EXHIBIT 10.25
HYDRO MED SCIENCES, INC.
RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
THIS RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT (this "Agreement") is
made and entered into as of this 27th day of December 2001, by and among Hydro
Med Sciences, Inc., a Delaware corporation (the "Company"), each of the persons
and entities listed on Exhibit A hereto (the "Investors"), and each of the
persons listed as "Common Stockholders" on Exhibit B hereto (the "Common
Stockholders").
RECITALS
The Common Stockholders are the beneficial owners of an aggregate
10,000,000 shares of Common Stock of the Company.
The Investors are purchasing shares of the Company's Series A
Convertible Preferred Stock, pursuant to that certain Stock Purchase Agreement
(the "Purchase Agreement") of even date herewith (the "Financing").
The obligations in the Purchase Agreement are conditioned upon the
execution and delivery of this Agreement.
In connection with the consummation of the Financing, the Company, the
Common Stockholders and the Investors have agreed to the first refusal and
co-sale rights as set forth below.
In consideration of these premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. DEFINITIONS.
(a) "Common Stock" shall mean shares of the Company's common stock, par value
$.001 per share, and shares of Common Stock issued or issuable upon conversion
of the Company's outstanding Series A Convertible Preferred Stock or exercise of
any option, warrant or other security or right of any kind convertible into or
exchangeable for Common Stock.
(b) "Series A Convertible Preferred Stock" shall mean shares of the Company's
preferred stock, par value $.001 per share, designated as "Series A Convertible
Preferred Stock".
(c) "Stock" shall mean shares of Common Stock now owned or subsequently acquired
by the Common Stockholders by gift, purchase, dividend, option exercise or any
other means whether or not such securities are only registered in a Common
Stockholder's name or beneficially or legally owned by such Common Stockholder,
including any interest of a spouse in any of the Stock, whether that interest is
asserted pursuant to marital property laws or otherwise. The number of shares of
Stock owned by each Common Stockholder as of the date hereof is set forth on
Exhibit B, which Exhibit may be amended from time to time by the Company to
reflect changes in the number of shares owned by the Common Stockholders, but
the failure to so amend shall have no effect on such Stock being subject to this
Agreement.
(d) For the purpose of this Agreement, the term "Transfer" shall include any
sale, assignment, encumbrance, hypothecation, pledge, conveyance in trust, gift,
transfer by request, merger or consolidation, devise or descent, or other
transfer or disposition of any kind, including, but not limited to, transfers to
receivers, levying creditors, trustees or receivers in bankruptcy proceedings or
general assignees for the benefit of creditors, whether voluntary or by
operation of law, directly or indirectly, of any of the Stock.
2. NOTICE OF TRANSFERS.
(a) Before any Common Stockholder, in the case of Section 3 or 5 of this
Agreement, or any Investor, in the case of Section 4 of this Agreement, may
effect any Transfer of Stock, such Common Stockholder or Investor, as applicable
(the "Selling Stockholder"), must give at the same time to the Company, if a
Common Stockholder, each Investor, and if an Investor, each Common Stockholder a
written notice signed by the Selling Stockholder (the "Selling Stockholder's
Notice") stating: (a) the Selling Stockholder's bona fide intention to transfer
such Stock; (b) the number of shares of Stock proposed to be transferred to each
proposed purchaser or other transferee ("Proposed Transferee"); (c) the name,
address and relationship, if any, to the Selling Stockholder of each Proposed
Transferee; (d) the bona fide cash price or, in reasonable detail, other
consideration, per share for which the Selling Stockholder proposes to transfer
such Stock to each Proposed Transferee (the "Offered Price"); (e) the proposed
time of payment; and (f) any other relevant terms of the proposed sale. Upon the
request of the Company, any Investor, or any Common Stockholder, the Selling
Stockholder will promptly furnish to the Company, all other Investors, and all
other Common Stockholders such other information as may be reasonably requested
to establish that the offer and Proposed Transferee(s) are bona fide.
