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Exhibit 4.1
EXHIBIT B
THIS CONVERTIBLE SENIOR SECURED DEBENTURE AND THE COMMON STOCK ISSUABLE UPON
CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED,
SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH DEBENTURE REASONABLY SATISFACTORY
TO THE COMPANY THAT SUCH DEBENTURE AND/OR COMMON STOCK MAY BE PLEDGED, SOLD,
ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
HALSEY DRUG CO., INC.
5% CONVERTIBLE SENIOR SECURED DEBENTURE
DUE MARCH 15, 2003
$________ No. N-__
March 10, 1998
HALSEY DRUG CO., INC., a corporation organized under the laws of the
State of New York (the "Company"), for value received, hereby promises to pay to
____________________ registered assigns (the "Payee" or "Holder") upon due
presentation and surrender of this Debenture, on March 15, 2003 (the "Maturity
Date"), the principal amount of _____________________________ ($_______) and
accrued interest thereon as hereinafter provided.
This Debenture was issued by the Company pursuant to a certain
Debenture and Warrant Purchase Agreement dated the date hereof among the Company
and certain persons, including the Payee (together with the Schedules and
Exhibits thereto, the "Purchase Agreement") relating to the purchase and sale of
5% Convertible Senior Secured Debentures maturing March 15, 2003 (the
"Debentures") in the aggregate principal amount of $20,800,000.00. The holders
of such Debentures are referred to hereinafter as the "Holders." The Payee is
entitled to the benefits of the Purchase Agreement. Reference is made to the
Purchase Agreement with respect to certain additional rights of the Holder and
obligations of the Company not set forth herein.
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ARTICLE I
PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT
1.1 Payment of the principal and accrued interest on this
Debenture shall be made in such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment of public and
private debts. Interest (computed on the basis of a 360-day year of twelve
30-day months) on the unpaid portion of said principal amount from time to time
outstanding shall be paid by the Company at the rate of five percent (5%) per
annum (the "Stated Interest Rate"), in like coin and currency, payable to the
Payee in three (3) month intervals on each January 1, April 1, July 1 and
October 1 during the term of this Debenture (commencing April 1, 1998) (an
"Interest Payment Date") and on the Maturity Date. Both principal hereof and
interest thereon are payable at the Holder's address above or such other address
as the Holder shall designate from time to time by written notice to the
Company. The Company will pay or cause to be paid all sums becoming due hereon
for principal and interest by check sent to the Holder's above address or to
such other address as the Holder may designate for such purpose from time to
time by written notice to the Company, without any requirement for the
presentation of this Debenture or making any notation thereon, except that the
Holder hereof agrees that payment of the final amount due shall be made only
upon surrender of this Debenture to the Company for cancellation. Prior to any
sale or other disposition of this instrument, the Holder hereof agrees to
endorse hereon the amount of principal paid hereon and the last date to which
interest has been paid hereon and to notify the Company of the name and address
of the transferee.
1.2 In the event any payment of principal or interest or both
shall remain unpaid for a period of ten (10) days or more, a late charge
equivalent to five (5%) percent of each installment shall be charged. Interest
on the indebtedness evidenced by this Debenture after default or maturity
accelerated or otherwise shall be due and payable at the rate of seven (7%)
percent per annum, subject to the limitations of applicable law.
1.3 If this Debenture or any installment hereof becomes due
and payable on a Saturday, Sunday or public holiday under the laws of the State
of New York, the due date hereof shall be extended to the next succeeding full
business day and interest shall be payable at the rate of five (5%) percent per
annum during such extension. All payments received by the Holder shall be
applied first to the payment of all accrued interest payable hereunder.
