-----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, GZJq0w4f32J8PFHF42H6AT/hWNVHXhuJovHUfePBkrkSHGA6QwUzf0+CWbPgx9fU BsSKBYabDqA421Nike0aeg== 0000950130-96-003846.txt : 19961010 0000950130-96-003846.hdr.sgml : 19961010 ACCESSION NUMBER: 0000950130-96-003846 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19961009 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROBERTS PHARMACEUTICAL CORP CENTRAL INDEX KEY: 0000853022 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 222429994 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-13729 FILM NUMBER: 96640879 BUSINESS ADDRESS: STREET 1: MERIDIAN CENTRE II STREET 2: 4 INDUSTRIAL WAY W CITY: EATONTOWN STATE: NJ ZIP: 07724 BUSINESS PHONE: 9083891182 MAIL ADDRESS: STREET 1: MERIDIAN CTR II STREET 2: 4 INDUSTRIAL WAY WEST CITY: EATONTOWN STATE: NJ ZIP: 07724 S-3 1 FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1996 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _______________ ROBERTS PHARMACEUTICAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) _______________ NEW JERSEY 22-2429994 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) MERIDIAN CENTER II 4 INDUSTRIAL WAY WEST EATONTOWN, NEW JERSEY 07724 (908) 389-1182 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ROBERT A. VUKOVICH, PH.D. CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER ROBERTS PHARMACEUTICAL CORPORATION MERIDIAN CENTER II 4 INDUSTRIAL WAY WEST EATONTOWN, NEW JERSEY 07724 (908) 389-1182 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) _______________ COPIES TO: JOHN A. AIELLO, ESQ. GIORDANO, HALLERAN & CIESLA A PROFESSIONAL CORPORATION 125 HALF MILE ROAD MIDDLETOWN, NEW JERSEY 07748 _______________ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
Title of each class of Proposed maximum Proposed maximum Amount of securities to be Amount to be offering price per aggregate offering registration fee registered registered (1)(2) share (3) price (3) - ----------------------------------------------------------------------------------------------------------------- Common Stock, 10,024,540 $17.75 $177,935,585 $61,353 $.01 par value - -----------------------------------------------------------------------------------------------------------------
(1) Includes the registration for resale of the following: (i) 600,000 shares of Common Stock (subject to adjustment) issued in a private placement in July 1996, (ii) all shares of Common Stock issuable upon conversion of 4,200,000 shares of the Registrant's 5% Convertible Preferred Stock issued in a private placement in August 1996, (iii) all shares of Common Stock issuable upon conversion of 419,229 shares of the Registrant's 5% Convertible Preferred Stock issuable, in lieu of cash, as dividends in respect of the shares of 5% Convertible Preferred Stock issued in the August private placement, (iv) 15,000 shares of Common Stock (subject to adjustment) issuable upon the exercise of warrants issued in connection with the July private placement, and (v) all shares of Common Stock issuable upon conversion of 420,000 shares of the Registrant's 5% Convertible Preferred Stock issuable upon the exercise of warrants issued in connection with the August private placement, and all shares of Common Stock issuable upon conversion of 41,923 shares of the Registrant's 5% Convertible Preferred Stock issuable, in lieu of cash, as dividends in respect of such shares of 5% Convertible Preferred Stock issuable upon the exercise of such warrants. Estimated solely for the purpose of calculating the registration fee in connection with this Registration Statement. Assumes that all shares of the Registrant's 5% Convertible Preferred Stock are converted into shares of Common Stock based on a conversion price of $13.50, which equals 90% of the market price of $15 per share of Common Stock (the lowest reported sale price on the Nasdaq National Market since January 1, 1994). (2) In the event of a stock split, stock dividend or similar transaction involving the Common Stock of the Registrant, in order to prevent dilution, the number of shares of Common Stock registered hereby shall be automatically increased to cover the additional shares of Common Stock in accordance with Rule 416 under the Securities Act of 1933. (3) Estimated in accordance with Rule 457(c) under the Securities Act of 1933, solely for purposes of calculating the registration fee and based upon an amount which is equal to the average of the high and low sale prices for a share of the Registrant's Common Stock as reported on the Nasdaq National Market on October 3, 1996. _______________ The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ________________________________________________________________ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. PROSPECTUS (SUBJECT TO COMPLETION) ISSUED OCTOBER __, 1996 10,024,540 SHARES* ROBERTS PHARMACEUTICAL CORPORATION COMMON STOCK _______________ All of the shares of Roberts Pharmaceutical Corporation Common Stock, $.01 par value per share ("Common Stock"), offered hereby are being offered by certain shareholders and warrantholders (the "Selling Shareholders") of Roberts Pharmaceutical Corporation (the "Company"). The Company will not receive any proceeds from the sale of shares of Common Stock by the Selling Shareholders. See "Use of Proceeds." All expenses of this offering will be paid for by the Company except for commissions, fees and discounts of any underwriters, brokers, dealers or agents retained by the Selling Shareholders. The Company has agreed to indemnify the Selling Shareholders against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). See "Plan of Distribution." The Common Stock of the Company is traded on the Nasdaq National Market under the symbol "RPCX." On October 4, 1996, the last reported sale price of the Company's Common Stock, as reported on the Nasdaq National Market, was $18-1/8 per share. * The shares of Common Stock offered hereby for resale are: (i) 600,000 shares of Common Stock (subject to adjustment) issued in a private placement in July 1996, (ii) all such currently indeterminate number of shares of Common Stock issuable upon conversion of 4,200,000 shares of the Company's 5% Convertible Preferred Stock, $.10 par value per share (the "Convertible Preferred Stock"), issued in a private placement in August 1996, (iii) all shares of Common Stock issuable upon conversion of 419,229 shares of Convertible Preferred Stock issuable, in lieu of cash, as dividends in respect of the shares of Convertible Preferred Stock issued in the August private placement, (iv) 15,000 shares of Common Stock (subject to adjustment) issuable upon the exercise of warrants issued in connection with the July private placement (the "Common Stock Warrants"), and (v) all shares of Common Stock issuable upon conversion of 420,000 shares of Convertible Preferred Stock issuable upon the exercise of warrants issued in connection with the August private placement (the "Convertible Preferred Stock Warrants"), and all shares of Common Stock issuable upon conversion of 41,923 shares of Convertible Preferred Stock issuable, in lieu of cash, as dividends in respect of such shares of Convertible Preferred Stock issuable upon the exercise of the Convertible Preferred Stock Warrants. The number of shares of Common Stock issuable in connection with such transactions and offered for resale hereby is an estimate based upon a "Conversion Price" (as such term is defined under the section of this Prospectus captioned "Risk Factors--Effects of Conversion of Convertible Preferred Stock") which is equal to ninety percent (90%) of the lowest market price of the Common Stock since January 1, 1994, is subject to adjustment, and could be materially less or more than such estimated amount depending upon factors which cannot be predicted by the Company at this time, including, without limitation, the future market price of the Common Stock. In addition, the estimated number of shares offered for resale hereby is based on the assumptions as to dates of conversion of the Convertible Preferred Stock, dividend payment dates and dates of exercise of Convertible Preferred Stock Warrants which are set forth under the caption "Risk Factors--Effects of Conversion of Convertible Preferred Stock." If a market price of $15 per share of Common Stock (the lowest reported sale price on the Nasdaq National Market since January 1, 1994) were to be used to determine the number of shares of Common Stock issuable as of August 29, 1998 (the date on which all outstanding shares of Convertible Preferred Stock automatically convert into Common Stock), the Company would be obligated to issue a total of approximately 9,409,540 shares of Common Stock if all 5,081,152 shares of Convertible Preferred Stock outstanding or issuable upon the exercise of Convertible Preferred Stock Warrants or as dividends on the Convertible Preferred Stock were converted on the basis of such market price. There can be no assurance that the market price set forth above is indicative of future market prices of the Common Stock at such times when shares of Convertible Preferred Stock are converted into shares of Common Stock. See "Risk Factors-- Effect of Conversion of Convertible Preferred Stock" and "Description of Securities--Class B Preferred Stock; Description of Convertible Preferred Stock." SEE "RISK FACTORS," BEGINNING ON PAGE 5 OF THIS PROSPECTUS, FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK. _______________ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE -2- ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS OCTOBER __, 1996. No person is authorized in connection with any offering made hereby to give any information or to make any representation not contained or incorporated by reference in this Prospectus and any information or representation not contained or incorporated by reference herein must not be relied upon as having been authorized by the Company or by any Selling Shareholder. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall under any circumstance at any time imply that the information herein is correct as of any date subsequent to the date hereof. _______________ TABLE OF CONTENTS
Page Page ---- ---- Available Information... 2 Use of Proceeds........... 22 Incorporation of Certain Selling Shareholders...... 23 Documents by Reference.. 3 Plan of Distribution...... 25 Risk Factors............ 4 Description of Securities. 26 The Company............. 15 Legal Matters............. 37 Recent Developments..... 17 Experts................... 38
___________________ AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy and information statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy and information statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices located at Seven World Trade Center, Suite 1300, New York, New York 10048, and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be obtained at prescribed rates from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the Commission maintains a Web site that contains reports, proxy and information statements and other information regarding the Company. The address of such site is http://www.sec.gov. -3- The Company has filed with the Commission a registration statement (the "Registration Statement") with respect to the Common Stock offered hereby. This Prospectus, which constitutes part of the Registration Statement, does not contain all of the information contained in the Registration Statement and the exhibits thereto. For further information with respect to the Company and the Common Stock offered hereby, reference is made to the Registration Statement, including the exhibits thereto. Statements contained herein concerning the provisions of any document filed as an exhibit to the Registration Statement or otherwise filed with the Commission are not necessarily complete, and in each instance reference is made to the copy of such document so filed. Each such statement is qualified in its entirety by such reference. Certain information included in this Prospectus and other Company filings (collectively, "SEC Filings") under the Securities Act and the Exchange Act (as well as information communicated orally or in writing between the dates of such SEC Filings) contains or may contain forward looking information that is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results. Among these risks, trends and uncertainties are the effect of governmental regulation on the Company, the availability of working capital, the cost of personnel and materials, and the competitive and constantly changing healthcare environment in which the Company competes. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, which have been filed by the Company with the Commission, are hereby incorporated by reference in this Prospectus: (i) the Company's Annual Report on Form 10-K for the year ended December 31, 1995; (ii) the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996; and (iii) the Company's Current Reports on Form 8-K, dated March 20, 1996 (two separate reports as of such date), March 26, 1996, May 17, 1996, May 31, 1996, June 10, 1996, July 17, 1996, July 18, 1996, July 22, 1996, July 24, 1996, August 14, 1996, September 9, 1996 and October 3, 1996. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein, or in any subsequently filed document which also is or is deemed to be incorporated by reference herein, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Copies of the documents incorporated -4- herein by reference (excluding exhibits unless such exhibits are specifically incorporated by reference into such documents) may be obtained upon written or oral request without charge by persons, including beneficial owners, to whom this Prospectus is delivered. Requests should be made to Roberts Pharmaceutical Corporation, Attention: Investor Relations Department, Meridian Center II, 4 Industrial Way West, Eatontown, New Jersey 07724, telephone number (908) 389- 1182, telefax number (908) 389-1014. RISK FACTORS In addition to the other information provided in this Prospectus, the following factors should be considered carefully in evaluating the Company and its business before purchasing shares of Common Stock offered by this Prospectus. RISKS OF NEW PRODUCT DEVELOPMENT; GOVERNMENT REGULATION The investigation, manufacture and sale of pharmaceutical products is subject to regulation, principally by the U.S. Food and Drug Administration ("FDA") and foreign equivalents. The process of obtaining FDA approval is costly and time-consuming, and there can be no assurance that any product that the Company is developing or may develop will be approved by the FDA. Products developed by the Company can be marketed commercially for specified therapeutic indications only when and where they have been approved by the applicable regulatory authorities. Of the pharmaceutical products under development by the Company, only PROAMATINE/TM/ has been approved by the FDA. Although the Company believes that its other products under development are promising, there can be no assurance that these products will prove to be efficacious or that toxic side effects will not occur. Furthermore, any of these products which are developed will be subject to requisite regulatory approval prior to their commercial sale, which approval may take several years and might not ever be obtained. Generally, only a small percentage of products under development are approved for sale. In addition, the Company is required, under FDA regulations, to conduct further studies to confirm the clinical benefits and safety of PROAMATINE. If these studies do not provide verification of the clinical benefits and safety of the drug, the Company will be required to file an accelerated approval withdrawal of such drug in accordance with FDA regulations and to cease selling such drug. No assurance can be given that the Company will succeed in the development and marketing of any of its products under development. United States Federal and state governments continue to seek means to reduce costs of Medicare and Medicaid programs, including placement of restrictions on reimbursement for, or access to, certain drug products. Major changes were made in the Medicaid program under the Omnibus Budget Reconciliation Act of 1990. As a result, the Company entered into a Medicaid Rebate Agreement ("Rebate Agreement") with the United States Government, under -5- Section 4401 of such Act. Pursuant to the Rebate Agreement, in order for federal reimbursement to be available for prescription drugs under state Medicaid plans, the Company must pay certain statutorily prescribed rebates on Medicaid purchases. Effective July 1, 1991, the law also denies federal Medicaid reimbursement for drug products of the original holder of the New Drug Application for such drug if a less expensive generic version of such drug is available from another manufacturer, unless the prescriber indicates on the prescription that the branded product is medically necessary. In most other markets, governments exert controls over pharmaceutical prices either directly or by controlling admission to, or levels for, reimbursement by government health programs. The nature of such controls and their effect on the pharmaceutical industry vary greatly from country to country. Such controls generally have an adverse effect on revenue levels of pharmaceutical companies such as the Company. PATENTS, PROPRIETARY RIGHTS AND RELATIONSHIPS WITH LICENSORS The Company owns, or is a licensee under, or has filed applications for, United States and foreign patents covering certain of its marketed products and for certain of its late-stage products under development. There can be no assurance that such patents are enforceable, will be approved, or will provide the Company with meaningful protection from competition or that the Company will possess the financial resources necessary to enforce any patent rights licensed to the Company. Others may be engaged in research which may lead to patents similar to those owned by the Company or under which the Company is a licensee. Accordingly, infringement claims may be asserted against the Company or its licensors which, if upheld, may require the Company to cease developing or marketing a product or to acquire licenses from others. There can be no assurance that such licenses, if required, will be available or can be obtained on terms satisfactory to the Company. In addition, the proprietary nature of PROAMATINE, and three (3) of the Company's late-stage products under development are dependent, in whole or in part, upon certain U.S. regulations. PROAMATINE, for idiopathic orthostatic hypotension, has been designated by the FDA as an "orphan drug" under the Orphan Drug Act of 1983 (the "Orphan Drug Act"). This entitles the Company to a seven year period of market exclusivity in the United States from the date of FDA approval of the drug, when and if obtained. PROAMATINE was approved by the FDA on September 6, 1996. Each of SOMAGARD (R), for central precocious puberty, and AGRELIN(R), for thrombocythemia, has been designated by the FDA as being eligible for orphan drug status. In addition, the Company believes that its late-stage product DIRAME(R) contains a new active ingredient which may entitle the product, under the Drug Price Competition and Patent Term Restoration Act of 1984 (commonly referred to as the "Waxman-Hatch Act"), to five years of market exclusivity from the date of FDA approval of the drug, if obtained. No assurance can be -6- given that (i) SOMAGARD and AGRELIN will be designated as orphan drugs in the event that FDA approval of such drug is obtained, or (ii) DIRAME will be entitled to market exclusivity under the Waxman-Hatch Act or that other parties will not challenge the Company's rights to such exclusivity. DEPENDENCE UPON THIRD PARTIES FOR MANUFACTURING AND RAW MATERIALS Currently, the Company does not manufacture its products. The products sold by the Company are manufactured for the Company by contractors which, in the case of certain products which generate substantial revenues for the Company, are large pharmaceutical manufacturers. In most instances where the Company has acquired the rights to approved products from other pharmaceutical companies, the seller or licensor has agreed to manufacture the Company's requirements of the products generally for periods of 2 to 5 years. The Company anticipates that most other products it acquires will be manufactured under similar arrangements. There can be no assurance that the Company will be able to renew its existing arrangements for the manufacture of its products or enter into similar arrangements in connection with the acquisition of additional pharmaceutical products. In addition, there can be no assurance that manufacturers engaged by the Company will meet the Company's requirements for quality, quantity, or timeliness, or that the Company would be able to find or obtain FDA approval of substitute manufacturers, if necessary. The principal raw materials used in the Company's business are active drug ingredients and inactive pharmaceutical chemicals. These types of raw materials are generally available from a limited number of foreign and U.S. sources. In certain instances, the Company is required to purchase active drug ingredients from the licensor of the product. Because the FDA approval process requires manufacturers to specify their proposed raw material suppliers in their drug approval applications, the approval process could be delayed in the event raw materials from a specific supplier were to become unavailable. Development and approval of its drugs are, therefore, dependent upon the ability of the Company and its contractors to procure active ingredients and raw materials from FDA-approved sources. Arrangements with foreign raw materials suppliers are subject to the usual risks of doing business abroad, including the availability of FDA, customs and other governmental clearances, the imposition of import duties, political and social instability, possible currency fluctuations and restrictions on the transfer of funds. PRODUCT LIABILITY The Company may, in the ordinary course of business, be subject to substantial claims by, and liability to, persons alleging injury as a result of taking drugs under development or being sold by the Company. With respect to marketed pharmaceutical products, such liability may result from claims made directly by consumers or by pharmaceutical companies or others selling such products. The Company attempts to reduce its risk with respect to -7- marketed pharmaceutical products and products under development by obtaining indemnity undertakings with respect to such claims from licensors, licensees and distributors of its products and by carrying product liability insurance of $5 million per occurrence and in the aggregate. In connection with the Company's Contract Clinical Research operations (which it plans to divest as described herein under the caption "Recent Developments--Divestiture of Non-Core Businesses"), the Company attempts to reduce its risk with respect to drugs tested by the Company by obtaining indemnity undertakings from the pharmaceutical companies that have engaged the Company to conduct clinical research on their products under development. In addition, the Company carries medical malpractice insurance of $1 million per occurrence and $3 million in the aggregate for its clinical staff. The Company recognizes that it cannot be fully protected from potential liability in these areas by insurance obtainable at reasonable cost. There can be no assurance that the Company's existing medical malpractice and product liability insurance can be renewed or renewed at rates comparable to those now being paid by the Company. If the Company is held liable for a claim against the Company for which it is not indemnified or for damages exceeding the limits of its insurance coverage, there could be a material adverse effect on the Company. DEPENDENCE UPON KEY PERSONNEL The Company is currently dependent upon the ability and experience of its executive officers, including, without limitation, Dr. Robert A. Vukovich, the Company's Chairman of the Board, President and Chief Executive Officer and beneficial owner, as of October 1, 1996, of 1,939,161 shares (10.1%) of the Company's Common Stock, and other key officers and employees. There can be no assurance that the Company will be able to retain all of such officers and employees. If for any reason such key personnel do not remain active in the Company's management, the Company's operations could be adversely affected. The Company maintains a $2,000,000 key man life insurance policy on the life of Dr. Vukovich. Because of the nature of its business, the Company will be dependent upon its ability to attract and retain additional qualified scientific and marketing and sales personnel. There is significant competition for such qualified personnel, and there is no assurance that the Company will be successful in recruiting and retaining such personnel. COMPETITION Many companies, including large pharmaceutical, chemical and biotechnology firms with financial and marketing resources and research and development staffs and facilities substantially greater than those of the Company, are engaged in researching, developing, marketing and selling products intended to treat the same conditions and diseases as the products currently sold and under development by the Company. Further, other products now in -8- use or under development by others may perform by other means or more effectively the same functions as the Company's products. The pharmaceutical industry is characterized by rapid technological advances, and competitors may develop products more rapidly than the Company. In addition, competitors may be able to complete the regulatory approval process sooner, and therefore market their products earlier, than the Company can market certain of its products. CLASS ACTION LAWSUIT A shareholders' class action lawsuit was filed on April 10, 1995 against the Company and certain of its officers and a former officer on behalf of all persons who purchased shares of Common Stock between November 7, 1994 and May 31, 1995. The plaintiffs contend that the Company violated federal securities laws, including Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, with respect to press releases, filings with the Commission and certain public statements allegedly made about the Company's business. The plaintiffs seek to recover damages in an unspecified amount. Although management believes that the Company has complied with all of its obligations under the federal securities laws and is vigorously defending against the allegations contained in the lawsuit, the Company is not able to predict the outcome of this proceeding at this time, and management is not able to determine the amount of the potential liability, if any. No assurance can be given that this action will not have a material adverse effect on the Company. VOLATILITY OF STOCK PRICE The market price of the Company's Common Stock has historically been highly volatile. Future announcements concerning the Company or its competitors, including the results of business operations, the results of testing, technological innovations or new commercial products, government regulations, developments concerning proprietary rights, litigation or public concern as to safety of the Company's products, may have a significant impact on the market price of the Company's Common Stock. POSSIBLE ISSUANCE OF PREFERRED STOCK WITHOUT SHAREHOLDER APPROVAL Shares of the Company's Class B Preferred Stock, $.10 par value per share (the "Class B Preferred Stock"), may be issued by the Board of Directors of the Company (the "Board"), without shareholder approval except as required pursuant to any applicable agreement with or the rules of any exchange or market on which the Company's securities are traded, in one or more series with such designations, rights and preferences as may be determined from time-to-time by the Company's Board of Directors. The Convertible Preferred Stock is a series of the Class B Preferred Stock. The rights of the holders of Common Stock will be subject to, and may -9- be adversely affected by, the rights of the holders of the Convertible Preferred Stock and any other shares of Class B Preferred Stock that may be issued in the future. Further, in the event of issuance, the Class B Preferred Stock could be used, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. The Company has no current intention to issue any additional shares of Convertible Preferred Stock, except upon exercise of the Convertible Preferred Stock Warrants and as dividends in respect of the Convertible Preferred Stock, or any other shares of Class B Preferred Stock; however, there can be no assurance that the Company will not do so in the future. See "Description of Securities--Class B Preferred Stock." EFFECTS OF CONVERSION OF CONVERTIBLE PREFERRED STOCK In August 1996, the Company sold 4,200,000 shares of Convertible Preferred Stock to accredited investors in a private placement. See "Recent Developments--Private Placements." The exact number of shares of Common Stock issuable upon conversion of the Convertible Preferred Stock depends on the Conversion Price in effect at the time of conversion. As more particularly described under the section of this Prospectus captioned "Description of Securities--Class B Preferred Stock; Description of Convertible Preferred Stock," the "Conversion Price" is equal to 90% of the lowest reported trade price of the Common Stock during a specified period of trading days and, accordingly, the number of shares of Common Stock issuable upon conversion of the Convertible Preferred Stock will vary inversely with the market price of the Common Stock. Holders of Common Stock will be diluted by issuances of Common Stock upon conversion of the Convertible Preferred Stock and may be substantially diluted depending on the market price of the Common Stock. The lowest reported sale price of the Common Stock on the Nasdaq National Market since January 1, 1994 was $15 per share. Assuming (i) such market price were to be used to calculate the Conversion Price used to determine the number of shares of Common Stock issuable upon the conversion of the shares of Convertible Preferred Stock outstanding, as well as upon the conversion of the shares of Convertible Preferred Stock issuable upon the exercise of the Convertible Preferred Stock Warrants and issuable, in lieu of cash, as dividends in respect of the Convertible Preferred Stock payable on the dates set forth in clause (iii) below, (ii) all shares of Convertible Preferred Stock issued or issuable as described in clause (i) above were to be held until automatically converted into shares of Common Stock on August 29, 1998, (iii) all dividends payable on the Convertible Preferred Stock on each of the quarterly dividend payment dates subsequent to November 27, 1996 were to be paid in shares of Convertible Preferred Stock valued at $25 per share, (iv) each of the Convertible Preferred Stock Warrants was exercised as of the date issued, and (v) the -10- "Liquidation Preference" (as such term is defined under the section of this Prospectus captioned "Description of Securities--Description of Convertible Preferred Stock--Liquidation Preference") used to determine the number of shares issuable upon conversion of the shares of Convertible Preferred Stock was $25 per share, the Company would issue a total of approximately 9,409,540 shares of Common Stock. If the market price of the Common Stock used to determine the Conversion Price were lower or higher than $15 per share or if some or all of the shares of Convertible Preferred Stock were converted into shares of Common Stock before August 29, 1998, or if some or all of the Convertible Preferred Stock Warrants were not exercised by the holder thereof, or if part or all of the dividends due in respect of the Convertible Preferred Stock were paid in cash, or if the amount of the Liquidation Preference was to include accrued but unpaid dividends and thus be greater than $25 per share, the Company would issue more or less shares of Common Stock than reflected in the estimate included herein, and such difference could be material. In addition, with respect to the private placement of 600,000 shares of Common Stock completed in July 1996, if the Company were to sell any shares of Common Stock for an effective issue price lower than $16.65 per share (the original issue price of such shares of Common Stock in the private placement) prior to January 23, 1997, then, subject to certain exceptions, the purchase price per share of the Common Stock issued in such private placement would be adjusted downward to equal such lower issue price (along with a similar adjustment to the exercise price of the Common Stock Warrants). Any such adjustment in the issue price and exercise price would be effected, subject to certain exceptions, by issuing additional shares of Common Stock to the holders who purchased such shares in the private placement and by lowering the per share purchase price and increasing the number of shares of Common Stock which may be acquired upon exercise of the Common Stock Warrants, and the issuance of such additional shares of Common Stock would further dilute the interests of the holders of Common Stock. See "Recent Developments--Private Placements." CERTAIN ANTI-TAKEOVER PROVISIONS Article Five of the Company's Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation") provides that certain business combinations involving the Company may be effected only if approved by the affirmative vote of the holders of at least 66-2/3% of all votes cast by the holders of all of the then outstanding shares of the Company's capital stock entitled to vote in respect of such business combination, voting together without regard to class. Article Five may inhibit and discourage attempts to acquire control of the Company without negotiation with management. In addition, Article Five creates a veto power in the minority over certain business combinations and may make it more difficult to effect a business combination, even if the business -11- combination is advantageous and favored by the Board of Directors or a majority of the shareholders of the Company. Further, Article Five could result in the denial or reduction to shareholders of potential premiums over market usually afforded by tender offers. The Company's Certificate of Incorporation authorizes 10,000,000 shares of Class B Preferred Stock, of which 5,500,000 shares have been designated as "5% Convertible Preferred Stock," and authorizes the Board to issue shares of Class B Preferred Stock in one or more series with such dividend, liquidation, conversion, redemption and other rights as the Board establishes at that time. As a result, the Board may issue such stock with such rights as would discourage possible acquirors of the Company from making a tender offer or other attempt to gain control of the Company. The provision of the Company's Certificate of Incorporation described above could limit the price that certain investors might be willing to pay in the future for shares of the Company's Common Stock and could make it more difficult for shareholders to effect certain corporate actions. See "Description of Securities--Provisions of the Certificate of Incorporation Affecting Acquisition of the Company." NO COMMON STOCK DIVIDENDS The Company has not paid any cash dividends on its Common Stock and does not intend to pay cash dividends on its Common Stock for the foreseeable future. In addition, holders of the Convertible Preferred Stock are entitled to receive dividends at the rate of $1.25 per annum per share, payable on a quarterly basis, in preference and priority to any payment of any dividend on the Common Stock; provided, that, subject to certain conditions, the Convertible Preferred Stock dividends may be paid with shares of Convertible Preferred Stock on or after November 28, 1996. See "Description of Securities--Class B Preferred Stock; Description of Convertible Preferred Stock--Dividends." OPERATING LOSSES IN RECENT FISCAL QUARTERS The Company has incurred operating losses and losses from continuing operations in each of the first and second quarters of 1996. For the three month period ended March 31, 1996, the Company reported an operating loss of approximately $5.7 million and a net loss from continuing operations of approximately $4.2 million. For the three and six month periods ended June 30, 1996, the Company reported operating losses of approximately $2.5 million and $8 million, respectively, and net losses from continuing operations of approximately $1.8 million and $6 million, respectively. The Company believes that the operating loss in the first quarter can be attributed to (i) an increase in cost of sales as a result of the continued distribution of NOROXIN and the higher costs related to the sale thereof as well as a decrease in sales of some of the Company's higher margin products and (ii) an increase in marketing -12- and administrative expenses resulting primarily from promotional activities for new products and the expansion of the Company's sales forces in the United States, United Kingdom and Canada. The Company believes that the second quarter operating loss can be attributed to the same factors set forth above as well as increased levels of chargebacks and product returns, and increased Medicaid costs of purchased products. There can be no assurance that the Company will return to profitability in the foreseeable future. In addition, the Company has recorded deferred tax assets of approximately $11.9 million. Realization is dependent upon generating sufficient taxable income to utilize such items. Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced. FUTURE SALES OF COMMON STOCK Future sales of a substantial number of shares of the Company's Common Stock in the public market, or the perception that such sales could occur, could adversely affect prevailing market prices. As of October 1, 1996, the Company had approximately 19,207,402 shares of Common Stock outstanding. Of these shares, approximately 12,467,402 shares are tradeable without restriction (except as to shares held by affiliates of the Company) or registration under the Securities Act, and approximately 6,740,000 shares are "restricted securities" as such term is defined in the Securities Act, and may not be sold in the absence of registration under the Securities Act or an exemption therefrom including the exemption contained in Rule 144. All of the restricted securities outstanding as of October 4, 1996 are eligible for sale in the public market in reliance upon Rule 144, and may be sold under Rule 144(k) without regard to volume limits. The Company has registered 10,024,540 shares of Common Stock being offered by the Selling Shareholders for public sale by means of the Registration Statement, which is a shelf registration statement, filed under the Securities Act, of which this Prospectus forms a part, pursuant to the terms of certain agreements and warrants issued in connection with the private placements completed by the Company in July and August 1996. Under the terms of such agreements and warrants, the Company could be required, with certain exceptions, to keep such Registration Statement effective until October 31, 1999. See "Recent Developments--Private Placements." The Company has granted Yamanouchi Pharmaceutical Co., Ltd. ("Yamanouchi"), which, through its wholly owned subsidiary, Yamanouchi Group Holding Inc. ("Yamanouchi Group Holding"), holds 5,048,500 (26.3%) of the outstanding shares of the Company's Common Stock, certain rights which enable Yamanouchi to require the Company to register the offer and sale of shares of Common Stock held by Yamanouchi. Yamanouchi has waived these -13- rights with respect to the offering contemplated by this Prospectus. The Company is unable to predict the effect that sales of such registered shares of Common Stock, or that sales made pursuant to such registration rights, under Rule 144, or otherwise, may have on the then prevailing market price of the Common Stock. A total of 2,155,219 shares of Common Stock are subject to outstanding options under the Company's stock option and incentive plans and an additional 1,468,500 shares of Common Stock are reserved for issuance under such plans and the Employee Stock Purchase Plan. All of these shares of Common Stock have been registered under the Securities Act. AGREEMENTS WITH SIGNIFICANT SHAREHOLDER As of October 4, 1996, Yamanouchi, through its wholly owned subsidiary, Yamanouchi Group Holding, owned 5,048,500 shares of Common Stock, representing approximately 26.3% of the Company's outstanding shares of Common Stock. Of the shares of Common Stock owned by Yamanouchi, 4,000,000 were acquired in March 1992 pursuant to a stock purchase agreement (the "Stock Purchase Agreement"). Under the terms of the Stock Purchase Agreement, for so long as Yamanouchi owns at least 15% of the Company's outstanding Common Stock on a fully diluted basis, Yamanouchi has certain preemptive rights to acquire securities issued by the Company and the Company is prohibited from taking any action to prevent Yamanouchi from directly or indirectly acquiring all of the remaining shares of the Company's Common Stock; provided, that any such acquisition is made pursuant to the terms of the Stock Purchase Agreement. Yamanouchi declined to exercise its preemptive rights in connection with the sale of securities by the Company pursuant to the "Private Placements" (as such term is defined in the section captioned "Recent Developments--Private Placements"). The Stock Purchase Agreement also provides that Yamanouchi is entitled to designate two (2) members of the Company's Board of Directors for so long as it owns at least 18% of the outstanding shares of the Company's Common Stock on a fully diluted basis (or one director for so long as it owns at least 10% of such Common Stock). Moreover, Dr. Vukovich, who was the beneficial owner of 1,939,161 shares (10.1%) of the Company's Common Stock as of October 1, 1996, has entered into a shareholder agreement (the "Shareholder Agreement") with Yamanouchi pursuant to which he has (i) agreed to vote all shares of Common Stock owned by him in favor of the election of Yamanouchi's designees as directors of the Company, (ii) agreed to support, in his capacity as shareholder and officer of the Company, any offer made by Yamanouchi to acquire the Company or the outstanding Common Stock of the Company not owned by Yamanouchi occurring before December 31, 1998, provided such offer is fair to the Company's shareholders, and (iii) granted to Yamanouchi for so long as he directly and indirectly owns at least 10% of the outstanding shares of Common Stock, on a fully diluted basis, the right of first refusal to purchase any Common Stock which he may, -14- from time to time, propose to sell, subject to certain exceptions set forth in the Shareholder Agreement. Yamanouchi has no obligation to acquire the Company or any shares of the Common Stock of the Company. These arrangements, together with Yamanouchi's current ownership interest in the Company, could affect the control of the Company. As of October 4, 1996, Yamanouchi and Dr. Vukovich were collectively the beneficial owners of 6,987,661 shares (36.4%) of the Company's outstanding Common Stock. The ownership percentages set forth above do not give effect to potential issuances of Common Stock upon conversion of any shares of Convertible Preferred Stock or upon excercise of any outstanding options or warrants. -15- THE COMPANY The Company is an international pharmaceutical company which commenced operations in 1983 to take advantage of the large and growing opportunity to license, acquire, develop and commercialize post-discovery drugs in selected therapeutic categories. The Company has organized its drug development, acquisition and marketing activities to focus on late-stage development drugs in Phase II or Phase III clinical trials and currently marketed prescription pharmaceutical products which (i) do not meet the strategic objectives or profit thresholds of larger pharmaceutical companies or (ii) are made available by government agencies and research institutions. The Company's executive offices are located at Meridian Center II, 4 Industrial Way West, Eatontown, New Jersey 07724, and its telephone number is (908) 389-1182. The Company has a broad product portfolio and currently markets approved pharmaceutical products in the United States, Canada, the United Kingdom, Ireland, the Benelux countries and several other European countries. In September 1996, the FDA approved the Company's New Drug Application ("NDA") for PROAMATINE and cleared PROAMATINE for marketing in the United States. PROAMATINE, which has been developed by the Company to fill the therapeutic void in the United States in the treatment of orthostatic hypotension, is the first of the Company's pipeline drugs to receive FDA approval. The Company had previously received approval to sell PROAMATINE for the treatment of orthostatic hypotension in Ireland (under the name MIDON(R)) and in Canada (under the name AMATINE(R)). PROAMATINE is also in Phase II trials for stress urinary incontinence. No assurance can be given that sales of PROAMATINE will be significant to the Company. See "Risk Factors--Risks of New Product Development; Government Regulation" and "Recent Developments-NDAs." The Company has another NDA pending with the FDA for AGRELIN, a drug used to treat thrombocythemia, a condition of excessive platelet production. The NDA for AGRELIN was officially accepted for filing by the FDA, effective January 29, 1996. The application remains under review by the FDA, and the Company continues to provide the FDA with additional information when requested. No assurance can be given that this NDA will be approved. See "Recent Developments--NDAs." The Company has five additional late-stage development drugs, including MAXIVENT(R), in Phase III trials for asthma; SOMAGARD(R), in Phase III trials for central precocious puberty and prostate cancer, and in a Phase II stage of development for endometriosis; DIRAME, in Phase III trials for pain management; RADINYL, in Phase III trials as a radiosensitizer; and STANATE/TM/, in Phase II/III trials for neonatal jaundice. Of these late-stage development products, the Company has obtained approval to sell SOMAGARD for the treatment of central precocious puberty in the United Kingdom -16- and for the treatment of prostate cancer in Ireland. To date, none of the pharmaceutical products under development, except for PROAMATINE, has been approved for sale in the United States and no assurance can be given that any such approval will be obtained. The Company expects to file NDAs for each of MAXIVENT and SOMAGARD with the FDA in 1997. The Company has created a marketing infrastructure and sales force now numbering in excess of 150 persons, which is capable of marketing its products to broad-based and specialized physicians, managed health care organizations and large retail and mass merchandise operations. The Company also uses contract sales representatives to assist in its sales efforts. The Company engages contractors, primarily large pharmaceutical companies, to manufacture its products. The Company seeks to develop its products for commercialization in the United States and other countries with attractive sales potential for such products. The Company has entered new markets by establishing foreign sales and marketing operations as well as by entering into license, distribution and co- marketing agreements with partners who have established capabilities in target markets. In order to develop and market its products in such foreign markets, the Company has established operations in the United Kingdom through its wholly- owned subsidiary, Monmouth Pharmaceuticals, Ltd., and in Canada through its wholly-owned subsidiary, Roberts Pharmaceutical Canada, Inc. The Company has marketed and sold certain over-the-counter nonprescription pharmaceuticals and engaged in certain other diversified, nonpharmaceutical business activities, such as providing home and outpatient medical care and selling medical products to industrial companies ("Homecare") and conducting clinical research for other pharmaceutical companies with respect to the safety and efficacy of their products ("Contract Clinical Research"). While the sale of nonprescription pharmaceuticals and the activities of the Homecare and Contract Clinical Research operations have provided the Company with diversification, the Company has determined that a continuation of this diversity of operations is inconsistent with its principal business objective of licensing, acquiring, developing, marketing and selling prescription pharmaceutical products. In August 1995, the Company announced its decision to divest and seek purchasers for certain nonprescription pharmaceuticals, certain nonperforming prescription pharmaceuticals and its Homecare operations. In connection therewith, the Company sold its NUCOFED(R) and QUIBRON(R) lines of pharmaceutical products in October 1996. See "Recent Developments--Divestiture of Non-Core Businesses." In March 1996, the Company announced its decision to discontinue and divest its Contract Clinical Research operations conducted by the -17- Company's wholly owned subsidiary, VRG International, Inc. ("VRG"). See "Recent Developments--Divestiture of Non-Core Businesses." RECENT DEVELOPMENTS PRIVATE PLACEMENTS GENERAL. In July and August 1996, the Company received aggregate net proceeds of approximately $108 million (after cash fees to the placement agent and estimated transaction expenses ) from the issuance of shares of Common Stock and Convertible Preferred Stock in certain private placements (the "Private Placements"). The Company intends to use the proceeds from the Private Placements primarily for potential acquisitions of new products; continued development of existing pipeline products; repayment of debt incurred in connection with prior product acquisitions; and capital expenditures. The placement agent for the Private Placements was Cappello & Laffer Capital Corp. (the "Placement Agent"). In consideration for placing such securities, the Placement Agent received aggregate cash compensation of 5% of the gross proceeds received by the Company and the reimbursement of certain expenses. Further, the Company also issued to certain designees of the Placement Agent Common Stock Warrants to acquire an aggregate of 15,000 shares of Common Stock for a purchase price of $16.65 per share which warrants expire in July 1999 and Convertible Preferred Stock Warrants to acquire 420,000 shares of Convertible Preferred Stock for a purchase price of $25 per share which warrants expire in August 1998. A description of each of the Private Placement transactions is set forth below. COMMON STOCK PLACEMENT. Pursuant to the terms of the several Stock Purchase Agreements, each dated as of July 17, 1996 (collectively, the "Common Stock Agreement"), the Company issued and sold in a private placement to certain investment funds 600,000 shares of Common Stock at an issue price of $16.65 per share (the "Common Stock Purchase Price") resulting in aggregate gross proceeds to the Company of $9,990,000 (the "Common Stock Placement"). The last reported sales price of the Common Stock on the Nasdaq National Market on July 17, 1996 was $16.75 per share. Subject to certain exceptions, if, during the six-month period following the closing of the Common Stock Placement, the Company sells any shares of Common Stock (or any securities pursuant to which the Company may be obligated to issue Common Stock) for an issue price lower than the Common Stock Purchase Price, the purchase price per share of the Common Stock issued in connection with the Common Stock Placement shall be adjusted downward to equal such lower issue price. Any such adjustment would be effected by -18- issuing additional shares of Common Stock to the holders who purchased in the Common Stock Placement unless the total number of shares of Common Stock held by an investor who purchased shares in the Common Stock Placement would exceed 4.99% of the total outstanding stock of the Company, in which case, the adjustment would be paid in cash. If there is any capital adjustment affecting the Common Stock of the Company, including, without limitation, a stock split or reverse stock split, stock dividend, reclassification of the Common Stock, recapitalization, merger or consolidation, the Common Stock purchase price shall be adjusted as if any such capital adjustment had occurred immediately prior to July 23, 1996 (the closing date of the Common Stock Placement). No adjustment will be required in the event of sales of shares of Common Stock by the Company (i) upon the conversion or exercise of any convertible securities, options or warrants outstanding on the date of the Common Stock Agreement, (ii) pursuant to the provisions of shareholder approved employee benefit or incentive plans (previously adopted or adopted in the future), (iii) to an entity which is a strategic investor in the Company or an investor which is in a related industry, as opposed to a financial investor, (iv) to the owners of another entity acquired by the Company, or (v) upon the conversion of the Convertible Preferred Stock or the issuance of Convertible Preferred Stock upon the exercise of the Convertible Preferred Stock Warrants or as dividends on the Convertible Preferred Stock. As of the date of this Prospectus, no adjustment has been made in the Common Stock Purchase Price and no event has occurred which would require such adjustment. Whether or not any adjustment will be necessary in the future will depend upon factors which cannot be predicted by the Company at this time including, among others, the future market price of the Common Stock. Pursuant to the terms of the Common Stock Agreement, the Company agreed to register for resale under the Securities Act (i) the shares of Common Stock issued in connection with the Common Stock Placement (including any shares issued upon any future adjustment of the Common Stock Purchase Price), (ii) the shares of Common Stock issuable upon exercise of the Common Stock Warrants and (iii) any shares of Common Stock or other securities of the Company or any successor corporation issued as, or issuable upon the conversion or exercise of any warrant, right or other security issued as, a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares of Common Stock issued in the Common Stock Placement. An estimate of the number of all such shares have been registered pursuant to the Registration Statement of which this Prospectus forms a part. PREFERRED STOCK PLACEMENT. Pursuant to the terms of the several Preferred Stock Investment Agreements, each dated as of August 29, 1996 (collectively, the "Preferred Stock Agreement"), the Company issued and sold in a private placement to certain accredited investors for $25 per share an aggregate of 4,200,000 -19- shares of a newly-established series of the Company's Class B Preferred Stock, designated as 5% Convertible Preferred Stock, resulting in gross aggregate proceeds to the Company of $105 million (the "Preferred Stock Placement"). Prior to this issuance, the Company had no shares of preferred stock outstanding. The last reported sales price of the Common Stock on the Nasdaq National Market on August 29, 1996 was $18.50 per share. As required by the rules of the National Association of Securities Dealers, Inc. (the "NASD") and pursuant to the terms of the Preferred Stock Agreement, the Company sought shareholder approval of the issuance of the full number of shares of Common Stock issuable upon conversion of the Convertible Preferred Stock at a meeting of its shareholders held on November [6], 1996. At such meeting, the Company's shareholders approved (i) the issuance of the full number of shares of Common Stock issuable upon conversion of the Convertible Preferred Stock and (ii) an amendment to the Company's Certificate of Incorporation which increased the number of authorized shares of Common Stock from 50,000,000 shares to 100,000,000 shares. As more particularly described in this Prospectus under the caption "Description of Securities--Class B Preferred Stock; Description of Convertible Preferred Stock," the Convertible Preferred Stock has a liquidation preference of $25 per share (plus accrued and unpaid dividends thereon), is generally non- voting and is entitled to receive dividends quarterly at the rate of $1.25 per share per annum, which dividends may be paid in cash or, after November 27, 1996 at the option of the Company and subject to certain conditions, in shares of Convertible Preferred Stock. The Convertible Preferred Stock is convertible into Common Stock in accordance with the terms of the Certificate of Amendment to the Company's Certificate of Incorporation filed with the Office of the Secretary of State, State of New Jersey on August 29, 1996 (the "Certificate of Amendment") which established the Convertible Preferred Stock and the rights, designations and preferences thereof. The number of shares of Common Stock into which each share of Convertible Preferred Stock is convertible depends, in part, upon the Conversion Price in effect at the time of the conversion. Under the terms of the Certificate of Amendment, the Conversion Price is equal to 90% of the lowest trade price of the Common Stock as reported by the Nasdaq National Market during a specified period of trading days and, accordingly, the number of shares of Common Stock issuable upon conversion of the Convertible Preferred Stock will vary inversely with the market price of the Common Stock. As a result, it is not possible to determine at this time the number of shares of Common Stock issuable upon conversion of the Convertible Preferred Stock. See "Risk Factors--Effects of Conversion of Convertible Preferred Stock" and "Description of Securities--Class B Preferred Stock; Description of Convertible Preferred Stock." -20- The Preferred Stock Agreement requires the Company to register the shares of Common Stock issuable upon conversion of the Convertible Preferred Stock (including shares of Common Stock issuable upon the conversion of shares of Convertible Preferred Stock that are issuable upon the exercise of the Convertible Preferred Stock Warrants and issuable as dividends, in lieu of cash, on the Convertible Preferred Stock) for resale under the Securities Act. An estimate of the number of all such shares have been registered pursuant to this Registration Statement. Any suspension of the effectiveness of the Registration Statement during 1996 or 1997 will require that the Company pay to each purchaser of the Convertible Preferred Stock, 3% of the total purchase price of the Convertible Preferred Stock (or Common Stock issuable upon conversion of the Convertible Preferred Stock, which purchase price will be based on the purchase price of the shares of Convertible Preferred Stock which were converted into such shares of Common Stock) then held by such purchasers, (i) in cash, or (ii) at the Company's option, in additional shares of Convertible Preferred Stock (valued at $25 per share plus any accrued but unpaid dividends), for each 30 day period that the effectiveness of the Registration Statement is suspended (prorated for any shorter period); provided, however, that no such penalty will be imposed in 1997 (a) for the initial 30 days of such suspension, and unless (b) the aggregate period of suspensions in such year exceeds 30 days. Each purchaser of the Convertible Preferred Stock has agreed that following the conversion of the Convertible Preferred Stock into Common Stock, such purchaser will not on any trading day offer or sell publicly on a net basis more than the following number of shares: the greatest of (i) 20% of the average trading volume for the Common Stock for the five consecutive trading days immediately preceding such date as reported by the Nasdaq National Market, (ii) 20,000 shares, and (iii) 10% of the trading volume for the Common Stock on such date. The Company has agreed that except in a business combination, or under existing employee stock incentive or purchase plans, the Company will not effect any public sale or distribution of Common Stock or any securities exercisable for or convertible into Common Stock during the 14 days prior to, and during the 90 days immediately following the effective date of the Registration Statement; provided, however, that the Company may effect such public sale or distribution during the 90 days immediately following the effective date of the Registration Statement if such sale or distribution of securities is at a price equal to or greater than 120% of the "Conversion Cap," as such term is defined in the section of this Prospectus captioned "Description of Securities--Class B Preferred Stock; Description of Convertible Preferred Stock." -21- NDAs In September 1996, the FDA approved the Company's NDA for PROAMATINE and cleared PROAMATINE for marketing in the United States for the treatment of symptomatic orthostatic hypotension. The Company is preparing for the commencement of marketing and sales activities with respect to PROAMATINE which it expects to commence by the end of 1996. The FDA approved PROAMATINE pursuant to its accelerated approval process for new drugs for serious or life threatening illnesses. The Company developed PROAMATINE to fill the U.S. therapeutic void in the treatment of orthostatic hypotension. No other studies are required prior to commercialization of PROAMATINE, although the Company is required to conduct post-approval and post-launch (Phase IV) studies of PROAMATINE with regard to certain specific symptoms of orthostatic hypotension. The Company received notice from the FDA that the Company's NDA for AGRELIN was officially accepted for filing, effective January 29, 1996. The application remains under FDA review and the Company is continuing to provide additional information as requested by the FDA. The Company has filed several process patents with the U.S. Patent and Trademark office for improved methods for the chemical synthesis of anagrelide, the active ingredient in AGRELIN. The patent applications were also submitted in certain international markets, including Europe, Canada and Japan. There can be no assurance that such patents will be approved. DIVESTITURE OF NON-CORE BUSINESSES In recent years, the Company has (i) acquired, marketed and sold certain nonprescription pharmaceuticals; (ii) through its Homecare subsidiaries, provided home and outpatient medical care, distributed prescription injectable and biotechnology pharmaceutical products for physician office use, and marketed and sold medical products to industrial companies; and (iii) through VRG, conducted Contract Clinical Research activities for pharmaceutical companies with respect to the safety and efficacy of their products. While sales of nonprescription pharmaceutical products and the operations of the nonpharmaceutical businesses provided the Company with diversification in its business operations, the Company has determined that a continuation of this diversity of operations is inconsistent with its principal objective of licensing, acquiring, developing, marketing and selling prescription pharmaceutical products and moving the Company's late-stage development drugs through the Company's research and development pipeline. In August 1995, the Company announced its decision to discontinue and divest the majority of its nonprescription pharmaceuticals, certain nonperforming prescription pharmaceuticals and the operations of its Homecare subsidiaries. In March 1996, Appointment of Director On October 7, 1996, the Company announced that its Board of Directors had appointed Dr. Zola P. Horovitz, age 62, as a Director of the Company to fill the vacancy created by the death in August 1996 of W. Robert Fowler. Dr. Horovitz has over 35 years of experience in the pharmaceutical industry and served as Vice President of Business Development and Planning for Bristol-Myers Squibb from 1991 until his retirement in 1994. Prior thereto he held numerous positions, including Vice President of Licensing for Bristol-Myers Squibb from 1990 to 1991 and Vice President of Research Planning & Scientific Liason for The Squibb Institute for Medical Research from 1985 to 1989. -22- the Company announced its intention to discontinue and divest the Company's Contract Clinical Research business operations. The Company has already sold many of the assets of Homecare's medical products division and is continuing the process of reviewing divestment opportunities and is actively soliciting offers for the assets of the remaining Homecare businesses. The Company expects the divestiture of the Homecare business to be completed by the end of 1996. The Company sold its NUCOFED and QUIBRON lines of pharmaceutical products in October 1996; however, no assurance can be given that the Company will reach a definitive agreement with respect to the sale of the other discontinued pharmaceutical products. USE OF PROCEEDS The Company will not receive any proceeds from the sale of the Common Stock by the Selling Shareholders. The shares of Common Stock being offered hereby by the Selling Shareholders have been acquired in connection with, or will be acquired upon the conversion of the shares of Convertible Preferred Stock and the exercise of the Common Stock Warrants which have been acquired in connection with, the Private Placements pursuant to which the Company received net proceeds of approximately $108 million. -23- SELLING SHAREHOLDERS The following table sets forth certain information regarding the beneficial ownership of the shares of Common Stock to be offered hereby as of October 1, 1996, and as adjusted to reflect the sale of the Common Stock offered hereby, by the Selling Shareholders. The information included in this table concerning the Selling Shareholders who may offer Common Stock hereunder from time to time is based on information provided to the Company by such shareholders, except for the assumed conversion ratio of shares of Convertible Preferred Stock into shares of Common Stock which is based solely on the assumptions discussed or referenced in footnote (1) to this table. Information concerning such Selling Shareholders may change from time to time and any changes of which the Company is advised will be set forth in a Prospectus Supplement to the extent required.
Beneficial Ownership Number of Shares Beneficial Ownership of Common Stock of Common Stock of Common Stock Name of Selling Shareholders Prior to Offering (1) Being Offered After Offering (1) - ---------------------------- --------------------- ---------------- ------------------ Number of Percent Number of Percent of Shares of Class Shares Class --------- -------- --------- ---------- DFA Group Trust - 6-7-8 Subtrust(2).. 26,000 (3) 26,000 -0- -0- DFA Group Trust - Small Cap Value Subtrust(2)......................... 268,300 1.4% 268,300 -0- -0- DFA Group Trust - 6-10 Subtrust(2)... 98,300 (3) 98,300 -0- -0- U.S. Small Cap Value Series(2)....... 203,700 1.1% 203,700 -0- -0- U.S. 6-10 Small Company Series(2).... 3,700 (3) 3,700 -0- -0- AG Super Fund International Partners, L.P....................... 69,248 (3) 69,248 -0- -0- Raphael, L.P......................... 57,028 (3) 57,028 -0- -0- SIL Nominees Ltd..................... 264,771 1.4% 264,771 -0- -0- Loretta Hirsh Shine.................. 6,517 (3) 6,517 -0- -0- Lisa G. Shine........................ 1,629 (3) 1,629 -0- -0- Otato Limited Partnership............ 40,734 (3) 40,734 -0- -0- ProFutures Special Equities Fund, L.P........................... 57,028 (3) 57,028 -0- -0- Olympus Securities, Ltd.............. 162,936 (3) 162,936 -0- -0- John J. Pujol........................ 4,073 (3) 4,073 -0- -0- Richmont Value Partners, L.P......... 20,367 (3) 20,367 -0- -0- Ailouros Ltd......................... 16,294 (3) 16,294 -0- -0- Alfred Partners, L.P................. 40,734 (3) 40,734 -0- -0- Alfred Partners, LLC................. 48,881 (3) 48,881 -0- -0- Kayne Anderson Non-Traditional Investments, L.P.................... 162,936 (3) 162,936 -0- -0- Foremost Insurance Company........... 81,468 (3) 81,468 -0- -0- Arbco Associates, L.P................ 162,936 (3) 162,936 -0- -0- Offense Group Associates, LP......... 162,936 (3) 162,936 -0- -0- Strome Partners, L.P................. 305,505 1.6% 305,505 -0- -0- Strome Offshore Limited.............. 305,505 1.6% 305,505 -0- -0- Strome Susskind Hedgecap Fund, L.P... 458,257 2.3% 458,257 -0- -0- Strome Hedgecap Limited.............. 152,752 (3) 152,752 -0- -0- Anvil Investment Partners, L.P....... 81,468 (3) 81,468 -0- -0- Lawrence K. Fleischman............... 256,608 (4) 1.3% 256,608 -0- -0- Trust Company of America FBO PAC..... 48,881 (3) 48,881 -0- -0- Fayerweather Associates.............. 16,294 (3) 16,294 -0- -0- Doerge-Deere Park, L.P............... 20,367 (3) 20,367 -0- -0- Deere Park Partners, L.P............. 61,101 (3) 61,101 -0- -0- Robert A. Davidow and Diana R. Davidow, JTWROS.................. 40,734 (3) 40,734 -0- -0- Chap-Cap Partners, L.P............... 40,737 (3) 40,734 -0- -0- Gerard K. Cappello................... 254,728 (4) 1.3% 254,728 -0- -0- Linda S. Cappello.................... 398,388 (4) 2% 398,388 -0- -0- Chestnut Pacific Fund................ 25,157 (3) 25,157 -0- -0- The & Trust.......................... 11,634 (3) 11,634 -0- -0- Standard Global Equity Partners L.P........................ 63,162 (3) 63,162 -0- -0-
-24-
Beneficial Ownership Number of Shares Beneficial Ownership of Common Stock of Common Stock of Common Stock Name of Selling Shareholders Prior to Offering (1) Being Offered After Offering (1) - ---------------------------- --------------------- ---------------- ------------------ Number of Percent Number of Percent of Shares of Class Shares Class --------- -------- --------- ---------- The Common Fund...................... 16,326 (3) 16,326 -0- -0- Scorpion Offshore Investment Fund.... 186,488 (3) 186,488 -0- -0- Standard Pacific Capital Offshore Fund, Ltd.................. 18,624 (3) 18,624 -0- -0- Banque Scandinave en Suisse.......... 407,339 2.1% 407,339 -0- -0- Metropolis Partners, L.P............. 134,422 (3) 134,422 -0- -0- Weyburn Overseas Ltd................. 162,936 (3) 162,936 -0- -0- Goodland International Investments Ltd..................... 651,743 3.3% 651,743 -0- -0- Richard Friedman..................... 20,367 (3) 20,367 -0- -0- Fortune Fund-Seeker.................. 122,202 (3) 122,202 -0- -0- Lake Management LDC.................. 175,971 (3) 175,971 -0- -0- Irvin Kessler........................ 24,440 (3) 24,440 -0- -0- JMG Capital Partners L.P............. 61,101 (3) 61,101 -0- -0- Efraim Gildor........................ 19,552 (3) 19,552 -0- -0- KA Trading L.P....................... 24,440 (3) 24,440 -0- -0- Leonardo, L.P........................ 350,312 1.8% 350,312 -0- -0- Gam Arbitrage Investments, Inc....... 93,688 (3) 93,688 -0- -0- NY-DBL Diamond Group................. 16,294 (3) 16,294 -0- -0- Edmond O'Donnell..................... 8,147 (3) 8,147 -0- -0- LICAP Partners....................... 40,734 (3) 40,734 -0- -0- Grove Limited Partnership............ 4,073 (3) 4,073 -0- -0- Stanley A. Kaplan.................... 4,073 (3) 4,073 -0- -0- Och-Ziff Capital Management, L.P..... 407,339 2.1% 407,339 -0- -0- Theodore Meisel...................... 10,183 (3) 10,183 -0- -0- Barry Meisel......................... 2,037 (3) 2,037 -0- -0- Gotham Capital III, L.P.............. 108,352 (3) 108,352 -0- -0- Gotham Capital IV, L.P............... 34,217 (3) 34,217 -0- -0- Newberg Family Trust UTD Dated 12/18/90.................. 57,028 (3) 57,028 -0- -0- Nelson Partners...................... 244,404 1.3% 244,404 -0- -0- Daniel S. Martin..................... 4,481 (3) 4,481 -0- -0- Jeffrey Markowitz.................... 12,220 (3) 12,220 -0- -0- Andrew M. Kaplan..................... 4,888 (3) 4,888 -0- -0- Lawrence Kaplan...................... 8,147 (3) 8,147 -0- -0- Charles B. Krusen.................... 16,294 (3) 16,294 -0- -0- Morgan and Morgan Trust Corp......... 81,468 (3) 81,468 -0- -0- Silverton International Fund Limited............................. 407,339 2.1% 407,339 -0- -0- Overlook Performance Fund............ 364,404 (5) 1.9% 244,404 120,000 (3) Q Investments, L.P................... 746,605 (6) 3.7% 366,605 380,000 1.3% Crisostomo B. Garcia Trust........... 40,734 (3) 40,734 -0- -0- Seafair Investments Ltd.............. 40,734 (3) 40,734 -0- -0- BT Holdings.......................... 244,404 1.3% 244,404 -0- -0- Wessel Corporation N.V............... 56,009 (3) 56,009 -0- -0- Andromeda Corporation N.V............ 56,009 (3) 56,009 -0- -0- Chesham Associates Limited........... 162,936 (3) 162,936 -0- -0- Rimata Corporation N.V............... 56,009 (3) 56,009 -0- -0- Stonehouse Investments N.V........... 56,009 (3) 56,009 -0- -0- Canadian Imperial Bank of Commerce... 244,404 1.3% 244,404 -0- -0- A.B. Laffer, V.A. Canto Associates... 12,828 (4) (3) 12,828 -0- -0-
