Exhibit 10.4

 

 

$750,000,000

 

CEPHALON, INC.

$375,000,000 Zero Coupon Convertible Subordinated Notes due June 15, 2033,
First Putable June 15, 2008

$375,000,000 Zero Coupon Convertible Subordinated Notes due June 15, 2033,
First Putable June 15, 2010

 

 

REGISTRATION RIGHTS AGREEMENT

 

 

June 11, 2003

 

Credit Suisse First Boston LLC,

 As Representative of the Several Purchasers,

  Eleven Madison Avenue

    New York, New York 10010-3629

 

Ladies and Gentlemen:

 

Cephalon, Inc., a Delaware corporation (the “Company”), proposes to issue and
sell to Credit Suisse First Boston LLC (the “Lead Purchaser”), CIBC World
Markets Corp., J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated,
SG Cowen Securities Corporation, ABN AMRO Rothschild LLC, Citigroup Global
Markets Inc. and Lehman Brothers Inc.  (collectively, the “Initial Purchasers”),
upon the terms set forth in a purchase agreement dated as of June 6, 2003 (the
“Purchase Agreement”), $300,000,000 aggregate principal amount (plus an
additional $75,000,000 principal amount pursuant to an option granted
thereunder) of its Zero Coupon Convertible Subordinated Notes due June 15, 2033,
First Putable June 15, 2008, and $300,000,000 aggregate principal amount (plus
an additional $75,000,000 principal amount pursuant to an option granted
thereunder) of its Zero Coupon Convertible Subordinated Notes due June 15, 2033,
First Putable June 15, 2010 (together, the “Initial Securities”).  The Initial
Securities will be convertible into shares of common stock, par value $0.01 per
share, of the Company (the “Common Stock”) at the conversion price set forth in
the Offering Circular dated June 6, 2003 (the “Offering Circular”).  The Initial
Securities will be issued pursuant to an Indenture, dated as of June 11, 2003
(the “Indenture”), among the Company and U.S. Bank, National Association, as
trustee (the “Trustee”).  As a condition to the Initial Purchasers’ obligation
to purchase the Initial Securities under the Purchase Agreement, the Company
agrees with the Initial Purchasers, for the benefit of (i) the Initial
Purchasers and (ii) the holders of the Initial Securities and the Common Stock
issuable upon conversion of the Initial Securities (collectively, the
“Securities”) from time to time until such time as such Securities have been
sold pursuant to a Shelf Registration Statement (as defined below) (each of the
foregoing a “Holder” and collectively the “Holders”), as follows:

 

1.  Shelf Registration.  (a)  The Company shall, at its cost, prepare and, as
promptly as practicable (but in no event more than 90 days after so required or
requested pursuant to this Section 1) file with the Securities and Exchange
Commission (the “Commission”) and thereafter use all commercially reasonable
efforts to cause to be declared effective as soon as practicable, but not later
than 180 days after the latest date of original issuance of the Initial
Securities, a registration statement on Form S-3 (the “Shelf Registration
Statement”) relating to the offer and sale of the Transfer Restricted Securities
(as defined in Section 5 hereof) by the Holders thereof from time to time in
accordance with the methods of distribution set forth in the Shelf Registration
Statement and Rule 415 under the Securities Act of 1933, as amended (the
“Securities Act”) (hereinafter, the “Shelf Registration”); provided, however,
that no Holder (other than an Initial Purchaser) shall be entitled to have the
Securities held by it covered by

 

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such Shelf Registration Statement unless such Holder agrees in writing to be
bound by all the provisions of this Agreement applicable to such Holder.