ARTICLE II
SECURITY
2.1 The obligations of the Company under this Debenture are
secured pursuant to security interests on and collateral assignments of, assets,
tangible and intangible, of the Company granted by the Company to the Payee
pursuant to a security agreement of even date herewith and collateral
assignments referred to in the Purchase Agreement. In addition, each
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of Houba, Inc. ("Houba"), Halsey Pharmaceuticals, Inc., Indiana Fine Chemicals
Corporation and Cenci Powder Products, Inc. ("CPP"), each a wholly-owned
subsidiary of the Company, and H.R. Cenci Laboratories, Inc. ("HR Cenci"), a 97%
owned subsidiary of the Company (collectively, the Guarantors"), has executed in
favor of the Holder a certain Continuing Unconditional Guaranty, dated of even
date, guaranteeing the full and unconditional payment when due of the amounts
payable by the Company to the Holder pursuant to the terms of this Debenture
(each the "Guaranty"). The obligations of each Guarantor under its Guaranty are
secured pursuant to security interests on and collateral assignments of, assets,
tangible and intangible, of such Guarantor granted by the Guarantor to the Payee
pursuant to a security agreement of even date herewith and collateral
assignments referred to in the Purchase Agreement. The obligations of Houba
under its Guaranty are also secured pursuant to a Mortgage on real property
located at 16235 State Road 17, Culver, Indiana. The obligations of each of CPP
and HR Cenci under their Guaranties are also secured pursuant to a Mortgage on
real property located at 152 North Broadway, Fresno, California.
ARTICLE III
CONVERSION
3.1 Conversion at Option of Holder. At any time and from time
to time on and after the date hereof (the "Initial Conversion Date") until the
earlier of (i) the Maturity Date or (ii) the conversion of the Debenture in
accordance with Section 3.2 hereof, this Debenture is convertible in whole or in
part at the Holder's option into shares of Common Stock of the Company upon
surrender of this Debenture, at the office of the Company, accompanied by a
written notice of conversion in form reasonably satisfactory to the Company duly
executed by the registered Holder or its duly authorized attorney. "Common
Stock" of the Company means common stock of the Company as it exists on the date
this Debenture is originally signed. This Debenture is convertible on or after
the Initial Conversion Date into shares of Common Stock at a price per share of
Common Stock equal to $1.50 per share (the "Conversion Price"). Interest shall
accrue to and including the day prior to the date of conversion and shall be
paid on the last day of the month in which conversion rights hereunder are
exercised. No fractional shares or scrip representing fractional shares will be
issued upon any conversion, but an adjustment in cash will be made, in respect
of any fraction of a share which would otherwise be issuable upon the surrender
of this Debenture for conversion. The Conversion Price is subject to adjustment
as provided in Section 3.5 and Section 3.7 hereof. As soon as practicable
following conversion and upon the Holder's compliance with the conversion
procedure described in Section 3.3 hereof, the Company shall deliver a
certificate for the number of full shares of Common Stock issuable upon
conversion and a check for any fractional share and, in the event the Debenture
is converted in part, a new Debenture in the principal amount equal to the
remaining principal balance of this Debenture after giving effect to such
partial conversion.
3.2 Conversion at Option of the Company. Provided that an
Event of Default as provided in Section 12.1(a) of the Purchase Agreement
(relating to the failure to pay principal and interest under the Debentures)
shall not have occurred and then be continuing, in the event that either (a)
following the second anniversary of the date hereof, the closing price per share
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of the Company's Common Stock on the American Stock Exchange ("AMEX") or the
NASDAQ National Market ("NNM") exceeds $4.75 per share for each of twenty (20)
consecutive trading days or (b) following the third anniversary of the date
hereof, the closing price per share of the Company's Common Stock on the AMEX or
NNM exceeds $7.125 per share for each of twenty (20) consecutive trading days,
then at any time thereafter until the earlier of (i) the Maturity Date or (ii)
the date a Change of Control (as defined in the Purchase Agreement) occurs, the
Company may upon written notice to the Holders of all Debentures (the "Mandatory
Conversion Notice") require that all, but not less than all, of the outstanding
principal amount of the Debentures be converted into shares of Common Stock at a
price per share equal to the Conversion Price (as such Conversion Price may be
adjusted as provided in Sections 3.5 and 3.7 hereof). The Mandatory Conversion
Notice shall state (1) the date fixed for conversion (the "Conversion Date")
(which date shall not be prior to the date the Mandatory Conversion Notice is
given), (2) any disclosures required by law, (3) the trading dates and closing
prices of the Common Stock giving rise to the Company's option to require
conversion of the Debenture, (4) that the Debentures shall cease to accrue
interest after the day immediately preceding the Conversion Date, (5) the place
where the Debentures shall be delivered and (6) any other instructions that
Holders must follow in order to tender their Debentures in exchange for
certificates for Common Stock. No failure to mail such notice nor any defect
therein or in the mailing thereof shall affect the validity of the proceedings
for such conversion, except as to a Holder (x) to whom notice was not mailed or
(y) whose notice was defective. An affidavit of the Secretary or an Assistant
Secretary of the Company or an agent employed by the Company that notice of
conversion has been mailed postage prepaid to the last address of the Holder
appearing on the Debenture registry books kept by the Company shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. On and
after the Conversion Date, except as provided in the next two sentences, Holders
of the Debentures shall have no further rights except to receive, upon surrender
of the Debentures, a certificate or certificates for the number of shares of
Common Stock as to which the Debenture shall have been converted. Interest shall
accrue to and including the day prior to the Conversion Date and shall be paid
on the last day of the month in which Conversion Date occurs. No fractional
shares or scrip representing fractional shares will be issued upon any
conversion, but an adjustment in cash will be made, in respect of any fraction
of a share which would otherwise be issuable upon the surrender of this
Debenture for conversion.