3. RIGHT OF FIRST REFUSAL WITH RESPECT TO COMMON STOCKHOLDERS.
(a) The Company shall have a right of first refusal (the "Company's Right of
First Refusal") to purchase all or any part of the Stock of any Common
Stockholder proposed to be transferred by such Common Stockholder ("Offered
Stock"), if the Company gives written notice of the exercise of such right to
the Selling Stockholder within 20 days (the "Company's Refusal Period") after
the date of the Selling Stockholder's Notice to the Company. Prior to the
expiration of the Company's Refusal Period, the Company shall send written
notice (the "Company's Notice") to the Selling Stockholder, each Investor, and
all Common Stockholders other than the Selling Stockholder ("Other Common
Stockholders") specifying (i) that the Company intends to exercise the Company's
Right of First Refusal in full or in part, (ii) that the Company does not intend
to exercise the Company's Right of First Refusal in full, or (iii) that the
Company is not lawfully able to repurchase all or any portion of the Offered
Stock.
(b) If the Company does not exercise its right of first refusal in full, each
Investor and Other Common Stockholder will have a right of first refusal (the
"Investors' Right of First Refusal") to purchase some or all of the Offered
Stock not purchased by the Company. The Investors' Right of First Refusal may be
exercised as follows:
(i) Each Investor and Other Common Stockholder desiring to purchase some or all
of the Offered Stock must, within the 20-day period commencing on the date of
the Company's Notice or expiration of the period therefor (the "Investor Refusal
Period"), give written notice to the Selling Stockholder and to the Company of
such Investor's or Other Common Stockholder's election to purchase the Offered
Stock, and the number of shares and type of the Offered Stock that such Investor
or Other Common Stockholder desires to purchase. If the total number of shares
specified in the elections of the Investors and Other Common Stockholders
exceeds the number of shares of Offered Stock available for purchase, then
(unless the electing Investors and Other Common Stockholders otherwise agree in
writing) each Investor and Other Common Stockholder electing to purchase will
have the right to purchase that number of shares of Offered Stock that is
obtained by multiplying the number of shares of Offered Stock available for
purchase by a fraction (A) the numerator of which will be the number of shares
of Common Stock then held by such Investor or Other Common Stockholder, and (B)
the denominator of which will be the sum of the total number of shares of Common
Stock then held by all Investors and Other Common Stockholders electing to
purchase the Offered Stock.
(ii) Within five days after expiration of the Investor Refusal Period, the
Company will give written notice (the "Investors' Notice") to the Selling
Stockholder, the Investors, and the Other Common Stockholders specifying (A)
that some or all of the Offered Stock was subscribed by the Company, the
Investors, and/or the Other Common Stockholders exercising their respective
Rights of First Refusal and (B) that the Transfer proposed by the Selling
Stockholder is subject to the co-sale rights pursuant to Section 4 hereof with
respect to the Offered Stock.
(c) The purchase price for the Offered Stock to be purchased by the Company, by
an Investor, or by an Other Common Stockholder exercising its Right of First
Refusal under this Agreement will be the Offered Price (subject, in the case of
the Company, to any rights the Company may have under any other agreement to
purchase all or some of such Offered Stock at a lower price), and will be
payable as set forth in Section 3(d) hereof. If the Offered Price includes
consideration other than cash, the cash equivalent value of the non-cash
consideration will be determined by the Board of Directors of the Company in
good faith, which determination will be binding upon the Company, the Investors,
the Other Common Stockholders, and the Selling Stockholder absent fraud or
error.
(d) Payment of the purchase price for Offered Stock purchased by the Company or
by an Investor or Other Common Stockholder exercising its respective Right of
First Refusal shall be made within 10 days after the date of the Investors'
Notice; provided that, if the Company elects to purchase all of the Offered
Stock, payment of the purchase price for such Offered Stock shall be made within
10 days after the earlier of (i) the date of the Company's Notice or (ii) the
expiration of the Company's Refusal Period. Payment of the purchase price will
be made, at the option of the Company or, as the case may be, by an Investor or
Other Common Stockholder to the Selling Stockholder (i) in cash or by cashier's
check, (ii) by wire transfer of immediately available funds, or (iii) by any
combination of the foregoing.
(e) Upon the date that payment is made for the Offered Stock purchased by the
Company or the Investors or Other Common Stockholders pursuant to their
respective Rights of First Refusal hereunder, the Selling Stockholder will have
no further rights as a holder of such Offered Stock and the Selling Stockholder
will forthwith cause all certificate(s) evidencing such Offered Stock to be
surrendered to the Company for cancellation, or, as to purchases by Investor(s)
or Other Common Stockholder(s), for transfer to the purchasing Investor(s) or
Other Common Stockholder(s).