 

(b)  The Company shall use all commercially reasonable efforts to keep the Shelf
Registration Statement continuously effective in order to permit the prospectus
included therein (the “Prospectus”) to be lawfully delivered by the Holders of
the relevant Securities, for a period of two years (or for such longer period if
extended pursuant to Section 2(h) below) from the date of its effectiveness or
such shorter period that will terminate when all the Securities covered by the
Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no
longer restricted securities (as defined in Rule 144(k) under the Securities
Act, or any successor rule thereof), assuming for this purpose that the Holders
thereof are not affiliates of the Company (in any such case, such period being
called the “Shelf Registration Period”).  The Company shall be deemed not to
have used all commercially reasonable efforts to keep the Shelf Registration
Statement effective during the requisite period if it voluntarily takes any
action that would result in Holders of Securities covered thereby not being able
to offer and sell such Securities during that period, unless such action is (i)
required by applicable law or (ii) taken by the Company in good faith and
contemplated by Section 2(b)(v) below, and the Company thereafter complies with
the requirements of Section 2(h).

 

(c)  Notwithstanding any other provisions of this Agreement to the contrary, the
Company shall cause the Shelf Registration Statement and the Prospectus and any
amendment or supplement thereto, as of the effective date of the Shelf
Registration Statement, amendment or supplement, (i) to comply in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations of the Commission and (ii) not to contain any untrue statement
of a material fact or omit 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.

 

2.  Registration Procedures.  In connection with the Shelf Registration
contemplated by Section 1 hereof, the following provisions shall apply:

 

(a)  The Company shall (i) furnish to the Lead Purchaser, (A) prior to the
filing thereof with the Commission, a copy of the Shelf Registration Statement
and each amendment thereof, (B) within one day following the filing thereof with
the Commission, each supplement, if any, to the prospectus included in the Shelf
Registration Statement, and (C) in the event that an Initial Purchaser (with
respect to any portion of an unsold allotment from the original offering) is
participating in the Shelf Registration Statement, shall use its best efforts to
reflect in the Shelf Registration Statement and each amendment thereof, when so
filed with the Commission, such comments as such Initial Purchaser reasonably
may propose; and (ii) include the names of the Holders who propose to sell
Securities pursuant to the Shelf Registration Statement as selling
securityholders and who have completed and returned to the Company the
questionnaire included as Annex A to the Offering Circular (a “Completed
Questionnaire”).

 

(b)  The Company shall give written notice to the Initial Purchasers and, in the
case of clauses (ii)-(vi) hereof, the Holders of the Securities from whom the
Company has received a Completed Questionnaire (which notice pursuant to clauses
(iii)-(vi) hereof shall be accompanied by an instruction to suspend the use of
the Prospectus until the requisite changes have been made):

 

(i) when the Shelf Registration Statement or any amendment thereto has been
filed with the Commission;

 

(ii)  and when the Shelf Registration Statement or any post-effective amendment
thereto has become effective;

 

(iii) of any request by the Commission for amendments or supplements to the
Shelf Registration Statement or the prospectus included therein or for
additional information;

 

(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Shelf Registration Statement or the initiation of any
proceedings for that purpose;

 

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(v) of the receipt by the Company or its legal counsel of any notification with
respect to the suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and

 

(vi) of the happening of any event that requires the Company to make changes in
the Shelf Registration Statement or the Prospectus in order that the Shelf
Registration Statement or the Prospectus  does not contain an untrue statement
of a material fact nor omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading.

 

(c)  The Company shall make every reasonable effort to obtain the withdrawal at
the earliest possible time, of any order suspending the effectiveness of the
Shelf Registration Statement.

 

(d)  The Company shall, upon request, furnish to each Holder of Securities
included as a selling securityholder in the Shelf Registration, without charge,
at least one copy of the Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if the
Holder so requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).

 

(e)  The Company shall, during the Shelf Registration Period, deliver to each
Holder of Securities included as a selling securityholder in the Shelf
Registration, without charge, as many copies of the Prospectus (including each
preliminary prospectus) included in the Shelf Registration Statement and any
amendment or supplement thereto as such person may reasonably request.  The
Company consents, subject to the provisions of this Agreement, to the use of the
Prospectus or any amendment or supplement thereto by each of the selling Holders
of the Securities in connection with the offering and sale of the Securities
covered by the Prospectus, or any amendment or supplement thereto, included in
the Shelf Registration Statement.

