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Ex 10.6
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of January __, 1999, between
ELAN INTERNATIONAL SERVICES, LTD., a Bermuda corporation ("EIS"), and DOV
PHARMACEUTICAL, INC., a New Jersey corporation (the "COMPANY").
R E C I T A L S:
A. The Company desires to issue and sell to EIS, and EIS desires to
purchase from the Company, (i) certain shares of the Company's voting common
stock, par value U.S.$.0001 per share (the "COMMON STOCK"), (ii) certain shares
of the Company's non-voting common stock, par value U.S.$.0001 per share (the
"SPECIAL STOCK"; the shares of Common Stock and the shares of Special Stock, the
"Shares"), convertible into the Common Stock on a share for share basis, (iii) a
convertible exchangeable note, with a maximum principal amount of U.S.$8,010,000
in the form attached hereto as EXHIBIT A (as amended at any time, the
"EXCHANGEABLE NOTE"), (iv) a convertible note, with a maximum principal amount
of U.S.$7,008,750 in the form attached hereto as EXHIBIT B (as amended at any
time, the "CONVERTIBLE NOTE"; together with the Exchangeable Note, the "NOTES");
and (v) a warrant (as amended at any time, the "WARRANT"; together with the
Shares and the Notes, the "SECURITIES") to purchase up to 75,000 shares of
Common Stock, as provided therein, in the form attached hereto as EXHIBIT C.
B. The Company and EIS have previously caused to be formed DOV
NEWCO, LTD., a Bermuda exempted limited company ("BERMUDA NEWCO"), which will be
the owner of 100% of the issued and outstanding share capital of NASCIME
LIMITED, an Irish private limited company ("IRELAND NEWCO"), and pursuant to the
terms of a Joint Development and Operating Agreement dated as of the date hereof
(as amended at any time, the "JDOA"): (i) the Company has acquired 16,020 shares
of the issued and outstanding ordinary shares of Bermuda Newco, par value
U.S.$1.00 per share (the "BERMUDA NEWCO COMMON STOCK"), and (ii) EIS has
acquired 3,980 non-voting shares of the issued and outstanding non-voting shares
of Bermuda Newco Common Stock; and, as of the date hereof, Ireland Newco has
entered into license agreements with (i) ELAN CORPORATION, PLC, an Irish public
limited company and parent corporation of EIS ("ELAN"; such agreement, as
amended at any time, the "ELAN LICENSE AGREEMENT"), and (ii) the Company (as
amended at any time, the "DOV LICENSE AGREEMENT"; together with the Elan License
Agreement, the "LICENSE AGREEMENTS").
C. The Company and EIS are executing and delivering on the date
hereof a Registration Rights Agreement in the form attached hereto as EXHIBIT D
(the "REGISTRATION RIGHTS AGREEMENT"; together with this Agreement, the
Securities, the JDOA, the License Agreements and each other document or
instrument executed and delivered in connection with the transactions
contemplated hereby and by the JDOA, the "TRANSACTION DOCUMENTS") in respect of
the Common Stock underlying the Warrant, the Special Stock and the Notes, and
any other Common Stock that may at any time be acquired or owned by EIS or any
of its affiliates or permitted transferees.
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A G R E E M E N T:
The parties agree as follows:
SECTION 1. CLOSINGS. (a) TIME AND PLACE. The closing of the
transactions contemplated hereby (the "CLOSING") shall occur as of the date
hereof (the "CLOSING DATE"), at the offices of counsel to EIS in New York City.
(b) ISSUANCE OF SECURITIES. At the Closing, the Company shall issue
and sell to EIS, and EIS shall purchase from the Company (i) (A) initially
324,090 shares of Common Stock, and 354,643 shares of Special Stock (which
issuance may be made, notwithstanding the foregoing, within 10 business days of
the Closing) and (B) the Warrant provided, that if the effective purchase price
per share of Common Stock in the Company's next BONA FIDE financing transaction
after the date hereof, whether in the form of Common Stock or securities
exchangeable, exercisable or convertible for or into Common Stock (any such
security, a "COMMON STOCK EQUIVALENT") which transaction closes within 18 months
of the Closing (the "SUBSEQUENT FINANCING"), is less than U.S.$3.68,
simultaneously with the closing of the Subsequent Financing, the Company shall
thereafter be obligated (at the request of EIS) to issue EIS additional shares
of Common Stock equal to the equal to the excess of (I) the quotient obtained by
dividing (x) U.S.$3,000,000 by (y) the product of (1) 1.2 and (2) such lower
share price over (II) 678,733, and (ii) the Notes, the principal amounts of
which shall be disbursed by EIS at or subsequent to the Closing in accordance
with their terms.
(c) PURCHASE PRICE. The purchase price for the Common Stock, Special
Stock and Warrant shall be U.S.$3,000,000 (the "PURCHASE PRICE").
(d) DELIVERY. At the Closing, EIS shall pay the Purchase Price and
the initial disbursements under the Notes, by wire transfer to an account
designated by the Company and the parties hereto shall execute and deliver to
each other, as applicable: (i) a certificate or certificates for the Shares;
(ii) the Warrant; (iii) the Notes; (iv) certificates as to the incumbency of the
officers of the Company executing this Agreement; and (v) each of the other
documents or instruments to be executed in connection herewith. In addition, at
the Closing, the Company shall cause to be delivered to EIS an opinion of
counsel in form attached hereto as EXHIBIT E.
(e) EXEMPTION FROM REGISTRATION. The Securities and any underlying
shares of Common Stock will be issued under an exemption or exemptions from
registration under the Securities Act of 1933, as amended (the "SECURITIES
ACT"); accordingly, the certificates evidencing the Shares, the Warrant and the
Notes, and any shares of Common Stock issuable upon the exercise, conversion or
exchange of any of the Securities shall, upon issuance, contain a legend,
substantially in the form as follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR ANY SECURITIES LAWS OF A STATE OR
OTHER JURISDICTION AND MAY NOT UNDER ANY
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CIRCUMSTANCES BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF (OTHER THAN
TO AN AFFILIATE OR AS OTHERWISE PERMITTED IN THE AGREEMENT PURSUANT TO
WHICH THEY WERE ISSUED) EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR
BLUE SKY LAWS, OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE
SECURITIES ACT (OR ANY SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO
THE DISPOSITION OF SECURITIES) TOGETHER WITH AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR APPLICABLE STATE SECURITIES LAWS.
(f) REGISTRATION RIGHTS AGREEMENT. On the date hereof, each of the
Company and EIS is executing and delivering the Registration Rights Agreement,
covering the Shares issuable upon conversion or exercise, as the case may be, of
any of the Securities.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to EIS, as of the date hereof, as
follows:
(a) ORGANIZATION. The Company is duly organized, validly existing
and in good standing under the laws of the State of New Jersey and has all
requisite corporate power and authority to own and lease its properties, to
carry on its business as presently conducted and as proposed to be conducted and
to consummate the transactions contemplated hereby. The Company is qualified and
in good standing to do business in jurisdictions set forth on SCHEDULE 2(a),
which constitute all the jurisdictions in which the nature of the business
conducted or the property owned by it requires such qualification, except where
the failure to so qualify would not have a material adverse effect on the
business, prospects, properties or condition (financial or otherwise) of the
Company (such effect including as a result of such failure is hereinafter called
a "MATERIAL ADVERSE EFFECT").
(b) CAPITALIZATION. The authorized capital stock of the Company
consists of (i) 10,000,000 shares of Common Stock, of which 2,580,000 have been
issued and are outstanding and 750,000 have been reserved for issuance upon
exercise of options granted and to be granted to employees, officers, directors
and consultants, and (ii) 5,000,000 shares of preferred stock, par value
U.S.$1.00 per share (the "PREFERRED STOCK") of which 440,000 shares of Series A
Preferred Stock have been issued and are outstanding.
(ii) Except as listed in SCHEDULE 2(b), as of the date hereof there
are no options, warrants or other rights or any Common Stock Equivalents
outstanding to purchase or otherwise acquire, or any securities convertible,
exchangeable or exercisable for or into, or any agreements to issue, any of the
Company's capital stock. Other than as set forth in this Agreement and as
described in SCHEDULE 2(b), there are no agreements, arrangements or
understandings concerning the voting, acquisition or disposition of any of the
Company's securities or any Common Stock Equivalents to which the Company is a
party or of which it
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is otherwise aware, and, other than as set forth in SCHEDULE 2(b) or in the
Registration Rights Agreement, there are no agreements to register any of the
Company's outstanding securities under the U.S. federal securities acts relating
to securities that have not already been registered under the Securities Act.
(iii) All of the outstanding shares of capital stock of the Company
have been issued in accordance with applicable U.S. federal and state laws and
regulations (or exemptions therefrom) governing the sale and purchase of
securities, all such shares have been duly and validly issued and are fully paid
and non-assessable, and none of such shares carries preemptive or similar
rights.
(c) AUTHORIZATION OF TRANSACTION DOCUMENTS. The Company has full
corporate power and authority to execute and deliver this Agreement and each of
the other Transaction Documents, and to perform its obligations hereunder and
thereunder. The execution, delivery and performance by the Company of the
Transaction Documents have been duly authorized by all requisite corporate
actions by the Company; and the Transaction Documents, including the issuance
and sale of the Securities, have been duly executed and delivered by the Company
and are the valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms.
(d) NO VIOLATION. Subject to compliance with applicable requirements
of the Securities Act or any other applicable securities laws of a state or
other jurisdiction and Hart-Scott-Rodino (upon conversion or exchange of the
Notes), the execution, delivery and performance by the Company of the
Transaction Documents, including the issuance and sale of the Securities, and
compliance with the provisions thereof, will not (i) violate any provision of
applicable law, statute, rule or regulation applicable to the Company or any
ruling, writ, injunction, order, judgment or decree of any court, arbitrator,
administrative agency or other governmental body applicable to the Company or
any of their respective properties or assets or (ii) conflict with or result in
a breach of any of the terms, conditions or provisions of, or constitute (with
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in the creation of,
any Encumbrance (as defined below) upon any of the properties or assets of the
Company under its Certificate of Incorporation, as amended, or bylaws, or any
material contract to which the Company is a party, except where such violation,
conflict or breach would not, individually or in the aggregate, have a Material
Adverse Effect. As used herein, "ENCUMBRANCE" shall mean any liens, charges,
encumbrances, equities, claims, options, proxies, pledges, security interests,
or other similar rights of any nature that would, individually or in the
aggregate, have a Material Adverse Effect.
(e) APPROVALS. Except as set forth on SCHEDULE 2(e), no material
permit, authorization, consent or approval of or by, or any notification of or
filing with, any person or entity (governmental or otherwise) is required in
connection with the execution, delivery or performance of the Transaction
Documents, including the issuance and sale of the Securities, by the Company,
other than the approval by the Company's stockholders of the transactions set
forth in this Agreement and the Transaction Documents, and any applicable notice
and filing requirements under the Securities Act and Hart-Scott-Rodino (upon
conversion and/or exchange of the Notes).
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(f) FILINGS, TAXES AND FINANCIAL STATEMENTS. (i) The Company has
filed in a timely manner all material federal, state, local and foreign tax
returns, reports and filings (collectively, "RETURNS"), including income,
franchise, property and other taxes, and has paid or accrued the appropriate
amounts reflected on such Returns. Copies of such returns are included in
SCHEDULE 2(f)(i). None of the Returns have been audited or challenged, nor has
the Company received any notice of challenge nor have any of the amounts or
other data included in the Returns been challenged or reviewed by any
governmental authority. Included in SCHEDULE 2(f)(i) are complete and correct
copies of the unaudited balance sheets of the Company as at December 31, 1997
and 1998 and the related statements of operations and cash flows for the years
ended December 31, 1997 and 1998 (collectively the "FINANCIAL STATEMENTS"). The
Financial Statements have been prepared in conformity with generally accepted
accounting principles ("GAAP") consistently applied throughout the periods
indicated, except for the omission of footnotes in the Financial Statements, and
present fairly the financial condition, results of operations and cash flows of
the Company as of the respective dates and for the respective periods indicated.
(ii) Except as listed on SCHEDULE 2(f)(ii), which sets forth a true
and accurate list and description of any employee benefit plans maintained or
sponsored by the Company or to which the Company is required to make
contributions, the Company does not maintain, sponsor, is not required to make
contributions to or otherwise have any liability with respect to any pension,
profit sharing, thrift or other retirement plan, employee stock ownership plan,
deferred compensation, stock ownership, stock purchase, performance share, bonus
or other incentive plan, severance plan, health or group insurance plan, welfare
plan, or other similar plan, agreement, policy or understanding (whether written
or oral), whether or not such plan is intended to be qualified under Section
401(a) of the Code, within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, which plan covers any
employee or former employee of the Company.
(g) ABSENCE OF CHANGES. Except as set forth on SCHEDULE 2(g), since
December 31, 1998, there has not been (a) any change having a Material Adverse
Effect in the business, properties, condition (financial or otherwise),
operations or prospects of the Company; (b) any damage, destruction or loss,
whether or not covered by insurance having a Material Adverse Effect; (c) any
declaration, setting aside or payment of any dividend or other distribution or
payment (whether in cash, stock or property) in respect of the capital stock of
the Company, or any redemption or other acquisition of such stock by the
Company; (d) any disposal or lapse of any trade secret, invention, patent,
trademark, trademark registration, service mark, service mark registration,
copyright, copyright registration, or any application therefor or filing in
respect thereof having a Material Adverse Effect; (e) loss of the services of
any of the key officers or key employees of the Company having a Material
Adverse Effect; (f) any incurrence of or entry into any liability, mortgage,
lien, commitment or transaction, including without limitation, any borrowing (or
assumption or guarantee thereof) or guarantee of a third party's obligations, or
capital expenditure (or lease in the nature of a conditional purchase of capital
equipment) in excess of U.S.$15,000; or (g) any material change by the Company
in accounting methods or principles or (h) any change in the assets,
liabilities, condition (financial or otherwise), results of operations or
prospects of the Company, except changes that have not had, individually or in
the aggregate, a Material
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Adverse Effect.
(h) NO LIABILITIES. Except as set forth in SCHEDULE 2(h), or as set
forth in its Financial Statements, the Company has not incurred or suffered any
liability or obligation, matured or unmatured, contingent or otherwise, except
in the ordinary course of business (not exceeding U.S.$100,000) that has not,
individually or in the aggregate, had a Material Adverse Effect.
(i) PROPERTIES AND ASSETS; ETC. (i) The Company owns, licenses or
leases all of its properties and assets, including patents, patent applications,
continuations, continuations-in-part, extensions, trademarks and trademark
applications, know-how and other intellectual property, subject in each case, to
no Encumbrances, and except where the failure to own, license or lease such
properties would not have a Material Adverse Effect. Except as set forth on
SCHEDULE 2(i)(i) or in the DOV License Agreement, (i) all the Company's patents,
trademarks, service marks, trade names, and copyrights are owned or licensed by
the Company free and clear of all Encumbrances and are valid and duly issued or
existing; none of the Company's rights in or use of such patents, trademarks,
service marks, trade names or copyrights has been, or to the best of the
Company's knowledge, is currently being threatened to be, challenged; to the
best of the Company's knowledge, no current or currently planned product based
upon the Company's intellectual property would infringe any patent, trademark,
service mark, trade name or copyright of any other person or entity issued or
pending on the Closing Date if the Company were to distribute, sell or
manufacture such products; and the Company has not received written notice, of
any actual or threatened claim by any person or entity alleging any infringement
by the Company of a patent, trademark, service mark, trade name or copyright
possessed by such person; (ii) all such patents, trademark registrations,
service mark registrations, trade name registrations and copyrights and
copyright registrations, whether foreign or domestic, have been duly issued and
have not been canceled, abandoned or otherwise terminated; and (iii) all the
Company's patent applications, trademark applications, service mark
applications, trade name applications and copyright applications have been duly
filed.
(ii) SCHEDULE 2(i)(ii) lists the material contracts of the Company,
and each is a legal and valid agreement binding upon each of the parties thereto
and is in full force and effect except where the expiration or termination has
not, individually or in the aggregate had a Material Adverse Effect. To the best
knowledge of the Company, there is no breach or default by any party thereunder
that has had a Material Adverse Effect.
(iii) Except as set forth in SCHEDULE 2(i)(iii), the Company has and
maintains adequate and sufficient insurance, including liability, casualty and
products liability insurance, covering risks associated with its business,
properties and assets, including insurance that is customary for companies
similarly situated.
(iv) Except as would not have a Material Adverse Effect, the
Company, its business and properties and assets are in compliance, in all
material respects, with all applicable laws and regulations, including without
limitation, those relating to (a) health, safety and employee relations, (b)
environmental matters, including the discharge of any hazardous or potentially
hazardous materials into the environment, and (c) the development,
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commercialization and sale of pharmaceutical and biotechnology products,
including all applicable regulations of the U.S. Food and Drug Administration
and comparable foreign regulatory authorities.
(j) LEGAL PROCEEDINGS, ETC. There is no legal, administrative,
arbitration or other action or proceeding or governmental investigation pending
or to the best of the Company's knowledge threatened against the Company, or any
director, officer or employee of the Company. The Company is not in violation of
or default under, any material laws, judgments, injunctions, orders or decrees
of any court, governmental department, commission, agency, instrumentality or
arbitrator applicable to its business.
(k) DISCLOSURE. The representations and warranties set forth herein
and in the other Transaction Documents, when viewed collectively, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements contained herein and therein not misleading in
light of circumstances in which they were made. The Company has disclosed herein
and in the other Transaction Documents and in the Schedules attached hereto all
matters, facts and circumstances that are material to the Company and any
contemplated investment in the Company of the type contemplated hereby.
(l) BROKERS OR FINDERS. The Company has not retained any investment
banker, broker or finder in connection with the transactions contemplated by the
Transaction Documents other than Aurora Capital LLC.
(m) YEAR 2000. The Company, uses, licenses, leases or owns, directly
or indirectly, by or on behalf of or for the account of the Company, whether in
development, in production form or otherwise, electronic data processing
systems, information systems, computer software programs, program
specifications, charts, procedures, input data, routines, data bases, report
layouts, formats, record file layouts, diagrams, functional specifications,
narrative descriptions, flow charts and other related material (the "SOFTWARE")
licensed or owned by the Company correctly recognizes and processes four-digit
year-dates, including the correct recognition of February 29th during the leap
year, and will continue to function properly with regard to dates before, during
and after transition to the year 2000.
SECTION 3. REPRESENTATION AND WARRANTIES OF EIS. EIS hereby
represents and warrants to the Company, as of the date hereof, as follows:
(a) ORGANIZATION. EIS is a corporation duly organized and validly
existing and in good standing under the laws of Bermuda and has all requisite
corporate power and authority to own and lease its properties, to carry on its
business as presently conducted and as proposed to be conducted and to
consummate the transactions contemplated hereby. EIS is qualified and in good
standing to do business in each jurisdiction in which the nature of the business
conducted or the property owned by it requires such qualification, except where
the failure to so qualify would not reasonably be expected to have a Material
Adverse Effect on EIS.
(b) AUTHORIZATION OF AGREEMENT. EIS has full legal right, power and
authority to execute and deliver this Agreement and each other Transaction
Document to which it is a party, and to purchase and accept the Notes, and
perform its obligations hereunder and
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thereunder, which have been duly authorized by all requisite corporate action.
The execution, delivery, and performance by EIS of this Agreement and each other
Transaction Document to which it is a party, have been duly authorized by all
requisite actions by EIS; and this Agreement and each other Transaction Document
to which it is a party, including the purchase of Securities have been duly
executed and delivered by and are the valid and binding obligations of EIS,
enforceable against it in accordance with its terms.
(c) NO CONFLICTS. The execution, delivery and performance by EIS of
this Agreement and each Transaction Document and compliance with provisions
hereof and thereof by EIS, will not (i) violate any provisions of applicable
law, statute, rule or regulation applicable to EIS or any ruling, written,
injunction, order, judgment or decree of any court, arbitration, administrative
agency of other governmental body applicable to EIS of any of its properties or
assets or (ii) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with notice or lapse of time to
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any Encumbrance upon any of
the properties or assets of EIS under the Memorandum and Articles of Association
of EIS or any material contract to which EIS is party, except where such
violation conflict or breach would not, individually or in the aggregate, have a
Material Adverse Effect on EIS.
(d) APPROVALS. No permit, authorization, consents or approval of or
by, or any notification of or filing with, any person or entity (governmental or
otherwise) is required in connection with the execution, delivery or performance
of this Agreement or the Transaction Documents by EIS.
(e) INVESTMENT REPRESENTATIONS. (i) EIS is sophisticated in
transactions of this type and capable of evaluating the merits and risks of the
transactions described herein and in the other Transaction Documents, and has
the capacity to protect its own interests. EIS has not been formed solely for
the purpose of entering into the transactions described herein and therein and
is acquiring the Securities for investment for its own account, not as a nominee
or agent, and not with the view to, or for resale, distribution or
fractionalization thereof, in whole or in part, and no other person has a direct
or indirect interest, beneficial or otherwise in the Securities; provided, that
EIS shall be permitted to convert or exchange such Securities.
(ii) EIS does not plan to enter into any contract, undertaking,
agreement or arrangement with any person to sell, transfer or pledge the Shares.
(iii) EIS acknowledges its understanding that the private placement
and sale of the Securities is exempt from registration under the Securities Act
and Section 4(2) of the Securities Act and the provisions of Regulation D
promulgated thereunder ("REGULATION D"). In furtherance thereof, EIS represents
and warrants that it is an "accredited investor" as that term is defined in
Regulation D, has the financial ability to bear the economic risk of its
investment, has adequate means for providing for its current needs and personal
contingencies and has no need for liquidity with respect to its investment in
the Company.
(iv) EIS agrees that it shall not sell or otherwise transfer any of
the Securities without registration under the Securities Act or pursuant to an
opinion of counsel reasonably satisfactory to the Company's counsel that an
exemption from registration is available, and
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fully understands and agrees that it must bear the total economic risk of its
purchase for an indefinite period of time because, among other reasons, none of
the Securities have been registered under the Securities Act or under the
securities laws of any applicable state or other jurisdiction and, therefore,
cannot be resold, pledged, assigned or otherwise disposed of unless subsequently
registered under the Securities Act and under the applicable securities laws of
such states or jurisdictions or an exemption from such registration is
available. EIS understands that the Company is under no obligation to register
the Securities on its behalf with the exception of certain "demand" and
"piggyback" registration rights, with respect to certain of the Securities, as
provided in the Registration Rights Agreement. EIS understands the lack of
liquidity and restrictions on transfer of the Securities and that this
investment is suitable only for a person or entity of adequate financial means
that has no need for liquidity of this investment and that can afford a total
loss of its investment.
(v) EIS understands that the Company is relying on its
representations and warranties herein.
(vi) EIS understands that no Federal or state agency has reviewed
the private placement of the Securities nor made any finding or determination as
to the fairness of an investment in the Securities. EIS understands the risks
of, and other considerations relating to, a purchase of the Securities,
including the risk of losing its entire investment. EIS acknowledges that it has
prior investment experience, including investments of a speculative nature in
non-registered or unlisted securities, and it has read all of the documents
furnished or made available by the Company to it and has evaluated the merits
and risks of such an investment. EIS recognizes the highly speculative nature of
this investment and is able to bear the total economic risk it hereby assumes.
(f) BROKERS OR FINDERS. EIS has not retained any investment banker,
broker or finder in connection with the transactions contemplated by the
Transaction Documents.
(g) LITIGATION. There is no litigation or governmental,
administrative, arbitration or other action or proceeding or governmental
investigation pending or threatened against EIS or any director or officer or
employee thereof that, if determined adversely to EIS, (i) may have a Material
Adverse Effect on EIS or any of its properties or assets or (ii) disturb or
challenge the validity or performance of this Agreement or the other Transaction
Documents to which EIS is a party.
(h) FINANCIAL ABILITY TO CLOSE. EIS has concluded all necessary
arrangements with institutional sources to provide it with sufficient funds (i)
to close the transactions contemplated by this Agreement and each Transaction
Document to which it is party and (ii) to advance and lend the funds in exchange
for, as provided in, the Notes.
(i) DUE DILIGENCE. EIS has received written information from the
Company relating to its business and prospects and has had adequate opportunity
to conduct the business, financial and legal due diligence it considers
necessary to close the transactions contemplated by the Transaction Documents.
SECTION 4. COVENANTS OF THE PARTIES. (a) OPERATING COVENANTS. From
the date hereof for so long as either of the Notes remain outstanding, in
addition to the covenants
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set forth in the Notes, the Company shall not effect any of the following
without the consent of EIS: (a) the sale of all or any material portion of the
properties or assets of the Company, or the grant of any option or right for the
same; (b) any liquidation or winding up the Company; (c) any material line of
business change of the Company outside of the pharmaceutical industry; (d) any
material transactions with affiliates other than with BONA FIDE arms length
terms; or (e) the repurchase or redemption of any outstanding indebtedness or
Common Stock.
(b) FULLY-DILUTED STOCK OWNERSHIP. (i) Notwithstanding any other
provision of this Agreement, in the event that EIS shall have determined that at
any time it (together with its Affiliates, if applicable) holds or has the right
to receive Common Stock (or securities or rights, options or warrants
exercisable, exchangeable or convertible for or into Common Stock) representing
in the aggregate in excess of 19.9% of the Company's outstanding Common Stock on
a fully diluted basis (i.e., assuming the exercise, exchange or conversion of
such securities beneficially owned by EIS or its affiliates, but not the
exercise, exchange or conversion of any other similar securities), EIS shall
have the right, in its sole discretion, rather than acquiring such securities
from the Company, to exchange such number of securities, as are necessary to
bring its holdings to below the excess of 19.9% of the voting securities of the
Company, for non-voting, liquidation preference equities of the Company,
including without limitation a new series of convertible preferred stock (the
"CONVERTIBLE PREFERRED") (which shall be reasonably satisfactory to each of the
Company and EIS), which equity securities shall be entitled to all of the other
rights and benefits of the Common Stock. The Convertible Preferred shall (i) not
bear any dividend, but shall participate fully with the Common Stock on any
declared or paid dividends, (ii) have a perpetual term, (iii) contain customary
adjustments for stock splits, recapitalizations and similar transactions, (iv)
not be entitled to vote together with the holders of Common Stock, including for
directors, but shall vote as a separate class on customary matters for similar
issues of convertible preferred stock and (v) be convertible at any time, in the
sole discretion of EIS, into shares of Common Stock on a share for share basis.
Adjustments shall be made for stock splits, reclassifications, reorganizations
and similar transactions.
(c) USE OF PROCEEDS. The Company shall use within 18 months of
receipt U.S.$1,001,250 of the proceeds of the sale of the Shares solely to meet
its developmental funding obligations to Bermuda Newco as described in the JDOA;
(ii) the issuance and funding of the Exchangeable Note solely to meet its
initial capitalization and funding obligations to Bermuda Newco; and (iii) the
issuance and funding of the Convertible Note solely to meet its developmental
funding obligations to Bermuda Newco, as described in the License Agreements and
the JDOA.
(d) CONFIDENTIALITY; NON-DISCLOSURE. (i) Subject to clauses (ii) and
(iii) below, from and after the date hereof, and except as may be required by
applicable law or judicial or administrative process, neither the Company nor
EIS (nor their respective affiliates) shall disclose to any person or entity
this Agreement or the other Transaction Documents or the contents thereof or the
parties thereto, except that (A) such parties may make such disclosure (x) to
their directors, officers, employees and advisors, so long as they shall have
advised such persons of the obligation of confidentiality herein and for whose
breach or default the disclosing shall be responsible, (B) the Company may make
such disclosure to proposed
10
<Page>
investors in connection with the Subsequent Financing and American Cyanamid
Company and Neurocrine Biosciences, Inc. pursuant to and in accordance with the
terms of DOV's existing agreements with such entities. EIS shall be entitled to
(i) compel the Company to enforce any confidentiality agreement obtained
pursuant to the previous clause (B) and (ii) obtain injunctive or other
equitable relief in respect of any breach or threatened breach of the foregoing
covenants without the requirement of posting a bond or other collateral.
(ii) Prior to issuing any press release or public disclosure
in respect of this Agreement or the transactions contemplated hereby, the party
proposing such issuance shall obtain the consent of the other party to the
contents thereof, which consent shall not be unreasonably withheld or delayed;
it being understood that if such second party shall not have responded to such
consent request within one business day, such consent shall be deemed given.
(h) FURTHER ASSURANCES. From and after the date hereof, each of the
parties hereto agree to do or cause to be done such further acts and things and
deliver or cause to be delivered to each other such additional assignments,
agreements, powers and instruments, as each may reasonably require or deem
advisable to carry into effect the purposes of the Transaction Documents or to
better to assure and confirm unto each other their respective rights, powers and
remedies hereunder and thereunder.
SECTION 5. PLEDGE OF COMPANY AND NEWCO STOCK. In order to secure the
Company's obligations hereunder and under the other Transaction Documents,
including without limitation, EIS's rights to exchange the indebtedness
underlying the Exchangeable Note (as described below) for (i) shares of Common
Stock (the "CONVERSION RIGHT") or (ii) shares of Newco Common Stock (the "NEWCO
EXCHANGE RIGHT"), the Company hereby pledges, assigns and sets over to EIS, all
the Company's right, title and interest in and to (i) all shares of Common Stock
issuable upon exercise of the Exchange Right and (ii) all shares of Bermuda
Newco issuable upon exercise of the Newco Exchange Right for such period of time
as the Exchange Right and Newco Exchange Right shall be exercisable. The Company
shall cause to be delivered to EIS all of the certificates evidencing such
shares, and cause to be filed with the Secretary of State of the State of New
Jersey an appropriate UCC-1 financing statement in respect of such pledge,
assignment or setting over, and take all other necessary, appropriate and
customary actions in connection therewith. Such pledge shall be governed by the
applicable provisions of the New Jersey Uniform Commercial Code. Upon exercise
of the Exchange Right and/or the Newco Exchange Right, EIS shall be entitled to
keep and retain such share certificates, which shall then be owned by EIS in
accordance with the terms thereof.
SECTION 6. CERTAIN RIGHTS OF EIS. (a) COMPANY BOARD OF DIRECTORS.
For so long as (i) EIS and/or its affiliates collectively own securities that
represent ownership of at least 10% of the Common Stock, on a fully diluted
basis, assuming full conversion of all Common Stock Equivalents, the Company
shall use its best efforts to cause the director appointed by EIS ("EIS
DIRECTOR") to be elected to the Company's board of directors, by including the
EIS Director in the management slate of directors at each meeting of the
stockholders at which the election of directors occurs.
11
<Page>
(b) PURCHASE RIGHTS. From the date hereof until the date which is
the fourth anniversary of the date hereof, EIS and/or its affiliates, in its
sole discretion, shall be entitled to participate in any equity financing (the
"PURCHASE RIGHT") effected by the Company, in order for EIS to maintain its
then-current PRO RATA percentage ownership interest in the equity securities (on
a fully diluted basis; assuming the conversion into Common Stock of the
Exchangeable Note and any Preferred Stock, but not the Convertible Note) of the
Company, after giving effect to the shares of the Common Stock underlying such
offered securities. Such participation by EIS shall be on the same terms and
conditions offered to any other potential investor in such offering; provided,
that such Purchase Right shall not apply to (i) any BONA FIDE offering of
securities to the public pursuant to the Securities Act or (ii) an offering of
securities (A) solely in connection with an acquisition of assets, merger,
consolidation or similar transaction with an unaffiliated third party or (B) in
connection with a stock option plan.
(c) CONVERSION AND EXCHANGE RIGHTS. EIS shall have the right (i) to
convert the Convertible Note into shares of Common Stock as set forth in the
Convertible Note and (ii) to convert or exchange the Exchangeable Note into
shares of Common Stock as set forth in the Exchangeable Note.
SECTION 7. SURVIVAL AND INDEMNIFICATION. (a) SURVIVAL PERIOD. The
representations and warranties of the Company and EIS contained herein shall
survive for a period of 15 months from and after the date hereof.
(b) INDEMNIFICATION. In addition to all rights and remedies
available to the parties hereto at law or in equity, the parties (each, in such
capacity, AN "INDEMNIFYING PARTY"; together, "INDEMNIFYING PARTIES") shall
indemnify each other as corporate entities (EIS and the Company), its
stockholders, officers, directors and assigns, their affiliates, and its
affiliates' stockholders, officers, directors, employees, agents,
representatives, successors and assigns (collectively, the "INDEMNIFIED
PERSON"), and save and hold each Indemnified Person harmless from and against
and pay on behalf of or reimburse each such Indemnified Person, as and when
incurred, for any and all loss, liability, demand, claim, action, cause of
action, cost, damage, deficiency, tax, penalty, fine or expense, whether or not
arising out of any claims by or on behalf of such Indemnified Person or any
third party, including interest, penalties, reasonable attorneys' fees and
expenses and all amounts paid in investigation, defense or settlement of any of
the foregoing (collectively, "LOSSES"), that any such Indemnified Person may
suffer, sustain incur or become subject to, as a result of, in connection with,
relating or incidental to or by virtue of:
(i) any misrepresentation or breach of warranty on the part of
the Indemnifying Party in the case of the Company under Section 2 of this
Agreement or in the case of EIS under Section 3 of this Agreement or any of the
other Transaction Documents; or
(ii) any nonfulfillment, default or breach of any covenant or
agreement on the part of the Indemnifying Party under Section 4 of this
Agreement or any of the other Transaction Documents.
(c) MAXIMUM RECOVERY. Notwithstanding anything to this Agreement to
the
12
<Page>
contrary, in no event shall the Indemnifying Parties be liable in the case of
the Company for indemnification under this Section 7 in an amount in excess of
the aggregate of the purchase price paid for the Shares and the amounts advanced
and not repaid under the Notes or in the case of EIS for indemnification
hereunder in an amount in excess of such same aggregate. No Indemnified Person
shall assert any such claim unless Losses in respect thereof incurred by any
Indemnified Person, when aggregated with all previous Losses hereunder, equal or
exceed U.S.$50,000, but at such time that an Indemnified Person is entitled to
assert a claim, such claim shall include all Losses covered by this Section 7.
(d) EXCEPTION. Notwithstanding the foregoing, upon judicial
determination that is final and no longer appealable, that the act or omission
giving rise to the indemnification set forth above resulted primarily out of or
was based primarily upon the Indemnified Person's negligence (unless such
Indemnified Person's negligence was based upon the Indemnified Person's reliance
in good faith upon any of the representations, warranties, covenants or promises
made by the Indemnifying Party herein) the Indemnifying Party shall not be
responsible for any Losses sought to be indemnified in connection therewith, and
the Indemnifying Party shall be entitled to recover from the Indemnified Person
all amounts previously paid in full or partial satisfaction of such indemnity,
together with all costs and expenses (including reasonable attorneys fees) of
the Indemnifying Party reasonably incurred in connection with the Indemnified
Person's claim for indemnity, together with interest at the rate per annum
publicly announced by Morgan Guaranty Trust Company as its prime rate from the
time of payment of such amounts to the Indemnified Person until repayment to the
Indemnifying Party.
(e) INVESTIGATION. All indemnification rights hereunder shall
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby to the extent provided in Section 7(g) below,
irrespective of any investigation, inquiry or examination made for or on behalf
of, or any knowledge of the Indemnified Person or the acceptance of any
certificate or opinion.
(f) CONTRIBUTION. If the indemnity provided for in this Section 7
shall be, in whole or in part, unavailable to any Indemnified Person, due to
Section 7(b) being declared unenforceable by a court of competent jurisdiction
based upon reasons of public policy, so that Section 7(b) shall be insufficient
to hold each such Indemnified Person harmless from Losses which would otherwise
be indemnified hereunder, then the Indemnifying Party and the Indemnified Person
shall each contribute to the amount paid or payable for such Loss in such
proportion as is appropriate to reflect not only the relative benefits received
by the Indemnifying Party on the one hand and the Indemnified Person on the
other, but also the relative fault of the Indemnifying Party and be in addition
to any liability that the Indemnifying Party may otherwise have. The indemnity,
contribution and expense reimbursement obligations that the Indemnifying Party
has under this Section 7 shall survive the expiration of the Transaction
Documents. The parties hereto further agree that the indemnification and
reimbursement commitments set forth in this Agreement shall apply whether or not
the Indemnified Person is a formal party to any such lawsuit, claims or other
proceedings.
(g) LIMITATION. No claim shall be brought by an Indemnified Person
in respect
13
<Page>
of any misrepresentation or breach of warranty under this Agreement
after one year from the date hereof; and any claim for nonfulfillment, default
or breach of any covenant shall be brought within one year of the date of that
such Indemnified Person became aware or should have become aware of the
nonfulfillment, default or breach. Except as set forth in the previous sentence
and in Section 7(c) above, this Section 7 is not intended to limit the rights or
remedies otherwise available to any party hereto with respect to this Agreement
or the Transaction Documents.
