIFIED IN THE WARRANT AGREEMENT (THE "WARRANT AGREEMENT"), DATED AS OF JULY 17, 2000 (COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF ENDO PHARMACEUTICALS HOLDINGS INC. (TOGETHER WITH ITS SUCCESSORS, THE "COMPANY") AND WHICH WILL BE MAILED TO A HOLDER HEREOF WITHOUT CHARGE WITHIN FIVE DAYS AFTER RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR FROM SUCH HOLDER). THE HOLDER HEREOF, BY ACCEPTANCE OF THIS WARRANT, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH WARRANT AGREEMENT. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS WARRANT MAY BE MADE EXCEPT PURSUANT TO THE PROVISIONS OF SUCH WARRANT AGREEMENT AND, EXCEPT AS OTHERWISE PROVIDED IN SUCH AGREEMENT, (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER AND THE SECURITIES LAWS OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF THE SECURITIES LAWS. EXERCISABLE ON OR AFTER THE EXERCISABILITY DATE AND ON OR BEFORE JULY 7, 2003 No. WT-1 70,938,030 Warrants Warrant Certificate ENDO PHARMACEUTICALS HOLDINGS INC. This Warrant Certificate certifies that Endo Pharma LLC, 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 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 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 per share 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. 2 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: July 17, 2000 ENDO PHARMACEUTICALS HOLDINGS INC. By: /s/ Carol A. Ammon -------------------------- Name: Carol A. Ammon Title: President & Chief Executive Officer By: /s/ Jeffrey R. Black -------------------------- Name: Jeffrey R. Black Title: Secretary Countersigned: UNITED STATES TRUST COMPANY OF NEW YORK, as Warrant Agent By: /s/ Glenn E. Mitchell ---------------------------- Name: Glenn E. Mitchell Title: Vice President 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 July 17, 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 4 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. 5 (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: 6 SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS The following exchanges of a part of this Global Warrant for certificated Warrants have been made:
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 - ---------- ------------------ ------------------ --------------- ---------------
7 EX-99.3 4 0004.txt PRE MERGER WARRANT AGREEMENT Exhibit 3 ================================================================================ WARRANT AGREEMENT by and between ENDO PHARMACEUTICALS HOLDINGS INC. and UNITED STATES TRUST COMPANY OF NEW YORK, as Warrant Agent ______________________ Dated as of July 17, 2000 ================================================================================ TABLE OF CONTENTS
Page ---- Section 1. Appointment of Warrant Agent.......................................... 1 Section 2. Warrant Certificates.................................................. 1 Section 3. Execution of Warrant Certificates..................................... 2 Section 4. Registration and Countersignature..................................... 2 Section 5. Transfer and Exchange of Warrants..................................... 3 Section 6. Registration of Transfers and Exchanges............................... 4 Section 7. Terms of Warrants; Exercise of Warrants............................... 7 Section 8. Payment of Taxes...................................................... 10 Section 9. Mutilated or Missing Warrant Certificates............................. 10 Section 10. Reservation of Warrant Shares......................................... 11 Section 11. Obtaining Stock Exchange Listings..................................... 11 Section 12. Adjustment of Exercise Price and Number of Warrant Shares Issuable.... 11 Section 13. Fractional Interests.................................................. 19 Section 14. Notices to Warrant Holders; Reservation of Dividends.................. 19 Section 15. Notices to the Company and Warrant Agent.............................. 21 Section 16. Supplements and Amendments............................................ 22 Section 17. Concerning the Warrant Agent.......................................... 21 Section 18. Change of Warrant Agent............................................... 25 Section 19. Successors............................................................ 26 Section 20. Termination........................................................... 26 Section 21. GOVERNING LAW......................................................... 26 Section 22. Benefits of This Agreement............................................ 26 Section 23. Counterparts.......................................................... 27 Section 24. Headings.............................................................. 27 Exhibit A. Form of Warrant Certificate........................................... A-1 Exhibit B. Certificate to be Delivered Upon Transfer............................. B-1
i INDEX OF DEFINED TERMS ---------------------- Agreement...................................................... 1 Algos.......................................................... 1 Business Day................................................... 8 Cashless Exercise.............................................. 9 closing bid price.............................................. 15 Common Stock................................................... 1 Company........................................................ 1 Current Market Value........................................... 14 Definitive Warrants............................................ 2 Exchange Act................................................... 14 Exercisability Date............................................ 8 Exercise Price................................................. 8 Exercise Rate.................................................. 11 Expiration Date................................................ 7 FDA............................................................ 8 Fully Diluted Shares........................................... 13 Global Warrants................................................ 1 Holders........................................................ 3 Independent Financial Expert................................... 15 Legal Holiday.................................................. 8 Merger Agreement............................................... 1 Ordinary Cash Distribution..................................... 15 Reorganizations................................................ 17 Sub............................................................ 1 Time of Determination.......................................... 12 Transfer Agent................................................. 10 Warrant Agent.................................................. 1 Warrant Certificates........................................... 1 Warrant Register............................................... 2 Warrant Shares................................................. 1 Warrants....................................................... 1
ii WARRANT AGREEMENT (the "Agreement"), dated as of July 17, 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 29,720,177 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 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 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 in located at 114 West 47th Street, 25th Floor, New York, New York 10036, Attention: Corporate Trust Division (the "Warrant Register") as they are issued. ---------------- 2 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 30 Broad Street, 14th Floor, New York, New York 10004-2304, 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. 3 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. (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. 4 (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 according dance 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 5 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 counter signature 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. 6 (h) Obligations with Respect to Transfers and Exchanges of ------------------------------------------------------ Definitive Warrants. - ------------------- (1) 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. (2) All Definitive Warrants and Global Warrants issued upon any registration, transfer or exchange of Definitive Warrants or Global War rants shall be the valid obligations of the Company, entitled to the same benefits under this Warrant Agreement as the Definitive War rants or Global Warrants surrendered upon the registration of transfer or exchange. (3) 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) 29,720,177 Warrant Shares (in the aggregate) (with each Warrant being exercise able for 0.416667 Warrant Shares) in the event the Adjustment Event has not occurred prior to such time or (b) 17,832,106 Warrant Shares (in the aggregate) (with each Warrant being exercisable for 0.250000 Warrant Shares) 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. 7 "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 8 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. 9 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 10 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, 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 11 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: 12 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. 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 13 (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'slength 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 14 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 45Business 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 15 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. (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 16 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 17 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. 18 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 19 (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 specified, or the date of the event in the case of events for which there is no record date, by firstclass 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 20 (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: 21 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. 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 22 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 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 23 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. 24 (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 30days' 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 25 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. 26 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. 27 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: /s/ Carol A. Ammon ------------------------------------ Name: Carol A. Ammon Title: President & Chief Executive Officer UNITED STATES TRUST COMPANY OF NEW YORK, as Warrant Agent By: /s/ Sirojni Dindial --------------------------------------- Name: Sirojni Dindial Title: Assistant Vice President EXHIBIT A [Form of Warrant Certificate] [Face] THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR THE APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS (SUCH FEDERAL AND STATE LAWS, THE "SECURITIES LAWS"). THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND CERTAIN OTHER CONDITIONS, AS SPECIFIED IN THE WARRANT AGREEMENT (THE "WARRANT AGREEMENT"), DATED AS OF JULY 17, 2000 (COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF ENDO PHARMACEUTICALS HOLDINGS INC. (TOGETHER WITH ITS SUCCESSORS, THE "COMPANY") AND WHICH WILL BE MAILED TO A HOLDER HEREOF WITHOUT CHARGE WITHIN FIVE DAYS AFTER RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR FROM SUCH HOLDER). THE HOLDER HEREOF, BY ACCEPTANCE OF THIS WARRANT, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH WARRANT AGREEMENT. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS WARRANT MAY BE MADE EXCEPT PURSUANT TO THE PROVISIONS OF SUCH WARRANT AGREEMENT AND, EXCEPT AS OTHERWISE PROVIDED IN SUCH AGREEMENT, (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER AND THE SECURITIES LAWS OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF THE SECURITIES LAWS. A-1 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 sixmonth anniversary of the Exercisability Date), (a) 0.416667 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 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 per share 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. A-2 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: A-3 [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 July 17, 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 A-4 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. A-5 [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: A-6 SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS The following exchanges of a part of this Global Warrant for certificated Warrants have been made:
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 -------- -------------- -------------- ----------- -------------
A-7 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. B-1 EX-99.4 5 0005.txt LETTER AGREEMENT EXHIBIT 4 Endo Pharmaceuticals Inc. 223 Wilmington West Chester Pike Chadds Ford, Pennsylvania 19317 November 26, 1999 Algos Pharmaceutical Corporation 1333 Campus Parkway Neptune, New Jersey 07753 Dear Sirs: In connection with that Agreement and Plan of Merger (the "Merger Agreement"), dated of even date herewith, by and among Endo Pharmaceuticals Holdings Inc. ("Holdings"), Endo Inc. and [Target] Pharmaceutical Corporation, each of the undersigned (collectively, the "Executives") hereby agrees to consent to (a) the termination of the Holdings' 1997 Executive Stock Option Plan, (b) the institution of a stock option plan of a newly formed limited liability company (the "LLC") pursuant to which each of the Executive's stock options will be exercisable only into shares of common stock of Holdings that is owned by the LLC, (c) the conversion of each of the Executive's outstanding options under Holdings' 1997 Executive Stock Option Plan into options under the stock option plan of the LLC and (d) the terms (including, but not limited to, the vesting schedule thereto) of such converted options under the stock option plan of the LLC are to be agreed upon by the Executives and the LLC. Each of the Executives hereby agrees and acknowledges that from and after the closing of the transaction contemplated by the Merger Agreement, the Executive's only recourse upon exercise of such Executive's stock options will be against the LLC and not against Holdings. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] Algos Pharmaceutical Corporation November __, 1999 Page 2 If the foregoing correctly sets forth our agreement, please so indicate by signing a counterpart of this letter whereupon it shall become a binding agreement between us. Very truly yours, /s/ CAROL A. AMMON ------------------ Carol A. Ammon /s/ MARIANN T. MACDONALD ------------------------ Mariann T. MacDonald /s/ LOUIS J. VOLLMER -------------------- Louis J. Vollmer /s/ JEFFREY R. BLACK -------------------- Jeffrey R. Black /s/ OSAGIE O. IMASOGIE ---------------------- Osagie O. Imasogie /s/ DAVID A. LEE ---------------- David A. Lee EX-99.5 6 0006.txt LIMITED LIABILITY COMPANY AGREEMENT OF ENDO PHARMA LLC EXHIBIT 5 LIMITED LIABILITY COMPANY AGREEMENT OF ENDO PHARMA LLC A Delaware Limited Liability Company Dated as of July 14, 2000 TABLE OF CONTENTS ARTICLE I DEFINED TERMS............................................................................. 2 ARTICLE II THE LIMITED LIABILITY COMPANY............................................................ 10 SECTION 2.1 Formation........................................................................ 10 SECTION 2.2 Name............................................................................. 10 SECTION 2.3 Business Purpose; Powers......................................................... 10 SECTION 2.4 Registered Office and Agent...................................................... 12 SECTION 2.5 Term............................................................................. 12 SECTION 2.6 Principal Place of Business...................................................... 12 SECTION 2.7 Title to Company Property........................................................ 12 SECTION 2.8 Business Transactions of the Members and Managers with the Company............... 12 SECTION 2.9 Fiscal Year...................................................................... 12 SECTION 2.10 Limited Liability Company........................................................ 12 ARTICLE III THE MEMBERS............................................................................. 13 SECTION 3.1 The Members...................................................................... 13 SECTION 3.2 No Liability of the Members...................................................... 13 SECTION 3.3 Member Meetings.................................................................. 13 SECTION 3.4 Power to Bind the Company........................................................ 14 ARTICLE IV THE BOARD OF MANAGERS.................................................................... 14 SECTION 4.1 Management by Board of Managers.................................................. 14 SECTION 4.2 Meetings of the Board............................................................ 15 SECTION 4.3 Power to Bind Company............................................................ 16 SECTION 4.4 Officers and Related Persons..................................................... 16 SECTION 4.5 Chief Executive Officer.......................................................... 16 SECTION 4.6 Chief Financial Officer.......................................................... 16 SECTION 4.7 Committees....................................................................... 16
i ARTICLE V CAPITAL STRUCTURE AND CONTRIBUTIONS....................................................... 17 SECTION 5.1 Authorized Units................................................................. 17 SECTION 5.2 Issuance of Units................................................................ 17 SECTION 5.3 Certificates..................................................................... 18 SECTION 5.4 Capital Contributions............................................................ 18 SECTION 5.5 Additional Contributions......................................................... 19 SECTION 5.6 Maintenance of Capital Accounts.................................................. 19 SECTION 5.7 Negative Capital Accounts........................................................ 20 SECTION 5.8 Sale or Exchange of Units........................................................ 20 ARTICLE VI ALLOCATIONS OF PROFITS AND LOSSES; DISTRIBUTIONS......................................... 21 SECTION 6.1 Allocations of Net Profits and Net Losses from Operations........................ 21 SECTION 6.2 Distributions.................................................................... 21 SECTION 6.3 Withholding Taxes................................................................ 22 SECTION 6.4 Limitations on Distributions..................................................... 22 SECTION 6.5 Qualified Income Offset.......................................................... 22 SECTION 6.6 Book/Tax Disparities............................................................. 22 SECTION 6.7 Allocation of Nonrecourse Deductions............................................. 22 SECTION 6.8 Allocation of Member Nonrecourse Deductions...................................... 23 SECTION 6.9 Minimum Gain Chargeback.......................................................... 23 SECTION 6.10 Member Minimum Gain Chargeback................................................... 23 ARTICLE VII ACCOUNTS................................................................................ 23 SECTION 7.1 Books............................................................................ 23 SECTION 7.2 Reports.......................................................................... 23 SECTION 7.3 Federal Tax Matters.............................................................. 24 SECTION 7.4 Special Basis Adjustment......................................................... 24 ARTICLE VIII TRANSFERS OF UNITS..................................................................... 24 SECTION 8.1 Prohibition...................................................................... 24 SECTION 8.2 Conditions to Permitted Transfers................................................ 25 SECTION 8.3 Effect of Transfers.............................................................. 25
ii ARTICLE IX ADDITIONAL AND SUBSTITUTE MEMBERS;WITHDRAWAL OF MEMBERS.................................. 25 SECTION 9.1 Admissions; Withdrawals.......................................................... 25 SECTION 9.2 Admission of Additional Members.................................................. 26 SECTION 9.3 Admission of Assignees as Substitute Members..................................... 26 SECTION 9.4 Cessation of Member.............................................................. 26 SECTION 9.5 Withdrawal of Members............................................................ 27 ARTICLE X EVENTS OF DISSOLUTION..................................................................... 27 SECTION 10.1 Dissolution...................................................................... 28 ARTICLE XI TERMINATION.............................................................................. 28 SECTION 11.1 Liquidation...................................................................... 28 SECTION 11.2 Final Accounting................................................................. 28 SECTION 11.3 Cancellation of Certificate...................................................... 28 ARTICLE XII EXCULPATION AND INDEMNIFICATION......................................................... 29 SECTION 12.1 Exculpation...................................................................... 29 SECTION 12.2 Indemnification.................................................................. 29 ARTICLE XIII AMENDMENTS TO AGREEMENT................................................................ 30 ARTICLE XIV GENERAL PROVISIONS...................................................................... 30 SECTION 14.1 Notices.......................................................................... 30 SECTION 14.2 Entire Agreement, etc............................................................ 30 SECTION 14.3 Construction Principles.......................................................... 31 SECTION 14.4 Counterparts..................................................................... 31 SECTION 14.5 Severability..................................................................... 31 SECTION 14.6 Governing Law.................................................................... 31 SECTION 14.7 Binding Effect................................................................... 31 SECTION 14.8 Additional Documents and Acts.................................................... 32 SECTION 14.9 No Third-Party Beneficiary....................................................... 32 SECTION 14.10 Limited Liability Company........................................................ 32
iii LIMITED LIABILITY COMPANY AGREEMENT OF ENDO PHARMA LLC THIS LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") of Endo --------- Pharma LLC (the "Company") is effective as of this 14th day of July, 2000 by and ------- among the Persons listed on the Schedule of Members attached hereto and each of their Permitted Transferees (the "Members"). ------- RECITALS WHEREAS, the Members have formed the Company as a limited liability company under the laws of the State of Delaware and desire to enter into a written agreement, in accordance with the provisions of the Delaware Limited Liability Company Act and any successor statute, as amended from time to time (the "Act"), governing the affairs of the Company and the conduct of its --- business; WHEREAS, Endo Pharmaceuticals Holdings Inc. ("Endo Holdings") has ------------- entered into an agreement and plan of merger, dated as of March 3, 2000 (as may be amended and restated from time to time, the "Merger Agreement"), by and among ---------------- Endo Holdings, Endo Inc. and Algos Pharmaceutical Corporation ("Algos") whereby ----- Algos will merge with and into Endo Inc., a wholly owned subsidiary of the Company (the "Merger"); ------ WHEREAS, as of the date hereof, the Members have exchanged (i) all of the shares of common stock, par value $.01 per share (the "Endo Common Stock") ----------------- and (ii) all of the shares of class A common stock, par value $.01 per share ("Class A Common Stock"), of Endo Holdings in each case previously owned by them - ---------------------- for a number of Units pursuant to the terms and upon the conditions of Exchange Agreements (the "Exchange Agreements"), dated as of the date hereof, by and ------------------- between the Company and each of the Members; and WHEREAS, the Members have formed the Company to effect certain of the transactions contemplated by the Merger Agreement; 1 NOW, THEREFORE, in consideration of the mutual covenants and obligations set forth in this Agreement, the parties hereto agree as follows: ARTICLE I DEFINED TERMS As used herein, the following terms shall have the meanings set forth below: "Additional Member" shall mean a Person who has acquired Units from ----------------- the Company after the Effective Date and been admitted as a Member of the Company pursuant to Section 9.2 hereof. "Adjusted Capital Account" shall mean, with respect to any Member, ------------------------ such Member's Capital Account as of the end of the relevant Fiscal Year after giving effect to the following adjustments: (a) credit to such Capital Account any amounts that such Member is obligated to restore pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (b) debit to such Capital Account the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). This definition of Adjusted Capital Account is intended to comply with the provisions of Section 1.704- 1(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted consistently therewith. "Adjusted Capital Account Deficit" shall mean, with respect to any -------------------------------- Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant Fiscal Year after giving effect to the following adjustments: (a) credit to such Capital Account any amounts that such Member is obligated to restore pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (b) debit to such Capital Account the items described in Treasury Regulations Sections 1.704- 1(b)(2)(ii)(d)(4), (5) and (6). This definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Section 1.704- 1(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted consistently therewith. "Affiliate" shall mean, with respect to any Person, (a) any Person --------- directly or indirectly controlling, controlled by or under common control with such Person and (b) any partner, officer or director of such Person (in the case of KIA V or KEP V, including, without limitation, any individual retirement account of any such partner, director or officer, any family member of any such partner, director or 2 officer, or any trust or family partnership for the benefit of any such partner, director or officer or family member thereof). For purposes of this definition, the term "controls," "is controlled by," or "is under common control with" shall mean possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agreed Value" shall mean the fair market value of contributed ------------ property, as determined by the majority of the Board using any reasonable method of valuation. "Assignee" shall mean a transferee of Units who has not been admitted -------- as a Substitute Member. "Bankruptcy" shall mean, with respect to any Person, the occurrence of ---------- any of the following events: (a) the filing by such Person of a petition in bankruptcy or for relief under applicable bankruptcy laws; (b) the filing against such Person of any such petition (unless such petition is dismissed within ninety (90) days from the date of filing thereof); (c) entry against such Person of an order for relief under applicable bankruptcy laws; (d) written admission by such Person of its inability to pay its debts as they mature, or an assignment by such Person for the benefit of creditors; or (e) appointment of a trustee, conservator or receiver for the property or affairs of such Person. "Board" shall mean the Board of Managers of the Company as described ----- in Article IV hereof, consisting of those Managers who are elected by the Members from time to time (or, with respect to Managers appointed to fill vacancies on the Board, by a majority of the remaining Managers) to serve on the Board pursuant to Article IV hereof. "Business Day" shall mean each day of the calendar year other than a ------------ Saturday, a Sunday or a day on which banks are required or authorized to close in the State of New York. "Capital Account" shall mean the account maintained for a Member or --------------- Assignee determined in accordance with Article V hereof. 3 "Capital Contribution" shall mean any contribution of cash or property -------------------- to the Company or the obligation to contribute cash, property or services to the Company made by or on behalf of a Member. "Certificate of Formation" shall mean the certificate of formation of ------------------------ the Company filed in the Office of the Secretary of State of the State of Delaware pursuant to the Act and through which the Company has been formed. "Chief Executive Officer" shall mean the Person elected by the Board ----------------------- from time to time to hold such office pursuant to Section 4.5 hereof. "Chief Financial Officer" shall mean the Person elected by the Board ----------------------- from time to time to hold such office pursuant to Section 4.6 hereof. "Code" shall mean the Internal Revenue Code of 1986, as amended from ---- time to time (or any corresponding provisions of succeeding law). "Company Minimum Gain" shall have the meaning of "partnership minimum -------------------- gain" set forth in Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d). "Depreciation" shall mean, for each Taxable Year, an amount equal to ------------ the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such Taxable Year, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Taxable Year, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Taxable Year bears to such beginning adjusted tax basis; provided, however, that if the -------- ------- adjusted basis for federal income tax purposes of an asset at the beginning of such Taxable Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Board. "Distribution" shall mean a transfer of cash or property by the ------------ Company to a Member on account of Units as described in Article VI hereof. 4 "Gross Asset Value" shall mean, with respect to any asset, the asset's ----------------- adjusted basis for federal income tax purposes, except as follows: (a) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the fair market value of such asset as determined by the Board at the time it is accepted by the Company, unreduced by any liability secured by such asset, as determined by the Board. (b) The Gross Asset Values of all Company assets shall be adjusted to equal their respective fair market values, unreduced by any liabilities secured by such assets, as determined by the Board as of the following times: (i) the acquisition of additional Units by any new or existing Member in exchange for a Capital Contribution; (ii) the Distribution by the Company to a Member of an amount of cash or property as consideration for Units; and (iii) the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g). (c) The Gross Asset Value of any asset of the Company distributed to any Member shall be adjusted to equal the fair market value of such asset, unreduced by any liability secured by such asset, on the date of Distribution as determined by the Board. (d) The Gross Asset Value of the Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Section 734(b) or 743(b) of the Code; but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and paragraph (f) of the definition of "Net Profits" and "Net Losses". If the Gross Asset Value of an asset has been determined or adjusted pursuant to paragraphs (a), (b) or (d) of this definition, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Net Profits and Net Losses. "Initial Members" shall mean those Persons who have executed this --------------- Agreement as of the Effective Date. "KEP V" shall mean Kelso Equity Partnership V, L.P., a Delaware ----- limited partnership. 5 "KIA V" shall mean Kelso Investment Associates V, L.P., a Delaware ----- limited partnership. "LLC Option Plans" shall mean, collectively, the Endo Pharma LLC ---------------- Amended and Restated 1997 Employee Stock Option Plan, the Endo Pharma LLC Amended and Restated 1997 Executive Stock Option Plan, the Endo Pharma LLC 2000 Supplemental Employee Stock Option Plan and the Endo Pharma LLC 2000 Supplemental Executive Stock Option Plan. "Majority of Members" shall mean the Members owning a majority of the ------------------- issued and outstanding Units. "Manager" shall mean each Person elected by the Members as a Manager ------- pursuant to Section 4.1(b) hereof and each Person appointed by the Board to serve as a Manager pursuant to Section 4.1(c) hereof to fill a vacancy on the Board. A Manager need not be a Member. "Member" shall mean an Initial Member, Substitute Member or Additional ------ Member, as the case may be; and "Members" shall mean the Initial Members, ------- Substitute Members and Additional Members, collectively. "Member Minimum Gain" shall mean a Member's share of Company Minimum ------------------- Gain as set forth in Treasury Regulations Section 1.704-2(g) and member nonrecourse debt minimum gain as described in Treasury Regulations Section 1.704-2(i). "Member Nonrecourse Debt" shall have the meaning of "partner ----------------------- nonrecourse debt" as set forth in Treasury Regulations Section 1.704-2(b)(4). "Member Nonrecourse Deductions" shall have the meaning of "partner ----------------------------- nonrecourse deductions" as set forth in Treasury Regulations Section 1.704-2(i). "Net Profits" and "Net Losses" shall mean, for any Taxable Year or ----------- ---------- other period, an amount equal to the Company's taxable income or loss for such year or period, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments: 6 (a) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Profits or Net Losses shall be added to such taxable income or loss; (b) Any expenditures of the Company described in Section 705(a)(2)(B) of the Code or treated as Code Section 705(a)(2)(B) expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations and not otherwise taken into account in computing Net Profits or Net Losses shall be subtracted from such taxable income or loss; (c) In the event the Gross Asset Value of any Company asset is adjusted pursuant to paragraphs (b) or (c) of the definition of "Gross Asset Value," the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Profits or Net Losses; (d) Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value; (e) In lieu of depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation with respect to each asset of the Company for such Taxable Year, computed in accordance with the definition of "Depreciation" above; (f) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Section 734(b) or 743(b) of the Code is required pursuant to Treasury Regulations 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a Distribution other than in complete liquidation of a Member's Units, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Net Profits or Net Losses; and (g) Notwithstanding any other provision of this subsection, any items of income, gain, loss or deduction which are specifically allocated shall not be taken into account in computing Net Profits or Net Losses. 7 "Nonrecourse Deductions" shall have the meaning set forth in Treasury ---------------------- Regulations Section 1.704-2(b)(1). "Permitted Transfer" shall have the meaning set forth in Section 8.1 ------------------ hereof. "Permitted Transferee" shall mean, with respect to any Member, (i) an -------------------- Affiliate of such Member, (ii) a spouse, child or other descendant of such Member or a trust for the benefit thereof or (iii) upon the death of such Member, such Member's personal representative, executor, administrator, testamentary trustees, legatees or beneficiaries. "Person" shall mean an individual, trust, estate, corporation, ------ partnership, limited liability company or any other incorporated or unincorporated entity permitted to be a member of a limited liability company under the Act. "Regulations" shall mean, except where the context indicates ----------- otherwise, the permanent and temporary regulations of the Department of the Treasury promulgated under the Code, as such regulations may be lawfully changed from time to time (including corresponding provisions of succeeding regulations). "Subsidiary" means any corporation, partnership, joint venture or ---------- other legal entity of which the Company (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. "Substitute Member" shall mean an Assignee who has been admitted to ----------------- all of the rights of membership pursuant to Section 9.3 hereof. "Taxable Year" shall mean the taxable year of the Company as ------------ determined for federal income tax purposes. "Transfer" shall mean, as a noun, any voluntary or involuntary -------- transfer, sale, assignment, pledge, encumbrance or other disposition; and, as a verb, voluntarily or involuntarily to sell, assign, transfer, grant, give away, hypothecate, 8 pledge, encumber or otherwise dispose of, and shall include any transfer by will, gift or intestate succession. "Unit" shall mean an equity interest in the Company as described in ---- Section 5.1 hereof. ARTICLE II THE LIMITED LIABILITY COMPANY SECTION 2.1 Formation. The Members have formed the Company as a --------- limited liability company pursuant to the provisions of the Act. A Certificate of Formation for the Company has been executed and filed by an authorized agent of the Company in the Office of the Secretary of State of the State of Delaware in conformity with the Act. Any and all prior acts by such agent in connection with the execution and filing of the Certificate of Formation are hereby ratified and approved in all respects. The Company and, if required, each of the Members shall execute or cause to be executed from time to time all other instruments, certificates, notices and documents and shall do or cause to be done all such acts and things (including keeping books and records and making publications or periodic filings) as may now or hereafter be required for the formation, valid existence and, when appropriate, termination of the Company as a limited liability company under the laws of the State of Delaware. SECTION 2.2 Name. The name of the Company shall be "Endo Pharma LLC" ---- and its business shall be carried on in such name with such variations and changes as the Board shall determine or deem necessary to comply with requirements of the jurisdictions in which the Company's operations are conducted. SECTION 2.3 Business Purpose; Powers. The Company is formed for the ------------------------ purpose of acquiring, holding and selling stocks, and engaging in any other lawful business, purpose or activity for which limited liability companies may be formed under the Act. The Company and the Board (acting on behalf of the Company) shall possess and may exercise all the powers and privileges granted by the Act or by any other law or by this Agreement, together with any powers incidental thereto, so far as such powers and privileges are necessary or convenient to the conduct, promotion or attainment of the business purposes or activities of the Company, including, without limitation, the power: 9 (a) to acquire, hold, manage, own, sell, transfer, convey, assign, exchange, license, pledge or otherwise dispose of the Company's interests in assets or any property held by the Company, including, without limitation, interests in real estate, intellectual property rights and other proprietary processes, products or services; (b) to establish, have, maintain or close one or more offices within or without the State of Delaware and in connection therewith to rent or acquire office space and to engage personnel; (c) to open, maintain and close bank and brokerage accounts, including the power to draw checks or other orders for the payment of moneys, and to invest such funds as are temporarily not otherwise required for Company purposes; (d) to bring and defend actions and proceedings at law or in equity or before any governmental, administrative or other regulatory agency, body or commission; (e) to hire consultants, custodians, attorneys, accountants and such other agents, officers and employees of the Company as it may deem necessary or advisable, and to authorize each such agent and employee to act for and on behalf of the Company; (f) to make all elections, investigations, evaluations and decisions, binding the Company thereby, that may, in the sole judgment of the Board, be necessary or appropriate to further the business purposes of the Company; (g) to enter into, perform and carry out contracts and agreements of every kind necessary or incidental to the accomplishment of the Company's business purposes, including, without limitation, to enter into, perform and carry out that certain tax sharing agreement contemplated by the Merger Agreement; (h) to take or omit to take such other action in connection with the business of the Company as may be necessary or desirable to further the business purposes of the Company, including, without limitation, any actions necessary to effect the treatment of the Current Endo Options (as defined in the Merger Agreement) as contemplated by Section 5.9 of the Merger Agreement; and 10 (i) to carry on any other activities necessary to, in connection with, or incidental to any of the foregoing or the Company's business. SECTION 2.4 Registered Office and Agent. The location of the --------------------------- registered office of the Company shall be 1209 Orange Street, Wilmington, Delaware 19801. The Company's Registered Agent at such address shall be The Corporation Trust Company. The Board may, from time to time, change the Company's registered office and/or registered agent and shall forthwith amend the Certificate of Formation to reflect such change(s). SECTION 2.5 Term. The existence of the Company commenced on the date ---- of the filing of the Certificate of Formation in the Office of the Secretary of State of the State of Delaware in accordance with the Act and, subject to the provisions of Articles X and XI below, the Company shall have perpetual existence. SECTION 2.6 Principal Place of Business. The principal place of --------------------------- business of the Company shall be at such location as the Board may, from time to time, select. The Company may, from time to time, have such other places of business within or without the State of Delaware as the Board may deem advisable. SECTION 2.7 Title to Company Property. Legal title to all property ------------------------- of the Company shall be held and vested and conveyed in the name of the Company and no real or other property of the Company shall be deemed to be owned by the Members individually. The Units of the Members in the Company shall constitute personal property. SECTION 2.8 Business Transactions of the Members and Managers with ------------------------------------------------------ the Company. In accordance with Section 18-107 of the Act, each Member and - ----------- Manager may lend money to, borrow money from, act as a surety, guarantor or endorser for, guarantee or assume one or more obligations of, provide collateral for, and transact other business with, the Company and, subject to applicable law, shall have the same rights and obligations with respect to any such matter as a Person who is not a Member or Manager. SECTION 2.9 Fiscal Year. The fiscal year of the Company (the "Fiscal ----------- ------ Year") for financial statement and federal tax purposes shall end on December 31 - ---- of each year, or as may be as determined by the Board from time to time. 11 SECTION 2.10 Limited Liability Company. The Members intend to form a ------------------------- limited liability company and does not intend to form a partnership or joint venture under the laws of the State of Delaware or any other laws; provided, -------- however, that, to the extent permitted by U.S. law, the Company will be treated - ------- as a partnership for U.S. federal, state and local income tax purposes. ARTICLE III THE MEMBERS SECTION 3.1 The Members. The name, address, Capital Contribution of, ----------- and number of Units held by, each Member are set forth on Schedule A hereto, and in the books and records of the Company, which Schedule A and books and records shall be amended from time to time to reflect the admission of an Additional Member or Substitute Member, an additional Capital Contribution or acquisition of additional Units by an existing Member, or the cessation of a Member pursuant to the terms hereof. SECTION 3.2 No Liability of the Members. All debts, obligations and --------------------------- liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a member. SECTION 3.3 Member Meetings. --------------- (a) Actions by the Members; Meetings. The Members may vote, -------------------------------- approve a matter or take any action by the vote of Members at a meeting, in person or by proxy, or without a meeting by the written consent of Members pursuant to subparagraph (b) below. Meetings of the Members may be called by the Board and shall be held upon at least five (5) days' prior written notice of the time and place of such meeting given by the Board to each Member. Notice of any meeting may be waived by any Member before or after any meeting. Meetings of the Members may be conducted in person or by conference telephone facilities. (b) Action by Written Consent. Any action required or permitted ------------------------- under the Act or this Agreement to be taken by the Members, and any action otherwise referred to the Members for their approval by the Board, may be taken by the Members without a meeting if authorized by the written consent of a 12 Majority of Members. In no instance where action is authorized by written consent of Members will a meeting of Members be called or notice be given; however, a copy of the action taken by written consent shall be sent promptly to all Members and filed with the records of the Company. (c) Quorum; Voting. For any meeting of Members, the presence in -------------- person or by proxy of a Majority of Members shall constitute a quorum for the transaction of any business. Except as otherwise provided in this Agreement, the affirmative vote of a Majority of Members shall constitute approval of any action. Except as set forth in this Agreement, each Member shall be entitled to vote on all matters upon which Members have the right to vote ratably in proportion to the number of Units held by such Member. SECTION 3.4 Power to Bind the Company. No Member (acting in its ------------------------- capacity as such) shall have the authority to bind the Company to any third party with respect to any matter except pursuant to a resolution expressly authorizing such action (and authorizing such Member to bind the Company with respect to such action) which resolution is duly adopted by the Board by the affirmative vote required for such matter pursuant to this Agreement or the Act. ARTICLE IV THE BOARD OF MANAGERS SECTION 4.1 Management by Board of Managers. ------------------------------- (a) Subject to such matters as are expressly reserved hereunder or under the Act to the Members for decision, the business and affairs of the Company shall be managed by a Board of Managers which shall be responsible for policy-setting, approving the overall direction of the Company and making all decisions affecting the business and affairs of the Company. The Board shall consist of at least one (1) but not more than nine (9) Managers, the exact number of Managers to be determined from time to time by resolution of the Board. The initial Board shall consist of three (3) Managers ("Initial ------- Managers"), as set forth on Schedule B hereto. - -------- (b) Each Manager (other than the Initial Managers) shall be elected by a vote of a Majority of the Members at a meeting, in person or by proxy, or without a meeting by the written consent of a Majority of the Members, and shall 13 serve until his or her successor has been duly elected and qualified, or until his or her earlier removal, resignation, death or disability. To effectuate the provisions of this Section 4.1(b), the Secretary of the Company, or if there be no Secretary such other officer of the Company as the Board may appoint to fulfill the duties of Secretary (the "Secretary"), shall not record any vote or --------- consent contrary to or inconsistent with the terms of this Section 4.1(b). (c) Each Member hereby agrees that (i) any Manager may be removed from the Board at any time, with or without cause, by a vote of a Majority of the Members at a meeting, in person or by proxy, or without a meeting by the written consent of a Majority of the Members and (ii) a Manager may resign at any time upon written notice to the Board. (d) Any vacancy occurring on the Board as a result of the resignation, removal, death or disability of a Manager or an increase in the size of the Board shall be filled by a Majority of the Members. A Manager chosen to fill a vacancy resulting from the resignation, removal, death or disability of a Manager shall serve the unexpired term of his or her predecessor in office. SECTION 4.2 Meetings of the Board. --------------------- (a) The Board shall meet at such times as determined by the Board to be necessary for the management of the Company's business. Meetings of the Board may be called by the Chairman of the Board or any two (2) Managers on at least two (2) days' prior written notice of the time and place of such meeting. A majority of Managers shall constitute a quorum for the transaction of business by the Board. (b) Notice of any Board meeting may be waived by any Manager before or after such meeting. (c) All actions of the Board shall require the affirmative vote of a majority of the Managers then in office. (d) Meetings of the Board may be conducted in person or by conference telephone facilities. Any action required or permitted to be taken at any meeting of the Board may be taken without a meeting if a majority of the Managers then in office consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board. 14 SECTION 4.3 Power to Bind Company. No Manager or officer of the --------------------- Company (in either case, acting in his or her capacity as such) shall have any authority to bind the Company with respect to any matter except pursuant to a resolution expressly authorizing such action (and authorizing such Manager to bind the Company with respect to such action) which resolution is duly adopted by the Board by the affirmative vote required for such matter pursuant to this Agreement or the Act. SECTION 4.4 Officers and Related Persons. The Board shall have the ---------------------------- authority to appoint and terminate officers of the Company, including, without limitation, the Chief Executive Officer and Chief Financial Officer, and retain and terminate employees, agents and consultants of the Company and to delegate such duties to any such officers, employees, agents and consultants as the Board deems appropriate, including the power, acting individually or jointly, to represent and bind the Company in all matters, in accordance with the scope of their respective duties. SECTION 4.5 Chief Executive Officer. There shall be a Chief ----------------------- Executive Officer of the Company who shall be elected by the Board and serve as such until the earlier of his or her death, resignation or removal by the Board, with or without cause. The Chief Executive Officer shall have the responsibility for managing the day-to-day business operations and affairs of the Company and supervising its other officers, subject to the direction, supervision and control of the Board. In general, the Chief Executive Officer shall have such other powers and perform such other duties as usually pertain to the office of the Chief Executive Officer, and as from time to time may be assigned to him or her by the Board, including, without limitation, the authority to appoint and terminate officers of the Company and retain and terminate employees of the Company to whom the Chief Executive Officer may delegate his or her duties. SECTION 4.6 Chief Financial Officer. There shall be a Chief ----------------------- Financial Officer of the Company who shall be elected by the Board and serve as such until the earlier of his or her death, resignation or removal by the Board, with or without cause. In general, the Chief Financial Officer shall have such powers and perform such duties as usually pertain to the office of Chief Financial Officer, and as from time to time may be assigned to him or her by the Board. SECTION 4.7 Committees. The Board may designate one or more ---------- committees, each committee to consist of one or more of the Managers of the Company. The Board may designate one or more Managers as alternate members of 15 any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent permitted by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company (including, but not limited to, the power and authority to issue Units). Each committee shall keep regular minutes and report to the Board when required. ARTICLE V CAPITAL STRUCTURE AND CONTRIBUTIONS SECTION 5.1 Authorized Units. Subject to the provisions of this ---------------- Agreement, the Company is authorized to issue equity interests in the Company designated as "Units" at varying prices per Unit as the Board shall approve. ----- The total number of Units which the Company shall have authority to issue is five hundred million (500,000,000) Units. Other than as set forth in Section 6.1 hereof, each Unit shall be identical in all respects (including with regard to the rights of Members to vote, to receive Distributions from time to time and to receive Distributions on liquidation of the Company) with each other Unit. SECTION 5.2 Issuance of Units. The Company is authorized to issue ----------------- Units in exchange for either Capital Contributions or the provision of services (together, "Unit Consideration"), as determined by the Board or a duly ------------------ authorized committee thereof. The number of Units issued to the Initial Members and the address for notice purposes hereunder of each Member are listed on Schedule A hereto, which shall be amended from time to time by the Board as required to reflect issuances of Units to new Members, changes in the number of Units held by Members and to reflect the addition or withdrawal of Members. The number of Units held by each Member shall not be affected by either (i) any issuance by the Company of Units to other Members or (ii) any change in the Capital Account of such Member (other than such changes to reflect additional Unit Consideration from such Member in exchange for new Units). If Units are certificated, the Board shall maintain a Unit 16 ledger. Fractional Units may be issued for pro rata Unit Consideration, as determined by the Board. SECTION 5.3 Certificates. Upon the determination of the Board, the ------------ issued and outstanding Units may be represented by certificates. Each such certificate shall bear the following legend: THE UNITS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO, AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF ("TRANSFERRED") WITHOUT COMPLYING WITH THE PROVISIONS OF THE LIMITED LIABILITY COMPANY AGREEMENT DATED AS OF JULY 14, 2000 BY AND AMONG THE MEMBERS OF THE COMPANY, A COPY OF WHICH IS ON FILE WITH THE COMPANY (THE "LLC AGREEMENT"). IN ADDITION TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SUCH AGREEMENT, NO TRANSFER OF THE UNITS REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER (THE "ACT") AND ALL APPLICABLE STATE SECURITIES LAWS OR (B) UNLESS THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL TO THE HOLDER OF THE UNITS REPRESENTED BY THIS CERTIFICATE, WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM THE PROVISIONS OF THE ACT OR IS OTHERWISE IN COMPLIANCE WITH THE ACT, SUCH LAWS AND THE LLC AGREEMENT. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THE LLC AGREEMENT. SECTION 5.4 Capital Contributions. No interest shall accrue on any --------------------- Capital Contribution. If any Member withdraws from the Company pursuant to Section 9.5 hereof, such Member shall remain obligated for any unpaid Capital Contributions and shall not be entitled to a return of its Capital Contribution. The 17 value of any Additional Member's Capital Contribution and the terms upon which such Capital Contribution shall be made shall be as agreed upon by the Board. SECTION 5.5 Additional Contributions. From time to time, the Board ------------------------ may determine that the Company requires additional capital and may request each Member to make an additional Capital Contribution in an amount determined by the Board. SECTION V.6 Maintenance of Capital Accounts. ------------------------------- (a) The Company shall establish and maintain Capital Accounts for each Member and Assignee in accordance with the following provisions: (i) to each Member's Capital Account there shall be credited (A) such Member's Capital Contributions, (B) such Member's distributive share of Net Profits and any items in the nature of income or gain which are specially allocated, and (C) the amount of any Company liabilities assumed by such Member which are secured by any property distributed to such Member; and (ii) to each Member's Capital Account there shall be debited (A) the amount of money and the Gross Asset Value of any property distributed to such Member pursuant to any provision of this Agreement, (B) such Member's distributive share of Net Losses and any items in the nature of expenses or losses which are specially allocated and (C) the amount of any liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company. (b) Immediately prior to the actual or deemed Distribution of property of the Company (other than the Distribution of cash) upon a dissolution and liquidation of the Company, the Capital Accounts of the Members shall be adjusted (consistent with the provisions hereof and Treasury Regulations under Section 704 of the Code) upward or downward to reflect any unrealized gain or unrealized loss attributable to property of the Company, as if such unrealized gain or unrealized loss had been recognized upon an actual sale of each asset immediately prior to such Distribution and had been allocated to the Members at such time. In determining such unrealized gain or unrealized loss, the fair market value of the property of the 18 Company as of any date of determination shall be reasonably determined by the Board or, if applicable, any liquidating trustee appointed by the Court of Chancery of the State of Delaware. This provision is intended to meet the requirements of Treasury Regulations Section 1.704-1(b)(2)(iv)(f). (c) This Section and other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Treasury Regulations. Notwithstanding that a particular adjustment is not set forth in this Section, the Capital Accounts of the Members shall be adjusted as required by, and in accordance with, the capital account maintenance rules of Treasury Regulations Section 1.704-1(b). SECTION 5.7 Negative Capital Accounts. No Member shall be required ------------------------- to make up an Adjusted Capital Account Deficit nor pay to any Member the amount of any such deficit in any such account. SECTION 5.8 Sale or Exchange of Units. In the event of a Transfer of ------------------------- some or all of a Member's Units in accordance with Article VIII hereof, the Capital Account of the Member making such Transfer shall become the capital account of the Assignee, to the extent it relates to the Member's Units so Transferred. ARTICLE VI ALLOCATIONS OF PROFITS AND LOSSES; DISTRIBUTIONS SECTION 6.1 (a) Allocations of Net Profits and Net Losses from Operations. --------------------------------------------------------- Net Profits and Net Losses shall be allocated among the Members ratably in proportion to their respective number of Units at the time of such allocation. Notwithstanding the foregoing, no item of loss or deduction of the Company shall be allocated to a Member if such allocation would result in a negative balance in such Member's Adjusted Capital Account. Such loss or deduction shall be allocated first among the Members with positive balances in their Capital Accounts in proportion to (and to the extent of) such positive balances and thereafter in accordance with their respective number of Units in the Company as determined under Section 1.704-1(b)(3) of the Treasury Regulations. 19 (b) Allocations of Tax Benefit Amount. Notwithstanding the --------------------------------- allocations set forth in Section 6.1(a) hereof, all items of income, gain, loss and deduction of the Company relating to or arising out of the exercise of any employee stock options issued pursuant to any of the LLC Option Plans shall be allocated among the Members ratably in proportion to their respective number of Units as of the Effective Time. SECTION 6.2 Distributions; Reductions in Capital Accounts. --------------------------------------------- (a) Profits. The Board shall determine, in its sole and ------- absolute discretion, profits available for distribution to Members and the amount to be distributed to Members, and shall authorize and distribute to the Members pro rata in proportion to the number of Units held by each Member at the time of such distribution, the determined amount when, as and if declared by the Board. Notwithstanding the foregoing, any profits available for distribution to Members attributable to the items of income or gain described in Section 6.1(b) hereof, as determined by the Board, shall be distributed, at the sole and absolute discretion of the Board, to the Members pro rata in proportion to the number of Units held by each Member as of the Effective Time. Available profits, as referred to herein, shall mean the net profits of the Company after appropriate provision for expenses and liabilities, including liabilities that are not deductible for federal income tax purposes, as determined by the Board, and such reserves for capital expenditures as determined by the Board, in its sole and absolute discretion. (b) Adjustment Event Reduction; General. If an Adjustment ----------------------------------- Event (as contemplated by and defined in the Merger Agreement) or an exercise of any employee stock option issued pursuant to any of the LLC Option Plans occurs, the number of Units owned by each Member will be reduced ratably in proportion to their respective number of Units as of the Effective Time (regardless of any reduction in their Capital Account pursuant to Section 5.4 hereof) and such reductions will be reflected in the books and records of the Company as well as Schedule A hereto. Each Member will be given written notice of an Adjustment Event at least three days prior thereto and such notice shall include (i) the number of shares of Endo Common Stock that the Company is transferring to Endo Holdings and (ii) the number of Units such Member will own following the Adjustment Event. SECTION 6.3 Withholding Taxes. The Company is authorized to ----------------- withhold from Distributions to a Member, or with respect to allocations to a Member, and to pay over to a federal, state or local government, any amounts required to 20 be withheld pursuant to the Code, or any provisions of any other federal, state or local law. Any amounts so withheld shall be treated as having been distributed to such Member pursuant to this Article VI for all purposes of this Agreement, and shall be offset against the amounts otherwise distributable to such Member. SECTION 6.4 Limitations on Distributions. No Distribution to Members ---------------------------- shall be declared or paid unless, after giving effect to such Distribution, the fair value of all assets of the Company exceeds all liabilities of the Company, other than liabilities to Members on account of their Capital Accounts. SECTION 6.5 Qualified Income Offset. If any Member unexpectedly ----------------------- receives any adjustments, allocations or distributions described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section 6.5 shall be made only if and to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Section 6.5 have been tentatively made as if this Section 6.5 were not in this Agreement. SECTION 6.6 Book/Tax Disparities. In the case of contributed -------------------- property, items of income, gain, loss, deduction and credit, as determined for federal income tax purposes, shall be allocated first in a manner consistent with the requirements of Section 704(c) of the Code to take into account the difference between the Agreed Value of such property and its adjusted tax basis at the time of contribution. The method under Section 704(c) of the Code and the Treasury Regulations thereunder shall be determined by the majority of the Board. SECTION 6.7 Allocation of Nonrecourse Deductions. Items of loss, ------------------------------------ deduction and Section 705(a)(2)(B) expenditures attributable under Section 1.704-2(c) of the Treasury Regulations to increases in the Company Minimum Gain shall be allocated, as provided in Section 1.704-2(e) of the Treasury Regulations, to the Members pro rata in proportion to the relative number of Units held by each Member. SECTION 6.8 Allocation of Member Nonrecourse Deductions. ------------------------------------------- Notwithstanding the provisions of Section 6.7 hereof, items of loss, deduction and Section 705(a)(2)(B) expenditures attributable under Section 1.704-2(i) of the 21 Treasury Regulations to Member Nonrecourse Debt shall (prior to any allocation pursuant to Section 6.7 hereof) be allocated, as provided in Section 1.704-2(i) of the Treasury Regulations, to the Members in accordance with the ratios in which they bear the economic risk of loss for such debt for purposes of Section 1.752-2 of the Treasury Regulations. SECTION 6.9 Minimum Gain Chargeback. In the event that there is a ----------------------- net decrease in the Company Minimum Gain during a Taxable Year, the minimum gain chargeback described in Sections 1.704-2(f) and (g) of the Treasury Regulations shall apply. SECTION 6.10 Member Minimum Gain Chargeback. If during a Taxable ------------------------------ Year there is a net decrease in Member Nonrecourse Debt Minimum Gain, any Member with a share of that Member Nonrecourse Debt Minimum Gain (determined under Section 1.704-2(i)(5) of the Treasury Regulations) as of the beginning of the year must be allocated items of income and gain for the year (and, if necessary, for succeeding years) equal to that Member's share of such net decrease in accordance with Section 1.704-2(i) of the Treasury Regulations. 22 ARTICLE VII ACCOUNTS SECTION 7.1 Books. The Board shall cause to be maintained complete ----- and accurate books of account of the Company's affairs at the Company's principal place of business. Such books shall be kept on such method of accounting as the Board shall select. SECTION 7.2 Reports. The books of account of the Company shall be ------- closed after the close of each Fiscal Year, and there shall be prepared and sent to each Member a statement of the profits and losses of the Company for that period and a statement of such Member's distributive share of income and expense for income tax reporting purposes. SECTION 7.3 Federal Tax Matters. Initially, the chief financial ------------------- officer of the Company shall be the Tax Matters Member, who shall be considered the tax matters partner for purposes of Section 6231 of the Code. The Tax Matters Member shall cause to be prepared and shall sign all tax returns of the Company, make any tax elections for the Company allowed under the Code or the tax laws of any state or other jurisdiction having taxing jurisdiction over the Company and monitor any governmental tax authority in any audit that such authority may conduct of the Company's books and records or other documents. The Tax Matters Member may be replaced with another person at any time, with or without cause, by a vote of a Majority of the Members at a meeting, in person or by proxy, or without a meeting by the written consent of a Majority of the Members. SECTION 7.4 Special Basis Adjustment. The Tax Matters Member shall, ------------------------ without any further consent of the Members being required (except as specifically required herein), have discretion to make an election for federal income tax purposes to adjust the basis of property pursuant to Sections 754, 734(b) and 743(b) of the Code, or comparable provisions of state, local or foreign law, in connection with Transfers of Units and Company Distributions. 23 ARTICLE VIII TRANSFERS OF UNITS SECTION 8.1 Prohibition. No Member may Transfer all or any portion ----------- of its Units other than (i) to a Permitted Transferee or (ii) upon the written consent of the Board, which consent shall be subject to a determination by the Board, after consultation with counsel, that such Transfer will not increase the likelihood that the Company would be treated as a publicly traded partnership within the meaning of Section 7704 of the Code (each of (i) and (ii) above shall be referred to herein as a "Permitted Transfer"). Any attempted Transfer of ------------------ Units, other than in strict accordance with this Article VIII, shall be null and void and the purported transferee shall have no rights as a Member or Assignee hereunder. The Company will not recognize any rights of a purported transferee by, including but not limited to, (i) redeeming the Units held by a purported transferee, (ii) admitting a purported transferee as a Member, (iii) recognizing the right of a purported transferee to receive Company distributions (directly or indirectly) or (iv) recognizing the right of a purported transferee to acquire an interest in the capital or profits of the Company. SECTION 8.2 Conditions to Permitted Transfers. A Member shall be --------------------------------- entitled to make a Permitted Transfer of all or any portion of its Units only upon satisfaction of each of the following conditions: (a) such Transfer does not cause a termination of the Company for federal or state income tax purposes; (b) such Transfer does not require the registration or qualification of such Units pursuant to any applicable federal or state securities laws; (c) such Transfer does not result in a violation of applicable laws; and (d) the Board receives written instruments that are in a form satisfactory to the Board, as determined in its sole and absolute discretion (including, without limitation, (i) copies of any instruments of Transfer, (ii) such Assignee's consent to be bound by this Agreement as an Assignee, and (iii) if requested by the Board, an opinion of counsel to such Assignee, in form and substance reasonably acceptable to the Board, to the effect that the conditions set forth in Subsections (a), (b) and (c) above have been satisfied). 24 SECTION 8.3 Effect of Transfers. Upon any Permitted Transfer, the ------------------- Assignee of the Units Transferred shall be entitled to receive the Distributions and allocations of income, gain, loss, deduction, credit or similar items to which the Transferring Member would be entitled with respect to such Units, and shall not be entitled to exercise any of the other rights of a Member with respect to the Transferring Member's Units, including, without limitation, the right to vote, unless and until such Assignee is admitted to the Company as a Substitute Member pursuant to Section 9.3 hereof. ARTICLE IX ADDITIONAL AND SUBSTITUTE MEMBERS; WITHDRAWAL OF MEMBERS SECTION 9.1 Admissions; Withdrawals. No Person shall be admitted to ----------------------- the Company as a Member (other than the Initial Members) except in accordance with Section 9.2 or 9.3 hereof. Except as otherwise specifically set forth in Section 9.5 hereof, no Member shall be entitled to withdraw from the Company. Any purported admission or withdrawal which is not in accordance with this Article IX shall be null and void. Upon admission of any Additional or Substitute Member, or upon any Member ceasing to be a Member, Schedule A hereto shall be revised accordingly to reflect such admission. SECTION 9.2 Admission of Additional Members. A Person shall become ------------------------------- an Additional Member pursuant to the terms of this Agreement only if and when each of the following conditions is satisfied: (a) the Board, in its sole and absolute discretion, determines the nature and amount of the Unit Consideration to be paid by such Person; (b) the Board has received, on behalf of the Company, such Person's Unit Consideration as so determined; (c) the Board consents in writing to such admission, which consent may be given or withheld in its sole and absolute discretion; and (d) the Board receives written instruments (including, without limitation, such Person's consent to be bound by this Agreement as a Member) that 25 are in a form satisfactory to the Board, as determined in its sole and absolute discretion. SECTION 9.3 Admission of Assignees as Substitute Members. An -------------------------------------------- Assignee of all or any portion of a Member's Units shall become a Substitute Member of the Company only if and when both of the following conditions are satisfied: (a) the Board consents in writing to such admission, which consent may be given or withheld, or made subject to such conditions as are determined by the Board, in its sole and absolute discretion; and (b) the Board receives written instruments (including, without limitation, such Assignee's consent to be bound by this Agreement as a Member) that are in a form satisfactory to the Board, as determined in its sole and absolute discretion. SECTION 9.4 Cessation of Member. ------------------- (a) Events Resulting in Cessation of Member. Any Member shall --------------------------------------- cease to be a Member of the Company upon the earliest to occur of any of the following events: (i) such Member's withdrawal from the Company pursuant to Section 9.5 hereof; (ii) as to any Member that is not an individual, the filing of a certificate of dissolution, or its equivalent, for such Member; or (iii) the Bankruptcy of such Member. (b) Upon any Member ceasing to be a Member pursuant to subsection (a) of this Section 9.4, such Member or its successor-in-interest shall become an Assignee of its Units, entitled to receive the Distributions and allocations of income, gain, loss, deduction, credit or similar item to which such Member would have been entitled and shall not be entitled to exercise any of the other rights of a Member in, or have any duties or other obligations of a Member with respect to, such Units. No such Member shall have a right to a return of its Capital Contribution. 26 SECTION 9.5 Withdrawal of Members. --------------------- (a) Withdrawal Upon Transfer. If a Member has Transferred all of its ------------------------ Units in one or more Permitted Transfers, then such Member shall withdraw from the Company on the date upon which each Assignee of such Units has been admitted as a Substitute Member in accordance with Section 9.3 hereof, and such Member shall no longer be entitled to exercise any rights or powers of a Member under this Agreement. (b) Voluntary Withdrawal. In addition to a withdrawal pursuant to -------------------- subsection (a) of this Section 9.5, each Member shall have the right to withdraw from the Company at any time, but only upon the consent of the Board, by providing written notice of withdrawal to the Board. A withdrawing Member shall have no right to a return of its Capital Contribution. ARTICLE X EVENTS OF DISSOLUTION SECTION 10.1 Dissolution. The Company shall be dissolved upon the ----------- occurrence of either of the following events (each, an "Event of Dissolution"): -------------------- (a) A Majority of Members votes for dissolution; or (b) A judicial dissolution of the Company pursuant to Section 18-802 of the Act. No other event, including the retirement, withdrawal, insolvency, liquidation, dissolution, insanity, resignation, expulsion, Bankruptcy, death, incapacity or adjudication of incompetency of a Member, shall cause the dissolution of the Company. ARTICLE XI TERMINATION SECTION 11.1 Liquidation. In the event that an Event of Dissolution ----------- shall occur, the Company shall be liquidated and its affairs shall be wound up. All proceeds from such liquidation shall be distributed as set forth below, in accordance with the provisions of Section 18-804 of the Act: 27 (a) to creditors, including Members who are creditors to the extent permitted by law, in satisfaction of the Company's liabilities; and (b) to Members in accordance with their positive Capital Account balances, taking into account all Capital Account adjustments for the Company's Taxable Year in which the liquidation occurs. Liquidation proceeds shall be paid within sixty (60) days of the end of the Company's Taxable Year or, if later, within ninety (90) days after the date of liquidation. Such Distributions shall be in cash or property (which need not be distributed proportionately) or partly in both, as determined by the Board. SECTION 11.2 Final Accounting. In the event of the dissolution of the ---------------- Company, prior to any liquidation, a proper accounting shall be made to the Members from the date of the last previous accounting to the date of dissolution. SECTION 11.3 Cancellation of Certificate. Upon the completion of the --------------------------- Distribution of the Company's assets upon dissolution, the Company shall be terminated, all Units shall be cancelled and the Board shall cause the Company to execute and file in the Office of the Secretary of State of the State of Delaware a Certificate of Cancellation in accordance with Section 18-203 of the Act. ARTICLE XII EXCULPATION AND INDEMNIFICATION SECTION 12.1 Exculpation. Notwithstanding any other provisions of this ----------- Agreement, whether express or implied, or obligation or duty at law or in equity, none of the Managers or Members, or any officers, directors, stockholders, partners, employees, representatives, consultants or agents of either of the foregoing, nor any officer, employee, representative, consultant or agent of the Company or any of its Affiliates (individually, a "Covered ------- Person" and, collectively, the "Covered Persons") shall be liable to the Company - ------ --------------- or any other Person for any act or omission (relating to the Company and the conduct of its business, this Agreement, any related document or any transaction contemplated hereby or thereby) taken or omitted in good faith by a Covered Person and in the reasonable belief that such act or omission was in or was not contrary to the best interests of the Company; provided that such act or -------- ---- omission does not constitute fraud, willful misconduct, bad faith or gross negligence. 28 SECTION 12.2 Indemnification. To the fullest extent permitted by law, --------------- the Company shall indemnify and hold harmless each Manager, Member and officer of the Company and each officer or director of any Member (individually, an "Indemnified Person" and, collectively, the "Indemnified Persons") from and ------------------ ------------------- against any and all losses, claims, demands, liabilities, expenses, judgments, fines, settlements and other amounts arising from any and all actions, suits or proceedings, whether civil, criminal, administrative or investigative ("Claims"), in which such Indemnified Person may be involved, or threatened to ------ be involved, as a party or otherwise, by reason of its management of the affairs of the Company or which relates to or arises out of the Company or its property, business or affairs. An Indemnified Person shall not be entitled to indemnification under this Section 12.2 with respect to any Claim in which it has engaged in fraud, willful misconduct, bad faith or gross negligence. Expenses incurred by an Indemnified Person in investigating or defending any Claim shall be paid by the Company in advance of the final disposition of such Claim upon receipt by the Company of an undertaking by or on behalf of such Indemnified Person to repay such amount if it shall be ultimately determined that such Indemnified Person is not entitled to be indemnified by the Company as authorized by this Section 12.2. The Company, upon a determination by the Board, may, but shall not be obligated to, provide indemnification to any employees, representatives, agents or consultants of the Company to the same extent provided to Indemnified Persons pursuant to this Section 12.2. ARTICLE XIII AMENDMENTS TO AGREEMENT Amendments to this Agreement and the Certificate of Formation shall be approved in writing upon consent of a Majority of the Members; provided that no -------- ---- such amendment shall adversely affect the economic interests of any of the other Members without such other Members' express prior written consent; provided -------- further that, notwithstanding the preceding proviso, any such amendment approved - ------- ---- in writing upon consent of a Majority of the Members may adversely affect the economic interests of all of the Members (including a Majority of the Members) without having to obtain any additional written consent. An amendment shall become effective as of the date specified in the Members' approval or, if none is specified as of the date of such approval, as otherwise provided in the Act. 29 ARTICLE XIV GENERAL PROVISIONS SECTION 14.1 Notices. Unless otherwise specifically provided in this ------- Agreement, all notices and other communications required or permitted to be given hereunder shall be in writing and shall be (i) delivered by hand, (ii) delivered by a nationally recognized commercial overnight delivery service, (iii) mailed postage prepaid by first class mail or (iv) by telecopier, in any such case directed or addressed to each Member at the address or telecopy number set forth on Schedule A hereto. Such notices shall be effective: (a) in the case of hand deliveries when received; (b) in the case of an overnight delivery service, on the next business day after being placed in the possession of such delivery service, with delivery charges prepaid; (c) in the case of mail, seven (7) days after deposit in the postal system, first class mail, postage prepaid; and (d) in the case of facsimile notices, when electronic indication of receipt is received. Any Member may change its address and telecopy number by written notice to the Company. SECTION 14.2 Entire Agreement, etc. This Agreement and the Exchange ---------------------- Agreement constitute the entire agreement among the Members hereto relating to the subject matter hereof and thereof and supersedes all prior contracts, agreements and understandings between them. No course of prior dealings among the Members shall be relevant to supplement or explain any term used in this Agreement. Acceptance or acquiescence in a course of performance rendered under this Agreement shall not be relevant to determine the meaning of this Agreement even though the accepting or the acquiescing party has knowledge of the nature of the performance and an opportunity for objection. No provisions of this Agreement may be waived, amended or modified orally, but only by an instrument in writing executed by the waiving party. No waiver of any terms or conditions of this Agreement in one instance shall operate as a waiver of any other term or condition or as a waiver in any other instance. SECTION 14.3 Construction Principles. As used in this Agreement, words ----------------------- in any gender shall be deemed to include all other genders. The singular shall be deemed to include the plural and vice versa. The captions and article and section headings in this Agreement are inserted for convenience of reference only and are not intended to have significance for the interpretation of or construction of the provisions of this Agreement. 30 SECTION 14.4 Counterparts. This Agreement may be executed in two or more ------------ counterparts by the parties hereto, each of which when so executed will be an original, but all of which together will constitute one and the same instrument. SECTION 14.5 Severability. If any provision of this Agreement is held to ------------ be invalid or unenforceable for any reason, such provision shall be ineffective to the extent of such invalidity or unenforceability; provided, however, that -------- ------- the remaining provisions will continue in full force without being impaired or invalidated in any way unless such invalid or unenforceable provision or clause shall be so significant as to materially affect the Members' expectations regarding this Agreement. Otherwise, the Members agree to replace any invalid or unenforceable provision with a valid provision which most closely approximates the intent and economic effect of the invalid or unenforceable provision. SECTION 14.6 Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Delaware without regard to the principles of conflicts of laws thereof. SECTION 14.7 Binding Effect. This Agreement shall be binding upon, and -------------- inure to the benefit of the Members. SECTION 14.8 Additional Documents and Acts. Each Member agrees to ----------------------------- execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions, and conditions of this Agreement and of the transactions contemplated hereby. SECTION 14.9 No Third-Party Beneficiary. This Agreement is made solely -------------------------- for the benefit of the parties hereto and no other person shall have any rights, interest, or claims hereunder or otherwise be entitled to any benefits under or on account of this Agreement as a third-party beneficiary or otherwise. SECTION 14.10 Limited Liability Company. The parties to this Agreement ------------------------- agree to form a limited liability company and do not intend to form a partnership under the laws of the State of Delaware or any other laws; provided, -------- however, that, to the extent permitted by U.S. law, the Company will be treated - ------- as a partnership for U.S. federal, state and local income tax purposes. [SIGNATURE PAGE FOLLOWS] 31 IN WITNESS WHEREOF, each Member has duly executed this Agreement as of the day first above written. KELSO INVESTMENT ASSOCIATES V, L.P. By: Kelso Partners V, L.P., General Partner By: /s/ David I. Wahrhaftig ------------------------------------ General Partner KELSO EQUITY PARTNERS V, L.P. By: /s/ David I. Wahrhaftig ------------------------------------ General Partner GREENWICH STREET CAPITAL PARTNERS, L.P. By: Greenwich Street Investments L.P. Inc., its general partner By: Greenwich Street Investments Inc., General Partner By: /s/ Eric S. Bomze -------------------------------------- Name: Eric S. Bomze Title: Assistant Vice President GREENWICH STREET CAPITAL OFFSHORE FUND, LTD. By: Greenwich Street Capital Partners Inc., as Manager By: /s/ Eric S. Bomze -------------------------------------- Name: Eric S. Bomze Title: Assistant Vice President TRV EMPLOYEES FUND, L.P. By: TRV Employees Investments, Inc., its general partner By: /s/ Eric S. Bomze -------------------------------------- Name: Eric S. Bomze Title: Assistant Vice President THE TRAVELERS INSURANCE COMPANY By: /s/ F. Denney Voss ----------------------------------- Name: F. Denney Voss Title: Senior Vice President THE TRAVELERS LIFE AND ANNUITY COMPANY By: /s/ F. Denney Voss ----------------------------------- Name: F. Denney Voss Title: Senior Vice President /s/ Carol A. Ammon ----------------------------------- CAROL A. AMMON /s/ Jeffrey R. Black ----------------------------------- JEFFREY R. BLACK /s/ Mariann T. MacDonald ----------------------------------- MARIANN T. MACDONALD /s/ David A. H. Lee ----------------------------------- DAVID A. H. LEE CAROL A. AMMON, TRUSTEE REVOCABLE TRUST U/A, DATED 6/13/97 By: /s/ Carol A. Ammon ------------------------------- Carol A. Ammon /s/ Margaret S. Cyert ---------------------------------- MARGARET S. CYERT /s/ U. Bertram Ellis ---------------------------------- U. BERTRAM ELLIS /s/ Linda Fairstein ---------------------------------- LINDA FAIRSTEIN /s/ Patricia Kelso ---------------------------------- LOUIS & PATRICIA KELSO TRUST DATED 2/1/88 By: Patricia Kelso, as Sole Trustee /s/ William Marquard ---------------------------------- WILLIAM MARQUARD /s/ John McGillicuddy ---------------------------------- JOHN MCGILLICUDDY /s/ John E. Tinder ---------------------------------- FRANK T. NICKELL I.R.A. By: Fleet National Bank, Trustee By: John E. Tinder Vice President /s/ Michel Rapoport ---------------------------------- MICHEL RAPOPORT /s/ David Roderick ----------------------------------- DAVID RODERICK /s/ Dr. John Rutledge I.R.A ----------------------------------- DR. JOHN RUTLEDGE I.R.A. /s/ George L. Shinn ----------------------------------- GEORGE L. SHINN /s/ Alan C. Snyder ----------------------------------- ALAN C. SNYDER Schedule A Members of Endo Pharma LLC
Name and Address of Member Capital Contribution Number of Units - -------------------------- -------------------- --------------- Kelso Investment Associates V, L.P. 847,028 shares of Common Stock 54,711,127 c/o Kelso & Co. 320 Park Avenue New York, NY 10022 Kelso Equity Partners V, L.P. 71,272 shares of Common Stock 4,603,592 c/o Kelso & Co. 320 Park Avenue New York, NY 10022 Greenwich Street Capital Partners, L.P. 108,531.1634 shares of Class A 7,010,232 388 Greenwich Street, 36/th/ Floor Common Stock New York, NY 10013 Attn: Robert Hamwee Greenwich Street Capital Offshore Fund, Ltd. 6,736.2383 shares of Class A 435,106 388 Greenwich Street, 36/th/ Floor Common Stock New York, NY 10013 Attn: Robert Hamwee TRV Employees Fund, L.P. 26,375.9097 shares of Class A 1,703,670 388 Greenwich Street, 36/th/ Floor Common Stock New York, NY 10013 Attn: Robert Hamwee The Travelers Insurance Company 5,598.9813 shares of Class A 361,649 388 Greenwich Street, 36/th/ Floor Common Stock New York, NY 10013 Attn: Robert Hamwee
Name and Address of Member Capital Contribution Number of Units -------------------------- -------------------- --------------- The Travelers Life and Annuity Company 2,757.7073 shares of Class A 178,125 388 Greenwich Street, 36/th/ Floor Common Stock New York, NY 10013 Attn: Robert Hamwee Carol A. Ammon 4,000 shares of Common Stock -- 223 Wilmington West Chester Pike (all held in trust described below) Chadds Ford, PA 19317 Jeffrey R. Black 500 shares of Common Stock 32,296 223 Wilmington West Chester Pike Chadds Ford, PA 19317 Mariann T. MacDonald 3,000 shares of Common Stock 193,776 5 Chesterton Road Landenberg, PA 19350 David Allen Harvey Lee, MD, Ph D. 250 shares of Common Stock 16,148 3209 Swarthmore Road Wilmington, DE 19807 Carol A. Ammon, Trustee Revocable Trust 4,000 shares of Common Stock 258,368 U/A, Dated 6/13/97 223 Wilmington West Chester Pike Chadds Ford, PA 19317 Margaret S. Cyert 1,000 shares of Class A Common 64,592 12 Edgewood Road Stock Pittsburgh, PA 15215 U. Bertram Ellis 1,000 shares of Common Stock 64,592 IXL Holdings, Inc. 1888 Emery Street, N.W. 3/rd/ Floor Atlanta, GA 30318
Name and Address of Member Capital Contribution Number of Units -------------------------- -------------------- --------------- Linda Fairstein 500 shares of Common Stock 32,296 Deputy Chief, Trial Division District Attorney's Office County of New York 1 Hogan Place, Room 836 New York, NY 10013 Patricia Kelso 2,000 shares of Common Stock 129,184 Kelso Institute 872 North Point San Francisco, CA 94109 William Marquard 500 shares of Common Stock 32,296 Eaglestone Farm, Inc. 2199 Maysville Road Carlisle, KY 40311 John McGillicuddy 500 shares of Common Stock 32,296 Chase Manhattan Bank, N.A. 270 Park Avenue New York, NY 10017-2070 Frank T. Nickell I.R.A. 10,000 shares of Common Stock 645,919 c/o Ms. Linda Romaniello Fleet Investment Services 240 Greenwich Avenue Greenwich, CT 06830 Attn: IRA Account No. 011 649 40 Michel Rapoport 2,000 shares of Common Stock 129,184 Mosler Inc. 8509 Berk Boulevard Hamilton, OH 45015 David Roderick 2,000 shares of Common Stock 129,184 USX Corporation 600 Grant Street Pittsburgh, PA 15219-4776
Name and Address of Member Capital Contribution Number of Units -------------------------- -------------------- --------------- Dr. John Rutledge I.R.A. 2,000 shares of Common Stock 129,184 Rutledge and Company, Inc. One Greenwich Office Park 51 Weaver Street Greenwich, CT 06831 George Shinn 200 shares of Common Stock 12,918 55 Pippin's Way Morristown, NJ 07960 Alan C. Snyder 500 shares of Common Stock 32,296 Shinnecock Partners, L.P. 15910 Venture Boulevard 14/th/ Floor Encino, CA 91436
Schedule B Initial Managers of Endo Pharma LLC Carol A. Ammon Michael B. Goldberg David I. Wahrhaftig EX-99.6 7 0007.txt AMENDED AND RESTATED STOCKHOLDERS AGREEMENT EXHIBIT 6 ___________________________ AMENDED AND RESTATED STOCKHOLDERS AGREEMENT ENDO PHARMACEUTICALS HOLDINGS INC. Dated as of July 14, 2000 ____________________________ TABLE OF CONTENTS
Page ---- ARTICLE I RESTRICTIONS ON TRANSFER OF STOCK................................... 2 1.1 General Restriction on Transfer by Management Stockholders..... 2 1.2 Permitted Transferees.......................................... 3 ARTICLE II PURCHASES BY ENDO LLC............................................... 4 2.1 Right to Purchase Shares from Management Stockholders.......... 4 2.2 Notice......................................................... 5 2.3 Payment........................................................ 5 2.4 Postponement, etc.............................................. 7 ARTICLE III PURCHASE PRICE...................................................... 7 3.1 Fair Market Value.............................................. 7 3.2 Carrying Value................................................. 7 3.3 Certain Defined Terms.......................................... 8 ARTICLE IV PROHIBITION ON PURCHASES............................................ 9 4.1 Prohibited Purchases........................................... 9 ARTICLE V SALES TO THIRD PARTIES.............................................. 12 5.1 General........................................................ 12 5.2 Agreements to Be Bound......................................... 12 5.3 Involuntary Transfers.......................................... 12 5.4 Tag- and Drag-Along Rights..................................... 13 ARTICLE VI REGISTRATION RIGHTS................................................. 16 6.1 Incidental Registration........................................ 16
i 6.2 Expenses....................................................... 18 6.3 Holdback and Other Agreements.................................. 18 6.4 Indemnification................................................ 19 ARTICLE VII CHARTER DOCUMENTS.................................................... 19 7.1 Charter Documents.............................................. 19 ARTICLE VIII TERMINATION.......................................................... 20 8.1 Sale of the Company............................................ 20 8.2 Cessation of Ownership of Stock................................ 20 8.3 Other Termination Events....................................... 20 ARTICLE IX MISCELLANEOUS PROVISIONS............................................. 21 9.1 Stock Certificate Legend....................................... 21 9.2 Option Plans................................................... 21 9.3 New Management Stockholders.................................... 22 9.4 No Other Arrangements or Agreements............................ 22 9.5 Amendment and Modification..................................... 22 9.6 Assignment..................................................... 22 9.7 Recapitalizations, Exchanges, etc. Affecting the Common Stock.. 23 9.8 Transfer of Common Stock....................................... 23 9.9 Further Assurances............................................. 24 9.10 Governing Law.................................................. 24 9.11 Invalidity of Provision........................................ 24 9.12 Notices........................................................ 24 9.13 Headings; Execution in Counterparts............................ 26 9.14 Entire Agreement; Effect on Certain Other Agreements........... 26 9.15 Injunctive Relief.............................................. 26 9.16 Attorneys' Fees................................................ 26
ii AMENDED AND RESTATED STOCKHOLDERS AGREEMENT ------------------------------------------- AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, dated as of July 14, 2000 (this "Agreement"), by and among Endo Pharmaceuticals Holdings Inc., a Delaware --------- corporation (the "Company"), Kelso Investment Associates V, L.P., a Delaware ------- limited partnership (together with Kelso Equity Partners V, L.P., a Delaware limited partnership, ("Kelso"), Endo Pharma LLC, a Delaware limited liability ----- company (together with its designee, "Endo LLC"), Carol A. Ammon, Jeffrey R. -------- Black and Mariann T. MacDonald (collectively, together with their Permitted Transferees, the "Initial Management Stockholders"), David A.H. Lee and the ------------------------------- Carol A. Ammon Trustee, Revocable Trust U/A, Dated 6/13/97 as Permitted Transferee of Carol A. Ammon (the Initial Management Stockholders, together with David A.H. Lee and any other persons who become parties to this Agreement pursuant to Sections 10.2 and 10.3 of this Agreement and each of their respective Permitted Transferees, the "Management Stockholders"). ----------------------- WHEREAS, the Company, Kelso and the Management Stockholders are parties to that certain Stockholders Agreement, dated as of December 1, 1997 (the "1997 Stockholders Agreement"); --------------------------- WHEREAS, 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"), by and among the Company, Endo Inc. and Algos ---------------- Pharmaceutical Corporation ("Algos") whereby Algos will merge with and into Endo ----- Inc., a wholly owned subsidiary of the Company (the "Merger"); ------ WHEREAS, the Company and Endo LLC have granted, and may grant additional, options to purchase shares of common stock, par value $.01 per share, of the Company (the "Common Stock") to the current Management ------------ Stockholders and certain employees of the Company and its subsidiaries pursuant to the Endo 1997 Employee Stock Option Plan, the Endo Pharma Amended and Restated 1997 Employee Stock Option Plan, the Endo Pharma Amended and Restated 1997 Executive Stock Option Plan, the Endo Pharma 2000 Supplemental Employee Stock Option Plan and the Endo Pharma 2000 Supplemental Executive Stock Option Plan (collectively, and together with any similar such plan the Company may in the future adopt, the "Option Plans") and, upon exercise of the options such ------------ shares of Common Stock will be subject to this Agreement and to the extent such employees are not already parties to this Agreement, such employees will become parties to this Agreement pursuant to Section 10.3 hereof; WHEREAS, the Company may offer additional shares of Common Stock after the date of this Agreement to employees of the Company and its subsidiaries and such shares of Common Stock will be subject to this Agreement and to the extent such employees are not already parties to this Agreement, such employees will become parties to this Agreement pursuant to Section 10.3 hereof; and WHEREAS, the Company, Endo LLC and the Management Stockholders believe it to be in their respective best interests and in the best interests of the Company that they enter into this Agreement providing for certain rights and restrictions with respect to the shares of Common Stock owned by the Management Stockholders or their Permitted Transferees. NOW, THEREFORE, in consideration of the mutual covenants and obligations set forth in this Agreement, the parties hereto agree that the 1997 Stockholders Agreement is hereby amended and restated in its entirety and agree as follows: ARTICLE I RESTRICTIONS ON TRANSFER OF STOCK 1.1 General Restriction on Transfer by Management Stockholders. ---------------------------------------------------------- No shares of Common Stock owned by any Management Stockholder or any interest therein may, directly or indirectly, be sold, assigned, transferred or otherwise disposed of or transferred by such Management Stockholder (collectively, "Transferred" and any such transaction, a "Transfer"), except for (i) Transfers ----------- -------- to a transferee pursuant to Section 1.2 hereof (a "Permitted Transferee"), (ii) -------------------- Transfers of shares of Common Stock to the Company, Kelso, Endo LLC or Management Stockholders, including pursuant to Article II or III hereof, or (iii) Transfers of shares of Common Stock pursuant to, or as otherwise permitted under, Article VI hereof; provided that in the event the employment of a -------- ---- Management Stockholder with the Company or any of its Subsidiaries is terminated for any reason, such Management Stockholder may pledge, hypothecate, mortgage or encumber his or her shares of Common Stock; provided further that the terms of -------- ------- ---- any such pledge, hypothecation, mortgage or encumbrance shall be approved by Endo LLC in its discretion taking into account the financial situation of Endo LLC at the time. 2 1.2 Permitted Transferees. --------------------- (a) Subject to paragraph (b) of this Section 1.2, any Management Stockholder may Transfer any shares of Common Stock or any interest therein or his or her rights to subscribe for the same, if any, (i) with the prior written consent of Endo LLC's Board of Managers (the "LLC Board"), which consent shall --------- not be unreasonably withheld (provided that reasonable grounds to withhold -------- ---- consent shall include, but not be limited to, the risk of subjecting the Company to registration or reporting requirements under federal securities laws), to a trust or corporation the beneficiaries or stockholders of which are such Management Stockholder, as the case may be, his or her spouse, parents, any other family members, (ii) in case of his or her death, by will or by the laws of intestate succession to executors, administrators, testamentary trustees, legatees or beneficiaries, or (iii) with the prior written consent of the LLC Board, to any transferee, including, without limitation, to one or more Management Stockholders or to any employee who is, in the opinion of the LLC Board, a current member of management of the Company or any of its subsidiaries, if any. In addition to the foregoing, any transferee of a Management Stockholder described above may Transfer shares of Common Stock back to such Stockholder or to another Permitted Transferee of such Stockholder. (b) Any Transfer of shares of Common Stock made pursuant to paragraph (a) of this Section 1.2 to a Permitted Transferee shall be permitted and shall be effective only if such Permitted Transferee shall agree in writing to be bound by the terms and conditions of this Agreement pursuant to an instrument of assumption reasonably satisfactory in form and substance to Endo LLC. (c) An "affiliate" of, or a person "affiliated" with, a specified --------- ---------- person, is a person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified (in the case of Kelso, including, without limitation, any partner of such entity or any director or officer of Kelso & Company, any individual retirement account of any such partner, director or officer, any family member of any such partner, director or officer, or any trust or family partnership for the benefit of any such partner, director or officer or family member thereof). 3 ARTICLE II PURCHASES BY ENDO LLC 2.1 Right to Purchase Shares from Management Stockholders. ----------------------------------------------------- (a) Subject to all provisions of this Article III and Article V hereof, Endo LLC shall have the right to purchase from a Management Stockholder, and such Management Stockholder shall have the obligation to sell to Endo LLC, all, but not less than all, of the shares of Common Stock owned by such Management Stockholder: (i) at the fair market value of such shares, as determined pursuant to Section 4.1 hereof ("Fair Market Value"), if such Management ----------------- Stockholder's employment with the Company or any of its subsidiaries is terminated as a result of (v) the termination by the Company or one of its subsidiaries of such employment without Cause, (w) the resignation of such Management Stockholder for Good Reason, (x) the resignation of such Management Stockholder without Good Reason, (y) the retirement of such Management Stockholder upon or after reaching the age of 65 or, if different, the Company's normal retirement age ("Retirement"), or (z) the ---------- death or Disability (as defined in Section 4.3 hereof) of such Management Stockholder; and (ii) at the lesser of the Fair Market Value and the Carrying Value (as defined in Section 4.2 hereof) of such shares, if such Management Stockholder's employment with the Company or any of its subsidiaries is terminated by the Company or one of its subsidiaries with Cause. (b) In the event that Endo LLC does not exercise such right to purchase the shares of Common Stock from a Management Stockholder by giving notice within the 30-day period referred to in Section 3.2 hereof, Kelso, or a party designated by Kelso, shall have the right to purchase, at its option, the shares of Common Stock referred to in Section 3.1(a) hereof from such Management Stockholder, by giving notice not later than the end of the succeeding 10-day period. 4 (c) In the event that the purchase of, or the payment for, some or all of the shares of Common Stock referred to in Section 3.1(a) hereof by Endo LLC is prohibited under Article V hereof, subject to Section 3.1(b) hereof, an Initial Management Stockholder may elect, at his or her option, to purchase some or all of such shares of Common Stock, within 20 days of the determination by Endo LLC that its purchase of, or its payment for, such shares would be prohibited by Article V hereof. 2.2 Notice. If Endo LLC desires to purchase shares of Common ------ Stock from a Management Stockholder pursuant to Section 3.1 hereof, it shall notify such Management Stockholder not more than 30 days after the occurrence of the event giving rise to Endo LLC's right to acquire such Management Stockholder's shares of Common Stock (or in the case of the Management Stockholder's death, it shall notify such Management Stockholder's estate within 30 days of notice to Endo LLC of the Management Stockholder's death). If Endo LLC does not deliver such notice within such 30-day period and Kelso (or its designee) desires to purchase such shares, then Kelso (or its designee) shall notify such Management Stockholder not later than the end of the succeeding 10- day period. 2.3 Payment. ------- (a) Subject to Article V and Section 3.4 hereof, payment for shares of Common Stock purchased pursuant to Section 3.1(a) and (b) hereof shall be made on the date that is (i) in any case in which the price to be paid for such shares may only be the Carrying Value thereof, the 30th business day following the date on which notice is given pursuant to Section 3.2 hereof, or (ii) in all other cases, the 15th business day following the date of the determination of Fair Market Value pursuant to Section 4.1 hereof. (b) If the termination of employment of such Management Stockholder is as a result of his or her resignation without Good Reason, and: (i) if the date of termination of employment occurs prior to December 1, 2002, then the purchase price of the purchased shares shall be paid within 15 days following the surrender of the certificates representing the purchased shares, and (ii) if the date of termination of employment occurs on or after December 1, 2002, then the portion of the purchase price of the purchased shares equal to the Carrying Value of such shares on the date of termination of employment shall be paid by the 15th day fol- 5 lowing the surrender of the certificates representing the purchased shares and the remainder shall be paid on the last day of the 18/th/ month following the date of termination of employment. (c) Notwithstanding the foregoing, in the event that the termination of employment of a Management Stockholder giving rise to Endo LLC's right to acquire such Management Stockholder's shares of Common Stock results from the death or Disability of such Management Stockholder prior to December 1, 2002, then such Management Stockholder shall have the right to elect (which election shall be irrevocable), within 90 days of the receipt of the notice specified in Section 3.2 hereof, to defer the effectiveness of Endo LLC's purchase right with respect to all or any portion of such Management Stockholder's shares of Common Stock until December 1, 2002. Notwithstanding the foregoing, no such election may be made by such Management Stockholder with respect to a portion of such Management Stockholder's shares of Common Stock unless such election is made with respect to at least one-third of the shares of Common Stock owned by such Management Stockholder at the time of such termination of employment. If a Management Stockholder shall fail to make an election with respect to when Endo LLC's purchase right shall be effective, such Management Stockholder shall be deemed to have elected to have Endo LLC's purchase right be effective immediately with respect to all of such Management Stockholder's shares of Common Stock. In the event Endo LLC's purchase right with respect to all or any portion of any shares of Common Stock is not effective until December 1, 2002 by reason of the election made by a Management Stockholder under this Section 3.3(c), December 1, 2002 shall be deemed to be the date of termination for purposes of determining the purchase price to be paid for the shares of Common Stock to be purchased after December 1, 2002. Endo LLC shall, subject to Article V hereof, pay to such Management Stockholder whose employment so terminates the Fair Market Value of such shares by the 15/th/ day following the date of determination of Fair Market Value with respect to such deemed termination date. (d) Any payments based on Fair Market Value required to be made by Endo LLC under this Section 3.3 shall accrue interest at 6% simple interest per annum on the amounts not paid from the date of termination of employment (or the date of deemed termination, including with respect to the election made pursuant to Section 3.3(c) hereof) to the date Endo LLC makes such payments. 6 2.4 Postponement, etc. ------------------ (a) The date of payment and closing of any purchase and sale under this Article III may be postponed to the extent necessary to permit such purchase and sale under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations promulgated thereunder, if applicable to such sale. No party shall be required to consummate any purchase and sale under this Article III until such time as such transaction would not violate applicable law, other than violations which would not have a direct or indirect material adverse effect on such party. (b) Notwithstanding anything to the contrary in this Article III, in no event shall any sale of Common Stock that was received by a Management Stockholder upon the exercise of an employee stock option occur prior to the six-month anniversary of such exercise. ARTICLE III PURCHASE PRICE 3.1 Fair Market Value. ----------------- (a) Fair Market Value. For the purposes of this Agreement, the ----------------- "Fair Market Value" of any share of Common Stock being purchased by or sold to - ------------------ Endo LLC or Kelso (or its designees) pursuant to this Agreement shall be the average for the ten consecutive trading days prior to such transaction of the last sales price for a share of Common Stock on the principal securities exchange on which the Common Stock is then listed or, if the Common Stock is not so listed, on the National Association of Securities Dealers Automated Quotation System or, if not so quoted, on the principal market on which the Common Stock is then traded. (b) Notice to Stockholders. After notice has been given pursuant ---------------------- to Section 2.2, 3.2 or 6.3 hereof, Endo LLC shall promptly deliver a letter setting forth the Fair Market Value to Kelso and to each Management Stockholder whose Common Stock is to be purchased pursuant to Section 2.1, 3.1 or 6.3 hereof. 