Exhibit 10.34
HYDRO MED SCIENCES, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
May 30, 2003
TABLE OF CONTENTS
PAGE
SECTION 1 GENERAL...................................................1
1.1 Definitions...............................................1
SECTION 2 RESTRICTIONS ON TRANSFER; REGISTRATION....................3
2.1 Restrictions on Transfer..................................3
2.2 Demand Registration.......................................5
2.3 Piggyback Registrations...................................6
2.4 Form S-2 and S-3 Registration.............................7
2.5 Expenses of Registration..................................9
2.6 Obligations of the Company................................9
2.7 Termination of Registration Rights.......................11
2.8 Delay of Registration; Furnishing Information............11
2.9 Indemnification..........................................11
2.10 Assignment of Registration Rights........................13
2.11 Amendment of Registration Rights.........................14
2.12 Limitation on Subsequent Registration Rights.............14
2.13 "Market Stand-Off" Agreement.............................14
2.14 Agreement to Furnish Information.........................14
2.15 Rule 144 Reporting.......................................14
SECTION 3 COVENANTS................................................15
3.1 Basic Financial Information and Reporting................15
3.2 Inspection Rights........................................15
3.3 Confidentiality of Records...............................16
3.4 Reservation of Common Stock..............................16
3.5 Stock Vesting............................................16
3.6 Special Relationships of Prospective Employees...........16
3.7 Directors' Liability and Indemnification.................17
3.8 Reimbursement of Expenses................................17
3.9 Qualified Small Business.................................17
3.10 Election of Directors....................................17
3.11 Observer Rights..........................................17
3.12 Termination of Covenants.................................18
SECTION 4 PREEMPTIVE RIGHTS........................................18
4.1 Subsequent Offerings.....................................18
4.2 Exercise of Preemptive Rights............................18
4.3 Termination and Waiver of Preemptive Right...............19
4.4 Transfer of Preemptive Rights............................19
4.5 Excluded Securities......................................19
SECTION 5 MISCELLANEOUS............................................20
5.1 Governing Law............................................20
5.2 Survival.................................................20
5.3 Successors and Assigns...................................20
5.4 Entire Agreement.........................................20
5.5 Severability.............................................20
5.6 Amendment and Waiver.....................................20
5.7 Delays or Omissions......................................21
5.8 Notices..................................................21
5.9 Attorneys' Fees..........................................21
5.10 Titles and Subtitles.....................................21
5.11 Additional Investors.....................................21
5.12 Counterparts.............................................22
5.13 Joinder of Spouses.......................................22
HYDRO MED SCIENCES, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (this "Agreement")
is entered into as of May 30, 2003, by and among HYDRO MED SCIENCES, INC., a
Delaware corporation (the "Company"), the stockholders of the Company listed as
"Common Stock Investors" on Exhibit A hereto (collectively, the "Common Stock
Investors", and each individually, a "Common Stock Investor"), the investors
listed as the "Series B Investors" on Exhibit A hereto (the "Series B
Investors"), and the stockholders of the Company listed as "Series A Investors"
on Exhibit A hereto (the "Series A Investors" and, together with the Common
Stock Investors and the Series B Investors, the "Investors").
RECITALS
The Series B Investors are purchasing shares of the Company's Series B
Convertible Preferred Stock pursuant to that certain Stock Purchase Agreement
(the "Purchase Agreement") of even date herewith (the "Financing").
The obligations in the Purchase Agreement are conditioned upon the
execution and delivery of this Agreement.
In connection with the consummation of the Financing, the parties
desire to enter into this Agreement in order to grant registration, information
rights and other rights to the Investors as set forth below.
AGREEMENT
In consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
intending to be legally bound hereby, the parties agree hereto as follows:
1. GENERAL.
1.1. Definitions. As used in this Agreement the following terms shall have the
following respective meanings:
"Board of Directors" means the Company's Board of Directors.
"Certificate" means the Company's Restated Certificate of
Incorporation, as filed with the Delaware Secretary of State on May 30, 2003.
"Common Stock" means the Company's common stock, par value
$.001 per share.
"Equity Securities" means (i) any Common Stock, Preferred
Stock, or other security of the Company, (ii) any security convertible, with or
without consideration, into any Common Stock, Preferred Stock, or other security
of the Company (including any option to purchase such a convertible security),
(iii) any security carrying any warrant or right to subscribe to or purchase any
Common Stock, Preferred Stock, or other security of the Company, or (iv) any
such warrant or right.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Form S-2" means such form under the Securities Act as in
effect on the date hereof or any successor or similar registration form under
the Securities Act subsequently adopted by the SEC that permits inclusion or
incorporation of certain information by reference to other documents filed by
the Company with the SEC.
"Form S-3" means such form under the Securities Act as in
effect on the date hereof or any successor or similar registration form under
the Securities Act subsequently adopted by the SEC, which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
"GP Strategies" means GP Strategies Corporation, a Delaware
corporation.
"Holder" means any person owning of record Registrable
Securities, or securities convertible into Registrable Securities that have not
been sold to the public or any assignee of record of such Registrable Securities
or securities in accordance with Section 2.10 hereof.
"Preferred Stock" means the Company's preferred stock, par
value $.001 per share.
"Qualified Offering" a firm commitment underwritten public
offering of the Company's Common Stock, pursuant to an effective registration
statement under the Securities Act (i) at a public offering price per share,
before deductions for underwriter discounts and commissions, of at least three
(3) times the higher of the then-applicable conversion price of the Series B
Convertible Preferred Stock or Series A Convertible Preferred Stock, and (ii)
with aggregate proceeds to the Company of at least $25,000,000 before deductions
for underwriter discounts and commissions and any and all expenses of such
underwritten offering incurred by the Company.