(1) Except as otherwise indicated, to the knowledge of the Company, all securities are held beneficially and of record and all persons listed in this table have sole voting and investment power with respect to their securities, except to the extent that authority is shared by spouses under applicable law. Except as indicated in footnotes (2), (4), (5) and (6), such beneficial ownership represents an estimate of the number of shares of Common Stock issuable upon the conversion of shares of Convertible Preferred Stock beneficially owned by such person and an estimate of the number of shares of Convertible Preferred Stock which may be issued, in lieu of cash, as dividends in respect of the outstanding shares of Convertible Preferred Stock, assuming (a) a conversion ratio which is determined by dividing (i) the Liquidation Preference per share of Convertible Preferred Stock of $25 by (ii) the Conversion Price of $13.50 per share, which represents an amount equal to 90% of the lowest reported sale price of $15 per share of Common Stock reported on the Nasdaq National Market since January 1, 1994, (b) all shares of Convertible Preferred Stock issued or issuable were to be held until automatically converted into shares of Common Stock on August 29, 1998, (c) all dividends payable on the Convertible Preferred Stock on each of the quarterly dividend payment dates subsequent to November 27, 1996 were to be paid in shares of Convertible Preferred Stock valued at $25 per share, and (d) each of the Convertible Preferred Stock Warrants was exercised as of the date of issuance. The actual number of shares of Common Stock offered hereby is subject to adjustment and -25- could be materially less or more than the estimated number of shares indicated depending upon factors which cannot be predicted by the Company at this time, including, among others, the market prices of the Common Stock prevailing on or about the actual dates of conversion and whether, or to what extent, dividends are paid in shares of Convertible Preferred Stock. See "Risk Factors--Effects of Conversion of Convertible Preferred Stock" and "Description of Securities--Class B Preferred Stock; Description of Covertible Preferred Stock." (2) Represents beneficial ownership of shares of Common Stock issued in the Common Stock Placement. The number of shares of Common Stock issued in connection with the Common Stock Placement is subject to adjustment under certain circumstances. See "Risk Factors--Effects of Conversion of Convertible Preferred Stock" and "Recent Developments--Private Placements; Common Stock Placement." (3) Shares of Common Stock beneficially owned do not exceed 1% of the Company's outstanding shares of Common Stock. (4) Represents an estimate of the number of shares of Common Stock issuable upon (i) the exercise of the Common Stock Warrants, and (ii) the conversion of the Covertible Preferred Stock that is issuable upon the exercise of the Convertible Preferred Stock Warrants and as dividends on the Convertible Preferred Stock in lieu of cash. See footnote (1) above for the determination of the conversion ratio for the Convertible Preferred Stock and the other assumptions used in making such estimate. The shares subject to the Common Stock Warrants issued in connection with the Common Stock Placement are subject to adjustment under certain circumstances. See "Risk Factors--Effects of Conversion of Convertible Preferred Stock" and "Recent Developments--Private Placements; Common Stock Placement." (5) Includes 120,000 shares of Common Stock acquired before the consummation of the Private Placements. (6) Includes 380,000 shares of Common Stock acquired before the consummation of the Private Placements. PLAN OF DISTRIBUTION The Selling Shareholders have advised the Company that the sale or distribution of the Common Stock may be effected directly to purchasers by the Selling Shareholders as principals or through one or more underwriters, brokers, dealers or agents from time to time in one or more transactions (which may involve crosses or block transactions) (i) on any stock exchange, in the Nasdaq National Market, or in the over-the-counter market, (ii) in transactions otherwise than on any stock exchange or in the over-the-counter market, or (iii) through the writing of options (whether such options are listed on an options exchange or otherwise) on, or settlement of short sales of, the Common Stock. Any of such transactions may be effected at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at varying prices determined at the time of sale or at negotiated or fixed prices, in each case as determined by the Selling Shareholder or by agreement between the Selling Shareholder and underwriters, brokers, dealers, or agents, or purchasers. If the Selling Shareholders effect such transactions by selling Common Stock to or through underwriters, brokers, dealers or agents, such underwriters, brokers, dealers or agents may receive compensation in the form of discounts, concessions or commissions from the Selling Shareholders or commissions from purchasers of Common Stock for whom they may act as agent (which discounts, concessions or commissions as to particular underwriters, brokers, dealers or agents may be in excess of those customary in the types of transactions involved). The Selling Shareholders and any brokers, dealers or agents that participate in the distribution of the Common Stock may be deemed to be underwriters, and any profit on the sale of Common Stock by them and any discounts, concessions or commissions received by any such underwriters, brokers, dealers or agents may be deemed to be underwriting discounts and commissions under the Securities Act. -26- Under the securities laws of certain states, the Common Stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in certain states the Common Stock may not be sold unless the Common Stock has been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. The Company will not receive any proceeds from the sale of the shares of Common Stock being offered by the Selling Shareholders. The Company has agreed to bear all expenses incident to the registration, offering and sale of the Common Stock to the public by the Selling Shareholders hereunder other than commissions and discounts of underwriters, brokers, dealers and agents. The Company has agreed to indemnify the Selling Shareholders and their officers, directors, employees, agents, partners and controlling persons against certain liabilities, including liabilities under the Securities Act, arising out of or incident to registration of the Common Stock. The Company estimates that the expenses of the offering to be borne by it will be approximately $200,000. The Company has informed the Selling Shareholders that the anti- manipulation provisions of Rules 10b-6 and 10b-7 under the Exchange Act may apply to purchases and sales of the Common Stock by the Selling Shareholders, and that there are restrictions on market-making activities by persons engaged in the distribution of the Common Stock. The Company has also advised the Selling Shareholders that if a particular offer of Common Stock is to be made on terms constituting a material change from the information set forth above with respect to the Plan of Distribution, then to the extent required, a Prospectus Supplement must be distributed setting forth such terms and related information as required. DESCRIPTION OF SECURITIES The Company's Certificate of Incorporation authorizes the issuance of 110,000,000 shares of capital stock, of which 100,000,000 shares are designated as Common Stock, par value $.01 per share, and 10,000,000 shares are designated as Class B Preferred Stock, par value $.10 per share, of which 5,500,000 shares have been designated as shares of 5% Convertible Preferred Stock. COMMON STOCK Each share of Common Stock entitles the holder thereof to one vote on all matters submitted to the shareholders. Since the Common Stock does not have cumulative voting rights, it is possible that holders of more than 50% of the outstanding shares could elect all of the directors and holders of the remaining shares could not elect any directors. The shares are not subject to redemption and, except as described below, there are no preemptive rights. All -27- shares of Common Stock currently issued and outstanding, and which shall be issued and outstanding upon completion of this offering, will be fully paid and non-assessable. Holders of Common Stock are entitled to receive dividends out of funds legally available therefor when, and if, declared by the Board of Directors of the Company. The Company has not paid any cash dividends on its Common Stock and the payment of cash dividends on the Common Stock is unlikely for the foreseeable future. See "Risk Factors--No Common Stock Dividends." Upon any liquidation, dissolution or winding up of the Company, holders of Common Stock are entitled to share pro rata in any distribution to the holders of Common Stock; provided, that, in the event of any liquidation, dissolution or winding up of the Company, holders of the Convertible Preferred Stock are entitled to receive an amount equal to the Liquidation Preference prior and in preference to any distribution to holders of Common Stock. See "Class B Preferred Stock--Description of Convertible Stock." A holder of any shares of capital stock of the Company may be granted preemptive rights to subscribe to or purchase any issuance of capital stock of the Company only to the extent that, and on the terms and conditions upon which, the Company's Board of Directors expressly grants such rights in a written agreement between such holder and the Company. Except for an agreement granting preemptive rights to Yamanouchi under certain circumstances and an agreement entitling investors in the Common Stock Placement to receive an adjustment of the purchase price of their shares through the issuance of additional shares of Common Stock, no such agreements are currently in effect. Yamanouchi did not exercise its preemptive rights in connection with the Private Placement Transactions. See "Risk Factors--Agreements with Significant Shareholder" and "Recent Development--Private Placements; Common Stock Placement." As of October 1, 1996, there were 19,207,402 shares of Common Stock outstanding and 931 record holders of such shares of the Company's Common Stock. CLASS B PREFERRED STOCK The Board of Directors of the Company is authorized to issue shares of Class B Preferred Stock in series and to fix the number of shares in each series; the designations, powers, preferences and relative, participating, optional or other special rights of and the qualifications, limitations and restrictions on the shares in such series. The Board of Directors of the Company has designated 5,500,000 shares of Class B Preferred Stock as "5% Convertible Preferred Stock." -28- DESCRIPTION OF CONVERTIBLE PREFERRED STOCK As of October 4 1996, there were 4,200,000 shares of Convertible Preferred Stock outstanding and 80 record holders of such Convertible Preferred Stock. The description of the Convertible Preferred Stock set forth below does not purport to be complete and is qualified in its entirety by reference to the Certificate of Amendment to the Company's Certificate of Incorporation which has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part and is available as set forth in this Prospectus under the caption "Available Information." DIVIDENDS. The holders of the Convertible Preferred Stock shall be entitled to receive out of any assets legally available therefor cumulative dividends at the rate of $1.25 per share per annum, payable quarterly on March 31, June 30, September 30 and December 31 of each year, when and as declared by the Board of Directors, in preference and priority to any payment of any dividend on the Common Stock or any other class or series of stock of the Company. Such dividends shall accrue on any given share from the day of original issuance of such share and shall accrue from day to day whether or not earned or declared. If at any time dividends on the outstanding Convertible Preferred Stock at the rate set forth above shall not have been paid or declared and set apart for payment with respect to all preceding periods, the amount of the deficiency shall be fully paid or declared and set apart for payment, but without interest, before any distribution, whether by way of dividend or otherwise, shall be declared or paid upon or set apart for the shares of any other class or series of stock of the Company. Any dividend payable on a dividend payment date occurring after November 27, 1996 may be paid, at the option of the Company, either (i) in cash or (ii) in shares of Convertible Preferred Stock valued at $25 per share if the Common Stock issuable upon conversion of such shares has been registered for resale under the Securities Act and the registration statement, including a current prospectus with respect thereto, remains in effect at the date of delivery of such shares, and if the Company shall have given written notice of its intention to pay such dividend in stock to all holders of the Convertible Preferred Stock at least 10 days before the record date for such dividend. No holder that is a bank holding company or subsidiary thereof shall be required to accept Convertible Preferred Stock in lieu of cash in payment of a dividend unless after giving effect thereto the provisions of the Certificate of Amendment would permit one share of Convertible Preferred Stock to be converted by such holder. Any dividend payable on a dividend payment date occurring prior to November 27, 1996 must be paid in cash. -29- LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of the Convertible Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any assets of the Company to the holders of any other class or series of shares, the amount of $25 per share plus any accrued but unpaid dividends (the "Liquidation Preference"). A consolidation or merger of the Company with or into any other corporation or corporations, or a sale of all or substantially all of the assets of the Company, shall, at the option of the holders of the Convertible Preferred Stock, be deemed a liquidation, dissolution or winding up entitling the holders of the Convertible Preferred Stock to receive their Liquidation Preference if the shares of stock of the Company outstanding immediately prior to such transaction represent immediately after such transaction less than a majority of the voting power of the surviving corporation (or of the acquiror of the Company's assets in the case of a sale of assets). Such option may be exercised by the vote or written consent of holders of a majority of the Convertible Preferred Stock at any time within thirty calendar days after written notice (which shall be given promptly) of the essential terms of such transaction shall have been given to the holders of the Convertible Preferred Stock in the manner provided by law for the giving of notice of meetings of shareholders. FORCED CONVERSION. The Company at its option may cause all outstanding shares of the Convertible Preferred Stock to be converted into Common Stock at any time beginning on August 29, 1997, on at least 20 days' notice, at a conversion price determined as described below under the caption "Determination of Conversion Price" (the "Conversion Price") as of the date specified in such notice (the "Conversion Date") and otherwise on the terms set forth in the Certificate of Amendment; provided, that the Company may not exercise such right of conversion unless (i) the closing price (last trade price) of the Common Stock as reported by the Nasdaq National Market for the 20 consecutive trading days prior to the date the "Conversion Notice" as defined below is mailed has not on any day been less than 120% of the "Conversion Cap" (as defined below) (subject to adjustment for stock dividends, stock splits and reverse stock splits), and (ii) the shares issuable upon conversion of the Convertible Preferred Stock are registered for resale by an effective registration statement under the Securities Act which became effective not later than November 27, 1997, and a current prospectus meeting the requirements of Section 10 of the Securities Act is available for delivery at the Conversion Date (the "Registration Condition"). At least 20 days prior to the Conversion Date, written notice (the "Conversion Notice") shall be mailed, first class postage prepaid, by the Company to each holder of record of the Convertible Preferred Stock, at the address last shown on the records of the -30- Company for such holder, notifying such holder of the conversion which is to be effected, specifying the Conversion Date and calling upon each such holder to surrender to the Company, in the manner and at the place designated, a certificate or certificates representing the number of shares of Convertible Preferred Stock held by such holder. On or after the Conversion Date, each holder of Convertible Preferred Stock shall surrender to the Company the certificate or certificates representing the shares of Convertible Preferred Stock owned by such holder as of the Conversion Date, in the manner and at the place designated in the Conversion Notice, and thereupon the shares issuable upon such conversion shall be delivered as provided in the Certificate of Amendment. If at the Conversion Date the Registration Condition shall not be satisfied, then no shares shall be converted and the Conversion Notice shall be deemed to be withdrawn. In such event, any certificates for Convertible Preferred Stock which have been surrendered for conversion shall be returned to the persons surrendering the same; provided, however, that if a holder shall have received shares of Common Stock upon conversion of Convertible Preferred Stock after the Conversion Notice was given but before the Conversion Date, such holder may elect either to retain such Common Stock or rescind such conversion by tendering such shares of Common Stock to the Company. On August 29, 1998, all then outstanding shares of Convertible Preferred Stock shall be automatically converted into Common Stock at the Conversion Price and otherwise pursuant to the applicable provisions of the Certificate of Amendment described below under the caption "Optional Conversion". OPTIONAL CONVERSION. At any time until August 29, 1998, at the option of a holder of Convertible Preferred Stock, each share of Convertible Preferred Stock shall be convertible into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing (x) the Liquidation Preference of the Convertible Preferred Stock on the date the notice of conversion is given by the holder (such date is also referred to herein as the "Conversion Date"), by (y) the Conversion Price in effect on the Conversion Date. DETERMINATION OF CONVERSION PRICE. Subject to the "Conversion Cap" described below, the Conversion Price shall be 90% of the lowest reported sale price of the Common Stock as reported by the Nasdaq National Market during a specified period of consecutive trading days immediately preceding the Conversion Date, which periods are set forth in the table below: -31- Period during which such Period of consecutive trading Conversion Date occurs: days preceding such Conversion Date: Through the 120th day after Closing 5 days 121st to 150th day after Closing 6 days 151st to 180th day after Closing 7 days 181th to 210th day after Closing 8 days 211th to 240th day after Closing 9 days 241st to 270th day after Closing 10 days 271st to 300th day after Closing 11 days 301st to 330th day after Closing 12 days 331st day after Closing or later 13 days The Conversion Price shall not be greater than the Conversion Cap. The Conversion Cap shall be calculated as follows: the mean between the closing bid price and closing ask price (as reported by the Nasdaq National Market) for each trading day during the 90-day period ending on November 27, 1996 shall be averaged; the Conversion Cap shall be equal to 115% of the resulting average. If during any period of consecutive trading days provided for above, the Company shall declare or pay any dividend on the Common Stock payable in Common Stock or in rights to acquire Common Stock, or shall effect a stock split or reverse stock split, or a combination, consolidation or reclassification of the Common Stock, then the Conversion Price shall be proportionately decreased or increased, as appropriate, to give effect to such event. If any such event occurs after the Conversion Cap has been determined, the Conversion Cap shall be proportionately decreased or increased, as appropriate, to give effect to such event. DISTRIBUTIONS. If the Company shall at any time or from time to time make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Company or any of its subsidiaries other than additional shares of Common Stock, then, in each such event, provision shall be made so that the holders of Convertible Preferred Stock shall receive, upon the conversion thereof, the securities of the Company which they would have received had they been the owners on the date of such event of the number of shares of Common Stock issuable to them upon conversion. FRACTIONAL SHARES. No fractional shares shall be issued upon the conversion of any share or shares of Convertible Preferred Stock. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Convertible Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the Company shall, in lieu of issuing any fractional share, pay the holder otherwise entitled to such fraction a sum in cash equal to the fair market value of such -32- fraction on the date of conversion (as determined in good faith by the Board of Directors of the Company). REORGANIZATION OR MERGER. In case of any reorganization or any reclassification of the capital stock of the Company or any consolidation or merger of the Company with or into any other corporation or corporations or a sale of all or substantially all of the assets of the Company to any other person, and the holders of Convertible Preferred Stock do not elect to treat such transaction as a liquidation, dissolution or winding up as described above under the caption "Liquidation Preference," then, as part of such reorganization, consolidation, merger or sale, provision shall be made so that each share of Convertible Preferred Stock shall thereafter be convertible into the number of shares of stock or other securities or property (including cash) to which a holder of the number of shares of Common Stock deliverable upon conversion of such share of Convertible Preferred Stock would have been entitled upon the record date of (or date of, if no record date is fixed) such event and, in any case, appropriate adjustment (as determined by the Board of Directors) shall be made in the application of the provisions of the Certificate of Amendment with respect to the rights and interests thereafter of the holders of the Convertible Preferred Stock, to the end that such provisions shall thereafter be applicable, as nearly as equivalent as is practicable, in relation to any shares of stock or the securities or property (including cash) thereafter deliverable upon the conversion of the shares of Convertible Preferred Stock. VOTING RIGHTS. The Company shall not undertake the following actions without the consent of the holders of a majority of the Convertible Preferred Stock: (i) modify its Certificate of Incorporation or Bylaws so as to amend or change any of the rights, preferences or privileges of the Convertible Preferred Stock, (ii) authorize or issue any other preferred equity security senior to or on a parity with the Convertible Preferred Stock, as to dividends, liquidation preferences, conversion rights, redemption rights or other rights, preferences or privileges, or (iii) purchase or otherwise acquire for value any Common Stock or other equity security of the Company either junior or senior to or on a parity with the Convertible Preferred Stock while there exists any arrearage in the payment of cumulative dividends hereunder. Except as described in the preceding sentence or as provided by law, the Convertible Preferred Stock shall have no voting rights. NO ADVERSE ACTIONS. The Company may not in any manner, whether by amendment of its Certificate of Incorporation, merger, reorganization, recapitalization, consolidation, sales of assets, sale of stock, tender offer, dissolution or otherwise, take any action, or permit any action to be taken, solely or primarily for the purpose of increasing the value of any class of stock of the Company if the effect of such action is to reduce the value or security of the Convertible Preferred Stock. -33- LIMITS ON CONVERSION OF CONVERTIBLE PREFERRED STOCK. Notwithstanding any right of conversion of Convertible Preferred Stock described above, no such shares of Convertible Preferred Stock originally issued by the Company to a bank holding company or an affiliate of a bank holding company shall be converted into shares of Common Stock or any other class or series of voting stock by the original holder or any direct or indirect transferee thereof if immediately after such conversion such person and its affiliates (which term includes such bank holding company, any such transferee and their respective affiliates) would own more than 4.9% of any class of voting securities of the Company, unless such shares are being distributed, disposed of or sold in any one of the following transactions: (a) an initial public offering or other widely-dispersed public distribution of the shares of the Company; (b) transfers in small amounts pursuant to Rule 144 under the Securities Act; (c) a transfer to a single purchaser (or a group acting in concert) which controls or which has negotiated the purchase of at least a majority of the Company's voting stock held by persons other than the bank holding company investor; (d) a private sale of such equity so long as no purchaser acquires more than 2% of the total equity outstanding upon conversion; or (e) such shares are being sold in any other manner permitted by the Federal Reserve Board. The limitations described in the preceding paragraph will not limit or affect the right of the Company to force a conversion of the Convertible Preferred Stock or an automatic conversion of the Preferred Stock in accordance with the provisions of the Certificate of Amendment. The Company has no obligation to monitor compliance with the limits described in the preceding paragraph and will have no liability for the failure of any person to comply with such limits. WARRANTS In connection with the Private Placements, certain designees of the Placement Agent collectively received (i) 15,000 Common Stock Warrants which may be exercised, at a purchase price of $16.65 per share, to acquire the same number of shares of Common Stock, and (ii) 420,000 Convertible Preferred Stock Warrants which may be exercised, at a purchase price of $25 per share, to acquire the same number of shares of Convertible Preferred Stock. (4) to the Selling Shareholders Table under the section captioned "Selling See "Common Stock" and "Class B Preferred Stock--Description of Convertible Preferred Stock" above for a description of the rights of a holder of Common Stock and of Convertible Preferred Stock. The Common Stock Warrants expire in July 1999 and the Convertible Preferred Stock Warrants expire in August 1998. The number of Common Stock Warrants and the per share purchase price shall be adjusted, subject to certain exceptions, if, prior to January 23, 1997, the Company sells any shares of Common Stock for an issue price lower than the Common -34- Stock Purchase Price. The Common Stock Warrants and the Convertible Preferred Stock Warrants contain customary antidilution provisions which provide for adjustments in the event of stock splits, stock dividends and similar events. See "Recent Developments--Private Placements--Common Stock Placement." The Company is obliged to register the offer and sale of shares of Common Stock issuable upon exercise of the Common Stock Warrants and upon conversion of the shares of Convertible Preferred Stock that are issuable upon exercise of the Convertible Preferred Stock Warrants under the Securities Act. An estimate of the number of all such shares have been registered pursuant to the Registration Statement of which this Prospectus forms a part. PROVISIONS OF THE CERTIFICATE OF INCORPORATION AFFECTING ACQUISITION OF THE COMPANY Article Five of the Company's Certificate of Incorporation provides that certain "Business Combinations" (as defined below) involving the Company may be effected only if approved by the affirmative vote of the holders of at least 66-2/3% of all votes cast by the holders of all of the then outstanding shares of the Company's capital stock entitled to vote in respect of such Business Combination, voting together without regard to class. In the absence of such a provision, the vote required by New Jersey law to effect Business Combinations is the affirmative vote of a majority of the votes cast by holders of the outstanding voting stock of the Company. In general, a Business Combination includes any merger or consolidation of the Company with or into any other corporation, except where shareholder approval is not required for such merger or consolidation under New Jersey law; any merger or consolidation of any other corporation with or into the Company, except where shareholder approval is not required for such merger or consolidation under New Jersey law; the sale, lease, exchange, transfer or other disposition of all or substantially all of the assets of the Company; the acquisition, in exchange for shares, obligations or other securities of the Company, of some or all of the shares of another corporation, or of some or all of the assets of another entity if such acquisition requires shareholder approval under New Jersey law; and the adoption of any plan or proposal for liquidation or dissolution of the Company. Article Five may inhibit and discourage attempts to acquire control of the Company, without negotiation with management, through the acquisition of a substantial number of shares of the Company followed by a forced merger. Such a merger may or may not be in the best interest of the Company or its shareholders. Article Five creates a veto power in the minority over any Business Combination. Companies with large numbers of shareholders -35- frequently have difficulty obtaining more than an ordinary majority vote even for a proposition which is supported by management. Article Five makes it more difficult to effect a Business Combination, even if the Business Combination is advantageous and favored by the Board of Directors or a majority of the shareholders of the Company, because of the higher voting standard it imposes. If a Business Combination is opposed by a group controlling a substantial minority of the Company's voting stock, that group might have effective veto power of the Business Combination. By blocking a proposed Business Combination, management of the Company could use Article Five to perpetuate its control of the Company. As of October 1, 1996, Yamanouchi controlled the vote of approximately 26.3% of the outstanding shares of Common Stock and Dr. Vukovich controlled approximately 10.1% of the outstanding shares of Common Stock. Accordingly, Article Five may allow Yamanouchi and/or Dr. Vukovich to prevent a Business Combination not favored by it and/or him, even though favored by a majority of the shareholders of the Company and a majority of the Board of Directors. Article Five will not prevent a tender offer for all or part of the Company's capital stock but it may have an adverse impact on shareholders who wish to participate in any such offer. In this connection, Article Five could result in the denial or reduction to shareholders of potential premiums over market usually afforded by tender offers. The higher voting standard contained in Article Five does, however, provide some protection for shareholders who do not wish to have their investment in the Company liquidated or shifted to an organization controlled by management not originally of their choosing. Management of the Company believes that over the long-term the Company's shareholders will benefit from the provisions of Article Five because Article Five will induce a prospective acquiror of the Company to negotiate with management on an arms-length basis rather than under the volatile conditions surrounding a hostile takeover. In order to prevent circumvention of Article Five by further amendment, alteration or repeal of the Company's Amended and Restated Certificate of Incorporation, the Amended and Restated Certificate of Incorporation requires 66-2/3% approval of any amendment, alteration or repeal of Article Five. The Company's Certificate of Incorporation authorizes 10,000,000 shares of Class B Preferred Stock and authorizes the Board of Directors to issue shares of Class B Preferred Stock in one or more series with such dividend, liquidation, conversion, redemption and other rights as the Board establishes at the time. The Board of Directors has designated 5,500,000 shares of Class B Preferred Stock as 5% Convertible Preferred Stock. As of October 1, 1996, 4,200,000 shares of Convertible Preferred Stock were outstanding. Except for the outstanding shares of Convertible -36- Preferred Stock, there are currently no shares of Class B Preferred Stock outstanding. The Board of Directors, without shareholder approval, unless otherwise required by any applicable agreement with or the rules of any exchange or market on which the Company's securities are traded, can issue Class B Preferred Stock with voting and conversion rights which could adversely affect the voting power or other rights of holders of Common Stock. Class B Preferred Stock could be issued in one or more series with such voting, conversion and other rights as would discourage possible acquirors of the Company from making a tender offer or other attempt to gain control of the Company, even if such transaction were generally favorable to the Company's shareholders. See "Risk Factors--Possible Issuance of Preferred Stock without Shareholder Approval." In the event of a proposed merger, tender offer or other attempt to gain control of the Company which the Board of Directors does not approve, it might be possible for the Board of Directors to authorize the issuance of a series of Class B Preferred Stock with rights and preferences which could impede the completion of such a transaction. The Board of Directors could authorize holders of the Class B Preferred Stock to vote, either separately as a class or with the holders of Common Stock, on any merger, sale or exchange of assets by the Company or other extraordinary corporate transaction. Class B Preferred Stock could be privately placed with purchasers who might ally themselves with the Board of Directors in opposing a hostile takeover bid. Accordingly, a possible effect of the authorization of the Class B Preferred Stock may be to discourage possible acquirors from making a tender offer or other attempt to gain control of the Company with a view to imposing a merger or sale of all or any part of the Company's assets, even though a majority of shareholders may deem such acquisition attempts to be desirable. In connection with the foregoing, it is also noted that certain companies have recently distributed preferred stock or warrants to acquire preferred or common stock to the holders of their common stock in an effort to discourage or defeat certain hostile tender offers. To the extent that it impedes any such takeover attempts, the Class B Preferred Stock may serve to perpetuate management. Pursuant to the terms of the Certificate of Amendment which established the Covertible Preferred Stock and the rights thereof, the holders of the Convertible Preferred Stock may, by majority vote, elect to treat a merger or consolidation of the Company with or into any other corporation, or a sale of all or substantially all of the assets of the Company, as a liquidation, dissolution or winding up of the Company, and receive their Liquidation Preference if the shares of stock of the Company outstanding immediately prior to such transaction represent less than a majority of the voting power of the surviving corporation or the acquiror of the Company's assets. See "Description of Securities--Class B Preferred Stock; Description of Covertible Preferred Stock--Liquidation Preference." -37- If such election is not made, then the holders of Convertible Preferred Stock are entitled to have provision made so that such shares are convertible into the number of shares of stock or other securities or property, including cash, which a holder of the number of shares of Common Stock deliverable upon conversion of such shares of Convertible Preferred Stock on the record date of such event would have been entitled to receive. The Board of Directors shall make appropriate adjustments to the rights and interests of the holders of Convertible Preferred Stock so that the rights, preferences and privileges with respect to the Convertible Preferred Stock shall continue to apply as nearly as equivalent as is practicable following any such transaction. See "Description of Securities--Class B Preferred Stock; Description of Covertible Preferred Stock--Reorganization or Merger." These rights of the holders of Convertible Preferred Stock may discourage possible acquirors of the Company from undertaking a Business Combination with respect to the Company. The Company's by-laws provide that special meetings of its shareholders, unless otherwise prescribed by statute or by the Company's Certificate of Incorporation, may be called by the Chairman of the Board or President of the Company, and shall be called by the President or Secretary of the Company at the request in writing of majority of the Board of Directors. The New Jersey Business Corporation Act provides, among other things, that upon the application of the holder or holders of not less than 10% of all of the shares entitled to vote at a meeting, the Superior Court of New Jersey, in an action in which the court may proceed in a summary manner, for good cause shown, may order a special meeting of the shareholders to be called at such time and place and for the purpose designated in such order. These provisions could make it more difficult for shareholders of the Company to take action opposed by the Board of Directors. TRANSFER AGENT AND REGISTRAR The Company's transfer agent is Continental Stock Transfer and Trust Company, New York, New York 10007. LEGAL MATTERS Giordano, Halleran & Ciesla, a Professional Corporation, Middletown, New Jersey, will pass upon certain legal matters with respect to the shares offered hereby for the Company. -38- EXPERTS The consolidated balance sheets of the Company as of December 31, 1995 and 1994 and the consolidated statements of operations of the Company and changes in shareholders' equity of the Company for each of the years ended December 31, 1995, 1994 and 1993 and the consolidated statements of cash flows for the years ended December 31, 1995, 1994 and 1993, have been incorporated by reference herein and in the Registration Statement in reliance on the report of Coopers & Lybrand L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. -39- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the fees and expenses in connection with the issuance and distribution of the securities being registered hereunder. All of the expenses identified below will be paid by the Company, and except for the SEC Registration Fee and NASD filing fee, all amounts are estimates.
