Exhibit B
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SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
By and Among
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
and the
PURCHASERS NAMED ON ANNEX I HERETO
As of October 5, 2001
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TABLE OF EXHIBITS
Exhibits
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A Certificate of Designation
B Form of Investors' Rights Agreement
C Form of Lock-Up Agreement
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SERIES A PREFERRED STOCK PURCHASE AGREEMENT
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SERIES A PREFERRED STOCK PURCHASE AGREEMENT, dated as of October 5,
2001 (the "Agreement"), is by and among Specialized Health Products
International, Inc., a Delaware corporation (the "Company"), and the purchasers
named on Annex I hereto. The parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Accounting terms used in this Agreement and not
otherwise defined herein shall have the meanings provided by GAAP. Certain
capitalized terms are used in this Agreement as specifically defined in this
Section 1.1 as follows:
"Affiliate" means any Person directly or indirectly controlling,
controlled by or under direct or indirect common control with the Company (or
other specified Person) and shall include (a) any Person who is an officer,
director or beneficial holder of at least 10% of the outstanding capital stock
of the Company (or other specified Person), (b) any Person of which the Company
(or other specified Person) or any officer or director of the Company (or other
specified Person) shall, directly or indirectly, either beneficially own at
least 10% of the outstanding equity securities or constitute at least a 10%
participant, and (c) in the case of a specified Person who is an individual,
Members of the Immediate Family of such Person; provided, however, that the
Investors shall not be Affiliates of the Company for purposes of this Agreement.
"Agreement" is defined in the Preamble.
"Alternative Transactions" is defined in Section 5.2.
"Balance Sheet Date" is defined in Section 3.6.
"Bridge Notes" means the $1,500,000 aggregate principal amount of 12%
Secured Convertible Promissory Notes issued by the Company in July 2001.
"By-laws" means all written rules, regulations, procedures and by-laws
and all other similar documents, relating to the management, governance or
internal regulation of a Person other than an individual, each as from time to
time amended or modified.
"Certificate of Designation" is defined in Section 2.1.
"Charter" means the articles or certificate of incorporation, statute,
constitution, joint venture or partnership agreement or articles or other
charter of any Person other than an individual, each as from time to time
amended or modified.
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"Code" means the federal Internal Revenue Code of 1986 or any
successor statute, and the rules and regulations thereunder, as from time to
time amended and in effect.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act, the Exchange Act or
both.
"Common Stock" means the common stock, $0.02 par value, of the
Company.
"Company" is defined in the Preamble.
"Company Intellectual Property" is defined in Section 3.17(b).
"Contractual Obligation" means, with respect to any Person, any
contracts, agreements, deeds, mortgages, leases, licenses, other instruments,
commitments, undertakings, arrangements or understandings, written or oral, or
other documents, including any document or instrument evidencing indebtedness,
to which any such Person is a party or otherwise subject to or bound by or to
which any asset of any such Person is subject.
"Employee Benefit Plan" means each and all "employee benefit plans" as
defined in section 3(3) of ERISA, maintained or contributed to by the Company,
any of its Affiliates or any of their respective predecessors, or in which the
Company, any of its Affiliates or any of their respective predecessors
participates or participated and which provides benefits to employees of the
Company or their spouses or covered dependents or with respect to which the
Company has or may have a material liability, including, (i) any such plans that
are "employee welfare plans" as defined in section 3(1) of ERISA and (ii) any
such plans that are "employee pension benefit plans" as defined in section 3(2)
of ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor statute and the rules and regulations thereunder, and in the case
of any referenced section of any such statute, rule or regulation, any successor
section thereof, collectively and as from time to time amended and in effect.
"ERISA Group", with respect to any entity, means any Person which is a
member of the same "controlled group" or under "common control", within the
meaning of section 414(b) or (c) of the Code or section 4001(b)(1) of ERISA,
with such entity.
"Exchange Act" means the Securities Exchange Act of 1934, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as from time to time amended and in effect.
"Financial Statements" is defined in Section 3.6.
"First Closing" is defined in Section 2.3.
"First Closing Date" is defined in Section 2.3.
"GAAP" means United States generally accepted accounting principles,
as in effect from time to time, consistently applied.
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"Intellectual Property" is defined in Section 3.17(a).
"Intellectual Property Licenses" is defined in Section 3.17(d).
"Investor Securities" is defined in Section 2.1.
"Investors" means the holders of Investor Securities immediately
following the First Closing, the original holders of which are listed on Annex I
hereto.
"Investors' Rights Agreement" is defined in Section 2.4(d)(i).
"Legal Requirement" means any federal, state or local law, statute,
standard, ordinance, code, order, rule, regulation, resolution, promulgation or
any final order, judgment or decree of any court, arbitrator, tribunal or
governmental authority, or any license, franchise, permit or similar right
granted under any of the foregoing.
"Lock-up Agreements" is defined in Section 2.4(d)(iii).
"Material Adverse Effect" means a material adverse effect upon the
business, assets, financial condition, income or prospects of the Company,
including, without limitation, the termination or modification in a manner
adverse to the Company of any license or other agreement to which the Company is
a party.
"Members of the Immediate Family," as applied to any individual, means
each parent, spouse, child, brother, sister or the spouse of a child, brother or
sister of the individual, and each trust created for the benefit of one or more
of such persons and each custodian of a property of one or more such persons.
"Other Intellectual Property" is defined in Section 3.17.
"Pension Plan" means each pension plan (as defined in section 3(2) of
ERISA) established or maintained, or to which contributions are or were made by
the Company or any of its Subsidiaries or former Subsidiaries, or any Person
which is a member of the same ERISA Group with any of the foregoing.
"Person" means an individual, partnership, corporation, company,
association, trust, joint venture, unincorporated organization and any
governmental department or agency or political subdivision.
"Proxy Statement" is defined in Section 5.1(b).
"Related Agreements" means the Investors' Rights Agreement and the
Lock-up Agreements.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be from time to time amended and in effect.
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"Series A Preferred Stock" means the Series A Preferred Stock, par
value $0.001 per share, of the Company.
"Subsidiary" means any Person of which the Company now or hereafter
shall at the time (a) own directly or indirectly through a Subsidiary at least
50% of the outstanding capital stock (or other shares of beneficial interest)
entitled to vote generally or (b) constitute a general partner.
"Third Party" is defined in Section 5.2.
"Welfare Plan" means each welfare plan (as defined in section 3(l) of
ERISA) established or maintained, or to which any contributions are or were
made, by the Company or any of its Subsidiaries or any Person which is a member
of the same ERISA Group with any of the foregoing.
ARTICLE II
SALE AND PURCHASE OF SECURITIES
2.1 INVESTOR SECURITIES. The Series A Preferred Stock being purchased
by the Investors hereunder, together with any securities issued with respect
thereto, upon exercise, conversion or transfer thereof or in exchange therefor,
including the Common Stock issuable upon conversion of the Series A Preferred
Stock, are collectively referred to as "Investor Securities"; provided, however,
that once any such securities have been sold in a public offering registered
under the Securities Act or sold pursuant to Rule 144 under the Securities Act
they shall cease to be Investor Securities for all purposes of this Agreement.
