Exhibit 7
RESERVED SHARES WAIVER AGREEMENT
This RESERVED SHARES WAIVER AGREEMENT (the "Agreement") by and among XXXXXX
DRUG CO., INC. ("XXXXXX") XXXXX PARTNERS III, L.P., XXXXX PARTNERS INTERNATIONAL
III, L.P. and XXXXX EMPLOYEE FUND III, L.P. (collectively, the "Xxxxx
Entities"), ORACLE STRATEGIC PARTNERS, L.P. ("Oracle"), CARE CAPITAL INVESTMENTS
II, LP, ESSEX WOODLANDS HEALTH VENTURES V, L.P. and XXXXXX PHARMACEUTICALS, INC.
is made as of the 20th day of December, 2002. The Xxxxx Entities and Oracle
shall be referred to individually as a "Waiving Party" and collectively as the
"Waving Parties".
RECITALS
WHEREAS, the Xxxxx Entities are parties to that certain Debenture and
Warrant Purchase Agreement dated as of March 10, 1998 (the "1998 Purchase
Agreement") executed by Xxxxxx Drug Co., Inc. ("Xxxxxx"), the Xxxxx Entities,
and other signatories thereto;
WHEREAS, pursuant to the 1998 Purchase Agreement, Xxxxxx issued in favor
of, inter alia, the Xxxxx Entities its 5% Convertible Senior Secured Debentures
due March 15, 2003 (the "1998 Debentures") and Warrants to purchase shares of
Xxxxxx'x Common Stock (the "1998 Warrants");
WHEREAS, the Xxxxx Entities and Oracle are parties to that certain
Debenture and Warrant Purchase Agreement dated as of May 26, 1999 (the "1999
Purchase Agreement") executed by Xxxxxx, the Xxxxx Entities, Oracle and other
signatories thereto;
WHEREAS, pursuant to the 1999 Purchase Agreement, Xxxxxx issued in favor
of, inter alia, the Xxxxx Entities and Oracle its 5% Convertible Senior Secured
Debentures due March 15, 2003 (the "1999 Debentures") and Warrants to purchase
shares of Xxxxxx'x Common Stock (the "1999 Warrants");
WHEREAS, the Xxxxx Entities are parties to that certain Bridge Loan
Agreement dated as of August 15, 2001 by and among Xxxxxx, the Xxxxx Entities
and other signatories thereto, as amended by the First Amendment to Bridge Loan
Agreement, dated as of January 9, 2002, Second Amendment to Bridge Loan
Agreement, dated as of April 5, 2002 and Third Amendment to Bridge Loan
Agreement, dated as of May 8, 2002 (the "Bridge Loan Agreement");
WHEREAS, pursuant to the Bridge Loan Agreement, Xxxxxx issued in favor of,
inter alia, the Xxxxx Entities its 10% Convertible Senior Secured Notes due
January 1, 2003 (the "Bridge Notes") and Warrants to purchase shares of Xxxxxx'x
Common Stock (the "Bridge Warrants");
WHEREAS, (i) Section 9.14 of the 1998 Purchase Agreement, (ii) Section 3.4
of the 1998 Debentures and (iii) Section 1(c) of the 1998 Warrants requires that
Xxxxxx cause at all times to be reserved for issuance a sufficient number of
shares of Xxxxxx'x Common Stock to be issued upon conversion of the 1998
Debentures and the exercise of the 1998 Warrants;
WHEREAS, (i) Section 9.14 of the 1999 Agreement, (ii) Section 3.4 of the
1999 Debentures and (iii) Section 1(c) of the 1999 Warrants requires that Xxxxxx
cause at all times to be reserved for issuance a sufficient number of shares of
Xxxxxx'x Common Stock to be issued upon conversion of the 1999 Debentures and
the exercise of the 1999 Warrants;
WHEREAS, (i) Section 6.1(n) of the Bridge Loan Agreement, (ii) Section 3.4
of the Bridge Notes, and (iii) Section 1(c) of the Bridge Warrants requires that
Xxxxxx cause at all times to be reserved for issuance a sufficient number of
share of Xxxxxx'x Common Stock to be issued upon conversion of the of the Bridge
Notes and the exercise of the Bridge Warrants;
WHEREAS, pursuant to a certain Debenture Purchase Agreement dated as of
December 20, 2002 (the "2002 Purchase Agreement"), proposed to be executed by
Xxxxxx in favor of Care Capital Investments II, LP, Essex Woodlands Health
Ventures Fund V and the other purchasers listed on the signature page thereto,
the Company proposes to issue its 5% Convertible Senior Secured Debentures due
March 31, 2006 (the "New Debentures");
WHEREAS, simultaneous with the closing of the 2002 Purchase Agreement,
Xxxxxx proposes to issue a certain Warrant to Purchase Common Stock dated as of
December 20, 2002 (the "Xxxxxx Warrant") to Xxxxxx Pharmaceuticals, Inc.