SEC Registration Fee................. $ 61,353 NASD Filing Fee...................... 18,294 Accounting Fees and Expenses......... 5,000 Legal Fees and Expenses.............. 75,000 Printing and Engraving Expenses...... 25,000 Blue Sky Fees and Expenses........... 5,000 Fees and Expenses of Transfer Agent and Registrar........................ 5,000 Miscellaneous........................ 5,000 -------- Total $199,647
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 14A:3-5 of the New Jersey Business Corporation Act empowers corporations to indemnify their directors, officers, employees and agents in accordance with the provisions therein set forth. Article VI of the Registrant's By-laws provides for the indemnification of the directors, officers, employees and agents of the Registrant ("Corporate Agents"). More specifically, the Registrant is obliged to indemnify a Corporate Agent against his expenses and liabilities actually and reasonably incurred in connection with the defense of any proceeding involving the Corporate Agent by reason of his being or having been such a Corporate Agent, other than a proceeding by or in the right of the Registrant; provided, that such Corporate Agent acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Registrant and, with respect to any criminal proceeding, such Corporate Agent had no reasonable cause to believe his conduct was unlawful. In addition, the Registrant shall indemnify a Corporate Agent against his liabilities and expenses, actually or reasonably incurred by him in connection with the defense, in any proceeding, by or in the right of the Registrant to procure a judgment in its favor which involves the Corporate Agent by reason of his being or having been such Corporate Agent; provided, that the Corporate Agent acted in good faith and in a manner he reasonably believed to be in or not II-1 opposed to the best interests of the Registrant or, if the Corporate Agent is adjudged liable to the Registrant, a court determines that the Corporate Agent is entitled to such indemnity. To the extent that a Corporate Agent of the Registrant has been successful on the merits in any proceeding referred to above, the Registrant must indemnify the Corporate Agent against expenses, including attorneys' fees. Unless otherwise ordered by a court, prior to the payment of any indemnification to a Corporate Agent of the Registrant, the Board of Directors of the Registrant (by a majority vote of a quorum consisting of directors not involved in the proceeding), or the shareholders, or independent legal counsel designated by the Board of Directors in a written opinion, will determine in a given situation whether indemnification is proper under the Registrant's By-laws based upon the conduct of the Corporate Agent. Expenses incurred by a Corporate Agent in connection with a proceeding may be paid by the Registrant in advance of the final disposition of the proceeding; provided, that such payment is authorized by the Registrant's Board of Directors and the Corporate Agent undertakes to repay such amount if it is found that he is not entitled to be indemnified under the Registrant's By-laws. No indemnification of a Corporate Agent will be made if a judgment or other final adjudication adverse to the Corporate Agent establishes that his acts or omissions (a) were in breach of his duty of loyalty to the Registrant or its shareholders, (b) were not in good faith or involved a knowing violation of law, or (c) resulted in receipt by the Corporate Agent of an improper personal benefit. With respect to provisions included in the Registrant's Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation") limiting the liability of officers and directors of the Registrant, Article 7.01 of the Registrant's Certificate of Incorporation provides that to the fullest extent permitted by the laws of the State of New Jersey, as they exist or may hereafter be amended, the directors and officers of the Registrant shall not be personally liable to the Registrant or its shareholders for damages as a result of a breach of any duty owed to the Registrant or its shareholders, except that the provisions of this Article 7.01 shall not relieve a director or officer from liability for any breach of duty based upon an act or omission (a) in breach of such person's duty of loyalty to the Registrant or its shareholders, (b) not in good faith or involving a knowing violation of law, or (c) resulting in receipt by such person of an improper personal benefit. This Article 7.01 shall apply with respect to acts or omissions occurring prior to or after the date of its adoption. The Registrant maintains two liability insurance policies providing coverage for its directors and officers in an aggregate amount up to $10,000,000 for any single occurrence. II-2 Reference is made to the Common Stock Agreement and the Preferred Stock Agreement, the forms of which are filed as Exhibits 4.4 and 4.5 to this Registration Statement, each of which contains certain provisions for the indemnification by the Registrant of the Selling Shareholders and their officers, directors, employees, agents, partners and controlling persons against certain liabilities, including liabilities under the Securities Act. The Common Stock Agreement and Preferred Stock Agreement also contain certain provisions for the indemnification by the Selling Shareholders of the Registrant and the Registrant's directors, officers, employees, agents, partners and controlling persons against certain liabilities, including liabilities under the Securities Act. The Stock Purchase Agreement dated as of January 22, 1992 between the Registrant and Yamanouchi Pharmaceutical Company, Ltd. ("Yamanouchi") which is incorporated by reference as an exhibit to this Registration Statement contains provisions for the indemnification against certain liabilities, including liabilities under the Securities Act of 1933, of (i) Yamanouchi, its officers, directors, employees and controlling persons by the Registrant, and (ii) the Registrant, its officers, directors and controlling persons by Yamanouchi. ITEM 16. EXHIBITS -------- # 4.1 Form of Specimen Certificate, Roberts Pharmaceutical Corporation Common Stock. 4.2 Form of Specimen Certificate, Roberts Pharmaceutical Corporation 5% Convertible Preferred Stock. 4.3 Certificate of Amendment, dated August 29, 1996, to the Amended and Restated Certificate of Incorporation of Roberts Pharmaceutical Corporation. 4.4 Form of Stock Purchase Agreement, dated July 17, 1996, by and between the Registrant and the Purchaser named therein. 4.5 Form of Preferred Stock Investment Agreement, dated August 29, 1996, by and between the Registrant and the Purchaser named therein. 4.6 Form of Stock Purchase Warrant used in connection with the Common Stock Placement. 4.7 Form of Stock Purchase Warrant used in connection with the Preferred Stock Placement. @ 4.8 Stock Purchase Agreement, dated as of January 22, 1992, between the Registrant and Yamanouchi Pharmaceutical Co., Ltd., including Shareholder Agreement dated as of January 22, 1992 between Dr. Robert A. Vukovich and Yamanouchi II-3 Pharmaceutical Co., Ltd. which comprises Annex A to such agreement. 5. Opinion of Giordano, Halleran & Ciesla, A Professional Corporation, regarding legality of the Common Stock, including consent of such Counsel. 23.1 Consent of Giordano, Halleran & Ciesla, A Professional Corporation (filed with Exhibit 5). 23.2 Consent of Coopers & Lybrand L.L.P. 24. Power of Attorney (filed with signature pages). - ----------- # Incorporated by reference to the identically numbered exhibit to Amendment No. 1 to Registrant's Registration Statement on Form S-1 (Registration No. 33-31876), pursuant to rule 411(c) promulgated under the Securities Act of 1933. @ Incorporated by reference to Exhibit 10.55 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-45069), pursuant to Rule 411(c) promulgated under the Securities Act of 1933. ITEM 17. UNDERTAKINGS. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act"), may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. For purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as II-4 amended (the "Exchange Act"), (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities being offered thereby, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The Registrant hereby undertakes to file, during any period in which offers or sales of Common Stock are being made, a post-effective amendment to this Registration Statement to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement. The Registrant hereby undertakes, if the Registrant is a foreign private issuer, to file a post-effective amendment to this Registration Statement to include any financial statements required by Rule 3-19 of Regulations S-X at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Securities Act need not be furnished, provided that the Registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. For the purpose of determining any liability under the Securities Act, each post-effective amendment referred to above shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as any shares of Common Stock being registered which remain unsold at the termination of the offering contemplated by this Registration Statement, such unsold shares of Common Stock shall be removed from registration by means of a post-effective amendment to the Registration Statement. II-5 SIGNATURES ---------- Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Township of Eatontown, State of New Jersey, on the 7th day of October, 1996. ROBERTS PHARMACEUTICAL CORPORATION (Registrant) By:/s/ Robert A. Vukovich ---------------------- Robert A. Vukovich, Ph.D. Chairman of the Board, President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert A. Vukovich, Ph.D., Peter M. Rogalin, CPA, and Anthony A. Rascio, Esq. and each of them, his true and lawful attorneys-in- fact and agents for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated. Signature Title Date --------- ----- ---- /s/ Robert A. Vukovich Chairman of the Board, October 7, 1996 - ----------------------- President and Chief Robert A. Vukovich Executive Officer (Principal Executive Officer) /s/ Peter M. Rogalin Vice President, October 7, 1996 - ----------------------- Treasurer, Chief Peter M. Rogalin Financial Officer and Director (Principal Financial and Accounting Officer) II-6 Signature Title Date --------- ----- ---- /s/ Anthony A. Rascio Director October 7, 1996 - ------------------------ Anthony A. Rascio /s/ Robert W. Loy Director October 7, 1996 - ------------------------ Robert W. Loy /s/ John T. Spitznagel Director October 7, 1996 - ------------------------ John T. Spitznagel Director October , 1996 - --------------------- Takao Miyamoto Director October , 1996 - --------------------- Akihiko Matsubara Director October , 1996 - --------------------- Digby W. Barrios Director October , 1996 - --------------------- Zola P. Horovitz II-7 EXHIBIT INDEX ------------- Exhibit No. - ----------- # 4.1 Form of Specimen Certificate, Roberts Pharmaceutical Corporation Common Stock. 4.2 Form of Specimen Certificate, Roberts Pharmaceutical Corporation 5% Convertible Preferred Stock. 4.3 Certificate of Amendment, dated August 29, 1996, to the Amended and Restated Certificate of Incorporation of Roberts Pharmaceutical Corporation. 4.4 Form of Stock Purchase Agreement, dated July 17, 1996, by and between the Registrant and the Purchaser named therein. 4.5 Form of Preferred Stock Investment Agreement, dated August 29, 1996, by and between the Registrant and the Purchaser named therein. 4.6 Form of Stock Purchase Warrant used in connection with the Common Stock Placement. 4.7 Form of Stock Purchase Warrant used in connection with the Preferred Stock Placement. @ 4.8 Stock Purchase Agreement, dated as of January 22, 1992, between the Registrant and Yamanouchi Pharmaceutical Co., Ltd., including Shareholder Agreement dated as of January 22, 1992 between Dr. Robert A. Vukovich and Yamanouchi Pharmaceutical Co., Ltd. which comprises Annex A to such agreement. 5. Opinion of Giordano, Halleran & Ciesla, A Professional Corporation, regarding legality of the Common Stock, including consent of such Counsel. 23.1 Consent of Giordano, Halleran & Ciesla, A Professional Corporation (filed with Exhibit 5). 23.2 Consent of Coopers & Lybrand L.L.P. II-8 24. Power of Attorney (filed with signature pages). - ----------- # Incorporated by reference to the identically numbered exhibit to Amendment No. 1 to Registrant's Registration Statement on Form S-1 (Registration No. 33-31876), pursuant to rule 411(c) promulgated under the Securities Act of 1933. @ Incorporated by reference to Exhibit 10.55 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-45069), pursuant to Rule 411(c) promulgated under the Securities Act of 1933. II-9 EX-4.2 2 FORM OF SPECIMEN CERT. - COMMON STOCK EXHIBIT 4.2 INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY ROBERTS PHARMACEUTICAL CORPORATION 5,500,000 Shares of 5% Convertible Preferred Stock, Par Value $.10 UPON REQUEST OF A SHAREHOLDER, THE CORPORATION WILL FURNISH A FULL STATEMENT OF THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF EACH CLASS AND SERIES OF ITS CAPITAL STOCK. This Certifies that ____________________ is the owner of ____________________ fully paid and non-assessable Shares of the Capital Stock of the above named Corporation transferable only on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this Certificate properly endorsed. IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be signed by its duly authorized officers and its Corporate Seal to be hereunto affixed this _____ day of __________ A.D. 19__. _______________________________ __________________ __________ Secretary/Treasurer President SEE REVERSE SIDE EXPLANATION OF ABBREVIATIONS The following appreviations, when used in the inscription of ownership on the fact of this certificate, shall be construed as if they were written out in full according to applicable laws or regulations. Abbreviations, in addition to those appearing below, may be used. JT TEN As joint tenants with right of TEN ENT As tenants by the entireties survivorship and not as tenants UNIN GIFT Uniform Gifts to Minors Act in common MIN ACT TEN COM As tenants in common CUST Custodian for For Value Received, ____________ hereby sell, assign and transfer unto _____________________, __________ Shares represented by the within Certificate, and do hereby irrevocably constitute and appoint ______________ Attorney to transfer the said Shares on the books of the within named Corporation with full power of substitution in the premises. Dated_______________, 19__ In presence of ____________________ ________________________ THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. EX-4.3 3 FORM OF SPECIMEN CERT. - PREFERRED STOCK EXHIBIT 4.3 CERTIFICATE OF AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF ROBERTS PHARMACEUTICAL CORPORATION Pursuant to Section 14A:7-2(4) of the New Jersey Business Corporation Act, the undersigned certifies as follows: 1. The name of the corporation is Roberts Pharmaceutical Corporation (the "Corporation"). 2. By Unanimous Written Consent dated as of August 29, 1996, a duly appointed committee of the Board of Directors of the Corporation duly adopted the following resolutions: RESOLVED, that the number of shares of the Class B Preferred Stock of the Corporation which were designated as "5% Convertible Preferred Stock" pursuant to the provisions of the Certificate of Amendment to the Corporation's Amended and Restated Certificate of Incorporation dated August 26, 1996 be and hereby is reduced from 5,500,000 shares to zero (0) shares (such that no shares having the rights and preferences set forth in such Certificate of Amendment may be issued); RESOLVED, that there shall be a newly established series of shares of the Class B Preferred Stock of the Corporation designated "5% Convertible Preferred Stock"; that the number of shares of such series shall be 5,500,000 and that the rights and preferences of such series (the "5% Preferred") and the limitations and restrictions thereon shall be as follows: 1. Dividends. ---------- a) The holders of the 5% Preferred shall be entitled to receive out of any assets legally available therefor cumulative dividends at the rate of $1.25 per share per annum, payable quarterly on March 31, June 30, September 30 and December 31 of each year, when and as declared by the Board of Directors, in preference and priority to any payment of any dividend on the Common Stock or any other class or series of stock of the Corporation. Such dividends shall accrue on any given share from the day of original issuance of such share and shall accrue from day to day whether or not earned or declared. If at any time dividends on the outstanding 5% Preferred at the rate set forth above shall not have been paid or declared and set apart for payment with respect to all preceding periods, the amount of the deficiency shall be fully paid or declared and set apart for payment, but without interest, before any distribution, whether by way of dividend or otherwise, shall be declared or paid upon or set apart for the shares of any other class or series of stock of the Corporation. b) Any dividend payable on a dividend payment date more than 90 days after the date of issuance may be paid, at the option of the Corporation, either (i) in cash or (ii) in shares of 5% Preferred value at $25 per share if the Common Stock issuable upon conversion of such shares has been registered for resale under the Securities Act of 1933, as amended (the "Act"), and the registration statement including a current prospectus with respect thereto remains in effect at the date of delivery of such shares, and if the Corporation shall have given written notice of its intention to pay such dividend in stock to all holders of the 5% Preferred at least 10 days before the record date for such dividend. No holder that is a bank holding company or subsidiary thereof shall be required to accept 5% Preferred in lieu of cash in payment of a dividend unless after giving effect thereto the provisions of Section 10 hereof would permit one share of 5% Preferred to be converted by such holder. 2. Liquidation Preference. ----------------------- a) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of the 5% Preferred shall be entitled to receive, prior and in preference to any distribution of any assets of the Corporation to the holders of any other class or series of shares, the amount of $25 per share plus any accrued but unpaid dividends (the "Liquidation Preference"). b) A consolidation or merger of the Corporation with or into any other corporation or corporations, or a sale of all or substantially all of the assets of the Corporation, shall, at the option of the holders of the 5% Preferred, be deemed a liquidation, dissolution or winding up within the meaning of this Section 2 if the shares of stock of the Corporation outstanding immediately prior to such transaction represent immediately after such transaction less than a majority of the voting power of the surviving corporation (or of the acquiror of the Corporation's assets in the case of a sale of assets). Such option may be exercised by the vote or written consent of holders of a majority of the 5% Preferred at any time within thirty calendar days after written notice (which shall be given promptly) of the essential terms of such transaction shall have been given to the holders of the 5% Preferred in the manner provided by law for the giving of notice of meetings of shareholders. 3. Forced Conversion. ------------------ a) The Company at its option may cause all outstanding shares of the 5% Preferred to be converted into Common Stock at any time beginning twelve months after the date of issuance, on at least 20 days' notice, at a conversion price determined as set forth in Section 4 hereof (the "Conversion Price") as of the date specified in such notice (the "Conversion Date") and otherwise on the terms set forth in said Section 4; provided, that the Corporation may not exercise such right of conversion unless (i) the Closing Price (last trade price) of the Common Stock as reported by NASDAQ for the 20 consecutive trading days prior to the date the Conversion Notice is mailed has not on any day been less than 120% of the Conversion Cap (as defined in Section 4(c)(ii) hereof)(subject to adjustment for stock dividends, stock splits and reverse stock splits), and (ii) the shares issuable upon conversion of the 5% Preferred are registered for resale by an effective registration statement ("Registration Statement") under the Act which became effective not more than 90 days after the date of issuance of the 5% Preferred, and a current prospectus meeting the requirements of Section 10 of the Act is available for delivery at the Conversion Date. b) At least 20 days prior to the Conversion Date, written notice (the "Conversion Notice") shall be mailed, first class postage prepaid, by the Corporation to each holder of record of the 5% Preferred, at the address last shown on the records of the Corporation for such holder, notifying such holder of the conversion which is to be effected, specifying the Conversion Date and calling upon each such holder to surrender to the Corporation, in the manner and at the place designated, a certificate or certificates representing the number of shares of 5% Preferred held by such holder. Subject to the provisions of the following subsection (c), on or after the Conversion Date, each holder of 5% Preferred shall surrender to the Corporation the certificate or certificates representing the shares of 5% Preferred owned by such holder as of the Conversion Date, in the manner and at the place designated in the Conversion Notice, and thereupon the shares issuable upon such conversion shall be delivered as provided in Section 4(b) hereof. c) If at the Conversion Date the registration condition specified in clause (ii) of subsection (a) shall not be satisfied, then no shares shall be converted and the Conversion Notice shall be deemed to be withdrawn. In such event, any certificates for 5% Preferred which have been surrendered for conversion shall be returned to the persons surrendering the same; provided, however, that if a holder shall have received shares of Common Stock upon conversion of 5% Preferred after the Conversion Notice was given but before the Conversion Date, such holder may elect either to retain such Common Stock or rescind such conversion by tendering such shares of Common Stock to the Corporation. d) On the second anniversary of the Closing Date, all then outstanding shares of 5% Preferred shall be automatically converted into Common Stock at the Conversion Price and otherwise pursuant to the applicable provisions set forth in Section 4 hereof. 4. Optional Conversion. The holders of the 5% Preferred shall have optional -------------------- conversion rights as follows: a) Right to Convert. At any time after the earlier of (i) the date at which a ----------------- Registration Statement has been declared effective and the requisite shareholder approval referred to in subsection (l) of this Section 4 has been obtained, or (ii) the close of business on the 91st day following the Closing Date, each share of 5% Preferred shall be convertible, at the option of the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing (x) the Liquidation Preference of the 5% Preferred determined pursuant to Section 2 hereof on the date the notice of conversion is given, by (y) the Conversion Price determined as hereinafter provided in effect on said date. b) Mechanics of Conversion. To convert shares of 5% Preferred into shares of ------------------------ Common Stock, the holder shall give written notice to the Corporation (which notice may be given by facsimile transmission) that such holder elects to convert the same and shall state therein the number of shares to be converted and the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. Promptly thereafter the holder shall surrender the certificate or certificates representing the shares to be converted, duly endorsed, at the office of the Corporation or of any transfer agent for such shares, or at such other place designated by the Corporation. The Corporation shall, immediately upon receipt of such notice, issue and deliver to or upon the order of such holder, against delivery of the certificates representing the shares which have been converted, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled. The Corporation shall effect such issuance within two (2) business days and shall transmit the certificates by messenger or overnight delivery service to reach the address designated by such holder within two (2) business days after the receipt of such notice. Notice of conversion may be given by a holder at any time during the day up to midnight New York time and such conversion shall be deemed to have been made immediately prior to the close of business on the date such notice of conversion is given. The person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock at the close of business on such date. c) Determination of Conversion Price. ---------------------------------- i) At any date following the earlier of (x) the date at which a Registration Statement is declared effective, or (ii) the 90th day following the Closing Date subject to the provisions of subparagraph (ii) below, the Conversion Price shall be 90% of the lowest trade price of the Common Stock as reported by NASDAQ during a specified period of consecutive trading days immediately preceding such date, which periods are set forth in the table below: Period during which such Period of consecutive trading date occurs: days preceding such date: Through the 120th day after Closing 5 days 121st to 150th day after Closing 6 days 151st to 180th day after Closing 7 days 181th to 210th day after Closing 8 days 211th to 240th day after Closing 9 days 241st to 270th day after Closing 10 days 271st to 300th day after Closing 11 days 301st to 330th day after Closing 12 days 331st day after Closing or later 13 days ii) The Conversion Price shall not be greater than the Conversion Cap. The Conversion Cap shall be calculated as follows: the mean between the closing bid price and closing ask price (as reported on NASDAQ) for each trading day during the 90-day period following the Closing Date (not including the Closing Date) shall be averaged; the Conversion Cap shall be equal to 115% of the resulting average. iii) The "lowest trade price" of the Common Stock on any day shall be the lowest reported sale price of the Common Stock on NASDAQ or any other principal securities price quotation system or market on which prices of the Common Stock are reported. The term "trading day" means a day on which trading is reported on the principal quotation system or market on which prices of the Common Stock are reported. iv) If during any period of consecutive trading days provided for above, the Corporation shall declare or pay any dividend on the Common Stock payable in Common Stock or in rights to acquire Common Stock, or shall effect a stock split or reverse stock split, or a combination, consolidation or reclassification of the Common Stock, then the Conversion Price shall be proportionately decreased or increased, as appropriate, to give effect to such event. If any such event occurs after the Conversion Cap has been determined, the Conversion Cap shall be proportionately decreased or increased, as appropriate, to give effect to such event. d) Distributions. If the Corporation shall at any time or from time to time -------------- make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation or any of its subsidiaries other than additional shares of Common Stock, then in each such event provision shall be made so that the holders of 5% Preferred shall receive, upon the conversion thereof, the securities of the Corporation which they would have received had they been the owners on the date of such event of the number of shares of Common Stock issuable to them upon conversion. e) Certificates as to Adjustments. Upon the occurrence of any adjustment or ------------------------------- readjustment of the Conversion Price or the Conversion Cap pursuant to this Section 4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and cause the independent public accountants regularly employed to audit the financial statements of the Corporation to verify such computation and prepare and furnish to each holder of 5% Preferred a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of 5% Preferred, furnish or cause to be furnished to such holder a like certificate prepared by the Corporation setting forth (i) such adjustments and readjustments, and (ii) the number of other securities and the amount, if any, of other property which at the time would be received upon the conversion of 5% Preferred with respect to each shares of Common Stock received upon such conversion. f) Notice of Record Date. In the event of any taking by the Corporation of a ---------------------- record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any security or right convertible into or entitling the holder thereof to receive additional shares of Common Stock, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of 5% Preferred at least 10 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution, security or right and the amount and character of such dividend, distribution, security or right. g) Issue Taxes. The Corporation shall pay any and all issue and other taxes, ------------ excluding any income, franchise or similar taxes, that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of shares of 5% Preferred pursuant hereto; provided, however, that the Corporation shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion. h) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all ---------------------------------------------- times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the 5% Preferred, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the 5% Preferred, subject to the limitation set forth in subsection (l) below, and if at any time the number of authorized but unissued shares of Common stock shall not be sufficient to effect the conversion of all then outstanding shares of the 5% Preferred, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval. i) Fractional Shares. No fractional shares shall be issued upon the conversion ------------------ of any share or shares of 5% Preferred. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of 5% Preferred by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the Corporation shall, in lieu of issuing any fractional share, pay the holder otherwise entitled to such fraction a sum in cash equal to the fair market value of such fraction on the date of conversion (as determined in good faith by the Board of Directors of the Corporation). j) Notices. Any notice required by the provisions of this Section to be given -------- to the holders of shares of 5% Preferred shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at its address appearing on the books of the Corporation. k) Reorganization or Merger. In case of any reorganization or any ------------------------- reclassification of the capital stock of the Corporation or any consolidation or merger of the Corporation with or into any other corporation or corporations or a sale of all or substantially all of the assets of the Corporation to any other person, and the holders of 5% Preferred do not elect to treat such transaction as a liquidation, dissolution or winding up as provided in Section 2, then, as part of such reorganization, consolidation, merger or sale, provision shall be made so that each share of 5% Preferred shall thereafter be convertible into the number of shares of stock or other securities or property (including cash) to which a holder of the number of shares of Common Stock deliverable upon conversion of such share of 5% Preferred would have been entitled upon the record date of (or date of, if no record date is fixed) such event and, in any case, appropriate adjustment (as determined by the Board of Directors) shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holders of the 5% Preferred, to the end that the provisions set forth herein shall thereafter be applicable, as nearly as equivalent as is practicable, in relation to any shares of stock or the securities or property (including cash) thereafter deliverable upon the conversion of the shares of 5% Preferred. l) Limitation on Number of Conversion Shares. The Corporation shall not be ------------------------------------------ obligated to issue, in the aggregate, more than 3,717,529 shares of Common Stock as presently constituted (the "NASDAQ Cap") upon (1) conversion of the 5% Preferred, (2) exercise of the warrants issued to Cappello & Laffer Capital Corp. or its designees in connection with the sale of the 5% Preferred and the sale of stock to entities advised by Dimensional Fund Advisors, and (3) the issuance of 600,000 shares on or about July 17, 1996 to entities advised by Dimensional Fund Advisors, if issuance of a larger number of shares would constitute a breach of the Corporation's obligations under its agreements with the NASD or NASDAQ or the rules of such organizations. Subject to the obligation to effect certain redemptions pursuant to the last three sentences of this subsection (l), if further issuances of shares of Common Stock pursuant to clauses (1) through (3) would constitute a breach of the Corporation's obligations under any applicable agreements with the NASD or NASDAQ or the rules of such organizations (i.e., all of the shares permitted to be issued under the NASDAQ Cap shall have been so issued), then so long thereafter as such limitation shall continue to be applicable and any shares of 5% Preferred are submitted for conversion, such shares shall receive in cash an amount equal to the the greater of (i) 111.11% of the Liquidation Preference of such shares or (ii) the current value of the Common Stock which such shares would otherwise be entitled to receive upon conversion (such value per share to be the closing price of such shares as reported by NASDAQ on the Conversion Date), in lieu of the Common Stock which such shares would otherwise be entitled to receive upon conversion, and such shares will be deemed cancelled. Payment of said cash amount shall be made no later than one business day after the time specified in Section 4(b) for the delivery of Common Stock upon conversion, and shall bear daily interest thereafter at the rate of one-tenth of one percent per day until pai. Such maximum number of shares of Common Stock shall be proportionately and equitably adjusted in the event of stock splits, stock dividends, reverse stock splits, reclassifications or other such events, in such manner as the Board of Directors of the Corporation shall reasonably determine. If the Corporation is unable to obtain the requisite shareholder approval concerning the issuance of shares of Common Stock in connection with the events specified in clauses (1) through (3) above to satisfy all NASD and NASDAQ requirements prior to 91 days after the date of issuance (the "Redemption Date"), the Corporation shall then redeem, at a "Special Redemption Price" equal to 111.11% of the Liquidation Preference of such shares, a number of shares equal to $75,000,000 (plus any earnings accumulated thereon from the Closing Date until the Redemption Date) divided by the Special Redemption Price. Any redemption effected pursuant to the preceding sentence shall require no notice except the notification of pro rata allocation provided for in the following sentence. Such redemption shall be made pro rata based on the number of shares of the 5% Preferred outstanding at 11:59 p.m. on the day prior to the Redemption Date, and as early as practicable on the Redemption Date the Corporation shall notify each holder of 5% Preferred by the most rapid means of communication available to the Corporation, which may be facsimilie transmission, of the pro rata number of shares to be redeemed from each holder. Such notice shall be binding upon holders who have submitted their stock certificates for redemption prior to the receipt of such notice, as well as on holders who submit their stock certificates thereafter. If there shall be a default in payment of the Special Redemption Price, the amount so payable shall bear daily interest from and after the Redemption Date at the rate of one-tenth of one percent per day until paid. Shares so redeemed shall be deemed to have been redeemed at the opening of business on the Redemption Date and shall no longer be treated as outstanding shares except for purposes of receiving the Special Redemption Price. If the requisiteshareholder approval is obtained before the Redemption Date, no shares shall be redeemed and any certificates submitted shall be returned to their respective holders. m) Reissuance of Certificates. In the event of an optional conversion of 5% --------------------------- Preferred pursuant to Section 4(a) hereof or a redemption of 5% Preferred pursuant to Section 4(1) hereof in which less than all of the shares of 5% Preferred of a particular certificate are converted or redeemed, as the case may be, the Corporation shall promptly cause to be issued and delivered to the holder of such certificate, a certificate representing the remaining shares of 5% Preferred which have not been so converted or redeemed. 5. Other Provisions. For all purposes of this Resolution, the term "date of ----------------- issuance" and the terms "Closing" or "Closing Date" shall mean the day on which shares of the 5% Preferred are first issued by the Corporation. Any provision herein which conflicts with or violates any applicable usury law shall be deemed modified to the extent necessary to avoid such conflict or violation. The term "NASDAQ" herein refers to the principal market on which the Common Stock of the Company is traded. If the Common Stock is listed on a securities exchange, or if another market becomes the principal market on which the Common Stock is traded or through which price quotations for the Common Stock are reported, the term "NASDAQ" shall be deemed to refer to such exchange or other principal market. 6. Restrictions and Limitations. The Corporation shall not undertake the ----------------------------- following actions without the consent of the holders of a majority of the 5% Preferred: (i) modify its Certificate of Incorporation or Bylaws so as to amend or change any of the rights, preferences or privileges of the 5% Preferred, (ii) authorize or issue any other preferred equity security senior to or on a parity with the 5% Preferred, as to dividends, liquidation, preferences, conversion rights, redemption rights or other rights, preferences or privileges, or (iii) purchase or otherwise acquire for value any Common Stock or other equity security of the Corporation either junior or senior to or on a parity with the 5% Preferred while there exists any arrearage in the payment of cumulative dividends hereunder. 7. Voting Rights. Except as provided herein or as provided by law, the 5% -------------- Preferred shall have no voting rights. 8. Attorneys' Fees. Any holder of 5% Preferred shall be entitled to recover ---------------- from the Corporation the reasonable attorneys' fees and expenses incurred by such holder in connection with enforcement by such holder of any obligation of the Corporation hereunder. 9. No Adverse Actions. The Corporation shall not in any manner, whether by ------------------- amendment of the Certificate of Incorporation (including, without limitation, any Certificate of Designation), merger, reorganization, recapitalization, consolidation, sales of assets, sale of stock, tender offer, dissolution or otherwise, take any action, or permit any action to be taken, solely or primarily for the purpose of increasing the value of any class of stock of the Corporation if the effect of such action is to reduce the value or security of the Preferred Stock. 10. Limits on Conversion of 5% Preferred Stock. Notwithstanding any right of ------------------------------------------- conversion of 5% Preferred Stock provided for above, no such shares of 5% Preferred Stock originally issued by the Corporation to a bank holding company or an affiliate of a bank holding company shall be converted into shares of Common Stock or any other class or series of voting stock by the original holder or any direct or indirect transferee thereof such that immediately after such conversion such person and its affiliates (which term, for avoidance of doubt, includes such bank holding company, any such transferee and their respective affiliates) would own more than 4.9% of any class of voting securities of the Corporation, unless such shares are being distributed, disposed of or sold in any one of the following transactions (each a "Conversion Event"): a) an initial public offering or other widely-dispersed public distribution of the shares of the Company; b) transfers in small amounts pursuant to Rule 144 under the Securities Act of 1933; c) a transfer to a single purchaser (or a group acting in concert) which controls or which has negotiated the purchase of at least a majority of the Company's voting stock held by persons other than the bank holding company investor; d) a private sale of such equity so long as no purchaser acquires more than 2% of the total equity outstanding upon conversion; or e) such shares are being sold in any other manner permitted by the Federal Reserve Board. For purposes of this Section 10, "persons" shall include any natural person and ------- any corporation, partnership, joint venture, trust, unincorporated organization and any other entity or organization and percentages of the Corporation's outstanding voting securities shall include shares issuable upon exercise or conversion of 5% Preferred Stock and other convertible securities, options, warrants or other similar instruments owned by such bank holding company, its transferees and their respective affiliates, but shall not include shares issuable upon exercise or conversion of convertible securities, options, warrants or other similar instruments owned by any other person. The provisions of this Section 10 shall not limit or affect the right of the Corporation to force conversion pursuant to Section 3(a) hereof nor the automatic conversion provided for in Section 3(d) hereof. The Corporation shall have no obligation to monitor compliance with the limits set forth in this Section 10 or the holdings of any shareholder, and shall have no liability for the failure of any person to comply with such limits. 3. The Amended and Restated Certificate of Incorporation is amended so that the relative rights, preferences and limitations of the 5% Preferred are as stated in the resolution set forth in Paragraph 2 above. IN WITNESS WHEREOF, Roberts Pharmaceutical Corporation has caused its duly authorized officer to execute this Certificate of Amendment on August 29, 1996. ROBERTS PHARMACEUTICAL CORPORATION By:__________________________________ ANTHONY A. RASCIO, Vice President EX-4.4 4 CERTIFICATE OF AMENDMENT Exhibit 4.4 STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (the "Agreement") is made as of July 17, 1996, between Roberts Pharmaceutical Corporation, a New Jersey corporation, (the "Corporation"), and an entity advised by Dimensional Fund Advisors Inc. whose name is set forth at the foot of this Agreement (the "Purchaser"). The Corporation and the Purchaser hereby agree as follows: SECTION I. Authorization, Purchase and Sale of the Stock --------------------------------------------- 1. Authorization of the Stock. The Corporation has authorized issuance --------------------------- and sale of _______ shares of its common stock (the "Stock") to Purchaser as herein provided. 2. Sale and Purchase of the Stock. At the Closing, subject to the terms ------------------------------ and conditions hereof and in reliance upon the representations, warranties and agreements contained herein, the Purchaser will purchase the Stock from the Corporation at a purchase price of $16.65 per share, $____________ in total. SECTION II. Closing, Payment and Delivery ----------------------------- 1. Closing Date and Place of Closing. The closing shall be held as soon --------------------------------- as practicable, and in no event more than 10 business days after execution of this Agreement, on such date as the Corporation and the Purchaser may agree to (the "Closing Date") and shall be held at the offices of Dimensional Fund Advisors Inc., 1299 Ocean Avenue, Santa Monica, CA 90401. 2. Payment and Delivery. At the Closing, the Purchaser will pay or cause -------------------- to be paid to the Corporation by wire funds transfer the entire purchase price. The Corporation will deliver in advance of the Closing to an institutional custodian designated by the Purchaser a certificate or certificates, registered in such name or names as Purchaser may designate, representing all of the Stock, with instructions that such certificates are to be held for the account of Purchaser upon payment of the purchase price. 