Exhibit 10.32
HYDRO MED SCIENCES, INC.
series B convertible preferred stock
PURCHASE AGREEMENT
May 30, 2003
Table of Contents
AGE
1. Agreement To Sell And Purchase......................................1
1.1 Authorization of Shares....................................1
1.2 Sale and Purchase..........................................1
2. Closing, Delivery And Payment.......................................2
2.1 Closing....................................................2
2.2 Delivery at Closing........................................2
2.3 Deferred Closing...........................................2
3. Representations And Warranties Of The Company.......................2
3.1 Organization, Good Standing and Qualification..............3
3.2 Subsidiaries...............................................3
3.3 Capitalization; Voting Rights..............................3
3.4 Authorization; Binding Obligations.........................4
3.5 Financial Statements.......................................4
3.6 Liabilities................................................5
3.7 Agreements; Action.........................................5
3.8 Obligations to Related Parties.............................6
3.9 Changes....................................................6
3.10 Title to Properties and Assets; Liens, Etc.................7
3.11 Intellectual Property......................................8
3.12 Compliance with Other Instruments..........................8
3.13 Litigation.................................................9
3.14 Tax Returns and Payments...................................9
3.15 Employees..................................................9
3.16 Obligations of Management.................................10
3.17 Registration Rights.......................................10
3.18 Compliance with Laws; Permits.............................10
3.19 Environmental and Safety Laws.............................10
3.20 Offering Valid............................................10
3.21 Full Disclosure...........................................11
3.22 Minute Books..............................................11
3.24 Insurance.................................................11
3.25 Qualified Small Business Stock............................11
4. Representations And Warranties Of The Investor.....................11
4.1 Requisite Power and Authority.............................11
4.2 Investment Representations................................11
4.3 Transfer Restrictions.....................................13
5. Conditions To Closing..............................................13
5.1 Conditions to Investor' Obligations at the Closing........13
5.2 Conditions to Obligations of the Company at the
Closing...................................................15
5.3 Conditions to Deferred Investor's Obligations at
the Deferred Closing......................................16
5.4 Conditions to Obligations of the Company at the
Deferred Closing..........................................17
6. Miscellaneous......................................................18
6.1 Governing Law.............................................18
6.2 Survival..................................................18
6.3 Expenses..................................................18
6.4 Attorneys' Fees...........................................18
6.5 Successors and Assigns....................................18
6.6 Entire Agreement..........................................18
6.7 Severability..............................................19
6.8 Amendment and Waiver......................................19
6.9 Delays or Omissions.......................................19
6.10 Notices...................................................19
6.11 Titles and Subtitles......................................19
6.12 Counterparts..............................................20
6.13 Broker's Fees.............................................20
6.14 Pronouns..................................................20
List of Exhibits
Schedule of Investors Exhibit A
Certificate Exhibit B
Amended and Restated Investor Rights Agreement Exhibit C
Amended and Restated Right of First Refusal and Co-Sale Agreement Exhibit D
List of Stockholders, Optionholders and Warrantholders Exhibit E
Form of Legal Opinion Exhibit F
Schedule of Exceptions
HYDRO MED SCIENCES INC.
series B convertible preferred stock
PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made and entered
into as of May 30, 2003, by and among Hydro Med Sciences Inc., a Delaware
corporation (the "Company"), and the investors whose names and addresses are set
forth on the Schedule of Investors attached hereto as EXHIBIT A (the
"Investors").
RECITALS
The Company has authorized the sale and issuance of an aggregate of
23,448,272 shares of its Series B Convertible Preferred Stock pursuant to this
Agreement (the "Shares").
The Investors desire to purchase the Shares on the terms and conditions
set forth herein.
The Company desires to issue and sell the Shares to the Investors on
the terms and conditions set forth herein.
AGREEMENT
In consideration of the foregoing recitals and the mutual promises,
representations, warranties and covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound hereby, the parties hereto agree as
follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 Authorization of Shares. On or prior to the Initial Closing (as hereinafter
defined), the Company shall have authorized (a) the sale and issuance to the
Investors of the Shares and (b) the issuance of such shares of Common Stock to
be issued upon conversion of the Shares (the "Conversion Shares"). The Shares
and the Conversion Shares shall each have the rights, preferences, privileges
and restrictions set forth in the Company's Restated Certificate of
Incorporation, in the form attached hereto as EXHIBIT B (the "Certificate").
1.2 Sale and Purchase.
(a) Subject to the terms and conditions hereof, at the Closing the Company
hereby agrees to issue and sell to each Investor, severally and not jointly, and
each Investor agrees to purchase from the Company, severally and not jointly,
the number of Shares set forth opposite each Investor's name on EXHIBIT A at a
purchase price of $0.725 per share.
(b) Subject to the terms and conditions hereof, GP Strategies Corporation, a
Delaware corporation, or an affiliated entity (the "Deferred Investor" or the
"Parent"), shall have the option to purchase up to 6,896,551 Shares at a
purchase price of $0.725 per share (the "Deferred Investment") during the period
(the "Deferred Investment Period") commencing on the date hereof and ending on
the first to occur of: (i) ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) the date an Acquisition or
Transfer (as defined in the Certificate) is consummated, or (iii) the date the
Series B Preferred stock is automatically converted into Common Stock as
provided in Section 6(b) of Article 4(C)(2) of the Certificate. If the Deferred
Investor exercises its option to purchase the Deferred Investment, the Company
hereby agrees to issue and sell to the Deferred Investor, and the Deferred
Investor agrees to purchase from the Company, the number of Shares that the
Deferred Investor elects to purchase at the Deferred Closing (as hereinafter
defined) on the terms and conditions set forth in this Agreement. The Company
shall give the Deferred Investor at least 60 days prior written notice of the
anticipated closing date of any Qualified Public Offering (as defined in the
Certificate).
2. CLOSINGS, DELIVERY AND PAYMENT.
2.1 Closing. The initial closing of the sale and purchase of the Shares under
this Agreement (the "Initial Closing") shall take place at 9:00 a.m. on the date
hereof, at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ or at such other time or place
as the Company and the Investors may mutually agree (such date is hereinafter
referred to as the "Initial Closing Date"). Subsequent closings will take place
at such place and time as the Company shall designate; provided, that no Closing
may occur subsequent to June 30, 2003 (each such subsequent closing and the
Initial Closing are collectively referred to herein as a "Closing" and the date
of each subsequent Closing and the Initial Closing Date are collectively
referred to herein as a "Closing Date").