3.3 Registration of Transfer; Conversion Procedure. The
Company shall maintain books for the transfer and registration of the
Debentures. Upon the transfer of any Debenture in accordance with the provisions
of the Purchase Agreement, the Company shall issue and register the Debenture in
the names of the new holders. The Debentures shall be signed manually by the
Chairman, Chief Executive Officer, President or any Vice President and the
Secretary or Assistant Secretary of the Company. The Company shall convert, from
time to time, any outstanding Debentures upon the books to be maintained by the
Company for such purpose upon surrender thereof for conversion properly endorsed
and, in the case of a conversion pursuant to Section 3.1 hereof, accompanied by
a properly completed and executed Conversion Notice attached hereto as
Attachment II. Subject to the terms of this Debenture, upon surrender of this
Debenture the Company shall issue and deliver with all reasonable dispatch to or
upon the written order of the Holder of such Debenture and in such name or
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names as such Holder may designate, a certificate or certificates for the number
of full shares of Common Stock due to such Holder upon the conversion of this
Debenture. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
the Holder of record of such Shares as of the date of the surrender of this
Debenture; provided, however, that if, at the date of surrender the transfer
books of the Common Stock shall be closed, the certificates for the Shares shall
be issuable as of the date on which such books shall be opened and until such
date the Company shall be under no duty to deliver any certificate for such
Shares; provided, further, however, that such transfer books, unless otherwise
required by law or by applicable rule of any national securities exchange, shall
not be closed at any one time for a period longer than twenty (20) days.
3.4 Company to Provide Common Stock. The Company has reserved
the remaining balance of its authorized but unissued and unreserved shares of
Common Stock and its Common Stock held in treasury to permit the conversion of
the Debentures to the extent of its current unissued and unreserved authorized
Common Stock. In accordance with the provisions of Section 9.14 of the Purchase
Agreement, the Company covenants to seek the approval of its shareholders to
amend its Certificate of Incorporation to increase its authorized shares from
20,000,000 to 40,000,000 shares of Common Stock and to provide voting rights to
the Holders on an as converted basis. Promptly upon receipt of shareholder
approval to amend its certificate of incorporation to increase its authorized
shares, the Company shall reserve out of its authorized but unissued common
stock a sufficient number of shares to permit the conversion of the Debentures
in full. The shares of Common Stock which may be issued upon the conversion of
the Debentures shall be fully paid and non-assessable and free of preemptive
rights. The Company will endeavor to comply with all securities laws regulating
the offer and delivery of the Shares upon conversion of the Debentures and will
endeavor to list such shares on each national securities exchange upon which the
Common Stock is listed.
3.5 Dividends; Reclassifications, etc.. In the event that the
Company shall, at any time prior to the earlier to occur of (i) exercise of
conversion rights hereunder and (ii) the Maturity Date: (i) declare or pay to
the holders of the Common Stock a dividend payable in any kind of shares of
capital stock of the Company; or (ii) change or divide or otherwise reclassify
its Common Stock into the same or a different number of shares with or without
par value, or in shares of any class or classes; or (iii) transfer its property
as an entirety or substantially as an entirety to any other company or entity;
or (iv) make any distribution of its assets to holders of its Common Stock as a
liquidation or partial liquidation dividend or by way of return of capital;
then, upon the subsequent exercise of conversion rights, the Holder thereof
shall receive, in addition to or in substitution for the shares of Common Stock
to which it would otherwise be entitled upon such exercise, such additional
shares of stock or scrip of the Company, or such reclassified shares of stock of
the Company, or such shares of the securities or property of the Company
resulting from transfer, or such assets of the Company, which it would have been
entitled to receive had it exercised these conversion rights prior to the
happening of any of the foregoing events.