The powers, preferences and rights of the Series A Preferred Stock are set forth
in the Company's Certificate of Designation, Preferences and Limitations,
attached hereto as Exhibit A (the "Certificate of Designation").
2.2 AGREEMENT TO SELL AND PURCHASE. Subject to the terms and
conditions hereof and in reliance on the Investors' representations, warranties
and agreements contained or referred to herein, the Company agrees to issue and
sell to the Investors and, subject to the terms and conditions hereof and in
reliance on the representations, warranties and agreements of the Company
contained or referred to herein, the Investors severally agree to purchase at
the First Closing, the number of shares of Series A Preferred Stock specified in
Annex I for each Investor at the purchase price of $0.458 per share, payable by
wire transfer or certified check or by conversion of the principal amount of
outstanding Bridge Notes. The Investors shall also have the right (but not the
obligation) to purchase the number of shares of Series A Preferred Stock
specified in Annex II at the purchase price of $0.458 per share, payable by wire
transfer or certified check, at the time and subject to the conditions set forth
below.
2.3 CLOSINGS. The first closing of the purchase and sale of the Series
A Preferred Stock (the "First Closing") and subsequent closings of the purchase
and sale of the Series A Preferred Stock (each a "Subsequent Closing" and
collectively, the "Subsequent Closings") shall take place in New York, New York
at the offices of Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol. The First
Closing shall take place on a date no later than one week after the Company's
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2001 annual stockholders meeting (the "First Closing Date") or at such other
place and time as the Company and the Investors may otherwise agree. Each
Subsequent Closing shall take place from time to time at the election of an
Investor or Investors upon no less than five days notice to the Company (each a
"Subsequent Closing Date"); provided, however, that no Subsequent Closing may
take place after the earlier to occur of (i) the first anniversary of the First
Closing and (ii) the thirtieth day following the date as of which an aggregate
of two-thirds of the shares of Series A Preferred Stock to be purchased in the
Subsequent Closings have been purchased. At each closing, the Company will
deliver to the Investors certificates evidencing the number of shares of Series
A Preferred Stock set forth on Annex I or Annex II, as the case may be, to be
purchased at the applicable closing against payment of the purchase price as set
forth on Annex I or Annex II, as the case may be. To the extent that an Investor
elects not to purchase the shares of Series A Preferred Stock on or prior to the
final Subsequent Closing, then the other Investors shall have the right to
purchase their pro rate percentage of such shares (based upon the number of
shares purchased at the First Closing) from the Company within ten days
following the final Subsequent Closing.
2.4 CONDITIONS TO CLOSING FOR THE INVESTORS. The Investors' several
obligations to purchase the Series A Preferred Stock pursuant to this Agreement
on each closing date are subject to the satisfaction, on or prior to the
applicable closing date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Company herein shall have been true and correct when
made and shall be true and correct on and as of the applicable closing date with
the same force and effect as though made on and as of such closing date, except
for representations and warranties that are made as of a specific date which
shall only be required to be true and correct as of such date.
(b) PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the applicable closing shall have been performed or complied with
and the Company shall not be in default in the performance of or compliance with
any provisions of this Agreement.
(c) COMPLIANCE CERTIFICATES. The Company shall have delivered to
the Investors a certificate of the chief executive officer or chief financial
officer of the Company, dated the date of the applicable closing, certifying to
the matters stated in Sections 2.4(a) and (b).
(d) RELATED AGREEMENTS. The Company and the other parties thereto
shall have duly authorized, executed and delivered to the Investors the
following agreements:
(i) Investors' Rights Agreement, in the form of Exhibit B,
among the Company and the Investors (as from time to time in effect, the
"Investors' Rights Agreement").
(ii) The Lock-up Agreements, in the form of Exhibit C, among
the Company, the Investors and the directors and executive officers of the
Company, in their individual capacity (as from time to time in effect, the
"Lock-up Agreements").
(e) SECRETARY'S CERTIFICATE. The Company shall have delivered to
the Investors copies of each of the following:
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(i) the Charter of the Company as of the applicable closing
(which shall include the Certificate of Designation), certified by the Secretary
of State of Delaware as of a date not more than five (5) days prior to the
applicable closing;
(ii) the By-laws of the Company; and
(iii) resolutions of the Board of Directors of the Company,
the form and substance of which are reasonably satisfactory to the Investors,
authorizing the execution, delivery and performance of this Agreement and the
Related Agreements to which the Company is a party, and the transactions
contemplated hereby and thereby, including the terms and filing of the
Certificate of Designation and the issuance and sale of the Series A Preferred
Stock.
(f) LEGAL OPINION. On the applicable closing date, the Investors
shall have received from ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇, counsel to the Company, an
opinion letter in a form that is reasonably satisfactory to Investors who have
agreed to purchase at least sixty-six and two-thirds percent (66-2/3%) of the
Investor Securities.
(g) NON-COMPETITION AGREEMENTS. The Company will have in full
force and effect on the applicable closing date non-competition,
confidentiality, non-solicitation and assignment of invention agreements with
each of its executive and key employees, each on terms and conditions
satisfactory to Investors who have agreed to purchase at least sixty-six and
two-thirds percent (66-2/3%) of the Investor Securities.
(h) ELECTION OF DIRECTORS. As of the applicable closing, the Board
of Directors of the Company shall consist of six directors, including two
persons selected by the Investors (who shall initially be ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇), and one person selected by the Investors shall have been appointed to
the Compensation Committee and the Audit Committee of the Board of Directors.
(i) LICENSE AND ROYALTY AGREEMENT. The Company will have in full
force and effect on the applicable closing date a blood collection license and
royalty agreement with Tyco International, Ltd. or a subsidiary thereof or
another party on terms and conditions satisfactory to Investors who have agreed
to purchase at least sixty-six and two-thirds percent (66-2/3%) of the Investor
Securities.
(j) SUPPLY AND DISTRIBUTION AGREEMENT. The Company will have in
full force and effect on the applicable closing date a ▇▇▇▇▇ needle supply and
distribution agreement with ▇.▇. ▇▇▇▇, Inc., on terms and conditions
satisfactory to Investors who have agreed to purchase at least sixty-six and
two-thirds percent (66-2/3%) of the Investor Securities.
(k) CHARTER AMENDMENT. As of the applicable closing, the
Certificate of Incorporation of the Company shall have been amended to increase
the number of authorized shares of preferred stock from five million shares to
30,000,000, which amendment shall have been approved by the stockholders of the
Company at the Annual Meeting.
(l) STOCKHOLDER APPROVAL. As of the applicable closing, the
stockholders of the Company shall have approved the issuance and sale of the
Series A Preferred Stock pursuant to this Agreement at the Annual Meeting.
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(m) TERMINATION OF RIGHTS AND WARRANTS. All rights to purchase
additional securities of the Company and all warrants outstanding in connection
with the Company's April 2001 private placement memorandum shall have been
terminated on terms satisfactory to Investors who have agreed to purchase at
least sixty-six and two-thirds percent (66-2/3%) of the Investor Securities.