2.2 Delivery at Closing. At each Closing, subject to the terms and conditions
hereof, the Company will deliver to each Investor a certificate(s) representing
the number of Shares to be purchased at such Closing by such Investor, against
payment of the purchase price therefor by check made payable to the order of the
Company, wire transfer of immediately available funds, or any combination of the
foregoing.
2.3 Deferred Closing. The closing and sale of the Deferred Investment under this
Agreement (the "Deferred Closing") shall take place at any time agreed upon by
the Deferred Investor and the Company, but no later than 90 days after the date
the Deferred Investor notifies the Company of its intention to exercise the
Deferred Investment (the "Deferred Investment Closing Date"). At the Deferred
Closing, subject to the terms and conditions hereof, the Company will deliver to
the Deferred Investor a certificate(s) representing the number of Shares to be
purchased at the Deferred Closing, against payment of the purchase price
therefor (the "Deferred Purchase Price") by check made payable to the order of
the Company, wire transfer of immediately available funds, or any combination of
the foregoing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on a Schedule of Exceptions delivered by
the Company to the Investors at the Closing (the "Schedule of Exceptions")
specifically identifying the relevant Section or Sections hereof, or as
described in the Confidential Private Placement Memorandum of SMH Hydro Med II
LLC dated April 23, 2003 (the "Memorandum"), the Company hereby represents and
warrants to each Investor as of the date of this Agreement as set forth below.
3.1 Organization, Good Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has all requisite corporate power and authority
to own and operate its properties and assets, to execute and deliver the
Certificate and this Agreement, the Amended and Restated Investor Rights
Agreement in the form attached hereto as EXHIBIT C (the "Amended and Restated
Investor Rights Agreement"), the Amended and Restated Right of First Refusal and
Co-Sale Agreement in the form attached hereto as EXHIBIT D (the "Amended and
Restated Right of First Refusal and Co-Sale Agreement") (collectively, the
"Related Agreements"), and any other agreements contemplated hereby, to issue
and sell the Shares, the Conversion Shares, and to carry out the provisions of
this Agreement, the Related Agreements and the Certificate and to carry on its
business as presently conducted. The Company is duly qualified and is authorized
to do business and is in good standing as a foreign corporation in all
jurisdictions in which the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business.
3.2 Subsidiaries. The Company does not own or control any equity security or
other interest of any other corporation, limited partnership or other business
entity. The Company is not a participant in any joint venture, partnership, or
similar arrangement.
3.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company, immediately prior to the
Initial Closing, consists of (i) 50,000,000 shares of common stock, par value
$.001 per share ("Common Stock"), 10,000,000 shares of which are issued and
outstanding, and (ii) 35,000,000 shares of preferred stock, par value $.001 per
share ("Preferred Stock"), (A) 7,000,000 shares of which are designated Series A
Convertible Preferred Stock (the "Series A Preferred"), of which 7,000,000
shares are issued and outstanding, and (B) 24,500,000 shares of which are
designated Series B 10% Convertible Preferred Stock (the "Series B Preferred"),
none of which are issued and outstanding. The Parent currently owns 100% of the
shares of Common Stock.
(b) Under the Hydro Med Sciences, Inc. Equity Incentive Plan (the "Incentive
Plan") and as of March 31, 2003, (i) no shares have been issued pursuant to
restricted stock purchase agreements and/or the exercise of outstanding options,
(ii) options to purchase 1,720,500 shares have been granted and are currently
outstanding (as listed on EXHIBIT E), and (iii) 3,779,500 shares of Common Stock
remain available for future issuance to officers, directors, employees and
consultants of the Company. Since March 31, 2003, the Company has not issued any
options to purchase shares of Common Stock or any other rights to purchase
shares of Common Stock pursuant to the Incentive Plan.
(c) Other than as set forth on EXHIBIT E, except as may be granted pursuant to
this Agreement and the other Related Agreements, there are no outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal, whether in favor of the Company or any other person), proxy or
stockholder agreements, or agreements of any kind for the purchase or
acquisition from the Company of any of its securities.
(d) All issued and outstanding shares of the Common Stock and Preferred Stock
(i) have been duly authorized and validly issued to the persons listed on
EXHIBIT E hereto, are fully paid and nonassessable, and (ii) were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities.
(e) The rights, preferences, privileges and restrictions of the Shares are as
stated in the Certificate. The Conversion Shares have been duly and validly
reserved for issuance. When issued in compliance with the provisions of this
Agreement and the Certificate, as the case may be, the Shares and the Conversion
Shares will be validly issued, fully paid and nonassessable, and, except as
provided in the Related Agreements, will be free of any liens or encumbrances;
provided, however, that the Shares and the Conversion Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is proposed.
3.4 Authorization; Binding Obligations. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization of this Agreement, the Certificate and the Related Agreements, the
performance of all obligations of the Company hereunder and thereunder at the
Closing and the authorization, sale, issuance and delivery of the Shares
pursuant hereto and the Conversion Shares pursuant to the Certificate, as the
case may be, has been taken or will be taken prior to the Closing. This
Agreement and the Related Agreements, when executed and delivered, will be valid
and binding obligations of the Company enforceable in accordance with their
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, (b) general principles of equity that restrict
the availability of equitable remedies, and (c) to the extent that the
enforceability of the indemnification provisions in Section 2.9 of the Amended
and Restated Investor Rights Agreement may be limited by applicable laws. The
sale of the Shares and the subsequent conversion of the Shares into Conversion
Shares are not and will not be subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with.
3.5 Financial Statements. The Company has made available to the Investor its (or
to the extent applicable, those of any predecessor in interest) (a) unaudited
balance sheet as of December 31, 2002, and unaudited statements of income, cash
flows, and stockholders' equity for the fiscal year then ended (collectively,
the "2002 Statements"), (b) unaudited balance sheet as of March 31, 2003 (the
"Statement Date") and unaudited statements of income, cash flows, and
stockholders' equity for the three-month period ending on the Statement Date
(the "Year to Date Statements" and together with the 2002 Statements, the
"Financial Statements"). Except as set forth on the Schedule of Exceptions, the
Financial Statements, together with the notes thereto, are complete and correct
in all material respects, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated, except as disclosed therein, and present fairly the financial
condition and position of the Company as of the dates indicated.
