Exhibit 10.3
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (the "Agreement") is entered into on this 3rd day
of October, 2002, by and between Hydro Med Sciences, Inc., a Delaware
corporation (the "Company"), and Paladin Labs Inc., a Canadian corporation (the
"Investor").
BACKGROUND
The Company desires to agree to issue and sell shares of its capital stock
to the Investor and the Investor desires to agree to purchase such shares from
the Company on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1. Initial Equity Investment.
(a) In the event that the Company raises at least Ten Million US
Dollars ($10,000,000) in the aggregate (the "Minimum Funding Amount") in one or
more equity financing transactions consummated after the date of this Agreement
and prior to June 30, 2003, the Company shall issue and sell to the Investor,
and the Investor shall purchase from the Company, such number of shares of the
same class and series of capital stock that are sold in the equity financing
transaction in which the Company meets or exceeds the Minimum Funding Amount as
is equal to One Million US Dollars ($1,000,000) divided by the price per share
paid in such financing for an aggregate purchase price of One Million US Dollars
($1,000,000).
(b) In connection with any equity financing transaction consummated
after the date of this Agreement and prior to June 30, 2003, if the Company has
not raised the Minimum Funding Amount upon the consummation of such transaction,
the Investor shall have the option to purchase from the Company such number of
shares of the same class and series of capital stock that are sold in such
financing transaction as is equal to One Million US Dollars ($1,000,000) divided
by the price per share paid in such financing for an aggregate purchase price of
One Million US Dollars ($1,000,000); provided, however, that if the Investor
does not invest at least One Million US Dollars ($1,000,000) in the Company by
June 30, 2003, then the Company shall have the right to terminate that certain
License Agreement by and between the Company and the Investor dated as of the
date hereof (the "License Agreement") pursuant to Section 13.2(d) thereof.
(c) The shares purchased by the Investor pursuant to Sections l(a) or
l(b) are referred to herein as the "Initial Shares."
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1.2. Subsequent Equity Investment.
The Company shall have the option to issue and sell to the Investor, and
upon the exercise of such option by the Company, the Investor shall purchase
from the Company, (i) such number of shares of the same class and series of
capital stock that were sold in the then most recently completed equity
financing of the Company as is equal to Five Hundred Thousand US Dollars
($500,000) divided by the per share price paid in such financing, or (ii) if the
Company's common stock is then listed on a national securities exchange or is
quoted on NASDAQ or another quotation and reporting service, then such number of
shares of common stock as is equal to Five Hundred Thousand US Dollars
($500,000) divided by the then current market price (based on the last reported
sales price, if listed on an exchange, or the average of the last reported bid
and ask prices, if otherwise quoted) of the common stock (the "Subsequent
Shares") for an aggregate purchase price of Five Hundred Thousand US Dollars
($500,000); provided, however, that the Company may only exercise this option
upon the receipt of Regulatory Approval (as such term is defined in the License
Agreement) to market the Product (as such term is defined in the License
Agreement) within Canada and each of its territories for use in the treatment of
prostate cancer.
2. CLOSINGS.
2.1. Initial Closing.
The purchase and sale of the Initial Shares shall take place at such time
as the Company and the Investor shall mutually agree (which date shall be no
later than thirty (30) days after the closing of the financing transaction in
connection with which such shares are being purchased the "Financing")) at the
offices of Xxxxxx Xxxxxxxx LLP, 400 Berwyn Park, 000 Xxxxxx Xxxx, Xxxxxx, XX
00000, or at such other place as the Company and the Investor may mutually agree
(which time and place are designated the "Initial Closing"). At the Initial
Closing, the Company shall deliver to the Investor a certificate representing
the Initial Shares which the Investor is purchasing against delivery to the
Company by the Investor of a certified check or bank wire in the amount of the
purchase price therefor payable to the Company's order in immediately available
funds.