3.2 Carrying Value. For the purposes of Sections 3.1 and 6.5 -------------- hereof, "Carrying Value" of any share of Common Stock being purchased by Endo -------------- LLC shall be equal to the price paid by the selling Management Stockholder for any such share. 7 3.3 Certain Defined Terms. As used in this Agreement, the --------------------- following terms shall have the meanings ascribed to them below, except with respect to Initial Management Stockholders (and such other Management Stockholders as determined, from time to time, by resolution of the LLC Board) with employment agreements with the Company which define such terms differently, in which case such terms shall have the meanings ascribed to them in such Initial Management Stockholder's respective employment agreement (or the employment agreements of such other Management Stockholders as determined, from time to time, by resolution of the LLC Board): (a) Cause. The term "Cause" used in connection with a termination ----- of employment of a Management Stockholder shall mean a termination of such Management Stockholder's employment by the Company or any of its subsidiaries due to (i) the continued failure, after written notice, by such Management Stockholder substantially to perform his or her duties with the Company or any of its subsidiaries (other than any such failure resulting from incapacity due to reasonably documented physical illness or injury or mental illness), (ii) the engagement by such Management Stockholder in serious misconduct that causes, or in the good faith judgment of the Board may cause, harm (financial or otherwise) to the Company or any of its subsidiaries including, without limitation, (A) the disclosure of material secret or confidential information of the Company or any of its subsidiaries (B) the potential debarment of the Company or any of its subsidiaries by the U.S. Food and Drug Administration or any successor agency (the "FDA"), or (C) the possibility that the registration of the Company or any --- of its subsidiaries with the U.S. Drug Enforcement Administration or any successor agency (the "DEA") could be revoked or an application with the DEA --- could be denied, (iii) the potential debarment of such Management Stockholder by the FDA, or (iv) the material breach by the Management Stockholder of this Agreement or any other agreement between such Management Stockholder, on the one hand, and the Company or Kelso, on the other hand. (b) Good Reason. A termination of a Management Stockholder's ----------- employment with the Company or any of its subsidiaries shall be for "Good ---- Reason" if such Management Stockholder voluntarily terminates his or her - ------ employment with the Company or any of its subsidiaries as a result of any of the following: (i) without the Management Stockholder's prior written consent, a material reduction by the Company or any of its subsidiaries in his or her current salary, other than any such reduction which is part of a general salary reduction or other concessionary arrangement affecting all employees 8 or affecting the group of employees of which the Management Stockholder is a member; (ii) the taking of any action by the Company or any of its subsidiaries that would substantially diminish the aggregate value of the benefits provided him or her under the Company's or any such subsidiary's medical, health, accident, disability, life insurance, thrift and retirement plans in which he or she was participating on the date of his or her execution of this Agreement, other than any such reduction that is (A) required by law, (B) implemented in connection with a general concessionary arrangement affecting all employees or affecting the group of employees of which the Management Stockholder is a member or (C) generally applicable to all beneficiaries of such plans; or (iii) the assignment to the Management Stockholder of duties inconsistent with his or her status within the Company, or a substantial adverse alteration in the nature or status of his or her responsibilities from those in effect on the date hereof. (c) Disability. The termination of the employment of any ---------- Management Stockholder by the Company or any of its subsidiaries shall be deemed to be by reason of a "Disability" if, as a result of such Management ---------- Stockholder's incapacity due to reasonably documented physical illness or injury or mental illness, such Management Stockholder shall have been unable for more than six months within any 12-month period to perform his or her duties with the Company or any of its subsidiaries on a full time basis and within 30 days after written notice of termination has been given to such Management Stockholder, such Management Stockholder shall not have returned to the full time performance of his or her duties. The date of termination in the case of a termination for "Disability" shall be the last day of the aforementioned 30-day period. ARTICLE IV PROHIBITION ON PURCHASES 4.1 Prohibited Purchases. Notwithstanding anything to the -------------------- contrary herein, Endo LLC shall not be permitted or obligated to purchase any shares of Common Stock from a Management Stockholder (or make any payment for any 9 purchased shares of Common Stock) pursuant to Section 2.1 or Section 3.1 hereof to the extent (i) Endo LLC or the Company (if the Company were to be the sole source of the funds necessary to make any such payment or purchase) is prohibited from purchasing such shares (or incurring debt to finance the purchase of such shares or making payment for such purchased shares) by any debt instruments or other agreements (the "Agreements") entered into by Endo LLC, the ---------- Company or any of their respective subsidiaries or by applicable law, (ii) an event of default under any Agreement has occurred and is continuing or a condition exists which would, with notice or lapse of time or both, result in an event of default under any Agreement or (iii) the purchase of such shares by Endo LLC or the Company (if the Company were to be the sole source of the funds necessary to make any such payment or purchase) (including the incurrence of any debt which in the judgment of the LLC Board is necessary to finance such purchase or the payment for such purchased shares) (A) could, in the judgment of the LLC Board, result in the occurrence of an event of default under any Agreement or create a condition which would or might, with notice or lapse of time or both, result in an event of default under any Agreement, (B) would, in the judgment of the LLC Board, be imprudent in view of the financial condition (present or projected) of Endo LLC and its subsidiaries, if any, taken as a whole, or the Company and its subsidiaries, taken as a whole, or the anticipated impact of the purchase of (or payment for) such shares on Endo LLC's, the Company's (if the Company were to be the sole source of the funds necessary to make any such payment or purchase) or any of their respective subsidiaries' ability to meet their respective obligations, including under any Agreement or (C) could, in the judgment of the LLC Board, constitute a fraudulent conveyance or transfer or render Endo LLC or the Company (if the Company were to be the sole source of the funds necessary to make any such payment or purchase) insolvent under applicable law or violate limitations in the Delaware General Corporation Law on repurchases of stock. If shares of Common Stock which Endo LLC has the right or obligation to purchase (or make payment for) on any date exceed the total amount permitted to be purchased on such date pursuant to the preceding sentence (the "Maximum Amount"), Endo LLC shall purchase (or pay for) -------------- on such date only that number of shares of Common Stock up to the Maximum Amount (and shall not be required to purchase more than the Maximum Amount) in such amounts as the LLC Board shall in good faith determine, applying the following order of priority: (a) first, the shares of Common Stock of all Management Stockholders whose shares of Common Stock are being (or were) purchased by Endo LLC by reason of termination of employment due to death or Disability up to the Maximum Amount and, to the extent that the number of shares of Common Stock that Endo LLC is obligated or has the right to purchase (or pay for) from such Manage- 10 ment Stockholders exceeds the Maximum Amount, such shares of Common Stock pro rata among such Management Stockholders on the basis of the number of shares of Common Stock held by each of such Management Stockholders that Endo LLC is obligated or has the right to purchase (or pay for), and (b) second, to the extent that the Maximum Amount is in excess of the amount Endo LLC purchases (or pays for) pursuant to clause (a) above, the shares of Common Stock of all Management Stockholders whose shares of Common Stock are being (or were) purchased (or paid for) by Endo LLC by reason of termination of employment without Cause or due to Retirement or resignation for Good Reason up to the Maximum Amount and, to the extent that the number of shares of Common Stock that Endo LLC is obligated or has the right to purchase from such Management Stockholders exceeds the Maximum Amount, such shares of Common Stock pro rata among such Management Stockholders on the basis of the number of shares of Common Stock held by each of such Management Stockholders that Endo LLC is obligated or has the right to purchase (or pay for), and (c) third, to the extent the Maximum Amount is in excess of the amounts Endo LLC purchases (or pays for) pursuant to clauses (a) and (b) above, the shares of Common Stock of all Management Stockholders whose shares of Common Stock are being (or were) purchased (or paid for) by Endo LLC for any other reason up to the Maximum Amount and, to the extent that the number of shares of Common Stock that Endo LLC is obligated or has the right to purchase (or pay for) from such Management Stockholders exceeds the Maximum Amount, the shares of Common Stock of such Management Stockholders in such order of priority and in such amounts as the LLC Board in its sole discretion shall in good faith determine to be appropriate under the circumstances. Subject to Sections 2.1(c)and 3.1(c) hereof, notwithstanding anything to the contrary contained in this Agreement, if Endo LLC is unable to purchase any Management Stockholder's shares pursuant to Section 2.1 or 3.1 of this Agreement by reason of this Article V (or make any payment for any purchased shares), Endo LLC may nonetheless in the case of Section 3.1 hereof exercise its option to purchase such shares and in the case of purchases pursuant to Sections 2.1 or 3.1 hereof shall purchase (or make payment for) such shares at the earliest practicable date permitted under this Article V and any payment therefor shall accrue simple interest (or if such payment is accruing interest at such time, shall continue to accrue interest) at 6% per annum from the date such payment would have been made but for this Article V to the date such payment is actually made. All payments of interest accrued hereunder shall be paid only at the date of payment by Endo LLC for the shares of Common 11 Stock being purchased. Any shares as to which Endo LLC has exercised its right to purchase pursuant to Section 3.1 hereof may not otherwise be sold by the Management Stockholder notwithstanding non-payment therefor pursuant to this Article V. ARTICLE V SALES TO THIRD PARTIES 5.1 General. No Management Stockholders shall sell any of his or ------- her shares of Common Stock to a third party for the term of this Agreement; provided that such restriction shall not apply to any sale or other transaction - -------- ---- described in clause (i) or (ii) of Section 1.1 hereof or to any sale pursuant to a Registration under the Act, subject to Article VII hereof. Endo LLC may not sell the shares of Common Stock it owns to a third party at any time after the date of this Agreement unless Endo LLC as transferor first complies with Section 6.4 hereof. 5.2 Agreements to Be Bound. Notwithstanding anything contained in ---------------------- this Article VI, any sale to a third party or any Involuntary Transfer (as defined in Section 6.3 hereof) to an Involuntary Transferee (as defined in Section 6.3 hereof) shall be permitted under the terms of this Agreement only if such third party or Involuntary Transferee, as the case may be, shall agree in writing to be bound by the terms and conditions of this Agreement pursuant to an instrument of assumption reasonably satisfactory in form and substance to Endo LLC. 5.3 Involuntary Transfers. In the case of any transfer of title --------------------- or beneficial ownership of shares of Common Stock upon default, foreclosure, forfeit, divorce, court order, or otherwise than by a voluntary decision on the part of a Management Stockholder (an "Involuntary Transfer"), Endo LLC shall -------------------- have the right to purchase such shares pursuant to this Section 6.3. Upon the Involuntary Transfer of any shares of Common Stock, such Management Stockholder shall promptly (but in no event later than two days after such Involuntary Transfer) furnish written notice (the "Notice") to Endo LLC indicating that the ------ Involuntary Transfer has occurred, specifying the name of the person to whom such shares have been transferred (the "Involuntary Transferee") and giving a ---------------------- detailed description of the circumstances giving rise to, and stating the legal basis for, the Involuntary Transfer. Upon the receipt of the Notice, and for 30 days thereafter, Endo LLC shall have the right to purchase, and the Involuntary Transferee shall have the obligation to sell, all, but not less than all, of the shares of Common Stock acquired by the Involuntary Transferee 12 for a purchase price equal to the lesser of (i) the Fair Market Value of such shares of Common Stock on the date of transfer to the Involuntary Transferee and (ii) the amount of the indebtedness or other liability that gave rise to the Involuntary Transfer plus the excess, if any, of the Carrying Value of such shares of Common Stock over the amount of such indebtedness or other liability that gave rise to the Involuntary Transfer. Notwithstanding the foregoing, the LLC Board may, for good cause shown by the Management Stockholder who made the Involuntary Transfer, determine that payment of a purchase price equal to the Fair Market Value of such shares of Common Stock on the date of transfer to the Involuntary Transferee would be appropriate under the circumstances, and direct that payment be made in such amount. Kelso shall have the right to require Endo LLC to assign to Kelso (or a designee of Kelso) Endo LLC's right to purchase pursuant to this Section 6.3. 5.4 Tag- and Drag-Along Rights. -------------------------- (a) Tag-Along Rights. Endo LLC shall not, in any one transaction ---------------- or any series of similar transactions not effected through a broker or over a national securities exchange, Transfer more than 25% of the shares of Common Stock it owns as of the date of the Merger, except pursuant to Section 6.4(b) hereof, to any third party or parties unaffiliated with Endo LLC (a "Third ----- Party") unless the Management Stockholders (collectively, the "Offerees"), are - ----- -------- offered the right, at the option of each Offeree, to include in such Transfer to the Third Party such number of shares of Common Stock then owned by each such Offeree, as determined in accordance with this Section 6.4(a). If Endo LLC receives from a Third Party a bona fide offer or offers to Transfer which it intends to accept, or proposes to Transfer to a Third Party, shares of its Common Stock, Endo LLC shall provide written notice (the "Tag-Along Notice") to ---------------- each of the Offerees, setting forth the consideration per share to be paid by such Third Party and the other material terms and conditions of such transaction. The Tag-Along Notice shall offer the Offerees the opportunity to participate in the proposed Transfer of shares to the Third Party according to the terms and conditions of this Section 6.4(a) and for the same type of consideration and for an amount of consideration per share not less than that offered to Endo LLC by the Third Party. At any time within 20 days after its receipt of the Tag-Along Notice, each of the Offerees may irrevocably accept the offer included in the Tag-Along Notice for up to such number of shares of Common Stock as is determined in accordance with the provisions of this Section 6.4(a) by furnishing written notice of 13 such acceptance to Endo LLC. Promptly following such acceptance by an Offeree, each such Offeree shall deliver to Endo LLC the certificate or certificates representing the shares of Common Stock to be Transferred pursuant to such offer by such Offeree, together with a limited power-of-attorney authorizing Endo LLC to sell or otherwise dispose of such shares of Common Stock pursuant to the proposed Transfer to the Third Party. Each Offeree shall have the right to participate in the proposed Transfer to the Third Party by Transferring in connection therewith shares of Common Stock equal to the product of (x) the total number of shares to be acquired by the Third Party, times (y) a fraction, the numerator of which shall be the total number of shares of Common Stock then owned by such Offeree, and the denominator of which shall be the number of shares of Common Stock then owned by Endo LLC plus the total number of shares of Common Stock then owned by the Offerees. The maximum number of shares of Common Stock that may be Transferred by each Offeree to the Third Party in accordance with this Section 6.4(a) shall be the total number of shares of Common Stock then owned by such Offeree. If within 20 days after the receipt of the Tag-Along Notice, any Offeree has not accepted the offer contained in the Tag-Along Notice, such Offeree will be deemed to have waived any and all rights with respect to, or to participate in, the Transfer of Common Stock described in the Tag-Along Notice and Endo LLC shall have 45 days in which to Transfer not more than the amount of Common Stock described in the Tag-Along Notice, for an amount and type of consideration per share not materially more favorable to Endo LLC than was set forth in the Tag-Along Notice. If, at the end of 65 days following the receipt of the Tag-Along Notice, Endo LLC has not completed the Transfer of Common Stock of Endo LLC and Common Stock of any Offeree, Endo LLC shall return to such Offeree all certificates representing shares of Common Stock which such Offeree delivered for Transfer pursuant to this Section 6.4(a), and all the restrictions on sale or other disposition contained in this Agreement with respect to Common Stock then or thereafter owned by the Offeree shall again be in effect. As promptly as practicable (but in no event later than 5 days) after the consummation of the Transfer of Common Stock of Endo LLC and Common Stock of the Offerees to the Third Party in accordance with this Section 6.4(a), Endo LLC shall notify the Offerees thereof, shall remit to each of the Offerees the total consideration in respect of the shares of Common Stock of such Offeree which were so Transferred, and shall furnish such other evidence of the completion and time of 14 completion of such Transfer and the terms thereof as may be reasonably requested by the Offerees. (b) Drag-Along Rights. If Endo LLC shall propose to Transfer at ----------------- least 60% of all shares of Common Stock then owned by Endo LLC to a Third Party, then (in addition to the rights of the Management Stockholders to participate in such Transfer pursuant to Section 6.4(a) hereof) Endo LLC may, at its option, require the Management Stockholders (collectively, the "Remaining Holders") to ----------------- include in such Transfer to the Third Party such number of shares of Common Stock then owned by such Remaining Holder, as determined in accordance with this Section 6.4(b). Endo LLC shall send written notice (the "Drag-Along Notice") of the ----------------- exercise of their rights pursuant to this Section 6.4(b) to each of the Remaining Holders, setting forth the consideration per share to be paid by the Third Party and the other material terms and conditions of such transaction. The Drag-Along Notice shall state that the Remaining Holders shall be required to participate in the proposed Transfer of shares of Common Stock to the Third Party according to the terms and conditions of this Section 6.4(b) and for the same type of consideration and for an amount of consideration per share not less than that offered to Endo LLC by the Third Party. Within 15 days following the receipt of the Drag-Along Notice, each of the Remaining Holders shall deliver to a representative of Endo LLC designated in the Drag-Along Notice certificates representing all shares of Common Stock held by such Remaining Holder, duly endorsed, together with all other documents required to be executed in connection with such transaction. In the event that any Remaining Holder should fail to deliver such certificates to Endo LLC, the Company shall cause the books and records of the Company to show that such shares are bound by the provisions of this Section 6.4(b) and that such shares may be Transferred only to the Third Party. Each Remaining Holder shall be required to participate in the proposed Transfer to the Third Party by Transferring in connection therewith shares of Common Stock equal to the product of (x) the total number of shares to be acquired by the Third Party, times (y) a fraction, the numerator of which shall be the total number of shares of Common Stock then owned by such Remaining Holder, and the denominator of which shall be the total number of shares of Common Stock then owned by Endo LLC plus the total number of shares of Common Stock then owned by the Remaining Holders. The maximum number of shares of Common Stock that may be Transferred by each Remaining Holder to the Third Party in accordance with this Section 6.4(b) shall be the total number of shares of Common Stock then owned by such Remaining Holder. 15 If, within 120 days after Endo LLC gave the Drag-Along Notice, it shall not have completed the Transfer of all the shares of Common Stock of the Remaining Holders in accordance with this Section 6.4(b), Endo LLC shall return to each of the Remaining Holders all certificates representing shares of Common Stock that such Remaining Holder delivered for Transfer pursuant hereto and that were not purchased pursuant to this Section 6.4(b). Promptly (but in no event later than 5 days) after the consummation of the Transfer of Common Stock of Endo LLC and Remaining Holders pursuant to this Section 6.4(b), Endo LLC shall give notice thereof to the Remaining Holders, shall remit to each of the Remaining Holders the total consideration in respect of the shares of Common Stock of such Remaining Holder which were so transferred, and shall furnish such other evidence of the completion and time of completion of such Transfer and the terms thereof as may be reasonably requested by such Remaining Holders. ARTICLE VI REGISTRATION RIGHTS 6.1 Incidental Registration. If Endo LLC, pursuant to that ----------------------- certain registration rights agreement, dated as of July 17, 2000, by and between the Company and Endo LLC (the "Endo LLC Registration Rights Agreement"), demands -------------------------------------- that the Company register any of its shares of Common Stock or any other of its common equity securities (collectively, "Other Securities") under the Act for ---------------- sale for cash to the public under the Act, then Endo LLC will at such time give prompt written notice to each any Management Stockholder or any of their respective Permitted Transferees (each, a "Holder") of its intention to do so ------ and of the rights of such Holder under this Section 7.1, at least 20 days prior to the Company's anticipated filing date of the registration statement relating to such demand registration. Such notice shall offer each such Holder the opportunity to include in such registration statement such number of shares of Common Stock as such Holder may request, in accordance with this Section 7.1. Upon the written request of a Holder made within 10 days after the receipt of the Endo LLC's notice (which request shall specify the number of shares of Common Stock intended to be disposed of and the intended method of disposition thereof), Endo LLC will use its best efforts to cause the Company to effect, in connection with the registration of the Other Securities, the registration under the Act of all shares of Common Stock which the Company has been so requested to register, to the extent required to permit the 16 disposition (in accordance with such intended methods of disposition) of such shares of Common Stock so requested to be registered, provided that: -------- ---- (a) if, at any time after Endo LLC has given such written notice of the Company's intention to register any Other Securities pursuant to a demand by Endo LLC and prior to the effective date of the registration statement filed in connection with such demand registration, Endo LLC shall determine for any reason not to demand such registration, Endo LLC shall give written notice of such determination to the Holders, and thereupon the Company shall be relieved of its obligation to register the shares of Common Stock requested to be registered in connection with the demand registration of such Other Securities; (b) if the registration referred to in the first sentence of Section 7.1(a) hereof is to be an underwritten registration on behalf of the Company, and the managing underwriter(s) advises the Company in writing that, in such firm's opinion, such offering would be materially and adversely affected by the inclusion therein of any of the Common Stock requested to be included therein, the Company shall include in such registration: (i) first, all securities for which Endo LLC has demanded registration ("Endo LLC Securities"), (ii) second, ------------------- up to the full number of shares of Common Stock requested to be included in such registration by the Management Stockholders, which, in the good faith opinion of such firm, can be so sold without so materially and adversely affecting such offering (and, if less than the full number of such shares of Common Stock, allocated pro rata among the Management Stockholders on the basis of the number of shares of Common Stock requested to be included therein by the Management Stockholders); provided, however, that with respect to the Management -------- ------- Stockholders, if the underwriter in connection with such registration determines that such offering would be materially and adversely affected by the inclusion of Common Stock owned by the Management Stockholders for reasons including, but not limited to, the status of the owners of such securities as Management Stockholders such underwriter may in its sole discretion exclude all or, in such manner as either in its sole discretion deems appropriate, the Common Stock owned by Management Stockholders from such offering, and (iii) third, an amount of other securities, if any, requested to be included therein in excess of the number or dollar amount of Company Securities and Common Stock of the Holders which, in the opinion of such firm, can be so sold without materially and adversely affecting such offering (allocated among the holders of such other securities in such proportions as such holders and the Company may agree); and 17 (c) no registration of Common Stock effected under this Section 7.1 shall relieve the Company of its obligation to effect a registration of shares of Common Stock pursuant to the Endo LLC Registration Rights Agreement. 6.2 Expenses. The Company will pay all expenses in connection -------- with any registration pursuant to this Article VII (including any registration not consummated as contemplated by Section 7.1(a) hereof) and any other actions that may be taken in connection with any such registration as contemplated by this Article VII; provided, however, that the Company will not be obligated to -------- ------- pay underwriting discounts or commissions or transfer taxes, if any, relating to the sale or disposition of shares sold pursuant to any such registration. 6.3 Holdback and Other Agreements. ----------------------------- (a) If and whenever the Company proposes to register any of its equity securities under the Securities Act for its own account (other than on Form S-4 or S-8 or any successor form) or is required to use its best efforts to effect the registration of any shares of Common Stock under the Securities Act pursuant to Section 7.1 hereof, each Holder agrees by acquisition of such shares of Common Stock not to effect any sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, or to request registration under Section 7.1 hereof of any shares of Common Stock within seven days prior to and 90 days (unless advised by the managing underwriter that a longer period, not to exceed 180 days, is required, or such shorter period as the managing underwriter for any underwritten offering may agree) after the effective date of the registration statement relating to such registration, except as part of such registration or unless, in the case of a private sale of distribution, the transferee agrees in writing to be subject to this Section 7.3. If requested by such managing underwriter, each holder of shares of Common Stock agrees to execute a holdback agreement, in customary form, consistent with the terms of this Section 7.3(a). (b) The Company agrees not to effect any public sale or distribution of its equity securities or securities convertible into or exchangeable or exercisable for any of such securities within seven days prior to and 90 days (unless advised in writing by the managing underwriter that a longer period, not to exceed 180 days, is required, or such shorter period as the managing underwriter for any underwritten offering may agree) after the effective date of any registration statement filed pursuant to Section 7.1 hereof (except (i) as - part of such registration, (ii) as permitted by the related underwriting, (iii) -- --- pursuant to an employee equity compensation plan, (iv) pursuant to an -- acquisition or strategic relationship, bank or 18 equipment financing or similar transaction or (v) pursuant to a registration on - Form S-4 or S-8 or any successor form). In addition, upon the request of the managing underwriter, the Company shall use its best efforts to cause each holder of its equity securities or any securities convertible into or exchangeable or exercisable for any of such securities, whether outstanding on the date of this Agreement or issued at any time after the date of this Agreement (other than any such securities acquired in a public offering), to agree not to effect any such public sale or distribution of such securities during such period, except as part of any such registration if permitted, and to cause each such holder to enter into a similar agreement to such effect with the Company. 6.4 Indemnification. The Company may require as a condition to --------------- including any Common Stock in any registration statement filed pursuant to Section 7.1 hereof that the Company shall have received an undertaking from the prospective seller of Common Stock to indemnify directors, officers and other persons, if any, who may control the Company within the meaning of the Act with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or such omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such prospective seller of Common Stock specifically stating that it is for use in the preparation of such registration statement, prospectus contained therein, or amendment or supplement thereto. The parties hereto hereby acknowledge and agree that, unless otherwise expressly agreed to in writing by such prospective seller to the contrary, for all purposes of this agreement the only information furnished or to be furnished by such prospective seller, in its capacity as such, to the Company for use in any registration statement, prospectus contained therein, or any amendment or supplement thereto are statements specifically relating to (i) transactions between the prospective seller and its affiliates, on the one hand, and the Company, on the other hand, (ii) the beneficial ownership of shares of Common Stock by the prospective seller and its affiliates and (iii) the name and address of the prospective seller and its affiliates. 19 ARTICLE VII CHARTER DOCUMENTS 7.1 Charter Documents. The Company has previously furnished to ----------------- the Management Stockholders copies of its Certificate of Incorporation and By- Laws, each as shall be in effect on the date of the closing of the Merger (the "Charter Documents"). From and after the date of this Agreement, each - ------------------ Management Stockholder shall vote its shares of voting stock of the Company, at any regular or special meeting of stockholders of the Company or in any written consent executed in lieu of such a meeting of stockholders, and shall take all actions necessary, to ensure that the Charter Documents do not, at any time, conflict with the provisions of this Agreement. ARTICLE VIII TERMINATION 8.1 Sale of the Company. This Agreement shall terminate (a) in the ------------------- event of a sale of the Company or all or substantially all of its assets to a party (whether by merger, stock sale or otherwise) other than Endo LLC or one of its affiliates or (b) in the event that all parties to this Agreement cease to own any shares of Common Stock or any interest therein. In the event that Endo LLC shall come to own less than five percent of the outstanding Common Stock, this Agreement shall also terminate, except with respect to Article VII hereof which shall survive such termination indefinitely. 8.2 Cessation of Ownership of Stock. Any party to, or person or ------------------------------- entity who is subject to, this Agreement (other than the Company and Kelso) which ceases to own shares of Common Stock or any interest therein shall cease to be a party to, or person or entity who is subject to, this Agreement and thereafter shall have no rights or obligations hereunder. 8.3 Other Termination Events. ------------------------ (a) This Agreement may be terminated by the affirmative vote of the members of Endo LLC owning a majority of the issued and outstanding membership interests in Endo LLC. 20 (b) Notwithstanding anything to the contrary contained herein, every provision of this Agreement, other than the provisions contained in Section 6.5 and Article VII hereof, shall terminate upon the fifteenth anniversary of this Agreement. ARTICLE IX MISCELLANEOUS PROVISIONS 9.1 Stock Certificate Legend. A copy of this Agreement shall be ------------------------ filed with the Secretary of the Company and kept with the records of the Company. Each certificate representing shares of Common Stock owned by the Management Stockholders shall bear upon its face the following legend: "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL TO THE HOLDER, WHICH COUNSEL MUST BE, AND THE FORM AND SUBSTANCE OF WHICH OPINION ARE, SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE ACT, SUCH LAWS AND THE AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF JULY 14, 2000." All Management Stockholders shall be bound by the requirements of such legends to the extent that such legends are applicable. Upon a registration under the Act of any shares of Common Stock, the certificate representing such shares shall be replaced, at the expense of the Company, with certificates not bearing the legend required by this Section 10.1. 9.2 Option Plans. Pursuant to the Option Plans, the Company has ------------ required that participants thereunder must become parties to this Agreement upon 21 exercise of the options and that they will be "Management Stockholders" hereunder with respect to such shares. In addition, Endo LLC, notwithstanding any requirement set forth in Section 10.4 hereof, can determine that any options granted pursuant to the Option Plans and outstanding and vested as of the option holder's termination of employment with the Company and its subsidiaries shall be deemed to be Common Stock for purposes of Sections 2 and 3 hereof; provided, -------- however, that appropriate adjustments shall be made to reflect the existence of - ------- an exercise price for such options. 9.3 New Management Stockholders. Each of the Management --------------------------- Stockholders hereby agrees that the Company may require that any executive employee of the Company or any of its subsidiaries who after the date of this Agreement is offered shares of Common Stock shall, as a condition precedent to the acquisition of such shares of Common Stock, become a party to this Agreement by executing the same and delivering it to the Company at its address specified in Section 10.11 hereof. Upon such execution and delivery, such executive employee shall be a "Management Stockholder" for all purposes of this Agreement. 9.4 No Other Arrangements or Agreements. Each Management Stockholder ----------------------------------- hereby represents, warrants and covenants to Endo LLC and to each other Management Stockholder that, except for, if applicable, the exchange agreement entered into on December 1, 1997, by and between the Company and each Management Stockholder (collectively, the "Exchange Agreements") and the exchange agreement ------------------- entered into as of the date of this Agreement, by and between Endo LLC and each Management Stockholder (collectively, the "LLC Exchange Agreements"), he or she ----------------------- has not entered into or agreed to be bound by, and will not enter into or agree to be bound by, any other arrangements or agreements of any kind with any other party with respect to the shares of Common Stock, including, but not limited to, arrangements or agreements with respect to the acquisition, disposition or voting of shares of Common Stock (whether or not such agreements and arrangements are with the Company, other Management Stockholders or holders of Common Stock that are not parties to this Agreement). Each Management Stockholder represents, warrants and covenants to Endo LLC and to each other Management Stockholder that it has not entered into or agreed to be bound by, and will not enter into or agree to be bound by, any voting agreements with respect to its shares of Common Stock. 9.5 Amendment and Modification. This Agreement may be amended, -------------------------- modified or supplemented only with the written consent of (i) Kelso and (ii) the Management Stockholders owning a majority of the outstanding Common 22 Stock then owned by all Management Stockholders; provided that Endo LLC may, at -------- ---- any time and from time to time, in its sole discretion, release all or a portion of any Management Stockholder's shares of Common Stock from this Agreement. 9.6 Assignment. The provisions of this Agreement shall be binding ---------- upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns; provided, however, that none of -------- ------- Endo LLC, the Company and any Management Stockholder shall assign any of its rights or obligations pursuant to this Agreement without the prior written consent of Kelso. Endo LLC, with the prior written consent of Kelso, shall have the right, but not the obligation, to assign any of its rights, and delegate any of its obligations, to purchase any shares of Common Stock of any Management Stockholder pursuant to Sections 2 and 3 hereof to any affiliate of Endo LLC, any one or more persons or entities who are or become parties to this Agreement or any employee stock ownership plan that the Company may have (or any combination of the foregoing). In the case of Permitted Transferees, third parties and Involuntary Transferees, such Permitted Transferees, third parties or Involuntary Transferees, as the case may be, shall be deemed the Management Stockholder hereunder for purposes of obtaining the benefits or enforcing the rights of such Management Stockholder hereunder; provided, however, that no -------- ------- Permitted Transferee, third party or Involuntary Transferee, as the case may be, shall derive any rights under this Agreement unless and until such Permitted Transferee, third party or Involuntary Transferee, as the case may be, has delivered to Endo LLC a valid undertaking to become, and becomes, bound by the terms of this Agreement to which the transferring Management Stockholder is subject. 9.7 Recapitalizations, Exchanges, etc. Affecting the Common Stock. ------------------------------------------------------------- Except as otherwise provided herein, the provisions of this Agreement shall apply to the full extent set forth herein with respect to (i) the shares of Common Stock and (ii) any and all shares of capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, exchange, sale of assets or otherwise), which may be issued in respect of, in exchange for, or in substitution for the shares of Common Stock, by reason of any stock dividend, split, reverse split, combination, recapitalization, reclassification, merger, consolidation or otherwise. References to the "Company" set forth herein shall be deemed to refer to any such successor or assign and such entity shall execute an appropriate instrument of assumption agreeing to be bound by the terms hereof. Except as otherwise provided herein, this Agreement is not intended to confer upon any person, except for the parties hereto, any rights or remedies hereunder. 23 9.8 Transfer of Common Stock. If at any time Endo LLC purchases ------------------------ any shares of Common Stock pursuant to this Agreement, Endo LLC may pay the purchase price determined under this Agreement for the shares of Common Stock it purchases by wire transfer of funds or Endo LLC check in the amount of the purchase price, and upon receipt of payment of such purchase price or, pursuant to Section 2.3, Section 3.3 or Article V hereof, any portion thereof, the selling Management Stockholder shall deliver to Endo LLC the certificates representing the number of shares of Common Stock being purchased in a form suitable for transfer, duly endorsed in blank, and free and clear of any lien, claim or encumbrance. In the event that any Management Stockholder refuses or otherwise fails to deliver, in accordance with the preceding sentence, certificates representing the number of shares of Common Stock being purchased, the shares of Common Stock purchased from such Management Stockholder shall (notwithstanding such refusal or failure) be deemed, upon receipt by such Management Stockholder of the purchase price therefor, to not be outstanding for any purposes. Notwithstanding anything in this Agreement to the contrary, Endo LLC shall not be required to make any payment for shares of Common Stock purchased hereunder until delivery to it of the certificates representing such shares. If Endo LLC is purchasing less than all the shares of Common Stock represented by a single certificate, the Company, after Endo LLC makes such purchase, shall deliver to the selling Management Stockholder a certificate for any unpurchased shares of Common Stock. 9.9 Further Assurances. Each party hereto or person or entity ------------------ subject hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto or person or entity subject hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 9.10 Governing Law. This Agreement and the rights and obligations ------------- of the parties hereunder and the persons subject hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of Delaware, without giving effect to the choice of law principles thereof. 9.11 Invalidity of Provision. The invalidity or unenforceability ----------------------- of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction. 24 9.12 Notices. All notices and other communications hereunder shall ------- be in writing and, unless otherwise provided herein, shall be deemed duly given if delivered personally, telecopied (which is confirmed) or sent by registered or certified mail (postage prepaid, return receipt requested) or by Fedex or other similar courier service to the parties at the following addresses (or at such other address as the person or entity to whom notice is given may have previously furnished to the others in writing as set forth in this Section 10.12 (provided that any change of address shall be effective only upon receipt thereof)): (a) If to the Company, to it at: Endo Pharmaceuticals Holdings Inc. 223 Wilmington - West Chester Pike Chadds Ford, Pennsylvania 19317 Attn: Carol A. Ammon with a copy to: Kelso & Company 320 Park Avenue, 24th Floor New York, New York 10022 Attention: James J. Connors, II Telecopy No.: (212) 223-2379 (b) if to a Management Stockholder, as listed on the signature page hereto, or, if not so listed, to it at its address as reflected in the stock records of the Company, or as such Management Stockholder shall designate to the Company in writing, with a copy to Kelso at its address indicated below (provided that any such designation shall be effective only upon receipt thereof). (c) If to Endo LLC, to it at: Endo Pharma LLC c/o Kelso & Company 320 Park Avenue, 24th Floor New York, New York 10022 Attention: James J. Connors, II Telecopy No.: (212) 223-2379 25 9.13 Headings; Execution in Counterparts. The headings and captions ----------------------------------- contained herein are for convenience and shall not control or affect the meaning or construction of any provision hereof. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and which together shall constitute one and the same instrument. 9.14 Entire Agreement; Effect on Certain Other Agreements. This ---------------------------------------------------- Agreement, the Exchange Agreements and the LLC Exchange Agreements embody the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings relating to the shares of Common Stock, other than those expressly set forth or referred to herein or in the Exchange Agreements or the LLC Exchange Agreements. This Agreement, the Exchange Agreements and the LLC Exchange Agreements supersede all prior agreements and understandings among the parties with respect to such subject matter. 9.15 Injunctive Relief. The Company, Endo LLC and the Management ----------------- Stockholders hereby acknowledge that they each shall be irreparably damaged in the event this Agreement is not specifically enforced. Each of the parties therefore agrees that in the event of a breach of any provision of this Agreement, the aggrieved party may elect to institute and prosecute proceedings in any court of competent jurisdiction to enforce specific performance or to enjoin the continuing breach of this Agreement. Such remedies shall, however, be cumulative and not exclusive, and shall be in addition to any other remedy which the Company, Endo LLC or the Management Stockholders may have. Each Management Stockholder hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts in New York and Delaware for the purposes of any suit, action or other proceeding arising out of or based upon this Agreement or the subject matter hereof. Each Management Stockholder hereby consents to service of process by mail made in accordance with Section 10.12 hereof. 9.16 Attorneys' Fees. If any legal action or any arbitration or --------------- other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover such reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled, as may be ordered in connection with such proceeding. 26 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. ENDO PHARMACEUTICALS HOLDINGS INC. By: /s/ Carol A. Ammon ------------------------------------------ Name: Carol A. Ammon Title: President and Chief Executive Officer KELSO INVESTMENT ASSOCIATES V, L.P. By: Kelso Partners V, L.P., General Partner By: /s/ Michael Goldberg ------------------------------------------ General Partner ENDO PHARMA LLC By: /s/ Carol A. Ammon ------------------------------------------ Name: Carol A. Ammon Title: Chief Executive Officer By: /s/ Carol A. Ammon ------------------------------------------ Carol A. Ammon By: /s/ Jeffrey R. Black ----------------------------------------- Jeffrey R. Black By: /s/ Mariann T. MacDonald ------------------------------------------ Mariann T. MacDonald By: /s/ David A.H. Lee ------------------------------------------ David A.H. Lee CAROL A. AMMON, TRUSTEE REVOCABLE TRUST U/A, DATED 6/13/97 By: /s/ Carol A. Ammon ------------------------------------------ Carol A. Ammon The undersigned, by its signature below hereby becomes a party to the Amended and Restated Stockholders Agreement, dated as of July __, 2000, among Endo Pharmaceuticals Holdings Inc. and certain of its stockholders (the "Stockholders Agreement") pursuant to Section 10.3 thereof and agrees to be ---------------------- bound by the terms of the Stockholders Agreement and, for all purposes thereof, to be a "Management Stockholder". ---------------------- IN WITNESS WHEREOF, the undersigned has executed this instrument as of the ____ day of ___________, 20__. ___________________________ Signature ___________________________ Print Name EX-99.7 8 0008.txt AMENDED AND RESTATED EMPLOYEE STOCKHOLDERS AGREEMENT EXHIBIT 7 ===================================================== AMENDED AND RESTATED EMPLOYEE STOCKHOLDERS AGREEMENT ENDO PHARMACEUTICALS HOLDINGS INC. Dated as of July 14, 2000 ===================================================== TABLE OF CONTENTS -----------------
Page ---- ARTICLE I RESTRICTIONS ON TRANSFER OF COMMON STOCK............................... 2 1.1 General Restriction on Transfer by Employee Stockholders........ 2 1.2 Permitted Transferees........................................... 3 ARTICLE II PURCHASES BY THE COMPANY............................................... 4 2.1 Right to Purchase Shares from Employee Stockholders............. 4 2.2 Notice.......................................................... 4 2.3 Payment......................................................... 5 2.4 Postponement, etc............................................... 6 ARTICLE III PURCHASE PRICE........................................................ 6 3.1 Fair Market Value.............................................. 6 3.2 Carrying Value................................................. 6 3.3 Certain Defined Terms.......................................... 7 ARTICLE IV PROHIBITION ON PURCHASES.............................................. 8 4.1 Prohibited Purchases........................................... 8 ARTICLE V SALES TO THIRD PARTIES................................................ 10 5.1 General........................................................ 10 5.2 Right of First Refusal......................................... 10 5.3 Agreements to Be Bound......................................... 11 5.4 Assignment..................................................... 11 5.5 Involuntary Transfers.......................................... 12 5.6 Tag- and Drag-Along Rights..................................... 13
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Page ---- ARTICLE VI TERMINATION........................................................... 16 6.1 Sale of the Company............................................ 16 6.2 Cessation of Ownership of Stock................................ 16 6.3 Other Termination Events....................................... 16 ARTICLE VII MISCELLANEOUS PROVISIONS.............................................. 17 7.1 Stock Certificate Legend....................................... 17 7.2 Option Plans................................................... 17 7.3 New Employee Stockholders...................................... 18 7.4 No Other Arrangements or Agreements............................ 18 7.5 Amendment and Modification..................................... 18 7.6 Assignment..................................................... 18 7.7 Recapitalizations, Exchanges, etc. Affecting the Common Stock.. 19 7.8 Transfer of Common Stock....................................... 19 7.9 Further Assurances............................................. 20 7.10 Governing Law.................................................. 20 7.11 Invalidity of Provision........................................ 20 7.12 Notices........................................................ 20 7.13 Headings; Execution in Counterparts............................ 21 7.14 Entire Agreement; Effect on Certain Other Agreements........... 22 7.15 Injunctive Relief.............................................. 22 7.16 Attorneys' Fees................................................ 22