(n) CONVERSION OF BRIDGE NOTES. Holders of all of the outstanding
Bridge Notes shall have executed a counterpart signature page and agreed to
convert the outstanding principal amount of their Bridge Notes into Series A
Preferred Stock at the First Closing, the Company shall have paid the accrued
interest on the Bridge Notes through the First Closing, and the Bridge Notes and
the related security documents shall have been cancelled and shall be of no
further force and effect.
(o) RETENTION OF EXECUTIVE SEARCH FIRM. The Company will have in full
force and effect on the First Closing Date an agreement with an executive search
firm selected by Investors who have agreed to purchase at least sixty-six and
two-thirds percent (66-2/3%) of the Investor Securities pursuant to which the
search firm will be retained to recruit a new chief executive officer for the
Company.
(p) MANAGEMENT INCENTIVE PLAN. As of the First Closing Date, the
Company shall have (i) reserved an additional 5.0 million shares for grant
pursuant to an option plan adopted by the Company and (ii) prepared and adopted
a management incentive plan for grants of options to key management personnel
and a reserve for new hires, which plan shall be satisfactory to Investors who
have agreed to purchase at least sixty-six and two-thirds percent (66-2/3%) of
the Investor Securities.
(q) RELEASES. The Company will have in full force and effect on
the applicable closing date releases relating to the Company's fundings that
took place between November 2000 and May 2001 from each of the following
investors: Procedo Capital Corp., ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, Banyan Investment Company, LC, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇. ▇▇▇▇ ▇▇▇▇▇▇, Whisper Investment Company, ▇▇▇▇▇ ▇▇▇▇▇, Harbour
Trustees Limited, ▇▇▇▇ Financial Corp., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇, Don and ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Family Trust, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, Asdale Limited, Plenteus Corp.,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇. The Company will also have in full
force and effect on the applicable closing date a release from Rubicon
International Limited relating to the payment of charges that accrued under its
agreement with the Company prior to the date the agreement was terminated. These
releases shall be on terms satisfactory to the Investors who have agreed to
purchase at least sixty-six and two-thirds percent (66-2/3%) of the Investor
Securities.
(r) CONSENTS. All consents and approvals to the transactions
contemplated by this Agreement required to be obtained by the Company from any
third party shall have been obtained by the Company.
(s) LEGALITY. All authorizations, approvals or permits of any
governmental authority or regulatory body that are required in connection with
the lawful issuance and sale of the Investor Securities pursuant to this
Agreement shall have been duly obtained and shall be in full force and effect.
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(t) COMPENSATION COMMITTEE. The Company will have in full force
and effect on the First Closing Date a Compensation Committee that is structured
in a manner that is reasonably acceptable to Investors who have agreed to
purchase at least sixty-six and two-thirds percent (66-2/3%) of the Investor
Securities.
(u) GENERAL. All instruments and legal and corporate proceedings
in connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to Investors who have agreed to
purchase at least sixty-six and two-thirds percent (66-2/3%) of the Investor
Securities, and the Investors shall have received copies of all documents,
including records of corporate proceedings and officers' certificates, which
they may have reasonably requested in connection therewith.
2.5 CONDITIONS TO CLOSING FOR THE COMPANY. The Company's obligation to
issue and sell the Series A Preferred Stock pursuant to this Agreement on the
applicable closing date is subject to the satisfaction, on or prior to the
applicable closing date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Investors herein shall have been true and correct
when made and shall be true and correct on and as of the applicable closing date
with the same force and effect as though made on and as of such closing date.
(b) LEGALITY. All authorizations, approvals or permits of any
governmental authority or regulatory body that are required in connection with
the lawful issuance and sale of the Investor Securities pursuant to this
Agreement shall have been duly obtained and shall be in full force and effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of the Investors as follows:
3.1 ORGANIZATION. The Company is a duly organized and validly existing
corporation in good standing under the laws of Delaware. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which it does business, except where the failure to be so
qualified would not have a Material Adverse Effect.
3.2 CORPORATE POWER. The Company has all necessary corporate power and
authority to enter into and perform this Agreement and the Related Agreements to
which it is a party, to issue and sell the Investor Securities hereunder, to own
all the properties owned by it and to carry on the businesses now conducted or
presently proposed to be conducted by it. The Company has taken all corporate
action necessary to authorize this Agreement, the Related Agreements to which it
is a party and the issuance of the Investor Securities to be issued and sold
hereunder.
3.3 SUBSIDIARIES. Except as listed in Schedule 3.3, the Company has no
Subsidiaries. Each of the Subsidiaries is a duly organized and validly existing
corporation under the laws of its jurisdiction of organization, which
jurisdiction is listed in Schedule 3.3. Each Subsidiary has all
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necessary corporate power and authority to own all the properties owned by it
and to carry on the businesses now conducted or presently proposed to be
conducted by it. Each Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which it does
business, except where the failure to be so qualified would not have a Material
Adverse Effect. The Company owns all of the issued and outstanding capital stock
of each of its Subsidiaries and there are no outstanding preemptive, conversion
or other rights, options, warrants or agreements granted or issued by or binding
upon any Subsidiary for the purchase or acquisition of any shares of its capital
stock.
3.4 CAPITALIZATION. The authorized capital stock of the Company as of
the date of the Agreement is set forth in Schedule 3.4. Schedule 3.4 contains a
true and correct list of all outstanding capital stock, warrants and options as
of the date of the Agreement, including the owner thereof, and, with respect to
the warrants and options, the exercise price and the dates of issuance and
termination. All of the outstanding shares of capital stock of the Company,
including the Series A Preferred Stock to be issued pursuant to this Agreement,
will be, upon consummation of the transactions contemplated by this Agreement,
validly issued, fully paid, nonassessable and subject to no lien or restriction
on transfer, except restrictions on transfer imposed by the Related Agreements
and applicable securities laws or as otherwise set forth in Schedule 3.4. The
shares of Common Stock issuable upon conversion of the Series A Preferred Stock
have been duly and validly reserved and, upon issuance in accordance with the
conversion provisions of the Series A Preferred Stock will be validly issued,
fully paid, nonassessable and subject to no lien or restriction on transfer,
except restrictions on transfer imposed by the Related Agreements and applicable
securities laws or as otherwise set forth in Schedule 3.4. All of the
outstanding shares of capital stock and warrants have been offered and sold in
compliance with applicable federal and state securities laws. Other than as set
forth in Schedule 3.4, the Company has no outstanding (i) rights (either
preemptive or otherwise) or options to subscribe for or purchase, or any
warrants or other agreements providing for or requiring the issuance of, any
capital stock or any securities convertible into or exchangeable for its capital
stock, (ii) obligation to repurchase or otherwise acquire or retire any of its
capital stock, any securities convertible into or exchangeable for its capital
stock or any rights, options or warrants with respect thereto, (iii) rights that
require it to register the offering of any of its securities under the
Securities Act or (iv) any restrictions on voting any of its securities.
