STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and shall be effective as of November 29, 1996,
by and between IOMED, Inc., a Utah corporation (the "Company") and Child Health
Investment Corporation, a Kansas corporation ("CHIC").
WHEREAS: The Company desires to issue and sell to CHIC, and CHIC
desires to purchase from the Company, certain authorized, but previously
unissued shares of the Company's common stock, on the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recital and the
covenants and agreements set forth herein, together with other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged the
parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK
1.1 Common Stock. On the terms and subject to the conditions set forth
in this Agreement, at the Closing (as defined below) the Company agrees to sell
to CHIC, and CHIC agrees to purchase from the Company, a total of 178,571 shares
of the Company's authorized but unissued common stock, par value $.001 per share
(the "Common Shares").
1.2 Purchase Price. The purchase price for each of the Common Shares
shall be $1.40, for an aggregate purchase price of $249,999.40 (the "Purchase
Price").
1.3 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Company, in
Salt Lake City, Utah, on December 3, 1996, or on such other date as may be
mutually agreed upon by the parties. At the Closing, the Company shall deliver
to CHIC one or more certificates evidencing the Common Shares, and CHIC shall
deliver the Purchase Price to the Company, in cash, by wire transfer to an
account designated by the Company, or by the delivery of other immediately
available funds.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
The Company hereby represents and warrants to, and covenants with, CHIC
as follows:
2.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah and is
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the failure to be so qualified would have a material
adverse effect on the business or financial condition of the Company.
2.2 Authorization. The Company has full corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly authorized, executed and
delivered by the Company, and constitutes the valid and binding obligation of
the Company, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights and by general equitable principles.
2.3 Valid Issuance. The Common Shares, when issued, sold and delivered
in accordance with the terms hereof and for the consideration expressed herein,
will be duly and validly issued, fully paid and nonassessable.
2.4 No Violation. Neither the execution and delivery of this Agreement
by the Company nor its performance and consummation of the transactions
contemplated hereby will violate (a) any provision of the Articles of
Incorporation or the Bylaws of the Company, (b) any statute or law or any
judgment, decree, order, regulation or rule of any court or governmental agency
that is applicable to the Company, or (c) any material agreement to which the
Company is a party.
2.5 Capitalization. As of the date hereof, the authorized capital stock
of the Company consists solely of (i) 40,000,000 shares of common stock, $.001
par value per share (the "Common Stock"), and (ii) 4,215,618 shares of preferred
stock, $.001 par value per share (the "Preferred Stock"). Immediately following
the Closing, after giving effect to the transactions contemplated hereby, the
issued and outstanding capital stock of the Company will consist solely of
15,037,966 shares of Common Stock and 172,800 shares of Series C Preferred
Stock. As of October 31, 1996, options to purchase approximately 1,553,314
shares of Common Stock, and a warrant to purchase 10,000 shares of Common Stock,
were outstanding. Except for (a) the options and warrants described above, (b)
an obligation to issue additional shares of Common Stock to Laboratoires
Xxxxxxxx, pursuant to the adjustment provisions of the agreement between Iomed,
Inc. and Laboratoires Xxxxxxxx S.C.A. ("Xxxxxxxx"), dated February 20, 1996 (the
"Xxxxxxxx Agreement") and (c) a Warrant, dated December 1, 1996, to purchase
215,000 shares of Common Stock, issued by the Company to the Alliance for
Children's Hospitals, Inc. (a subsidiary of CHIC), the Company does not have
outstanding any rights (either preemptive or other) or options to subscribe for
or purchase, or any warrants or other agreements providing for or requiring the
issuance by the Company of, any capital stock or securities convertible into or
exchangeable for its capital stock. Pursuant to the Xxxxxxxx Agreement, the
Company will issue 4,644 additional shares of Common Stock to Xxxxxxxx in
connection with this sale of Common Stock to CHIC.
2.6 Litigation. The Company is not a party, nor has it been threatened,
in writing, to be made a party to any charge, complaint, action, suit,
proceeding, hearing or investigation of or in any court or quasi-judicial or
administrative agency of any federal, state, local or foreign jurisdiction or
before any arbitrator, which could result in any material adverse change in the
assets, liabilities, business, financial condition, operations, results of
operations or future prospects of the Company.
2.7 Reports and Financial Statements.
(a) CHIC heretofore has been furnished with complete and
correct copies of the unaudited consolidated balance sheet of the Company as of
September 30, 1996 and of the unaudited interim consolidated statements of
operations and cash flow for the three month period then ended and of the
audited balance sheets of the Company as of June 30, 1996 and as of June 30,
1995 and the related income statements and statements of cash flows for the
fiscal years then ended.