3.6 Liabilities. The Company has no material liabilities and, to the best of its
knowledge, knows of no material liabilities, in each case except as disclosed in
the Financial Statements and except for current liabilities incurred in the
ordinary course of business subsequent to the Statement Date that have not been,
either in any individual case or in the aggregate, material.
3.7 Agreements; Action.
(a) There are no material agreements, understandings or proposed transactions
between the Company and any of its officers, directors, affiliates or any
affiliate thereof.
(b) Except as set forth in the Schedule of Exceptions, there are no agreements,
understandings, instruments, contracts, proposed transactions, judgments,
orders, writs or decrees to which the Company is a party or to its knowledge by
which it is bound that may involve (i) obligations (contingent or otherwise) of,
or payments to, the Company in excess of $50,000 (other than obligations of, or
payments to, the Company arising from purchase or sale agreements entered into
in the ordinary course of business), (ii) the transfer or license of any
material patent, copyright, trade secret or other proprietary right to or from
the Company (other than licenses arising from the purchase of "off the shelf" or
other standard products), (iii) provisions restricting the development,
manufacture or distribution of the Company's products or services or (iv)
indemnification by the Company with respect to infringements of proprietary
rights (other than indemnification obligations arising from purchase or license
agreements entered into in the ordinary course of business).
(c) The Company has not (i) declared or paid any dividends, or authorized or
made any distribution upon or with respect to any class or series of its capital
stock, (ii) incurred any indebtedness for money borrowed or any other
liabilities (other than with respect to dividend obligations, distributions,
indebtedness and other obligations incurred in the ordinary course of business
or as disclosed in the Financial Statements) individually in excess of $50,000
or, in the case of indebtedness and/or liabilities individually less than
$50,000, in excess of $250,000 in the aggregate, (iii) made any loans or
advances to any person, other than ordinary advances for travel expenses, or
(iv) sold, exchanged or otherwise disposed of any of its assets or rights, other
than the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Company has reason to believe are affiliated therewith) shall be aggregated
for the purpose of meeting the individual minimum dollar amounts of such
subsections.
(e) The Company has not engaged in the past twelve months in any discussion (i)
with any representative of any corporation or corporations regarding the
consolidation or merger of the Company with or into any such corporation or
corporations, (ii) with any corporation, partnership, association or other
business entity or any individual regarding the sale, conveyance or disposition
of all or substantially all of the assets of the Company, or a transaction or
series of related transactions in which more than 50% of the voting power of the
Company is disposed of, or (iii) regarding any other form of acquisition,
liquidation, dissolution or winding up, of the Company.
3.8 Obligations to Related Parties. Except as set forth on the Schedule of
Exceptions, there are no obligations of the Company to officers, directors,
stockholders or employees of the Company other than (a) for payment of salary
for services rendered, (b) reimbursement for reasonable expenses incurred on
behalf of the Company, (c) for other standard employee benefits made generally
available to all employees (including stock option agreements outstanding under
any stock option plan approved by the Board of Directors of the Company), and
(d) obligations for indemnification under the Company's organizational documents
and applicable law. Except as set forth on the Schedule of Exceptions, none of
the officers, directors or, to the best of the Company's knowledge, key
employees or stockholders of the Company, or any members of their immediate
families, are indebted to the Company or have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation which
competes with the Company, other than passive investments in publicly traded
companies (representing less than 1% of such company) which may compete with the
Company. No officer, director or stockholder, or any member of their immediate
families, is, directly or indirectly, interested in any contract with the
Company (other than such contracts as relate to any such person's ownership of
capital stock or other securities of the Company). Except as may be disclosed in
the Financial Statements, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.9 Changes. Since the Statement Date, except as set forth on the Schedule of
Exceptions, there has not been, to the Company's knowledge:
(a) Any change in the assets, liabilities, financial condition, or operations of
the Company from that reflected in the Financial Statements, other than changes
in the ordinary course of business, none of which individually or in the
aggregate has had or is reasonably expected to have a material adverse effect on
such assets, liabilities, financial condition, or operations of the Company;
(b) Any resignation or termination of any officer, key employee or group of
employees of the Company; and the Company, to the best of its knowledge, does
not know of the impending resignation or termination of employment of any such
officer, key employee or group of employees;
(c) Any material change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the properties, business or prospects or
financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a material debt owed to
it;
(f) Any direct or indirect loans made by the Company to any stockholder,
employee, officer or director of the Company, other than advances made in the
ordinary course of business;
(g) Any material change in any compensation arrangement or agreement with any
employee, officer, director or stockholder;
(h) Any declaration or payment of any dividend or other distribution of the
assets of the Company;
(i) Any labor organization activity related to the Company;
(j) Any debt, obligation or liability incurred, assumed or guaranteed by the
Company, except those for immaterial amounts and for current liabilities
incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks, copyrights,
trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company is a party or by
which it is bound which materially and adversely affects the business, assets,
liabilities, financial condition, operations or prospects of the Company;
(m) Any other event or condition of any character that, either individually or
cumulatively, has materially and adversely affected the business, assets,
liabilities, financial condition, or operations of the Company; or
(n) Any arrangement or commitment by the Company to do any of the acts described
in subsection (a) through (m) above.
3.10 Title to Properties and Assets; Liens, Etc. The Company has good and
marketable title to its material tangible properties and assets, including the
tangible properties and assets reflected in the most recent balance sheet
included in the Financial Statements, and good title to its leasehold estates,
in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge,
other than (a) those resulting from taxes which have not yet become delinquent,
(b) minor liens and encumbrances which do not materially detract from the value
of the property subject thereto or materially impair the operations of the
Company, and (c) those that have otherwise arisen in the ordinary course of
business. All material facilities, machinery, equipment, fixtures, vehicles and
other tangible assets owned, leased or used by the Company are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. The Company is in compliance with all material terms
of each lease to which it is a party or is otherwise bound.