(f) If the Company, the Investors, or Other Common Stockholder have not elected
pursuant to their respective Rights of First Refusal set forth in paragraphs (a)
and (b) of this Section 3 to purchase all of the Offered Stock, then the Selling
Stockholder shall have the right either to (i) elect to sell to the Company, the
Investors, or the Other Common Stockholders whatever portion of the Offered
Stock that Company, the Investors, and the Other Common Stockholders have
elected to purchase pursuant to paragraphs (a) and (b) of this Section 3 and
transfer the remaining Offered Stock to any person named as a Proposed
Transferee in the Selling Stockholder's Notice, or (ii) withdraw all offers
under this Section 3 and either retain the Offered Stock or transfer the Offered
Stock proposed to be sold by the Selling Stockholder to any person named as a
Proposed Transferee in the Selling Stockholder's Notice, in either case at the
Offered Price or at a higher price, provided that such transfer (i) is
consummated within 120 days after the date of the Selling Stockholder's Notice
and (ii) is in accordance with the terms and conditions of this Agreement
(including the co-sale rights provided for in Section 5). If the Offered Stock
is transferred in accordance with the terms and conditions of this Agreement,
then the Proposed Transferee(s) of the Offered Stock will thereafter hold such
Offered Stock free of all restrictions on transfer imposed by this Agreement. If
the Offered Stock is not so transferred during such 120-day period, then the
Selling Stockholder will not transfer any of such Offered Stock without
complying again in full with the provisions of this Agreement.
(g) The exercise or non-exercise of the rights of the Investors or the Other
Common Stockholders hereunder to participate in one or more Transfers of Offered
Stock made by such Selling Stockholder shall not adversely affect their rights
to participate in subsequent Transfers of Offered Stock subject to this Section
3. An Investor that exercises its right to purchase Offered Stock pursuant to
Section 4(b)(ii) shall not be entitled to exercise its co-sale right under
Section 5.
4. RIGHT OF FIRST REFUSAL WITH RESPECT TO INVESTORS.
(a) The Company shall have a right of first refusal (the
"Company's Investor Right of First Refusal") to purchase all or any part of the
Stock of any Investor proposed to be transferred by such Investor ("Offered
Investor Stock"), if the Company gives written notice of the exercise of such
right to the Selling Stockholder within 20 days (the "Company's Investor Refusal
Period") after the date of the Selling Stockholder's Notice to the Company.
Prior to the expiration of the Company's Investor Refusal Period, the Company
shall send written notice (the "Company's Investor Notice") to the Selling
Stockholder and to each other Investor and Common Stockholder specifying (i)
that the Company intends to exercise the Company's Investor Right of First
Refusal in full or in part, (ii) that the Company does not intend to exercise
the Company's Investor Right of First Refusal in full, or (iii) that the Company
is not lawfully able to repurchase all or any portion of the Offered Investor
Stock.
(b) If the Company does not exercise its right of first
refusal in full, each other Investor and each Common Stockholder will have a
right of first refusal (the "Common Stockholder' Right of First Refusal") to
purchase some or all of the Offered Investor Stock not purchased by the Company.
The Common Stockholders' Right of First Refusal may be exercised as follows:
(i) Each Investor (other than the Selling Stockholder) and each Common
Stockholder desiring to purchase some or all of the Offered Investor Stock must,
within the 20-day period commencing on the date of the Company's Investor Notice
or expiration of the period therefor (the "Common Stockholder Refusal Period"),
give written notice to the Selling Stockholder and to the Company of such
Investor's or Common Stockholder's election to purchase the Offered Investor
Stock, and the number of shares and type of the Offered Investor Stock that such
Investor or Common Stockholder desires to purchase. If the total number of
shares specified in the elections of the Investors and Common Stockholders
exceeds the number of shares of Offered Investor Stock available for purchase,
then (unless the electing Investors and Common Stockholders otherwise agree in
writing) each Investor and Common Stockholder electing to purchase will have the
right to purchase that number of shares of Offered Investor Stock that is
obtained by multiplying the number of shares of Offered Investor Stock available
for purchase by a fraction (A) the numerator of which will be the number of
shares of Common Stock then held by such Investor or Common Stockholder, and (B)
the denominator of which will be the sum of the total number of shares of Common
Stock then held by all Investors and Common Stockholders electing to purchase
the Offered Stock.
