ENDO PHARMACEUTICALS HOLDINGS INC.
Exhibit
3
ENDO
PHARMACEUTICALS HOLDINGS INC.
April 29,
2008
D. E.
Shaw Valence Portfolios, L.L.C.
▇/▇ ▇. ▇.
▇▇▇▇ & ▇▇., ▇.▇.
▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ 45
▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇
Ladies
and Gentlemen:
This
letter sets forth the agreement between Endo Pharmaceuticals Holdings Inc. (the
“Company”), on the one hand, and D. E. Shaw Valence Portfolios, L.L.C., on
behalf of itself and its respective affiliates that are or become members of a
Section 13(d) group with respect to the shares of Common Stock of the Company
(collectively the “▇. ▇. ▇▇▇▇ Entities”), on the other hand, with respect to the
matters set forth below.
1. The
▇. ▇. ▇▇▇▇ Entities have identified an individual whom they have suggested be
appointed as a new, “independent” director (the “New Director”) to the Company’s
Board of Directors (the “Board”) and who is not employed by or affiliated with
any of the ▇. ▇. ▇▇▇▇ Entities and who is “independent” under current NASDAQ
Stock Market Rules. The Nominating and Governance Committee of the
Board (the “Committee”) shall, in accordance with the Committee’s regular
procedures and guidelines, meet to review the qualifications of the New Director
to serve as a member of the Board. If the Committee determines that
the New Director meets the qualifications to serve as a member of the Board, it
shall recommend the New Director to the Board for appointment or for election at
the 2008 annual meeting of stockholders (the “2008 Annual
Meeting”). The Board shall meet to consider the appointment or
election of the New Director as promptly as practicable (but not later than the
next regularly-scheduled Board Meeting) after such candidate’s qualifications
have been reviewed and favorably recommended by the Committee. The Company shall
notify the ▇. ▇. ▇▇▇▇ Entities as promptly as practicable if the Committee
determines that the New Director does not meet the qualifications of the Board,
and the ▇. ▇. ▇▇▇▇ Entities shall have the right to propose additional persons
so qualified to be considered and appointed or elected as a New Director in
accordance with the provisions hereof. In the event that the New
Director is recommended by the Committee and approved by the Board prior to the
mailing of the Company’s definitive proxy statement for the 2008 Annual Meeting,
such New Director shall be included in the Board’s slate of directors for
election at the 2008 Annual Meeting. In the event that the New
Director is recommended by the Committee and approved by the Board following the
mailing of the definitive proxy statement for the 2008 Annual Meeting, such New
Director shall be appointed to the Board at the first regular meeting of the
Board following the 2008 Annual Meeting. The Company agrees that it
will take all necessary action to increase the size of the Board, if
necessary, in order to permit the election or appointment of the New
Director.
2. The
▇.▇. ▇▇▇▇ Entities agree not to nominate directors for election or present new
business at the 2008 Annual Meeting, including by providing any notice of such
action under Article II, Section 3 or Article II, Section 10 of the Company’s
By-laws.
3. If
the New Director leaves the Board (whether by resignation or otherwise) before
the 2009 Annual Meeting, the ▇. ▇. ▇▇▇▇ Entities will be entitled to suggest to
the Committee a replacement director who meets the Committee’s qualifications
for serving as a member of the Board. In the event the Committee does
not favorably recommend to the Board a replacement director suggested by the ▇.
▇. ▇▇▇▇ Entities, the ▇. ▇. ▇▇▇▇ Entities will have the right to suggest an
additional replacement director(s) for consideration by the Committee. After a
favorable recommendation by the Committee and approval by the Board, the Board
will appoint such replacement director to the Board as soon as practicable, but
not later than the next regularly-scheduled meeting of the Board.
4. The
▇.▇. ▇▇▇▇ Entities further agree that they will not engage or in any way
participate, directly or indirectly, in any solicitation of proxies with respect
to the election of directors or any other matter to be voted on at the 2008
Annual Meeting. The ▇.▇. ▇▇▇▇ Entities further agree that they will
not solicit, or in any way participate directly or indirectly in the
solicitation of consents of, stockholders on any matter, including the removal
or election of directors, prior to the 2009 Annual Meeting of Stockholders (the
“2009 Annual Meeting”) and will not take any action, directly or indirectly, to
convene, or participate with or encourage any other stockholder to convene a
special meeting of the Company’s stockholders prior to the 2009 Annual Meeting
or seek to advise, encourage or influence any person with respect to the voting
of shares of the Company’s Common Stock. In the event that the New
Director is renominated to the Board in connection with the 2009 Annual Meeting
(or in the event that no replacement director with similar qualifications as the
New Director is suggested by the ▇.▇. ▇▇▇▇ Entities after the New Director
ceases to serve on the Board), the ▇.▇. ▇▇▇▇ Entities agree (i) to withdraw any
previously submitted notice of intention to nominate directors for election or
notice of intention to present new business at the 2009 Annual Meeting, and (ii)
not to engage or in any way participate, directly or indirectly, in any
solicitation of proxies with respect to the election of directors or any other
matter to be voted on at the 2009 Annual Meeting or seek to advise, encourage or
influence any person with respect to the voting of shares of the Company’s
Common Stock.
5. The
▇. ▇. ▇▇▇▇ Entities agree to cause all shares of the Company’s Common Stock
which they are entitled to vote at the 2008 Annual Meeting to be present, in
person or by proxy, at the 2008 Annual Meeting and to vote all such shares of
the Company’s Common Stock in favor of (i) the election of each of the
nominees of the Board and (ii) the proposal to amend the Company’s Amended and
Restated Certificate of Incorporation to increase the number of shares of common
stock authorized for issuance by 175 million shares (the “2008 Proposal”). In
the event that the New Director is renominated to the Board in connection with
the 2009 Annual Meeting, the ▇. ▇. ▇▇▇▇ Entities agree to cause all shares of
the Company’s Common Stock which they are entitled to vote at the 2009 Annual
Meeting to be present, in person or by proxy, at the 2009 Annual Meeting and to
vote all such shares of the Company’s Common Stock in favor of the election of
each of the nominees of the Board; provided, however, that nothing herein shall
limit the ability of the ▇. ▇. ▇▇▇▇ Entities to vote their voting securities on
any matter submitted to a vote of the stockholders of the Company or announce
its opposition to any Board-approved proposals, other than (i) the election of
directors at the 2008 Annual Meeting, (ii) the election of directors at the 2009
Annual Meeting, if applicable, and (iii) the 2008 Proposal.
6. Notwithstanding
the last sentence of paragraph 4 hereof or the last sentence of paragraph 5
hereof, the restrictions or proscriptions set forth in such sentences
relating to the 2009 Annual Meeting shall not be applicable if either of the
following events occur: (i) ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall cease to be the Chief Executive
Officer of the Company or (ii) the Company receives an unsolicited bona fide
offer (which offer is accompanied by evidence of fully committed financing from
a nationally recognized financing source or is not subject to any financing
condition) to acquire all of the outstanding shares of the Company’s Common
Stock from a third party (the “Third Party”), which Third Party is not
affiliated with any of the ▇. ▇. ▇▇▇▇ Entities and is not in any way acting as a
“group” within the meaning of Rule 13d-5 or in concert with or
participating with any of the ▇.▇. ▇▇▇▇ Entities in connection with such offer,
and the Third Party is soliciting proxies to elect one or more candidates to the
Board at the 2009 Annual Meeting. In addition, the restrictions or
proscriptions set forth in the last sentence of paragraph 4 and the last
sentence of paragraph 5 shall not be applicable if the volume weighted average
closing price per share of the Company’s Common Stock as reported on NASDAQ does
not equal or exceed the Minimum Trading Price (as defined below) (the “Minimum
Trading Price”) during any consecutive 15 day trading period beginning January
1, 2009 and ending on the later of March 31, 2009 and the day that is three days
before the deadline for timely notice (the “2009 Nomination Deadline”) provided
in Article II, Section 10 of the Company’s By-laws (the “Trading
Period”). The Minimum Trading Price shall be $30 per share or such
other price per share as may reflect appropriate adjustments in connection with
stock splits, reverse stock splits, stock dividends or similar share adjustments
for which the record dates occur at any time prior to the end of the Trading
Period. In the event that the ▇.▇. ▇▇▇▇ Entities are not subject to
the restrictions of the last sentence of paragraph 4 or the last sentence of
paragraph 5, before making a determination to solicit proxies in connection
with the 2009 Annual Meeting, the ▇.▇. ▇▇▇▇ Entities agree to take into
consideration the effect that negative general economic conditions beyond the
Company’s control affecting the trading markets generally or the specialty
pharmaceutical industry generally (including the effect of governmental
regulation applicable to the pharmaceutical industry, such as the adoption of
price controls) have had on the trading price of the Company’s Common
Stock. Notwithstanding the provisions of this paragraph, the ▇.▇.