3.5 AUTHORIZATION. All stockholder approval and corporate action on
the part of the Company necessary for the due authorization, execution and
delivery of this Agreement, the Certificate of Designation and the Related
Agreements to which the Company is a party and the consummation of the
transactions contemplated herein and therein, and for the due authorization and
issuance of (i) the shares of Series A Preferred Stock, and (ii) the Common
Stock issuable upon conversion of the Series A Preferred Stock has been or will
be taken prior to the Closing Date. This Agreement and the Related Agreements to
which the Company is a party are legal, valid and binding agreements of the
Company, enforceable in accordance with their terms. The execution, delivery and
performance by the Company of this Agreement and the Related Agreements to which
the Company is a party and the issuance and sale of the Investor Securities will
not result in any violation of or be in conflict with, or result in a breach of
or constitute a default under, any term or provision of any Legal Requirement to
which the Company or any of its Subsidiaries is subject, or the Company's or any
Subsidiary's Charter or By-Laws, or any Contractual Obligation to which the
Company or any of its Subsidiaries is a party or by which it is bound.
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3.6 FINANCIAL STATEMENTS. The Investors have been furnished with
complete and correct copies of the following financial statements of the Company
(the "Financial Statements"): (a) the audited consolidated balance sheet of the
Company as of December 31, 1999 and the respective related consolidated
statements of income, retained earnings and cash flows for the twelve-month
period then ended, (b) the audited consolidated balance sheet of the Company as
of December 31, 2000 together with the related consolidated statements of
operations, retained earnings and cash flows for the twelve-month period then
ended, and (c) the unaudited consolidated balance sheet of the Company as of
June 30, 2001 (the "Balance Sheet Date") together with the related consolidated
statements of operations, cash flows and stockholders' equity for the
three-month period then ended. The Financial Statements have been prepared in
accordance with GAAP consistently applied, except that the June 30, 2001
financial statements do not contain the notes required by GAAP, and fairly and
accurately present the financial condition of the Company and its Subsidiaries
at the date thereof and the results of its operations for the period covered
thereby. All the books, records and accounts of the Company and its Subsidiaries
are accurate and complete, are in accordance with good business practice and all
laws, regulations and rules applicable to the Company and its Subsidiaries and
the conduct of their business and accurately present and reflect all of the
transactions described therein.
3.7 OUTSTANDING DEBT: ABSENCE OF LIABILITIES. Neither the Company nor
any of its Subsidiaries (i) has any outstanding indebtedness for borrowed money
except as reflected in the Financial Statements or Schedule 3.7 and (ii) except
as reflected, is a guarantor or otherwise contingently liable on such
indebtedness of any other Person. Except as set forth in Schedule 3.7, neither
the Company nor any of its Subsidiaries has any material liabilities or
obligations, contingent or otherwise, which are not reflected or provided for in
the Financial Statements.
3.8 CHANGES IN CONDITION. Since the Balance Sheet Date, there have
occurred no event or events that, individually or in the aggregate, have caused
or will cause a Material Adverse Effect. Except as set forth in Schedule 3.8,
since the Balance Sheet Date, neither the Company nor any of its Subsidiaries
has (a) declared any dividend or other distribution on any shares of its capital
stock, (b) made any payment (other than compensation to its directors, officers
and employees at rates in effect prior to the Balance Sheet Date or for bonuses
accrued in accordance with normal practice prior to the Balance Sheet Date) to
any of its Affiliates, (c) increased the compensation, including bonuses,
payable or to be payable to any of its directors, officers, employees or
Affiliates, or (d) entered into any Contractual Obligation, or entered into or
performed any other transaction, other than as specifically contemplated by this
Agreement.
3.9 CONTRACTUAL OBLIGATIONS. Schedule 3.9 contains, together with a
reference to the paragraph pursuant to which each item is being disclosed, a
correct and complete list of all Contractual Obligations of a material nature of
the Company and its Subsidiaries of the types described below:
(a) All collective bargaining agreements, all employment, bonus or
consulting agreements, all pension, profit sharing, deferred compensation, stock
option, stock purchase, retirement, welfare or incentive plans or agreements,
and all plans, agreements or practices that constitute "fringe benefits" to any
of the employees of the Company or its Subsidiaries.
(b) All Contractual Obligations under which the Company or any
Subsidiary is restricted from carrying on any business, venture or other
activities anywhere in the world.
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(c) All Contractual Obligations to sell or lease (as lessor) any
of the properties or assets of the Company or any Subsidiary, except in the
ordinary course of business, or to purchase or lease (as lessee) any real
property.
(d) All Contractual Obligations pursuant to which the Company or
any Subsidiary guarantees any liability of any Person, or pursuant to which any
Person guarantees any liability of the Company or any Subsidiary.
(e) All Contractual Obligations pursuant to which the Company or
any Subsidiary provides goods or services involving payments to the Company or
any Subsidiary of more than $50,000 annually, which Contractual Obligation is
not terminable by the Company or any Subsidiary without penalty upon notice of
thirty (30) days or less.
(f) All Contractual Obligations with any Affiliate of the Company
or any Subsidiary (other than the Related Agreements).
(g) All Contractual Obligations providing for the disposition of
the business, assets or shares of the Company or any Subsidiary or the merger or
consolidation or sale or purchase of all or substantially all of the assets or
business of any Person, and any letters of intent relating to the foregoing.
(h) All Contractual Obligations of the Company or any Subsidiary
relating to the borrowing of money or to the mortgaging or pledging of, or
otherwise placing a lien on, any asset of the Company or any Subsidiary (except
liens imposed by operation of law in favor of landlords, suppliers, mechanics or
others who provide services to the Company or any Subsidiary).
All of the Contractual Obligations of the Company and its Subsidiaries
are enforceable against the Company and its Subsidiaries, as the case may be,
and, to the Company's knowledge, the other parties thereto in accordance with
their terms, except that the enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws, from time to
time in effect, which affect enforcement of creditors' rights generally. Neither
the Company nor any of its Subsidiaries is in default under nor, to the
Company's knowledge, are there any liabilities arising from any breach or
default by any Person prior to the date of this Agreement of, any provision of
any such Contractual Obligation. Upon request by counsel for the Investors, the
Company will, prior to each Closing, furnish to counsel for the Investors true
and correct copies of all Contractual Obligations listed in Schedule 3.9.
3.10 INSURANCE. The Company has insurance policies in full force and
effect, written by reputable insurers licensed to write insurance in the states
in which the Company and its Subsidiaries conduct business, which insurance
contracts provide for coverages which are usual and customary in its business as
to amount and scope. Schedule 3.10 contains a correct and complete list and
description of all insurance policies owned by the Company or any of its
Subsidiaries, correct and complete copies of which have previously been made
available to the Investors. Neither the Company nor any of its Subsidiaries is
in default under any of its insurance policies, nor has the Company or any of
its Subsidiaries received any notice of cancellation or intent to cancel or
increase premiums with respect to present insurance policies. Schedule 3.10 also
contains a list of all pending claims with any insurance company and any
11
instances of a denial of coverage of the Company or any of its Subsidiaries by
any insurance company.