2.2. Subsequent Closing.
The purchase and sale of the Subsequent Shares shall take place at such
time as the Company and the Investor shall mutually agree (which date shall be
no later than ten (10) days after the Company notifies the Investor of its
exercise of its option to issue and sell the Subsequent Shares) at the offices
of Xxxxxx Xxxxxxxx LLP, 400 Berwyn Park, 000 Xxxxxx Xxxx, Xxxxxx, XX 00000, or
at such other place as the Company and the Investor may mutually agree (which
time and place are designated the "Subsequent Closing", together with the
Initial Closing, the "Closings"). At the Subsequent Closing, the Company shall
deliver to the Investor a certificate representing the Subsequent Shares which
the Investor is purchasing against delivery to the Company by the Investor of a
certified check or bank wire in the amount of the purchase price therefor
payable to the Company's order in immediately available funds.
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2.3. Terms and Conditions of Sale of Shares.
(a) The sale of the Initial Shares shall be upon the same terms and
conditions as those contained in the Stock Purchase Agreement entered into
between the Company and the purchasers of its capital stock in the Financing
(the "Stock Purchase Agreement"), and the Investor shall become a party to, and
execute a counterpart signature page to, such Stock Purchase Agreement and all
other agreements entered into by the Company and the purchasers of its capital
stock in connection with the Financing (the "Ancillary Agreements"), and shall
have the rights and obligations of a purchaser. Notwithstanding anything to the
contrary in the Ancillary Agreements, upon joining the Ancillary Agreements the
Investor shall have the right to have one representative attend all meetings of
the Board of Directors of the Company in a nonvoting observer capacity, to
receive notice of such meetings and to receive quarterly financial statements of
the Company; provided, however, that the Company may require as a condition
precedent to the Investor's rights under this Section 2.3(a) that the Investor
and any such representative proposing to attend any meeting of the Board of
Directors and each person that shall have access to any of the information
provided by the Company to the Board of Directors shall agree to hold in
confidence and trust and to act in a fiduciary manner with respect to all
information received during such meetings or otherwise; and, provided further,
that the Company reserves the right not to provide information and to exclude
the Investor from any meeting or portion thereof if delivery of such information
or attendance at such meeting by the Investor would result in disclosure of
trade secrets to the Investor.
(b) If the Company's common stock is not then listed on a national
securities exchange or is not quoted on NASDAQ or another quotation and
reporting service, the sale of the Subsequent Shares shall be upon the same
terms and conditions as those contained in the stock purchase agreement entered
into between the Company and the purchasers of its capital stock in the then
most recently completed equity financing of the Company (the "Subsequent Stock
Purchase Agreement"), and the Investor shall become a party to, and execute a
counterpart signature page to, such Subsequent Stock Purchase Agreement and all
other agreements entered into by the Company and the purchasers of its capital
stock in connection with such financing (the "Subsequent Ancillary Agreements"),
and shall have the rights and obligations of a purchaser thereunder.
(c) If the Company's common stock is then listed on a national
securities exchange or is quoted on NASDAQ or another quotation and reporting
service, the sale of the Subsequent Shares shall be upon the terms and
conditions of a subscription agreement that will contain provisions customary in
such transactions (the "Subscription Agreement," collectively with the Stock
Purchase Agreement, the Ancillary Documents and the Subsequent Stock Purchase
Agreement, the "Transaction Documents").
3. REPRESENTATIONS AND WARRANTIES.
3.1. Representations and Warranties of Company.
The Company represents and warrants to the Investor as follows:
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(a) Organization and Standing. The Company is a corporation duly
organized and validly existing under the laws of the State of Delaware.
(b) Authorization. The execution, delivery and performance of this
Agreement by the Company has been duly authorized by all requisite corporate
action, and this Agreement constitutes the legal, valid and binding obligation
of the Company enforceable in accordance with its terms, subject as to
enforcement of remedies to applicable bankruptcy, insolvency, reorganization or
similar laws relating to or affecting the enforcement of creditors' rights. The
execution, delivery and performance of this Agreement does not conflict with, or
result in the breach or violation of the terms, conditions or provisions of, or
constitute a default (or an event with which the giving of notice or passage of
time, or both could result in a default) under, or result in the creation or
imposition of any lien pursuant to the terms of, the Certificate of
Incorporation or the Bylaws of the Company.