SECTION 8. NOTICES. All notices, demands and requests of any kind to
be delivered to any party in connection with this Agreement shall be in writing
and shall be deemed to have been duly given if personally or hand delivered or
if sent by an internationally-recognized overnight delivery or by registered or
certified airmail, return receipt requested and postage prepaid, addressed as
follows:
(i) if to the Company, to:
DOV Pharmaceutical Inc.
One Parker Plaza
Fort Lee, New Jersey 07024
Attn: Chief Executive Officer
with a copy to:
Friedman Siegelbaum LLP
399 Park Avenue
20th Floor
New York, New York 10022
Attention: J. Robert Horton, Esq.
(ii) if to EIS, to:
Elan International Services, Ltd.
Flatts, Smiths Parish
Bermuda, FL 04
Attention: Director
with a copy to:
Brock Silverstein McAuliffe LLC
153 East 53rd Street , 56th Floor
New York, New York 10022
Attention: David Robbins, Esq.
or to such other address as the party to whom notice is to be given may have
furnished to the other party hereto in writing in accordance with provisions of
this Section 8. Any such notice or communication shall be deemed to have been
received (i) in the case of personal or hand delivery, on the date of such
delivery, (ii) in the case of an internationally-recognized overnight delivery
service, on the second business day after the date when sent and (iii) in the
14
<Page>
case of mailing, on the fifth business day following that day on which the piece
of mail containing such communication is posted. Notice hereunder may be given
on behalf of the parties by their respective attorneys.
SECTION 9. ENTIRE AGREEMENT. This Agreement and the other
Transaction Documents contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto.
SECTION 10. AMENDMENTS. This Agreement may not be modified or
amended, or any of the provisions hereof waived, except by written agreement of
the Company and EIS.
SECTION 11. COUNTERPARTS AND FACSIMILE. The Transaction Documents
may be executed in any number of counterparts, and each such counterpart hereof
shall be deemed to be an original instrument, but all such counterparts together
shall constitute one agreement. Each of the Transaction Documents may be signed
and delivered to the other party by facsimile transmission; such transmission
shall be deemed a valid signature.
SECTION 12. HEADINGS. The section and paragraph headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of the Agreement.
SECTION 13. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the substantive (as opposed to procedural) laws of
the State of New York, without giving effect to principles thereof relating to
conflicts of laws. Each of the parties hereby irrevocably submits to the
jurisdiction of any New York State or United States Federal court sitting in the
County, City and State of New York over any action or proceeding arising out of
or relating to this Agreement or the other Transaction Documents; and each
hereby waives the defense of an inconvenient forum for the maintenance of such
an action.
SECTION 14. EXPENSES. Each of the parties shall be responsible for
its own costs and expenses incurred in connection with the transactions
contemplated hereby and by the other Transaction Documents.
SECTION 15. PUBLIC RELEASES; ETC. Subject to Section 4(d), neither
the Company nor EIS shall, except as required by applicable law or judicial or
administrative process or pursuant to arrangements with financial, accounting or
legal advisors, disclose to any person or entity, publicly or privately, this
Agreement or the substance of the transactions contemplated hereby, without the
prior written consent of the other party.
SECTION 16. SCHEDULES, ETC. All statements contained in any exhibit
or schedule delivered by or on behalf of the parties hereto, or in connection
with the transactions contemplated hereby, are an integral part of this
Agreement and shall be deemed representations and warranties hereunder.
SECTION 17. ASSIGNMENTS AND TRANSFERS. This Agreement and the other
15
<Page>
Transaction Documents may be transferred or assigned, in whole or in part, (a)
by EIS to its affiliates and/or subsidiaries or other entities in which EIS or
its affiliates may have an interest, by contract, ownership of securities or
otherwise, and that are in the nature of financing vehicles or similar entities
for EIS or its affiliates, or (b) by the Company to its affiliates and/or
subsidiaries; provided, that in each case, the transferor shall continue to be
liable and obligated for its obligations hereunder. Subject to the foregoing,
this Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. Other than as set forth above, neither this Agreement nor the
other Transaction Documents may be transferred or assigned by either party
without the prior written consent of the other.
16
<Page>
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Agreement as of the date first written above.
DOV PHARMACEUTICAL, INC.
By:/s/ Arnold Lippa
----------------
Arnold Lippa
CEO
ELAN INTERNATIONAL SERVICES, LTD.
By:__________________________________
Name:
Title:
17
<Page>
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Agreement as of the date first written above.
DOV PHARMACEUTICAL, INC.
By:_________________________________
Arnold Lippa
CEO
ELAN INTERNATIONAL SERVICES, LTD.
By:/s/ Kevin Insley
----------------
Name: Kevin Insley
Title: President and Chief Financial Officer
18
<Page>
SCHEDULE 2(a)
New Jersey
<Page>
SCHEDULE 2(b)
1. Pursuant to its Stock Option Plan, the Company has issued to the following
persons the following number of options to purchase Company Common Stock:
Bernard Beer: 100,000 shares
Arnold Lippa: 100,000 shares
Zola Horovitz: 50,000 shares
David Farb: 10,000 shares
2. In connection with the closing of the private placement of securities
pursuant to that certain confidential private placement memorndum dated October
1, 1998, Aurora Capital LLC will received five-year warrants to acquire Company
Common Stock equal to 10% of the total amount of Company Common Stock sold in
the offering.
3. In connection with the closing of the sale of the Shares to EIS, Aurora
Capital LLC will receive certain warrants to acquire Company Common Stock.
4. Neurocrine Biosciences, Inc. owns 440,000 shares of Series A Convertible
Secured Stock with the rights, restrictions and preferences set forth in the
Company's Restated Certificate of Incorporation.
5. Pursuant to the Preferred Stock Purchase Agreement between the Company and
Neurocrine Biosciences, Inc. dated June 30, 1998, Neurocrine Biosciences, Inc.
has certain demand and piggyback registration rights with respect to its
ownership of Company capital stock.
6. In connection with the closing of the privte placement of securities pursuant
to that certain confidential private placement memorandum dated October 1, 1998,
the Company will be granting to investors therein certain demand and piggyback
registration rights.
<Page>
SCHEDULE 2(d)
None
<Page>
SCHEDULE 2(e)
1. Notice was provided and consent received by American Cyanamid Company
pursuant to the License Agreement between the Company and American Cyanamid
Company dated May 29, 1998.
<Page>
SCHEDULE 2(f)(i)
See attached Returns.
<Page>
1996
CBT-100
NEW JERSEY CORPORATION BUSINESS TAX RETURN 1996 - Page 1
FOR TAXABLE YEARS ENDING JULY 31, 1996 THROUGH JUNE 30, 1997
TAXABLE YEAR BEGINNING _________, 19__, AND ENDING _________, 19____
- --------------------------------------------------------------------------------
Place the label provided below. Make necessary corrections on the label.
Otherwise, type or print the requested information. Check if address change
appears below |_|
- --------------------------------------------------------------------------------
FEDERAL EMPLOYER I.D. NUMBER N.J. CORPORATION NUMBER
22-3374365
- --------------------------------------------------------------------------------
CORPORATION NAME
Dov Pharmaceutical Inc.
- --------------------------------------------------------------------------------
MAILING ADDRESS
400 Kelby Street
- --------------------------------------------------------------------------------
CITY STATE ZIP CODE
Fort Lee NJ 07024
- --------------------------------------------------------------------------------
Total assets $_______________________________
|_| Check if initial return |_| Check if 1120-S filer |_| Check if final return
- --------------------------------------------------------------------------------
State and date of incorporation NJ 4/95
------------------------------------------------
Oats authorized to do business in N.J. 4/95
-----------------------------------------
Date first began business in N.J. 4/95
----------------------------------------------
Federal business activity code 8950
-------------------------------------------------
Corporation books are in the care of Taxpayer
-------------------------------------------
at 400 Kelby Street Fort Lee NJ 07024
-----------------------------------------------------------------------------
Telephone Number:
--------------------------------------------------------------
- --------------------------------------------------------------------------------
DIVISION USE
RP NP A____________ B_______________
- --------------------------------------------------------------------------------
PAGES 1 AND 2 MUST BE COMPLETED ON THIS FORM. ONLY EXACT COPIES MAY BE
SUBSTITUTED.
- --------------------------------------------------------------------------------
<Table>
1. Entire net income from Schedule A, line 38 ............................... 1. (4090)
--------------------------------
2. Allocation factor from Schedule J, Part III, line 5. Non-allocating
taxpayers should not make an entry on line ............................... 2.
--------------------------------
3. Allocated net income - Multiply line 1 by line 2. Non-allocating taxpayers
must enter the amount from line 1 ........................................ 3. (4090)
--------------------------------
4. a) Total nonoperational income $________________ (Schedule O, Part I) (see
instruction 32)
b) Allocated New Jersey nonoperational income (Schedule O, Part III) .. 4.(b)
--------------------------------
5. Total operational and nonoperational income (line 3 plus line 4(b)) ...... 5. (4090)
--------------------------------
6. Investment Company - Enter 25% of line 1 ................................. 6.
--------------------------------
7. Real Estate Investment Trust - Enter 4% of line t ........................ 7.
--------------------------------
8. Tax Base - Enter amount from line 5, 6 or 7, whichever is applicable ..... 8. (4090)
--------------------------------
9. AMOUNT OF TAX - Multiply line 8 by .09 or, if applicable, by .075 (see
instruction 11(d)) (see instruction 11(e) for minimum tax requirements) .. 9. 150
--------------------------------
10. Credit for taxes paid to other jurisdictions (see instruction 28(a)) ..... 10.
--------------------------------
11. Subtract line 10 from line 9 ............................................. 11. 150
--------------------------------
12. Tax Credits (from Schedule A-3) (see instruction 37) ..................... 12.
--------------------------------
13. TOTAL TAX LIABILITY - line 11 minus line 12 .............................. 13. 150
--------------------------------
14. INSTALLMENT PAYMENT (see instruction 38) ................................. 14.
--------------------------------
15. Total of line 13 plus line 14 ............................................ 15. 150
--------------------------------
16. PAYMENTS & CREDITS (see instruction 39) .................................. 16.
--------------------------------
17. Balance of Tax Due - line 15 minus line 16 ............................... 17. 150
--------------------------------
18. Penalty and Interest Due - (see instructions 7(d) and 40)
Penalty ___________________ Interest__________________ ..............Total 18.
--------------------------------
19. Interest from CBT-160 (see instruction 41) (Attach Form CBT-150) ......... 19.
--------------------------------
20. Total Banlance Due - line 17 plus line 18 plus line 19 ................... 20. 150
--------------------------------
21. If line 15 is greater than line 15 plus line 18 plus line 19, DIVISION USE
enter the amount of overpayment ..................$_______________________
22. Amount of Item 21 to be Credited to 1997 return Refunded
$______________________ $______________
</Table>
SIGNATURE AND VERIFICATION
I declare under the penalties provided by law, that this return (including
any accompanying schedules and statements) has been examined by me and to the
best of my knowledge and belief is a true, correct and complete return. If the
return is prepared by a person other than the taxpayer, his declaration is based
on all the information relating to the matters required to be reported in the
return of which he has knowledge.
- --------------------------------------------------------------------------------
(Date) (Signature of Duly Authorized Officer of Taxpayer) (Title)
- --------------------------------------------------------------------------------
(Date) (Signature of Individual (Address) (Preparer's ID Number)
Preparing Return)
- --------------------------------------------------------------------------------
(Name of Tax Preparer's Employer) (Address) (Employer's ID Number)
<Page>
1996 - Page 3
- --------------------------------------------------------------------------------
NAME AS SHOWN ON RETURN FEDERAL ID NUMBER
Dov Pharmaceutical Inc. 22-3374365
- --------------------------------------------------------------------------------
SCHEDULE A-1 NET OPERATING LOSS DEDUCTION AND CARRYOVER (SEE INSTRUCTIONS 16(I)
AND 17)
- --------------------------------------------------------------------------------
<Table>
<Caption>
(1) (2) (3) (4)
Loss Reported Add N.J. ENI Adj.'s Excluding
Fiscal Year Ended on Schedule A, line 28 the Dividend Exclusion Amount
- ------------------------------------------------------------------------------------------------------------------------------------
N.J. NOCS 12/31/95 614 (G14)
-----------------------------------------------------------------------------------------------------------
2. ( )
-----------------------------------------------------------------------------------------------------------
3. ( )
-----------------------------------------------------------------------------------------------------------
4. ( )
-----------------------------------------------------------------------------------------------------------
5. ( )
-----------------------------------------------------------------------------------------------------------
6. ( )
-----------------------------------------------------------------------------------------------------------
7. (614)
- ------------------------------------------------------------------------------------------------------------------------------------
N.J. NOL'S Used 8.
---------------------------- ----------------
9.
---------------------------- ----------------
10.
---------------------------- ----------------
11.
---------------------------- ----------------
12.
---------------------------- ----------------
13.
---------------------------- ----------------
14.
- ------------------------------------------------------------------------------------------------------------------------------------
N.J. NOL Carryover 15. Total lines 1 - 14, Column 4 ..........................................................
-----------------------------------------------------------------------------------------------------------
</Table>
<Table>
1. Inventory at beginning of year ......................................................................... 1.
---------------------
2. Purchases .............................................................................................. 2. N/A
---------------------
3. Cost of labor .......................................................................................... 3. N/A
---------------------
4. Additional section 263A costs .......................................................................... 4.
---------------------
5. Other costs (attach schedule) .......................................................................... 5.
---------------------
6. Total - Add lines 1 through 5 .......................................................................... 6.
---------------------
7. Inventory at end of year ............................................................................... 7.
---------------------
8. Cost of goods Sold - Subtract line 7 from line 6. Enter here and on Schedule A, line 2 .................
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
SCHEDULE A-3 SUMMARY OF TAX CREDITS (SEE INSTRUCTION 37)
- --------------------------------------------------------------------------------
<Table>
1. New Jobs Investment Tax Credit from Form 304 ........................................................... 1.
---------------------
2. EITHER: a) Urban Enterprise Zone Employee Tax Credit from Form 300
OR b) Urban Enterprise Zone Investment Tax Credit from Form 301 ................................... 2.
---------------------
3. Urban development Project Employee Tax Credit from Form 302 ............................................ 3.
---------------------
4. Recycling Equipment Tax Credit from Form 303 ........................................................... 4.
---------------------
5. Manufacturing Equipment and Employment Investment Tax Credit from Form 305 ............................. 5.
---------------------
6. Research and Development Tax Credit from Form 306 ...................................................... 6.
---------------------
7. Employer Trip Reduction Plan - Rids Share Tax Credit from Form 307 ..................................... 7.
---------------------
8. Total tax credits taken on this return - Add lines 1 through 7.
Enrrr here and on page 1, line 12 ...................................................................... 8.
---------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
1996 - Page 4
Dov Pharmaceutical Inc. 22-3374365
- --------------------------------------------------------------------------------
SCHEDULE B BALANCE SHEET AS OF 12/31 1996
Figures appearing below must be the same as year-end
figures shown on the taxpayer's books. If not, explain
and reconcile on rider. Consolidated returns are not
permitted.
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------
ASSETS BEGINNING OF THE TAX YEAR END OF TAX YEAR
- ----------------------------------------------------------------------------------------------------------------------
1. Cash 5476 1317
- ----------------------------------------------------------------------------------------------------------------------
2. Trade notes and accounts receivable 77315
- ----------------------------------------------------------------------------------------------------------------------
(a) Reserve for bad debts ( ) ( )
- ----------------------------------------------------------------------------------------------------------------------
3. Loans to stockholders / affiliates
- ----------------------------------------------------------------------------------------------------------------------
4. Stock of subsidiaries
- ----------------------------------------------------------------------------------------------------------------------
5. Corporate stocks
- ----------------------------------------------------------------------------------------------------------------------
6. Bonds, mortgages and notes
- ----------------------------------------------------------------------------------------------------------------------
7. New Jersey State and Local government obligations
- ----------------------------------------------------------------------------------------------------------------------
8. All other government obligations
- ----------------------------------------------------------------------------------------------------------------------
9. Patents and copyrights
- ----------------------------------------------------------------------------------------------------------------------
10. Deferred charges
- ----------------------------------------------------------------------------------------------------------------------
11. Goodwill
- ----------------------------------------------------------------------------------------------------------------------
12. All other intangible personal property (itemize)
- ----------------------------------------------------------------------------------------------------------------------
13. (total lines 1 to 12)
- ----------------------------------------------------------------------------------------------------------------------
14. Land
- ----------------------------------------------------------------------------------------------------------------------
15. Buildings and other improvements
- ----------------------------------------------------------------------------------------------------------------------
(a) Less accumulated depreciation ( ) ( )
- ----------------------------------------------------------------------------------------------------------------------
16. Machinery and equipment 4722 15583
- ----------------------------------------------------------------------------------------------------------------------
(a) Less accumulated depreciation (945) (4625)
- ----------------------------------------------------------------------------------------------------------------------
17. Inventories
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
21. Accounts payable 72487
- ----------------------------------------------------------------------------------------------------------------------
22. Mortgages, notes, bonds payable in less than 1 year (attach schedule)
- ----------------------------------------------------------------------------------------------------------------------
23. Other current liabilities (attach schedule)
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
(b) common stock 5000 5000
- ----------------------------------------------------------------------------------------------------------------------
28. Paid-in or capital surplus
- ----------------------------------------------------------------------------------------------------------------------
29. Retained earnings - appropriated (attach schedule)
- ----------------------------------------------------------------------------------------------------------------------
30. Retained earnings - unappropriated (2497) (7355)
- ----------------------------------------------------------------------------------------------------------------------
31. Less cost of treasury stock
- ----------------------------------------------------------------------------------------------------------------------
32. Total liabilities and Stockholder equity 9253 89587
- ----------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
1996 - Page 5
- --------------------------------------------------------------------------------
NAME AS SHOWN ON RETURN FEDERAL ID NUMBER
Dov Pharmaceutical Inc. 22-3374365
- --------------------------------------------------------------------------------
SCHEDULE C RECONCILIATION OF INCOME PER BOOKS WITH INCOME PER RETURN (SEE
INSTRUCTION 21)
- --------------------------------------------------------------------------------
3. Excess of capital losses over capital gains
- --------------------------------------------------------------------------------
4. Income subject to tax not recorded on books
this year (itemize)
_______________________________
_______________________________
- --------------------------------------------------------------------------------
5. Expenses recorded on books this year not deducted
in this return (itemize)
(a) Depreciation $____________________
(b) Contributions Carryover $___________
(c) Other (itemize) $50% T[ILLEGIBLE]E-1312
- --------------------------------------------------------------------------------
6. Total of lines 1 through 5 1312
- --------------------------------------------------------------------------------
7. Income recorded on books this year not included
in this return (itemize)
(a) Tax-exempt interest $ _________________
(b) _______________________________________
(c) _______________________________________
- --------------------------------------------------------------------------------
8. Deductions in this tax return not charged against
book income this year (itemize)
(a) Depreciation $ ________________________
(b) Contributions Carryover $ _____________
___________________________________________
- --------------------------------------------------------------------------------
9. Total of lines 7 and 8
10. Income (Item 28, Schedule A) - line 6 less 9
- --------------------------------------------------------------------------------
SCHEDULE C-1 ANALYSIS OF UNAPPROPRIATED RETAINED EARNINGS PER BOOKS (SEE
INSTRUCTION 21)
- --------------------------------------------------------------------------------
1. Balance at beginning of year (2497)
- --------------------------------------------------------------------------------
2. Net income per books (4888)
- --------------------------------------------------------------------------------
3. Other increases (itemize)
- --------------------------------------------------------------------------------
4. Total of lines 1, 2 and 3 (7385)
- --------------------------------------------------------------------------------
5. Distributions
(a) Cash $ ___________________________
(b) Stock $___________________________
(c) Property $ _______________________
- --------------------------------------------------------------------------------
6. Other decreases (itemize)
- --------------------------------------------------------------------------------
7. Total of lines 5 and 6
- --------------------------------------------------------------------------------
8. Balance end of year (line 4 less 7) (7385)
- --------------------------------------------------------------------------------
SCHEDULE E GENERAL INFORMATION (SEE INSTRUCTION 22) ALL TAXPAYERS MUST ANSWER
THE FOLLOWING QUESTIONS. RIDERS MUST BE PROVIDED WHERE NECESSARY.
- --------------------------------------------------------------------------------
1. Type of business Service
---------------------------------------------------------
Principal products handled Consulting
-----------------------------------------------
Internal Revenue Center where corresponding Federal tax return was
filed Hottsville NY
--------------------------------------------------------------------
2. FINAL DETERMINATION OF NET INCOME BY FEDERAL GOVERNMENT (See Instruction
15) Has a change or correction in the amount of taxable income of the
reporting corporation or for any other corporation purchased, merged or
consolidated with the reporting corporation, been finally determined by
the Internal Revenue Service, and not previously reported to New Jersey?
"Yes" or "No" No. IF "YES", an amended return must be filed.
3. Did one or more other corporations own beneficially, or control, a
majority of the stock of taxpayer corporation or did the same interests
own beneficially, or control, a majority of the stock of taxpayer
corporation and of one or more other corporations? "Yes" or "No" No. If
"Yes", give full information below (Attach rider if necessary).
- --------------------------------------------------------------------------------
Percent of Stock
Name of Controlled Corporations Owned or Controlled By Whom Controlled
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. Is the capital stock of the taxpayer listed on any exchange? "Yes or No"
No. If yes, specify exchanges where listed and submit taxpayer's
Annual Report to stockholders for the period covered by this return.
5. This question must be answered by domestic corporations only.
(a) Does the taxpayer hold any personal property, including moneys,
negotiable instruments, choses in action, interest, dividends, wages,
debts or demands, stocks, bonds, deposits, and the accretions thereon, due
or belonging to another where the owner, beneficial owner or person
entitled to such property has been unknown, or where the whereabouts of
such owner has been unknown, or where such personal property has been
unclaimed for a period of fourteen successive years, (five successive
years in the case of cash items such as money, wages, cash dividends,
etc.) as of the last day of the accounting period covered in this return?
"Yes or No" No.
(b) If "Yes", itemize on a separate rider the nature of the property,
value thereof and last known names and addresses of such owners or
persons.
6. This question must be answered by corporations with income from sources
outside the United States.
(a) Is income from sources outside the United States included in entire
net income at line 38 of Schedule A. "Yes or No" ________________.
(b) If the answer is "No", set forth such items of gross income, the
source, the deductions and the amount of foreign taxes paid thereon.
Enter at line 33, Schedule A, the difference between the net of such
income and the amount of foreign taxes paid thereon not previously
deducted.
<Page>
1996 - Page 6
Dor Pharmaceutical Inc. 22-3374365
- --------------------------------------------------------------------------------
SCHEDULE F CORPORATE OFFICERS - GENERAL INFORMATION AND COMPENSATION (See
instruction 23)
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5) (6)
Dates Employed Percent of
Name and Social Security Number Title in this position Stock Owned Amount of
Current Address of Officer From To Common Preferred Compensation
- ------------------------------------------------------------------------------------------------------------------------------------
None
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Total compensation of officers .............................................................................
----------------
(b) Less: Compensation of officers claimed elsewhere on the return .............................................
----------------
(c) Balance of compensation of officers (enter here and on Schedule A, line 12, page 2) ........................ -0-
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
SCHEDULE H TAXES (See instructions 16(F) AND 24)
Include all taxes paid or accrued during the accounting period
wherever deducted on Schedule A.
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
New Jersey Other States Federal Total
Taxes Taxes Taxes
- ---------------------------------------------------------------------------------------------------------------------
(a) Corporation Franchise Tax and/or Income Tax 100 100
- ---------------------------------------------------------------------------------------------------------------------
(b) Local Property Taxes
- ---------------------------------------------------------------------------------------------------------------------
(c) U.C.C. or Payroll Taxes
- ---------------------------------------------------------------------------------------------------------------------
(d) Other Taxes (attach rider)
- ---------------------------------------------------------------------------------------------------------------------
(*) Total columns 1, 2 and 3 .......................................................................
---------------
(f) Taxes paid to foreign countries and U.S. possessions ...........................................
---------------
(g) Total *All Taxes ............................................................................... 100
- ---------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
Form 1120 U.S. Corporation Income Tax Return OMB No. 1545-0123
1996
For calendar year 1996 or tax year beginning _______, 1996, ending _______, 19
> Instructions are separate. See Page 1 for Paperwork Reduction Act Notice.
Department of the Treasury
Internal Revenue Service
- --------------------------------------------------------------------------------
A Check if a:
1 Consolidated return (attach Form 851)
2 Personal holding co. (attach Sch. PH)
3 Personal service corp. (as defined in Temporary Regs. sec. 1.441-4T--see
instructions)
- --------------------------------------------------------------------------------
Use IRS label. Otherwise, print or type.
- --------------------------------------------------------------------------------
Name
Dov Pharmaceutical Inc.
- --------------------------------------------------------------------------------
Number, street, and room or suite no. (If a P.O. box, see page 6 of
instructions.)
400 Kelby Street Ste 1500
- --------------------------------------------------------------------------------
City or town, state, and ZIP code
Fort Lee NJ 07024
- --------------------------------------------------------------------------------
B Employer identification number
22 3374365
- --------------------------------------------------------------------------------
C Date incorporated
4/95
- --------------------------------------------------------------------------------
D Total assets (see page 6 of instructions)
$ 89587
- --------------------------------------------------------------------------------
E Check applicable boxes: (1) |_| Initial return (2) |_|Final return
(3) |_| Change of address
- --------------------------------------------------------------------------------
<Table>
<Caption>
Income
- ------------------------------------------------------------------------------------------------------------
1b Gross receipts or sales 147736 b Less returns and allowances c Bal > 1c 147736
-----------------
2 Cost of goods sold (Schedule A, line 8) ...................................... 2
-----------------
3 Gross profit. Subtract line 2 from line 1c ................................... 3
-----------------
4 Dividends (Schedule C, line 19) .............................................. 4
-----------------
5 Interest ..................................................................... 5
-----------------
6 Gross rents .................................................................. 6
-----------------
7 Gross royalties .............................................................. 7
-----------------
8 Capital gain net income (attach Schedule D (Form 1120)) ...................... 8
-----------------
9 Net gain or (loss) from Form 4797, Part II, line 20 (attach Form 4797) ....... 9
-----------------
10 Other income (see page 7 of instructions--attach schedule) ................... 10
-----------------
11 TOTAL INCOME. Add lines 3 through 10 ......................................... 11 147736
-----------------
- ------------------------------------------------------------------------------------------------------------
<Caption>
Deductions (See Instructions for limitations on deductions.)
- ------------------------------------------------------------------------------------------------------------
12 Compensation of officers (Schedule E, line 4) ................................ 12
-----------------
13 Salaries and wages (less employment credits) ................................. 13
-----------------
14 Repairs and maintenance ...................................................... 14 12D
-----------------
15 Bad debts .................................................................... 15 --
-----------------
16 Rents ........................................................................ 16 11150
-----------------
17 Taxes and licenses ........................................................... 17
-----------------
18 Interest ..................................................................... 18
-----------------
19 Charitable contributions (see page 8 of instructions for 10% limitation) ..... 19
-----------------
20 Depreciation (attach Form 4562) ............................................20 3683
---------
21 Less depreciation claimed on Schedule A and elsewhere on return ............21a 21b
--------------------------
22 Depletion .................................................................... 22 3683
-----------------
23 Advertising .................................................................. 23
-----------------
24 Pension, profit-sharing, etc., plans ......................................... 24
-----------------
25 Employee benefit programs .................................................... 25
-----------------
26 Other deductions (attach schedule) ..See Schedule Attached.................... 26 136359
-----------------
27 TOTAL DEDUCTIONS. Add lines 12 through 26 ....................................> 27 151312
-----------------
28 Taxable income before net operating loss deduction and special deductions.
Subtract line 27 from line 11 ................................................ 28 (3576)
-----------------
29 LESS: a Net operating loss deduction (see page 10 of instructions) 12/31/96 29a 614
---------
b Special deductions (Schedule C, line 20) 29b 29c 614
- ------------------------------------------------------------------------------------------------------------
<Caption>
Tax and Payments
- ------------------------------------------------------------------------------------------------------------
30 Taxable income. Subtract line 29c from line 28 ............................... 30 (4190)
-----------------
31 Total tax (Schedule J, line 10) .............................................. 31 -0-
-----------------
32 PAYMENTS: A 1995 overpayment credited to 1996 32a
---------------------
b 1996 estimated tax payments 32b
---------------------
c Less 1996 refund applied for on Form 4488 32c d Bal > 32d
--------------------- ---------
e Tax deposited with Form 7004 32e
---------
f Credit from regulated investment companies (attach Form 2439) 32f
---------
g Credit for Federal tax on fuels. (attach Form 4136). See instructions 32g 32h
--------------------------
33 Estimated tax penalty (see page 11 of instructions). Check if
Form 2220 is attached .........................................................> |_| 33
-----------------
34 Tax due. If line 32h is smaller than the total of lines 31 and 33,
enter amount owed 34 None
-----------------
35 Overpayment. If line 32h is larger than the total of lines 31 and 33,
enter amount overpaid ......................................................... 35
-----------------
36 Enter amount of line 35 you want: Credited to 1997 estimated tax > Refunded > 36
- ------------------------------------------------------------------------------------------------------------
</Table>
SIGN HERE
Under penalties of perjury, I declare that I have examined this return,
including accompanying schedules and statements, and to the best of my knowledge
and belief, it is true, correct, and complete. Declaration of preparer (other
than taxpayer) is based on all information of which preparer has any knowledge.
> --------------------------------------------- > -----------------------------
Signature of officer Date Title
- --------------------------------------------------------------------------------
PAID PREPARER'S USE ONLY
Preparer's Signature > Date Check if Preparer's social
self-employed |_| security number
085 52 5897
- --------------------------------------------------------------------------------
Firm's name (or
yours if self-employed) > Joseph Randt CPA [ILLEGIBLE] >
and address [ILLEGIBLE] ZIP code > 10993
- --------------------------------------------------------------------------------
Cat. No. 11-4500
311
<Page>
Page 2
Form 1120 (1995) Dov Pharmaceutical Inc. 22-3374365
- --------------------------------------------------------------------------------
SCHEDULE A COST OF GOODS SOLD (SEE PAGE 11 OF INSTRUCTIONS)
- --------------------------------------------------------------------------------
1 N/A
---------------------------
2
---------------------------
3
---------------------------
4
lines ---------------------------
5
---------------------------
6
---------------------------
7
---------------------------
8
---------------------------
---------------------------
- --------------------------------------------------------------------------------
SCHEDULE C DIVIDENDS AND SPECIAL DEDUCTIONS (SEE PAGE 12 OF INSTRUCTIONS.)
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------
(A) Dividends (B) % (C) Special deductions
received (A) X (B)
- -----------------------------------------------------------------------------------------------------------------------
1 Dividends from less-than-20%-owned domestic
corporations that are subject to the 70% deduction
(other than debt-financed stock) ..................... 70
-------------------------------------------------------
2 Dividends from 20%-or-more-owned domestic
corporations that are subject to the 80% deduction
(other than debt-financed stock) ..................... 80
-------------------------------------------------------
3 Dividends on debt-financed stock of domestic and see
foreign corporations (section 246A) .................. instructions
-------------------------------------------------------
4 Dividends on certain preferred stock of
less-than-20%-owned public utilities ................. 42
-------------------------------------------------------
5 Dividends on certain preferred stock of
20%-or-more-owned public utilities ................... 48
-------------------------------------------------------
6 Dividends from less-than-20%-owned foreign
corporations and certain FSCs that are subject to
the 70% deduction .................................... 70
-------------------------------------------------------
7 Dividends from 20%-or-more-owned foreign
corporations and certain FSCs that are subject to
the 80% deduction .................................... 80
-------------------------------------------------------
8 Dividends from wholly owned foreign subsidiaries
subject to the 100% deduction (section 245(b)) ....... 100
-------------------------------------------------------
9 TOTAL. Add lines 1 through 8. See page 12 of
instructions for limitation ..........................
-------------------------------------------------------
10 Dividends from domestic corporations received by a
small business investment company operating under
the Small Business Investment Act of 1958 ............ 100
-------------------------------------------------------
11 Dividends from certain FSCs that are subject to
the 100% deduction (section 245(c)(1)) ............... 100
-------------------------------------------------------
12 Dividends from affiliated group members subject to
the 100% deduction (section 243(a)(3)) ............... 100
-------------------------------------------------------
13 Other dividends from foreign corporations not
included on lines 3, 6, 7, 8, or 11 ..................
-------------------------------------------------------
14 Income from controlled foreign corporations under
subpart F (attach Form(s) 5471) ......................
-------------------------------------------------------
15 Foreign dividend gross-up (section 78) ...............
-------------------------------------------------------
16 IC-DISC and former DISC dividends not included on
lines 1, 2, or 3 (section 246(d)) ....................
-------------------------------------------------------
17 Other dividends ......................................
-------------------------------------------------------
18 Deduction for dividends paid on certain preferred
stock of public utilities ............................
-------------------------------------------------------
19 TOTAL DIVIDENDS. Add lines 1 through 17. Enter
here and on line 4, page 1 ........................... >
-------------------------------------------------------
20 Total special deductions. Add lines 9, 10, 11, 12, and 18.
Enter here and on line 29b, page 1 ........................................................... >
- -----------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
SCHEDULE E COMPENSATION OF OFFICERS (See instructions for line 12, page 1.)
COMPLETE SCHEDULE E ONLY IF TOTAL RECEIPTS (LINE 1A PLUS LINES 4
THROUGH 10 ON PAGE 1, FORM 1120) ARE $500,000 OR MORE.
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
Percent of corporation
(c) Percent of stock owned
(a) Name of officer (b) Social security number time devoted to -------------------------- (f) Amount of compensation
business (d) Common (e) Preferred
- -----------------------------------------------------------------------------------------------------------------------------------
1 N/A % % % None
- -----------------------------------------------------------------------------------------------------------------------------------
% % %
- -----------------------------------------------------------------------------------------------------------------------------------
% % %
- -----------------------------------------------------------------------------------------------------------------------------------
% % %
- -----------------------------------------------------------------------------------------------------------------------------------
% % %
- -----------------------------------------------------------------------------------------------------------------------------------
2 Total compensation of officers .......................
--------------------------------
3 Compensation of officers claimed on Schedule A and
elsewhere on return ..................................
--------------------------------
4 Subtract line 3 from line 2. Enter the result here
and on line 12, page 1 ............................... None
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
312
<Page>
Page 3
Form 1120 (1996) Dov Pharmaceutical 22-3374365
- --------------------------------------------------------------------------------
SCHEDULE J TAX COMPUTATION (SEE PAGE 13 OF INSTRUCTIONS.)
- --------------------------------------------------------------------------------
<Table>
1 Check if the corporation is a member of a controlled group
(see sections 1561 and 1563) ............................................. .........> |_|
IMPORTANT: Members of a controlled group, see instructions
on page 13.
2a If the box on line 1 is checked, enter the corporation's
share of the $50,000, $25,000, and $9,925,000 taxable
income brackets (in that order):
(1) $_____________ (2) $_____________ (3) $_____________
b Enter the corporation's share of:
(1) Additional 5% tax (not more than $11,750) $_____________
(2) Additional 3% tax (not more than $100,000) $_____________
3 Income tax. Check this box if the corporation is a qualified
personal service corporation as defined in section 448(d)(2)
(see instructions on page 13) ......................................................> |_| 3
---------------
4a Foreign tax credit (attach Form 1118) 4a
-----------------
b Possessions tax credit (attach Form 5735) 4b
-----------------
c Check: |_| Nonconventional source fuel credit 4c
-----------------
|_| QEV credit (attach Form 8834)
d General business credit. Enter here and check which forms
are attached:
|_| 3800 |_| 3466 |_| 5884 |_| 6478 |_| 6765 |_| 8586 |_| 8830
|_| 8826 |_| 8835 |_| 8844 |_| 8845 |_| 8846 |_| 8820 |_| 8847 4d
-----------------
e Credit for prior year minimum tax (attach Form 8827) 4e
-----------------
5 TOTAL CREDITS. Add lines 4a through 4e 5
---------------
6 Subtract line 5 from line 3 6
---------------
7 Personal holding company tax (attach Schedule PH (Form 1120)) 7
---------------
8 Recapture taxes. Check if from: Form 4255 Form 8611 8
---------------
9 Alternative minimum tax (attach Form 4626) 9
---------------
10 TOTAL TAX. Add lines 6 through 9. Enter here and on line 31, page 1 10
- ----------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
SCHEDULE K OTHER INFORMATION (SEE PAGE 15 OF INSTRUCTIONS.)
- --------------------------------------------------------------------------------
YES NO
- --------------------------------------------------------------------------------
1 Check method of accounting: a |_| Cash
b |X| Accrual c |_| Other (specify) > ......................