 

(f)  Prior to any public offering of the Securities pursuant to the Shelf
Registration Statement, the Company shall register or qualify or cooperate with
the Holders of the Securities included therein and their respective counsel in
connection with the registration or qualification of the Securities for offer
and sale under the securities or “blue sky” laws of such states of the United
States as any Holder of the Securities reasonably requests in writing and do any
and all other acts or things necessary or advisable to enable the offer and sale
in such jurisdictions of the Securities covered by such Registration Statement;
provided, however, that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it is not then so qualified
or (ii) take any action which would subject it to general service of process or
to taxation in any jurisdiction where it is not then so subject.

 

(g)  The Company shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing the
Securities to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such names as
the Holders may request, and with respect to the Initial Securities in
accordance with the Indenture, a reasonable period of time prior to sales of the
Securities pursuant to the Shelf Registration Statement.

 

(h)  Upon the occurrence of any event contemplated by paragraphs (iii) through
(vi) of Section 2(b) above during the period for which the Company is required
to maintain an effective Shelf Registration Statement, the Company shall
promptly prepare and file a post-effective amendment to the Shelf Registration
Statement or an amendment or supplement to the Prospectus and any other required
document so that, as thereafter delivered to Holders or purchasers of the
Securities, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.  If the Company notifies the Initial
Purchasers and the Holders in accordance with paragraphs (iii) through (vi) of
Section 2(b) above to suspend the use of the Prospectus until the requisite
changes to the Prospectus have been made, then the Initial Purchasers and the
Holders shall suspend use of such prospectus, and the period of effectiveness of
the Shelf Registration Statement provided for in Section 1(b) above shall be
extended by the number of days from and including the date of the giving of such
notice to and including the date when the Initial Purchasers and the Holders
shall have received such amended or supplemented prospectus pursuant to this
Section 2(h).

 

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(i)  Not later than the effective date of the Shelf Registration Statement, the
Company will obtain CUSIP numbers for the Initial Securities and the Common
Stock registered under the Shelf Registration Statement (and provide such CUSIP
numbers to the Depository Trust Company), and provide the Trustee with printed
certificates for the Initial Securities, in a form eligible for deposit with The
Depository Trust Company.

 

(j)  The Company will comply with all rules and regulations of the Commission to
the extent and so long as they are applicable to the Shelf Registration and will
make generally available to its security holders (or otherwise provide in
accordance with Section 11(a) of the Securities Act), an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act, no later than
45 days after the end of a 12-month period (or 90 days, if such period is a
fiscal year) beginning with the first month of the Company’s first fiscal
quarter commencing after the effective date of the Shelf Registration Statement,
which statement shall cover such 12-month period.

 

(k)  The Company shall cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the “Trust Indenture Act”), in a timely
manner and containing such changes, if any, as shall be necessary for such
qualification.  In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Company shall appoint a
new trustee thereunder pursuant to the applicable provisions of the Indenture.

 

(l)  The Company may require each Holder of Securities to be sold pursuant to
the Shelf Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of the Securities as the Company may
from time to time reasonably require for inclusion in the Shelf Registration
Statement, and the Company may exclude from such registration the Securities of
any Holder that unreasonably fails to furnish such information within a
reasonable time after receiving such request.

 

(m)  The Company shall enter into such customary agreements (including, if
requested, an underwriting agreement in customary form) and take all such other
actions, if any, as any Holder shall reasonably request in order to facilitate
the disposition of the Securities pursuant to the Shelf Registration; provided,
however, that the Company is required to facilitate no more than two
underwritten offerings.

 

(n)  The Company shall (i) make reasonably available for inspection by the
Holders, any underwriter participating in any disposition pursuant to the Shelf
Registration Statement and any attorney, accountant or other agent retained by
the Holders or any such underwriter, all relevant financial and other records,
pertinent corporate documents and properties of the Company and (ii) cause the
Company’s officers, directors, employees, accountants and auditors to supply all
relevant information reasonably requested by the Holders or any such
underwriter, attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be reasonably necessary to enable
such persons, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act; provided, however, that the foregoing
inspection and information gathering shall be coordinated on behalf of the
Initial Purchasers by you and on behalf of the other parties, by one counsel
designated by and on behalf of such other parties as described in Section 3
hereof.

