EXHIBIT 10.56
HORIZON MEDICAL PRODUCTS, INC.
SECURITYHOLDERS AGREEMENT
This Securityholders' Agreement (the "Agreement") is entered into as of
March 16, 2002, by and among Horizon Medical Products, Inc., a Georgia
corporation (the "Company"), ComVest Venture Partners, L.P., a Delaware limited
partnership ("ComVest"), Medtronic, Inc., a Minnesota corporation ("Medtronic"
and, together with ComVest, each, an "Investor," and, together, the
"Investors"), Standard Federal Bank National Association, a national banking
association, acting by and through LaSalle Business Credit, Inc., a Delaware
corporation ("Lender"), and the stockholders of the Company listed on the
signature pages hereof and identified as Major Stockholders (each, a "Major
Stockholder" and, collectively, the "Major Stockholders" and, the Major
Stockholders together with the Investors, the "Company Stockholders").
RECITALS
WHEREAS, the Company and the Investors executed a Note Purchase
Agreement, dated as of March 1, 2002 (the "Purchase Agreement"), pursuant to
which the Company has agreed to issue, and the Investors have agreed to
purchase, up to $15,000,000 of the Company's Senior Subordinated Convertible
Notes (the "Subordinated Notes"); and, pursuant to the terms of the Subordinated
Notes and the Purchase Agreement, (i) the Investors have the option to convert a
portion of principal of the Subordinated Notes for shares of common stock of the
Company (the "Common Stock") at a conversion price of $.01 per share, (ii) upon
certain Events of Default as defined in the Purchase Agreement the Investors may
also convert the principal of the Subordinated Notes into Shares of Common Stock
(the "Default Stock"); (iii) pursuant to the terms of a Convertible Promissory
Bridge Note, dated the date hereof, the holder of such Note is entitled to
receive shares of Common Stock (the "Bridge Stock"), and (iv) pursuant to the
terms of the Fee Letter, dated March 1, 2002, between ComVest and the Company,
ComVest may receive certain additional shares of Common Stock (the "Fee Stock");
WHEREAS, ComVest has also agreed, in the event that the Company is
unable to secure a bank or other financial institution to provide the Company
with a line of credit or other senior debt financing, pursuant to which the
Company would receive or be entitled to draw down immediately available funds of
at least $15,000,000, to provide such funds to the Company by purchasing the
Company's Senior Secured Notes in the principal amount of $15,000,000 (the
"Senior Notes"); and in connection with the issuance of the Senior Notes,
ComVest has the option to exchange certain of the Senior Notes for shares of
Common Stock; and
WHEREAS, in order to induce the Investors to purchase the Subordinated
Notes pursuant to the Purchase Agreement and, if applicable, to induce ComVest
to purchase the Senior Notes, the Company has agreed to provide the Investors
with certain rights as set forth herein; and
WHEREAS, in order to induce Lender to enter into that certain Loan and
Security Agreement to be dated as of March 18, 2002, between Lender and the
Company, the Company agreed to issue to Lender a warrant (the "Lender Warrant")
to purchase a number of shares of Common Stock equal to one percent (1%) of the
Common Stock of the Company (on a fully diluted basis) and to provide certain
registration rights to Lender in connection therewith;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
AGREEMENT
1. Registration Rights.
1.1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
(a) "Affiliate" shall mean with respect to a
Person, any other Person that directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with,
such Person. Without limiting the foregoing, with respect to ComVest, an
"Affiliate" shall mean the General Partner of ComVest or any Person that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, the General Partner of ComVest
or any partnership in which the General Partner of ComVest is a general partner.
(b) "Board of Directors" shall mean the Board of
Directors of the Company.
(c) "Closing" shall mean the closing of the
transactions contemplated by the Purchase Agreement.
(d) "Commission" shall mean the Securities and
Exchange Commission or any other federal agency at the time administering the
Securities Act.
(e) "Conversion Stock" means (i) the shares of
Common Stock issued or issuable upon conversion of the Subordinated Notes, (ii)
the shares of Common Stock issued or issuable upon conversion of the Senior
Notes, (iii) the Bridge Stock, (iv) the Fee Stock, and (v) the Default Stock.
(f) "Exchange Act" means the Securities Exchange
Act of 1934, as amended.
(g) "Holder" shall mean any stockholder of the
Company or Person holding Registrable Securities or a security convertible into,
or exchangeable for, Registrable Securities, who is or hereafter becomes a party
to this Agreement or the rightful and permitted assign or successor of such a
party to whom the rights under this Section 1 have been transferred in
accordance with Section 1.10; provided, that, notwithstanding anything to the
contrary, (i) Xxxx and Xxxxxxxx shall only be deemed to be Holders for purposes
of Sections 1.3, 1.5, 1.7, 1.8
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and 1.12 hereof and (ii) Lender shall only be deemed a Holder for purposes of
Section 1 and Section 6 hereof.
(h) "Xxxx" means Xx. Xxxxxxxx Xxxx, a Major
Stockholder hereunder.
(i) "Xxxx Stock" means up to 832,000 shares of
Common Stock held of record by Xxxxxxxx Xxxx and pledged to Tapir Investments
(Bahamas) Ltd.
(j) "Lender Warrant Stock" means the shares of
Common Stock issued or issuable upon exercise of the Lender Warrant.
(k) "Person" shall mean an individual,
partnership, association, joint venture, corporation, trust or unincorporated
organization, a government or any department, agency or political subdivision
thereof or other entity.
(l) "Xxxxxxxx" means Mr. Xxxxxxx Xxxxxxxx, a
Major Stockholder hereunder.
(m) "Xxxxxxxx Stock" means up to 150,000 shares
of Common Stock held by Xxxxxxxx.
(n) "Registrable Securities" means (i) the
Conversion Stock; (ii) for purposes of Sections 1.3, 1.5, 1.7, 1.8 and 1.12
only, the Xxxx Stock and the Xxxxxxxx Stock; (iii) the Lender Warrant Stock; and
(iv) stock issued in respect of the Common Stock referred to in (i), (ii) and
(iii) as a result of a stock split, stock dividend, recapitalization or the
like, which has not been sold to the public.
(o) The terms "register," "registered" and
"registration" refers to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.
(p) "Registration Expenses" shall mean all
expenses, except as otherwise stated below, incurred by the Company in complying
with Sections 1.3 and 1.6 hereof, 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,
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company) and the reasonable fees and
disbursements of one counsel for all Holders in the event of each registration
provided for in Section 1.3 hereof.
(q) "Securities Act" shall mean the Securities
Act of 1933, as amended, or any similar federal statute and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
(r) "Selling Expenses" shall mean all
underwriting discounts, selling commissions and stock transfer taxes applicable
to the securities registered or sold by the Holders.
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(s) "Stock" means and includes all shares of
Common Stock issued and outstanding at the relevant time plus (i) all shares of
Common Stock that may be issued upon exercise of any options, warrants and other
rights of any kind that are then exercisable, and (ii) all shares of Common
Stock that may be issued upon conversion of (A) any convertible securities,
including, without limitation, preferred stock and debt securities then
outstanding, which are by their terms then convertible into or exchangeable for
Common Stock, or (B) any such convertible securities issuable upon exercise of
options, warrants or other rights that are then exercisable.
1.2. [Reserved].
1.3. Company Registration.
(a) Notice of Registration. If at any time or from time
to time the Company shall determine to register any of its securities, either
for its own account or the account of Holders, other than (i) a registration
relating solely to employee benefit plans; or (ii) a registration relating
solely to a Commission Rule 145 transaction or (iii) the registration required
under Section 1.6(a) hereunder, the Company will:
(i) notify each Holder in writing at least
thirty (30) days prior to filing any registration statement under the Securities
Act; and
(ii) subject to paragraph (b) of this Section,
include in such registration (and any related qualification under blue sky laws
or other compliance), and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests, made within
twenty (20) days after receipt of such written notice from the Company, by any
Holder.