2 See page 17 of the instructions and state the principal:
a Business activity code no. > 8980
b Business activity > Consulting
c Product or service > Service
3 Did the corporation at the end of the tax year own,
directly or indirectly, 50% or more of the voting stock
of a domestic corporation? (For rules of attribution,
see section 267(c).) ....................................... X
If "Yes," attach a schedule showing: (a) name and
identifying number, (b) percentage owned, and (c)
taxable income or (loss) before NOL and special
deductions of such corporation for the tax year ending
with or within your tax year.
4 Is the corporation a subsidiary in an affiliated group
or a parent-subsidiary controlled group? ................... X
If "Yes," enter employer identification number and name
of the parent corporation ..................................
5 Did any individual, partnership, corporation, estate or
trust at the end of the tax year own, directly or
indirectly, 50% or more of the corporation's voting
stock? (For rules of attribution, see section 267(c).) ..... X
If "Yes," attach a schedule showing name and identifying
number. (Do not include any information already entered
in 4 above.) Enter percentage owned > ......................
6 During this tax year, did the corporation pay dividends
(other than stock dividends and distributions in
exchange for stock) in excess of the corporation's
current and accumulated earnings and profits? (See secs.
301 and 316.) .............................................. X
If "Yes," file Form 5452. If this is a consolidated
return, answer here for the parent corporation and on
FORM 851, Affiliations Schedule, for each subsidiary.
7 Was the corporation a U.S. shareholder of any controlled
foreign corporation? (See sections 951 and 957.) ........... X
If "Yes," attach Form 5471 for each such corporation.
Enter number of Forms 5471 attached > ......................
8 At any time during the 1996 calendar year, did the
corporation have an interest in or a signature or other
authority over a financial account (such as a bank
account, securities account, or other financial account)
in a foreign country? X
If "Yes," the corporation may have to file Form TD F
90-22.1.
If "Yes," enter name of foreign country ....................
9 During the tax year, did the corporation receive a
distribution from, or was it the grantor of, or
transferor to, a foreign trust? If "Yes," see page 16 of
the instructions for other forms the corporation may
have to file ............................................... X
10 Did one foreign person at any time during the tax year
own, directly or indirectly, at least 25% of: (a) the
total voting power of all classes of stock of the
corporation entitled to vote, or (b) the total value of
all classes of stock of the corporation? If "Yes," X
a Enter percentage owned > ...................................
b Enter owner's country > ....................................
c The corporation may have to file Form 5472. Enter number
of Forms 5472 attached > ...................................
11 Check this box if the corporation issued publicly
offered debt instruments with original issue discount > |_|
If so, the corporation may have to file Form 8281.
12 Enter the amount of tax-exempt interest received or
accrued during the tax year > $ ............................
13 If there were 35 or fewer shareholders at the end of the
tax year, enter the number > 8
14 If the corporation has an NOL for the tax year and is
electing to forego the carryback period, check here |X|
15 Enter the available NOL carryover from prior tax years
(Do not reduce it by any deduction on line 29a.) > $ 614
- --------------------------------------------------------------------------------
313
<Page>
Page 4
Form 1120 (1996) Dov Pharmaceutical 22-3374365
- --------------------------------------------------------------------------------
<Table>
<Caption>
SCHEDULE L BALANCE SHEETS PER BOOKS Beginning of tax year End of tax year
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS (a) (b) (c) (d)
--------------------------------------------------------
1 Cash ....................................................... 5476 1317
--------------------------------------------------------
2a Trade notes and accounts receivable ........................ 77315
--------------------------------------------------------
b Less allowance for bad debts ............................... ( ) ( ) 77315
--------------------------------------------------------
3 Inventories ................................................
--------------------------------------------------------
4 U.S. government obligations ................................
--------------------------------------------------------
5 Tax-exempt securities (see instructions) ...................
--------------------------------------------------------
6 Other current assets (attach schedule) .....................
--------------------------------------------------------
7 Loans to stockholders ......................................
--------------------------------------------------------
8 Mortgage and real estate loans .............................
--------------------------------------------------------
9 Other investments (attach schedule) ........................
--------------------------------------------------------
10a Buildings and other depreciable assets ..................... 4722 15583
--------------------------------------------------------
b Less accumulated depreciation .............................. (945) 3777 (4628) 10955
--------------------------------------------------------
11a Depletable assets ..........................................
--------------------------------------------------------
b Less accumulated depletion ................................. ( ) ( )
--------------------------------------------------------
12 Land (net of any amortization) .............................
--------------------------------------------------------
13a Intangible assets (amortizable only) .......................
--------------------------------------------------------
b Less accumulated amortization .............................. ( ) ( )
--------------------------------------------------------
14 Other assets (attach schedule) .............................
--------------------------------------------------------
15 Total assets ............................................... 9253 89587
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
16 Accounts payable ........................................... 72487
--------------------------------------------------------
17 Mortgages, notes, bonds payable in less than 1 year ........
--------------------------------------------------------
18 Other current liabilities (attach schedule) ................
--------------------------------------------------------
19 Loans from stockholders .................................... 6750 19485
--------------------------------------------------------
20 Mortgages, notes, bonds payable in 1 year or more ..........
--------------------------------------------------------
21 Other liabilities (attach schedule) ........................
--------------------------------------------------------
22 Capital stock: a Preferred stock
b Common stock .............................. 5000 5000
--------------------------------------------------------
23 Paid-in or capital surplus .................................
--------------------------------------------------------
24 Retained earnings--Appropriated (attach schedule) ..........
--------------------------------------------------------
25 Retained earnings--Unappropriated .......................... (2497) (7385)
--------------------------------------------------------
26 Less cost of treasury stock ................................ ( ) ( )
--------------------------------------------------------
27 Total liabilities and stockholders' equity ................. 9253 89587
--------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
NOTE: YOU ARE NOT REQUIRED TO COMPLETE SCHEDULES M-1 AND M-2 BELOW IF THE TOTAL
ASSETS ON LINE 15, COLUMN (D) OF SCHEDULE L ARE LESS THAN $25,000.
- --------------------------------------------------------------------------------
SCHEDULE M-1 RECONCILIATION OF INCOME (LOSS) PER BOOKS WITH INCOME PER RETURN
(See page 16 of instructions.)
- --------------------------------------------------------------------------------
1 Net income (loss) per books ................................ (4888)
------------
2 Federal income tax .........................................
------------
3 Excess of capital losses over capital gains ................
------------
4 Income subject to tax not recorded on books this year
(itemize): .................................................
------------
5 Expenses recorded on books this year not deducted on this
return (itemize): ..........................................
a Depreciation .......... $ ________________
b Contributions carryover $ ________________
c Travel and entertainment $ 1312
----------------
6 Add lines 1 through 5 ...................................... 1312
------------
7 Income recorded on books this year not included on this
return (itemize):
Tax-exempt interest $ ....................
------------
8 Deductions on this return not charged against book income this year
(itemize):
a Depreciation $ ________________
b Contributions carryover $ ________________
9 Add lines 7 and 8
------------
10 Income (line 28, page 1)--line 6 less line 9 (3576)
------------
- --------------------------------------------------------------------------------
SCHEDULE M-2 ANALYSIS OF UNAPPROPRIATED RETAINED EARNINGS PER BOOKS (LINE 25,
SCHEDULE L)
- --------------------------------------------------------------------------------
1 Balance at beginning of year ............................... (2497)
------------
2 Net income (loss) per books ................................ (4888)
------------
3 Other increases (itemize): .................................
------------
4 Add lines 1, 2, and 3 ...................................... (7385)
------------
5 Distributions: a Cash ..................................
------------
b Stock .................................
------------
c Property ..............................
------------
6 Other decreases (itemize): .................................
------------
7 Add lines 5 and 6 ..........................................
------------
8 Balance at end of year (line 4 less line 7) ................ (7385)
------------
- --------------------------------------------------------------------------------
[RECYCLE LOGO] Printed on recycled paper
314
<Page>
Form 4562 DEPRECIATION AND AMORTIZATION OMB No. 1545-0172
(INCLUDING INFORMATION ON LISTED PROPERTY) 1996
Department of the Treasury Attach this form Attachment
Internal Revenue Service (99) See instructions to your return Sequence No. 67
- --------------------------------------------------------------------------------
Name(s) shown on return
Dov Pharmaceutical Inc.
- --------------------------------------------------------------------------------
Business or activity to which this form relates
Form 1120
- --------------------------------------------------------------------------------
Identifying number
22-3374365
- --------------------------------------------------------------------------------
PART I ELECTION TO EXPENSE CERTAIN TANGIBLE PROPERTY (SECTION 179) (NOTE:
IF YOU HAVE ANY "LISTED PROPERTY," COMPLETE PART V BEFORE YOU
COMPLETE PART I.)
- --------------------------------------------------------------------------------
<Table>
1 Maximum dollar limitation. If an enterprise zone
business, see the instructions ........................................... 1 $17,500
------------------
2 Total cost of section 179 property placed in service.
See the instructions ..................................................... 2
------------------
3 Threshold cost of section 179 property before reduction
in limitation ............................................................ 3 $200,000
------------------
4 Reduction in limitation. Subtract line 3 from line 2. If
zero or less, enter -0- .................................................. 4 0
------------------
5 Dollar limitation for tax year. Subtract line 4 from
line 1. If zero or less, enter -0-. If married filing
separately, see instructions ............................................. 5 17,000
------------------
- -----------------------------------------------------------------------------------------
(a) Description of property (b) Cost (business use only) (c) Elected cost
- -----------------------------------------------------------------------------------------
6
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
7 Listed property. Enter amount from line 27 7 0
---------------------------
8 Total elected cost of section 179 property. Add amounts
in column (c), lines 6 and 7 ............................................. 8 0
------------------
9 Tentative deduction. Enter the smaller of line 5 or line 8 ............... 9 0
------------------
10 Carryover of disallowed deduction from 1995. See the instructions ........ 10
------------------
11 Business income limitation. Enter the smaller of business
income (not less than zero) or line 5 (see instructions) ................. 11 17,500
------------------
12 Section 179 expense deduction. Add lines 9 and 10, but
do not enter more than line 11 ........................................... 12 0
------------------
13 Carryover of disallowed deduction to 1997. Add lines 9
and 10, less line 12 ................................. 13 0
---------------------------
</Table>
- --------------------------------------------------------------------------------
NOTE: DO NOT USE PART II OR PART III BELOW FOR LISTED PROPERTY (AUTOMOBILES,
CERTAIN OTHER VEHICLES, CELLULAR TELEPHONES, CERTAIN COMPUTERS, OR PROPERTY USED
FOR ENTERTAINMENT, RECREATION, OR AMUSEMENT). INSTEAD, USE PART V FOR LISTED
PROPERTY.
- --------------------------------------------------------------------------------
PART II MACRS DEPRECIATION FOR ASSETS PLACED IN SERVICE ONLY DURING YOUR
1997 TAX YEAR (DO NOT INCLUDE LISTED PROPERTY.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
> |_|
- --------------------------------------------------------------------------------
SECTION B--GENERAL Depreciation System (GDS) (See the instructions.)
- --------------------------------------------------------------------------------
<Table>
<Caption>
(b) Month and (c) Basis for depreciation
(a) Classification year placed in (business/investment use (d) Recovery (e) Convention (f) Method (G) Depreciation
of property service only--see instructions) period deduction
- ------------------------------------------------------------------------------------------------------------------------------------
15a 3-year property
- ----------------------- -------------------------------------------------------------------------------------------
b 5-year property 10860 5yr. MY MACRS 2172
- ----------------------- -------------------------------------------------------------------------------------------
c 7-year property
- ----------------------- -------------------------------------------------------------------------------------------
d 10-year property
- ----------------------- -------------------------------------------------------------------------------------------
e 15-year property
- ----------------------- -------------------------------------------------------------------------------------------
f 20-year property
- ----------------------- -------------------------------------------------------------------------------------------
g 25-year property 25 yrs. S/L
- ------------------------------------------------------------------------------------------------------------------------------------
h Residential rental 27.7 yrs. MM S/L
property -------------------------------------------------------------------------------------------------------------
27.5 yrs. MM S/L
- ------------------------------------------------------------------------------------------------------------------------------------
i Nonresidential 39 yrs. MM S/L
real property -------------------------------------------------------------------------------------------------------------
MM S/L
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
16a Class life S/L
- ----------------------- -------------------------------------------------------------------------------------------
b 12-year 12 yrs. S/L
- ------------------------------------------------------------------------------------------------------------------------------------
c 40-year 40 yrs. MM S/L
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
17 GDS and ADS deductions for assets placed in service in tax years beginning before 1996 .................... 17 15.1
-------------------
18 Property subject to section 168(f)(1) election ............................................................ 18
-------------------
19 ACRS and other depreciation ............................................................................... 19 3683
- ------------------------------------------------------------------------------------------------------------------------------------
20 Listed property. Enter amount from line 26 ................................................................ 20 6
-------------------
21 Total. Add deductions on line 12, lines 15 and 16 in column (g), and lines 17 through 20.
Enter here and on the appropriate lines of your return. Partnerships and S corporations--see instructions . 21 0
-------------------
22 For assets shown above and placed in service during the current year, enter the portion of the
basis attributable to section 263A costs ............................................... 22
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
Dov Pharmaceutical, Inc.
22-3374365
Form 1120 page 1 line 26 other deductions:
Consulting -- 45700
Professional Fees -- 72872
Office/Postage -- 1447
Auto -- 21
Bank Charges -- 63
Books/Publications -- 205
Computer Supplies -- 2442
License/Fees -- 50
Dues/Subscriptions -- 639
Gifts -- 209
Insurance -- 113
Travel -- 7118
Supplies -- 288
Telephone -- 3880
Entertainment(50%) -- 1312
------
Total Other Expenses 136359
======
<Page>
Form 4562 DEPRECIATION AND AMORTIZATION OMB No. 1545-0172
(INCLUDING INFORMATION ON LISTED PROPERTY) 1997
Department of the Treasury Attachment
Internal Revenue Service (99) Sequence No. 67
- --------------------------------------------------------------------------------
Name(s) shown on return
Dov Pharmaceutical Inc.
- --------------------------------------------------------------------------------
Business or activity to which this form relates
Form 1120
- --------------------------------------------------------------------------------
Identifying number
22-3374365
- --------------------------------------------------------------------------------
PART I ELECTION TO EXPENSE CERTAIN TANGIBLE PROPERTY (SECTION 179) (NOTE:
IF YOU HAVE ANY "LISTED PROPERTY," COMPLETE PART V BEFORE YOU
COMPLETE PART I.)
- --------------------------------------------------------------------------------
<Table>
1 Maximum dollar limitation. If an enterprise zone
business, see of the instructions ........................................ 1 $18,000
------------------
2 Total cost of section 179 property placed in service.
See the instructions ..................................................... 2
------------------
3 Threshold cost of section 179 property before reduction
in limitation ............................................................ 3 $200,000
------------------
4 Reduction in limitation. Subtract line 3 from line 2. If
zero or less, enter ...................................................... 4 0
------------------
5 Dollar limitation for tax year. Subtract line 4 from
line 1. If zero or less, enter -0-. If married filing
separately, see the instructions ......................................... 5 18,000
------------------
- -----------------------------------------------------------------------------------------
(a) Description of property (b) Cost (business use only) (c) Elected cost
- -----------------------------------------------------------------------------------------
6
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
7 Listed property. Enter amount from line 27 7 0
---------------------------
8 Total elected cost of section 179 property. Add amounts
in column (c), lines 6 and 7 8 0
------------------
9 Tentative deduction. Enter the smaller of line 5 or line 8 9 0
------------------
10 Carryover of disallowed deduction from 1996. See the instructions 10
------------------
11 Business income limitation. Enter the smaller of
business income (not less than zero) or line 5 (see
instructions) 11 18,000
------------------
12 Section 179 expense deduction. Add lines 9 and 10, but
do not enter more than line 11 0
------------------
13 Carryover of disallowed deduction to 1998. Add lines 9
and 10, less line 12 13 0
---------------------------
</Table>
- --------------------------------------------------------------------------------
NOTE: DO NOT USE PART II OR PART III BELOW FOR LISTED PROPERTY (AUTOMOBILES,
CERTAIN OTHER VEHICLES, CELLULAR TELEPHONES, CERTAIN COMPUTERS, OR PROPERTY USED
FOR ENTERTAINMENT, RECREATION, OR AMUSEMENT). INSTEAD, USE PART V FOR LISTED
PROPERTY.
- --------------------------------------------------------------------------------
PART II MACRS DEPRECIATION FOR ASSETS PLACED IN SERVICE ONLY DURING YOUR
1997 TAX YEAR (DO NOT INCLUDE LISTED PROPERTY.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
> |_|
- --------------------------------------------------------------------------------
SECTION B--GENERAL ASSET ACCOUNT ELECTION
- --------------------------------------------------------------------------------
<Table>
<Caption>
(b) Month and (c) Basis for depreciation
(a) Classification year placed in (business/investment use (d) Recovery (e) Convention (f) Method (G) Depreciation
of property service only--see instructions) period deduction
- ------------------------------------------------------------------------------------------------------------------------------------
15a 3-year property
- ----------------------- -------------------------------------------------------------------------------------------
b 5-year property
- ----------------------- -------------------------------------------------------------------------------------------
c 7-year property
- ----------------------- -------------------------------------------------------------------------------------------
d 10-year property
- ----------------------- -------------------------------------------------------------------------------------------
e 15-year property
- ----------------------- -------------------------------------------------------------------------------------------
f 20-year property
- ----------------------- -------------------------------------------------------------------------------------------
g 25-year property 25 yrs. S/L
- ------------------------------------------------------------------------------------------------------------------------------------
h Residential rental 27.7 yrs. MM S/L
-------------------------------------------------------------------------------------------------------------
property 27.5 yrs. MM S/L
- ------------------------------------------------------------------------------------------------------------------------------------
39 yrs. MM S/L
- ------------------------------------------------------------------------------------------------------------------------------------
MM S/L
- ----------------------- -------------------------------------------------------------------------------------------
- ----------------------- -------------------------------------------------------------------------------------------
- ----------------------- -------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
17 GDS and ADS deductions for assets placed in service in tax years beginning before 1997 17
-------------------
18 Property subject to section 168(f)(1) election 18
-------------------
19 ACRS and other depreciation 19 4382
-------------------
20 Listed property. Enter amount from line 26 20 0
-------------------
21 TOTAL. Add deductions on line 12, lines 15 and 16 in column (g), and lines 17 through 20.
Enter here and on the appropriate lines of your return. Partnerships and S corporations--see instructions 21 4382
-------------------
22 For assets shown above and placed in service during the current year, enter the portion of the
basis attributable to section 263A costs 22
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
1997 NEW JERSEY CORPORATION BUSINESS TAX RETURN 1997 - Page 1
CBT-100 FOR TAXABLE YEARS ENDING JULY 31, 1997 THROUGH JUNE 30, 1998
Taxable year beginning ______, 19__, and ending _________, 19__
<Table>
===================================================================================================================================
Place the lable below. Make necessary corrections on State and date of incorporation NJ 4/95
this label. Otherwise type or print the requested ---------------------------------
information. Check if address change appears below |_| Date authorized to do business in N.J. 4/95
- -------------------------------------------------------------- ---------------------------
FEDERAL EMPLOYER I.D. NUMBER N.J. CORPORATION NUMBER Date first began business in N.J. 4/95
22-3374365 --------------------------------
- -------------------------------------------------------------- Federal business activity code 8980
CORPORATION NAME ----------------------------------
DOV Pharmaceutical Inc. Corporation books are in the care of Taxpayer
- -------------------------------------------------------------- -----------------------------
MAILING ADDRESS at 400 Kelby St, Fort Lee, NY 07024
Fort Lee NJ 07204 ---------------------------------------------------------------
- --------------------------------------------------------------
CITY STATE ZIP CODE Telephone Number(_____) _________________________________________
-----------------------------------------------------------------
Total assets $_____________________________________ DIVISION USE
|_| Check if initial return |_|Check if 1120-S filer AP NP A_______________ R _______________
|_| Check if final return
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
PAGES 1 AND 2 MUST BE COMPLETED ON THIS FORM. ONLY EXACT COPIES MAY BE SUBSTITUTED.
- -----------------------------------------------------------------------------------------------------------------------------------
1. Entire net income from Schedule A, line 38 .................................................. 1. -a-
--------------------------------
2. Allocation factor from Schedule J, Part III, line 5. Non-allocating taxpayers should not make
an entry on line 2 .......................................................................... 2.
--------------------------------
3. Allocated net income - Multiply line 1 by line 2. Non-allocating taxpayers must enter the
amount from line 1 on this line ................................................................ 3. -0-
--------------------------------
4. a) Total nonoperational income $________________ (Schedule O, Part I) (see instruction 32)
b) Allocated New Jersey nonoperational income (Schedule O, Part III) ........................ 4(b)
--------------------------------
5. Total operational and nonoperational income (line 3 plus line 4(b)) ......................... 5. -0-
--------------------------------
6. Investment Company - Enter 25% of line 1 .................................................... 6.
--------------------------------
7. Real Estate Investment Trust - Enter 4% of line 1 ........................................... 7.
--------------------------------
8. Tax Base - Enter amount from line 5, 6 or 7, whichever is applicable ........................ 8.
--------------------------------
9. AMOUNT OF TAX - Multiply line 8 by .09 or, if applicable, by .075 (see instruction 11(a))
(see instruction 11(d) for minimum tax requirements) ........................................ 9. 200
--------------------------------
10. Credit for taxes paid to other jurisdictions (see instruction 29(a)) ....................... 10.
--------------------------------
11. Subtract line 10 from line 9 ............................................................... 11. 200
--------------------------------
12. Tax Credits (from Schedule A-3) (see instruction 39) ....................................... 12.
--------------------------------
200
--------------------------------
13. TOTAL TAX LIABILITY - line 11 minus line 12 ................................................ 13.
--------------------------------
14. INSTALLMENT PAYMENT (see instruction 39) ................................................... 14.
--------------------------------
15. Total of line 13 plus line 14 .............................................................. 15. 200
--------------------------------
16. PAYMENTS & CREDITS (see instruction 40) 16.
--------------------------------
17. Balance of Tax Due - line 15 minus line 16 ................................................. 17. 200
--------------------------------
18. Penalty and Interest Due - (see instructions 7(d) and 4t)
Penalty ___________________ Interest__________________.................................Total 18.
--------------------------------
19. Interest from CBT-150 (see instruction 42) (Attach Form CBT-160) ........................... 19.
--------------------------------
20. Total Balance Due - line 17 plus line 18 plus line 19 ...................................... 20.
------------------------------------------------------------
21. If line 16 is greater than line 15 plus line 18 plus line 19 DIVISION USE
enter the amount of overpayment ............................ $
----------------------------------------------------------------
23. Amount of Item 22 to be Credited to 1998 return Refunded
$
- -----------------------------------------------------------------------------------------------------------------------------------
SIGNATURE AND VERIFICATION (SEE INSTRUCTION 14)
I declare under the penalties provided by law, that this return (including any accompanying schedules and statements)
has been examined by me and to the best of my knowledge and belief is a true, correct and complete return. If the return is prepared
by a person other than the taxpayer, his declaration is based on all the information relating to the matters required to be reported
in the return of which he has knowledge.
- -----------------------------------------------------------------------------------------------------------------------------------
(Date) (Signature of Duly Authorized Officer of Taxpayer) (Title)
- -----------------------------------------------------------------------------------------------------------------------------------
(Date) (Signature of Individual Preparing Return) (Address) (Preparer's ID Number)
- ------------------------------------------------------------------------------------------------------------------------------------
(Name of Tax Preparer's Employer) (Address) (Employer's ID Number)
</Table>
<Page>
SCHEDULE A COMPUTATION OF ENTIRE NET INCOME (SEE INSTRUCTION 16)
EVERY CORPORATION MUST COMPLETE LINES 1 - 38 OF THIS SCHEDULE,
ONLY THOSE TAXPAYERS WHO FILE AN UNCONSOLIDATED FEDERAL FORM 1120 ARE
PERMITTED TO SUBMIT A COPY OF SUCH RETURN IN LIEU OF COMPLETING LINES
1 - 28 BELOW.
<Table>
================================================================================================================================
1. Gross receipts or sales ______________ Less returns and allowances _____________ ............. 1 See Federal
-----------------------------
2. Less: Cost of goods sold (Schedule A-2, line 8) .............................................. 2 1120
-----------------------------
3. Gross profit - Subtract line 2 from line 1 ................................................... 3 Attached
-----------------------------
4. Dividends .................................................................................... 4
-----------------------------
5. Interest ..................................................................................... 5
-----------------------------
6. Gross rents .................................................................................. 6
-----------------------------
7. Gross royalties .............................................................................. 7
-----------------------------
8. Capital gain net income (attach separate Federal Schedule D) ................................. 8
-----------------------------
9. Net gain or (loss) from Federal Form 4797 (attach Federal Form 4797) ......................... 9
-----------------------------
10. Other income (attach schedule) .............................................................. 10
-----------------------------
11. TOTAL INCOME - Add lines 3 through 10 ....................................................... 11
-----------------------------
12. Compensation of officers (Schedule F) ....................................................... 12
-----------------------------
13. Salaries and wages __________________ Less jobs credit __________________ Balance ........... 13
-----------------------------
14. Repairs (Do not include capital expenditures) ............................................... 14
-----------------------------
15. Bad debts ................................................................................... 15
-----------------------------
16. Rents ....................................................................................... 16
-----------------------------
17. Taxes ....................................................................................... 17
-----------------------------
18. Interest .................................................................................... 18
-----------------------------
19. Contributions ............................................................................... 19
------------------------------------------------------------
20. Depreciation from Federal Form 4562 (attach copy) ............. 20
-----------------------------
21. Less depreciation claimed in Schedule A and elsewhere on return 21(a) 21(b)
------------------------------------------------------------
22. Depletion ................................................................................... 22
-----------------------------
23. Advertising ................................................................................. 23
-----------------------------
24. Pension, profit-sharing plans, etc .......................................................... 24
-----------------------------
25. Employee benefit programs ................................................................... 25
-----------------------------
26. Other deductions (attach schedule) .......................................................... 26
-----------------------------
27. TOTAL DEDUCTIONS - Add lines 12 through 26 .................................................. 27
-----------------------------
28. Taxable income before net operating loss deductions and special deductions (line 11 less
line 27 must agree with line 28, page 1 of the Unconsolidated Federal Form 1120, or the
appropriate line item from the Federal Forms 1120-IC-DISC, 1120-FSC or 1120-A, whichever
is applicable. 1120-S filers who have not elected to be New Jersey S Corporations must report
the amount from line 7, Schedule S-1 of the CBT-100.) (see instructions 8(b) and 16(c)) 28 154
- --------------------------------------------------------------------------------------------------------------------------------
<Caption>
NEW JERSEY ADJUSTMENTS
LINES 29 - 38 MUST BE COMPLETED ON THIS FORM
- ------------------------------------------------------------------------------------------------
29. Interest on Federal, State, Municipal and other obligations not included in Item 5 above
(see instruction 16(d)) ..................................................................... 29
-----------------------------
30. Environmental taxes deducted above (see instruction 16(e)) .................................. 30
-----------------------------
31. New Jersey State and other states taxes deducted above (see instruction 16(f)) .............. 31
-----------------------------
32. Depreciation and other adjustments from Schedule S (see instruction 37) ..................... 32
-----------------------------
33. (a) Deduction for Foreign Taxes paid, withheld or deemed paid. (see instruction 16(h)) ...... 33(a)
-----------------------------
(b) Other deductions. Explain on separate rider. (see instruction 16(h)) .................... 33(b)
-----------------------------
(c) Other additions. Explain on separate rider. (see instruction 16(h)) ..................... 33(c)
-----------------------------
(d) Elimination of nonoperational activity (Schedule O, Part I) ............................. 33(d)
-----------------------------
34. Entire net income before net operating loss deduction and dividend exclusion (total of
lines 28 through 33 inclusive) .............................................................. 34 154
=============================
35. Net operating loss deduction from Schedule A-1 (see instructions 16(i) and 17) .............. 35 154
=============================
36. Entire Net Income before dividend exclusion (line 34 minus line 35) ......................... 36 -0-
-----------------------------
37. Dividend Exclusion from Schedule R, line 5. (see instruction 16(j)) ......................... 37
-----------------------------
38. ENTIRE NET INCOME (line 36 minus line 37 - carry to page 1, line 1) ......................... 38 -0-
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
1997-C - Page 3
- --------------------------------------------------------------------------------
NAME AS SHOWN ON RETURN FEDERAL ID NUMBER
DOV Pharmacuetical Inc. 22-3374365
- --------------------------------------------------------------------------------
SCHEDULE A-1 NET OPERATING LOSS DEDUCTION AND CARRYOVER (SEE INSTRUCTIONS 16(I)
AND 17)
- --------------------------------------------------------------------------------
<Table>
<Caption>
(1) (2) (3) (4)
Loss Reported Add N.J. ENI Adj.'s Excluding
Fiscal Year Ended on Schedule A, line 28 the Dividend Exclusion Amount
- ---------------------------------------------------------------------------------------------------------------------------------
N.J. NOL'S 1. 12/31/95 614 0 ( 614 )
--------------------------------------------------------------------------------------------------------
2. 12/31/96 3576 100 ( 3476 )
--------------------------------------------------------------------------------------------------------
3. ( )
--------------------------------------------------------------------------------------------------------
4. ( )
--------------------------------------------------------------------------------------------------------
5. ( )
--------------------------------------------------------------------------------------------------------
6. ( )
--------------------------------------------------------------------------------------------------------
7. ( )
- ---------------------------------------------------------------------------------------------------------------------------------
N.J. NOLCS Used 8. 12/31/97 154
------------------ --------------------
9.
------------------ --------------------
10.
------------------ --------------------
11.
------------------ --------------------
12.
------------------ --------------------
13.
------------------ --------------------
14.
- ---------------------------------------------------------------------------------------------------------------------------------
N.J. NOL Carryover 15. Total lines 1 - 14, Column 4 ...................................................... 3936
- ---------------------------------------------------------------------------------------------------------------------------------
SCHEDULE A-2 COST OF GOODS SOLD
1. Inventory at beginning of year .................................................................. 1.
----------------------------
2. Purchases ....................................................................................... 2.
----------------------------
3. Cost of labor ................................................................................... 3. N/A
----------------------------
4. Additional section 263A costs ................................................................... 4. N/A
----------------------------
5. Other costs (attach schedule) ................................................................... 5.
----------------------------
6. Total - Add lines 1 through 5 ................................................................... 6.
----------------------------
7. Inventory at end of year ........................................................................ 7.
----------------------------
8. Cost of goods sold - Subtract line 7 from line 6. Enter here and on Schedule A, line 2 .......... 8.
- ---------------------------------------------------------------------------------------------------------------------------------
SCHEDULE A-3 SUMMARY OF TAX CREDITS (SEE INSTRUCTION 38)
- ---------------------------------------------------------------------------------------------------------------------------------
1. New Jobs Investment Tax Credit from Form 304 .................................................... 1.
----------------------------
2. EITHER: a) Urban Enterprise Zone Employee Tax Credit from Form 300
OR b) Urban Enterprise Zone Investment Tax Credit from Form 301 ............................ 2.
----------------------------
3. Redevelopment Authority Project Tax Credit from Form 302 ........................................ 3. N/A
----------------------------
4. Recycling Equipment Tax Credit from Form 303 .................................................... 4. N/A
----------------------------
5. Manufacturing Equipment and Employment Investment Tax Credit from Form 305 ...................... 5.
----------------------------
6. Research and Development Tax Credit from Form 306 ............................................... 6.
----------------------------
7. Employer Trip Reduction Plan - Ride Share Tax Credit from Form 307 .............................. 7.
----------------------------
8. Total tax credits taken on this return - Add lines 1 through 7.
Enter here and on page 1, line 12 ............................................................... 8.
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
1997-C - Page 4
DOV Pharmaceutical Inc. 22-3374365
- --------------------------------------------------------------------------------
SCHEDULE B BALANCE SHEET AS OF 12/31, 1995
Figures appearing below must be the same as year-end figures shown
on the taxpayer's books. If not, explain and reconcile on rider.
Consolidated returns are not permitted.
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS BEGINNING OF THE TAX YEAR END OF TAX YEAR
- -----------------------------------------------------------------------------------------------------------------------------------
1. Cash 1317 40654
- -----------------------------------------------------------------------------------------------------------------------------------
2. Trade notes and accounts receivable 733 77875
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Reserve for bad debts ( ) ( )
- -----------------------------------------------------------------------------------------------------------------------------------
3. Loans to stockholders / affiliates
- -----------------------------------------------------------------------------------------------------------------------------------
4. Stock of subsidiaries
- -----------------------------------------------------------------------------------------------------------------------------------
5. Corporate stocks
- -----------------------------------------------------------------------------------------------------------------------------------
6. Bonds, mortgages and notes
- -----------------------------------------------------------------------------------------------------------------------------------
7. New Jersey State and Local government obligations
- -----------------------------------------------------------------------------------------------------------------------------------
8. All other government obligations
- -----------------------------------------------------------------------------------------------------------------------------------
9. Patents and copyrights
- -----------------------------------------------------------------------------------------------------------------------------------
10. Deferred charges
- -----------------------------------------------------------------------------------------------------------------------------------
11. Goodwill
- -----------------------------------------------------------------------------------------------------------------------------------
12. All other intangible personal property (itemize)
- -----------------------------------------------------------------------------------------------------------------------------------
13. TOTAL INTANGIBLE PERSONAL PROPERTY (total lines 1 to 12) 78632 118529
- -----------------------------------------------------------------------------------------------------------------------------------
14. Land
- -----------------------------------------------------------------------------------------------------------------------------------
15. Buildings and other improvements
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Less accumulated depreciation ( ( ) ( )
- -----------------------------------------------------------------------------------------------------------------------------------
16. Machinery and equipment 15583 15583
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Less accumulated depreciation ( 4628 ) ( 9010 )
- -----------------------------------------------------------------------------------------------------------------------------------
17. Inventories
- -----------------------------------------------------------------------------------------------------------------------------------
18. All other tangible personal (net) (itemize on rider)
- -----------------------------------------------------------------------------------------------------------------------------------
19. TOTAL REAL AND TANGIBLE PERSONAL PROPERTY (total lines 14 to 18) 10955 6573
- -----------------------------------------------------------------------------------------------------------------------------------
20. Total assets (add lines 13 and 19) 89587 125102
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
21. Accounts payable 72457 125296
- -----------------------------------------------------------------------------------------------------------------------------------
22. Mortgages, notes, bonds payable in less than 1 year (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
23. Other current liabilities (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
24. Loans from stockholders / affiliates 19485 7328
- -----------------------------------------------------------------------------------------------------------------------------------
25. Mortgages, notes, bonds payable in 1 year or more (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
26. Other liabilities (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
27. Capital stock: (a) Preferred stock
- -----------------------------------------------------------------------------------------------------------------------------------
(b) common stock 5000 5000
- -----------------------------------------------------------------------------------------------------------------------------------
28. Paid-in or capital surplus
- -----------------------------------------------------------------------------------------------------------------------------------
29. Retained earnings - appropriated (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
30. Retained earnings - unappropriated (7385) (12522)
- -----------------------------------------------------------------------------------------------------------------------------------
31. Less cost of treasury stock
- -----------------------------------------------------------------------------------------------------------------------------------
32. Total liabilities and stockholder's equity (total lines 21 to 32) 89587 125102
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
1997-C - Page 5
- --------------------------------------------------------------------------------
NAME AS SHOWN ON RETURN FEDERAL ID NUMBER
DOV Pharmaceutical Inc. 22-3374365
- --------------------------------------------------------------------------------
SCHEDULE C RECONCILIATION OF INCOME PER BOOKS WITH INCOME PER RETURN
(SEE INSTRUCTION 21)
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
1. Net income per books (5137) 7. Income recorded on books this year not
- ----------------------------------------------------------------- included in this return (itemize)
2. Federal income tax
- -----------------------------------------------------------------
3. Excess of capital losses over capital gains (a) Tax-exempt interest $ _______________ 1
- -----------------------------------------------------------------
4. Income subject to tax not recorded on (b) _____________________________________
books this year (itemize)
(c) _____________________________________
------------------------------------------- --------------------------------------------------------------
8. Deductions in this tax return not charged
------------------------------------------- against book income this year (itemize)
- -----------------------------------------------------------------
(a) Depreciation $ _______________________
5. Expenses recorded on books this year not
deducted in this return (itemize) (b) Contributions Carryover $ ____________
(a) Depreciation $______________________
------------------------------------
(b) Contributions Carryover $___________ --------------------------------------------------------------
(c) Other (itemize) $ TIE 5291 5291 9. Total of lines 7 and 8
-------------------
- ------------------------------------------------------------------------------------------------------------------------------------
6. Total of lines 1 through 5 154 10. Income (Item 28, Schedule A) - line 6 less 9 154
- ------------------------------------------------------------------------------------------------------------------------------------
SCHEDULE C-1 ANALYSIS OF UNAPPROPRIATED RETAINED EARNINGS PER BOOKS (SEE INSTRUCTION 21)
- ------------------------------------------------------------------------------------------------------------------------------------
1. Balance at beginning of year 7385 5. Distributions
- ------------------------------------------------------------------
2. Net income per books (5137) (a) Cash $ ___________________________
- ------------------------------------------------------------------
3. Other increases (itemize) (b) Stock $___________________________
------------------------- (c) Property $_______________________
--------------------------------------------------------------
------------------------- 6. Other decreases (itemize)
------------------------- -------------------------
------------------------- -------------------------
--------------------------------------------------------------
------------------------- 7. Total of lines 5 and 6
- ------------------------------------------------------------------------------------------------------------------------------------
4. Total of lines 1, 2 and 3 (12522) 8. Balance end of year (line (12522)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
_________________________________________________________________________________________________________________
______________________________________________________________________________________________________
_________________________________________________________
_______________________
_______________________
- ------------------------------------------------------------------------------------------------------------------------------------
Percent of Stock
Name of Controlled Corporations Owned or Controlled By Whom Controlled
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
4. Is the capital stock of the taxpayer listed on any exchange? "Yes or No" No. If yes, specify exchanges where listed and
submit taxpayer's Annual Report to stockholders for the period covered by this return.