3.11 TRANSACTIONS WITH AFFILIATES. Other than as set forth in Schedule
3.11, no Affiliate of the Company or any Subsidiary is a customer or supplier
of, or is party to any Contractual Obligation with, the Company or any
Subsidiary.
3.12 CONFORMITY WITH LEGAL REQUIREMENTS. The operations of the Company
and its Subsidiaries as now conducted are not in violation of, nor is the
Company or any Subsidiary in default under, any Legal Requirements presently in
effect or the Company's or any Subsidiary's Charter or By-Laws. The Company and
its Subsidiaries have all franchises, licenses, permits or other authority
presently necessary for the conduct of their businesses as now conducted.
3.13 BENEFIT PLANS. Schedule 3.13 sets forth a complete list of all
Employee Benefit Plans and all Welfare Plans applicable to the employees of the
Company and its Subsidiaries. Each Employee Benefit Plan and Welfare Plan has
been administered in substantial compliance with its terms and all applicable
laws, including the Code and ERISA. Except as set forth in Schedule 3.13,
neither Company nor any Subsidiary has any obligation under any Welfare Plan to
provide for the continuation of benefits (other than disability payments and
medical benefits incurred for illness arising in the course of employment) for
more than one year after retirement or other termination of employment. No
"reportable events" within the meaning of section 4043 of ERISA have occurred
with respect to any Employee Benefit Plan. No Pension Plan is a "multiemployer
plan" as defined in ERISA. The present value of benefits liabilities as
described in Title IV of ERISA of Employee Benefit Plans does not exceed the
current value of such Employee Benefit Plans assets allocable to such benefits
liabilities by more than $50,000.
3.14 EMPLOYEES. None of the employees of the Company or any Subsidiary
is presently represented by a labor union, and no petition has been filed or
proceedings instituted by any employee or group of employees with any labor
relations board seeking recognition of a bargaining representative. Except as
set forth in Schedule 3.14, no controversies or disputes are pending between the
Company or any Subsidiary and any of its employees. To the Company's knowledge,
no employee of the Company or any Subsidiary is in violation of any term of any
Contractual Obligation with a former employer relating to the right of any such
employee to be employed by the Company or such Subsidiary because of the nature
of the Company's or such Subsidiary's business or the use of any trade secrets
or proprietary information. Except as set forth in Schedule 3.14, each employee
of the Company and its Subsidiaries is an "employee at will" and may be
terminated by the Company or such Subsidiary without payment of any amounts
other than accrued wages.
3.15 TAXES. The Company and each of its Subsidiaries has filed all
federal, state and local tax and information returns which are required to be
filed by it and such returns are true and correct. The Company and each of its
Subsidiaries have paid all taxes, interest and penalties, if any, reflected in
such tax returns or otherwise due and payable by it. The Company has no
knowledge of any material additional assessments or any basis therefor. The
charges, accruals and reserves on the balance sheet of the Company as of the
Balance Sheet Date in respect of taxes or other governmental charges are
adequate in amount for the payment of all liabilities for such taxes or other
governmental charges. The Company and its Subsidiaries have withheld or
collected from each payment made to its employees the amount of all taxes
required to be
12
withheld or collected therefrom and has paid over such amounts to the
appropriate taxing authorities. Any deficiencies proposed as a result of any
governmental audits of such tax returns have been paid or settled or are being
contested in good faith, and there are no present disputes as to taxes payable
by the Company or any of its Subsidiaries.
3.16 LITIGATION. Except as set forth on Schedule 3.16, No litigation
or proceeding before, or investigation by, any foreign, federal, state or
municipal board or other governmental or administrative agency or any arbitrator
is pending or, to the Company's knowledge, threatened (nor to the Company's
knowledge, does any basis exist therefor) against the Company or any of its
Subsidiaries or, to the Company's knowledge, any officer of the Company or any
Subsidiary, which individually or in the aggregate could result in any material
liability or which may otherwise result in a Material Adverse Effect, or which
seeks rescission of, seeks to enjoin the consummation of, or which questions the
validity of, this Agreement or any other Related Agreement or any of the
transactions contemplated hereby or thereby.
3.17 PATENTS AND TRADEMARKS.
(a) "Intellectual Property" shall mean any or all of the following
and all rights in, arising out of, or associated therewith anywhere in the world
held by such Person and not otherwise in the public domain: (1) all United
States, international and foreign patents and applications therefor (including
provisional applications) and all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part thereof; (2) all
inventions (whether patentable or not), patterns, drawings, blueprints,
specifications, products in development, processes, applications, circuits,
invention disclosures, improvements, trade secrets, proprietary information,
know how, mask works (and all information contained in a mask but not yet fixed
in a chip), technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (3) all copyrights, copyright registrations
and applications therefor; (4) all industrial designs and any registrations and
applications therefor throughout the world; (5) all trade names, logos, common
law trademarks and service marks, trademark and service ▇▇▇▇ registrations and
applications therefor and all goodwill associated therewith throughout the
world; (6) all databases and data collections and all rights therein throughout
the world; (7) all software including all source code, object code, firmware,
development tools, files, records and data, all media on which any of the
foregoing is recorded; (8) all permits, privileges or royalties; (9) all domain
names and website addresses; (10) any similar, corresponding or equivalent
rights to any of the foregoing and (11) all documentation related to any of the
foregoing.
(b) Schedule 3.17 sets forth each item of Intellectual Property
that is owned by the Company and that is used in or material to the conduct of
the Company's business as it is currently conducted (the "Company Intellectual
Property"), including, without limitation, all software programs and databases,
including any registration and/or application numbers therefor. Except as set
forth on Schedule 3.17, the Company owns and will own on the Closing Date each
item of Company Intellectual Property set forth on Schedule 3.17. The Company's
patents, trademarks and copyrights that have been duly registered with, filed in
or issued by, as the case may be, the U.S. Patent and Trademark Office and U.S.
Copyright Office or other filing offices, domestic or foreign are listed on
Schedule 3.17, and the same remain in full force and effect.
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(c) Schedule 3.17 lists each item of Intellectual Property other
than Company Intellectual Property that is necessary for the conduct of, or
otherwise material to, the Company's business as currently conducted ("Other
Intellectual Property"), including without limitation, all software programs.
The Company has the right, by license or other agreement, to use each item of
Other Intellectual Property.
(d) Schedule 3.17 sets forth all written or oral licenses,
permissions and arrangements pursuant to which (a) the Company permits any
Person to use any item of Company Intellectual Property (b) the Company uses any
Intellectual Property owned by any Person ((a) and (b) collectively, the
"Intellectual Property Licenses"). Except as set forth on Schedule 3.17, all
Intellectual Property Licenses are in full force and effect in accordance with
their terms, and are free and clear of any Liens.
(e) The Company has delivered to the Investors correct and
complete copies of (1) all registrations and applications for any Company
Intellectual Property; (2) all Intellectual Property Licenses listed on Schedule
3.17; and (3) copies of any assignments pursuant to which the Company owns any
Company Intellectual Property.