(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 1.3(a)(i). In such event the right of any
Holder to registration pursuant to Section 1.3 shall be conditioned upon such
Holder's participation in such 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 distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 1.3, if the
managing underwriter determines that marketing factors require limitation of the
number of shares to be underwritten, the managing underwriter may limit the
Registrable Securities to be included in such registration. In that case, the
Company shall so advise all Holders and any other holders distributing their
securities through such underwriting and the number of securities that may be
included in the registration and underwriting shall be allocated (i) first up to
that number of shares of Common Stock constituting the Xxxx Stock at such time
up to that dollar amount secured by the pledge of Xxxx Stock at such time (the
"Xxxx Stock Amount"), provided that the managing underwriter determines that
such priority with respect to the Xxxx Stock is compatible with the success of
the offering, (ii) second, to the Company, and (iii) third among all Holders
(other than Xxxx) who are entitled to include and have requested the inclusion
of their
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Registrable Securities in such offering pursuant to this Section 1.3 on a pro
rata basis in proportion to the respective number of Registrable Securities so
requested to be included by such Holders, in priority to the inclusion of any
other securities that are proposed to be sold in such offering by any other
Persons (other than the Company). If all of the Registrable Securities requested
for inclusion in such registration and underwriting by the Holders as aforesaid
have been so included, the remaining number of securities, if any, that may be
included in the registration and underwriting shall be allocated among any other
holders distributing securities in such offering (provided that such other
holders have contractual rights to participate in such registration and such
rights have been granted pursuant to Section 1.13 of this Agreement). Anything
herein to the contrary notwithstanding, subject to the sale of Xxxx Stock, as
provided in clause (i) above, (x) in no event shall the aggregate amount of
Registrable Securities of the Holders (other than Xxxx) included in the offering
be reduced below forty percent (40%) of the total amount of securities included
in such offering, unless the Holders of sixty-six and two-thirds percent
(66-2/3%) of the Registrable Securities (excluding the Xxxx Stock) consent in
writing to such a reduction and (y) the number of Registrable Securities
(excluding the Xxxx Stock) included in any registration shall not be reduced
unless there are first excluded all other securities (other than securities to
be offered for the account of the Company) proposed to be included in the
registration. If any Holder disapproves of the terms of any such underwriting,
such Holder may elect to withdraw therefrom by written notice to the Company and
the managing underwriter.
1.4. [Reserved].
1.5. Expenses of Registration. Unless otherwise stated, all Selling
Expenses relating to securities registered on behalf of the Holders (whether for
a registration requested pursuant to Section 1.3 or any registration requested
pursuant to Section 1.6 for offerings on a continuous basis pursuant to Rule 415
under the Securities Act) shall be borne by the Holders of such securities pro
rata on the basis of the number of shares so registered. All Registration
Expenses incurred in connection with all registrations pursuant to Sections 1.3
shall be borne by the Company.
1.6. Shelf Registration; Registration Procedures. At its expense,
the Company will:
(a) Within ninety (90) days from the date hereof, prepare
and file with the Commission a registration statement on Form S-3, or if such
form is not available, Form S-1 (the "Registration Statement"), to enable the
resale of the Registrable Securities by the Holders thereof from time to time
and use its best efforts to cause such Registration Statement to be declared
effective as promptly as possible after filing, but in any event no later than
the date occurring one hundred and eighty (180) days from the date hereof and to
remain continuously effective until such time as all Registrable Securities have
been sold thereunder or pursuant to Rule 144 under the Securities Act (the
"Registration Period");
(b) Furnish to the Holders with respect to the
Registrable Securities registered under the Registration Statement such
reasonable numbers of copies of the Registration Statement, preliminary
prospectus and final prospectus in conformity with the requirements of the
Securities Act, any amendments or supplements thereto, and such other
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documents as the Holders may reasonably request in order to facilitate the
public sale or other disposition of all or any of the Registrable Securities by
the Holders;
(c) Prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection therewith as may be necessary to
keep the Registration Statement effective at all times until the end of the
Registration Period;
(d) Register and qualify the securities covered by the
Registration Statement under such other securities, or "Blue Sky," laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions;
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
(f) Permit a single firm of legal counsel ("Legal
Counsel") designated by the Holders to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time prior to their
filing with the Commission;
(g) Promptly after a Registration Statement covering
Registrable Securities is ordered effective by the Commission, the Company shall
deliver, or shall cause its legal counsel to deliver, to the transfer agent for
such Registrable Securities (with copies to the Holders) confirmation that such
Registration Statement has been declared effective by the SEC;
(h) Notify each Holder of Registrable Securities covered
by the Registration Statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing and at the request of any Holder promptly prepare and furnish to such
seller and each underwriter, if any, 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 securities, 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 in the light of the circumstances then existing;
(i) Obtain the withdrawal of any order suspending the
effectiveness of the Registration Statement at the earliest possible moment;
(j) File in a timely manner any reports required to be
filed by the Company under the Securities Act, the Exchange Act and the
securities laws of any jurisdiction in which the Registrable Securities were
sold;
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(k) Cause all Registrable Securities covered by such
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Registrable Securities;
(l) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (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, if any, and to the Holders requesting
registration of Registrable Securities 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,
if any, and to the Holders requesting registration of Registrable Securities;
(m) 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; and
(n) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
1.7. Indemnification.
(a) The Company will indemnify each Holder, each of its
officers and directors, partners and members, and each person controlling such
person within the meaning of Section 15 of the Securities Act, with respect to
which registration, qualification or compliance has been effected pursuant to
this Section 1, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, 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, in light of the circumstances in which they were made,
not misleading, or any violation by the Company of the Securities Act or any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of its officers and
directors, 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, preparing or
defending any such claim,
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loss, damage, liability or action as such expenses are incurred; provided that
the Company will not be liable to any such person in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission (or alleged untrue statement or
omission), made in reliance upon and in conformity with written information
furnished to the Company in an instrument duly executed by such Holder,
controlling person or underwriter and stated to be specifically for use therein
or the preparation thereof.
(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, severally but not jointly,
indemnify the Company, each of its directors and officers, 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, and each other such Holder, each of its
officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of any untrue
statement (or alleged untrue statement) of a material fact contained in any
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, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating, preparing 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 in an instrument
duly executed by such Holder and stated to be specifically for use therein or
the preparation thereof; provided, however, that the indemnity agreement
contained in this subsection 1.7(b) shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability or action if such
settlement is effected without the consent of the Holder. Notwithstanding the
foregoing, the liability of each Holder under this subsection (b) shall be
limited to an amount equal to the net proceeds received by such Holder from the
sale of Registrable Securities held by such Holder in such registration.
(c) Each party entitled to indemnification under this
Section 1.7 (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 any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be 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 1.7 unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's ability
to defend such action and provided further, that the Indemnifying Party shall
not assume the defense for matters as to which there is a conflict of interest
or separate and different defenses. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional
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term thereof the giving by the claimant or plaintiff to such Indemnified Party a
release from all liability in respect to such claim or litigation.
(d) If the indemnification provided for in this
Section 1.7 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages, or liabilities
referred to therein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage, expense or liability in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the
violation(s) that resulted in such loss, claim, damage, expense or liability, as
well as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by a court
of law by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact related to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, that in no event
shall any contribution by a Holder hereunder exceed the net proceeds from the
offering received by such Holder.
