<PAGE>

                                                                    EXHIBIT 10.1



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                          FORM OF WARRANT AGREEMENT

                                by and between

                      ENDO PHARMACEUTICALS HOLDINGS INC.

                                      and

                   UNITED STATES TRUST COMPANY OF NEW YORK,
                                      as
                                 Warrant Agent


                             ---------------------

                        Dated as of _____________, 2000

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<PAGE>


                                TABLE OF CONTENTS

                                                                           Page
                                                                           ----

             Section 1.   Appointment of Warrant Agent........................1
             Section 2.   Warrant Certificates................................1
             Section 3.   Execution of Warrant Certificates...................2
             Section 4.   Registration and Countersignature...................3
             Section 5.   Transfer and Exchange of Warrants...................3
             Section 6.   Registration of Transfers and Exchanges.............4
             Section 7.   Terms of Warrants; Exercise of Warrants.............7
             Section 8.   Payment of Taxes...................................10
             Section 9.   Mutilated or Missing Warrant Certificates..........10
             Section 10.  Reservation of Warrant Shares......................11
             Section 11.  Obtaining Stock Exchange Listings. ................12
             Section 12.  Adjustment of Exercise Price and Number
                          of Warrant Shares Issuable.........................12
             Section 13.  Fractional Interests...............................20
             Section 14.  Notices to Warrant Holders; Reservation
                          of Dividends.......................................20
             Section 15.  Notices to the Company and Warrant Agent...........22
             Section 16.  Supplements and Amendments.........................23
             Section 17.  Concerning the Warrant Agent.......................24
             Section 18.  Change of Warrant Agent............................27
             Section 19.  Successors.........................................27
             Section 20.  Termination........................................27
             Section 21.  GOVERNING LAW......................................28
             Section 22.  Benefits of This Agreement.........................28
             Section 23.  Counterparts.......................................28
             Section 24.  Headings...........................................28

Exhibit A.   Form of Warrant Certificate....................................A-1
Exhibit B.   Certificate to be Delivered Upon Transfer......................B-1


                                       i
<PAGE>

                  WARRANT AGREEMENT (the "Agreement"), dated as of _______ __,
                                          ---------
2000, by and between Endo Pharmaceuticals Holdings Inc., a Delaware corporation
(together with any successors and assigns, the "Company"), and United States
                                                -------
Trust Company of New York, as Warrant Agent (the "Warrant Agent").
                                                  -------------

                  WHEREAS, pursuant to that certain Agreement and Plan of
Merger, dated as of November 26, 1999 (as may be amended and restated from time
to time, the "Merger Agreement"), by and among the Company, Endo Inc., a
              ----------------
Delaware corporation and wholly owned subsidiary of the Company ("Sub"), and
                                                                  ---
Algos Pharmaceutical Corporation, a Delaware corporation ("Algos"), the
                                                           -----
Company proposes to issue warrants (each a "Warrant," and collectively, the
                                            -------
"Warrants") for the purchase of an aggregate of 29,920,177 shares of common
 --------
stock, par value $.01 per share, of the Company (the "Common Stock," and the
                                                      ------------
shares of Common Stock issuable upon exercise of the Warrants being referred to
herein as the "Warrant Shares");
               --------------

                  WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company and the Warrant Agent is willing to act in connection with
the issuance, transfer, exchange and exercise of Warrants as provided herein;
and

                  NOW, THEREFORE, in consideration of the premises and mutual
agreements herein, the Company and the Warrant Agent hereby agree as follows:

                  Section 1. Appointment of Warrant Agent. The Company hereby
                             ----------------------------
appoints the Warrant Agent to act as agent for the Company in accordance with
the instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.

                  Section 2. Warrant Certificates. The Warrants will initially
                             --------------------
be issued in global form (the "Global Warrants"), substantially in the form of
                               ---------------
Exhibit A hereto. Any certificates evidencing the Global Warrants to be
delivered pursuant to this Agreement (the "Warrant Certificates") shall be
                                           --------------------
substantially in the form set forth in Exhibit A hereto. Such Global Warrants
shall represent such of the outstanding Warrants as shall be specified therein
and each shall provide that it shall represent the aggregate amount of
outstanding Warrants from time to time endorsed thereon and that the aggregate
amount of outstanding Warrants represented thereby may from time to time be
reduced or increased, as appropriate. Any endorsement of a

--------

   1These numbers shall be adjusted in the final Endo Warrant. See footnotes
     2-5 below.
<PAGE>

Global Warrant to reflect the amount of any increase or decrease in the amount
of outstanding Warrants represented thereby shall be made by the Warrant Agent
and the Depositary (as defined below) in accordance with instructions given by
the holder thereof. The Depository Trust Company shall act as the Depositary
with respect to the Global Warrants until a successor shall be appointed by the
Company. Upon written request, a Warrant holder who holds Warrants may receive
from the Depositary and Warrant Agent Warrants in registered form as definitive
Warrant Certificates (the "Definitive Warrants") as set forth in Section 6
                           -------------------
below.

                  Section 3. Execution of Warrant Certificates. Warrant
                             ---------------------------------
Certificates shall be signed on behalf of the Company by its Chairman of the
Board, its President, Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer or Treasurer or a Vice President and by its Secretary or an
Assistant Secretary. Each such signature upon the Warrant Certificates may be in
the form of a facsimile signature of the present or any future Chairman of the
Board, President, Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer, Treasurer, Vice President, Secretary or Assistant Secretary
and may be imprinted or otherwise reproduced on the Warrant Certificates and for
that purpose the Company may adopt and use the facsimile signature of any person
who shall have been Chairman of the Board, President, Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer, Treasurer, a Vice President,
Secretary or an Assistant Secretary, notwithstanding the fact that at the time
the Warrant Certificates shall be countersigned and delivered or disposed of
such person shall have ceased to hold such office.

                  In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Company, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such person had not ceased
to be such officer of the Company; and any Warrant Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this Warrant
Agreement any such person was not such officer.

                  Warrant Certificates shall be dated the date of
countersignature by the Warrant Agent.

                                       2
<PAGE>


                  Section 4. Registration and Countersignature. The Warrants
                             ---------------------------------
shall be numbered and shall be registered on the books of the Company maintained
at the principal office of the Warrant Agent in located at 114 West 47th Street,
25th Floor, New York, New York 10036, Attention: Corporate Trust Division (the
"Warrant Register") as they are issued.
 ----------------

                  Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
The Warrant Agent shall, upon written instructions of the Chairman of the Board,
the President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, Treasurer, a Vice President, the Secretary or an Assistant Secretary of
the Company, initially countersign and deliver Warrants entitling the holders
thereof to purchase not more than the number of Warrant Shares referred to above
in the first recital hereof and shall thereafter countersign and deliver
Warrants as otherwise provided in this Agreement.

                  The Company and the Warrant Agent may deem and treat the
registered holders (the "Holders") of the Warrant Certificates as the absolute
                         -------
owners thereof (notwithstanding any notation of ownership or other writing
thereon made by anyone) for all purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.

                  Section 5. Transfer and Exchange of Warrants. The Warrant
                             ---------------------------------
Agent shall from time to time, subject to the limitations of Section 6 hereof,
register the transfer of any outstanding Warrants upon the records to be
maintained by it for that purpose, upon surrender thereof duly endorsed or
accompanied (if so required by it) by a written instrument or instruments of
transfer in form satisfactory to the Warrant Agent, duly executed by the
registered Holder or Holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Subject to the terms of
this Agreement, each Warrant Certificate may be exchanged for another
certificate or certificates entitling the Holder thereof to purchase a like
aggregate number of Warrant Shares as the certificate or certificates
surrendered then entitle each Holder to purchase. Any Holder desiring to
exchange a Warrant Certificate or Certificates shall make such request in
writing delivered to the Warrant Agent, and shall surrender, duly endorsed or
accompanied (if so required by the Warrant Agent) by a written instrument or
instruments of transfer in form satisfactory to the Warrant Agent, the Warrant
Certificate or Certificates to be so exchanged.

