Exhibit 10.35
HYDRO MED SCIENCES, INC.
AMENDED AND RESTATED RIGHT OF FIRST REFUSAL
AND CO-SALE AGREEMENT
THIS AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE 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"), each of the
persons and entities listed on Exhibit A hereto (the "Investors"), each of the
persons listed as "Common Stockholders" on Exhibit B hereto (the "Common
Stockholders"), and each of the persons listed as "Series A Stockholders" on
Exhibit C hereto (the "Series A Stockholders" and together with the Common
Stockholders, the "Current Stockholders").
RECITALS
The Common Stockholders are the beneficial owners of an aggregate
10,000,000 shares of Common Stock of the Company.
The Series A Stockholders are the beneficial owners of an aggregate
7,000,000 shares of Series A Convertible Preferred Stock of the Company.
The 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 Company, the
Common Stockholders, the Series A Stockholders, and the Investors have agreed to
the first refusal and co-sale rights as set forth below.
In consideration of these 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 hereto agree as follows:
1. DEFINITIONS.
(a) "Common Stock" shall mean shares of the Company's common
stock, par value $.001 per share, and shares of Common Stock issued or issuable
upon conversion of the Company's outstanding Series A Convertible Preferred
Stock or Series B Convertible Preferred Stock or exercise of any option,
warrant, or other security or right of any kind convertible into or exchangeable
for Common Stock.
(b) "Preferred Stock" shall mean shares of Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock.
(c) "Preferred Stockholder" shall mean the Investors and the
Series A Stockholders.
(d) "Series A Convertible Preferred Stock" shall mean shares
of the Company's preferred stock, par value $.001 per share, designated as
"Series A Convertible Preferred Stock."
(e) "Series B Convertible Preferred Stock" shall mean shares
of the Company's preferred stock, par value $.001 per share, designated as
"Series B 10% Convertible Preferred Stock."
(f) "Stock" shall mean shares of Common Stock or Preferred
Stock now owned or subsequently acquired by the Current Stockholders or the
Investors by gift, purchase, dividend, option exercise or any other means
whether or not such securities are only registered in a Current Stockholder's or
Investor's name or beneficially or legally owned by such Current Stockholder or
Investor, including any interest of a spouse in any of the Stock, whether that
interest is asserted pursuant to marital property laws or otherwise. The number
of shares of Stock owned by each Current Stockholder as of the date hereof is
set forth on Exhibit B or Exhibit C, as applicable, which Exhibit may be amended
from time to time by the Company to reflect changes in the number of shares
owned by the Current Stockholders, but the failure to so amend shall have no
effect on such Stock being subject to this Agreement.
(g) "Stockholder" shall mean the holders of Stock, including
the Investors and the Current Stockholders.
(h) For the purpose of this Agreement, the term "Transfer"
shall include any sale, assignment, encumbrance, hypothecation, pledge,
conveyance in trust, gift, transfer by request, merger or consolidation, devise
or descent, or other transfer or disposition of any kind, including, but not
limited to, transfers to receivers, levying creditors, trustees or receivers in
bankruptcy proceedings or general assignees for the benefit of creditors,
whether voluntary or by operation of law, directly or indirectly, of any of the
Stock.
2. NOTICE OF TRANSFERS.
(a) Before any Common Stockholder, in the case of Section 3
or 5 of this Agreement, or any Investor or Series A Stockholder, in the case of
Section 4 of this Agreement, may effect any Transfer of Stock, such Common
Stockholder, Investor, or Series A Stockholder, as applicable (the "Selling
Stockholder"), must give at the same time to (i) the Company, (ii) if a Common
Stockholder, each other Common Stockholder (if any) and each Investor and Series
A Stockholder, (iii) if an Investor, each other Investor and each Common
Stockholder and Series A Stockholder, and (iv) if a Series A Stockholder, each
other Series A Stockholder and each Investor and Common Stockholder, a written
notice signed by the Selling Stockholder (the "Selling Stockholder's Notice")
stating: (a) the Selling Stockholder's bona fide intention to transfer such
Stock; (b) the number of shares of Stock proposed to be transferred to each
proposed purchaser or other transferee ("Proposed Transferee"); (c) the name,
address and relationship, if any, to the Selling Stockholder of each Proposed
Transferee; (d) the bona fide cash price or, in reasonable detail, other
consideration, per share for which the Selling Stockholder proposes to transfer
such Stock to each Proposed Transferee (the "Offered Price"); (e) the proposed
time of payment; and (f) any other relevant terms of the proposed sale. Upon the
request of the Company, any Investor, any Series A Stockholder, or any Common
Stockholder, the Selling Stockholder will promptly furnish to the Company, all
other Investors, all other Series A Stockholders, and all other Common
Stockholders such other information as may be reasonably requested to establish
that the offer and Proposed Transferee(s) are bona fide.