The obligations of the Company and Holders under this Section 1.7 shall survive
completion of any offering of Registrable Securities in a registration statement
and the termination of this Agreement. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
1.8. Information by Holder. The Holders of securities included in
any registration shall furnish to the Company such information regarding such
Holders, the Registrable Securities held by them and the distribution proposed
by such Holders as the Company may request in writing and as shall be required
in connection with any registration, qualification or compliance referred to in
this Section 1.
1.9. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration the Company agrees to use its best efforts to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times during which the Company is required to comply with the reporting
requirements of the Securities Act or the Exchange Act;
(b) take such action as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities;
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(c) use its best efforts to 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
(d) so long as a Holder owns any Registrable Securities
to furnish to such Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
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 of the
Company and other information in the possession of or reasonably obtainable by
the Company as such Holder may reasonably request in availing itself of any rule
or regulation of the Commission allowing such Holder to sell any such securities
without registration.
1.10. Transfer of Registration Rights. Subject to Section 6.1
hereof, the rights to cause the Company to register securities granted to a
Holder under Section 1.3 may be assigned to a transferee or assignee in
connection with any transfer or assignment of Registrable Securities by such
Holder, provided that the transferor provides the Company with written notice of
the proposed transfer and: (i) the transferee is a partner, member, former
partner or member, stockholder or Affiliate of the Holder; (ii) the transferee
is a Holder's sibling, mother, father or child or a trust for the benefit of a
Holder; or (iii) the transferee is a foundation or other charitable organization
associated with Medtronic.
1.11. Standoff Agreements. (a) Each Major Stockholder agrees, until
the date which is five (5) business days after the Registration Statement has
been declared effective, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any shares of Common Stock
or any other securities of the Company or enter into any agreement with respect
to the foregoing (collectively, a "Sale"); provided, that such agreements shall
not apply to (a) shares of Common Stock purchased after the date hereof by the
Major Stockholder in the public market or in a registered offering, and (b) with
respect to Xxxx and Xxxxxxxx, up to the Xxxx Stock Amount which may be sold by
Xxxx, and the Xxxxxxxx Stock which may be sold by Xxxxxxxx, in each case
pursuant to an underwritten public offering of Common Stock with a reputable
national or regional investment bank.
(b) Each Major Stockholder further agrees after the date any
registration statement is declared effective with respect to an underwritten
public offering of the Company's equity securities, not to engage in any Sale
for such period of time as to which the Holders agree to the same restriction;
provided that Xxxx may engage in a Sale of the Xxxx Stock and Xxxxxxxx may
engage in a Sale of the Xxxxxxxx Stock.
1.12. Termination. Any registration rights granted pursuant to this
Section 1 shall terminate (if not already terminated as provided herein) and the
Company shall have no obligations pursuant to Sections 1.3 with respect to any
Registrable Securities proposed to be sold by a Holder in a registration
pursuant to Section 1.3 if, in the opinion of counsel to the Company, all
Registrable Securities held by a Holder (and any affiliate of the Holder with
whom such Holder must aggregate its sales under Rule 144) may be sold in a
three-month period without registration under the Securities Act pursuant to
Rule 144.
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1.13. Other Registration Rights. The Company shall not, without the
prior written consent of Holders of sixty-six and two-thirds percent (66-2/3%)
of the Registrable Securities then outstanding grant any registration rights
superior to or on a parity with the rights granted pursuant to this Section 1
other than the registration rights previously granted by the Company to Tapir
Investments (Bahamas) Ltd. pursuant to the Rights Agreement dated as of April 9,
1998, as in effect on the date hereof.
2. Holders' Right of First Refusal Upon Issuance of Securities by
the Company.
2.1. Right of First Refusal. The Company hereby grants to
each Holder or any of their transferees pursuant to Section 2.1(f) hereof
(collectively, hereinafter, the "Rights Holders") the right of first refusal to
purchase all or part of its pro rata share of New Securities (as defined in this
Section 2.1) which the Company may, from time to time, propose to sell and
issue. For purposes of this right of first refusal, a pro rata share for a
Rights Holder is the number of New Securities to be issued multiplied by the
ratio that the number of shares of Stock then held by or issuable to (assuming
full conversion and exercise of the Subordinated Notes and the Senior Notes,
respectively) such Rights Holder bears to the sum of the total number of shares
of Stock then outstanding (assuming full conversion and exercise of the
Subordinated Notes and the Senior Notes, respectively).
(a) Except as set forth below, "New Securities"
shall mean any Equity Securities (as defined below), whether now authorized or
not. "Equity Securities" shall mean any securities having voting rights in the
election of the Board of Directors not contingent upon default, or any
securities evidencing an ownership interest in the Company, or any securities
convertible into or exercisable for any shares of the foregoing, or any
securities issuable pursuant to any agreement or commitment to issue any of the
foregoing. Notwithstanding the foregoing, "New Securities" does not include (i)
the Conversion Stock; (ii) stock issued in connection with any stock split,
stock dividend or recapitalization by the Company, (iii) shares of Common Stock
issued to officers, directors, employees or consultants of the Company pursuant
to stock grants, stock purchase and stock option plans or other stock incentive
programs, agreements or arrangements approved by the Board of Directors unless
such shares constitute greater than 10% of the Company's outstanding Common
Stock at the time of issuance, (iv) shares of Common Stock or preferred stock of
the Company issued or issuable upon conversion, exercise or exchange of
currently outstanding warrants, or (v) securities issued pursuant to the
acquisition of all or part of another company by the Company by merger or other
reorganization, or by purchase or all or part of the assets of another company,
pursuant to a plan or arrangement approved by the Board of Directors.
(b) In the event the Company proposes to
undertake an issuance of New Securities, it shall give each Rights Holder
written notice of its intention, describing the type of New Securities, and the
price and terms upon which the Company proposes to issue the same. Each Rights
Holder shall have twenty (20) days from the date of receipt of any such notice
to agree to purchase up to its respective pro rata share of such New Securities
for the price and upon the applicable terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased.
11
(c) If not all of the Rights Holders elect to
purchase their pro rata share of the New Securities, then the Company shall
promptly notify in writing the Rights Holders who do so elect and shall offer
such Rights Holders the right to acquire such unsubscribed shares. The Rights
Holders shall have five (5) business days after receipt of such notice to notify
the Company of their election to purchase all or a portion of the unsubscribed
shares.
(d) In the event a Rights Holder fails to
exercise the right of first refusal within said twenty (20) day period, the
Company shall have ninety (90) days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within fifteen (15) days from the date of said agreement) to
sell the New Securities not elected to be purchased by Rights Holders at the
price and upon the terms no more favorable to the purchasers of such securities
than specified in the Company's notice. In the event the Company has not sold
the New Securities within said ninety (90) day period (or sold and issued New
Securities in accordance with the foregoing within fifteen (15) days from the
date of said agreement), the Company shall not thereafter issue or sell any New
Securities, without first offering such securities in the manner provided above.
(e) The right of first refusal granted under
this Section 2.1 shall expire upon the closing of a statutory share exchange,
consolidation or merger of this Company with or into any other corporation or
corporations (other than a wholly-owned subsidiary), or the sale, transfer or
other disposition of all or substantially all of the assets of this Company.
(f) The right of first refusal hereunder may be
assigned to a transferee or assignee (other than a competitor as reasonably
determined by the Company in good faith) in connection with any transfer or
assignment of Registrable Securities, provided that the transferor provides the
Company with written notice of the proposed transfer and (i) the transferee is a
partner (or former partner), member (or former member), stockholder or Affiliate
of the Holder, (ii) the transferee is a Holder's sibling, mother, father or
child or a trust for the benefit of a Holder, or (iii) the transferee is a
foundation or other charitable organization associated with Medtronic.