3. Covenant of Best Efforts and Good Faith. The Corporation and the --------------------------------------- Purchaser agree to use their respective best efforts and to act in good faith to cause to occur all conditions to Closing which are in their respective control. SECTION III. Purchase Price Adjustment ------------------------- 3.1. Subsequent Sale at Lower Price. If during the six month period ------------------------------ following the Closing Date, the Corporation sells any shares of its common stock for a selling price lower than the purchase price per share set forth in Section 1.2 hereof, the purchase price per share of the Stock sold to Purchaser hereunder shall be adjusted downward to equal such lower selling price. The Corporation shall give to the Purchaser prompt written notice of any such sale. 3.2. Adjustment Mechanism. If an adjustment of the purchase price is -------------------- required pursuant to this Section the Corporation shall immediately deliver to Purchaser such number of additional shares of common stock as will cause (i) the total number of shares of common stock delivered to Purchaser hereunder, multiplied by (ii) the adjusted purchase price per share, to equal (iii) the total purchase price set forth in Section 1.2 hereof; provided however, that the ---------------- Corporation shall effect such adjustment in cash, in whole or in part, to the extent required by the following subsection. 3.3. Limitation on Number of Shares. Purchaser and other entities ------------------------------ advised by Dimensional Fund Advisors Inc. shall not be required to accept, by way of any such adjustment, a number of shares of the Corporation such that the total number of such shares held by Purchaser and such other entities, which were held by them on the date of this Agreement or acquired by them pursuant to this Agreement or agreements of like tenor with such other entities, would exceed 4.99% of the total outstanding stock of the Corporation. The Corporation shall effect the adjustment required by this Section by cash refund to the extent necessary to avoid causing the aforesaid limitation to be exceeded. 3.4 Capital Adjustments. In case of any stock split or reverse stock ------------------- split, stock dividend, reclassification of the common stock, recapitalization, merger or consolidation, or like capital adjustment affecting the common stock of the Corporation, the provisions of this Section shall be applied as if such capital adjustment event had occurred immediately prior to the Closing Date and the original purchase price had been fairly allocated to the stock resulting from such capital adjustment; and in other respects the provisions of this Section shall be applied in a fair, equitable and reasonable manner so as to give effect, as nearly as may be, to the purposes hereof. 3.5. Exclusions. Section 3.1 shall not apply to sales of shares by ---------- the Corporation (i) upon conversion or exercise of any convertible securities, options or warrants outstanding on the date hereof, (ii) pursuant to the provisions of any shareholder-approved employee benefit or incentive plan heretofore or hereafter adopted by the Corporation, (iii) to an entity which is a strategic investor in the Corporation or an investor which is in a related industry, as opposed to a financial investor, (iv) to the owners of another entity acquired by the Corporation, or (v) in the contemplated private transactions identified in a letter from the Corporation to Cappello & Laffer Group, Inc., a copy of which has been delivered to the Purchaser. 3.6. Definitions. For purposes of Section 3.1 hereof, a sale of ----------- shares shall mean and include the sale or issuance of rights, options, warrants or convertible securities under which the Corporation is or may become obligated to issue shares of common stock, and the "selling price" of the common stock covered thereby shall be the exercise or conversion price thereof plus the consideration (if any) received by the Corporation upon such sale or issuance. If shares are issued for a consideration other than cash, the "selling price" shall be the fair value of the such consideration as determined in good faith by the Board of Directors of the Corporation. The term "Stock" as used in this Agreement shall include shares issued pursuant to this Section. SECTION IV. Representations and Warranties of the Corporation ------------------------------------------------- The Corporation hereby represents and warrants to the Purchaser that: 1. Corporate Power, Qualification and Standing. The Corporation and its -------------------------------------------- subsidiaries are validly existing and in good standing under the laws of their respective jurisdictions of incorporation and each of them is qualified to transact business in each jurisdiction in which its ownership of property or conduct of activities requires such qualification. The Corporation has all requisite corporate power and authority to enter into this Agreement, to sell the Stock and to carry out and perform its other obligations under this Agreement. 2. S.E.C. Reports; Financial Statements. The common stock of the -------------- -------------------- Corporation is registered under Section 12(b) or (g) of the Securities Exchange Act of 1934 and the Corporation is in full compliance with its reporting and filing obligations under said Act. The Corporation has delivered to Purchaser its Annual Reports to shareholders and its reports on Form 10K for its last three fiscal years, and all its quarterly reports to shareholders, quarterly reports on Form 10Q, and each other report, registration statement, definitive proxy statement or other document filed with the S.E.C. since the beginning of said three fiscal years (collectively, the "SEC Reports"). The SEC Reports do not (as of their respective dates) contain any 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, in the light of the circumstances under which they were made, not misleading. The audited and unaudited financial statements of the Corporation included in the SEC Reports (the "Financial Statements") have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as stated in such Financial Statements or the notes thereto) and fairly present the financial position of the Corporation and its consolidated subsidiaries as of the dates thereof and the results of their operations and changes in financial position for the periods then ended. Except as publicly disclosed by the Corporation in the SEC Reports or otherwise, since the end of the most recent of said fiscal years there has been no material adverse change in the business, financial condition, or results of operations of the Corporation and its subsidiaries taken together, and there is no existing condition, event or series of events which can reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of the Corporation and its subsidiaries taken together, or its ability to perform its obligations under this Agreement. 3. Authorization; No Conflict. Execution and delivery of this Agreement ------------- ----------- and issuance and sale of the Stock have been duly authorized by all necessary corporate action of the Corporation, and the Stock when issued will be validly issued, fully paid and non-assessable. Performance by the Corporation of its obligations under this Agreement will not conflict with or violate (i) the charter documents or bylaws of the Corporation, (ii) any indenture, loan agreement, lease, mortgage or other material agreement binding on the Corporation, (iii) any order of a court or administrative agency binding on the Corporation, or (iv) any applicable law or governmental regulation; and such performance does not and will not require the permission or approval of any governmental agency, and will not result in the imposition or creation of any lien or charge against any assets of the Corporation. Except as disclosed in the Financial Statements, the SEC Reports and the attachments to the letter described in Section 3.5(v) hereof, (i) the Corporation has no obligation to redeem or repurchase any of its equity securities, (ii) except for the pre-emptive rights granted to Yamanouchi Pharmaceutical Corporation, Ltd. ("Yamanouchi") pursuant to the Stock Purchase Agreement dated January 22, 1992 between the Company and Yamanouchi (the "Yamanouchi Agreement") no shareholder or other person has pre-emptive or other rights to acquire equity securities of the Corporation, and (iii) the Corporation has no obligation to register any of its securities otherwise than pursuant to Section 8 of this Agreement or as disclosed on Exhibit A hereto. 4. Material Agreements; No Defaults. All material indentures, loan -------------------------------- agreements, leases, mortgages and other agreements binding on the Corporation or its subsidiaries are identified in the list of exhibits contained in the Corporation's most recent 10K report ("Other Agreements"). No material default on the part of the Corporation or any of its subsidiaries (including any event which, with notice or the passage of time, would constitute a default) exists under any of the Other Agreements. 5. Material Liabilities. Except for liabilities disclosed in the -------------------- Financial Statements or the SEC Reports, and obligations under the Other Agreements, the Corporation and its subsidiaries have no material liabilities or obligations, absolute or contingent, other than liabilities arising in the ordinary course of business subsequent to the date of the most recent of the Financial Statements. 6. Properties. The Corporation and its subsidiaries (i) have good title ---------- to the properties and assets reflected in the Financial Statements as owned by them, (ii) have valid leasehold interests in the properties leased by them, and (iii) own or have the right to use under valid license agreements all trademarks, trade names, copyrights, patents and other intellectual property rights regularly utilized by them; subject in each case to no material liens, security interests or adverse claims except as disclosed in the Financial Statements. 7. Litigation. There are no material legal actions, arbitrations, ---------- or administrative proceedings pending against the Corporation or its subsidiaries, except for the matters disclosed in the SEC Reports. 8. Tax Matters. The Corporation and its subsidiaries have filed on a ----------- timely basis all tax returns required to be filed by them and have paid their taxes prior to delinquency, and have made adequate accruals for tax liabilities on the Financial Statements in accordance with generally accepted accounting principles. 9. ERISA Compliance. Neither the Corporation nor any of its subsidiaries ---------------- has incurred any material funding deficiency within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or any material liability to the Pension Benefit Guarantee Corporation in connection with any employee benefit plan. The Corporation and its subsidiaries are in compliance in all material respects with all applicable provisions of ERISA, and have no obligations with respect to any multi-employer plan. No "reportable event" as such term is defined in ERISA, which may result in any material liability, has occurred with respect to any employee benefit or other plan maintained for employees of the Corporation or any subsidiary. 10. Environmental Matters. Except as disclosed in the SEC Reports, --------------------- neither the Corporation nor any of its subsidiaries (i) has been notified by any governmental authority that it is, or may be, a Responsible Party with respect to cleanup or remediation of any environmental condition or hazardous waste site, (ii) has violated any law, regulation, order or requirement of governmental authority with respect to Hazardous Substances, or (iii) has incurred any material liability for violation or noncompliance with applicable Environmental Regulations. The term "Environmental Regulations" means any law, regulation, order or requirement relating to protection of the environment, including without limitation, the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the Hazardous Materials Transportation Act and the Toxic Substances Control Act. The term "Hazardous Substance" means any substance defined or listed as such in any Environmental Regulation. 11. Other Matters. The Corporation is not now and will not be after ------------- giving effect to the receipt of the proceeds from the sale of the Stock an "Investment Company" within the meaning of the Investment Company Act of 1940, nor will it be controlled by or acting on behalf of any person which is such an investment company. The Corporation is not selling the Stock "for the purpose of purchasing or carrying any margin stock" within the meaning of Regulation G of the Board of Governors of the Federal Reserve System. The Corporation has not offered the Stock to any person other than the Purchaser or certain accredited investors who may become purchasers of Common Stock of the Corporation. SECTION V. Representations and Warranties of the Purchaser ----------------------------------------------- The Purchaser represents and warrants to the Corporation that: 1. Corporate Power and Authority. It is validly existing and in good ----------------------------- standing with all requisite power and authority to enter into this Agreement and carry out its obligations hereunder and has taken all actions necessary to authorize it to enter into this Agreement and carry out such obligations. 2. Investment. It is acquiring the Stock for investment and not with the ---------- view to, or for resale in connection with, any distribution thereof. It is an "accredited investor" within the meaning of the Securities Act of 1933 and the rules thereunder. It understands that the Stock has not been registered under the Securities Act of 1933 nor qualified under any State blue sky law by reason of specified exemptions therefrom which depend upon, among other things, the bona fide nature of its investment intent as expressed herein. 3. Rule 144. It acknowledges that the Stock must be held indefinitely -------- unless it is subsequently registered under the Securities Act of 1933 or an exemption from such registration is available. It has been advised or is aware of the provisions of Rule 144 promulgated under the Securities Act. SECTION VI. Conditions to Obligations of the Purchaser ------------------------------------------ The obligation of the Purchaser to purchase the Stock is subject to the fulfillment on or prior to the Closing Date of each of the following conditions: (a) Representations and Warranties. The representations and warranties of the ------------------------------ Corporation shall be true and correct in all material respects on the Closing Date. (b) Performance. All covenants, agreements and conditions contained in this ------------ Agreement to be performed or complied with by the Corporation on or prior to the Closing Date shall have been performed or complied with in all material respects. (c) Opinion of Corporation's Counsel. The Purchaser shall have received from -------------------------------- counsel to the Corporation an opinion confirming the representations set forth in the first sentence of Section 4.3 hereof, and on the basis of such counsel's review of the Other Agreements and certificates of officers of the Corporation as to factual matters, confirming the representations set forth in the second and third sentences of Section 4.3 hereof. (d) Legal Issuance. At the time of the Closing, the issuance and purchase of -------------- the Stock shall be legally permitted by all laws and regulations to which the Purchaser and the Corporation are subject. (e) Proceedings and Documents. All corporate and other proceedings in ------------------------- connection with the transactions contemplated hereby and all documents and instruments incident to such transactions shall be satisfactory in form and substance to the Purchaser and its counsel. (f) Satisfaction of Obligations to Broker. The Corporation shall have ------------------------------------- furnished the Purchaser with assurances satisfactory to the Purchaser that the Corporation has satisfied its obligations to any broker entitled to compensation in connection with the sale of the Stock. SECTION VII. Conditions to Obligations of the Corporation -------------------------------------------- The Corporation's obligation to sell the Stock is subject to the fulfillment on or prior to the Closing Date of each of the following conditions: (a) Representations and Warranties. The representations and warranties made by ------------------------------ the Purchaser shall be true and correct in all material respects on the Closing Date. (b) Legal Issuance. At the time of the Closing, the issuance and purchase of -------------- the Stock shall be legally permitted by all laws and regulations to which the Purchaser and the Corporation are subject. (c) Payment. The Corporation shall concurrently receive payment for the Stock -------- as provided in Section 2. SECTION VIII. Covenant to Register -------------------- (a) For purposes of this Section 8, the following definitions shall apply: (i) The terms "register", "registered", and "registration" refer to a registration under the Securities Act of 1933, as amended (the "Act") effected by preparing and filing a registration statement or similar document in compliance with the Act or an amendment thereto, and the declaration or ordering of effectiveness of such registration statement, document or amendment thereto. (ii) The term "Registrable Securities" means the Stock and any securities of the Corporation or securities of any successor corporation issued as, or issuable upon the conversion or exercise of any warrant, right or other security that is issued as, a dividend or other distribution with respect to, or in exchange for or in replacement of, the Stock. (b) (i) The Company shall, as expeditiously as possible following the Closing, file a registration statement on Form S-3, or if Form S-3 is not then available, another appropriate form, covering all the Registrable Securities, and shall use its best efforts to cause such registration statement to become effective by the 120th calendar day after the Closing Date. In the event such registration is not so declared effective or does not include all Registrable Securities, from time to time thereafter, Purchaser shall have the right to require by notice in writing that the Corporation register all or any part of the Registrable Securities held by Purchaser (a "Demand Registration") and the Corporation shall thereupon effect such registration in accordance herewith. (ii) The Corporation shall not be obligated to effect Demand Registration (i) if all of the Registrable Securities held by Purchaser which are intended to be covered by the Demand Registration are, at the time of the request of a Demand Registration, included in an effective registration statement and the Corporation is in compliance with its obligations under Subsection (d)(ii) through (v) hereof with respect to such registration statement, or (ii) within 120 days after the effective date of any other registration as to which Purchaser was given piggy-back rights pursuant to subsection (c) hereof and in which Purchaser was able to register and sell at least eighty percent (80%) of the Registrable Securities requested by Purchaser to be included in such registration. (iii) If the registration statement covering all Registrable Securities is not effective by the 120th calendar day after the Closing Date, then the Company shall pay the Purchaser in cash an amount equal to 3% of the total Purchase Price for each 30 day period thereafter until such registration statement is effective (pro-rata as to a period of less than 30 days). (c) If the Corporation proposes to register (including for this purpose a registration effected by the Corporation for shareholders other than the Purchaser) any of its stock or other securities under the Act in connection with a public offering of such securities (other than a registration on Form S- 4, Form S-8 or other limited purpose form) and the Registrable Securities have not heretofore been included in a registration statement under Subsection (b), which remains effective, the Corporation shall, at such time, promptly give the Purchaser written notice of such registration. Upon the written request of the Purchaser given within twenty (20) days after receipt of such notice by the Purchaser, the Corporation shall cause to be registered under the Act all of the Registrable Securities that the Purchaser has requested to be registered. However, the Corporation shall have no obligation under this Subsection (c) to the extent that, with respect to a public offering registration, any underwriter of such public offering reasonably requests that the Registrable Securities or a portion thereof be excluded therefrom. (d) Whenever required under this Section 8 to effect the registration of any Registrable Securities, the Corporation shall, as expeditiously as reasonably possible: (i) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration to become effective and, upon the request of the Purchaser, keep such registration statement effective for so long as Purchaser desires to dispose of the securities covered by such registration statement (but not after Purchaser in the reasonable opinion of its counsel is free to sell such securities under the provisions of Rule 144(k) or any amendment thereof or any similar or successor rule under the Act). (ii) Prepare and file with the SEC such amendments and supplements to such registration statements and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement. (iii) Furnish to the Purchaser such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the 1933 Act, and such other documents as the Purchaser may reasonably request in order to facilitate the disposition of Registrable Securities owned by Purchaser. (iv) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by Purchaser, provided that the Corporation shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (v) Notify Purchaser of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of material fact or omits 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. (vi) Furnish, at the request of Purchaser, an opinion of counsel of the Corporation, dated the effective date of the registration statement, as to the due authorization and issuance of the securities being registered and compliance with securities laws by the Corporation in connection with the authorization and issuance thereof. (e) The Purchaser will furnish to the Corporation in connection with any registration under this Section 8 such information regarding itself, the Registrable Securities and other securities of the Corporation held by it, and the intended method of disposition of such securities as shall be required to effect the registration of the Registrable Securities held by Purchaser. (f) (i) The Corporation shall indemnify, defend and hold harmless each holder of Registrable Securities which are included in a registration statement pursuant to the provisions of Subsections (b) or (c), any underwriter (as defined in the Act) for such holder, and the directors, officers and controlling persons of such holder or underwriter from and against, and shall reimburse all of them with respect to, any and all claims, suits, demands, causes of action, losses, damages, liabilities, costs or expenses ("Liabilities") to which any of them may become subject under the Act or otherwise, arising from or relating to (A) any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or (B) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, however, that -------- ------- the Corporation shall not be liable in any such case to the extent that any such Liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such person in writing specifically for use in the preparation thereof. (ii) Each holder of Registrable Securities included in a registration pursuant to the provisions of Subsection (b) or (c) shall indemnify, defend, and hold harmless the Corporation, its directors, officers, and controlling persons, and shall reimburse the Corporation, its directors, officers, and controlling persons with respect to, any and all Liabilities to which any of them may become subject under the Act or otherwise, arising from or relating to (A) any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or (B) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon and in strict conformity with written information furnished by or on behalf of such holder specifically for use in the preparation thereof. (iii) Promptly after receipt by an indemnified party pursuant to the provisions of Subsection (f) (i) or (f) (ii) of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party shall, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of Subsection (f)(i) or (f)(ii), promptly notify the indemnifying party of the commencement thereof; provided, -------- however, that the failure to so notify the indemnifying party shall not relieve - ------- it from its indemnification obligations hereunder except to the extent that the indemnifying party is materially prejudiced by such failure. If such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party; provided, however, if the -------- ------- defendants in any action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses different from or in addition to those available to the indemnifying party, or if there is conflict of interest which would prevent counsel for the indemnifying party from also representing the indemnified party, the indemnified party shall have the right to select separate counsel to participate in the defense of such action on behalf of such indemnified party. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party pursuant to Subsection (f)(i) or (f)(ii) for any expense of counsel subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless (A) the indemnified party shall have employed counsel in accordance with the provisions of the preceding sentence, or (B) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of the action. An indemnifying party shall not be responsible for amounts paid in settlement without its consent, provided that its consent may not be unreasonably withheld. (g) (i) With respect to the inclusion of Registrable Securities in a registration statement pursuant to subsections (b) or (c), all fees, costs and expenses of and incidental to such registration, inclusion and public offering shall be borne by the Corporation; provided, however, that any securityholders participating in such registration shall bear their pro rata share of the underwriting discounts and commissions, if any. (ii) The fees, costs and expenses of registration to be borne by the Corporation as provided in this Subsection (g) shall include, without limitation, all registration, filing and NASD fees, printing expenses, fees and disbursements of counsel and accountants for the Corporation, and all legal fees and disbursements and other expenses of complying with state securities or Blue Sky laws of any jurisdiction or jurisdictions in which securities to be offered are to be registered and qualified. Fees and disbursements of counsel and accountants for the selling securityholders shall, however, be borne by the respective selling securityholder. (h) The rights to cause the Corporation to register all or any portion of Registrable Securities pursuant to this Section 8 may be assigned by Purchaser to a transferee or assignee of 20% or more of the Stock. Within a reasonable time after such transfer the Purchaser shall notify the Corporation of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned. Such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act. Any transferee asserting registration rights hereunder shall be bound by the provisions of this Section 8. (i) Subject to the rights of Yamanouchi and its assigns under the Yamanouchi Agreement, which are hereby confirmed, from and after the date of this Agreement, the Corporation shall not agree to allow the holders of any securities of the Corporation to include any of their securities in any registration statement filed by the Corporation pursuant to Subsection (b) unless the inclusion of such securities will not reduce the amount of the Registrable Securities included therein. SECTION IX. Affirmative Covenants of the Corporation ---------------------------------------- The Corporation hereby covenants that, during such time as the Purchaser (or one of its affiliates) owns any Stock, or for four years, whichever period is shorter: 1. Reports and Financial Statements. -------------------------------- (a) The Corporation will cause its common stock to continue to be registered under Sections 12(b) or 12(g) of the Securities Exchange Act of 1934, will comply in all respects with its reporting and filing obligations under said Act, and will not take any action or file any document (whether or not permitted by said Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said Act. The Corporation will take all action necessary to continue the listing or trading of its common stock on any national securities exchange or the Automated Quotation System of the National Association of Securities Dealers on which such common stock is listed or traded, and will comply in all respects with its reporting, filing and other obligations under the bylaws or rules of said exchange or Association. (b) The Corporation will furnish to the Purchaser, concurrently with the distribution or filing thereof, each annual and quarterly report to its shareholders, its reports on Form 10K and 10Q, and each other report, registration statement, definitive proxy statement or other document filed with the S.E.C., and each press release or other public announcement issued by the Corporation. 2. Maintenance of Office. The Corporation will maintain an office or agency ---------------------- in the United States at such address as may be designated in writing from time to time to the registered holders of the Stock, where notices, presentations and demands to or upon the Corporation in respect of the Stock may be given or made. Unless or until another office or agency is designated by the Corporation, such office shall be at the address set forth adjacent to the name of the Corporation at the foot of this Agreement. 3. Maintenance and Compliance. The Corporation will (i) maintain its --------------------------- corporate existence, rights, powers and privileges in good standing, (ii) comply in all material respects with all laws and governmental regulations and restrictions applicable to its business or properties, (iii) keep records and books of account and maintain a system of internal accounting controls in accordance with generally accepted accounting principles and in compliance with Section 13(b)(2) of the Securities Exchange Act of 1934, and (iv) retain independent public accountants of recognized national standing as auditors of the Corporation's annual financial statements. 4. Assignment of Rights. The rights of the Purchaser hereunder may be --------------------- assigned by the Purchaser in connection with the transfer or assignment to a single transferee of not less than 20% of the Stock originally purchased by the Purchaser hereunder, and such rights may be further reassigned by such transferee to another such single transferee. Any transferee asserting rights under this Agreement shall be bound by its provisions. 5. Effect of Covenants. The covenants in Sections 9.1 and 9.3 shall not be -------------------- deemed to prohibit a merger, sale of all assets or other corporate reorganization if (i) the entity surviving or succeeding to the Corporation is bound by this Agreement with respect to its securities issued in exchange for or replacement of the Stock, or (ii) the consideration received in exchange for or replacement of the Stock is cash. SECTION X. Legend on Stock --------------- Each certificate representing the Stock shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required under any applicable state securities laws): THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. Upon request of a holder of Stock the Corporation shall remove the foregoing legend or issue to such holder a new certificate therefor free of any such legend, if the Corporation shall have received either an opinion of counsel or a "no-action" letter of the S.E.C., in either case reasonably satisfactory in substance to the Corporation and its counsel, to the effect that such legend is no longer required. SECTION XI. Miscellaneous ------------- 1. Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of California. Any action or proceeding relating to this Agreement may be brought in the courts of California sitting in Los Angeles County, or in the United States courts located in Los Angeles County, California, and each of the parties irrevocably consents to the jurisdiction of such courts in any such action or proceeding. 2. Successors and Assigns. Except as otherwise expressly provided herein, ---------------------- the provisions hereof shall inure to the benefit of and be binding upon the successors and assigns of the parties. 3. Entire Agreement; Amendment. This Agreement (including any Exhibits --------------------------- hereto) and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Corporation and the Purchaser. 4. Notices, etc. All notices and other communications required or permitted ------------ hereunder shall be mailed by first-class mail, postage prepaid, or delivered either by hand or by messenger, addressed (a) if to the Purchaser, as indicated below the Purchaser's signature, or at such other address as the Purchaser shall have furnished to the Corporation in writing, or (b) if to any other holder of any Stock, at the address of such holder as shown on the records of the Corporation, or (c) if to the Corporation, at its address set forth below or at such other address as the Corporation shall have furnished to the Purchaser and each such other holder in writing. All such notices or communications shall be deemed given when actually delivered by hand, messenger, facsimile or mailgram or, if mailed, three days after deposit in the U.S. mail. 5. Delays or Omissions. No delay or omission to exercise any right, power or ------------------- remedy accruing to any party to this Agreement (including any holder of Stock), upon any breach or default of another party under this Agreement, shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative. 6. Severability. In case any provision of the Agreement shall be invalid, ------------ illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 7. Titles and Subtitles. The titles of the Sections and subsections of this -------------------- Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 8. Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be an original, but all of which together shall constitute one instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the day and year first written above. Roberts Pharmaceutical Corporation By: ________________________________ Address: Meridian Center II Four Industrial Way West Eatontown, NJ 07724-2274 [ Purchaser ] By: ________________________________ Address: % Dimensional Fund Advisors 1299 Ocean Avenue, 12th floor Santa Monica, CA 90401 EX-4.5 5 FORM OF PREF. STOCK INVESTMENT AGREEMENT Exhibit 4.5 PREFERRED STOCK INVESTMENT AGREEMENT AGREEMENT dated as of August 29, 1996 between Roberts Pharmaceutical Corporation, a New Jersey corporation (the "Company") and the investor whose name is set forth at the foot of this Agreement (the "Investor"). The parties hereto agree as follows: ARTICLE I. Purchase and Sale of Preferred Stock ------------------------------------ Section 1. Purchase and Sale of Preferred Stock. Upon the ------------------------------------ following terms and conditions, the Company shall issue and sell to the Investor, and the Investor shall purchase from the Company, [_________] shares of the Company's 5% Convertible Preferred Stock (the "Shares" or the "5% Preferred") having the rights, designations and preferences set forth in Schedule I hereto. Section 2. Purchase Price. The purchase price for the Shares -------------- (the "Purchase Price") shall be $25 per share. Section 3. The Closing. ----------- (a) The closing of the purchase and sale of the Shares (the "Closing"), shall take place at the offices of the Company, at 10:00 a.m., local time on the later of the following: (i) the date on which the last to be fulfilled or waived of the conditions set forth in Article IV hereof and applicable to the Closing shall be fulfilled or waived in accordance herewith, or (ii) such other time and place and/or on such other date as the Investor and the Company may agree. The date on which the Closing occurs is referred to herein as the "Closing Date." (b) On the Closing Date, the Company shall deliver to the Investor certificates representing the Shares registered in the name of the Investor or deposit such Shares into accounts designated by the Investor, and the Investor shall deliver to the Company the Purchase Price for all the Shares by cashier's check or wire transfer in immediately available funds to such account as shall be designated in writing by the Company. In addition, each party shall deliver all documents, instruments and writings required to be delivered by such party pursuant to this Agreement at or prior to the Closing. Section 4. Covenant to Register. -------------------- (a) For purposes of this Section, the following definitions shall apply: (i) The terms "register," "registered," and "registration" refer to a registration under the Securities Act of 1933, as amended (the "Act"), effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement, document or amendment thereto. (ii) The term "Registrable Securities" means the stock issuable upon conversion of the Shares, or upon conversion of any 5% Preferred or other stock issued in payment of dividends on the Shares, or otherwise issuable pursuant to this Agreement or the provisions of Schedule I hereto (excluding, however, the 5% Preferred as such), and any securities of the Company or securities of any successor corporation issued as, or issuable upon the conversion or exercise of any warrant, right or other security that is issued as a dividend or other distribution with respect to, or in exchange for, or in replacement of, the Shares. (iii) The term "holder of Registrable Securities" means the Investor and any permitted assignee of registration rights pursuant to Section 1.4(h). (b) The Company shall, as expeditiously as possible following the Closing, file a registration statement on Form S-3, or if Form S-3 is not then available, another appropriate form, covering all the Registrable Securities, and shall use its best efforts to cause such registration statement to become effective by the 90th calendar day after the Closing Date (the "Initial Registration"). In the event such registration is not so declared effective or does not include all Registrable Securities, a holder of Registrable Securities shall have the right to require by notice in writing that the Company register all or any part of the Registrable Securities held by such holder (a "Demand Registration") and the Company shall thereupon effect such registration in accordance herewith (which may include adding such shares to an existing shelf registration). The parties agree that if the holder of Registrable Securities demands registration of less than all of the Registrable Securities, the Company, at its option, may nevertheless file a registration statement covering all of the Registrable Securities. If such registration statement is declared effective with respect to all Registrable Securities and the Company is in compliance with its obligations under Subsections (d)(i) through (v) of this Section 1.4, the demand registration rights granted pursuant to this Subsection (b) (i) shall cease. If such registration statement is not declared effective with respect to all Registrable Securities or if the Company is not in compliance with said obligations the demand registration rights described herein shall remain in effect. The Company shall provide holders of Registrable Securities reasonable opportunity (at least 5 business days) to review any such registration statement or amendment or supplement thereto prior to the filing thereof. (i) The Company shall not be obligated to effect a Demand Registration under Subsection (b)(i) above (a) if all of the Registrable Securities held by the holder of Registrable Securities which are demanded to be covered by the Demand Registration are, at the time of such demand, included in an effective registration statement and the Company is in compliance with its obligations under Subsection (d) (i) through (v) of this Section 1.4, (b) if all of the Registrable Securities may be sold under Rule 144(k) of the Act and the Company's transfer agent has accepted an instruction from the Company to such effect, or (c) at any time after three years from the date of the Closing. (ii) The Company may suspend the effectiveness of any such registration effected pursuant to this Subsection (b) in the event, and for such period of time as, such a suspension is required by the rules and regulations of the Securities and Exchange Commission ("SEC"). The Company will use its best efforts to cause such suspension to terminate at the earliest possible date. (iii) (A) If the registration statement covering all Registrable Securities is not effective by the 90th calendar day after the Closing Date, then the Company shall pay the Investor in cash an amount equal to 3% of the total Purchase Price of Shares and any Registrable Securities then held by the Investor for each 30 day period thereafter until such registration statement is effective (pro-rata as to a period of less than 30 days). (B) If following such effectiveness, during the calendar year following the Closing Date, either the effectiveness of the Registration Statement is suspended or a current prospectus meeting the requirements of Section 10 of the Act is not available for delivery by the Investor (either, a "suspension"), an amount equal to 3% of the total Purchase Price of Shares and any Registrable Securities then held by Investor shall be paid to the Investor in cash, or at the Company's option, in additional shares of 5% Convertible Preferred Stock, for each 30 days of such suspension (pro-rata as to a period of less than 30 days). (C) If during the second calendar year following the Closing Date, there is a suspension for a period or periods aggregating more than 30 days, an amount equal to 3% of the total Purchase Price of Shares and any Registrable Securities then held by Investor shall be paid to the Investor in cash, or at the Company's option, in additional shares of 5% Convertible Preferred Stock, for each 30 days of such suspension in excess of the initial 30 days (pro-rata as to a period of less than 30 days). (D) Any amount payable pursuant to the foregoing provisions of this subsection (iv) shall be paid on or before the fifth day following the end of the calendar month in which such payment obligation arose. For purposes of this subsection (iv), any shares of 5% Convertible Preferred Stock to be issued in satisfaction of the Company's obligation shall be valued at the Liquidation Preference (as defined in Schedule I hereto) of a Share issued on the Closing Date. The "Purchase Price" of Registrable Securities shall be (1) if derived from conversion or substitution of Shares, the Purchase Price of such Shares, and (2) if received in satisfaction of a Company obligation, the dollar amount of such obligation. (E) This subsection is in addition to the provisions of Section 7.2(a) hereof. (c) If the Company proposes to register (including for this purpose a registration effected by the Company for shareholders other than the Investor) any of its stock or other securities under the Act in connection with a public offering of such securities (other than a registration on Form S-4, Form S-8 or other limited purpose form) and all Registrable Securities have not theretofore been included in a registration statement under Subsection (b) of this Section 1.4 which remains effective, the Company shall, at such time, promptly give all holders of Registrable Securities written notice of such registration. Upon the written request of any holder of Registrable Securities given within twenty (20) days after receipt of such notice by the holder of Registrable Securities, the Company shall use its best efforts to cause to be registered under the Act all Registrable Securities that such holder of Registrable Securities requests to be registered. However, the Company shall have no obligation under this Subsection (c) if (i) the Registrable Securities may be sold without registration under Rule 144(k) and the Company's transfer agent has accepted an instruction from the Company to such effect, or (ii) the Registration Statement is filed more than three years after the date of closing, or (iii) to the extent that, with respect to any underwritten offering initiated by the Company later than twelve months following the Closing or initiated at the demand of Yamanouchi Pharmaceutical Co., Ltd. or the purchasers of Common Stock (or their assignees) pursuant to the Stock Purchase Agreements dated as of July 17, 1996 between the Company and certain entities advised by Dimensional Fund Advisors, Inc., the managing underwriter of such offering reasonably notifies such holder(s) in writing of its determination that the Registrable Securities or a portion thereof shall be excluded therefrom. (d) Whenever required under this Section 1.4 to effect the registration of any Registrable Securities, including, without limitation, the Initial Registration, the Company shall, as expeditiously as reasonably possible: (i) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration to become effective as provided in Section 1.4(b)(i), and keep such registration statement effective for so long as any holder of Registrable Securities desires to dispose of the securities covered by such registration statement; provided, however, that in no event shall the Company be required to keep the Registration Statement effective for a period greater than three years from the date of the Closing. (ii) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement and notify the holders of the filing and effectiveness of such Registration Statement and any