3. RIGHT OF FIRST REFUSAL WITH RESPECT TO COMMON STOCKHOLDERS.
(a) The Company shall have a right of first refusal (the
"Company's Right of First Refusal") to purchase all or any part of the Stock of
any Common Stockholder proposed to be transferred by such Common Stockholder
("Offered Stock"), if the Company gives written notice of the exercise of such
right to the Selling Stockholder within 20 days (the "Company's Refusal Period")
after the date of the Selling Stockholder's Notice to the Company. Prior to the
expiration of the Company's Refusal Period, the Company shall send written
notice (the "Company's Notice") to the Selling Stockholder, each Investor, each
Series A Stockholder, and all Common Stockholders other than the Selling
Stockholder ("Other Common Stockholders") specifying (i) that the Company
intends to exercise the Company's Right of First Refusal in full or in part,
(ii) that the Company does not intend to exercise the Company's Right of First
Refusal in full, or (iii) that the Company is not lawfully able to repurchase
all or any portion of the Offered Stock.
(b) If the Company does not exercise its right of first
refusal in full, each Investor, Series A Stockholder, and Other Common
Stockholder will have a right of first refusal (the "Investors' Right of First
Refusal") to purchase some or all of the Offered Stock not purchased by the
Company. The Investors' Right of First Refusal may be exercised as follows:
(i) Each Investor, Series A Stockholder, and Other Common
Stockholder desiring to purchase some or all of the Offered Stock must, within
the 20-day period commencing on the date of the Company's Notice or expiration
of the period therefor (the "Investor Refusal Period"), give written notice to
the Selling Stockholder and to the Company of such Investor's, Series A
Stockholder's, or Other Common Stockholder's election to purchase the Offered
Stock, and the number of shares and type of the Offered Stock that such
Investor, Series A Stockholder or Other Common Stockholder desires to purchase.
If the total number of shares specified in the elections of the Investors,
Series A Stockholders, and Other Common Stockholders exceeds the number of
shares of Offered Stock available for purchase, then (unless the electing
Investors, Series A Stockholders, and Other Common Stockholders otherwise agree
in writing) each Investor, Series A Stockholder, and Other Common Stockholder
electing to purchase will have the right to purchase that number of shares of
Offered Stock that is obtained by multiplying the number of shares of Offered
Stock available for purchase by a fraction (A) the numerator of which will be
the number of shares of Common Stock then held by such Investor, Series A
Stockholder, or Other Common Stockholder, and (B) the denominator of which will
be the sum of the total number of shares of Common Stock then held by all
Investors, Series A Stockholders, and Other Common Stockholders electing to
purchase the Offered Stock.
(ii) Within five days after expiration of the Investor
Refusal Period, the Company will give written notice (the "Investors' Notice")
to the Selling Stockholder, the Investors, the Series A Stockholders, and the
Other Common Stockholders specifying (A) that some or all of the Offered Stock
was subscribed by the Company, the Investors, the Series A Stockholders, and/or
the Other Common Stockholders exercising their respective Rights of First
Refusal and (B) that the Transfer proposed by the Selling Stockholder is subject
to the co-sale rights pursuant to Section 6 hereof with respect to the Offered
Stock.
(c) The purchase price for the Offered Stock to be purchased
by the Company, by an Investor, by a Series A Stockholder, or by an Other Common
Stockholder exercising its Right of First Refusal under this Agreement will be
the Offered Price (subject, in the case of the Company, to any rights the
Company may have under any other agreement to purchase all or some of such
Offered Stock at a lower price), and will be payable as set forth in Section
3(d) hereof. If the Offered Price includes consideration other than cash, the
cash equivalent value of the non-cash consideration will be determined by the
Board of Directors of the Company in good faith, which determination will be
binding upon the Company, the Investors, the Series A Stockholders, the Other
Common Stockholders, and the Selling Stockholder absent fraud or error.
(d) Payment of the purchase price for Offered Stock
purchased by the Company or by an Investor, Series A Stockholder, or Other
Common Stockholder exercising its respective Right of First Refusal shall be
made within 10 days after the date of the Investors' Notice; provided that, if
the Company elects to purchase all of the Offered Stock, payment of the purchase
price for such Offered Stock shall be made within 10 days after the earlier of
(i) the date of the Company's Notice or (ii) the expiration of the Company's
Refusal Period. Payment of the purchase price will be made, at the option of the
Company or, as the case may be, by an Investor, Series A Stockholder, or Other
Common Stockholder to the Selling Stockholder (i) in cash or by cashier's check,
(ii) by wire transfer of immediately available funds, or (iii) by any
combination of the foregoing.
(e) Upon the date that payment is made for the Offered Stock
purchased by the Company or the Investors, Series A Stockholders, or Other
Common Stockholders pursuant to their respective Rights of First Refusal
hereunder, the Selling Stockholder will have no further rights as a holder of
such Offered Stock and the Selling Stockholder will forthwith cause all
certificate(s) evidencing such Offered Stock to be surrendered to the Company
for cancellation, or, as to purchases by Investor(s), Series A Stockholder(s),
or Other Common Stockholder(s), for transfer to the purchasing Investor(s),
Series A Stockholder(s), or Other Common Stockholder(s).