(f) Except as set forth on Schedule 3.17: (1) the Company is not
in material default under any Intellectual Property License, and to the
Company's knowledge, no such material default is currently threatened; (2) the
operation of the Company's business as currently conducted does not infringe the
proprietary rights of any Person or constitute unfair competition or trade
practices under the laws of any jurisdiction and the Company has not received
any notice, oral or written, that alleges the contrary; (3) to the Company's
knowledge, no Company Intellectual Property and no Other Intellectual Property
used by the Company under any Intellectual Property License is being infringed
by any third party or group thereof; and (4) there is no claim or demand of any
Person pertaining to, or any proceeding which is pending or, to the Company's
knowledge, threatened, that challenges the Company's rights with respect to any
item of Company Intellectual Property or any Other Intellectual Property used by
the Company, or the validity or enforceability of any item of Company
Intellectual Property, nor are there any claims that any default exists under
any Intellectual Property License.
(g) Except as set forth on Schedule 3.17, no item of Company
Intellectual Property or Other Intellectual Property, or any Intellectual
Property License, is subject to any outstanding order, ruling, decree, judgment
or stipulation by or with any court, tribunal arbitrator, or other Governmental
Authority that could affect the Seller's ability to use, license, or transfer
such Company Intellectual Property or its validity or enforceability.
(h) The Company has taken all steps that are reasonably required
to protect the Company's rights in confidential information and trade secrets of
the Company or the Company's business or provided by any third party to the
Company. Without limiting the foregoing, the Company has, and enforces, a policy
requiring each employee and contractor to execute (A) proprietary information
and confidentiality agreements in connection with Company Intellectual Property
and (B) invention assignment agreements, substantially in the Company's standard
forms, and all current employees and contractors of the Company have executed
such agreements.
14
3.18 CONSENTS. No consent, approval, qualification, order or
authorization of, or filing with any governmental authority is required in
connection with the Company's valid execution, delivery or performance of the
Related Agreements to which it is a party, or the offer, issue or sale of the
Investor Securities by the Company, the conversion of the Series A Preferred
Stock, or the issuance of Common Stock upon conversion of the Series A Preferred
Stock, or the consummation of any other transaction pursuant to this Agreement
on the part of the Company, except the filing of the Certificate of Designation
and filings under applicable federal securities or blue sky laws.
3.19 FILINGS, BROKER'S FEES. The Company is not obligated to pay any
broker's fee, finder's fee, investment banker's fee or other similar transaction
fee in connection with the transactions contemplated hereby.
3.20 MINUTE BOOKS. The minute books of the Company, which shall have
been provided to counsel for the Investors prior to the Closing if requested,
contain a complete record of actions taken at all meetings of directors and
stockholders since August 1995 and reflect all such actions accurately in all
material respects.
3.21 REAL PROPERTY HOLDING CORPORATION. The Company is not a "United
States real property holding corporation" as defined in section 897(c)(2) of the
Code and Treasury Regulation section 1.897-2(b).
3.22 DISCLOSURE. The Company's Annual Report on Form 10-KSB for the
year ended December 31, 2000 does not contain any untrue statement of a material
fact, nor omits to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. Neither this Agreement, nor any agreement,
certificate, statement or document furnished in writing by or on behalf of the
Company to the Investors in connection herewith or therewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. The Company has
furnished the Investors with an accurate and complete copy of its Annual Report
on Form 10-KSB for the 2000 fiscal year and all other reports or documents
required to be filed by the Company pursuant to the Exchange Act and the rules
and regulations of the Commission thereunder, since the filing of the most
recent annual report to stockholders. The Company has made all filings with the
Commission that it has been legally required to make.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
4.1 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each of the
Investors severally represents and warrants to the Company that:
(a) He or it has full power and authority to enter into this
Agreement and the Related Agreements, and that this Agreement and the Related
Agreements, when executed and delivered, will constitute the valid and binding
legal obligation of such Investor.
15
(b) He or it is an "accredited investor" for purposes of
Regulation D under the Securities Act and that he or it has sufficient knowledge
and experience in evaluating and investing in companies similar to the Company
in terms of the Company's stage of development so as to be able to evaluate the
risks and merits of his or its investment in the Company and is able financially
to bear the risks thereof. If such Investor is other than an individual, then
such Investor represents that it was not organized for the purpose of acquiring
the Series A Preferred Stock or, if such Investor was formed for the purpose of
acquiring the Series A Preferred Stock, then all of its members are "accredited
investors" for purposes of Regulation D under the Securities Act.
(c) He or it is acquiring the Investor Securities at the
applicable closing, subject to the terms hereof and related contemporaneous
agreements, for investment for his or its own account and not with a view to, or
for resale in connection with, any distribution thereof, and that such Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same; provided, however, that the disposition of the Investors'
property shall at all times remain in the Investors' control. By executing this
Agreement, each Investor further represents and warrants that such Investor does
not have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Investor Securities.
(d) He or it has had an opportunity to discuss the terms and
conditions of the offering of the Series A Preferred Stock and the Company,
business, management and financial affairs with the Company's management and has
received (or had made available to it) any financial and business documents
requested by him or it.
(e) He or it understands that the shares of Series A Preferred
Stock to be purchased hereunder have not been registered under the Securities
Act and must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration.
(f) He or it has no contract, arrangement or understanding with
any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
4.2 LEGEND. Each certificate representing shares of Investor
Securities shall bear a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
the securities laws of any state, and may not be sold, or
otherwise transferred, in the absence of such registration or
unless the Corporation has been furnished with an opinion of
counsel satisfactory to the Corporation that such registration is
not required."
ARTICLE V
COVENANTS OF THE COMPANY AND THE INVESTORS
16
5.1 ANNUAL STOCKHOLDER MEETING.
(a) As soon as practicable, the Company shall take all action
necessary in accordance with the Delaware general corporation law and its
Charter and By-laws to call, give notice of and convene a meeting of the
Company's stockholders to consider and vote upon the approval of the
transactions contemplated by this Agreement.
(b) The Company shall, as promptly as practicable, prepare and
file with the Commission a proxy statement (the "Proxy Statement") with respect
to the approval of the transactions contemplated by this Agreement. The Company
shall use commercially reasonable efforts to cause the Proxy Statement to be
mailed to the stockholders of the Company at the earliest practicable date and
shall use commercially reasonable efforts to hold the Annual Meeting as soon as
practicable after the date hereof. The Proxy Statement will contain a
recommendation of the board of directors of the Company that the stockholders of
the Company vote in favor of the issuance of the Series A Preferred Stock and
the transactions contemplated by this Agreement.