3. Holder's Right of First Refusal and Co-Sale on Sales by Major
Stockholders.
3.1. Right of First Refusal on Sales.
(a) Sales to Third Parties. If at any time a Major
Stockholder (an "Offeror") desires to sell, transfer, hypothecate, pledge,
assign or otherwise dispose of all or any part of his shares pursuant to a bona
fide offer from a third party (the "Proposed Transferee"), such Offeror shall
submit a written offer (the "Offer") to sell such shares (the "Offered Shares")
to the Holders on terms and conditions, including price (the "Offered Price"),
not less favorable to the Holders than those on which the Offeror proposes to
sell such Offered Shares to the Proposed Transferee. The Offer shall disclose
the identity of the Proposed Transferee, the Offered Shares proposed to be sold,
the total number of shares owned by the Offeror, the terms and conditions,
including the Offered Price and any other material facts relating to the
proposed sale and shall include a copy of any written proposal, term sheet or
other agreement relating to the proposed transfer. The Offer shall further state
that the Holders may acquire, in accordance
12
with the provisions of this Agreement, the Offered Shares for the Offered Price
and upon the other terms and conditions, including deferred payment (if
applicable), set forth therein. For the purposes of Section 3.1, the Offered
Shares shall not include the Xxxx Stock or the Xxxxxxxx Stock.
(b) Holders' Right of First Refusal.
(i) The Offered Shares may be purchased by the
Holders as set forth below. Each Holder shall have the opportunity to purchase
its pro rata share of the Offered Shares. For purposes of this Section 3 only, a
Holder's pro rata share shall be determined by multiplying the number of Offered
Shares by a ratio calculated by dividing the number of shares of Stock held by
or issuable to (assuming full conversion of the Subordinated Notes and the
Senior Notes, respectively) such Holder by the total number of shares of Stock
held by all Holders (assuming full conversion of the Subordinated Notes and the
Senior Notes, respectively). (The amount of Offered Shares that each Holder is
entitled to purchase under this Section 3.1(b) shall be referred to as its "Pro
Rata Fraction"). If any Holder, or their respective assignees, desire to
purchase any of the Offered Shares, such Holder must, within a fifteen (15) day
period (the "Holder Refusal Period") following receipt of the Offer, give
written notice ("Holder Notice") to the Offeror and to the Company of such
party's election to purchase its Pro Rata Fraction of the Offered Shares. A
failure by a Holder to exercise its Right of First Refusal within the Holder
Refusal Period shall be deemed a waiver of such right with respect to that
particular Offer only. In the event that a Holder does not wish to purchase such
Holder's Pro Rata Fraction, then the Offeror shall notify all Holders who
elected to purchase their full pro rata share of the number of shares not so
purchased, and any Holder who has elected to purchase its full Pro Rata Fraction
shall have the right to purchase, on a pro rata basis with any other Holder who
so elects, any Offered Share not purchased by providing notice to the Offeror
within seven (7) days of receipt of such notice (the "Second Holder Refusal
Period").
(c) Closing on Offered Shares. Sales of the Offered
Shares to be sold to the Holders pursuant to this Section 3 shall be made at the
offices of the Company on the 45th day following the date the Offer was made (or
if such 45th day is not a business day, then on the next succeeding business
day). Such sales shall be effected by the Offeror's delivery to the Holder of a
certificate or certificates evidencing the Offered Shares to be purchased by it,
duly endorsed for transfer to such Holder, against payment to the Offeror of the
Offered Price therefor by such Holder. If the Offered Price includes
consideration other than cash, the cash equivalent value of the non-cash
consideration will be determined by an independent third party appraiser
selected by the Board of Directors of the Company, which determination will be
binding upon the parties absent fraud or error.
(d) Sales to Proposed Transferee. If the Holders do not
purchase all of the Offered Shares, the Offered Shares not so purchased may be
sold by the Offeror at any time within ninety (90) days after the date the Offer
was made, subject to the provisions of Sections 3.2 and 3.3 below. Any such sale
shall, subject to Sections 3.2 and 3.3, be to the Proposed Transferee, at not
less than the Offered Price and upon other terms and conditions, if any, not
more favorable to the Proposed Transferee than those specified in the Offer. Any
Offered Shares not sold within such 90-day period shall once again be subject to
the requirements of a prior offer pursuant to this Section 3.1.
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3.2. Holders' Right of Participation in Sales by a Major
Stockholder.
(a) Co-Sale Right. If at any time an Offeror
desires to sell all or any part of the shares owned by him to any Proposed
Transferee in accordance with Section 3.1, each of the Holders shall have the
right to sell to the Proposed Transferee, as a condition to such sale by the
Offeror, upon the same economic terms and legal conditions as involved in such
sale by the Offeror, a number of shares equal to the Holder's Pro Rata Fraction
of the Offered Shares that have not been purchased pursuant to exercise of the
Right of First Refusal in Section 3.1(b) (the "Co-Sale Shares"). In the event
that a Holder does not hold any of the series, class or type of shares that the
Proposed Transferee proposes to purchase from the Offeror and the Proposed
Transferee is unwilling to purchase a different series, class or type of shares
from the Holder, or is otherwise unwilling to purchase the shares held by Holder
with respect to which such Holder has the right to exercise its co-sale rights,
then the Holder shall have the Put Right set forth in Section 3.4 below with
respect to its Pro Rata Fraction of the Offered Shares. For purposes of Section
3.2, the Offered Shares shall not include the Xxxx Stock, or any Stock owned by
Xxxxxxxx after the date he is no longer an employee of the Company.
(b) Notice of Intent to Participate. Upon
termination of the Holder Refusal Period, the Offeror shall notify all Holders
of the number of Offered Shares not purchased pursuant to the Right of First
Refusal (the "Second Offer"). Such notice shall also contain the information
described in Section 3.1(a) above. Each Holder wishing to so participate in any
sale under this Section 3.2 shall notify the Offeror in writing of such
intention within ten (10) days after the date of receipt of the Second Offer.
Such notification shall be delivered in person or mailed to the Offeror at the
address set forth in accordance with Section 6.6 below.
(c) Sale to Proposed Transferee. The Offeror and
each participating Holder may sell to the Proposed Transferee those Co-Sale
Shares proposed to be sold by the Offeror and each participating Holder at a
price and upon other terms and conditions, if any, not more favorable to the
Proposed Transferee than those in the Offer provided by the Offeror under
Sections 3.1 and 3.2(b) above.
(d) Continuation of Restrictions. Any shares
sold by the Offeror and/or participating Holder(s) to any third party pursuant
to this Section 3.2 shall still be subject to the restrictions or benefits
imposed by Section 3 of this Agreement, and such third party shall be required
to execute a counterpart of this Agreement.
3.3. Prohibited and Permitted Transfers.
(a) Prohibited Transfers. No Major Stockholder
may sell, assign, transfer, grant an option to or for, pledge, hypothecate,
mortgage, encumber or dispose of (in each case, a "Transfer") all or any of his
shares except as expressly provided in this Agreement and except as provided
pursuant to the Note Purchase Agreement .
(b) Legends. The Company shall affix to each
certificate evidencing shares of Common Stock issued to Holders a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES
14
ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OF 1933, AS AMENDED OR AN EXEMPTION THEREFROM AND,
IN EACH CASE, IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET
FORTH IN A SECURITYHOLDERS' AGREEMENT DATED AS OF
MARCH 16, 2002, AS IT MAY BE AMENDED FROM TIME TO
TIME, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE ISSUER. NO REGISTRATION OR
TRANSFER OF THESE SHARES WILL BE MADE ON THE BOOKS
OF THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS
SHALL HAVE BEEN COMPLIED WITH."