(f) If the Company, the Investors, the Series A
Stockholders, or the Other Common Stockholders have not elected pursuant to
their respective Rights of First Refusal set forth in paragraphs (a) and (b) of
this Section 3 to purchase all of the Offered Stock, then the Selling
Stockholder shall have the right either to (i) elect to sell to the Company, the
Investors, the Series A Stockholders, or the Other Common Stockholders whatever
portion of the Offered Stock that Company, the Investors, the Series A
Stockholders, and the Other Common Stockholders have elected to purchase
pursuant to paragraphs (a) and (b) of this Section 3 and transfer the remaining
Offered Stock to any person named as a Proposed Transferee in the Selling
Stockholder's Notice, or (ii) withdraw all offers under this Section 3 and
either retain the Offered Stock or transfer the Offered Stock proposed to be
sold by the Selling Stockholder to any person named as a Proposed Transferee in
the Selling Stockholder's Notice, in either case at the Offered Price or at a
higher price, provided that such transfer (i) is consummated within 120 days
after the date of the Selling Stockholder's Notice and (ii) is in accordance
with the terms and conditions of this Agreement (including the co-sale rights
provided for in Section 6). If the Offered Stock is transferred in accordance
with the terms and conditions of this Agreement, then the Proposed Transferee(s)
of the Offered Stock will thereafter hold such Offered Stock free of all
restrictions on transfer imposed by this Agreement. If the Offered Stock is not
so transferred during such 120-day period, then the Selling Stockholder will not
transfer any of such Offered Stock without complying again in full with the
provisions of this Agreement.
(g) The exercise or non-exercise of the rights of the
Investors, the Series A Stockholders, or the Other Common Stockholders hereunder
to participate in one or more Transfers of Offered Stock made by such Selling
Stockholder shall not adversely affect their rights to participate in subsequent
Transfers of Offered Stock subject to this Section 3. An Investor or Series A
Stockholder that exercises its right to purchase Offered Stock pursuant to
Section 4(b)(ii) shall not be entitled to exercise its co-sale right under
Section 6.
4. RIGHT OF FIRST REFUSAL WITH RESPECT TO PREFERRED STOCKHOLDERS.
(a) The Company shall have a right of first refusal (the
"Company's Preferred Right of First Refusal") to purchase all or any part of the
Stock of any Preferred Stockholder proposed to be transferred by such Preferred
Stockholder ("Offered Preferred Stock"), if the Company gives written notice of
the exercise of such right to the Selling Stockholder within 20 days (the
"Company's Preferred Refusal Period") after the date of the Selling
Stockholder's Notice to the Company. Prior to the expiration of the Company's
Preferred Refusal Period, the Company shall send written notice (the "Company's
Preferred Notice") to the Selling Stockholder and to each other Series A
Stockholder, Investor, and Common Stockholder specifying (i) that the Company
intends to exercise the Company's Preferred Right of First Refusal in full or in
part, (ii) that the Company does not intend to exercise the Company's Preferred
Right of First Refusal in full, or (iii) that the Company is not lawfully able
to repurchase all or any portion of the Offered Preferred Stock.
(b) If the Company does not exercise its right of first
refusal in full, each other Preferred Stockholder and each Common Stockholder
will have a right of first refusal (the "Stockholders' Right of First Refusal")
to purchase some or all of the Offered Preferred Stock not purchased by the
Company. The Stockholders' Right of First Refusal may be exercised as follows:
(i) Each Preferred Stockholder (other than the Selling
Stockholder) and each Common Stockholder desiring to purchase some or all of the
Offered Preferred Stock must, within the 20-day period commencing on the date of
the Company's Preferred Notice or expiration of the period therefor (the
"Stockholder Refusal Period"), give written notice to the Selling Stockholder
and to the Company of such Preferred Stockholder's or Common Stockholder's
election to purchase the Offered Preferred Stock, and the number of shares and
type of the Offered Preferred Stock that such Preferred Stockholder or Common
Stockholder desires to purchase. If the total number of shares specified in the
elections of the Preferred Stockholders and Common Stockholders exceeds the
number of shares of Offered Preferred Stock available for purchase, then (unless
the electing Preferred Stockholders and Common Stockholders otherwise agree in
writing) each Preferred Stockholder and Common Stockholder electing to purchase
will have the right to purchase that number of shares of Offered Preferred Stock
that is obtained by multiplying the number of shares of Offered Preferred Stock
available for purchase by a fraction (A) the numerator of which will be the
number of shares of Common Stock then held by such Preferred Stockholder or
Common Stockholder, and (B) the denominator of which will be the sum of the
total number of shares of Common Stock then held by all Preferred Stockholders
and Common Stockholders electing to purchase the Offered Preferred Stock.
(ii) Within five days after expiration of the Stockholder
Refusal Period, the Company will give written notice (the "Preferred
Stockholders' Notice") to the Selling Stockholder, the other Preferred
Stockholders and the Common Stockholders specifying that some or all of the
Offered Preferred Stock was subscribed by the Company, the other Preferred
Stockholders and/or the Common Stockholders exercising their respective Rights
of First Refusal.
