EXHIBIT 10.7
DEBENTUREHOLDERS AGREEMENT
THIS DEBENTUREHOLDERS AGREEMENT (this "Debentureholders Agreement") is
entered into as of December 20, 2002 by and among HALSEY DRUG CO., INC., a
corporation organized and existing under the laws of the State of New York
("Halsey" or the "Company"), and each of the holders of the Company's 5%
Convertible Senior Secured Debentures due March 31, 2006 listed on the signature
page hereto.
WHEREAS, Halsey is a party to a certain Debenture and Warrant Purchase
Agreement dated as of March 10, 1998, as amended (the "1998 Purchase
Agreement"), with the persons listed on the signature pages thereto and pursuant
to which the Company issued certain 5% Convertible Senior Secured Debentures due
March 31, 2006 (the "1998 Debentures"); and
WHEREAS, Halsey entered into a certain Debenture and Warrant Purchase
Agreement dated as of May 26, 1999, as amended (the "1999 Purchase Agreement"),
with the persons listed on the signature pages thereto and pursuant to which the
Company issued certain 5% Convertible Senior Secured Debentures due March 31,
2006 (the "1999 Debentures" and together with the 1998 Debentures, the "Existing
Debentures"); and
WHEREAS, the Company has concurrently herewith entered into a certain
Debenture Purchase Agreement dated as of December __, 2002 (the "2002 Purchase
Agreement"; capitalized terms used herein but not otherwise defined herein shall
have the meanings ascribed thereto in the 2002 Purchase Agreement) with Care
Capital, LLC, Essex Woodlands Health Ventures Fund V and those other persons
listed on the signature pages thereto and pursuant to which the Company proposes
to issue certain 5% Convertible Senior Secured Debentures due March 31, 2006
(the "2002 Debentures" and together with the Existing Debentures, the
"Debentures"); and
WHEREAS, it is a condition to the completion of the transactions
contemplated pursuant to the 2002 Purchase Agreement that the Company shall have
executed this Debentureholders Agreement providing that the approval of the
holders of the Debentures shall be required as a condition to the Company's
completion of certain material transactions; and
WHEREAS, the Company and the holders of the Debentures desire to enter
into this Agreement to provide for the approval rights of the holders of the
Debentures as hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. DEBENTUREHOLDER APPROVAL FOR MATERIAL TRANSACTIONS.
(a) Consent of Holders of 2002 Debentures. The Company
hereby covenants and agrees, that so long as any of the 2002 Debentures remain
outstanding, it will not, directly or indirectly, without the prior written
consent of the holders of at least sixty-six and two-thirds percent (66 2/3%) in
the aggregate principal amount of the 2002 Debentures then outstanding, take, or
permit to be taken, any of the following actions or complete, or permit to be
taken, any of the following transactions:
(i) Any modification of the rights of the holders of
the 2002 Debentures;
(ii) Any issuance of securities, or the incurrence
of indebtedness, by the Company or any Guarantor which rank
senior or equal in right of payment to the 2002 Debentures;
(iii) Any declaration or payment of any dividends or
distributions on, or redemptions of, any securities ranking
junior in priority to the 2002 Debentures, other than
dividends or distributions payable in the Company's capital
stock or cash interest paid to individual investors in the
Existing Debentures;
(iv) (A) A merger, reorganization, consolidation or
other business combination involving the Company or any
Guarantor, (B) a sale, transfer, lease, license or other
disposition of all or substantially all of the assets of the
Company or any Guarantor or (C) any other similar
extraordinary transaction involving the Company or any
Guarantor, in any single transaction or a series of related
transactions (the "Extraordinary Transactions"), other than
any such transaction where the cash, marketable securities and
other liquid consideration received by the holders of the
voting stock of the Company in such transaction is at least
equal to four (4) times the then applicable conversion price
of the 2002 Debentures;
(v) The liquidation, dissolution, commencement of any
bankruptcy or other proceeding of the type referred to in
Section 12.1(j) of the 2002 Purchase Agreement,
recapitalization or reorganization of the Company (in each
case whether or not they constitute transactions of the type
referred to in Section 1(a)(vi) below); and
(vi) Without limiting the generality of Section
1(a)(iv) above, the consummation of a strategic alliance,
Extraordinary Transaction, licensing arrangement or other
corporate partnering arrangement involving the issuance by the
Company or any Guarantor of in excess of ten million dollars
($10,000,000) in equity securities of the Company or any
Guarantor.