3.11 Intellectual Property
(a) Set forth in the Schedule of Exceptions is a true and complete list of all
patents, patent applications, trademarks, service marks, trademark and service
▇▇▇▇ applications, trade names, copyright registrations and licenses presently
used by the Company (with the exception of licenses and rights in off the shelf
software publications and sold as such). The Company has full title and
ownership of, or is duly licensed or otherwise authorized to use, all patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes necessary for its
business as now conducted, without any known infringement of the rights of
others. There are no outstanding options, licenses or agreements of any kind
relating to the foregoing proprietary rights, nor is the Company bound by or a
party to any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes of any other
person or entity other than such licenses or agreements arising from the
purchase of "off the shelf" or standard products.
(b) The Company has not received any communications alleging that the Company
has violated any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person or
entity.
(c) The Company is not aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to the Company. No
former or current employee, officer or consultant of the Company has excluded
works or inventions made prior to his or her employment with the Company from
his or her assignment of inventions pursuant to such employee, officer or
consultant's proprietary information and inventions agreement. The Company does
not believe it is or will be necessary to utilize any inventions, trade secrets
or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company and which are disclosed in
the Schedule of Exceptions hereto.
(d) Neither the execution, delivery nor performance of this Agreement or the
Related Agreements, nor the carrying on of the Company's business by the
employees of the Company, will, to the Company's knowledge, conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any employee is
now obligated.
3.12 Compliance with Other Instruments. The Company is not in violation or
default of any material term of its certificate of incorporation or Bylaws, or
of any provision of any material mortgage, indenture, contract, agreement,
instrument or contract to which it is party or by which it is bound or of any
judgment, decree, order or writ. The execution, delivery and performance of and
compliance with this Agreement, the Certificate and the Related Agreements, and
the issuance and sale of the Shares pursuant hereto, and of the Conversion
Shares pursuant to the Certificate, will not, with or without the passage of
time or giving of notice or both, result in any such material violation, or be
in conflict with or constitute a default under any such term, or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company or the suspension, revocation, impairment,
forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to the Company, its business or operations or any of its assets or
properties.
3.13 Litigation. There is no action, suit, proceeding or investigation pending
or, to the Company's knowledge, currently threatened against the Company that
questions the validity of this Agreement, the Certificate, or the Related
Agreements or the right of the Company to enter into any of such agreements, or
to consummate the transactions contemplated hereby or thereby, or which might
result, either individually or in the aggregate, in any material adverse change
in the assets, condition, affairs or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company. The
foregoing includes, without limitation, actions pending or, to the Company's
knowledge, threatened or any basis therefor known by the Company involving the
prior employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
prior employers. The Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
3.14 Tax Returns and Payments. The Company has timely filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be due
and payable on such returns, any assessments imposed, and to the Company's
knowledge all other taxes due and payable by the Company on or before the
Closing, have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised (a) that any of its returns,
federal, state or other, have been or are being audited as of the date hereof,
or (b) of any deficiency in assessment or proposed adjustment to its federal,
state or other taxes. The Company has no knowledge of any liability of any tax
to be imposed upon its properties or assets as of the date of this Agreement
that is not adequately provided for.
3.15 Employees. The Company has no collective bargaining agreements with any of
its employees. There is no labor union organizing activity pending or, to the
Company's knowledge, threatened with respect to the Company. The Company is not
a party to or bound by any currently effective employment contract, deferred
compensation arrangement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation plan or agreement,
including, but not limited to, any Employee Pension Benefit Plan as defined in
Section 3 of the Employee Retirement Income Security Act of 1974, as amended. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. The Company is not aware that any officer, key employee or
group of employees intends to terminate his, her or their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of employees.
3.16 Obligations of Management. Each officer and key employee of the Company is
currently devoting substantially all of his or her business time to the conduct
of the business of the Company. The Company is not aware that any officer or key
employee of the Company is planning to work less than full time at the Company
in the future. No officer or key employee is currently working or, to the
Company's knowledge, plans to work for a competitive enterprise, whether or not
such officer or key employee is or will be compensated by such enterprise.
3.17 Registration Rights. Except as required pursuant to the Amended and
Restated Investor Rights Agreement, the Company is presently not under any
obligation, and has not granted any rights, to Register (as defined in Section
1.1 of the Amended and Restated Investor Rights Agreement) any of the Company's
presently outstanding securities or any of its securities that may hereafter be
issued.
3.18 Compliance with Laws; Permits. The Company is not in violation of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities, financial
condition, operations or prospects of the Company. No governmental orders,
permissions, consents, approvals or authorizations are required to be obtained
and no registrations or declarations are required to be filed in connection with
the execution and delivery of this Agreement and the issuance of the Shares and
the Conversion Shares, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing, as
will be filed in a timely manner. The Company has all franchises, permits,
licenses and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could materially and adversely
affect the business, properties, prospects or financial condition of the Company
and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted.
3.19 Environmental and Safety Laws. The Company is not in violation in any
material respect of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
3.20 Offering Valid. Assuming the accuracy of the representations and warranties
of each Investor contained in Section 4.2 hereof, the offer, sale and issuance
of the Shares and the Conversion Shares will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws. Neither the Company nor any agent on its
behalf has solicited or will solicit any offers to sell or has offered to sell
or will offer to sell all or any part of the Shares to any person or persons so
as to bring the sale of such Shares by the Company within the registration
provisions of the Securities Act or any state securities laws.
3.21 Full Disclosure. The Company has provided each Investor with all
information requested in writing by the Investor in connection with its decision
to purchase the Shares. Neither this Agreement, the Related Agreements, the
Certificate nor any other certificate delivered by the Company to the Investor
or its attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, contain any untrue statement of a
material fact nor omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading.
3.22 Minute Books. The minute books of the Company made available to the
Investors' counsel contain a complete summary in all material respects of all
meetings of directors and stockholders since the time of incorporation.
3.23 Insurance. The Company has general commercial, product liability, fire and
casualty insurance policies and, to the best of its knowledge, such policies
provide coverage customary for companies similarly situated to the Company.