                                       3
<PAGE>


                  Upon registration of transfer, the Warrant Agent shall
countersign and deliver by certified or first class mail a new Warrant
Certificate or Certificates to the persons entitled thereto. The Warrant
Certificates may be exchanged at the option of the Holder thereof, when
surrendered at the office or agency of the Company maintained for such purpose,
which initially will be the corporate trust office of the Warrant Agent
located at 770 Broadway, 13th Floor, New York, New York 10003, Attention:
Corporate Trust Services, for another Warrant Certificate, or other Warrant
Certificates of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Warrant Shares.

                  No service charge shall be made for any exchange or
registration of transfer of Warrant Certificates, but the Company may require
payment of a sum sufficient to cover any stamp or other tax or other
governmental charge that is imposed in connection with any such exchange or
registration of transfer.

                  Section 6.        Registration of Transfers and Exchanges.
                                    ---------------------------------------

                  (a)      Transfer and Exchange of Definitive Warrants.  When
                           --------------------------------------------
Definitive Warrants are presented to the Warrant Agent with a request:

         (i)      to register the transfer of the Definitive Warrants; or

         (ii)     to exchange such Definitive Warrants for an equal number of
                  Definitive Warrants of other authorized denominations,

the Warrant Agent shall register the transfer or make the exchange as requested
if its requirements under this Agreement are met; provided, however, that the
                                                  --------  -------
Definitive Warrants presented or surrendered for registration of transfer or
exchange shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Warrant Agent, duly executed by the Holder
thereof or by such Holder's attorney, duly authorized in writing.

                  (b)      Restrictions on Transfer of a Definitive Warrant for
                           ----------------------------------------------------
a Beneficial Interest in a Global Warrant.  The Warrant Agent may exchange a
-----------------------------------------
Definitive Warrant for a beneficial interest in a Global Warrant only if the
Warrant Agent has received such Definitive Warrant, duly endorsed or accompanied
by appropriate instruments of transfer, in form satisfactory to the Warrant
Agent, together with written instructions directing the Warrant Agent to make,
or to direct the Depositary

                                       4
<PAGE>


to make, an endorsement on the Global Warrant to reflect an increase in the
aggregate amount of the Warrants represented by the Global Warrant. If such
conditions have been satisfied, the Warrant Agent shall cancel such Definitive
Warrant and cause, or direct the Depositary to cause, in accordance with the
standing instructions and procedures existing between the Depositary and the
Warrant Agent, the number of Warrant Shares represented by the Global Warrant to
be increased accordingly. If no Global Warrant is then outstanding, the Company
shall issue and the Warrant Agent shall countersign a new Global Warrant in the
appropriate amount.

                  (c)      Transfer and Exchange of Global Warrants. The
                           ----------------------------------------
transfer and exchange of Global Warrants or beneficial interests therein shall
be effected through the Depositary, in accordance with this Warrant Agreement
(including the restrictions on transfer set forth herein) and the procedures of
the Depositary therefor.

                  (d)      Transfer of a Beneficial Interest in a Global Warrant
                           -----------------------------------------------------
for a Definitive Warrant.
------------------------

         (i)      Any person having a beneficial interest in a Global Warrant
                  may upon his, her or its request exchange such beneficial
                  interest for a Defini tive Warrant. Upon receipt by the
                  Warrant Agent of written instructions (or such other form of
                  instructions as is customary for the Depositary) from the
                  Depositary or its nominee on behalf of any person having a
                  beneficial interest in a Global Warrant and upon receipt by
                  the Warrant Agent of a written order or such other form of
                  instructions as is customary for the Depositary or the person
                  designated by the Depositary as having such a beneficial
                  interest containing registration instructions, then the
                  Warrant Agent will cause, in according dance with the standing
                  instructions and procedures existing between the Depositary
                  and the Warrant Agent, the aggregate amount of the Global
                  Warrant to be reduced and, following such reduction, the
                  Company will execute and, upon receipt of a countersignature,
                  the Warrant Agent will countersign and deliver to the
                  transferee a Definitive Warrant.

         (ii)     Definitive Warrants issued in exchange for a beneficial
                  interest in a Global Warrant pursuant to this Section 6(d)
                  shall be registered in such names and in such authorized
                  denominations as the Depositary, pursuant to instructions from
                  its direct or indirect participants or


                                       5
<PAGE>


                  otherwise, shall instruct the Warrant Agent in writing,
                  provided such designation is in accordance with this Section
                  6(d). The Warrant Agent shall deliver such Definitive Warrants
                  to the persons in whose names such Definitive Warrants are
                  registered.

                  (e) Restrictions on Transfer and Exchange of Global Warrants.
                      --------------------------------------------------------
Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 6), a Global Warrant may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.

                  (f) Authentication of Definitive Warrants in Absence of
                      ---------------------------------------------------
Depositary.  If at any time:
----------

         (i)      the Depositary for the Global Warrants notifies the Company
                  that the Depositary is unwilling or unable to continue as
                  Depositary for the Global Warrant and a successor Depositary
                  for the Global Warrant is not appointed by the Company within
                  90 days after delivery of such notice; or

         (ii)     the Company, at its sole discretion, notifies the Warrant
                  Agent in writing that it elects to cause the issuance of
                  Definitive Warrants under this Warrant Agreement,

then the Company will execute, and the Warrant Agent, upon receipt of an
officers' certificate, signed by the President, Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer or a Vice President of the Company,
requesting the counter signature and delivery of Definitive Warrants, will
countersign and deliver Definitive Warrants, in an aggregate number equal to the
aggregate number of Warrants represented by the Global Warrant, in exchange for
such Global Warrant.

                  (g) Cancellation and/or Adjustment of a Global Warrant. At
                      --------------------------------------------------
such time as all beneficial interests in a Global Warrant have either been
exchanged for Definitive Warrants, redeemed, repurchased or cancelled, such
Global Warrant shall be returned to or retained and cancelled by the Warrant
Agent. At any time prior to such cancellation, if any beneficial interest in a
Global Warrant is exchanged for

                                       6
<PAGE>


Definitive Warrants, redeemed, repurchased or cancelled, the number of Warrants
represented by such Global Warrant shall be reduced and an endorsement shall be
made on such Global Warrant, by the Warrant Agent to reflect such reduction.

                  (h)      Obligations with Respect to Transfers and Exchanges
                           ---------------------------------------------------
of Definitive Warrants.
----------------------

         (i)      To permit registrations of transfers and exchanges in
                  accordance with the terms of this Agreement, the Company shall
                  execute, and the Warrant Agent shall countersign Definitive
                  Warrants and Global Warrants.

         (ii)     All Definitive Warrants and Global Warrants issued upon any
                  registration, transfer or exchange of Definitive Warrants or
                  Global War rants shall be the valid obligations of the
                  Company, entitled to the same benefits under this Warrant
                  Agreement as the Definitive War rants or Global Warrants
                  surrendered upon the registration of transfer or exchange.

         (iii)    Prior to due presentment for registration of transfer of any
                  Warrant, the Warrant Agent and the Company may deem and treat
                  the person in whose name any Warrant is registered as the
                  absolute owner of such Warrant, and neither the Warrant Agent
                  nor the Company shall be affected by notice to the contrary.