ii AMENDED AND RESTATED EMPLOYEE STOCKHOLDERS AGREEMENT ---------------------------------------------------- AMENDED AND RESTATED EMPLOYEE STOCKHOLDERS AGREEMENT, dated as of July 14, 2000 (this "Agreement"), by and among Endo Pharmaceuticals Holdings Inc., a --------- Delaware corporation (the "Company"), Kelso Investment Associates V, L.P., a ------- Delaware limited partnership (together with Kelso Equity Partners V, L.P., a Delaware limited partnership, ("Kelso"), Endo Pharma LLC, a Delaware limited ----- liability company (together with its designee, "Endo LLC"), each of the -------- employees of the Company listed on the signature page of this Agreement and the employees of the Company or its subsidiaries who become parties to this Agreement pursuant to Sections 8.2 and 8.3 of this Agreement and each of their respective Permitted Transferees (the "Employee Stockholders"). --------------------- WHEREAS, the Company and the Employee Stockholders are parties to that certain Employee Stockholders Agreement, dated as of December 1, 1997 (the "1997 ---- Employee Stockholders Agreement"); - ------------------------------- WHEREAS, 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"), by and among the Company, Endo Inc. and Algos ---------------- Pharmaceutical Corporation ("Algos") whereby Algos will merge with and into Endo ----- Inc., a wholly owned subsidiary of the Company (the "Merger"); ------ WHEREAS, the Company and Endo LLC have granted, and may grant additional, options to purchase shares of common stock, par value $.01 per share, of the Company (together with shares of class A common stock, par value $.01 of the Company, the "Common Stock") to employees of the Company and its ------------ subsidiaries pursuant to the Endo 1997 Employee Stock Option Plan, the Endo Pharma Amended and Restated 1997 Employee Stock Option Plan and the Endo Pharma 2000 Supplemental Employee Stock Option Plan (collectively, and together with any similar such plan the Company may in the future adopt, the "Employee Option --------------- Plans") and, upon exercise of the options such shares of Common Stock will be - ----- subject to this Agreement and to the extent such employees are not already parties to this Agreement, such employees will become parties to this Agreement pursuant to Section 8.2 hereof; WHEREAS, the Company may offer additional shares of Common Stock after the date of this Agreement to employees of the Company and its subsidiaries and such shares of Common Stock will be subject to this Agreement and to the extent such employees are not already parties to this Agreement, such employees will become parties to this Agreement pursuant to Section 10.3 hereof; and WHEREAS, the Company, Endo LLC and the Employee Stockholders believe it to be in their respective best interests and in the best interests of the Company that they enter into this Agreement providing for certain rights and restrictions with respect to the shares of Common Stock owned by the Employee Stockholders or their Permitted Transferees. NOW, THEREFORE, in consideration of the mutual covenants and obligations set forth in this Agreement, the parties hereto agree that the 1997 Employee Stockholders Agreement is hereby amended and restated in its entirety and agree as follows: ARTICLE I RESTRICTIONS ON TRANSFER OF COMMON STOCK 1.1 General Restriction on Transfer by Employee Stockholders. No -------------------------------------------------------- shares of Common Stock owned by any Employee Stockholder or any interest therein may, directly or indirectly, be sold, assigned, mortgaged, transferred, pledged or hypothecated or otherwise disposed of or transferred by such Employee Stockholder (collectively, "Transferred" and any such transaction, a ----------- "Transfer"), except for (i) Transfers to a transferee pursuant to Section 1.2 -------- hereof (a "Permitted Transferee"), (ii) Transfers of shares of Common Stock to -------------------- the Company, Endo LLC, Kelso or any designated affiliate or other designee of Kelso, including pursuant to Article II hereof, or (iii) Transfers of shares of Common Stock pursuant to, or as otherwise permitted under, Article V hereof; provided that in the event the employment of an Employee Stockholder with the - -------- ---- Company or any of its Subsidiaries is terminated for any reason, such Employee Stockholder may pledge, hypothecate, mortgage or encumber his or her shares of Common Stock; provided further that the terms of any such pledge, hypothecation, -------- ------- ---- mortgage or encumbrance shall be approved by Endo LLC in its discretion taking into account the financial situation of Endo LLC at the time. 2 1.2 Permitted Transferees. --------------------- (a) Subject to paragraph (b) of this Section 1.2, any Employee Stockholder may Transfer any shares of Common Stock or any interest therein or his or her rights to subscribe for the same, if any, (i) with the prior written consent of Endo LLC's Board of Managers (the "LLC Board"), which consent shall --------- not be unreasonably withheld (provided that reasonable grounds to withhold -------- ---- consent shall include, but not be limited to, the risk of subjecting the Company to registration or reporting requirements under federal securities laws), to a trust or corporation the beneficiaries or stockholders of which are such Employee Stockholder, as the case may be, his or her spouse, parents or any other family members, or (ii) in case of his or her death, by will or by the laws of intestate succession to executors, administrators, testamentary trustees, legatees or beneficiaries. In addition to the foregoing, any transferee of an Employee Stockholder described above may Transfer shares of Common Stock back to such Employee Stockholder or to another Permitted Transferee of such Employee Stockholder. (b) Any Transfer of shares of Common Stock made pursuant to paragraph (a) of this Section 1.2 to a Permitted Transferee shall be permitted and shall be effective only if such Permitted Transferee shall agree in writing to be bound by the terms and conditions of this Agreement pursuant to an instrument of assumption reasonably satisfactory in form and substance to Endo LLC. (c) An "affiliate" of, or a person "affiliated" with, a specified person, is a person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified (in the case of Kelso, including, without limitation, any partner of such entity or any director or officer of Kelso & Company, any individual retirement account of any such partner, director or officer, any family member of any such partner, director or officer, or any trust or family partnership for the benefit of any such partner, director or officer or family member thereof). 3 ARTICLE II PURCHASES BY THE COMPANY 2.1 Right to Purchase Shares from Employee Stockholders. --------------------------------------------------- (a) Subject to all of the provisions of this Article II and Article IV hereof, Endo LLC shall have the right to purchase from an Employee Stockholder, and such Employee Stockholder shall have the obligation to sell to Endo LLC, all, but not less than all, of the shares of Common Stock owned by such Employee Stockholder: (i) at the Fair Market Value of such shares, if such Employee Stockholder's employment with the Company or any of its subsidiaries is terminated as a result of (v) the termination by the Company or one of its subsidiaries of such employment without Cause, (w) the resignation of such Employee Stockholder for Good Reason, (x) the resignation of such Management Stockholder without Good Reason, (y) the Retirement of such Employee Stockholder, or (z) the death or Disability of such Employee Stockholder; and (ii) at the lesser of the Fair Market Value and the Carrying Value (as defined in Section 3.2 hereof) of such shares, if such Employee Stockholder's employment with the Company or any of its subsidiaries is terminated by the Company or one of its subsidiaries with Cause. (b) In the event that Endo LLC does not exercise such right to purchase the shares of Common Stock from an Employee Stockholder by giving notice within the 30-day period referred to in Section 2.2 hereof, Kelso, or a party designated by Kelso, shall have the right to purchase, at its option, the shares of Common Stock referred to in Section 2.1(a) hereof from such Employee Stockholder, by giving notice not later than the end of the succeeding 10-day period. 2.2 Notice. If Endo LLC desires to purchase shares of Common Stock ------ from an Employee Stockholder pursuant to Section 2.1 hereof, it shall notify such Employee Stockholder not more than 30 days after the occurrence of the event giving rise to Endo LLC's right to acquire such Employee Stockholder's shares of Common Stock (or in the case of the Employee Stockholder's death, it shall notify 4 such Employee Stockholder's estate within 30 days of notice to Endo LLC of the Employee Stockholder's death). If Endo LLC does not deliver such notice within such 30-day period and Kelso (or its designee) desires to purchase such shares, then Kelso (or its designee) shall notify such Employee Stockholder not later than the end of the succeeding 10-day period. 2.3 Payment. ------- (a) Subject to Article IV and Section 2.4 hereof, payment for shares of Common Stock purchased pursuant to Section 2.1(a) and (b) hereof shall be made on the date that is (i) in any case in which the price to be paid for such shares may only be the Carrying Value thereof, the 30th business day following the date on which notice is given pursuant to Section 2.2 hereof, or (ii) in all other cases, the 15th business day following the date of the determination of Fair Market Value pursuant to Section 3.1 hereof. (b) If the termination of employment of such Employee Stockholder is as a result of his or her resignation without Good Reason, and: (i) if the date of termination of employment occurs prior to December 1, 2002, then the purchase price of the purchased shares shall be paid within 15 days following the surrender of the certificates representing the purchased shares, and (ii) if the date of termination of employment occurs on or after December 1, 2002, then the portion of the purchase price of the purchased shares equal to the Carrying Value of such shares on the date of termination of employment shall be paid by the 15th day following the surrender of the certificates representing the purchased shares and the remainder shall be paid on the last day of the 18th month following the date of termination of employment. (c) Any payments based on Fair Market Value required to be made by Endo LLC under this Section 2.3 shall accrue interest at 6% simple interest per annum on the amounts not paid from the date of termination of employment (or the date of deemed termination) to the date Endo LLC makes such payments. 5 2.4 Postponement, etc. ------------------ (a) No party shall be required to consummate any purchase and sale under this Article II until such time as such transaction would not violate applicable law, other than violations which would not have a direct or indirect material adverse effect on such party. (b) Notwithstanding anything to the contrary in this Article II, in no event shall any sale of Common Stock that was received by an Employee Stockholder upon the exercise of an employee stock option occur prior to the six-month anniversary of such exercise. ARTICLE III PURCHASE PRICE 3.1 Fair Market Value. ----------------- (a) Fair Market Value. For the purposes of this Agreement, the ----------------- "Fair Market Value" of any share of Common Stock being purchased by or sold to Endo LLC or Kelso (or its designees) pursuant to this Agreement shall be the average for the ten consecutive trading days prior to such transaction of the last sales price for a share of Common Stock on the principal securities exchange on which the Common Stock is then listed or, if the Common Stock is not so listed, on the National Association of Securities Dealers Automated Quotation System or, if not so quoted, on the principal market on which the Common Stock is then traded. (b) Notice to Employee Stockholders. After notice has been given ------------------------------- pursuant to Section 2.2 or 5.5 hereof, Endo LLC shall promptly deliver a letter setting forth the Fair Market Value to Kelso and to each Employee Stockholder whose Common Stock is to be purchased pursuant to Section 2.1 or 5.5 hereof. 3.2 Carrying Value. For the purposes of Sections 2.1 and 5.5 hereof, -------------- "Carrying Value" of any share of Common Stock being purchased by Endo LLC shall ------------- be equal to the price paid by the selling Employee Stockholder for any such share. 6 3.3 Certain Defined Terms. As used in this Agreement, the following --------------------- terms shall have the meanings ascribed to them below, except with respect to such Employee Stockholders as determined, from time to time, by resolution of the LLC Board, with employment agreements with the Company which define such terms differently, in which case such terms shall have the meanings ascribed to them in such employment agreements of such Employee Stockholders as determined, from time to time, by resolution of the LLC Board: (a) Cause. The term "Cause" used in connection with a termination of ----- employment of an Employee Stockholder shall mean a termination of such Employee Stockholder's employment by the Company or any of its subsidiaries due to (i) the continued failure, after written notice, by such Employee Stockholder substantially to perform his or her duties with the Company or any of its subsidiaries (other than any such failure resulting from incapacity due to reasonably documented physical illness or injury or mental illness), (ii) the engagement by such Employee Stockholder in serious misconduct that causes, or in the good faith judgment of the Board may cause, harm (financial or otherwise) to the Company or any of its subsidiaries including, without limitation, (A) the disclosure of material secret or confidential information of the Company or any of its subsidiaries, (B) the potential debarment of the Company or any of its subsidiaries by the U.S. Food and Drug Administration or any successor agency (the "FDA"), or (C) the possibility that the registration of the Company or any --- of its subsidiaries with the U.S. Drug Enforcement Administration or any successor agency (the "DEA") could be revoked or an application with the DEA could be denied, (iii) the potential debarment of such Employee Stockholder by the FDA, or (iv) the material breach by the Employee Stockholder of this Agreement or any other agreement between such Employee Stockholder, on the one hand, and the Company or Kelso, on the other hand. (b) Good Reason. A termination of an Employee Stockholder's ----------- employment with the Company or any of its subsidiaries shall be for "Good ---- Reason" if such Employee Stockholder voluntarily terminates his or her employment with the Company or any of its subsidiaries as a result of any of the following: (i) without the Employee Stockholder's prior written consent, a material reduction by the Company or any of its subsidiaries in his or her current salary, other than any such reduction which is part of a general salary reduction or other concessionary arrangement affecting all employees or affecting the group of employees of which the Employee Stockholder is a member; or 7 (ii) the taking of any action by the Company or any of its subsidiaries that would substantially diminish the aggregate value of the benefits provided him or her under the Company's or any such subsidiary's medical, health, accident, disability, life insurance, thrift and retirement plans in which he or she was participating on the date of his or her execution of this Agreement, other than any such reduction that is (A) required by law, (B) implemented in connection with a general concessionary arrangement affecting all employees or affecting the group of employees of which the Employee Stockholder is a member or (C) generally applicable to all beneficiaries of such plans. (c) Disability. The termination of the employment of any Employee ---------- Stockholder by the Company or any of its subsidiaries shall be deemed to be by reason of a "Disability" if, as a result of such Employee Stockholder's ---------- incapacity due to reasonably documented physical illness or injury or mental illness, such Employee Stockholder shall have been unable for more than six months within any 12-month period to perform his or her duties with the Company or any of its subsidiaries on a full time basis and within 30 days after written notice of termination has been given to such Employee Stockholder, such Employee Stockholder shall not have returned to the full time performance of his or her duties. The date of termination in the case of a termination for "Disability" shall be the last day of the aforementioned 30-day period. ARTICLE IV PROHIBITION ON PURCHASES 4.1 Prohibited Purchases. Notwithstanding anything to the contrary -------------------- herein, Endo LLC shall not be permitted to purchase any shares of Common Stock from an Employee Stockholder (or make any payment for any purchased shares of Common Stock) pursuant to Section 2.1 hereof to the extent (i) Endo LLC or the Company (if the Company were to be the sole source of the funds necessary to make any such payment or purchase) is prohibited from purchasing such shares (or incurring debt to finance the purchase of such shares or making payment for such purchased shares) by any debt instruments or other agreements (the "Agreements") ---------- entered into by Endo LLC, the Company or any of their respective subsidiaries, or by applicable law, (ii) an event of default under any Agreement has occurred and is continuing or a condition exists which would, with notice or lapse of time or both, result 8 in an event of default under any Agreement or (iii) the purchase of such shares by Endo LLC or the Company (if the Company were to be the sole source of the funds necessary to make any such payment or purchase)(including the incurrence of any debt which in the judgment of the LLC Board is necessary to finance such purchase or the payment for such purchased shares) (A) could, in the judgment of the LLC Board, result in the occurrence of an event of default under any Agreement or create a condition which would or might, with notice or lapse of time or both, result in an event of default under any Agreement, (B) would, in the judgment of the LLC Board, be imprudent in view of the financial condition (present or projected) of Endo LLC and its subsidiaries, if any, taken as a whole, or the Company and its subsidiaries, taken as a whole, or the anticipated impact of the purchase of (or payment for) such shares on Endo LLC's, the Company's (if the Company were to be the sole source of the funds necessary to make any such payment or purchase) or any of their respective subsidiaries' ability to meet their respective obligations, including under any Agreement or (C) could, in the judgment of the LLC Board, constitute a fraudulent conveyance or transfer or render Endo LLC or the Company (if the Company were to be the sole source of the funds necessary to make any such payment or purchase) insolvent under applicable law or violate limitations in the Delaware General Corporation Law on repurchases of stock. If shares of Common Stock which Endo LLC has the right to purchase (or make payment for) on any date exceed the total amount permitted to be purchased on such date pursuant to the preceding sentence, Endo LLC shall purchase (or pay for) on such date only up to that number of shares of Common Stock in the manner that the LLC Board determines in its sole discretion. Subject to Section 2.1(c) hereof, notwithstanding anything to the contrary contained in this Agreement, if Endo LLC is unable to purchase any Employee Stockholder's shares pursuant to Section 2.1 of this Agreement by reason of this Article IV (or make any payment for any purchased shares), Endo LLC may nonetheless in the case of Section 2.1 hereof exercise its option to purchase such shares and shall purchase (or make payment for) such shares at the earliest practicable date permitted under this Article IV and any payment therefor shall accrue simple interest (or if such payment is accruing interest at such time, shall continue to accrue interest) at 6% per annum from the date such payment would have been made but for this Article IV to the date such payment is actually made. All payments of interest accrued hereunder shall be paid only at the date of payment by Endo LLC for the shares of Common Stock being purchased. Any shares as to which Endo LLC has exercised its right to purchase pursuant to Section 2.1 hereof may not otherwise be sold by the Employee Stockholder notwithstanding non-payment therefor pursuant to this Article IV. 9 ARTICLE V SALES TO THIRD PARTIES 5.1 General. Prior to the end of the Restricted Period (as defined ------- below), no Employee Stockholder shall sell any of his or her shares of Common Stock to a third party. Except as otherwise permitted under Section 5.6 hereof, after the termination of the Restricted Period, Employee Stockholders may sell their shares of Common Stock they then own to a third party only in compliance with the provisions of Sections 5.2 and 5.3 hereof. The foregoing provisions of this Section 5.1 do not apply to any sale or other transaction described in clause (i) or (ii) of Section 1.1 hereof or to any sale pursuant to a registration under the Act. The period of time from the date of this Agreement until December 1, 2002 shall hereinafter be referred to as the "Restricted ---------- Period." - ------ 5.2 Right of First Refusal. ---------------------- (a) Subject to Section 5.1 hereof, if an Employee Stockholder shall have received a bona fide offer or offers from a third party or parties to purchase for cash any shares of Common Stock whether now or hereafter owned by such Employee Stockholder, then prior to selling such shares of Common Stock to such third party or parties, the Employee Stockholder shall deliver to Endo LLC a letter signed by such Employee Stockholder setting forth: (i) the name or names of the third party or parties; (ii) the prospective purchase price per share of Common Stock; (iii) all material terms and conditions contained in the offer of the third party or parties; (iv) the Employee Stockholder's offer (which shall be irrevocable by its terms for 30 days following receipt) to sell to Endo LLC all, but not less than all, of the shares of Common Stock covered by the offer of the third party or parties, for a purchase price per share of Common Stock, and on other terms and conditions, not less favorable to Endo LLC than those contained in the offer of the third party or parties (an "Offer"); and ----- 10 (v) closing arrangements and a closing date (not less than 45 nor more than 60 days following the date of such letter) for any purchase and sale that may be effected by Endo LLC or any of its assignees pursuant to this Section 5. Endo LLC shall, within 10 days following receipt of such letter, have the right to elect to purchase such shares of Common Stock or the obligation to assign its right to purchase such shares to Kelso, in the event Kelso elects to exercise its right to require Endo LLC to assign its right to Kelso prior to 5 days after the expiration of such 10-day period pursuant to Section 5.4 hereof. If Endo LLC shall be required to assign such right to purchase such shares of Common Stock to Kelso, pursuant to Section 5.4 hereof, it shall deliver written notice of such assignment, on the first day following the end of such 10-day period, to Kelso. Within 15 days after receipt of such notice from Endo LLC, Kelso shall have the right to exercise its right of first refusal. (b) If, upon the expiration of 30 days following receipt by Endo LLC of the letter described in Section 5.2(a) hereof, neither Endo LLC nor Kelso shall have accepted the Offer in full, the Employee Stockholder may sell only to such third party or parties all (but not less than all) of the shares of Common Stock covered by the Offer, for the purchase price and on the other terms and conditions contained in the Offer. If Endo LLC or its assignee or assignees shall accept such Offer, the closing of the purchase and sale pursuant to such acceptance shall take place as set forth in the letter of such Employee Stockholder to Endo LLC pursuant to subparagraph (v) of Section 5.2(a) hereof. 5.3 Agreements to Be Bound. Notwithstanding anything contained in ---------------------- this Article 5, any sale to a third party or any Involuntary Transfer (as defined in Section 5.5 hereof) to an Involuntary Transferee (as defined in Section 5.5 hereof) shall be permitted under the terms of this Agreement only if such third party or Involuntary Transferee, as the case may be, shall agree in writing to be bound by the terms and conditions of this Agreement pursuant to an instrument of assumption reasonably satisfactory in form and substance to Endo LLC. 5.4 Assignment. Kelso shall have the right to require Endo LLC to ---------- assign to Kelso (or any affiliates or designees of Kelso) Endo LLC's right of first refusal with respect to an Offer in accordance with Section 5.2(a) hereof. 11 5.5 Involuntary Transfers. In the case of any transfer of title or --------------------- beneficial ownership of shares of Common Stock upon default, foreclosure, forfeit, divorce, court order, or otherwise than by a voluntary decision on the part of an Employee Stockholder (an "Involuntary Transfer"), Endo LLC shall have -------------------- the right to purchase such shares pursuant to this Section 5.5. Upon the Involuntary Transfer of any shares of Common Stock, such Employee Stockholder shall promptly (but in no event later than two days after such Involuntary Transfer) furnish written notice (the "Notice") to Endo LLC indicating that the ------ Involuntary Transfer has occurred, specifying the name of the person to whom such shares have been transferred (the "Involuntary Transferee") and giving a ---------------------- detailed description of the circumstances giving rise to, and stating the legal basis for, the Involuntary Transfer. Upon the receipt of the Notice, and for 30 days thereafter, Endo LLC shall have the right to purchase, and the Involuntary Transferee shall have the obligation to sell, all, but not less than all, of the shares of Common Stock acquired by the Involuntary Transferee for a purchase price equal to the lesser of (i) the Fair Market Value of such shares of Common Stock on the date of transfer to the Involuntary Transferee and (ii) the amount of the indebtedness or other liability that gave rise to the Involuntary Transfer plus the excess, if any, of the Carrying Value of such shares of Common Stock over the amount of such indebtedness or other liability that gave rise to the Involuntary Transfer. Notwithstanding the foregoing, the LLC Board may, for good cause shown by the Employee Stockholder who made the Involuntary Transfer, determine that payment of a purchase price equal to the Fair Market Value of such shares of Common Stock on the date of transfer to the Involuntary Transferee would be appropriate under the circumstances, and direct that payment be made in such amount. Endo LLC's right to purchase pursuant to this Section 5.5 shall be assignable in accordance with Section 5.4 as if such right to purchase were a "right of first refusal". 12 5.6 Tag- and Drag-Along Rights. -------------------------- (a) Tag-Along Rights. Endo LLC shall not, in any one transaction or ---------------- any series of similar transactions not effected through a broker or over a national securities exchange, Transfer more than 25% of the shares of Common Stock it owns as of the date of the Merger, except pursuant to Section 5.6(b) hereof, to any third party or parties unaffiliated with Endo LLC (a "Third ----- Party") unless the Employee Stockholders (collectively, the "Offerees"), are - ----- -------- offered the right, at the option of each Offeree, to include in such Transfer to the Third Party such number of shares of Common Stock then owned by each such Offeree, as determined in accordance with this Section 5.6(a). If Endo LLC receives from a Third Party a bona fide offer or offers to Transfer which it intends to accept, or proposes to Transfer to a Third Party, shares of its Common Stock, Endo LLC shall provide written notice (the "Tag-Along Notice") to ---------------- each of the Offerees, setting forth the consideration per share to be paid by such Third Party and the other material terms and conditions of such transaction. The Tag-Along Notice shall offer the Offerees the opportunity to participate in the proposed Transfer of shares to the Third Party according to the terms and conditions of this Section 5.6(a) and for the same type of consideration and for an amount of consideration per share not less than that offered to Endo LLC by the Third Party. At any time within 20 days after its receipt of the Tag-Along Notice, each of the Offerees may irrevocably accept the offer included in the Tag-Along Notice for up to such number of shares of Common Stock as is determined in accordance with the provisions of this Section 5.6(a) by furnishing written notice of such acceptance to Endo LLC. Promptly following such acceptance by an Offeree, each such Offeree shall deliver to Endo LLC the certificate or certificates representing the shares of Common Stock to be Transferred pursuant to such offer by such Offeree, together with a limited power-of-attorney authorizing Endo LLC to sell or otherwise dispose of such shares of Common Stock pursuant to the proposed Transfer to the Third Party. Each Offeree shall have the right to participate in the proposed Transfer to the Third Party by Transferring in connection therewith shares of Common Stock equal to the product of (x) the total number of shares to be acquired by the Third Party, times (y) a fraction, the numerator of which shall be the total number of shares of Common Stock then owned by such Offeree, and the denominator of which shall be the number of shares of Common Stock then owned by Endo LLC plus the total number of shares of Common Stock then owned by the Offerees (plus offerees of tag-along rights under that certain Amended and Restated Stockholders Agreement, dated as of July 14, 2000 (the "Principal --------- Stockholders Agree- - ------------------ 13 ment"), among the Company, Endo LLC and certain other stockholders of the - ---- Company with respect to the Common Stock), subject to the allocations under the Principal Stockholders Agreement. The maximum number of shares of Common Stock that may be Transferred by each Offeree to the Third Party in accordance with this Section 5.6(a) hereof shall be the total number of shares of Common Stock then owned by such Offeree. If within 20 days after the receipt of the Tag-Along Notice, any Offeree has not accepted the offer contained in the Tag-Along Notice, such Offeree will be deemed to have waived any and all rights with respect to, or to participate in, the Transfer of Common Stock described in the Tag-Along Notice and Endo LLC shall have 45 days in which to Transfer not more than the amount of Common Stock described in the Tag-Along Notice, for an amount and type of consideration per share not materially more favorable to Endo LLC than was set forth in the Tag-Along Notice. If, at the end of 65 days following the receipt of the Tag-Along Notice, Endo LLC has not completed the Transfer of Common Stock of Endo LLC and Common Stock of any Offeree, Endo LLC shall return to such Offeree all certificates representing shares of Common Stock which such Offeree delivered for Transfer pursuant to this Section 5.6(a), and all the restrictions on sale or other disposition contained in this Agreement with respect to Common Stock then or thereafter owned by the Offeree shall again be in effect. As promptly as practicable (but in no event later than 5 days) after the consummation of the Transfer of Common Stock of Endo LLC and Common Stock of the Offerees to the Third Party in accordance with this Section 5.6(a), Endo LLC shall notify the Offerees thereof, shall remit to each of the Offerees the total consideration in respect of the shares of Common Stock of such Offeree which were so Transferred, and shall furnish such other evidence of the completion and time of completion of such Transfer and the terms thereof as may be reasonably requested by the Offerees. (b) Drag-Along Rights. If Endo LLC shall propose to Transfer at ----------------- least 60% of all shares of Common Stock then owned by Endo LLC to a Third Party, then (in addition to the rights of the Employee Stockholders to participate in such Transfer pursuant to Section 5.6(a) hereof) Endo LLC may, at its option, require the Employee Stockholders (collectively, the "Remaining Holders") to include in such Transfer to the Third Party such number of shares of Common Stock then owned by such Remaining Holder, as determined in accordance with this Section 5.6. 14 Endo LLC shall send written notice (the "Drag-Along Notice") of the ----------------- exercise of their rights pursuant to this Section 5.6(b) to each of the Remaining Holders, setting forth the consideration per share to be paid by the Third Party and the other material terms and conditions of such transaction. The Drag-Along Notice shall state that the Remaining Holders shall be required to participate in the proposed Transfer of shares of Common Stock to the Third Party according to the terms and conditions of this Section 5.6(b) and for the same type of consideration and for an amount of consideration per share not less than that offered to Endo LLC by the Third Party. Within 15 days following the receipt of the Drag-Along Notice, each of the Remaining Holders shall deliver to a representative of Endo LLC designated in the Drag-Along Notice certificates representing all shares of Common Stock held by such Remaining Holder, duly endorsed, together with all other documents required to be executed in connection with such transaction. In the event that any Remaining Holder should fail to deliver such certificates to Endo LLC, the Company shall cause the books and records of the Company to show that such shares are bound by the provisions of this Section 5.6(b) and that such shares may be Transferred only to the Third Party. Each Remaining Holder shall be required to participate in the proposed Transfer to the Third Party by Transferring in connection therewith shares of Common Stock equal to the product of (x) the total number of shares to be acquired by the Third Party, times (y) a fraction, the numerator of which shall be the total number of shares of Common Stock then owned by such Remaining Holder, and the denominator of which shall be the total number of shares of Common Stock then owned by Endo LLC plus the total number of shares of Common Stock then owned by the Remaining Holders. The maximum number of shares of Common Stock that may be Transferred by each Remaining Holder to the Third Party in accordance with this Section 5.6(b) shall be the total number of shares of Common Stock then owned by such Remaining Holder. If, within 120 days after Endo LLC gave the Drag-Along Notice, it shall not have completed the Transfer of all the shares of Common Stock of the Remaining Holders in accordance with this Section 5.6(b), Endo LLC shall return to each of the Remaining Holders all certificates representing shares of Common Stock that such Remaining Holder delivered for Transfer pursuant hereto and that were not purchased pursuant to this Section 5.6(b). Promptly (but in no event later than 5 days) after the consummation of the Transfer of Common Stock of Endo LLC and Remaining Holders pursuant to this 15 Section 5.6(b), Endo LLC shall give notice thereof to the Remaining Holders, shall remit to each of the Remaining Holders the total consideration in respect of the shares of Common Stock of such Remaining Holder which were so transferred, and shall furnish such other evidence of the completion and time of completion of such Transfer and the terms thereof as may be reasonably requested by such Remaining Holders. ARTICLE VI TERMINATION 6.1 Sale of the Company. This Agreement shall terminate (a) in the ------------------- event of a sale of the Company or all or substantially all of its assets to a party (whether by merger, stock sale or otherwise) other than Endo LLC or one of its affiliates, or (b) in the event that all parties to this Agreement cease to own any shares of Common Stock or any interest therein. In the event that Endo LLC shall come to own less than five percent of the outstanding Common Stock, this Agreement shall also terminate. 6.2 Cessation of Ownership of Stock. Any party to, or person or ------------------------------- entity who is subject to, this Agreement (other than the Company and Kelso) which ceases to own shares of Common Stock or any interest therein shall cease to be a party to, or person or entity who is subject to, this Agreement and thereafter shall have no rights or obligations hereunder. 6.3 Other Termination Events. ------------------------ (a) This Agreement may be terminated by the affirmative vote of the members of Endo LLC owning a majority of the issued and outstanding membership interests in Endo LLC. (b) Notwithstanding anything to the contrary contained herein, every provision of this Agreement, other than the provisions contained in Section 5.5, shall terminate on the fifteenth anniversary of this Agreement. 16 ARTICLE VII MISCELLANEOUS PROVISIONS 7.1 Stock Certificate Legend. A copy of this Agreement shall be ------------------------ filed with the Secretary of the Company and kept with the records of the Company. Each certificate representing shares of Common Stock owned by the Employee Stockholders shall bear upon its face the following legend: "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL TO THE HOLDER, WHICH COUNSEL MUST BE, AND THE FORM AND SUBSTANCE OF WHICH OPINION ARE, SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE ACT, SUCH LAWS AND THE AMENDED AND RESTATED EMPLOYEE STOCKHOLDERS AGREEMENT, DATED AS OF JULY __, 2000." All Employee Stockholders shall be bound by the requirements of such legends to the extent that such legends are applicable. Upon a registration under the Act of any shares of Common Stock, the certificate representing such shares shall be replaced, at the expense of the Company, with certificates not bearing the legend required by this Section 8.1. 7.2 Option Plans. Pursuant to the Option Plans, the Company has ------------ required that participants thereunder must become parties to this Agreement upon exercise of the options and that they will be "Employee Stockholders" hereunder with respect to such shares. In addition, Endo LLC, notwithstanding any requirement set forth in Section 8.5 hereof, can determine that any options granted pursuant to the Option Plans and outstanding and vested as of the option holder's termination of employment with the Company and its subsidiaries shall be deemed to be Com- 17 mon Stock for purposes of Section 2 hereof; provided, however, that appropriate -------- ------- adjustments shall be made to reflect the existence of an exercise price for such options. 7.3 New Employee Stockholders. Each of the Employee Stockholders ------------------------- hereby agrees that the Company may require that any employee of the Company or any of its subsidiaries who after the date of this Agreement is offered shares of Common Stock shall, as a condition precedent to the acquisition of such shares of Common Stock, become a party to this Agreement by executing the same and delivering it to the Company at its address specified in Section 8.12 hereof. Upon such execution and delivery, such employee shall be an "Employee Stockholder" for all purposes of this Agreement. 7.4 No Other Arrangements or Agreements. Each Employee Stockholder ----------------------------------- hereby represents, warrants and covenants to Endo LLC and to each other Employee Stockholder that, except for, if applicable, the exchange agreement entered into on December 1, 1997, by and between the Company and each Employee Stockholder (collectively, the "Exchange Agreements"), he or she has not entered into or ------------------- agreed to be bound by, and will not enter into or agree to be bound by, any other arrangements or agreements of any kind with any other party with respect to the shares of Common Stock, including, but not limited to, arrangements or agreements with respect to the acquisition, disposition or voting of shares of Common Stock (whether or not such agreements and arrangements are with the Company, other Employee Stockholders or holders of Common Stock that are not parties to this Agreement). 7.5 Amendment and Modification. This Agreement may be amended, -------------------------- modified or supplemented only with the written consent of (i) Kelso and (ii) Employee Stockholders owning a majority of the outstanding Common Stock then owned by all Employee Stockholders. Promptly after any amendment, modification or supplement shall take effect, Endo LLC shall notify all Employee Stockholders of such amendment, modifications or supplement; provided that Endo LLC may, at -------- ---- any time and from time to time, in its sole discretion, release all or a portion of any Employee Stockholder's shares of Common Stock from this Agreement. 7.6 Assignment. The provisions of this Agreement shall be binding ---------- upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns; provided, however, that none of -------- ------- Endo LLC, the Company and any Employee Stockholder shall assign any of its rights or obliga- 18 tions pursuant to this Agreement without the prior written consent of Kelso. Endo LLC, with the prior written consent of Kelso, shall have the right, but not the obligation, to assign any of its rights, and delegate any of its obligations, to purchase any shares of Common Stock of any Employee Stockholder pursuant to Section 2 hereof to any affiliate of Endo LLC, any one or more persons or entities who are or become parties to this Agreement or any employee stock ownership plan that the Company may have (or any combination of the foregoing). In the case of Permitted Transferees, third parties and Involuntary Transferees, such Permitted Transferees, third parties or Involuntary Transferees, as the case may be, shall be deemed the Employee Stockholder hereunder for purposes of obtaining the benefits or enforcing the rights of such Employee Stockholder hereunder; provided, however, that no Permitted Transferee, -------- ------- third party or Involuntary Transferee, as the case may be, shall derive any rights under this Agreement unless and until such Permitted Transferee, third party or Involuntary Transferee, as the case may be, has delivered to Endo LLC a valid undertaking to become, and becomes, bound by the terms of this Agreement to which the transferring Employee Stockholder is subject. 7.7 Recapitalizations, Exchanges, etc. Affecting the Common Stock. ------------------------------------------------------------- Except as otherwise provided herein, the provisions of this Agreement shall apply to the full extent set forth herein with respect to (i) the shares of Common Stock and (ii) any and all shares of capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, exchange, sale of assets or otherwise), which may be issued in respect of, in exchange for, or in substitution for the shares of Common Stock, by reason of any stock dividend, split, reverse split, combination, recapitalization, reclassification, merger, consolidation or otherwise. References to the "Company" set forth herein shall be deemed to refer to any such successor or assign and such entity shall execute an appropriate instrument of assumption agreeing to be bound by the terms hereof. Except as otherwise provided herein, this Agreement is not intended to confer upon any person, except for the parties hereto, any rights or remedies hereunder. 7.8 Transfer of Common Stock. If at any time Endo LLC purchases any ------------------------ shares of Common Stock pursuant to this Agreement, Endo LLC may pay the purchase price determined under this Agreement for the shares of Common Stock it purchases by wire transfer of funds or Endo LLC check in the amount of the purchase price, and upon receipt of payment of such purchase price or, pursuant to Section 2.3 or Article IV hereof, any portion thereof, the selling Employee Stockholder shall deliver to Endo LLC the certificates representing the number of shares of Common Stock being purchased in a form suitable for transfer, duly 19 endorsed in blank, and free and clear of any lien, claim or encumbrance. In the event that any Employee Stockholder refuses or otherwise fails to deliver, in accordance with the preceding sentence, certificates representing the number of shares of Common Stock being purchased, the shares of Common Stock purchased from such Employee Stockholder shall (notwithstanding such refusal or failure) be deemed, upon receipt by such Employee Stockholder of the purchase price therefor, to not be outstanding for any purposes. Notwithstanding anything in this Agreement to the contrary, Endo LLC shall not be required to make any payment for shares of Common Stock purchased hereunder until delivery to it of the certificates representing such shares. If Endo LLC is purchasing less than all the shares of Common Stock represented by a single certificate, Endo LLC, after making such purchase, shall deliver to the selling Employee Stockholder a certificate for any unpurchased shares of Common Stock. 7.9 Further Assurances. Each party hereto or person or entity ------------------ subject hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto or person or entity subject hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 7.10 Governing Law. This Agreement and the rights and obligations of ------------- the parties hereunder and the persons subject hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of Delaware, without giving effect to the choice of law principles thereof. 7.11 Invalidity of Provision. The invalidity or unenforceability of ----------------------- any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction. 7.12 Notices. All notices and other communications hereunder shall be ------- in writing and, unless otherwise provided herein, shall be deemed duly given if delivered personally, telecopied (which is confirmed) or sent by registered or certified mail (postage prepaid, return receipt requested) or by Fedex or other similar courier service to the parties at the following addresses (or at such other address as the person or entity to whom notice is given may have previously furnished to the 20 others in writing as set forth in this Section 8.12 (provided that any change of address shall be effective only upon receipt thereof)): (a) If to the Company, to it at: Endo Pharmaceuticals Holdings Inc. 223 Wilmington-West Chester Pike Chadds Ford, Pennsylvania 19317 Attn: Carol A. Ammon with a copy to: Kelso & Company 320 Park Avenue, 24/th/ Floor New York, New York 10022 Attention: James J. Connors, II Telecopy No.: (212) 223-2379 (b) if to an Employee Stockholder, as listed on the signature page hereto, or, if not so listed, to it at his or her address as reflected in the stock records of the Company, or as such Employee Stockholder shall designate to the Company in writing, with a copy to Endo LLC at its address indicated below (provided that any such designation shall be effective only upon receipt thereof). (c) If to Endo LLC, to it at: Endo Pharma LLC c/o Kelso & Company 320 Park Avenue, 24/th/ Floor New York, New York 10022 Attention: James J. Connors, II Telecopy No.: (212) 223-2379 7.13 Headings; Execution in Counterparts. The headings and captions ----------------------------------- contained herein are for convenience and shall not control or affect the meaning or construction of any provision hereof. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and which together shall constitute one and the same instrument. 21 7.14 Entire Agreement; Effect on Certain Other Agreements. This ---------------------------------------------------- Agreement and the Exchange Agreements embody the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings relating to the shares of Common Stock, other than those expressly set forth or referred to herein or in the Exchange Agreements. This Agreement and the Exchange Agreements supersede all prior agreements and understandings among the parties with respect to such subject matter. 7.15 Injunctive Relief. The Company, Endo LLC and the Employee ----------------- Stockholders hereby acknowledge that they each shall be irreparably damaged in the event this Agreement is not specifically enforced. Each of the parties therefore agrees that in the event of a breach of any provision of this Agreement, the aggrieved party may elect to institute and prosecute proceedings in any court of competent jurisdiction to enforce specific performance or to enjoin the continuing breach of this Agreement. Such remedies shall, however, be cumulative and not exclusive, and shall be in addition to any other remedy which the Company, Endo LLC or the Employee Stockholders may have. Each Employee Stockholder hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts in New York and Delaware for the purposes of any suit, action or other proceeding arising out of or based upon this Agreement or the subject matter hereof. Each Employee Stockholder hereby consents to service of process by mail made in accordance with Section 8.12 hereof. 7.16 Attorneys' Fees. If any legal action or any arbitration or --------------- other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover such reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled, as may be ordered in connection with such proceeding. 22 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. ENDO PHARMACEUTICALS HOLDINGS INC. By: /s/ Carol A. Ammon -------------------------------------------- Name: Carol A. Ammon Title: President and Chief Executive Officer KELSO INVESTMENT ASSOCIATES V, L.P. By: Kelso Partners V, L.P., General Partner By: /s/ David I. Wahrhaftig -------------------------------------------- General Partner ENDO PHARMA LLC By: /s/ Carol A. Ammon -------------------------------------------- Name: Carol A. Ammon Title: Chief Executive Officer The undersigned, by its signature below hereby becomes a party to the Amended and Restated Employee Stockholders Agreement, dated as of July __, 2000, by and among Endo Pharmaceuticals Holdings Inc. and certain of its stockholders (the "Employee Stockholders Agreement") pursuant to Section 8.3 thereof and agrees to be bound by the terms of the Employee Stockholders Agreement and, for all purposes thereof, to be an "Employee Stockholder". IN WITNESS WHEREOF, the undersigned has executed this instrument as of the ____ day of __________, 20__. ___________________________ Signature ___________________________ Print Name Address (please print) ___________________________ ___________________________ ___________________________ ___________________________ EX-99.8 9 0009.txt ENDO PHARMA AMENDED AND RESTATED 1997 EMPLOYEE STOC Exhibit 8 ENDO PHARMA LLC AMENDED AND RESTATED 1997 EMPLOYEE STOCK OPTION PLAN 1. Purpose. The purpose of this Endo Pharma LLC Amended and Restated ------- 1997 Employee Stock Option Plan (the "Plan") is to advance the interests of Endo Pharma LLC, a Delaware limited liability company ("Endo Pharma"), by affording certain directors, officers, employees, consultants and agents of Endo Pharmaceuticals Holdings Inc. (the "Company") and its subsidiaries an opportunity to acquire a substantial proprietary interest in shares of common stock of the Company held by Endo Pharma and thus to stimulate in such persons increased personal interest in the success and future growth of the Company. 2. Definitions. ----------- "Acquiring Person" shall mean, with reference to the transactions ---------------- referred to in Section 12(a), (i) the continuing or surviving entity of a consolidation or merger with the Company (if other than the Company), (ii) the transferee of all or substantially all of the assets of the Company, (iii) the parent entity of any corporation consolidating with or merging into the Company in a consolidation or merger in connection with which the Common Stock is changed into or exchanged for stock or other securities of any other Person (including such parent entity) or cash or any other property if the Company becomes a subsidiary of such entity, or (iv) in the case of a capital reorganization or reclassification or in any case in which the Company is a surviving corporation in a merger not described in clause (i) or (iii) above, the Company. "Affiliate" shall mean, with respect to a specified person, a person --------- that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. "Board" shall mean the Board of Managers of Endo Pharma. ----- "Business Day" shall mean any day other than a Saturday or a Sunday or ------------ a day on which commercial banking institutions in the City of New York are authorized by law to be closed. Any reference herein to "days" (unless Business Days are specified) shall mean calendar days. "Cash Gross Profit" shall have the meaning ascribed to such term in ----------------- Section 5.21(d) of the Merger Agreement. "Cash Gross Profit Target" shall mean the Company's attainment of a ------------------------ Cash Gross Profit for the fiscal year ending December 31, 2000 that equals or exceeds $147.4 million. "Class A Option" shall mean an option to purchase a number of shares -------------- of Common Stock, as specified in an option agreement, identified as a "Class A Option," which shall be subject to the exercise and termination provisions set forth in Section 8(a) hereof. "Class B Option" shall mean an option to purchase a number of shares -------------- of Common Stock, as specified in an option agreement, identified as a "Class B Option," which shall be subject to the exercise and termination provisions set forth in Section 8(b) hereof. "Class C Options" shall mean, collectively, Class C1 Options, Class C2 --------------- Options, Class C3 Options and Class C4 Options. "Class C1 Option" shall mean, collectively, Class C1A Options and --------------- Class C1B Options. "Class C1A Option" shall mean an option to purchase a number of shares ---------------- of Common Stock, as specified in an option agreement, identified as a "Class C1A Option," which shall be subject to the exercise and termination provisions set forth in Section 8(c) hereof. "Class C1B Option" shall mean an option to purchase a number of shares ---------------- of Common Stock, as specified in an option agreement, identified as a "Class C1B Option," which shall be subject to the exercise and termination provisions set forth in Section 8(c) hereof. "Class C2 Option" shall mean an option to purchase a number of shares --------------- of Common Stock, as specified in an option agreement, identified as a "Class C2 Option," which shall be subject to the exercise and termination provisions set forth in Section 8(c) hereof. 2 "Class C3 Option" shall mean an option to purchase a number of shares --------------- of Common Stock, as specified in an option agreement, identified as a "Class C3 Option," which shall be subject to the exercise and termination provisions set forth in Section 8(c) hereof. "Class C4 Options" shall mean an option to purchase a number of shares ---------------- of Common Stock, as specified in an option agreement, identified as a "Class C4 Option," which shall be subject to the exercise and termination provisions set forth in Section 8(c) hereof. "Class C Option Exercise Date" shall have the meaning ascribed to such ---------------------------- term in Section 8(c)(ii) hereof. "Closing Date" shall mean August 26, 1997. ------------ "Code" shall mean the Internal Revenue Code of 1986, as amended from ---- time to time. "Committee" shall mean the committee appointed by the Board to --------- administer the Plan and to perform the functions set forth herein. "Common Stock" shall mean the common stock, par value $0.01 per share, ------------ of the Company held by Endo Pharma, such term to include any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock. "Company" shall have the meaning ascribed to such term in Section 1 ------- hereof. "Compelled Exercise and Sale" shall have the meaning ascribed to such --------------------------- term in Section 12(b) hereof. "Credit Agreement" shall mean the Credit Agreement, dated as of August ---------------- 26, 1997, among Endo Pharmaceuticals, Chase Manhattan Bank, as Administrative Agent, Chase Securities Inc., as Arranger and the Lenders party thereto. "EBITDA" shall have the meaning ascribed to "Consolidated EBITDA" in ------ the Credit Agreement. 3 "Eligible Person" shall have the meaning ascribed to such term in --------------- Section 5 hereof. "Employee Stockholders Agreement" shall mean the Stockholders ------------------------------- Agreement, dated as of July 14, 2000, by and among the Company, Endo Pharma, KIA V and the Employee Stockholders (as such term is defined therein). "Endo Pharma" shall have the meaning ascribed to such term in Section ----------- 1 hereof. "Endo Pharmaceuticals" shall mean Endo Pharmaceuticals Inc., a -------------------- Delaware corporation, and any successor thereto. "Exercise Notice" shall have the meaning ascribed to such term in --------------- Section 8(a) hereof. "Existing Stock Option Plans" shall mean collectively the Plan and the --------------------------- Endo Pharma LLC Amended and Restated 1997 Executive Stock Option Plan. "Exit Event" shall mean a sale, disposition or transfer (collectively, ---------- a "sale") of shares of common stock of the Company after which neither Endo Pharma nor Kelso any longer holds any shares of common stock of the Company. "Fair Market Value" shall have the meaning ascribed to such term in ----------------- Section 4.1 of the Employee Stockholders Agreement. "Holder" shall mean a person to whom an Option is granted pursuant to ------ the Plan. "Implied Public Stock Price Threshold", with respect to any Class C ------------------------------------ Option, shall mean: (i) in the case of Class C1A Options, $8.09 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C1 - ------- Options shall be adjusted in accordance with Schedule II attached hereto; (ii) in the case of Class C1B Options, $8.09 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C1 - ------- Options shall be adjusted in accordance with Schedule II attached hereto; 4 (iii) in the case of Class C2 Options, $12.50 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C2 - ------- Options shall be adjusted in accordance with Schedule II attached hereto; (iv) in the case of Class C3 Options, $19.99 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C3 - ------- Options shall be adjusted in accordance with Schedule II attached hereto; (v) in the case of Class C4 Options, $32.66 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C4 - ------- Options shall be adjusted in accordance with Schedule II attached hereto. "Kelso" shall mean, collectively, KIA V, KEP V and their permitted ----- transferees. "KEP V" shall mean Kelso Equity Partners V, L.P., a Delaware limited ----- partnership. "KIA V" shall mean Kelso Investment Associates V, L.P., a Delaware ----- limited partnership. "Merger Agreement" shall mean the Agreement and Plan of Merger, dated ---------------- as of November 26, 1999 (as may be amended and/or restated from time to time), by and among, the Company, Endo, Inc., a Delaware corporation, and Algos Pharmaceutical Corporation, a Delaware corporation. "MorphiDex(R) Approval" shall mean the Company's receipt of approval ------------------- from the U.S. Food and Drug Administration with respect to its New Drug Application for MorphiDex(R) for the treatment of any pain. "Options" shall mean, collectively, Class A Options, Class B Options, ------- and Class C Options. "Option Price" shall mean, with respect to any Option, the price per ------------ share for which shares of Common Stock may be purchased pursuant to such Option, which shall initially be $2.42 per share, except for Class C1A Options as to which the Option Price shall initially be $3.42 per share. 