(c) Validity of Securities. The Initial Shares and the Subsequent
Shares (together, the "Shares"), when issued, sold and delivered by the Company
in accordance with the terms of this Agreement, will be duly and validly issued,
fully-paid and nonassessable and free and clear of any liens and encumbrances.
Except as set forth in the Investor Rights Agreement dated December 27, 2001
among the Company and Investors named therein and in the Ancillary Agreements,
there are no statutory, contractual or other preemptive rights or rights of
first refusal with respect to the issuance and sale of the Shares.
(d) Authorized and Issued Stock. The authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock, par value $.001 per
share, and 20,000,000 shares of Preferred Stock, $.001 par value. Immediately
prior to the Closing, 10,000,000 shares of Common Stock and 7,000,000 of
Preferred Stock are issued and outstanding and except as set forth on Schedule
3.1 (d), there are a) no outstanding securities, options or other rights to
acquire any capital stock or securities of the Company and b) no agreements made
by or known to the Company respecting the voting of any shares of the Company's
capital stock.
(e) Rights of Common Stock. The Shares shall have the rights,
preferences, privileges and restrictions of the common stock provided in the
Company's Restated Certificate of Incorporation. The Company will furnish the
Investor with copies of its Restated Certificate of Incorporation and Bylaws.
Said copies are true, correct and complete and contain all amendments through
the Closing Date.
(f) Compliance with Law. The Company is, and all aspects of its
business are, conducted in compliance with all applicable laws, ordinances and
regulations, inclusive of those of any administrative boards or agencies or
other public authorities having jurisdiction, the non-compliance with which
would have material adverse effects on the Company or its operations.
(g) Financial Statements. The Company will deliver to the Investor
the audited consolidated financial statements of the Company for the year ended
December 31,2001 and the audited or if not available, the unaudited financial
statements for the quarter ended June
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30, 2002 (hereinafter collectively referred to as "Financial Statements"). The
Financial Statements:
(i) reflect accurately in all material respects the transactions
entered into the books and accounts of the Company, as at the dates thereof;
(ii) present fairly in all material respects the assets,
liabilities, retained earnings, profit and loss and financial position of the
Company as at the dates thereof;
(iii) have been prepared in accordance with generally accepted
accounting principles, consistently applied, except for the absence of footnote
information in the Company's unaudited Financial Statements; and
(iv) except to the extent reflected or reserved against thereon,
the Company does not have on the dates thereof any liabilities or obligations of
any nature, whether direct or indirect, accrued, absolute, contingent,
unasserted or otherwise, known or unknown, fixed or unfixed, liquidated or
unliquidated including, without limitation, federal, provincial, local,
municipal or other tax liabilities due or to become due or penalties,
assessments or interest charges in respect thereof, or unusual forward or long
term commitments or unrealized or anticipated losses from any unfavorable
commitments, except for liabilities that have been incurred in the ordinary
course of the Company's business since June 30, 2002 or liabilities which, in
the aggregate, are not material.
(h) No Conflict. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit under any
provision of the Restated Certificate of Incorporation or Bylaws of Hydro Med or
any mortgage, indenture, lease or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Hydro Med, its properties or assets,
which conflict, violation, default or right would have a material adverse effect
on the business, properties, prospects or financial condition of Hydro Med.
(i) Title to Assets. The Company has good and marketable title to its
material properties and assets, and has good title to all its leasehold
interests, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than the lien of current taxes not yet due and payable or which
are being contested in good faith, and possible minor liens and encumbrances
which do not in any case materially detract from the value of the property
subject thereto or materially impair the operations of the Company, and which
have not arisen otherwise than in the ordinary course of business.