3.24 Qualified Small Business Stock. The Company will use reasonable efforts to
comply with the reporting and record keeping requirements of Section 1202 of the
Code and any regulations promulgated thereunder.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
Each Investor hereby represents and warrants to the Company as
follows:
4.1 Requisite Power and Authority. Such Investor has all necessary power and
authority to execute and deliver this Agreement and the Related Agreements to
which it is a party and to carry out their provisions. All action on such
Investor's part required for the lawful execution and delivery of this
Agreement, and the Related Agreements to which it is a party, has been or will
be effectively taken prior to the Closing. Upon their execution and delivery,
this Agreement and the Related Agreements to which it is a party will be valid
and binding obligations of such Investor, enforceable in accordance with their
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, (b) as limited by general principles of equity
that restrict the availability of equitable remedies, and (c) to the extent that
the enforceability of the indemnification provisions of Section 2.9 of the
Amended and Restated Investor Rights Agreement may be limited by applicable
laws.
4.2 Investment Representations. Such Investor understands that none of the
Shares or the Conversion Shares has been registered under the Securities Act.
Such Investor also understands that the Shares are being offered and sold
pursuant to an exemption from registration contained in the Securities Act based
in part upon Investor's representations contained in the Agreement. Investor
hereby represents and warrants as follows:
(a) Investor Bears Economic Risk. Such Investor has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. Such Investor must bear the economic risk of this investment
indefinitely unless the Shares (or the Conversion Shares) are registered
pursuant to the Securities Act, or an exemption from registration is available.
Such Investor understands that the Company has no present intention of
registering the Shares, the Conversion Shares, or any shares of its Common
Stock. Such Investor also understands that there is no assurance that any
exemption from registration under the Securities Act will be available and that,
even if available, such exemption may not allow such Investor to transfer all or
any portion of the Shares or the Conversion Shares under the circumstances, in
the amounts or at the times Investor might propose.
(b) Acquisition for Own Account. Such Investor is acquiring the Shares, and the
Conversion Shares for such Investor's own account for investment only, and not
with a view towards their distribution.
(c) Investor Can Protect Its Interest. Such Investor represents that by reason
of its, or of its management's, business or financial experience, such Investor
has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement and the Related Agreements. Further,
such Investor is aware of no publication of any advertisement in connection with
the transactions contemplated in the Agreement.
(d) Accredited Investor. Such Investor represents that it is an "accredited
investor" within the meaning of Regulation D under the Securities Act.
(e) Company Information. Such Investor has received and read all information it
has deemed necessary or appropriate for purposes of considering its investment
hereunder, including, without limitation, the Financial Statements and has had
an opportunity to discuss the Company's business, management and financial
affairs with directors, officers and management of the Company and has had the
opportunity to review the Company's operations and facilities. Such Investor has
also had the opportunity to ask questions of and receive answers from, the
Company and its management regarding the terms and conditions of this
investment.
(f) Rule 144. Such Investor acknowledges and agrees that the Shares, and, if
issued, the Conversion Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Such Investor has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
(g) Residence. If the Investor is an individual, then the Investor resides in
the state or province identified in the address of the Investor set forth on
EXHIBIT A; if the Investor is a partnership, corporation, limited liability
company or other entity, then the principal place of business of the Investor
and, if different, the office or offices in which its investment decision was
made, is located at the address or addresses of the Investor set forth on
EXHIBIT A.
4.3 Transfer Restrictions. Investors acknowledge and agree that the Shares and,
if issued, the Conversion Shares are subject to restrictions on transfer as set
forth in the Amended and Restated Investor Rights Agreement.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Investors' Obligations at the Closing. The Investors'
obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:
(a) Representations and Warranties True; Performance of Obligations. The
representations and warranties made by the Company in Section 3 hereof shall be
true and correct as of the Closing Date with the same force and effect as if
they had been made as of the Closing Date, and the Company shall have performed
all obligations and conditions herein required to be performed or observed by it
on or prior to the Closing.
(b) Minimum Investment. The Company shall have received at least $11,000,000 in
aggregate gross proceeds from Investors' subscriptions for Series B Convertible
Preferred Stock, exclusive of the Deferred Investment by GP Strategies
Corporation pursuant to Section 1.2(b).
(c) Legal Investment. On the Closing Date, the sale and issuance of the Shares
and the proposed issuance of the Conversion Shares shall be legally permitted by
all laws and regulations to which the Investors and the Company are subject.
(d) Consents, Permits and Waivers. The Company shall have obtained any and all
consents, permits and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement and the Related Agreements (except
for such as may be properly obtained subsequent to the Closing).
(e) Amendment of Certificate. The Certificate shall have been filed with the
Secretary of State of the State of Delaware and shall continue to be in full
force and effect as of the Closing Date.
(f) Corporate Documents. The Company shall have delivered to the Investors or
their counsel copies of all corporate documents of the Company as the Investors
shall reasonably request.
(g) Reservation of Conversion Shares. The Conversion Shares issuable upon
conversion of the Shares shall have been duly authorized and reserved for
issuance upon such conversion.
(h) Compliance Certificate. The Company shall have delivered to the Investors a
Compliance Certificate, executed by the President of the Company, dated the
Closing Date, to the effect that the conditions specified in subsections (a),
(c), (d) and (f) of this Section 5.1 have been satisfied.
(i) Secretary's Certificate. The Investors shall have received from the
Company's Secretary, a certificate having attached thereto (i) the Certificate
as in effect at the time of the Closing, (ii) the Company's Bylaws as in effect
at the time of the Closing, (iii) the resolutions approved by the Board of
Directors of the Company authorizing the transactions contemplated hereby, (iv)
good standing certificates (including tax good standing) with respect to the
Company from the applicable authority(ies) in Delaware and any other
jurisdiction in which the Company is qualified to do business, dated a recent
date before the Closing, and (v) all required stockholder consents to the
transaction as described in this Agreement.
(j) Amended and Restated Investor Rights Agreement. The Amended and Restated
Investor Rights Agreement substantially in the form attached hereto as EXHIBIT C
shall have been executed and delivered by the parties thereto.