                  Section 7. Terms of Warrants; Exercise of Warrants. Subject to
                             ---------------------------------------
the terms of this Agreement, the Warrant Holders shall have the right, which may
be exercised commencing on or after the Exercisability Date (as defined below)
and until 5:00 p.m., New York City time, on July 7, 2003 (the six-month
anniversary of the Exercisability Date) (the "Expiration Date"), to receive from
                                              ---------------
the Company (on exercise of such Warrants and payment of the Exercise Price then
in effect for such Warrant Shares) (together, if applicable, with cash payable
as provided in Section 13 hereof and any dividends or distributions payable as
provided in Section 14 hereof) (a) 29,920,177 Warrant Shares (in the aggregate)
(with each Warrant being exercise-

                                       7
<PAGE>


able for 0.416667 Warrant Shares)2 in the event the Adjustment Event has not
occurred prior to such time or (b) 17,952,106 Warrant Shares (in the aggregate)
(with each Warrant being exercisable for 0.250000 Warrant Shares)3 in the event
the Adjustment Event has occurred prior to such time. Each Warrant not exercised
prior to the Expiration Date shall become void and all rights thereunder and all
rights in respect thereof under this Agreement shall cease as of the Expiration
Date. If applicable, dividends and other distributions will be made upon
exercise of the Warrants as set forth in Section 14 hereof.

                  "Exercisability Date" shall mean the fifth (5th) Business Day
                   -------------------
(as defined below) following December 31, 2002 if the Company (or any of its
subsidiaries) has not received approval from the U.S. Food and Drug
Administration (the "FDA") with respect to its New Drug Application for
MorphiDex(R) for the treatment of any pain prior to December 31, 2002.

                  In addition to the notices required by Section 14 hereof, the
Company shall give prompt written notice to the Warrant Agent that the
Exercisability Date has occurred and shall cause the Warrant Agent, on behalf of
and at the expense of the Company, within 5 Business Days after such
notification is received by the Warrant Agent, to mail by first class mail,
postage prepaid, to each Holder a notice specifying that the Exercisability Date
has occurred and that the Warrant has become exercisable pursuant to its terms
and that the Warrant will expire at 5:00 p.m., New York City time, on the
Expiration Date. In addition, the Company shall post appropriate
notices of the Exercisability Date on its web pages and issue press releases to
wire services. A "Business Day" is a day that is not a Legal Holiday. A "Legal
                  ------------                                           -----
Holiday"
-------

________________

         2 These numbers shall be adjusted in the final Agreement and Warrants
in order to reflect that at the Effective Time such aggregate number, when taken
together with the shares of Parent Common Stock held by Persons who had been
holders of Parent Common Stock immediately prior to the Effective Time, shall
equal 85% of the shares of Parent Common Stock on a fully diluted basis
(excluding the effect of the Algos Warrants as if no Adjustment Event had
occurred).

         3 These numbers shall be adjusted in the final Agreement and Warrants
in order to reflect that at the Effective Time such aggregate number, when taken
together with the shares of Parent Common Stock held by Persons who had been
holders of Parent Common Stock immediately prior to the Effective Time, shall
equal 80% of the shares of Parent Common Stock on a fully diluted basis
(excluding the effect of the Algos Warrants and after giving effect to the
Adjustment Event as if it had occurred).

                                       8
<PAGE>


is a Saturday, a Sunday, a federally recognized holiday or a day on which
banking institutions are not required to be open in the State of New York.

                  The initial price per share at which Warrant Shares shall be
purchasable upon exercise of Warrants (the "Exercise Price") shall equal $0.01.
                                             --------------
A Warrant may be exercised upon surrender at the office or agency of the Company
maintained for such purpose, which initially will be the corporate trust office
of the Warrant Agent or its agents located at 114 West 47th Street, 25th
Floor, New York, New York 10036, Attention: Corporate Trust Division, of the
Warrant Certificate(s) evidencing the Warrants to be exercised with the form of
election to purchase on the reverse thereof duly filled in and signed, which
signature shall be guaranteed by a participant in a recognized Signature
Guarantee Medallion Program, and upon payment to the Warrant Agent for the
account of the Company of the Exercise Price, as adjusted as herein provided,
for the number of Warrant Shares together, if applicable, with cash payable as
provided in Section 13 hereof and any dividends or distributions as provided in
Section 14 hereof in respect of which such Warrants are then exercised. Payment
of the Exercise Price may be made (a) in the form of cash or by certified or
official bank check payable to the order of the Company in New York Clearing
House Funds, (b) by delivering to the Company a written notice accompanying the
surrender of a Warrant to, at the time of exercise, apply to the payment of the
Exercise Price such number of Warrant Shares as shall be specified in such
notice, in which case an amount equal to the excess of the Current Market Value
(as defined in Section 12(d) hereof) of such Warrant Shares on the date of
exercise over the Exercise Price required for such exercise shall be deemed to
have been paid to the Company and the number of Warrant Shares issuable upon
such exercise shall be reduced by such specified number (a "Cashless Exercise")
                                                            -----------------
or (c) any combination of (a) and (b) above.

                  Subject to the provisions of Section 6 hereof, upon such
surrender of Warrants and payment of the Exercise Price, the Company shall issue
and cause to be delivered with all reasonable dispatch to or upon the written
order of the Holder and in such name or names as the Warrant Holder may
designate a certificate or certificates for the number of full Warrant Shares
issuable upon the exercise of such Warrants together with cash as provided in
Section 13 hereof. Such certificate or certificates shall be deemed to have been
issued and any person so named therein shall be deemed to have become a holder
of record of such Warrant Shares as of the date of the surrender of such
Warrants and payment of the Exercise Price.

                                       9
<PAGE>


                  On or after the Exercisability Date, the Warrants shall be
exercisable, at the election of the Holders thereof, either in full or from time
to time in part and, in the event that a certificate evidencing Warrants is
exercised in respect of fewer than all of the Warrant Shares issuable on such
exercise at any time prior to the Expiration Date, a new certificate evidencing
the remaining Warrant or Warrants will be issued, and the Warrant Agent is
hereby irrevocably authorized to countersign and to deliver the required new
Warrant Certificate or Certificates pursuant to the provisions of this Section 7
and of Section 3 hereof, and the Company, whenever required by the Warrant
Agent, will promptly supply the Warrant Agent with Warrant Certificates duly
executed on behalf of the Company for such purpose.

                  All Warrant Certificates surrendered upon exercise of Warrants
shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates
shall then be either delivered to the Company or disposed of by the Warrant
Agent in a manner consistent with the Warrant Agent's customary procedure for
such disposal and in a manner reasonably satisfactory to the Company. The
Warrant Agent shall account promptly to the Company with respect to Warrants
exercised and concurrently pay to the Company all monies received by the Warrant
Agent for the purchase of the Warrant Shares through the exercise of such
Warrants.

                  The Warrant Agent shall keep copies of this Agreement
available for inspection by the Holders during normal business hours at its
office. The Company shall supply the Warrant Agent from time to time with such
numbers of copies of this Agreement as the Warrant Agent may request.

                  Section 8. Payment of Taxes. The Company will pay all
                             ----------------
documentary stamp taxes attributable to the initial issuance of Warrant Shares
upon the exercise of Warrants; provided, however, that the Company shall not be
                               --------  -------
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issue of any Warrant Certificates or any certificates for
Warrant Shares in a name other than that of the registered Holder of a Warrant
Certificate surrendered upon the exercise of a Warrant, and the Company shall
not be required to issue or deliver such Warrant Certificates unless or until
the person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.