(c) The purchase price for the Offered Preferred Stock to be
purchased by the Company, by a Preferred Stockholder or by a Common Stockholder
exercising its Right of First Refusal under this Agreement will be the Offered
Price (subject, in the case of the Company, to any rights the Company may have
under any other agreement to purchase all or some of such Offered Preferred
Stock at a lower price), and will be payable as set forth in Section 4(d)
hereof. If the Offered Price includes consideration other than cash, the cash
equivalent value of the non-cash consideration will be determined by the Board
of Directors of the Company in good faith, which determination will be binding
upon the Company, the Preferred Stockholders, the Common Stockholders, and the
Selling Stockholder absent fraud or error.
(d) Payment of the purchase price for Offered Preferred
Stock purchased by the Company, a Preferred Stockholder, or a Common Stockholder
exercising its respective Right of First Refusal shall be made within 10 days
after the date of the Preferred Stockholders' Notice; provided that, if the
Company elects to purchase all of the Offered Preferred Stock, payment of the
purchase price for such Offered Preferred Stock shall be made within 10 days
after the earlier of (i) the date of the Company's Preferred Notice or (ii) the
expiration of the Company's Preferred Refusal Period. Payment of the purchase
price will be made, at the option of the Company or, as the case may be, by a
Preferred Stockholder or Common Stockholder to the Selling Stockholder (i) in
cash or by cashier's check, (ii) by wire transfer of immediately available
funds, or (iii) by any combination of the foregoing.
(e) Upon the date that payment is made for the Offered
Preferred Stock purchased by the Company, the other Preferred Stockholders, or
the Common Stockholders pursuant to their respective Rights of First Refusal
hereunder, the Selling Stockholder will have no further rights as a holder of
such Offered Preferred Stock and the Selling Stockholder will forthwith cause
all certificate(s) evidencing such Offered Preferred Stock to be surrendered to
the Company for cancellation, or, as to purchases by the Preferred
Stockholder(s) or Common Stockholder(s), for transfer to the purchasing
Investor(s).
(f) If the Company, the other Preferred Stockholders, or the
Common Stockholders have not elected pursuant to their respective Rights of
First Refusal hereunder to purchase all of the Offered Preferred Stock, then the
Selling Stockholder shall have the right either to (i) elect to sell to the
Company, the other Preferred Stockholders or the Common Stockholders whatever
portion of the Offered Preferred Stock that Company, the other Preferred
Stockholders, and the Common Stockholders have elected to purchase pursuant to
paragraphs (a) and (b) of this Section 4 and transfer the remaining Offered
Preferred Stock to any person named as a Proposed Transferee in the Selling
Stockholder's Notice, or (ii) withdraw all offers under this Section 3 and
either retain the Offered Preferred Stock or transfer the Offered Preferred
Stock proposed to be sold by the Selling Stockholder to any person named as a
Proposed Transferee in the Selling Stockholder's Notice, in either case, at the
Offered Price or at a higher price, provided that such transfer (i) is
consummated within 120 days after the date of the Selling Stockholder's Notice
and (ii) is in accordance with the terms and conditions of this Agreement. If
the Offered Preferred Stock is transferred in accordance with the terms and
conditions of this Agreement, then the Proposed Transferee(s) of the Offered
Preferred Stock will thereafter hold such Offered Preferred Stock free of all
restrictions on transfer imposed by this Agreement. If the Offered Investor
Stock is not so transferred during such 120-day period, then the Selling
Stockholder will not transfer any of such Offered Preferred Stock without
complying again in full with the provisions of this Agreement.
(g) The exercise or non-exercise of the rights of the
Preferred Stockholders and the Common Stockholders hereunder to participate in
one or more Transfers of Offered Preferred Stock made by such Selling
Stockholder shall not adversely affect their rights to participate in subsequent
Transfers of Offered Preferred Stock subject to this Section 4.
5. CO-SALE RIGHT.
(a) In the event the Company, the Investors, the Series A
Stockholders, and/or the Other Common Stockholders fail to exercise their
respective rights to purchase all of the Offered Stock of a Common Stockholder
subject to Section 3(a) and/or (b) hereof, following the exercise or expiration
of the rights of purchase set forth in Section 3(a) and 3(b), then the Common
Stockholder shall deliver to the Company, which the Company shall in turn
promptly deliver to each Investor and Series A Stockholder, written notice (the
"Co-Sale Notice") that each Investor and Series A Stockholder shall have the
right, exercisable upon written notice to the Selling Stockholder within 15 days
after receipt of the Co-Sale Notice by the Investors and Series A Stockholders,
to participate in such Transfer of Stock by the Common Stockholder to the
Proposed Transferee ("Co-Sale Stock") on the same terms and conditions. Such
notice shall indicate the number of shares of Common Stock such Investor or
Series A Stockholder wishes to sell under its right to participate. To the
extent one or more of the Investors or Series A Stockholders exercise such right
of participation in accordance with the terms and conditions set forth below,
the number of shares of Co-Sale Stock that such Selling Stockholder may sell in
the transaction shall be correspondingly reduced.