(b) Consent of Holders of Debentures. Without limiting in
any way the approval rights granted to the holders of the 2002 Debentures in
Section 1(a) above, the Company hereby covenants and agrees, that so long as any
of the Debentures remain outstanding, it will not, directly or indirectly,
without the prior written consent of the holders of at least sixty-six and
two-thirds percent (66 2/3%) in the aggregate principal amount of the Debentures
then
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outstanding, take, or permit to be taken, any of the following actions or
complete, or permit to be completed, any of the following transactions:
(i) Any amendment to the Company's Certificate of
Incorporation;
(ii) Any declaration or payment of any dividends or
distributions on, or redemptions of, the Company's capital
stock, other than dividends or distributions payable in the
Company's capital stock or cash interest paid to individual
investors in the 2002 Debentures, the 1999 Debentures and the
1998 Debentures;
(iii) An Extraordinary Transaction; provided,
however, that (I) for purposes of calculating the consent of
at least sixty-six and two-thirds percent (66 2/3%) in the
aggregate principal amount of the Debentures where the cash,
marketable securities and other liquid consideration received
by the holders of the voting stock of the Company in such
Extraordinary Transaction is at least equal to four (4) times
the then applicable conversion price of (a) the 2002
Debentures, the 2002 Debentures shall be excluded, (b) the
1999 Debentures, the 1999 Debentures shall be excluded, and
(c) the 1998 Debentures, the 1998 Debentures shall be
excluded; and (II) no prior approval or consent of the holders
of the Debentures shall be required for any Extraordinary
Transaction where the cash, marketable securities and other
liquid consideration received by the holders of the voting
stock of the Company in such Extraordinary Transaction is at
least equal to four (4) times the then highest applicable
conversion price of the Debentures;
(iv) The liquidation, dissolution, commencement of any
bankruptcy or other proceeding of the type referred to in
Section 12.1(j) of the 2002 Purchase Agreement,
recapitalization or reorganization of the Company (in each
case whether or not they constitute transactions of the type
referred to in Section 1(b)(vii) below);
(v) Except as otherwise waived, any issuance of the
Company's securities which rank senior or equal in right of
payment to the Existing Debentures;
(vi) Any increase in the number of members comprising
the Company's Board of Directors above eleven (11); and
(vii) Without limiting the generality of Section
1(b)(iii) above, the consummation of a strategic alliance,
Extraordinary Transaction, licensing arrangement or other
corporate partnering arrangement involving the issuance by the
Company of in excess of ten million dollars ($10,000,000) in
equity securities of the Company or any Guarantor.
2. AMENDMENT AND WAIVER. Except as otherwise provided
herein, no modification, amendment or waiver of any provision of this
Debentureholders Agreement shall be effective against the Company or the holders
of the Debentures unless such modification, amendment or waiver is approved in
writing by the Company and the holders of not less than fifty-one percent (51%)
of the aggregate principal amount of the Debentures then outstanding; provided
that notwithstanding the foregoing, (a) the prior written consent of each holder
of the 2002 Debentures will be required to amend any payment terms of the 2002
Debentures, (b) the prior
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written consent of the holders of at least sixty-six and two-thirds percent
(66 2/3%) in the aggregate principal amount of the 2002 Debentures will be
required to modify, amend or waive any provision of Sections 1(a), 2(a), 2(b)
and 3 of this Debentureholders Agreement and (c) the prior written consent of
the holders of at least sixty-six and two-thirds percent (66 2/3%) in the
aggregate principal amount of the Debentures then outstanding will be required
to modify, amend or waive any provision of Section 1(b) of this Debentureholders
Agreement. The failure of any party to enforce any of the provisions of this
Debentureholders Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of such party thereafter to enforce
each and every provision of this Debentureholders Agreement in accordance with
its terms.