                  Section 9. Mutilated or Missing Warrant Certificates. In case
                             -----------------------------------------
any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed,
the Company

                                      10
<PAGE>


may in its discretion issue and the Warrant Agent may countersign, in exchange
and substitution for and upon cancellation of the mutilated Warrant Certificate,
or in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence satisfactory to
the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant Certificate and indemnity, if requested, also satisfactory to them.
Applicants for such substitute Warrant Certificates shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company or the Warrant Agent may prescribe.

                  Section 10. Reservation of Warrant Shares. The Company will at
                              -----------------------------
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.

                  The Company will keep a copy of this Agreement on file with
the transfer agent for the Common Stock (the "Transfer Agent") and with every
                                              --------------
subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from
time to time from such Transfer Agent the stock certificates required to honor
outstanding warrants upon exercise thereof in accordance with the terms of this
Agreement. The Company will supply such Transfer Agent with duly executed
certificates for such purposes and will provide or otherwise make available any
cash which may be payable as provided in Section 13 hereof. The Company will
furnish such Transfer Agent a copy of all notices of adjustments and
certificates related thereto transmitted to each Holder pursuant to Section 14
hereof.

                  The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants will, upon payment of the Exercise Price
therefor and issue, be validly authorized and issued, fully paid, nonassessable,
free of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issuance thereof. The Company will use its
reasonable best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having

                                      11
<PAGE>


jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Agreement.

                  Section 11. Obtaining Stock Exchange Listings. The Company
                              ---------------------------------
will from time to time take all action which may be necessary so that the
Warrants and, immediately upon their issuance upon exercise of the Warrants, the
Warrant Shares will be listed on the principal securities exchanges and markets
within the United States of America, if any, on which other shares of Common
Stock are then listed.

                  Section 12.  Adjustment of Exercise Price and Number of
                               ------------------------------------------
Warrant Shares Issuable.
-----------------------

                  (a)       If the Company:

         (i)      pays a dividend or makes a distribution on its Common Stock in
                  shares of its Common Stock or other capital stock of the
                  Company; or

         (ii)     subdivides, splits, combines or reclassifies its outstanding
                  shares of Common Stock into a different number of securities
                  of the same class,

then the number of shares of Common Stock issuable upon the exercise of each
Warrant (the "Exercise Rate") in effect immediately prior to such action shall
              -------------
be proportionately adjusted so that the Holder of any Warrant thereafter
exercised may receive the aggregate number and kind of shares of capital stock
of the Company which such Holder would have owned immediately following such
action if such Warrant had been exercised immediately prior to such action and
the Exercise Price in effect immediately prior to such action shall be adjusted
to a price determined by multiplying the Exercise Price in effect immediately
prior to such action by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding before giving effect to such action and
the denominator of which shall be the number of shares of Common Stock and/or
such other capital stock outstanding referred to in the foregoing clause (a)(1)
after giving effect to such action.

                  An adjustment pursuant to this Section 12(a) shall become
effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case of a
subdivision, combination or reclassification.

                                      12
<PAGE>


                  If, after an adjustment pursuant to this Section 12(a), a
Holder of a Warrant upon exercise of it may receive shares of two or more
classes of capital stock of the Company, the board of directors of the Company
shall determine the allocation of the adjusted Exercise Price between the
classes of capital stock. After such allocation, the exercise privilege and the
Exercise Price of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section 12.

                  Such adjustment shall be made successively whenever any event
listed above shall occur.

                  (b)      Adjustment for Certain Issuances of Common Stock.  If
                           ------------------------------------------------
the Company issues or sells to any Affiliate (as defined in Section 12(d)
hereof) of the Company (other than KIA V, L.P. and KEP V, L.P.) shares of its
Common Stock or distributes to any Affiliate of the Company (other than KIA V,
L.P. and KEP V, L.P.) any rights, options or warrants entitling them to purchase
shares of Common Stock, or securities convertible into or exchangeable for
Common Stock, in each case, at a price per share less than the Current Market
Value on the record date for determining entitlements of such Affiliates to
participate in such issuance, sale or distribution (the "Time of Determination")
                                                         ---------------------
and prior to such issuance, sale or distribution the Company did not first offer
to issue, sell or distribute such shares of its Common Stock or such rights,
options or warrants or such securities convertible into or exchangeable for
Common Stock to all holders of Common Stock on the same economic terms and on a
pro rata basis with the issuance, sale or distribution to such Affiliates of the
Company, then the Exercise Rate shall be adjusted in accordance with the
         ----
formula:

                                    E' = E x   O + N
                                             ----------
                                             O + N x P
                                                 -----
                                                   M

and the Exercise Price shall be adjusted in accordance with the following
formula:

                                    EP' = EP x E
                                               -
                                               E'

where:

                                      13
<PAGE>


                  E'  =    the adjusted Exercise Rate.

                  E   =    the Exercise Rate immediately prior to the Time of
                           Determination for any such issuance, sale or
                           distribution.

                  EP' =    the Adjusted Exercise Price.

                  EP  =    the Exercise Price immediately prior to the Time of
                           Determination for any such issuance, sale or
                           distribution.

                  O   =    the number of Fully Diluted Shares (as defined below)
                           outstanding immediately prior to the Time of
                           Determination for any such issuance, sale or
                           distribution.

                  N   =    the number of additional shares of Common Stock
                           issued, sold or issuable upon exercise of such
                           rights, options or warrants.

                  P   =    the per share price received and receivable by the
                           Company in the case of any issuance or sale of Common
                           Stock or rights, options or warrants as to which such
                           adjustment is being made, inclusive of the exercise
                           price per share of Common Stock payable upon exercise
                           of such rights, options or warrants.

                  M   =    the Current Market Value per share of Common Stock on
                           the Time of Determination for any such issuance, sale
                           or distribution.

                  For purposes of this Section 12(b), the term "Fully Diluted
                                                                -------------
Shares" shall mean (i) the shares of Common Stock outstanding as of a specified
------
date, and (ii) the shares of Common Stock into or for which rights, options,
warrants or other securities of the Company outstanding as of such date are
exercisable or convertible (other than the Warrants).

                  Any adjustments shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the relevant Time of Determination. Notwithstanding the foregoing, the
Exercise

                                      14
<PAGE>


Rate and the Exercise Price shall not be subject to adjustment in connection
with (i) the issuance of any shares of Common Stock upon exercise of any such
rights, options or warrants which have previously been the subject of an
adjustment under this Agreement for which the required adjustment has been made
and (ii) any exercise of the Warrants. If at the end of the period during which
any such rights, options or warrants are exercisable, not all rights, options or
warrants shall have been exercised, the Warrant shall be immediately readjusted
to what it would have been if "N" in each of the above formulas had been the
number of shares actually issued.

                  (c) When De Minimis Adjustment May Be Deferred. No adjustment
                      ------------------------------------------
in the Exercise Rate need be made unless the adjustment would require an
increase or decrease of at least 1% in the Exercise Rate. Notwithstanding the
foregoing, any adjustments that are not made shall be carried forward and taken
into account in any subsequent adjustment, provided that no such adjustment
                                           -------- ----
shall be deferred beyond the date on which a Warrant is exercised.

                  All calculations under this Section 12 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be.

                  (d)      Certain Definitions.  "Current Market Value" per
                           -------------------    --------------------
share of Common Stock or of any other security (herein collectively referred to
as a "Security") at any date shall be:

                  (1) if the Security is not registered under the Securities
         Exchange Act of 1934, as amended (the "Exchange Act"), (i) the value of
                                                ------------
         the Security determined in good faith by the board of directors of the
         Company and certified in a board resolution, based on the most recently
         completed arm's-length transaction between the Company and a person
         other than an Affiliate of the Company and the closing of which occurs
         on such date or shall have occurred within the six months preceding
         such date or (ii) if no such transaction shall have occurred on such
         date or within such six-month period, the value of the Security
         determined as of a date within 30 days preceding such date by an
         Independent Financial Expert (as defined below), or

                  (2) if the Security is registered under the Exchange Act, the
         average of the daily closing bid prices of such Security for 30
         consecutive Business Days selected by the Company from the period of 45
         Business Days


                                      15
<PAGE>


         preceding such date, but only if such Security shall have been listed
         on a national securities exchange or the Nasdaq National Market or
         traded through an automated quotation system during such entire
         45-Business Day period.