(b) Each Investor and Series A Stockholder may sell all or
any part of that number of shares equal to the product obtained by multiplying
(i) the aggregate number of shares of Co-Sale Stock covered by the Selling
Stockholder Notice by (ii) a fraction the numerator of which is the number of
shares of Common Stock owned by such Investor or Series A Stockholder at the
time of the Transfer and the denominator of which is the total number of shares
of Common Stock owned by such Selling Stockholder and the Investors and Series A
Stockholders at the time of the Transfer. If not all of the Investors and Series
A Stockholders elect to sell their share of the Co-Sale Stock proposed to be
transferred within said 15-day period, then the Selling Stockholder shall
promptly notify in writing the Investors and Series A Stockholders who do so
elect and shall offer such Investors and Series A Stockholders the additional
right to participate in the sale of such additional shares of Co-Sale Stock
proposed to be transferred on the same percentage basis as set forth above in
this Section 5(b). The Investors and Series A Stockholders shall have five days
after the receipt of such notice to notify the Selling Stockholder of their
election to sell all or a portion thereof of the unsubscribed shares.
(c) Each Investor and Series A Stockholder who elects to
participate in the Transfer pursuant to this Section 5 (a "Participant") shall
effect its participation in the Transfer by promptly delivering to the Selling
Stockholder for transfer to the Proposed Transferee one or more certificates,
properly endorsed for transfer, which represent:
(i) number of shares of Common Stock which such Participant
elects to sell; or
(ii) that number of shares of Series A Convertible Preferred
Stock or Series B Convertible Preferred Stock which is at such time convertible
into the number of shares of Common Stock which such Participant elects to sell;
provided, however, that if the Proposed Transferee objects to the delivery of
Series A Convertible Preferred Stock or Series B Convertible Preferred Stock in
lieu of Common Stock, such Participant shall convert such Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock into Common Stock and
deliver Common Stock as provided in Section 5(c)(i) above. The Company agrees to
make any such conversion concurrent with the actual transfer of such shares to
the Proposed Transferee.
(d) The stock certificate or certificates that the
Participant delivers to such Selling Stockholder pursuant to Section 5(c) shall
be transferred to the Proposed Tranferee in consummation of the sale of the
Common Stock pursuant to the terms and conditions specified in the Co-Sale
Notice, and the Selling Stockholder shall concurrently therewith remit to such
Participant that portion of the sale proceeds to which such Participant is
entitled by reason of its participation in such sale. To the extent that any
Proposed Transferee prohibits such assignment or otherwise refuses to purchase
shares or other securities from a Participant exercising its rights of co-sale
hereunder, such Selling Stockholder shall not sell to such Proposed Transferee
any Co-Sale Stock unless and until, simultaneously with such sale, such Selling
Stockholder shall purchase such shares or other securities from such Participant
on the same terms and conditions specified in the Co-Sale Notice.
(e) To the extent that the Investors and Series A
Stockholders do not elect to participate in the sale of the Co-Sale Stock
subject to the Co-Sale Notice, such Selling Stockholder may, not later than 120
days following delivery to the Company of the Co-Sale Notice, enter into an
agreement providing for the closing of the Transfer of the Co-Sale Stock covered
by the Co-Sale Notice within 30 days of such agreement on terms and conditions
not materially more favorable to the Selling Stockholder than those described in
the Co-Sale Notice. Any proposed Transfer on terms and conditions materially
more favorable than those described in the Co-Sale Notice, as well as any
subsequent proposed transfer of any of the Co-Sale Stock by a Selling
Stockholder, shall again be subject to the co-sale rights of the Investors and
Series A Stockholders and shall require compliance by a Selling Stockholder with
the procedures described in this Section 5.
(f) The exercise or non-exercise of the rights of the
Investors and Series A Stockholders hereunder to participate in one or more
Transfers of Co-Sale Stock made by such Selling Stockholder shall not adversely
affect their rights to participate in subsequent Transfers of Co-Sale Stock
subject to this Section 5.
6. EXEMPT TRANSFERS.
(a) Notwithstanding the foregoing, the rights of first
refusal and the co-sale rights of the Company, the Investors, and the Series A
Stockholders under Sections 3, 4 and 5 shall not apply to (i) any Transfer to
the ancestors, descendants or spouse of the Common Stockholders or to trusts for
the benefit of such persons, (ii) any Transfer or Transfers by a Common
Stockholder to another Common Stockholder or to an individual employed by the
Company at the time of such transfer (the "Employee"), but only if the
transferring Common Stockholder first offers the shares to all other Common
Stockholders or Employees, as applicable, and each member of the applicable
group is allowed to participate pro rata with the other members of that group,
(iii) any pledge of Stock made pursuant to a bona fide loan transaction that
creates a mere security interest; (iv) any Transfer by a Common Stockholder or
Preferred Stockholder which is a partnership, limited liability company or
corporation to the partners, members or stockholders of such entity without the
payment of consideration therefor, or (v) any bona fide gift; provided that in
the event of any transfer made pursuant to one of the exemptions provided by
clauses (i), (ii), (iii), (iv), or (v), (A) the transferor shall inform the
Company and the Investors of such pledge, transfer or gift prior to effecting it
and (B) the pledgee, transferee or donee shall furnish the Company and the
Investors with a written agreement to be bound by and comply with all provisions
of this Agreement. Such transferred Stock shall remain "Stock" hereunder, and
such pledgee, transferee or donee shall be treated as a "Common Stockholder" (to
the extent such transfer was from a Common Stockholder) for purposes of this
Agreement.