(b) Each of the financial statements referred to in (a) above
was prepared in accordance with generally accepted accounting principles applied
on a basis consistent with prior periods. Each of the balance sheets included in
such financial statements fairly presents the financial condition of the Company
as of the close of business on the date thereof, and each of the statements of
income included in such financial statements fairly presents the results of
operations of the Company for the fiscal period then ended.
(c) The Company shall deliver to CHIC:
(i) as soon as available and in any event within 90
days after the end of each fiscal year of the Company, beginning with the fiscal
year ending June 30, 1997, audited financial statements of the Company for such
year, accompanied by a report thereon of independent public accountants of
recognized national standing, which report shall state that such financial
statements fairly present the financial condition and results of operations of
the Company as at the end of, and for, such fiscal year; and
(ii) as soon as available and in any event within 45
days after the end of each fiscal quarter of the Company (other than the last
fiscal quarter in each fiscal year) unaudited financial statements of the
Company for such fiscal quarter accompanied, in each case, by a certificate of
the chief financial officer of the Company, which certificate shall state that
such financial statements fairly present the financial position and results of
operations of the Company in accordance with generally accepted accounting
principles, subject to changes resulting from year-end audit adjustments.
2.8 Material Adverse Change. There has been no material adverse change
in the business, properties or financial condition of the Company since June 30,
1996.
2.9 Other Documents. CHIC heretofore has been furnished with complete
and correct copies of (i) the Articles of Incorporation and the Bylaws of the
Company, (ii) the Preferred Stock Purchase Agreement, dated as of August 4,
1987, by and between the Company and the Investors named therein (the "Preferred
Stock Purchase Agreement").
2.10 Use of Proceeds. The proceeds from the sale of the Common Share
will be used by the Company for general corporate purposes in connection with
its primary business activity.
2.11 Disclosure. No representation or warranty by the Company contained
in this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein not
misleading in light of the circumstances under which they were made; provided,
it is understood that any projections or other forward-looking information
contained herein represent the Company's good faith estimate under the
circumstances based on assumptions which the Company believes are reasonable,
and the Company does not represent or warrant that such projections or future
events will occur; and provided further, that CHIC acknowledges the disclosures
made by IOMED with respect to (i) the status of the Ciba-Geigy development
projects and (ii) patent issues, and agrees that such disclosures shall
constitute supplements to the other written statements and certificates
furnished to CHIC pursuant hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CHIC
CHIC hereby represents and warrants to the Company as follows:
3.1 Organization. CHIC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Kansas.
3.2 Authorization. CHIC has full corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly authorized, executed and delivered by CHIC,
and constitutes the valid and binding obligation of CHIC, enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting creditors' rights and by
general equitable principles.
3.3 Experience. It is experienced in evaluating and investing in
emerging companies such as the Company.
3.4 Investment Intent. It is acquiring the Common Shares pursuant to
this Agreement (the "Securities"), for its own account and not with a present
view to, or for resale in connection with, any distribution. It understands that
the Securities have not been registered under the Securities Act of 1933, as
amended (the "Act"), by reason of a specific exemption from the registration
requirements of the Act which depends upon, among other things, the bona fide
nature of the investment intent as expressed herein.
3.5 Holding Period. It acknowledges that the Securities must be held
indefinitely unless subsequently registered under the Act, or unless an
exemption from the registration requirements thereof is available. It is aware
of the provisions of Rule 144 promulgated under the Act, the limitations on
resales of securities imposed thereby, that the public information required
thereby is not presently published by the Company, and that the Company is under
no obligation to so publish such information in the future.
3.6 No Public Market. It understands that no public market now exists
for any of securities issued by the Company (including without limitation the
Securities) and that there is no assurance that a public market will ever exist
for the Securities. Additionally, it is aware that, except as specifically set
forth in Article IV hereof, the Company is under no obligation to register any
of the Securities under the Act.
3.7 Discussions with the Company. It has had an opportunity to discuss
the Company's business, management and financial affairs with management of the
Company and an opportunity to review the Company's facilities. It understands
that such discussions were intended to describe the aspects of the Company's
business and prospects which the Company believes to be material, but were not
necessarily a thorough or exhaustive description, and do not constitute
representations or warranties of the Company hereunder.
3.8 Sophisticated Investor. It is a sophisticated investor with such
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of a prospective investment in the
Securities, and it is capable of bearing the economic risks of an investment in
the Securities.
3.9 Due Diligence. It, both by itself and through its agents, has been
solely responsible for its "due diligence" investigation of the Company and its
management and business, for the analysis of the merits and risks of this
investment and of the fairness and desirability of the terms of the investment.