5. This question must be answered by domestic corporations only -
(a) Does the taxpayer hold any personal property, including moneys, negotiable instruments, choses in action, interest,
dividends, wages, debts or demands, stocks, bonds, deposits, and the accretions thereon, due or belonging to another where the
owner, beneficial owner or person entitled to such property has been unknown, or where the whereabouts of such owner has been
unknown, or where such personal property has been unclaimed for a period of fourteen successive years, (five successive years
in the case of cash items such as money, wages, cash dividends, etc.) as of the last day of the accounting period covered in
this return? "Yes or No" No.
(b) If "Yes", itemize on a separate rider the nature of the property, value thereof and last known names and addresses of such
owners or persons.
6. THIS QUESTION MUST BE ANSWERED BY CORPORATIONS WITH INCOME FROM SOURCES OUTSIDE THE UNITED STATES.
(a) Is income from sources outside the United States included in entire net income at line 38 of Schedule A. "Yes or No"
_________ .
(b) If the answer is "No", set forth such items of gross income, the source, the deductions and the amount of foreign taxes paid
thereon. Enter at line 33, Schedule A, the difference between the net of such income and the amount of foreign taxes paid
thereon not previously deducted.
</Table>
<Page>
1997-C - Page 6
DOV Pharmaceutical Inc. 22-3374365
- --------------------------------------------------------------------------------
<Table>
<Caption>
SCHEDULE F CORPORATE OFFICERS - GENERAL INFORMATION AND COMPENSATION (SEE INSTRUCTION 23)
- ------------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5) (6)
Dates Employed Percent of Corporation
Name and Current Address of Officer Social Security Number Title in this position Stock Owned Amount of
From To Common Preferred Compensation
- ------------------------------------------------------------------------------------------------------------------------------------
None
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Total compensation of officers .........................................................................
-----------------------
(b) Less: Compensation of officers claimed elsewhere on the return ........................................
-----------------------
(c) Balance of compensation of officers (enter here and on Schedule A, line 12, page 2) .................... -0-
- ------------------------------------------------------------------------------------------------------------------------------------
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
SCHEDULE H TAXES (SEE INSTRUCTIONS 16(F) AND 24)
Include all taxes paid or accrued during the accounting period wherever deducted on Schedule A.
- ------------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
New Jersey Other States Federal Total
Taxes Taxes Taxes
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Corporation Franchise Tax and/or Income Tax
- ------------------------------------------------------------------------------------------------------------------------------------
(b) Local Property Taxes
- ------------------------------------------------------------------------------------------------------------------------------------
(c) U.C.C. or Payroll Taxes
- ------------------------------------------------------------------------------------------------------------------------------------
(d) Other Taxes (attach rider)
- ------------------------------------------------------------------------------------------------------------------------------------
(e) Total Columns 1, 2 and 3 ............................................................................
-------------------------
(f) Taxes paid to foreign countries and U.S. possessions ................................................
-------------------------
(g) Total All Taxes .....................................................................................
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
OMB No. 1545-0123 U.S.
Form 1120 ----------------------
Department of the Treasury 1997
Internal Revenue Service
US. Corporation Income Tax Return
For calendar year 1997 OR tax year beginning....1997, ending.... 19...
Instructions are Separate. See Page 1 for Paperwork Reduction Act Notice.
- --------------------------------------------------------------------------------
^ Check if a:
<Table>
1 Consolidated return NC 22-3374365 DEC97 SI9 8980MP B Employer Identification Number
(attach Form 851) |_| DOV PHARMACEUTICAL INC ---------------------------------------------------
2 Personal holding co. [ILLEGIBLE] 400 KELBY PL STE 1600 C Date incorporated
(attach Sch. PH) |_| FORT LEE NJ 07024 I 4/95
3 Personal service corp. R ---------------------------------------------------
(as defined in Temporary S D Total assets (see page 5 of instructions)
Regs. sec. 1.441-IT-- ---------------------------------------------------
see instructions) |_| S 125102
- -----------------------------------------------------------------------------------------------------------------------------------
E Check applicable boxes: (1) |_| Initial return (2) |_| Final return (3) |_| Change of address
- -----------------------------------------------------------------------------------------------------------------------------------
1a Gross receipts or sales | 4575524 | b Less returns and allowances |______________|___| c Bal > 1c 451552
----------------
2 Cost of goods sold (Schedule A, line 8) ........................................................ 2
----------------
3 Gross profit. Subtract line 2 from line 1c ..................................................... 3 451552
----------------
4 Dividends (Schedule C, line 19) ................................................................ 4
----------------
Income 5 Interest ....................................................................................... 5
----------------
6 Gross rents .................................................................................... 6
----------------
7 Gross royalties ................................................................................ 7
----------------
8 Capital gain net income (attach Schedule D (Form 1120)) ........................................ 8
----------------
9 Net gain or (loss) from Form 4797, Part II, line 16 (attach Form 4797) ......................... 9
----------------
10 Other income (see page 6 of instructions--attach schedule) ..................................... 10
----------------
11 Total income. Add lines 3 through 10 ..........................................................> 11 451552
- -----------------------------------------------------------------------------------------------------------------------------------
12 Compensation of officers (Schedule E, line 4) .................................................. 12
----------------
13 Salaries and wages (less employment credits) ................................................... 13
----------------
14 Repairs and maintenance ........................................................................ 14 28
----------------
15 Bad debts ...................................................................................... 15
----------------
16 Rents .......................................................................................... 16 21480
----------------
17 Taxes and licenses ............................................................................. 17
----------------
18 Interest ....................................................................................... 18 136
----------------
Deductions 19 Charitable contributions (see page 8 of instructions for 10% limitation) ....................... 19
(See ----------------
instructions 20 Depreciation (attach Form 4562) ........................................ 20 4382
for -----------------------
limitations 21 Less depreciation claimed on Schedule A and elsewhere on return ....... 21a 21b 4382
on -----------------------------------------
Deductions 22 Depletion ...................................................................................... 22
----------------
23 Advertising .................................................................................... 23 320
----------------
24 Pension, profit-sharing, etc., plans ........................................................... 24
----------------
25 Employee benefit programs ...................................................................... 25
----------------
26 Other deductions (attach schedule) ............................................................. 26 425052
----------------
27 Total deductions. Add lines 12 through 26 ...................................................... 27 457398
----------------
28 Taxable income before net operating loss deduction and special deductions.
Subtract line 27 from line 11 .................................................................. 28 154
----------------
29a Less: a Net operating loss deduction (see page 19 of instructions) (2/31/95 29a 154
-------------------
b Special deductions (Schedule C, line 20) 29b 29c 154
- -----------------------------------------------------------------------------------------------------------------------------------
30 Taxable income. Subtract line 29c from line 28 ................................................. 30 None
----------------
31 Total tax (Schedule J, line 10) ................................................................ 31
----------------
32 Payments: a 1996 overpayment credited to 1997 32a
-----------------------
b 1997 estimated tax payments ..................32b
-----------------------
c Less 1997 refund applied for on Form 4466.....32c ( ) d Bal > 32d
----------------------- -----------------
Tax and
Payments e Tax deposited with Form 7004 ................................................ 32e
-----------------
f Credit for tax paid on undistributed capital gains (attach Form 2433) ....... 32f
-----------------
g Credit for Federal tax on fuels (attach Form 4136). See instructions .........32g 32h
----------------- ----------------
33 Estimated tax penalty (see page 10 of instructions). Check if Form 2220 is attached ......> |_| 33
----------------
34 Tax due. If line 32h is smaller than the total of lines 31 and 33, enter amount owed ........... 34 None
----------------
35 Overpayment, If line 32h is larger than the total of lines 31 and 33, enter amount overpaid .... 35
----------------
Enter amount of line 35 you want: Credited to 1998 estimated tax > Refunded > 36
- -----------------------------------------------------------------------------------------------------------------------------------
Under penalties of perjury, I declare that I have examined this return,
including accompanying schedules and statements, and to the best of my
knowledge and belief, it is true, correct, and complete. Declaration of
Sign preparer (other than taxpayer) is based on all information of which
Here preparer has any knowledge.
>
-------------------------------------------------- > -----------------------------------------------------
Signature of officer Date Title
- -----------------------------------------------------------------------------------------------------------------------------------
Preparer's Date Preparer's social security number
Paid Signature > Check if
Preparer's Self-employed |_|
Use Only ------------------------------------------------------------------------------------------------------------------
Firm's name for EIN >
yours if self-employed > -----------------------------------------------------------------------------------
and address Zip code >
- -----------------------------------------------------------------------------------------------------------------------------------
Cat. No. 114500
</Table>
<Page>
Form 1120 (1997) DOV Pharmaceutical, Inc. 22-3374365 Page 2
- --------------------------------------------------------------------------------
Schedule A Cost of Goods Sold (See page 11 of instructions.)
- --------------------------------------------------------------------------------
1
2
3
4
5
6
7
8
9a
|_|
(ii)
b
c
d If the LIFO Inventory menthod was used for this tax
year, enter percentage (or amounts) of closing --------------------
e
f
<Table>
- ------------------------------------------------------------------------------------------------------------------------------------
Schedule C Dividends and Special Deductions (See page 11 of (a) Dividends (b) % (c) Special deductions
Instructions.) received (a) x (b)
- ------------------------------------------------------------------------------------------------------------------------------------
1 Dividends from less-than-20%-owned domestic corporations that
are subject to the 70% deduction (other than debt-financed stock).... 70
---------------------------------------------------------
2 O i v i i from 20%-or-more-owned domestic corporations that are
subject to the 80% deduction (other than debt-financed stock) ....... 80
---------------------------------------------------------
3 Dividends debt-financed stock of domestic and foreign corporations see
(section 246A) ...................................................... instructions
---------------------------------------------------------
4 Dividends on certain preferred stock of less-than-20%-owned public
utilities ........................................................... 42
---------------------------------------------------------
5 Dividends on certain preferred stock of 20%-or-more-owned public
utilities ........................................................... 48
---------------------------------------------------------
6 Dividends from less-than-20%-owned foreign corporations and certain
FSCs that are subject to the 70% deduction .......................... 70
---------------------------------------------------------
7 Dividends from 20%-or-more-owned foreign corporations and certain
FSCs that are subject to the 80% deduction .......................... 80
---------------------------------------------------------
8 Dividends from wholly owned foreign subsidiaries subject to the 100%
deduction (section 245(b)) .......................................... 100
---------------------------------------------------------
9 Total. Add lines 1 through 8. See page 12 of instructions for
limitation ..........................................................
---------------------------------------------------------
10 Dividends from domestic corporations received by a small business
investment company operating under the Small Business Investment
Act of 1958 ......................................................... 100
---------------------------------------------------------
11 Dividends from certain FSCs that are subject to the 100% deduction
(section 245(c)(1)) ................................................. 100
---------------------------------------------------------
12 Dividends from affiliated group members subject to the 100%
deduction (section 243(a)(3)) ....................................... 100
---------------------------------------------------------
13 Other dividends from foreign corporations not included on lines
3, 6, 7, 8, or 11 ...................................................
----------------
14 Income from controlled foreign corporations under subpart F
(attach Form(s) 5471) ...............................................
----------------
15 Foreign dividend gross-up (section 78) ..............................
----------------
16 IC-DISC and former DISC dividends not included on lines 1, 2,
or 3 (section 246(d)) ...............................................
----------------
17 Other dividends .....................................................
----------------
18 Deduction for dividends paid on certain preferred stock of
public utilities ....................................................
-----------------------
19 Total dividends. Add lines 1 through 17. Enter here and on line 4,
page 1 ..............................................................
----------------
20 Total special deductions. Add lines 9, 10, 11, 12, and 18. Enter
here and on line 29b, page 1 ..............................................................................>
- ------------------------------------------------------------------------------------------------------------------------------------
Schedule E Compensation of Officers (See instructions for line 12, page 1.)
Complete Schedule E only if total receipts (line 1a plus lines 4 through 10 on page 1, Form 1120) are $500,000 or more.
- ------------------------------------------------------------------------------------------------------------------------------------
Percent of corporation
(c) Percent of stock owned
(a) Name of officer (b) Social security number time devoted to -------------------------- (f) Amount of compensation
business (d) Common (e) Preferred
- ------------------------------------------------------------------------------------------------------------------------------------
1 N/A % % % None
- ------------------------------------------------------------------------------------------------------------------------------------
% % %
- ------------------------------------------------------------------------------------------------------------------------------------
% % %
- ------------------------------------------------------------------------------------------------------------------------------------
% % %
- ------------------------------------------------------------------------------------------------------------------------------------
% % %
- ------------------------------------------------------------------------------------------------------------------------------------
2 Total compensation of officers .......................................................................
---------------------------
3 Compensation of officers claimed on Schedule A and elsewhere on return ...............................
---------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
Form 1120 (1997) DOV Pharmaceutical Inc. 22-3374365 Page 3
<Table>
- ------------------------------------------------------------------------------------------------------------------------------------
Schedule J Tax Computation (see page 12 of instructions.)
- ------------------------------------------------------------------------------------------------------------------------------------
1 Check if the corporation is a member of a controlled group (see sections 1561 and 1563) ............. > |_|
Important: Members of a controlled group, see instructions on page 13.
2a If the box on line 1 is checked, enter the corporation's share of the $50,000, $25,000,
and $9,925,000 taxable income brackets (in that order):
(1) |$________|___| (2)|$_________|___| (3) |$_________|___|$
b Enter the corporation's share of:
(1) Additional 5% tax (not more than $11,750) |$_________|___|
(2) Additional 3% tax (not more than $100,000) |$_________|___|
3 Income tax. Check this box if the corporation is a qualified personal service corporation
as defined in section 448(d)(2) (see instructions on page 13)......................................... > |_| 3 None
-------------------
4a Foreign tax credit (attach Form 1118) ......................................................... 4a
b Possessions tax credit (attach Form 5735) ..................................................... 4b
c Check: |_| Nonconventional source fuel credit |_| QEV credit (attach Form 8834) ............... 4c
d General business credit. Enter here and check which forms are attached: |_| 3800
|_| 3468 |_| 5884 |_| 6478 |_| 6765 |_| 8588 |_| 8830 |_| 8526
|_| 8835 |_| 8844 |_| 8845 |_| 8846 |_| 8820 |_| 8847 |_| 8851 .... 4d
e Credit for prior year minimum tax (attach Form 8827) .......................................... 4e
5 Total credits. Add lines 4a through 4e ..................................................................... 5
-------------------
6 Subtract line 5 from line 3 ................................................................................ 6
-------------------
7 Personal holding company tax (attach Schedule PH (Form 1120)) .............................................. 7
-------------------
8 Recapture taxes. Check if from: |_| Form 4255 |_| Form 8611............................................... 8
-------------------
9 Alternative minimum tax (attach Form 4626) ................................................................. 9
-------------------
10 Total tax. Add lines 6 through 9. Enter here and on line 31, page 1 ........................................ 10 None
- ------------------------------------------------------------------------------------------------------------------------------------
Schedule K Other Information (see page 14 instructions)
- ------------------------------------------------------------------------------------------------------------------------------------
1 Check method of accounting: a |_| Cash Yes No 7 Was the corporation a U.S. shareholder of any Yes No
b |X| Accrual c |_| Other (specify) > _________________ controlled foreign corporation? (See sections 951 and. X
957.)
2 See page 16 of the instructions and state the principal:
|_| Business activity code no. > 8980 If "Yes," attach Form 5471 for each such corporation.
b Business activity > Consulting Enter number of Forms 5471 attached ................
c Product or service > Service
8 At any time during the 1997 calendar year, did the
3 At the end of the tax year, did the corporation own, corporation have an interest in or a signature or
directly or indirectly, 50% or more of the voting stock other authority over a financial account (such as a
of a domestic corporation? (For rules of attribution, see bank account, securities account, or other financial
section 267(c).) ........................................ X account) in a foreign country? > ..................... X
If "Yes," attach a schedule showing: (a) name and If "Yes," the corporation may have to file Form TD F
identifying number, (b) percentage owned, and (c) taxable 90-22.1.
income or (loss) before NOL and special deductions of
such corporation for the tax year ending with or within If "Yes," enter name of foreign country >...........
your tax year.
9 During the tax year, did the corporation receive a
4 Is the corporation a subsidiary in an affiliated group or distribution from, or was it the grantor of, or
a parent-subsidiary controlled group? .................. X transferor to, a foreign trust? If "Yes," see page 15
of the instructions for other forms the corporation
If "Yes," enter employer identification number and name may have to file ..................................... X
of the parent corporation > ____________________________
10 At any time during the tax year, did one foreign person
-------------------------------------------------------- own, directly or indirectly, at least 25% of: (a)
the total voting power of all classes of stock of the
5 At the end of the tax year, did any individual, corporation entitled to vote, or (b) the total value of
partnership, corporation, estate or trust own, directly or all classes of stock of the corporation? If "Yes," X
indirectly, 50% or more of the corporation's voting
stock? (For rules of attribution, see section 267(c).).. X a Enter percentage owned >______________________________
country >_____________________________________________
If "Yes," attach a schedule showing name and identifying
number. (Do not include any information already entered b Enter owner's country >_______________________________
in 4 above.) Enter percentage owned >___________________ c The corporation may have to file Form 5472. Enter
number of Forms 5472 attached >______________________
6 During this tax year, did the corporation pay dividends
(other than stock dividends and distributions in exchange 11 Check this box if the corporation issued publicly
for stock) in excess of the corporation's current and offered debt instruments with original issue discount |_|
accumulated earnings and profits? (See secs. 301 and
316.)................................................... X If so, the corporation may have to file Form 8281.
If "Yes," file Form 5452. If this is a consolidated 12 Enter the amount of tax-exempt interest received or
return, answer here for the parent corporation and on accrued during the tax year o $ _____________________
Form 851, Affiliations Schedule, for each subsidiary.
13 If there were 35 or fewer shareholders at the end of
the tax year, enter the number > 3
14 If the corporation has an NOL for the tax year and is
electing to forego the carryback period, check here ^
15 Enter the available NOL carryover from prior tax years
(Do not reduce it by any deduction on line 29a.) > $ 4190
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
Form 1120 (1997) DOV Phamaceutical Inc 22-3374365 Page 4
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Schedule L Balance Sheets per Books Beginning of tax year End of tax year
- ------------------------------------------------------------------------------------------------------------------------------------
Assets (a) (b) (c) (d)
------------------------------------------------------------------------------
1 Cash .......................................... 1317 40654
--------------- -------------
2a Trade notes and accounts receivable .......... 77315 77875
-------------- --------------
b Less allowance for bad debts ..................( ) 77315 ( ) 77875
------------------------------------------------------------------------------
3 Inventories ...................................
--------------- -------------
4 U.S. government obligations ...................
--------------- -------------
5 Tax-exempt securities (see instructions) ......
--------------- -------------
6 Other current assets (attach schedule) ........
--------------- -------------
7 Loans to stockholders .........................
--------------- -------------
8 Mortgage and real estate loans ................
--------------- -------------
9 Other investments (attach schedule) ...........
--------------- -------------
10a Buildings and other depreciable assets ........ 15583 15583
-------------- --------------
b Less accumulated depreciation .................( 4628 ) 10155 9010 6573
------------------------------------------------------------------------------
11a Depletable assets .............................
-------------- --------------
b Less accumulated depletion ....................
------------------------------------------------------------------------------
12 Land (net of any amortization) .................
--------------- -------------
13a Intangible assets (amortizable only)
--------------- -------------
b Less accumulated amortization .................
------------------------------------------------------------------------------
14 Other assets (attach schedule) .................
--------------- -------------
15 Total assets ................................... 89587 125102
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity ...........
16 Accounts payable ............................... 72487 125286
--------------- -------------
17 Mortgages, notes, bonds payable in less
than 1 year ....................................
--------------- -------------
18 Other current liabilities (attach schedule)
--------------- -------------
19 Loans from stockholders ........................ 19485 7328
--------------- -------------
20 Mortgages, notes, bonds payable in 1 year
or more ........................................
--------------- -------------
21 Other liabilities (attach schedule) ............
--------------- -------------
22 Capital stock: a Preferred stock ...............
-------------- --------------
b Common stock .................. 5000 5000
------------------------------------------------------------------------------
23 Additional paid-in or capital surplus
--------------- -------------
24 Retained earnings--Appropriated (attach
schedule) ......................................
--------------- -------------
25 Retained earnings--Unappropriated .............. (7385) (12522)
--------------- -------------
26 Adustments to shareholders' equity (attach
schedule) ......................................
--------------- -------------
27 Less cost of treasury stock ....................
--------------- -------------
28 Total liabilities and stockholders' equity ..... 82587 125102
- ---------------------------------------------------------------------------------------------------------------------------------
Note: You are not required to complete Schedules M-1 and M-2 below if the total assets on line 15, column (d) of Schedule L are
less than $25,000.
- ---------------------------------------------------------------------------------------------------------------------------------
Schedule M-1 Reconciliation of Income (Loss) per Books With Income per Return (See page 15 of instructions.)
- ---------------------------------------------------------------------------------------------------------------------------------
1 Net income (loss) per books .................... (5137) 7 Income recorded on books this year
-------------- not included on this return (itemize):
2 Federal income tax .............................
-------------- Tax-exempt interest $
3 Excess of capital losses over capital gains .... -----------------
-------------- 8 Deductions on this return not charged against
4 Income subject to tax not recorded on books book income this year (itemize):
this year (itemize):
---------------------------- a Depreciation.................. $__________
------------------------------------------------ b Contributions carryover ...... $__________
--------------
5 Expenses recorded on books this year not deducted ------------------------------------------
on this return (itemize):
------------------------------------------
a Depreciation.................. $
------------------------------------------
b Contributions carryover ...... $ -------------
9 Add lines 7 and 8 .......................................
c Travel and entertainment ..... $ 5291 -------------
10 Income (line 28, page 1)--line 6 less line 9 154
------------------------------------------------- -------------
------------------------------------------------- 5291
--------------
6 Add lines 1 through 5 ........................... 154
- ---------------------------------------------------------------------------------------------------------------------------------
Schedule M-2 Analysis of Unappropriated Retained Earnings per Books (Line 25, Schedule L)
- ---------------------------------------------------------------------------------------------------------------------------------
1 Balance at beginning of year................... (7355) 5 Distributions: a Cash
--------------- -------------
2 Net income (loss) per books (5137) b Stock
--------------- -------------
3 Other increases (itemize): c Property
--------------------- -------------
6 Other decreases (itemize):
----------------------------------------------- -------------
7 Add lines 5 and 6
----------------------------------------------- --------------- -------------
8 Balance at end of year (line 4 less line 7) (12522)
4 Add lines 1, 2, and 3.......................... (12522)
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
DOV Pharmaceutical Inc. 1997
22-3374365
Form 1120 Page 1 line 36 other deductions:
<Table>
Automobile expenses 2356
Bank Charges 898
Dues/Books/Subscriptions 1121
Telephone 6352
Computer Expenses 4807
Printing 1106
Insurance 288
Computer lease 1856
Office Expenses 3803
Management Fees 187896
Legal - Professional Fees 203207
Travel 5956
Entertainment 5291
Corporate Fees 115
------
Total other expenses - 425052
======
</Table>
<Page>
<Table>
<Caption>
===================================================================================================================================
Place the lable below. Make necessary corrections on State and date of incorporation NJ 4/95
this label. Otherwise type or print the requested ---------------------------------
information. Check if address change appears below |_| Date authorized to do business in N.J. 4/95
- -------------------------------------------------------------- ---------------------------
FEDERAL EMPLOYER I.D. NUMBER N.J. CORPORATION NUMBER Date first began business in N.J. 4/95
22-3374365 --------------------------------
- -------------------------------------------------------------- Federal business activity code 8980
CORPORATION NAME ----------------------------------
DOV Pharmaceutical Inc. Corporation books are in the care of taxpayer
- -------------------------------------------------------------- -----------------------------
MAILING ADDRESS at 400 Kelby St, Fort Lee, NY 07024
400 Kelby Street ---------------------------------------------------------------
- --------------------------------------------------------------
CITY STATE ZIP CODE Telephone Number(_____) _________________________________________
Fort Lee NJ 07204 -----------------------------------------------------------------
Total assets $_____________________________________ DIVISION USE
|_| Check if initial return |_|Check if 1120-S filer AP NP A_______________ R _______________
|_| Check if final return
- -----------------------------------------------------------------------------------------------------------------------------------
PAGES 1 AND 2 MUST BE COMPLETED ON THIS FORM. ONLY EXACT COPIES MAY BE SUBSTITUTED.
- -----------------------------------------------------------------------------------------------------------------------------------
1. Entire net income from Schedule A, line 38 .................................................. 1. -0-
--------------------------------
2. Allocation factor from Schedule J, Part III, line 5. Non-allocating taxpayers should not make
an entry on line 2 .......................................................................... 2.
--------------------------------
3. Allocated net income - Multiply line 1 by line 2. Non-allocating taxpayers must enter the
amount from line 1 on this line ................................................................ 3. -0-
--------------------------------
4. a) Total nonoperational income $________________ (Schedule O, Part I) (see instruction 32)
b) Allocated New Jersey nonoperational income (Schedule O, Part III) ........................ 4(b)
--------------------------------
5. Total operational and nonoperational income (line 3 plus line 4(b)) ......................... 5. -0-
--------------------------------
6. Investment Company - Enter 25% of line 1 .................................................... 6.
--------------------------------
7. Real Estate Investment Trust - Enter 4% of line 1 ........................................... 7.
--------------------------------
8. Tax Base - Enter amount from line 5, 6 or 7, whichever is applicable ........................ 8.
--------------------------------
9. AMOUNT OF TAX - Multiply line 8 by .09 or, if applicable, by .075 (see instruction 11(a))
(see instruction 11(d) for minimum tax requirements) ........................................ 9. 200
--------------------------------
10. Credit for taxes paid to other jurisdictions (see instruction 29(a)) ....................... 10.
--------------------------------
11. Subtract line 10 from line 9 ............................................................... 11. 200
--------------------------------
12. Tax Credits (from Schedule A-3) (see instruction 38) ....................................... 12.
--------------------------------
200
--------------------------------
13. TOTAL TAX LIABILITY - line 11 minus line 12 ................................................ 13.
--------------------------------
14. INSTALLMENT PAYMENT (see instruction 39) ................................................... 14.
--------------------------------
15. Total of line 13 plus line 14 .............................................................. 15. 200
--------------------------------
16. PAYMENTS & CREDITS (see instruction 40) 16.
--------------------------------
17. Balance of Tax Due - line 15 minus line 16 ................................................. 17. 200
--------------------------------
18. Penalty and Interest Due - (see instructions 7(d) and 41)
Penalty ___________________ Interest__________________.................................Total 18.
--------------------------------
19. Interest from CBT-150 (see instruction 42) (Attach Form CBT-160) ........................... 19.
--------------------------------
20. Total Balance Due - line 17 plus line 18 plus line 19 ...................................... 20.
------------------------------------------------------------
21. If line 16 is greater than line 15 plus line 18 plus line 19 DIVISION USE
enter the amount of overpayment ............................ $
----------------------------------------------------------------
21. Amount of Item 21 to be Credited to 1998 return Refunded
$ $
- -----------------------------------------------------------------------------------------------------------------------------------
SIGNATURE AND VERIFICATION
I declare under the penalties provided by law, that this return (including any accompanying schedules and statements)
has been examined by me and to the best of my knowledge and belief is a true, correct and complete return. If the return is prepared
by a person other than the taxpayer, his declaration is based on all the information relating to the matters required to be reported
in the return of which he has knowledge.
3/12/98 Bernard Berr President
- -----------------------------------------------------------------------------------------------------------------------------------
(Date) (Signature of Duly Authorized Officer of Taxpayer) (Title)
[SIGNATURE ILLEGIBLE] ###-##-####
- -----------------------------------------------------------------------------------------------------------------------------------
(Date) (Signature of Individual Preparing Return) (Address) (Preparer's ID Number)
- ------------------------------------------------------------------------------------------------------------------------------------
(Name of Tax Preparer's Employer) (Address) (Employer's ID Number)
</Table>
<Page>
<Table>
<Caption>
SCHEDULE A COMPUTATION OF ENTIRE NET INCOME (SEE INSTRUCTION 16)
EVERY CORPORATION MUST COMPLETE LINES 1 - 38 OF THIS SCHEDULE.
ONLY THOSE TAXPAYERS WHO FILE AN UNCONSOLIDATED FEDERAL FORM 1120 ARE
PERMITTED TO SUBMIT A COPY OF SUCH RETURN IN LIEU OF COMPLETING LINES 1 - 28 BELOW.
===================================================================================================================================
1. Gross receipts or sales _____________ Less returns and allowances _____________ ................... 1 See Federal
------------------------
2. Less: Cost of goods sold (Schedule A-2, line 8) 2 1170
------------------------
3. Gross profit - Subtract line 2 from line 1 3 Attached
------------------------
4
------------------------
5
------------------------
6
------------------------
7
------------------------
8
------------------------
9
------------------------
10
------------------------
11. TOTAL INCOME - Add lines 3 through 10 ...................................................... 11
- -----------------------------------------------------------------------------------------------------------------------------------
12. Compensation of officers (Schedule F) ............................................................. 12
------------------------
13. Salaries and wages _________ Less jobs credit _________ Balance ................................... 13
------------------------
14. Repairs (Do not include capital expenditures) 14
------------------------
15. Bad debts 15
------------------------
16
------------------------
17
------------------------
18
------------------------
19
----------------------------------------------------------
20
------------------------------
21(a) 21(b)
----------------------------------------------------------
22
------------------------
23
------------------------
24
------------------------
25. Employee benefit programs ........................................................................ 25
------------------------
26. Other deductions (attach schedule) ............................................................... 26
------------------------
27. TOTAL DEDUCTIONS - Add lines 12 through 26 ................................................ 27
------------------------
28. Taxable income before net operating loss deductions and special deductions (line 11 less
line 27 must agree with line 28, page 1 of the Unconsolidated Federal Form 1120, or the
appropriate line item from the Federal Forms 1120-IC-DISC, 1120-FSC or 1120-A, whichever
is applicable. 1120-S filers who have not elected to be New Jersey S Corporations must report
the amount from line 7, Schedule S-1 of the CBT-100.) (see instructions 8(b) and 16(c)) .......... 28 154
- -----------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY ADJUSTMENTS
LINES 29 - 38 MUST BE COMPLETED ON THIS FORM
- -------------------------------------------------------------------------------------------------------
29. Interest on Federal, State, Municipal and other obligations not included in Item 5 above
(see instruction 16(d)) .......................................................................... 29
------------------------
30. Environmental taxes deducted above (see instruction 16(e)) ....................................... 30
------------------------
31. New Jersey State and other states taxes deducted above (see instruction 16(f)) ................... 31
------------------------
32. Depreciation and other adjustments from Schedule S (see instruction 36) .......................... 32
------------------------
33. (a) Deduction for Foreign Taxes paid, withheld or deemed paid. (see instruction 16(h)) ........... 33(a)
------------------------
(b) Other deductions. Explain on separate rider. (see instruction 16(h)) ......................... 33(b)
------------------------
(c) Other additions. Explain on separate rider. (see instruction 16(h)) .......................... 33(c)
------------------------
(d) Elimination of nonoperational activity (Schedule O, Part I) .................................. 33(d)
------------------------
34. Entire net income before net operating loss deduction and dividend exclusion (total of lines 28
through 33 inclusive) ............................................................................ 34 154
------------------------
35. Net operating loss deduction from Schedule A-1 (see instructions 16(i) and 17) ................... 35 154
------------------------
36. Entire Net Income before dividend exclusion (line 34 minus line 35) .............................. 36 -0-
------------------------
37. Dividend Exclusion from Schedule R, line 5. (see instruction 16(j)) .............................. 37
------------------------
38. ENTIRE NET INCOME (line 36 minus line 37 - carry to page 1, line 1) .............................. 38 -0-
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
<Table>
<Caption>
------------------------------------------------------------------------------------------
NAME AS SHOWN ON RETURN FEDERAL ID NUMBER
Dov Pharmaceutical Inc. 22-3374365
- -----------------------------------------------------------------------------------------------------------------------------------
SCHEDULE A-1 NET OPERATING LOSS DEDUCTION AND CARRYOVER (See Instructions 16(i) and 17)
- -----------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
Loss Reported Add N.J. ENI Adj.'s Excluding
Fiscal Year Ended on Schedule A, line 28 the Dividend Exclusion Amount
- -----------------------------------------------------------------------------------------------------------------------------------
N.J. NOL'S 1. 12/31/95 614 0 ( 614 )
---------------------------------------------------------------------------------------------------
2. 12/31/96 3,576 100 ( 3,476 )
---------------------------------------------------------------------------------------------------
3. ( )
---------------------------------------------------------------------------------------------------
4. ( )
---------------------------------------------------------------------------------------------------
5. ( )
---------------------------------------------------------------------------------------------------
6. ( )
---------------------------------------------------------------------------------------------------
7. ( )
- -----------------------------------------------------------------------------------------------------------------------------------
N.J. NOL'S Used 8. 12/31/97 154
----------------- ----------------------
9.
----------------- ----------------------
10.
----------------- ----------------------
11.
----------------- ----------------------
12.
----------------- ----------------------
13.
----------------- ----------------------
14.
- -----------------------------------------------------------------------------------------------------------------------------------
N.J. NOL Carryover 15. Total lines 1 - 14, Column 4 ...............................................
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1. Inventory at beginning of year ..................................................................... 1.
--------------------------
2. Purchases .......................................................................................... 2.
--------------------------
3. Cost of labor ...................................................................................... 3. N/A
--------------------------
4. Additional section 263A costs ...................................................................... 4.
--------------------------
5. Other costs (attach schedule) ...................................................................... 5.
--------------------------
6. Total - Add lines 1 through 5 ...................................................................... 6.
--------------------------
7. Inventory at end of year ........................................................................... 7.
--------------------------
8. Cost of goods sold - Subtract line 7 from line 6. Enter here and on Schedule A, line 2 ............. 8.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1. New Jobs Investment Tax Credit from Form 304 ....................................................... 1.
--------------------------
2. EITHER: a) Urban Enterprise Zone Employee Tax Credit from Form 300
OR b) Urban Enterprise Zone Investment Tax Credit from Form 301 ............................... 2. N/A
--------------------------
3. Redevelopment Authority Project Tax Credit from Form 302 ........................................... 3.
--------------------------
4. Recycling Equipment Tax Credit from Form 303 ....................................................... 4.
--------------------------
5. Manufacturing Equipment and Employment Investment Tax Credit from Form 305 ......................... 5.
--------------------------
6. Research and Development Tax Credit from Form 306 .................................................. 6.
--------------------------
7. Employer Trip Reduction Plan - Ride Share Tax Credit from Form 307.................................. 7.
--------------------------
8. Total tax credits taken on this return - Add lines 1 through 7.
Enter here and on page 1, line 12................................................................... 8.