(b) Notwithstanding the foregoing, the provisions of
Sections 3, 4, and 5 shall not apply to the sale of any Stock to the public
pursuant to a registration statement filed with, and declared effective by, the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act").
(c) This Agreement is subject to, and shall in no manner
limit, any other right that the Company may have to repurchase securities from
the Common Stockholders pursuant to a stock restriction agreement or other
agreement between the Company and the Common Stockholders.
7. PROHIBITED TRANSFERS.
(a) In the event that a Stockholder (a "Prohibited
Transferee") should Transfer any Stock in contravention of the right of first
refusal or co-sale rights of the Investors, Series A Stockholders, and/or Common
Stockholders under Sections 3, 4 or 5, as the case may be, under this Agreement
(a "Prohibited Transfer"), each Investor, Series A Stockholder, or Common
Stockholder, as the case may be, in addition to such other remedies as may be
available at law, in equity or hereunder, shall have the option provided below,
and the Prohibited Transferee shall be bound by the applicable provisions of
such option.
(b) In the event of a Prohibited Transfer, each Investor,
Series A Stockholder, and/or Common Stockholder, as the case may be, shall have
the right to purchase from (to the extent the Prohibited Transferee still owns
Stock) or sell to Prohibited Transferee, as applicable, the type and number of
shares of Common Stock equal to the number of shares such Investor or Series A
Stockholder would have been entitled to purchase from or sell to the purchaser
under Sections 3 and 5 hereof, or such Common Stockholder would have been
entitled to purchase under Section 3 and 4 hereof, had the Prohibited Transfer
been effected pursuant to and in compliance with the terms hereof. Such sale
shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be
purchased from or sold to the Prohibited Transferee shall be equal to the price
per share paid by the Proposed Transferee to the Prohibited Transferee in such
Prohibited Transfer. The Prohibited Transferee shall also reimburse each
Investor, Series A Stockholder, or Common Stockholder for any and all fees and
expenses, including legal fees and expenses, incurred pursuant to the exercise
or the attempted exercise of the Investor's rights under Sections 3, 4, or 5,
the Series A Stockholder's rights under Section 3, 4, or 5, or the Common
Stockholder's rights under Section 3 or 4.
(ii) Within 30 days after the date on which an Investor,
Series A Stockholder, or Common Stockholder, as the case may be, received notice
of the Prohibited Transfer or otherwise became aware of the Prohibited Transfer,
such Investor, Series A Stockholder, or Common Stockholder shall, if exercising
the option created hereby, deliver to the Prohibited Transferee payment for the
aggregate purchase price or the certificate or certificates representing shares
to be purchased or sold, each certificate to be properly endorsed for transfer.
(iii) The Prohibited Transferee shall, upon receipt of the
purchase price or certificate or certificates for the shares to be purchased or
sold by an Investor, Series A Stockholder, or Common Stockholder, pursuant to
this Section 7(b), deliver to the Investor, Series A Stockholder or Common
Stockholder the certificate or certificates representing the shares to be
purchased or pay the aggregate purchase price therefor, as applicable, and the
amount of reimbursable fees and expenses, as specified in Section 7(b)(i), in
cash or by other means acceptable to the Investor, the Series A Stockholder, or
the Common Stockholder.
(iv) Notwithstanding the foregoing, (A) any attempt by a
Common Stockholder to Transfer Stock in violation of Sections 3 or 5 shall be
voidable at the option of a majority-in-interest of the Other Common
Stockholders, the Investors and Series A Stockholders (voting as a single class
on an as converted basis) if a majority in interest of the Other Common
Stockholders, the Investors and Series A Stockholders (taken as a single class
on an as converted basis) do not elect to exercise the option set forth in this
Section 7, and (B) any attempt by a Preferred Stockholder to Transfer Stock in
violation of Section 4 hereof shall be voidable at the option of a
majority-in-interest of the Common Stockholders and the other Preferred
Stockholders if a majority in interest of the Common Stockholders and the other
Preferred Stockholders do not elect to exercise the option set forth in this
Section 7, and the Company agrees it will not effect such a Transfer nor will it
treat any alleged transferee as the holder of such shares without the written
consent of a majority in interest of the Investors, the Series A Stockholders,
and/or the Common Stockholders, as the case may be.