(ii) Within five days after expiration of the Common Stockholder Refusal Period,
the Company will give written notice (the "Common Stockholders' Notice") to the
Selling Stockholder, the other Investors, and the Common Stockholders specifying
that some or all of the Offered Investor Stock was subscribed by the Company,
the other Investors, and/or the Common Stockholders exercising their respective
Rights of First Refusal.
(c) The purchase price for the Offered Investor Stock to be
purchased by the Company, by an Investor, or by a Common Stockholder exercising
its Right of First Refusal under this Agreement will be the Offered Price
(subject, in the case of the Company, to any rights the Company may have under
any other agreement to purchase all or some of such Offered Stock at a lower
price), and will be payable as set forth in Section 4(d) hereof. If the Offered
Price includes consideration other than cash, the cash equivalent value of the
non-cash consideration will be determined by the Board of Directors of the
Company in good faith, which determination will be binding upon the Company, the
Investors, and the Selling Stockholder absent fraud or error.
(d) Payment of the purchase price for Offered Stock purchased by the Company, an
Investor, or a Stockholder exercising its respective Right of First Refusal
shall be made within 10 days after the date of the Common Stockholders' Notice;
provided that, if the Company elects to purchase all of the Offered Investor
Stock, payment of the purchase price for such Offered Investor Stock shall be
made within 10 days after the earlier of (i) the date of the Company's Investor
Notice or (ii) the expiration of the Company's Investor Refusal Period. Payment
of the purchase price will be made, at the option of the Company or, as the case
may be, by an Investor or Common Stockholder to the Selling Stockholder (i) in
cash or by cashier's check, (ii) by wire transfer of immediately available
funds, or (iii) by any combination of the foregoing.
(e) Upon the date that payment is made for the Offered Investor Stock purchased
by the Company, the other Investors, or the Common Stockholder pursuant to their
respective Rights of First Refusal hereunder, the Selling Stockholder will have
no further rights as a holder of such Offered Investor Stock and the Selling
Stockholder will forthwith cause all certificate(s) evidencing such Offered
Investor Stock to be surrendered to the Company for cancellation, or, as to
purchases by Investor(s) or Common Stockholder(s), for transfer to the
purchasing Investor(s).
(f) If the Company, the other Investors, or Common Stockholders have not elected
pursuant to their respective Rights of First Refusal hereunder to purchase all
of the Offered Investor Stock, then the Selling Stockholder shall have the right
either to (i) elect to sell to the Company, the other Investors, or the Common
Stockholders whatever portion of the Offered Stock that Company, the other
Investors, and the Common Stockholders have elected to purchase pursuant to
paragraphs (a) and (b) of this Section 4 and transfer the remaining Offered
Stock to any person named as a Proposed Transferee in the Selling Stockholder's
Notice, or (ii) withdraw all offers under this Section 3 and either retain the
Offered Stock or transfer the Offered Stock proposed to be sold by the Selling
Stockholder to any person named as a Proposed Transferee in the Selling
Stockholder's Notice, in either case, at the Offered Price or at a higher price,
provided that such transfer (i) is consummated within 120 days after the date of
the Selling Stockholder's Notice and (ii) is in accordance with the terms and
conditions of this Agreement. If the Offered Investor Stock is transferred in
accordance with the terms and conditions of this Agreement, then the Proposed
Transferee(s) of the Offered Investor Stock will thereafter hold such Offered
Investor Stock free of all restrictions on transfer imposed by this Agreement.
If the Offered Investor Stock is not so transferred during such 120-day period,
then the Selling Stockholder will not transfer any of such Offered Investor
Stock without complying again in full with the provisions of this Agreement.
(g) The exercise or non-exercise of the rights of the
Investors and Common Stockholders hereunder to participate in one or more
Transfers of Offered Investor Stock made by such Selling Stockholder shall not
adversely affect their rights to participate in subsequent Transfers of Offered
Investor Stock subject to this Section 4.