 

(o)  The Company, if requested by any Holder of Securities covered by the Shelf
Registration Statement, shall (i) use all commercially reasonable efforts to
cause (A) its counsel to deliver an opinion and updates thereof relating to the
Securities (in form, scope, and substance which is reasonably satisfactory to
the managing underwriters, if any) addressed to such Holders and the managing
underwriters, if any, thereof, and dated, in the case of the initial opinion,
the effective date of such Shelf Registration Statement, and (B) its independent
public accountants to provide to the selling Holders of the applicable
Securities and any underwriter therefor a comfort letter in customary form and
covering matters of the type customarily covered in comfort letters in
connection with primary underwritten offerings, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by Statement
of Auditing Standards No. 72,  and (ii) cause its officers to execute and
deliver all customary documents and certificates and updates thereof requested
by any underwriters of the Securities.

 

(p)  In the event that any broker-dealer registered under the Exchange Act shall
underwrite any Securities or participate as a member of an underwriting
syndicate or selling group or “assist in the distribution” (within the meaning
of the Conduct Rules (the “Rules”) of the National Association of Securities
Dealers, Inc. (“NASD”)) thereof, whether as a Holder of such Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company will assist such broker-dealer in complying
with the requirements of

 

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such Rules, including, without limitation, by (i) if such Rules, including
Rule 2720, shall so require, engaging a “qualified independent underwriter” (as
defined in Rule 2720) to participate in the preparation of the Shelf
Registration Statement relating to such Securities, to exercise usual standards
of due diligence in respect thereto and, if any portion of the offering
contemplated by such Registration Statement is an underwritten offering or is
made through a placement or sales agent, to recommend the yield of such
Securities, (ii) indemnifying any such qualified independent underwriter to the
extent of the indemnification of underwriters provided in Section 5 hereof and
(iii) providing such information to such broker-dealer as may be required in
order for such broker-dealer to comply with the requirements of the Rules.

 

(q)  The Company shall use commercially reasonable efforts to take all other
steps necessary to effect the registration of the Securities covered by a
Registration Statement contemplated hereby.

 

(r)  The Company may suspend use of the Prospectus for a period not to exceed an
aggregate of 45 days in any 90-day period or an aggregate of 90 days in any
twelve-month period in the event of:

 

(i)            the issuance by the SEC of a stop order suspending the
effectiveness of the Shelf Registration Statement or the initiation of
proceedings with respect to the Shelf Registration Statement under Section 8(d)
or 8(e) of the Securities Act,

 

(ii)           the occurrence of any event or the existence of any fact as a
result of which any Registration Statement shall contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, or any Prospectus
shall contain any untrue statement of a material fact or omit to state any
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, or

 

(iii)          the occurrence or existence of any pending corporate development
that, in the discretion of the Company, makes it appropriate to suspend the
availability of the Shelf Registration Statement and the related Prospectus.

 

In the event of a suspension pursuant to clause (ii) above, subject to the next
sentence, the Company shall as promptly as practicable prepare and file a
post-effective amendment to such Registration Statement or a supplement to the
related Prospectus or any document incorporated therein by reference or file any
other required document that would be incorporated by reference into such
Registration Statement and Prospectus so that such Registration Statement does
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and such Prospectus does not contain any untrue
statement of a material fact or omit to state any 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, as thereafter
delivered to the purchasers of the Securities being sold thereunder, and, in the
case of a post-effective amendment to a Registration Statement, subject to the
next sentence, use all commercially reasonable efforts to cause it to be
declared effective as promptly as is reasonably practicable, and give notice to
the Holders that the availability of the Shelf Registration Statement is
suspended and, upon receipt of any such notice, each Holder agrees not to sell
any Securities pursuant to the Registration Statement until such Holder’s
receipt of copies of the supplemented or amended Prospectus provided for above,
or until it is advised in writing by the Company that the Prospectus may be
used, and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such Prospectus.