(j) Litigation. There are no pending or, to the best of Hydro Med's
knowledge, threatened lawsuit, administrative proceeding, arbitration, labor
dispute or governmental investigation ("Litigation") to which Hydro Med is a
party or by which any material portion of its assets, taken as a whole, may be
bound, which Litigation, if adversely determined, would have a material adverse
effect on the business, properties, prospects or financial condition of Hydro
Med. Hydro Med is not a party or subject to the provisions of any
CONFIDENTIAL 5
order, writ, injunction, judgment, or decree of any court or governmental agency
or instrumentality. There is no action, suit, proceeding, or investigation by
Hydro Med currently pending or that Hydro Med intends to initiate.
(k) No material default. Hydro Med is not in violation of or default
under any provision of (a) its Restated Certificate of Incorporation or Bylaws
or (b) any mortgage, indenture, lease or other agreement or instrument, permit,
concession, franchise or license to which it is a party of by which it is bound
or (c) any federal or state judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Hydro Med, except with respect to clauses (b)
and (c) above, such violations or defaults as would not have a material adverse
effect on the business, properties, prospects or financial condition of Hydro
Med.
(1) Disclosure. No representation or warranty of Hydro Med contained
in this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained in
this Agreement not misleading in light of the circumstances under which they
were made.
(m) Solvency, no default. As of this date the Company has sufficient
funds and cask flow to pay its debts and other liabilities as they become due,
and the Company is not in default with respect to any material debt or
liability.
(n) No bankruptcy. There has not been filed any petition or
application, or any proceeding commenced which has not been discharged, by or
against the Company with respect to any assets of the Company under any law,
domestic or foreign, relating to bankruptcy, reorganization, fraudulent
transfer, compromise, arrangements, insolvency, readjustment of debt or
creditors' rights, and no assignment has been made by the Company for the
benefit of its creditors.
3.2. Representations and Warranties of Investor.
The Investor represents and warrants to the Company as follows:
(a) Organization and Standing. The Investor is a corporation duly
organized and validly existing under the laws of Canada.
(b) Authorization. The execution, delivery and performance of this
Agreement by the Investor has been duly authorized by all requisite corporate
action (including approval to purchase the Initial Shares and the Subsequent
Shares (collectively, the "Shares")), and this Agreement constitutes the legal,
valid and binding obligation of the Investor enforceable in accordance with its
terms, subject as to enforcement of remedies to applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights. The execution, delivery and performance of
this Agreement does not conflict with, or result in the breach or violation of
the terms, conditions or provisions of, or constitute a default (or an event
with which the giving of notice or passage of time, or both could result in a
default) under, or result in the creation or imposition of any lien pursuant to
the terms of, the Certificate of Incorporation or the Bylaws of the Investor.
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(c) Purchase for Investment. The Investor shall be purchasing the
Shares for investment for Investor's own account only and not with a view to, or
for resale in connection with any "distribution" thereof within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"). The Investor will
not sell, pledge, grant an interest in or otherwise transfer the Shares or any
part thereof unless (a) the Shares are registered under the Securities Act and
any other applicable securities act, or (b) in the opinion of counsel to the
Company, an exemption from the registration requirements of the Act and any
other applicable securities act is available and such transfer complies with the
provisions of Regulation S as promulgated by the United States Securities and
Exchange Commission under the Securities Act.
(d) Investor Suitability Standards. The Investor represents,
warrants, covenants and acknowledges that neither the Company nor any person
acting on its behalf offered to sell the Shares by means of a form of general
advertising or conducted any direct selling efforts in the United States with
respect to the Shares.
(e) Investment Experience. The Investor is aware of the Company's
business affairs and financial condition, has had sufficient opportunity to ask
questions of and receive answers from representatives of the Company and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to purchase the Shares. The Investor is experienced in
evaluating and investing in securities of companies in the development stage and
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment, and has such knowledge and experience in financial and business
matters as to capable of evaluating the merits and risks of investing in the
Shares, including a complete loss of its investment.