amendments or supplements. (iii) Furnish to each holder of Registrable Securities such numbers of copies of a current prospectus, including a preliminary prospectus, conforming with the requirements of the Act, copies of the registration statement, any amendment or supplement to any thereof and any documents incorporated by reference therein and such other documents as such holder of Registrable Securities may reasonably require in order to facilitate the disposition of Registrable Securities owned by such holder of Registrable Securities. (iv) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or "Blue Sky" laws of such jurisdictions as shall be reasonably requested by the holder of Registrable Securities, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (v) Notify each holder of Registrable Securities immediately of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of material fact or omits 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, and use its best efforts to promptly update and/or correct such prospectus. (vi) Furnish, at the request of any holder of Registrable Securities, (1) an opinion of counsel of the Company, dated the effective date of the registration statement, in form and substance reasonably satisfactory to the holder and its counsel and covering, without limitation, such matters as the due authorization and issuance of the securities being registered and certain matters pertaining to disclosure under and compliance with securities laws by the Company in connection with the registration thereof and (2) a "comfort" letter or letters of the Company's independent public accountants in form and substance reasonably satisfactory to the holder and its counsel. (vii) Use its best efforts to list the Registrable Securities covered by such registration statement with any national market or securities exchange on which such securities are then listed; (viii) Make available for inspection by the holder of Registrable Securities, upon request, all SEC Documents (as defined below) filed subsequent to the Closing and require the Company's officers, directors and employees to supply all information reasonably requested by any holder of Registrable Securities in connection with such registration statement. (ix) Furnish to each holder of Registrable Securities prompt notice of the commencement of any stop-order proceedings under the Act, together with copies of all relevant documents in connection therewith, and use its best efforts to obtain withdrawal of any such stop order as soon as possible. (e) Upon request of the Company, each holder of Registrable Securities will furnish to the Company in connection with any registration under this Section such information regarding itself, the Registrable Securities and other securities of the Company held by it, and the intended method of disposition of such securities as shall be reasonably required to effect the registration of the Registrable Securities held by such holder of Registrable Securities. The intended method of disposition (Plan of Distribution) of such securities as so provided by Investor shall be included without alteration in the Registration Statement covering the Registrable Securities and shall not be changed without written consent of the Investor. (f) The Company shall indemnify, defend and hold harmless each holder of Registrable Securities which are included in a registration statement pursuant to the provisions of Subsections (b) or (c) and each of its officers, directors, employees, agents, partners or controlling persons (within the meaning of the Act) (each, an "indemnified party") from and against, and shall reimburse such indemnified party with respect to, any and all claims, suits, demands, causes of action, losses, damages, liabilities, costs or expenses ("Liabilities") to which such indemnified party may become subject under the Act or otherwise, arising from or relating to (A) any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or (B) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, however, that the Company shall not be liable in any such case to the extent that any such Liability arises out of or is based upon an untrue statement or omission so made in strict conformity with information furnished by such indemnified party in writing specifically for use in the registration statement. (i) In the event of any registration under the Act of Registrable Securities pursuant to Subsections (b) or (c), each holder of such Registrable Securities hereby severally agrees to indemnify, defend and hold harmless the Company, and its officers, directors, employees, agents, partners, or controlling persons (within the meaning of the Act) (each, an "indemnified party") from and against, and shall reimburse such indemnified party with respect to, any and all Liabilities to which such indemnified party may become subject under the Act or otherwise, arising from or relating to (A) any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or (B) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, that such holders will be liable in any such case to the extent, and only to the extent, that any such Liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, prospectus or amendment or supplement thereto in reliance upon and in conformity with written information furnished by such holder specifically for use in the preparation thereof. (ii) Promptly after receipt by any indemnified party of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against another party (the "indemnifying party") hereunder, notify such party in writing thereof, but the omission so to notify such party shall not relieve such party from any Liability which it may have to the indemnified party other than under this section and shall only relieve it from any Liability which it may have to the indemnified party under this section if and to the extent an indemnifying party is materially prejudiced by such omission. In case any such action shall be brought against any indemnified party and such indemnified party shall notify an indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party, and, after notice from the indemnifying party to the indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to the indemnified party under this section for any legal expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that if the defendants in any such action include both parties and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the reasonable expenses and fees of one such separate counsel and other reasonable expenses related to such participation to be reimbursed by the indemnifying party as incurred. (g) With respect to the inclusion of Registrable Securities in a registration statement pursuant to Subsections (b) or (c), all fees, costs and expenses of and incidental to such registration, inclusion and public offering shall be borne by the Company; provided, however, that any securityholders participating in such registration shall bear their pro-rata share of the underwriting discounts and commissions, if any, incurred by them in connection with such registration. (i) The fees, costs and expenses of registration to be borne by the Company as provided in this Subsection (g) shall include, without limitation, all registration, filing and NASD fees, printing expenses, fees and disbursements of counsel and accountants for the Company, and all legal fees and disbursements and other expenses of complying with state securities or Blue Sky laws of any jurisdiction or jurisdictions in which securities to be offered are to be registered and qualified. Subject to appropriate agreements as to confidentiality, the Company shall make available to the holders of Registrable Securities and their counsel its documents and personnel for due diligence purposes, and will pay the reasonable fees and expenses of one counsel designated by a majority in interest of the holders of Registrable Securities included in the Registration Statement, if such a firm is so designated. Except as otherwise provided herein, fees and disbursements of counsel and accountants for the selling securityholders shall be borne by the respective selling securityholders. (h) The rights to cause the Company to register all or any portion of Registrable Securities pursuant to this Section 1.4 may be assigned by Investor to a transferee or assignee of the entire holding of the Investor or of 20% or more but not less than 10,000 of the Shares or the Registrable Securities derived from such Shares. Within a reasonable time after such transfer the Investor shall notify the Company of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned. Such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act. Any transferee asserting registration rights hereunder shall be bound by the applicable provisions of this Agreement. (i) Subject to the rights of (a) Yamanouchi Pharmaceutical Corporation, Ltd. and its designees under the Stock Purchase Agreement dated January 22, 1992, which are hereby confirmed, (b) the holders of Common Stock sold by the Company pursuant to the Stock Purchase Agreements dated on or about July 17, 1996, (c) the holders of the Warrants and shares issuable to the Placement Agents under this offering and the offering of shares issued pursuant to the Stock Purchase Agreements dated on or about July 17, 1996, and (d) the Agreement dated August 9, 1996 with Robert A. Vukovich, from and after the date of this Agreement, the Company shall not agree to allow the holders of any securities of the Company to include any of their securities in any registration statement filed by the Company pursuant to Subsection (b) unless such inclusion will not reduce the amount of the Registrable Securities included therein; and none of said existing agreements will reduce the amount of Registrable Securities which the holders may include in the Initial Registration or a non-underwritten Demand Registration. 5. Company Standoff. Except in a business combination, or under existing ---------------- employee stock incentive or purchase plans, the Company shall not effect any public sale or distribution of any securities similar to the Registrable Securities or any securities exercisable for or convertible or exchangeable into the Registrable Securities during the 14 days prior to, and during the 90 days immediately following the effective date of any registration statement filed pursuant to Section 1.4(b); provided, however, that the Company may effect such public sale or distribution during the 90 days immediately following the effective date of such registration statement if such sale or distribution of securities is at a price equal to or greater than 120% of the Conversion Cap (as defined in Section 4(c)(ii) of Schedule I hereto). ARTICLE II. Representations and Warranties ------------------------------ Section 1. Representations and Warranties of the Company. The --------------------------------------------- Company hereby makes the following representations and warranties to the Investor: (a) Organization and Qualification. The Company is a corporation ------------------------------ duly incorporated and existing in good standing under the laws of the State of New Jersey and has the requisite corporate power to own its properties and to carry on its business as now being conducted. The Company does not have any subsidiaries except as listed in Exhibit A hereto. The Company and each such subsidiary, if any, is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary other than those in which the failure so to qualify would not have a Material Adverse Effect. "Material Adverse Effect" means any adverse effect on the business, operations, properties, prospects, or financial condition of the entity with respect to which such term is used and which is material to such entity and other entities controlled by such entity taken as a whole. (b) Authorization; Enforcement. (i) The Company has the requisite -------------------------- corporate power and authority to enter into and perform this Agreement and to issue the Shares in accordance with the terms hereof, (ii) the execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors or stockholders is required except for any stockholder approval required by the terms of the Company's listing agreement with NASDAQ or the rules of such organization, (iii) this Agreement has been duly executed and delivered by the Company, (iv) this Agreement constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application, and (v) prior to the Closing Date a Certificate of Amendment to the Company's charter which authorizes the 5% Preferred Stock as provided in Schedule I will have been filed with the New Jersey Secretary of State and will be in full force and effect, enforceable against the Company in accordance with its terms. (c) Capitalization. The authorized capital stock of the Company -------------- consists of 50,000,000 shares of Common Stock and 10,000,000 shares of Class B Preferred Stock; there are 19,187,648 shares of Common Stock and no shares of Preferred Stock issued and outstanding; and, upon issuance of the Shares in accordance with the terms hereof and pursuant to similar agreements of like tenor, there will be 19,187,648 shares of Common Stock and approximately 4,200,000 shares of Class B Preferred Stock of the series denominated "5% Preferred Stock" issued and outstanding. All of the outstanding shares of the Company's Common Stock have been validly issued and are fully paid and nonassessable. Except as set forth in Exhibit A hereto and as described in the SEC Documents, no shares of Common Stock are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company, or contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of capital stock of the Company or options, warrants, scrip, rights to subscribe to, or commitments to purchase or acquire, any shares, or securities or rights convertible into shares, of capital stock of the Company. The Company has furnished or made available to the Investor true and correct copies of the Company's Certificate of Incorporation as in effect on the date hereof (the "Charter"), and the Company's By-Laws, as in effect on the date hereof (the "By-Laws"). (d) Issuance of Shares. The issuance of the Shares has been duly ------------------ authorized and, when paid for and issued in accordance with the terms hereof, the Shares shall be validly issued, fully paid and non-assessable and entitled to the rights and preferences set forth in Schedule I hereto. The Common Stock issuable upon conversion of the Shares will be duly authorized and reserved for issuance and, upon conversion in accordance with the Certificate of Amendment to be filed by the Company to establish the rights and preferences of the Shares, will be validly issued, fully paid and non-assessable and the holders shall be entitled to all rights and preferences accorded to a holder of Common Stock. (e) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Company and the consummation by the Company of the transactions contemplated hereby do not and will not (i) result in a violation of the Company's Charter or By-Laws or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party, or result in a violation of any federal, state, local or foreign law, rule, regulation, order, judgment or decree (including Federal and state securities laws and regulations) applicable to the Company or any of its subsidiaries or by which any property or assets of the Company or any of its subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect); provided that, for purposes of such representation as to Federal, state, local or foreign law, rule or regulation, no representation is made herein with respect to any of the same applicable solely to the Investor and not to the Company. The business of the Company is not being conducted in violation of any law, ordinance or regulations of any governmental entity, except for violations which either singly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required under Federal, state or local law, rule or regulation in the United States to obtain any consent, authorization or order of, or make any filing (other than the filing of the Certificate of Amendment with the New Jersey Secretary of State) or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or issue and sell the Shares in accordance with the terms hereof (other than any SEC, NASD or state securities filings which may be required to be made by the Company subsequent to the Closing, and any registration statement which may be filed pursuant hereto); provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of the Investor herein. (f) SEC Documents, Financial Statements. The Common Stock of the ----------------------------------- Company is registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the Company has filed on a timely basis all reports, schedules, forms, statements and other documents required to be filed by it with the SEC since July 1, 1993 pursuant to the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a) or 15(d), in addition to one or more registration statements and amendments thereto heretofore filed by the Company with the SEC under the Act since July 1, 1993 (all of the foregoing including filings incorporated by reference therein being referred to herein as the "SEC Documents"). The Company has delivered or made available to the Investor true and complete copies of the SEC Documents. The Company has not provided to the Investor any information which, according to applicable law, rule or regulation, should have been disclosed publicly by the Company but which has not been so disclosed, other than with respect to the transactions contemplated by this Agreement. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Act or the Exchange Act as the case may be and the rules and regulations of the SEC promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). (g) No Material Adverse Change. Since the date through which the -------------------------- most recent quarterly report of the Company on Form 10-Q has been prepared and filed with the SEC, a copy of which is included in the SEC Documents, no Material Adverse Effect has occurred or exists with respect to the Company or its subsidiaries. (h) No Undisclosed Liabilities. The Company and its subsidiaries -------------------------- have no material liabilities or obligations not disclosed in the SEC Documents, other than those incurred in the ordinary course of the Company's or its subsidiaries' respective businesses since the date of the most recently filed SEC Documents which, individually or in the aggregate, do not or would not have a Material Adverse Effect on the Company or its subsidiaries. (i) No Undisclosed Events or Circumstances. No event or circumstance -------------------------------------- has occurred or exists with respect to the Company or its subsidiaries or their respective businesses, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed. (j) No General Solicitation. Neither the Company, nor any of its ----------------------- affiliates, or, to its knowledge, any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Act) in connection with the offer or sale of the Shares. (k) No Integrated Offering. Neither the Company, nor any of its ---------------------- affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the Shares under the Act. Section 2. Representations and Warranties of the Investor. The ---------------------------------------------- Investor hereby makes the following representations and warranties to the Company: (a) Authorization, Enforcement. (i) Such Investor has the -------------------------- requisite power and authority to enter into and perform this Agreement and to purchase the Shares being sold hereunder, (ii) the execution and delivery of this Agreement by the Investor and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate or partnership action, and (iii) this Agreement constitutes a valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. (b) No Conflicts. The execution, delivery and performance of ------------ this Agreement and the consummation by the Investor of the transactions contemplated hereby do not and will not (i) result in a violation of the Investor's charter documents or By-Laws or (ii) conflict with any agreement, indenture or instrument to which Investor is a party, or (iii) result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to Investor. The Investor is not required to obtain any consent or authorization of any governmental agency in order for it to perform its obligations under this Agreement. The data to be provided by the Investor in connection with registering the Registrable Securities under the Act will be true and correct in all material respects when so provided. (c) Investment Representation. The Investor is purchasing the ------------------------- Shares for its own account for investment and not with a view to distribution otherwise than in compliance with the Act. Investor has no present arrangement (whether or not legally binding) to sell the Shares to or through any person or entity; provided, however, that by making the representations herein, the Investor does not agree to hold the Shares for any minimum or other specific term and reserves the right to dispose of the Shares at any time in accordance with Federal and state securities laws applicable to such disposition. (d) Accredited Investor. The Investor is an accredited investor as ------------------- defined in Rule 501 promulgated under the Act. (e) Rule 144. The Investor understands that there is no public -------- trading market for the Shares, that none is expected to develop, and that the Shares must be held indefinitely unless such Shares or securities into which the Shares are converted are registered under the Act or an exemption from registration is available. The Investor has been advised or is aware of the provisions of Rule 144 promulgated under the Act. ARTICLE III. Covenants --------- Section 1. Securities Compliance. --------------------- (a) The Company shall notify the SEC and NASD, in accordance with their requirements, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Shares and Common Stock issuable upon conversion thereof to the Investor or subsequent holder. (b) The Investor understands that the Shares are being offered and sold in reliance on a transactional exemption from the registration requirements of Federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of such Investor set forth herein in order to determine the applicability of such exemptions and the suitability of such Investor to acquire the Shares. Section 2. Registration and Listing. Until at least three (3) ------------------------ years after all Shares have been converted into Common Stock, the Company will cause its Common Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, will comply in all respects with its reporting and filing obligations under said act, will comply with all requirements related to any registration statement filed pursuant to this Agreement and will not take any action or file any document (whether or not permitted by the Act or the Exchange Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said Acts, except as permitted herein. Until at least three (3) years after all Shares have been converted into Common Stock the Company will take all action within its power to continue the listing or trading of its Common Stock on the NASDAQ National Market and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of the NASD and NASDAQ. The covenants set forth in this Section 3.2 shall not be deemed to prohibit a merger, sale of all assets or other corporate reorganization if the entity surviving or succeeding to the Company is bound by this Agreement with respect to its securities issued in exchange for or in replacement of the Shares or Common Stock or the consideration received for or in replacement of the Shares or Common Stock is cash. Section 3. Stockholder Approval. Following the Closing, the -------------------- Company will use its best efforts to promptly notice and hold a stockholders meeting not later than three months after the Closing Date to obtain any necessary stockholder approvals required by the Company (including those required by all applicable agreements between the Company and the NASD) to allow for issuance of Common Stock upon conversion of the Shares. Section 4. Sale Restrictions. Following conversion of the Shares ----------------- into Common Stock of the Company, Investor will not on any trading day offer or sell publicly on NASDAQ or on the principal exchange on which the Common Stock is traded, on a net basis more than the following number of such shares of Common Stock: the greatest of (i) 20% of the average daily trading volume for the Common Stock for the five consecutive trading days immediately preceding such date as reported by NASDAQ or by such principal exchange, (ii) 20,000 shares, and (iii) 10% of the trading volume for the Common Stock on such day. Section 5. Notice of Conversion Cap. No later than 97 days after ------------------------ the Closing Date, the Company will deliver notice to the Investor specifying the amount of the Conversion Cap (as defined in Section 4(c)(ii) of Schedule I hereto) and the calculation thereof. Section 6. Limitation on Conversion Rights. Investor shall not ------------------------------- be entitled to convert any Share into Common Stock of the Company if following conversion of such Share the Investor and its affiliates (within the meaning of the Exchange Act) shall be the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of more than the percentage of the Common Stock of the Company set forth after the name of the Investor in the signature page hereof. Section 7. BHC Restrictions. If the Investor is subject to the ---------------- Bank Holding Company Act of 1956, as amended, and the rules and regulations thereunder (the "BHC Act"), such Investor (a) may decline receipt of additional shares of 5% Convertible Preferred Stock pursuant to Section 1.4(b)(iv) and the Company shall make such payment in cash, or (b) shall not be entitled to convert any Share into Common Stock of the Company unless such conversion is effected in certain specified transactions (as particularly set forth in the Company's Certificate of Incorporation), if, following either such proposed distribution or such conversion of such Share, the Investor and its affiliates (as defined in the BHC Act) shall hold or beneficially own (as defined in the BHC Act) more than 4.9% of the Common Stock of the Company. Section 8. Limitations. The provisions of the foregoing Sections ----------- 3.6 and 3.7 shall not limit or affect the right of the Company to force conversion pursuant to the provisions of Section 3(a) of Schedule I hereto, nor the automatic conversion provided for in Section 3(d) thereof. The Company shall have no obligation to monitor compliance with said Sections or the holdings of any stockholder, and shall have no liability for the failure of any Investor to comply with said Sections. Section 9. Redemption Fund. The Company covenants and agrees --------------- that pursuant to Section 4(l) of Schedule I hereto it will pay, in cash, to the holders of the 5% Preferred Stock on a pro-rata basis by way of redemption of approximately 2,700,000 of such shares at the Special Redemption Price and on the Redemption Date defined in said Section 4(l), the sum of $75,000,000 plus earnings accumulated thereon (if any) if the shareholders of the Company have not, within the time specified in said Section 4(l), approved the issuance to the holders of the 5% Preferred Stock of the full number of shares of common stock of the Company to which they are entitled upon conversion of the 5% Preferred Stock. On the Closing Date the Company shall deposit as a trust fund (the "Redemption Fund") with a financial institution (the "Redemption Agent") acceptable to Cappello & Laffer Capital Corp. (the "Placement Agent") the sum of $75,000,000, constituting an amount equal to or greater than 71% of the total Purchase Price paid by the Investor hereunder together with an equal percentage of the Purchase Price paid by other Investors similarly situated. Prior to the Closing the Company shall deliver written instructions to the Redemption Agent, joined in by the Placement Agent, and the Redemption Agent shall acknowledge receipt of such instructions and agree to be bound thereby, providing in substance that on the date which is specified in said Section 4(l), all funds contained in the Redemption Fund (including earnings on the initial deposit, if any) are to be disbursed to holders of 5% Preferred Stock of the Company in redemption thereof at the Special Redemption Price referred to above against delivery of certificates representing such shares. The Company agrees to give written notice of such redemption as specified in said Section 4(l) to all record holders of 5% Preferred Stock, but failure to give such notice shall not delay or cancel such redemption, and such notice may be given by any holder of the 5% Preferred Stock or by the Placement Agent. The Redemption Date shall not be later than the date which is specified in said Section 4(l). The Company agrees to provide to the Redemption Agent, at least 10 days prior to the Redemption Date, a list of the holders of 5% Preferred Stock whose shares are to be redeemed, which list shall set forth the complete name and address of the holder, the number of shares of 5% Preferred Stock to be redeemed and the dollar amount to be paid to such holder. The Company's failure to provide such a list shall not delay or cancel the redemption; if the Company fails timely to provide such a list to the Redemption Agent, the Placement Agent may provide such a list based on the best information available to the Placement Agent. As partial security for the performance by the Company of its obligations under this Section and under Section 4(l) of Schedule I hereto, the Redemption Fund shall be held subject to a Security Agreement executed by the Company in favor of all of the Investors. The instructions to the Redemption Agent, and the Security Agreement, shall provide that the redemption of the 5% Preferred Stock may be annulled and the funds in the Redemption Account paid over to the Company if each of the following conditions is satisfied: (i) the Investors, the Placement Agent, and the Redemption Agent shall each have received a certificate executed by the chief executive officer and the chief legal officer of the Company certifying that the shareholders of the Company have approved the issuance to the holders of the 5% Preferred Stock, upon conversion of such shares, of the full number of shares of Common Stock of the Company issuable upon such conversion pursuant to the terms of the 5% Preferred Stock, and further certifying that such issuance of Common Stock upon conversion will not violate and will not be voidable under any rule or regulation of the National Association of Securities Dealers, (ii) the Placement Agent shall have received evidence reasonably satisfactory to the Placement Agent as to the correctness of the statements contained in such certificate of the Company's officers, and (iii) the Redemption Agent shall have received written confirmation from the Placement Agent to the effect that the Redemption Agent may rely on such certificate of the officers of the Company and may annul the Redemption proceedings and pay over all funds in the Redemption Account (including earnings on the initial deposit, if any) to the Company. The Company and the Investor each agrees that the Placement Agent shall have no liability for any action or inaction, decision, or instruction given or made in good faith pursuant to the provisions of this Section 3.9, and the Company agrees to indemnify the Placement Agent against any loss or expense (including attorneys' fees) incurred in connection with any assertion of such liability by any person. ARTICLE IV. Conditions ---------- Section 1. Conditions Precedent to the Obligation of the Company to Sell ------------------------------------------------------------- the Shares. The - ---------------- obligation hereunder of the Company to issue and/or sell the Shares to the Investor is subject to the satisfaction, at or before the Closing, of each of the conditions set forth below. These conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion. (a) Accuracy of the Investor's Representations and Warranties. The --------------------------------------------------------- representations and warranties of the Investor shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a particular date). (b) Performance by the Investor. The Investor shall have performed all --------------------------- agreements and satisfied all conditions required to be performed or satisfied by the Investor at or prior to the Closing. (c) No Injunction. No statute, rule, regulation, executive order, decree, ------------- ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. (d) Legal action. No legal action, suit or proceeding shall be pending or ------------ threatened which seeks to restrain or prohibit the transactions contemplated by this Agreement. Section 2. Conditions Precedent to the Obligation of the Investor ------------------------------------------------------ to Purchase the Shares. The obligation hereunder of the ---------------------- Investor to acquire and pay for the Shares is subject to the satisfaction, at or before the Closing, of each of the conditions set forth below. These conditions are for the Investor's sole benefit and may be waived by the Investor at any time in its sole discretion. (a) Accuracy of the Company's Representations and Warranties. The -------------------------------------------------------- representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a particular date). (b) Performance by the Company. The Company shall have performed all -------------------------- agreements and satisfied all conditions required to be performed or satisfied by the Company at or prior to the Closing. (c) NASDAQ. From the date hereof to the Closing Date, trading in the Company's ------ Common Stock shall not have been suspended by the SEC or the NASDAQ National Market (except for any suspension of trading of limited duration agreed to between the Company and the NASDAQ National Market solely to permit dissemination of material information regarding the Company), and trading in securities generally as reported by NASDAQ shall not have been suspended or limited or minimum prices shall not have been established on securities whose trades are reported by NASDAQ. (d) No Injunction. No statute, rule, regulation, executive order, decree, ------------- ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. (e) Opinion of Counsel, Etc. At the Closing the Investor shall have received ----------------------- an opinion of counsel to the Company (covering, without limitation, the matters set forth in Section 2.1(a) through (e)), in form and substance reasonably satisfactory to the Investor and its counsel, and such other certificates and documents as the Investor or its counsel shall reasonably require incident to the Closing. (f) Undertaking of Stockholders. At or prior to the Closing, the Investor --------------------------- shall have received a copy of a letter executed by Yamanouchi Pharmaceutical Co., Ltd. to the effect that such corporation, as a common stockholder of the Company, is prepared to vote its shares in the Company in favor of the preferred stock offering contemplated by this Agreement. In addition, the Investor shall have received a letter executed by Dr. Robert A. Vukovich and a majority of the directors of the Company to the effect that each of them will use his best efforts to cause a meeting of the stockholders of the Company to be held as soon as practicable for the purpose of approving the issuance to the Investor of the full number of shares of Common Stock to which the Investor may be entitled upon conversion, including, without limitation, authorization of an increase in the number of authorized shares of Common Stock to enable conversion to Common Stock of all of the 5% Preferred, and will use his best efforts to cause such stockholder approval to be given, and will vote all of his shares of the Company in favor of such approval. ARTICLE V. Legend on Stock --------------- Each certificate representing the Shares and, if appropriate, securities issued upon conversion thereof, shall be stamped or otherwise imprinted with a legend substantially in the following form: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. The Company agrees to reissue certificates representing the Shares or, if applicable, the securities issued upon conversion thereof without the legend set forth above at such time as (i) the holder thereof is permitted to dispose of such Shares (or securities issued upon conversion thereof) pursuant to Rule 144(k) under the Act, (ii) the securities are sold to a purchaser or purchasers who (in the opinion of counsel to such purchasers, in form and substance reasonably satisfactory to the Company and its counsel) are able to dispose of such shares publicly without registration under the Act, or (iii) such securities are registered under the Act. ARTICLE VI. Termination ----------- Section 1. Termination by Mutual Consent. This Agreement may be ----------------------------- terminated at any time prior to the Closing by the mutual written consent of the Company and the Investor. Section 2. Other Termination. This Agreement may be terminated ----------------- by action of the Board of Directors or other governing body of the Investor or the Company at any time if the Closing shall not have been consummated by the fifth business day following the date of this Agreement, provided that the party seeking to terminate the Agreement is not in breach of the Agreement. Section 3. Automatic Termination. This Agreement shall --------------------- automatically terminate without any further action of either party hereto if the Closing shall not have occurred by the tenth business day following the date of this Agreement, provided, however, that any such termination shall not terminate the liability of any party which is then in breach of the Agreement. ARTICLE VII. Miscellaneous ------------- Section 1. Fees and Expenses. Except as otherwise set forth in ----------------- Section 1.4 hereof, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement, provided that the Company shall pay, at the Closing, to the Investor's law firm all legal costs related to this transaction, and (unless the gross proceeds to the Company from the sale of 5% Convertible Preferred Stock exceed $40,000,000) all such costs incurred by the Placement Agent, in accordance with and up to the maximums stated in the final letter agreement dated August 15, 1996 between the Company and the Placement Agent. The Company shall compensate and indemnify the Placement Agent as set forth in said letter agreement. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the Shares pursuant hereto. As set forth in said letter agreement, as amended, the Placement Agent's compensation includes a cash payment in an amount equal to 5% of the Purchase Price of Shares sold by the Company, and the issuance of a warrant to purchase that number of Shares equal to 10% of the number of Shares sold at a purchase price equal to $25 per share. Section 2. Specific Enforcement, Consent ----------------------------- to Jurisdiction. --------------- (a) The Company and the Investor acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which either of them may be entitled by law or equity. (b) Each of the Company and the Investor (i) hereby irrevocably submits to the jurisdiction of the United States District Court and other courts of the United States sitting in New York for the purposes of any suit, action or proceeding arising out of or relating to this Agreement and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Company and the Investor consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this paragraph shall affect or limit any right to serve process in any other manner permitted by law. Section 3. Entire Agreement: Amendment. This Agreement contains --------------------------- the entire understanding of the parties with respect to the matters covered hereby and, except as specifically set forth herein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by a written instrument signed by the party against whom enforcement of any such amendment or waiver is sought. Section 4. Notices. Any notice or other communication required ------- or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery or delivery by telex (with correct answer back received), telecopy or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: to the Company: Roberts Pharmaceutical Corporation Meridian Center II 4 Industrial Way West Eatontown, New Jersey 07724 Attention: Anthony A. Rascio with copies to: Giordano, Halleran & Ciesla, P.C. 125 Half Mile Road Middletown, New Jersey 07748 Attention: John A. Aiello to the Investor: At the address set forth at the foot of this Agreement, with copies to Investor's counsel as set forth at the foot of this Agreement or as specified in writing by Investor with copies to: Gerard K. Cappello Cappello & Laffer Capital Corp. 1299 Ocean Avenue, Suite 306 Santa Monica, California 90401 Any party hereto may from time to time change its address for notices by giving at least 10 days' written notice of such changed address to the other party hereto. Section 5. Waivers. No waiver by either party of any default ------- with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. Section 6. Headings. The headings herein are for convenience -------- only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. Section 7. Successors and Assigns. Except as otherwise provided ---------------------- herein, this Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. The parties hereto may amend this Agreement without notice to or the consent of any third party. The assignment by a party to this Agreement of any rights hereunder shall not affect the obligations of such party under this Agreement. Section 8. No Third Party Beneficiaries. This Agreement is ---------------------------- intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person. Section 9. Governing Law. This Agreement shall be governed by ------------- and construed and enforced in accordance with the internal laws of the present state of incorporation of the Company without regard to such state's principles of conflict of laws. Section 10. Survival. The representations and warranties of the -------- Company and the Investor contained in Article II and the agreements and covenants set forth in Articles I, III and VII shall survive the Closing. Section 11. Execution. This Agreement may be executed in two or --------- more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event any signature is delivered by facsimile transmission, the party using such means of delivery shall cause the manually executed signature page(s) to be physically delivered to the other party within five days of the execution hereof. Section 12. Publicity. The Company agrees that it will not --------- disclose, and will not include in any public announcement, the name of the Investor without its consent, unless and until such disclosure is required by law or applicable regulation, and then only to the extent of such requirement. Section 13. NASDAQ. The term "NASDAQ" or "NASDAQ National ------ Market" herein refers to the principal market on which the Common Stock of the Company is traded. If the Common Stock is listed on a securities exchange, or if another market becomes the principal market on which the Common Stock is traded or through which price quotations for the Common Stock are reported, the term "NASDAQ" or "NASDAQ National Market" shall be deemed to refer to such exchange or other principal market. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date hereof. Roberts Pharmaceutical Corporation By: -------------------------------- Name: Its: THE INVESTOR By: -------------------------------- Name: Its: Investor's address: For purposes of Section 3.6 of this Agreement, the following percentage limitation shall be applicable: [_] 4.99% [_] 9.99% [_] no limitation If no box is marked, no limitation shall be applicable. Name and address of Investor's counsel: Exhibit A Subsidiaries - ------------ Roberts Laboratories, Inc. Linz-Roberts, Inc. Pronetics Health Care Group, Inc.* VRG International, Inc. Monmouth Pharmaceuticals, Ltd. Roberts Pharma GmbH Roberts Pharmaceutical of Canada, Inc. Roberts Investments, Inc. RPC Acquisition Corp. Geriatric Pharmaceutical Corp. * Pronetics Healthcare Group, Inc. is the name of 4 separate subsidiary corporations organized in New Jersey, New York, North Carolina and South Carolina. In 1995, the Company adopted a plan to discontinue and divest the operations of each of these subsidiaries. Preemptive or Similar Rights - ---------------------------- Rights granted to Yamanouchi Pharmaceutical Corporation (or its designee) ("Yamanouchi") pursuant to Stock Purchase Agreement dated January 22, 1996 (the "Yamanouchi Agreement"). Other Rights - ------------ Purchase price adjustment rights granted to investors pursuant to Section 3 of the Stock Purchase Agreements dated as of July 17, 1996 (the "DFA Agreements"). Registration Rights - ------------------- 1. Rights granted to Yamanouchi pursuant to Yamanouchi Agreement. 2. Rights granted to investors pursuant to the DFA Agreements. 3. Rights granted pursuant to warrants issued to designees of Cappello & Laffer Capital Corp. with respect to 15,000 shares of Common Stock and 420,000 shares of 5% Preferred (the "Cappello Warrants"). 