"Register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"Registrable Securities" means (a) Common Stock of the Company
issued or issuable upon conversion of the Shares, (b) for purposes of Section
2.3 and 2.4 only (and to the extent such provisions relate to Section 2.3 or
2.4, Sections 2.1, 2.5, 2.6, 2.7, 2.8, 2.9, 2.10, 2.11, 2.12, 2.13, 2.14, 2.15
or Section 5), Common Stock owned by GP Strategies, and (c) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under Section 2 of this Agreement
are not assigned.
"Registrable Securities then outstanding" shall be the number
of shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities, excluding any Registrable Securities as to which the rights under
Section 2 have terminated pursuant to Section 2.7.
"Registration Expenses" mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements of a
single special counsel for the Holders, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).
"SEC" or "Commission" means the Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Expenses" mean all underwriting discounts and selling
commissions applicable to the sale.
"Series A Convertible Preferred Stock" means shares of the
Company's Preferred Stock designated as Series A Convertible Preferred Stock,
par value $.001 per share.
"Series B Convertible Preferred Stock" means shares of the
Company's Preferred Stock designated as Series B 10% Convertible Preferred
Stock, par value $.001 per share.
"Shares" mean (i) Series B Convertible Preferred Stock issued
pursuant to the Purchase Agreement held by the Series B Investors hereto and
their permitted assigns, (ii) Series A Convertible Preferred Stock held by the
Series A Investors and their permitted assigns, and (iii) for purposes of
Section 2.3 and 2.4 only (and to the extent such provisions relate to Section
2.3 or 2.4, Sections 2.1, 2.5, 2.6, 2.7, 2.8, 2.9, 2.10, 2.11, 2.12, 2.13 and
2.14 or Section 5), shares of Common Stock held by GP Strategies and its
permitted assigns.
"Special Registration Statement" means a registration
statement relating to any employee benefit plan or with respect to any corporate
reorganization or other transaction under Rule 145 of the Securities Act.
2. RESTRICTIONS ON TRANSFER; REGISTRATION.
2.1. Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any portion of the
Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by the terms of this
Agreement, (B) such Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (C) if reasonably
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act. It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.
Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement, detailed statement or opinion of counsel
shall be necessary for a transfer by a party hereto which is (A) a partnership
to its partners or former partners in accordance with partnership interests, (B)
a corporation to its shareholders in accordance with their interest in the
corporation, (C) a limited liability company to its members or former members in
accordance with their interest in the limited liability company, (D) to the
party's family member or trust for the benefit of an individual party, (E) an
entity which is controlled by, controls or is under common control with the
transferor (an "Affiliate"), or (F) a Common Stock Investor to another Common
Stock Investor or then current employees of the Company; provided that in each
case the transferee will be subject to the terms of this Agreement to the same
extent as if he, she or it were an original party hereunder.
(b) Each certificate representing Shares or Registrable Securities shall (unless
otherwise permitted by the provisions of the Agreement) be stamped or otherwise
imprinted with a legend substantially similar to the following (in addition to
any legend required under applicable state securities laws or under any other
agreement):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE STATE SECURITIES
OR BLUE SKY LAWS OF ANY JURISDICTION. SUCH SHARES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. COPIES OF THE
AGREEMENTS COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
(c) If such Shares or Registrable Securities are proposed to be disposed of, the
Company shall be obligated to reissue promptly certificates without the
foregoing legend at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities may
lawfully be so disposed of thereafter without registration, qualification, or
legend.
2.2. Demand Registration.
(a) Subject to the conditions of this Section 2.2, if the Company shall receive
a written request from a Holder or Holders of at least 50% of the Registrable
Securities then outstanding (the "Initiating Holders") that the Company file a
registration statement under the Securities Act covering the registration of a
majority of the Registrable Securities owned by such Initiating Holders, then
the Company shall, within 30 days of receipt thereof, give written notice of
such request to all Holders and, subject to the limitations of this Section 2.2,
use its commercially reasonable efforts to file a registration statement under
the Securities Act with the Commission covering all Registrable Securities that
the Initiating Holders request to be registered.
(b) If the Initiating Holders intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to this Section 2.2 and the
Company shall include such information in the written notice referred to in
Section 2.2(a), as applicable. In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company (which underwriter or
underwriters shall be reasonably acceptable to a majority in interest of the
Initiating Holders). Notwithstanding any other provision of this Section 2.2, if
the underwriter advises the Company that marketing factors require a limitation
of the number of securities to be underwritten (including Registrable
Securities) then the Company shall so advise all Holders of Registrable
Securities that would otherwise be underwritten pursuant hereto, and the number
of shares that may be included in the underwriting shall be allocated first to
the Holders who are holders of Series B Convertible Preferred Stock (or shares
of Common Stock issued upon conversion thereof) and Series A Convertible
Preferred Stock (or shares of Common Stock issued upon conversion thereof) on a
pro rata basis based on the total number of Registrable Securities held by such
Holders of Series B Convertible Preferred Stock and Series A Convertible
Preferred Stock; provided, however, that the number of shares of Registrable
Securities to be included in such underwriting and registration shall not be
reduced unless all other securities of the Company are first entirely excluded
from the underwriting and registration. Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration pursuant to this
Section 2.2:
(1) prior to the earlier of (A) six months following a
Qualified Offering, and (B) December 31, 2004;
(2) after the Company has effected two (2) registrations
pursuant to Section 2.2(a), and such registrations have been declared or ordered
effective;
(3) during the period starting with the date of filing of,
and ending on the date 90 days following the effective date of, any registration
statement (other than a Special Registration Statement) of the Company;
(4) if within 30 days of receipt of a written request from
Initiating Holders pursuant to Section 2.2(a), the Company gives notice to the
Holders of the Company's intention to make a Qualified Offering within 90 days;
(5) if the Company shall furnish to the Initiating Holders,
a certificate signed by the Chairman of the Board of Directors stating that in
the good faith judgment of the Board of Directors, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be effected at such time, in which event the Company shall have the right to
defer such filing for a period of not more than 120 days after receipt of the
request of the Initiating Holders; provided that such right to delay a request
shall be exercised by the Company not more than once in any twelve-month period;
or
(6) if the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 2.4 below.