5 "Other Securities" shall mean any stock (other than Common Stock) and ---------------- other securities of the Company or any other Person (corporate or otherwise) which the Holders of the Options at any time shall be entitled to receive, or shall have received, upon the exercise of the Options, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities. "Permitted Transferee" of a Holder shall mean Endo Pharma and (A) the -------------------- spouses, family members, heirs, executors, administrators, testamentary trustees or legatees or beneficiaries of the Holder and (B) any trust, the beneficiaries of which, or a corporation or partnership, the stockholders or general or limited partners of which, include only the Holder or the spouse or family members of the Holder; provided, however, that each such transferor has obtained -------- ------- the prior written consent of the Company; provided further that the transfer to -------- ------- any such person is in compliance with all applicable federal, state and foreign securities laws. "Person" shall mean a corporation, an association, a partnership, an ------ organization, a business, an individual, a government or political subdivision thereof or a governmental agency. "Plan" shall have the meaning ascribed to such term in Section 1 ---- hereof. 3. Options Available for Grant Pursuant to the Existing Stock Option ----------------------------------------------------------------- Plans. The Options available for grant pursuant to the Existing Stock Option - ----- Plans shall in no case exceed, in the aggregate, the following quantities (subject to adjustment as provided in Section 11 hereof): (a) in the case of Class A Options, options to purchase 2,650,382 shares of Common Stock; (b) in the case of Class B Options, options to purchase 2,977,957 shares of Common Stock; (c) in the case of Class C1A Options, options to purchase 2,000,000 shares of Common Stock; (d) in the case of Class C1B Options, options to purchase 2,561,911 shares of Common Stock; 6 (e) in the case of Class C2 Options, options to purchase 4,743,458 shares of Common Stock; (f) in the case of Class C3 Options, options to purchase 7,119,725 shares of Common Stock; (g) in the case of Class C4 Options, options to purchase 3,561,906 shares of Common Stock. Notwithstanding the foregoing, the Company may from to time to time reallocate the number of Options available for grant, in the case of either Class A Options or Class B Options, from such Class A Options or Class B Options to Class C Options to the extent such Class A Options or Class B Options available for grant are not then subject to outstanding Options under the Existing Stock Option Plans. 4. Reservation of Shares. Endo Pharma has reserved (subject to --------------------- adjustment as provided in Section 11 hereof), solely for issuance and delivery upon exercise of the Options pursuant to the Existing Stock Option Plans 25,615,339 shares of Common Stock. All shares of Common Stock (or Other Securities) issuable upon exercise of any Options shall be duly authorized and, when issued upon such exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable with no liability on the part of the Holders thereof. 5. Grant of Options. Options may be granted by Endo Pharma to ---------------- directors, officers, employees, consultants and agents of the Company or any of its subsidiaries, from time to time, as determined by the Committee (each, an "Eligible Person"). In determining (i) who shall be an Eligible Person or (ii) grants under the Plan, the Committee shall take into account such factors as it shall deem relevant in connection with accomplishing the purposes of the Plan. 6. No Right to Employment or Continued Service. Nothing in the Plan ------------------------------------------- or in any Option shall confer any right on any Eligible Person to continue in the employ or service of the Company or any of its subsidiaries or shall interfere in any way with the right of the stockholders of the Company or any of its subsidiaries to terminate such Eligible Person's employment or service at any time. 7. Administration of the Plan. The Plan shall be administered by the -------------------------- Committee. The Committee shall have full power to construe and interpret the Plan, to establish rules for its administration and to grant Options to Eligible 7 Persons, in each case in accordance with the provisions of the Plan. In addition, the Committee may delegate such of its duties under the Plan as may be deemed by the Committee to be clerical or ministerial to such delegates as the Committee deems appropriate. All actions taken and decisions made by the Committee pursuant to the Plan shall be binding and conclusive on all persons interested in the Plan. 8. Exercisability of Options. ------------------------- (a) Class A Options. --------------- (i) Subject to the acceleration and forfeiture provisions set forth in this Section 8(a), Class A Options shall become exercisable with respect to an equal proportion of the Common Stock subject thereto on each anniversary of the date of grant of such Class A Option, through and until the end of the fifth anniversary of the date of grant of such Class A Option. (ii) Subject to Section 10 hereof, Class A Options shall become exercisable in full upon the occurrence of an Exit Event and the right to exercise such Option shall terminate at 12:00 p.m. on the date of the Exit Event. In the event that any Exit Event is contemplated, Endo Pharma will mail or deliver to each Holder of such Option at least ten days prior to the date of such Exit Event a notice (an "Exercise Notice") specifying that (x) an Exit Event is contemplated and that upon such Exit Event such Option will become exercisable pursuant to its terms, (y) the date of the contemplated Exit Event and the terms thereof, and (z) such Option shall expire at 12:00 p.m., New York City time, on the date of the Exit Event if not exercised prior thereto. (iii) Notwithstanding anything to the contrary herein, in the event that a Holder's employment or service with the Company or any of its subsidiaries is terminated for any reason, with or without cause, initiated either by the Company or any of its subsidiaries or by the Holder, any unexercisable portion of any Class A Option held by a Holder shall expire immediately upon termination. Any portion of any Class A Option exercisable upon termination shall expire on the 90th day after the termination of the Holder's employment or service if unexercised. (iv) Notwithstanding anything to the contrary herein, the Committee may accelerate the exercisability or delay or postpone the expiration of any outstanding Class A Option at such time and under such circumstances as the Committee, in its sole discretion, deems appropriate. 8 (b) Class B Options. --------------- (i) Subject to the acceleration and forfeiture provisions set forth in this Section 8(b), Class B Options shall become exercisable after December 31, 2006; provided, however, that, in the event that the EBITDA targets -------- ------- set forth on Schedule I are achieved for a particular fiscal year by Endo Pharmaceuticals, a portion of such Class B Option equal to the fraction, the numerator of which is one and the denominator of which is the number of fiscal years ending between the date of the grant of such Class B Option and end of the fifth full fiscal year of the Company after the Closing Date, inclusive, shall become exercisable at the end of such fiscal year of the Company. Notwithstanding the foregoing, in the event that Endo Pharmaceuticals fails to achieve the EBITDA target for a fiscal year, and the portion of a Class B Option with respect to such fiscal year therefore does not become exercisable on an accelerated basis, such portion of such Class B Option will nevertheless become exercisable at the end of a subsequent fiscal year, if Endo Pharmaceuticals exceeds such fiscal year's EBITDA target by a margin which equals or exceeds the shortfall amount for the year in which the EBITDA target was not achieved. Endo Pharmaceuticals' excess over the EBITDA target for subsequent years, for purposes of the Class B Options, shall be treated on a cumulative basis, and applied to portions of the Class B Options in chronological order, such that the portion of Class B Options with respect to the earliest fiscal year in which Endo Pharmaceuticals failed to achieve the EBITDA target would become exercisable first. The Committee may, in its discretion, delay the acceleration of the exercisability of any fiscal year's portion of Class B Options, or any portion thereof, until the completion of the audited financial statements for the applicable fiscal year, in order to verify the satisfaction of the preceding exercisability requirements. (ii) Subject to Section 10 hereof, Class B Options shall become exercisable in full upon the occurrence of an Exit Event and the right to exercise such Option shall terminate at 12:00 p.m. on the date of the Exit Event, provided, however, that in order for such Class B Options to become -------- ------- exercisable pursuant to this clause (ii), either (A) the EBITDA targets for all previous fiscal years must have been achieved by Endo Pharmaceuticals by the date of the Exit Event, either in the contemporaneous fiscal year or in a subsequent fiscal year, or (B) any of the Class C1 Options have become exercisable. In the event that any Exit Event is contemplated, Endo Pharma will mail or deliver to each Holder of such Option at least ten days prior to the date of such Exit Event an Exercise Notice specifying that (x) an Exit Event is contemplated and whether such Option will become exercisable pursuant to its terms upon such Exit Event, (y) the date of the 9 contemplated Exit Event and the terms thereof, and (z) such Option shall expire at 12:00 p.m., New York City time, on the date of the Exit Event if not exercised prior thereto. (iii) Notwithstanding anything to the contrary herein, in the event that a Holder's employment or service with the Company or any of its subsidiaries is terminated for any reason, with or without cause, initiated either by the Company or any of its subsidiaries or by the Holder, any unexercisable portion of any Class B Option held by a Holder shall expire immediately upon termination. Any portion of any Class B Option exercisable upon termination shall expire on the 90/th/ day after the termination of the Holder's employment or service if unexercised. (iv) Notwithstanding anything to the contrary herein, the Committee may accelerate the exercisability or delay or postpone the expiration of any outstanding Class B Option at such time and under such circumstances as the Committee, in its sole discretion, deems appropriate. (c) Class C Options. --------------- (i) In the event (I) the Fair Market Value of a share of Common Stock exceeds the Implied Public Stock Price Threshold with respect to such subclass of Class C Option (for purposes of this Section 8(c)(i) only, "Fair Market Value" shall have the meaning ascribed to such term in Section 3.1 of the Employee Stockholders Agreement, except that "90 consecutive trading days" shall be substituted for "ten consecutive trading days" wherever it appears in such term and, in any event, any such 90-consecutive-trading-day- period shall not commence until the consummation of the merger contemplated by the Merger Agreement), (II) such Fair Market Value of each share of Common Stock on the last trading day of such 90 consecutive trading day period is greater than or equal to 85% of such Implied Public Stock Price Threshold, and (III) the Holder is a director, officer, employee, consultant or agent of the Company or any of its subsidiaries on the date on which the conditions set forth in clauses (I) and (II) of this Section 8(c)(i) are satisfied, then the Holder shall become vested, with respect to each subclass of such Class C Options, in options with respect to the number of shares equal to the product of (x) the number of outstanding Class C Options of that subclass held by a Holder and (y) the quotient of (A) number of Class C Options of that subclass set forth on Schedule II attached hereto and (B) the aggregate number of outstanding Class C Options of that subclass granted pursuant to the Existing Stock Option Plans. Whether or not some of the Holder's Class C Options vest prior to December 31, 10 2000 in accordance with the foregoing sentence, any Class C Options then still unvested will continue to vest in accordance with the foregoing sentence and Schedule II attached hereto. (ii) Subject to Section 10 hereof, Class C Options shall be exercisable, solely to the extent vested pursuant to Section 8(c)(i) hereof, upon the earlier of the occurrence of an Exit Event or January 1, 2006 (the "Class C Option Exercise Date") and the right to exercise such Options shall terminate at 12:00 p.m. on the Class C Option Exercise Date. In the event that any Exit Event is contemplated prior to January 1, 2006 and that the conditions in clauses (I), (II) and (III) of Section 8(c)(i) hereof will be satisfied, Endo Pharma will mail or deliver to each Holder of such Option at least ten days prior to the date of such Exit Event an Exercise Notice specifying that (i) an Exit Event is contemplated and that upon such Exit Event such Option will become exercisable pursuant to its terms, (ii) the date of the contemplated Exit Event and the terms thereof, and (iii) such Option shall expire at 12:00 p.m., New York City time, on the Class C Option Exercise Date if not exercised prior thereto. Any Class C Options not vested as of the Class C Option Exercise Date shall terminate at 12:00 p.m., New York City time, on the Class C Option Exercise Date. (iii) Notwithstanding anything to the contrary herein, any unexercisable portion of any Class C Option held by a Holder will become immediately exercisable in full, solely to the extent then vested pursuant to Section 8(c)(i) hereof, in the event that such Holder's employment or service with the Company or any of its subsidiaries is terminated for any reason; provided, however, that any such Option shall expire on the 90th day after - -------- ------- termination of the Holder's employment or service if unexercised. 9. Manner of Exercise. ------------------ (a) Each Option shall further state the terms and conditions of the Option (including the conditions to exercisability thereof) and the Option Price. An Option may be exercised, subject to this Section 9, for any or all whole number of shares which have become purchasable under such Option. To the extent necessary upon the exercise of an Option, Endo Pharma shall round each fractional share issuable upon such exercise up to the next whole number. (b) Subject to the terms and conditions set forth in this Plan (including the conditions to exercisability thereof), an Option may be exercised by the Holder during normal business hours on any Business Day, by surrender of the 11 Option to Endo Pharma at its principal office, accompanied by a subscription, in cash or by certified or official bank check payable to the order of Endo Pharma, in the amount obtained by multiplying (x) the number of shares of Common Stock designated in such subscription (up to the amount of shares which such Holder is entitled to receive at such time upon exercise of the Option) by (y) the Option Price. (c) Each exercise of an Option shall be deemed to have been effected immediately prior to the close of business on the Business Day on which an Option shall have been surrendered to Endo Pharma, and at such time the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock (or Other Securities) shall be issuable upon such exercise shall be deemed to have become the Holder or Holders of record thereof. (d) Endo Pharma at its expense shall deliver to the relevant Holder (or as such Holder may direct pursuant to the Option) a certificate or certificates representing shares of the Common Stock so purchased as soon as reasonably practicable, but in any event within five Business Days, after receipt of such notice. Each such certificate shall bear the legend required by the Employee Stockholders Agreement to the effect that there are restrictions on the transfer of shares of Common Stock. (e) In the event that such exercise is in part only, Endo Pharma shall deliver a new Option of the same class and tenor, calling in the aggregate on the face thereof for the number of shares of Common Stock equal to the number of such shares which such Holder would be entitled to receive at such time upon exercise of this Option, after giving effect to such recent exercise. (f) Notwithstanding anything to the contrary in the Plan, in no event may any Option be exercised prior to the time at which the Option becomes exercisable (as set forth in the Option) or after the expiration of such Option, and each Option shall terminate upon the terms set forth in Sections 8 and 10 hereof. (g) If, at any time, the Committee shall determine, in its sole discretion, that the listing, registration or qualification of the shares of Common Stock upon any securities exchange or under any applicable securities laws, or the consent or approval of any governmental or self-regulatory agency or body, is necessary or reasonably desirable as a condition of, or in connection with, the issue or purchase of the shares of Common Stock under any Option, such Option may not be exercised in whole or in part unless such listing, registration, qualification, 12 consent or approval shall have been effected or obtained free of any conditions unacceptable to the Committee. 10. Expiration of Options. Notwithstanding the provisions of Section --------------------- 8 above, the Options will expire no later than December 31, 2012; provided, -------- however, that in the event that any shares of Common Stock have been sold to the - ------- public pursuant to an effective registration statement, other than a registration statement on Form S-4 or S-8 or any successor forms under the Securities Act of 1933, the Options will expire no later than on August 26, 2007. Any outstanding unexercised Option, or portion thereof, shall be forfeited, whether or not exercisable, upon the expiration of such Option. 11. Adjustment of Number of Shares of Common Stock Issuable Upon ------------------------------------------------------------ Exercise. The number and kind of shares of Common Stock purchasable upon the - -------- exercise of Options shall be subject to adjustment from time to time as follows: (a) Stock Dividends; Stock Splits; Reverse Stock Splits. In case the --------------------------------------------------- Company shall (i) pay a dividend or make any other distribution with respect to the common stock of the Company in shares of its capital stock, (ii) subdivide the outstanding common stock of the Company, or (iii) combine the outstanding common stock of the Company into a smaller number of shares, the number of shares of Common Stock issuable upon exercise of the Options immediately prior to the record date for such dividend or distribution or the effective date of such subdivision or combination shall be adjusted so that the Holder of the Options shall thereafter be entitled to receive the kind and number of shares of Common Stock or Other Securities of the Company that such Holder would have owned or have been entitled to receive after the happening of any of the events described above, had such Options been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this Section 11 shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) No Adjustment for Dividends; No Adjustment of Option Price. ---------------------------------------------------------- Except as otherwise provided in this Section 11, no adjustment in respect of any dividends declared and paid on common stock of the Company, or on any other capital stock of the Company, shall be made during the term of an Option or upon the exercise of an Option. Notwithstanding anything to the contrary contained in this Plan, in the event of any adjustments to Options pursuant to this Section 11, 13 adjustments shall be made solely to the number and kind of securities purchasable upon the exercise of Options and no adjustments shall be made to the Option Price. (c) Other Adjustments. In the event that at any time, as a result of ----------------- an adjustment made pursuant to this Section 11, the registered Holders shall become entitled to receive any securities of the Company other than shares of Common Stock, thereafter the number of such Other Securities so receivable upon exercise of the Options 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 shares of Common Stock contained in this Section 11. (d) Notice of Adjustment. Whenever the number of shares of Common -------------------- Stock purchasable upon the exercise of an Option is adjusted, as herein provided, the Company shall give notice to each Holder of such adjustment or adjustments. 12. Purchase Rights Upon Merger, Consolidation, etc. ----------------------------------------------- (a) In the event of any consolidation of the Company with or merger of the Company with or into another corporation or in case of any sale, transfer or lease to another corporation of all or substantially all the assets of the Company, the Acquiring Person shall execute an agreement that each Holder shall have the right thereafter (whether or not the Option is then exercisable by its terms) upon payment of the Option Price in effect immediately prior to such action to purchase upon exercise of the Option the kind and amount of securities, cash or other assets which such Holder would have owned or have been entitled to receive after the happening of such consolidation, merger, sale, transfer or lease had such Option been exercised immediately prior to such action; provided, however, that no adjustment in respect of dividends, interest -------- ------- or other income on or from such shares or other securities and property shall be made during the term of an Option or upon the exercise of an Option. The Company shall mail by first class mail, postage prepaid, to each Holder, notice of the execution of any such agreement (including a copy thereof). Such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 12. The provisions of this Section 12 shall similarly apply to successive consolidations, mergers, sales, transfers or leases. The Acquiring Person shall mail to Holders a notice describing any supplemental Option Agreement. In the event that this Section 12 shall be applicable, the provisions of Section 11(a) shall not be applicable. 14 (b) In the event of a sale of all or substantially all of the Company to a third party, whether pursuant to a sale of capital stock of the Company, merger, consolidation, sale of assets or similar transaction, the Company shall have the right to compel the Holder of an Option to exercise such Option (whether or not the Option is then exercisable by its terms) (a "Compelled Exercise"). In the event that the Company determines to exercise its right to a Compelled Exercise, it shall mail to Holders written notice of such event. 13. Employee Stockholders Agreement. Notwithstanding anything in the ------------------------------- Plan to the contrary, all shares of Common Stock issued upon the exercise of Options shall be subject to all terms and conditions set forth in the Employee Stockholders Agreement. As a condition to the exercise of any Option, each Holder shall be required to execute and deliver to Endo Pharma (i) an executed copy of the Employee Stockholders Agreement, in the form in effect at the time of such exercise, if such Holder had not previously done so and (ii) such written representations and other documents as may be necessary or reasonably desirable, in the opinion of the Committee, for purposes of compliance with federal or state securities or other laws. For purposes of the Employee Stockholders Agreement, each Holder shall be deemed to be a "Employee Stockholder." 14. Restrictions on Transfer. ------------------------ (a) Restrictive Legend. Except as otherwise permitted by this ------------------ Section 14, each Option (including each Option issued upon the transfer of any option) shall be stamped or otherwise imprinted with a legend in substantially the following form: "This Option and any shares acquired upon the exercise of this option have not been registered under the Securities Act of 1933, as amended, and may not be transferred, sold or otherwise disposed of except while a registration under such Act is in effect or pursuant to an exemption therefrom under such Act and in all cases in compliance with all applicable state securities laws, and in any event may not be transferred to any party other than a Permitted Transferee as defined in this Option." (b) Restrictions on Transfer. Each Holder, by acceptance of an ------------------------ Option, shall acknowledge and agree that such Option may not be sold, assigned, transferred, exchanged, mortgaged, pledged or granted a security interest in, or 15 otherwise disposed of or encumbered by or to any party other than by or to a Permitted Transferee. 15. Registration and Transfer of Options, etc. ----------------------------------------- (a) Option Register; Ownership of Options. Endo Pharma will keep at ------------------------------------- its principal office a register in which Endo Pharma will provide for the registration of Options and the registration of transfers of Options. Endo Pharma may treat the Person in whose name any Option is registered on such register as the owner thereof for all other purposes, and Endo Pharma shall not be affected by any notice to the contrary, except that, if and when any Option is accompanied by an instrument of assignment in a form acceptable to Endo Pharma, it may (but shall not be obligated to) treat the bearer thereof as the owner of such Option for all purposes. Subject to Section 14(b) hereof, an Option, if properly assigned, may be exercised by a new Holder without a new Option first having been issued. (b) Transfer and Exchange of Options. Upon surrender of any Option -------------------------------- for registration of transfer or for exchange to the Company at its principal office, the Company at its expense will (subject to compliance with Section 14(b) hereof, if applicable) execute and deliver in exchange therefor a new Option or Options of the same class and tenor, in the name of such Holder or as such Holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Option or Options so surrendered. (c) Replacement of Options. Upon receipt of evidence reasonably ---------------------- satisfactory to Endo Pharma of the loss, theft, destruction or mutilation of any Option and, in the case of any such loss, theft or destruction of any Option, upon delivery of an indemnity bond in such reasonable amount as Endo Pharma may determine (or, at the sole option of Endo Pharma, of an indemnity agreement reasonably satisfactory to Endo Pharma), or, in the case of any such mutilation, upon the surrender of such Option for cancellation to Endo Pharma at its principal office, Endo Pharma at its expense will execute and deliver, in lieu thereof, a new Option of the same class and tenor. 16. Rights as Option Holders of Shares. Neither the Holder of an ---------------------------------- Option nor any Permitted Transferees shall have any rights as a stockholder of the Company (including, without limitation, any right to vote or to receive dividends or to consent or to receive notice as a stockholder in respect of any meeting of stock- 16 holders for the election of directors of the Company or any other matter, or any right whatsoever as a stockholder of the Company (except for those notices and other matters expressly set forth under the Plan or in the Option)). An Option does not impose any obligation on a Holder or any of its Permitted Transferees to purchase any securities or impose any liabilities on a Holder as a stockholder of the Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company. 17. Withholding. Endo Pharma shall have the right to require a ----------- Holder or other person entitled to receive shares of Common Stock upon the exercise of Options (or, if the Holder makes an election under Section 83(b) of the Code, in connection with such grant) under the Plan to pay to Endo Pharma the amount which Endo Pharma is or will be required to withhold with respect to the issuance of such shares in order for Endo Pharma or the Company to pay taxes or to claim an income tax deduction with respect to the issuance of such shares. In lieu of a portion of such payment equal to the amount of the minimum statutory tax withholding, Endo Pharma may retain, at the discretion of the Committee, a sufficient number of such shares (valued at the Fair Market Value thereof) to cover the amount equal to the minimum statutory tax withholding. A Holder, however, may elect to pay to Endo Pharma all or a portion of the total amount Endo Pharma is required to withhold by tendering shares of Common Stock with a Fair Market Value equal to the amount Endo Pharma is required to withhold; provided, however, that such Holder must have owned such tendered -------- ------- shares of Common Stock continuously through the date of issuance (or lapse) for a period of a least six months. With respect to Class C Options, a Holder may elect to pay to Endo Pharma all or a portion of the total amount Endo Pharma is required to withhold by having shares of Common Stock with a Fair Market Value equal to the minimum statutory amount Endo Pharma is required to withhold withheld by Endo Pharma. The Holder shall promptly notify Endo Pharma of any election made pursuant to Section 83(b) of the Code. 18. Liability. Endo Pharma, and not the Company, the Board, the --------- Committee, or any member thereof, shall be liable for any and all claims made against Endo Pharma, the Company, the Board or the Committee in connection with the Plan or any Option. 19. Legal Requirements. ------------------ (a) Endo Pharma shall be responsible and shall pay for any transfer, revenue or documentary stamps with respect to shares of Common Stock 17 issued upon the exercise of Options granted under the Plan (other than any transfer tax applicable to a transfer to a Permitted Transferee which shall be payable by a Holder). (b) Endo Pharma shall not be required to issue a certificate or certificates for shares upon the exercise of any Option if such issuance would result in a violation of any federal or state securities or other laws. Endo Pharma agrees to use its reasonable efforts to clear the legal impediment as soon as possible. 20. Amendment and Termination of the Plan. The Committee may at any ------------------------------------- time and from time to time alter, amend, suspend, or terminate the Plan in whole or in part. Notwithstanding the foregoing, no amendment, suspension, or termination shall affect adversely any of the rights of any Holder, unless such amendment suspension or termination is approved by a majority of the members of the Committee that includes a Committee member who is a representative of the Management Stockholders. 21. Nonqualified Stock Options. Options granted hereby shall be -------------------------- treated as nonqualified stock options under the Code. 22. Effective Date. The Plan shall take effect upon its adoption by -------------- the Board. 23. Interpretations. Except as otherwise expressly provided in the --------------- Plan, the following rules of interpretation apply to the Plan and each Option: (i) the singular includes the plural and the plural includes the singular; (ii) "include" and "including" are not limiting and "or" is not exclusive; (iii) a reference to any agreement or other contract includes permitted supplements and amendments; (iv) a reference to a law includes any amendment or modification to such law and any rules or regulations issued thereunder; and (v) a reference to any person, corporation or other entity includes its permitted successors and assigns. 24. GOVERNING LAW. THE PLAN AND ANY AND ALL OPTIONS AND OPTION AWARD ------------- AGREEMENTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 18 SCHEDULE I ENDO PHARMACEUTICALS EBITDA TARGETS FOR CLASS B OPTIONS Fiscal Year EBITDA Target - ----------- ------------- 1998 $43.0 million 1999 $60.0 million 2000 $80.0 million 2001 $100.0 million 2002 $120.0 million 19 SCHEDULE II VESTING MATRIX AND IMPLIED PUBLIC STOCK PRICE THRESHOLDS FOR CLASS C OPTIONS
- -------------------------------------------------------------------------------------- Option Prior to December Cash Gross Profit Target is achieved Class 31, 2000 ----------------------------------------------------------------------------- Implied Public Stock Implied Public Stock MorphiDex(R) Approval Price Threshold is met. Price Threshold is met does not occur on or on or prior to Decem- prior to December 31, ber 31, 2002, regardless 2002. of whether or not MorphiDex(R) Approval occurs. ----------------------------------------------------------------------------- Implied Total Implied Total Implied Total Public Number Public Number Public Number Stock of Stock of Stock of Price Vested Price Vested Price Vested Threshold Class C Threshold Class C Threshold Class C Options Options Options - -------------------------------------------------------------------------------------- Class C1A $ 8.09 2,000,000 $ 6.06 2,000,000 $ 4.28 2,000,000 - -------------------------------------------------------------------------------------- Class C1B $ 8.09 14,349 $ 6.06 2,561,911 $ 4.28 2,561,911 - -------------------------------------------------------------------------------------- Class C2 $12.50 3,557,594 $ 9.38 4,743,458 $ 6.62 4,743,458 - -------------------------------------------------------------------------------------- Class C3 $19.99 5,339,794 $14.99 7,119,725 $10.58 7,119,725 - -------------------------------------------------------------------------------------- Class C4 $32.66 2,671,429 $24.50 3,561,906 $17.29 3,561,906 - -------------------------------------------------------------------------------------- Option Cash Gross Profit Target is not achieved Class -------------------------------------------------------------------------------------- Implied Public Stock Implied Public Stock Price MorphiDex(R) Approval Price Threshold is met Threshold is met and does not occur on or prior and MorphiDex(R) MorphiDex(R) Approval to December 31, 2002. Approval has occurred has occurred prior prior to March 31, 2001. to March 31, 2001. -------------------------------------------------------------------------------------- Implied Total Implied Total Implied Total Number Public Number Public Number of Public of Vested Stock of Stock Vested Stock Class C Price Vested Price Class C Price Options Threshold Class C Threshold Options Threshold Options - ----------------------------------------------------------------------------------------------- Class C1A $ 7.51 2,000,000 $ 8.09 2,000,000 $ 6.06 2,000,000 - ----------------------------------------------------------------------------------------------- Class C1B $ 7.51 602,248 $ 8.09 14,349 $ 6.06 14,349 - ----------------------------------------------------------------------------------------------- Class C2 $11.61 3,831,255 $12.50 3,557,594 $ 9.38 3,557,594 - ----------------------------------------------------------------------------------------------- Class C3 $18.56 5,750,547 $19.99 5,339,794 $14.99 5,339,794 - ----------------------------------------------------------------------------------------------- Class C4 $30.33 2,876,924 $32.66 2,671,429 $24.50 2,671,429 - -----------------------------------------------------------------------------------------------
20 EX-99.9 10 0010.txt ENDO PHARMA AMENDED AND RESTATED 1997 EXECUTIVE STO Exhibit 9 ENDO PHARMA LLC AMENDED AND RESTATED 1997 EXECUTIVE STOCK OPTION PLAN 1. Purpose. The purpose of this Endo Pharma LLC Amended and Restated ------- 1997 Executive Stock Option Plan (the "Plan") is to advance the interests of Endo Pharma LLC, a Delaware limited liability company ("Endo Pharma"), by affording certain executive officers or directors of Endo Pharmaceuticals Holdings Inc. (the "Company") and its subsidiaries an opportunity to acquire a substantial proprietary interest in shares of common stock of the Company held by Endo Pharma and thus to stimulate in such persons increased personal interest in the success and future growth of the Company. 2. Definitions. ----------- "Acquiring Person" shall mean, with reference to the transactions ---------------- referred to in Section 12(a), (i) the continuing or surviving entity of a consolidation or merger with the Company (if other than the Company), (ii) the transferee of all or substantially all of the assets of the Company, (iii) the parent entity of any corporation consolidating with or merging into the Company in a consolidation or merger in connection with which the Common Stock is changed into or exchanged for stock or other securities of any other Person (including such parent entity) or cash or any other property if the Company becomes a subsidiary of such entity, or (iv) in the case of a capital reorganization or reclassification or in any case in which the Company is a surviving corporation in a merger not described in clause (i) or (iii) above, the Company. "Affiliate" shall mean, with respect to a specified person, a person --------- that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. "Board" shall mean the Board of Managers of Endo Pharma. ----- "Business Day" shall mean any day other than a Saturday or a Sunday or ------------ a day on which commercial banking institutions in the City of New York are authorized by law to be closed. Any reference herein to "days" (unless Business Days are specified) shall mean calendar days. "Cash Gross Profit" shall have the meaning ascribed to such term in ----------------- Section 5.21(d) of the Merger Agreement. "Cash Gross Profit Target" shall mean the Company's attainment of a ------------------------ Cash Gross Profit for the fiscal year ending December 31, 2000 that equals or exceeds $147.4 million. "Cause" shall have the meaning as defined in or pursuant to Section ----- 4.3(a) of the Stockholders Agreement. "Class A Option" shall mean an option to purchase a number of shares -------------- of Common Stock, as specified in an option agreement, identified as a "Class A Option," which shall be subject to the exercise and termination provisions set forth in Section 8(a) hereof. "Class B Option" shall mean an option to purchase a number of shares -------------- of Common Stock, as specified in an option agreement, identified as a "Class B Option," which shall be subject to the exercise and termination provisions set forth in Section 8(b) hereof. "Class C Options" shall mean, collectively, Class C1 Options, Class C2 --------------- Options, Class C3 Options and Class C4 Options. "Class C1 Option" shall mean, collectively, Class C1A Options and --------------- Class C1B Options. "Class C1A Option" shall mean an option to purchase a number of shares ---------------- of Common Stock, as specified in an option agreement, identified as a "Class C1A Option," which shall be subject to the exercise and termination provisions set forth in Section 8(c) hereof. "Class C1B Option" shall mean an option to purchase a number of shares ---------------- of Common Stock, as specified in an option agreement, identified as a "Class C1B Option," which shall be subject to the exercise and termination provisions set forth in Section 8(c) hereof. "Class C2 Option" shall mean an option to purchase a number of shares --------------- of Common Stock, as specified in an option agreement, identified as a "Class 2 C2 Option," which shall be subject to the exercise and termination provisions set forth in Section 8(c) hereof. "Class C3 Option" shall mean an option to purchase a number of shares --------------- of Common Stock, as specified in an option agreement, identified as a "Class C3 Option," which shall be subject to the exercise and termination provisions set forth in Section 8(c) hereof. "Class C4 Options" shall mean an option to purchase a number of shares ---------------- of Common Stock, as specified in an option agreement, identified as a "Class C4 Option," which shall be subject to the exercise and termination provisions set forth in Section 8(c) hereof. "Class C Option Exercise Date" shall have the meaning ascribed to such ---------------------------- term in Section 8(c)(ii) hereof. "Closing Date" shall mean August 26, 1997. ------------ "Code" shall mean the Internal Revenue Code of 1986, as amended from ---- time to time. "Committee" shall mean the committee appointed by the Board to --------- administer the Plan and to perform the functions set forth herein. The composition of the Committee shall at all times consist of at least one person who is a representative of the Management Stockholders. "Common Stock" shall mean the common stock, par value $0.01 per share, ------------ of the Company held by Endo Pharma, such term to include any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock. "Company" shall have the meaning ascribed to such term in Section 1 ------- hereof. "Compelled Exercise and Sale" shall have the meaning ascribed to such --------------------------- term in Section 12(b) hereof. 3 "Credit Agreement" shall mean the Credit Agreement, dated as of August ---------------- 26, 1997, among Endo Pharmaceuticals, Chase Manhattan Bank, as Administrative Agent, Chase Securities Inc., as Arranger and the Lenders party thereto. "Disability" shall have the meaning as defined in or pursuant to ---------- Section 4.3(c) of the Stockholders Agreement. "EBITDA" shall have the meaning ascribed to "Consolidated EBITDA" in ------ the Credit Agreement. "Eligible Person" shall have the meaning ascribed to such term in --------------- Section 5 hereof. "Endo Pharma" shall have the meaning ascribed to such term in Section ----------- 1 hereof. "Endo Pharmaceuticals" shall mean Endo Pharmaceuticals Inc., a -------------------- Delaware corporation, and any successor thereto. "Exercise Notice" shall have the meaning ascribed to such term in --------------- Section 8(a) hereof. "Existing Stock Option Plans" shall mean collectively the Plan and the --------------------------- Endo Pharma LLC Amended and Restated 1997 Employee Stock Option Plan. "Exit Event" shall mean a sale, disposition or transfer (collectively, ---------- a "sale") of shares of common stock of the Company after which neither Endo Pharma nor Kelso any longer holds any shares of common stock of the Company. "Fair Market Value" shall have the meaning ascribed to such term in ----------------- Section 4.1 of the Stockholders Agreement. "Good Reason" shall have the meaning as defined in or pursuant to ----------- Section 4.3(b) of the Stockholders Agreement. "Holder" shall mean a person to whom an Option is granted pursuant to ------ the Plan. 4 "Implied Public Stock Price Threshold", with respect to any Class C ------------------------------------ Option, shall mean: (i) in the case of Class C1A Options, $8.09 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C1 - ------- Options shall be adjusted in accordance with Schedule II attached hereto; (ii) in the case of Class C1B Options, $8.09 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C1 - ------- Options shall be adjusted in accordance with Schedule II attached hereto; (iii) in the case of Class C2 Options, $12.50 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C2 - ------- Options shall be adjusted in accordance with Schedule II attached hereto; (iv) in the case of Class C3 Options, $19.99 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C3 - ------- Options shall be adjusted in accordance with Schedule II attached hereto; (v) in the case of Class C4 Options, $32.66 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C4 - ------- Options shall be adjusted in accordance with Schedule II attached hereto. "Kelso" shall mean, collectively, KIA V, KEP V and their permitted ----- transferees. "KEP V" shall mean Kelso Equity Partners V, L.P., a Delaware limited ----- partnership. "KIA V" shall mean Kelso Investment Associates V, L.P., a Delaware ----- limited partnership. "Merger Agreement" shall mean the Agreement and Plan of Merger, dated ---------------- as of November 26, 1999 (as may be amended and/or restated from time to time), by and among, the Company, Endo, Inc., a Delaware corporation, and Algos Pharmaceutical Corporation, a Delaware corporation. 5 "MorphiDex(R) Approval" shall mean the Company's receipt of approval --------------------- from the U.S. Food and Drug Administration with respect to its New Drug Application for MorphiDex(R) for the treatment of any pain. "Options" shall mean, collectively, Class A Options, Class B Options, ------- and Class C Options. "Option Price" shall mean, with respect to any Option, the price per ------------ share for which shares of Common Stock may be purchased pursuant to such Option, which shall initially be $2.42 per share, except for Class C1A Options as to which the Option Price shall initially be $3.42 per share. "Other Securities" shall mean any stock (other than Common Stock) and ---------------- other securities of the Company or any other Person (corporate or otherwise) which the Holders of the Options at any time shall be entitled to receive, or shall have received, upon the exercise of the Options, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities. "Permitted Transferee" of a Holder shall mean Endo Pharma and (A) the -------------------- spouses, family members, heirs, executors, administrators, testamentary trustees or legatees or beneficiaries of the Holder and (B) any trust, the beneficiaries of which, or a corporation or partnership, the stockholders or general or limited partners of which, include only the Holder or the spouse or family members of the Holder; provided, however, that each such transferor has obtained -------- ------- the prior written consent of the Company; provided further that the transfer to -------- ------- any such person is in compliance with all applicable federal, state and foreign securities laws. "Person" shall mean a corporation, an association, a partnership, an ------ organization, a business, an individual, a government or political subdivision thereof or a governmental agency. "Plan" shall have the meaning ascribed to such term in Section 1 ---- hereof. "Retirement" shall have the meaning as defined in or pursuant to ---------- Section 2.1 of the Stockholders Agreement. 6 "Stockholders Agreement" shall mean the Stockholders Agreement, dated ---------------------- as of July 14, 2000, by and among the Company, Endo Pharma, KIA V and the Management Stockholders (as such term is defined therein). 3. Options Available for Grant Pursuant to the Existing Stock Option ----------------------------------------------------------------- Plans. The Options available for grant pursuant to the Existing Stock Option - ----- Plans shall in no case exceed, in the aggregate, the following quantities (subject to adjustment as provided in Section 11 hereof): (a) in the case of Class A Options, options to purchase 2,650,382 shares of Common Stock; (b) in the case of Class B Options, options to purchase 2,977,957 shares of Common Stock; (c) in the case of Class C1A Options, options to purchase 2,000,000 shares of Common Stock; (d) in the case of Class C1B Options, options to purchase 2,561,911 shares of Common Stock; (e) in the case of Class C2 Options, options to purchase 4,743,458 shares of Common Stock; (f) in the case of Class C3 Options, options to purchase 7,119,725 shares of Common Stock; (g) in the case of Class C4 Options, options to purchase 3,561,906 shares of Common Stock. Notwithstanding the foregoing, the Company may from to time to time reallocate the number of Options available for grant, in the case of either Class A Options or Class B Options, from such Class A Options or Class B Options to Class C Options to the extent such Class A Options or Class B Options available for grant are not then subject to outstanding Options under the Existing Stock Option Plans. 4. Reservation of Shares. Endo Pharma has reserved (subject to --------------------- adjustment as provided in Section 11 hereof), solely for issuance and delivery upon exercise of the Options pursuant to the Existing Stock Option Plans 25,615,339 7 shares of Common Stock. All shares of Common Stock (or Other Securities) issuable upon exercise of any Options shall be duly authorized and, when issued upon such exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable with no liability on the part of the Holders thereof. 5. Grant of Options. Options may be granted by Endo Pharma to ---------------- executive officers or directors of the Company or any of its subsidiaries, from time to time, as determined by the Committee (each, an "Eligible Person"). In determining (i) who shall be an Eligible Person or (ii) grants under the Plan, the Committee shall take into account such factors as it shall deem relevant in connection with accomplishing the purposes of the Plan. 6. No Right to Employment or Continued Service. Nothing in the Plan ------------------------------------------- or in any Option shall confer any right on any Eligible Person to continue in the employ or service of the Company or any of its subsidiaries or shall interfere in any way with the right of the stockholders of the Company or any of its subsidiaries to terminate such Eligible Person's employment or service at any time. 7. Administration of the Plan. The Plan shall be administered by the -------------------------- Committee. The Committee shall have full power to construe and interpret the Plan, to establish rules for its administration and to grant Options to Eligible Persons, in each case in accordance with the provisions of the Plan. In addition, the Committee may delegate such of its duties under the Plan as may be deemed by the Committee to be clerical or ministerial to such delegates as the Committee deems appropriate. All actions taken and decisions made by the Committee pursuant to the Plan shall be binding and conclusive on all persons interested in the Plan. 8. Exercisability of Options. ------------------------- (a) Class A Options. --------------- (i) Subject to the acceleration and forfeiture provisions set forth in this Section 8(a), Class A Options shall become exercisable with respect to an equal proportion of the Common Stock subject thereto on each anniversary of the date of grant of such Class A Option, through and until the end of the fifth anniversary of the date of grant of such Class A Option. (ii) Subject to Section 10 hereof, Class A Options shall become exercisable in full upon the occurrence of an Exit Event and the right to exercise such Option shall terminate at 12:00 p.m. on the date of the Exit Event. In 8 the event that any Exit Event is contemplated, Endo Pharma will mail or deliver to each Holder of such Option at least ten days prior to the date of such Exit Event a notice (an "Exercise Notice") specifying that (x) an Exit Event is contemplated and that upon such Exit Event such Option will become exercisable pursuant to its terms, (y) the date of the contemplated Exit Event and the terms thereof, and (z) such Option shall expire at 12:00 p.m., New York City time, on the date of the Exit Event if not exercised prior thereto. (iii) Notwithstanding anything to the contrary herein, any unexercisable portion of any Class A Option held by a Holder will become immediately exercisable in full in the event that such Holder's employment or service with the Company or any of its subsidiaries is terminated (w) by the Company or any of its subsidiaries without Cause, (x) by the Holder for Good Reason, (y) by reason of Retirement of the Holder, or (z) by reason of death or Disability of the Holder; provided, however, that any such Option shall expire -------- ------- on the 90th day after termination of the Holder's employment or service if unexercised. (iv) Notwithstanding anything to the contrary herein, in the event that a Holder's employment or service with the Company or any of its subsidiaries is terminated (x) by the Company or any of its subsidiaries for Cause or (y) by the Holder without Good Reason, any unexercisable portion of any Class A Option held by such Holder shall expire immediately upon termination. Any portion of any Class A Option exercisable upon termination shall expire on the 90th day after termination the Holder's employment or service if unexercised. (v) Notwithstanding anything to the contrary herein, the Committee may accelerate the exercisability or delay or postpone the expiration of any outstanding Class A Option at such time and under such circumstances as the Committee, in its sole discretion, deems appropriate. (b) Class B Options. --------------- (i) Subject to the acceleration and forfeiture provisions set forth in this Section 8(b), Class B Options shall become exercisable after December 31, 2006; provided, however, that, in the event that the EBITDA targets set -------- ------- forth on Schedule I are achieved for a particular fiscal year by Endo Pharmaceuticals, a portion of such Class B Option equal to the fraction, the numerator of which is one and the denominator of which is the number of fiscal years ending between the date of the grant of such Class B Option and end of the fifth full fiscal year of the 9 Company after the Closing Date, inclusive, shall become exercisable at the end of such fiscal year of the Company. Notwithstanding the foregoing, in the event that Endo Pharmaceuticals fails to achieve the EBITDA target for a fiscal year, and the portion of a Class B Option with respect to such fiscal year therefore does not become exercisable on an accelerated basis, such portion of such Class B Option will nevertheless become exercisable at the end of a subsequent fiscal year, if Endo Pharmaceuticals exceeds such fiscal year's EBITDA target by a margin which equals or exceeds the shortfall amount for the year in which the EBITDA target was not achieved. Endo Pharmaceuticals' excess over the EBITDA target for subsequent years, for purposes of the Class B Options, shall be treated on a cumulative basis, and applied to portions of the Class B Options in chronological order, such that the portion of Class B Options with respect to the earliest fiscal year in which Endo Pharmaceuticals failed to achieve the EBITDA target would become exercisable first. The Committee may, in its discretion, delay the acceleration of the exercisability of any fiscal year's portion of Class B Options, or any portion thereof, until the completion of the audited financial statements for the applicable fiscal year, in order to verify the satisfaction of the preceding exercisability requirements. (ii) Subject to Section 10 hereof, Class B Options shall become exercisable in full upon the occurrence of an Exit Event and the right to exercise such Option shall terminate at 12:00 p.m. on the date of the Exit Event, provided, however, that in order for such Class B Options to become -------- ------- exercisable pursuant to this clause (ii), either (A) the EBITDA targets for all previous fiscal years must have been achieved by Endo Pharmaceuticals by the date of the Exit Event, either in the contemporaneous fiscal year or in a subsequent fiscal year, or (B) any of the Class C1 Options have become exercisable. In the event that any Exit Event is contemplated, Endo Pharma will mail or deliver to each Holder of such Option at least ten days prior to the date of such Exit Event an Exercise Notice specifying that (x) an Exit Event is contemplated and whether such Option will become exercisable pursuant to its terms upon such Exit Event, (y) the date of the contemplated Exit Event and the terms thereof, and (z) such Option shall expire at 12:00 p.m., New York City time, on the date of the Exit Event if not exercised prior thereto. (iii) Notwithstanding anything to the contrary herein, any unexercisable portion of any Class B Option held by a Holder will become immediately exercisable in full in the event that such Holder's employment or service with the Company or any of its subsidiaries is terminated at any time during the Company's fiscal years ending December 31, 2000 through December 31, 2002 (w) by 10 the Company or any of its subsidiaries without Cause, (x) by the Holder for Good Reason, (y) by reason of Retirement of the Holder, or (z) by reason of death or Disability of the Holder; provided, however, that in order for such Class B -------- ------- Options to become exercisable pursuant to this clause (iii), the EBITDA targets for the Company's fiscal years ended December 31, 1998 and December 31, 1999 must have been achieved by Endo Pharmaceuticals by the date of such termination of employment or service, either in the contemporaneous fiscal year to such termination or in a subsequent fiscal year to such termination; provided, -------- further, that any such Option shall expire on the 90th day after termination of - ------- the Holder's employment or service if unexercised (iv) Notwithstanding anything to the contrary herein, in the event that a Holder's employment or service with the Company or any of its subsidiaries is terminated subsequent to December 31, 2002, any unexercisable portion of any Class B Option held by such Holder shall expire immediately upon termination. Any portion of any Class B Option exercisable upon termination shall expire on the 90th day after termination the Holder's employment or service if unexercised. (v) Notwithstanding anything to the contrary herein, in the event that a Holder's employment or service with the Company or any of its subsidiaries is terminated at any time (x) by the Company or any of its subsidiaries for Cause or (y) by the Holder without Good Reason, any unexercisable portion of any Class B Option held by such Holder shall expire immediately upon termination. Any portion of any Class B Option exercisable upon termination shall expire on the 90th day after termination of the Holder's employment or service if unexercised. (vi) Notwithstanding anything to the contrary herein, the Committee may accelerate the exercisability or delay or postpone the expiration of any outstanding Class B Option at such time and under such circumstances as the Committee, in its sole discretion, deems appropriate. In the event that a Holder's employment or service with the Company or any of its subsidiaries is terminated during a particular fiscal year (w) by the Company or any of its subsidiaries without Cause, (x) by the Holder for Good Reason, (y) by reason of Retirement of the Holder, or (z) by reason of death or Disability of the Holder, the Committee will consider Endo Pharmaceuticals' year-to-date performance in relation to the proportional EBITDA targets for such fiscal year, in exercising its discretion with respect to Class B Options which may have become exercisable in such fiscal year (either with respect to such fiscal year or a previous fiscal year) pursuant to the acceleration provisions set forth in Section 8(b)(i). 