5. CO-SALE RIGHT.
(a) In the event the Company, the Investors, and/or the Other Common
Stockholders fail to exercise their respective rights to purchase all of the
Offered Stock of a Common Stockholder subject to Section 3(a) and/or (b) hereof,
following the exercise or expiration of the rights of purchase set forth in
Section 3(a) and 3(b), then the Common Stockholder shall deliver to the Company,
which the Company shall in turn promptly deliver to each Investor, written
notice (the "Co-Sale Notice") that each Investor shall have the right,
exercisable upon written notice to the Selling Stockholder within 15 days after
receipt of the Co-Sale Notice by the Investor, to participate in such Transfer
of Stock by the Common Stockholder to the Proposed Transferee ("Co-Sale Stock")
on the same terms and conditions. Such notice shall indicate the number of
shares of Common Stock such Investor wishes to sell under its right to
participate. To the extent one or more of the Investors exercise such right of
participation in accordance with the terms and conditions set forth below, the
number of shares of Co-Sale Stock that such Selling Stockholder may sell in the
transaction shall be correspondingly reduced.
(b) Each Investor may sell all or any part of that number of shares equal to the
product obtained by multiplying (i) the aggregate number of shares of Co-Sale
Stock covered by the Selling Stockholder Notice by (ii) a fraction the numerator
of which is the number of shares of Common Stock owned by such Investor at the
time of the Transfer and the denominator of which is the total number of shares
of Common Stock owned by such Selling Stockholder and the Investors at the time
of the Transfer. If not all of the Investors elect to sell their share of the
Co-Sale Stock proposed to be transferred within said 15-day period, then the
Selling Stockholder shall promptly notify in writing the Investors who do so
elect and shall offer such Investors the additional right to participate in the
sale of such additional shares of Co-Sale Stock proposed to be transferred on
the same percentage basis as set forth above in this Section 5(b). The Investors
shall have five days after the receipt of such notice to notify the Selling
Stockholder of their election to sell all or a portion thereof of the
unsubscribed shares.
(c) Each Investor who elects to participate in the Transfer pursuant to this
Section 5 (a "Participant") shall effect its participation in the Transfer by
promptly delivering to the Selling Stockholder for transfer to the Proposed
Transferee one or more certificates, properly endorsed for transfer, which
represent:
(i) number of shares of Common Stock which such Participant elects to sell; or
(ii) that number of shares of Series A Convertible Preferred Stock which is at
such time convertible into the number of shares of Common Stock which such
Participant elects to sell; provided, however, that if the Proposed Transferee
objects to the delivery of Series A Convertible Preferred Stock in lieu of
Common Stock, such Participant shall convert such Series A Convertible Preferred
Stock into Common Stock and deliver Common Stock as provided in Section 5(c)(i)
above. The Company agrees to make any such conversion concurrent with the actual
transfer of such shares to the Proposed Transferee.
(d) The stock certificate or certificates that the Participant delivers to such
Selling Stockholder pursuant to Section 5(c) shall be transferred to the
Proposed Tranferee in consummation of the sale of the Common Stock pursuant to
the terms and conditions specified in the Co-Sale Notice, and the Selling
Stockholder shall concurrently therewith remit to such Participant that portion
of the sale proceeds to which such Participant is entitled by reason of its
participation in such sale. To the extent that any Proposed Transferee prohibits
such assignment or otherwise refuses to purchase shares or other securities from
a Participant exercising its rights of co-sale hereunder, such Selling
Stockholder shall not sell to such Proposed Transferee any Co-Sale Stock unless
and until, simultaneously with such sale, such Selling Stockholder shall
purchase such shares or other securities from such Participant on the same terms
and conditions specified in the Co-Sale Notice.
(e) To the extent that the Investors do elect to participate in the sale of the
Co-Sale Stock subject to the Co-Sale Notice, such Selling Stockholder may, not
later than 120 days following delivery to the Company of the Co-Sale Notice,
enter into an agreement providing for the closing of the Transfer of the Co-Sale
Stock covered by the Co-Sale Notice within 30 days of such agreement on terms
and conditions not materially more favorable to the Selling Stockholder than
those described in the Co-Sale Notice. Any proposed Transfer on terms and
conditions materially more favorable than those described in the Co-Sale Notice,
as well as any subsequent proposed transfer of any of the Co-Sale Stock by a
Selling Stockholder, shall again be subject to the co-sale rights of the
Investors and shall require compliance by a Selling Stockholder with the
procedures described in this Section 5.