2.3. Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least 20 days prior to the filing of any
registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding Special Registration Statements) and will afford each
such Holder an opportunity to include in such registration statement all or part
of such Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by it shall, within 15 days after the above-described notice
from the Company, so notify the Company in writing. Such notice shall state the
intended method of disposition of the Registrable Securities by such Holder. If
a Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(a) Underwriting. If the registration statement under which the Company gives
notice under this Section 2.3 is for an underwritten offering, the Company shall
so advise the Holders of Registrable Securities. In such event, the right of any
such Holder to be included in a registration pursuant to this Section 2.3 shall
be conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of the
Agreement, if the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting shall be allocated, first, to
the Company; second, to the Holders who are holders of Series B Convertible
Preferred Stock (or shares of Common Stock issued upon conversion thereof) and
Series A Convertible Preferred Stock (or shares of Common Stock issued upon
conversion thereof) on a pro rata basis based on the total number of Registrable
Securities held by such Holders of Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock; and third, to the Holders who are holders
of Common Stock (issued otherwise than upon conversion of Series B Convertible
Preferred Stock or Series A Convertible Preferred Stock) on a pro rata basis
based on the total number of Registrable Securities held by such Holders;
provided, however, that the number of shares of Registrable Securities to be
included in such underwriting and registration shall not be reduced unless all
other securities of the Company (other than securities being offered by the
Company and Registrable Securities being offered by the Holders) are first
entirely excluded from the underwriting and registration. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter,
delivered at least ten business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration. For any
Holder that is a partnership or corporation, the partners, retired partners,
stockholders and Affiliates of such Holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing person shall be deemed to be a single "Holder," and any pro rata
reduction with respect to such "Holder" shall be based upon the aggregate amount
of shares of Registrable Securities owned by all entities and individuals
included in such "Holder," as defined in this sentence.
(b) Right to Terminate Registration. The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 2.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration Expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 2.5 hereof.
2.4. Form S-2 and S-3 Registration. In case the Company shall receive from a
Holder or Holders of at least 50% of the Registrable Securities then outstanding
a written request or requests that the Company effect a registration on Form S-2
or Form S-3 or any similar short-form registration statement and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any related
qualification or compliance, to all other Holders of Registrable Securities; and
(b) as soon as practicable, use its best efforts to file such registration
statement as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Holder's Registrable Securities as
are specified in such request, together with all or such portion of the
Registrable Securities of any other Holder or Holders joining in such request as
are specified in a written request given within 15 days after receipt of such
written notice from the Company; provided, however, that the Company shall not
be obligated to effect any such registration, qualification or compliance
pursuant to this Section 2.4:
(i) if Form S-2 or Form S-3, as the case may be, is not available for such
offering by the Holders, or
(ii) if the Company shall furnish to the Holders a certificate signed by the
Chairman of the Board of Directors stating that in the good faith judgment of
the Board of Directors, it would be seriously detrimental to the Company and its
stockholders for such Form S-2 or Form S-3 registration to be effected at such
time, in which event the Company shall have the right to defer the filing of the
registration statement for a period of not more than 90 days after receipt of
the request of the Holder or Holders under this Section 2.4; provided, that such
right to delay a request shall be exercised by the Company not more than once in
any twelve-month period, or
(iii) in any particular jurisdiction in which the Company would be required to
qualify to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance, or
(iv) if the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such Form S-2 or Form S-3 registration
statement, propose to sell Registrable Securities and such other securities (if
any) at an aggregate price to the public of less than $3,000,000; or
(v) if the Company has filed a registration statement at the request of Holders
under this Section 2.4 within the preceding six months.
(c) Subject to the foregoing, the Company shall file a Form S-2 or Form S-3
registration statement, as the case may be, covering the Registrable Securities
and other securities so requested to be registered as soon as practicable after
receipt of the request or requests of the Holders. Registrations effected
pursuant to this Section 2.4 shall not be counted as demands for registration or
registrations effected pursuant to Sections 2.2 or 2.3, respectively.
(d) If the registration statement under which the Company gives notice under
this Section 2.4 is for an underwritten offering, the Company shall so advise
the Holders of Registrable Securities. In such event, the right of any such
Holder to be included in a registration pursuant to this Section 2.4 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this
Agreement, if the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting shall be allocated, first, to
the Holders who are holders of Series B Convertible Preferred Stock (or shares
of Common Stock issued upon conversion thereof) and Series A Convertible
Preferred Stock (or shares of Common Stock issued upon conversion thereof) on a
pro rata basis based on the total number of Registrable Securities held by such
Holders of Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock; and second, to the Holders who are holders of Common Stock
issued other than upon conversion of the Series B Convertible Preferred Stock or
Series A Convertible Preferred Stock on a pro rata basis based on the total
number of Registrable Securities held by such Holders; provided, however, that
the number of shares of Registrable Securities to be included in such
underwriting and registration shall not be reduced unless all other securities
of the Company (other than securities being offered by the Company and
Registrable Securities being offered by the Holders) are first entirely excluded
from the underwriting and registration. If any Holder disapproves of the terms
of any such underwriting, such Holder may elect to withdraw therefrom by written
notice to the Company and the underwriter, delivered at least ten (10) business
days prior to the effective date of the registration statement. Any Registrable
Securities excluded or withdrawn from such underwriting shall be excluded and
withdrawn from the registration. For any Holder which is a partnership or
corporation, the partners, retired partners, stockholders and Affiliates of such
Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing person shall be
deemed to be a single "Holder," and any pro rata reduction with respect to such
"Holder" shall be based upon the aggregate amount of shares of Registrable
Securities owned by all entities and individuals included in such "Holder," as
defined in this sentence.