8. DRAG ALONG RIGHT. Notwithstanding anything contained herein to the contrary,
if at any time (i) the holders of a 75% majority-in-interest of the Common
Stock, the Series A Convertible Preferred Stock, and the Series B Convertible
Preferred Stock (voting as a single class on an as converted basis), and (ii)
the Board of Directors of the Company shall approve (x) a bona fide arms length
proposal from a person for the transfer, directly or indirectly, of all of the
Common Stock to such person, (y) the merger or consolidation of the Company with
or into another person in which the stockholders of the Company will receive
cash or securities of any other person for their shares or (z) the sale by the
Company of all or substantially all of its assets to a person, in each of the
above cases for a specified price payable in cash or otherwise and on specified
terms and conditions (a "Sale Proposal"), then the Board of Directors of the
Company shall deliver a notice (a "Required Sale Notice") with respect to such
Sale Proposal to each Common Stockholder and each Preferred Stockholder stating
that the Sale Proposal has been approved in the manner provided in this Section
8. Each such Common Stockholder and Preferred Stockholder, upon receipt of a
Required Sale Notice, shall be obligated, which obligation shall be enforceable
by the Company, if applicable, to sell their Stock and participate in the
transaction (a "Required Sale") contemplated by the Sale Proposal, vote their
shares of Stock in favor of such Sale Proposal at any meeting of stockholders of
the Company called to vote on or approve such Sale Proposal and otherwise to
take all necessary action to cause the Company, the Common Stockholders and the
Preferred Stockholders to consummate such Required Sale.
9. LEGEND.
(a) Each certificate representing shares of Stock now or
hereafter owned by the Common Stockholders, the Series A Stockholders, or the
Investors shall be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL AND CO-SALE
AGREEMENT BY AND BETWEEN THE STOCKHOLDER, THE COMPANY AND
CERTAIN HOLDERS OF STOCK OF THE COMPANY. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE COMPANY."
(b) The Common Stockholders, the Series A Stockholders, and
the Investors agree that the Company may instruct its transfer agent to impose
transfer restrictions on the shares represented by certificates bearing the
legend referred to in Section 9(a) above to enforce the provisions of this
Agreement and the Company agrees to promptly do so. The legend shall be removed
upon termination of this Agreement.
10. MISCELLANEOUS.
(a) Conditions to Exercise of Rights. Exercise of the
Investors' or Series A Stockholders' rights under this Agreement shall be
subject to and conditioned upon, and the Common Stockholders and the Company
shall use their best efforts to assist each Investor or Series A Stockholder in,
compliance with applicable laws.
(b) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware, without reference to
principles of conflict of laws.
(c) Amendment. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only by the
written consent of (i) as to the Company, only the Company, (ii) as to the
Investors, persons holding more than a majority-in-interest of the Common Stock
held by the Investors and their assignees, pursuant to Section 10(d) hereof, and
(iii) as to the Series A Stockholders, persons holding more than a
majority-in-interest of the Common Stock held by Series A Stockholders and their
assignees, pursuant to Section 10(d) hereof, and (iv) as to the Common
Stockholders, only the Common Stockholders (unless such amendment and waiver is
less restrictive to the Common Stockholders, in which case a
majority-in-interest of the Common Stock held by the Common Stockholders);
provided, that no consent of any Common Stockholder shall be necessary for any
amendment and/or restatement which includes additional holders of Series B
Convertible Preferred Stock as "Investors" and parties hereto. Any amendment or
waiver effected in accordance with clauses (i), (ii), (iii) and (iv) of this
Section 10(c) shall be binding upon each Investor, Series A Stockholder, Common
Stockholder, the Company, and their successors and assigns.
(d) Assignment of Rights. This Agreement constitutes the
entire agreement between the parties relative to the specific subject matter
hereof. Any previous agreement among the parties relative to the specific
subject matter hereof is superseded by this Agreement. This Agreement and the
rights and obligations of the parties hereunder shall inure to the benefit of,
and be binding upon, their respective successors, assigns and legal
representatives.
(e) Term. This Agreement shall continue in full force and
effect from the date hereof through the earliest of the following dates, on
which date it shall terminate in its entirety:
(i) the date of the closing of a firmly underwritten public
offering of the Common Stock pursuant to a registration statement filed with the
Securities and Exchange Commission, and declared effective under the Securities
Act, which results in the Series A Convertible Preferred Stock and the Series B
Convertible Preferred Stock being converted into Common Stock;
(ii) the date of the closing of a sale, lease, or other
disposition of all or substantially all of the Company's assets or the Company's
merger into or consolidation with any other corporation or other entity, or any
other corporate reorganization, in which the holders of the Company's
outstanding voting stock immediately prior to such transaction own, immediately
after such transaction, securities representing less than fifty percent (50%) of
the voting power of the corporation or other entity surviving such transaction,
provided that this Section 10(e)(ii) shall not apply to a merger effected
exclusively for the purpose of changing the domicile of the Company; or
(iii) the date as of which the parties hereto terminate this
Agreement by written consent of a majority in interest of the Preferred
Stockholders and a majority in interest of the Common Stockholders (voting on a
fully diluted basis).
(f) Ownership. Except as disclosed on Schedule 10(f), the
Current Stockholders represent and warrant that each is the sole legal and
beneficial owner of those shares of Stock he, she or it currently holds subject
to the Agreement and that no other person has any interest (other than a
community property interest) in such shares.