(f) The exercise or non-exercise of the rights of the Investors hereunder to
participate in one or more Transfers of Co-Sale Stock made by such Selling
Stockholder shall not adversely affect their rights to participate in subsequent
Transfers of Co-Sale Stock subject to this Section 5.
6. EXEMPT TRANSFERS.
(a) Notwithstanding the foregoing, the right of first refusal and the co-sale
rights of the Company and the Investors shall not apply to (i) any Transfer to
the ancestors, descendants or spouse of the Common Stockholders or to trusts for
the benefit of such persons, (ii) any Transfer or Transfers by a Common
Stockholder to another Common Stockholder or to an individual employed by the
Company at the time of such transfer (the "Employee"), but only if the
transferring Common Stockholder first offers the shares to all other Common
Stockholders or Employees, as applicable, and each member of the applicable
group is allowed to participate pro rata with the other members of that group,
(iii) any pledge of Stock made pursuant to a bona fide loan transaction that
creates a mere security interest; (iv) any Transfer by a Common Stockholder
which is a partnership, limited liability company or corporation to the
partners, members or stockholders of such entity without the payment of
consideration therefor, (v) any bona fide gift, or (vi) the exchange by GP
Strategies Corporation, a Delaware corporation ("GP Strategies"), of shares of
Common Stock of the Company for 6% Convertible Exchangeable Subordinated Notes
due 2003 issued by GP Strategies pursuant to the terms of the Note Agreement
dated June 30, 2000, among GP Strategies and the holders of such notes; provided
that in the event of any transfer made pursuant to one of the exemptions
provided by clauses (i), (ii), (iii), (iv), (v), or (vi), (A) the transferor
shall inform the Investors of such pledge, transfer or gift prior to effecting
it and (B) the pledgee, transferee or donee shall furnish the Investors with a
written agreement to be bound by and comply with all provisions of this
Agreement. Such transferred Stock shall remain "Stock" hereunder, and such
pledgee, transferee or donee shall be treated as a "Common Stockholder" (to the
extent such transfer was from a Common Stockholder) for purposes of this
Agreement.
(b) Notwithstanding the foregoing, the provisions of Sections 3, 4, and 5 shall
not apply to the sale of any Stock to the public pursuant to a registration
statement filed with, and declared effective by, the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act").
(c) This Agreement is subject to, and shall in no manner limit, any other right
that the Company may have to repurchase securities from the Common Stockholders
pursuant to a stock restriction agreement or other agreement between the Company
and the Common Stockholders.
7. PROHIBITED TRANSFERS.
(a) In the event that a Common Stockholder or Investor (a "Prohibited
Transferee") should Transfer any Stock in contravention of the right of first
refusal or co-sale rights of the Investors and/or Common Stockholders, as the
case may be, under this Agreement (a "Prohibited Transfer"), each Investor or
Common Stockholder, as the case may be, in addition to such other remedies as
may be available at law, in equity or hereunder, shall have the option provided
below, and the Prohibited Transferee shall be bound by the applicable provisions
of such option.
(b) In the event of a Prohibited Transfer, each Investor and/or Common
Stockholder, as the case may be, shall have the right to purchase from (to the
extent the Prohibited Transferee still owns Stock) or sell to Prohibited
Transferee, as applicable, the type and number of shares of Common Stock equal
to the number of shares such Investor would have been entitled to purchase from
or sell to the purchaser under Sections 3 and 5 hereof or such Common
Stockholder would have been entitled to purchase under Section 4 hereof had the
Prohibited Transfer been effected pursuant to and in compliance with the terms
hereof. Such sale shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be purchased from or sold to
the Prohibited Transferee shall be equal to the price per share paid by the
Proposed Transferee to the Prohibited Transferee in such Prohibited Transfer.
The Prohibited Transferee shall also reimburse each Investor or Common
Stockholder for any and all fees and expenses, including legal fees and
expenses, incurred pursuant to the exercise or the attempted exercise of the
Investor's rights under Sections 3 or 5 or the Common Stockholder's rights under
Section 4.