3. TERMINATION. This Debentureholders Agreement shall
terminate on the earliest to occur of (a) mutual written agreement of the
parties hereto and (b) the conversion of Debentures into the Company's Common
Stock, or repayment of the Debentures with accrued and unpaid interest, or
combination of the foregoing, such that the aggregate outstanding principal
amount of the Debentures then outstanding is less than five million dollars
($5,000,000).
4. 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 Debentureholders Agreement is
held to be invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision or any other jurisdiction, but this
Debentureholders Agreement shall be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never
been contained herein.
5. ENTIRE AGREEMENT. Except as otherwise expressly set
forth herein, this document, the 2002 Purchase Agreement, the 1998 Purchase
Agreement, as amended pursuant to the Amendment to Debenture and Warrant
Purchase Agreement dated of even date, and the 1999 Purchase Agreement, as
amended pursuant to the Amendment to Debenture and Warrant Purchase Agreement
dated of even date embody the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
6. SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Debentureholders Agreement shall bind and inure to the benefit of
and be enforceable by the Company and its successors and assigns, and the
holders of the Debentures and any subsequent holders of the Debentures and the
respective successors and assigns of each of them, so long as they hold the
Debentures.
7. COUNTERPARTS. This Debentureholders Agreement may be
executed in separate counterparts each of which shall be an original and all of
which taken together shall constitute one and the same agreement.
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8. NOTICES. All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this
Debentureholders Agreement will be in writing and will be deemed to have been
given when delivered personally, mailed by certified or registered mail, return
receipt requested and postage prepaid, or sent via a nationally recognized
overnight courier, or sent via facsimile to the recipient accompanied by a
certified or registered mailing. Such notices, demands or other communications
will be sent to the address indicated below:
To the Company:
Halsey Drug Co., Inc.
695 N. Perryville Road
Rockford, Illinois 61107
Attn: President
Fax: 815-399-9710
If to the holders of the Debentures:
To the address provided
on the signature pages to
the 1998 Purchase Agreement,
1999 Purchase Agreement and
2002 Purchase Agreement
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
such notice, demand or communication shall be deemed to have been given (a) on
the date of delivery, if delivered personally, (a) on the date of facsimile
transmission, receipt confirmed, (c) one business day after delivery to a
nationally recognized overnight courier service, if marked for next day delivery
or (d) five business days after the date of mailing, if mailed.
9. GOVERNING LAW. This Debentureholders Agreement shall
be governed by, and construed in accordance with, the laws of the State of New
York wherein the terms of this Debentureholder Agreement were negotiated,
excluding to the greatest extent permitted by law any rule of law that would
cause the application of the laws of any jurisdiction other than the State of
New York.
10. JURISDICTION. (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or United States Federal
court sitting in New York City, and any appellate court from any thereof, in any
action or proceeding arising our of or relating to this Debentureholders
Agreement to which it is a party, or for recognition or enforcement of any
judgment, and each of the parties hereto irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the fullest extent permitted
by law, in such United States Federal court. Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the right that any party may
otherwise have to bring any
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action or proceeding relating to this Debentureholders Agreement in the courts
of any other jurisdiction.
(b) Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or in relation to this
Debentureholders Agreement to which it is a party in any such New York State or
United States Federal court sitting in New York City. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
11. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS DEBENTUREHOLDERS AGREEMENT OR THE ACTIONS OF ANY PARTY IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
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IN WITNESS WHEREOF, the parties hereto have executed this Debentureholders
Agreement as of the date first above written.
Halsey Drug Co., Inc.
By:___________________________
Name:_________________________
Title:________________________
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2002 DEBENTUREHOLDERS
GALEN PARTNERS III, L.P. GALEN PARTNERS INTERNATIONAL, III, L.P.