5.2 INQUIRIES AND NEGOTIATIONS. From the date hereof until the
termination hereof, the Company, its Subsidiaries and their respective officers,
directors, employees, representatives and other agents will not, directly or
indirectly, solicit or initiate any discussions, submissions of proposals or
offers or negotiations with or participate in any negotiations or discussions
with, or provide any information or date of any nature whatsoever to, or
otherwise cooperate in any other way with, or assist or participate in,
facilitate or encourage any effort or attempt by, any person, corporation,
entity or "group" (as defined in Section 13(d) of the Exchange Act) other than
the Investors, Medisys PLC, Surgical Innovations and their respective
Affiliates, representatives and agents (each a "Third Party") in connection with
any merger, consolidation, sale of any Subsidiary of division that is material
to the business of the Company and the Subsidiaries, sale of shares of capital
stock or other equity securities, tender or exchange offer, recapitalization,
debt restructuring or similar transaction involving the Company (such
transactions being hereinafter referred to as "Alternative Transactions"). The
Company shall immediately notify the Investors if any proposal, offer, inquiry
or other contact is received by, any information is requested from, or any
discussions or negotiations are sought to be initiated or continued with, the
Company in respect of an Alternative Transaction or any comparable transaction
with either of Medisys PLC, Surgical Innovations or any of their respective
Affiliates, and shall, in any such notice to the Investors, indicate the
identity of the Third Party and the terms and conditions of any proposals or
offers or the nature of any inquiries or contacts, and thereafter shall keep the
Investors informed, on a current basis, of the status and terms of any such
proposals or offers and the status of any such negotiations or discussions.
5.3 EXPENSES. The Company will bear its own expenses and legal fees
incurred on its behalf with respect to this Agreement and the Related
Agreements, and the Company hereby agrees to pay the reasonable fees, expenses
and disbursements of ▇▇▇▇▇ Partners III, L.P. and its Affiliates, including
those of Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol, counsel for the ▇▇▇▇▇
parties, with respect to services rendered in connection with the transactions
contemplated by this Agreement, up to an aggregate maximum of $150,000. The
Company represents that as of the date of this Agreement and through the earlier
of the First Closing or termination of this Agreement, the Company has and will
maintain $150,000 in cash in its bank accounts which amount will be available
for payment of the expenses referenced in the prior sentence.
17
5.4 USE OF PROCEEDS. Without the consent of Investors holding greater
than sixty-six and two thirds percent (66-2/3%) of the voting power of all of
the Investor Securities, the Company will not use the proceeds from the sale of
the Series A Preferred Stock hereunder for any purpose other than (i) working
capital and general corporate purposes and (ii) payment of all reasonable fees
and expenses incurred by the Company and the Investors in connection with the
transactions contemplated by this Agreement.
5.5 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including, without limitation, using all reasonable efforts to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings.
ARTICLE VI
MISCELLANEOUS
6.1 INDEMNIFICATION.
(a) All representations, warranties, covenants or agreements made
herein or in any Related Agreement or in any closing certificate or other
certificate delivered to the Investors pursuant to an express requirement hereof
shall be deemed to have been material and relied on by the Investors,
notwithstanding any investigation made by the Investors or on the Investors'
behalf, and shall survive the execution and delivery to the Investors hereof and
of the Investor Securities.
(b) The Company shall indemnify and hold any Investors harmless
from and against any and all actions, causes of action, suits, litigation,
losses, liabilities, damages and expenses (including, but not limited to,
reasonable legal fees and court costs), whether or not resulting from judgments
or arbitration awards, that shall be suffered or incurred by any Investor, as
the case may be, resulting from or arising out of any breach of any of the
representations, warranties, covenants or agreements of the Company made in this
Agreement or in any Related Agreement to which the Company is a party or in any
schedule, certificate, exhibit or other instrument furnished or to be furnished
by the Company hereunder or thereunder.
(c) The indemnified party will notify the indemnifying party in
writing within ten days after the receipt by any indemnified party of any notice
of legal process of any suit brought against or claim made against such
indemnified party as to any matters covered by this Section 6.1. The
indemnifying party shall be entitled to participate at its own expense in the
defense of any claim, action, suit or proceeding covered by this Section 6.1,
or, if it so elects, to assume at its expense by counsel satisfactory to the
indemnified parties the defense of any such claim, action, suit or proceeding,
and if the indemnifying party elects to assume such defense, the indemnified
party shall be entitled to participate in the defense of any such claim, action,
suit or proceeding at its expense.
18
6.2 SURVIVAL. The obligations of the Company to the Investors under
this Agreement shall survive the redemption, repurchase or transfer of
any or all of the Investor Securities.
6.3 TERMINATION.
(a) This Agreement may be terminated, whether before or after
approval by the stockholders of the Company:
(i) by mutual action of the board of directors of the
Company and the Investors who have agreed to purchase at least
sixty-six and two-thirds percent (66-2/3%) of the Investor
Securities; or
(ii) by either the Company or Investors who have agreed to
purchase at least sixty-six and two-thirds percent (66-2/3%) of
the Investor Securities, if (A) the conditions to its obligations
under Sections 2.4 and 2.5, as applicable, shall not have been
complied with or performed in any material respect and such
noncompliance or nonperformance shall not have been cured or
eliminated (or by its nature cannot be cured or eliminated) by
the other party on or before December 31, 2001 or such later date
as agreed to by the Company and ▇▇▇▇▇ Partners III, L.P., or (B)
the First Closing shall not have occurred prior to the close of
business on December 31, 2001 or such later date as agreed to by
the Company and ▇▇▇▇▇ Partners III, L.P.; unless in the case of
either (A) or (B), such event has been caused by the breach of
this Agreement by the party seeking such termination.
(b) In the event this Agreement is terminated prior to the First
Closing pursuant to Section 6.3(a) above (other than a termination by the
Company due to the failure of ▇▇▇▇▇ Partners III, L.P. or any of its Affiliates
to satisfy the condition set forth in Section 2.5(a)), the Company will issue to
▇▇▇▇▇ Partners III, L.P. and its Affiliates (as specified by ▇▇▇▇▇ Partners III,
L.P.) three year warrants to purchase an aggregate 1.0 million shares of Common
Stock of the Company at an exercise price of $0.50 per share.
6.4 NOTICES. Any notice or other communication in connection with this
Agreement or the Investor Securities shall be deemed to be delivered if in
writing addressed as provided below and if either (a) actually delivered at said
address, (b) in the case of a letter, seven business days shall have elapsed
after the same shall have been deposited in the United States mails, postage
prepaid and registered or certified, return receipt requested or (c) transmitted
to any address outside of the United States, by telecopy and confirmed by
overnight or two-day courier:
If to the Company, to it at ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
attention: ▇▇▇▇ ▇▇▇▇▇, telecopy: (▇▇▇) ▇▇▇-▇▇▇▇, telephone: (▇▇▇) ▇▇▇-▇▇▇▇, with
a copy to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, 77 West ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq., telecopy (▇▇▇) ▇▇▇-▇▇▇▇, telephone (801)
▇▇▇-▇▇▇▇ or at such other address as the Company shall have specified by notice
to the Investors.
If to the Investors, to the Investors' respective addresses set forth
on Annex I, or at such other address as the Investors shall have specified by
notice to the Company, with a copy to Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ &
Kristol, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Esq., telecopy: (▇▇▇) ▇▇▇-▇▇▇▇, telephone: (▇▇▇) ▇▇▇-▇▇▇▇.
19
If to any other holder of record of any Investor Security, to it at
its address set forth in the stock register of the Company.