(ii) Within 30 days after the date on which an Investor or Common Stockholder,
as the case may be, received notice of the Prohibited Transfer or otherwise
became aware of the Prohibited Transfer, such Investor or Common Stockholder
shall, if exercising the option created hereby, deliver to the Prohibited
Transferee payment for the aggregate purchase price or the certificate or
certificates representing shares to be purchased or sold, each certificate to be
properly endorsed for transfer.
(iii) The Prohibited Transferee shall, upon receipt of the purchase price or
certificate or certificates for the shares to be purchased or sold by an
Investor or Common Stockholder, pursuant to this Section 7(b), deliver to the
Investor or Common Stockholder the certificate or certificates representing the
shares to be purchased or pay the aggregate purchase price therefor, as
applicable, and the amount of reimbursable fees and expenses, as specified in
Section 7(b)(i), in cash or by other means acceptable to the Investor or the
Common Stockholder.
(iv) Notwithstanding the foregoing, (A) any attempt by a Common Stockholder to
Transfer Stock in violation of Sections 3 or 5 shall be voidable at the option
of a majority-in-interest of the Investors if a majority in interest of the
Investors do not elect to exercise the option set forth in this Section 7 and
(B) any attempt an Investor to Transfer Stock in violation of Section 4 hereof
shall be voidable at the option of a majority-in-interest of the Common
Stockholders if a majority in interest of the Common Stockholders do not elect
to exercise the option set forth in this Section 7, and the Company agrees it
will not effect such a Transfer nor will it treat any alleged transferee as the
holder of such shares without the written consent of a majority in interest of
the Investors or the Common Stockholders, as the case may be.
8. DRAG ALONG RIGHT. Notwithstanding anything contained herein to the contrary,
if at any time (i) the holders of a 75% majority-in-interest of Common Stock and
the Series A Preferred Stock (voting as a single class on an as converted basis,
and (ii) the Board of Directors of the Company shall approve (x) a bona fide
arms length proposal from a person for the transfer, directly or indirectly, of
all of the Common Stock to such person, (y) the merger or consolidation of the
Company with or into another person in which the stockholders of the Company
will receive cash or securities of any other person for their shares or (z) the
sale by the Company of all or substantially all of its assets to a person, in
each of the above cases for a specified price payable in cash or otherwise and
on specified terms and conditions (a "Sale Proposal"), then the Board of
Directors of the Company shall deliver a notice (a "Required Sale Notice") with
respect to such Sale Proposal to each Common Stockholder (as well as each other
holder of any shares of Common Stock) stating that the Sale Proposal has been
approved in the manner provided in this Section 8. Each such Common Stockholder,
upon receipt of a Required Sale Notice, shall be obligated, which obligation
shall be enforceable by the Company, if applicable, to sell their Stock and
participate in the transaction (a "Required Sale") contemplated by the Sale
Proposal, vote their shares of Stock in favor of such Sale Proposal at any
meeting of stockholders of the Company called to vote on or approve such Sale
Proposal and otherwise to take all necessary action to cause the Company and the
Common Stockholders to consummate such Required Sale.
9. LEGEND.
(a) Each certificate representing shares of Stock now or hereafter owned by the
Common Stockholders or Investors shall be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL AND CO-SALE
AGREEMENT BY AND BETWEEN THE STOCKHOLDER, THE COMPANY AND
CERTAIN HOLDERS OF STOCK OF THE COMPANY. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE COMPANY."
(b) The Common Stockholders and the Investors agree that the Company may
instruct its transfer agent to impose transfer restrictions on the shares
represented by certificates bearing the legend referred to in Section 9(a) above
to enforce the provisions of this Agreement and the Company agrees to promptly
do so. The legend shall be removed upon termination of this Agreement.
10. MISCELLANEOUS.
(a) Conditions to Exercise of Rights. Exercise of the Investors' rights under
this Agreement shall be subject to and conditioned upon, and the Common
Stockholders and the Company shall use their best efforts to assist each
Investor in, compliance with applicable laws.
(b) Governing Law. This Agreement shall be governed by and construed under the
laws of the State of Delaware, without reference to principles of conflict of
laws.