3.6 Notice to Holder. If, at any time while this Debenture is
outstanding, the Company shall pay any dividend payable in cash or in Common
Stock, shall offer to the holders
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of its Common Stock for subscription or purchase by them any shares of stock of
any class or any other rights, shall enter into an agreement to merge or
consolidate with another corporation, shall propose any capital reorganization
or reclassification of the capital stock of the Company, including any
subdivision or combination of its outstanding shares of Common Stock or there
shall be contemplated a voluntary or involuntary dissolution, liquidation or
winding up of the Company, the Company shall cause notice thereof to be mailed
to the registered Holder of this Debenture at its address appearing on the
registration books of the Company, at least thirty (30) days prior to the record
date as of which holders of Common Stock shall participate in such dividend,
distribution or subscription or other rights or at least thirty (30) days prior
to the effective date of the merger, consolidation, reorganization,
reclassification or dissolution.
3.7 Adjustments to Conversion Price. In order to prevent
dilution of the conversion right granted hereunder, the Conversion Price shall
be subject to adjustment from time to time in accordance with this Section 3.7.
Upon each adjustment of the Conversion Price pursuant to this Section 3.7, the
Holder of this Debenture shall thereafter be entitled to acquire upon conversion
under Section 3.1 or Section 3.2, at the Applicable Conversion Price (as
hereinafter defined), the number of shares of Common Stock obtainable by
multiplying the Conversion Price in effect immediately prior to such adjustment
by the number of shares of Common Stock acquirable immediately prior to such
adjustment and dividing the product thereof by the Applicable Conversion Price
resulting from such adjustment.
The Conversion Price in effect at the time of the exercise of
conversion rights hereunder set forth in Section 3.1 shall be subject to
adjustment from time to time as follows:
(a) If at any time after the date of issuance hereof
the Company shall grant or issue any shares of Common Stock, or grant or issue
any rights or options for the purchase of, or stock or other securities
convertible into, Common Stock (such convertible stock or securities being
herein collectively referred to as "Convertible Securities") other than:
(i) shares issued in a transaction described in subsection (b)
of this Section 3.7; or
(ii) shares issued, subdivided or combined in transactions
described in Section 3.5 if and to the extent that the number of shares of
Common Stock received upon conversion of this Debenture shall have been
previously adjusted pursuant to Section 3.5 as a result of such issuance,
subdivision or combination of such securities;
for a consideration per share which is less than the Fair Market Value (as
hereinafter defined) of the Common Stock, then the Conversion Price in effect
immediately prior to such issuance or sale (the "Applicable Conversion Price")
shall, and thereafter upon each issuance or sale for a consideration per share
which is less than the Fair Market Value of the Common Stock, the Applicable
Conversion Price shall, simultaneously with such issuance or sale, be adjusted,
so that such Applicable Conversion Price shall equal a price determined by
multiplying the Applicable Conversion Price by a fraction, the numerator of
which shall be:
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(A) the sum of (x) the total number of shares of Common Stock
outstanding when the Applicable Conversion Price became
effective, plus (y) the number of shares of Common Stock which
the aggregate consideration received, as determined in
accordance with subsection 3.7(c) for the issuance or sale of
such additional Common Stock or Convertible Securities deemed
to be an issuance of Common Stock as provided in subsection
3.7(d), would purchase (including any consideration received
by the Company upon the issuance of any shares of Common Stock
since the date the Applicable Conversion Price became
effective not previously included in any computation resulting
in an adjustment pursuant to this Section 3.7(a)) at the Fair
Market Value of the Common Stock; and the denominator of which
shall be
(B) the total number of shares of Common Stock outstanding (or
deemed to be outstanding as provided in subsection 3.7(d)
hereof) immediately after the issuance or sale of such
additional shares.
For purposes of this Section 3.7, "Fair Market Value" shall
mean the average of the closing price of the Common Stock for each of the twenty
(20) consecutive trading days prior to such issuance or sale on the principal
national securities exchange on which the Common Stock is traded, or if shares
of Common Stock are not listed on a national securities exchange during such
period, the closing price per share as reported by the National Association of
Securities Dealers Automatic Quotation System ("NASDAQ") National Market System
if the shares are quoted on such system during such period, or the average of
the bid and asked prices of the Common Stock in the over-the-counter market at
the close of trading during such period if the shares are not traded on an
exchange or listed on the NASDAQ National Market System, or if the Common Stock
is not traded on a national securities exchange or in the over-the-counter
market, the fair market value of a share of Common Stock during such period as
determined in good faith by the Board of Directors.