4. Rights granted to Dr. Robert A. Vukovich pursuant to Registration Rights Agreement dated August 9, 1996. Outstanding options, Warrants Etc. - ---------------------------------- 1. Restricted Stock option Plan - options with respect to 175,440 shares of Common Stock outstanding. 2. Incentive Stock option Plan - options with respect to 1,034,027 shares of Common Stock outstanding. 3. Employee Stock Purchase Plan covering up to 500,000 shares, none of which have been issued as yet. 4. 1996 Equity Incentive Plan - 1,500,000 shares reserved. 5. The Cappello Warrants. SCHEDULE I RESOLUTION ESTABLISHING PREFERENCES OF 5% CONVERTIBLE PREFERRED STOCK RESOLVED that there shall be a series of shares of the Class B Preferred Stock of the Corporation designated "5% Convertible Preferred Stock"; that the number of shares of such series shall be 5,500,000 and that the rights and preferences of such series (the "5% Preferred") and the limitations or restrictions thereon, shall be as follows: 1. Dividends. --------- (a) The holders of the 5% Preferred shall be entitled to receive out of any assets legally available therefor cumulative dividends at the rate of $1.25 per share per annum, payable quarterly on March 31, June 30, September 30 and December 31 of each year, when and as declared by the Board of Directors, in preference and priority to any payment of any dividend on the Common Stock or any other class or series of stock of the Corporation. Such dividends shall accrue on any given share from the day of original issuance of such share and shall accrue from day to day whether or not earned or declared. If at any time dividends on the outstanding 5% Preferred at the rate set forth above shall not have been paid or declared and set apart for payment with respect to all preceding periods, the amount of the deficiency shall be fully paid or declared and set apart for payment, but without interest, before any distribution, whether by way of dividend or otherwise, shall be declared or paid upon or set apart for the shares of any other class or series of stock of the Corporation. (b) Any dividend payable on a dividend payment date more than 90 days after the date of issuance may be paid, at the option of the Corporation, either (i) in cash or (ii) in shares of 5% Preferred valued at $25 per share, if the Common Stock issuable upon conversion of such shares has been registered for resale under the Securities Act of 1933, as amended (the "Act"), and the registration statement including a current prospectus with respect thereto remains in effect at the date of delivery of such shares, and if the Corporation shall have given written notice of its intention to pay such dividend in stock to all holders of the 5% Preferred at least 10 days before the record date for such dividend. No holder that is a bank holding company or subsidiary thereof shall be required to accept 5% Preferred in lieu of cash in payment of a dividend unless after giving effect thereto the provisions of Section 10 hereof would permit one share of 5% Preferred to be converted by such holder. 2. Liquidation Preference. ---------------------- (a) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of the 5% Preferred shall be entitled to receive, prior and in preference to any distribution of any assets of the Corporation to the holders of any other class or series of shares, the amount of $25 per share plus any accrued but unpaid dividends (the "Liquidation Preference"). (b) A consolidation or merger of the Corporation with or into any other corporation or corporations, or a sale of all or substantially all of the assets of the Corporation, shall, at the option of the holders of the 5% Preferred, be deemed a liquidation, dissolution or winding up within the meaning of this Section 2 if the shares of stock of the Corporation outstanding immediately prior to such transaction represent immediately after such transaction less than a majority of the voting power of the surviving corporation (or of the acquiror of the Corporation's assets in the case of a sale of assets). Such option may be exercised by the vote or written consent of holders of a majority of the 5% Preferred at any time within thirty calendar days after written notice (which shall be given promptly) of the essential terms of such transaction shall have been given to the holders of the 5% Preferred in the manner provided by law for the giving of notice of meetings of shareholders. 3. Forced Conversion. ------------------ (a) The Company at its option may cause all outstanding shares of the 5% Preferred to be converted into Common Stock at any time beginning twelve months after the date of issuance, on at least 20 days' notice, at a conversion price determined as set forth in Section 4 hereof (the "Conversion Price") as of the date specified in such notice (the "Conversion Date") and otherwise on the terms set forth in said Section 4; provided, that the Corporation may not exercise such right of conversion unless (i) the Closing Price (last trade price) of the Common Stock as reported by NASDAQ for the 20 consecutive trading days prior to the date the Conversion Notice is mailed has not on any day been less than 120% of the Conversion Cap (as defined in Section 4(c)(ii) hereof) (subject to adjustment for stock dividends, stock splits and reverse stock splits), and (ii) the shares issuable upon conversion of the 5% Preferred are registered for resale by an effective registration statement ("Registration Statement") under the Act which became effective not more than 90 days after the date of issuance of the 5% Preferred, and a current prospectus meeting the requirements of Section 10 of the Act is available for delivery at the Conversion Date. (b) At least 20 days prior to the Conversion Date, written notice (the "Conversion Notice") shall be mailed, first class postage prepaid, by the Corporation to each holder of record of the 5% Preferred, at the address last shown on the records of the Corporation for such holder, notifying such holder of the conversion which is to be effected, specifying the Conversion Date and calling upon each such holder to surrender to the Corporation, in the manner and at the place designated, a certificate or certificates representing the number of shares of 5% Preferred held by such holder. Subject to the provisions of the following subsection (c), on or after the Conversion Date, each holder of 5% Preferred shall surrender to the Corporation the certificate or certificates representing the shares of 5% Preferred owned by such holder as of the Conversion Date, in the manner and at the place designated in the Conversion Notice, and thereupon the shares issuable upon such conversion shall be delivered as provided in Section 4(b) hereof. (c) If at the Conversion Date the registration condition specified in clause (ii) of subsection (a) shall not be satisfied, then no shares shall be converted and the Conversion Notice shall be deemed to be withdrawn. In such event, any certificates for 5% Preferred which have been surrendered for conversion shall be returned to the persons surrendering the same; provided, however, that if a holder shall have received shares of Common Stock upon conversion of 5% Preferred after the Conversion Notice was given but before the Conversion Date, such holder may elect either to retain such Common Stock or rescind such conversion by tendering such shares of Common Stock to the Corporation. (d) On the second anniversary of the Closing Date, all then outstanding shares of 5% Preferred shall be automatically converted into Common Stock at the Conversion Price and otherwise pursuant to the applicable provisions set forth in Section 4 hereof. 4. Optional Conversion. The holders of the 5% Preferred shall ------------------- have optional conversion rights as follows: (a) Right to Convert. At any time after the earlier of (i) the date ---------------- at which a Registration Statement has been declared effective and the requisite shareholder approval referred to in subsection (l) of this Section 4 has been obtained, or (ii) the close of business on the 91st day following the Closing Date, each share of 5% Preferred shall be convertible, at the option of the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing (x) the Liquidation Preference of the 5% Preferred determined pursuant to Section 2 hereof on the date the notice of conversion is given, by (y) the Conversion Price determined as hereinafter provided in effect on said date. (b) Mechanics of Conversion. To convert shares of 5% Preferred into ----------------------- shares of Common Stock, the holder shall give written notice to the Corporation (which notice may be given by facsimile transmission) that such holder elects to convert the same and shall state therein the number of shares to be converted and the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. Promptly thereafter the holder shall surrender the certificate or certificates representing the shares to be converted, duly endorsed, at the office of the Corporation or of any transfer agent for such shares, or at such other place designated by the Corporation. The Corporation shall, immediately upon receipt of such notice, issue and deliver to or upon the order of such holder, against delivery of the certificates representing the shares which have been converted, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled. The Corporation shall effect such issuance within two business days and shall transmit the certificates by messenger or overnight delivery service to reach the address designated by such holder within two business days after the receipt of such notice. Notice of conversion may be given by a holder at any time during the day up to midnight New York time and such conversion shall be deemed to have been made immediately prior to the close of business on the date such notice of conversion is given. The person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock at the close of business on such date. (c) Determination of Conversion Price. --------------------------------- (i) At any date following the earlier of (x) the date at which a Registration Statement is declared effective, or (ii) the 90th day following the Closing Date, subject to the provisions of subparagraph (ii) below, the Conversion Price shall be 90% of the lowest trade price of the Common Stock as reported by NASDAQ during a specified period of consecutive trading days immediately preceding such date, which periods are set forth in the table below: Period during which such Period of consecutive trading date occurs: days preceding such date: Through the 120th day after Closing 5 days 121st to 150th day after Closing 6 days 151st to 180th day after Closing 7 days 181st to 210th day after Closing 8 days 211th to 240th day after Closing 9 days 241st to 270th day after Closing 10 days 271st to 300th day after Closing 11 days 301st to 330th day after Closing 12 days 331st day after Closing or later 13 days (ii) The Conversion Price shall not be greater than the Conversion Cap. The Conversion Cap shall be calculated as follows: the mean between the closing bid price and closing ask price (as reported on NASDAQ) for each trading day during the 90-day period following the Closing Date (not including the Closing Date) shall be averaged; the Conversion Cap shall be equal to 115% of the resulting average. (iii) The "lowest trade price" of the Common Stock on any day shall be the lowest reported sale price of the Common Stock on NASDAQ or any other principal securities price quotation system or market on which prices of the Common Stock are reported. The term "trading day" means a day on which trading is reported on the principal quotation system or market on which prices of the Common Stock are reported. (iv) If during any period of consecutive trading days provided for above, the Corporation shall declare or pay any dividend on the Common Stock payable in Common Stock or in rights to acquire Common Stock, or shall effect a stock split or reverse stock split, or a combination, consolidation or reclassification of the Common Stock, then the Conversion Price shall be proportionately decreased or increased, as appropriate, to give effect to such event. If any such event occurs after the Conversion Cap has been determined, the Conversion Cap shall be proportionately decreased or increased, as appropriate, to give effect to such event. (d) Distributions. If the Corporation shall at any time or from time ------------- to time make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation or any of its subsidiaries other than additional shares of Common Stock, then in each such event provision shall be made so that the holders of 5% Preferred shall receive, upon the conversion thereof, the securities of the Corporation which they would have received had they been the owners on the date of such event of the number of shares of Common Stock issuable to them upon conversion. (e) Certificates as to Adjustments. Upon the occurrence of any ------------------------------ adjustment or readjustment of the Conversion Price or the Conversion Cap pursuant to this Section 4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and cause the independent public accountants regularly employed to audit the financial statements of the Corporation to verify such computation and prepare and furnish to each holder of 5% Preferred a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of 5% Preferred, furnish or cause to be furnished to such holder a like certificate prepared by the Corporation setting forth (i) such adjustments and readjustments, and (ii) the number of other securities and the amount, if any, of other property which at the time would be received upon the conversion of 5% Preferred with respect to each share of Common Stock received upon such conversion. (f) Notice of Record Date. In the event of any taking by the --------------------- Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any security or right convertible into or entitling the holder thereof to receive additional shares of Common Stock, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of 5% Preferred at least 10 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution, security or right and the amount and character of such dividend, distribution, security or right. (g) Issue Taxes. The Corporation shall pay any and all issue and ----------- other taxes, excluding any income, franchise or similar taxes, that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of shares of 5% Preferred pursuant hereto; provided, however, that the Corporation shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion. (h) Reservation of Stock Issuable Upon Conversion. The Corporation --------------------------------------------- shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the 5% Preferred, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the 5% Preferred, subject to the limitation set forth in subsection (l) below, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the 5% Preferred, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval. (i) Fractional Shares. No fractional shares shall be issued upon the ----------------- conversion of any share or shares of 5% Preferred. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of 5% Preferred by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the Corporation shall, in lieu of issuing any fractional share, pay the holder otherwise entitled to such fraction a sum in cash equal to the fair market value of such fraction on the date of conversion (as determined in good faith by the Board of Directors of the Corporation). (j) Notices. Any notice required by the provisions of this Section to ------- be given to the holders of shares of 5% Preferred shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at its address appearing on the books of the Corporation. (k) Reorganization or Merger. In case of any reorganization or any ------------------------ reclassification of the capital stock of the Corporation or any consolidation or merger of the Corporation with or into any other corporation or corporations or a sale of all or substantially all of the assets of the Corporation to any other person, and the holders of 5% Preferred do not elect to treat such transaction as a liquidation, dissolution or winding up as provided in Section 2, then, as part of such reorganization, consolidation, merger or sale, provision shall be made so that each share of 5% Preferred shall thereafter be convertible into the number of shares of stock or other securities or property (including cash) to which a holder of the number of shares of Common Stock deliverable upon conversion of such share of 5% Preferred would have been entitled upon the record date of (or date of, if no record date is fixed) such event and, in any case, appropriate adjustment (as determined by the Board of Directors) shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holders of the 5% Preferred, to the end that the provisions set forth herein shall thereafter be applicable, as nearly as equivalent as is practicable, in relation to any shares of stock or the securities or property (including cash) thereafter deliverable upon the conversion of the shares of 5% Preferred. (l) Limitation on Number of Conversion Shares. The Corporation shall ------------------------------------------ not be obligated to issue, in the aggregate, more than 3,717,529 shares of Common Stock as presently constituted (the "NASDAQ Cap") upon (1) conversion of the 5% Preferred, (2) exercise of the warrants issued to Cappello & Laffer Capital Corp. or its designees in connection with the sale of the 5% Preferred and the sale of stock to entities advised by Dimensional Fund Advisors, and (3) the issuance of 600,000 shares on or about July 17, 1996 to entities advised by Dimensional Fund Advisors, if issuance of a larger number of shares would constitute a breach of the Corporation's obligations under its agreements with the NASD or NASDAQ or the rules of such organizations. Subject to the obligation to effect certain redemptions pursuant to the last three sentences of this subsection (l), if further issuances of shares of Common Stock pursuant to clauses (1) through (3) would constitute a breach of the Corporation's obligations under any applicable agreements with the NASD or NASDAQ or the rules of such organizations (i.e., all of the shares permitted to be issued under the NASDAQ Cap shall have been so issued), then so long thereafter as such limitation shall continue to be applicable and any shares of 5% Preferred are submitted for conversion, such shares shall receive in cash an amount equal to the greater of (i) 111.11% of the Liquidation Preference of such shares or (ii) the current value of the Common Stock which such shares would otherwise be entitled to receive upon conversion (such value per share to be the closing price of such shares as reported by NASDAQ on the Conversion Date), in lieu of the Common Stock which such shares would otherwise be entitled to receive upon conversion, and such shares will be deemed cancelled. Payment of said cash amount shall be made no later than one business day after the time specified in Section 4(b) for the delivery of Common Stock upon conversion, and shall bear daily interest thereafter at the rate of one-tenth of one percent per day until paid. Such maximum number of shares of Common Stock shall be proportionately and equitably adjusted in the event of stock splits, stock dividends, reverse stock splits, reclassifications or other such events, in such manner as the Board of Directors of the Corporation shall reasonably determine. If the Corporation is unable to obtain the requisite shareholder approval concerning the issuance of shares of Common Stock in connection with the events specified in clauses (1) through (3) above to satisfy all NASD and NASDAQ requirements prior to 91 days after the date of issuance (the "Redemption Date"), the Corporation shall then redeem, at a "Special Redemption Price" equal to 111.11% of the Liquidation Preference of such shares, a number of shares equal to $75,000,000 (plus any earnings accumulated thereon from the Closing Date until the Redemption Date) divided by the Special Redemption Price. Any redemption effected pursuant to the preceding sentence shall require no notice except the notification of pro-rata allocation provided for in the following sentence. Such redemption shall be made pro rata based on the number of shares of the 5% Preferred outstanding at 11:59 p.m. on the day prior to the Redemption Date, and as early as practicable on the Redemption Date the Corporation shall notify each holder of 5% Preferred by the most rapid means of communication available to the Corporation, which may be facsimile transmission, of the pro rata number of shares to be redeemed from each holder. Such notice shall be binding upon holders who have submitted their stock certificates for redemption prior to receipt of such notice, as well as on holders who submit their stock certificates thereafter. If there shall be a default in payment of the Special Redemption Price, the amount so payable shall bear daily interest from and after the Redemption Date at the rate of one-tenth of one percent per day until paid. Shares so redeemed shall be deemed to have been redeemed at the opening of business on the Redemption Date and shall no longer be treated as outstanding shares except for purposes of receiving the Special Redemption Price. If the requisite shareholder approval is obtained before the Redemption Date, no shares shall be redeemed and any certificates submitted shall be returned to their respective holders. (m) Reissuance of Certificates. In the event of an optional --------------------------- conversion of 5% Preferred pursuant to Section 4(a) hereof or a redemption of 5% Preferred pursuant to Section 4(l) hereof in which less than all of the shares of 5% Preferred of a particular certificate are converted or redeemed, as the case may be, the Company shall promptly cause to be issued and delivered to the holder of such certificate, a certificate representing the remaining shares of 5% Preferred which have not been so converted or redeemed. 5. Other Provisions. For all purposes of this Resolution, the term ----------------- "date of issuance" and the terms "Closing" or "Closing Date" shall mean the day on which shares of the 5% Preferred are first issued by the Corporation. Any provision herein which conflicts with or violates any applicable usury law shall be deemed modified to the extent necessary to avoid such conflict or violation. The term "NASDAQ" herein refers to the principal market on which the Common Stock of the Company is traded. If the Common Stock is listed on a securities exchange, or if another market becomes the principal market on which the Common Stock is traded or through which price quotations for the Common Stock are reported, the term "NASDAQ" shall be deemed to refer to such exchange or other principal market. 6. Restrictions and Limitations. The Corporation shall not undertake ---------------------------- the following actions without the consent of the holders of a majority of the 5% Preferred: (i) modify its Certificate of Incorporation or Bylaws so as to amend or change any of the rights, preferences, or privileges of the 5% Preferred, (ii) authorize or issue any other preferred equity security senior to or on a parity with the 5% Preferred, as to dividends, liquidation preferences, conversion rights, redemption rights or other rights, preferences or privileges, or (iii) purchase or otherwise acquire for value any Common Stock or other equity security of the Corporation either junior or senior to or on a parity with the 5% Preferred while there exists any arrearage in the payment of cumulative dividends hereunder. 7. Voting Rights. Except as provided herein or as provided for by -------------- law, the 5% Preferred shall have no voting rights. 8. Attorneys' Fees. Any holder of 5% Preferred shall be entitled to --------------- recover from the Corporation the reasonable attorneys' fees and expenses incurred by such holder in connection with enforcement by such holder of any obligation of the Corporation hereunder. 9. No Adverse Actions. The Corporation shall not in any manner, ------------------ whether by amendment of the Certificate of Incorporation (including, without limitation, any Certificate of Designation), merger, reorganization, recapitalization, consolidation, sales of assets, sale of stock, tender offer, dissolution or otherwise, take any action, or permit any action to be taken, solely or primarily for the purpose of increasing the value of any class of stock of the Corporation if the effect of such action is to reduce the value or security of the Preferred Stock. 10. Limits on Conversion of 5% Preferred Stock. Notwithstanding any ------------------------------------------ right of conversion of 5% Preferred Stock provided for above, no such shares of 5% Preferred Stock originally issued by the Corporation to a bank holding company or an affiliate of a bank holding company shall be converted into shares of Common Stock or any other class or series of voting stock by the original holder or any direct or indirect transferee thereof such that immediately after such conversion such person and its affiliates (which term, for avoidance of doubt, includes such bank holding company, any such transferee and their respective affiliates) would own more than 4.9% of any class of voting securities of the Corporation, unless such shares are being distributed, disposed of or sold in any one of the following transactions (each a "Conversion Event"): (a) an initial public offering or other widely-dispersed public distribution of the shares of the Company; (b) transfers in small amounts pursuant to Rule 144 under the Securities Act of 1933; (c) a transfer to a single purchaser (or a group acting in concert) which controls or which has negotiated the purchase of at least a majority of the Company's voting stock held by persons other than the bank holding company investor; (d) a private sale of such equity so long as no purchaser acquires more than 2% of the total equity outstanding upon conversion; or (e) such shares are being sold in any other manner permitted by the Federal Reserve Board. For purposes of this Section 10, "persons" shall include any natural person and ------- any corporation, partnership, joint venture, trust, unincorporated organization and any other entity or organization and percentages of the Corporation's outstanding voting securities shall include shares issuable upon exercise or conversion of 5% Preferred Stock and other convertible securities, options, warrants or other similar instruments owned by such bank holding company, its transferees and their respective affiliates, but shall not include shares issuable upon exercise or conversion of convertible securities, options, warrants or other similar instruments owned by any other person. The provisions of this Section 10 shall not limit or affect the right of the Corporation to force conversion pursuant to Section 3(a) hereof nor the automatic conversion provided for in Section 3(d) hereof. The Corporation shall have no obligation to monitor compliance with the limits set forth in this Section 10 or the holdings of any shareholder, and shall have no liability for the failure of any person to comply with such limits. EX-4.6 6 FORM OF STOCK PURCHASE WARRANT - COMMON Exhibit 4.6 STOCK PURCHASE WARRANT THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. No.W___________ WARRANT TO PURCHASE [15,000] SHARES -------- OF COMMON STOCK VOID AFTER 5:00 P.M., NEW YORK TIME, on July 20, 2001 ROBERTS PHARMACEUTICAL CORPORATION This certifies that [Cappello & Laffer Capital Corp.], the --------------------------------- registered holder hereof or assigns (the "Warrantholder") is entitled to purchase from Roberts Pharmaceutical Corporation, a New Jersey corporation (the "Company"), at any time before the expiration time and date shown above (the "Expiration Time") at the purchase price per share of $_____ (the "Warrant Price"), the number of shares shown above. The number of shares purchasable upon exercise of this Warrant and the Warrant Price per share shall be subject to adjustment from time to time as set forth below. 1 Transferability and Form of Warrant. 1.1 Registration. This Warrant shall be numbered and shall be registered ------------ on the books of the Company. 1.2 TRANSFER. This Warrant shall be transferable on the books of the -------- Company only upon delivery thereof duly endorsed by the Warrantholder or duly authorized attorney or representative, accompanied by proper evidence of succession, assignment or authority to transfer. Upon any registration of transfer, the Company shall execute and deliver a new Warrant to the person entitled thereto. This Warrant may be divided or combined, upon request to the Company by the Warrantholder, into a certificate or certificates representing the right to purchase the same aggregate number of shares. Unless the context indicates otherwise, the term "Warrantholder" shall include any transferee or transferees of a Warrant and the term "Warrant" shall include any and all warrants issued upon division, exchange, substitution or transfer of this Warrant. 1.3 FORM OF WARRANT. The form of election to exercise this Warrant and --------------- the form of assignment of this Warrant shall be substantially as attached hereto. The Warrant shall be executed on behalf of the Company by its President, Vice President or other authorized officer, and shall be dated as of the date of signature thereof by the Company either upon initial issuance or upon division, exchange, substitution or transfer. A Warrant bearing the signature of an individual who was at any time the proper officer of the Company shall bind the Company, notwithstanding that such individual shall have ceased to hold such office prior to the delivery of such Warrant. 1.4 LEGEND ON WARRANTS AND SHARES. Each Warrant and, if appropriate, ----------------------------- certificate for shares initially issued upon exercise of this Warrant shall bear the legend set forth above, unless (i) the holder thereof is permitted to dispose of such Warrant or shares pursuant to Rule 144(k) under the Act, or (ii) the Warrant or shares are sold to a purchaser or purchasers who, in the reasonable opinion of their counsel, are able to dispose of such securities publicly without registration under the Act, or (iii) such securities are registered under the Act. SECTION 2 PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of shares to the Warrantholder; provided, however, that -------- ------- the Company shall not be required to pay any tax or taxes which may be payable in respect of any secondary transfer of the Warrant or the shares. SECTION 3 MUTILATED OR MISSING WARRANTS. In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company shall, at the request of the Warrantholder, issue and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant, or in lieu of and in substitution for the lost, stolen or destroyed Warrant, a new Warrant of like tenor, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant and of bond of indemnity, if requested, also satisfactory in form and amount at the applicant's cost. The applicant shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. SECTION 4 RESERVATION OF SHARES. There has been reserved, and the Company shall at all times keep reserved so long as this Warrant remains outstanding, out of its authorized shares of capital stock, such number and class of shares as shall be subject to purchase under this Warrant. SECTION 5 EXERCISE OF WARRANT. 5.1 EXERCISE BY CASH PAYMENT. The Holder of this Warrant shall have the ------------------------ right at any time and from time to time to exercise this Warrant in full or in part by surrender of this Warrant to the Company with the purchase form annexed hereto duly completed and signed, accompanied by payment to the Company in cash or by certified or cashier's check or by wire transfer of funds of the aggregate Warrant Price for the number of shares in respect of which this Warrant is then exercised. 5.2 CASHLESS EXERCISE. In addition to the exercise of all or a portion of ----------------- this Warrant by the payment of the exercise price in cash, and in lieu of any such payment, the holder of this Warrant shall have the right at any time and from time to time to exercise the Warrant in full or in part by surrendering the Warrant in exchange for that number of shares of Common Stock which, valued at Current Market Price, have a value equal to the total Current Market Price of the shares as to which this Warrant is then being exercised less the total Warrant Price payable for such shares. Current Market Price of the Common Stock shall be as defined in Section 7. 5.3 DELIVERY OF CERTIFICATES. Upon exercise of this Warrant the Company ------------------------ shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Warrantholder and in such name or names as the Warrantholder may designate, a certificate or certificates for the number of full shares issuable upon such exercise together with cash, as provided in Section 7 hereof, in respect of any fractional shares. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such shares as of the date of surrender of the Warrant and payment of the Warrant Price, as aforesaid, notwithstanding that the certificates representing such shares shall not actually have been delivered or that the stock transfer books of the Company shall then be closed. In the event of partial exercise a new Warrant evidencing the remaining portion of this Warrant will be issued by the Company. SECTION 6 ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. 6.1 ADJUSTMENTS. The number and kind of securities purchasable upon the ----------- exercise of the Warrants and the Warrant Price shall be subject to adjustment from time to time upon the happening of certain events, as follows: 6.1.1 In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) issue by reclassification of its Common Stock other securities of the Company, the number of shares purchasable upon exercise of the Warrants immediately prior thereto shall be adjusted so that the Warrantholder shall be entitled to receive the kind and number of shares or other securities of the Company which it would have owned or would have been entitled to receive after the happening of any of the events described above, had the Warrants been exercised immediately prior to the happening of such event or any record date with respect thereto. Any adjustment made pursuant to this paragraph (a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. 6.1.2 In case the Company shall issue rights, options, warrants or convertible securities to all or substantially all holders of its Common Stock, without any charge to such holders, entitling them to subscribe for or to purchase shares of Common Stock at a price per share which is lower at the record date mentioned below than the then Current Market Price (as defined in Section 7), the number of shares thereafter purchasable upon the exercise of the Warrants shall be determined by multiplying the number of shares theretofore purchasable upon exercise of each Warrant by a fraction, of which the numerator shall be (1) the number of shares of Common Stock outstanding immediately prior to the issuance of such rights, options or warrants plus (2) the number of additional shares of Common Stock offered for subscription or purchase, and of which the denominator shall be (x) the number of shares of Common Stock outstanding immediately prior to the issuance of such rights, options or warrants plus (y) the number of shares which the aggregate offering price of the total number of shares offered would purchase at the Current Market Price. Such adjustment shall be made whenever such rights, options or warrants are issued, and shall become effective immediately and retroactively after the record date for the determination of shareholders entitled to receive such rights, options or warrants. 6.1.3 In case the Company shall distribute to all or substantially all holders of its shares of Common Stock evidences of its indebtedness or assets (excluding cash dividends or distributions out of earnings) or rights, options, warrants or convertible securities containing the right to subscribe for or purchase shares of Common Stock (excluding those referred to in paragraph (b) above), then, in each case, the number of shares thereafter purchasable upon the exercise of the Warrants shall be determined by multiplying the number of shares theretofore purchasable upon exercise of the Warrants by a fraction, of which the numerator shall be the then Current Market Price on the date of such distribution, and of which the denominator shall be such Current Market Price on such date minus the then fair value of the portion of the assets or evidence of indebtedness so distributed or of such subscription rights, options or warrants applicable to one share. Such adjustment shall be made whenever any such distribution is made and shall become effective on the date of distribution retroactive to the record date for the determination of shareholders entitled to receive such distribution. 6.1.4 No adjustment in the number of shares purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the number of shares then purchasable upon the exercise of a Warrant; provided, however, that any -------- ------- adjustments which by reason of this paragraph (d) are not required to be made immediately shall be carried forward and taken into account in any subsequent adjustment. 6.1.5 Whenever the number of shares purchasable upon the exercise of a Warrant is adjusted as herein provided, the Warrant Price payable upon exercise of a Warrant shall be adjusted by multiplying such Warrant Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of shares purchasable upon the exercise of a Warrant immediately prior to such adjustment, and of which the denominator shall be the number of shares so purchasable immediately thereafter. 6.1.6 To the extent not covered by paragraphs (b) or (c) hereof, in case the Company shall sell or issue shares of Common Stock or rights, options, warrants or convertible securities containing the right to subscribe for or purchase shares of Common Stock at a price per share (determined, in the case of such rights, options, warrants or convertible securities, by dividing (i) the total amount received or receivable by the Company in consideration of the sale or issuance of such rights, options, warrants or convertible securities, plus the total consideration payable to the Company upon exercise or conversion thereof, by (ii) the total number of shares covered by such rights, options, warrants or convertible securities) lower than the then Current Market Price in effect immediately prior to such sale or issuance, then the Warrant Price shall be reduced to a price (calculated to the nearest cent) determined by dividing (I) an amount equal to the sum of (A) the number of shares of Common Stock outstanding immediately prior to such sale or issuance multiplied by the then existing Warrant Price, plus (B) the consideration received by the Company upon such sale or issuance divided by the Current Market Price and multiplied by the existing Warrant Price, by (II) the total number of shares of Common Stock outstanding immediately after such sale or issuance. The number of Shares purchasable upon the exercise of the Warrant shall be that number determined by multiplying the number of Shares issuable upon exercise immediately prior to such adjustment by a fraction, of which the numerator shall be the Warrant Price in effect immediately prior to such adjustment and the denominator shall be the Warrant Price as so adjusted. For the purposes of such adjustments, the shares of Common Stock which the holders of any such rights, options, warrants or convertible securities shall be entitled to subscribe for or purchase shall be deemed issued and outstanding as of the date of such sale or issuance and the consideration received by the Company therefor shall be deemed to be the consideration received by the Company for such rights, options, warrants or convertible securities, plus the consideration or premiums stated in such rights, options, warrants or convertible securities to be paid for the shares of Common Stock covered thereby. In case the Company shall sell or issue shares of Common Stock or rights, options, warrants or convertible securities containing the right to subscribe for or purchase shares of Common Stock for a consideration consisting, in whole or in part, of property other than cash or its equivalent, the value of such property shall be as determined in good faith by the Board of Directors of the Company. For purposes of determining the "price per share" of shares of Common Stock issued in a registered, underwritten public offering, any underwriting discounts or commissions shall not be deducted from the price received by the Company for sales of securities registered under the Act. There shall be no adjustment of the Warrant Price pursuant to this paragraph (f) if the amount of such adjustment would be less than $.01 per share; provided, however, that any adjustment which by reason of this provision is not required to be made immediately shall be carried forward and taken into account in any subsequent adjustment. 6.1.7 Whenever the number of shares purchasable upon the exercise of a Warrant or the Warrant Price is adjusted as herein provided, the Company shall cause to be promptly mailed to the Warrantholder by first class mail, postage prepaid, notice of such adjustment or adjustments and a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of shares purchasable upon the exercise of a Warrant and the Warrant Price after such adjustment, together with a brief statement of the facts requiring such adjustment and the computation by which such adjustment was made. 6.1.8 The term "Common Stock" shall mean (i) the class of stock designated as the Common Stock of the Company at the date of this Agreement or (ii) any other class of stock resulting from successive changes or reclassifications of such Common Stock. In the event that at any time, as a result of an adjustment made pursuant to this Section, the Warrantholder shall become entitled to purchase any securities of the Company other than shares of Common Stock, thereafter the number of such other securities so purchasable upon exercise of the Warrant and the Warrant Price of such securities 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 contained in this Section. 6.1.9 Upon the expiration of any rights, options, warrants or conversion privileges, if such shall not have been exercised, the number of Shares purchasable upon exercise of the Warrants and the Warrant Price, to the extent the Warrants have not then been exercised, shall, upon such expiration, be readjusted and shall thereafter be such as they would have been had they been originally adjusted (or had the original adjustment not been required, as the case may be) on the basis of (A) the fact that the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion rights and (B) the fact that such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the consideration, if any, actually received by the Company for the issuance, sale or grant of all such rights, options, warrants or conversion rights whether or not exercised; provided, however, that -------- ------- no such readjustment shall have the effect of increasing the Warrant Price by an amount in excess of the amount of the adjustment initially made in respect of the issuance, sale or grant of such rights, options, warrants or conversion privileges. 6.1.10 If the Purchase Price under the Agreements dated on or about July 17, 1996 between the Company and entities advised by Dimensional Fund Advisors shall be reduced pursuant to Section 3.1 thereof, the Warrant Price per share shall be reduced to equal such Purchase Price per share, and the number of shares purchasable upon exercise of this Warrant shall be increased so that the aggregate Warrant Price shall remain the same. 6.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Subsection 6.1, no --------------------------- adjustment in respect of any dividends shall be made during the term of the Warrant or upon the exercise of the Warrant. 6.3 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, --------------------------------------------------------------------- ETC. In case of any reclassification of the securities of the Company or --- any consolidation of the Company with or merger of the Company into another corporation or in case of any sale or conveyance to another corporation of the property, assets or business of the Company as an entirety or substantially as an entirety, the Company or such successor or purchasing corporation, as the case may be, shall provide by agreement that the Warrantholder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of the Warrant the kind and amount of shares and other securities and property which he would have owned or have been entitled to receive after the happening of such reclassification, consolidation, merger, sale or conveyance had the Warrant been exercised immediately prior to such action. Such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section. The provisions of this subsection shall similarly apply to successive reclassifications, consolidations, mergers, sales or conveyances. 