exercisable for 10,700,665 shares of Xxxxxx'x Common Stock;
WHEREAS, Xxxxxx does not have sufficient authorized and unreserved shares
of Common Stock necessary to provide for conversion of the New Debentures and
the exercise of the Xxxxxx Warrant; and
WHEREAS, pursuant to Section 6.16 of the 2002 Purchase Agreement, it is a
condition to closing that the parties hereto execute this Reserved Shares Waiver
Agreement;
WHEREAS, Xxxxxx has required as a condition of its acceptance of the Xxxxxx
Warrant that the parties execute this Reserved Shares Waiver Agreement;
NOW, THEREFORE, in consideration of the foregoing premises, and the mutual
covenants and obligations set forth herein, each of the Waiving Parties and
Xxxxxx hereby agrees as follows:
1. Xxxxxx is hereby authorized to release, and shall release, from its
authorized but unissued shares of its Common Stock such number of shares of
Common Stock, otherwise reserved for (i) the Xxxxx Entities pursuant to the 1998
Purchase Agreement, the 1998 Debentures (including any shares reserved for
debentures issued in satisfaction of the interest payments under the 1998
Debentures), the 1998 Warrants, the Bridge Loan Agreement, the Bridge Notes, and
the Bridge Warrants, and (ii) the Xxxxx Entities and Oracle pursuant to the 1999
Purchase Agreement, the 1999 Debentures (including any shares reserved for
debentures issued in satisfaction of the interest payments under the 1999
Debentures) and the 1999 Warrants (collectively, the "Xxxxx/Oracle Reserved
Shares") as are necessary to permit (A) the conversion of the New Debentures
(including any shares reserved for debentures issued in satisfaction of the
interest payments under the New Debentures) issued solely to Care Capital
Investments II, LP and Essex Woodlands Health Ventures Fund V, including such
number of additional shares of Common Stock as necessary to be reserved to take
into account any change in the number of shares of Common Stock issuable upon
conversion of the New Debentures issued solely to Care Capital Investments II,
LP and Essex Woodlands Health Ventures Fund V based upon a change in the
conversion price of the New Debentures, and (B) the exercise of the Xxxxxx
Warrant, including such number of additional shares of Common Stock as necessary
to be reserved to take into account any change in the number of shares of Common
Stock issuable upon exercise of the Xxxxxx Warrant, based upon a change in the
exercise price of the Xxxxxx Warrant (together with the Xxxxx/Oracle Reserved
Shares, the "Care/Essex/Xxxxxx Reserved Shares").
2. Each of the Waiving Parties agrees that the Care/Essex/ Xxxxxx Reserved
Shares shall be reallocated from the Xxxxx/Oracle Reserved Shares on a
proportionate basis, using the following formula:
X = A (B/C)
Where:
X = the Waiving Party's portion of Xxxxx/Oracle Reserved Shares to be
reallocated to Care/Essex/Xxxxxx Reserved Shares.