In the event a Holder shall transfer any shares of Common Stock to any Person in
accordance with this Agreement, such securities shall nonetheless bear legends
as provided above; provided, however, that the provisions of this Section shall
not apply in respect of sales of shares included in registered public offerings
under the Securities Act or a sale of shares of Common Stock pursuant to Rule
144 under the Securities Act.
(c) Permitted Transfers. Notwithstanding the
foregoing, the terms and conditions of Sections 3.1 and 3.2 hereof shall not
apply to any Permitted Transfer by a Major Stockholder. For purposes of this
Agreement, "Permitted Transfer" means any transfer by a Major Stockholder (i) of
such party's shares to or for the benefit of any parent, sibling, spouse, child
or grandchild of such Major Stockholder, or to a trust for the benefit of any of
the foregoing, (ii) by will or the laws of descent and distribution to any of
the persons listed in Section 3.3(i) (any person referred to in this paragraph
is defined as a "Permitted Transferee"), (iii) any transfer in connection with
the merger or consolidation of the Company with or into any other corporation or
other entity or person (an "Acquisition") or the sale of all or substantially
all of the outstanding shares of capital stock of the Company to a third party
provided that such Acquisition or sale of shares has been approved by the Board
and/or shareholders as required by the Certificate of Incorporation or (iv) up
to five percent (5%) of such Major Stockholder's Shares as of the date hereof.
As used herein, the term "Major Stockholder" is deemed to include any
Permitted Transferees of the Major Stockholder, except as expressly provided
otherwise, and any Permitted Transferee shall agree to be bound by this
Agreement.
3.4. Put Right. In the event that a Major Stockholder
should sell any securities in violation of the co-sale rights hereunder, each
Holder, in addition to such other remedies as may be available at law, in equity
or hereunder, shall have a put option whereby such Holder shall have the right
to sell to such Major Stockholder the type and number of shares equal to the
15
number of shares such Holder would have been entitled to transfer to the Company
or to the Proposed Transferee at the price per share at which the shares were
transferred by the violating Major Stockholder; provided, however, that such
Holder must exercise its put option within forty-five (45) days of such Holder's
knowledge of a Major Stockholder's violation of the co-sale rights hereunder.
3.5. Termination. The right of first refusal and co-sale
rights, each with respect to sales by Major Stockholders, set forth in this
Section 3 shall terminate on the earlier of (a) 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 3.5 shall not apply to a merger
effected exclusively for the purpose of changing the domicile of the Company; or
(b) with respect to Xxxxxxxx, the date he is no longer an employee of the
Company, but no earlier than six months from the date hereof, and (c) with
respect to Xxxx, if his employment is terminated by the Company, one year from
the date of such termination, or if Xxxx voluntarily terminates his Employment
with the Company, two years from the date of such termination, but in no event
longer than five years from the date hereof.
3.6. No Agreements. Except as set forth in Section 3.7 of
this Agreement, no Major Stockholder shall grant any irrevocable proxy or any
other proxy inconsistent with this agreement or enter into or agree to be bound
by any voting trust with respect to any shares of Common Stock, nor shall any
Major Stockholder enter into any stockholder agreements or arrangements of any
kind with any person with respect to any shares of Common Stock (whether or not
such agreements and arrangements are with other holders of Common Stock who are
not parties to this Agreement), including agreements or arrangements with
respect to the acquisition, disposition or voting (if applicable) of any shares
of Common Stock, except this Agreement, nor shall any Major Stockholder act, for
any reason, as a member of a group or in concert with any other persons in
connection with the acquisition, disposition or voting (if applicable) of any
shares of Common Stock, except to the extent consistent with this Agreement.
4. Holders' Bring Along Rights.
4.1. Bring Along Right. If at any time the Holders propose
to sell in the aggregate 51% or more of the Common Stock held by the Holders
(the "Sale Shares") to a third party or parties (a "Third Party"), then the
Holders shall have the right, subject to the provisions of this Section 4, to
require each Major Stockholder to sell (a "Required Sale") the same percentage
of Common Stock held by it that is proposed to be sold by the Holders. In the
event this Section 4.1 is invoked, the Holders shall deliver notice (the
"Required Sale Notice") to each Major Stockholder.
4.2. Notice. The Required Sale Notice shall set forth: (i)
the date of such notice (the "Notice Date"), (ii) the name and address of the
Third Party, (iii) the proposed amount of the consideration to be paid per share
for the Sale Shares (the "Sale Price") and the terms and conditions of payment
offered by the Third Party in reasonable detail, together with
16
written proposals or agreements, if any, with respect thereto, (iv) the
aggregate number of Sale Shares, (v) confirmation that the Holders are selling
51% or more of the aggregate number of shares of Common Stock then held by it to
a Third Party, and (vi) the proposed date of the Required Sale (the "Required
Sale Date"), which shall be not less than 20 nor more than 180 days after the
date of the Notice Date.
4.3. Cooperation. The Major Stockholders shall cooperate
in good faith with the Holders in connection with consummating the Required Sale
(including, without limitation, the voting of shares of any voting stock of the
Company held by the Major Stockholders to approve such Required Sale). On the
Required Sale Date, each Major Stockholder shall deliver certificates for all of
its Common Stock, duly endorsed for transfer, to such Third Party in the manner
and at the address indicated in the Required Sale Notice and the Holders shall
cause each of the Major Stockholders' shares of the purchase price to be paid to
the respective Major Stockholder.
5. Board of Directors; Voting of Capital Stock; Certain Other
Matters.
5.1. Board of Directors. Subject to Section 5.7,
immediately following the Closing and until such time as the principal amount of
all Subordinated Notes, together with all interest thereon, has been paid in
full and ComVest has sold more than 50% of the Common Stock issuable upon the
conversion of the Subordinated Notes purchased by ComVest pursuant to the Note
Purchase Agreement, the parties hereto shall take all action within their
respective power, including the voting of Common Stock, required to cause the
Board of Directors to consist of seven (7) directors, who shall be designated as
follows:
(a) Designees of ComVest. Subject to Section
5.1(b) and Section 5.7, ComVest shall designate one (1) director of the Company;
(b) ComVest Independent Directors. ComVest shall
designate two (2) additional directors of the Company who shall be independent
directors in accordance with the requirements of the American Stock Exchange.
(c) Medtronic Observer. Medtronic shall
designate one (1) person who shall be an observer on the Board of Directors with
no voting rights.
5.2. Removal. If a director designated and elected
pursuant to Section 5.1 hereof has been designated by ComVest and ComVest
requests that such director be removed (with or without cause) by written notice
thereof to the other Holders, the Company and the Major Stockholders, then such
director shall be removed, with or without cause, upon the affirmative vote of
holders of a majority of the outstanding shares of Common Stock, and each party
hereto hereby agrees to vote all shares of Common Stock owned or held of record
by such holder to effect such removal upon such request.
5.3. Vacancies. In the event that a vacancy is created on
the Board of Directors at any time by the death, disability, retirement,
resignation, removal (with or without cause) of a director or otherwise, or if
for any reason there shall exist or occur any vacancy on the Board of Directors,
each Company Stockholder hereby agrees to cause the director(s) designated by
such Company Stockholder to, subject to such director's applicable fiduciary
17
duties, vote for that individual designated to fill such vacancy and serve as a
director by whichever of the Company Stockholders that had designated (pursuant
to Section 5.1 hereof) the director whose death, disability, retirement,
resignation or removal (with or without cause) resulted in such vacancy on the
Board of Directors (in the manner set forth in Section 5.1); provided, however,
that such other individual so designated may not previously have been a director
of the Company who was removed for cause from its Board of Directors.