6.4 STATEMENT ON WARRANT CERTIFICATES. Irrespective of any adjustments in --------------------------------- the Warrant Price or the number of securities purchasable upon the exercise of the Warrant, the Warrant certificate or certificates theretofore or thereafter issued may continue to express the same price and number of securities as are stated in the similar Warrant certificates initially issuable pursuant to this Agreement. However, the Company may at any time in its sole discretion (which shall be conclusive) make any change in the form of the Warrant certificate that it may deem appropriate and that does not affect the substance thereof; and any Warrant certificate thereafter issued, whether upon registration or transfer of, or in exchange or substitution for, an outstanding Warrant certificate, may be in the form so changed. SECTION 7 FRACTIONAL INTERESTS; CURRENT MARKET PRICE. The Company shall not be required to issue fractional shares on the exercise of the Warrant. If any fraction of a share would, except for the provisions of this Section, be issuable on the exercise of the Warrant (or specified portion thereof), the Company shall pay an amount in cash equal to the then Current Market Price multiplied by such fraction. The term "Current Market Price" shall mean (i) if the Common Stock is traded in the over-the-counter market or on the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ"), the average per share closing bid prices of the Common Stock on the 20 consecutive trading days immediately preceding the date in question, as reported by NASDAQ or an equivalent generally accepted reporting service, or (ii) if the Common Stock is traded on a national securities exchange, the average for the 20 consecutive trading days immediately preceding the date in question of the daily per share closing prices of the Common Stock on the principal stock exchange on which it is listed, as the case may be, or (iii) if the Common Stock is not so listed or traded, the fair market value of the Common Stock as determined in good faith by the board of directors of the Company. The closing price referred to in clause (ii) above shall be the last reported sales price or in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices, in either case on the national securities exchange on which the Common Stock is then listed. SECTION 8 NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER. Nothing contained in this Agreement or in any of the Warrants shall be constructed as conferring upon the Warrantholder or its transferees any rights whatsoever as a shareholder of the Company, including the right to vote, to receive dividends, to consent or to receive notices as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter. If, however, at any time prior to the expiration of the Warrant and prior to its exercise, any of the following events shall occur: 8.0.1 any action which would require an adjustment pursuant to Sections 6.1 or 6.3; or 8.0.2 a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger or sale of its property, assets and business, as an entirety) shall be proposed; then in any one or more of said events, the Company shall give notice in writing of such event to the Warrantholder as provided in Section 11 hereof at least twenty (20) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the shareholders entitled to any relevant dividend, distribution, subscription rights or other rights or for the determination of shareholders entitled to vote on such proposed dissolution, liquidation or winding up. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. SECTION 9 RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS. 9.0.1 The Warrantholder agrees that prior to making any disposition of any of the Warrants or securities issued upon exercise of the Warrants ("Securities"), the Warrantholder shall give written notice to the Company describing briefly the manner in which any such proposed disposition is to be made; and no such disposition shall be made if the Company has notified the Warrantholder that, in the reasonable opinion of counsel to the Company, a registration statement or other notification or post-effective amendment thereto (hereinafter collectively a "Registration Statement") under the Securities Act is required with respect to such disposition and no such Registration Statement has been filed by the Company with, and declared effective, if necessary, by, the Securities and Exchange Commission (the "Commission"). 9.0.2 The Company shall be obligated to the owners of the Warrant and the Securities to file a Registration Statement only as follows: Whenever, during the seven-year period following the issuance of the Warrant, the Company proposes to file with the Commission a Registration Statement (other than a registration on Form S-4, S-8 or other limited purpose form) it shall, at least thirty (30) days prior to such filing, give written notice of such proposed filing to the Warrantholder and each known holder of Securities, at its address appearing on the records of the Company, and shall offer to include and shall include in such filing any proposed disposition of the Securities upon receipt by the Company, not less than fifteen days prior to the proposed filing date, of a request therefor setting forth the facts with respect to such proposed disposition. 9.0.3 All fees, disbursements and out-of-pocket expenses in connection with the filing of any Registration Statement under paragraph (b) of this Section and in complying with applicable securities and Blue Sky laws shall be borne by the Company, provided, however, that any -------- ------- expenses of the Warrantholder or holders of the Securities, including but not limited to attorneys' fees and discounts and commissions, shall be borne by the Warrantholder or such holders. The Company at its expense will supply the Warrantholder and any holder of Securities being registered thereunder with copies of such Registration Statement and the prospectus or offering circular included therein and other related documents in such quantities as may be reasonably requested by the Warrantholder or holder of Securities. 9.0.4 The Company shall not be required by this Section to file such Registration Statement if, in the opinion of counsel for the Warrantholder or holder of Securities reasonably satisfactory to the Company, the proposed public offering or other transfer as to which such registration is requested is exempt from applicable federal and state securities registration requirements and would result in all purchasers or transferees obtaining securities which are not "restricted securities," as defined in Rule 144 under the Securities Act. 9.0.5 The Company shall have no obligation under this Section to the extent that, with respect to a public offering registration, any underwriter of such public offering reasonably requests that the Securities or a portion thereof be excluded. 9.0.6 The Company agrees that it will use its best efforts to keep such Registration Statement effective until three months after this Warrant has been exercised in full or has expired, or until any Securities covered thereby may be publicly distributed pursuant to an exemption from the registration requirements of the Securities Act. SECTION 10 INDEMNIFICATION. 10.0.1 In the event of the filing of any Registration Statement pursuant hereto, the Company agrees to indemnify and hold harmless the Warrantholder or any holder of Securities registered thereby and each officer, director or controlling person of the Warrantholder or any holder of such Securities against any losses, claims, damages or liabilities, joint or several (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all attorneys' fees), to which the Warrantholder or any holder of such Securities or such director, officer or controlling person may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such Registration Statement, or any related preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading; provided, however, that the Company will not be liable in -------- ------- any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by such Warrantholder or the holder of such Securities specifically for use in the preparation thereof. This indemnity will be in addition to any liability which the Company may otherwise have. 10.0.2 The Warrantholder agrees, and the holder of any Securities included in any such Registration Statement shall agree, that they will indemnify and hold harmless the Company, each other person referred to in subparts (1), (2) and (3) of Section 11(a) of the Securities Act in respect of the Registration Statement, each officer of the Company, and each person who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all attorneys' fees) to which the Company or any such director, officer or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such Registration Statement, or any related preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in such Registration Statement, preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by the Warrantholder or such holder of Securities specifically for use in the preparation thereof. This indemnity will be in addition to any liability which the Warrantholder or such holder of Securities may otherwise have. 10.0.3 Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section, notify the indemnifying party of the commencement thereof. No indemnification provided for in such paragraph shall be available to any party who shall fail to give the Notice if the party to whom such Notice was not given was prejudiced by the failure to give the Notice, but the omission so to notify the indemnifying party will not relieve the indemnifying party or parties from any liability which it may have to any indemnified party for contribution otherwise than as to the particular item as to which indemnification is then being sought solely pursuant to this Section. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, reasonably assume the defense thereof, subject to the provisions herein stated 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 under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation unless the indemnifying party shall not pursue the action to its final conclusion. The indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the indemnifying party; provided that the fees and expenses of such counsel shall be at the expense of the indemnifying party if (i) the employment of such counsel has been specifically authorized in writing by the indemnifying party or (ii) the named parties to any such action (including any impleaded parties) and the indemnifying party shall have been advised by such counsel that there may be one or more legal defenses available to the indemnifying party different from or in conflict with any legal defenses which may be available to the indemnified party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for the indemnified party, which firm shall be designated in writing by the indemnifying party). No settlement of any action against an indemnified party shall be made without the consent of the indemnifying party, which shall not be unreasonably withheld in light of all factors of importance to such indemnified party. SECTION 11 NOTICES. Any notice pursuant to this Agreement by the Company or by the Warrantholder shall be in writing and shall be deemed to have been duly given if delivered or mailed by certified mail, return receipt requested. 11.0.1 If to the Warrantholder: 11.0.2 If to the Company: Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance herewith to the other party. SECTION 12 SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrantholder shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 13 MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation or sell all or substantially all of its property to another corporation, unless the provisions of Section 6.3 are complied with. SECTION 14 APPLICABLE LAW. This Agreement shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the laws of said State. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by a duly authorized officer of the Company. Roberts Pharmaceutical Corporation Dated:__________________ By: ---------------------------- Name: ---------------------------- Title: ---------------------------- PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ______________ of the shares provided for therein, and requests that certificates be issued in the name of: _________________________________________________________________ (Please Print Name, Address and Taxpayer Identification Number) _________________________________________________________________ and, if said number of shares shall not be all the shares purchasable hereunder, that a new Warrant certificate for the balance of the shares purchasable under the within Warrant be registered in the name of the undersigned Warrantholder or his Assignee as below indicated and delivered to the address stated below. The undersigned: [_] elects to pay the full Warrant Price in cash or by certified or cashier's check or wire funds transfer [_] elects "cashless exercise" pursuant to Section 5.2 of the Warrant Dated: ________________ _____________________________ Signature of Warrantholder The above signature must correspond with the name appearing upon the face of this Warrant in every particular, without alteration or enlargement or any change whatever. Name of Assignee, if any: ____________________________ (Please Print) ______________________________________________________ (Please print Name, Address and Taxpayer Identification Number) _______________________________________________________ Signature Guaranteed: Signature guarantee is required if certificates are to be registered in the name of any person other than the name written upon the face of the Warrant. Signature must be guaranteed by a commercial bank or trust company or a member firm of the New York Stock Exchange. ASSIGNMENT (To be signed only upon assignment of Warrant) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _________________________________________________________________ (Name and Address of Assignee Must Be Printed or Typewritten) _________________________________________________________________ _________________________________________________________________ (Taxpayer Identification Number of Assignee) the within Warrant, hereby irrevocably constituting and appointing ____________________ Attorney to transfer said Warrant on the books of the Company, with full power of substitution in the premises. Dated: ________________, 19__ ______________________________ Signature of Registered Holder Signature Guaranteed: The above signature must correspond with the name appearing upon the face of this Warrant in every particular, without alteration or enlargement or any change whatever, and must be guaranteed by a commercial bank or trust company or a member firm of the New York Stock Exchange. EX-4.7 7 FORM OF STOCK PURCHASE WARRANT - PREF. Exhibit 4.7 STOCK PURCHASE WARRANT THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. No. WP-1 WARRANT TO PURCHASE 420,000 SHARES OF 5% PREFERRED STOCK VOID AFTER 5:00 P.M., NEW YORK TIME, on August 29, 1998 ROBERTS PHARMACEUTICAL CORPORATION This certifies that Cappello & Laffer Capital Corp., the registered holder hereof or assigns (the "Warrantholder") is entitled to purchase from Roberts Pharmaceutical Corporation, a New Jersey corporation (the "Company"), at any time before the expiration time and date shown above (the "Expiration Time") at the purchase price per share of $25.00 (the "Warrant Price"), the number and class of shares shown above. The number and class of shares purchasable upon exercise of this Warrant and the Warrant Price per share shall be subject to adjustment from time to time as set forth below. SECTION 1. TRANSFERABILITY AND FORM OF WARRANT. 1.1 REGISTRATION. This Warrant shall be numbered and shall be ------------ registered on the books of the Company. 1.2 TRANSFER. This Warrant shall be transferable on the books of the -------- Company only upon delivery thereof duly endorsed by the Warrantholder or duly authorized attorney or representative, accompanied by proper evidence of succession, assignment or authority to transfer. Upon any registration of transfer, the Company shall execute and deliver a new Warrant to the person entitled thereto. This Warrant may be divided or combined, upon request to the Company by the Warrantholder, into a certificate or certificates representing the right to purchase the same aggregate number of shares. Unless the context indicates otherwise, the term "Warrantholder" shall include any transferee or transferees of a Warrant and the term "Warrant" shall include any and all warrants issued upon division, exchange, substitution or transfer of this Warrant. 1.3 FORM OF WARRANT. The form of election to exercise this Warrant --------------- and the form of assignment of this Warrant shall be substantially as attached hereto. The Warrant shall be executed on behalf of the Company by its President, Vice President or other authorized officer, and shall be dated as of the date of signature thereof by the Company either upon initial issuance or upon division, exchange, substitution or transfer. A Warrant bearing the signature of an individual who was at any time the proper officer of the Company shall bind the Company, notwithstanding that such individual shall have ceased to hold such office prior to the delivery of such Warrant. 1.4 LEGEND ON WARRANTS AND SHARES. Each Warrant and, if appropriate, ----------------------------- certificate for shares initially issued upon exercise of this Warrant shall bear the legend set forth above, unless (i) the holder thereof is permitted to dispose of such Warrant or shares pursuant to Rule 144(k) under the Act, or (ii) the Warrant or shares are sold to a purchaser or purchasers who, in the reasonable opinion of their counsel, are able to dispose of such securities publicly without registration under the Act, or (iii) such securities are registered under the Act. SECTION 2. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of shares to the Warrantholder; provided, however, that -------- ------- the Company shall not be required to pay any tax or taxes which may be payable in respect of any secondary transfer of the Warrant or the shares. SECTION 3. MUTILATED OR MISSING WARRANTS. In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company shall, at the request of the Warrantholder, issue and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant, or in lieu of and in substitution for the lost, stolen or destroyed Warrant, a new Warrant of like tenor, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant and of bond of indemnity, if requested, also satisfactory in form and amount at the applicant's cost. The applicant shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. SECTION 4. RESERVATION OF SHARES. There has been reserved, and the Company shall at all times keep reserved so long as this Warrant remains outstanding, out of its authorized shares of capital stock, such number and class of shares as shall be subject to purchase under this Warrant. Such reservation shall continue irrespective of whether or not any other shares of such class remain outstanding. The shares of 5% Preferred Stock issuable upon exercise of this Warrant shall have all the rights and privileges of the other shares of 5% Preferred Stock of the Company, whenever issued, subject to the adjustment provisions set forth below. SECTION 5. EXERCISE OF WARRANT. 5.1 EXERCISE BY CASH PAYMENT. The Holder of this Warrant shall have ------------------------ the right at any time and from time to time to exercise this Warrant in full or in part by surrender of this Warrant to the Company with the purchase form annexed hereto duly completed and signed, accompanied by payment to the Company in cash or by certified or cashier's check or by wire transfer of funds of the aggregate Warrant Price for the number of shares in respect of which this Warrant is then exercised. 5.2 CASHLESS EXERCISE. Unless the shares of Common Stock issuable ----------------- upon exercise of this Warrant are registered under the Securities Act of 1933 and a current prospectus is available for delivery in connection with sales of such shares, in addition to the exercise of all or a portion of this Warrant by the payment of the exercise price in cash, and in lieu of any such payment, the holder of this Warrant shall have the right at any time and from time to time (subject to the opening clause of this subsection) to exercise the Warrant in full or in part by surrendering the Warrant in exchange for that number of shares of Common Stock which, valued at Current Market Price, have a value equal to the total Current Market Value of the shares as to which this Warrant is then being exercised less the total Warrant Price payable for such shares. Current Market Price of the Common Stock shall be as defined in Section 7. Current Market Value of a share as to which this Warrant is then being exercised shall be the product of (i) the number of shares of Common Stock into which such share is then convertible and (ii) the Current Market Price of one share of Common Stock. 5.3 DELIVERY OF CERTIFICATES. Upon exercise of this Warrant the ------------------------ Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Warrantholder and in such name or names as the Warrantholder may designate, a certificate or certificates for the number of full shares issuable upon such exercise together with cash, as provided in Section 7 hereof, in respect of any fractional shares. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such shares as of the date of surrender of the Warrant and payment of the Warrant Price, as aforesaid, notwithstanding that the certificates representing such shares shall not actually have been delivered or that the stock transfer books of the Company shall then be closed. In the event of partial exercise a new Warrant evidencing the remaining portion of this Warrant will be issued by the Company. SECTION 6. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. 6.1 ADJUSTMENTS. The number and kind of securities purchasable upon ----------- the exercise of the Warrants and the Warrant Price shall be subject to adjustment from time to time upon the happening of certain events, as follows: (a) If the shares purchasable upon exercise of the Warrants are subdivided, combined or reclassified, or if other shares of the kind so purchasable are issued in respect thereof as a dividend thereon, the number of shares purchasable upon exercise of the Warrants immediately prior thereto shall be adjusted so that the Warrantholder shall be entitled to receive the kind and number of shares of the Company which it would have owned or would have been entitled to receive after the happening of any of the events described above, had the Warrants been exercised immediately prior to the happening of such event or any record date with respect thereto. Any adjustment made pursuant to this paragraph (a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) If the shares purchasable upon exercise of the Warrants become entitled to receive a distribution of evidences of indebtedness or assets (excluding cash dividends required by the charter provisions governing such shares) or rights, options, warrants or convertible securities containing the right to subscribe for or purchase securities or assets of the Company, then, in each case, the number of shares thereafter purchasable upon the exercise of the Warrants shall be determined by multiplying the number of shares theretofore purchasable upon exercise of the Warrants by a fraction, of which the numerator shall be the Current Market Value on the date of such distribution, and of which the denominator shall be such Current Market Value on such date minus the then fair value of the portion of the assets or evidence of indebtedness or of such subscription rights, options or warrants so distributed applicable to one share. Such adjustment shall be made whenever any such distribution is made and shall become effective on the date of distribution retroactive to the record date for the determination of shareholders entitled to receive such distribution. Current Market Value shall have the meaning set forth in Section 5.2. (c) No adjustment in the number of shares purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the number of shares then purchasable upon the exercise of a Warrant; provided, -------- however, that any adjustments which by reason of this paragraph (d) are ------- not required to be made immediately shall be carried forward and taken into account in any subsequent adjustment. (d) Whenever the Warrant Price, or the number or class of shares purchasable upon exercise of this Warrant, is adjusted as herein provided, a corresponding adjustment in the number of shares so purchasable or the Warrant Price, as the case may be, shall be made so that the aggregate Warrant Price payable upon full exercise of this Warrant shall remain the same. If such adjustment results in more than one class of security being purchasable upon exercise of this Warrant, the adjusted Warrant Price shall be allocated to such securities on the basis of their respective fair market values. (e) Whenever the number or class of shares purchasable upon the exercise of a Warrant or the Warrant Price is adjusted as herein provided, the Company shall cause to be promptly mailed to the Warrantholder by first class mail, postage prepaid, notice of such adjustment or adjustments and a certificate of the President or Chief Financial Officer of the Company, stating that such adjustment and the determination thereof have been approved by the Board of Directors of the Company and setting forth the number of shares purchasable upon the exercise of a Warrant and the Warrant Price after such adjustment, together with a brief statement of the facts requiring such adjustment and the computation by which such adjustment was made. (f) The term "Common Stock" shall mean (i) the class of stock designated as the Common Stock of the Company at the date of this Warrant or (ii) any other class of stock resulting from successive changes or reclassifications of such Common Stock, and the term "5% Preferred Stock" shall mean (x) the class or series of stock so designated at the date of this Warrant, shares of which are initially purchasable upon exercise hereof, or (y) any other class or series of shares resulting from successive reclassifications or changes of such 5% Preferred Stock. In the event that at any time, as a result of an adjustment made pursuant to this Section, the Warrantholder shall become entitled to purchase any securities of the Company other than shares of 5% Preferred Stock, thereafter the number of such other securities so purchasable upon exercise of the Warrant and the Warrant Price of such securities shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained in this Section. 6.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Subsection --------------------------- 6.1, no adjustment in respect of any dividends shall be made during the term of the Warrant or upon the exercise of the Warrant. 6.3 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, ------------------------------------------------------ CONSOLIDATION, ETC. In case of any reclassification of the securities of the - ------------------ Company or any consolidation of the Company with or merger of the Company into another corporation or in case of any sale or conveyance to another corporation of the property, assets or business of the Company as an entirety or substantially as an entirety, the Company or such successor or purchasing corporation, as the case may be, shall provide by agreement that the Warrantholder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of the Warrant the kind and amount of shares and other securities and property which he would have owned or have been entitled to receive after the happening of such reclassification, consolidation, merger, sale or conveyance had the Warrant been exercised immediately prior to such action. Such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section. The provisions of this subsection shall similarly apply to successive reclassifications, consolidations, mergers, sales or conveyances. 6.4 STATEMENT ON WARRANT CERTIFICATES. Irrespective of any --------------------------------- adjustments in the Warrant Price or the number of securities purchasable upon the exercise of the Warrant, the Warrant certificate or certificates theretofore or thereafter issued may continue to express the same price and number of securities as are stated in the similar Warrant certificates initially issued. However, the Company may at any time in its sole discretion (which shall be conclusive) make any change in the form of the Warrant certificate that it may deem appropriate and that does not affect the substance thereof; and any Warrant certificate thereafter issued, whether upon registration or transfer of, or in exchange or substitution for, an outstanding Warrant certificate, may be in the form so changed. SECTION 7. FRACTIONAL INTERESTS; CURRENT MARKET PRICE. The Company shall not be required to issue fractional shares on the exercise of the Warrant. If any fraction of a share would, except for the provisions of this Section, be issuable on the exercise of the Warrant (or specified portion thereof), the Company shall pay an amount in cash equal to the then Current Market Value (as defined in Section 5.2) of such share multiplied by such fraction, or if such fraction is a fraction of a share of Common Stock, the Current Market Price multiplied by such fraction. The term "Current Market Price" shall mean the lowest trade price of the Common Stock during the number of consecutive trading days specified in Section 4(c) of the charter provision establishing the preferences of the 5% Preferred Stock. The "low trade price" on any day shall be the lowest reported sale price of the Common Stock on the principal securities price quotation system on which prices of the Common Stock are reported. The term "trading day" means a day on which trading is reported on such principal quotation system. If prices of the Common Stock are not reported on any securities price quotation system, "Current Market Price" shall mean the fair market value of the Common Stock as determined in good faith by the board of directors of the Company. SECTION 8. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER. Nothing contained in this Agreement or in any of the Warrants shall be construed as conferring upon the Warrantholder or its transferees any rights whatsoever as a shareholder of the Company, including the right to vote, to receive dividends, to consent or to receive notices as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter. If, however, at any time prior to the expiration of the Warrant and prior to its exercise, any of the following events shall occur: (a) any action which would require an adjustment pursuant to Sections 6.1 or 6.3; or (b) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger or sale of its property, assets and business, as an entirety) shall be proposed; then in any one or more of said events, the Company shall give notice in writing of such event to the Warrantholder as provided in Section 11 hereof at least twenty (20) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the shareholders entitled to any relevant dividend, distribution, subscription rights or other rights or for the determination of shareholders entitled to vote on such proposed dissolution, liquidation or winding up. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. SECTION 9. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS. (a) The Warrantholder agrees that prior to making any disposition of any of the Warrants, or securities issued upon exercise or cashless exercise of the Warrants or securities issued upon conversion thereof ("Securities"), the Warrantholder shall give written notice to the Company describing briefly the manner in which any such proposed disposition is to be made; and no such disposition shall be made if the Company has notified the Warrantholder that, in the reasonable opinion of counsel to the Company, a registration statement or other notification or post-effective amendment thereto (hereinafter collectively a "Registration Statement") under the Securities Act is required with respect to such disposition and no such Registration Statement has been filed by the Company with, and declared effective, if necessary, by, the Securities and Exchange Commission (the "Commission"). (b) The Company shall be obligated to the owners of the Warrant and the Securities to file a Registration Statement only as follows: Whenever, during the three-year period following the issuance of the Warrant, the Company proposes to file with the Commission a Registration Statement (other than a registration on Form S-4, S-8 or other limited purpose form) it shall, at least twenty (20) days prior to such filing, give written notice of such proposed filing to the Warrantholder and each known holder of Securities, at its address appearing on the records of the Company, and shall offer to include and shall include in such filing any proposed disposition of the Securities upon receipt by the Company, not less than fifteen days prior to the proposed filing date, of a request therefor setting forth the facts with respect to such proposed disposition. (c) All fees, disbursements and out-of-pocket expenses in connection with the filing of any Registration Statement under paragraph (b) of this Section and in complying with applicable securities and Blue Sky laws shall be borne by the Company, provided, however, that any expenses of the Warrantholder -------- ------- or holders of the Securities, including but not limited to attorneys' fees and discounts and commissions, shall be borne by the Warrantholder or such holders. The Company at its expense will supply the Warrantholder and any holder of Securities being registered thereunder with copies of such Registration Statement and the prospectus or offering circular included therein and other related documents in such quantities as may be reasonably requested by the Warrantholder or holder of Securities. (d) The Company shall not be required by this Section to file such Registration Statement if, in the opinion of counsel for the Warrantholder or holder of Securities reasonably satisfactory to the Company, the proposed public offering or other transfer as to which such registration is requested is exempt from applicable federal and state securities registration requirements and would result in all purchasers or transferees obtaining securities which are not "restricted securities," as defined in Rule 144 under the Securities Act. (e) The Company shall have no obligation under this Section to the extent that, with respect to a public offering registration, any underwriter of such public offering reasonably requests that the Securities or a portion thereof be excluded. (f) The Company agrees that it will use its best efforts to keep such Registration Statement effective until three months after this Warrant has been exercised in full or has expired, or until any Securities covered thereby may be publicly distributed pursuant to an exemption from the registration requirements of the Securities Act, but in no event later than October 31, 1999. SECTION 10. INDEMNIFICATION. (a) In the event of the filing of any Registration Statement pursuant hereto, the Company agrees to indemnify and hold harmless the Warrantholder or any holder of Securities registered thereby and each officer, director or controlling person of the Warrantholder or any holder of such Securities against any losses, claims, damages or liabilities, joint or several (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all attorneys' fees), to which the Warrantholder or any holder of such Securities or such director, officer or controlling person may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such Registration Statement, or any related preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading; provided, however, that -------- ------- the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by such Warrantholder or the holder of such Securities specifically for use in the preparation thereof. This indemnity will be in addition to any liability which the Company may otherwise have. (b) The Warrantholder agrees, and the holder of any Securities included in any such Registration Statement shall agree, that they will indemnify and hold harmless the Company, each other person referred to in subparts (1), (2) and (3) of Section 11(a) of the Securities Act in respect of the Registration Statement, each officer of the Company, and each person who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all attorneys' fees) to which the Company or any such director, officer or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such Registration Statement, or any related preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in such Registration Statement, preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by the Warrantholder or such holder of Securities specifically for use in the preparation thereof. This indemnity will be in addition to any liability which the Warrantholder or such holder of Securities may otherwise have. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section, notify the indemnifying party of the commencement thereof. No indemnification provided for in such paragraph shall be available to any party who shall fail to give the Notice if the party to whom such Notice was not given was prejudiced by the failure to give the Notice, but the omission so to notify the indemnifying party will not relieve the indemnifying party or parties from any liability which it may have to any indemnified party for contribution otherwise than as to the particular item as to which indemnification is then being sought solely pursuant to this Section. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, reasonably assume the defense thereof, subject to the provisions herein stated 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 under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation unless the indemnifying party shall not pursue the action to its final conclusion. The indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the indemnifying party; provided that the fees and expenses of such counsel shall be at the expense of the indemnifying party if (i) the employment of such counsel has been specifically authorized in writing by the indemnifying party or (ii) the named parties to any such action (including any impleaded parties) and the indemnifying party shall have been advised by such counsel that there may be one or more legal defenses available to the indemnifying party different from or in conflict with any legal defenses which may be available to the indemnified party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for the indemnified party, which firm shall be designated in writing by the indemnified party). No settlement of any action against an indemnified party shall be made without the consent of the indemnifying party, which shall not be unreasonably withheld. SECTION 11. NOTICES. Any notice pursuant to this Agreement by the Company or by the Warrantholder shall be in writing and shall be deemed to have been duly given if delivered or mailed by certified mail, return receipt requested. (a) If to the Warrantholder: Cappello & Laffer Capital Corp. 1299 Ocean Avenue Suite 306 Santa Monica, California 90401 (b) If to the Company: Roberts Pharmaceutical Corporation Meridian Center II 4 Industrial Way West Eatontown, New Jersey 07724 Attention: Chief Financial Officer Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance herewith to the other party. SECTION 12. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrantholder shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation or sell all or substantially all of its property to another corporation, unless the provisions of Section 6.3 are complied with. SECTION 14. APPLICABLE LAW. This Agreement shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the laws of said State. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by a duly authorized officer of the Company. Roberts Pharmaceutical Corporation Dated: August 29, 1996 By: ------------------------------ Name: Peter Rogalin Title: Chief Financial Officer PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ______________ of the shares provided for therein, and requests that certificates be issued in the name of: _________________________________________________________________ (Please Print Name, Address and Taxpayer Identification Number) _________________________________________________________________ and, if said number of shares shall not be all the shares purchasable hereunder, that a new Warrant certificate for the balance of the shares purchasable under the within Warrant be registered in the name of the undersigned Warrantholder or his Assignee as below indicated and delivered to the address stated below. The undersigned: [_] elects to pay the full Warrant Price in cash or by certified or cashier's check or wire funds transfer [_] elects "cashless exercise" pursuant to Section 5.2 of the Warrant (may not be elected if underlying shares are registered under the Securities Act of 1933 and a current prospectus is available) Dated: ________________ _____________________________ Signature of Warrantholder The above signature must correspond with the name appearing upon the face of this Warrant in every particular, without alteration or enlargement or any change whatever. Name of Assignee, if any: ____________________________ (Please Print) ______________________________________________________ (Please print Name, Address and Taxpayer Identification Number) _______________________________________________________ Signature Guaranteed: Signature guarantee is required if certificates are to be registered in the name of any person other than the name written upon the face of the Warrant. Signature must be guaranteed by a commercial bank or trust company or a member firm of the New York Stock Exchange. ASSIGNMENT (To be signed only upon assignment of Warrant) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _________________________________________________________________ (Name and Address of Assignee Must Be Printed or Typewritten) _________________________________________________________________ _________________________________________________________________ (Taxpayer Identification Number of Assignee) the within Warrant, hereby irrevocably constituting and appointing ____________________ Attorney to transfer said Warrant on the books of the Company, with full power of substitution in the premises. Dated: ________________, 19__ ______________________________ Signature of Registered Holder Signature Guaranteed: The above signature must correspond with the name appearing upon the face of this Warrant in every particular, without alteration or enlargement or any change whatever, and must be guaranteed by a commercial bank or trust company or a member firm of the New York Stock Exchange. EX-5 8 OPINION OF GIORDANO, HALLERAN & CIESLA EXHIBIT 5 GIORDANO, HALLERAN & CIESLA A Professional Corporation 125 Half Mile Road P.O. Box 190 Middletown, New Jersey 07724 (908) 741-3900 October 8, 1996 Roberts Pharmaceutical Corporation Meridian Center II 4 Industrial Way West Eatontown, NJ 07724 Gentlemen: We refer to the Registration Statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Act"), filed by Roberts Pharmaceutical Corporation, a New Jersey corporation (the "Company") with the Securities and Exchange Commission for the registration of 10,024,540 shares of the Company's common stock $.01 par value (the "Common Stock") which are proposed to be offered and sold by certain security-holders of the Company (the "Selling Shareholders"), including shares (the "Conversion Shares") of Common Stock issuable upon the conversion of the Company's 5% Convertible Preferred Stock and shares issuable pursuant to the terms of certain Common Stock Purchase Warrants (the "Warrants"). We have examined the orginal, or a photostatic or certified copy, of such records and certificates of the Company, certificates of officers of the Company and of public officials and such other documents as we have deemed relevant and necessary as the basis for the opinion set forth below. In such examination we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies, and the authenticity of the originals of such copies and the correctness of all statements of fact contained therein. Based upon our examination mentioned above, subject to the assumptions stated and relying on statements of fact contained in the documents that we have examined, we are of the opinion that (a) the Common Stock has been duly authorized and (b ) assuming (i) the proper conversion of the Company's 5% Convertible Preferred Stock in the case of the Conversion Shares and (ii) the proper exercise of the Warrants in the case of the Warrant Shares, the Common Stock, when sold by the Selling Shareholders, will be validly issued, fully paid and non-assessable. We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm appearing under the caption "Legal Matters" in the Prospectus that forms a part of the Registration Statement. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the General Rules and Regulations of the Securities and Exchange Commission. Very truly yours, GIORDANO, HALLERAN & CIESLA A Professional Corporation PDF/db EX-23.2 9 CONSENT OF COOPERS & LYBRAND LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this registration statement of Roberts Pharmaceutical Corporation on Form S-3 of our report dated March 20, 1996, on our audits of the consolidated financial statements of Roberts Pharmaceutical Corporation and Subsidiaries as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, which report is included in the Corporation's 1995 Annual Report on Form 10-K. We also consent to the reference to our firm under the caption "Experts." COOPERS & LYBRAND L.L.P. Princeton, New Jersey October 3, 1996 -----END PRIVACY-ENHANCED MESSAGE-----