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
Assets Beginning of the Tax Year End of Tax Year
- -----------------------------------------------------------------------------------------------------------------------------------
1. Cash 1317 40654
- -----------------------------------------------------------------------------------------------------------------------------------
2. Trade notes and accounts receivable 77315 77575
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Reserve for bad debts ( ) ( )
- -----------------------------------------------------------------------------------------------------------------------------------
3. Loans to stockholders / affiliates
- -----------------------------------------------------------------------------------------------------------------------------------
4. Stock of subsidiaries
- -----------------------------------------------------------------------------------------------------------------------------------
5. Corporate stocks
- -----------------------------------------------------------------------------------------------------------------------------------
6. Bonds, mortgages and notes
- -----------------------------------------------------------------------------------------------------------------------------------
7. New Jersey State and Lacal government obligations
- -----------------------------------------------------------------------------------------------------------------------------------
8. All other government obligations
- -----------------------------------------------------------------------------------------------------------------------------------
9. Patents and copyrights
- -----------------------------------------------------------------------------------------------------------------------------------
10. Deferred charges
- -----------------------------------------------------------------------------------------------------------------------------------
11. Goodwill
- -----------------------------------------------------------------------------------------------------------------------------------
12. All other intangible personal property (ITEMIZE)
- -----------------------------------------------------------------------------------------------------------------------------------
13. Total intangible personal property (total tines 1 to 12) 78632 118529
- -----------------------------------------------------------------------------------------------------------------------------------
14. Land
- -----------------------------------------------------------------------------------------------------------------------------------
15. Buildings and other improvements
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Less accumulated depreciation ( ) ( )
- -----------------------------------------------------------------------------------------------------------------------------------
16. Machinery and equipment 15583 15583
- -----------------------------------------------------------------------------------------------------------------------------------
(a) less accumulated depreciation ( 4628) ( 9010)
- -----------------------------------------------------------------------------------------------------------------------------------
17. Inventories
- -----------------------------------------------------------------------------------------------------------------------------------
18. All other tangible personalty (net) (itemize on rider)
- -----------------------------------------------------------------------------------------------------------------------------------
19. Total real and tangible personal property (total lines 14 to 18) 10755 6573
- -----------------------------------------------------------------------------------------------------------------------------------
20. Total assets (add lines 13 and 19) 89587 125102
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholder's Equity
- -----------------------------------------------------------------------------------------------------------------------------------
21. Accounts payable 72487 125296
- -----------------------------------------------------------------------------------------------------------------------------------
22. Mortgages, notes, bonds payable in less than 1 year (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
23. Other current liabilities (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
24. Loans from stockholders / affiliates 19485 7328
- -----------------------------------------------------------------------------------------------------------------------------------
25. Mortgages, notes, bonds payable in 1 year or more (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
26. Other liabilities (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
27. Capital stock: (a) Preferred stock
- -----------------------------------------------------------------------------------------------------------------------------------
(b) common stock 5000 5000
- -----------------------------------------------------------------------------------------------------------------------------------
28. Paid-in or capital surplus
- -----------------------------------------------------------------------------------------------------------------------------------
29. Retained earnings - appropriated (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
30. Retained earnings - unappropriated (7395) (12522)
- -----------------------------------------------------------------------------------------------------------------------------------
31. Less cost of treasury stock
- -----------------------------------------------------------------------------------------------------------------------------------
32. Total liabilities and stockholder's equity (total lines 21 to 31) 89587 125102
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
NAME AS SHOWN ON RETURN FEDERAL ID NUMBER
Dov Pharmaceutical 22-3374365
- -----------------------------------------------------------------------------------------------------------------------------------
SCHEDULE C RECONCILIATION OF INCOME PER BOOKS WITH INCOME PER RETURN (See Instruction 21)
- -----------------------------------------------------------------------------------------------------------------------------------
1. Net income per books (5137) 7. Income recorded on books this year not
- ------------------------------------------------------------- included in this return (itemize)
2. Federal income tax
- ------------------------------------------------------------- (a) Tax-exempt interest $_________________
3. Excess of capital losses over capital gains
- ------------------------------------------------------------- (b) ______________________________________
4. Income subject to tax not recorded on
books this year (itemize) (c) ______________________________________
_______________________________________ ------------------------------------------------------------------
_______________________________________ 8. Deductions in this tax return not charged
against book income this year (itemize)
- -------------------------------------------------------------
5. Expenses recorded on books this year not (a) Depreciation $________________________
deducted in this return (itemize)
(b) Contributions Carryover $_____________
(a) Depreciation $_____________________ _________________________________________
(b) Contributions Carryover $__________ ------------------------------------------------------------------
(c) Other (itemize) $ T/E 5291
------------------- 5291 9. Total of lines 7 and 8
- -----------------------------------------------------------------------------------------------------------------------------------
6. Total of lines 1 through 5 154 10. Income (Item 28, Schedule A) - line 6 less 9 154
- -----------------------------------------------------------------------------------------------------------------------------------
SCHEDULE C-1 ANALYSIS OF UNAPPROPRIATED RETAINED EARNINGS PER BOOKS (See Instruction 21)
- -----------------------------------------------------------------------------------------------------------------------------------
1. Balance at beginning of year 7385 5. Distributions
- -------------------------------------------------------------
2. Net income per books (5137) (a) Cash $___________________________________
- -------------------------------------------------------------
3. Other increases (itemize) (b) Stock $__________________________________
________________________________________
________________________________________ (c) Property $_______________________________
________________________________________ ------------------------------------------------------------------
________________________________________ 6. Other decreases (itemize)
________________________________________ __________________________________________
__________________________________________
------------------------------------------------------------------
7. Total of lines 5 and 6
- -----------------------------------------------------------------------------------------------------------------------------------
4. Total of lines 1, 2 and 3 (12522) 8. Balance end of year (line 4 less 7) (12522)
- -----------------------------------------------------------------------------------------------------------------------------------
SCHEDULE E GENERAL INFORMATION (See Instruction 22)
ALL TAXPAYERS MUST ANSWER THE FOLLOWING QUESTIONS. RIDERS MUST BE PROVIDED WHERE NECESSARY.
- -----------------------------------------------------------------------------------------------------------------------------------
1. Type of business Service
---------------------------------------------------------------------------------------------------------
Principal products handled Consulting
-----------------------------------------------------------------------------------------------
Internal Revenue Center where corresponding Federal tax return was filed Holtsville NY
-------------------------------------------------
2. FINAL DETERMINATION OF NET INCOME BY FEDERAL GOVERNMENT (See Instruction 15)
Has a change or correction in the amount of taxable income of the reporting corporation or for any other corporation
purchased, merged or consolidated with the reporting corporation, been finally determined by the Internal Revenue Service,
and not previously reported to New Jersey?
"Yes" or "No" NO . If "Yes", an amended return must be filed.
---------------
3. Did one or more other corporations own beneficially, or control, a majority of the stock of taxpayer corporation or did
the same interests own beneficially, or control, a majority of the stock of taxpayer corporation and of one or more other
corporations? "Yes" or "No" NO . If "Yes", give full information below (Attach rider if necessary).
---------------
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
Percent of Stock
Name of Controlled Corporations Owned or Controlled By Whom Controlled
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
4. Is the capital stock of the taxpayer listed on any exchange? "Yes or No" NO . If yes, specify exchanges where listed
and submit taxpayer's on any exchange? Annual Report to stockholders for the period covered by this return.
5. This question must be answered by domestic
corporations only -
(a) Does the taxpayer hold any personal property, including moneys, negotiable instruments, choses in action, interest,
dividends, wages, debts or demands, stocks, bonds, deposits, and the accretions thereon, due or belonging to another
where the owner, beneficial owner or person entitled to such property has been unknown, or where the whereabouts of
such owner has been unknown, or where such personal property has been unclaimed for a period of fourteen successive
years, (five successive years in the case of cash items such as money, wages, cash dividends, etc.) as of the last
day of the accounting period covered in this return? "Yes or No" NO
-------
(b) If "Yes", itemize on a separate rider the nature of the property, value thereof and last known names and addresses of
such owners or persons.
6. This question must be answered by corporations with income from sources outside the United States.
(a) Is income from sources outside the United States included in entire net income at line 38 of Schedule A.
"Yes or No"_____________.
(b) If the answer is "No", set forth such items of gross income, the source, the deductions and the amount of foreign
taxes paid thereon. Enter at line 33, Schedule A, the difference between the net of such income and the amount of
foreign taxes paid thereon not previously deducted.
</Table>
<Page>
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5) (6)
Dates Employed Percent of Corporation
Name and Current Address of Officer Social Security Number Title in this position Stock Owned Amount of
From To Common Preferred Compensation
- -----------------------------------------------------------------------------------------------------------------------------------
NONE
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Total compensation of officers ...........................................................................
----------------
(b) Less: Compensation of officers claimed elsewhere on the return ...........................................
----------------
(c) Balance of compensation of officers (enter here and on Schedule A, line 12, page 2) ......................
----------------
- -----------------------------------------------------------------------------------------------------------------------------------
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
SCHEDULE H TAXES (See Instructions 16(f) and 24)
Include all taxes paid or accrued during the accounting period however reflected on Schedule A.
- -----------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
New Jersey Other States Federal Total
Taxes Taxes Taxes
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Corporation Franchise Tax and/or income Tax
- -----------------------------------------------------------------------------------------------------------------------------------
(b) Local Property Takes
- -----------------------------------------------------------------------------------------------------------------------------------
(c) U.C.C. or Payroll Taxes
- -----------------------------------------------------------------------------------------------------------------------------------
(d) other Taxes (attach rider)
- -----------------------------------------------------------------------------------------------------------------------------------
(e) Total Columns 1, 2 and 3
----------------
(f) Taxes paid to foreign countries and U.S. possessions
----------------
(g) Total All Taxes
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
<Table>
<Caption>
Form 4562 (INCLUDING INFORMATION ON LISTED PROPERTY) 1997
Department of the Treasury Attachment
Internal Revenue Service (99) >SEE SEPARATE INSTRUCTIONS. > ATTACH THIS FORM TO YOUR RETURN. Sequence No. 67
- -----------------------------------------------------------------------------------------------------------------------------------
Name(s) shown on return Business or activity to which this form relates IDENTIFYING NUMBER
Dov Pharmaceutical Inc. 1120 22-3374365
- -----------------------------------------------------------------------------------------------------------------------------------
PART I ELECTION TO EXPENSE CERTAIN TANGIBLE PROPERTY (SECTION 179) (NOTE: IF YOU HAVE ANY "LISTED PROPERTY,"
COMPLETE PART V BEFORE YOU COMPLETE PART I.)
- -----------------------------------------------------------------------------------------------------------------------------------
1 Maximum dollar limitation. If an enterprise zone business, see the instructions .................... 1 $18,000
----------------------
2 Total cost of section 179 property placed in service. See the instructions ......................... 2
----------------------
3 Threshold cost of section 179 property before reduction in limitation .............................. 3 $200,000
----------------------
4 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0- ................... 4 0
----------------------
5 Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter -0-. If married
filing separately, see instructions ................................................................ 5 18,000
- -----------------------------------------------------------------------------------------------------------------------------------
(A) DESCRIPTION OF PROPERTY (B) COST (BUSINESS USE ONLY) (C) ELECTED COST
- ---------------------------------------------------------------------------------------------------------------
6
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
7 Listed property. Enter amount from line 27 ......................... 7 0
- ------------------------------------------------------------------------------------------------------------------------------------
8 Total elected cost of section 179 property. Add amounts in column (c), lines 6 and 7 ............... 8 0
- ------------------------------------------------------------------------------------------------------------------------------------
9 Tentative deduction. Enter the smaller of line 5 or line 8 ......................................... 9 0
- ------------------------------------------------------------------------------------------------------------------------------------
10 Carryover of disallowed deduction from 1996. See the instructions .................................. 10
- ------------------------------------------------------------------------------------------------------------------------------------
11 Business income limitation. Enter the smaller of business income (not less than zero) or line 5 (see
instructions) ...................................................................................... 11 18,000
- ------------------------------------------------------------------------------------------------------------------------------------
12 Section 179 expense deduction. Add lines 9 and 10, but do not enter more than line 11 .............. 12 0
- ------------------------------------------------------------------------------------------------------------------------------------
13 Carryover of disallowed deduction to 1998. Add lines 9 and 10, less line 12 ....> 13 0
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE: DO NOT USE PART II OR PART III BELOW FOR LISTED PROPERTY (AUTOMOBILES, CERTAIN OTHER VEHICLES, CELLULAR TELEPHONES,
CERTAIN COMPUTERS, OR PROPERTY USED FOR ENTERTAINMENT, RECREATION, OR AMUSEMENT). INSTEAD, USE PART V FOR LISTED PROPERTY.
- -----------------------------------------------------------------------------------------------------------------------------------
PART II MACRS DEPRECIATION FOR ASSETS PLACED IN SERVICE ONLY DURING YOUR 1997 TAX YEAR (DO NOT INCLUDE
LISTED PROPERTY.)
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION A--GENERAL ASSET ACCOUNT ELECTION
- -----------------------------------------------------------------------------------------------------------------------------------
14 If you are making the election under section 168(i)(4) to group any assets placed in service during the
tax year into one or more general asset accounts, check this box. See the instructions .......................> |_|
- -----------------------------------------------------------------------------------------------------------------------------------
<Caption>
SECTION B--GENERAL DEPRECIATION SYSTEM (GDS) (See the instructions.)
- -----------------------------------------------------------------------------------------------------------------------------------
(A) CLASSIFICATION OF (B) MONTH AND (C) BASIS FOR DEPRECIATION
PROPERTY YEAR PLACED IN (BUSINESS/INVESTMENT USE (D) RECOVERY (E) CONVERSION (F) METHOD (G) DEPRECIATION
SERVICE ONLY--SEE INSTRUCTIONS) PERIOD DEDUCTION
- -----------------------------------------------------------------------------------------------------------------------------------
15a 3-year property
- ------------------------------ -------------------------------------------------------------------------------------
b 5-year property
- ------------------------------ -------------------------------------------------------------------------------------
c 7-year property
- ------------------------------ -------------------------------------------------------------------------------------
d 10-year property
- ------------------------------ -------------------------------------------------------------------------------------
e 15-year property
- ------------------------------ -------------------------------------------------------------------------------------
f 20-year property
- ------------------------------ -------------------------------------------------------------------------------------
g 25-year property 25 yrs. S/L
- -----------------------------------------------------------------------------------------------------------------------------------
h Residential rental 27.5 yrs. MM S/L
property -------------------------------------------------------------------------------------
27.5 yrs. MM S/L
- -----------------------------------------------------------------------------------------------------------------------------------
i Nonresidential real 39 yrs. MM S/L
property -------------------------------------------------------------------------------------
MM S/L
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION C--ALTERNATIVE DEPRECIATION SYSTEM (ADS) (See the instructions.)
- -----------------------------------------------------------------------------------------------------------------------------------
16a Class life S/L
- ------------------------------ -------------------------------------------------------------------------------------
b 12-year 12 yrs. S/L
- ------------------------------ -------------------------------------------------------------------------------------
c 40-year 40 yrs. MM S/L
- ------------------------------ -------------------------------------------------------------------------------------
PART III OTHER DEPRECIATION (DO NOT INCLUDE LISTED PROPERTY.) (See the instructions.)
- -----------------------------------------------------------------------------------------------------------------------------------
17 GDS and ADS deductions for assets placed in service in tax years beginning before 1997 ............. ??
--------------------
18 Property subject to section 168(f)(1) election ..................................................... 18
--------------------
19 ACRS and other depreciation ........................................................................ 19 4382
- -----------------------------------------------------------------------------------------------------------------------------------
PART IV SUMMARY (See the instructions.)
- -----------------------------------------------------------------------------------------------------------------------------------
20 Listed property. Enter amount from line 26 ......................................................... 20 0
--------------------
21 TOTAL. Add deductions on line 12, lines 15 and 16 in column (g), and lines 17 through 20. Enter here
and on the appropriate lines of your return. Partnerships and S corporations--see instructions ..... 21 4382 0
--------------------
22 For assets shown above and placed in service during the current year, enter
the portion of the basis attributable to section 263A costs ....................... 22
- -----------------------------------------------------------------------------------------------------------------------------------
K/A Form 4562 (1997)
</Table>
<Page>
<Table>
<Caption>
NEW JERSEY CORPORATION BUSINESS TAX RETURN 1996 - Page
1996 FOR TAXABLE YEARS ENDING JULY 31, 1996 THROUGH JUNE 30, 1997
CBT-100
TAXABLE YEAR BEGINNING _________________, 19___, AND ENDING _________________, 19___
===================================================================================================================================
Place the label provided below. Make necessary corrections on the label. State and date of incorporation NJ 4/95
Otherwise, type or print the requested information. Check if address change ---------------
appears below |_| Date authorized to do business in N.J. 4/95
- --------------------------------------------------------------------------- ---------------
FEDERAL EMPLOYER I.D. NUMBER N.J. CORPORATION NUMBER Date first began business in N.J. 4/95
22-3374365 ---------------
- --------------------------------------------------------------------------- Federal business activity code 8950
CORPORATION NAME ---------------
Dov Pharmaceutical Inc. Corporation books are in the care of Taxpayer
- --------------------------------------------------------------------------- ---------------
MAILING ADDRESS at 400 Kelby Street, Fort Lee NJ 07024
400 Kelby Street ---------------------------------------------------
- --------------------------------------------------------------------------- Telephone Number
CITY STATE ZIP CODE -------------------------------------
Fort Lee NJ 07024 ------------------------------------------------------
- --------------------------------------------------------------------------- DIVISION USE
Total assets $
------------------------------------------------- RP NP A___________ R__________
|_| Check if initial |_| Check if 1120-S |_| Check if final
return filer return
- -----------------------------------------------------------------------------------------------------------------------------------
PAGES 1 AND 2 MUST BE COMPLETED ON THIS FORM-ONLY EXACT COPIES MAY BE SUBSTITUTED.
- -----------------------------------------------------------------------------------------------------------------------------------
1. Entire net income from Schedule A, line 38 ................................................... 1. (4090)
----------------------------
2. Allocation factor from Schedule J, Part III, line 5. Non-allocating taxpayers should not make
an entry on line 2 ........................................................................... 2.
----------------------------
3. Allocated net income - Multiply line 1 by line 2. Non-allocating taxpayers must enter the
amount from line 1 ........................................................................... 3. (4090)
----------------------------
4. a) Total nonoperational income $________________ (Schedule O, Part I) (see instruction 32)
b) Allocated New Jersey nonoperational income (Schedule O, Part III) ......................... 4(b)
----------------------------
5. Total operational and nonoperational income (line 3 plus line 4(b)) .......................... 5. (4090)
----------------------------
6. Investment Company - Enter 25% 4f line 1 ..................................................... 6.
----------------------------
7. Real Estate Investment Trust - Enter 4% of line 1 ............................................ 7.
----------------------------
8. Tax Base - Enter amount from line 5, 6 or 7, whichever is applicable ......................... 8. (4090)
----------------------------
9. AMOUNT OF TAX - Multiply line 8 by .09 or, if applicable, by .075 (see instruction 11(d))
(see instruction 11(e) for minimum tax requirements) ......................................... 9. 150
----------------------------
10. Credit for taxes paid to other jurisdictions (see instruction 28(a)) ......................... 10.
----------------------------
11. Subtract line 10 from line 9 ................................................................. 11. 150
----------------------------
12. Tax Credits (from Schedule A-3) (see instruction 37) ......................................... 12.
----------------------------
13. TOTAL TAX LIABILITY - line 11 minus line 12 .................................................. 13. 150
----------------------------
14. INSTALLMENT PAYMENT (see instruction 38) ..................................................... 14.
----------------------------
15. Total of line 13 plus line 14 ................................................................ 15. 150
----------------------------
16. PAYMENTS & CREDITS (see instruction 39) ...................................................... 16.
----------------------------
17. Balance of Tax Due - line 15 minus line 16 ................................................... 17. 150
----------------------------
18. Penalty and Interest Due - (see instructions 7(d) and LO)
----------------------------
Penalty __________________________ Interest __________________________ ..............Total 18.
----------------------------
19. Interest from CBT-160 (see instruction 41) (Attach Form CBT-150) ............................. 19.
----------------------------
20. Total Balance Due - line 17 plus line 13 plus line 19 ........................................ 20. 150
-------------------------------------------------------
21. If line 16 is greater than line 15 plus line 13 plus line 19 DIVISION USE
enter the amount of overpayment.................................... $
--------------------------------------------------------------------
23. Amount of Item 21 to be Credited to 1997 return Refunded
$ $
- -----------------------------------------------------------------------------------------------------------------------------------
SIGNATURE AND VERIFICATION
I declare under the penalties provided by law, that this return (including any accompanying schedules and statements) has
been examined by me and to the best of my knowledge and belief is a true, correct and complete return. If the return is prepared by
a person other than the taxpayer, his declaration is based on all the information relating to the matters required to be reported
in the return of which he has knowledge.
- -----------------------------------------------------------------------------------------------------------------------------------
(Date) (Signature of Duly Authorized Officer of Taxpayer) (Title)
- -----------------------------------------------------------------------------------------------------------------------------------
(Date) (Signature of Individual Preparing Return) (Address) (Preparer's ID No.)
- -----------------------------------------------------------------------------------------------------------------------------------
(Name of Tax Preparer's Employer) (Address) (Employer's ID No.)
[ILLEGIBLE]
</Table>
<Page>
<Table>
<Caption>
Dov Pharmaceutical Inc. 22-3374307
SCHEDULE A COMPUTATION OF ENTIRE NET INCOME (SEE INSTRUCTION 16) 1996 - Page 2
EVERY CORPORATION MUST COMPLETE LINES 1 - 38 OF THIS SCHEDULE.
ONLY THOSE TAXPAYERS WHO FILE AN UNCONSOLIDATED FEDERAL FORM 1120 ARE
PERMITTED TO SUBMIT A COPY OF SUCH RETURN IN LIEU OF COMPLETING LINES 1 - 28 BELOW.
===================================================================================================================================
1. Gross receipts or sales _____________ Less returns and allowances _____________ ................... 1 See Federal
------------------------
2. Less: Cost of goods sold (Schedule A-2, line 8) ................................................... 2 Form 1120
------------------------
3. Gross profit - Subtract line 2 from line 1 ........................................................ 3
------------------------
4. Dividends.......................................................................................... 4
------------------------
5. Interest .......................................................................................... 5
------------------------
6. Gross rents ....................................................................................... 6
------------------------
7. Gross royalties ................................................................................... 7
------------------------
8. Capital gain net income (attach separate Federal Schedule D) ...................................... 8
------------------------
9. Net gain or (loss) from Federal Form 4797 (attach Federal Form 4797) .............................. 9
------------------------
10. Other income (attach schedule) .................................................................... 10
------------------------
11. TOTAL INCOME - Add lines 3 through 10 ...................................................... 11
- -----------------------------------------------------------------------------------------------------------------------------------
12. Compensation of officers (Schedule F) ............................................................. 12
------------------------
13. Salaries and wages _________ Less jobs credit _________ Balance ................................... 13
------------------------
14. Repairs (Do not include capital expenditures) ..................................................... 14
------------------------
15. Bad debts ......................................................................................... 15
------------------------
16. Rents ............................................................................................. 16
------------------------
17. Taxes ............................................................................................. 17
------------------------
18. Interest .......................................................................................... 18
------------------------
19. Contributions ..................................................................................... 19
----------------------------------------------------------
20. Depredation from Federal Form 4562 (attach copy) .................. 20
------------------------------
21. Less depreciation claimed in Schedule A and elsewhere on return ... 21(a) 21(b)
----------------------------------------------------------
22. Depletion ......................................................................................... 22
------------------------
23. Advertising ....................................................................................... 23
------------------------
24. Pension, profit-sharing plans, etc. ............................................................... 24
------------------------
25. Employee benefit programs ........................................................................ 25
------------------------
26. Other deductions (attach schedule) ............................................................... 26
------------------------
27. TOTAL DEDUCTIONS - Add lines 12 through 26 ................................................ 27
------------------------
28. Taxable income before net operating loss deductions and special deductions (line 11 less
line 27 must agree with line 28, page 1 of the Unconsolidated Federal Form 1120, or the
appropriate line item from the Federal Forms 1120-IC-DISC, 1120-FSC or 1120-A, whichever
is applicable. 1120-S filers who have not elected to be New Jersey S Corporations must report
the amount from line 7, Schedule S-1 of the CBT-100.) (see instructions 8(b) and 16(c)) .......... 28 (3576)
- -----------------------------------------------------------------------------------------------------------------------------------
LINES 29 - 38 MUST BE COMPLETED ON THIS FORM
- -------------------------------------------------------------------------------------------------------
29. Interest on Federal, State, Municipal and other obligations not included in Item 5 above
(see instruction 16(d)) .......................................................................... 29
------------------------
30. Environmental taxes deducted above (see instruction 16(e)) ....................................... 30
------------------------
31. New Jersey State and other states taxes deducted above (see instruction 16(f)) ................... 31 100
------------------------
32. Depreciation and other adjustments from Schedule S (see instruction 35) .......................... 32
------------------------
33. (a) Deduction for Foreign Taxes paid, withheld or deemed paid. (see instruction 16(h)) ........... 33(a)
------------------------
(b) Other deductions. Explain on separate rider. (see instruction 16(h)) ......................... 33(b)
------------------------
(c) Other additions. Explain on separate rider. (see instruction 16(h)) ..........................
------------------------
(d) Elimination of nonoperational activity (Schedule O, Part I) .................................. 33(d)
------------------------
34. Entire net income before net operating loss deduction and dividend exclusion (total of lines 28
through 33 inclusive) ............................................................................ 34 (3476)
------------------------
36. Entire Net Income before dividend exclusion (line 34 minus line 35) .............................. 36 (4090)
------------------------
37. Dividend Exclusion from Schedule R, line 5. (see instruction 16(j)) .............................. 37
------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
<Table>
<Caption>
1996 - Page 3
- -----------------------------------------------------------------------------------------------------------------------------------
NAME AS SHOWN ON RETURN FEDERAL ID NUMBER
Dov Pharmaceutical Inc. 22-3374365
- -----------------------------------------------------------------------------------------------------------------------------------
SCHEDULE A-1 NET OPERATING LOSS DEDUCTION AND CARRYOVER (See Instructions 16(i) and 17)
- -----------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
Loss Reported Add N.J. ENI Adj.'s Excluding
Fiscal Year Ended on Schedule A, line 28 the Dividend Exclusion Amount
- -----------------------------------------------------------------------------------------------------------------------------------
N.J. NOL'S 1. 12/31/95 614 ( 614 )
---------------------------------------------------------------------------------------------------
2. ( )
---------------------------------------------------------------------------------------------------
3. ( )
---------------------------------------------------------------------------------------------------
4. ( )
---------------------------------------------------------------------------------------------------
5. ( )
---------------------------------------------------------------------------------------------------
6. ( )
---------------------------------------------------------------------------------------------------
7. ( 614 )
- -----------------------------------------------------------------------------------------------------------------------------------
N.J. NOL'S Used 8.
----------------- ----------------------
9.
----------------- ----------------------
10.
----------------- ----------------------
11.
----------------- ----------------------
12.
----------------- ----------------------
13.
----------------- ----------------------
14.
- -----------------------------------------------------------------------------------------------------------------------------------
N.J. NOL Carryover 15. Total lines 1 - 14, Column 4 ...............................................
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1. Inventory at beginning of year ..................................................................... 1.
--------------------------
2. Purchases .......................................................................................... 2.
--------------------------
3. Cost of labor ...................................................................................... 3. N/A
--------------------------
4. Additional section 263A costs ...................................................................... 4.
--------------------------
5. Other costs (attach schedule) ...................................................................... 5.
--------------------------
6. Total - Add lines 1 through 5 ...................................................................... 6.
--------------------------
7. Inventory at end of year ........................................................................... 7.
--------------------------
8. Cost of goods sold - Subtract line 7 from line 6. Enter here and on Schedule A. line 2 ............. 8.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1. New Jobs Investment Tax Credit from Form 304 ....................................................... 1.
--------------------------
2. EITHER: a) Urban Enterprise Zone Employee Tax Credit from Form 300
OR b) Urban Enterprise Zone Investment Tax Credit from Form 301 ............................... 2.
--------------------------
3. Urban Development Project Employed Tax.............................................................. 3.
--------------------------
4. Recycling Equipment Tax Credit from Form 303 ....................................................... 4.
--------------------------
5. Manufacturing Equipment and Employment Investment Tax Credit from Form 305 ......................... 5.
--------------------------
6. Research and Development Tax Credit from Form 306 .................................................. 6.
--------------------------
7. Employer Trip Reduction Plan - Ride Share Tax Credit from Form 307.................................. 7.
--------------------------
8. Total tax credits taken on this return - Add lines 1 through 7,
Enter here and on page 1, line 12................................................................... 8.
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
<Table>
<Caption>
1996 - Page 4
Dov Pharmaceutical Inc. 22-3374365
- -----------------------------------------------------------------------------------------------------------------------------------
SCHEDULE B BALANCE SHEET AS OF 12/31 1996
----------------------------------------- --
Figures appearing below must be the same as year-end figures shown on the taxpayer's books. If not, explain and
reconcile on rider. Consolidated returns am not permitted.
- -----------------------------------------------------------------------------------------------------------------------------------
Assets Beginning of the Tax Year End of Tax Year
- -----------------------------------------------------------------------------------------------------------------------------------
1. Cash 5476 1317
- -----------------------------------------------------------------------------------------------------------------------------------
2. Trade notes and accounts receivable 77315
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Reserve for bad debts ( ) ( )
- -----------------------------------------------------------------------------------------------------------------------------------
3. Loans to stockholders / affiliates
- -----------------------------------------------------------------------------------------------------------------------------------
4. Stock of subsidiaries
- -----------------------------------------------------------------------------------------------------------------------------------
5. Corporate stocks
- -----------------------------------------------------------------------------------------------------------------------------------
6. Bonds, mortgages and notes
- -----------------------------------------------------------------------------------------------------------------------------------
7. New Jersey State and Lacal government obligations
- -----------------------------------------------------------------------------------------------------------------------------------
8. All other government obligations
- -----------------------------------------------------------------------------------------------------------------------------------
9. Patents and copyrights
- -----------------------------------------------------------------------------------------------------------------------------------
10. Deferred charges
- -----------------------------------------------------------------------------------------------------------------------------------
11. Goodwill
- -----------------------------------------------------------------------------------------------------------------------------------
12. All other intangible personal property (itemize)
- -----------------------------------------------------------------------------------------------------------------------------------
13. Total intangible personal property (total lines 1 to 12)
- -----------------------------------------------------------------------------------------------------------------------------------
14. Land
- -----------------------------------------------------------------------------------------------------------------------------------
15. Buildings and other improvements
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Less accumulated depreciation ( ) ( )
- -----------------------------------------------------------------------------------------------------------------------------------
16. Machinery and equipment 4722 15583
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Less accumulated depreciation ( 945) ( 4628)
- -----------------------------------------------------------------------------------------------------------------------------------
17. Inventories
- -----------------------------------------------------------------------------------------------------------------------------------
18. All other tangible personalty (net) (itemize on rider)
- -----------------------------------------------------------------------------------------------------------------------------------
19. Total real and tangible personal property (total lines 14 to 18)
- -----------------------------------------------------------------------------------------------------------------------------------
20. Total assets (add lines 13 and 19) 9253 89587
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholder's Equity
- -----------------------------------------------------------------------------------------------------------------------------------
21. Accounts payable 72487
- -----------------------------------------------------------------------------------------------------------------------------------
22. Mortgages, notes, bonds payable in less than 1 year (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
23. Other current liabilities (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
24. Loans from stockholders / affiliates 6750 19485
- -----------------------------------------------------------------------------------------------------------------------------------
25. Mortgages, notes, bonds payable in 1 year or more (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
26. Other liabilities (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
27. Capital stock: (a) Preferred stock
- -----------------------------------------------------------------------------------------------------------------------------------
(b) common stock 5000 5000
- -----------------------------------------------------------------------------------------------------------------------------------
28. Paid-in or capital surplus
- -----------------------------------------------------------------------------------------------------------------------------------
29. Retained earnings - appropriated (attach schedule)
- -----------------------------------------------------------------------------------------------------------------------------------
30. Retained earnings - unappropriated (2497) (7385)
- -----------------------------------------------------------------------------------------------------------------------------------
31. Less cost of treasury stock
- -----------------------------------------------------------------------------------------------------------------------------------
32. Total liabilities and stockholder's equity 9253 59587
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
NAME AS SHOWN ON RETURN FEDERAL ID NUMBER
Dov Pharmaceutical Inc. 22-3374365
- -----------------------------------------------------------------------------------------------------------------------------------
1. Net income per books (4888) 7. Income recorded on books this year not
- ------------------------------------------------------------- included in this return (itemize)
- ------------------------------------------------------------- (a) Tax-exempt interest $_________________
3. Excess of capital losses over capital gains
- ------------------------------------------------------------- (b) ______________________________________
4. Income subject to tax not recorded on
books this year (itemize) (c) ______________________________________
_______________________________________ ------------------------------------------------------------------
_______________________________________ 8. Deductions in this tax return not charged
against book income this year (itemize)
- -------------------------------------------------------------
5. Expenses recorded on books this year not (a) Depreciation $________________________
deducted in this return (itemize)
(b) Contributions Carryover $_____________
(a) Depreciation $_____________________ _________________________________________
(b) Contribution Carryover $___________ ------------------------------------------------------------------
(c) Other (itemize) $ -4T -1312
------------------- 9. Total of lines 7 and 8
- -----------------------------------------------------------------------------------------------------------------------------------
6. Total of lines 1 through 5 1312 10. Income (Item 28, Schedule A) - line 6 less 9 (3576)
- -----------------------------------------------------------------------------------------------------------------------------------
SCHEDULE C-1 ANALYSIS OF UNAPPROPRIATED RETAINED EARNINGS PER BWKS (See Instruction 21)
- -----------------------------------------------------------------------------------------------------------------------------------
1. Balance at beginning of year (2497) 5. Distributions
- -------------------------------------------------------------
2. Net income per books (4888) (a) Cash $___________________________________
- -------------------------------------------------------------
3. Other increases (itemize) (b) Stock $__________________________________
________________________________________
________________________________________ (c) Property $_______________________________
________________________________________ ------------------------------------------------------------------
________________________________________ 6. Other decreases (itemize)
________________________________________ __________________________________________
__________________________________________
------------------------------------------------------------------
7. Total of lines 5 and 6
- -----------------------------------------------------------------------------------------------------------------------------------
4. Total of lines 1, 2 and 3 (7385) 8. Balance end of year (line 4 less 7) (7385)
- -----------------------------------------------------------------------------------------------------------------------------------
SCHEDULE E GENERAL INFORMATION (See Instruction 22)
- -----------------------------------------------------------------------------------------------------------------------------------
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
Percent of Stock
Name of Controlled Corporations Owned or Controlled By Whom Controlled
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
4. Is the capital stock of the taxpayer listed on any exchange? "Yes or No" NO . If yes, specify exchanges where listed
and submit taxpayer Annual Report to stockholders for the period covered by this return.
5. This question must be answered by domestic
corporations only -
(a) Does the taxpayer hold any personal property, including moneys, negotiable instruments, choses in action, interest,
dividends, wages, debts or demands, stocks, bonds, deposits, and the accretions thereon, due or belonging to another
where the owner, beneficial owner or person entitled to such property has been unknown, or where the whereabouts of
such owner has been unknown, or where such personal property has been unclaimed for a period of fourteen successive
years, (five successive years in the case of cash items such as money, wages, cash dividends, etc.) as of the last
day of the accounting period covered in this return? "Yes or No" NO
-------
(b) If "Yes", itemize on a separate rider the nature of the property, value thereof and last known names and addresses of
such owners or persons.
6. This question must be answered by corporations with income from sources outside the United States.
(a) Is income from sources outside the United States included in entire net income at line 38 of Schedule A.
"Yes or No"_____________.
(b) If the answer is "No", set forth such items of gross income, the source, the deductions and the amount of foreign
taxes paid thereon. Enter at line 33, Schedule A, the difference between the net of such income and the amount of
foreign taxes paid thereon not previously deducted.
</Table>
<Page>
<Table>
<Caption>
1996 - Page 6
Dov Pharmaceutical Inc. 22-3374365
- -----------------------------------------------------------------------------------------------------------------------------------
SCHEDULE F CORPORATE OFFICES - GENERAL INFORMATION AND COMPENSATION (See Instruction 23)
- -----------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5) (6)
Dates Employed Percent of Corporation
Name and Current Address of Officer Social Security Number Title in this position Stock Owned Amount of
From To Common Preferred Compensation
- -----------------------------------------------------------------------------------------------------------------------------------
None
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
--
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Total compensation of officers ...........................................................................
----------------
(b) Less: Compensation of officers claimed elsewhere on the return ...........................................
----------------
(c) Balance of compensation of officers (enter here and on Schedule A, line 12, page 2) ...................... -0-
----------------
- -----------------------------------------------------------------------------------------------------------------------------------
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
New Jersey Other States Federal Total
Taxes Taxes Taxes
- -----------------------------------------------------------------------------------------------------------------------------------
(31 Corporation Franchise Tax and/or income Tax OD /@-
- -----------------------------------------------------------------------------------------------------------------------------------
(b) Local Property Takes
- -----------------------------------------------------------------------------------------------------------------------------------
(c) U.C.C. or Payroll Taxes
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
----------------
----------------
100
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
OMB No. 1545-0123 U.S.