2.5. Expenses of Registration. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company; provided,
however, that the Company shall not be required to pay any Registration Expenses
incurred in connection with any registration, qualification or compliance
proceedings begun pursuant to a request under Section 2.2 if such request is
subsequently withdrawn by the Holders of a majority of the Registrable
Securities to be included in such registration, qualification or compliance (in
which case all participating Holders shall bear all such Registration Expenses).
All Selling Expenses incurred in connection with any registrations hereunder,
shall be borne by the holders of the securities so registered pro rata on the
basis of the number of shares so registered and sold.
2.6. Obligations of the Company. Whenever required to effect the registration of
any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the SEC a registration statement with respect to such
Registrable Securities and use all reasonable efforts to cause such registration
statement to become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep such
registration statement effective (i) in the case of any registration under
Section 2.2, for up to 180 days or, if earlier, until the Holder or Holders have
completed the distribution related thereto and (ii) in the case of any
registration under Section 2.4, indefinitely or, if earlier, until the Holder or
Holders have completed the distribution related thereto.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders; provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter(s) of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement.
(f) Notify each Holder of Registrable Securities covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing. The Company will
use reasonable efforts to amend or supplement such prospectus in order to cause
such prospectus not to include any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Use its reasonable efforts to furnish, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (ii) a letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering addressed to the
underwriters.
(h) Use reasonable efforts to cause all such Registrable Securities to be listed
on each securities exchange on which similar securities issued by the Company
are then listed and to be qualified for trading on each system on which
securities issued by the Company are from time to time qualified.
(i) Use its reasonable efforts to provide a transfer agent and registrar for all
such Registrable Securities not later than the effective date of such
registration statement and thereafter maintain such transfer agent and
registrar.
(j) Use its reasonable efforts to provide a CUSIP number for all Registrable
Securities, not later than the effective date of the applicable registration
statement.
2.7. Termination of Registration Rights. All registration rights granted under
Sections 2.2, 2.3, and 2.4 shall terminate and be of no further force and effect
with respect to any Holder when all Registrable Securities held by and issuable
to such Holder (and its Affiliates, partners, former partners, members and
former members) may be sold under Rule 144 during any 90-day period.
2.8. Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an injunction restraining
or otherwise delaying any such registration as the result of any controversy
that might arise with respect to the interpretation or implementation of this
Section 2.
(b) It shall be a condition precedent to the obligations of the Company to take
any action pursuant to Section 2.2, 2.3, or 2.4 that the selling Holders shall
furnish to the Company such information regarding themselves, the Registrable
Securities held by them and the intended method of disposition of such
securities as shall be required to effect the registration of their Registrable
Securities.
2.9. Indemnification. In the event any Registrable Securities are included in a
registration statement under Section 2.2, 2.3, or 2.4:
(a) To the extent permitted by law, the Company will indemnify and hold harmless
each Holder, the partners, members, officers and directors of each Holder, any
underwriter (as defined in the Securities Act) for such Holder and each person,
if any, who controls such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will pay as incurred to
each such Holder, partner, officer, director, underwriter or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, or by any partner,
member, officer, director, underwriter or controlling person of such Holder; and
provided, further, that such indemnity shall not apply with respect to any
untrue statement or alleged untrue statement or omission or alleged omission in
any preliminary or final prospectus if the prospectus (as amended or
supplemented), as provided to the person claiming indemnification prior to the
time the Company made the sale to the person making the claim of a Violation,
did not contain such statement or alleged statement or omission or alleged
omission.
(b) To the extent permitted by law, each Holder will, if Registrable Securities
held by such Holder are included in the securities as to which such registration
qualifications or compliance is being effected, indemnify and hold harmless the
Company, each of its directors, its officers and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act, any underwriter and any other Holder selling securities under such
registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder in writing
expressly for use in connection with such registration; and each such Holder
will pay as incurred any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter or other
Holder, or partner, officer, director or controlling person of such other Holder
in connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.9(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.9
exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 2.9 of
notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 2.9, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 2.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with respect
to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, that in no event shall any contribution by a Holder hereunder exceed
the net proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.9 shall
survive completion of any offering of Registrable Securities in a registration
statement and the termination of this Agreement. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
2.10. Assignment of Registration Rights.
(a) The rights to cause the Company to register Registrable Securities pursuant
to this Section 2 may be assigned by a Holder to a transferee or assignee of
Registrable Securities which (i) is a subsidiary, parent, Affiliate, general
partner, limited partner, retired partner, member, retired member or shareholder
of a Holder, (ii) is a Holder's family member or trust for the benefit of an
individual Holder or (iii) acquires at least 100,000 shares of such Holder's
Registrable Securities (as adjusted for any stock dividend, combination, splits,
reorganization, and the like); provided, however, (A) the transferor shall,
within ten (10) days after such transfer, furnish to the Company written notice
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned and (B) such
transferee shall agree to be subject to all restrictions set forth in this
Agreement.
(b) Notwithstanding anything to the contrary contained in this Section 2.10, no
assignment under Section 2.10(a) shall be valid if the transferee of the
Registrable Securities of a Holder is determined in good faith by the Board of
Directors to be a direct competitor of the Company.
2.11. Amendment of Registration Rights. Any provision of this Section 2 may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 2.11 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12. Limitation on Subsequent Registration Rights. Other than as provided in
Section 5.11, after the date of this Agreement, the Company shall not, without
the prior written consent of the Holders of at least a majority of the
Registrable Securities then outstanding, enter into any agreement with any
holder or prospective holder of any securities of the Company that would grant
such holder registration rights pari passu or senior to those granted to the
Holders hereunder.