 

The Company will use all commercially reasonable efforts to ensure that the use
of the Prospectus may be resumed (x) in the case of clause (i) above, as
promptly as is practicable, (y) in the case of clause (ii) above, as soon as, in
the sole judgment of the Company, public disclosure of such material event would
not be prejudicial to or contrary to the interests of the Company or, if
necessary to avoid unreasonable burden or expense, as soon as reasonably
practicable thereafter and (z) in the case of clause (iii) above, as soon as, in
the discretion of the Company, such suspension is no longer appropriate.

 

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3.  Registration Expenses.  (a) All expenses incident to the Company’s
performance of and compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement is ever filed or becomes
effective, including without limitation;

 

(i)  all registration and filing fees and expenses;

 

(ii) all fees and expenses of compliance with federal securities and state “blue
sky” or securities laws;

 

(iii) all expenses of printing (including printing certificates for the
Securities to be issued and printing of Prospectuses), messenger and delivery
services and telephone;

 

(iv) all fees and disbursements of counsel for the Company;

 

(v) all application and filing fees in connection with listing the Securities on
a national securities exchange or automated quotation system pursuant to the
requirements hereof; and

 

(vi) all fees and disbursements of independent certified public accountants of
the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).

 

The Company will bear its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expenses of any annual audit and the fees and expenses
of any person, including special experts, retained by the Company.

 

(b)  In connection with the Shelf Registration Statement required by this
Agreement, the Company will reimburse the Initial Purchasers and the Holders of
Securities covered by the Shelf Registration Statement, for the reasonable fees
and disbursements of not more than one counsel, designated by the Holders of a
majority in principal amount of the Securities covered by the Shelf Registration
Statement (provided that Holders of Common Stock issued upon the conversion of
the Initial Securities shall be deemed to be Holders of the aggregate principal
amount of Initial Securities from which such Common Stock was converted) to act
as counsel for the Holders in connection therewith.

 

4.  Indemnification.  (a)  The Company agrees to indemnify and hold harmless
each Holder and each person, if any, who controls such Holder within the meaning
of the Securities Act or the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) (each Holder, and such controlling persons are referred to
collectively as the “Indemnified Parties”) from and against any losses, claims,
damages or liabilities, joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages, liabilities or
actions relating to purchases and sales of the Securities) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Shelf Registration Statement or Prospectus
including any document incorporated by reference therein, or in any amendment or
supplement thereto or in any preliminary prospectus relating to the Shelf
Registration, 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, and shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action in respect thereof; provided, however, that
(i) the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Shelf Registration Statement or Prospectus or in any amendment or supplement
thereto or in any preliminary prospectus relating to the Shelf Registration in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein (which shall include, without limitation, the information
provided to the Company by such Indemnified Party in the Completed
Questionnaire) and (ii) with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus relating
to the Shelf Registration Statement, the indemnity agreement contained in this
subsection (a) shall not inure to the

 

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benefit of any Holder from whom the person asserting any such losses, claims,
damages or liabilities purchased the Securities concerned, to the extent that a
prospectus relating to such Securities was required to be delivered by such
Holder under the Securities Act in connection with such purchase and any such
loss, claim, damage or liability of such Holder results from the fact that there
was not sent or given to such person, at or prior to the written confirmation of
the sale of such Securities to such person, a copy of the final prospectus if
the Company had previously furnished copies thereof to such Holder; provided
further, however, that this indemnity agreement will be in addition to any
liability which the Company may otherwise have to such Indemnified Party.  The
Company also shall indemnify underwriters, their officers and directors and each
person who controls such underwriters within the meaning of the Securities Act
or the Exchange Act to the same extent as provided above with respect to the
indemnification of the Holders of the Securities if requested by such Holders.