Form 1120 ----------------------
Department of the Treasury 1997
Internal Revenue Service
US. Corporation Income Tax Return
For calendar year 1997 OR tax year beginning....1997, ending.... 19...
Instructions are Separate. See Page 1 for Paperwork Reduction Act Notice.
- --------------------------------------------------------------------------------
^ Check if a:
<Table>
1 Consolidated return NC 22-3374365 DEC97 SI9 8980MP B Employer Identification Number
(attach Form 851) |_| DOV PHARMACEUTICAL INC ---------------------------------------------------
2 Personal holding co. [ILLEGIBLE] 400 KELBY PL STE 1600 C Date incorporated
(attach Sch. PH) |_| FORT LEE NJ 07024 I 4/95
3 Personal service corp. R ---------------------------------------------------
(as defined in Temporary S D Total assets (see page 5 of instructions)
Regs. sec. 1.441-IT-- ---------------------------------------------------
see instructions) |_| S 125102
- -----------------------------------------------------------------------------------------------------------------------------------
E Check applicable boxes: (1) |_| Initial return (2) |_| Final return (3) |_| Change of address
- -----------------------------------------------------------------------------------------------------------------------------------
1a Gross receipts or sales | 451552 | b Less returns and allowances |______________|___| c Bal > 1c 451552
----------------
2 Cost of goods sold (Schedule A, line 8) ........................................................ 2
----------------
3 Gross profit. Subtract line 2 from line 1c ..................................................... 3 451552
----------------
4 Dividends (Schedule C, line 19) ................................................................ 4
----------------
Income 5 Interest ....................................................................................... 5
----------------
6 Gross rents .................................................................................... 6
----------------
7 Gross royalties ................................................................................ 7
----------------
8 Capital gain net income (attach Schedule 0 (Form 1120)) ........................................ 8
----------------
9 Net gain or (loss) from Form 4797, Part II, line 16 (attach Form 4797) ......................... 9
----------------
10 Other income (see page 6 of instructions--attach schedule) ..................................... 10
----------------
11 Total income. Add lines 3 through 10 ..........................................................> 11 451552
- -----------------------------------------------------------------------------------------------------------------------------------
12 Compensation of officers (Schedule E, line 4) .................................................. 12
----------------
13 Salaries and wages (less employment credits) ................................................... 13
----------------
14 Repairs and maintenance ........................................................................ 14 28
----------------
15 Bad debts ...................................................................................... 15
----------------
16 Rents .......................................................................................... 16 21480
----------------
17 Taxes and licenses ............................................................................. 17
----------------
18 Interest ....................................................................................... 18 136
----------------
Deductions 19 Charitable contributions (see page 8 of instructions for 10% limitation) ....................... 19
(See ----------------
instructions 20 Depreciation (attach Form 4562) ........................................ 20 4382
for -----------------------
limitations 21 Less depreciation claimed on Schedule A and elsewhere on return ....... 21a 21b 4382
on -----------------------------------------
Deductions 22 Depletion ...................................................................................... 22
----------------
23 Advertising .................................................................................... 23 320
----------------
24 Pension, profit-sharing, etc., plans ........................................................... 24
----------------
25 Employee benefit programs ...................................................................... 25
----------------
26 Other deductions (attach schedule) ............................................................. 26 425052
----------------
27 Total deductions. Add lines 12 through 26 ...................................................... 27 457398
----------------
28 Taxable income before net operating loss deduction and special deductions.
Subtract line 27 from line 11 .................................................................. 28 154
----------------
29a Less: a Net operating loss deduction (see page 19 of instructions) (2/31/95 29a 154
-------------------
b Special deductions (Schedule C, line 20) 29b 29c 154
- -----------------------------------------------------------------------------------------------------------------------------------
30 Taxable income. Subtract line 29c from line 28 ................................................. 30 None
----------------
31 Total tax (Schedule J, line 10) ................................................................ 31
----------------
32 Payments: a 1996 overpayment credited to 1997 32a
-----------------------
b 1997 estimated tax payments ..................32b
-----------------------
c Less 1997 refund applied for on Form 4466.....32c ( ) d Bal > 32d
----------------------- -----------------
Tax and
Payments e Tax deposited with Form 7004 ................................................ 32e
-----------------
f Credit for tax paid on undistributed capital gains (attach Form 2433) ....... 32f
-----------------
g Credit for Federal tax on fuels (attach Form 4136). See instructions .........32g 32h
----------------- ----------------
33 Estimated tax penalty (see page 10 of instructions). Check if Form 2220 is attached ......> |_| 33
----------------
34 Tax due. If line 32h is smaller than the total of lines 31 and 33, enter amount owed ........... 34 None
----------------
35 Overpayment, If line 32h is larger than the total of lines 31 and 33, enter amount overpaid .... 35
----------------
Enter amount of line 35 you want: Credited to 1998 estimated tax > Refunded > 36
- -----------------------------------------------------------------------------------------------------------------------------------
Under penalties of perjury, I declare that I have examined this return,
including accompanying schedules and statements, and to the best of my
knowledge and belief, it is true, correct, and complete. Declaration of
Sign preparer (other than taxpayer) is based on all information of which
Here preparer has any knowledge.
>
-------------------------------------------------- > -----------------------------------------------------
Signature of officer Date Title
- -----------------------------------------------------------------------------------------------------------------------------------
Preparer's Date Preparer's social security number
Paid Signature > Check if
Preparer's Self-employed |_|
Use Only ------------------------------------------------------------------------------------------------------------------
Firm's name for EIN >
yours if self-employed > -----------------------------------------------------------------------------------
and address Zip code >
- -----------------------------------------------------------------------------------------------------------------------------------
Cat. No. 114500
</Table>
<Page>
Form 1120 (1997) DOV Pharmaceutical, Inc. 22-3374365 Page 2
- --------------------------------------------------------------------------------
Schedule A Cast of Goods Sold (See page 10ai of instructions.)
- --------------------------------------------------------------------------------
<Table>
1 Inventory at beginning of year ................................................................... 1
---------------------------
2 Purchases ........................................................................................ 2
---------------------------
3 Cost of labor .................................................................................... 3 N/A
---------------------------
4 Additional section 263A costs (attach schedule) .................................................. 4
---------------------------
5 Other Cost 9 (attach schedule) ................................................................... 5
---------------------------
6 Total. Add lines 1 through 5 ..................................................................... 6
---------------------------
7 Inventory at end of year ......................................................................... 7
---------------------------
8 Cost of goods sold. Subtract line 7 from line 6. Enter here and on page 1, line 2 ................ 8
---------------------------
9a Check all methods used for valuing dosing inventory:
(i) |_| Cost as described in Regulations section 1.471-3
(ii) |_| Lower of cost or market as described in Regulations section 1.471-4
(iii) |_| Other (Specify method used and attach explanation.) ^ ................................................................
b Check if there was a writedown of subnormal goods as described in Regulations section 1.471-2(c) ..................... > |_|
c Check if the LIFO inventory method was adopted this tax year for any goods (if checked, attach Form 970) ............. > |_|
d If the LIFO inventory method was used for this tax year, enter percentage (or amounts) of closing
inventory computed under LIFO ................................................................... 9d
---------------------------
e If property is produced or acquired for resale, do the rules of section 263A apply to the corporation? .......|_| Yes |_| No
f Was there any change in determining quantities, cost, or valuations between opening and closing inventory?
If "Yes," |_|
</Table>
<Table>
- ------------------------------------------------------------------------------------------------------------------------------------
Schedule C Dividends and Special Deductions (See page 11 of (a) Dividends (b) % (c) Special deductions
Instructions.) received (a) x (b)
- ------------------------------------------------------------------------------------------------------------------------------------
1 Dividends from less-than-20%-owned domestic corporations that
are subject to the 70% deduction (other than debt-financed stock).... 70
---------------------------------------------------------
2 O i v i i from 20%-or-more-owned domestic corporations that are
subject to the 80% deduction (other than debt-financed stock) ....... 80
---------------------------------------------------------
3 Dividends debt-financed stock of domestic and foreign corporations see
(section 246A) ...................................................... instructions
---------------------------------------------------------
4 Dividends on certain preferred stock of less-than-20%-owned public
utilities ........................................................... 42
---------------------------------------------------------
5 Dividends on certain preferred stock of 20%-or-more-owned public
utilities ........................................................... 48
---------------------------------------------------------
6 Dividends from less-than-20%-owned foreign corporations and certain
FSCs that are subject to the 70% deduction .......................... 74
---------------------------------------------------------
7 Dividends from 20%-or-more-owned foreign corporations and certain
FSCs that are subject to the 80% deduction .......................... 80
---------------------------------------------------------
8 Dividends from wholly owned foreign subsidiaries subject to the 100%
deduction (section 245(b)) .......................................... 100
---------------------------------------------------------
9 Total. Add lines 1 through 8. See page 12 of instructions for
limitation ..........................................................
---------------------------------------------------------
10 Dividends from domestic corporations received by a small business
investment company operating under the Small Business Investment
Act of 1958 ......................................................... 100
---------------------------------------------------------
11 Dividends from certain FSCs that are subject to the 100% deduction
(section 245(c)(1)) ................................................. 100
---------------------------------------------------------
12 Dividends from affiliated group members subject to the 100%
deduction (section 243(a)(3)) ....................................... 100
---------------------------------------------------------
13 Other dividends from foreign corporations not included on lines
3, 6, 7, 8, or 11 ...................................................
----------------
14 Income from controlled foreign corporations under subpart F
(attach Form(s) 5471) ...............................................
----------------
15 Foreign dividend gross-up (section 78) ..............................
----------------
16 IC-DISC and former DISC dividends not included on lines 1, 2,
or 3 (section 246(d)) ...............................................
----------------
17 Other dividends .....................................................
----------------
18 Deduction for dividends paid on certain preferred stock of
public utilities ....................................................
-----------------------
19 Total dividends. Add lines 1 through 17. Enter here and on line 4,
page 1 ..............................................................
----------------
20 Total special deductions. Add lines 9, 10, 11, 12, and 18. Enter
here and on line 29b, page 1 ..............................................................................>
- ------------------------------------------------------------------------------------------------------------------------------------
Schedule E Compensation of Officers (See instructions for line 12, page 1.)
Complete Schedule E only if total receipts (line 1a plus lines 4 through 10 on page 1, Form 1120) are $500,000 or more.
- ------------------------------------------------------------------------------------------------------------------------------------
Percent of corporation
(c) Percent of stock owned
(a) Name of officer (b) Social security number time devoted to -------------------------- (f) Amount of compensation
business (d) Common (e) Preferred
- ------------------------------------------------------------------------------------------------------------------------------------
1 N/A % % % None
- ------------------------------------------------------------------------------------------------------------------------------------
% % %
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
2 Total compensation of officers .......................................................................
---------------------------
3 Compensation of officers claimed on Schedule A and elsewhere on return ............................... None
---------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
Form 1120 (1997) DOV Pharmaceutical Inc. 22-3374365 Page 3
<Table>
- ------------------------------------------------------------------------------------------------------------------------------------
Schedule J Tax Computation (see page 12 of instructions.)
- ------------------------------------------------------------------------------------------------------------------------------------
1 Check if the corporation is a member of a controlled group (see sections 1561 and 1563) ............. > |_|
Important: Members of a controlled group, see instructions on page 13.
2a If the box on line 1 is checked, enter the corporation's share of the $50,000, $25,000,
and $9,925,000 taxable income brackets (in that order):
(1) |$________|___| (2)|$_________|___| (3) |$_________|___|$
b Enter the corporation's share of:
(1) Additional 5% tax (not more than $11,750) |$_________|___|
(2) Additional 3% tax (not more than $100,000) |$_________|___|
3 Income tax. Check this box if the corporation is a qualified personal service corporation
as defined in section 448(d)(2) (see instructions on page 13)......................................... > |_| 3 None
-------------------
4a Foreign tax credit (attach Form 1118) ......................................................... 4a
b Possessions tax credit (attach Form 5735) ..................................................... 4b
c Check: |_| Nonconventional source fuel credit |_| QEV credit (attach Form 8834) ............... 4c
d General business credit. Enter here and check which forms are attached: |_| 3800
|_| 3468 |_| 5884 |_| 6478 |_| 6765 |_| 8588 |_| 8830 |_| 8526
|_| 8835 |_| 8844 |_| 8845 |_| 8846 |_| 8820 |_| 8847 |_| 8851 .... 4d
e Credit for prior year minimum tax (attach Form 8827) .......................................... 4e
5 Total credits. Add lines 4a through 4e ..................................................................... 5
-------------------
6 Subtract line 5 from line 3 ................................................................................ 6 None
-------------------
7 Personal holding company tax (attach Schedule PH (Form 1120)) .............................................. 7
-------------------
8 Recapture taxes. Check if from: |_| Form 4255 |_| Form 8611............................................... 8
-------------------
9 Alternative minimum tax (attach Form 4626) ................................................................. 9
-------------------
10 Total tax. Add lines 6 through 9. Enter here and on line 31, page 1 ........................................ 10 None
- ------------------------------------------------------------------------------------------------------------------------------------
Schedule K Other Information (see page 14 instructions)
- ------------------------------------------------------------------------------------------------------------------------------------
1 Check method of accounting: a |_| Cash Yes No 7 Was the corporation a U.S. shareholder of any Yes No
b |X| Accrual c |_| Other (specify) > _________________ controlled foreign corporation? (See sections 951 and. X
957.)
2 See page 16 of the instructions and state the principal:
|_| Business activity code no. > 8980 If "Yes," attach Form 5471 for each such corporation.
b Business activity > Consulting Enter number of Forms 5471 attached ..................
c Product or service > Service
8 At any time during the 1997 calendar year, did the
3 At the end of the tax year, did the corporation own, corporation have an interest in or a signature or
directly or indirectly, 50% or more of the voting stock other authority over a financial account (such as a
of a domestic corporation? (For rules of attribution, see bank account, securities account, or other financial
section 267(c).) ........................................ X account) in a foreign country? > ..................... X
If "Yes," attach a schedule showing: (a) name and If "Yes," the corporation may have to file Form TD F
identifying number, (b) percentage owned, and (c) taxable 90-22.1.
income or (loss) before NOL and special deductions of
such corporation for the tax year ending with or within If "Yes," enter name of foreign country >
your tax year.
9 During the tax year, did the corporation receive a
4 Is the corporation a subsidiary in an affiliated group or distribution from, or was it the grantor of, or
a parent-subsidiary controlled group? .................. X transferor to, a foreign trust? If "Yes," see page 16
of the instructions for other forms the corporation
If "Yes," enter employer identification number and name may have to file ..................................... X
of the parent corporation > ____________________________
10 At any time during the tax year, did one foreign person
-------------------------------------------------------- own, directly or indirectly, at least 25% of: (a)
the total voting power of all classes of stock of the
5 At the end of the tax year, did any individual, corporation entitled to vote, or (b) the total value of
partnership, corporation, estate or trust own, directly or all classes of stock of the corporation? If "Yes," X
indirectly, 50% or more of the corporation's voting
stock? (For rules of attribution, see section 267(c).).. X a Enter percentage owned >______________________________
country >_____________________________________________
If "Yes," attach a schedule showing name and identifying
number. (Do not include any information already entered b Enter owner's country >_______________________________
in 4 above.) Enter percentage owned >___________________ c The corporation may have to file Form 5472. Enter
number of Forms 5472 attached >______________________
6 During this tax year, did the corporation pay dividends
(other than stock dividends and distributions in exchange 11 Check this box if the corporation issued publicly
for stock) in excess of the corporation's current and offered debt instruments with original issue discount |_|
accumulated earnings and profits? (See secs. 301 and
316.)................................................... X If so, the corporation may have to file Form 8281.
If "Yes," file Form 5452. If this is a consolidated 12 Enter the amount of tax-exempt interest received or
return, answer here for the parent corporation and on accrued during the tax year o $ _____________________
Form 851, Affiliations Schedule, for each subsidiary.
13 If there were 35 or fewer shareholders at the end of
the tax year, enter the number > 3
14 If the corporation has an NOL for the tax year and is
electing to forego the carryback period, check here ^
15 Enter the available NOL carryover from prior tax years
(Do not reduce it by any deduction on line 29a.) > $ 4190
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
Form 1120 (1997) DOV Phamaceutical Inc 22-3374365 Page 4
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Schedule L Balance Sheets per Books Beginning of tax year End of tax year
- ------------------------------------------------------------------------------------------------------------------------------------
Assets (a) (b) (c) (d)
------------------------------------------------------------------------------
1 Cash .......................................... 1317 40654
--------------- -------------
2a Trade notes and accounts receivable .......... 77315 77875
-------------- --------------
b Less allowance for bad debts ..................( ) 77315 ( ) 77875
------------------------------------------------------------------------------
3 Inventories ...................................
--------------- -------------
4 U.S. government obligations ...................
--------------- -------------
5 Tax-exempt securities (see instructions) ......
--------------- -------------
6 Other current assets (attach schedule) ........
--------------- -------------
7 Loans to stockholders .........................
--------------- -------------
8 Mortgage and real estate loans ................
--------------- -------------
9 Other investments (attach schedule) ...........
--------------- -------------
10a Buildings and other depreciable assets ........ 15583 15583
-------------- --------------
b Less accumulated depreciation .................( 4628 ) 10155 9010 6573
------------------------------------------------------------------------------
11a Depletable assets .............................
-------------- --------------
b Less accumulated depletion ....................
------------------------------------------------------------------------------
12 Land (net of any amortization) .................
--------------- -------------
13a Intangible assets (amortizable only)
--------------- -------------
b Less accumulated amortization .................
------------------------------------------------------------------------------
14 Other assets (attach schedule) .................
--------------- -------------
15 Total assets ................................... 89587 125102
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity ...........
16 Accounts payable ............................... 72487 125286
--------------- -------------
17 Mortgages, notes, bonds payable in less
than 1 year ....................................
--------------- -------------
18 Other current liabilities (attach schedule)
--------------- -------------
19 Loans from stockholders ........................ 19485 7328
--------------- -------------
20 Mortgages, notes, bonds payable in 1 year
or more ........................................
--------------- -------------
21 Other liabilities (attach schedule) ............
--------------- -------------
22 Capital stock: a Preferred stock ...............
-------------- --------------
b Common stock .................. 5000 5000
------------------------------------------------------------------------------
23 Additional paid-in or capital surplus
--------------- -------------
24 Retained earnings--Appropriated (attach
schedule) ......................................
--------------- -------------
25 Retained earnings--Unappropriated .............. (7385) (12522)
--------------- -------------
26 Adustments to shareholders' equity (attach
schedule) ......................................
--------------- -------------
27 Less cost of treasury stock ....................
--------------- -------------
28 Total liabilities and stockholders' equity ..... 82587 125102
- ---------------------------------------------------------------------------------------------------------------------------------
Note: You are not required to complete Schedules M-1 and M-2 below if the total assets on line 15, column (d) of Schedule L are
less than $25,000.
- ---------------------------------------------------------------------------------------------------------------------------------
Schedule M-1 Reconciliation of Income (Loss) per Books With Income per Return (See page 15 of instructions.)
- ---------------------------------------------------------------------------------------------------------------------------------
1 Net income (loss) per books .................... (5137) 7 Income recorded on books this year
-------------- not included on this return (itemize):
2 Federal income tax .............................
-------------- Tax-exempt interest $
3 Excess of capital losses over capital gains .... -----------------
-------------- 8 Deductions on this return not charged against
4 Income subject to tax not recorded on books book income this year (itemize):
this year (itemize):
---------------------------- a Depreciation.................. $__________
------------------------------------------------ b Contributions carryover ...... $__________
--------------
5 Expenses recorded on books this year not deducted ------------------------------------------
on this return (itemize):
------------------------------------------
a Depreciation.................. $
------------------------------------------
b Contributions carryover ...... $ -------------
9 Add lines 7 and 8
c Travel and entertainment ..... $ 5291 -------------
10 Income (line 28, page 1)--line 6 less line 9 154
------------------------------------------------- -------------
------------------------------------------------- 520
--------------
6 Add lines 1 through 5 ........................... 154
- ---------------------------------------------------------------------------------------------------------------------------------
Schedule M-2 Analysis of Unappropriated Retained Earnings per Books (Line 25, Schedule L)
- ---------------------------------------------------------------------------------------------------------------------------------
1 Balance at beginning of year................... (7355) 5 Distributions: a Cash
--------------- -------------
2 Net income (loss) per books (5137) b Stock
--------------- -------------
3 Other increases (itemize): c Property
--------------------- -------------
6 Other decreases (itemize):
----------------------------------------------- -------------
7 Add lines 5 and 6
----------------------------------------------- --------------- -------------
8 Balance at end of year (line 4 less line 7) (12522)
4 Add lines 1, 2, and 3.......................... (12522)
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
<Page>
DOV Pharmaceutical Inc. 1997
22-3374365
Form 1120 Page 1 line 36 other deductions:
<Table>
Automobile Expenses 2356
Bank Charges 898
Dues/Books/Subscriptions 1121
Telephone 6352
Computer Expenses 4807
Printing 1106
Insurance 288
Computer Lease 1856
Office Expenses 3803
Management Fees 187896
Legal & Professional Fees 203207
Travel 5956
Entertainment 5291
Corporate Fees 115
------
Total other expenses - 425052
======
</Table>
<Page>
SCHEDULE 2(f)(ii)
1. The Company has a Stock Option Plan.
2. The Company has provided for bonuses to paid to Arnold Lippa and Bernard Beer
upon achievement of certain performance milestones pursuant their respective
employment agreements with the Company.
3. Following the Closing, the Company plans to obtain certain insurance policies
covering its employees.
<Page>
SCHEDULE 2(g)
1. Attached is a list of the Company's patents together with their respective
expiration dates.
<Page>
[DOV LOGO] PHARMACEUTICAL
INCORPORATED
CONFIDENTIAL
SCHEDULE 2(g)
PATENT STATUS
BICIFADINE and DOV 216,303
U.S. 4.196,120 - expired 04/01/97
U.S. 4,231.935 - expired 11/04/97
U.S. 4,435,419 - expires 07/01/0l
DOV 273,547 and DOV 285,489
U.S. 4321,422 - expires 06/23/03
U.S. 4,900,836 - expires 02/13/07
U.S. 5,059,709 - expires 10/22/08
DILTIAZEM DOV ER
U.S. PATENT PENDING
<Page>
SCHEDULE 20(h)
NONE
<Page>
SCHEDULE 2(i)(i)
1. Attached is a list of the Company's patents together with their respective
expiration dates.
2. The Company has not conducted a trademark or trade name search regarding and
makes no representation or warranty with respect to its corporate name DOV
Pharmaceutical, Inc. or any variation or derivative form thereof, other than its
right to use such name as a corporation in the State of New Jersey.
<Page>
[DOV LOGO] PHARMACEUTICAL
INCORPORATED
CONFIDENTIAL
SCHEDULE (i)(i)
PATENT STATUS
BICIFADINE and DOV 216,303
U.S. 4,196,120 - expired 04/01/97
U.S. 4,231,935 - expired 11/04/97
U.S. 4,435,419 - expires 07/01/01
DOV 273,547 and DOV 285,489
U.S. 4,521,422 - expires 06/23/03
U.S. 4,900,836 - expires 02/13/07
U.S. 5,059,709 - expires 10/22/08
DILTIAZEM DOV ER
U.S. PATENT PENDING
Suite 1500, 400 Kelby Place, Fort Lee, NJ 07024 (201) 461-2365
(201) 947-6201 o fax
<Page>
SCHEDULE 2(i)(ii)
1. License agreement between the Company and American Cyanamid Company dated May
22, 1998.
2. The Company has an agreement with Summit Bank to provide a line of credit, in
the form of an overdraft allowance, up to $25,000. The line of credit is due on
demand, bears interest at 16% and is guaranteed by Arnold Lippa and Bernard
Beer.
3. Placement agency letter agreement dated March 27, 1998, as supplemented by a
letter agreement dated March 27, 1998 between Jeff Margolis as President of
Aurora Capital LLC and the Company.
4. The Company has executed several non-disclosure agreements with third
parties.
5. Confidentiality and Assignment Agreement between the Company and Bernard Beer
dated June 30, 1998.
6. Confidentiality and Assignment Agreement between the Company and Arnold Lippa
dated June 30, 1998.
7. Preferred Stock Purchase Agreement dated as of June 30, 1998 between the
Company and Neurocrine Biosciences, Inc.
8. Sublicense Agreement dated as of June 30, 1998 between the Company and
Neurocrine Biosciences, Inc.
9. Warrant Agreement between the Company and Neurocrine Biosciences, Inc.
whereby the Company has warrants to purchase certain common stock of Neurocrine
Biosciences, Inc.
10. The Company is a party to that certain Neurocrine Biosciences, Inc.
Registration Rights Agreement pursuant to which it has certain registration
rights relating to its ownership of capital stock, upon exercise of its
warrants, of Neurocrine Biosciences, Inc.
11. Employment Agreement between the Company and Arnold Lippa.
12. Employment Agreement between the Company and Bernard Beer.
13. Sales Agency Agreement between the Company and Aurora Capital LLC relating
to the transactions contemplated by this Agreement and the related Transaction
Documents.
<Page>
SCHEDULE 2(i)(ii)
1. The Company does not, at this time, have or maintain any insurance policies.
<Page>
EXHIBIT A
FORM OF CONVERTILBLE EXCHANGEABLE PROMISSORY NOTE
<Page>
THIS EXCHANGEABLE PROMISSORY NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY SECURITIES LAWS OF A STATE
OR OTHER JURSDICTION AND MAY NOT UNDER ANY CIRCUMSTANCES BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF (OTHER THAN TO AN AFFILIATE OR AS OTHERWISE PERMITTED BY
THIS NOTE PURSUANT TO WHICH THEY WERE ISSUED) EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES OR BLUE SKYLAWS, OR (ii) TO THE EXTENT APPLICABLE, RULE 144
UNDER THE SECURITIES ACT (OR ANY SIMILAR RULE UNDER THE SECURITIES ACT RELATING
TO THE DISPOSITION OF SECURITIES) TOGETHER WITH AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR
APPLICABLE STATE SECURITIES LAWS-
DOV PHARMACEUTICAL, INC.
CONVERTIBLE EXCHANGEABLE PROMISSORY NOTE
U.S. $8,010,000 January___, 1999
New York, New York
The undersigned, DOV Pharmaceutical, Inc, a New Jersey corporation with
offices at One Parker Plaza, Fort Lee, New Jersey 07024 ("DOV"), unconditionally
promises to pay to Elan International Services, Ltd., a Bermuda corporation
("EIS"), or its permitted assigns, transferees and successors as provided herein
(collectively, the "HOLDER") on January ______, 2005 (the "MATURITY DATE"), at
such place as may be designated by the Holder to DOV, the principal amount
outstanding hereunder (not to exceed U.S.$8,010,000), together with interest
thereon accrued at a rate per annum equal to the lesser of (x) 7% and (y) the
maximum rate of interest permitted by applicable law, from and after the date of
the that date hereof (the "ORIGINAL ISSUE DATE'?, compounded on a semi-annual
basis, the initial such compounding to commence on the date that is six months
from and after the Original Issue Date (each such date, a "COMPOUNDING DATE").
The entire principal amount of this Note shall be disbursed by EIS to DOV on the
date hereof.
SECTION 1. Securities Purchase Agreement and Joint Development and
Operating Agreement.
This Note is issued pursuant to a Securities Purchase Agreement dated an
of the date hereof by and between DOV and EIS (as amended at any time, the
"SECURITIES PURCHASE AGREEMENT", and is intended to be afforded the benefits
thereof, including the representations
1
<Page>
and warranties set forth therein. DOV shall use the proceeds of the issuance and
sale of this Note solely in accordance with the provisions set forth therein and
in a certain Joint Development and Operating Agreement, dated as of the date
hereof (as amended at any time, the "JOINT DEVELOPMENT AND OPERATING
AGREEMENT"), by and among Elan Corporation, plc, an Irish public limited company
and the parent corporation of EIS, EIS, DOV, DOV Newco, Ltd., a Bermuda exempted
limited company ("BERMUDA NEWCO") and Nascime Limited, an Irish private limited
company ("Ireland Newco"), and as described in Section 5 below.
SECTION 2. PAYMENTS AND COVENANTS.
(a) Unless earlier converted in accordance with the terms of Section 3
below, exchanged in accordance with Section 4 below, or prepaid in accordance
with the terms hereof, the entire outstanding principal amount of this Note,
together with any accrued and unpaid interest thereon, shall be due and payable
on the Maturity Date.
(b) Accrued interest hereon shall not be paid in cash, but shall be
capitalized and added to principal amount outstanding hereunder on each
Compounding Date.
(c) This Note may not be prepaid by DOV without EIS's prior written
consent.
(d) During the time that this Note remains outstanding, DOV shall not,
without the prior written consent of the Holder, (i) incur or permit to exist
any indebtedness by DOV or any of DOV's subsidiaries senior or PARI PASSU with
to the indebtedness represented by this Note; provided, that DOV may incur (A)
senior indebtedness in the form of working capital lines of credit and financing
or similar leasing arrangements up to $1 million (including the aggregate
available amount of any undrawn lines or similar credit financings) and (B)
senior indebtedness, without limit on a PARI PASSU basis, funded by banks, bank
holding companies, insurance companies and other investors customarily defined
as institutional investors, it being understood that the amounts described in
clauses {A) and (B) shall be additive,
SECTION 3. CONVERSION.
(a ) CONVERSION RINHT. (i) From and after the date that is two years after
the Original Issue Date and until this Note is repaid in full, the Holder shall
have the right from time to time, in its sole discretion, to convert the
outstanding principal amount and accrued and unpaid interest then-outstanding
hereunder into such number of shares of the common stock of DOV par value $.0001
per share (the "DOV COMMON STOCK"), that shall be obtained by dividing the sum
of the outstanding principal amount of this Note and all accrued interest
thereon by the price (the "Benchmark Price") equal to the lesser of (A) U.S.
$6.44 and (B) the product of (x) 1.75 and (y) due per share price, in the case
of DOV Common Stock, or the initial per share conversion price, in the case of
equity securities convertible, exchangeable or exercisable for or into shares of
DOV Common Stock, in each case, in the next BONA FIDE financing that is
consummated by DOV or its affiliates after the Original Issue Date and within 18
months thereof; provided, that if a transaction giving rise to the calculation
in (E) shall not have occurred, then, in such event, the Benchmark Price shall
be the amount set forth in (A). In the event that, within 18 months of the
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Original Issue Closing Date and after conversion in whole or part of this Note,
DOV issues any equity securities (or rights, options, warrants or other
securities exchangeable, convertible or exercisable for or into equity
securities) at an effective price per share that is less than the Benchmark
Price, DOV shall have the obligation (to be implemented upon the request of EIS
at any time thereafter during the term of this Note), from and after the date
that is the date of closing of such offering, to issue to EIS, for no additional
consideration, pro-rats additional shares of voting and non-voting DOV Common
Stock so that such additional shares, when added to the DOV Common Stock issued
upon such conversion, causes the aggregate number of shares of such DOV Common
Stock issued upon such conversion to be issued as if the denominator in such
formula were the Benchmark Price. Such additional issuance shall be applicable
with respect to accrued and unpaid interest if EIS has exercised the Exchange
Right (as defined below).
(ii) EIS shall notify DOV in writing of its intention to exercise the
conversion. Upon 10 days of receipt of the notice, DOV shall issue stock
certificates to EIS representing the aggregate number of shares of DOV Common
Stock EIS shall own after the conversion. Upon such exercise, EIS shall, if
necessary, exchange with DOV, the DOV Common Stock certificates currently in its
possession for the DOV Common Stock certificates which reflect the aggregate
number of shares of DOV common Stock transferable to EIS after EIS exercises the
conversion.
(b) RECLASSIFICATION, ETC. In case of any reclassification,
reorganization, change or conversion of securities of the class issuable upon
conversion of the outstanding principal amount and accrued and unpaid interest
then-outstanding hereunder (other than a change in par value, or from par value
to no par value), or (ii) any consolidation of DOV with or into another entity
(other than a merger or consolidation with another entity in which DOV is the
acquiring and the surviving entity and that does not result in any
reclassification or change of outstanding securities issuable upon the
conversion of the outstanding principal amount and accrued and unpaid interest
then-outstanding hereunder), or (iii) any sale of all or substantially all the
assets of DOV, then DOV, or such successor or purchasing entity, as the case may
be, shall duly execute and deliver to the Holder a new Note or a supplement
hereto (in form and substance reasonably satisfactory to the Holder), so that
the Holder shall have the right to receive, at a total purchase price not to
exceed that payable upon the conversion of the outstanding principal amount and
accrued and unpaid interest then-outstanding hereunder, and in Lieu of the
shares of Common Stock theretofore issuable upon the conversion the outstanding
principal amount and accrued and unpaid interest then out-standing hereunder,
the kind and amount of shares of stock and other securities, receivable upon
such reclassification, reorganization, change or conversion by a holder of the
number of shares of Common Stock then issuable under this Note. Such new Note
shall provide for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 3. The provisions of
this Section 3(b) shall similarly attach to successive reclassifications,
reorganizations, changes, and conversions.
(c) SUBDIVISION OR COMBINATION OF SHARES. If DOV at any time during which
there is any outstanding principal amount and accrued and unpaid interest
then-outstanding hereunder shall subdivide or combine its Common Stock, (i) in
the case of a subdivision, the Benchmark Price shall be proportionately
decreased and the number of Shares issuable hereunder
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shall be proportionately increased, and (ii) in the case of a combination, the
Benchmark Price shall be proportionately increased and the number of Shares
issuable hereunder shall be proportionately decreased.
(d) NO IMPAIRMENT. DOV will not, by amendment of its certificate of
incorporation or bylaws or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by DOV,
but will at all times in good faith assist in the carrying out of all the
provisions of this Section 3 and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of EIS against
impairment.
(e) NOTICE OF ADJUSTMENTS. Whenever the Benchmark Price or the number of
Shares issuable hereunder shall be adjusted pursuant to this Section 3, DOV
shall prepare a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated. Such certificate shall be signed by its chief
financial officer and shall be delivered to EIS.
(f) FRACTIONAL SHARES. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
DOV shall make a cash payment therefor based on the fair market value of the
Common Stock on the date of exercise as reasonably determined in good faith by
DOV's Board of Directors.
(g) CUMULATIVE ADJUSTMENTS. No adjustment in the Benchmark Price shall be
required under this Section 3 until cumulative adjustments result in a
concomitant change of 1% or more of the Benchmark Price or in the number of
shares of Common Stock issuable upon conversion of the outstanding principal
amount and accrued and unpaid interest then-outstanding hereunder, as in effect
prior to the last such adjustment; provided, however, that any adjustments which
by reason of this Section 3 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 3 shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be.
(h) NOTICE OF CONVERSION. The Holder shall be entitled to exercise the
rights of conversion as described in this Section 3 upon 30 days' notice to DOV,
such notice to be in the form attached hereto as EXHIBIT B.
SECTION 4. EXHIBIT RIGHT
(a) If no portion of the original principal amount hereof (as opposed to
accrued interest) has been converted, this Note shall be exchangeable (the
"Newco Exchange Right") at any time during the term for a number of additional
"B" Shares of Bermuda Newco, par value $1.00 per share (together with the "A"
Shares the "NEWCO COMMON STOCK") so that the aggregate number of B Shares of
Bermuda Newco originally issued to EIS on the Original Issue Date and the shares
issued or transferred to EIS in connection with such exchange shall be equal to
the aggregate number of "A" Shares in Bermuda Newco originally issued to and
subscribed for by
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DOV on the Original Issue Date less the number of "B" Shares, if any,
transferred to EIS by DOV in connection with the exercise of the Newco Exchange
Right. The parties shall make appropriate arithmetic adjustments to any share
issuance to give effect to the foregoing in the cases of issuance of new shares
of Bermuda Newco rather than transfers by DOV or its affiliates of existing
shares to EIS. In the event of the exercise of die Newco Exchange Right, (x) the
outstanding principal amount of this Note shall be cancelled, and shall no
longer be entitled to any exchange right for shares of DOV Common Stock and (y)
the accrued interest on this Note shall continue to carry the rights
attributable thereto (including conversion into DOV Common Stock), other than
the Newco Exchange Right. As provided in the Joint Development and Operating
Agreement prior to and upon any such exchange, EIS shall have a like interest
(proportionate to its then shareholding interest) in any additional or other
capital in Bermuda Newco.
(b) EIS shall notify DOV and Bermuda Newco writing of its intention to
exercise the Newco Exchange Right. Upon 1O days of receipt of the notice,
Bermuda Newco shall issue new stock certificates to EKS representing the
aggregate number of shares of Newco Common Stock EIS shall own after the
exercise of the Newco Exchange Right. Upon such exercise, EIS shall, if
necessary, exchange with Bermuda Newco, the Newco Common Stock certificates
currently in its possession for the Newco Common Stock certificates which
reflect the aggregate number of shares of Newco Common Stock transferable or
issuable to EIS after EIS exercises the Newco Exchange Right.