11 (c) Class C Options. --------------- (i) In the event (I) the Fair Market Value of a share of Common Stock exceeds the Implied Public Stock Price Threshold with respect to such subclass of Class C Option (for purposes of this Section 8(c)(i) only, "Fair Market Value" shall have the meaning ascribed to such term in Section 4.1 of the Stockholders Agreement, except that "90 consecutive trading days" shall be substituted for "ten consecutive trading days" wherever it appears in such term and, in any event, any such 90-consecutive-trading-day-period shall not commence until the consummation of the merger contemplated by the Merger Agreement), (II) such Fair Market Value of each share of Common Stock on the last trading day of such 90 consecutive trading day period is greater than or equal to 85% of such Implied Public Stock Price Threshold, and (III) the Holder is a director, officer or employee of the Company or any of its subsidiaries on the date on which the conditions set forth in clauses (I) and (II) of this Section 8(c)(i) are satisfied, then the Holder shall become vested, with respect to each subclass of such Class C Options, in options with respect to the number of shares equal to the product of (x) the number of outstanding Class C Options of that subclass held by a Holder and (y) the quotient of (A) number of Class C Options of that subclass set forth on Schedule II attached hereto and (B) the aggregate number of outstanding Class C Options of that subclass granted pursuant to the Existing Stock Option Plans. Whether or not some of the Holder's Class C Options vest prior to December 31, 2000 in accordance with the foregoing sentence, any Class C Options then still unvested will continue to vest in accordance with the foregoing sentence and Schedule II attached hereto. (ii) Subject to Section 10 hereof, Class C Options shall be exercisable, solely to the extent vested pursuant to Section 8(c)(i) hereof, upon the earlier of the occurrence of an Exit Event or January 1, 2006 (the "Class C Option Exercise Date") and the right to exercise such Options shall terminate at 12:00 p.m. on the Class C Option Exercise Date. In the event that any Exit Event is contemplated prior to January 1, 2006 and that the conditions in clauses (I), (II) and (III) of Section 8(c)(i) hereof will be satisfied, Endo Pharma will mail or deliver to each Holder of such Option at least ten days prior to the date of such Exit Event an Exercise Notice specifying that (i) an Exit Event is contemplated and that upon such Exit Event such Option will become exercisable pursuant to its terms, (ii) the date of the contemplated Exit Event and the terms thereof, and (iii) such Option shall expire at 12:00 p.m., New York City time, on the Class C Option Exercise Date if not exercised prior thereto. Any Class C Options not vested as of the Class C Option 12 Exercise Date shall terminate at 12:00 p.m., New York City time, on the Class C Option Exercise Date. (iii) Notwithstanding anything to the contrary herein, any unexercisable portion of any Class C Option held by a Holder will become immediately exercisable in full, solely to the extent then vested pursuant to Section 8(c)(i) hereof, in the event that such Holder's employment or service with the Company or any of its subsidiaries is terminated for any reason; provided, however, that any such Option shall expire on the 90th day after - -------- ------- termination of the Holder's employment or service if unexercised. 9. Manner of Exercise. ------------------ (a) Each Option shall further state the terms and conditions of the Option (including the conditions to exercisability thereof) and the Option Price. An Option may be exercised, subject to this Section 9, for any or all whole number of shares which have become purchasable under such Option. To the extent necessary upon the exercise of an Option, Endo Pharma shall round each fractional share issuable upon such exercise up to the next whole number. (b) Subject to the terms and conditions set forth in this Plan (including the conditions to exercisability thereof), an Option may be exercised by the Holder during normal business hours on any Business Day, by surrender of the Option to Endo Pharma at its principal office, accompanied by a subscription, in cash or by certified or official bank check payable to the order of Endo Pharma, in the amount obtained by multiplying (x) the number of shares of Common Stock designated in such subscription (up to the amount of shares which such Holder is entitled to receive at such time upon exercise of the Option) by (y) the Option Price. (c) Each exercise of an Option shall be deemed to have been effected immediately prior to the close of business on the Business Day on which an Option shall have been surrendered to Endo Pharma, and at such time the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock (or Other Securities) shall be issuable upon such exercise shall be deemed to have become the Holder or Holders of record thereof. (d) Endo Pharma at its expense shall deliver to the relevant Holder (or as such Holder may direct pursuant to the Option) a certificate or certificates representing shares of the Common Stock so purchased as soon as reasonably 13 practicable, but in any event within five Business Days, after receipt of such notice. Each such certificate shall bear the legend required by the Stockholders Agreement to the effect that there are restrictions on the transfer of shares of Common Stock. (e) In the event that such exercise is in part only, Endo Pharma shall deliver a new Option of the same class and tenor, calling in the aggregate on the face thereof for the number of shares of Common Stock equal to the number of such shares which such Holder would be entitled to receive at such time upon exercise of this Option, after giving effect to such recent exercise. (f) Notwithstanding anything to the contrary in the Plan, in no event may any Option be exercised prior to the time at which the Option becomes exercisable (as set forth in the Option) or after the expiration of such Option, and each Option shall terminate upon the terms set forth in Sections 8 and 10 hereof. (g) If, at any time, the Committee shall determine, in its sole discretion, that the listing, registration or qualification of the shares of Common Stock upon any securities exchange or under any applicable securities laws, or the consent or approval of any governmental or self-regulatory agency or body, is necessary or reasonably desirable as a condition of, or in connection with, the issue or purchase of the shares of Common Stock under any Option, such Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions unacceptable to the Committee. 10. Expiration of Options. Notwithstanding the provisions of Section --------------------- 8 above, the Options will expire no later than December 31, 2012; provided, -------- however, that in the event that any shares of Common Stock have been sold to the - ------- public pursuant to an effective registration statement, other than a registration statement on Form S-4 or S-8 or any successor forms under the Securities Act of 1933, the Options will expire no later than on August 26, 2007. Any outstanding unexercised Option, or portion thereof, shall be forfeited, whether or not exercisable, upon the expiration of such Option. 11. Adjustment of Number of Shares of Common Stock Issuable Upon ------------------------------------------------------------ Exercise. The number and kind of shares of Common Stock purchasable upon the - -------- exercise of Options shall be subject to adjustment from time to time as follows: 14 (a) Stock Dividends; Stock Splits; Reverse Stock Splits. In case --------------------------------------------------- the Company shall (i) pay a dividend or make any other distribution with respect to the common stock of the Company in shares of its capital stock, (ii) subdivide the outstanding common stock of the Company, or (iii) combine the outstanding common stock of the Company into a smaller number of shares, the number of shares of Common Stock issuable upon exercise of the Options immediately prior to the record date for such dividend or distribution or the effective date of such subdivision or combination shall be adjusted so that the Holder of the Options shall thereafter be entitled to receive the kind and number of shares of Common Stock or Other Securities of the Company that such Holder would have owned or have been entitled to receive after the happening of any of the events described above, had such Options been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this Section 11 shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) No Adjustment for Dividends; No Adjustment of Option Price. ---------------------------------------------------------- Except as otherwise provided in this Section 11, no adjustment in respect of any dividends declared and paid on common stock of the Company, or on any other capital stock of the Company, shall be made during the term of an Option or upon the exercise of an Option. Notwithstanding anything to the contrary contained in this Plan, in the event of any adjustments to Options pursuant to this Section 11, adjustments shall be made solely to the number and kind of securities purchasable upon the exercise of Options and no adjustments shall be made to the Option Price. (c) Other Adjustments. In the event that at any time, as a result ----------------- of an adjustment made pursuant to this Section 11, the registered Holders shall become entitled to receive any securities of the Company other than shares of Common Stock, thereafter the number of such Other Securities so receivable upon exercise of the Options 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 shares of Common Stock contained in this Section 11. (d) Notice of Adjustment. Whenever the number of shares of Common -------------------- Stock purchasable upon the exercise of an Option is adjusted, as herein provided, the Company shall give notice to each Holder of such adjustment or adjustments. 12. Purchase Rights Upon Merger, Consolidation, etc. ----------------------------------------------- 15 (a) In the event of any consolidation of the Company with or merger of the Company with or into another corporation or in case of any sale, transfer or lease to another corporation of all or substantially all the assets of the Company, the Acquiring Person shall execute an agreement that each Holder shall have the right thereafter (whether or not the Option is then exercisable by its terms) upon payment of the Option Price in effect immediately prior to such action to purchase upon exercise of the Option the kind and amount of securities, cash or other assets which such Holder would have owned or have been entitled to receive after the happening of such consolidation, merger, sale, transfer or lease had such Option been exercised immediately prior to such action; provided, however, that no adjustment in respect of dividends, interest -------- ------- or other income on or from such shares or other securities and property shall be made during the term of an Option or upon the exercise of an Option. The Company shall mail by first class mail, postage prepaid, to each Holder, notice of the execution of any such agreement (including a copy thereof). Such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 12. The provisions of this Section 12 shall similarly apply to successive consolidations, mergers, sales, transfers or leases. The Acquiring Person shall mail to Holders a notice describing any supplemental Option Agreement. In the event that this Section 12 shall be applicable, the provisions of Section 11(a) shall not be applicable. (b) In the event of a sale of all or substantially all of the Company to a third party, whether pursuant to a sale of capital stock of the Company, merger, consolidation, sale of assets or similar transaction, the Company shall have the right to compel the Holder of an Option to exercise such Option (whether or not the Option is then exercisable by its terms) (a "Compelled Exercise"). In the event that the Company determines to exercise its right to a Compelled Exercise, it shall mail to Holders written notice of such event. 13. Stockholders Agreement. Notwithstanding anything in the Plan to ---------------------- the contrary, all shares of Common Stock issued upon the exercise of Options shall be subject to all terms and conditions set forth in the Stockholders Agreement. As a condition to the exercise of any Option, each Holder shall be required to execute and deliver to Endo Pharma (i) an executed copy of the Stockholders Agreement, in the form in effect at the time of such exercise, if such Holder had not previously done so and (ii) such written representations and other documents as may be necessary or reasonably desirable, in the opinion of the Committee, for purposes of compliance with federal or state securities or other laws. For purposes 16 of the Stockholders Agreement, each Holder shall be deemed to be a "Management Stockholder." 14. Restrictions on Transfer. ------------------------ (a) Restrictive Legend. Except as otherwise permitted by this ------------------ Section 14, each Option (including each Option issued upon the transfer of any option) shall be stamped or otherwise imprinted with a legend in substantially the following form: "This Option and any shares acquired upon the exercise of this option have not been registered under the Securities Act of 1933, as amended, and may not be transferred, sold or otherwise disposed of except while a registration under such Act is in effect or pursuant to an exemption therefrom under such Act and in all cases in compliance with all applicable state securities laws, and in any event may not be transferred to any party other than a Permitted Transferee as defined in this Option." (b) Restrictions on Transfer. Each Holder, by acceptance of an ------------------------ Option, shall acknowledge and agree that such Option may not be sold, assigned, transferred, exchanged, mortgaged, pledged or granted a security interest in, or otherwise disposed of or encumbered by or to any party other than by or to a Permitted Transferee. 15. Registration and Transfer of Options, etc. ----------------------------------------- (a) Option Register; Ownership of Options. Endo Pharma will keep ------------------------------------- at its principal office a register in which Endo Pharma will provide for the registration of Options and the registration of transfers of Options. Endo Pharma may treat the Person in whose name any Option is registered on such register as the owner thereof for all other purposes, and Endo Pharma shall not be affected by any notice to the contrary, except that, if and when any Option is accompanied by an instrument of assignment in a form acceptable to Endo Pharma, it may (but shall not be obligated to) treat the bearer thereof as the owner of such Option for all purposes. Subject to Section 14(b) hereof, an Option, if properly assigned, may be exercised by a new Holder without a new Option first having been issued. 17 (b) Transfer and Exchange of Options. Upon surrender of any Option -------------------------------- for registration of transfer or for exchange to the Company at its principal office, the Company at its expense will (subject to compliance with Section 14(b) hereof, if applicable) execute and deliver in exchange therefor a new Option or Options of the same class and tenor, in the name of such Holder or as such Holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Option or Options so surrendered. (c) Replacement of Options. Upon receipt of evidence reasonably ---------------------- satisfactory to Endo Pharma of the loss, theft, destruction or mutilation of any Option and, in the case of any such loss, theft or destruction of any Option, upon delivery of an indemnity bond in such reasonable amount as Endo Pharma may determine (or, at the sole option of Endo Pharma, of an indemnity agreement reasonably satisfactory to Endo Pharma), or, in the case of any such mutilation, upon the surrender of such Option for cancellation to Endo Pharma at its principal office, Endo Pharma at its expense will execute and deliver, in lieu thereof, a new Option of the same class and tenor. 16. Rights as Option Holders of Shares. Neither the Holder of an ---------------------------------- Option nor any Permitted Transferees shall have any rights as a stockholder of the Company (including, without limitation, any right to vote or to receive dividends or to consent or to receive notice as a stockholder in respect of any meeting of stockholders for the election of directors of the Company or any other matter, or any right whatsoever as a stockholder of the Company (except for those notices and other matters expressly set forth under the Plan or in the Option)). An Option does not impose any obligation on a Holder or any of its Permitted Transferees to purchase any securities or impose any liabilities on a Holder as a stockholder of the Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company. 17. Withholding. Endo Pharma shall have the right to require a ----------- Holder or other person entitled to receive shares of Common Stock upon the exercise of Options (or, if the Holder makes an election under Section 83(b) of the Code, in connection with such grant) under the Plan to pay to Endo Pharma the amount which Endo Pharma is or will be required to withhold with respect to the issuance of such shares in order for Endo Pharma or the Company to pay taxes or to claim an income tax deduction with respect to the issuance of such shares. In lieu of a portion of such payment equal to the amount of the minimum statutory tax withholding, Endo 18 Pharma may retain, at the discretion of the Committee, a sufficient number of such shares (valued at the Fair Market Value thereof) to cover the amount equal to the minimum statutory tax withholding. A Holder, however, may elect to pay to Endo Pharma all or a portion of the total amount Endo Pharma is required to withhold by tendering shares of Common Stock with a Fair Market Value equal to the minimum statutory amount Endo Pharma is required to withhold; provided, -------- however, that such Holder must have owned such tendered shares of Common Stock - ------- continuously through the date of issuance (or lapse) for a period of a least six months. With respect to Class C Options, a Holder may elect to pay to Endo Pharma all or a portion of the total amount Endo Pharma is required to withhold by having shares of Common Stock with a Fair Market Value equal to the amount Endo Pharma is required to withhold withheld by Endo Pharma. The Holder shall promptly notify Endo Pharma of any election made pursuant to Section 83(b) of the Code. 18. Liability. Endo Pharma, and not the Company, the Board, the --------- Committee, or any member thereof, shall be liable for any and all claims made against Endo Pharma, the Company, the Board or the Committee in connection with the Plan or any Option. 19. Legal Requirements. ------------------ (a) Endo Pharma shall be responsible and shall pay for any transfer, revenue or documentary stamps with respect to shares of Common Stock issued upon the exercise of Options granted under the Plan (other than any transfer tax applicable to a transfer to a Permitted Transferee which shall be payable by a Holder). (b) Endo Pharma shall not be required to issue a certificate or certificates for shares upon the exercise of any Option if such issuance would result in a violation of any federal or state securities or other laws. Endo Pharma agrees to use its reasonable efforts to clear the legal impediment as soon as possible. 20. Amendment and Termination of the Plan. The Committee may at any ------------------------------------- time and from time to time alter, amend, suspend, or terminate the Plan in whole or in part. Notwithstanding the foregoing, no amendment, suspension, or termination shall affect adversely any of the rights of any Holder, unless such amendment suspension or termination is approved by a majority of the members of the Committee that includes a Committee member who is a representative of the Management Stockholders. 19 21. Nonqualified Stock Options. Options granted hereby shall be -------------------------- treated as nonqualified stock options under the Code. 22. Effective Date. The Plan shall take effect upon its adoption by -------------- the Board. 23. Interpretations. Except as otherwise expressly provided in the --------------- Plan, the following rules of interpretation apply to the Plan and each Option: (i) the singular includes the plural and the plural includes the singular; (ii) "include" and "including" are not limiting and "or" is not exclusive; (iii) a reference to any agreement or other contract includes permitted supplements and amendments; (iv) a reference to a law includes any amendment or modification to such law and any rules or regulations issued thereunder; and (v) a reference to any person, corporation or other entity includes its permitted successors and assigns. 24. GOVERNING LAW. THE PLAN AND ANY AND ALL OPTIONS AND OPTION AWARD ------------- AGREEMENTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 20 SCHEDULE I ENDO PHARMACEUTICALS EBITDA TARGETS FOR CLASS B OPTIONS Fiscal Year EBITDA Target - ----------- ------------- 1998 $43.0 million 1999 $60.0 million 2000 $80.0 million 2001 $100.0 million 2002 $120.0 million 21 SCHEDULE II VESTING MATRIX AND IMPLIED PUBLIC STOCK PRICE THRESHOLDS FOR CLASS C OPTIONS
- ---------------------------------------------------------------------------------------- Prior to December Cash Gross Profit Target is achieved 31, 2000 - ---------------------------------------------------------------------------------------- Implied Public Stock Implied Public Stock MorphiDex* Approval Price Threshold is met. Price Threshold is met on does not occur on or or prior to December 31, prior to December 31, 2002, regardless of 2002. whether or not MorphiDex* Approval occurs. - ---------------------------------------------------------------------------------------- Implied Total Implied Total Implied Total Public Number Public Number Public Number Stock of Vested Stock of Vested Stock of Vested Price Class C Price Class C Price Class C Threshold Options Threshold Options Threshold Options - ---------------------------------------------------------------------------------------- Class C1A $ 8.09 2,000,000 $ 6.06 2,000,000 $ 4.28 2,000,000 - ---------------------------------------------------------------------------------------- Class C1B $ 8.09 14,349 $ 6.06 2,561,911 $ 4.28 2,561,911 - ---------------------------------------------------------------------------------------- Class C2 $12.50 3,557,594 $ 9.38 4,743,458 $ 6.62 4,743,458 - ---------------------------------------------------------------------------------------- Class C3 $19.99 5,339,794 $14.99 7,119,725 $10.58 7,119,725 - ---------------------------------------------------------------------------------------- Class C4 $32.66 2,671,429 $24.50 3,561,906 $17.29 3,561,906 - ---------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------ Cash Gross Profit Target is not achieved - ------------------------------------------------------------------------------------------ Implied Public Stock Implied Public Stock Price MorphiDex* Approval does Price Threshold is met Threshold is met and not occur on prior to De- and MorphiDex* Ap- MorphiDex* Approval has cember 31, 2002. proval has occured prior not yet occurred or occurs to March 31, 2001. subsequent to March 31 2001. - ------------------------------------------------------------------------------------------ Implied Total Implied Total Implied Total Public Number Public Number Public Number Stock of Vested Stock of Vested Stock of Vested Price Class C Price Class C Price Class C Threshold Options Threshold Options Threshold Options - ------------------------------------------------------------------------------------------ Class C1A $ 7.51 2,000,000 $ 8.09 2,000,000 $ 6.06 2,000,000 - ------------------------------------------------------------------------------------------ Class C1B $ 7.51 602,248 $ 8.09 14,349 $ 6.06 14,349 - ------------------------------------------------------------------------------------------ Class C2 $11.61 3,831,255 $12.50 3,557,594 $ 9.38 3,557,594 - ------------------------------------------------------------------------------------------ Class C3 $18.56 5,750,547 $19.99 5,339,794 $14.99 5,339,794 - ------------------------------------------------------------------------------------------ Class C4 $30.33 2,876,924 $32.66 2,671,429 $24.50 2,671,429 - ------------------------------------------------------------------------------------------
22 EX-99.10 11 0011.txt ENDO PHARMA 2000 SUPPLEMENTAL EMPLOYEE STOCK OPTION Exhibit 10 ENDO PHARMA LLC 2000 SUPPLEMENTAL EMPLOYEE STOCK OPTION PLAN 1. Purpose. The purpose of this Endo Pharma LLC 2000 Supplemental ------- Employee Stock Option Plan (the "Plan") is to advance the interests of Endo Pharma LLC, a Delaware limited liability company ("Endo Pharma"), by affording certain directors, officers, employees, consultants and agents of Endo Pharmaceuticals Holdings Inc. (the "Company") and its subsidiaries an opportunity to acquire a substantial proprietary interest in shares of common stock of the Company held by Endo Pharma and thus to stimulate in such persons increased personal interest in the success and future growth of the Company. 2. Definitions. ----------- "Acquiring Person" shall mean, with reference to the transactions ---------------- referred to in Section 12(a), (i) the continuing or surviving entity of a consolidation or merger with the Company (if other than the Company), (ii) the transferee of all or substantially all of the assets of the Company, (iii) the parent entity of any corporation consolidating with or merging into the Company in a consolidation or merger in connection with which the Common Stock is changed into or exchanged for stock or other securities of any other Person (including such parent entity) or cash or any other property if the Company becomes a subsidiary of such entity, or (iv) in the case of a capital reorganization or reclassification or in any case in which the Company is a surviving corporation in a merger not described in clause (i) or (iii) above, the Company. "Affiliate" shall mean, with respect to a specified person, a person --------- that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. "Board" shall mean the Board of Managers of Endo Pharma. ----- "Business Day" shall mean any day other than a Saturday or a Sunday or ------------ a day on which commercial banking institutions in the City of New York are authorized by law to be closed. Any reference herein to "days" (unless Business Days are specified) shall mean calendar days. "Cash Gross Profit" shall have the meaning ascribed to such term in ----------------- Section 5.21(d) of the Merger Agreement. "Cash Gross Profit Target" shall mean the Company's attainment of a ------------------------ Cash Gross Profit for the fiscal year ending December 31, 2000 that equals or exceeds $147.4 million. "Class C Options" shall mean, collectively, Class C1 Options, Class C2 --------------- Options, Class C3 Options and Class C4 Options. "Class C1 Option" shall mean an option to purchase a number of shares --------------- of Common Stock, as specified in an option agreement, identified as a "Class C1 Option," which shall be subject to the exercise and termination provisions set forth in Section 8(a) hereof. "Class C2 Option" shall mean an option to purchase a number of shares --------------- of Common Stock, as specified in an option agreement, identified as a "Class C2 Option," which shall be subject to the exercise and termination provisions set forth in Section 8(a) hereof. "Class C3 Option" shall mean an option to purchase a number of shares --------------- of Common Stock, as specified in an option agreement, identified as a "Class C3 Option," which shall be subject to the exercise and termination provisions set forth in Section 8(a) hereof. "Class C4 Options" shall mean an option to purchase a number of shares ---------------- of Common Stock, as specified in an option agreement, identified as a "Class C4 Option," which shall be subject to the exercise and termination provisions set forth in Section 8(a) hereof. "Class C Option Exercise Date" shall have the meaning ascribed to such ---------------------------- term in Section 8(a)(ii) hereof. "Closing Date" shall mean August 26, 1997. ------------ "Code" shall mean the Internal Revenue Code of 1986, as amended from ---- time to time. 2 "Committee" shall mean the committee appointed by the Board to --------- administer the Plan and to perform the functions set forth herein. "Common Stock" shall mean the common stock, par value $0.01 per share, ------------ of the Company held by Endo Pharma, such term to include any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock. "Company" shall have the meaning ascribed to such term in Section 1 ------- hereof. "Compelled Exercise and Sale" shall have the meaning ascribed to such --------------------------- term in Section 12(b) hereof. "Credit Agreement" shall mean the Credit Agreement, dated as of August ---------------- 26, 1997, among Endo Pharmaceuticals, Chase Manhattan Bank, as Administrative Agent, Chase Securities Inc., as Arranger and the Lenders party thereto. "EBITDA" shall have the meaning ascribed to "Consolidated EBITDA" in ------ the Credit Agreement. "Effective Date" shall have the meaning ascribed to such term in -------------- Section 22 hereof. "Eligible Person" shall have the meaning ascribed to such term in --------------- Section 5 hereof. "Employee Stockholders Agreement" shall mean the Stockholders ------------------------------- Agreement, dated as of July 14, 2000, by and among the Company, Endo Pharma, KIA V and the Employee Stockholders (as such term is defined therein). "Endo Pharma" shall have the meaning ascribed to such term in Section ----------- 1 hereof. "Endo Pharmaceuticals" shall mean Endo Pharmaceuticals Inc., a -------------------- Delaware corporation, and any successor thereto. "Exercise Notice" shall have the meaning ascribed to such term in --------------- Section 8(a) hereof. 3 "Existing Stock Option Plans" shall mean collectively the Endo Pharma --------------------------- LLC Amended and Restated 1997 Executive Stock Option Plan and the Endo Pharma LLC Amended and Restated 1997 Employee Stock Option Plan. "Exit Event" shall mean a sale, disposition or transfer (collectively, ---------- a "sale") of shares of common stock of the Company after which neither Endo Pharma nor Kelso any longer holds any shares of common stock of the Company. "Fair Market Value" shall have the meaning ascribed to such term in ----------------- Section 4.1 of the Employee Stockholders Agreement. "Holder" shall mean a person to whom an Option is granted pursuant to ------ the Plan. "Implied Public Stock Price Threshold", with respect to any Class C ------------------------------------ Option, shall mean: (i) in the case of Class C1 Options, $6.06 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C1 - ------- Options shall be adjusted in accordance with Schedule I attached hereto; (ii) in the case of Class C2 Options, $9.38 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C2 - ------- Options shall be adjusted in accordance with Schedule I attached hereto; (iii) in the case of Class C3 Options, $14.99 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C3 - ------- Options shall be adjusted in accordance with Schedule I attached hereto; (iv) in the case of Class C4 Options, $24.50 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C4 - ------- Options shall be adjusted in accordance with Schedule I attached hereto. "Kelso" shall mean, collectively, KIA V, KEP V and their permitted ----- transferees. "KEP V" shall mean Kelso Equity Partners V, L.P., a Delaware limited ----- partnership. 4 "KIA V" shall mean Kelso Investment Associates V, L.P., a Delaware ----- limited partnership. "Merger Agreement" shall mean the Agreement and Plan of Merger, dated ---------------- as of November 26, 1999 (as may be amended and/or restated from time to time), by and among, the Company, Endo, Inc., a Delaware corporation, and Algos Pharmaceutical Corporation, a Delaware corporation. "MorphiDex(R) Approval" shall mean the Company's receipt of approval ------------------- from the U.S. Food and Drug Administration with respect to its New Drug Application for MorphiDex7 for the treatment of any pain. "Options" shall mean Class C Options. ------- "Option Price" shall mean, with respect to any Option, the price per ------------ share for which shares of Common Stock may be purchased pursuant to such Option, which shall initially be $2.42 per share. "Other Securities" shall mean any stock (other than Common Stock) and ---------------- other securities of the Company or any other Person (corporate or otherwise) which the Holders of the Options at any time shall be entitled to receive, or shall have received, upon the exercise of the Options, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities. "Permitted Transferee" of a Holder shall mean Endo Pharma and (A) the -------------------- spouses, family members, heirs, executors, administrators, testamentary trustees or legatees or beneficiaries of the Holder and (B) any trust, the beneficiaries of which, or a corporation or partnership, the stockholders or general or limited partners of which, include only the Holder or the spouse or family members of the Holder; provided, however, that each such transferor has obtained -------- ------- the prior written consent of the Company; provided further that the transfer to -------- ------- any such person is in compliance with all applicable federal, state and foreign securities laws. "Person" shall mean a corporation, an association, a partnership, an ------ organization, a business, an individual, a government or political subdivision thereof or a governmental agency. 5 "Plan" shall have the meaning ascribed to such term in Section 1 ---- hereof. "Supplemental Stock Option Plans" shall mean collectively the Plan and ------------------------------- the Endo Pharma LLC 2000 Supplemental Executive Stock Option Plan. 3. Class C Options Available for Grant Pursuant to the Supplemental ---------------------------------------------------------------- Stock Option Plans. The Class C Options available for grant pursuant to the - ------------------ Supplemental Stock Option Plans shall in no case exceed, in the aggregate, the following quantities (subject to adjustment as provided in Section 11 hereof): (a) in the case of Class C1 Options, options to purchase 4,245,223 shares of Common Stock; (b) in the case of Class C2 Options, options to purchase 1,976,411 shares of Common Stock; (c) in the case of Class C3 Options, options to purchase 2,966,552 shares of Common Stock; (d) in the case of Class C4 Options, options to purchase 1,484,128 shares of Common Stock. 4. Reservation of Shares. Endo Pharma has reserved (subject to --------------------- adjustment as provided in Section 11 hereof), solely for issuance and delivery upon exercise of the Class C Options pursuant to the Supplemental Stock Option Plans 10,672,314 shares of Common Stock. All shares of Common Stock (or Other Securities) issuable upon exercise of any Options shall be duly authorized and, when issued upon such exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable with no liability on the part of the Holders thereof. 5. Grant of Options. Upon the Effective Date: ---------------- (a) Each Holder who holds outstanding Class C1 Options under the Existing Stock Option Plans and who is a director, officer, employee, consultant or agent of the Company or any of its subsidiaries as of the Effective Date shall be granted a number of Class C1 Options equal to the product of (x) the number of Class C1 Options made available for grant under the Supplemental Stock Option Plans and (y) the quotient of (i) the number of outstanding Class C1 Options under 6 the Existing Stock Option Plans held by such Holder as of the Effective Date and (ii) the aggregate number of Class C1 Options outstanding under the Existing Stock Option Plans immediately prior to such adjustment. (b) Each Holder who holds outstanding Class C2 Options under the Existing Stock Option Plans and who is a director, officer, employee, consultant or agent of the Company or any of its subsidiaries as of the Effective Date shall be granted a number of Class C2 Options equal to the product of (x) the number of Class C2 Options made available for grant under the Supplemental Stock Option Plans and (y) the quotient of (i) the number of outstanding Class C2 Options under the Existing Stock Option Plans held by such Holder as of the Effective Date and (ii) the aggregate number of Class C2 Options outstanding under the Existing Stock Option Plans immediately prior to such adjustment. (c) Each Holder who holds outstanding Class C3 Options under the Existing Stock Option Plans and who is a director, officer, employee, consultant or agent of the Company or any of its subsidiaries as of the Effective Date shall be granted a number of Class C3 Options equal to the product of (x) the number of Class C3 Options made available for grant under the Supplemental Stock Option Plans and (y) the quotient of (i) the number of outstanding Class C3 Options under the Existing Stock Option Plans held by such Holder as of the Effective Date and (ii) the aggregate number of Class C3 Options outstanding under the Existing Stock Option Plans immediately prior to such adjustment. (d) Each Holder who holds outstanding Class C4 Options under the Existing Stock Option Plans and who is a director, officer, employee, consultant or agent of the Company or any of its subsidiaries as of the Effective Date shall be granted a number of Class C4 Options equal to the product of (x) the number of Class C4 Options made available for grant under the Supplemental Stock Option Plans and (y) the quotient of (i) the number of outstanding Class C4 Options under the Existing Stock Option Plans held by such Holder as of the Effective Date and (ii) the aggregate number of Class C4 Options outstanding under the Existing Stock Option Plans immediately prior to such adjustment. 6. No Right to Employment or Continued Service. Nothing in the Plan ------------------------------------------- or in any Option shall confer any right on any Eligible Person to continue in the employ or service of the Company or any of its subsidiaries or shall interfere in any way with the right of the stockholders of the Company or any of its subsidiaries to terminate such Eligible Person's employment or service at any time. 7 7. Administration of the Plan. The Plan shall be administered by the -------------------------- Committee. The Committee shall have full power to construe and interpret the Plan, to establish rules for its administration and to grant Options to Eligible Persons, in each case in accordance with the provisions of the Plan. In addition, the Committee may delegate such of its duties under the Plan as may be deemed by the Committee to be clerical or ministerial to such delegates as the Committee deems appropriate. All actions taken and decisions made by the Committee pursuant to the Plan shall be binding and conclusive on all persons interested in the Plan. 8. Exercisability of Options. ------------------------- (a) Class C Options. --------------- (i) In the event (I) the Fair Market Value of a share of Common Stock, including but not limited to the Fair Market Value of a share of Common Stock with respect to a 90 consecutive day trading period beginning prior to January 1, 2003, exceeds the Implied Public Stock Price Threshold with respect to such subclass of Class C Option (for purposes of this Section 8(a)(i) only, "Fair Market Value" shall have the meaning ascribed to such term in Section 4.1 of the Employee Stockholders Agreement, except that "90 consecutive trading days" shall be substituted for "ten consecutive trading days" wherever it appears in such term and, in any event, any such 90-consecutive-trading-day- period shall not commence until the consummation of the merger contemplated by the Merger Agreement), (II) such Fair Market Value of each share of Common Stock on the last trading day of such 90 consecutive trading day period is greater than or equal to 85% of such Implied Public Stock Price Threshold, and (III) the Holder is a director, officer, employee, consultant or agent of the Company or any of its subsidiaries on January 1, 2003 and on the date on which the conditions set forth in clauses (I) and (II) of this Section 8(a)(i) are satisfied, then the Holder shall become vested, with respect to each subclass of such Class C Options, in options with respect to the number of shares equal to the product of (x) the number of outstanding Class C Options of that subclass held by a Holder and (y) the quotient of (A) number of Class C Options of that subclass set forth on Schedule I attached hereto and (B) the aggregate number of outstanding Class C Options of that subclass granted pursuant to the Supplemental Stock Option Plans. (ii) Subject to Section 10 hereof, Class C Options shall be exercisable, solely to the extent vested pursuant to Section 8(a)(i) hereof, upon the earlier of the occurrence of an Exit Event or January 1, 2006 (the "Class C Option 8 Exercise Date") and the right to exercise such Options shall terminate at 12:00 p.m. on the Class C Option Exercise Date. In the event that any Exit Event is contemplated prior to January 1, 2006 and that the conditions in clauses (I), (II) and (III) of Section 8(a)(i) hereof will be satisfied, Endo Pharma will mail or deliver to each Holder of such Option at least ten days prior to the date of such Exit Event an Exercise Notice specifying that (i) an Exit Event is contemplated and that upon such Exit Event such Option will become exercisable pursuant to its terms, (ii) the date of the contemplated Exit Event and the terms thereof, and (iii) such Option shall expire at 12:00 p.m., New York City time, on the Class C Option Exercise Date if not exercised prior thereto. Any Class C Options not vested as of the Class C Option Exercise Date shall terminate at 12:00 p.m., New York City time, on the Class C Option Exercise Date. (iii) Notwithstanding anything to the contrary herein, any unexercisable portion of any Class C Option held by a Holder will become immediately exercisable in full, solely to the extent then vested pursuant to Section 8(c)(i) hereof, in the event that such Holder's employment or service with the Company or any of its subsidiaries is terminated for any reason; provided, however, that any such Option shall expire on the 90th day after - -------- ------- termination of the Holder's employment or service if unexercised. 9. Manner of Exercise. ------------------ (a) Each Option shall further state the terms and conditions of the Option (including the conditions to exercisability thereof) and the Option Price. An Option may be exercised, subject to this Section 9, for any or all whole number of shares which have become purchasable under such Option. To the extent necessary upon the exercise of an Option, Endo Pharma shall round each fractional share issuable upon such exercise up to the next whole number. (b) Subject to the terms and conditions set forth in this Plan (including the conditions to exercisability thereof), an Option may be exercised by the Holder during normal business hours on any Business Day, by surrender of the Option to Endo Pharma at its principal office, accompanied by a subscription, in cash or by certified or official bank check payable to the order of Endo Pharma, in the amount obtained by multiplying (x) the number of shares of Common Stock designated in such subscription (up to the amount of shares which such Holder is entitled to receive at such time upon exercise of the Option) by (y) the Option Price. 9 (c) Each exercise of an Option shall be deemed to have been effected immediately prior to the close of business on the Business Day on which an Option shall have been surrendered to Endo Pharma, and at such time the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock (or Other Securities) shall be issuable upon such exercise shall be deemed to have become the Holder or Holders of record thereof. (d) Endo Pharma at its expense shall deliver to the relevant Holder (or as such Holder may direct pursuant to the Option) a certificate or certificates representing shares of the Common Stock so purchased as soon as reasonably practicable, but in any event within five Business Days, after receipt of such notice. Each such certificate shall bear the legend required by the Employee Stockholders Agreement to the effect that there are restrictions on the transfer of shares of Common Stock. (e) In the event that such exercise is in part only, Endo Pharma shall deliver a new Option of the same class and tenor, calling in the aggregate on the face thereof for the number of shares of Common Stock equal to the number of such shares which such Holder would be entitled to receive at such time upon exercise of this Option, after giving effect to such recent exercise. (f) Notwithstanding anything to the contrary in the Plan, in no event may any Option be exercised prior to the time at which the Option becomes exercisable (as set forth in the Option) or after the expiration of such Option, and each Option shall terminate upon the terms set forth in Sections 8 and 10 hereof. (g) If, at any time, the Committee shall determine, in its sole discretion, that the listing, registration or qualification of the shares of Common Stock upon any securities exchange or under any applicable securities laws, or the consent or approval of any governmental or self-regulatory agency or body, is necessary or reasonably desirable as a condition of, or in connection with, the issue or purchase of the shares of Common Stock under any Option, such Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions unacceptable to the Committee. 10. Expiration of Options. Notwithstanding the provisions of Section --------------------- 8 above, the Options will expire no later than December 31, 2012; provided, -------- however, that in the event that any shares of Common Stock have been sold to the - ------- 10 public pursuant to an effective registration statement, other than a registration statement on Form S-4 or S-8 or any successor forms under the Securities Act of 1933, the Options will expire no later than on August 26, 2007. Any outstanding unexercised Option, or portion thereof, shall be forfeited, whether or not exercisable, upon the expiration of such Option. 11. Adjustment of Number of Shares of Common Stock Issuable Upon ------------------------------------------------------------ Exercise. The number and kind of shares of Common Stock purchasable upon the - -------- exercise of Options shall be subject to adjustment from time to time as follows: (a) Stock Dividends; Stock Splits; Reverse Stock Splits. In case the --------------------------------------------------- Company shall (i) pay a dividend or make any other distribution with respect to the common stock of the Company in shares of its capital stock, (ii) subdivide the outstanding common stock of the Company, or (iii) combine the outstanding common stock of the Company into a smaller number of shares, the number of shares of Common Stock issuable upon exercise of the Options immediately prior to the record date for such dividend or distribution or the effective date of such subdivision or combination shall be adjusted so that the Holder of the Options shall thereafter be entitled to receive the kind and number of shares of Common Stock or Other Securities of the Company that such Holder would have owned or have been entitled to receive after the happening of any of the events described above, had such Options been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this Section 11 shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) No Adjustment for Dividends; No Adjustment of Option Price. ---------------------------------------------------------- Except as otherwise provided in this Section 11, no adjustment in respect of any dividends declared and paid on common stock of the Company, or on any other capital stock of the Company, shall be made during the term of an Option or upon the exercise of an Option. Notwithstanding anything to the contrary contained in this Plan, in the event of any adjustments to Options pursuant to this Section 11, adjustments shall be made solely to the number and kind of securities purchasable upon the exercise of Options and no adjustments shall be made to the Option Price. (c) Other Adjustments. In the event that at any time, as a result ----------------- of an adjustment made pursuant to this Section 11, the registered Holders shall become entitled to receive any securities of the Company other than shares of Common Stock, thereafter the number of such Other Securities so receivable upon exercise of 11 the Options 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 shares of Common Stock contained in this Section 11. (d) Notice of Adjustment. Whenever the number of shares of Common -------------------- Stock purchasable upon the exercise of an Option is adjusted, as herein provided, the Company shall give notice to each Holder of such adjustment or adjustments. 12. Purchase Rights Upon Merger, Consolidation, etc. ----------------------------------------------- (a) In the event of any consolidation of the Company with or merger of the Company with or into another corporation or in case of any sale, transfer or lease to another corporation of all or substantially all the assets of the Company, the Acquiring Person shall execute an agreement that each Holder shall have the right thereafter (whether or not the Option is then exercisable by its terms) upon payment of the Option Price in effect immediately prior to such action to purchase upon exercise of the Option the kind and amount of securities, cash or other assets which such Holder would have owned or have been entitled to receive after the happening of such consolidation, merger, sale, transfer or lease had such Option been exercised immediately prior to such action; provided, however, that no adjustment in respect of dividends, interest -------- ------- or other income on or from such shares or other securities and property shall be made during the term of an Option or upon the exercise of an Option. The Company shall mail by first class mail, postage prepaid, to each Holder, notice of the execution of any such agreement (including a copy thereof). Such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 12. The provisions of this Section 12 shall similarly apply to successive consolidations, mergers, sales, transfers or leases. The Acquiring Person shall mail to Holders a notice describing any supplemental Option Agreement. In the event that this Section 12 shall be applicable, the provisions of Section 11(a) shall not be applicable. (b) In the event of a sale of all or substantially all of the Company to a third party, whether pursuant to a sale of capital stock of the Company, merger, consolidation, sale of assets or similar transaction, the Company shall have the right to compel the Holder of an Option to exercise such Option (whether or not the Option is then exercisable by its terms) (a "Compelled Exercise"). In the event that 12 the Company determines to exercise its right to a Compelled Exercise, it shall mail to Holders written notice of such event. 13. Employee Stockholders Agreement. Notwithstanding anything in the ------------------------------- Plan to the contrary, all shares of Common Stock issued upon the exercise of Options shall be subject to all terms and conditions set forth in the Employee Stockholders Agreement. As a condition to the exercise of any Option, each Holder shall be required to execute and deliver to Endo Pharma (i) an executed copy of the Employee Stockholders Agreement, in the form in effect at the time of such exercise, if such Holder had not previously done so and (ii) such written representations and other documents as may be necessary or reasonably desirable, in the opinion of the Committee, for purposes of compliance with federal or state securities or other laws. For purposes of the Employee Stockholders Agreement, each Holder shall be deemed to be a "Employee Stockholder." 14. Restrictions on Transfer. ------------------------ (a) Restrictive Legend. Except as otherwise permitted by this ------------------ Section 14, each Option (including each Option issued upon the transfer of any option) shall be stamped or otherwise imprinted with a legend in substantially the following form: "This Option and any shares acquired upon the exercise of this option have not been registered under the Securities Act of 1933, as amended, and may not be transferred, sold or otherwise disposed of except while a registration under such Act is in effect or pursuant to an exemption therefrom under such Act and in all cases in compliance with all applicable state securities laws, and in any event may not be transferred to any party other than a Permitted Transferee as defined in this Option." (b) Restrictions on Transfer. Each Holder, by acceptance of an ------------------------ Option, shall acknowledge and agree that such Option may not be sold, assigned, transferred, exchanged, mortgaged, pledged or granted a security interest in, or otherwise disposed of or encumbered by or to any party other than by or to a Permitted Transferee. 15. Registration and Transfer of Options, etc. ----------------------------------------- 13 (a) Option Register; Ownership of Options. Endo Pharma will keep ------------------------------------- at its principal office a register in which Endo Pharma will provide for the registration of Options and the registration of transfers of Options. Endo Pharma may treat the Person in whose name any Option is registered on such register as the owner thereof for all other purposes, and Endo Pharma shall not be affected by any notice to the contrary, except that, if and when any Option is accompanied by an instrument of assignment in a form acceptable to Endo Pharma, it may (but shall not be obligated to) treat the bearer thereof as the owner of such Option for all purposes. Subject to Section 14(b) hereof, an Option, if properly assigned, may be exercised by a new Holder without a new Option first having been issued. (b) Transfer and Exchange of Options. Upon surrender of any Option -------------------------------- for registration of transfer or for exchange to the Company at its principal office, the Company at its expense will (subject to compliance with Section 14(b) hereof, if applicable) execute and deliver in exchange therefor a new Option or Options of the same class and tenor, in the name of such Holder or as such Holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Option or Options so surrendered. (c) Replacement of Options. Upon receipt of evidence reasonably ---------------------- satisfactory to Endo Pharma of the loss, theft, destruction or mutilation of any Option and, in the case of any such loss, theft or destruction of any Option, upon delivery of an indemnity bond in such reasonable amount as Endo Pharma may determine (or, at the sole option of Endo Pharma, of an indemnity agreement reasonably satisfactory to Endo Pharma), or, in the case of any such mutilation, upon the surrender of such Option for cancellation to Endo Pharma at its principal office, Endo Pharma at its expense will execute and deliver, in lieu thereof, a new Option of the same class and tenor. 16. Rights as Option Holders of Shares. Neither the Holder of an ---------------------------------- Option nor any Permitted Transferees shall have any rights as a stockholder of the Company (including, without limitation, any right to vote or to receive dividends or to consent or to receive notice as a stockholder in respect of any meeting of stockholders for the election of directors of the Company or any other matter, or any right whatsoever as a stockholder of the Company (except for those notices and other matters expressly set forth under the Plan or in the Option)). An Option does not impose any obligation on a Holder or any of its Permitted Transferees to purchase any securities or impose any liabilities on a Holder as a stockholder of the Company, 14 whether such obligation or liabilities are asserted by the Company or by creditors of the Company. 17. Withholding. Endo Pharma shall have the right to require a ----------- Holder or other person entitled to receive shares of Common Stock upon the exercise of Options (or, if the Holder makes an election under Section 83(b) of the Code, in connection with such grant) under the Plan to pay to Endo Pharma the amount which Endo Pharma is or will be required to withhold with respect to the issuance of such shares in order for Endo Pharma or the Company to pay taxes or to claim an income tax deduction with respect to the issuance of such shares. In lieu of a portion of such payment equal to the amount of the minimum statutory tax withholding, Endo Pharma may retain, at the discretion of the Committee, a sufficient number of such shares (valued at the Fair Market Value thereof) to cover the amount equal to the minimum statutory tax withholding. A Holder, however, may elect to pay to Endo Pharma all or a portion of the total amount Endo Pharma is required to withhold by tendering shares of Common Stock with a Fair Market Value equal to the amount Endo Pharma is required to withhold; provided, however, that such Holder must have owned such tendered -------- ------- shares of Common Stock continuously through the date of issuance (or lapse) for a period of a least six months. With respect to Class C Options, a Holder may elect to pay to Endo Pharma all or a portion of the total amount Endo Pharma is required to withhold by having shares of Common Stock with a Fair Market Value equal to the minimum statutory amount Endo Pharma is required to withhold withheld by Endo Pharma. The Holder shall promptly notify Endo Pharma of any election made pursuant to Section 83(b) of the Code. 18. Liability. Endo Pharma, and not the Company, the Board, the --------- Committee, or any member thereof, shall be liable for any and all claims made against Endo Pharma, the Company, the Board or the Committee in connection with the Plan or any Option. 19 Legal Requirements. ------------------ (a) Endo Pharma shall be responsible and shall pay for any transfer, revenue or documentary stamps with respect to shares of Common Stock issued upon the exercise of Options granted under the Plan (other than any transfer tax applicable to a transfer to a Permitted Transferee which shall be payable by a Holder). 15 (b) Endo Pharma shall not be required to issue a certificate or certificates for shares upon the exercise of any Option if such issuance would result in a violation of any federal or state securities or other laws. Endo Pharma agrees to use its reasonable efforts to clear the legal impediment as soon as possible. 20 Amendment and Termination of the Plan. The Committee may at any ------------------------------------- time and from time to time alter, amend, suspend, or terminate the Plan in whole or in part. Notwithstanding the foregoing, no amendment, suspension, or termination shall affect adversely any of the rights of any Holder, unless such amendment suspension or termination is approved by a majority of the members of the Committee. 21. Nonqualified Stock Options. Options granted hereby shall be -------------------------- treated as nonqualified stock options under the Code. 22. Effective Date. The Plan shall take effect on January 1, 2003 -------------- (the "Effective Date") in the event MorphiDex(R) Approval does not occur on or prior to December 31, 2002. If MorphiDex(R) Approval occurs on or prior to December 31, 2002, the Plan shall be null and of no effect. 23. Interpretations. Except as otherwise expressly provided in the --------------- Plan, the following rules of interpretation apply to the Plan and each Option: (i) the singular includes the plural and the plural includes the singular; (ii) "include" and "including" are not limiting and "or" is not exclusive; (iii) a reference to any agreement or other contract includes permitted supplements and amendments; (iv) a reference to a law includes any amendment or modification to such law and any rules or regulations issued thereunder; and (v) a reference to any person, corporation or other entity includes its permitted successors and assigns. 24. GOVERNING LAW. THE PLAN AND ANY AND ALL OPTIONS AND OPTION AWARD ------------- AGREEMENTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 16 SCHEDULE I VESTING MATRIX AND IMPLIED PUBLIC STOCK PRICE THRESHOLDS FOR CLASS C OPTIONS
