Exhibit 10.20
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement"), dated as of March 7,
2005,
is entered into by and among Specialized
Health Products International, Inc.
(the "Company"), Galen Partners III, L.P.
("Galen Partners"), Galen Partners
International III, L.P. ("Galen
International"), and Galen Employee Fund III,
L.P. ("Galen Employee," and together with
Galen Partners and Galen
International, the "Galen Funds").
RECITALS
A. The Galen Funds are willing to purchase convertible promissory
notes
in the aggregate principal amount of
$1,000,000 (the "Convertible Notes") upon
the request of the Company made at any time
between March 31, 2005 and September
30, 2005 (the "Option Period") and under
the circumstances described herein.
B. The Company is willing to sell to the Galen Funds the
Convertible
Notes under the circumstances described
herein, and as consideration for
agreement of the Galen Funds to purchase
the Convertible Notes, the Company will
issue to the Galen Funds warrants (the
"Warrants") to purchase an aggregate of
40,000 shares of common stock, par value
$0.02 per share ("Common Stock").
C. At the sole election of the Company, which election must be made
on
or before September 30, 2005, the Option
Period may be extended through March
31, 2006 in consideration for the Company
issuing to the Galen Funds Warrants to
purchase an aggregate of an additional
40,000 shares of Common Stock.
In consideration of the mutual promises and covenants contained in
this
Agreement, and for other good and valuable
consideration, the receipt and
sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF CONVERTIBLE NOTES AND WARRANTS
1.1 Purchase and Sale of Convertible Notes and Warrants.
(a) At any time during the Option Period, the Company may, at its
sole
option, elect to require the Galen Funds to
purchase all but not less than all
of the Convertible Notes. The notice
provided by the Company to the Galen Funds
(the "Purchase Notice") shall set forth the
date of such purchase of Convertible
Notes (the "Purchase Date"), which date
shall not be less than twenty (20)
business days after the date of the
Purchase Notice.
(b) Upon delivery or receipt of the Purchase Notice, each of
Galen
Partners, Galen International and Galen
Employee jointly and severally agrees to
purchase from the Company on the Purchase
Date the Convertible Notes for an
aggregate purchase price equal to
$1,000,000 (the "Purchase Price"). On the
Purchase Date, the Galen Funds shall pay
the Purchase Price to the Company by
wire transfer of immediately available
funds, and the Company shall issue to the
Galen Funds the Convertible Notes, which
shall be in the form of Exhibit A
attached hereto.
(c) As consideration for the agreement by the Galen Funds to
purchase
the Convertible Notes, on the date hereof
the Company shall issue the Warrants
to the Galen Funds, such Warrants to be in
the form of Exhibit B attached
hereto. In addition, on the date hereof,
the parties agree to execute and
deliver Amendment No. 2 to Investors'
Rights Agreement (the "Amendment"), which
shall be in the form of Exhibit C attached
hereto.
(d) By written notice to the Galen Partners on or before September
30,
2005, the Option Period may be extended
through March 31, 2006 (the "Extension
Notice"). As consideration for the
extension of the Option Period, the Company
shall issue to the Galen Funds Warrants in
the form of Exhibit B for an
aggregate of an additional 40,000 shares of
Common Stock. The additional 40,000
Warrants shall be delivered to the Galen
Funds with the Extension Notice.
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1.2 Conditions to Closing. The obligation of the Galen Funds to
purchase the Convertible Notes pursuant to
this Agreement on the Purchase Date
is subject to the satisfaction of the
following conditions:
(a) The
representations and warranties made by the Company herein shall
have been true and correct when made and
shall be true and correct on and as of
the Purchase Date with the same force and
effect as though made on and as of the
Purchase Date, except for representations
and warranties that are made as of a
specific date which shall only be required
to be true and correct as of such
date.
(b) All covenants, agreements and conditions contained in this
Agreement to be performed or complied with
by the Company on or prior to the
Purchase Date shall have been performed or
complied with and the Company shall
not be in default in the performance of or
compliance with any provision of this
Agreement.