 

(b)  Each Holder, severally and not jointly, will indemnify and hold harmless
the Company, its officers and directors and each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act from
and against any losses, claims, damages or liabilities or any actions in respect
thereof, to which the Company or any such controlling person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Shelf Registration Statement or Prospectus or in any amendment or supplement
thereto or in any preliminary prospectus relating to the Shelf Registration, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary to make the statements therein not misleading, but in
each case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Company by or
on behalf of such Holder specifically for inclusion therein (which shall
include, without limitation, the information provided to the Company by such
Indemnified Party in the Completed Questionnaire); and, subject to the
limitation set forth immediately preceding this clause, shall reimburse, as
incurred, the Company for any legal or other expenses reasonably incurred by the
Company or any such controlling person in connection with investigating or
defending any loss, claim, damage, liability or action in respect thereof.  This
indemnity agreement will be in addition to any liability which such Holder may
otherwise have to the Company or any of its controlling persons.

 

(c)  Promptly after receipt by an indemnified party under this Section 4 of
notice of the commencement of any action or proceeding (including a governmental
investigation), such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 4, notify the
indemnifying party of the commencement thereof; but the failure to notify the
indemnifying party shall not relieve it from any liability that it may have
under subsection (a) or (b) above except to the extent that it has been
materially prejudiced (through the forfeiture of substantive rights or defenses)
by such failure; and provided further that the failure to notify the
indemnifying party shall not relieve it from any liability that it may have to
an indemnified party otherwise than under subsection (a) or (b) above.  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 therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 4 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof.  No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement (i) includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action, and (ii) does not include a statement as to or an admission of
fault, culpability or a failure to act by or on behalf of any indemnified party.

 

(d)  If the indemnification provided for in this Section 4 is unavailable or
insufficient to hold harmless an indemnified party under subsections (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above in such proportion as is appropriate to reflect the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on the
other in connection with

 

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the statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations.  The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Holder or such other indemnified party, as the case may be, on the other,
and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.  The amount paid
by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d).  Notwithstanding any other
provision of this Section 4(d), the Holders shall not be required to contribute
any amount in excess of the amount by which the net proceeds received by such
Holders from the sale of the Securities pursuant to the Shelf Registration
Statement exceeds the amount of damages which such Holders have otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.  No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.  For purposes of this paragraph (d), each person, if any, who
controls such indemnified party within the meaning of the Securities Act or the
Exchange Act shall have the same rights to contribution as such indemnified
party and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.

 

(e)  The agreements contained in this Section 4 shall survive the sale of the
Securities pursuant to the Shelf Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.

 

5.  Interest Amounts Under Certain Circumstances.  (a) Interest  (the “Interest
Amounts”) with respect to the Securities shall be assessed as follows if any of
the following events occur (each such event in clauses (i) through (iii) below
being herein called a “Registration Default”):

 

(i)  the Shelf Registration Statement has not been filed with the Commission by
the 90th day after the first date of original issuance of the Initial
Securities;

 

(ii)  the Shelf Registration Statement has not been declared effective by the
Commission by the 180th day after the first date of original issue of the
Initial Securities; or

 

(iii)  after the Shelf Registration Statement has been declared effective, such
Shelf Registration Statement ceases to be effective, or the Prospectus ceases to
be usable in connection with resales of the Initial Securities and the Common
Stock issuable upon conversion of the Initial Securities, in accordance with 
and during the periods specified in this Agreement and (A) the Company does not
cure the Shelf Registration Statement within five business days by
post-effective amendment or report filed pursuant to the Exchange Act or (B) if
applicable, the Company does not terminate the suspension period described in
Section 2(s) above by the 45th or 90th day, as the case may be.

 

Each of the foregoing will constitute a Registration Default whatever the reason
for any such event and whether it is voluntary or involuntary or is beyond the
control of the Company or pursuant to operation of law or as a result of any
action or inaction by the Commission.