2.13. "Market Stand-Off" Agreement. Each Holder hereby agrees that such Holder
shall not sell, transfer, make any short sale of, grant any option for the
purchase of, or enter into any hedging or similar transaction with the same
economic effect as a sale of, any Common Stock (or other securities) of the
Company held by such Holder (other than those included in the registration) for
a period specified by the representative of the underwriters of Common Stock (or
other securities) of the Company not to exceed 180 days following the effective
date of a registration statement of the Company filed under the Securities Act;
provided that such agreement shall apply only to the Company's initial Qualified
Offering.
2.14. Agreement to Furnish Information. Each Holder agrees to execute and
deliver such other agreements as may be reasonably requested by the Company or
the underwriter which are consistent with the foregoing or which are necessary
to give further effect thereto. In addition, if requested by the Company or the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Holder shall provide, within ten (10) days of such request, such
information as may be required by the Company or such representative in
connection with the completion of any public offering of the Company's
securities pursuant to a registration statement filed under the Securities Act.
2.15. Rule 144 Reporting. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are understood
and defined in SEC Rule 144 or any similar or analogous rule promulgated under
the Securities Act, at all times after the effective date of the first
registration filed by the Company for an offering of its securities to the
general public;
(b) File with the SEC, in a timely manner, all reports and other documents
required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish to such Holder
forthwith upon request: a written statement by the Company as to its compliance
with the reporting requirements of said Rule 144 of the Securities Act, and of
the Exchange Act (at any time after it has become subject to such reporting
requirements); a copy of the most recent annual or quarterly report of the
Company; and such other reports and documents as a Holder may reasonably request
in availing itself of any rule or regulation of the SEC allowing it to sell any
such securities without registration.
3. COVENANTS.
3.1. Basic Financial Information and Reporting.
(a) The Company will maintain true books and records of account in which full
and correct entries will be made of all its business transactions pursuant to a
system of accounting established and administered in accordance with generally
accepted accounting principles consistently applied, and will set aside on its
books all such proper accruals and reserves as shall be required under generally
accepted accounting principles consistently applied.
(b) As long as shares of Series B Convertible Preferred Stock, Series A
Convertible Preferred Stock, and/or Registrable Securities issued therefor are
outstanding, the Company shall deliver or provide to each Series B Investor and
Series A Investor (so long as such Investor continues to hold 10% of the Shares
originally purchased by said Series B Investor or Series A Investor and/or
Registrable Securities issued therefor) of each respective class, and as long as
GP Strategies holds at least 10% of the outstanding Common Stock, the Company
shall deliver and provide to GP Strategies:
(i) Within 90 days after the end of each fiscal year of the Company, a balance
sheet of the Company, as at the end of such fiscal year, and a statement of
income and a statement of cash flows of the Company, for such year, all prepared
in accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail. Such financial statements shall be
accompanied by a report and opinion thereon by independent public accountants of
national standing selected by the Board of Directors; and
(ii) (A) At least 30 days prior to the beginning of each fiscal year, an annual
budget and operating plans for such fiscal year (and as soon as available, any
subsequent revisions thereto); and (B) within 20 days after the end of each
quarter, a balance sheet of the Company as of the end of each such quarter, and
a statement of income and a statement of cash flows of the Company for such
quarter and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles consistently applied, with the
exception that no notes need be attached to such statements and year-end audit
adjustments may not have been made.
3.2. Inspection Rights. As long as Series B Convertible Preferred Stock and
Series A Convertible Preferred Stock, and/or Registrable Securities issued
therefor are outstanding, each Series B Investor and Series A Investor (so long
as such Investor continues to hold 10% of the Shares originally purchased by
said Investor and/or Registrable Securities issued therefor), and as long as GP
Strategies holds at least 10% of the outstanding Common Stock, GP Strategies,
after giving reasonable advance notice to the Company, shall have the right
during normal business hours to visit and inspect any of the properties of the
Company or any of its subsidiaries, and to discuss the affairs, finances and
accounts of the Company or any of its subsidiaries with its officers, and to
review such information as is reasonably requested all at such reasonable times
and as often as may be reasonably requested; provided, however, that the Company
shall not be obligated under this Section 3.2 with respect to a direct
competitor of the Company or with respect to information which the Board of
Directors determines in good faith is confidential and should not, therefore, be
disclosed.
3.3. Confidentiality of Records. Each Investor agrees to use, and to use its
reasonable commercial efforts to insure that its authorized representatives use,
the same degree of care as such Investor uses to protect its own confidential
information to keep confidential any information furnished to it which the
Company identifies as being confidential or proprietary (so long as such
information is not in the public domain), except that such Investor may disclose
such proprietary or confidential information to any partner, Affiliate,
subsidiary or parent of such Investor for the purpose of evaluating its
investment in the Company as long as such partner, subsidiary or parent is
advised of and agrees to abide by the confidentiality provisions of this Section
3.3. Notwithstanding the foregoing, each Investor (and each employee,
representative, or other agent of such Investor) may disclose to any and all
persons, without limitations of any kind, the tax treatment and tax structure of
the transactions contemplated by this Agreement and all materials of any kind
(including opinions or other tax analysis) that are provided to such Investor
relating to such tax treatment and tax structure.
3.4. Reservation of Common Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the conversion of the Shares,
all Common Stock issuable from time to time upon such conversion.