By: Claudius, L.L.C., General Partner By: Claudius, L.L.C., General Partner
610 Fifth Avenue, 5th Fl. 610 Fifth Avenue, 5th Floor
New York, New York 10019 New York, New York 10020
______________________________________ ___________________________________
By: Srini Conjeevaram By: Srini Conjeevaram
Its: General Partner Its: General Partner
GALEN EMPLOYEE FUND III, L.P. ESSEX WOODLANDS HEALTH
By: Wesson Enterprises, Inc. VENTURES V, L.P.
610 Fifth Avenue, 5th Floor By: Essex Woodlands Health Ventures V, L.L.C.,
New York, New York 10020 its General Partner
190 South LaSalle Street, Suite 2800
Chicago, IL 60603
______________________________________ ___________________________________
By: Bruce F. Wesson By: Immanuel Thangaraj
Its: General Partner Its: Managing Director
CARE CAPITAL INVESTMENTS II, LP BERNARD SELZ
By: Care Capital II, LLC, General Partner c/o Furman Selz
47 Hulfish Street, Suite 310 230 Park Avenue
Princeton, NJ 08542 New York, New York 10069
______________________________________ ___________________________________
By: David R. Ramsay
Its: Authorized Signatory
MICHAEL WEISBROT SUSAN WEISBROT
1136 Rock Creek Road 1136 Rock Creek Road
Gladwyne, Pennsylvania 19035 Gladwyne, Pennsylvania 19035
______________________________________ ___________________________________
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GREG WOOD ROGER GRIGGS
c/o D.R. International c/o Tom Jennings
7474 No. Figueroa Street 7300 Turfway Road
Los Angeles, California 90041 Suite 300
Florence, KY 41042
______________________________________ ___________________________________
GEORGE E. BOUDREAU
222 Elbow Lane
Haverford, PA 19041
______________________________________
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EXISTING DEBENTUREHOLDERS
ORACLE STRATEGIC PARTNERS, L.P. GALEN PARTNERS III, L.P.
By: Oracle Strategic Capital L.L.C., By: Claudius, L.L.C., General Partner
General Partner 610 Fifth Avenue, 5th Fl.
200 Greenwich Avenue New York, New York 10019
3rd Floor
Greenwich, CT 06830
______________________________________ ___________________________________
By: Joel Liffmann By: Srini Conjeevaram
Its: Authorized Agent Its: General Partner
GALEN EMPLOYEE FUND III, L.P. GALEN PARTNERS INTERNATIONAL, III, L.P.
By: Wesson Enterprises, Inc. By: Claudius, L.L.C., General Partner
610 Fifth Avenue, 5th Floor 610 Fifth Avenue, 5th Floor
New York, New York 10020 New York, New York 10020
______________________________________ ___________________________________
By: Bruce F. Wesson By: Srini Conjeevaram
Its: General Partner Its: General Partner
ALAN SMITH PATRICK COYNE
21 Bedlow Avenue 800 Merion Square Road
Newport, Rhode Island 02840 Gladwyne, PA 19035
______________________________________ ___________________________________
MICHAEL WEISBROT SUSAN WEISBROT
1136 Rock Creek Road 1136 Rock Creek Road
Gladwyne, Pennsylvania 19035 Gladwyne, Pennsylvania 19035
______________________________________ ___________________________________
GREG WOOD DENNIS ADAMS
c/o D.R. International 120 Kynlyn Road
7474 No. Figueroa Street Radnor, Pennsylvania 19312
Los Angeles, California 90041
______________________________________ ___________________________________
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BERNARD SELZ ROBERT W. BAIRD & CO., INC., TTEE
c/o Furman Selz FBO Michael K. Reicher IRA
230 Park Avenue c/o Halsey Drug Co., Inc.
New York, New York 10069 695 North Perryville Rd.
Crimson Building #2
Rockford, Ill. 61107
______________________________________ ___________________________________
By: Michael K. Reicher
Its: Trustee
MICHAEL REICHER PETER CLEMENS
c/o Halsey Drug Co., Inc. c/o Halsey Drug Co., Inc.