 

Interest Amounts shall accrue on the Initial Securities and the underlying
Common Stock from and including the date on which any such Registration Default
shall occur to but excluding the date on which all such Registration Defaults
have been cured, at a rate of 0.50% per annum, or an equivalent amount for any
Common Stock issued upon conversion of the Initial Securities (the “Interest
Amount Rate”).

 

(b)  A Registration Default referred to in Section 5(a)(iii) hereof shall be
deemed not to have occurred and be continuing in relation to the Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to the Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment

 

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is not yet effective and needs to be declared effective to permit Holders to use
the related prospectus or (y) other material events, with respect to the Company
that would need to be described in such Shelf Registration Statement or the
related prospectus and (ii) in the case of clause (y), the Company is proceeding
promptly and in good faith to amend or supplement the Shelf Registration
Statement and related prospectus to describe such events as required by
paragraph 2(h) hereof; provided, however, that in any case if such Registration
Default occurs for a continuous period in excess of 30 days, Interest Amounts
shall be payable in accordance with the above paragraph from the day such
Registration Default occurs until such Registration Default is cured.

 

(c)  Any Interest Amounts due pursuant to Section 5(a) will be payable in cash
on the Interest Amount payment dates, which shall be June 15 and December 15 of
each  year, to the holders of record of the Initial Securities or the shares of
Common Stock issued upon conversion of the Initial Securities, as the case may
be, on the preceding June 1 or December 1, as the case may be.  The amount of
Interest Amounts will be determined by multiplying the applicable Interest
Amount Rate by the principal amount of the Initial Securities, or an equivalent
amount for any Common Stock issued upon conversion of the Initial Securities,
further multiplied by a fraction, the numerator of which is the number of days
such Interest Amount Rate was applicable during such period (determined on the
basis of a 360-day year comprised of twelve 30-day months), and the denominator
of which is 360.

 

(d)  “Transfer Restricted Securities” means each Security until (i) the date on
which such Security has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (ii) the date
on which such Security is distributed to the public pursuant to Rule 144 under
the Securities Act or is saleable pursuant to Rule 144(k) under the Securities
Act.

 

6.  Rules 144 and 144A.  The Company shall use its best efforts to file the
reports required to be filed by it under the Securities Act and the Exchange Act
in a timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder, make publicly available other
information so long as necessary to permit sales of their securities pursuant to
Rules 144 and 144A.  The Company covenants that it will take such further action
as any Holder may reasonably request in writing, all to the extent required from
time to time to enable such Holder to sell Transfer Restricted Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rules 144 and 144A (including the requirements of
Rule 144A(d)(4)).  The Company will provide a copy of this Agreement to
prospective purchasers of Securities identified to the Company by the Initial
Purchasers upon written request.  Upon the written request of any Holder, the
Company shall deliver to such Holder a written statement as to whether it has
complied with such requirements.  Notwithstanding the foregoing, nothing in this
Section 6 shall be deemed to require the Company to register any of its
securities pursuant to the Exchange Act.

 

7.  Underwritten Registrations.  If any of the Transfer Restricted Securities
covered by the Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
administer the offering (“Managing Underwriters”) will be selected by the
holders of a majority in aggregate principal amount of such Transfer Restricted
Securities to be included in such offering (provided that holders of Common
Stock issued upon conversion of the Initial Securities shall not be deemed
holders of Common Stock, but shall be deemed to be holders of the aggregate
principal amount of Initial Securities from which such Common Stock was
converted).

 

No person may participate in any underwritten registration hereunder unless such
person (i) agrees to sell such person’s Transfer Restricted Securities on the
basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.

 

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8.  Miscellaneous.

 

(a)  Remedies.  The Company acknowledges and agrees that any failure by the
Company to comply with its obligations under Section 1 hereof may result in
material irreparable injury to the Initial Purchasers or the Holders for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such failure,
the Initial Purchasers or any Holder may obtain such relief as may be required
to specifically enforce the Company’s obligations under Sections 1 hereof.  The
Company further agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.