- ---------------------------------------------------------------------------------------- Option Grants under Sections 5(a), 5(b), 5(c) and 5(d) of the Plan ----------------------------------------------------------- Class - ---------------------------------------------------------------------------------------- Cash Gross Profit Target is Cash Gross Profit Target is not achieved achieved - ---------------------------------------------------------------------------------------- Implied Public Total Number of Implied Public Stock Total Number of Stock Price Vested Class C Price Threshold Vested Class C Threshold Options Options - ---------------------------------------------------------------------------------------- Class C1 $ 4.28 4,245,223 $ 6.06 2,547,134 - ---------------------------------------------------------------------------------------- Class C2 $ 6.62 1,976,411 $ 9.38 1,185,865 - ---------------------------------------------------------------------------------------- Class C3 $10.58 2,966,552 $14.99 1,779,931 - ---------------------------------------------------------------------------------------- Class C4 $17.29 1,484,128 $24.50 890,476 - ----------------------------------------------------------------------------------------
17 EX-99.11 12 0012.txt ENDO PHARMA 2000 SUPPLEMENTAL EXECUTIVE STOCK OPTIO Exhibit 11 ENDO PHARMA LLC 2000 SUPPLEMENTAL EXECUTIVE STOCK OPTION PLAN 1. Purpose. The purpose of this Endo Pharma LLC 2000 Supplemental ------- Executive Stock Option Plan (the "Plan") is to advance the interests of Endo Pharma LLC, a Delaware limited liability company ("Endo Pharma"), by affording certain executive officers or directors of Endo Pharmaceuticals Holdings Inc. (the "Company") and its subsidiaries an opportunity to acquire a substantial proprietary interest in shares of common stock of the Company held by Endo Pharma and thus to stimulate in such persons increased personal interest in the success and future growth of the Company. 2. Definitions. ----------- "Acquiring Person" shall mean, with reference to the transactions ---------------- referred to in Section 12(a), (i) the continuing or surviving entity of a consolidation or merger with the Company (if other than the Company), (ii) the transferee of all or substantially all of the assets of the Company, (iii) the parent entity of any corporation consolidating with or merging into the Company in a consolidation or merger in connection with which the Common Stock is changed into or exchanged for stock or other securities of any other Person (including such parent entity) or cash or any other property if the Company becomes a subsidiary of such entity, or (iv) in the case of a capital reorganization or reclassification or in any case in which the Company is a surviving corporation in a merger not described in clause (i) or (iii) above, the Company. "Affiliate" shall mean, with respect to a specified person, a person --------- that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. "Board" shall mean the Board of Managers of Endo Pharma. ----- "Business Day" shall mean any day other than a Saturday or a Sunday or ------------ a day on which commercial banking institutions in the City of New York are authorized by law to be closed. Any reference herein to "days" (unless Business Days are specified) shall mean calendar days. "Cash Gross Profit" shall have the meaning ascribed to such term in ----------------- Section 5.21(d) of the Merger Agreement. "Cash Gross Profit Target" shall mean the Company's attainment of a ------------------------ Cash Gross Profit for the fiscal year ending December 31, 2000 that equals or exceeds $147.4 million. "Class C Options" shall mean, collectively, Class C1 Options, Class C2 --------------- Options, Class C3 Options and Class C4 Options. "Class C1 Option" shall mean an option to purchase a number of shares --------------- of Common Stock, as specified in an option agreement, identified as a "Class C1 Option," which shall be subject to the exercise and termination provisions set forth in Section 8(a) hereof. "Class C2 Option" shall mean an option to purchase a number of shares --------------- of Common Stock, as specified in an option agreement, identified as a "Class C2 Option," which shall be subject to the exercise and termination provisions set forth in Section 8(a) hereof. "Class C3 Option" shall mean an option to purchase a number of shares --------------- of Common Stock, as specified in an option agreement, identified as a "Class C3 Option," which shall be subject to the exercise and termination provisions set forth in Section 8(a) hereof. "Class C4 Options" shall mean an option to purchase a number of shares ---------------- of Common Stock, as specified in an option agreement, identified as a "Class C4 Option," which shall be subject to the exercise and termination provisions set forth in Section 8(a) hereof. "Class C Option Exercise Date" shall have the meaning ascribed to such ---------------------------- term in Section 8(a)(ii) hereof. "Closing Date" shall mean August 26, 1997. ------------ "Code" shall mean the Internal Revenue Code of 1986, as amended from ---- time to time. 2 "Committee" shall mean the committee appointed by the Board to --------- administer the Plan and to perform the functions set forth herein. The composition of the Committee shall at all times consist of at least one person who is a representative of the Management Stockholders. "Common Stock" shall mean the common stock, par value $0.01 per share, ------------ of the Company held by Endo Pharma, such term to include any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock. "Company" shall have the meaning ascribed to such term in Section 1 ------- hereof. "Compelled Exercise and Sale" shall have the meaning ascribed to such --------------------------- term in Section 12(b) hereof. "Credit Agreement" shall mean the Credit Agreement, dated as of August ---------------- 26, 1997, among Endo Pharmaceuticals, Chase Manhattan Bank, as Administrative Agent, Chase Securities Inc., as Arranger and the Lenders party thereto. "EBITDA" shall have the meaning ascribed to "Consolidated EBITDA" in ------ the Credit Agreement. "Effective Date" shall have the meaning ascribed to such term in -------------- Section 22 hereof. "Eligible Person" shall have the meaning ascribed to such term in --------------- Section 5 hereof. "Endo Pharma" shall have the meaning ascribed to such term in Section ----------- 1 hereof. "Endo Pharmaceuticals" shall mean Endo Pharmaceuticals Inc., a -------------------- Delaware corporation, and any successor thereto. "Exercise Notice" shall have the meaning ascribed to such term in --------------- Section 8(a) hereof. 3 "Existing Stock Option Plans" shall mean collectively the Endo Pharma --------------------------- LLC Amended and Restated 1997 Executive Stock Option Plan and the Endo Pharma LLC Amended and Restated 1997 Employee Stock Option Plan. "Exit Event" shall mean a sale, disposition or transfer (collectively, ---------- a "sale") of shares of common stock of the Company after which neither Endo Pharma nor Kelso any longer holds any shares of common stock of the Company. "Fair Market Value" shall have the meaning ascribed to such term in ----------------- Section 4.1 of the Stockholders Agreement. "Holder" shall mean a person to whom an Option is granted pursuant to ------ the Plan. "Implied Public Stock Price Threshold", with respect to any Class C ------------------------------------ Option, shall mean: (i) in the case of Class C1 Options, $6.06 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C1 - ------- Options shall be adjusted in accordance with Schedule I attached hereto; (ii) in the case of Class C2 Options, $9.38 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C2 - ------- Options shall be adjusted in accordance with Schedule I attached hereto; (iii) in the case of Class C3 Options, $14.99 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C3 - ------- Options shall be adjusted in accordance with Schedule I attached hereto; (iv) in the case of Class C4 Options, $24.50 per share, provided, -------- however, that the Implied Public Stock Price Threshold with respect to Class C4 - ------- Options shall be adjusted in accordance with Schedule I attached hereto. "Kelso" shall mean, collectively, KIA V, KEP V and their permitted ----- transferees. "KEP V" shall mean Kelso Equity Partners V, L.P., a Delaware limited ----- partnership. 4 "KIA V" shall mean Kelso Investment Associates V, L.P., a Delaware ----- limited partnership. "Merger Agreement" shall mean the Agreement and Plan of Merger, dated ---------------- as of November 26, 1999 (as may be amended and/or restated from time to time), by and among, the Company, Endo, Inc., a Delaware corporation, and Algos Pharmaceutical Corporation, a Delaware corporation. "MorphiDex(R) Approval" shall mean the Company's receipt of approval ------------------- from the U.S. Food and Drug Administration with respect to its New Drug Application for MorphiDex(R) for the treatment of any pain. "Options" shall mean Class C Options. ------- "Option Price" shall mean, with respect to any Option, the price per ------------ share for which shares of Common Stock may be purchased pursuant to such Option, which shall initially be $2.42 per share. "Other Securities" shall mean any stock (other than Common Stock) and ---------------- other securities of the Company or any other Person (corporate or otherwise) which the Holders of the Options at any time shall be entitled to receive, or shall have received, upon the exercise of the Options, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities. "Permitted Transferee" of a Holder shall mean Endo Pharma and (A) the -------------------- spouses, family members, heirs, executors, administrators, testamentary trustees or legatees or beneficiaries of the Holder and (B) any trust, the beneficiaries of which, or a corporation or partnership, the stockholders or general or limited partners of which, include only the Holder or the spouse or family members of the Holder; provided, however, that each such transferor has obtained -------- ------- the prior written consent of the Company; provided further that the transfer to -------- ------- any such person is in compliance with all applicable federal, state and foreign securities laws. "Person" shall mean a corporation, an association, a partnership, an ------ organization, a business, an individual, a government or political subdivision thereof or a governmental agency. 5 "Plan" shall have the meaning ascribed to such term in Section 1 ---- hereof. "Stockholders Agreement" shall mean the Stockholders Agreement, dated ---------------------- as of July 14, 2000, by and among the Company, Endo Pharma, KIA V and the Management Stockholders (as such term is defined therein). "Supplemental Stock Option Plans" shall mean collectively the Plan and ------------------------------- the Endo Pharma LLC 2000 Supplemental Employee Stock Option Plan. 3. Class C Options Available for Grant Pursuant to the Supplemental ---------------------------------------------------------------- Stock Option Plans. The Class C Options available for grant pursuant to the - ------------------ Supplemental Stock Option Plans shall in no case exceed, in the aggregate, the following quantities (subject to adjustment as provided in Section 11 hereof): (a) in the case of Class C1 Options, options to purchase 4,245,223 shares of Common Stock; (b) in the case of Class C2 Options, options to purchase 1,976,411 shares of Common Stock; (c) in the case of Class C3 Options, options to purchase 2,966,552 shares of Common Stock; (d) in the case of Class C4 Options, options to purchase 1,484,128 shares of Common Stock. 4. Reservation of Shares. Endo Pharma has reserved (subject to --------------------- adjustment as provided in Section 11 hereof), solely for issuance and delivery upon exercise of the Class C Options pursuant to the Supplemental Stock Option Plans 10,672,314 shares of Common Stock. All shares of Common Stock (or Other Securities) issuable upon exercise of any Options shall be duly authorized and, when issued upon such exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable with no liability on the part of the Holders thereof. 5. Grant of Options. Upon the Effective Date: ---------------- 6 (a) Each Holder who holds outstanding Class C1 Options under the Existing Stock Option Plans and who is a director, officer, employee, consultant or agent of the Company or any of its subsidiaries as of the Effective Date shall be granted a number of Class C1 Options equal to the product of (x) the number of Class C1 Options made available for grant under the Supplemental Stock Option Plans and (y) the quotient of (i) the number of outstanding Class C1 Options under the Existing Stock Option Plans held by such Holder as of the Effective Date and (ii) the aggregate number of Class C1 Options outstanding under the Existing Stock Option Plans immediately prior to such adjustment. (b) Each Holder who holds outstanding Class C2 Options under the Existing Stock Option Plans and who is a director, officer, employee, consultant or agent of the Company or any of its subsidiaries as of the Effective Date shall be granted a number of Class C2 Options equal to the product of (x) the number of Class C2 Options made available for grant under the Supplemental Stock Option Plans and (y) the quotient of (i) the number of outstanding Class C2 Options under the Existing Stock Option Plans held by such Holder as of the Effective Date and (ii) the aggregate number of Class C2 Options outstanding under the Existing Stock Option Plans immediately prior to such adjustment. (c) Each Holder who holds outstanding Class C3 Options under the Existing Stock Option Plans and who is a director, officer, employee, consultant or agent of the Company or any of its subsidiaries as of the Effective Date shall be granted a number of Class C3 Options equal to the product of (x) the number of Class C3 Options made available for grant under the Supplemental Stock Option Plans and (y) the quotient of (i) the number of outstanding Class C3 Options under the Existing Stock Option Plans held by such Holder as of the Effective Date and (ii) the aggregate number of Class C3 Options outstanding under the Existing Stock Option Plans immediately prior to such adjustment. (d) Each Holder who holds outstanding Class C4 Options under the Existing Stock Option Plans and who is a director, officer, employee, consultant or agent of the Company or any of its subsidiaries as of the Effective Date shall be granted a number of Class C4 Options equal to the product of (x) the number of Class C4 Options made available for grant under the Supplemental Stock Option Plans and (y) the quotient of (i) the number of outstanding Class C4 Options under the Existing Stock Option Plans held by such Holder as of the Effective Date and (ii) the aggregate number of Class C4 Options outstanding under the Existing Stock Option Plans immediately prior to such adjustment. 7 6. No Right to Employment or Continued Service. Nothing in the Plan ------------------------------------------- or in any Option shall confer any right on any Eligible Person to continue in the employ or service of the Company or any of its subsidiaries or shall interfere in any way with the right of the stockholders of the Company or any of its subsidiaries to terminate such Eligible Person's employment or service at any time. 7. Administration of the Plan. The Plan shall be administered by the -------------------------- Committee. The Committee shall have full power to construe and interpret the Plan, to establish rules for its administration and to grant Options to Eligible Persons, in each case in accordance with the provisions of the Plan. In addition, the Committee may delegate such of its duties under the Plan as may be deemed by the Committee to be clerical or ministerial to such delegates as the Committee deems appropriate. All actions taken and decisions made by the Committee pursuant to the Plan shall be binding and conclusive on all persons interested in the Plan. 8. Exercisability of Options. ------------------------- (a) Class C Options. --------------- (i) In the event (I) the Fair Market Value of a share of Common Stock, including but not limited to the Fair Market Value of a share of Common Stock with respect to a 90 consecutive day trading period beginning prior to January 1, 2003, exceeds the Implied Public Stock Price Threshold with respect to such subclass of Class C Option (for purposes of this Section 8(a)(i) only, "Fair Market Value" shall have the meaning ascribed to such term in Section 4.1 of the Stockholders Agreement, except that "90 consecutive trading days" shall be substituted for "ten consecutive trading days" wherever it appears in such term and, in any event, any such 90-consecutive-trading-day-period shall not commence until the consummation of the merger contemplated by the Merger Agreement), (II) such Fair Market Value of each share of Common Stock on the last trading day of such 90 consecutive trading day period is greater than or equal to 85% of such Implied Public Stock Price Threshold, and (III) the Holder is a director, officer or employee of the Company or any of its subsidiaries on January 1, 2003 and on the date on which the conditions set forth in clauses (I) and (II) of this Section 8(a)(i) are satisfied, then the Holder shall become vested, with respect to each subclass of such Class C Options, in options with respect to the number of shares equal to the product of (x) the number of outstanding Class C Options of that subclass held by a Holder and (y) the quotient of (A) number of Class C Options of that subclass set forth on 8 Schedule I attached hereto and (B) the aggregate number of outstanding Class C Options of that subclass granted pursuant to the Supplemental Stock Option Plans. (ii) Subject to Section 10 hereof, Class C Options shall be exercisable, solely to the extent vested pursuant to Section 8(a)(i) hereof, upon the earlier of the occurrence of an Exit Event or January 1, 2006 (the "Class C Option Exercise Date") and the right to exercise such Options shall terminate at 12:00 p.m. on the Class C Option Exercise Date. In the event that any Exit Event is contemplated prior to January 1, 2006 and that the conditions in clauses (I), (II) and (III) of Section 8(a)(i) hereof will be satisfied, Endo Pharma will mail or deliver to each Holder of such Option at least ten days prior to the date of such Exit Event an Exercise Notice specifying that (i) an Exit Event is contemplated and that upon such Exit Event such Option will become exercisable pursuant to its terms, (ii) the date of the contemplated Exit Event and the terms thereof, and (iii) such Option shall expire at 12:00 p.m., New York City time, on the Class C Option Exercise Date if not exercised prior thereto. Any Class C Options not vested as of the Class C Option Exercise Date shall terminate at 12:00 p.m., New York City time, on the Class C Option Exercise Date. (iii) Notwithstanding anything to the contrary herein, any unexercisable portion of any Class C Option held by a Holder will become immediately exercisable in full, solely to the extent then vested pursuant to Section 8(c)(i) hereof, in the event that such Holder's employment or service with the Company or any of its subsidiaries is terminated for any reason; provided, however, that any such Option shall expire on the 90th day after - -------- ------- termination of the Holder's employment or service if unexercised. 9. Manner of Exercise. ------------------ (a) Each Option shall further state the terms and conditions of the Option (including the conditions to exercisability thereof) and the Option Price. An Option may be exercised, subject to this Section 9, for any or all whole number of shares which have become purchasable under such Option. To the extent necessary upon the exercise of an Option, Endo Pharma shall round each fractional share issuable upon such exercise up to the next whole number. (b) Subject to the terms and conditions set forth in this Plan (including the conditions to exercisability thereof), an Option may be exercised by the Holder during normal business hours on any Business Day, by surrender of the 9 Option to Endo Pharma at its principal office, accompanied by a subscription, in cash or by certified or official bank check payable to the order of Endo Pharma, in the amount obtained by multiplying (x) the number of shares of Common Stock designated in such subscription (up to the amount of shares which such Holder is entitled to receive at such time upon exercise of the Option) by (y) the Option Price. (c) Each exercise of an Option shall be deemed to have been effected immediately prior to the close of business on the Business Day on which an Option shall have been surrendered to Endo Pharma, and at such time the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock (or Other Securities) shall be issuable upon such exercise shall be deemed to have become the Holder or Holders of record thereof. (d) Endo Pharma at its expense shall deliver to the relevant Holder (or as such Holder may direct pursuant to the Option) a certificate or certificates representing shares of the Common Stock so purchased as soon as reasonably practicable, but in any event within five Business Days, after receipt of such notice. Each such certificate shall bear the legend required by the Stockholders Agreement to the effect that there are restrictions on the transfer of shares of Common Stock. (e) In the event that such exercise is in part only, Endo Pharma shall deliver a new Option of the same class and tenor, calling in the aggregate on the face thereof for the number of shares of Common Stock equal to the number of such shares which such Holder would be entitled to receive at such time upon exercise of this Option, after giving effect to such recent exercise. (f) Notwithstanding anything to the contrary in the Plan, in no event may any Option be exercised prior to the time at which the Option becomes exercisable (as set forth in the Option) or after the expiration of such Option, and each Option shall terminate upon the terms set forth in Sections 8 and 10 hereof. (g) If, at any time, the Committee shall determine, in its sole discretion, that the listing, registration or qualification of the shares of Common Stock upon any securities exchange or under any applicable securities laws, or the consent or approval of any governmental or self-regulatory agency or body, is necessary or reasonably desirable as a condition of, or in connection with, the issue or purchase of the shares of Common Stock under any Option, such Option may not be exercised in whole or in part unless such listing, registration, qualification, 10 consent or approval shall have been effected or obtained free of any conditions unacceptable to the Committee. 10. Expiration of Options. Notwithstanding the provisions of Section --------------------- 8 above, the Options will expire no later than December 31, 2012; provided, -------- however, that in the event that any shares of Common Stock have been sold to the - ------- public pursuant to an effective registration statement, other than a registration statement on Form S-4 or S-8 or any successor forms under the Securities Act of 1933, the Options will expire no later than on August 26, 2007. Any outstanding unexercised Option, or portion thereof, shall be forfeited, whether or not exercisable, upon the expiration of such Option. 11. Adjustment of Number of Shares of Common Stock Issuable Upon ------------------------------------------------------------ Exercise. The number and kind of shares of Common Stock purchasable upon the - -------- exercise of Options shall be subject to adjustment from time to time as follows: (a) Stock Dividends; Stock Splits; Reverse Stock Splits. In case the --------------------------------------------------- Company shall (i) pay a dividend or make any other distribution with respect to the common stock of the Company in shares of its capital stock, (ii) subdivide the outstanding common stock of the Company, or (iii) combine the outstanding common stock of the Company into a smaller number of shares, the number of shares of Common Stock issuable upon exercise of the Options immediately prior to the record date for such dividend or distribution or the effective date of such subdivision or combination shall be adjusted so that the Holder of the Options shall thereafter be entitled to receive the kind and number of shares of Common Stock or Other Securities of the Company that such Holder would have owned or have been entitled to receive after the happening of any of the events described above, had such Options been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this Section 11 shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) No Adjustment for Dividends; No Adjustment of Option Price. ---------------------------------------------------------- Except as otherwise provided in this Section 11, no adjustment in respect of any dividends declared and paid on common stock of the Company, or on any other capital stock of the Company, shall be made during the term of an Option or upon the exercise of an Option. Notwithstanding anything to the contrary contained in this Plan, in the event of any adjustments to Options pursuant to this Section 11, 11 adjustments shall be made solely to the number and kind of securities purchasable upon the exercise of Options and no adjustments shall be made to the Option Price. (c) Other Adjustments. In the event that at any time, as a result of ----------------- an adjustment made pursuant to this Section 11, the registered Holders shall become entitled to receive any securities of the Company other than shares of Common Stock, thereafter the number of such Other Securities so receivable upon exercise of the Options 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 shares of Common Stock contained in this Section 11. (d) Notice of Adjustment. Whenever the number of shares of Common -------------------- Stock purchasable upon the exercise of an Option is adjusted, as herein provided, the Company shall give notice to each Holder of such adjustment or adjustments. 12. Purchase Rights Upon Merger, Consolidation, etc. ----------------------------------------------- (a) In the event of any consolidation of the Company with or merger of the Company with or into another corporation or in case of any sale, transfer or lease to another corporation of all or substantially all the assets of the Company, the Acquiring Person shall execute an agreement that each Holder shall have the right thereafter (whether or not the Option is then exercisable by its terms) upon payment of the Option Price in effect immediately prior to such action to purchase upon exercise of the Option the kind and amount of securities, cash or other assets which such Holder would have owned or have been entitled to receive after the happening of such consolidation, merger, sale, transfer or lease had such Option been exercised immediately prior to such action; provided, however, that no adjustment in respect of dividends, interest -------- ------- or other income on or from such shares or other securities and property shall be made during the term of an Option or upon the exercise of an Option. The Company shall mail by first class mail, postage prepaid, to each Holder, notice of the execution of any such agreement (including a copy thereof). Such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 12. The provisions of this Section 12 shall similarly apply to successive consolidations, mergers, sales, transfers or leases. The Acquiring Person shall mail to Holders a notice describing any supplemental Option Agreement. In the event that this Section 12 shall be applicable, the provisions of Section 11(a) shall not be applicable. 12 (b) In the event of a sale of all or substantially all of the Company to a third party, whether pursuant to a sale of capital stock of the Company, merger, consolidation, sale of assets or similar transaction, the Company shall have the right to compel the Holder of an Option to exercise such Option (whether or not the Option is then exercisable by its terms) (a "Compelled Exercise"). In the event that the Company determines to exercise its right to a Compelled Exercise, it shall mail to Holders written notice of such event. 13. Stockholders Agreement. Notwithstanding anything in the Plan to ---------------------- the contrary, all shares of Common Stock issued upon the exercise of Options shall be subject to all terms and conditions set forth in the Stockholders Agreement. As a condition to the exercise of any Option, each Holder shall be required to execute and deliver to Endo Pharma (i) an executed copy of the Stockholders Agreement, in the form in effect at the time of such exercise, if such Holder had not previously done so and (ii) such written representations and other documents as may be necessary or reasonably desirable, in the opinion of the Committee, for purposes of compliance with federal or state securities or other laws. For purposes of the Stockholders Agreement, each Holder shall be deemed to be a "Management Stockholder." 14. Restrictions on Transfer. ------------------------ (a) Restrictive Legend. Except as otherwise permitted by this ------------------ Section 14, each Option (including each Option issued upon the transfer of any option) shall be stamped or otherwise imprinted with a legend in substantially the following form: "This Option and any shares acquired upon the exercise of this option have not been registered under the Securities Act of 1933, as amended, and may not be transferred, sold or otherwise disposed of except while a registration under such Act is in effect or pursuant to an exemption therefrom under such Act and in all cases in compliance with all applicable state securities laws, and in any event may not be transferred to any party other than a Permitted Transferee as defined in this Option." (b) Restrictions on Transfer. Each Holder, by acceptance of an ------------------------ Option, shall acknowledge and agree that such Option may not be sold, assigned, transferred, exchanged, mortgaged, pledged or granted a security interest in, or 13 otherwise disposed of or encumbered by or to any party other than by or to a Permitted Transferee. 15. Registration and Transfer of Options, etc. ----------------------------------------- (a) Option Register; Ownership of Options. Endo Pharma will keep at ------------------------------------- its principal office a register in which Endo Pharma will provide for the registration of Options and the registration of transfers of Options. Endo Pharma may treat the Person in whose name any Option is registered on such register as the owner thereof for all other purposes, and Endo Pharma shall not be affected by any notice to the contrary, except that, if and when any Option is accompanied by an instrument of assignment in a form acceptable to Endo Pharma, it may (but shall not be obligated to) treat the bearer thereof as the owner of such Option for all purposes. Subject to Section 14(b) hereof, an Option, if properly assigned, may be exercised by a new Holder without a new Option first having been issued. (b) Transfer and Exchange of Options. Upon surrender of any Option -------------------------------- for registration of transfer or for exchange to the Company at its principal office, the Company at its expense will (subject to compliance with Section 14(b) hereof, if applicable) execute and deliver in exchange therefor a new Option or Options of the same class and tenor, in the name of such Holder or as such Holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Option or Options so surrendered. (c) Replacement of Options. Upon receipt of evidence reasonably ---------------------- satisfactory to Endo Pharma of the loss, theft, destruction or mutilation of any Option and, in the case of any such loss, theft or destruction of any Option, upon delivery of an indemnity bond in such reasonable amount as Endo Pharma may determine (or, at the sole option of Endo Pharma, of an indemnity agreement reasonably satisfactory to Endo Pharma), or, in the case of any such mutilation, upon the surrender of such Option for cancellation to Endo Pharma at its principal office, Endo Pharma at its expense will execute and deliver, in lieu thereof, a new Option of the same class and tenor. 16. Rights as Option Holders of Shares. Neither the Holder of an ---------------------------------- Option nor any Permitted Transferees shall have any rights as a stockholder of the Company (including, without limitation, any right to vote or to receive dividends or to consent or to receive notice as a stockholder in respect of any meeting of stock- 14 holders for the election of directors of the Company or any other matter, or any right whatsoever as a stockholder of the Company (except for those notices and other matters expressly set forth under the Plan or in the Option)). An Option does not impose any obligation on a Holder or any of its Permitted Transferees to purchase any securities or impose any liabilities on a Holder as a stockholder of the Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company. 17. Withholding. Endo Pharma shall have the right to require a ----------- Holder or other person entitled to receive shares of Common Stock upon the exercise of Options (or, if the Holder makes an election under Section 83(b) of the Code, in connection with such grant) under the Plan to pay to Endo Pharma the amount which Endo Pharma is or will be required to withhold with respect to the issuance of such shares in order for Endo Pharma or the Company to pay taxes or to claim an income tax deduction with respect to the issuance of such shares. In lieu of a portion of such payment equal to the amount of the minimum statutory tax withholding, Endo Pharma may retain, at the discretion of the Committee, a sufficient number of such shares (valued at the Fair Market Value thereof) to cover the amount equal to the minimum statutory tax withholding. A Holder, however, may elect to pay to Endo Pharma all or a portion of the total amount Endo Pharma is required to withhold by tendering shares of Common Stock with a Fair Market Value equal to the amount Endo Pharma is required to withhold; provided, however, that such Holder must have owned such tendered -------- ------- shares of Common Stock continuously through the date of issuance (or lapse) for a period of a least six months. With respect to Class C Options, a Holder may elect to pay to Endo Pharma all or a portion of the total amount Endo Pharma is required to withhold by having shares of Common Stock with a Fair Market Value equal to the minimum statutory amount Endo Pharma is required to withhold withheld by Endo Pharma. The Holder shall promptly notify Endo Pharma of any election made pursuant to Section 83(b) of the Code. 18. Liability. Endo Pharma, and not the Company, the Board, the --------- Committee, or any member thereof, shall be liable for any and all claims made against Endo Pharma, the Company, the Board or the Committee in connection with the Plan or any Option. 19. Legal Requirements. ------------------ 15 (a) Endo Pharma shall be responsible and shall pay for any transfer, revenue or documentary stamps with respect to shares of Common Stock issued upon the exercise of Options granted under the Plan (other than any transfer tax applicable to a transfer to a Permitted Transferee which shall be payable by a Holder). (b) Endo Pharma shall not be required to issue a certificate or certificates for shares upon the exercise of any Option if such issuance would result in a violation of any federal or state securities or other laws. Endo Pharma agrees to use its reasonable efforts to clear the legal impediment as soon as possible. 20 Amendment and Termination of the Plan. The Committee may at any ------------------------------------- time and from time to time alter, amend, suspend, or terminate the Plan in whole or in part. Notwithstanding the foregoing, no amendment, suspension, or termination shall affect adversely any of the rights of any Holder, unless such amendment suspension or termination is approved by a majority of the members of the Committee that includes a Committee member who is a representative of the Management Stockholders. 21. Nonqualified Stock Options. Options granted hereby shall be -------------------------- treated as nonqualified stock options under the Code. 22. Effective Date. The Plan shall take effect on January 1, 2003 -------------- (the "Effective Date") in the event MorphiDex(R) Approval does not occur on or prior to December 31, 2002. If MorphiDex(R) Approval occurs on or prior to December 31, 2002, the Plan shall be null and of no effect. 23. Interpretations. Except as otherwise expressly provided in the --------------- Plan, the following rules of interpretation apply to the Plan and each Option: (i) the singular includes the plural and the plural includes the singular; (ii) "include" and "including" are not limiting and "or" is not exclusive; (iii) a reference to any agreement or other contract includes permitted supplements and amendments; (iv) a reference to a law includes any amendment or modification to such law and any rules or regulations issued thereunder; and (v) a reference to any person, corporation or other entity includes its permitted successors and assigns. 24. GOVERNING LAW. THE PLAN AND ANY AND ALL OPTIONS AND OPTION AWARD ------------- AGREEMENTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE 16 PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 17 SCHEDULE I VESTING MATRIX AND IMPLIED PUBLIC STOCK PRICE THRESHOLDS FOR CLASS C OPTIONS - ------------------------------------------------------------------------------ Option Class Grants under Sections 5(a), 5(b), 5(c) and 5(d) of the Plan ----------------------------------------------------------- --------------------------------------------------------------- Cash Gross Profit Cash Gross Profit Target is achieved Target is not achieved ---------------------------------------------------------------- Implied Public Total Number Implied Public Total Number of Stock Price of Vested Stock Price Vested Class C Threshold Class C Threshold Options Options - ------------------------------------------------------------------------------ Class C1 $ 4.28 4,245,223 $ 6.06 2,547,134 - ------------------------------------------------------------------------------ Class C2 $ 6.62 1,976,411 $ 9.38 1,185,865 - ------------------------------------------------------------------------------ Class C3 $10.58 2,966,552 $14.99 1,779,931 - ------------------------------------------------------------------------------ Class C4 $17.29 1,484,128 $24.50 890,476 - ------------------------------------------------------------------------------ 18 EX-99.12 13 0013.txt TAX SHARING AGREEMENT EXHIBIT 12 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 17th -------- day of July, 2000. 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; 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 Endo Inc. 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 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 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 Endo Inc., 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, 24/th/ 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 counter ------------ parts, 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 AGREE MENT OR THE ACTIONS OF ENDO, ENDO LLC OR ENDO INC. IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCE MENT 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. 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 Endo LLC or otherwise have a financial interest in any payments that may be made by Endo or any successor to Endo 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: /s/ Carol A. Ammon --------------------------------------------- Name: Carol A. Ammon Title: President & Chief Executive Officer ENDO INC. By: /s/ Carol A. Ammon --------------------------------------------- Name: Carol A. Ammon Title: President & Chief Executive Officer ENDO PHARMA LLC By: /s/ Jeffrey R. Black --------------------------------------------- Name: Jeffrey R. Black Title: Chief Financial Officer EX-99.13 14 0014.txt TREASURY AGREEMENT EXHIBIT 13 AGREEMENT AGREEMENT, dated as of July 17, 2000 (this "Agreement"), by and between --------- ENDO PHARMACEUTICALS HOLDINGS INC., a Delaware corporation ("Holdings"), and -------- ENDO PHARMA LLC, a Delaware limited liability company ("Endo LLC"). -------- WITNESSETH: WHEREAS, Holdings, Endo Inc., a Delaware corporation and a newly formed, wholly owned subsidiary of Holdings ("Sub"), and Algos Pharmaceutical --- Corporation, a Delaware corporation (the "Algos"), entered into an agreement and ----- plan of merger, dated as of November 26, 1999 (as amended and restated as of March 3, 2000 and as amended on April 17, 2000, the "Merger Agreement"), whereby ---------------- Algos will merge with and into Sub; WHEREAS, Endo LLC was formed in order to complete certain of the transactions contemplated by the Merger Agreement; WHEREAS, the Board of Directors of Holdings and the Board of Managers of Endo LLC have each determined that this Agreement is advisable and in the best interest of their stockholders and unitholders, respectively, and is in furtherance of and consistent with their respective long-term business strategies; WHEREAS, the Board of Directors of Holdings and the Board of Managers of Endo LLC have each approved this Agreement upon the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the premises, representations, warranties and agreements herein contained, the parties hereto agree as follows: FIRST, Endo LLC hereby agrees to comply with Section 5.21 of the Merger Agreement, insofar as such section is applicable to Endo LLC, thereby having the effect of making Endo LLC a party to the Merger Agreement for purposes of such section; and SECOND, Endo LLC hereby further agrees that, with respect to its agreement in clause FIRST above, it will be subject to Sections 8.6, 8.7 and 8.9 of the Merger Agreement. 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 hereto and delivered to the other party. ENDO PHARMACEUTICALS HOLDINGS INC. By: /s/ Carol A. Ammon --------------------------------------------- Name: Carol A. Ammon Title: President & Chief Executive Officer ENDO PHARMA LLC By: /s/ Jeffrey R. Black --------------------------------------------- Name: Jeffrey R. Black Title: Chief Financial Officer 2 EX-99.14 15 0015.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 14 ================================================================================ REGISTRATION RIGHTS AGREEMENT by and between ENDO PHARMACEUTICALS HOLDINGS INC. and ENDO PHARMA LLC Dated as of July 17, 2000 ================================================================================ TABLE OF CONTENTS ----------------- Page ---- 1. Registrations Upon Request......................................... 1 1.1. Requests by Endo LLC....................................... 1 1.2. Registration Statement Form................................ 2 1.3. Expenses................................................... 2 1.4. Priority in Demand Registrations........................... 2 1.5. No Company Initiated Registration.......................... 3 2. Incidental Registrations........................................... 3 3. Registration Procedures............................................ 5 4. Underwritten Offerings............................................. 9 4.1. Underwriting Agreement..................................... 9 4.2. Selection of Underwriters.................................. 10 5. Holdback Agreements................................................ 10 6. Preparation; Reasonable Investigation.............................. 11 7. No Grant of Future Registration Rights............................. 11 8. Indemnification.................................................... 11 8.1. Indemnification by the Company............................. 11 8.2. Indemnification by the Sellers............................. 12 8.3. Notices of Claims, etc..................................... 13 8.4. Other Indemnification...................................... 14 8.5. Indemnification Payments................................... 14 8.6. Other Remedies............................................. 14 9. Representations and Warranties..................................... 15 10. Definitions........................................................ 15 11. Miscellaneous...................................................... 16 11.1. Rule 144, etc.............................................. 16 11.2. Successors, Assigns and Transferees........................ 17 11.3. Stock Splits............................................... 17 11.4. Amendment and Modification................................. 17 11.5. Governing Law.............................................. 17 -i- 11.6. Invalidity of Provision.................................... 18 11.7. Notices.................................................... 18 11.8. Headings; Execution in Counterparts........................ 18 11.9. Injunctive Relief.......................................... 19 11.10. Term....................................................... 19 11.11. Further Assurances......................................... 19 11.12. Entire Agreement........................................... 19 -ii- REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of July 17, 2000, by and among Endo Pharmaceuticals Holdings Inc., a Delaware corporation (the "Company"), and Endo Pharma LLC, a Delaware limited liability company ("Endo ------- ---- LLC"). Capitalized terms used herein without definition are defined in Section - --- 10 hereof. WHEREAS, Endo LLC owns shares of Common Stock; WHEREAS, the parties hereto wish to set forth certain rights and obligations with respect to the registration of the shares of Common Stock under the Securities Act. NOW, THEREFORE, in consideration of the mutual covenants and obligations set forth in this Agreement, the parties hereto agree as follows: 1. Registrations Upon Request. -------------------------- 1.1. Requests by Endo LLC. At any time, Endo LLC shall have the -------------------- right to make up to six (6) separate requests that the Company effect the registration under the Securities Act of all or a portion of the Registrable Securities owned by Endo LLC, each such request to specify the intended method or methods of disposition thereof; provided that the Company shall not be -------- ---- required to effect a registration pursuant to this Section 1.1 until a period of 180 days shall have elapsed from the effective date of the most recent registration previously effected pursuant to this Section 1.1. A request made by Endo LLC shall not be counted for purposes of the request limitations set forth above (a) if Endo LLC determines in its good faith judgment to withdraw - the proposed registration of any Registrable Securities requested to be registered pursuant to this Section 1.1 due to marketing or regulatory reasons, (b) the registration statement relating to any such request is not declared - effective within 90 days of the date such registration statement is first filed with the Commission, (c) if, within 180 days after the registration relating to - any such request has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason and the Company fails to have such stop order, injunction or other order or requirement removed, withdrawn or resolved to Endo LLC's reasonable satisfaction within 30 days or (d) the - conditions to closing specified in the underwriting agreement or purchase agreement entered into in connection with the registration relating to any such request are not satisfied (other than as a result of a default or breach thereunder by Endo LLC). Upon any such request, the Company will promptly, but in any event within 15 days, give written notice of such request to all holders of Registrable Securities and thereupon the Company will, subject to Section 1.4 hereof, use its best efforts to effect the prompt registration under the Securities Act of: (i) the Registrable Securities which the Company has been so requested to register by Endo LLC, and (ii) all other Registrable Securities which the Company has been requested to register by the holders thereof by written request given to the Company by such holders within 15 days after the giving of such written notice by the Company to such holders, all to the extent required to permit the disposition of the Registrable Securities so to be registered in accordance with the intended method or methods of disposition of each seller of such Registrable Securities. 