3.5. Stock Vesting. Except as otherwise provided by the Board of Directors, all
stock options and other stock equivalents issued by the Company after the date
of this Agreement to employees, directors, consultants and other service
providers of the Company shall be subject to vesting as follows: (a) 25% of such
stock shall vest at the end of the first year following the date of issuance,
and (b) 75% of such stock shall vest on a monthly basis over the remaining three
years. With respect to any shares of stock purchased by any such person, except
as otherwise provided by the Board of Directors, the Company will enter into an
agreement in connection with each such issuance of stock to an employee,
director or consultant of the Company that provides that upon the termination of
the employment or service of such employee, director or consultant, with or
without cause with respect to any unvested shares or options owned or held by an
employee, director or consultant of the Company, such unvested shares or options
shall be forfeited to the Company or its assignee.
3.6. Special Relationships of Prospective Employees. The Company shall not hire
or contract for the services, directly or indirectly, whether as an employee,
independent contractor, consultant or in any other capacity, of any person who
is a spouse, sibling, parent, child, or other family member of a current
officer, director, employee, independent contractor or consultant to the Company
without the unanimous consent of the Board of Directors of the Company.
3.7. Directors' Liability and Indemnification. The Company's Certificate of
Incorporation and Bylaws shall provide (a) for elimination of the liability of
directors to the maximum extent permitted by law and (b) for indemnification of
directors for acts on behalf of the Company to the maximum extent permitted by
law.
3.8. Reimbursement of Expenses. The Company shall reimburse each nonemployee
member of the Board of Directors for all reasonable and customary actual
expenses incurred in connection with their service as a member of the Board of
Directors, including without limitation all actual travel and lodging expenses
incurred in connection with the attendance by any such member at a meeting of
the Board of Directors or any committee thereof.
3.9. Qualified Small Business. The Company will use its best efforts to comply
with the reporting and recordkeeping requirements of Section 1202 of the
Internal Revenue Code of 1986, as amended, any regulations promulgated
thereunder and any similar state laws and regulations, and agrees not to
repurchase any stock of the Company if such repurchase would cause the Shares
not to so qualify as "Qualified Small Business Stock."
3.10. Election of Directors.
(a) In any election of directors of the Company, the Investors shall vote at any
regular meeting or special meeting of stockholders of the Company (or by written
consent) such number of shares of voting capital stock then owned by them (or as
to which they then have voting power) as may be necessary to elect the following
individuals to the Board of Directors:
(i) One director designated by the Corporate Opportunities Fund, L.P., who shall
initially be βββββ β. ββββ;
(ii) One director designated by ββββββββ MedTech Partners L.P.;
(iii) One director designated by GP Strategies;
(iv) One director designated by SMH Hydro Med II, LLC;
(v) Two directors who have relevant industry experience and are not employees of
the Company or GP Strategies, nominated by mutual agreement of the Investors
(the "Outside Directors"); and
(vi) The President or Chief Executive Officer of the Company.
(b) Any director nominated pursuant to Section 3.10(a)(i), (ii), (iii) or (iv)
may be removed by, and shall not be removed except by, Corporate Opportunities
Fund, L.P., ββββββββ MedTech Partners L.P., GP Strategies, and SMH Hydro Med II,
LLC, respectively.
3.11. Observer Rights. As long as SMH Hydro Med LLC or Paladin Labs, Inc.,
respectively, hold any Shares, the Company shall, if such Investors do not
otherwise have a representative on the Board of Directors, invite a
representative of each such Investor to attend all meetings of its Board of
Directors and the committees of the Board of Directors in a nonvoting observer
capacity and, in this respect, shall give such representative copies of all
notices, minutes, consents, and other materials that it provides to its
directors; provided, however, that such representative shall agree to hold in
confidence and trust and to act in a fiduciary manner with respect to all
information so provided; and, provided further, that the Company reserves the
right to withhold any information and to exclude such representative from any
meeting or portion thereof if access to such information or attendance at such
meeting could adversely affect the attorney-client privilege between the Company
and its counsel.
3.12. Termination of Covenants. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor upon
the earlier of (a) the effective date of the registration statement pertaining
to the initial Qualified Offering, or (b) upon (i) the acquisition of the
Company by another entity by means of any transaction or series of related
transactions, including, without limitation, any reorganization, merger or
consolidation but, excluding any merger effected exclusively for the purpose of
changing the domicile of the Company or (ii) a sale of all or substantially all
of the assets of the Company (a "Change in Control"); provided that in the event
that the Company's stockholders of record as constituted immediately prior to
any such transaction (on a fully diluted basis) will, immediately after such
transaction (by virtue of securities issued as consideration for the Company's
acquisition or sale or otherwise), hold at least 50% of the voting power of the
surviving or acquiring entity, such transaction shall not be deemed to
constitute a Change in Control.
4. PREEMPTIVE RIGHTS.
4.1. Subsequent Offerings. In the event the Company issues and sells Equity
Securities (as defined below) other than the Equity Securities excluded by
Section 4.5 hereof, each Investor shall have a preemptive right to purchase such
number of shares of Equity Securities necessary for such Investor to maintain
its percentage ownership position in the Company on an as converted basis. Each
Investor's preemptive share is equal to the ratio of (a) the number of shares of
the Company's Common Stock (including all shares of Common Stock issued or
issuable upon conversion of the Series B Convertible Preferred Stock or Series A
Convertible Preferred Stock) of which such Investor is deemed to be a holder
immediately prior to the issuance of such Equity Securities to (b) the total
number of shares of the Company's outstanding Common Stock (including all shares
of Common Stock issued or issuable upon conversion of the Series B Convertible
Preferred Stock, Series A Convertible Preferred Stock, or other security of the
Company or upon the exercise of any outstanding warrants, options, or rights to
subscribe to or purchase any Common Stock, Preferred Stock, or other security)
immediately prior to the issuance of the Equity Securities.