(k) Amended and Restated Right of First Refusal and Co-Sale Agreement. The
Amended and Restated Right of First Refusal and Co-Sale Agreement substantially
in the form attached hereto as EXHIBIT D shall have been executed and delivered
by the parties thereto. The stock certificates representing the shares subject
to the Amended and Restated Right of First Refusal and Co-Sale Agreement shall
have been delivered to the Secretary of the Company and shall have had
appropriate legends placed upon them to reflect the restrictions on transfer set
forth on the Amended and Restated Right of First Refusal and Co-Sale Agreement.
(l) Board of Directors. Upon the Initial Closing, the authorized size of the
Board of Directors of the Company shall be seven members, and the Board shall
consist of (i) three directors nominated by the Investors, voting as a separate
class, one of whom shall be designated by the Corporate Opportunities Fund, L.P.
and who shall initially be ▇▇▇▇▇ ▇. ▇▇▇▇, one of whom shall be designated by
▇▇▇▇▇▇▇▇ MedTech Partners L.P., and who shall initially be ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, and
one of whom shall be designated by SMH Hydro Med II, LLC; (ii) one director
nominated by the holders of Common Stock, voting as a separate class; (iii) two
outside directors, who have relevant industry experience and who are not
employees of the Company or Parent or otherwise would not be considered
independent, nominated by mutual agreement of (X) the holders of Common Stock,
(Y) the holders of the Series A Preferred, and (Z) the Investors; and (iv) one
director who also is a member of the Company's senior management.
(m) Legal Opinion. The Investors shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP,
legal counsel to the Company, an opinion addressed to them, dated as of the
Initial Closing Date, in substantially the form attached hereto as EXHIBIT F.
(n) Proceedings and Documents. All corporate and other proceedings in connection
with the transactions contemplated at the Closing hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Investors and their counsel, and the Investors and
their counsel shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
(o) Due Diligence. The due diligence conducted by the Investors and their
representatives in connection with the proposed transactions contemplated hereby
shall not have caused the Investors or their representatives to become aware of
any material facts relating to the business, assets, results of operations,
condition (financial or otherwise), or prospects of the Company which, in the
good faith judgment of the Investors, make it inadvisable for the Investors to
proceed with the consummation of the transactions contemplated hereby.
(p) No Material Adverse Change. The business, assets, financial condition,
operations, results of operations and prospects of the Company are substantially
as have been represented to the Investors. Since March 31, 2003, there shall not
have been any material adverse change in the business, assets, results of
operations, condition (financial or otherwise) or prospects of the Company.
5.2 Conditions to Obligations of the Company at the Closing.
The Company's obligation to issue and sell the Shares is subject to the
satisfaction, on or prior to the Closing, of the following conditions:
(a) Representations and Warranties True. The representations and warranties in
Section 4 made by the Investors shall be true and correct in all material
respects at the date of the Closing, with the same force and effect as if they
had been made on and as of said date.
(b) Minimum Investment. The Company shall have received at least $11,000,000 in
aggregate gross proceeds from the Investors' subscriptions for Series B
Convertible Preferred Stock, exclusive of the Deferred Investment by GP
Strategies Corporation pursuant to Section 1.2(b).
(c) Performance of Obligations. The Investors shall have performed and complied
with all agreements and conditions herein required to be performed or complied
with by Investors on or before the Closing.
(d) Filing of Certificate. The Certificate shall have been filed with the
Secretary of State of the State of Delaware.
(e) Securities Exemption. The offer and sale of the Shares to the Investors
pursuant to this Agreement shall be exempt from the registration requirements of
the Securities Act and the registration requirements and/or qualification
requirements of all other applicable state securities laws.
(f) Amended and Restated Investor Rights Agreement. The Amended and Restated
Investor Rights Agreement substantially in the form attached hereto as EXHIBIT C
shall have been executed and delivered by the Investors.
(g) Amended and Restated Right of First Refusal and Co-Sale Agreement. The
Amended and Restated Right of First Refusal and Co-Sale Agreement substantially
in the form attached hereto as EXHIBIT D shall have been executed and delivered
by the parties thereto.
(h) Consents, Permits, and Waivers. The Company shall have obtained any and all
consents, permits and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement and the Related Agreements (except
for such as may be properly obtained subsequent to the Closing).
(i) Board of Directors and Stockholder Approval. The Board of Directors and the
holders of the requisite number of the issued and outstanding shares of capital
stock of the Company shall have approved the transactions contemplated by this
Agreement.
5.3 Conditions to Deferred Investor's Obligations at the
Deferred Closing. The Deferred Investor's obligations to purchase the Shares at
the Deferred Closing are subject to the satisfaction, at or prior to the
Deferred Investment Closing Date, of the following conditions:
(a) Representations and Warranties True; Performance of Obligations. The
representations and warranties made by the Company in Section 3 hereof shall be
true and correct as of the Deferred Closing Date with the same force and effect
as if they had been made as of the Deferred Closing Date, and the Company shall
have performed all obligations and conditions required to be performed or
observed by it under this Section 5.3 on or prior to the Deferred Closing;
provided, however, that the Company may update the Schedule of Exceptions as of
the Deferred Closing Date and for purposes of the representations and warranties
set forth in Section 3.5, the term "Year to Date Statements" shall refer to the
unaudited balance sheet of the Company as of the last day of the calendar
quarter ended at least 30 days prior to the Deferred Investment Closing Date,
and the related unaudited statements of income, partner's capital, and cash
flows for the three, six, or nine-month period then ended.
(b) Legal Investment. On the Deferred Closing Date, the sale and issuance of the
Shares proposed to be issued to the Deferred Investor, and the proposed issuance
of the Conversion Shares issuable upon conversion thereof, shall be legally
permitted by all laws and regulations to which the Deferred Investor and the
Company are subject.
(c) Consents, Permits and Waivers. The Company shall have obtained any and all
consents, permits and waivers necessary or appropriate for the sale and issuance
of the Shares to the Deferred Investor (except for such as may be properly
obtained subsequent to the Deferred Closing).
(d) Corporate Documents. The Company shall have delivered to the Deferred
Investor or its counsel copies of all corporate documents of the Company as the
Deferred Investor shall reasonably request.
(e) Reservation of Conversion Shares. The Conversion Shares issuable upon
conversion of the Shares proposed to be issued to the Deferred Investor shall
have been duly authorized and reserved for issuance upon such conversion.