▇▇▇▇ Entities agree that they will not be entitled to solicit proxies in
connection with the 2009 Annual Meeting if (i) the AMEX Pharmaceutical Index is
down more than 10% based on the consecutive 10 day trading period beginning
the date hereof and the consecutive 10 day trading period ending on the later of
March 31, 2009 and the day that is three days before the 2009 Nomination
Deadline and (ii) the share price of the Company’s Common Stock has outperformed
such index by at least 15% based on the volume weighted average closing price
per share of the Company’s Common Stock as reported on NASDAQ for the
consecutive 10 day trading period beginning on the date hereof and the
consecutive 10 day trading period ending on the later of March 31, 2009 and the
day that is three days before the 2009 Nomination Deadline.
7. For
so long as the ▇.▇. ▇▇▇▇ Entities beneficially own more that 5% of the Company’s
outstanding common stock, but in no event later than December 31, 2010, the ▇.
▇. ▇▇▇▇ Entities agree that, notwithstanding any contrary provisions in the
Company’s By-laws, if the ▇.▇. ▇▇▇▇ Entities seek to undertake a consent
solicitation or call a special meeting for purposes of soliciting proxies in
connection with removing one or more directors from the Company’s Board of
Directors without cause or proposing directors for election to the Company’s
Board of Directors, then the ▇.▇. ▇▇▇▇ Entities will provide the Company with
notice of such intent not less than 45 days before any special meeting at which
such matter is to be considered and no less than 45 days before written consents
are solicited in connection with any such proposal. To be valid, any
such notice proposing directors for election to the Company’s Board of Directors
shall include all information required to be included in an advance notice given
pursuant to Article II, Section 10 of the Company’s By-laws. The
Company agrees that, during the period commencing on the date notice is received
by the Company pursuant to this Section and ending on the date the consent
solicitation is completed or the special meeting is held, whichever the case may
be, it shall not amend its Amended and Restated Certificate of Incorporation or
its By-laws, if such amendment would have the effect of enjoining, prohibiting
or restricting in any material way the ▇.▇. ▇▇▇▇ Entities from proceeding with
its solicitation.
8. Promptly
following the execution of this letter agreement, the Company and the ▇. ▇. ▇▇▇▇
Entities shall jointly issue a mutually agreeable press release announcing
the terms of this agreement, substantially in the form of Exhibit A
hereto. Except for such press release and the Company’s earnings
press release, the relevant sections of which have been previously provided to
the ▇.▇. ▇▇▇▇ Entities, neither the Company nor the ▇. ▇. ▇▇▇▇ Entities shall
issue any press release or otherwise make any other public announcement with
respect to this letter agreement or the matters contemplated hereby, except as
required by law.
9. The
Company and the ▇. ▇. ▇▇▇▇ Entities each acknowledge and agree that money
damages would not be a sufficient remedy for any breach (or threatened breach)
of this letter agreement by it and that, in the event of any breach or
threatened breach hereof, the non-breaching party shall be entitled to seek
injunctive and other equitable relief, without proof of actual damages, that the
breaching party shall not plead in defense thereto that there would be an
adequate remedy at law, and that the breaching party agrees to waive any
applicable right or requirement that a bond be posted by the non-breaching
party. Such remedies shall not be the exclusive remedies for a breach
of this letter agreement, but will be in addition to all other remedies
available at law or in equity.
10. This
letter agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without regard to the principles of the conflicts
of laws thereof. The parties hereby irrevocably submit to the
exclusive jurisdiction of the courts of the State of Delaware and irrevocably
and unconditionally waive any objection to the laying of venue of any action,
suit, or proceeding arising out of this letter agreement in the courts of the
State of Delaware or the United States of America located in Delaware, and
further irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such action, suit, or proceeding brought in any such
court has been brought in an inconvenient forum. This letter agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof. This letter agreement shall inure to the benefit of
the parties hereto and their respective successors and assigns.
11. This
letter agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which shall constitute the same
agreement. One or more counterparts of this letter agreement may be
delivered by telecopier or PDF electronic transmission, with the intention
that they shall have the same effect as an original counterpart
hereof.
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Very
truly yours,
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ENDO
PHARMACEUTICALS HOLDINGS INC.
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By:
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/s/
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name:
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▇▇▇▇▇
▇. ▇▇▇▇▇▇
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Title:
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Chairman
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Confirmed
and Agreed to:
D. E.
SHAW VALENCE PORTFOLIOS, L.L.C. (on behalf of itself and its affiliates that are
members of the Section 13(d) Group with respect to the Common Stock
of the Company)
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By:
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/s/
▇▇▇▇▇ ▇▇▇▇▇▇
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Name:
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▇▇▇▇▇
▇▇▇▇▇▇
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Title:
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Authorized
Signatory
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Dated: April
29, 2008