4.2. Exercise of Preemptive Rights. If the Company issues any Equity Securities,
it shall give each Investor written notice of such issuance, describing the
Equity Securities and the price and the terms and conditions upon which the
Company issued the same and shall provide each Investor with access to any
information regarding such offering and the Company, provided to the purchasers
of Equity Securities. Each Investor shall have 45 days from the giving of such
notice to exercise its preemptive right to purchase Equity Securities for the
price and upon the terms and conditions specified in the notice by giving
written notice to the Company and stating therein the quantity of Equity
Securities to be purchased. Notwithstanding the foregoing, the Company shall not
be required to offer or sell such Equity Securities to any Investor who would
cause the Company to be in violation of applicable federal securities laws by
virtue of such offer or sale.
4.3. Termination and Waiver of Preemptive Rights. The preemptive rights
established by this Section 4 shall terminate following the Company's initial
Qualified Offering.
4.4. Transfer of Preemptive Rights. The preemptive rights of each Investor under
this Section 4 may be transferred to the same parties, subject to the same
restrictions, as any transfer of registration rights pursuant to Section 2.10.
4.5. Excluded Securities. The preemptive rights established by this Section 4
shall have no application to any of the following Equity Securities:
(a) Up to 5,500,000 shares (as may be adjusted for any stock dividend,
combinations, splits, recapitalizations and the like) of Common Stock (and/or
options, warrants or other Common Stock purchase rights issued pursuant to such
options, warrants or other rights) issued or to be issued after the date hereof
to employees, officers or directors of, or consultants or advisors to the
Company or any subsidiary, pursuant to stock purchase or stock option plans or
other arrangements that are approved by the Board of Directors;
(b) Up to 6,896,552 shares (as may be adjusted for any stock dividend,
combinations, splits, recapitalizations and the like) of Series B Convertible
Preferred Stock issued or to be issued after the date hereof to GP Strategies;
(c) capital stock of the Company issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, options and warrants outstanding
as of the date of this Agreement, and capital stock issued pursuant to or upon
the exercise of any such rights or agreements granted after the date of this
Agreement; provided that in the case of rights or agreements granted after the
date of this Agreement, such rights or agreements were approved by the Board of
Directors, including representatives designated by βββββββ ββββββ ββββββ and
ββββββββ MedTech Partners L.P.;
(d) shares of Common Stock issued in connection with any stock split, dividend,
combination, distribution, or recapitalization;
(e) shares of Common Stock issued in connection with any merger, consolidation,
acquisition, or similar business combination approved by the Board of Directors;
(f) shares of Common Stock issued upon conversion of the Shares;
(g) any Equity Securities issued pursuant to any equipment leasing or loan
arrangement, or debt financing from a bank or similar financial or lending
institution approved by the Board of Directors; and
(h) any Equity Securities issued in connection with strategic transactions
involving the Company and other entities, including (i) joint ventures,
manufacturing, marketing or distribution arrangements or (ii) technology
transfer or development arrangements; provided that such strategic transactions
and the issuance of shares therein, has been approved by the Board of Directors.
5. MISCELLANEOUS.
5.1. Governing Law. This Agreement shall be governed by and construed under the
laws of the State of Delaware, without regard to principals of conflict of laws.
5.2. Survival. The representations, warranties, covenants, and agreements made
herein shall survive any investigation made by any Holder and the closing of the
transactions contemplated hereby. All statements as to factual matters contained
in any certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the Company hereunder solely as
of the date of such certificate or instrument.
5.3. Successors and Assigns. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities in accordance with this Agreement, such notice to
specify the full name and address of the transferee, the Company may deem and
treat the person listed as the holder of such shares in its records as the
absolute owner and holder of such shares for all purposes, including the payment
of dividends or any redemption price.
5.4. Entire Agreement. This Agreement, the Exhibits and Schedules hereto, the
Purchase Agreement and the other documents delivered pursuant thereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein. This Agreement replaces and
supercedes the Investor Rights Agreement dated December 27, 2001 by and among
the Company, the Common Investors, and the Series A Investors.
5.5. Severability. In the event one or more of the provisions of this Agreement
should, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein.
5.6. Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be amended or
modified only upon the written consent of the Company and the Holders of at
least a majority of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of the Company and
the rights of the Holders under this Agreement may be waived only with the
written consent of the Holders of at least a majority of the Registrable
Securities.
(c) Notwithstanding the foregoing, this Agreement may be amended with only the
written consent of the Company to include additional purchasers of Series B
Convertible Preferred Stock as "Series B Investors," "Holders," and parties
hereto.
(d) For the purposes of determining the number of Holder or Investors entitled
to vote or exercise any rights hereunder, the Company shall be entitled to rely
solely on the list of record holders of its stock as maintained by or on behalf
of the Company.
5.7. Delays or Omissions. It is agreed that no delay or omission to exercise any
right, power, or remedy accruing to any Holder, upon any breach, default or
noncompliance of the Company under this Agreement shall impair any such right,
power, or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent, or approval of any kind or character on any Holder's
part of any breach, default or noncompliance under the Agreement or any waiver
on such Holder's part of any provisions or conditions of this Agreement must be
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, by law, or otherwise
afforded to Holders, shall be cumulative and not alternative.
5.8. Notices. All notices required or permitted hereunder shall be in writing
and shall be deemed effectively given: (a) upon personal delivery to the party
to be notified, (b) when sent by confirmed electronic mail or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
days advance written notice to the other parties hereto.
5.9. Attorneys' Fees. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all reasonable fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
5.10. Titles and Subtitles. The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
5.11. Additional Investors. Notwithstanding anything to the contrary contained
herein, if the Company shall issue additional shares of its Preferred Stock
pursuant to the Purchase Agreement, any purchaser of such shares of Preferred
Stock may become a party to this Agreement by executing and delivering an
additional counterpart signature page to this Agreement and shall be deemed an
"Investor" hereunder.