If, however, the Applicable Conversion Price thus obtained would result in the
issuance of a lesser number of shares upon conversion than would be issued at
the initial Conversion Price specified in Section 3.1, as appropriate, the
Applicable Conversion Price shall be such initial Conversion Price.
Upon each adjustment of the Conversion Price pursuant to this
subsection (a), the total number of shares of Common Stock into which this
Debenture shall be convertible shall be such number of shares (calculated to the
nearest tenth) purchasable at the Applicable Conversion Price multiplied by a
fraction, the numerator of which shall be the Conversion Price in effect
immediately prior to such adjustment and the denominator of which shall be the
exercise price in effect immediately after such adjustment.
(b) Anything in this Section 3.7 to the contrary
notwithstanding, no adjustment in the Conversion Price shall be made in
connection with:
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(i) the grant, issuance or exercise of any Convertible
Securities pursuant to the Company's qualified or
non-qualified Employee Stock Option Plans or any other bona
fide employee benefit plan or incentive arrangement, adopted
or approved by the Company's Board of Directors and approved
by the Company's shareholders, as may be amended from time to
time, or under any other bona fide employee benefit plan
hereafter adopted by the Company's Board of Directors; or
(ii) the grant, issuance or exercise of any Convertible
Securities in connection with the hire or retention of any
officer, director or key employee of the Company, provided
such grant is approved by the Company's Board of Directors; or
(iii) the issuance of any shares of Common Stock pursuant to
the grant or exercise of Convertible Securities outstanding as
of the date hereof (exclusive of any subsequent amendments
thereto).
(c) For the purpose of subsection 3.7(a), the
following provisions shall also be applied:
(i) In case of the issuance or sale of additional shares of
Common Stock for cash, the consideration received by the
Company therefor shall be deemed to be the amount of cash
received by the Company for such shares, before deducting
therefrom any commissions, compensation or other expenses paid
or incurred by the Company for any underwriting of, or
otherwise in connection with, the issuance or sale of such
shares.
(ii) In the case of the issuance of Convertible Securities,
the consideration received by the Company therefor shall be
deemed to be the amount of cash, if any, received by the
Company for the issuance of such rights or options, plus the
minimum amounts of cash and fair value of other consideration,
if any, payable to the Company upon the exercise of such
rights or options or payable to the Company upon conversion of
such Convertible Securities.
(iii) In the case of the issuance of shares of Common Stock or
Convertible Securities for a consideration in whole or in
part, other than cash, the consideration other than cash shall
be deemed to be the fair market value thereof as reasonably
determined in good faith by the Board of Directors of the
Company (irrespective of accounting treatment thereof);
provided, however, that if such consideration consists of the
cancellation of debt issued by the Company, the consideration
shall be deemed to be the amount the Company received upon
issuance of such debt (gross proceeds) plus accrued interest
and, in the case of original issue discount or zero coupon
indebtedness, accrued value to the date of such cancellation,
but not including any premium or discount at which the debt
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may then be trading or which might otherwise be appropriate
for such class of debt.
(iv) In case of the issuance of additional shares of Common
Stock upon the conversion or exchange of any obligations
(other than Convertible Securities), the amount of the
consideration received by the Company for such Common Stock
shall be deemed to be the consideration received by the
Company for such obligations or shares so converted or
exchanged, before deducting from such consideration so
received by the Company any expenses or commissions or
compensation incurred or paid by the Company for any
underwriting of, or otherwise in connection with, the issuance
or sale of such obligations or shares, plus any consideration
received by the Company in connection with such conversion or
exchange other than a payment in adjustment of interest and
dividends. If obligations or shares of the same class or
series of a class as the obligations or shares so converted or
exchanged have been originally issued for different amounts of
consideration, then the amount of consideration received by
the Company upon the original issuance of each of the
obligations or shares so converted or exchange shall be deemed
to be the average amount of the consideration received by the
Company upon the original issuance of all such obligations or
shares. The amount of consideration received by the Company
upon the original issuance of the obligations or shares so
converted or exchanged and the amount of the consideration, if
any, other than such obligations or shares, received by the
Company upon such conversion or exchange shall be determined
in the same manner as provided in paragraphs (i) and (ii)
above with respect to the consideration received by the
Company in case of the issuance of additional shares of Common
Stock or Convertible Securities.