(f) Compliance Certificate. The Company shall have delivered to the Deferred
Investor a Compliance Certificate, executed by the President of the Company,
dated the Deferred Closing Date, to the effect that the conditions specified in
subsections (a), (c) and (e) of this Section 5.3 have been satisfied.
(g) Secretary's Certificate. The Deferred Investor shall have received from the
Company's Secretary, a certificate having attached thereto (i) the Certificate
as in effect at the time of the Deferred Closing, (ii) the Company's Bylaws as
in effect at the time of the Deferred Closing, (iii) the resolutions approved by
the Board of Directors of the Company authorizing the transactions contemplated
hereby, (iv) good standing certificates (including tax good standing) with
respect to the Company from the applicable authority(ies) in Delaware and any
other jurisdiction in which the Company is qualified to do business, dated a
recent date before the Deferred Closing, and (v) all required stockholder
consents to the transactions as described in this Agreement.
(h) Proceedings and Documents. All corporate and other proceedings in connection
with the transactions contemplated at the Deferred Closing hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Deferred Investor and its counsel, and
the Deferred Investor and its counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.
5.4 Conditions to Obligations of the Company at the Deferred
Closing. The Company's obligation to issue and sell the Shares comprising the
Deferred Investment to the Deferred Investor is subject to the satisfaction, on
or prior to the Deferred Closing, of the following conditions:
(a) Representations and Warranties True. The representations and warranties in
Section 4 made by the Deferred Investor shall be true and correct in all
material respects at the date of the Deferred Closing, with the same force and
effect as if they had been made on and as of said date.
(b) Performance of Obligations. The Deferred Investor shall have performed and
complied with all agreements and conditions herein required to be performed or
complied with by the Deferred Investor on or before the Deferred Closing.
(c) Securities Exemption. The offer and sale of the Shares to the Deferred
Investor pursuant to this Agreement shall be exempt from the registration
requirements of the Securities Act and the registration requirements and/or
qualification requirements of all other applicable state securities laws.
(d) Amended and Restated Investor Rights Agreement. The Amended and Restated
Investor Rights Agreement in the form delivered to the Company by the Investors
at the Closing shall have been executed and delivered by the Deferred Investor.
(e) Amended and Restated Right of First Refusal and Co-Sale Agreement. The
Amended and Restated Right of First Refusal and Co-Sale Agreement in the form
delivered to the Company by the Investors at the Closing shall have been
executed and delivered by the Deferred Investor.
(f) Consents, Permits, and Waivers. The Company shall have obtained any and all
consents, permits and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement and the Related Agreements (except
for such as may be properly obtained subsequent to the Deferred Closing).
6. MISCELLANEOUS.
6.1 Governing Law. This Agreement shall be governed in all respects by the laws
of the State of New York, without reference to principles of conflict of laws.
6.2 Survival. The representations, warranties, covenants and agreements made
herein shall survive any investigation made by the Investors and the closing of
the transactions contemplated hereby for a period of one year following the
Deferred Investment Period. 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.
6.3 Expenses. The Company shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of the
Agreement, the Certificate and the Related Agreements.
6.4 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 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.
6.5 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 the Shares from time to time.
6.6 Entire Agreement. This Agreement, the exhibits and schedules hereto, the
Related Agreements and the other documents delivered pursuant hereto, all of
even date herewith between the parties hereto, 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.
6.7 Severability. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
6.8 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the written consent of
the Company and the Investors.
(b) The obligations of the Company and the rights of the holders of the Shares
and the Conversion Shares under this Agreement may be waived only with the
written consent of the holders of at least a majority of the Shares (treated as
if converted and including any Conversion Shares into which the Shares have been
converted that have not been sold to the public). The rights of the Company
under this Agreement may be waived only by the prior written consent of the
Company.
6.9 Delays or Omissions. It is agreed that no delay or omission to exercise any
right, power or remedy accruing to any party, upon any breach, default or
noncompliance by another party under this Agreement, the Related Agreements or
the Certificate, 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 or in 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 the Investors' part of any breach, default
or noncompliance under this Agreement, the Related Agreements or under the
Certificate or any waiver on such party's part of any provisions or conditions
of the Agreement, the Related Agreements or the Certificate must be in writing
and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, the Related Agreements, the
Certificate, by law, or otherwise afforded to any party, shall be cumulative and
not alternative.
6.10 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 Company
at the address as set forth on the signature page hereof and to the Investors at
the addresses set forth on EXHIBIT A attached hereto or at such other address as
the Company or the Investors may designate by ten days advance written notice to
the other parties hereto.
6.11 Titles and Subtitles. The titles of the sections and subsections of the
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
6.12 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.
6.13 Broker's Fees. Each party hereto represents and warrants that except for
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Inc., a Texas corporation, no agent, broker, investment
banker, person or firm acting on behalf of or under the authority of such party
hereto is or will be entitled to any broker's or finder's fee or any other
commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each other
party for any claims, losses or expenses incurred by such other party as a
result of the representation in this Section 6.13 being untrue.
6.14 Pronouns. All pronouns contained herein, and any variations thereof, shall
be deemed to refer to the masculine, feminine or neutral, singular or plural, as
to the identity of the parties hereto may require.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed the PURCHASE
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
HYDRO MED SCIENCES, INC.
SMH HYDRO MED II, LLC
By: By:
-------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: President Title: Manager
CORPORATE OPPORTUNITIES FUND, L.P.
By: SMM Corporate Management, LLC,
General Partner
By: ________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Manager
CORPORATE OPPORTUNITIES FUND
(INSTITUTIONAL), L.P.
By: SMM Corporate Management, LLC,
General Partner
By: ________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Manager
LIFE SCIENCES OPPORTUNITIES FUND, L.P.
By: SMH Life Sciences Management, LLC,
General Partner
By: ________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Manager
▇▇▇▇▇▇▇▇ MEDTECH PARTNERS L.P.
By: ▇▇▇▇▇▇▇▇ MedTech Partners LLC,
General Partner
By: ________________________________
Name:__________________________
Title:___________________________
▇▇▇▇▇▇▇▇ ASSOCIATES III, L.P.
By: ▇▇▇▇▇▇▇▇ Partners III, LLC,
General Partner
By: ________________________________
Name:__________________________
Title:___________________________
▇▇▇▇▇▇▇▇ PARTNERS III, L.P.