(c) In the event that EIS exercises the Newco Exchange Right, EIS shall,
within 10 days of the date of the consummation of such transaction, cause to be
paid to or as directed by DOV an amount equal to the excess of (A) the
percentage of Bermuda Newco then owned by EIS (assuming such exchange) but not
in excess of 50%, of the aggregate amount of development and related funding
contributed or paid to Bermuda Newco by DOV and EIS (or their respective
affiliates) from and after the Original Issue Date over (B) the amount described
in (A) above that was paid by EIS and its affiliates; together with interest
thereon at a rate per annum equal to the lesser of (x) 7% and (y) the maximum
rate of interest permitted by applicable law from and after the Original Issue
Date, compounded on a semi-annual basis.
(d) In no event shall the amount determined in accordance with subsection
(a) above exceed the aggregate principal amount issued hereunder and accrued
interest thereon.
SECTION 5. USE OF PROCEEDS.
DOV shall use the proceeds of this Note solely in accordance with the
Joint Development and Operating Agreement.
SECTION 6. EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an event of
default (an
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"EVENT OF DEFAULT");
(a) a default in the payment of the principal amount of this Note, when
and as the same shall become due and payable;
(b) a default in the payment of any accrued and unpaid interest on this
Note, when and as the same shall become due and payable;
(c) a default in the performance, or a breach of any other covenant or
agreement of DOV contained in this Note, and continuance of such default or
breach for a period of 10 days after the Holder has notified DOV of its
occurrence;
(d) a default or breach in any covenant of DOV contained in this Note, or
any other Transaction Document (as defined in the Securities Purchase
Agreement), and continuance of such default or breach for a period of 10
business days after the Holder has notified DOV of its occurrence;
(e) any representation, warranty, covenant or certification made by DOV
pursuant to this Note, or any other Transaction Document shall prove to have
been false or misleading as of the date made in any material respect and EIS has
rightfully submitted a claim for indemnity in respect thereof in accordance with
the Securities Purchase Agreement;
(f) (i) the entry of a decree or order by a court having jurisdiction
adjudging DOV bankrupt or insolvent, or approving a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of DOV,
under United States bankruptcy or insolvency law, as now or hereafter
constituted, and the continuance of any such decree or order unstayed and in
effect for a period of 120 days; (ii) the commencement by DOV of a voluntary
case under United States bankruptcy law, as now or hereafter constituted, or the
consent by DOV to the institution of bankruptcy or insolvency proceedings
against it; (iii) the filing by DOV of a petition or answer or consent seeking
reorganization or relief under United States bankruptcy law; (v) the appointment
of a receiver, liquidator, assignee, trustee, or similar official of DOV or of
any substantial part of its property that is not discharged within 120 days;
(vi) the making by DOV of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as they
become due, or the taking of corporate action by DOV in furtherance of any such
action; or
(g) a material default by DOV under any of the Transaction Documents and
continuance of such default for a period of 30 days after the Holder has
notified DOV of its occurrence.
SECTION 7. REMEDIES IN THE EVENT OF DEFAULT.
(a) In the case of any Event of Default by DOV, the Holder, may in its
sole
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discretion, demand that the aggregate amount of funds advanced to DOV under this
Note and outstanding hereunder and accrued and unpaid interest thereon shall, in
addition to all other rights and remedies of the Holder hereunder and under
applicable law, be and become immediately due and payable upon written notice
delivered by the Holder to DOV. Notwithstanding the preceding sentence, the
rights of the Holder as set forth in Sections 3 and 4 hereunder shall survive.
(b) DOV hereby waives demand and presentment for payment, notice of
nonpayment, protest and notice of protest, diligence, filing suit, and all other
notice and promises to pay the Holder its costs of collection of all amounts due
hereunder, including reasonable attorneys' fees.
(c) In the case of any Event of Default or breach of this Note by DOV this
Note shall continue to bear interest after such default or breach at the
interest rate otherwise in effect hereunder plus 3% per annum (but in any event
not in excess of the maximum rate of interest permitted by applicable law).
SECTION 8. SENIORITY.
Subject to Section 2(d), this Note shall constitute senior indebtedness of
DOV.
SECTION 9. MISCELLANEOUS.
(a) This Note may be transferred or assigned, in whole or in part, (a) by
EIS to its affiliates and/or subsidiaries or other entities in which EIS or its
affiliates may have an interest, by contract, ownership of securities or
otherwise, and that are in the nature of financing vehicles or similar entities
for EIS or its affiliates or (b) by DOV to its affiliates and/or subsidiaries;
provided, that in each case, the transferor shall continue to be liable and
obligated for its obligations hereunder. Subject to the foregoing, this Note and
all of the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. Other
than as set forth above, this Note may not be transferred or assigned by either
party without the prior written consent of the other party.
(b) All notices, demands and requests of any kind to be delivered to any
party in connection with this Agreement shall be in writing and shall be deemed
to have been duly given if personally delivered or if Sent by
nationally-recognized overnight courier or by registered or certified airmail,
return receipt requested and postage prepaid, addressed as follows:
(i) if to DOV:
DOV Pharmaceutical Inc.
One Parker Plaza
Fort Lee, New Jersey 07024
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Attn: Dr. Arnold Lippa
if to Bermuda Newco:
DOV Newco, Ltd.
Clarendon House
2 Church Street
Hamilton
Bermuda
Attn: President
with a copy to:
Friedman Siegelbaum LLP
399 Park Avenue
2Oth Floor
New York, New York 10022.
Attention: J. Robert Horton, Esq.
(ii) if to EIS, to:
Elan International Services, Ltd.
102 St. James Court
Flatts, Smiths Parish
Bermuda SLO4
Attention: Director
with a copy to:
Brock Silverstein McAuliffe LLC
153 East 53rd Street
New York, New York 10022
Attention: David Robbins, Esq.
Each party, by written notice given to the other in accordance with this
Section 10(b) may change the address to which notices, other communication or
documents are to be sent to such party, All notices, other communications or
documents shall be deemed to have been duly given when received. Any such notice
or communication shall be deemed to have been received (iv) in the case of
personal delivery, on the date of such delivery, (v) in the case of
nationally-recognized overnight courier, on the second business day after the
date when sent and (vi) in the case of mailing, on the fifth business day
following that day on which the piece of mail containing such communication is
posted. Notice hereunder may be given on behalf of the parties by their
respective attorneys.
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(c) This Note may not be modified or amended, or any of the
provisions hereof waived, except by Written agreement of DOV and EIS.
(d) This Note shall be governed by and construed in accordance with
the substantive (as opposed to procedural) laws of the State of New York,
without giving effect to the principles thereof relating to conflicts of laws.
(e) This Note may be executed in any number of counterparts, and
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute one note. The Note may be signed
and delivered to the other party by a facsimile transmission; such transmission
shall be deemed a valid signature,
(f) Each of the parties shall be responsible for its own costs and
expenses incurred in connection with the transactions contemplated hereby.
[Signature page follows]
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IN WITNESS WHEREOF, DOV and EIS have executed this Note on the date
first above written.
DOV PHARMACEUTICAL, INC.
By:
--------------------------
Name:
Title:
ELAN INTERNATIONAL SERVICES, LTD.
By:
--------------------------
Name:
Title:
For purposes of Section 4:
DOV NEWCO, LTD.
By:
--------------------------
Name:
Title:
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EXHIBIT A
NOTICE OF ELECTION TO EXERCISE THE CONVERSION RIGHT
Date:
To: DOV Pharmaceutical, Inc.
From: Elan International Services, Ltd.
Re: Exercise of the Conversion Right
- --------------------------------------------------------------------------------
Pursuant to the terms of the Exchangeable Promissory Note (the "Note")
issued by DOV Pharmaceutical, Inc. ("DOV") to Elan International Services, Ltd.
("EIS"), dated January ____ , 1999, specifically Section 3 thereof, EIS hereby
notifies DOV of its intention to exercise its right of conversion.
Pursuant to Section 3 of the Note, EIS hereby elects to convert the
principal and all accrued and unpaid interest on the Note for shares of the
common stock of DOV, par value $.0001 per share, or such portion thereof
exercised below, based upon a conversion rate of U.S. $6.44 per share.
We have instructed our attorneys to contact DOV to discuss the timing and
documentation of the conversion.
Sincerely,
ELAN INTERNATIONAL SERVICES, LTD.
By:
--------------------------
Name:
Title:
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EXHIBIT B
FORM OF CONVERTIBLE PROMISSORY NOTE
<Page>
THIS CONVERTIBLE PROMISSORY NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY SECURITIES LAWS OF A STATE
OR OTHER JURISDICTION AND MAY NOT UNDER ANY CIRCUMSTANCES BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF (OTHER THAN TO AN AFFILIATE OR AS OTHERWISE PERMITTED
BY THIS NOTE PURSUANT TO WHICH THEY WERE ISSUED) EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS, OR (ii) TO THE EXTENT APPLICABLE, RULE 144
UNDER THE SECURITIES ACT (OR ANY SIMILAR RULE UNDER THE SECURITIES ACT RELATING
TO THE DISPOSITION OF SECURITIES) TOGETHER WITH AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR
APPLICABLE STATE SECURITIES LAWS.
DOV PHARMACEUTICAL, INC.
CONVERTIBLE PROMISSORY NOTE
MAXIMUM U.S. $7,008,750
January ___, 1999
New York, New York
The undersigned, DOV Pharmaceutical, Inc., a New Jersey corporation
with offices at One Parker Place, Fort Lee, New Jersey 07024 ("DOV"),
unconditionally promises to pay to Elan International Services, Ltd., a Bermuda
corporation ("EIS"), or its permitted assigns, transferees and successors as
provided herein (collectively, the "HOLDER"), on January ___, 2005 (the
"MATURITY DATE"), at such place as may be designated by the Holder to DOV, the
principal amount outstanding hereunder (not to exceed U.S. $7,008,750) together
with interest on the outstanding principal hereunder accrued at a rate per annum
equal to the lesser of (x) 10% and (y) the maximum rate of interest permitted by
applicable law, from and after the date of the Original Issue Date (as
hereinafter defined), compounded on a semi-annual basis, the initial such
compounding to take place on the date which is six months from and after the
Original Issue Date (each such date, a "COMPOUNDING DATE").
SECTION 1. SECURITIES PURCHASE AND JOINT DEVELOPMENT AND OPERATING
AGREEMENTS; DISBURSEMENTS.
(a) This Note is issued pursuant to a securities purchase agreement
dated as of the date hereof by and between DOV and EIS (as amended at any time,
the "SECURITIES PURCHASE AGREEMENT"). This Note is the Convertible Note referred
to in the Securities Purchase Agreement and DOV and Holder are intended to be
afforded the benefits thereof, including the representations and warranties set
forth therein. DOV shall use the proceeds of the issuance and
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sale of this Note solely in accordance with the provisions set forth in that
certain Joint Development and Operating Agreement, dated as of the date hereof,
by and among Elan Corporation, plc, an Irish public limited company and parent
corporation of EIS, EIS, DOV, DOV NEWCO, Ltd., a Bermuda private limited company
("BERMUDA NEWCO"), and Nascime Limited, an Irish private limited company
("IRELAND NEWCO") (as amended at any time, the "JOINT DEVELOPMENT AND OPERATING
AGREEMENT"), and as described in Section 5 below.
(b) The Holder shall make the initial disbursement of funds
hereunder in accordance with and upon delivery of a notice to the Holder in the
form of EXHIBIT A attached hereto (the "DISBURSEMENT NOTICE") (such date the
"ORIGINAL ISSUE DATE"). For a period of 30 months from and after the Original
Issue Date, disbursements shall be made to DOV hereunder in minimum increments
of U.S. $500,000 (except in the event that an amount less than U.S. $500,000
remains available for funding hereunder, in which case such lesser amount may be
funded hereunder), upon delivery of the Disbursement Notice. The Holder, shall,
subject to the terms and conditions hereof, fund such amounts within five
business days of the receipt of the Disbursement Notice. A "BUSINESS DAY" is any
day that commercial banks are open for the transaction of business in the City
of New York.
(c) The Holder shall not be obliged to disburse more than an
aggregate principal amount of U.S. $7,008,750.
SECTION 2. PAYMENTS.
(a) Unless earlier converted in accordance with the terms of
Sections 3 below or prepaid in accordance with the terms hereof, the entire
outstanding principal amount of this Note, together with any accrued and unpaid
interest thereon, shall be due and payable on the Maturity Date.
(b) Accrued interest hereon shall not be paid in cash, but shall be
capitalized and added to principal amount outstanding hereunder on each
Compounding Date.
(c) This Note may not be prepaid by DOV without EIS's prior written
consent.
SECTION 3. CONVERSION.
(a) CONVERSION RIGHT. (i) From and after the Original Issue Date and
until this Note is repaid in full, the Holder shall have the right from time to
time, in its sole discretion, to convert the outstanding principal amount and
accrued and unpaid interest then-outstanding hereunder into that number of
shares of the common stock of DOV, par value $.0001 per share (the "COMMON
STOCK"), that shall be obtained by dividing such sum of the outstanding
principal amount and accrued interest thereon by the price ("BENCHMARK PRICE")
equal to the lesser of (A) U.S. $5.52 and (B) the product of (x) 1.5 and (y) the
per share price, in the case of Common Stock, or the initial per share
conversion price, in the case of equity securities convertible.
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exchangeable or exercisable for or into shares of Common Stock, in the next BONA
FIDE financing after the date hereof that is consummated by DOV after the
closing of the Securities Purchase Agreement (the "CLOSING") and within 18
months thereof; provided, that if a transaction giving rise to the calculation
in (B) shall not have occurred, then, in such event, the Benchmark Price shall
be the amount set forth in (A). In the event that within IS months of the
Closing and after conversion in whole or in part of this Note, DOV issues any
equity securities (or rights, options, warrants or other securities
exchangeable, convertible or exercisable for or into equity securities) at an
effective price per share that is less than the Benchmark Price, DOV shall have
the obligation (to be implemented at the request of EIS at any time during the
six year term of this Note), from and after the date that is the date of closing
of such offering, to issue to EIS, for no additional consideration, pro-rata
additional shares of voting and non-voting Common Stock so that such additional
shares, when added to the Common Stock issued upon conversion, causes the
aggregate number of shares of such Common Stock issued upon such conversion to
be issued as if the denominator in such formula were the Benchmark Price.
(ii) EIS shall notify DOV in writing of its intention to exercise
the conversion. Upon 10 days of receipt of the notice, DOV shall issue stock
certificates to EIS representing the aggregate number of shares of Common Stock
EIS shall own after the conversion. Upon such exercise, EIS shall, if necessary,
exchange with DOV, the Common Stock certificates currently in its possession for
the Common Stock certificates which reflect the aggregate number of shares of
Common Stock transferable or issuable to EIS after EIS exercises the conversion
(b) RECLASSIFICATION, ETC. In case of any reclassification,
reorganization, change or conversion of securities of the class issuable upon
conversion of the outstanding principal amount and accrued and unpaid interest
then-outstanding hereunder (other than a change in par value, or from par value
to no par value) of other shares or securities of DOV, or (ii) any consolidation
of DOV with or into another entity (other than a merger or consolidation with
another entity in which DOV is the acquiring and the surviving entity and that
does not result in any reclassification or change of outstanding securities
issuable upon conversion of the outstanding principal amount and accrued and
unpaid interest then-outstanding hereunder), or (iii) any sale of all or
substantially all the assets of DOV, then DOV, or such successor or purchasing
entity, as the case may be, shall duly execute and deliver to the Holder a new
Note or a supplement hereto (in form and substance reasonably satisfactory to
the Holder), so that the Holder shall have the right to receive, at a total
purchase price not to exceed that payable upon the conversion of the outstanding
principal amount and accrued and unpaid interest then-outstanding hereunder, and
in lieu of the shares of Common Stock theretofore issuable upon the conversion
of the outstanding principal amount and accrued and unpaid interest
then-outstanding hereunder, the kind and amount of shares of stock and other
securities, receivable upon such reclassification, reorganization, change or
conversion by a holder of the number of shares of Common Stock then issuable
under this Note. Such new Note shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 3. The provisions of this Section 3(b) shall similarly attach to
successive reclassifications, reorganizations, changes, and conversions.
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(c) SUBDIVISION OR COMBINATION OF SHARES. If DOV at any time during
which there is any outstanding principal amount and accrued and unpaid interest
then-outstanding hereunder shall subdivide or combine its Common Stock, (i) in
the case of a subdivision, the Benchmark Price shall be proportionately
decreased and the number of Shares issuable hereunder shall be proportionately
increased, and (ii) in the case of a combination, the Benchmark Price shall be
proportionately increased and the number of Shares issuable hereunder shall be
proportionately decreased.
(d) NO IMPAIRMENT. DOV will not, by incorporation of its certificate
of incorporation or bylaws or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by DOV,
but will at all times in good faith assist in the carrying out of all the
provisions of this Section 3 and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
impairment.
(e) NOTICE OF ADJUSTMENTS. Whenever the Benchmark price or the
number of Shares issuable hereunder shall be adjusted pursuant to this Section
3, DOV shall prepare a certificate setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated. Such certificate shall be signed by its
chief financial officer and shall be delivered to the holder of this Note.
(f) FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares DOV shall make a cash payment therefor based on the fair market value of
the Common Stock on the date of exercise as reasonably determined in good faith
by DOV's Board of Directors.
(g) CUMULATIVE ADJUSTMENTS. No adjustment in the Benchmark Price
shall be required under this Section 3 until cumulative adjustments result in a
concomitant change of 1% or more of the Benchmark Price or in the number of
shares of Common Stock issuable upon conversion of this Note as in effect prior
to the last such adjustment; provided, however, that any adjustments which by
reason of this Section 3 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 3 shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be.
(h) NOTICE OF CONVERSION. The Holder shall be entitled to exercise
the rights of conversion as described in this Section 3 upon 30 days notice to
DOV, such notice to be in the form attached hereto as Exhibit B.
SECTION 4. CONDITIONS OF FUNDING.
(a) It shall be a condition of the Holder's funding obligations
hereunder that at any time DOV shall present a Disbursement Notice to the
Holder, DOV shall not be in default or
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breach in any material respect under (a) within six months of the issuance
hereof, Section 6 hereof, (b) Sections 2,4 and 5 of the Securities Purchase
Agreement or (c) within six months of the issuance hereof, the representations
and warranties of the license agreement dated as of the date hereof between DOV
and Bermuda Newco.
(b) It shall be a condition of the Holder's funding obligations
hereunder that the Holder receive written notice from the board of directors of
Bermuda Newco that the board of directors of Bermuda Newco has determined that
such funding is necessary to continue the business objectives of Bermuda Newco
as provided in the Business Plan and Joint Development ad Operating Agreement.
SECTION 5. USE OF PROCEEDS.
DOV shall use the proceeds of this Note solely to fund its
obligations to Bermuda Newco in accordance with a duly authorized Business
Plan approved by Bermuda Newco's board of directors pursuant to the Joint
Development and Operating Agreement.
SECTION 6. EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an
event of default (an "EVENT OF DEFAULT"):
(a) a default in the payment of the principal amount of this Note,
when and as the same shall become due and payable;
(b) a default in the payment of any accrued and unpaid interest on
this Note, when and as the same shall become due and payable;
(c) a default in the performance, or a breach of any other Covenant
or agreement of DOV contained in this Note, and continuance of such default or
breach for a period of 10 business days after the Holder has notified DOV of its
occurrence;
(d) a default or breach of any covenant of DOV contained in this
Note, or any other Transaction Document (as defined in the Securities Purchase
Agreement), and continuance of such default or breach for a period of 10 days
after the Holder has notified DOV of its occurrence;
(e) any representation, warranty or certification made by DOV
pursuant to this Note, or any other Transaction Document shall prove to have
been false or misleading as of the date made in any material respect and EIS has
rightfully submitted a claim for indemnity in respect thereof in accordance with
the Securities Purchase Agreement;
(f) (i) the entry of a decree or order by a court having
jurisdiction adjudging DOV bankrupt or insolvent, or approving a petition
seeking reorganization, arrangement,
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adjustment or composition of or in respect of DOV, under United States
bankruptcy or insolvency law, as now or hereafter constituted, and the
continuance of any such decree or order unstayed and in effect for a period of
120 days; (ii) the commencement by DOV of a voluntary case under United States
bankruptcy law, as now or hereafter constituted, or the consent by DOV to the
institution of bankruptcy or insolvency proceedings against it; (iii) the filing
by DOV of a petition or answer or consent seeking reorganization or relief under
United States bankruptcy law; (v) the appointment of a receiver, liquidator,
assignee, trustee, or similar official of DOV or of any substantial part of its
property which is not discharged within 120 days; (vi) the making by DOV of an
assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due, or the taking of
corporate action by DOV in furtherance of any such action; or
(g) a material default by DOV under any of the Transaction Documents
and continuance of such default for a period of 30 days after the Holder has
notified DOV of its occurrence.
SECTION 7. REMEDIES IN THE EVENT OF DEFAULT.
(a) In the case of any Event of Default by DOV, the Holder, may in
its sole discretion, demand that the aggregate amount of funds advanced to DOV
under this Note and outstanding hereunder and accrued and unpaid interest
thereon shall, in addition to all other rights and remedies of the Holder
hereunder and under applicable law, be and become immediately due and payable
upon written notice delivered by the Holder to DOV. Notwithstanding the
preceding sentence, the rights of the Holder as set forth in Section 3 shall
survive.
(b) DOV hereby waives demand and presentment for payment, notice of
nonpayment, protest and notice of protest, diligence, filing suit, and all other
notice and promises to pay the Holder its costs of collection of all amounts due
hereunder, including reasonable attorneys' fees.
(c) In the case of any Event of Default or breach of this Note by
DOV this Note shall continue to bear interest after such default or breach at
the interest rate otherwise in effect hereunder plus 3% per annum (but in any
event not in excess of the maximum rate of interest permitted by applicable
law).
SECTION 8. MISCELLANEOUS.
(a) This Note may be transferred or assigned, in whole or in part,
(a) by EIS to its affiliates and/or subsidiaries or other entities in which EIS
or its affiliates may have an interest, by contract, ownership of securities or
otherwise, and that are in the nature of financing vehicles or similar entities
for EIS or its affiliates, or (b) by DOV to its affiliates and/or subsidiaries;
provided, that in each case, the transferor shall continue to be liable and
obligated for its
6
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obligations hereunder. Subject to the foregoing, this Note and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Other than as set
forth above, this Note may not be transferred or assigned by either party
without the prior written consent of the other party.
(b) All notice, demands and requests of any kind to be delivered to
any party in connection with this Agreement shall be in writing and shall be
deemed to have been duly given if personally delivered or if sent by
nationally-recognized overnight courier or by registered or certified airmail,
return receipt requested and postage prepaid, addressed as follows:
(i) if to DOV:
DOV Pharmaceutical, Inc.
One Parker Plaza
Fort Lee, New Jersey 07024
Attn: Dr. Arnold Lippa
with a copy to:
Friedman Siegelbaum LLP
399 Park Avenue
20th Floor
New York, New York 10022
Attention: J. Robert Horton, Esq.
(ii) if to EIS, to:
Elan International Services, Ltd.
102 St. James Court
Flatts, Smiths Parish
Bermuda SL04
Attention: Director
with a copy to:
Brock Silverstein McAuliffe LLC
153 East 53rd Street
New York, New York 10022
Attention: David Robbins, Esq.
Each party, by written notice given to the other in accordance with
this Section 8(b) may change the address to which notices, other communication
or documents are to be sent to such party. All notices, other communications or
documents shall be deemed to have been
7
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duly given when received. Any such notice or communication shall be deemed to
have been received (iv) in the case of personal delivery, on the date of such
delivery, (v) in the case of nationally-recognized overnight courier, on the
second business day after the date when sent and (vi) in the case of mailing, on
the fifth business day following that day on which the piece of mail containing
such communication is posted. Notice hereunder may be given on behalf of the
parties by their respective attorneys.
(c) This Note may not be modified or amended, or any of the
provisions hereof waived, except by written agreement of DOV and EIS.
(d) This Note shall be governed by and construed in accordance with
the substantive (as opposed to procedural) laws of the State of New York,
without giving effect to the principles thereof relating to conflicts of laws.
(e) This Note may be executed in any number of counterparts, and
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute one note. This Note may be
signed and delivered to the other party by a facsimile transmission; such
transmission shall be deemed a valid signature.
(f) Each of the parties shall be responsible for its own costs and
expenses incurred in connection with the transactions contemplated hereby.
[Signature page follows]
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IN WITNESS WHEREOF, DOV and EIS have executed this Note on the date
first above written.
DOV PHARMACEUTICAL, INC.
By:
--------------------------
Name:
Title:
ELAN INTERNATIONAL SERVICES, LTD.
By:
--------------------------
Name:
Title:
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EXHIBIT A
NOTICE OF REQUEST FOR DISBURSEMENT
Date:
To: Elan International Services, Ltd.
From: DOV Pharmaceutical, Inc.
Re: Disbursement Request
- --------------------------------------------------------------------------------
Pursuant to the terms of the Convertible Promissory Note issued by DOV
Pharmaceutical, Inc. ("DOV") to Elan International Services, Ltd. ("EIS"),
dated_________, DOV hereby notifies EIS of its request for a disbursement
thereunder in the amount of U.S. $_________. Please provide funding in the
requested amount to DOV in accordance with the following wire instructions:
[
]
Sincerely,
DOV PHARMACEUTICAL, INC.
By:
--------------------------
Name:
Title:
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EXHIBIT B
NOTICE OF ELECTION TO EXERCISE THE CONVERSION RIGHT
Date:
To: DOV Pharmaceutical, Inc.
From: Elan International Services, Ltd.
Re: Exercise of the Conversion Right
- --------------------------------------------------------------------------------
Pursuant to the terms of the Convertible Promissory Note (the "Note")
issued by DOV Pharmaceutical, Inc. ("DOV") to Elan International Services, Ltd.
("EIS"), dated ________, specifically Section 3 thereof, EIS hereby notifies DOV
of its intention to exercise its right of conversion.
Pursuant to Section 3 of the Note, EIS hereby elects to convert the
principal and all accrued and unpaid interest the Note for shares of the common
stock of DOV, par value $.0001 per share, or such portion thereof specified
below, based upon a conversion rate of U.S.$5.52 per share.
We have instructed our attorneys to contact DOV to discuss the timing and
documentation of the conversion.
Sincerely,
ELAN INTERNATIONAL SERVICES, LTD.
By:
--------------------------
Name:
Title:
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EXHIBIT C
FORM OF WARRANT
<Page>
THIS WARRANT CERTIFICATE AND THE SECURITIES REPRESENTED BY THIS WARRANT
CERTIFICATE AND THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY SECURITIES LAWS OF A STATE OR OTHER JURISDICTION AND
MAY NOT UNDER ANY CIRCUMSTANCES BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
(OTHER THAN TO AN AFFILIATE OR AS OTHERWISE PERMITTED BY THIS WARRANT
CERTIFICATE PURSUANT TO WHICH THEY WERE ISSUED) EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS, OR (ii) TO THE EXTENT APPLICABLE, RULE 144
UNDER THE SECURITIES ACT (OR ANY SIMILAR RULE UNDER THE SECURITIES ACT RELATING
TO THE DISPOSITION OF SECURITIES) TOGETHER WITH AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR
APPLICABLE STATE SECURITIES LAWS.
DOV PHARMACEUTICAL, INC.
WARRANT TO PURCHASE SHARES
OF COMMON STOCK
THIS CERTIFIES THAT, for value received, Elan International
Services, Ltd., a Bermuda corporation, or its permitted transferees and
successors as provided herein (each a "HOLDER"), is entitled to subscribe for
and purchase up to 75,000 shares, as adjusted pursuant to Section 4 (the
"SHARES"), of the fully paid and nonassessable common stock, par value $.0001
(the "COMMON STOCK"), of DOV Pharmaceutical, Inc., a New Jersey corporation (the
"COMPANY"), at the price of U.S.$5.52 per share (such price, and such other
prices that shall result from time to time, from the adjustments specified in
Section 4, the "WARRANT PRICE"), subject to the provisions and upon the terms
and conditions hereinafter set forth,
1. TERM. Subject to the limitations set forth in Sections 3 and 4,
the purchase right represented by this Warrant is exercisable, in whole or in
part, at any time, and from time to time, from and after the date hereof and
until 5:00 p.m. Eastern Standard Time January 15, 2005. To the extent not
exercised at 5:00 p.m. Eastern Standard Time on January 15, 2005, this Warrant
shall completely and automatically terminate and expire, and thereafter it shall
be of no force or effect.
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. (a) The
purchase right represented by this Warrant may be exercised by the Holder, in
whole or in part and from time to time, by the surrender of this Warrant (with
the notice of exercise form attached hereto as ANNEX A duly executed) at the
principal office of the Company and by the payment to the Company of an
<Page>
amount, in cash or other immediately available funds, equal to the
then-applicable Warrant Price per Share multiplied by the number of Shares then
being purchased.
(b) The persons or entities in whose name(s) any certificate(s)
representing Shares shall be issuable upon exercise of this Warrant shall be
deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the Shares represented thereby (and such
Shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is properly exercised and
full payment for the Shares acquired pursuant to such exercise is made. Upon any
exercise of the rights represented by this Warrant, certificates for the Shares
purchased shall be delivered to the holder hereof as soon as possible and in any
event within 30 days of receipt of such notice and payment, and unless this
Warrant has been fully exercised or expired, a new Warrant representing the
portion of Shares, if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the holder hereof as soon as
possible and in any event within such 30-day period.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may be
issued upon the exercise of this Warrant will, upon issuance, be duly and
validly authorized and issued, fully paid and nonassessable, and will be free
from all taxes, liens and charges with respect to the issue thereof and assuming
payment of the Warrant Price for all Shares so purchased, legally and validly
owned by the Holder. During the period within which this Warrant may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of the issue upon the exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Common Stock to provide for the
exercise of the rights represented by this Warrant
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to the adjustment from time to time upon the occurrence
of certain events, as follows:
(a) NEXT FINANCING. If the effective price per share in the next
round of bona fide financing after the date hereof that is consummated within 18
months of the date hereof is less than U.S.$3.68, (i) if this Warrant has been
exercised simultaneously with the closing of such offering, the Company shall be
obligated to issue to Holder, subject to Holder's request, pro-rata additional
shares of voting and non-voting Common Stock equal to the excess of (A) the
quotient obtained by dividing (x) the consideration paid upon exercise of this
Warrant by (y) the product of (1) 1.5 and (2) such lower share price over (B)
the number of shares of DOV Common Stock issued at an exercise price of
U.S.$5.52 and (ii) if this Warrant has not been exercised or has been partially
exercised. this Warrant shall be amended to provide for an exercise price of 1.5
times suck lower share price,
(b) RECLASSIFICATION, ETC. In case of any reclassification,
reorganization, change or conversion of securities of the class issuable upon
exercise of this Warrant (other than a change in its par value, or from par
value to no par value) of other shares or securities of the Company, or (ii) any
consolidation of the Company with or into another entity (other than a merger or
consolidation with
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another entity in which the Company is the acquiring and surviving entity and
that does not result in any reclassification or change of outstanding securities
issuable upon exercise of this Warrant), or (iii) any sale of all or
substantially all the assets of the Company, then the Company, or such successor
or purchasing entity, as the case may be, shall duly execute and deliver to the
holder of this Warrant a new Warrant or a supplement hereto (in form and
substance reasonably satisfactory to the holder of this Warrant), so that the
Holder shall have the right to receive, at a total purchase price not to exceed
that payable upon the exercise of the unexercised portion of this Warrant, and
in lieu of the shares of Common Stock therefore issuable upon the exercise of
this Warrant, the kind and amount of shares of stock and other securities,
receivable upon such reclassification, reorganization, change or conversion by a
holder of the number of shares of Common Stock then purchasable under this
Warrant[, provided that if a transfer, sale, consolidation or merger results in
the shareholders of the Company receiving cash or publicly traded securities
having a per share value in excess of the Warrant Price, this Warrant shall
terminate if not exercised prior to the closing date of such transaction]. Such
new Warrant shall provide for adjustments that shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 4. The
provisions of this Section 4{b) shall similarly attach to successive
reclassifications, reorganizations, changes, and conversions.
(c) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time
during which this Warrant remains outstanding and unexpired shall subdivide or
combine its Common Stock, (i) in the case of a subdivision, the Warrant Price
shall be proportionately decreased and the number of Shares purchasable
hereunder shall be proportionately increased, and (ii) in the case of a
combination, the Warrant Price shall be proportionately increased and the number
of Shares purchasable hereunder shall be proportionately decreased.
(d) NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or bylaws or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such actions may be necessary or appropriate in order to protect the rights of
the Holder against impairment.
(e) NOTICE OF ADJUSTMENTS. Whenever the Warrant Price or the number
of Shares purchasable hereunder shall be adjusted pursuant to this Section 4,
the Company shall prepare a certificate setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated. Such certificate shall be signed by its
chief financial officer and shall be delivered to the Holder.
(f) FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Common Stock on the date of exercises reasonably determined in good
faith by the Company's Board of Directors.
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(g) CUMULATIVE ADJUSTMENTS. No adjustment in the Warrant Price shall
be required under this Section 4 until cumulative adjustments result in a
concomitant charge of 1% or more of the Warrant Price or in the number of shares
of Common Stock purchasable upon exercise of this Warrant as in effect prior to
the last such adjustment; provided, however, that any adjustment that by reason
of this Section 4 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
4 shall be made to the nearest cent or to the nearest one-hundredth of a share,
as the case may be.
5. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF WARRANT OR SHARES
OF COMMON STOCK. (a) The Holder, by acceptance hereof, agrees that this Warrant
and the Shares to be issued upon exercise hereof are being acquired for
investment and that such holder will not offer, sell or otherwise dispose of
this Warrant or any Shares to be issued upon exercise hereof except under
circumstances which will not result in a violation of applicable securities
laws. Upon exercise of this Warrant, unless the Shares being acquired are
registered under the Securities Act of 1933, as amended (the "ACT"), or an
exemption from the registration requirements of such Act is available, the
Holder shall confirm in writing, by executing an instrument in form reasonably
satisfactory to the Company, that the Shares so purchased are being acquired for
investment and not with a view toward distribution or resale, This Warrant and
all Shares issued upon exercise of this Warrant (unless registered under the
Act) shall be stamped or imprinted with a legend in substantially the following
form:
THIS WARRANT CERTIFICATE AND THE SECURITIES REPRESENTED BY THIS WARRANT
CERTIFICATE AND THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED ,OR ANY SECURITIES LAWS OF A STATE OR OTHER JURISDICTION AND
MAY NOT UNDER ANY CIRCUMSTANCES BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
(OTHER THAN TO AN AFFILIATE OR AS OTHERWISE PERMITTED BY THIS WARRANT
CERTIFICATE PURSUANT TO WHICH THEY WERE ISSUED) EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS, OR (ii) TO THE EXTENT APPLICABLE, RULE 144
UNDER THE SECURITIES ACT (OR ANY SIMILAR RULE UNDER THE SECURITIES ACT RELATING
TO THE DISPOSITION OF SECURITIES) TOGETHER WITH AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR
APPLICABLE STATE SECURITIES LAWS.
(b)(i) This Warrant may be transferred or assigned, in whole or in
part, (a) by EIS or its affiliates and/or subsidiaries or other entities in
which EIS or its affiliates may have an interest, by contract, ownership of
securities or otherwise and that are in the nature of financing vehicles or
similar entities for EIS or its affiliates, or (b) by the Company to its
affiliates and/or subsidiaries; provided, that in each case, the transferor
shall continue to be liable and obligated
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for its obligations hereunder. Subject to the foregoing, this Warrant and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Other than
as set forth above, this Warrant may not be transferred or assigned by either
party without the prior written consent of the other.
(ii) With respect to any offer, sale or other disposition of this
Warrant or any Shares acquired pursuant to the exercise of this Warrant prior to
registration of such Shares, the Holder shall give written notice to the Company
prior thereto, describing briefly the manner thereof, together with a written
opinion of such holders counsel, if requested by the Company, to the effect that
such offer, sale or other disposition may be effected without registration or
qualification (under the Securities Act as then is effect or any federal or
state law then in effect) of this Warrant or such Shares and indicating whether
or not under the Act certificates for this Warrant or such Shares to be sold or
otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with the Act.
Promptly upon receiving such written notice and reasonably satisfactory opinion,
if so requested, the Company, as promptly as practicable, shall not notify such
Holder that such Holder may sell or otherwise dispose of this Warrant or such
Shares, all in accordance with the terms of the notice delivered to the Company.