(v) In the case of the issuance of additional shares of Common
Stock as a dividend, the aggregate number of shares of Common
Stock issued in payment of such dividend shall be deemed to
have been issued at the close of business on the record date
fixed for the determination of stockholders entitled to such
dividend and shall be deemed to have been issued without
consideration; provided, however, that if the Company, after
fixing such record date, shall legally abandon its plan to so
issue Common Stock as a dividend, no adjustment of the
Applicable Conversion Price shall be required by reason of the
fixing of such record date.
(d) For purposes of the adjustment provided for in
subsection 3.7(a) above, if at any time the Company shall issue any Convertible
Securities, the Company shall be deemed to have issued at the time of the
issuance of such Convertible Securities the maximum number of shares of Common
Stock issuable upon conversion of the total amount of such Convertible
Securities.
(e) On the expiration, cancellation or redemption of
any Convertible Securities, the Conversion Price then in effect hereunder shall
forthwith be readjusted to such
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Conversion Price as would have been obtained (a) had the adjustments made upon
the issuance or sale of such expired, canceled or redeemed Convertible
Securities been made upon the basis of the issuance of only the number of shares
of Common Stock theretofore actually delivered upon the exercise or conversion
of such Convertible Securities (and the total consideration received therefor)
and (b) had all subsequent adjustments been made on only the basis of the
Conversion Price as readjusted under this subsection 3.7(e) for all transactions
(which would have affected such adjusted Conversion Price) made after the
issuance or sale of such Convertible Securities.
(f) Anything in this Section 3.7 to the contrary
notwithstanding, no adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
Conversion Price; provided, however, that any adjustments which by reason of
this subsection 3.7(f) are not required to be made shall be carried forward and
taken into account in making subsequent adjustments. All calculations under this
Section 3.7 shall be made to the nearest cent.
(g) Upon any adjustment of any Conversion Price, then
and in each such case the Company shall promptly deliver a notice to the
registered Holder of this Debenture, which notice shall state the Conversion
Price resulting from such adjustment, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.
3.8 Reorganization of the Company. If the Company is a party
to a merger or other transaction which reclassifies or changes its outstanding
Common Stock, upon consummation of such transaction this Debenture shall
automatically become convertible into the kind and amount of securities, cash or
other assets which the Holder of this Debenture would have owned immediately
after such transaction if the Holder had converted this Debenture at the
Conversion Price in effect immediately before the effective date of the
transaction. Concurrently with the consummation of such transaction, the person
obligated to issue securities or deliver cash or other assets upon conversion of
this Debenture shall execute and deliver to the Holder a supplemental Debenture
so providing and further providing for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided in this Article 3.
The successor Company shall mail to the Holder a notice describing the
supplemental Debenture.
If securities deliverable upon conversion of this Debenture,
as provided above, are themselves convertible into the securities of an
affiliate of a corporation formed, surviving or otherwise affected by the merger
or other transaction, that issuer shall join in the supplemental Debenture which
shall so provide. If this section applies, Section 3.5 does not apply.
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ARTICLE IV
MISCELLANEOUS
4.1 Default. Upon the occurrence of any one or more of the
events of default specified or referred to in the Purchase Agreement or in the
other documents or instruments executed in connection therewith, all amounts
then remaining unpaid on this Debenture may be declared to be immediately due
and payable as provided in the Purchase Agreement.
4.2 Collection Costs. In the event that this Debenture shall
be placed in the hands of an attorney for collection by reason of any event of
default hereunder, the undersigned agrees to pay reasonable attorney's fees and
disbursements and other reasonable expenses incurred by the Holder in connection
with the collection of this Debenture.
4.3 Rights Cumulative. The rights, powers and remedies given
to the Payee under this Debenture shall be in addition to all rights, powers and
remedies given to it by virtue of the Purchase Agreement, any document or
instrument executed in connection therewith, or any statute or rule of law.
4.4 No Waivers. Any forbearance, failure or delay by the Payee
in exercising any right, power or remedy under this Debenture, the Purchase
Agreement, any documents or instruments executed in connection therewith or
otherwise available to the Payee shall not be deemed to be a waiver of such
right, power or remedy, nor shall any single or partial exercise of any right,
power or remedy preclude the further exercise thereof.
