EXHIBIT 10.7
DEBENTUREHOLDERS AGREEMENT
THIS DEBENTUREHOLDERS AGREEMENT (this "Debentureholders Agreement") is
entered into as of December 20, 2002 by and among XXXXXX DRUG CO., INC., a
corporation organized and existing under the laws of the State of New York
("Xxxxxx" 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, Xxxxxx 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, Xxxxxx 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:
Xxxxxx Drug Co., Inc.
000 X. Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: President
Fax: 000-000-0000
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.
Xxxxxx Drug Co., Inc.
By:___________________________
Name:_________________________
Title:________________________
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2002 DEBENTUREHOLDERS
XXXXX PARTNERS III, L.P. GALEN PARTNERS INTERNATIONAL, III, L.P.
By: Claudius, L.L.C., General Partner By: Claudius, L.L.C., General Partner
000 Xxxxx Xxxxxx, 0xx Xx. 000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
______________________________________ ___________________________________
By: Xxxxx Xxxxxxxxxxx By: Xxxxx Xxxxxxxxxxx
Its: General Partner Its: General Partner
XXXXX EMPLOYEE FUND III, L.P. ESSEX WOODLANDS HEALTH
By: Wesson Enterprises, Inc. VENTURES V, L.P.
000 Xxxxx Xxxxxx, 0xx Xxxxx By: Essex Xxxxxxxxx Xxxxxx Xxxxxxxx X, X.X.X.,
Xxx Xxxx, Xxx Xxxx 00000 its General Partner
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
______________________________________ ___________________________________
By: Xxxxx X. Xxxxxx By: Xxxxxxxx Xxxxxxxxx
Its: General Partner Its: Managing Director
CARE CAPITAL INVESTMENTS II, LP XXXXXXX XXXX
By: Care Capital II, LLC, General Partner c/o Xxxxxx Xxxx
00 Xxxxxxx Xxxxxx, Xxxxx 000 000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000 Xxx Xxxx, Xxx Xxxx 00000
______________________________________ ___________________________________
By: Xxxxx X. Xxxxxx
Its: Authorized Signatory
XXXXXXX XXXXXXXX XXXXX XXXXXXXX
0000 Xxxx Xxxxx Xxxx 0000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000 Xxxxxxxx, Xxxxxxxxxxxx 00000
______________________________________ ___________________________________
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XXXX XXXX XXXXX XXXXXX
c/o D.R. International c/o Xxx Xxxxxxxx
0000 Xx. Xxxxxxxx Xxxxxx 0000 Xxxxxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000 Xxxxx 000
Xxxxxxxx, XX 00000
______________________________________ ___________________________________
XXXXXX X. XXXXXXXX
000 Xxxxx Xxxx
Xxxxxxxxx, XX 00000
______________________________________
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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 000 Xxxxx Xxxxxx, 0xx Xx.
000 Xxxxxxxxx Xxxxxx Xxx Xxxx, Xxx Xxxx 00000
0xx Xxxxx
Xxxxxxxxx, XX 00000
______________________________________ ___________________________________
By: Xxxx Xxxxxxxx By: Xxxxx Xxxxxxxxxxx
Its: Authorized Agent Its: General Partner
XXXXX EMPLOYEE FUND III, L.P. GALEN PARTNERS INTERNATIONAL, III, L.P.
By: Wesson Enterprises, Inc. By: Claudius, L.L.C., General Partner
000 Xxxxx Xxxxxx, 0xx Xxxxx 000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
______________________________________ ___________________________________
By: Xxxxx X. Xxxxxx By: Xxxxx Xxxxxxxxxxx
Its: General Partner Its: General Partner
XXXX XXXXX XXXXXXX XXXXX
00 Xxxxxx Xxxxxx 000 Xxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxx Xxxxxx 00000 Xxxxxxxx, XX 00000
______________________________________ ___________________________________
XXXXXXX XXXXXXXX XXXXX XXXXXXXX
0000 Xxxx Xxxxx Xxxx 0000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000 Xxxxxxxx, Xxxxxxxxxxxx 00000
______________________________________ ___________________________________
XXXX XXXX XXXXXX XXXXX
c/o D.R. International 000 Xxxxxx Xxxx
0000 Xx. Xxxxxxxx Xxxxxx Xxxxxx, Xxxxxxxxxxxx 00000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
______________________________________ ___________________________________
00
XXXXXXX XXXX XXXXXX X. XXXXX & CO., INC., TTEE
c/o Xxxxxx Xxxx FBO Xxxxxxx X. Xxxxxxx XXX
000 Xxxx Xxxxxx c/x Xxxxxx Drug Co., Inc.
Xxx Xxxx, Xxx Xxxx 00000 000 Xxxxx Xxxxxxxxxx Xx.
Xxxxxxx Xxxxxxxx #0
Xxxxxxxx, Xxx. 00000
______________________________________ ___________________________________
By: Xxxxxxx X. Xxxxxxx
Its: Trustee
XXXXXXX XXXXXXX XXXXX XXXXXXX
c/x Xxxxxx Drug Co., Inc. c/x Xxxxxx Drug Co., Inc.