(f) Foreign Investor. The Investor hereby represents that it has
satisfied itself as to the full observance of the laws of its jurisdiction in
connection with any invitation to purchase the Shares or any use of this
Agreement, including (i) the legal requirements within its jurisdiction for the
purchase of the Shares, (ii) any foreign exchange restriction applicable to such
purchase of the Shares; (iii) any governmental or other consents that may need
to be obtained, and (iv) the income tax and other tax consequences, if any, that
may be relevant to the purchase, holding, redemption, sale or transfer of the
Shares. Such Investor's purchase and payment for, and its continued beneficial
ownership of the Shares, will not violate any applicable securities; or other
laws of its jurisdiction.
(g) Holding Periods; Legends. The Investor further acknowledges and
understands that the Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. The Investor understands that such Shares, when
issued, will be imprinted with a legend that prohibits the transfer of such
Shares, unless they are registered or such registration is not required in the
opinion of counsel for the Company.
(h) Restricted Shares. The Investor acknowledges that the Shares,
when issued, shall not have been registered under the Securities Act or any
other applicable securities act and are characterized as "restricted
securities". Under the Securities Act and applicable regulations, such
securities may be resold without registration under the Securities Act only in
certain limited circumstances. In this connection, Investor represents that it
is familiar with
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Regulation S of the Securities Act, as presently in effect, and understands the
resale limitations imposed thereby and by the Securities Act.
(i) No Market. The Investor further understands that, at the time the
Investor wishes to sell the Shares, there may be no public market upon which to
make such a sale.
4. COVENANTS OF INVESTOR IN CONNECTION WITH CLOSINGS.
4.1. In connection with the Closings:
(a) Performance. The Investor shall have performed and complied with
all agreements and conditions herein required to be performed or complied with
by the Investor on or before the Closings.
(b) Consents. The Investor shall use its best efforts to obtain all
approvals and consents required to be obtained by the Investor in order to
consummate the purchase and sale of the Shares contemplated hereby.
(c) Fulfillment of Conditions; Compliance with Agreement. The
Investor shall use commercially reasonable efforts to fulfill the conditions
applicable to it set forth in the Transaction Documents, including the execution
and delivery of the Transaction Documents and the taking of such actions as may
be necessary to fulfill such conditions. The Investor shall also use
commercially reasonable efforts to do all such acts and take all such measures
as may be reasonably necessary, proper or advisable to comply with the
representations, agreements, conditions and other provisions of this Agreement
and the Transaction Documents and consummate the purchase and sale of Shares as
contemplated hereby.
5. MISCELLANEOUS.
5.1. Governing Law.
This Agreement shall be governed in all respects by the laws of the State
of Delaware as such laws are applied to agreements between Delaware residents
entered into and performed entirely in Delaware.
5.2. Successors and Assigns.
This Agreement shall bind and benefit the successors, assigns, heirs,
executors and administrators of the parties (including without limitation, any
successor corporation to the Company). The rights of the Investor under this
Agreement may not be assigned without the written consent of the Company.
5.3. Entire Agreement.
This Agreement and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the Investor's purchase and the Company's sale of the Shares, supercede all
prior agreements and understandings with
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respect to the Company's sale of the Shares, and may be amended only in a
writing signed by the Company and the Investor.
5.4. Severability.
If one or more provisions of this Agreement are held to be invalid, illegal
or unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
5.5. Amendments and Modifications
This Agreement may be amended, waived, changed, modified or discharged only
by an agreement in writing signed by all of the parties.
5.6. Delays or Omissions.
It is agreed that no delay or omission to exercise any right, power or
remedy accruing to any party, upon any breach, default or noncompliance by
another party under this Agreement, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character on either the
Company's or the Investor's part of any breach, default or noncompliance under
this Agreement or any waiver on such party's part of any provisions or
conditions of the Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement, by law, or otherwise afforded to any party shall be cumulative
and not alternative.