                  The "closing bid price" for any Security on each Business Day
                       -----------------
means the closing price, regular way, on such day on the principal exchange on
which such Security is traded, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day.

                  "Independent Financial Expert" shall mean any nationally
                   ----------------------------
recognized investment banking firm that is not an Affiliate of the Company. Any
such person may receive customary compensation and indemnification by the
Company for opinions or services it provides as an Independent Financial Expert.

                  "Affiliate" of any specified person means any other person
                   ---------
which directly or indirectly through one or more intermediaries controls or is
controlled by, or is under common control with, such specified person. For the
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling," "controlled by" and "under common control with") as used
with respect to any person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
person, whether through the ownership of voting securities, by agreement or
otherwise.

                  "Ordinary Cash Distribution" means any quarterly cash dividend
                   --------------------------
on the Common Stock to the extent that the aggregate cash dividend per share of
Common Stock in any calendar quarter does not exceed the greater of (x) the
amount per share of Common Stock of the next preceding quarterly cash dividend
on the Common Stock (as adjusted to reflect subdivisions or combinations of the
Common Stock) and (y) 3.0% of the average of the last reported sales prices of
the Common Stock during the ten trading days immediately prior to the date of
declaration of such dividend.

                  (e)      When No Adjustment Required. If an adjustment is made
                           ---------------------------
upon the establishment of a record date for an issuance, sale or distribution
subject to subsection (a) or (b) hereof and such issuance, sale or distribution
is subsequently cancelled or is not otherwise made, the Exercise Rate and
Exercise Price then in effect shall be readjusted, effective as of the date when
the board of directors of the

                                      16
<PAGE>


         Company determines to cancel such issuance, sale or distribution or
         when it is otherwise evident that such issuance, sale or distribution
         will not be so made, to that which would have been in effect if such
         record date had not been fixed. If an adjustment would be required
         under both subsections (a) and (b) above, such adjustments will be
         determined without duplication.

                  To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the amount of cash into which such
Warrants are exercisable. Interest will not accrue on the cash.

                  (f)      Notice of Adjustment.  Whenever the Exercise Rate or
                           --------------------
Exercise Price is adjusted, the Company shall provide the notices required by
Section 14 hereof.

                  (g)      Voluntary Reduction. The Company from time to time
                           -------------------
may increase the Exercise Rate or reduce the Exercise Price by any amount for
any period of time (including, without limitation, permanently) if the period is
at least 20 Business Days and the Company has given notice of such increase or
reduction in accordance with Section 14 hereof.

                  An increase of the Exercise Rate or reduction in the Exercise
Price under this subsection (g) (other than a permanent increase) does not
change or adjust the Exercise Rate otherwise in effect for purposes of
subsection (a) and (b) of this Section 12.

                  (h)      When Issuance or Payment May Be Deferred. In any case
                           ----------------------------------------
in which this Section 12 shall require that an adjustment in the Exercise Rate
or Exercise Price be made effective as of a record date for a specified event,
the Company may elect to defer until the occurrence of such event (i) issuing to
the Holder of any Warrant exercised after such record date the Warrant Shares
and other capital stock of the Company, if any, issuable upon such exercise over
and above the Warrant Shares and other capital stock of the Company, if any,
issuable upon such exercise on the basis of the Exercise Rate prior to such
adjustment, and (ii) paying to such Holder any amount in cash in lieu of a
fractional share pursuant to Section 13 hereof; provided, however, that the
                                                --------  -------
Company shall deliver to the Warrant Agent and shall cause the Warrant Agent, on
behalf of and at the expense of the Company, to deliver to such Holder a due
bill or other appropriate instrument evidencing such

                                      17
<PAGE>


Holder's right to receive such additional Warrant Shares, other capital stock
and cash upon the occurrence of the event requiring such adjustment.

                  (i) Reorganizations. In case of (i) any capital
                      ---------------
reorganization, other than in the cases referred to in Section 12(a) and (b)
hereof and other than any capital reorganization that does not result in any
reclassification of the outstanding shares of Common Stock into shares of other
stock or other securities or property, or (ii) the consolidation or merger of
the Company with or into another corporation (other than a merger or
consolidation in which the Company is the continuing corporation and which does
not result in any reclassification of the outstanding shares of Common Stock
into shares of other stock or other securities or property), or (iii) the sale
of all or substantially all of the assets of the Company (collectively such
actions being hereinafter referred to as "Reorganizations"), there shall
                                          ---------------
thereafter be deliverable upon exercise of any Warrant in accordance with the
terms hereof (in lieu of the number of shares of Common Stock theretofore
deliverable) the number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock that would otherwise have
been deliverable upon the exercise of such Warrant would have been entitled upon
such Reorganization if the Exercisability Date had occurred and such Warrant had
been exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the
board of directors of the Company, whose determination shall be described in a
duly adopted resolution certified by the Company's Secretary or Assistant
Secretary, shall be made in the application of the provisions herein set forth
with respect to the rights and interests of Holders so that the provisions set
forth herein shall thereafter be applicable, as nearly as possible, in relation
to any such shares or other securities or property thereafter deliverable upon
exercise of Warrants.

                  The Company shall not effect any such Reorganization unless
prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such Reorganization or
the corporation or other entity purchasing such assets shall expressly assume,
by a supplemental warrant agreement or other acknowledgment executed and
delivered to the Warrant Agent, the obligation to deliver to the Warrant Agent
and to cause the Warrant Agent to deliver to each such Holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such Holder may be entitled to purchase in accordance with the terms hereof upon
the occurrence of the Exercisability Date, and

                                      18
<PAGE>


the due and punctual performance and observance of each and every covenant,
condition, obligation and liability under this Agreement to be performed and
observed by the Company in the manner prescribed herein.

                  The foregoing provisions of this Section 12(i) shall apply to
successive Reorganization transactions.

                  (j)      Form of Warrants. Irrespective of any adjustments in
                           ----------------
the number or kind of shares purchasable upon the exercise of the Warrants,
Warrants theretofore or thereafter issued may continue to express the same price
and number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.

                  (k)      Warrant Agent's Disclaimer.  The Warrant Agent has no
                           --------------------------
duty to determine when an adjustment under this Section 12 should be made, how
it should be made or what it should be. The Warrant Agent has no duty to
determine whether any provisions of a supplemental warrant agreement under
subsection (i) of this Section 12 are correct. The Warrant Agent makes no
representation as to the validity or value of any securities or assets issued
upon exercise of Warrants. The Warrant Agent shall not be responsible for the
Company's failure to comply with this Section 12.

                  (l)      Miscellaneous. For purpose of this Section 12 the
                           -------------
term "shares of Common Stock" shall mean (i) shares of the class of stock
      ----------------------
designated as the Common Stock, par value $.01 per share, of the Company as of
the date of this Agreement, and (ii) shares of any other class of stock
resulting from successive changes or reclassification of such shares consisting
solely of changes in par value, or from par value to no par value, or from no
par value to par value. In the event that at any time, as a result of an
adjustment made pursuant to this Section 12, the Holders of Warrants shall
become entitled to purchase any securities of the Company other than, or in
addition to, shares of Common Stock, thereafter the number or amount of such
other securities so purchasable upon exercise of each Warrant shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares contained in
subsections (a) through (l) of this Section 12, inclusive, and the provisions of
Sections 7, 8, 10 and 13 with respect to the Warrant Shares or the Common Stock
shall apply on like terms to any such other securities.