695 North Perryville Rd. 695 North Perryville Rd.
Crimson Building #2 Crimson Building #2
Rockford, Ill. 61107 Rockford, Ill. 61107
______________________________________ ___________________________________
CONNIE REICHER TRUST STEPHANIE HEITMEYER
c/o Halsey Drug Co., Inc. 17759 Road, Route 66
695 North Perryville Rd. Ft. Jennings, Ohio 45844
Crimson Building #2
Rockford, Ill. 61107
______________________________________ ___________________________________
By: Connie Reicher
Its: Trustee
VARSHA H. SHAH HEMANT K. SHAH
29 Christy Drive 29 Christy Drive
Warren, New Jersey 07059 Warren, New Jersey 07059
______________________________________ ___________________________________
VARSHA H. SHAH AS CUSTODIAN VARSHA H. SHAH AS CUSTODIAN
FOR SACHIN H. SHAH FOR SUMEET H. SHAH
29 Christy Drive 29 Christy Drive
Warren, New Jersey 07059 Warren, New Jersey 07059
______________________________________ ___________________________________
By: Varshah H. Shah By: Varshah H. Shah
Its: Custodian Its: Custodian
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MICHAEL RAINISCH ILENE RAINISCH
c/o Alvin Rainisch c/o Alvin Rainisch
31 Congressional Road 31 Congressional Road
Jackson, New Jersey 08527 Jackson, New Jersey 08527
______________________________________ ___________________________________
KENNETH GIMBEL, IRA ACCOUNT KENNETH GIMBEL
FBO KENNETH GIMBEL 2455 Montgomery Avenue
2455 Montgomery Avenue Highland Park, Ill. 60035
Highland Park, Ill. 60035
______________________________________ ___________________________________
By:___________________________________
Its: Trustee
JESSICA K. CLEMENS JAKE P. CLEMENS
c/o Halsey Drug Co., Inc. c/o Halsey Drug Co., Inc.
695 North Perryville Rd. 695 North Perryville Rd.
Crimson Building #2 Crimson Building #2
Rockford, Ill. 61107 Rockford, Ill. 61107
______________________________________ ___________________________________
BROOKE EMILY REICHER ALEC JOHN REICHER
c/o Halsey Drug Co., Inc. c/o Halsey Drug Co., Inc.
695 North Perryville Rd. 695 North Perryville Rd.
Crimson Building #2 Crimson Building #2
Rockford, Ill. 61107 Rockford, Ill. 61107
______________________________________ ___________________________________
COURTNEY PAIGE REICHER DEANA REICHER
c/o Halsey Drug Co., Inc. c/o Halsey Drug Co., Inc.
695 North Perryville Rd. 695 North Perryville Rd.
Crimson Building #2 Crimson Building #2
Rockford, Ill. 61107 Rockford, Ill. 61107
______________________________________ ___________________________________
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MICHAEL K. REICHER II TODD ALLEN REICHER
c/o Halsey Drug Co., Inc. c/o Halsey Drug Co., Inc.
695 North Perryville Rd. 695 North Perryville Rd.
Crimson Building #2 Crimson Building #2
Rockford, Ill. 61107 Rockford, Ill. 61107
______________________________________ ___________________________________
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ROBERT W. BAIRD & CO., INC., TTEE ROBERT W. BAIRD & CO., INC., TTEE
FBO Michael Reicher IRA FBO Connie Reicher IRA
c/o Halsey Drug Co., Inc. c/o Halsey Drug Co., Inc.
695 North Perryville Rd. 695 North Perryville Rd.
Crimson Building #2 Crimson Building #2
Rockford, Illinois 61107 Rockford, Illinois 61107
______________________________________ ___________________________________
By: Robert W. Baird By: Robert W. Baird
Its: Trustee Its: Trustee
MICHAEL REICHER TRUST
c/o Halsey Drug Co., Inc.
695 North Perryville Rd.
Crimson Building #2
Rockford, Illinois 61107
______________________________________
By: Michael K. Reicher
Its: Trustee
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