5.4. Actions of the Board of Directors. During the period
that ComVest retains the appointment rights under Section 5.1 hereof, any action
of the Board of Directors shall require the vote of a majority of the directors
present at a meeting with respect to which a quorum is in attendance; provided,
however, that such majority vote must include the affirmative vote of the
director designated and elected by ComVest in order to approve the following:
(a) The acquisition of the Company by another
entity by means of any transaction or series of related transactions with this
Company (including, without limitation, any stock purchase, reorganization,
merger or consolidation but, excluding any merger effected exclusively for the
purpose of changing the domicile of this Corporation); or any other transaction
which results in the disposition of 50% or more of the voting power of all
classes of capital stock of the Company unless the Company's stockholders of
record as constituted immediately prior to such acquisition or sale will,
immediately after such acquisition or sale (solely by virtue of securities
issued as consideration for this Corporation's acquisition or sale or otherwise)
hold at least 50% of the voting power of the surviving or acquiring entity.
(b) The sale of all or any material portion of
the assets of the Company; or
(c) The liquidation, dissolution or winding up
of the Company;
(d) Making, or permitting any subsidiary to
make, any loan or advance to, or own any stock or other securities of, any
subsidiary or other corporation, partnership, or other entity unless it is
wholly owned by the Company;
(e) Making, or permitting any subsidiary to
make, any loan or advance to any person, including, without limitation, any
employee or director of the Company or any subsidiary;
(f) Guaranteeing, directly or indirectly, or
permitting any subsidiary to guarantee, directly or indirectly, any indebtedness
except for trade accounts of the Company or any subsidiary arising in the
ordinary course of business;
(g) The declaration or payment of any dividends
on its capital stock other than dividends payable solely in Common Stock;
(h) Any amendment, supplement or modification of
any kind whatsoever to the Company's Certificate of Incorporation or By-Laws,
including any increase in the number of members of the Board of Directors
(except as provided in Section 5.7 of this Agreement); or
18
(i) The issuance of any stock options, except
the stock options to be issued to Xxxx and Xxxxxxxx as provided in the Purchase
Agreement; provided, that if an Event of Default, as provided in Section 11 of
the Purchase Agreement has occurred, then all vesting of such stock options
shall immediately cease until such default is cured or waived by the director
designated and elected by ComVest pursuant to Section 5.1(a).
5.5. Covenant to Vote. During the period that ComVest
retains the appointment rights under Section 5.1 hereof, each Company
Stockholder hereby agrees to take all actions necessary to call, or to cause the
Company and the appropriate officers and directors of the Company to call, a
special or annual meeting of stockholders of the Company and to vote all shares
of voting stock of the Company owned or held of record by such Company
Stockholder at any such annual or special meeting in favor of, or take all
action by written consent in lieu of any such meeting: (a) necessary to ensure
that the number of directors constituting the entire Board of Directors is
consistent with, and that the election as members of the Board of Directors of
those individuals so designated is in accordance with, and to otherwise effect
the intent of, this Section 5; (b) upon any other matter arising under this
Agreement and the Purchase Agreement submitted to a vote or consent of the
stockholders in a manner so as to implement fully the terms of this Agreement
and the Purchase Agreement (including, without limitation, any issuance by the
Company of the Subordinated Notes and the Senior Notes, and shares of its common
stock issuable upon the exercise of conversion (or similar) rights granted to
the holders of the Subordinated Notes and the Senior Notes and any amendments to
the Company's Certificate of Incorporation or Bylaws required pursuant to the
Purchase Agreement).
5.6. Proxy. Each of the Major Stockholders agrees to
execute and deliver to the Investors a Proxy, dated the date hereof, in the form
attached hereto as Exhibit A.
5.7. Executive Committee.
(a) The Company shall establish and maintain an
Executive Committee of the Board of Directors (the "Executive Committee"), which
shall consist of three (3) members of the Board of Directors, who shall be (i)
the director designated by ComVest pursuant to Section 5.1(a) who shall serve as
Chairman), (ii) one of the independent directors designated by ComVest pursuant
to Section 5.1(b) (initially Xxx Xxxxx) and (iii) Xxxx, so long as he is an
employee of the Company. The Executive Committee, to the fullest extent
permitted by law, shall have and may exercise when the Board of Directors is not
in session all powers of the Board in the management of the business and affairs
of the Company.
(b) The Executive Committee shall generally have
the powers and authority set forth in the Company's Bylaws. In addition, and
without limiting the foregoing, the affirmative vote of a majority of the
members of the Executive Committee shall be required in order to approve any the
following:
(i) The annual business plan and budget for the
Company and any amendments or supplements thereto;
19
(ii) Retention of auditors and lawyers for the
Company or any material change in the Company's accounting principals;
(iii) Establishment, termination or modification
of any committees of the Board of Directors;
(iv) Hiring the CEO, CFO, COO or CIO or any
employee of similar status; paying annual compensation of $100,000 or more to
any employee; or granting options to purchase 25,000 or more shares of Stock to
any employee;
(v) The acquisition of the Company by another
entity by means of any transaction or series of related transactions with this
Company (including, without limitation, any stock purchase, reorganization,
merger or consolidation but, excluding any merger effected exclusively for the
purpose of changing the domicile of this Company); or any other transaction
which results in the disposition of 50% or more of the voting power of all
classes of capital stock of the Company unless the Company's stockholders of
record as constituted immediately prior to such acquisition or sale will,
immediately after such acquisition or sale (solely by virtue of securities
issued as consideration for the Company's acquisition or sale or otherwise) hold
at least 50% of the voting power of the surviving or acquiring entity;
(vi) The sale of all or any material portion of
the assets of the Company;
(vii) The liquidation, dissolution or winding up
of the Company;
(viii) Making, or permitting any subsidiary to
make, any loan or advance to, or own any stock or other securities of, any
subsidiary or other corporation, partnership, or other entity unless it is
wholly owned by the Company;
(ix) Making, or permitting any subsidiary to
make, any loan or advance to any person, including, without limitation, any
employee or director of the Company or any subsidiary;
(x) Guaranteeing, directly or indirectly, or
permitting any subsidiary to guarantee, directly or indirectly, any indebtedness
except for trade accounts of the Company or any subsidiary arising in the
ordinary course of business;
(xi) The declaration or payment of any dividends
on its capital stock other than dividends payable solely in Common Stock;
(xii) Any amendment, supplement or modification of
any kind whatsoever to the Company's Certificate of Incorporation or By-Laws;
(xiii) The issuance of any stock options, except
the stock options to be issued to Xxxx and Xxxxxxxx under the Purchase
Agreement;
(xiv) Any capital expenditures exceeding $75,000
in any single instance or $250,000 in the aggregate in any Fiscal Year;
20
(xv) Entering into, modifying or terminating any
Material Contract, as defined in the Purchase Agreement;
(xvi) The issuance of any debt or equity
securities other than shares of Common Stock issuable upon exercise of stock
options and warrants and the conversion of convertible securities outstanding as
of the date hereof and any additional stock options as may be approved by the
Board of Directors;
(xvii) The redemption by the Company of any of its
securities;
(xviii) The incurrence by the Company or any
subsidiary of any Indebtedness (as defined in the Purchase Agreement) in excess
of $50,000 in any single instance or $150,000 in the aggregate in any fiscal
year, other than the Subordinated Notes, the Senior Notes, the Bridge Note and
any Senior Secured Indebtedness;
(xix) Permitting any Liens to be placed or exist
upon the Property of the Company or any of its subsidiaries, other than
Permitted Liens (as each of those capitalized terms are defined in the Purchase
Agreement);
(xx) The selection of the managing underwriter(s)
for any underwritten public offering of the Company's securities or any
placement agent for any private placement of the Company's securities; or
(xxi) Taking any action that would result in an
Event of Default under the Purchase Agreement.