By: ▇▇▇▇▇▇▇▇ Partners III, LLC,
General Partner
By: ________________________________
Name:__________________________
Title:___________________________
▇▇▇▇▇▇▇▇ FOREIGN PARTNERS III, L.P.
By: ▇▇▇▇▇▇▇▇ Partners III, LLC,
General Partner
By: ________________________________
Name:__________________________
Title:___________________________
PALADIN LABS INC.
By: ________________________________
Name:__________________________
Title:___________________________
FALCON SEABOARD HOLDINGS, L.P.
By: ________________________________
Name:__________________________
Title:___________________________
DEFERRED INVESTOR:
GP STRATEGIES CORPORATION
By: ________________________________
Name:__________________________
Title:___________________________
List Of Exhibits:
Schedule of Investors Exhibit A
Certificate Exhibit B
Amended and Restated Investor Rights Agreement Exhibit C
Amended and Restated Right of First Refusal and Co-Sale Agreement Exhibit D
List of Stockholders, Optionholders and Warrantholders Exhibit E
Form of Legal Opinion Exhibit F
EXHIBIT A
schedule of InvestorS
AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
SMH Hydro Med II LLC
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ 4,358,620 $3,160,000.00
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Corporate Opportunities Fund, L.P.
c/o SMM Corporate Management LLC 863,448 $626,000.00
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
4,653,793 $3,374,000.00
Corporate Opportunities Fund
(Institutional), L.P.
c/o SMM Corporate Management LLC
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇▇ MedTech Partners L.P.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ 689,655 $499,999.88
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ Partners
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, M.D.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Partners III, L.P. 964,964* $699,598.90*
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ Partners
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, M.D.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Associates III, L.P.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ 203,822* $147,770.95*
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ Partners
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, M.D.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Wheatley Foreign Partners III, L.P.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ 210,524* $152,629.90*
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ Partners
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, M.D.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Life Sciences Opportunities Fund, L.P.
c/o SMM Corporate Management LLC 1,379,310 $1,000,000.00
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Paladin Labs, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 1,379,310 $1,000,000.00
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Falcon Seaboard Holdings, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ 468,865 $340.000.00
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
GP Strategies Corporation**
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 6,896,551** $5,000,000.00**
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
* ▇▇▇▇▇▇▇▇ Partners III, L.P., ▇▇▇▇▇▇▇▇ Associates II, L.P., and ▇▇▇▇▇▇▇▇
Foreign Partners III, L.P. have the right to purchase up to an additional
1,379,310 Shares on or before June 30, 2003.
** Subject to exercise of option granted to GP Strategies Corporation (or an
affiliated entity of GP Strategies Corporation) to purchase all or a
portion of its $5,000,000 allocation on or before March 31, 2004, and fund
such purchase within 90 days following its exercise.
EXHIBIT E
LIST OF STOCKHOLDERS, OPTIONHOLDERS AND WARRANTHOLDERS
Series A
Convertible
Common Stock Preferred Stock
--------------------------------------
GP Strategies Corporation 10,000,000.00
-
SMH Hydro Med, LLC
- 4,000,000.00
Corporate Opportunities Fund, LP
- 313,000.00
Corporate Opportunities Fund
(Institutional), LP - 1,687,000.00
▇▇▇▇▇▇▇▇ MedTech Partners, LP
- 1,000,000.00
--------------------------------------
10,000,000.00 7,000,000.00
Incentive Stock Options Qualified Non-Qualified Total Vested Vested Shares
--------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 2,000.00 - 2,000.00 25.00% 500.00
Cuza 5,000.00 - 5,000.00 25.00% 1,250.00
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 7,000.00 - 7,000.00 25.00% 1,750.00
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 30,000.00 - 30,000.00 25.00% 7,500.00
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 12,000.00 - 12,000.00 25.00% 3,000.00
▇▇▇▇▇ ▇▇▇▇▇ 2,500.00 - 2,500.00 25.00% 625.00
▇▇▇▇▇ ▇▇▇▇ 20,000.00 - 20,000.00 25.00% 5,000.00
▇▇▇▇▇ ▇▇▇▇▇▇▇ 10,000.00 - 10,000.00 25.00% 2,500.00
▇▇▇▇▇ ▇▇▇ 18,000.00 - 18,000.00 25.00% 4,500.00
▇▇▇▇ ▇▇▇▇▇ 100,000.00 - 100,000.00 25.00% 25,000.00
▇▇▇▇▇ ▇▇▇▇ 7,000.00 - 7,000.00 25.00% 1,750.00
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 4,000.00 - 4,000.00 25.00% 1,000.00
▇▇▇▇▇ ▇▇▇▇ 3,000.00 - 3,000.00 25.00% 750.00
▇▇▇▇▇▇▇ ▇. ▇▇▇ III 300,000.00 - 300,000.00 25.00% 75,000.00
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 400,000.00 600,000.00 1,000,000.00 25.00% 250,000.00
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 80,000.00 - 80,000.00 25.00% 20,000.00
▇▇▇▇▇▇ ▇▇▇▇▇▇ 80,000.00 - 80,000.00 25.00% 20,000.00
▇▇▇▇▇ ▇▇▇▇ 40,000.00 - 40,000.00 25.00% 10,000.00
------------------------------------------------------------------------------------
1,120,500.00 600,000.00 1,720,500.00 380,125.00
====================================================================================
Upon the Company's receipt of Regulatory Approval (as defined in the License
Agreement dated October 3, 2002 (the "License Agreement"), between the Company
and Paladin Labs Inc. ("Paladin")) to market the Product (as defined in the
License Agreement) within Canada, the Company shall have the option to issue and
sell to Paladin, and upon the exercise of such option by the Company, Paladin
shall purchase from the Company, (1) such number of shares of the same class and
series of capital stock that were sold in the then most recently completed
equity financing of the Company as is equal to US$500,000 divided by the per
share price paid in such financing, or (2) if the Company's common stock is then
listed on a national securities exchange or is quoted on Nasdaq or another
quotation and reporting service, then such number of shares of common stock as
is equal to US$500,000 divided by the then current market price of the common
stock, for an aggregate purchase price of US$500,000.