                                      19
<PAGE>


                  Section 13. Fractional Interests. The Company shall not be
                              --------------------
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same Holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 13,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the excess of the Current Market
Value of a Warrant Share over the Exercise Price on the day immediately
preceding the date the Warrant is presented for exercise, multiplied by such
fraction.

                  Section 14. Notices to Warrant Holders; Reservation of
                              ------------------------------------------
Dividends. Upon any adjustment pursuant to Section 12 hereof, the Company shall
---------
give prompt written notice of such adjustment to the Warrant Agent and shall
cause the Warrant Agent, on behalf of and at the expense of the Company, within
10 days after notification is received by the Warrant Agent of such adjustment,
to mail by first class mail, postage prepaid, to each Holder a notice of such
adjustment(s) and shall deliver to the Warrant Agent a certificate of the Chief
Financial Officer of the Company, setting forth in reasonable detail (i) the
number of Warrant Shares purchasable upon the exercise of each Warrant and the
Exercise Price of such Warrant after such adjustment(s), (ii) a brief statement
of the facts requiring such adjustment(s) and (iii) the computation by which
such adjustment(s) was made. Where appropriate, such notice may be given in
advance and included as a part of the notice required under the other provisions
of this Section 14.

                  In case the Exercisability Date has occurred and:

                  (a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or warrants;
or

                  (b) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or assets or
cash; or

                                      20
<PAGE>



                  (c) of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of Common
Stock issuable upon exercise of the Warrants (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange offer for
shares of Common Stock; or

                  (d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or

                  (e) the Company proposes to take any action that would require
an adjustment to the Exercise Rate pursuant to Section 12 hereof;

then the Company shall give prompt written notice to the Warrant Agent and shall
cause the Warrant Agent, on behalf of and at the expense of the Company to give
to each of the registered holders of the Warrant Certificates at his, her or its
address appearing on the Warrant Register, at least 30 days (or 20 days in any
case specified specified, or the date of the event in the case of events for
which there is no record date, by first-class mail, postage prepaid, a written
notice stating (i) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such rights, options, warrants or
distribution are to be determined, or (ii) the initial expiration date set forth
in any tender offer or exchange offer for shares of Common Stock, or (iii) the
date on which any such consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective or consummated, and
the date as of which it is expected that holders of record of shares of Common
Stock shall be entitled to exchange such shares for securities or other
property, if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up. The failure by the
Company or the Warrant Agent to give such notice or any defect therein shall not
affect the legality or validity of any distribution, right, option, warrant,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up, or the vote upon any action.

                  The Company shall give prompt written notice to the Warrant
Agent and shall cause the Warrant Agent, on behalf of and at the expense of the
Company

                                      21
<PAGE>


to give to each Holder written notice of any determination to make a
distribution or dividend to the holders of its Common Stock of any assets
(including cash (other than any Ordinary Cash Distribution)), debt securities,
preferred stock, or any rights or warrants to purchase debt securities,
preferred stock, assets or other securities (other than Common Stock, or rights,
options, or warrants to purchase Common Stock) of the Company, which notice
shall state the nature and amount of such planned dividend or distribution and
the record date therefor, and shall be given by the Company at least 20 days
prior to such record date therefor.

                  At any time prior to the date that is 30 Business Days after
the Exercisability Date, with respect to any distribution or dividend made by
the Company to all of the holders of its Common Stock for which notice to the
Holders of the Warrants under this Section 14 would be required had such
dividend or distribution occurred after the Exercisability Date and except for
such distributions or dividends as are provided for in Section 12 hereof, the
Company shall hold in reserve the amount of any such dividend or distribution
that would have been payable to the Holders in respect of their Warrant Shares
had the Holders exercised their Warrants immediately prior to such dividend or
distribution. The Company shall release to each Holder of Warrants his, her or
its pro rata share of such reserved dividends or distributions upon the exercise
of such Holder's Warrants pursuant to Section 7 hereof. Any notice delivered to
the Holders by the Company pursuant to this Section 14 shall state the nature
and amount of such dividend or distribution that shall be held in reserve.

                  Nothing contained in this Agreement or in any Warrant
Certificate shall be construed as conferring upon the Holders the right to vote
or to consent or to receive notice as stockholders in respect of the meetings of
stockholders or the election of directors of the Company or any other matter, or
any rights whatsoever as stockholders of the Company.

                  Section 15. Notices to the Company and Warrant Agent. Any
                              ----------------------------------------
notice or demand authorized by this Agreement to be given or made by the Warrant
Agent or by any Holder to or on the Company shall be sufficiently given or made
when received at the office of the Company expressly designated by the Company
as its office for purposes of this Agreement (until the Warrant Agent is
otherwise notified in accordance with this Section 15 by the Company), as
follows:

                                      22
<PAGE>


                           Endo Pharmaceuticals Holdings Inc.
                           c/o Kelso & Company
                           320 Park Avenue
                           24th Floor
                           New York, New York 10022
                           Attention:   Managing Director
                                        with a copy to General Counsel

                           with a copy to:

                           Skadden, Arps, Slate, Meagher & Flom LLP
                           Four Times Square
                           New York, New York  10036-6522
                           Attention:  Eileen T. Nugent, Esq.

                  Any notice pursuant to this Agreement to be given by the
Company or by any Holder(s) to the Warrant Agent shall be sufficiently given
when received by the Warrant Agent at the address appearing below (until the
Company is otherwise notified in accordance with this Section by the Warrant
Agent).

                           United States Trust Company of New York
                           114 West 47th Street, 25th Floor
                           New York, New York 10036
                           Attention: Corporate Trust Division

                  Section 16. Supplements and Amendments. The Company and the
                              --------------------------
Warrant Agent may from time to time supplement or amend this Agreement without
the approval of any holders of Warrants in order to cure any ambiguity or to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not in any way
adversely affect the rights of any holder of Warrants hereunder. Any amendment
or supplement to this Agreement that has a material adverse effect on the rights
of holders hereunder shall require the written consent of registered holders of
a majority of the then outstanding Warrants, which consent shall then be
effective against all the Holders of Warrants hereunder. The consent of each
holder of a Warrant affected shall be required for any amendment pursuant to
which the Exercise Price would be increased or the number of

                                      23
<PAGE>


Warrant Shares purchasable upon exercise of Warrants would be decreased (not
including adjustments contemplated hereunder). The Warrant Agent shall be
entitled to receive and shall be fully protected in relying upon an officers'
certificate and opinion of counsel as conclusive evidence that any such
amendment or supplement is authorized or permitted hereunder, that it is not
inconsistent herewith, and that it will be valid and binding upon the Company in
accordance with its terms.

                  Section 17. Concerning the Warrant Agent. The Warrant Agent
                              ----------------------------
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the Holders, by
their acceptance of Warrants, shall be bound:

                  (a) The statements contained herein and in the Warrant
Certificate shall be taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or any action taken by it. The Warrant Agent assumes
no responsibility with respect to the distribution of the Warrants except as
herein otherwise provided.

                  (b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with the covenants contained in this Agreement or in
the Warrants to be complied with by the Company.

                  (c) The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
(through its employees) or by or through its attorneys or agents (which shall
not include its employees) and shall not be responsible for the misconduct of
any agent appointed with due care.