(g) Notices. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) 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, (iii) five days after having been sent by
registered or certified mail, return receipt requested, postage prepaid or (iv)
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 (i) each Investor at the address set forth on Exhibit A hereto,
(ii) each Series A Stockholder at the address set forth on Exhibit C hereto, or
(iii) at such other address as such party may designate by ten days advance
written notice to the other parties hereto. All communications shall be sent to
the Common Stockholders at their respective address of record with the Company
or at such other address as such party may designate by ten days advance written
notice to the other parties hereto.
(h) 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.
(i) 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.
(j) Entire Agreement. This Agreement and the Exhibits
hereto, along with the Purchase Agreement and each of the Exhibits thereto,
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof 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 Right of First Refusal and Co-Sale
Agreement dated December 27, 2001, by and among the Company, the Common
Stockholders, and the Series A. Stockholders.
(k) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(l) Joinder of Spouses. The undersigned spouses of each
Investor and Current Stockholder, 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 Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock, and Common Stock, as applicable.
[THIS SPACE INTENTIONALLY LEFT BLANK]
The foregoing AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE
AGREEMENT is hereby executed as of the date first above written.
COMPANY: INVESTORS:
HYDRO MED SCIENCES, INC. SMH HYDRO MED II LLC
By: By:
-------
Name: David S. Tierney Name: James C. Gale
Title: President Title: Manager
LIFE SCIENCES OPPORTUNITIES FUND, L.P.
By: SMH Life Sciences Management, LLC,
General Partner
By:
Name: James C. Gale
Title: Manager
CORPORATE OPPORTUNITIES FUND, L.P.
By: SMM Corporate Management, LLC,
General Partner
By:
Name: James C. Gale
Title: Manager
CORPORATE OPPORTUNITIES FUND(INSTITUTIONAL),L.P.
By: SMM Corporate Management, LLC,
General Partner
By:
Name: James C. Gale
Title: Manager
WHEATLEY MEDTECH PARTNERS L.P.
By: Wheatley Medtech Partners LLC,
General Partner
By:
Name:
Title:
WHEATLEY PARTNERS III, L.P.
By: Wheatley Partners III, LLC,
General Partner
By:
Name:
Title: ___________________________
WHEATLEY ASSOCIATES III, L.P.
By: Wheatley Partners III, LLC,
General Partner
By:
Name:
Title:___________________________
WHEATLEY FOREIGN PARTNERS III, L.P.
By: Wheatley Partners III, LLC,
General Partner
By:
Name:
Title:___________________________
PALADIN LABS INC.
By:
Name:
Title:
FALCON SEABOARD HOLDINGS, L.P.
By:
Name:
Title:
COMMON STOCKHOLDERS:
GP STRATEGIES CORPORATION
By:
Name:
Title:
SERIES A STOCKHOLDERS:
SMH HYDRO MED LLC
By:
Name: James C. Gale
Title: Manager
CORPORATE OPPORTUNITIES FUND, L.P.
By: SMM Corporate Management, LLC,
General Partner
By:
Name: James C. Gale
Title: Manager
CORPORATE OPPORTUNITIES FUND(INSTITUTIONAL),L.P.
By: SMM Corporate Management, LLC,
General Partner
By:
Name: James C. Gale
Title: Manager
WHEATLEY MEDTECH PARTNERS L.P.
By: Wheatley Medtech Partners LLC,
General Partner
By:
Name:
Title:
EXHIBIT A
LIST OF INVESTORS
As of April __, 2003
SMH Hydro Med II LLC
600 Travis, Suite 3100
Houston, Texas 77002
Attention: John Malanga
Corporate Opportunities Fund, L.P.
Corporate Opportunities Fund (Institutional), L.P.
Life Sciences Opportunities Fund, L.P.
c/o SMM Corporate Management LLC
126 East 56 Street
New York, New York 10022
Attention: James C. Gale
Wheatley MedTech Partners L.P.
80 Cuttermill Road, Suite 311
Great Neck, New York 11021
With a copy to:
Wheatley Partners
825 Third Avenue, 32nd Floor
New York, New York 10022
Attn: David R. Dantzker, M.D./
Lawrence Wagenburg
Paladin Labs, Inc.
======================
Attn: __________________
RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
EXHIBIT B
STOCK OWNERSHIP
GP Strategies Corporation
9 West 57th Street
New York, New York 10019
EXHIBIT C
Series A Stockholders
SMH Hydro Med LLC
600 Travis, Suite 3100
Houston, Texas 77002
Attention: John Malanga
Corporate Opportunities Fund, L.P.
Corporate Opportunities Fund
(Institutional), L.P.
c/o SMM Corporate Management LLC
126 East 56 Street
New York, New York 10022
Attention: James C. Gale
Wheatley MedTech Partners L.P.
80 Cuttermill Road, Suite 311
Great Neck, New York 11021
With a copy to:
Wheatley Partners
825 Third Avenue, 32nd Floor
New York, New York 10022
Attn: David R. Dantzker, M.D./
Lawrence Wagenburg
GP Strategies Corporation
9 West 57th Street
New York, New York 10019