In addition, the Executive Committee shall have the power and authority
to take (i) such cost-cutting measures on behalf of the Company (including,
without limitation, arrangements with creditors, reductions in personnel and
sales of assets) as it may deem necessary or appropriate for the benefit of the
business operations or condition (financial or otherwise) of the Company or (ii)
such other measures as may be appropriate for the Company to be in material
compliance with its annual business plan and budget. Notwithstanding the
foregoing, the Executive Committee shall not have the authority to terminate the
CEO other than for cause as provided in his employment agreement.
In the event the Subordinated Notes are paid in full, the Executive
Committee shall consist of four (4) members of the Board of Directors, and such
fourth member shall be an independent director approved by at least two-thirds
of the Board of Directors. Further, in the event ComVest shall have received in
the aggregate a twenty-five percent (25%) return, per annum, with respect to the
Subordinated Notes purchased by ComVest, then the provisions of this Section 5.7
shall no longer be applicable. (For example, assuming that ComVest has purchased
$5,000,000 of Subordinated Notes, if, after one (1) year, ComVest shall have
been repaid such $5,000,000 and sold shares of Common Stock for an aggregate net
sales price of not less than $1,250,000 ($6,250,000 net in the aggregate), then
ComVest shall be deemed to have achieved a 25% return per annum and the
provisions of Section 5.7 shall no longer be applicable. After two (2) years,
the net proceeds received from the sale of shares of Common Stock would have to
aggregate $2,812,500 ($7,812,500 net in the aggregate.))
21
5.8. Events of Election. Until such time as the entire
principal amount of all Subordinated Notes, together with all interest thereon,
has been paid in full, if (a) the Company or any Major Stockholder fails to
comply in any material respect with any covenants or agreements contained herein
and fails to cure such breach within ten (10) days after written notice thereof,
(b) there shall occur an "Event of Default" with respect to the Purchase
Agreement as such term is defined in the Purchase Agreement, (c) there shall
occur an "Event of Default" under any agreement governing the Senior
Indebtedness (as defined in the Purchase Agreement) as such term shall be
defined in such agreement, or (d) if any approvals of the Company's stockholders
are necessary to fully implement the terms of this Agreement and the Purchase
Agreement (including, without limitation, the issuance by the Company of the
Subordinated Notes and the Senior Notes, and shares of its common stock issuable
upon the exercise of conversion (or similar) rights granted to the holders of
the Subordinated Notes and the Senior Notes, and any amendments to the Company's
Certificate of Incorporation or Bylaws required pursuant to the Purchase
Agreement) and such stockholders approvals are not obtained by the date which is
sixty (60) days after the date hereof, then, without limiting any of the
foregoing rights, remedies and powers, and in addition thereto, ComVest shall
have the right to immediately elect such additional number of Persons designated
by it to the Board of Directors of the Company, such that, when such number of
additional Persons so designated is combined with the number of Persons
theretofore elected to the Board of Directors of the Company as designees of the
Investors, Persons designated by the Investors and serving as members of the
Board of Directors of the Company shall comprise a majority of the entire Board
of Directors of the Company. The terms of the Proxy executed pursuant to Section
5.6 shall provide that all shares of Common Stock owned or held of record by
each Major Stockholder shall be voted to effect such changes in the composition
of the Board of Directors.
6. Miscellaneous.
6.1. Assignment.
(a) The rights of the Company or any Holder
other than the Investors under this Agreement may be assigned only to (i) a
stockholder, partner, former partner, member, former member or beneficiary of a
Holder, (ii) a spouse, child, parent or beneficiary of the estate of a Holder;
(iii) to an affiliate (as defined for purposes of Rule 144 of the Securities
Act) of the Holder; or (iv) a trust for the benefit of the persons set forth in
(i) or (ii); provided, however, that no party may be assigned any of the
foregoing rights unless the Company is given written notice by the assigning
party at the time of such assignment stating the name, address and tax
identification number of the assignee and identifying the securities of the
Company as to which the rights in question are being assigned; and provided
further that any such assignee shall receive such assigned rights subject to all
the terms and conditions of this Agreement, including without limitation the
provisions of this Section 6.1. Notwithstanding anything contained in this
Agreement to the contrary, (A) any rights to cause the Company to register
securities and any preemptive rights and rights of first refusal to purchase
certain new securities proposed to be sold by the Company or other shareholders
may be transferred or assigned by ComVest (together with any affiliates, a
"ComVest Entity"), or any relevant ComVest Entity to another ComVest Entity,
provided that (a) the Company is given written notice at the time of or within a
reasonable time after said transfer or assignment, stating the name and address
of such transferee or assignee and identifying the specific rights being
transferred or assigned and (b) such transferee or assignee
22
assumes the obligations of the ComVest Entity and agrees to be bound, hereunder
and (B) any rights to cause the Company to register securities and any
preemptive rights and rights of first refusal to purchase certain new securities
proposed to be sold by the Company or other shareholders may be transferred or
assigned by Medtronic (together with any affiliates, a "Medtronic Entity"), or
any relevant Medtronic Entity to another Medtronic Entity, provided that (a) the
Company is given written notice at the time of or within a reasonable time after
said transfer or assignment, stating the name and address of such transferee or
assignee and identifying the specific rights being transferred or assigned and
(b) such transferee or assignee assumes the obligations of the Medtronic Entity
and agrees to be bound, hereunder.
6.2. Survival. The representations, warranties, covenants
and agreements made herein shall survive the closing of the transactions
contemplated hereby.
6.3. Successors and Assigns. Except as otherwise 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.
6.4. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Georgia without
giving effect to its principles regarding conflicts of laws. The Company and
each of the Company Stockholders irrevocably consents to the non-exclusive
personal jurisdiction of the federal and state courts located in New York
County, New York, as applicable, for any matter arising out of or relating to
this Agreement. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any such dispute,
action or proceeding based on a lack of personal jurisdiction or the laying of
venue.
6.5. Determination of Share Amounts. To determine the
number of Registrable Securities held by a Holder for purposes of this
Agreement, all Registrable Securities held by an Affiliate of the Holder shall
be deemed held by such Holder.
6.6. Entire Agreement; Amendment. This Agreement
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth herein. With the written consent of the record or
beneficial holders of at least eighty percent (80%) of the Registrable
Securities held by the Holders, the obligations of the Company and the Major
Stockholders under this Agreement may be waived (either generally or in a
particular instance, either retroactively or prospectively, and either for a
specified period of time or indefinitely), and with the same consent the
Company, when authorized by resolution of its Board of Directors, may enter into
a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
otherwise amending or restating this Agreement in any respect.