                  (d) The Warrant Agent may consult at any time with legal
counsel satisfactory to it (who may be counsel for the Company), and the Warrant
Agent shall incur no liability or responsibility to the Company or to any Holder
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in accordance with the opinion or the advice of such counsel.

                  (e) Whenever in the performance of its duties under this
Agreement the Warrant Agent shall deem it necessary or desirable that any fact
or matter

                                      24
<PAGE>


be proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless such evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the President,
Chief Financial Officer, one of the Vice Presidents, the Treasurer or the
Secretary of the Company and delivered to the Warrant Agent; and such
certificate shall be full authorization to the Warrant Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.

                  (f) The Company agrees to pay the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the performance
of its duties under this Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind and
nature incurred by the Warrant Agent (including reasonable fees and expenses of
the Warrant Agent's counsel and agents) in the performance of its duties under
this Agreement, and to indemnify the Warrant Agent and save it harmless against
any and all liabilities, including judgments, costs and counsel fees, for
anything done or omitted by the Warrant Agent in the performance of its duties
under this Agreement, except as a result of the Warrant Agent's negligence or
bad faith.

                  (g) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or one or more Holders shall
furnish the Warrant Agent with reasonable security and indemnity satisfactory to
the Warrant Agent for any costs and expenses which may be incurred, but this
provision shall not affect the power of the Warrant Agent to take such action as
the Warrant Agent may consider proper, whether with or without any such security
or indemnity. All rights of action under this Agreement or under any of the
Warrants may be enforced by the Warrant Agent without the possession of any of
the Warrants or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent, and any recovery of judgment
shall be for the ratable benefit of the Holders, as their respective rights or
interests may appear.

                  (h) The Warrant Agent and any stockholder, director, officer
or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transactions in

                                      25
<PAGE>


which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Warrant Agent
under this Agreement or such director, officer or employee. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity including, without limitation, acting as Transfer
Agent or as a lender to the Company or an Affiliate thereof.

                  (i) The Warrant Agent shall act hereunder solely as agent, and
its duties shall be determined solely by the provisions hereof. The Warrant
Agent shall not be liable for anything which it may do or refrain from doing in
connection with this Agreement except for its own negligence or bad faith.

                  (j) The Warrant Agent will not incur any liability or
responsibility to the Company or to any Holder for any action taken in reliance
on any notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument reasonably believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.

                  (k) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant (except its countersignature thereof); nor
shall the Warrant Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Warrant
Shares (or other stock) to be issued pursuant to this Agreement or any Warrant,
or as to whether any Warrant Shares (or other stock) will, when issued, be
validly issued, fully paid and nonassessable, or as to the Exercise Price or the
number or amount of Warrant Shares or other securities or other property
issuable upon exercise of any Warrant.

                  (l) The Warrant Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice President or the Secretary
of the Company, and to apply to such officers for advice or instructions in
connection with its duties, and shall not be liable for any action taken or
suffered to be taken by it in good faith and without negligence in accordance
with instructions of any such officer or officers.

                                      26
<PAGE>


                  Section 18. Change of Warrant Agent. The Warrant Agent may
                              -----------------------
resign at any time and be discharged from its duties under this Agreement by
giving to the Company 30-days' notice in writing. The Warrant Agent may be
removed by like notice to the Warrant Agent from the Company. If the Warrant
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of 30 days after such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent or by any Holder (who shall with such
notice submit his, her or its Warrant for inspection by the Company), then any
Holder may apply to any court of competent jurisdiction for the appointment of a
successor to the Warrant Agent. Pending appointment of a successor warrant
agent, either by the Company or by such court, the duties of the Warrant Agent
shall be carried out by the Company. Any successor warrant agent, whether
appointed by the Company or such a court, shall be a bank or trust company in
good standing, incorporated under the laws of the United States of America or
any State thereof or the District of Columbia and having at the time of its
appointment as warrant agent a combined capital and surplus of at least
$10,000,000. After appointment, the successor warrant agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Warrant Agent without further act or deed; but the former
Warrant Agent shall deliver and transfer to the successor warrant agent any
property at the time held by it hereunder, and execute and deliver any further
assurance, conveyance, act or deed necessary for such purpose. Failure to file
any notice provided for in this Section 18, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Warrant Agent or the appointment of the successor warrant agent, as the case may
be. In the event of such resignation or removal, the Company or the successor
warrant agent shall mail by first class mail, postage prepaid, to each Holder,
written notice of such removal or resignation and the name and address of such
successor warrant agent.

                  Section 19. Successors.  All the covenants and provisions of
                              ----------
this Agreement by or for the benefit of the Company, the Warrant Agent or any
holder of Warrants shall bind and inure to the benefit of their respective
successors and assigns hereunder.

                  Section 20. Termination.  This Agreement shall terminate
                              -----------
at 5:00 p.m., New York City time, on the Expiration Date. Notwithstanding the
foregoing,

                                      27
<PAGE>


this Agreement will terminate on any earlier date if all Warrants have been
exercised pursuant to this Agreement.

                  Section 21.  GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT
                               -------------
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO THE CONFLICT OF LAW
RULES THEREOF.

                  Section 22.  Benefits of This Agreement. Nothing in this
                               --------------------------
Agreement shall be construed to give to any person or corporation other than
the Company, the Warrant Agent and the registered Holders of the Warrant
Certificates any legal or equitable right, remedy or claim under this Agreement;
but this Agreement shall be for the sole and exclusive benefit of the Company,
the Warrant Agent and the registered Holders of the Warrant Certificates.

                  Section 23.  Counterparts.  This Agreement may be
                               ------------
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.

                  Section 24.  Headings.  The headings in this Agreement
                               --------
are for convenience of reference only and shall not limit or otherwise affect
the meaning hereof.

                                      28
<PAGE>


                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.



                                       ENDO PHARMACEUTICALS HOLDINGS INC.


                                       By:  ________________________________
                                            Name:
                                            Title:


                                       UNITED STATES TRUST COMPANY OF NEW YORK,
                                            as Warrant Agent


                                       By:  ________________________________
                                            Name:
                                            Title:
<PAGE>


                                                                       EXHIBIT A


                         [Form of Warrant Certificate]
                                    [Face]


     THIS SECURITY IS A GLOBAL CERTIFICATE AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON
OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE WARRANT AGREEMENT, DATED AS OF ____________, 2000, BY AND
BETWEEN THE COMPANY AND THE WARRANT AGENT (THE "WARRANT AGREEMENT"), AND NO
TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY
TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.


                                      A-1
<PAGE>


                EXERCISABLE ON OR AFTER THE EXERCISABILITY DATE
                         AND ON OR BEFORE JULY 7, 2003

No. __________                                               __________ Warrants

                              Warrant Certificate

                      ENDO PHARMACEUTICALS HOLDINGS INC.


     This Warrant Certificate certifies that _______, or registered assigns, is
the registered holder of Warrants expiring on or before July 7, 2003 (the
"warrants") to purchase shares of Common Stock, par value $.01 per share (the
"Common Stock"), of Endo Pharmaceuticals Holdings Inc., a Delaware corporation
(the "Company"). Each Warrant entitles the holder upon exercise to receive from
the Company on or after the Exercisability Date and on or before 5:00 p.m. New
York City Time on July 7, 2003 (the six-month anniversary of the Exercisability
Date), (a) 0.4166674 fully paid and nonassessable shares of Common Stock (each
such share, a "Warrant Share") in the event the Adjustment Event (as defined in
that certain Agreement and Plan of Merger, dated as of November 26, 1999, as may
be amended and restated from time to time, by and among the Company, Endo Inc.,
a Delaware corporation and wholly owned subsidiary of the Company, and Algos
Pharmaceutical Corporation, a Delaware corporation) has not occurred prior to
such time or (b) 0.2500005 Warrant Shares in the event the Adjustment Event has
occurred prior to such time, in either case, at the initial exercise price (the
"Exercise Price") equal to $0.01 payable upon surrender of this Warrant
Certificate and payment of the Exercise Price in the manner set forth in the
Warrant Agreement, subject only to the conditions set forth herein and in the
Warrant Agreement referred

------------------
     4This number shall be adjusted in the final Agreement and Warrants in order
to reflect that at the Effective Time the aggregate number on which it is based,
when taken together with the shares of Parent Common Stock held by Persons who
had been holders of Parent Common Stock immediately prior to the Effective Time,
shall equal 85% of the shares of Parent Common Stock on a fully diluted basis
(excluding the effect of the Algos Warrants as if no Adjustment Event had
occurred).