(c) All authorizations, approvals or permits of any
governmental
authority or regulatory body that are
required in connection with the lawful
issuance and sale of the Convertible Notes
pursuant to this Agreement shall have
been duly obtained and shall be in full
force and effect.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE GALEN FUNDS
Each of the Galen Funds hereby represents and warrants to the
Company
as follows:
2.1 Authority. Each Galen Fund has full power and authority to
enter
into and to perform this Agreement and the
Amendment in accordance with their
respective terms and to consummate the
transactions contemplated hereby.
2.2 Organization. Each Galen Fund is validly existing and in
good
standing under the laws of the jurisdiction
of its organization, and the
consummation of the transactions
contemplated hereby will not result in a
violation of its limited partnership
agreement or other organizing documents.
2.3 Enforceability. This Agreement and the Amendment have been
duly
authorized, executed and delivered by each
Galen Fund and constitute legal,
valid and binding obligations of each Galen
Fund, enforceable in accordance with
their terms.
2.4 Accredited Investor. Each Galen Fund is, and will be on the
date of
any transfer contemplated hereby, an
"accredited investor" within the meaning of
Rule 501(a) under the Securities Act of
1933, as amended.
2.5 Access to Information. Each Galen Fund has had access to
the
Company's last annual report on Form 10-KSB
and all subsequent filings by the
Company with the Securities and Exchange
Commission and any and all other
information concerning the Company that
each such Galen Fund and its financial,
tax and legal advisors required or
considered necessary to make a proper
evaluation of this investment. In making
the decision to enter into this
Agreement, each Galen Fund and its advisors
have relied solely upon this
Agreement, the exhibits hereto and their
own independent investigations, and
fully understand that there are no
guarantees, assurances or promises in
connection with any investment hereunder
(other than as expressly provided
herein, and in the Amendment, the
Convertible Notes and the Warrants) and
understand that the particular tax
consequences arising from this investment in
the Company will depend upon the individual
circumstances of each Galen Fund.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of the Galen
Funds
as follows:
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3.1 Organization. The Company is a duly organized and validly
existing
corporation in good standing under the laws
of the State of Delaware. The
Company is duly qualified to do business as
a foreign corporation and is in good
standing in each jurisdiction in which it
does business, except where the
failure to be so qualified would not have a
material adverse effect on the
business, assets, financial condition,
income or prospects of the Company (a
"Material Adverse Effect").
3.2 Corporate Power. The Company has all necessary corporate power
and
authority to enter into and perform this
Agreement and the Amendment, to issue
and sell the Convertible Notes and the
Warrants, to own all the properties owned
by it and to carry on the business now
conducted or presently proposed to be
conducted by it. The Company has taken all
corporate action necessary to
authorize this Agreement, the Amendment and
the issuance of the Convertible
Notes and the Warrants to be issued and
sold hereunder and to reserve all shares
of Common Stock issuable upon conversion of
the Convertible Notes and upon
exercise of the Warrants.
3.3 Enforceability. This Agreement and the Amendment have been
duly
executed and delivered by the Company and
constitute legal, valid and binding
obligations of the Company, enforceable in
accordance with their terms. The
execution, delivery and performance by the
Company of this Agreement and the
Amendment and the issuance and sale of the
Convertible Notes and the Warrants
will not result in any violation of or be
in conflict with, or result in a
breach of or constitute a default under (i)
any term or provision of any
federal, state, local or foreign law,
statute, standard, ordinance, code, order,
rule, regulation, resolution, promulgation
or any final order, judgment or
decree of any court, arbitrator, tribunal
or governmental authority, or any
license, franchise, permit or similar right
granted under any of the foregoing,
(ii) the Company's certificate of
incorporation or by-laws, or (iii) any
contractual obligation to which the Company
or any of its subsidiaries is a
party or by which it is bound. The
Convertible Notes, when executed and
delivered against payment therefore as
provided in this Agreement, will
constitute legal, valid and binding
obligations of the Company, enforceable in
accordance with their terms. The shares of
Common Stock issuable upon conversion
of the Convertible Notes and upon exercise
of the Warrants, in each case in
accordance with the terms of the
Convertible Notes and the Warrants, as the case
may be, will be validly issued, fully paid
and nonassessable and subject to no
lien or restriction on transfer, except
restrictions on transfer imposed by the
Investors' Rights Agreement (as amended by
the Amendment) and applicable
securities laws.
