This RESERVED SHARES WAIVER AGREEMENT (the "Agreement") by and among XXXXXX DRUG
CO., INC. ("XXXXXX") XXXXX PARTNERS Ill, 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
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WHEREAS, the Xxxxx Entities are parties to that certain Debenture and
Warrant Purchase Agreement dated as of March 10, 1 998 (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 1 5, 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 1 998 Purchase Agreement, (ii) Section
3 .4 of the 1 998 Debentures and (iii) Section 1(c) of the 1 998 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 1
998 Debentures and the exercise of the 1 998 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 V. L.P. and the other purchasers listed on the signature page thereto,
the Company proposes to issue its 5% Convertible Senior Secured Debentures due
March 3 1 , 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 1 0,700,665 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 debenturesissued 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 1 999 Purchase Agreement, the 1 999 Debentures
(including any shares reserved for debentures issued in
satisfaction of the interest payments under the 0000 Xxxxxxxxxx)
and the 1 999 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 V, L.P.,
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 V, L.P. 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, 1 000 Xxxxxxxx, Xxxxxx 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 1 998 Debentures,
the 1 998 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 1 999 Purchase Agreement, the 1 999
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 V, L.P. 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
/s/ Xxxx Xxxxxxxx /s/ Xxxxx Xxxxxxxxxxx
-------------------------------------- ---------------------------------------
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
/s/ Xxxxx Xxxxxxxxxxx /s/ Xxxxx X. Xxxxxx
-------------------------------------- ---------------------------------------
By: Xxxxx Xxxxxxxxxxx
Its: General Partner By: Xxxxx X. Xxxxxx
Its: General Partner
ESSEX WOODLANDS HEATH VENTURES V, L.P.,
By: Essex Woodlands Heath Ventures V, L.L.C., CARE CAPITAL INVESTMENTS II, L.P.
000 Xxxxx XxXxxxx Xxxxxx By: Care Capital II, LLC, General Partner
Suite 2800 00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
/s/ Xxxxxxxx Xxxxxxxxx /s/ Xxxxx X. Xxxxxx
-------------------------------------- ---------------------------------------
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
/s/ Xxxxxxx Xxxxxxx /s/ Xxxxxxx Xxxxx
-------------------------------------- ---------------------------------------
By: Xxxxxxx Xxxxxxx By: Xxxxxxx Xxxxx
Its: Chairman and Chief Executive Officer Its: Sr. V.P., CFO