     5This number shall be adjusted in the final Agreement and Warrants in order
to reflect that at the Effective Time the aggregate number on which it is based,
when taken together with the shares of Parent Common Stock held by Persons who
had been holders of Parent Common Stock immediately prior to the Effective Time,
shall equal 80% of the shares of Parent Common Stock on a fully diluted basis
(excluding the effect of the Algos Warrants and after giving effect to the
Adjustment Event as if it had occurred).

                                      A-2
<PAGE>


to on the reverse hereof. The Exercise Price and number of Warrant Shares
issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events as set forth in the Warrant Agreement.

     No Warrant may be exercised before the Exercisability Date or after 5:00
p.m., New York City Time, on July 7, 2003 and to the extent not exercised by
such time such Warrants shall become void.

     This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.

     THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

                                      A-3
<PAGE>


     IN WITNESS WHEREOF, Endo Pharmaceuticals Holdings Inc. has caused this
Warrant Certificate to be signed by an officer and by its Secretary, each by a
facsimile of his or her signature, and has caused a facsimile of its corporate
seal to be affixed hereunto or imprinted hereon.

Dated:      , ____


                                            ENDO PHARMACEUTICALS HOLDINGS INC.


                                            By:      __________________________
                                                     Name:
                                                     Title:


                                            By:      __________________________
                                                     Name:
                                                     Title:   Secretary


Countersigned:

UNITED STATES TRUST COMPANY
OF NEW YORK,
 as Warrant Agent


By:      ____________________________
         Name:
         Title:

                                      A-4
<PAGE>


                         [Form of Warrant Certificate]

                                   [Reverse]


     The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring July 7, 2003, entitling the holder on
exercise to receive shares of Common Stock, par value $.01 per share, of the
Company (the "Common Stock"), and are issued or to be issued pursuant to a
Warrant Agreement dated as of ________ __, 2000 (the "Warrant Agreement"), duly
executed and delivered by the Company to United States Trust Company of New
York, as warrant agent (the "Warrant Agent"), which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Company.

     Warrants may be exercised at any time on or after the "Exercisability Date"
and on or before July 7, 2003. The holder of Warrants evidenced by this Warrant
Certificate may exercise them by surrendering this Warrant Certificate, with the
form of election to purchase set forth hereon properly completed and executed,
together with payment in the manner provided for in the Warrant Agreement at the
office of the Warrant Agent. In the event that upon any exercise of Warrants
evidenced hereby, the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the holder hereof
or his, her or its assignee a new Warrant Certificate evidencing the number of
Warrants not exercised.

     The Warrant Agreement provides that upon the occurrence of certain events
the number of Warrants set forth on the face hereof and the Exercise Price may,
subject to certain conditions, be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.

     Warrant Certificates, when surrendered at the office of the Warrant Agent
by the registered holder thereof in person or by legal representative or
attorney

                                      A-5
<PAGE>


duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.

     Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.

     The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwith-
standing any notation of ownership or other writing hereon made by anyone), for
the purpose of any exercise hereof, of any distribution to the holder(s) hereof,
and for all other purposes, and neither the Company nor the Warrant Agent shall
be affected by any notice to the contrary. Neither the Warrants nor this Warrant
Certificate entitles any holder hereof to any rights of a stockholder of the
Company.

                                      A-6
<PAGE>


                        [Form of Election to Purchase]

                   (To Be Executed upon Exercise of Warrant)


     The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _____shares of Common Stock
and herewith tenders payment for such shares to the order of Endo
Pharmaceuticals Holdings Inc. in the amount of $______ payable in (select one or
more: (i) cash and/or (ii) pursuant to a Cashless Exercise) in accordance with
the terms hereof and of the Warrant Agreement. The undersigned requests that a
certificate for such shares be registered in the name of _________, whose
address is ________ and that such shares be delivered to ________ whose address
is ________. If said number of shares is less than all of the shares of Common
Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of ________, whose address is ________, and that such Warrant
Certificate be delivered to ________, whose address is ________.

                                                     Signature:


Date:


                                                     Signature Guaranteed:

                                      A-7
<PAGE>


                SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS

     The following exchanges of a part of this Global Warrant for certificated
Warrants have been made:

<TABLE>
<CAPTION>
                                                                 Number of
                                                                 Warrants of
                      Amount of             Amount of            this Global
                      decrease in           increase in          Warrant               Signature of
                      Number of             Number of            following             authorized
Date of               Warrants of this      Warrants of this     such decrease         officer of
Exchange              Global Warrant        Global Warrant       (or increase)         Warrant Agent
-----------------------------------------------------------------------------------------------------------
<S>                   <C>                   <C>                  <C>                   <C>
</TABLE>


                                      A-8
<PAGE>

                                                                       EXHIBIT B

                   CERTIFICATE TO BE DELIVERED UPON EXCHANGE
                    OR REGISTRATION OF TRANSFER OF WARRANTS

Re:      Warrants to Purchase Common Stock (the "Warrants") of Endo
         Pharmaceuticals Holdings Inc.

                 This Certificate relates to Warrants held in* ___book-entry or
* ____ certificated form by ____________ (the "Transferor").


The Transferor:*

                 [ ] has requested the Warrant Agent by written order to deliver
in exchange for its beneficial interest in the Global Warrant held by the
depository a Warrant or Warrants in definitive, registered form equal to its
beneficial interest in Warrants represented by such Global Warrant (or the
portion thereof indicated above); or

                 [ ] has requested the Warrant Agent by written order to
exchange or register the transfer of a Warrant or Warrants.





                                          ---------------------------
                                          [INSERT NAME OF TRANSFEROR]



                                          By: _______________________

Date:    __________________


         *Check applicable box.

<PAGE>


                            INDEX OF DEFINED TERMS
                            ----------------------
Affiliate.....................................................................16
Agreement......................................................................1
Algos..........................................................................1
Business Day...................................................................9
Cashless Exercise..............................................................9
closing bid price.............................................................16
Common Stock...................................................................1
Company........................................................................1
Current Market Value..........................................................15
Definitive Warrants............................................................2
Exchange Act..................................................................16
Exercisability Date............................................................8
Exercise Price.................................................................9
Exercise Rate.................................................................12
Expiration Date................................................................7
FDA............................................................................8
Fully Diluted Shares..........................................................15
Global Warrants................................................................1
Holders........................................................................3
Independent Financial Expert..................................................16
Legal Holiday..................................................................9
Merger Agreement...............................................................1
Ordinary Cash Distribution....................................................17
Reorganizations...............................................................18
Security......................................................................15
shares of Common Stock........................................................20
Sub............................................................................1
Time of Determination.........................................................13
Transfer Agent................................................................11
Warrant........................................................................1
Warrant Agent..................................................................1
Warrant Certificates...........................................................1
Warrant Register...............................................................3
Warrant Shares.................................................................1
Warrants.......................................................................1