5.7. Notices.
All notices required or permitted hereunder shall be in writing and shall
be deemed effectively given: (a) upon personal delivery to the party to be
notified, (b) when sent by confirmed telex or facsimile if sent during normal
business hours of the recipient, if not, then on the next business day, (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the Company at the
address as set forth on the signature page hereof and to the Investor at the
address set forth on the signature page hereto or at such other address as the
Company or the Investor may designate by ten (10) days advance written notice to
the other parties hereto.
5.8. Attorneys' Fees,
In the event that any suit or action is instituted to enforce any provision
in this Agreement, the prevailing party in such dispute shall be entitled to
recover from the losing party all fees, costs and expenses of enforcing any
right of such prevailing party under or with respect
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to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals.
5.9. Titles and Subtitles.
The titles of the sections and subsections of the Agreement are for
convenience of reference only and are not to be considered in construing or
interpreting this Agreement.
5.10. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute a
single agreement.
5.11. Finder's Fees.
Each party represents that it neither is nor will be obligated for any
finder's fee or commission in connection with the transactions contemplated by
this Agreement. The Investor agrees to indemnify and hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of the Investor's officers,
employees or representatives is responsible. The Company agrees to indemnify and
hold harmless the Investor from any liability for any commission or compensation
in the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
5.12. Pronouns.
All pronouns contained herein, and any variations thereof, shall be deemed
to refer to the masculine, feminine or neutral, singular or plural, as to the
identity of the parties hereto may require.
5.13. Further Actions.
The parties shall take such actions and execute and deliver such
instruments and documents as may reasonably be required from time to time to
effect and complete the transactions contemplated by this Agreement, including,
without limitation, the Stock Purchase Agreement, the Investors Rights Agreement
and the Co-Sale Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first above written.
COMPANY
HYDRO MED SCIENCES, INC.
0 Xxxxx Xxxxx
Xxxxxxxx, XX 00000
By: /s/ Xxxxx Xxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxx
Title: President & CEO
INVESTOR
PALADIN LABS INC.
0000 Xxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx, X0X 0X0
By: /s/ Xxxxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxxxx Xxxxxxx
Title: President & CEO
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Schedule 3.l(d)
Capitalization
Percent
-------------------
Number of Common Fully
Stock Equivalents Held Basic Distributed
---------------------- ----- -----------
Preferred Stockholders
SMH Hydro Med LLC(l) 4,000,000 23.5% 21.4%
Corporate Opportunities Fund, L.P. (1) 2,000,000 11.8% 10.7%
Xxxxxxxx Medtech Partners, L.P. 1,000,000 5.9% 5.3%
---------- ----- -----
Total preferred shares 7,000,000 41.2% 37.4%
Common Stockholders
GP Strategies (2) 10,000,000 58.8% 53.5%
---------- ----- -----
Total shares outstanding 10,000,000 100.0% 90.9%
=====
Option Holders
Incentive stock option pool 1,700,000 9.1%
---------- -----
Total fully distributed shares 18,700,000 100.0%
========== =====
----------
(1) Affiliate of Xxxxxxx Xxxxxx Xxxxxx, Inc.
(2) Corporate Opportunities Fund, L.P. has the option to exchange the Notes (as
defined below) for 1,999,000 shares of common stock currently held by GP
Strategies.
On July 7, 2000, GP Strategies, in a transaction with Corporate
Opportunities Fund, L.P. (an affiliate of Xxxxxxx Xxxxxx Xxxxxx), received
approximately $2.6 million in exchange for 6% Convertible Exchangeable Notes
due June 30, 2003 (the "Notes"). The Notes, at the option of the holders, may be
exchanged for 1,999,000 shares of common stock of the Company currently held by
GP Strategies. The holders of the Notes can convert or exchange at any time
prior to June 30, 2003.
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