3.10 Independent Legal Counsel. It has had the opportunity to be
advised by legal counsel of its own choice in connection with the purchase of
the Securities and has either been advised by such counsel or concluded that
such advice is not required. It acknowledges that Xxxxxxx Xxxxx & Xxxxxxx is
acting solely as counsel for the Company in connection therewith.
3.11 Restrictive Legend. It acknowledges that the certificates
representing the Common Share shall be endorsed with the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED EXCEPT (i)
PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT WHICH HAS BECOME EFFECTIVE
AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC
EXEMPTION FROM REGISTRATIONS UNDER THE ACT BUT ONLY UPON A HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE CORPORATION, OR OTHER
COUNSEL ACCEPTABLE TO THE CORPORATION, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS WELL AS ANY APPLICABLE
"BLUE SKY" OR SIMILAR SECURITIES LAW.
The Company need not register a transfer of any of the Securities,
unless the conditions specified in the foregoing legend are satisfied. The
Company may also instruct its transfer agent not to register the transfer of any
of the Securities unless such conditions are satisfied.
3.12 Reliance on Written Representations and Warranties. In connection
with its decision to enter into this Agreement and to purchase the Common Shares
hereunder, CHIC has relied only upon the written representations and warranties
of the Company which are set forth herein, and it has not relied upon any other
representation, warranty document or statement by the Company, its officers,
directors, employees or agents concerning the Company, its business or its
affairs.
3.13 Disclosure. No representation or warranty by CHIC contained in
this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein not
misleading in light of the circumstances under which they were made.
ARTICLE IV
REGISTRATION RIGHTS
4.1 Definitions. As used in this Article IV:
(a) The term "Registrable Securities" means the Common Shares
issued hereunder excluding in all cases, however, any Registrable Securities
sold by a person in a transaction in which his rights under this Article IV are
not assigned to the purchaser; provided, however, that such Common Shares shall
only be treated as Registrable Securities if and so long as they have not been
sold to or through a broker or dealer or underwriter in a public distribution or
a public securities transaction.
(b) The term "Holder" means CHIC and any other person or
entity that acquires any Registrable Securities in compliance with Sections 3.11
and 4.5 hereof.
(c) The term "SEC" means the Securities and Exchange
Commission or any successor agency thereto.
4.2 Company Registration.
(a) If at any time, or from time to time, prior to the date
seven (7) years after the date of this Agreement, the Company shall determine to
register any of its securities, either for its own account or for the account of
a security holder or holders, other than a registration on Form S-1 or S-8
relating solely to employee benefit plans, or a registration on Form S-4
relating solely to an SEC Rule 145 transaction, or a registration on any other
form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of
Registrable Securities, the Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) include in such registration, and in any
underwriting involved therein, all the Registrable securities specified in any
written request or requests by any Holder or Holders received by the Company
within twenty (20) days after the date of the written notice required by Section
4.2(a)(i) above, on the same terms and conditions as the shares of Common Stock,
if any, otherwise being sold through the underwriter in such registration.
(b) 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 clause (i)
of Section 4.2(a). In such event the right of any Holder to registration
pursuant to this Section 4.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Company.
(c) Notwithstanding any other provision of this Section 4.2,
if the underwriter determines that marketing factors require a limitation of the
number of shares of Common Stock to be underwritten, the underwriter may limit
the amount of Registrable Securities to be included in the registration and
underwriting. The Company shall so advise all Holders of Registrable Securities
which would otherwise be registered and underwritten pursuant hereto, and the
number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all of the Holders, in
proportion, as nearly as practicable, to the amounts of Registrable Securities
held by such Holders at the time of filing the registration statement. No
Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration.
(d) Notwithstanding any other provision of this Section 4.2,
no Holder shall be entitled to include any Registrable Securities in a
registration pursuant to this Section 4.2 if and to the extent that such
inclusion would reduce the number of shares of Registrable Securities entitled
to participate in such registration pursuant to Section 7.2, 7.3 or 7.4 of the
Preferred Stock Purchase Agreement. The Company shall so advise all Holders of
Registrable Securities which would otherwise be registered pursuant hereto but
for the foregoing sentence, and the number of shares of Registrable Securities
that may be included in the registration shall be allocated among all of the
Holders, in proportion, as nearly as practicable, to the amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement.
4.3 Expenses of Registration. All expenses incurred in connection with
any registration, qualification or compliance pursuant to this Article IV,
including without limitation, all registration, filing and qualification fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, accounting fees and expenses, and expenses of any special audits
incidental to or required by such registration, shall be borne by the Company;
provided, however, that the Company shall not be required to pay underwriters'
fees, discounts or commissions relating to Registrable Securities, or any fees
or expenses of counsel to any of the selling Holders.