Each certificate representing this Warrant or the Shares thus transferred shall
bear a legend as to the applicable restrictions on transferability in order to
insure compliance with the Securities Act, unless in the aforesaid opinion of
counsel for the Holder such legend is not required in order to insure compliance
with the Securities Act. The Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions.
(iii) The shares of Common Stock underlying this Warrant are
entitled to the benefit of certain registration rights as set forth in a
Registration Rights Agreement dated as of the date hereof between the Company
and the initial Holder named herein.
6. RIGHTS AS SHAREHOLDERS. No Holder, as such, shall be entitled to
vote or receive dividends or be deemed the holder of Shares or any other
securities of the Company which may at any time issuable on the exercise hereof
for any purpose, nor shall anything contained herein be construed to confer upon
the Holder, as such, any right to vote for the election of directors or upon any
matters submitted to shareholders at any meeting thereof, or to receive notice
of meetings, or to receive dividends or subscription rights or otherwise until
this Warrant is exercised and the Shares purchasable upon the exercise hereof
shall have become deliverable, as provided herein.
7. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Holder as follows:
(a) The Company has all requisite corporate power and authority to
authorize and execute this Warrant and the certificates evidencing the Shares
and to perform all obligations and undertakings under this Warrant and the
certificates evidencing the Shares;
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(b) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms;
(c) The Shares have been duly authorized and reserved for issuance
by the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable; and
(d) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Certificate of
Incorporation bylaws, as amended, and do not and will not constitute a default
under, any indenture, mortgage, contract or other instrument of which the
Company is a party or by which it is bound.
8. MISCELLANEOUS. (a) This Warrant may not be modified or
amended, or any provisions hereof waived, except by written agreement of the
Company and the Holder.
(b) Any notice, request or other document required or permitted to
be given or delivered to the Holder or the Company shall (i) be in writing, (ii)
be delivered personally or sent by mail or overnight courier to the intended
recipient to Holder at its address as shown on the books of the Company or to
the Company at the address indicated therefor on the signature page of this
Warrant, unless the recipient has given notice of another address, and (iii) be
effective on receipt if delivered personally, two business days after dispatch
if mailed, and one business day after dispatch if sent by overnight courier
service.
(c) The Company covenants to the Holder that upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant and, in the case of any such loss, theft or
destruction, upon receipt of a bond or indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant., the Company will make and deliver a new Warrant, of like
tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant.
(d) The descriptive headings of the several sections and paragraphs
of this Warrant are inserted for convenience only and do not constitute a part
of this Warrant.
(e) This Warrant shall be governed by and construed in accordance
with the substantive (as opposed to procedural) laws of the State of New York,
without giving effect to the principles thereof relating to conflicts of laws.
(f) This Warrant may be executed in any number of counterparts, and
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute one Warrant. This Warrant may be
signed and delivered to the other party by a facsimile transmission; such
transmission shall be deemed a valid signature.
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(g) Each of the parties shall be responsible for its own costs and
expenses incurred in connection with the transactions contemplated hereby.
[Signature page follows]
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IN WITNESS WHEREOF, DOV Pharmaceutical, Inc. has executed this
Warrant as of ___ day of January, 1999.
DOV PHARMACEUTICAL, INC.
By: _____________________
Dr. Hold Lippa
Chief Executive Officer
Attest:
By: _____________________
Bernard Beer
President
Agreed and accepted on this ____ day of January, 1999 by:
ELAN INTERNATIONAL SERVICES, LTD.
By: ____________________
Name:
Title:
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ANNEX A
NOTICE OF EXERCISE
To: DOV Pharmaceutical, Inc.
1. The undersigned hereby elects to purchase _____ shares of Common Stock of DOV
Pharmaceutical, Inc. pursuant to the terms of the attached Warrant, and tenders
herewith full payment of the purchase price of such shares, in cash or other
immediately available funds.
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name or names as are specified below:
_______________________________(Name)
(Address)
3. The undersigned represents that the aforesaid shares are being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares.
Signature: ____________________________
Name: _________________________________
Address: ______________________________
_______________________________________
_______________________________________
Social Security or taxpayer identification number:
_______________________________________
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EXHIBIT D
FORM OF REGISTRATION RIGHTS AGREEMENT
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DOV PHARMACEUTICAL, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of January ___,
1999 by and among DOV Pharmaceutical, Inc., a New Jersey corporation (the
"COMPANY"), and Elan International Services, Ltd., a Bermuda corporation
("EIS").
RECITALS;
A. Pursuant to a Securities Purchase Agreement dated as of the data
hereof by and between the Company and EIS (as amended at anytime, the
"SECURITIES PURCHASE AGREEMENT"), EIS has (x) acquired, among other things,
certain promissory notes (as amended at anytime, the "NOTES"), that are
convertible and may be converted into shares of common stock, par value 5.0001
per share (the "COMMON STOCK" of the Company, and (y) a warrant (as amended at
anytime, the "WARRANT"), that is exercisable for shares of Common Stock.
B. The execution of the Securities Purchase Agreement has
occurred on the date hereof. It is a condition to the closing of the
transactions contemplated thereby that the parties execute and deliver this
Agreement.
C. The parties desire to set forth herein their agreement related to
the granting of certain registration rights to the Holders (as defined below) of
any Common Stock or securities convertible, exercisable or exchangeable for or
into Common Stock.
AGREEMENT:
The parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"AFFILIATE" of any Person shall mean any other Person controlling,
controlled by or under common control with such particular Person. In the case
of a natural Person, his Affiliates include members of such Person's immediate
family, natural lineal descendants of such Person or a trust for the exclusive
benefit of such Person and his immediate family and natural lineal descendants.
"COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or
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any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"HOLDERS", "HOLDERS" or "HOLDERS OF REGISTRABLE SECURITIES" shall
mean EIS and any Person who shall have acquired Registrable Securities from EIS
as permitted herein, either individually or jointly as the case may be.
"PERSON" shall mean an individual, a partnership, a company, an
association, a joint stock company, a trust, a joint venture, an Unincorporated
organization and a governmental quasi-governmental entity or any department,
agency or political subdivision thereof.
"REGISTRABLE SECURITIES" means (i) any shares of Common Stock held
by the Holders, (ii) any Common Stock issued to any Holder upon conversion of or
in connection with the Notes or exercise of the Warrant, and (iii) any Common
Stock issued in respect of the securities referred to in clauses (i) and (ii)
above upon any stock split, stock dividend, recapitalization or similar event;
excluding in all cases, however, any Registrable Securities sold by a Person in
a transaction (including a transaction pursuant to a registration statement
under this Agreement and transaction pursuant to Rule 144 promulgated under the
Securities Act) in which registration rights are not transferred pursuant to
Section 9 hereof. Common Stock owned by a Holder shall cease to be Registrable
Securities (i) upon any sale by a Holder pursuant to a Registration Statement,
Section 4(2) of the Securities Act or Rule 144 under the Securities Act, (ii) at
such time as a Holder receives an opinion of counsel reasonably satisfactory to
the Company that all of such Registrable Securities may be sold pursuant to Rule
144, without regard to volume and manner of sale restrictions or (iii) upon any
assignment or transfer of the Registrable Securities in a manner not in
compliance with the Securities Act or this Agreement or in which registration
rights are not transferred pursuant to Section 9 hereof.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act. and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses, other than Selling
Expenses, incurred by the Company in complying with Sections 2 or 3 hereof,
including without limitation, all registration, qualification and filing fees,
exchange listing fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, blue sky fees and expenses, the expense of any special
audits incident to or required by any such registration and the reasonable fees
and disbursements, not to exceed $10,000 in the aggregate. of one counsel for
the Holders. such counsel to be selected by Holders holding a majority of the
Registrable Securities held by the Holders and included in such registration.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
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"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and the costs of any accountants, counsel or other experts retained
by the Holders.
2. DEMAND REGISTRATIONS. (a) REQUESTS FOR REGISTRATION. Any
Holder or Holders who collectively hold Registrable Securities representing at
least 25% of the Registered Securities then outstanding shall have the right at
any time from and after 18 months of the Company's initial public offering of
securities (an "IPO"), to request registration under the Securities Act of all
or part of their Registrable Securities on Form S-1, S-2 or S-3 {if available)
or any similar registration (each, a "Demand Registration"), such form to be
selected by the Company. Each written request for a Demand Registration shall
specify the approximate number of Registrable Securities requested to be
registered. Within 10 days after receipt of any such request, the Company shall
give written notice of such requested registration to all other Holders of
Registrable Securities and, if they request to be included in such registration,
the Company shall include such Holders' Registrable Securities in such offering
if they have responded affirmatively within 10 days after the receipt of the
Company's notice. The Holders in aggregate shall be entitled to request one
Demand Registration. A registration shall not count as the permitted Demand
Registration until it has become effective (unless such Demand Registration has
not become effective due solely to the fault of the Holders requesting such
registration, including a request by such Holders that such registration be
withdrawn). The Company shall pay all Registration Expenses in connection with
any Demand Registration whether or not such Demand Registration has become
effective; provided, that the Company shall not be obligated to pay such
Registration Expenses if the Demand Registration has not become effective due to
the fault (including such request to withdraw) of the Holders requesting such
registration.
(b) PRIORITY ON DEMAND REGISTRATIONS. If a Demand Registration is an
underwritten offering and the managing underwriters advise the Company in
Writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering,
exceeds the number of Registrable Securities and other securities, if any, that
can be sold in such offering without adversely affecting the marketability of
the offering, the Company shall include in such registration:
(i) first but subject to underwriter cut-back to eliminate such
excess, the Registrable Securities requested to be included in such registration
by the Holders together with any securities held by third parties holding a
similar, previously granted right to be included in such registration (or, if
necessary, such Registrable Securities or other securities pro rata among the
Holders or holders thereof); and
(ii) thereafter, other securities quested to be included in such
registration or sold by the Company.
(c) RESTRICTIONS ON DEMAND REGISTRATIONS. The Company may postpone
for to six months in any 12 month period the filing or the effectiveness of a
registration statement for a
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Demand Registration if the Company determines in good faith that such Demand
Registration would reasonably be expected to have a material adverse effect on
any proposal or plan by the Company to engage in any financing, acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or similar transaction or would require
disclosure of any information that the board of directors of the Company
determines in good faith be detrimental to the Company; provided that in such
event, the Holders initially requesting such Demand Registration shall be
entitled to withdraw such request and, if such request is withdrawn, such Demand
Registration shall not count as one of the permitted Demand Registrations
hereunder and the Company shall pay any Registration Expenses in connection with
such registration
(d) SELECTION OF UNDERWRITERS. The Company shalt have the right to
select the investment banker(s) and manager(s) to administer an offering
pursuant to a Demand Registration, subject to the Holders' and other holders'
approval, which shall not be unreasonably withheld.
(e) OTHER REGISTRATION RIGHTS. Except as provided in this Agreement,
so long as any Holder owns any Registrable Securities, the Company shall not
grant to any Persons the right to request the Company to register any equity
securities of the Company, or any securities convertible or exchangeable into or
exercisable for such securities, that, is in conflict with the rights granted to
the Holders hereunder, without the prior written consent of the Holders of at
least 50% of the Registrable Securities held by the Holders; it being understood
that the Company may grant rights to other Persons to (i) participate in
Piggyback Registrations so long as such rights are subordinate or pari passu to
the rights of the holders of Registrable Securities with respect to such
Piggyback Registrations and (ii) demand registrations so long as the Holders of
Registrable Securities are entitled to participate in one such demand
registration with such Persons pro rata on the basis of the number of shares
owned by each such Holder.
3. PIGGYBACK REGISTRATIONS. (a) RIGHT TO PIGGYBACK. At any time
the Company shall propose to register Common Stock under the Securities Act
(other than in a registration on Form S-3 relating to sales of securities to
participants in a Company dividend reinvestment plan, S-4 or S-8 or any
successor form or in connection with an acquisition or exchange of or an
offering of securities solely to the existing stockholders or employees of
the Company) (each, a "PIGGYBACK REGISTRATION") the company shall give prompt
written notice to all Holders of Registrable Securities of its intention to
effect such a registration and, subject to Section 3(b) and the other terms
of this Agreement, shall include in such registration all Registrable
Securities that are permitted under applicable securities laws to be included
in the form of registration statement selected by the Company and with
respect to which the Company has received written requests for inclusion
therein by the Holders within 15 days after the receipt of the Company's
notice.
(b) PRIORITY ON PIGGYBACK REGISTRATIONS. If a Piggyback
Registration is an underwritten registration on behalf of the Company, and
the managing underwriters advise the Company in writing that in their opinion
the number of securities requested to be included in
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such registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company shall include
in such registration:
(i) first, the securities the Company proposes to sell;
(ii) but subject to underwriter cut-back to eliminate such excess
any securities having the right to be included in such registration prior to the
securities of the Holders;
(iii) but subject to underwriter cut-back to eliminate such excess,
the Registrable Securities requested to be included in such registration by the
Holders and any securities requested to be included in such registration by any
other Person, if necessary, pro rata among the Holders of such Registrable
Securities and such other Persons, on the basis of the number of shares owned by
each of such Holders; and
(iv) thereafter (but so subject) other securities requested to be
included in such registration.
The Holders of a Registrable Securities included in such a registration shall
execute an underwriting agreement in form and substance satisfactory to the
managing underwriters.
(c) RIGHT TO TERMINATE REGISTRATION. If, at any time after giving
written notice of its intention to register any of its securities as set forth
in Section 3(a) and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for any
reason not to register such securities, the Company may, at its election, give
written notice of such determination to each Holder of Registrable Securities
and thereupon be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith as provided herein).
(d) SELECTION OF UNDERWRITERS. The Company shall have the right to
select the investment banker(s) and manager(s) to administer an offering
pursuant to a Piggyback Registration and, subject to Section 2(d), pursuant to a
Demand Registration.
4. EXPENSES OF REGISTRATION. Except as otherwise provided herein,
all Registration Expenses incurred in connection with all
registrations pursuant to Sections 2 and 3 shall be borne by the
Company. All Selling Expenses relating to securities registered
on behalf of the Holders of Registrable Securities shall be borne
by such Holders.
5. HOLDBACK -----ENTS. (a) The Company agrees (i) not to effect any
public sale or distribution of its equity securities, or any securities
convertible into or exchangeable or exercisable for such securities, during the
seven days prior to and during the 90-day period beginning on the effective date
of any underwritten Demand Registration or any underwritten Piggyback
Registration (except as part of such underwritten registration or pursuant to
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registrations on Form S-8 or any successor form), unless the underwriters
managing the registered public offering otherwise agree, and (ii) to use
reasonable efforts to cause each holder of at least 5% (on a fully-diluted
basis) of its Common Stock, or any securities convertible into or exchangeable
or exercisable for Common Stock, purchased from the Company at any time after
the date of this Agreement (other than in a registered public offering) to agree
not to effect any public sale or distribution (including sales pursuant to Rule
144) of any such securities during such period (except as part of such
underwritten registration, if otherwise permitted), unless the underwriters
managing the registered public offering otherwise agree.
(b) Each Holder agrees if requested by the managing underwriter or
underwriters in an underwritten offering of securities of the Company, not to
effect any offer, sale, distribution or transfer of Registrable Securities
(other than transfers to an Affiliate of such Holder in accordance with the
provisions of the Securities Purchase Agreement), including a sale pursuant to
Rule 144 (or any similar provision then in effect) under the Securities Act
(except as part of such underwritten registration), during the seven-day period
prior to, and during the 180-day period (or such shorter period as may be agreed
to by the parties hereto) following, the effective date of such Registration
Statement to the extent timely notified in writing by the Company or the
managing underwriter or underwriters.
6. REGISTRATION PROCEDURES. Whenever the Holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of distribution thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) subject to Section 2(c) hereof, prepare and file with the
Commission a registration statement on any form for which the Company qualifies
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company shall (i) furnish to the counsel selected by the Holders copies of
all such documents proposed to be filed, which documents shall be subject to the
review of such counsel, and (ii) notify each holder of Registrable Securities
covered by such registration of any stop order issued or threatened by the
Commission);
(b) subject to Section 2(c) hereof, prepare and file with the
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period equal to the shorter of (i) six
months and (ii) the time by which all Registrable Securities covered by such
registration statement have been sold, and comply with the provisions of the
Securities Act with respect to the disposition of all such Registrable
Securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
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(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdiction as
any seller reasonably requests and do any and all other acts and things that may
be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 6(d), (ii) subject itself to taxation in any
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which the prospectus
included in such registration statement contains an untrue statement of a
material fact or omits any fact necessary to make the statements therein not
misleading, and, at the request of any such seller, the Company shall prepare a
supplement of amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus shall not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading; provided that the Company shall not
be required to amend the registration statement or supplement the Prospectus for
a period of up to six months if the board of directors determines in good faith
and so notifies the Holders that to do so would reasonably be expected to have a
material adverse effect on any proposal or plan by the Company to engage in any
financing, acquisition or disposition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer or similar
transaction or would require the disclosure of any information that the board of
directors determines in good faith the disclosure of which would be detrimental
to the Company, it being understood that the period for which the Company is
obligated to keep the Registration Statement effective shall be extended for a
number of days equal to the number of days the Company delays amendments or
supplements pursuant to this provision. Upon receipt of any notice pursuant to
this Section 6(e) Holders shall suspend all offers and sales of securities of
the Company and all use of any prospectus until advised by the Company that
offers and sales may resume, and shall keep confidential the fact and content of
any notice given by the Company pursuant to this section 6(e).
(f) use its best efforts to cause all such Registrable Securities to
be listed on each securities exchange or quotation system on which similar
securities issued by the Company are then Listed;
(g) provide a transfer agent and registrar for all such Registrable
Securities not
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later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold to the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including Without limitation, effecting a stock split or
a combination of shares);
(i) make available for inspection by a representative of the Holders
included in the registration statement, any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other agent retained by any such seller or underwriter all pertinent
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonable requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least 12 months beginning with the first day of the Company's first
full calendar quarter after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(k) in the went of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, use its best efforts promptly to obtain the withdrawal of such
order; and
(l) use its best efforts to obtain a so-called "cold comfort" letter
from the Company's independent public accountants in customary form and covering
such matters of the type customarily covered by cold comfort letters.
7. INDEMNIFICATION. (a) The Company shall indemnify, to the fullest
extent permitted by applicable law, each Holder, its officers and directors and
each Person who controls such Holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities, expenses or any amounts paid
in settlement of any litigation, investigation or proceeding commenced or
threatened (collectively, "CLAIMS") to which each such indemnified party may
become subject under the Securities Act insofar as such Claim arose out of (i)
any untrue or alleged untrue statement of material fact contained, on the
effective date thereof, in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or (ii) any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as the same are caused by or contained in or omitted from any
information furnished in
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writing to the Company by such Holder expressly for use therein or by such
Holder's failure to deliver a copy of the registration statement or prospectus
or any amendments or supplements thereto after the Company has furnished such
Holder with a sufficient number of copies of the same, In connection with an
underwritten offering, the Company shall indemnify such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the Holders of Registrable Securities.
(b) in connection with any registration statements in which a Holder
is participating, each such Holder shall furnish to the Company in writing such
customary information and affidavits as the Company reasonably requests for use
in connection with any such registration statement or prospectus (the "Sellar's
Information") and, to the fullest extent permitted by applicable law shall
indemnify the Company, its directors and officers and each Person who controls
the Company (within the meaning of the Securities Act) against any and all
Claims to which each such indemnified party may become subject under the
Securities Act insofar as such Claim arose out of (i) any untrue or alleged
untrue statement of material fact contained, on the effective date thereof, in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto, (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading or (iii) any violations by such
Person of any federal, state or common law rule or regulation applicable to such
Person and relating to action required of or inaction by such Person in
connection with any such registration; provided that with respect to a Claim
arising pursuant to clause (i) or (ii) above, the material misstatement or
omission is contained in or omitted in such Seller's Information; provided,
further, that the obligation to indemnify shall be individual to each Holder and
shall be limited to the net amount of proceeds received by such Holder from the
sale of Registrable Securities pursuant to such registration statement
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (but the failure to provide such notice shall not
release the indemnifying party of its obligation under paragraphs (a) and (b),
unless and then only to the extent that the indemnifying party has been
prejudiced by such failure to provide such notice) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties exists with respect to such claim, permit
such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of the indemnified party a conflict of interest exists
between such indemnified party and my other of such indemnified parties with
respect to such claim.
(d) The indemnifying party shall not be liable to indemnify an
indemnified party
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for any settlement, or consent to judgment of any such action effected without
the indemnifying party's consent (but such consent shall not be unreasonably
withheld). Furthermore, the indemnifying party shall not, except with the
approval of each indemnified party, consent to entry of any judgment or enter
into any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to each indemnified party of a release from
all liability in respect to such claim or litigation without any payment or
consideration provided by each such indemnified party.
(e) If the indemnification provided far in this Section 7 is
unavailable to an indemnified party under clauses (a) and (b) above in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect not only the relative benefits received by the Company,
the underwriters, the sellers of Registrable Securities and any other sellers
participating in the registration statement from the sale of shares pursuant to
the registered offering of securities to which indemnity is sought but also the
relative fault of the Company, the underwriters the sellers of Registrable
Securities and any other sellers participating in the registration statement in
connection with the statement or omissions that resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable considerations.
The relative benefits received by the Company, the underwriters, the sellers of
Registrable Securities and any other sellers participating in the registration
statement shall be deemed to be based on the relative relationship of the total
net proceeds from the offering (before deducting expenses) to the Company, the
total underwriting commissions and fees from the offering (before deducting
expenses) to the underwriters and the total net proceeds from the offering
(before deducting expenses) to the sellers of Registrable Securities and any
other sellers participating in the registration statement. The relative fault of
the Company, the underwriters, the sellers of Registrable Securities and any
other sellers participating in the registration statement shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied or omitted by the Company or by the Holders for
use in registration statement and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
(f) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling person
of such indemnified party and shall survive the transfer of securities.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements, (b) as expeditiously as possible notifies the
Company of the occurrence of any event as a result of which such prospectus
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contains an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (c) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
9. TRANSFER OF REGISTRATION RIGHTS. The rights granted to any Person
under this Agreement may be assigned to a transferee or assignee who is an
Affiliate of such Person in connection with any transfix or assignment of
Registrable Securities by a Holder, provided, that: (a) such transfer may
otherwise be effected in accordance with applicable securities laws, (b) if not
already a party hereto, the assignee or transferee agrees in writing prior to
such transfer to be bound by the provisions of this Agreement applicable to the
transferor, (c) such transferee shall own Registrable Securities representing at
least 1,000,000 shares of Common Stock (subject to the anti-dilution
adjustments), and (d) shall act as agent and representative for such Holder for
the giving and receiving of notices hereunder.
10. INFORMATION BY HOLDER. Each Holder shall furnish the Company
such written information regarding such Holder and any distribution proposed by
such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement
11. EXCHANNE ACT COMPLIANCE. After the effectiveness of a
registration statement, the Company shall comply with all the reporting
requirements of the Exchange Act applicable to them and shall comply with all
other public information reporting requirements of the Commission that are
conditions to the mailability of Rule 144 for the sale of the Registrable
Securities. The Company shall cooperate with each Purchaser in supplying such
information as may be necessary for such Purchaser to complete and file any
information reporting forms currently or hereafter required by the Commission as
a condition to the availability of Rule 144.
12. LIMITATION ON REGISTRATION. The Company shall not be obligated
to effect a registration of any Holder's Registrable Securities pursuant to
Sections 2 or 3 hereof if all the Registrable Securities have been sold under
Rule 144, Regulation S or similar provision under the Securities Act so that
there is no further restriction on the transfer by the transferee or the
Holder's shares of Common Stock no longer constitute Registrable Securities. The
Company shall not be required to include any Registrable Securities of a Holder
in a registration if all such Holder's Registrable Securities could be sold
within a three month period pursuant to Rule 144 OK other similar rule or
regulation.
13. MISCELLANEOUS. (a) NO INCONSISTENT AGREEMENTS. The Company shall
not hereafter enter into any agreement with respect to its securities that is
inconsistent with or violates the rights granted to the Holders of Registrable
Securities in this Agreement without the prior written consent of a majority in
interest of such Registrable Securities.
(b) REMEDIES. Any Person having rights under any provision of this
Agreement
11
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shall be entitled to enforce such tights specifically to recover damages caused
by reason of any breach of any provision of this Agreement and to exercise all
other rights granted by Law. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any bond or other
security) for specific performance and for other injunctive relief in order to
enforce or prevent violation of the provisions of this Agreement; provided that
in no event shall any Holder have the right to enjoin or interfere with any
offering of securities by the Company.
(c) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and Holders of at least 50% of the Registrable
Securities; provided, that without the prior written consent of all the Holders,
no such amendment or waiver shall reduce the. foregoing percentage.
(d) SUCCESSORS AND ASSIGNS. Subject to Section 9, all covenants and
agreements in this Agreement by or on behalf of any parties hereto shall bind
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. In particular, no Holder of Registrable securities shall
transfer registered securities (or securities convertible in, exercisable or
exchangeable for Registrable Securities) other than pursuant to Rule 144 or sale
pursuant to an effective registration statement, whether or not the transferee
shall have rights under this Agreement, without obtaining an agreement from the
transferee to be bound by terms of this Agreement. In addition, whether or not
any express assignment has been made, the provisions of this Agreement that are
for the benefit of Holders of Registrable Securities are also for the benefit
of, and enforceable by, any permitted transferee of Registrable Securities.
(e) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law. but if any provision of this Agreement is held to be prohibited
or invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
(f) COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
(g) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(h) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the substantive (as opposed to procedural) laws of the of New
York, without giving effect to the principles thereof relating to conflicts of
laws.
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(i) NOTICES. All notices, demands and requests of any kind to be
delivered to any party in connection with this Agreement shall be in writing and
shall be deemed to have been duly given if personally delivered or if sent by
nationally-recognized overnight courier or by registered or certifieda i d,
return receipt requested and postage prepaid, addressed as follows:
(i) if to the Company, to:
DOV Pharmaceutical, Inc.
One Parker Plaza
Fort Lee, New Jersey 07024
Attn: Dr. Arnold Lippa
with a copy to:
Friedman Siegelbaum LLP
399 Park Avenue
New York, New York 10022
Attn: Robert Horton, Esq.
(ii) if to EIS, to:
Elan International Services; Ltd.
102 Si, James Court
Flatts, Smiths Parish
Bermuda FL04
Attn: Director
with a copy to:
Brock Silverstein McAuliffe LLC
153 East 53rd Sweet, 56th Floor
New York, New York 10022
Attn: David Robbins, Esq.
or to such other address as the party to whom notice is to be given may have
furnished to the other party hereto in Writing in accordance with provisions of
this Section 7. Any such notice or communication shall be deemed to have been
received (i) in the case of personal delivery, on the date of such delivery,
(ii) in the case nationally-recognized overnight courier, on the second business
day after the date when sent and (iii) in the case of mailing, on the fifth
business day following that day on which the piece of mail containing such
communications is posted. Notice hereunder may be given on behalf of the parties
by their respective attorneys.
(j) TERMINATION. The Agreement shall terminate on the date, as of
which each
13
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Holder has sold all remaining Registrable Securities in a transaction or
transactions of the type described in Section 12 hereof.
[Signature page fallows]
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IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
DOV Pharmaceutical, Inc.
By:___________________________________
Name:
Title:
Elan International Services, Ltd.
By:___________________________________
Name:
Title:
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EXHIBIT E
FORM OF FRIEDMAN SIEGELBAUM LEGAL OPINION
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[FORM OF LEGAL OPINION]
January-, 1999
Elan International Services, Ltd.
102 St. James Court
Flatts, Smith's Parish
Bermuda FL 04
Re: DOV PHARMACEUTICAL, INC. SECURITIES PURCHASE AGREEMENT
AND OTHER TRANSACTION DOCUMENTS
Dear Sirs/Mesdames:
We have acted as counsel to DOV Pharmaceutical, Inc., a New Jersey
corporation (the "COMPANY"), in connection with the issuance or the issuance and
sale to you of: (a) 324,090 shares of common stock of the Company, par value
$.0001 per share ("COMMON STOCK") and 354,643 shares of special non-voting stock
(which issuance is required by the Securities Purchase Agreement, as defined
below, to be made within ten business days of the Closing, the "SPECIAL STOCK")
at $.42 per share, or $3 million aggregate purchase price, (b) a warrant (the
"WARRANT"), exercisable for the purchase of up to 75,000 shares of Common Stock
at $5.52 per share, (c) a convertible exchangeable note in the maximum principal
amount of $8,010,000 (the "EXCHANGEABLE NOTE") and (d) a convertible note in the
maximum principal amount of $7,008,750 (the "CONVERTIBLE NOTE"; together with
the Exchangeable Note, the "NOTES"), pursuant to the Securities Purchase
Agreement dated as of the date hereof between you and the Company (the
"SECURITIES PURCHASE AGREEMENT"). This opinion is issued pursuant to action 1(c)
of the Securities Purchase Agreement. Capitalized terms used but not defined
herein have the meaning given in the Securities Purchase Agreement.
In connection with this opinion we have examined the (a) certificate of
incorporation and by-laws of the Company, (b) resolutions adopted December 10,
1998, January 14, 1999, of the board of directors of the Company, (c) Securities
Purchase Agreement, Warrant and Notes including in each case the exhibits and
schedules if any thereto, (d) certificate of good standing dated January 12,
1999, from the New Jersey Secretary of State relating to the Company, (e)
registration rights agreement, dated as of date hereof, between you and the
Company (the "DOV REGISTRATION RIGHTS AGREEMENT"), (f) registration rights
agreement, dated as of the date hereof, among DOV Newco, Ltd., a Bermuda
exempted limited company ("BERMUDA NEWCO"), you and the Company (the "NEWCO
REGISTRATION RIGHTS AGREEMENT"), (g) license agreement, dated as of the date
hereof between Nascime Limited, an Irish limited company, ("NASCIME") and the
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Elan International Services, Ltd.
January __, 1999
Page 2
Company (the "DOV LICENSE AGREEMENT"), (h) joint development and operating
agreement dated as of the date hereof, by and among Elan Corporation, plc, an
Irish public limited company, Bermuda Newco, Nascime, the Company and you (the
"JOINT VENTURE AGREEMENT" together with the Securities Purchase Agreement,
Notes, Warrant, DOV Registration Rights Agreement, Newco Registration Rights
Agreement, and the DOV License Agreement, the "TRANSACTION DOCUMENTS") and (e)
representations dated the date hereof addressed to us of the Company and the
president and CEO of the Company covering certain facts relied upon herein (the
"OFFICERS' CERTIFICATE"). We have also in such connection conducted such other
examination of documents including documents delivered at Closing and made such
other investigations we have considered necessary and appropriate for the
purpose of this opinion.
Based upon the foregoing, and subject to the qualifications set forth
below, we are of the opinion as follows:
1. The Company has duly organized and is validly existing and in good
standing as a corporation in New Jersey and has all requisite
corporate power and authority to own and operate its properties and
to conduct its business as currently conducted. To our knowledge,
the business activities of the Company do not require licensure as a
foreign corporation in any jurisdiction.
2. The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under each of the
Transaction Documents and to consummate the transactions
contemplated thereby and no approval or other action by, and no
notice to or filing with, any governmental or regulatory authority
or to our knowledge any state or local such authority was or is a
prerequisite for the due execution and delivery by the Company of
the Transaction Documents, or the performance by the Company or its
obligations thereunder.
3. Neither the execution and delivery of the Transaction Documents nor
any of the documents to be delivered pursuant thereto at the
Closing, nor the consummation of the transactions therein
contemplated, nor compliance with the provisions thereof, has
violated or will violate any law or regulation or to our knowledge
any order of any court or governmental agency or to our knowledge
conflicts or will conflict with or result in the breach or, or
constitutes a default under, any material agreement to which the
Company is a party or by which it is bound listed on Schedule
2(i)(ii) to the Securities Purchase Agreement.
4. All corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution, delivery
and performance of the Transaction Documents by the Company and
performance by the Company of its obligations thereunder has been
taken. The Transaction Documents have been
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Elan International Services, Ltd.
January __, 1999
Page 3
duly and validly executed and delivered by the Company and
constitute valid and binding obligations of the Company enforceable
in accordance with their respective terms.
5. The Company is not in violation of its certificate of incorporation
or by-laws. The execution, delivery and performance of and
compliance with the Transaction Documents do not violate any
provision of the certificate of incorporation or by-laws of the
Company or to our knowledge any provision of any applicable law,
rule or regulations,
6. The Common Stock issued at the Closing pursuant to the Securities
Purchase Agreement has been and the Special Stock to be issued
pursuant thereto as aforesaid subsequent to the Closing will be duly
and validly authorized and issued, and is and will be fully paid and
non-assessable. The Common Stock issuable upon (a) exercise of the
Warrant in accordance with its terms, (b) conversion of the
Convertible Note in accordance with its terms and (c) conversion of
the Exchangeable Note in accordance with its terms will when so
issued be fully paid and non-assessable.
7. The authorized capital stock of the Company consists of (a)
10,000,000 shares of Common Stock of which 2,850,000 shares were
issued and outstanding immediately prior to the issuance of the
Common Stock and commitment to issue the Special Stock, in each case
as contemplated by the Securities Purchase Agreement, and 750,000
have been reserved for issuance upon exercise of options available
for grant to employees, officers, directors and consultants, and (b)
5,000,000 shares of series A preferred stock, pat value $1.00 per
share (the "Preferred Stock"), of which 440,000 shares have been
issued and are outstanding. All such shares of Common and Preferred
Stock are fully paid and non-assessable.
Our opinion is delivered subject to the following qualifications and
limitations:
A. With respect to opinion items nos. 4 and 6, we assume the due
authorization, execution and delivery of the Transaction Documents by you and
the other parties thereto and that each represents a valid and binding
obligation of yours and theirs enforceable against you and them in accordance
with its terms subject to the bankruptcy and equitable qualifications set forth
in opinion qualification item no. B.
B. Our opinion is subject to (a) bankruptcy, insolvency,
reorganization, moratorium and other laws or equitable principles relating to or
affecting the enforcement of creditors' rights generally, (b) the fact that the
granting of specific performance and the issuance
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Elan International Services, Ltd.
January __, 1999
Page 4
of other rulings of enforcement are subject to the discretion of a court of
equity and to the application of general principles of equity including the
possible unavailability of specific performance, injunctive relief or other
equitable remedies and concepts of materiality, resonableness, good faith and
fair dealing, (c) limitations on the enforceability of certain indemnifications
that might be held to violate public policy and (d) emergency and other powers
that may be exercised by government bodies or entities with jurisdiction.
C. While we have been advised by, and nothing has come to our
attention that causes us to doubt such advice, that the Company has full legal
and equitable title to the compounds and technology licensed to Nasgime pursuant
to the DOV License Agreement, we express no opinion as to the title of the
Company to any such property.
D. We express no opinion as to any provision in the Transaction
Documents that purports to indemnify you or any other person for its own gross
negligence or willful misconduct or that for which you or such other person may
be responsible.
E. We have assumed the authenticity of all documents submitted to us
as originals, the conformity to the corresponding original document of each
document submitted to us as a copy, the authenticity of the corresponding
originals of such copies, the genuineness of the signatures appearing thereon
and (except for those on behalf of the Company) the authority of the signatories
thereto.
F. We have with respect to factual matters expressed or assumed
herein relied upon the Officer's Certificate.
G. With respect to opinion item nos. 1-5, to the extent that they
cover or express an opinion on Irish law, we have relied exclusively on the
legal opinion of Matheson Ormsby Prentice, Dublin, Ireland, dated the date
hereof and addressed to the Company, The DOV License Agreement and Joint Venture
Agreement are stated to be governed by Irish law and accordingly we express no
independent or separate opinion apart from one of reliance on their validity or
legally binding and enforceable nature thereunder.
H. With respect to the factual matters expressed or assumed in
opinion item nos. 1, 3, 5 and 7, and those portions of this opinion given to our
knowledge and our reliance as aforesaid on the Officers' Certificate, in the
course of preparation by the parties thereto of the Transaction Documents we
participated in conferences with officers and representatives of the Company
relating to the representations and warranties contained therein and although
nothing has come to our attention that causes us to doubt the correctness of any
such information so imparted to us, we have not independently investigated or
verified the statements therein, or personally conducted searches of public
records, relating to the Company.
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Elan International Services, Ltd.
January __, 1999
Page 5
We are members of the bar and qualified to practice law in New
Jersey and New York and do not for the purpose of this opinion purport to be an
expert on, or express any opinion concerning, the law of any other jurisdiction
except New Jersey, New York and the federal law of the United States.
This opinion may be relied upon by you in connection with the
Closing, but may not be relied upon by any other person without our prior
written consent. We assume no obligation to update this opinion or to advise you
of facts or changes of law occurring or coming to light after the date hereof.
Very truly yours,