1.2. Registration Statement Form. A registration requested pursuant --------------------------- to Section 1.1 hereof shall be effected by the filing of a registration statement on a form agreed to by Endo LLC. 1.3. Expenses. The Company will pay all Registration Expenses in -------- connection with any registration requested under Section 1.1 hereof and any other actions that may be taken in connection with any such registration as contemplated by this Article I; provided, however, that the Company will not be -------- ------- obligated to pay underwriting discounts or commissions or transfer taxes, if any, relating to the sale or disposition of shares sold pursuant to any such registration. 1.4. Priority in Demand Registrations. If a registration pursuant to -------------------------------- Section 1.1 hereof involves an underwritten offering, and the managing underwriter (or, in the case of an offering which is not underwritten, a nationally recognized investment banking firm) shall advise the Company in writing (with a copy to Endo LLC) that, in its opinion, the number of securities requested and otherwise proposed to be included in such registration exceeds the number which can be sold in such offering without materially and adversely affecting the offering price, the Company will include in such registration the number which the Company is so advised can be sold in such offering without such material adverse effect, first, the Registrable Securities of Endo LLC and up to ----- the full number of shares of Common Stock requested to be included in such registration by the Management Stockholders (as defined in that certain amended and restated stockholders agreement, dated as of July 14, 2000, by and among the Company, Endo LLC, and the other parties named therein (the "Stockholders ------------ Agreement")), allocated pro rata among Endo LLC and the Management Stockholders - --------- on the basis of the number of shares of Common Stock requested to be included therein by Endo LLC and the Management Stockholders and second, the securities, ------ if any, being sold by the Company. Notwithstanding the foregoing, the Management 2 Stockholders (and any successor managers of the Company and its subsidiaries) will not be entitled to participate in any such registration requested by Endo LLC to the extent that the managing underwriter (or, in the case of an offering that is not underwritten, a nationally recognized investment banking firm) shall determine in good faith and in writing, that the participation of management would adversely affect the marketability or offering price of the securities being sold in such registration, it being understood that the Company will include in such registration that number of shares of the Management Stockholders which can be sold in such offering without adversely affecting the marketability or offering price of the other securities to be sold in such registration. Neither the Company nor Endo LLC will be required to give any notice to any holder of Registrable Securities with respect to a given offering if such holder is to be excluded from such offering pursuant to this Section 1.4. 1.5. No Company Initiated Registration. After receipt of notice of a --------------------------------- requested registration pursuant to Section 1.1 hereof, the Company shall not initiate, without the consent of Endo LLC, a registration of any of its securities for its own account until 90 days after such registration has been terminated or declared effective (unless advised by the managing underwriter that a longer period, not to exceed 180 days, is required, or such shorter period as the managing underwriter for any underwritten offering may agree), except as provided in Section 5(b) hereof. 2. Incidental Registrations. If the Company proposes to register any ------------------------ of its Common Stock or any other of its common equity securities (collectively, "Other Securities") under the Securities Act (other than a registration on Form ---------------- S-4 or S-8 or a successor form), whether or not for sale for its own account, in a manner which would permit registration of shares of Common Stock owned by Endo LLC or any of its Permitted Transferees (as defined in Section 13.2 hereof) (each, a "Holder") for sale for cash to the public under the Securities Act, it ------ will at such time give prompt written notice to each Holder of its intention to do so and of the rights of such Holder under this Section 2, at least 20 days prior to the anticipated filing date of the registration statement relating to such registration. Such notice shall offer each such Holder the opportunity to include in such registration statement such number of shares of Common Stock as such Holder may request, in accordance with this Section 2. Upon the written request of a Holder made within 10 days after the receipt of the Company's notice (which request shall specify the number of shares of Common Stock intended to be disposed of and the intended method of disposition thereof), the Company will use its best efforts to effect, in connection with the registration of the Other Securities, the registration under the Securities Act of all shares of Common Stock which the Company has been so requested to register, to the extent required to permit the disposition (in accordance with such intended methods of disposition) of such shares of Common Stock so requested to be registered; provided that: -------- ---- 3 (a) if, at any time after giving such written notice of its intention to register any Other Securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register the Other Securities, the Company may, at its election, give written notice of such determination to the Holders, and thereupon the Company shall be relieved of its obligation to register the shares of Common Stock requested to be registered in connection with the registration of such Other Securities; (b) if the registration referred to in the first sentence of Section 2(a) hereof is to be an underwritten registration on behalf of the Company, and the managing underwriter(s) advises the Company in writing that, in such firm's opinion, such offering would be materially and adversely affected by the inclusion therein of any of the Common Stock requested to be included therein, the Company shall include in such registration: (i) first, all securities the Company proposes to sell for its own account ("Company Securities"), (ii) ------------------ second, up to the full number of shares of Common Stock requested to be included in such registration by Endo LLC, which, in the good faith opinion of such firm, can be so sold without so materially and adversely affecting such offering and (iii) third, an amount of other securities, if any, requested to be included therein in excess of the number or dollar amount of Company Securities and Common Stock of the Holders which, in the opinion of such firm, can be so sold without materially and adversely affecting such offering (allocated among the holders of such other securities in such proportions as such holders and the Company may agree); (c) the Company shall not be required to effect any registration of Common Stock under this Section 2 incidental to the registration of any of its securities in connection with mergers, acquisitions, exchange offers, subscription offers, dividend reinvestment plans or stock option or other executive or employee benefit or compensation plans; and (d) no registration of Common Stock effected under this Section 2 shall relieve the Company of its obligation to effect a registration of shares of Common Stock pursuant to Section 1.1 hereof and pursuant to the Stockholders Agreement. Notwithstanding the foregoing, a Holder will not be entitled to participate in any registration pursuant to this Section 2 to the extent that the managing underwriter (or, in the case of an offering that is not underwritten, a nationally recognized investment banker) shall determine in good faith and in writing (with a copy to each affected Person requesting registration of Registrable Securities) that the participation of any such Holder would adversely affect the offering or the marketability or offering price of the securities being sold by the Company in such registration. 4 The Company will pay all Registration Expenses in connection with any registration requested under this Section 2 and any other actions that may be taken in connection with any such registration as contemplated by this Section 2; provided, however, that the Company will not be obligated to pay underwriting -------- ------- discounts or commissions or transfer taxes, if any, relating to the sale or disposition of shares sold pursuant to any such registration. 3. Registration Procedures. If and whenever the Company is required ----------------------- to use its best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Sections 1.1 and 2 hereof, the Company will promptly: (a) prepare, and as soon as practicable, but in any event within 60 days thereafter, file with the Commission, a registration statement with respect to such Registrable Securities, make all required filings with the NASD and use its best efforts to cause such registration statement to become effective as soon as practicable; (b) prepare and promptly file with the Commission such amendments and post-effective amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for so long as is required to comply with the provisions of the Securities Act and to complete the disposition of all securities covered by such registration statement in accordance with the intended method or methods of disposition thereof, but in no event for a period of more than six months after such registration statement becomes effective; (c) furnish copies of all documents proposed to be filed with the Commission in connection with such registration to (i) counsel selected by - Endo LLC and (ii) each seller of Registrable Securities (or in the case of -- the initial filing of a registration statement, within five business days of such initial filing) and such documents shall be subject to the review of such counsel and the Company shall not file any registration statement or any amendment or post-effective amendment or supplement to such registration statement or the prospectus used in connection therewith to which either such counsel or Endo LLC shall have reasonably objected in writing on the grounds that such amendment or supplement does not comply (explaining why) in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder; (d) furnish to each seller of Registrable Securities, without charge, such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits and documents filed therewith) and such number of copies of the prospectus in- 5 cluded in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller in accordance with the intended method or methods of disposition thereof; (e) use its best efforts to register or qualify such Registrable Securities covered by such registration statement under the securities or blue sky laws of such jurisdictions as each seller shall reasonably request, and do any and all other acts and things which may be necessary or advisable to enable such seller to consummate the disposition of such Registrable Securities in such jurisdictions in accordance with the intended method or methods of disposition thereof; provided that the -------- ---- Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, subject itself to taxation in any jurisdiction wherein it is not so subject, or take any action which would subject it to general service of process in any jurisdiction wherein it is not so subject; (f) use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies, authorities or self-regulatory bodies as may be necessary by virtue of the business and operations of the Company to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities in accordance with the intended method or methods of disposition thereof; (g) furnish to Endo LLC: (i) an opinion of counsel for the Company experienced in securities law matters, dated the effective date of the registration statement (and, if such registration includes an underwritten public offering, the date of the closing under the underwriting agreement), and (ii) a "comfort" letter (unless the registration is pursuant to Section 2 and such a letter is not otherwise being furnished to the Company), dated the effective date of such registration statement (and if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have issued an audit report on the Company's financial statements included in the registration statement; provided that such comfort letter shall be delivered only -------- ---- to Endo LLC which represents to such accountants in a form satisfactory to such accountants that Endo 6 LLC is an underwriter or has performed the due diligence customarily performed by an underwriter, covering such matters as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities and such other matters as Endo LLC may reasonably request; (h) notify each seller of any Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event or existence of any fact as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and, as promptly as is practicable, prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (i) otherwise comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement of the Company (in form complying with the provisions of Rule 158 under the Securities Act) covering the period of at least 12 months, but not more than 18 months, beginning with the first month after the effective date of such registration statement; (j) notify each seller of any Registrable Securities covered by such registration statement (i) when the prospectus or any prospectus supplement - or post-effective amendment has been filed, and, with respect to such registration statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission for amendments or -- supplements to such registration statement or to amend or to supplement such prospectus or for additional information, (iii) of the issuance by the --- Commission of any stop order suspending the effectiveness of such registration statement or the initiation of any proceedings for that purpose and (iv) of the suspension of the qualification of such securities -- for offering or sale in any jurisdiction, or of the institution of any proceedings for any of such purposes; 7 (k) use every reasonable effort to obtain the lifting of any stop order that might be issued suspending the effectiveness of such registration statement at the earliest possible moment; (l) use its best efforts (i) (A) to list such Registrable Securities - - on any securities exchange on which the equity securities of the Company are then listed or, if no such equity securities are then listed, on an exchange selected by the Company, if such listing is then permitted under the rules of such exchange, or (B) if such listing is not practicable, to - secure designation of such securities as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 under the Exchange Act or, failing that, to secure NASDAQ authorization for such Registrable Securities, and, without limiting the foregoing, to arrange for at least two market makers to register as such with respect to such Registrable Securities with the NASD, and (ii) to provide a transfer agent and -- registrar for such Registrable Securities not later than the effective date of such registration statement and to instruct such transfer agent (A) to - release any stop transfer order with respect to the certificates with respect to the Registrable Securities being sold and (B) to furnish - certificates without restrictive legends representing ownership of the shares being sold, in such denominations requested by the sellers of the Registrable Securities or the lead underwriter; (m) enter into such agreements and take such other actions as the sellers of Registrable Securities or the underwriters reasonably request in order to expedite or facilitate the disposition of such Registrable Securities, including, without limitation, preparing for, and participating in, such number of "road shows" and all such other customary selling efforts as the underwriters reasonably request in order to expedite or facilitate such disposition; (n) furnish to any holder of such Registrable Securities such information and assistance as such holder may reasonably request in connection with any "due diligence" effort which such seller deems appropriate; and (o) use its best efforts to take all other steps necessary to effect the registration of such Registrable Securities contemplated hereby. As a condition to its registration of Registrable Securities of any prospective seller, the Company may require such seller of any Registrable Securities as to which any registration is being effected to execute powers-of- attorney, custody arrangements and other customary agreements appropriate to facilitate the offering and to furnish to the Company such information regarding such seller, its ownership of Registrable Securities and the disposition of such Registrable Securities as the Company may from time to time reasonably request in writing and as shall be required by law in connection therewith. Each such holder agrees to furnish promptly to the Company all 8 information required to be disclosed in order to make the information previously furnished to the Company by such holder not materially misleading. The Company agrees not to file or make any amendment to any registration statement with respect to any Registrable Securities, or any amendment of or supplement to the prospectus used in connection therewith, which refers to (in a capacity as a selling stockholder) any seller of any Registrable Securities covered thereby by name, or otherwise identifies such seller as the holder of any Registrable Securities, to which counsel to the sellers may reasonably object. By acquisition of Registrable Securities, each holder of such Registrable Securities shall be deemed to have agreed that upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(h) hereof, such holder will promptly discontinue such holder's disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(h) hereof. If so directed by the Company, each holder of Registrable Securities will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, in such holder's possession of the prospectus covering such Registrable Securities at the time of receipt of such notice. In the event that the Company shall give any such notice, the period mentioned in Section 3(b) hereof shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each seller of any Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by Section 3(h) hereof. 4. Underwritten Offerings. ---------------------- 4.1. Underwriting Agreement. If requested by the underwriters for ---------------------- any underwritten offering pursuant to a registration requested under Sections 1.1 or 2 hereof, the Company shall enter into an underwriting agreement with the underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the underwriters and to Endo LLC. Any such underwriting agreement shall contain such representations and warranties by the Company and such other terms and provisions as are customarily contained in agreements of this type, including, without limitation, indemnities to the effect and to the extent provided in Section 9 hereof. The holders of a majority of the Registrable Securities to be distributed by such underwriter shall be parties to such underwriting agreement and may, at their option, require that any or all of the representations and warranties by, and the agreements on the part of, the Company to and for the benefit of such underwriters be made to and for the benefit of such holders of Registrable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement shall also be conditions precedent to the obligations of such holders of Registrable Securities. No 9 underwriting agreement (or other agreement in connection with such offering) shall require Endo LLC , in their respective capacities as stockholders and/or controlling persons, to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder, the ownership of such holder's Registrable Securities and such holder's intended method or methods of disposition and any other representation required by law or to furnish any indemnity to any Person which is broader than the indemnity furnished by such holder pursuant to Section 9.2 hereof. 4.2. Selection of Underwriters. If the Company at any time proposes ------------------------- to register any of its securities under the Securities Act for sale for its own account pursuant to an underwritten offering, the Company will have the right to select the managing underwriter (which shall be of nationally recognized standing) to administer the offering, but if Endo LLC at such time own at least 60% of the number of shares of Common Stock they own on the date hereof, only with the approval of Endo LLC, such approval not to be unreasonably withheld. Notwithstanding the foregoing sentence, whenever a registration requested pursuant to Section 1.1 hereof is for an underwritten offering, Endo LLC will have the right to select the managing underwriter (which shall be of nationally recognized standing) to administer the offering, but only with the approval of the Company, such approval not to be unreasonably withheld. 5. Holdback Agreements. (a) If and whenever the Company proposes to ------------------- register any of its equity securities under the Securities Act for its own account (other than on Form S-4 or S-8 or any successor form) or is required to use its best efforts to effect the registration of any Registrable Securities under the Securities Act pursuant to Sections 1.1 or 2, each holder of Registrable Securities agrees by acquisition of such Registrable Securities not to effect any sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, or to request registration under Section 1.1 of any Registrable Securities within seven days prior to and 90 days (unless advised by the managing underwriter that a longer period, not to exceed 180 days, is required, or such shorter period as the managing underwriter for any underwritten offering may agree) after the effective date of the registration statement relating to such registration, except as part of such registration or unless, in the case of a private sale of distribution, the transferee agrees in writing to be subject to this Section 5. If requested by such managing underwriter, each holder of Registrable Securities agrees to execute a holdback agreement, in customary form, consistent with the terms of this Section 5(a). (b) The Company agrees not to effect any public sale or distribution of its equity securities or securities convertible into or exchangeable or exercisable for any of such securities within seven days prior to and 90 days (unless advised in writing by the managing underwriter that a longer period, not to exceed 180 days, is required, or such shorter period as the managing underwriter for any underwritten offering may agree) after the effective date of any registration statement filed pursuant to Section 1.1 10 (except (i) as part of such registration, (ii) as permitted by the related - -- underwriting, (iii) pursuant to an employee equity compensation plan, (iv) --- -- pursuant to an acquisition or strategic relationship, bank or equipment financing or similar transaction or (v) pursuant to a registration on Form S-4 - or S-8 or any successor form). In addition, upon the request of the managing underwriter, the Company shall use its best efforts to cause each holder of its equity securities or any securities convertible into or exchangeable or exercisable for any of such securities, whether outstanding on the date of this Agreement or issued at any time after the date of this Agreement (other than any such securities acquired in a public offering), to agree not to effect any such public sale or distribution of such securities during such period, except as part of any such registration if permitted, and to cause each such holder to enter into a similar agreement to such effect with the Company. 6. Preparation; Reasonable Investigation. In connection with the ------------------------------------- preparation and filing of each registration statement registering Registrable Securities under the Securities Act, the Company will give counsel to the holders of such Registrable Securities so to be registered the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each of them such access to the financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have issued audit reports on its financial statements as shall be reasonably requested by such holders in connection with such registration statement. 7. No Grant of Future Registration Rights. The Company shall not -------------------------------------- grant any other demand or incidental registration rights to any other Person without the prior written consent of Endo LLC, so long as Endo LLC continues to own at least 15% of the number of shares of Common Stock that Endo LLC owns on the date hereof. During the term of this Agreement, the Company shall not grant to any third party incidental registration rights that are of a higher priority to the rights granted to the holders of Registrable Securities under Section 2 hereof. 8. Indemnification. --------------- 8.1. Indemnification by the Company. In the event of any ------------------------------ registration of any Registrable Securities pursuant to this Agreement, the Company will indemnify, defend and hold harmless (a) each seller of such - Registrable Securities, (b) the directors, members, stockholders, officers, - partners, employees, agents and Affiliates of such seller, (c) each Person who - participates as an underwriter in the offering or sale of such securities and (d) each person, if any, who controls (within the meaning of Section 15 of the - Securities Act or Section 20 of the Exchange Act) any of the foregoing against any and all losses, claims, damages or liabilities (or actions or proceedings in respect 11 thereof), jointly or severally, directly or indirectly, based upon or arising out of (i) any untrue statement or alleged untrue statement of a fact - contained in any registration statement under which such Registrable Securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein or used in connection with the offering of securities covered thereby, or any amendment or supplement thereto, or (ii) any omission or alleged omission to state a fact required to be -- stated therein or necessary to make the statements therein not misleading; and the Company will reimburse each such indemnified party for any legal or any other expenses reasonably incurred by them in connection with enforcing its rights hereunder or under the underwriting agreement entered into in connection with such offering or investigating, preparing, pursuing or defending any such loss, claim, damage, liability, action or proceeding, except insofar as any such loss, claim, damage, liability, action, proceeding or expense arises out of or is based upon an untrue statement or omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such seller expressly for use in the preparation thereof. Such indemnity shall remain in full force and effect, regardless of any investigation made by such indemnified party and shall survive the transfer of such Registrable Securities by such seller. If the Company is entitled to, and does, assume the defense of the related action or proceedings provided herein, then the indemnity agreement contained in this Section 8.1 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld or delayed). 8.2. Indemnification by the Sellers. The Company may require, as a ------------------------------ condition to including any Registrable Securities in any registration statement filed pursuant to Sections 1.1 or 2 that the Company shall have received an undertaking satisfactory to it from each of the prospective sellers of such Registrable Securities to indemnify and hold harmless, severally, not jointly, in the same manner and to the same extent as set forth in Section 8.1 hereof, the Company, its directors, officers, employees, agents and each person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) the Company with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. (The Company and the holders of the Registrable Securities hereby acknowledge and agree that, unless otherwise expressly agreed to in writing by such holders, the only information furnished or to be furnished to the Company for use in any registration statement or 12 prospectus relating to the Registrable Securities or in any amendment, supplement or preliminary materials associated therewith are statements specifically relating to (a) transactions between such holder and its - Affiliates, on the one hand, and the Company, on the other hand, (b) the - beneficial ownership of shares of Common Stock by such holder and its Affiliates and (c) the name and address of such holder. If any additional information - about such holder or the plan of distribution (other than for an underwritten offering) is required by law to be disclosed in any such document, then such holder shall not unreasonably withhold its agreement referred to in the immediately preceding sentence of this Section 8.2.) Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling Person and shall survive the transfer of such Registrable Securities by such seller. The indemnity agreement contained in this Section 8.2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of such seller (which consent shall not be unreasonably withheld or delayed). The indemnity provided by each seller of Registrable Securities under this Section 8.2 shall be limited in amount to the net amount of proceeds actually received by such seller from the sale of Registrable Securities pursuant to such registration statement. 8.3. Notices of Claims, etc. Promptly after receipt by an ---------------------- indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraphs of this Section 8, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the indemnifying party of the commencement of such action or proceeding; provided that the failure of any -------- ---- indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 8, except to the extent that the indemnifying party is materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, the indemnifying party will be entitled to participate therein and to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof except for the reasonable fees and expenses of any counsel retained by such indemnified party to monitor such action or proceeding. Notwithstanding the foregoing, if such indemnified party reasonably determines, based upon advice of independent counsel, that a conflict of interest may exist between the indemnified party and the indemnifying party with respect to such action and that it is advisable for such indemnified party to be represented by separate counsel, such indemnified party may retain other counsel, reasonably satisfactory to the indemnifying party, to represent such indemnified party, and the indemnifying party shall pay all reasonable fees and expenses of such counsel. No indemnifying party, in the defense of any such 13 claim or litigation, shall, except with the consent of such indemnified party, which consent shall not be unreasonably withheld, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. 8.4. Other Indemnification. Indemnification similar to that --------------------- specified in the preceding paragraphs of this Section 8 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration (other than under the Securities Act) or other qualification of such Registrable Securities under any federal or state law or regulation of any governmental authority. 8.5. Indemnification Payments. Any indemnification required to be ------------------------ made by an indemnifying party pursuant to this Section 8 shall be made by periodic payments to the indemnified party during the course of the action or proceeding, as and when bills are received by such indemnifying party with respect to an indemnifiable loss, claim, damage, liability or expense incurred by such indemnified party. 8.6. Other Remedies. If for any reason the foregoing indemnity is -------------- unavailable, or is insufficient to hold harmless an indemnified party, other than by reason of the exceptions provided therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities, actions, proceedings or expenses in such proportion as is appropriate to reflect the relative benefits to and faults of the indemnifying party on the one hand and the indemnified party on the other in connection with the offering of Registrable Securities (taking into account the portion of the proceeds of the offering realized by each such party) and the statements or omissions or alleged statements or omissions which resulted in such loss, claim, damage, liability, action, proceeding or expense, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statements or omissions. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. No party shall be liable for contribution under this Section 8.6 except to the extent and under such circumstances as such party would have been liable to indemnify under this Section 8 if such indemnification were enforceable under applicable law. 14 9. Representations and Warranties. Endo LLC represents and warrants ------------------------------ to the Company that: (i) Endo LLC has all limited liability company power and to execute, deliver and perform this Agreement; (ii) the execution, delivery and performance of this Agreement by Endo LLC has been duly and validly authorized and approved by all necessary limited liability company action; (iii) this Agreement has been duly and validly executed and delivered by Endo LLC and constitutes a valid and legally binding obligation of Endo LLC, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to creditors' rights generally and general principles of equity; and (iv) the execution, delivery and performance of this Agreement by Endo LLC does not and will not violate the terms of or result in the acceleration of any obligation under (A) any material contract, commitment or - other material instrument to which Endo LLC is a party or by which Endo LLC is bound and (B) the limited liability company agreement of Endo LLC. - 10. Definitions. For purposes of this Agreement, the following ----------- terms shall have the following respective meanings: Affiliate: a Person that directly, or indirectly through one or more --------- intermediaries, controls, or is controlled by, or is under common control with, the Person specified. Board: the board of directors of the Company. ----- Commission: the Securities and Exchange Commission. ---------- Common Stock: the common stock of the Company, par value $.01 per ------------ share. Exchange Act: the Securities Exchange Act of 1934, as amended, or any ------------ successor federal statute, and the rules and regulations thereunder which shall be in effect at the time. NASD: National Association of Securities Dealers, Inc. ---- NASDAQ: the Nasdaq National Market. ------ 15 Permitted Transferee: as defined in Section 11.2 hereof. -------------------- Person: an individual, corporation, partnership, limited liability ------ company, joint venture, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. Registrable Securities: the shares of Common Stock beneficially owned ---------------------- (within the meaning of Rule 13d-3 of the Exchange Act) by Endo LLC or the Permitted Transferees. As to any particular shares of Common Stock, such securities shall cease to be Registrable Securities when (i) a registration - statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) a registration statement -- on Form S-8 with respect to the sale of such securities shall have become effective under the Securities Act, (iii) they shall have been sold to the --- public pursuant to Rule 144 under the Securities Act, (iv) they shall have been -- otherwise transferred other than to a Permitted Transferee and subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force or (v) they - shall have ceased to be outstanding. Registration Expenses: all expenses incident to the Company's --------------------- performance of or compliance with any registration pursuant to this Agreement, including, without limitation, (i) registration, filing and NASD fees, (ii) fees - -- and expenses of complying with securities or blue sky laws, (iii) fees and --- expenses associated with listing securities on an exchange or NASDAQ, (iv) word -- processing, duplicating and printing expenses, (v) messenger and delivery - expenses, (vi) transfer agents', trustees', depositories', registrars' and -- fiscal agents' fees, (vii) fees and disbursements of counsel for the Company and --- of its independent public accountants, including the expenses of any special audits or "cold comfort" letters, (viii) reasonable fees and disbursements of ---- any one counsel retained by the sellers of Registrable Securities, which counsel shall be designated in the manner specified in Section 3 hereof and (ix) any -- fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding underwriting discounts and commissions and transfer taxes, if any. Securities Act: the Securities Act of 1933 or any successor federal -------------- statute, and the rules and regulations thereunder which shall be in effect at the time. 11. Miscellaneous. ------------- 11.1. Rule 144, etc. If the Company shall have filed a registration ------------- statement pursuant to the requirements of Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the Securities Act relating to any class of equity securities, the Company will file the reports required to be filed by it under 16 the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder, and will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such rule may be amended - from time to time, or (b) any successor rule or regulation hereafter adopted by - the Commission. Upon the request of any holder of Registrable Securities, the Company will deliver to such holder a written statement as to whether it has complied with such requirements. 11.2. Successors, Assigns and Transferees. This Agreement shall be ----------------------------------- binding upon and insure to the benefit of the parties hereto and their respective successors and permitted assigns under this Section 11.2. Provided that an express assignment shall have been made, and the assignee has executed a joinder agreement agreeing to be bound by all of the assignor's obligations hereunder, including, without limitation, Section 5 hereof, copies of which shall have been delivered to the Company, the provisions of this Agreement which are for the benefit of a holder of Registrable Securities shall be for the benefit of and enforceable by any subsequent holder of any Registrable Securities; provided that such transferee is a holder of Registrable Securities -------- ---- in accordance with the terms of the Stockholders Agreement ("Permitted --------- Transferees"). - ----------- 11.3. Stock Splits. Each holder of Registrable Securities agrees ------------ that it will vote to effect a stock split, reverse stock split, recapitalization or combination with respect to any Registrable Securities in connection with any registration of any Registrable Securities hereunder, or otherwise, if the managing underwriter shall advise the Company in writing (or, in connection with an offering that is not underwritten, if an investment banker shall advise the Company in writing) that in its opinion such a stock split, reverse stock split, recapitalization or combination would facilitate or increase the likelihood of success of the offering. The Company shall cooperate in all respects in effecting any such stock split, reverse stock split, recapitalization or combination. 11.4. Amendment and Modification. This Agreement may be amended, -------------------------- modified or supplemented by the Company with the written consent of Endo LLC and a majority (by number of shares) of any other holders of Registrable Securities whose interests would be adversely affected by such amendment. 11.5. Governing Law. This Agreement and the rights and obligations ------------- of the parties hereunder and the persons subject hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of Delaware, without giving effect to the choice of law principles thereof. 17 11.6. Invalidity of Provision. The invalidity or unenforceability of ----------------------- any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction. 11.7. Notices. All notices, requests, demands, letters, waivers and ------- other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered - personally, (b) mailed, certified or registered mail with postage prepaid, (c) - - sent by next-day or overnight mail or delivery or (d) sent by fax, as follows: - (i) If to the Company, to it at: Endo Pharmaceuticals Holdings Inc. 223 Wilmington-West Chester Pike Chadds Ford, PA 19317 Fax: (610) 558-9683 Attention: Carol A. Ammon President and Chief Executive Officer with a copy to Endo LLC at its address set forth in (iv) below. (iv) If to Endo LLC, to it at: Endo Pharma LLC c/o Kelso & Company 320 Park Avenue New York, New York 10022 Fax: 212-223-2379 Attention: James J. Connors, II, Esq. General Counsel or to such other person or address as any party shall specify by notice in writing to the Company. All such notices, requests, demands, letters, waivers and other communications shall be deemed to have been received (w) if by - personal delivery on the day after such delivery, (x) if by certified or - registered mail, on the fifth business day after the mailing thereof, (y) if by - next-day or overnight mail or delivery, on the day delivered or (z) if by fax, - on the next day following the day on which such fax was sent, provided that a copy is also sent by certified or registered mail. 11.8. Headings; Execution in Counterparts. The headings and captions ----------------------------------- contained herein are for convenience and shall not control or affect the meaning or construction of any provision hereof. This Agreement may be executed in any number 18 of counterparts, each of which shall be deemed to be an original and which together shall constitute one and the same instrument. 11.9. Injunctive Relief. Each of the parties recognizes and agrees ----------------- that money damages may be insufficient and, therefore, in the event of a breach of any provision of this Agreement the aggrieved party may elect to institute and prosecute proceedings in any court of competent jurisdiction to enforce specific performance or to enjoin the continuing breach of this Agreement. Such remedies shall, however, be cumulative and not exclusive, and shall be in addition to any other remedy which such party may have. 11.10. Term. This Agreement shall be effective as of the date hereof ---- and shall continue in effect thereafter until the earlier of (a) its termination - by the consent of the parties hereto or their respective successors in interest and (b) the date on which no Registrable Securities remain outstanding. - 11.11. Further Assurances. Subject to the specific terms of this ------------------ Agreement, each of the Company and Endo LLC shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions, as may be reasonably required in order to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby. 11.12. Entire Agreement. This Agreement, together with the ---------------- Stockholders Agreement and the Exchange Agreements (as defined in the Stockholders Agreement), is intended by the parties hereto as a final expression of their agreement and intended to be a complete and exclusive statement of their agreement and understanding in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. [SIGNATURES FOLLOW] 19 IN WITNESS WHEREOF this Agreement has been signed by each of the parties hereto, and shall be effective as of the date first above written. ENDO PHARMACEUTICALS HOLDINGS INC. By: /s/ Carol A. Ammon ----------------------------------------------- Name: Carol A. Ammon Title: President & Chief Executive Officer ENDO PHARMA LLC By: /s/ Jeffrey R. Black ----------------------------------------------- Name: Jeffrey R. Black Title: Chief Financial Officer 20 EX-99.15 16 0016.txt JOINT FILING AGREEMENT Exhibit 15 JOINT FILING AGREEMENT ---------------------- Pursuant to Rule 13d-1(k)(1)(iii) promulgated under the Securities Exchange Act of 1934, as amended, the undersigned agree that the Statement on Schedule 13D (including amendments thereto) with respect to the Common Stock of Endo Pharmaceuticals Holdings Inc. to which this exhibit is attached is filed on behalf of each of them in the capacities set forth below. Dated: July 26, 2000 ENDO PHARMA LLC By: /s/ Jeffrey R. Black ---------------------------------- Name: Jeffrey R. Black Title: Chief Financial Officer KELSO INVESTMENT ASSOCIATES V, L.P. By: Kelso Partners V, L.P., its General Partner By: * ------------------------------------- KELSO EQUITY PARTNERS V, L.P. By: * ------------------------------------ KELSO PARTNERS V, L.P. By: * ------------------------------------- * ----------------------------------------- Joseph S. Schuchert * ---------------------------------------- Frank T. Nickell * ---------------------------------------- George E. Matelich * ____________________________________ Thomas R. Wall, IV * ____________________________________ Frank K. Bynum, Jr. * ____________________________________ Michael B. Goldberg * ____________________________________ David I. Wahrhaftig * ____________________________________ Philip E. Berney GREENWICH STREET CAPITAL PARTNERS, L.P. By: Greenwich Street Investments, L.P., its general partner By: Greenwich Street Investments, L.L.C., General Partner By: /s/ Eric S. Bomze ------------------------------- Name: Eric S. Bomze Title: Assistant Vice President GREENWICH STREET CAPITAL OFFSHORE FUND, LTD. By: Greenwich Street Capital Partners, Inc., as Manager By: /s/ Eric S. Bomze ------------------------------- Name: Eric S. Bomze Title: Assistant Vice President TRV EMPLOYEES FUND, L.P. By: TRV Employees Investments, Inc. its general partner By: /s/ Eric S. Bomze ------------------------------- Name: Eric S. Bomze Title: Assistant Vice President 2 THE TRAVELERS INSURANCE COMPANY By: /s/ Millie Kim -------------------------------------- Name: Millie Kim Title: Assistant Secretary THE TRAVELERS LIFE AND ANNUITY COMPANY By: /s/ Millie Kim -------------------------------------- Name: Millie Kim Title: Assistant Secretary CITIGROUP INC. By: /s/ Joseph B. Wollard -------------------------------------- Name: Joseph B. Wollard Title: Assistant Secretary GREENWICH STREET INVESTMENTS, L.P. By: Greenwich Street Investments, L.L.C., General Partner By: /s/ Eric S. Bomze -------------------------------------- Name: Eric S. Bomze Title: Assistant Vice President GREENWICH STREET INVESTMENTS, L.L.C. By: /s/ Eric S. Bomze -------------------------------------- Name: Eric S. Bomze Title: Assistant Vice President GREENWICH STREET CAPITAL PARTNERS, INC. By: /s/ Eric S. Bomze -------------------------------------- Name: Eric S. Bomze Title: Assistant Vice President TRV EMPLOYEES INVESTMENTS, INC. By: /s/ Eric S. Bomze -------------------------------------- Name: Eric S. Bomze Title: Assistant Vice President /s/ Alfred C. Eckert III -------------------------------------- Alfred C. Eckert III 3 /s/ Keith W. Abell -------------------------------------- Keith W. Abell /s/ Sanjay H. Patel -------------------------------------- Sanjay H. Patel * The undersigned, by signing his name hereto, executes this Agreement pursuant to the Power of Attorney executed on behalf of the above-named entities and individuals and filed herewith. By: /s/ Stanley de J. Osborne ------------------------------------ Attorney-in-Fact 4 EX-99.16 17 0017.txt POWERS OF ATTORNEY Exhibit 16 Power of Attorney ----------------- Each of the undersigned hereby constitutes and appoints James J. Connors, II, Howard A. Matlin, Frank J. Loverro and Stanley de J. Osborne, and each of them, with full power of substitution and resubstitution, as his true and lawful attorneys-in-fact and agents to: (1) execute and deliver for and on behalf of the undersigned (i) any and all Forms 3, 4 and 5 (and any amendments thereto) relating to Endo Pharmaceuticals Holdings Inc. (the "Company") and required to be filed in accordance with Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules thereunder and (ii) any and all schedules relating to the company required to be filed in accordance with Section 13(d) of the Exchange Act and the rules thereunder (together, the "Forms and Schedules"), in each of the undersigned's capacity as a director and/or con trolling person of the Company and/or as a partner of Kelso Partners V, L.P., and/or Kelso Investment Associates V, L.P. and/or Kelso Equity Partners V, L.P., and in and all other capacities pursuant to which such Forms and Schedules may be required to be filed by the undersigned; (2) do and perform any and all acts on behalf of the undersigned which may be necessary or desirable to complete and execute any such Forms and timely file such Forms and Schedules with the United States Securities and Ex change Commission and any stock exchange or similar authority; and (3) take any other action of any type whatsoever in connection with the foregoing which, in the opinion of such attorney-in-fact, may be of benefit to, in the best interest of, or legally required by, the undersigned, it being understood that the documents executed by such attorney-in-fact on behalf of the under signed pursuant to this Power of Attorney shall be in such form and shall contain such terms and conditions as such attorney-in- fact may approve in such attorney-in-fact's discretion. Each of the undersigned hereby grants to such attorney-in-fact and agent full power and authority to do and perform any and every act and thing whatsoever requisite, necessary or proper to be done in the exercise of any of the rights and powers herein granted, as fully to all intents and purposes as the under signed might or could do if personally present, with full power of substitution of revocation, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitute or substitutes, shall lawfully do or cause to be done by virtue of this power of attorney and the rights and powers herein grants. The undersigned acknowledges that the foregoing attorneys-in-fact and agents, in servicing in such capacity at the request of the undersigned, are not assuming any of the undersigned's responsibilities to comply with Section 16 or Section 13(d) of the Exchange Act. This Power of Attorney shall remain in full force and effect until the undersigned is no longer required to file the Forms and Schedules with respect to the undersigned's holdings of, and transactions in, securities issued by the Company, unless earlier revoked by the undersigned in a signed writing delivered to the foregoing attorneys-in-fact and agents. This Power of Attorney may be signed in two or more counterparts by the parties hereto, each of which when so executed will be an original, but all of which together will constitute one and the same instrument. 2 IN WITNESS WHEREOF, each of the undersigned has caused this Power of Attorney to be executed as of the 26th day of July, 2000. /s/ Michael B. Goldberg -------------------------- Michael B. Goldberg /s/ David I. Wahrhaftig -------------------------- David I. Wahrhaftig /s/ Frank J. Loverro -------------------------- Frank J. Loverro /s/ Philip E. Berney -------------------------- Philip E. Berney /s/ Frank K. Bynum, Jr. -------------------------- Frank K. Bynum, Jr. /s/ George E. Matelich -------------------------- George E. Matelich /s/ Frank T. Nickell -------------------------- Frank T. Nickell /s/ Joseph S. Schuchert -------------------------- Joseph S. Schuchert /s/ Thomas R. Wall, IV -------------------------- Thomas R. Wall, IV 3 Power of Attorney ----------------- Each of the undersigned hereby constitutes and appoints Carol A. Ammon and Jeffrey R. Black, and each of them, with full power of substitution and resubstitution, as his true and lawful attorneys-in-fact and agents to: (1) execute and deliver for and on behalf of the undersigned (i) any and all Forms 3, 4 and 5 (and any amendments thereto) relating to Endo Pharmaceuticals Holdings Inc. (the "Company") and required to be filed in accordance with Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules thereunder and (ii) any and all schedules relating to the company required to be filed in accordance with Section 13(d) of the Exchange Act and the rules thereunder (together, the "Forms and Schedules"), in each of the undersigned's capacity as a director of the Com pany, and in and all other capacities pursuant to which such Forms and Schedules may be required to be filed by the undersigned; (2) do and perform any and all acts on behalf of the undersigned which may be necessary or desirable to complete and execute any such Forms and timely file such Forms and Schedules with the United States Securities and Ex change Commission and any stock exchange or similar authority; and (3) take any other action of any type whatsoever in connection with the foregoing which, in the opinion of such attorney-in-fact, may be of benefit to, in the best interest of, or legally required by, the undersigned, it being understood that the documents executed by such attorney-in-fact on behalf of the under signed pursuant to this Power of Attorney shall be in such form and shall contain such terms and conditions as such attorney-in- fact may approve in such attorney-in-fact's discretion. Each of the undersigned hereby grants to such attorney-in-fact and agent full power and authority to do and perform any and every act and thing whatsoever requisite, necessary or proper to be done in the exercise of any of the rights and powers herein granted, as fully to all intents and purposes as the under signed might or could do if personally present, with full power of substitution of revocation, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitute or substitutes, shall lawfully do or cause to be done by virtue of this power of attorney and the rights and powers herein grants. The undersigned acknowledges that the foregoing attorneys- in-fact and agents, in servicing in such capacity at the request of the undersigned, are not assuming any of the undersigned's 4 responsibilities to comply with Section 16 or Section 13(d) of the Exchange Act. This Power of Attorney shall remain in full force and effect until the undersigned is no longer required to file the Forms and Schedules with respect to the undersigned's holdings of, and transactions in, securities issued by the Company, unless earlier revoked by the undersigned in a signed writing delivered to the foregoing attorneys-in-fact and agents. This Power of Attorney may be signed in two or more counterparts by the parties hereto, each of which when so executed will be an original, but all of which together will constitute one and the same instrument. 5 IN WITNESS WHEREOF, each of the undersigned has caused this Power of Attorney to be executed as of the 26/th/ day of July, 2000. /s/ Carol A. Ammon -------------------------- Carol A. Ammon /s/ David Fyfe -------------------------- David Fyfe /s/ Michael W. Mitchell -------------------------- Michael W. Mitchell 6 -----END PRIVACY-ENHANCED MESSAGE-----