4.4 Information and Indemnification. It shall be a condition precedent
to the obligations of the Company hereunder in regard to Registerable
Securities, that each Holder participating in any registration under this
Article IV provide to the Company all information concerning such Holder and the
Registerable Securities to be included by such Holder in such registration, as
the Company, its legal counsel or any underwriter involved in such registration
reasonably requests. Additionally, each such Holder shall indemnify and hold the
Company harmless (to the full extent permitted by law) from and against any
losses, claims, damages or expenses which the Company may suffer or incur in
connection with such registration as the result of any omission or inaccuracy in
such requested information.
4.5 Transfer of Registration Rights. The rights to cause the Company to
register securities granted by the Company under Section 4.2 hereof may be
assigned in writing by any Holder of Registrable Securities to a transferee or
assignee of not less than fifty thousand (50,000) shares of the Registrable
Securities (as appropriately adjusted from time to time for stock splits and the
like); provided, that such transfer is effected in accordance with the terms of
this Agreement and applicable securities laws; and provided further, that the
Company is given written notice by such holder of Registrable Securities at the
time of such transfer, stating the name and address of the transferee or
assignee and identifying the securities with respect to which such registration
rights are being assigned.
4.6 "Market Stand-off" Agreement. The Holders hereby agree not to sell
or otherwise transfer or dispose of any Registrable Securities held by them
during the one hundred eighty (180) day period following the effective date of a
registration statement of the Company filed under the Act; provided that:
(a) such agreement shall only apply to the first such
registration statement of the Company including shares of Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) such agreement shall not apply to any shares of
Registrable Securities that are included in such public offering; and
(c) all executive officers and directors of the Company and
all other persons with registration rights (whether or not granted pursuant to
this Agreement) enter into similar agreements.
The Company may impose stop-transfer instructions with respect to the
Registrable Securities subject to the foregoing restriction until the end of
said one hundred eighty (180) day period.
ARTICLE V
NOTICE OF CHANGE-IN-CONTROL
5.1 Change-in-Control Transactions. If the Company receives notice that
a shareholder or group of shareholders, other than CHIC (collectively the
"Selling Shareholders"), intend to sell or exchange all or a portion of their
common shares of the Company in a transaction or series of transactions which
will not be registered under the Act, and which will result in a
change-in-control of the Company, (a "Change-In-Control Transaction"), the
Company shall, to the extent it may do so without violating any other agreement
or obligation to which it is a party or by which it is bound (regardless of when
such agreement or obligation was undertaken or became effective), give notice of
such Change-In-Control Transaction to CHIC. Such notice shall set forth, to the
extent known by the Company, the identity of the Selling Shareholders, the
identity of the proposed buyer, and the general terms and conditions of the
proposed Change-In-Control Transaction. The notice obligations of the Company,
as set forth in this Section 5.1, shall apply only to proposed sales or
exchanges which take place prior to the issuance by the Company of its
securities in a registered, underwritten public offering in which the Company
receives at least $5,000,000 in gross proceeds. For purposes of this Section
5.1, the term "change-in-control" shall mean a transaction or series of
transactions pursuant to which securities of the Company representing 50% or
more of the combined voting power of all of the Company's issued and outstanding
common shares (or securities convertible by their terms into common shares) are
transferred to a person or persons not owned or controlled by, or under common
control with, one or more of the Selling Shareholders.
ARTICLE VI
MISCELLANEOUS
6.1 Notice. Any notice or other communication required or permitted
hereunder must be in writing, and shall be delivered personally, by facsimile or
by certified, registered, or express mail, postage prepaid and return receipt
requested. Such notice shall be deemed given when so delivered personally or
when sent by confirmed facsimile transmission on a business day to the party in
question or, if mailed, three (3) business days after the date of deposit in the
United States mails, as follows:
(i) if to the Company:
IOMED, Inc.
0000 Xxxx 0000 Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: President
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx & Xxxxxxx
000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx
(ii) if to CHIC, to:
Child Health Investment Corporation
0000 Xxxx 00xx Xxxxxx
Xxxxx 000
Xxxxxxx Xxxxxxx, Xxxxxx 00000
Attn: President
Fax:
with a copy to:
Attn:
6.2 Governing Law. This Agreement shall be governed by the laws of the
State of Utah, without giving effect to the choice of laws provisions thereof.
6.3 Counterparts. This Agreement may be executed in counterparts, each
of which shall be an original, but all of which together shall constitute one
instrument.
6.4 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 subjects hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
THE COMPANY:
IOMED, Inc.
a Utah Corporation
By: /s/ Xxx X. Xxxxxxxxxxx
Xxx X. Xxxxxxxxxxx, President and
Chief Executive Officer
CHIC:
CHILD HEALTH INVESTMENT
CORPORATION, a Kansas corporation
By: /s/ illegible
Its: Chief Operating Officer