4.5 Amendments in Writing. No modification or waiver of any
provision of this Debenture, the Purchase Agreement or any documents or
instruments executed in connection therewith shall be effective unless it shall
be in writing and signed by the Payee, and any such modification or waiver shall
apply only in the specific instance for which given.
4.6 Governing Law. This Debenture and the rights and
obligations of the parties hereto, shall be governed, construed and interpreted
according to the laws of the State of New York, wherein it was negotiated and
executed, and the undersigned consents and agrees that the State and Federal
Courts which sit in the State of New York, County of New York shall have
exclusive jurisdiction of all controversies and disputes arising hereunder.
4.7 No Counterclaims. The undersigned waives the right to
interpose counterclaims or set-offs of any kind and description in any
litigation arising hereunder and waives the right in any litigation with the
Payee (whether or not arising out of or relating to this Debenture) to trial by
jury.
4.8 Successors. The term "Payee" and "Holder" as used herein
shall be deemed to include the Payee and its successors, endorsees and assigns.
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4.9 Certain Waivers. The Company hereby waives presentment,
demand for payment, protest, notice of protest and notice of non-payment hereof.
4.10 Stamp Tax. The Company will pay any documentary stamp
taxes attributable to the initial issuance of the Common Stock issuable upon the
conversion of this Debenture; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for the Common Stock in
a name other than that of the Holder in respect of which such Common Stock is
issued, and in such case the Company shall not be required to issue or deliver
any certificate for the Common Stock until the person requesting the same has
paid to the Company the amount of such tax or has established to the Company's
satisfaction that such tax has been paid.
4.11 Mutilated, Lost, Stolen or Destroyed Debentures. In case
this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated Debenture, or in lieu of and substitution for the Debenture,
mutilated, lost, stolen or destroyed, a new Debenture of like tenor and
representing an equivalent right or interest, but only upon receipt of evidence
satisfactory to the Company of such loss, theft or destruction and an indemnity,
if requested, also satisfactory to it.
4.12 Maintenance of Office. The Company covenants and agrees
that so long as this Debenture shall be outstanding, it will maintain an office
or agency in New York (or such other place as the Company may designate in
writing to the holder of this Debenture) where notices, presentations and
demands to or upon the Company in respect of this Debenture may be given or
made.
IN WITNESS WHEREOF, Halsey Drug Co., Inc. has caused this
Debenture to be signed by its President and to be dated the day and year first
above written.
ATTEST [SEAL] HALSEY DRUG CO., INC.
/s/ Rosento Ferran By: /s/ Michael Reicher
- ---------------------------- -------------------------------
Rosento Ferran, Michael Reicher
Assistant Secretary Chief Executive Officer
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ATTACHMENT I
Assignment
For value received, the undersigned hereby assigns subject to
the provisions of Section of the Purchase Agreement, to ________
$_________________ principal amount of the 5% Convertible Senior Secured
Debenture due March 15, 2003 evidenced hereby and hereby irrevocably appoint
_______________ attorney to transfer the Debenture on the books of the within
named corporation with full power of substitution in the premises.
Dated:
In the presence of:
________________________________________ _________________
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ATTACHMENT II
CONVERSION NOTICE
TO: HALSEY DRUG CO., INC.
The undersigned holder of this Debenture hereby irrevocably
exercises the option to convert $________ principal amount of such Debenture
(which may be less than the stated principal amount thereof) into shares of
Common Stock of Halsey Drug Co., Inc., in accordance with the terms of such
Debenture, and directs that the shares of Common Stock issuable and deliverable
upon such conversion, together with a check (if applicable) in payment for any
fractional shares as provided in such Debenture, be issued and delivered to the
undersigned unless a different name has been indicated below. If shares of
Common Stock are to be issued in the name of a person other than the undersigned
holder of such Debenture, the undersigned will pay all transfer taxes payable
with respect thereto.
__________________________________________________
Name and address of Holder
__________________________________________________
Signature of Holder
Principal amount of Debenture
to be converted $_________________________________
If shares are to be issued otherwise then to the holder:
__________________________________
Name of Transferee
Address of Transferee
_____________________________________
_____________________________________
_____________________________________
Social Security Number of Transferee
_____________________________________
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