5.12. Counterparts. 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.
5.13. Joinder of Spouses. The undersigned spouses of each Investor, if
applicable, join in the execution and delivery of this Agreement for the express
purpose of binding any interest he or she may have in the Shares or Common
Stock.
[THIS SPACE INTENTIONALLY LEFT BLANK]
406523 000088 HOUSTON 256618.1
IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: SERIES B INVESTORS:
HYDRO MED SCIENCES, INC. SMH HYDRO MED II LLC
By: By:
-------
Name: βββββ β. βββββββ Name: βββββ β. ββββ
Title: President Title: Manager
CORPORATE OPPORTUNITIES FUND, L.P.
By: SMM Corporate Management, LLC,
General Partner
By: ________________________________
Name: βββββ β. ββββ
Title: Manager
CORPORATE OPPORTUNITIES FUND (INSTITUTIONAL
By: SMM Corporate Management, LLC,
General Partner
By: ________________________________
Name: βββββ β. ββββ
Title: Manager
LIFE SCIENCES OPPORTUNITIES FUND, L.P.
By: SMH Life Sciences Management, LLC,
General Partner
By: ________________________________
Name: βββββ β. ββββ
Title: Manager
ββββββββ MEDTECH PARTNERS L.P.
By: ββββββββ MedTech Partners LLC,
General Partner
By: ________________________________
Name:__________________________
Title:___________________________
ββββββββ PARTNERS III, L.P.
By: ββββββββ Partners III, LLC,
General Partner
By: ________________________________
Name:__________________________
Title:___________________________
ββββββββ ASSOCIATES III, L.P.
By: ββββββββ Partners III, LLC,
General Partner
By: ________________________________
Name:__________________________
Title:___________________________
ββββββββ FOREIGN PARTNERS III, L.P.
By: ββββββββ Partners III, LLC,
General Partner
By: ________________________________
Name:__________________________
Title:___________________________
PALADIN LABS INC.
By:_________________________________
Name:____________________________
Title: _____________________________
FALCON SEABOARD HOLDINGS, L.P.
By:_________________________________
Name:____________________________
Title: _____________________________
SERIES A INVESTORS:
SMH HYDRO MED LLC
By:
Name: βββββ β. ββββ
Title: Manager
CORPORATE OPPORTUNITIES FUND, L.P.
By: SMM Corporate Management, LLC,
General Partner
By: ________________________________
Name: βββββ β. ββββ
Title: Manager
CORPORATE OPPORTUNITIES FUND
(INSTITUTIONAL), L.P.
By: SMM Corporate Management, LLC,
General Partner
By: ________________________________
Name: βββββ β. ββββ
Title: Manager
ββββββββ MEDTECH PARTNERS L.P.
By: ββββββββ MedTech Partners LLC,
General Partner
By: ________________________________
Name:__________________________
Title:___________________________
COMMON STOCK INVESTORS:
GP STRATEGIES CORPORATION
By:_________________________________
Name:____________________________
Title:_____________________________
406523 000088 HOUSTON 256618.1 A-3
EXHIBIT A
common stock investors
GP Strategies Corporation
β ββββ ββββ ββββββ
βββ ββββ, βββ ββββ βββββ
SERIES B INVESTORS
As of May 30, 2003
SMH Hydro Med II LLC
βββ ββββββ, βββββ ββββ
βββββββ, βββββ βββββ
Attention: ββββ βββββββ
Corporate Opportunities Fund, L.P.
Corporate Opportunities Fund (Institutional), L.P.
Life Sciences Opportunities Fund, L.P.
c/o SMM Corporate Management LLC
βββ ββββ ββ ββββββ
βββ ββββ, βββ ββββ βββββ
Attention: βββββ β. ββββ
ββββββββ MedTech Partners L.P.
ββ ββββββββββ ββββ, βββββ βββ
βββββ ββββ, βββ ββββ βββββ
With a copy to:
ββββββββ Partners
βββ βββββ ββββββ, ββββ βββββ
βββ ββββ, βββ ββββ βββββ
Attn: βββββ β. ββββββββ, M.D./
ββββββββ βββββββββ
ββββββββ Partners III, β.β.
ββββββββ Associates III, β.β.
ββββββββ Foreign Partners, III, L.P.
ββ ββββββββββ ββββ, βββββ βββ
βββββ ββββ, βββ ββββ βββββ
With a copy to:
ββββββββ Partners
βββ βββββ ββββββ, ββββ βββββ
βββ ββββ, βββ ββββ βββββ
Attn: βββββ β. ββββββββ, M.D./
βββββ β. βββββββββ
Paladin Labs, Inc.
ββββ ββββββββββ ββββββ
βββββ βββ
ββββββββ, ββββββ βββ βββ
Attention: ββββββ ββββββ
Falcon Seaboard Holdings, L.P.
βββ β. ββββ βββ ββββ
βββββββ, βββββ βββββ
GP Strategies Corporation
β ββββ ββββ ββββββ
βββ ββββ, βββ ββββ βββββ
Attention: ββββββ ββββββ
Series A Investors
SMH Hydro Med LLC
βββ ββββββ, βββββ ββββ
βββββββ, βββββ βββββ
Attention: ββββ βββββββ
Corporate Opportunities Fund, L.P.
Corporate Opportunities Fund (Institutional), L.P.
c/o SMM Corporate Management LLC
βββ ββββ ββ ββββββ
βββ ββββ, βββ ββββ βββββ
Attention: βββββ β. ββββ
ββββββββ MedTech Partners L.P.
ββ ββββββββββ ββββ, βββββ βββ
βββββ ββββ, βββ ββββ βββββ
With a copy to:
ββββββββ Partners
βββ βββββ ββββββ, ββββ βββββ
βββ ββββ, βββ ββββ βββββ
Attn: βββββ β. ββββββββ, M.D./
ββββββββ βββββββββ