(c) Amendment. Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by the written consent of (i) as to the
Company, only the Company, (ii) as to the Investors, persons holding more than a
majority-in-interest of the Common Stock held by the Investors and their
assignees, pursuant to Section 10(d) hereof, and (iii) as to the Common
Stockholders, only the Common Stockholders (unless such amendment and waiver is
less restrictive to the Common Stockholders, in which case a
majority-in-interest of the Common Stock held by the Common Stockholders);
provided, that no consent of any Common Stockholder shall be necessary for any
amendment and/or restatement which includes additional holders of Series A
Convertible Preferred Stock as "Investors" and parties hereto. Any amendment or
waiver effected in accordance with clauses (i), (ii) and (iii) of this Section
10(c) shall be binding upon each Investor, its successors and assigns, the
Company and the Common Stockholders.
(d) Assignment of Rights. This Agreement constitutes the entire agreement
between the parties relative to the specific subject matter hereof. Any previous
agreement among the parties relative to the specific subject matter hereof is
superseded by this Agreement. This Agreement and the rights and obligations of
the parties hereunder shall inure to the benefit of, and be binding upon, their
respective successors, assigns and legal representatives.
(e) Term. This Agreement shall continue in full force and effect from the date
hereof through the earliest of the following dates, on which date it shall
terminate in its entirety:
(i) the date of the closing of a firmly underwritten public offering of the
Common Stock pursuant to a registration statement filed with the Securities and
Exchange Commission, and declared effective under the Securities Act, which
results in the Series A Convertible Preferred Stock being converted into Common
Stock;
(ii) the date of the closing of a sale, lease, or other disposition of all or
substantially all of the Company's assets or the Company's merger into or
consolidation with any other corporation or other entity, or any other corporate
reorganization, in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction, provided that this
Section 10(e)(ii) shall not apply to a merger effected exclusively for the
purpose of changing the domicile of the Company; or
(iii) the date as of which the parties hereto terminate this Agreement by
written consent of a majority in interest of the Investors and a majority in
interest of the Common Stockholders (voting on a fully diluted basis).
(f) Ownership. Except as disclosed on Schedule 10(f), the Common Stockholders
represent and warrant that each is the sole legal and beneficial owner of those
shares of Stock he, she or it currently holds subject to the Agreement and that
no other person has any interest (other than a community property interest) in
such shares.
(g) Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (i) upon personal delivery to the party to be
notified, (ii) when sent by confirmed electronic mail or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid or (iv) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Investors at the address as set forth on Exhibit A hereto or at such other
address as such party may designate by ten days advance written notice to the
other parties hereto. All communications shall be sent to the Common
Stockholders at their respective address of record with the Company or at such
other address as such party may designate by ten days advance written notice to
the other parties hereto.
(h) Severability. In the event one or more of the provisions of this Agreement
should, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein.
(i) Attorneys' Fees. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
(j) Entire Agreement. This Agreement and the Exhibits hereto, along with the
Purchase Agreement and each of the Exhibits thereto, constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof and no party shall be liable or bound to any other
in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
(k) Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(l) Joinder of Spouses. The undersigned spouses of each
Investor and Common Stockholder, if applicable, join in the execution and
delivery of this Agreement for the express purpose of binding any interest he or
she may have in the Series A Convertible Preferred Stock and Stock, as
applicable.
[THIS SPACE INTENTIONALLY LEFT BLANK]
The foregoing RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT is hereby
executed as of the date first above written.
COMPANY: INVESTOR(S):
HYDRO MED SCIENCES, INC. SMH HYDRO MED LLC
By: By:
Name: Xxxxx X. Xxxxxxx Name: Xxxxx X. Xxxx
Title: President Title: Manager
CORPORATE OPPORTUNITIES FUND
(INSTITUTIONAL), L.P.
By: SMM Corporate Management, LLC,
General Partner
By:
Name: Xxxxx X. Xxxx
Title: Manager
CORPORATE OPPORTUNITIES FUND, L.P.
By: SMM Corporate Management, LLC,
General Partner
By:
Name: Xxxxx X. Xxxx
Title: Manager
XXXXXXXX MEDTECH PARTNERS L.P.
By: Xxxxxxxx Medtech Partners LLC,
General Partner
By:
Name:_________________________
Title:________________________
COMMON STOCKHOLDERS:
GP STRATEGIES CORPORATION
By:
Name:
Title:
