EXHIBIT 10.2
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
INVESTORS' RIGHTS AGREEMENT
This Investors' Rights Agreement (this "Agreement") is made and entered
into as of the 5th day of October, 2001 by and among Specialized Health Products
International, Inc., a Delaware corporation (the "Company"), and the persons
identified on Exhibit A attached hereto (the "Investors").
Recitals
WHEREAS, the Investors are parties to the Series A Preferred Stock
Purchase Agreement dated as of October 5, 2001 between the Company and the
Investors (the "Series A Agreement"), and certain of the Company's and the
Investors' obligations under the Series A Agreement are conditioned upon the
execution and delivery by the Investors and the Company of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS.
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Affiliate" shall have the same meaning given to such term in the
Series A Agreement.
(b) "Closing" shall mean the date of the initial sale of shares of the
Company's Series A Preferred Stock.
(c) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(e) "Holder" shall mean any Investor who holds Registrable Securities
and any holder of Registrable Securities to whom the registration rights
conferred by this Agreement have been transferred in compliance with Section 1.2
and Section 1.12 hereof.
(f) "Initiating Holders" shall mean any Holder or Holders who in the
aggregate hold more than fifty percent (50%) of the outstanding Registrable
Securities.
(g) "Investors" shall mean persons who purchased Shares pursuant to the
Series A Agreement.
(h) "Material Adverse Effect" shall mean a material adverse effect upon
the business, assets, financial condition, income or prospects of the Company.
(i) "Other Stockholders" shall mean persons other than Holders who, by
virtue of agreements with the Company, are entitled to include their securities
in certain registrations hereunder.
(j) "Registrable Securities" shall mean (i) shares of Common Stock
issued or issuable pursuant to the conversion of the Shares, and (ii) any Common
Stock issued as a dividend or other distribution with respect to or in exchange
for or in replacement of the shares referenced in clause (i) above, provided,
however, that Registrable Securities shall not include any shares of Common
Stock which have previously been registered or which have been sold to the
public either pursuant to a registration statement or Rule 144, or which have
been sold in a private transaction in which the transferor's rights under this
Agreement are not assigned.
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(k) The terms "register," "registered" and "registration" shall refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
(l) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, and expenses of any regular or special audits incident to or
required by any such registration, but shall not include Selling Expenses, fees
and disbursements of counsel for the Holders and the compensation of regular
employees of the Company, which shall be paid in any event by the Company.
(m) "Restricted Securities" shall mean any Registrable Securities
required to bear the legend set forth in Section 1.2(b) hereof.
(n) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(o) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(p) "Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(q) "Selling Expense" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of Registrable
Securities and fees and disbursements of counsel for any Holder (other than the
fees and disbursements of counsel included in Registration Expenses).
(r) "Shares" shall mean the Company's Series A Preferred Stock par
value $.001 per share.
1.2 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Registrable Securities unless and until the transferee has agreed
in writing for the benefit of the Company to be bound by this Section 1.2,
provided and to the extent such Section is then applicable, and:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) Such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, and (B) if reasonably requested by the Company, such
Holder shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not
require registration of such shares under the Securities Act. It is
agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.
Notwithstanding the provisions of paragraphs (i) and (ii) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by a Holder which is (A) a partnership to its partners or retired
partners in accordance with partnership interests, (B) a corporation to its
shareholders in accordance with their interest in the corporation, (C) a limited
liability company to its members or former members in accordance with their
interest in the limited liability company, or (D) to the Holder's family member
or trust for the benefit of an individual Holder or for the benefit of a
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Holder's family member, provided the transferee will be subject to the terms of
this Section 1.2 to the same extent as if such transferee were an original
Holder hereunder.
(b) Each certificate representing Registrable Securities shall (unless
otherwise permitted by the provisions of this Agreement) be stamped or otherwise
imprinted with a legend substantially similar to the following (in addition to
any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION, OR
UNLESS THE CORPORATION HAS BEEN FURNISHED WITH AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any Holder thereof if the Holder shall have
obtained an opinion of counsel at such Holder's expense (which counsel may be
counsel to the Company) reasonably acceptable to the Company to the effect that
the securities proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
1.3 Requested Registration.
(a) Request for Registration. If the Company shall receive from
Initiating Holders at any time or times not earlier than November 7, 2003 (the
second anniversary of the Closing), a written request that the Company effect
any registration with respect to all or a part of the Registrable Securities,
the Company will:
(i) promptly, and in any event no later than ten (10) days of
the receipt of such written request; give written notice of the
proposed registration to all other Holders; and
(ii) as soon as practicable, use commercially reasonable
efforts to effect such registration (including, without limitation,
filing post-effective amendments, appropriate qualifications under
applicable blue sky or other state securities laws, and appropriate
compliance with the Securities Act) to permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities
as are specified in such request, together with all or such portion of
the Registrable Securities of any Holder or Holders joining in such
request as are specified in a written request received by the Company
within twenty (20) days after such written notice from the Company is
mailed or delivered.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 1.3:
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to
service of process in effecting such registration,
qualification, or compliance, unless the Company is already
subject to service in such jurisdiction and except as may be
required by the Securities Act;
(B) After the Company has initiated two (2) such
registrations pursuant to this Section 1.3(a) (counting for
these purposes only registrations which have been declared or
ordered effective and pursuant to which securities have been
sold and registrations which have been withdrawn by the
Holders as to which the Holders have not elected to bear the
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Registration Expenses pursuant to Section 1.5 hereof and
would, absent such election, have been required to bear such
expenses);
(C) During the period starting with the date sixty
(60) days prior to the Company's good faith estimate of the
date of filing of, and ending on a date one hundred eighty
(180) days after the effective date of, a Company-initiated
registration; provided that the Company is actively employing
in good faith all reasonable efforts to cause such
registration statement to become effective; or
(D) If the Initiating Holders propose to dispose of
shares of Registrable Securities which may be immediately
registered on Form S-3 pursuant to a request made under
Section 1.6 hereof.
(b) Subject to the foregoing clauses (A) through (D), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, and in any event no later than
forty-five (45) days, after receipt of the request or requests of the Initiating
Holders; provided, however, that if (i) in the good faith judgment of the Board
of Directors of the Company, such registration would be seriously detrimental to
the Company and the Board of Directors of the Company concludes, as a result,
that it is essential to defer the filing of such registration statement at such
time, and (ii) the Company shall furnish to the Initiating Holders a certificate
signed by the Chief Executive Officer of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company for such registration statement to be filed in the
near future and that it is, therefore, essential to defer the filing of such
registration statement, then the Company shall have the right to defer such
filing (except as provided in clause (C) above) for a period of not more than
one hundred twenty (120) days after receipt of the request of the Initiating
Holders, and, provided further, that the Company shall not defer its obligation
in this manner more than once in any twelve-month period.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Sections 1.3(d) and 1.14
hereof, include other securities of the Company, with respect to which
registration rights have been granted, and may include securities of the Company
being sold for the account of the Company.
(c) Participation. A Holder may elect to include in any registration
and underwriting, if applicable, all or a part of the Registrable Securities he
holds.
(d) Procedures. If (i) the Company shall request inclusion in any
registration pursuant to this Section 1.3 of securities being sold for its own
account, or if other persons shall request inclusion in any registration
pursuant to this Section 1.3 and (ii) the Initiating Holders request that
pursuant to this Section 1.3, Registrable Securities be registered pursuant to
an underwriting, the Initiating Holders shall, on behalf of all Holders, offer
to include such securities in the underwriting and may condition such offer on
their acceptance of the further applicable provisions of this Article 1
(including Section 1.13). The Company shall (together with all Holders and other
persons proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected for such underwriting by a majority
in interest of the Initiating Holders, which underwriters are reasonably
acceptable to the Company. Notwithstanding any other provision of this Section
1.3, if the representative of the underwriters advises the Initiating Holders in
writing that marketing factors require a limitation on the number of shares to
be underwritten, then the number of such shares to be included in the
underwritten public offering shall be reduced, and shares shall be excluded from
such underwritten public offering in a number deemed necessary by such
underwriters, first by excluding shares held by the Company, directors,
officers, employees and founders of the Company, and then, to the extent
necessary, by excluding Registrable Securities in accordance with the allocation
provisions contained in Section 1.13.
(e) If a person who has requested inclusion in such registration as
provided above does not agree to the terms of any such underwriting, such person
shall be excluded therefrom by written notice from the Company, the underwriter
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or the Initiating Holders. Any Registrable Securities or other securities so
excluded or withdrawn from such underwriting shall also be withdrawn from such
registration. If shares are so withdrawn from the registration and if the number
of shares to be included in such registration was previously reduced as a result
of marketing factors pursuant to this Section 1.3(d), then the Company shall
offer to all Holders who have retained rights to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among such Holders requesting additional inclusion in accordance
with Section 1.13.
1.4 Company Registration.
(a) If the Company shall determine to register any of its securities
either for its own account or the account of a security holder or holders
exercising their respective demand registration rights (other than pursuant to
Section 1.3 or 1.6 hereof), other than a registration relating solely to
employee benefit plans on Form X-0, Xxxx X-0 or any successor Forms or a
registration relating to a corporate reorganization or other transaction on Form
S-4 or any successor to Form S-4, or a registration on any registration form
that does not permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) use commercially reasonable efforts to include in such
registration (and any related qualification under blue sky laws or
other compliance), except as set forth in Section 1.4(b) below, and in
any underwriting involved therewith, all the Registrable Securities
specified in a written request or requests, made by any Holder and
received by the Company within ten (10) days after the written notice
from the Company described in clause (i) above is mailed or delivered
by the Company. Such written request may specify all or a part of a
Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company shall
so advise the Holders as a part of the written notice given pursuant to Section
1.4(a)(i). In such event, the right of any Holder to registration pursuant to
this Section 1.4 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders of securities of the Company with registration rights to
participate therein distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 1.4, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Securities from, or limit the number of Registrable Securities to be
included in, the registration and underwriting. The Company shall so advise all
holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated first to the Company for securities being sold for its own
account and thereafter as set forth in Section 1.13.
If any person does not agree to the terms of any such underwriting, he
shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities so excluded from
such underwriting shall be withdrawn from such registration. If shares are so
withdrawn from the registration and if the number of shares of Registrable
Securities to be included in such registration was previously reduced as a
result of marketing factors, the Company shall then offer to all persons who
have retained the right to include securities in the registration the right to
include additional securities in the registration in an aggregate amount equal
to the number of shares so withdrawn, with such shares to be allocated among the
persons requesting additional inclusion in accordance with Section 1.13 hereof.
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1.5 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.3, 1.4 and 1.6 hereof and reasonable fees of one counsel for the
selling stockholders in the case of registrations pursuant to Section 1.3 and
1.6 shall be borne by the Company; provided, however, that if the Holders bear
the Registration Expenses for any registration proceeding begun pursuant to
Section 1.3 and subsequently withdrawn by the Holders registering shares
therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 1.3 hereof. Furthermore, in the event that a
withdrawal by the Holders is based upon material adverse information relating to
the Company that is different from the information known or available (upon
request from the Company or otherwise) to the Holders requesting registration at
the time of their request for registration under Section 1.3, such registration
shall not be treated as a counted registration for purposes of Section 1.3
hereof, even though the Holders do not bear the Registration Expenses for such
registration. All Selling Expenses relating to securities so registered shall be
borne by the holders of such securities pro rata on the basis of the number of
shares of securities so registered on their behalf, as shall any other expenses
in connection with the registration required to be borne by the Holders of such
securities.
1.6 Registration on Form S-3.
(a) If the Company qualifies for the use of Form S-3, in addition to
the rights contained in the foregoing provisions of this Article 1, the Holders
of Registrable Securities shall have the right to request registrations on Form
S-3 (such requests shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended methods of disposition
of such shares by such Holder or Holders), provided, however, that any such
request must be made by Holders who in the aggregate hold more than ten percent
(10%) of the outstanding Registrable Securities, provided, further, that the
Company shall not be obligated to effect any such registration (i) if the
Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) on Form S-3 at an aggregate price
to the public of less than $1,000,000, (ii) in the circumstances described in
clauses (A) and (C) of Section 1.3(a), (iii) if the Company shall furnish the
certification described in Section 1.3(b) (but subject to the limitations set
forth therein) or (iv) if, in a given twelve month period, the Company has
effected one such registration in such period.
(b) If a request complying with the requirements of Section 1.6(a)
hereof is delivered to the Company, the provisions of Sections 1.3(a)(i) and
(ii) and Section 1.3(b) hereof shall apply to such registration. If the
registration is for an underwritten offering, the rights of any Holder to
registration pursuant to this Section 1.6 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless mutually agreed by a majority
in interest of the Initiating Holders and such Holder with respect to such
participation and inclusion) to the extent provided herein and the provisions of
Section 1.3(d) hereof shall apply to such registration. A Holder may elect to
include in such underwriting all or a part of the Registrable Securities he
holds.
1.7 Registration Procedures. In the case of each registration effected
by the Company pursuant to Section 1, the Company will keep each Holder advised
in writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use commercially reasonable efforts
to:
(a) Keep such registration effective for a period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such 120-day period shall be extended for a
period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company; and (ii) in the case of any
registration of Registrable Securities on Form S-3 which are intended to be
offered on a continuous or delayed basis, such 120-day period shall be extended,
if necessary, to keep the registration statement effective until all such
Registrable Securities are sold, however in no event longer than one year from
the effective date of the registration statement and provided that Rule 145, or
any successor rule under the Securities Act, permits an offering on a continuous
or delayed basis, and provided further that applicable rules under the
Securities Act governing the obligation to file a post-effective amendment
permit, in lieu of filing a post-effective amendment, that (I) includes any
prospectus required by Section 10(a)(3) of the Securities Act, or (II) reflects
facts or events representing a material or fundamental change in the information
set forth in the registration statement, the incorporation by reference of
information required to be included in (I) and (II) above to be contained in
periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in
the registration statement;
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(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a Holder
from time to time may reasonably request;
(d) Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant hereunder
to be listed on each securities exchange on which similar securities issued by
the Company are then listed;
(f) Use commercially reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions;
(g) Use commercially reasonable efforts to furnish, at the request of
any underwriter on the date that such Registrable Securities are delivered to
the underwriters for sale in connection with a registration pursuant to this
Section 1, (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, and (ii) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters.;
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration; and
(i) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.3 hereof, the Company will
enter into an underwriting agreement in form reasonably necessary to effect the
offer and sale of Common Stock, provided such underwriting agreement contains
reasonable and customary provisions.
1.8 Indemnification.
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Article 1, and each underwriter, if any, and each
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person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel, and accountants and each person controlling such Holder, each such
underwriter, and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability, or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability, or expense rises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by such Holder or underwriter and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this Section
1.8(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel, and accountants and each underwriter, if any,
of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and Other Stockholder,
and each of their officers, directors, and partners, and each person controlling
such Holder or Other Stockholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holders, other Stockholders,
directors, officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular, or other document in reliance upon and in conformity with written
information furnished to the Company by such Holder (with respect to such
Holder) and stated to be specifically for use therein provided, however, that
the obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld); and provided that in
no event shall any indemnity under this Section 1.8 exceed the gross proceeds
from the offering received by such Holder.
(c) Each party entitled to indemnification under this Section 1.8 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1.8, to the extent such
failure is not prejudicial. Notwithstanding the foregoing, any Indemnified Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Indemnified Party unless (i) the Indemnified
Party shall have been advised by counsel that representation of the Indemnified
Party by counsel provided by the Indemnifying Party would be inappropriate due
to actual or potential conflicting interests between the Indemnifying Party and
the Indemnified Party, including situations in which there are one or more legal
defenses available to the Indemnified Party that are different from or
additional to those available to the Indemnifying Party, (ii) the Indemnifying
Party shall have authorized in writing the employment of counsel for the
Indemnified Party at the expense of the Indemnifying Party, or (iii) the
Indemnifying Party shall have failed to assume the defense or retain counsel
reasonably satisfactory to the Indemnified Party. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
8
Indemnified Party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.8 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission. In no event shall
any contribution by a Holder under this Section 1.8(d) exceed the net proceeds
from the offering received by such Holder.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in any underwriting agreement entered
into in connection with the underwritten public offering of Registrable
Securities are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
(f) This Section 1.8 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 1, and
otherwise.
1.9 Information by Holder. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 1.
1.10 Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission that may permit the sale of
the Restricted Securities to the public without registration, the Company agrees
to use its best efforts to:
(a) Make and keep public information regarding the Company available as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times from and after the date hereof;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) So long as a Holder owns any Restricted Securities, furnish to the
Holder forthwith upon written request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
as a Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing a Holder to sell any such securities without
registration.
1.11 Transfer or Assignment of Registration Rights. The rights to cause
the Company to register securities granted to a Holder by the Company under this
Article 1 may be transferred or assigned by a Holder only to its partners and
Affiliates, provided that the Company is given written notice at the time of or
9
within a reasonable time after said transfer or assignment, stating the name and
address of the transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned,
and, provided further, that the transferee or assignee of such rights assumes in
writing the obligations of such Holder under this Section 1.
1.12 "Market Stand-Off" Agreement. If requested by an underwriter of
Common Stock (or other securities) of the Company, a Holder shall not sell or
otherwise transfer or dispose of any Common Stock (or other securities) of the
Company held by such Holder (other than those included in the registration)
during the one hundred eighty (180) day period following the effective date of a
registration statement of the Company filed under the Securities Act; provided,
however, that this Section 1.12 shall not apply unless all officers and
directors of the Company and other Investors holding five percent (5%) of the
Shares enter into similar agreements.
The obligations described in this Section 1.12 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a transaction on Form S-4 or similar forms that may be
promulgated in the future. The Company may impose stop-transfer instructions
with respect to the shares of Common Stock (or other securities) subject to the
foregoing restriction until the end of such one hundred eighty (180) day period.
1.13 Allocation of Registration Opportunities. In any circumstance in
which all of the Registrable Securities and other shares of Common Stock of the
Company (including shares of Common Stock issued or issuable upon conversion of
shares of any currently unissued series of Preferred Stock of the Company) with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or other selling stockholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, the number of
shares of Registrable Securities and Other Shares that may be so included shall
be allocated among the Holders and other selling stockholders requesting
inclusion of shares pro rata on the basis of the number of shares of Registrable
Securities and Other Shares that would be held by such Holders and other selling
stockholders, assuming conversion; provided, however, that such allocation shall
not operate to reduce the aggregate number of Registrable Securities and Other
Shares to be included in such registration, if any Holder or other selling
stockholder does not request inclusion of the maximum number of shares of
Registrable Securities and Other Shares allocated to him pursuant to the
above-described procedure, in which case the remaining portion of his allocation
shall be reallocated among those requesting Holders and other selling
stockholders whose allocations did not satisfy their requests pro rata on the
basis of the number of shares of Registrable Securities and Other Shares which
would be held by such Holders and other selling stockholders, assuming
conversion, and this procedure shall be repeated until all of the shares of
Registrable Securities and Other Shares which may be included in the
registration on behalf of the Holders and other selling stockholders have been
so allocated. The Company shall not limit the number of Registrable Securities
to be included in a registration pursuant to this Agreement in order to include
shares held by stockholders with no registration rights or to include shares of
stock issued to employees, officers, directors, or consultants pursuant to the
Company's stock option or similar compensation plan, or in the case of
registrations under Sections 1.3 or 1.6 hereof, in order to include in such
registration securities registered for the Company's own account.
1.14 Delay of Registration. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Article 1.
1.15 Termination of Registration Rights.
(a) Except as set forth in subparagraph (b) below, the right of any
Holder to request registration or inclusion in any registration pursuant to
Section 1.3, 1.4 or 1.6 shall terminate if all shares of Registrable Securities
held or entitled to be held upon conversion by such Holder may immediately be
sold under Rule 144 during any 90-day period.
(b) The provisions of subparagraph (a) above shall not apply to any
Holder who owns more than one percent (1%) of the Company's outstanding stock
until such time as such Holder owns less than one percent (1%) of the
outstanding stock of the Company.
10
2. COVENANTS OF THE COMPANY.
The Company hereby covenants and agrees, so long as any Holder owns any
Registrable Share, as follows:
2.1 Basic Financial Information. The Company will furnish the following
reports to each Holder who, together with its Affiliates, owns at least twenty
percent (20%) of the Shares issued pursuant to the Series A Agreement (each a
"Significant Holder"):
(a) As soon as practicable, and in any event, within ninety (90) days
after the end of each fiscal year of the Company, a consolidated balance sheet
of the Company and its subsidiaries, if any, as at the end of such fiscal year,
and consolidated statements of income and cash flows of the Company and its
subsidiaries, if any, for such year, prepared in accordance with generally
accepted accounting principles consistently applied and certified by independent
public accountants of recognized national standing selected by the Company.
(b) As soon as practicable, and in any event, within forty-five (45)
days after the end of the first, second, and third quarterly accounting periods
in each fiscal year of the Company, a consolidated balance sheet of the Company
and its subsidiaries, if any, as of the end of each such period, and
consolidated statements of income and cash flows of the Company and its
subsidiaries, if any, for such period and for the current fiscal year to date,
prepared in accordance with generally accepted accounting principles --
consistently applied and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year, subject to changes resulting
from normal year-end audit adjustments, except that such financial statements
need not contain the notes required by generally accepted accounting principles.
2.2 Additional Information and Rights.
(a) The Company will deliver the reports and information described
below in this Section 2.2 to each Significant Holder:
(i) As soon as practical after the end of each month and in
any event within thirty (30) days thereafter, a consolidated balance
sheet of the Company and its subsidiaries, if any, as at the end of
such month and consolidated statements of income and cash flows of the
Company and its subsidiaries, for each month and for the current fiscal
year of the Company to date, all subject to normal year-end audit
adjustments, prepared in accordance with generally accepted accounting
principles consistently applied, together with a comparison of such
statements to the corresponding periods of the prior fiscal year,
subject to changes resulting from normal year-end audit adjustments,
except that such financial statements need not contain the notes
required by generally accepted accounting principles.
(ii) Annually (and in any event no later than ten (10) days
after adoption by the Board of Directors of the Company) the budget of
the Company, in the form approved by its Board of Directors, which
operating plan shall include at least a projection of income and a
projected cash flow statement for each fiscal quarter in such fiscal
year, a projected balance sheet as of the end of each fiscal quarter in
such fiscal year and proposed management incentives for the fiscal year
(the "Budget").
(iii) With reasonable promptness, all press releases issued by
the Company or any subsidiary, any filings made with the Commission by
the Company or any subsidiary, and such other data and information as
from time to time may be reasonably requested by any Holder or such
other data as the Company may from time to time furnish to any of the
holders of its securities.
(b) The provisions of Section 2.1 and this Section 2.2 shall not be in
limitation of any rights which any Holder or Significant Holder may have with
respect to the books and records of the Company and its subsidiaries, or to
inspect their properties or discuss their affairs, finances and accounts, under
the laws of the jurisdictions in which they are incorporated.
11
(c) Anything in Article 2 to the contrary notwithstanding, no Holder by
reason of this Agreement shall have access to any trade secrets or classified
information of the Company. Each Holder hereby agrees to hold in confidence and
trust and not to misuse or disclose any confidential information provided
pursuant to this Section 2.2. The Company shall not be required to comply with
this Section 2.2 in respect of any Holder whom the Company reasonably determines
to be, directly or indirectly, a competitor or an officer, employee, director or
greater than two percent (2%) stockholder of a competitor.
(d) In lieu of the financial information required pursuant to Section
2.1, copies of the Company's annual reports on Form 10-K or Form 10-KSB and its
quarterly reports on Form 10-Q or Form 10-QSB, respectively, may be provided to
the Significant Holders.
2.3 Board of Directors. For so long as any of the Shares are
outstanding, the Company's Board of Directors shall maintain a Compensation
Committee and an Audit Committee, each to be comprised of at least three
members, of which a majority are outside directors, including two (2) members to
be appointed by the holders of a majority of the Shares.
2.4 Chief Executive Officer Search. The Company will work with the
executive search firm retained prior to the Closing to retain a new chief
executive officer for the Company and agrees to offer a suitable candidate a
reasonable market compensation package. The Company shall not retain a new chief
executive officer without the consent of the holders of a majority of the
Shares.
2.5 Employee Non-Competition, Confidentiality, Non-Solicitation and
Invention Agreements. For so long as any of the Shares are outstanding, the
Company shall include non-competition, confidentiality, non-solicitation and
assignment of invention provisions reasonably acceptable to the Holders in the
employment agreement for each current and future officer or key employee of the
Company or any of its subsidiaries.
2.6 D&O Insurance. The Company will use commercially reasonable efforts
to increase its directors' and officers' insurance coverage to $20 million as
soon as practicable following the Closing.
2.7 Dissolution of Subsidiaries. The Company will use commercially
reasonable efforts to dissolve or divest the Company's interest in those
subsidiaries that the Board of Directors determines is appropriate.
3. MISCELLANEOUS.
3.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Delaware, without regard to its conflicts of laws
principles.
3.2 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.
3.3 Entire Agreement; Amendment; Waiver. This Agreement (including the
Exhibits hereto) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated, except by
a written instrument signed by the Company and the Initiating Holders and any
such amendment, waiver, discharge or termination shall be binding on all the
Holders.
3.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, sent by facsimile or delivered personally by
hand or nationally recognized courier addressed (a) if to a Holder, as indicated
on the list of Holders attached hereto as Exhibit A, or at such other address or
facsimile number as such holder or permitted assignee shall have furnished to
the Company in writing, or (b) if to the Company, at such address or facsimile
number as the Company shall have furnished to each Holder in writing. All such
notices and other written communications shall be effective on the date of
mailing, confirmed facsimile transfer or delivery.
12
3.5 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default therefore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative and
not alternative.
3.6 Rights; Separability. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. 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.
3.7 Information Confidential. Each Holder acknowledges that the
information received pursuant hereto may be confidential and for its use only,
and it will not use such confidential information in violation of the Exchange
Act or reproduce, disclose or disseminate such information to any other person
(other than its employees or agents having a need to know the contents of such
information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or such Holder is required to disclose such
information by a governmental body.
3.8 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing or interpreting this Agreement.
3.9 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. One or more counterparts of this Agreement may
be delivered via facsimile and such facsimile counterpart shall have the same
effect as an original counterpart hereof.
13
IN WITNESS WHEREOF, the parties hereto have executed this Investors'
Rights Agreement effective as of the day and year first above written.
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President
XXXXX PARTNERS III, L.P.
By: Claudius, L.L.C., its General Partner
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxx
Title:
XXXXX PARTNERS INTERNATIONAL III, L.P.
By: Claudius, L.L.C., its General Partner
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxx
Title:
XXXXX EMPLOYEE FUND III, L.P.
By: Wesson Enterprises, Inc., its General Partner
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
14
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
----------------------------------------------
Counterpart Signature Page to Investors' Rights Agreement
The undersigned hereby agrees to become a party as an Investor to the
Investors' Rights Agreement dated October 5, 2001 (the "Agreement") among
Specialized Health Products International, Inc. (the "Company") and the
Investors named therein, and hereby authorizes the Company (i) to attach this
Counterpart Signature Page to such Agreement and (ii) to add the name of the
undersigned to the list of Investors set forth in Annex I to such Agreement.
-------------------------------
Date: ___________________
EXHIBIT A
INVESTORS:
Xxxxx Partners III, L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxx Partners International III, L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxx Employee Fund III, L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Banyan Investment Company
0000 Xxxxx Xxxxx
Xxxxxx, XX 00000
Whisper Investment Co.
000 X. 000 X.
Xxxx Xxxx Xxxx, XX 00000
Will X. Xxxxx
000 Xxxxx Xx.
Xxxxxx, XX 00000
Xxxxxxx X. Xxxxxxxxxx
0000 X. XX 00
Xxxx, XX 00000
Alpine Securities
FBO Xxxxxxx Xxxxx XXX
0000 Xxxx Xxxxx Xx.
Xxxx Xxxx Xxxx, XX 00000
Alpine Securities
FBO Xxxx Xxxxxxxx XXX #2
0000 Xxxxx Xxxxx
Xxxxxx, XX 00000
Alpine Securities
FBO Xxxxx Xxxxxxxx XXX
0000 Xxxxx Xxxxx
Xxxxxx, XX 00000
Harbour Trustees Limited
X.X. Xxx 00, Xxxxxxx Xxxxx
Xxx Xxxxxxxx, Xx. Xxxxx Port, Guernsey GY1 3DD
Xxxx Financial Corporation
0000 Xxxxxx Xxxxxxxx Xxxx, #00
Xxx Xxxxx, XX 00000
X-x
Xxxxx M. Mower
0000 X. Xxxxxxxx Xxxx Xxxxx
Xxxxxxxx Xxxxx, XX 00000
Xxxxxxx Xxxxx
0000 Xxxx Xxxxx Xxxxx
Xxxx Xxxx Xxxx, XX 00000
Xxxxxxxxxx Xxxxxx Family Trust
Xxxxx Xxxxxxx - Trustee
000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, XX 00000
X. Xxxx Xxxxxx
0000 Xxxxxxxxx Xx.
Xxxx Xxxx Xxxx, XX 00000
Alpine Securities
FBO Xxxxx Xxxxxxxx, Xxxx XXX
0000 Xxxxx Xxxxx
Xxxxxx, XX 00000
Xxxxxxx X. Xxxxxxxx
00000 X.Xxxx Xxxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
Xxxx Xxxxxxxx
0000 Xxxxx Xxxxx
Xxxxxx, XX 00000
Xxxxxx X. and Xxxx X. Xxxxxxx
0000 Xxxxx Xxx.
Xxxxx, XX 00000
A-ii
