Exhibit 10.1
MEMORANDUM OF
UNDERSTANDING
This Memorandum of Understanding
(“Memorandum”) is entered into as of February 4,
2009, by the undersigned parties to the above action in the Court
of Chancery of the State of Delaware (the “Court”), and
the other actions referenced herein.
WHEREAS, on January 5, 2009, an
Agreement and Plan of Merger (the “Merger Agreement”)
was executed among Indevus Pharmaceuticals, Inc.
(“Indevus”), Endo Pharmaceuticals Holdings Inc.
(“Endo”), and BTB Purchaser Inc.
(“Purchaser”), a subsidiary of Endo, whereby Endo
commenced a tender offer (the “Tender Offer”) to
acquire all outstanding shares of Indevus common stock for
approximately $370 million, or $4.50 per share, in cash and up to
an additional approximately $267 million, or $3.00 per share, in
Contingent Cash Consideration Payments (as that term is defined in
the Merger Agreement) upon the achievement of certain milestones
relating to certain products currently in development by Indevus
(the “Proposed Transaction”);
WHEREAS, on January 7, 2009,
Endo and Purchaser commenced the Tender Offer by filing their
Schedule TO concerning the Tender Offer, and Indevus filed its
Schedule 14D-9 with respect to the Tender Offer (together, the
Schedule TO and the Schedule 14D-9 are hereinafter referred to as
the “Tender Offer Documents”);
WHEREAS, the Tender Offer is
currently set to expire at 5:00 p.m., New York City time, on
Friday, February 20, 2009;
WHEREAS, on January 9, 2009,
Arthur Gober, CGM IRA Beneficiary Custodian, Beneficiary of Jerome
Gober (“Gober”), filed a putative class action
complaint in the Delaware Court of Chancery against Indevus, its
board of directors (the “Directors” and collectively
with
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Indevus, the “Indevus Defendants”),
Endo, and Purchaser (the “Gober Action”), alleging,
among other things, that (i) as a result of an excessive
termination fee, the Proposed Transaction is unfair and coercive to
Indevus’s shareholders, and (ii) that the Directors
failed to disclose certain material information regarding the
Proposed Transaction necessary to enable Indevus’s public
shareholders to make a fully informed decision as to whether to
tender their shares, and that Endo and Purchaser aided and abetted
the Directors in breaching their fiduciary duties;
WHEREAS, on January 12, 2009,
Malena C. Schroeder, (“Schroeder”) filed a putative
class action complaint in Massachusetts Superior Court, County of
Suffolk against the Indevus Defendants, Endo, and Purchaser (the
“Schroeder Action”) raising similar claims;
WHEREAS, on January 13, 2009,
Martin Wexler (“Wexler”) filed a putative class action
complaint in Massachusetts Superior Court, County of Suffolk
against the Indevus Defendants and Endo (the “Wexler
Action”) raising similar claims;
WHEREAS, on January 13, 2009, a
motion to expedite proceedings and a motion for a preliminary
injunction were filed in the Gober Action;
WHEREAS, on January 13, 2009,
plaintiff in the Wexler Action filed an Emergency Motion for
Expedited Proceedings with respect to the Tender Offer;
WHEREAS, by letter dated
January 19, 2009, counsel for plaintiffs in the Schroeder and
Wexler Actions made a settlement demand on Defendants based on
certain of the complaints that had been filed, requesting, among
other things, a reduction in the Termination Fee and certain
additional disclosures;
WHEREAS, on January 20, 2009,
H. Steven Mishket (“Mishket” and collectively with
Gober, Schroeder, and Wexler, the “Plaintiffs”) filed a
putative class action in the Delaware Court of Chancery raising
similar claims against the Indevus Defendants, Endo, and Purchaser
(the “Mishket Action” and, collectively with the Gober
Action, Schroeder Action, and Wexler Action, the “Putative
Class Actions”);
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WHEREAS, counsel for Plaintiffs
represent that they respectively engaged in an investigation of the
claims asserted in the Actions, including, among other things, a
review of news articles, analyst reports, SEC filings, the Tender
Offer Documents, and other publicly available documents. Counsel
for Gober and counsel for Plaintiffs in the Schroeder and Wexler
Actions retained and consulted with their respective financial
advisers with respect to an evaluation of the
Transaction;
WHEREAS, counsel for Plaintiffs have
determined that, on the basis of information available to them,
including publicly available information and consultations with
independent financial advisors retained by counsel for Plaintiffs
as well as certain information learned from Defendants, and subject
to the additional discovery described below, the Settlement
described below is fair, reasonable, adequate, and in the best
interests of the Plaintiffs and the Class (as defined
herein);
WHEREAS, the Indevus Defendants have
denied, and continue to deny, that they have committed or aided and
abetted in the commission of any violation of law of any kind or
engaged in any of the wrongful acts alleged in the Putative Class
Actions, and expressly maintain that they have diligently and
scrupulously complied with their fiduciary and other legal duties,
and are entering into this Memorandum solely to eliminate the
burden and expense of further litigation;
WHEREAS, Endo and Purchaser have
denied, and continue to deny, that either of them has committed or
aided and abetted in the commission of any violation of law of any
kind or engaged in any of the wrongful acts alleged in the Putative
Class Actions, and each expressly maintains that it has diligently
and scrupulously complied with its legal duties, and is entering
into this Memorandum solely to eliminate the burden and expense of
further litigation; and
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WHEREAS, the parties wish to settle
and resolve the claims asserted by Plaintiffs and all claims
relating to or arising out of the Proposed Transaction, and the
parties have, following arm’s-length negotiations, reached an
agreement in principle as set forth in this Memorandum providing
for the settlement of the Putative Class Actions on the terms and
subject to the conditions set forth below (the
“Settlement”), and the parties believe the Settlement
is in the best interests of the parties and Indevus
shareholders.
NOW, THEREFORE, IT IS HEREBY AGREED
IN PRINCIPLE AS FOLLOWS:
1. As a result of arm’s-length
discussions between and among the parties, and in consideration of
the full settlement and release of all Settled Claims (as defined
below), Indevus agrees that the Schedule 14D-9 will include the
additional supplemental disclosures attached hereto as Exhibit A to
this Memorandum, which will be promptly disseminated to Indevus
shareholders following execution of this Memorandum. Defendants
agree that the Plaintiffs’ efforts were a substantial factor
leading to the inclusion of such disclosures in the Tender Offer
Documents.
2. As a result of arm’s-length
discussions between and among the parties, and in consideration of
the full settlement and release of all Settled Claims (as defined
below), the parties to the Proposed Transaction agree to reduce the
Company Termination Fee, as that term is defined in the Merger
Agreement, by 10% (from $20,000,000 to $18,000,000). Defendants
agree that the Plaintiffs’ efforts were the sole factor
leading to the 10% reduction of the Company Termination Fee and
will amend the Merger Agreement and announce such reduction in an
SEC filing within 24 hours of the execution of this
Memorandum.
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3. As promptly as possible after the
execution of this Memorandum by all of the parties thereto, counsel
for the parties shall inform the Court of the execution of this
Memorandum.
4. Subject to the execution of a
reasonable and satisfactory confidentiality order, Defendants will
provide (and request the cooperation of their financial advisor(s)
to provide) to Plaintiffs’ counsel such reasonable discovery,
including document discovery and depositions, as is necessary for
Plaintiffs to confirm the fairness and reasonableness of the
Settlement, and the parties will attempt in good faith to complete
such discovery as promptly as possible.
5. Except with respect to payment of
the expenses associated with providing notice to the Class (as
defined in paragraph 7(a) below), which costs shall be borne by
Indevus or its successor entity as provided in paragraph 14 below,
no fees or expenses shall be paid to Plaintiffs’ counsel
unless all of the following occur: (a) tender of a majority of
Indevus’ shares to Endo on or before February 20, 2009,
or a later date if the Tender Offer is extended;
(b) consummation of the Merger; (c) conditional
certification, for settlement purposes only, of a class of holders
of Indevus stock as provided under paragraph 7(a) below; and
(d) approval by the Court of the complete release by
Plaintiffs and the Class (as defined in paragraph 7(a) below) of
all Settled Claims (as defined in paragraph 7(b) below) against all
Released Persons (as defined in paragraph 7(b) below).
6. Following completion of the
confirmatory discovery contemplated above, the parties will attempt
in good faith to agree upon an appropriate stipulation of
settlement (the “Stipulation”) and such other
documentation to be filed in the Gober Action as may be required in
order to obtain final approval by the Court in the Gober Action of
the Settlement. The Stipulation shall be executed and submitted to
the Court in the Gober Action for approval at the earliest
practicable time. The Stipulation shall expressly provide that,
among other things:
(a) the Defendants in the Putative
Class Actions, including Indevus, the Directors, Endo, and
Purchaser, have denied, and continue to deny, that they have
committed or aided and abetted in the commission of any violation
of law of any kind or engaged in any of the wrongful acts alleged
in the Putative Class Actions, and expressly maintain that they
complied with their fiduciary and other legal duties;
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(b) the Defendants are entering into
the Stipulation solely because the Settlement would eliminate the
burden and expense of further litigation;
(c) subject to confirmatory
discovery, Plaintiffs and their counsel believe that the Settlement
is fair, reasonable, adequate, and in the best interests of the
Plaintiffs and the Class (as defined in paragraph 7(a)
below);
(d) each of the Defendants shall
have the right to withdraw from the Settlement in the event that
any injunction precluding the Proposed Transaction is entered, or
any claims related to the subject matter of the Putative Class
Actions are commenced or prosecuted against any of the Released
Persons (as defined in paragraph 7(b) below) in any court prior to
final approval of the Settlement and (following a motion by the
Defendants) such claims are not dismissed with prejudice or stayed
in contemplation of dismissal, and that in the event such claims
are commenced, the Plaintiffs and the Defendants agree to cooperate
and use their reasonable best efforts to secure the dismissal (or a
stay in contemplation of dismissal following final approval of the
Settlement) thereof; and
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(e) the parties to the Stipulation
shall include in any proposed order of the Court preliminarily
approving the Settlement a term providing that, pending the
Court’s determination as to final approval of the Settlement,
the Plaintiffs and all members of the Class (as defined in
paragraph 7(a) below), or any of them, are barred and enjoined from
commencing, prosecuting, instigating, or in any way participating
in the commencement or prosecution of any action asserting any
Settled Claims (as defined in paragraph 7(b) below) against any of
the Released Persons (as defined in paragraph 7(b)
below).
7. The Stipulation will further
provide for, among other things:
(a) conditional certification, for
settlement purposes only, of a non-opt out class pursuant to Court
of Chancery Rule 23(b)(1) and (b)(2) (defined as all persons or
entities who held shares of Indevus common stock, either of record
or beneficially, including the legal representatives, predecessors,
successo