6.7. Notices, etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be delivered
personally, via facsimile with confirmation of transmission, mailed by first
class mail, postage prepaid, or delivered by courier or overnight delivery, (a)
if to a Company Stockholder, at such party's address or facsimile number as set
23
forth on Schedule I attached hereto, or at such other address or facsimile
number as such party shall have furnished to the Company in writing, (b) if to
the Company, at Horizon Medical Products, Inc., Seven North Parkway Square, 0000
Xxxxxxxxx Xxxxxxx, Xxxxxxx, Xxxxxxx 00000 or such address as the Company shall
have furnished to the Company Stockholder in writing or if by facsimile to (404)
264-2611 or (c) if to Lender, at Lender's address or Lender's address set forth
on Schedule IA attached hereto, or at such other address or facsimile number as
Lender shall have furnished Company in writing. Notices that are mailed shall be
deemed received five (5) days after deposit in the United States mail. Notices
that are sent via facsimile shall be deemed received upon receipt of
confirmation of transmission.
6.8. Delays or Omissions. Except as expressly provided
herein, no delay or omission to exercise any right, power or remedy accruing to
any holder of any shares, 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 theretofore 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 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.
6.9. 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.
6.10. Severability. If any provision of this Agreement, or
the application thereof, shall for any reason and to any extent be invalid or
unenforceable the remainder of this Agreement and application of such provision
to persons or circumstances shall be interpreted so as best to reasonably effect
the intent of the parties hereto, the parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision which will achieve to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
6.11. Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not considered in
construing or interpreting this Agreement.
6.12. Specific Performance; Injunctive Relief. The parties
hereto acknowledge that the Investors will be irreparably harmed and that there
will be no adequate remedy at law for a violation of any of the covenants or
agreement of the Company or the Major Stockholders set forth herein. Therefore,
it is agreed that, in addition to any other remedies that may be available to
Investor upon any such violation, the Investors shall have the right to enforce
such covenants and agreements by specific performance, injunctive relief or by
any other means available to the Investors at law or in equity without any
requirement of the posting of a bond or other security.
24
6.13. Attorneys' Fees. If any action at law or in equity
(including arbitration) is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorney's fees,
costs and necessary disbursements in addition to any other relief to which such
party may be entitled.
25
IN WITNESS WHEREOF, the parties hereto have executed this
Securityholders' Agreement as of the date set forth in the first paragraph
hereof.
COMPANY:
HORIZON MEDICAL PRODUCTS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx, Xx.
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx, Xx.
Title: President
COMVEST COUNTERPART SIGNATURE PAGE TO
SECURITYHOLDERS' AGREEMENT
COMVEST VENTURE PARTNERS, L.P.
By ComVest Capital Management LLC,
its General Partner
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Managing Director
[SIGNATURE PAGE TO SECURITYHOLDERS' AGREEMENT]
MEDTRONIC COUNTERPART SIGNATURE PAGE TO
SECURITYHOLDERS' AGREEMENT
MEDTRONIC, INC.
Medtronic, Inc.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President and Chief
Development Officer
[SIGNATURE PAGE TO SECURITYHOLDERS' AGREEMENT]
LASALLE COUNTERPART SIGNATURE PAGE TO
SECURITYHOLDERS' AGREEMENT
STANDARD FEDERAL BANK NATIONAL
ASSOCIATION, acting by and through,
LASALLE BUSINESS CREDIT, INC., as its agent
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Vice President
[SIGNATURE PAGE TO SECURITYHOLDERS' AGREEMENT]
MAJOR STOCKHOLDERS' COUNTERPART SIGNATURE PAGE TO
SECURITYHOLDERS' AGREEMENT
MAJOR STOCKHOLDERS:
/s/ Xxxxxxxx Xxxx
--------------------------------------------
Xxxxxxxx Xxxx
/s/ Xxxxxxx Xxxxxxxx
--------------------------------------------
Xxxxxxx Xxxxxxxx
SCHEDULE I
ADDRESSES OF COMPANY STOCKHOLDERS
Name: Address:
---- -------
Xxxxxxxx X. Xxxx 0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Xxxxxxx X. Xxxxxxxx, Xx. 0000 Xxxxxxxx Xxxxx Xxxxx
Xxxxxx Xxxxxxx, Xxxxxxx 00000
SCHEDULE IA
ADDRESS OF LENDER
LaSalle Business Credit, Inc.
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxxxx Xxxxxx
Telecopier: 000-000-0000
IRREVOCABLE PROXY
WITH RESPECT TO THE CAPITAL STOCK OF
HORIZON MEDICAL PRODUCTS, INC.
This Irrevocable Proxy is granted pursuant to the Securityholder's
Agreement, dated as of March 16, 2002 (the "Agreement"), among ComVest Venture
Partners, L.P. ("Investor"), Medtronic, Inc. ("Medtronic"), Standard Federal
Bank National Association, a national banking association, acting by and through
LaSalle Business Credit, Inc., a Delaware corporation ("Lender"), Horizon
Medical Products, Inc., a Georgia corporation (the "Company") and the senior
managers and stockholders of the Company listed on the signature pages thereof.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to such terms in the Agreement.
The undersigned Stockholder of the Company, hereby irrevocably appoints
Investor as the sole and exclusive attorney and proxy of the undersigned until
the date on which the Agreement is terminated in accordance with its terms (the
"Expiration Date"), with full power of substitution and resubstitution, to the
full extent of the undersigned's rights with respect to the shares of capital
stock of the Company and any other securities of Company beneficially owned by
the undersigned, which shares and other securities are listed on the final page
of this Irrevocable Proxy (the "Shares"), and any and all other shares or
securities issued or issuable in respect thereof on or after the date hereof.
Upon the execution hereof, all prior proxies given by the undersigned with
respect to the Shares, other than the Proxy, dated as of March 1, 2002, granted
by the undersigned to Investor pursuant to the Voting Agreement, dated March 1,
2002, among Investor, Xxxxxxxx Xxxx, Xxxxxxx Xxxxxxxx and the Xxxx Family
Limited Partnership, L.P.; and any and all other shares or securities issued or
issuable in respect thereof on or after the date hereof are hereby revoked and
no subsequent proxies will be given.
Investor and the undersigned Stockholder agree and acknowledge that the
grant of this irrevocable proxy is a material inducement for Investor to enter
into the Agreement and is therefore coupled with an interest and irrevocable.
The attorneys and proxies named above will be empowered at any time prior to the
Expiration Date to exercise all voting and other rights (including, without
limitation, the power to execute and deliver written consents with respect to
the Shares) of the undersigned at every annual, special or adjourned meeting of
the Company shareholders, and in every written consent in lieu of such a
meeting, or otherwise, in favor of carrying out and consummating the intents and
purposes of Sections 5.1, 5.2, 5.3, 5.4, 5.5, 5.7 and 5.8 of the Agreement (the
"Board Actions") as well as any other matter that could reasonably be expected
to facilitate the consummation of the Board Actions.
The attorneys and proxies named above may only exercise this proxy to
vote the Shares subject hereto at any time prior to the Expiration Date at every
annual, special or adjourned meeting of the shareholders of the Company and in
every written consent in lieu of such
meeting, in favor of the Board Actions as described above, and may not exercise
this proxy on any other matter. The undersigned Stockholder may vote the Shares
on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the successors
and assigns of the undersigned.
Dated: March 16, 2002
/s/ Xxxxxxxx Xxxx
--------------------------------------------
Xxxxxxxx Xxxx
Shares beneficially owned:
3,646,198* shares of common stock
-----------------
0 shares of preferred stock
-----------------
0 options
-----------------
0 warrants
-----------------
/s/ Xxxxxxx Xxxxxxxx
-------------------------------------------
Xxxxxxx Xxxxxxxx
Shares beneficially owned:
2,921,890 shares of common stock
-----------------
0 shares of preferred stock
-----------------
0 options
-----------------
0 warrants
-----------------
* Includes 924,210 shares of common stock owned by Xxxx Family Investments,
L.L.L.P., a Georgia limited liability limited partnership of which Xx. Xxxx
is the managing general partner.