000 Xxxxx Xxxxxxxxxx Xx. 000 Xxxxx Xxxxxxxxxx Xx.
Crimson Building #2 Crimson Building #2
Rockford, Ill. 61107 Xxxxxxxx, Xxx. 00000
______________________________________ ___________________________________
XXXXXX XXXXXXX TRUST XXXXXXXXX XXXXXXXXX
c/x Xxxxxx Drug Co., Inc. 00000 Xxxx, Xxxxx 00
000 Xxxxx Xxxxxxxxxx Xx. Xx. Xxxxxxxx, Xxxx 00000
Xxxxxxx Xxxxxxxx #0
Xxxxxxxx, Xxx. 00000
______________________________________ ___________________________________
By: Xxxxxx Xxxxxxx
Its: Trustee
XXXXXX X. XXXX XXXXXX X. XXXX
00 Xxxxxxx Xxxxx 00 Xxxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000 Xxxxxx, Xxx Xxxxxx 00000
______________________________________ ___________________________________
XXXXXX X. XXXX AS CUSTODIAN XXXXXX X. XXXX AS CUSTODIAN
FOR XXXXXX X. XXXX FOR XXXXXX X. XXXX
00 Xxxxxxx Xxxxx 00 Xxxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000 Xxxxxx, Xxx Xxxxxx 00000
______________________________________ ___________________________________
By: Varshah X. Xxxx By: Varshah X. Xxxx
Its: Custodian Its: Custodian
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XXXXXXX XXXXXXXX XXXXX XXXXXXXX
c/o Xxxxx Xxxxxxxx c/o Xxxxx Xxxxxxxx
00 Xxxxxxxxxxxxx Xxxx 00 Xxxxxxxxxxxxx Xxxx
Xxxxxxx, Xxx Xxxxxx 00000 Xxxxxxx, Xxx Xxxxxx 00000
______________________________________ ___________________________________
XXXXXXX XXXXXX, XXX ACCOUNT XXXXXXX XXXXXX
FBO XXXXXXX XXXXXX 0000 Xxxxxxxxxx Xxxxxx
0000 Xxxxxxxxxx Xxxxxx Xxxxxxxx Xxxx, Xxx. 00000
Xxxxxxxx Xxxx, Xxx. 00000
______________________________________ ___________________________________
By:___________________________________
Its: Trustee
XXXXXXX X. XXXXXXX XXXX X. XXXXXXX
c/x Xxxxxx Drug Co., Inc. c/x Xxxxxx Drug Co., Inc.
000 Xxxxx Xxxxxxxxxx Xx. 000 Xxxxx Xxxxxxxxxx Xx.
Crimson Building #2 Crimson Building #2
Rockford, Ill. 61107 Xxxxxxxx, Xxx. 00000
______________________________________ ___________________________________
BROOKE XXXXX XXXXXXX ALEC XXXX XXXXXXX
c/x Xxxxxx Drug Co., Inc. c/x Xxxxxx Drug Co., Inc.
000 Xxxxx Xxxxxxxxxx Xx. 000 Xxxxx Xxxxxxxxxx Xx.
Crimson Building #2 Crimson Building #2
Rockford, Ill. 61107 Xxxxxxxx, Xxx. 00000
______________________________________ ___________________________________
XXXXXXXX XXXXX XXXXXXX XXXXX XXXXXXX
c/x Xxxxxx Drug Co., Inc. c/x Xxxxxx Drug Co., Inc.
000 Xxxxx Xxxxxxxxxx Xx. 000 Xxxxx Xxxxxxxxxx Xx.
Crimson Building #2 Crimson Building #2
Rockford, Ill. 61107 Xxxxxxxx, Xxx. 00000
______________________________________ ___________________________________
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XXXXXXX X. XXXXXXX XX XXXX XXXXX XXXXXXX
c/x Xxxxxx Drug Co., Inc. c/x Xxxxxx Drug Co., Inc.
000 Xxxxx Xxxxxxxxxx Xx. 000 Xxxxx Xxxxxxxxxx Xx.
Crimson Building #2 Crimson Building #2
Rockford, Ill. 61107 Xxxxxxxx, Xxx. 00000
______________________________________ ___________________________________
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XXXXXX X. XXXXX & CO., INC., TTEE XXXXXX X. XXXXX & CO., INC., TTEE
FBO Xxxxxxx Xxxxxxx XXX FBO Xxxxxx Xxxxxxx XXX
c/x Xxxxxx Drug Co., Inc. c/x Xxxxxx Drug Co., Inc.
000 Xxxxx Xxxxxxxxxx Xx. 000 Xxxxx Xxxxxxxxxx Xx.
Crimson Building #2 Crimson Building #2
Rockford, Illinois 61107 Xxxxxxxx, Xxxxxxxx 00000
______________________________________ ___________________________________
By: Xxxxxx X. Xxxxx By: Xxxxxx X. Xxxxx
Its: Trustee Its: Trustee
XXXXXXX XXXXXXX TRUST
c/x Xxxxxx Drug Co., Inc.
000 Xxxxx Xxxxxxxxxx Xx.
Xxxxxxx Xxxxxxxx #0
Xxxxxxxx, Xxxxxxxx 00000
______________________________________
By: Xxxxxxx X. Xxxxxxx
Its: Trustee
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