 

(b)  No Inconsistent Agreements.  The Company will not on or after the date of
this Agreement enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof.  The Company represents that the
rights granted to the Holders hereunder do not in any way conflict with and are
not inconsistent with the rights granted to the holders of the Company’s
securities under any agreement in effect on the date hereof.

 

(c)  Amendments and Waivers.  The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents
(provided that holders of Common Stock issued upon conversion of Initial
Securities shall not be deemed holders of Common Stock, but shall be deemed to
be holders of the aggregate principal amount of Initial Securities from which
such Common Stock was converted).  Without the consent of the Holder of each
Initial Security, however, no modification may change the provisions relating to
the payment of Interest Amounts.

 

(d)  Notices.  All notices and other communications provided for or permitted
hereunder shall be made in writing by hand delivery, first-class mail, facsimile
transmission, or air courier which guarantees overnight delivery:

 

(1)  if to a Holder of the Securities, at the most current address given by such
Holder to the Company.

 

(2)  if to the Initial Purchasers;

 

c/o    Credit Suisse First Boston LLC

Eleven Madison Avenue

New York, NY 10010-3629

Fax No.:  (212) 325-8278

Attention:  Transactions Advisory Group

 

with a copy to:

 

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY 10017

Fax No.: (212) 455-2502

Attn: Alan D. Schnitzer, Esq.

 

(3)           if to the Company, at its address as follows:

 

Cephalon, Inc.

145 Brandywine Parkway

West Chester, PA 19380

Fax No.: (610) 344-7563

Attn: General Counsel

 

with a copy to:

 

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Morgan, Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103

Fax No.: (215) 963-5001

Attn: Richard A. Silfen, Esq.

 

All such notices and communications shall be deemed to have been duly given:  at
the time delivered by hand, if personally delivered; three business days after
being deposited in the mail, postage prepaid, if mailed; when receipt is
acknowledged by recipient’s facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.

 

(e) Third Party Beneficiaries.  The Holders shall be third party beneficiaries
to the agreements made hereunder between the Company, on the one hand, and the
Initial Purchasers, on the other hand, and shall have the right to enforce such
agreements directly to the extent they may deem such enforcement necessary or
advisable to protect their rights or the rights of Holders hereunder.

 

(f)  Successors and Assigns.  This Agreement shall be binding upon the Company
and its successors and assigns.

 

(g)  Counterparts.  This Agreement may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.

 

(h)  Headings.  The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

 

(i)  Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

By the execution and delivery of this Agreement, the Company submits to the
nonexclusive jurisdiction of any federal or state court in the State of New
York.

 

(j)  Severability.  If any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.

 

(k)  Securities Held by the Company.  Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.

 

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If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the several Initial Purchasers and the Company in accordance with its terms.

 

 

Very truly yours,

 

 

 

 

 

CEPHALON, INC.

 

 

 

 

 

 

 

 

 

by

/s/ J. KEVIN BUCHI

 

 

Name: J. Kevin Buchi

 

 

Title: Senior Vice President

 

 

 

 

The foregoing Registration Rights

 

 

 

Agreement is hereby confirmed

 

 

 

and accepted as of the date first

 

 

 

above written.

 

 

 

 

 

 

 

CREDIT SUISSE FIRST BOSTON LLC

 

 

 

CIBC WORLD MARKETS CORP.

 

 

 

J.P. MORGAN SECURITIES INC.

 

 

 

MORGAN STANLEY & CO. INCORPORATED

 

 

 

SG COWEN SECURITIES CORPORATION

 

 

 

ABN AMRO ROTHSCHILD LLC

 

 

 

CITIGROUP GLOBAL MARKETS INC.

 

 

 

LEHMAN BROTHERS INC.

 

 

 

 

 

 

 

BY: CREDIT SUISSE FIRST BOSTON LLC

 

 

 

 

 

 

 

 

 

 

 

by

/s/ PETE MEYERS

 

 

 

 

Name: Pete A. Meyers

 

 

 

 

Title: Director

 

 

 

 

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