A = the total number of Care/Essex/Xxxxxx Reserved Shares.
B = the aggregate number of shares issuable to the Waiving Party under each
of the 1998 Debentures, 1998 Warrants, 1999 Debentures, 1999 Warrants, Bridge
Notes, and Bridge Warrants, as applicable.
C = the aggregate amount of the shares issuable to the Waiving Parties
under each of the 1998 Debentures, 1998 Warrants, 1999 Debentures, 1999
Warrants, Bridge Notes and the Bridge Warrants.
3. Each of the Xxxxx Entities hereby waives the application of (i) Section
9.14 of the 1998 Purchase Agreement, (ii) Section 3.4 of the 1998 Debentures,
and (iii) Section 1(c) of the 1998 Warrants, (iv) Section 6.1(n) of the Bridge
Loan Agreement, (v) Section 3.4 of the Bridge Notes, and (vi) Section 1(c) of
the Bridge Warrants in connection with Xxxxxx'x release of the Xxxxx/Oracle
Reserved Shares in accordance with paragraph 1 above and agrees that such action
shall not constitute a Default or an Event of Default under the 1998 Purchase
Agreement, the 1998 Debentures, the 1998 Warrants, the Bridge Loan Agreement,
the Bridge Notes, or the Bridge Warrants.
4. Each of the Xxxxx Entities and Oracle hereby waives the application of
(i) Section 9.14 of the 1999 Purchase Agreement, (ii) Section 3.4 of the 1999
Debentures, and (iii) Section 1(c) of the 1999 Warrants in connection with
Xxxxxx'x release of the Xxxxx/Oracle Reserved Shares in accordance with
paragraph 1 above and agrees that such action shall not constitute a Default or
an Event of Default under the 1999 Purchase Agreement, the 1999 Debentures, or
the 1999 Warrants.
5. Each of the Waiving Parties hereby agree to execute (without cost to any
other party and unreasonable delay), such additional documents and instruments
as may be required in order to effect the release of Xxxxxx'x reserved shares of
Common Stock as provided above.
6. Xxxxxx hereby agrees to maintain the Care/Essex/Xxxxxx Reserved Shares
for the sole benefit of Care Capital Investments II, LP, and Essex Woodlands
Health Ventures Fund V and Xxxxxx.
7. This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
8. No amendment, waiver or modification of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by all the parties
hereto.
9. The provisions of this Agreement shall inure to the benefit of, and be
binding upon and enforceable by and against, the parties hereto and their
respective successors, assigns, heirs, executors and administrators.
10. This Agreement and the rights of the parties hereunder shall be
governed in all respects by the laws of the State of New York wherein the terms
of this 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.
11. In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
[SIGNATURE PAGE TO FOLLOW]
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 PARTNERS INTERNATIONAL III, L.P. GALEN EMPLOYEE FUND III, L.P.
By: Claudius, L.L.C., General Partner By: Wesson Enterprises, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx 000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
By: Xxxxx Xxxxxxxxxxx By: Xxxxx X. Xxxxxx
Its: General Partner Its: General Partner
ESSEX WOODLANDS HEALTH VENTURES V, L.P., CARE CAPITAL INVESTMENTS II, L.P.
By: Essex Woodlands Health Ventures V, By: Care Capital, LLC, General Partner
L.L.C., 00 Xxxxxxx Xxxxxx, Xxxxx 000
its General Partner Xxxxxxxxx, XX 00000
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx XX 00000
Name: Xxxxxxxx Xxxxxxxxx By: Xxxxx X. Xxxxxx
Title: Managing Director Its: Authorized Signatory
XXXXXX DRUG CO., INC., XXXXXX PHARMACEUTICALS, INC.,
a New York corporation a Nevada corporation
By: Xxxxxxx Xxxxxxx By:
Its: Chairman and Chief Its:
Executive Officer