6.5 PRESS RELEASES. The Company and all of the Investors shall agree
on a form of press release related to this Agreement following the Closing Date
and the Company may thereafter issue such press release from time to time
without consulting the Investors named in such press release (if any); provided
that the Company shall not issue such press release in the event that (i) any
material modifications are made to the form of press release or (ii) the
information provided regarding any Investor is modified in any manner.
Notwithstanding the foregoing, this Section 6.5 shall in no way restrict the
Company's ability to file with the Securities and Exchange Commission such
information as Company counsel deems to be required or prudent under the
circumstances.
6.6 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only with
the written consent of (i) the Company and (ii) Investors who have agreed to
purchase at least sixty-six and two-thirds percent (66-2/3%) of the Investor
Securities or, following the First Closing, those Investors holding at the
relevant time greater than sixty-six and two-thirds percent (66-2/3%) of the
voting power of all Investor Securities. Any amendment or waiver effected in
accordance with this Section 6.6 shall be binding upon each holder of any
Investor Securities and the Company and each of its Subsidiaries.
6.7 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the personal representatives, successors and assigns
of the respective parties hereto. The Company shall not have the right to assign
its rights or obligations hereunder or any interest herein without obtaining the
prior written consent of the Investors or, following the Closing, the Investors
holding at the relevant time greater than sixty-six and two-thirds percent
(66-2/3%) of the voting power of all Investor Securities. The Investors may
assign or transfer their rights under this Agreement to the extent permitted
herein and by the other agreements between the respective parties and the
Company. Whether or not any express assignment has been made in this Agreement,
provisions of this Agreement that are for the Investors' benefit as the holder
of any Investor Securities are also for the benefit of, and enforceable by, all
subsequent holders of Investor Securities.
6.8 GENERAL. The invalidity or unenforceability of any term or
provision hereof shall not affect the validity or enforceability of any other
term or provision hereof. The headings in this Agreement are for convenience of
reference only and shall not alter or otherwise affect the meaning hereof. This
Agreement, the Related Agreements and the other items referred to herein or
therein constitute the entire understanding of the parties hereto with respect
to the subject matter hereof and thereof and supersede all present and prior
agreements, whether written or oral. This Agreement is intended to take effect
as a sealed instrument and may be executed in any number of counterparts which
together shall constitute one instrument and shall be governed by and construed
in accordance with the laws (other than the conflict of laws rules) of the State
of Delaware, and shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns.
20
6.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. One or more counterparts of this
Agreement or any Exhibit or Schedule hereto may be delivered via facsimile and
such facsimile counterpart shall have the same effect as an original counterpart
hereof.
[Signature pages follow]
21
The undersigned have executed this Agreement as of the date first
above written.
SPECIALIZED HEALTH PRODUCTS
INTERNATIONAL, INC.
By: ____________________________
Name:
Title:
▇▇▇▇▇ PARTNERS III, L.P.
By: Claudius, L.L.C., its General Partner
By: ____________________________
Name:
Title:
▇▇▇▇▇ PARTNERS INTERNATIONAL III, L.P.
By: Claudius, L.L.C., its General Partner
By: ____________________________
Name:
Title:
▇▇▇▇▇ EMPLOYEE FUND III, L.P.
By: Wesson Enterprises, Inc., its General Partner
By:____________________________
Name:
Title:
22
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
----------------------------------------------
Counterpart Signature Page to Series A Preferred Stock Purchase Agreement
-------------------------------------------------------------------------
The undersigned hereby agrees to become a party as an Investor to the
Series A Preferred Stock Purchase Agreement dated October 5, 2001 (the
"Agreement") among Specialized Health Products International, Inc. (the
"Company") and the Investors named therein, and hereby authorizes the Company
(i) to attach this Counterpart Signature Page to such Agreement and (ii) to add
the name of the undersigned to the list of Investors set forth in Annex I to
such Agreement.
______________________________
Date:______________________
23
ANNEX I TO SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
Investors
---------
Principal
Amount of
Bridge
Notes to the Cash
Name and Address Shares Converted Purchase Price
----------------------------------------- ---------- ------------ --------------
▇▇▇▇▇ Partners III, L.P. 6,981,397 -- $ 3,197,479.85
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ Partners International III, L.P. 631,937 -- 289,427.15
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ Employees Fund III, L.P. 28,588 -- 13,093.00
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Banyan Investment Company 1,091,703 $500,000 --
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Whisper Investment Co. 109,170 50,000 --
▇▇▇ ▇. ▇▇▇ ▇.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Will ▇. ▇▇▇▇▇ 109,170 50,000 --
▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 218,341 100,000 --
▇▇▇▇ ▇. ▇▇ ▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Alpine Securities 54,585 25,000 --
FBO ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Alpine Securities 218,341 100,000 --
FBO ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ #2
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Alpine Securities 65,502 30,000 --
FBO ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
24
Harbour Trustees Limited 218,341 100,000 --
▇.▇. ▇▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇ Port, Guernsey
GY1 3DD
▇▇▇▇ Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, #▇▇ 218,341 100,000 --
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ 109,170 50,000 --
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ 87,336 40,000 --
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Family Trust
▇▇▇▇▇ ▇▇▇▇▇▇▇ - Trustee 54,585 25,000 --
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. 163,755 75,000 --
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Alpine Securities
FBO ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇ 21,834 10,000 --
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇.▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ 10,917 5,000 --
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ 74,236 34,000 --
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇. 32,751 15,000 --
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Asdale Limited
163,755 75,000 --
▇▇▇▇▇ ▇▇▇▇▇▇
253,275 116,000 --
Total 10,917,030 $1,500,000 $3,500,000
25
ANNEX II TO SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
Investors
---------
Cash
Name and Address Shares Purchase Price
---------------------------------------------- ---------- --------------
▇▇▇▇▇ Partners III, L.P. 6,981,397 $ 3,197,479.85
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ Partners International III, L.P. 631,937 289,427.15
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ Employees Fund III, L.P. 28,588 13,093
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Banyan Investment Company 1,091,703 500,000
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Whisper Investment Co. 109,170 50,000
▇▇▇ ▇. ▇▇▇ ▇.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Will ▇. ▇▇▇▇▇ 109,170 50,000
▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 218,341 100,000
▇▇▇▇ ▇. ▇▇ ▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Alpine Securities 54,585 25,000
FBO ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Alpine Securities 218,341 100,000
FBO ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ #2
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Alpine Securities 65,502 30,000
FBO ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Harbour Trustees Limited 218,341 100,000
▇.▇. ▇▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇ Port, Guernsey GY1 3DD
26
▇▇▇▇ Financial Corporation 218,341 100,000
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, #▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇ 109,170 50,000
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ 87,336 40,000
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Family Trust 54,585 25,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ - Trustee
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇. ▇▇▇▇ ▇▇▇▇▇▇ 163,755 75,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Alpine Securities 21,834 10,000
FBO ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 10,917 5,000
▇▇▇▇▇ ▇.▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ 74,236 34,000
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 32,751 15,000
▇▇▇▇ ▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Asdale Limited 163,755 75,000
▇▇▇▇▇ ▇▇▇▇▇▇ 253,275 116,000
Total 10,917,030 $5,000,000
27