3.4 Financial Statements. The Galen Funds have been furnished
with
complete and correct copies of the
following financial statements of the Company
(the "Financial Statements"): (a) the
audited consolidated balance sheet of the
Company as of December 31, 2003 together
with the related consolidated
statements of operations, retained earnings
and cash flows for the twelve-month
period then ended, and (b) the unaudited
consolidated balance sheet of the
Company as of December 31, 2004 (the
"Balance Sheet Date") together with the
related consolidated statements of
operations, cash flows and stockholders'
equity for the twelve-month period then
ended. The Financial Statements have
been prepared in accordance with GAAP
consistently applied and fairly and
accurately present the financial condition
of the Company and its subsidiaries
at the date thereof and the results of its
operations for the period covered
thereby. All the books, records and
accounts of the Company and its subsidiaries
are accurate and complete, are in
accordance with good business practice and all
laws, regulations and rules applicable to
the Company and its subsidiaries and
the conduct of their business and
accurately present and reflect all of the
transactions described therein.
3.5 Outstanding Debt; Absence of Liabilities. Neither the Company
nor
any of its subsidiaries (i) has any
outstanding indebtedness for borrowed money
except as reflected in the Financial
Statements and (ii) except as reflected, is
a guarantor or otherwise contingently
liable on such indebtedness of any other
person or entity. Except as set forth in
Schedule 3.5, neither the Company nor
any of its subsidiaries has any material
liabilities or obligations, contingent
or otherwise, which are not reflected or
provided for in the Financial
Statements.
3.6 Changes in Condition. Since the Balance Sheet Date, there
have
occurred no event or events that,
individually or in the aggregate, have caused
or are reasonably likely to cause a
Material Adverse Effect. Since the Balance
Sheet Date, neither the Company nor any of
its subsidiaries has (a) declared any
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dividend or other distribution on any
shares of its capital stock, (b) made any
payment (other than compensation to its
directors, officers and employees at
rates in effect prior to the Balance Sheet
Date or for bonuses accrued in
accordance with normal practice prior to
the Balance Sheet Date) to any of its
affiliates, (c) increased the compensation,
including bonuses, payable or to be
payable to any of its directors, officers,
employees or affiliates, or (d)
entered into any material contractual
obligation, or entered into or performed
any other transaction, not in the ordinary
and usual course of business and
consistent with past practice, other than
as specifically contemplated by this
Agreement.
ARTICLE IV
COVENANTS
4.1 Existence. The Company shall do or cause to be done all
things
necessary to preserve, renew and keep in
full force and effect its legal
existence in good standing.
4.2 Payment of Obligations. The Company shall punctually pay or
cause
to be paid when due all amounts that become
due and owing under the Convertible
Notes (following their issuance), in strict
conformity with the respective terms
thereof, and faithfully observe and perform
all of the conditions, covenants and
requirements of this Agreement, the
Amendment, the Convertible Notes and the
Warrants. Neither the Company nor any
subsidiary of the Company shall incur any
indebtedness of an aggregate of $500,000 or
more without the prior written
consent of the Galen Funds.
4.3 Notices. The Company will notify the Galen Funds promptly
as
provided in Section 5.6 below of the
occurrence of any event or events which
have caused or are reasonably likely to
cause the termination of this Agreement
pursuant to Section 5.1.
4.4 Further Assurances. The Company will execute and deliver to
the
Galen Funds all such documents and
instruments and do all such other acts as may
be reasonably required by the Galen Funds
to enable the Galen Funds to exercise,
perfect and enforce their respective rights
under this Agreement, the Amendment,
the Convertible Notes and the Warrants.
ARTICLE V
MISCELLANEOUS
5.1 Termination. This Agreement, including without limitation,
the
obligation of the Galen Funds to purchase
the Convertible Notes, shall terminate
on September 30, 2005, unless the extension
right is exercised by the Company in
which case the obligation of the Galen
Funds to purchase the Convertible Notes
shall terminate on March 31, 2006.
5.2 Entire Agreement. This Agreement, together with the Amendment,
the
Convertible Notes (if issued) and the
Warrants, contains the entire agreement of
the parties with respect to the matter
addressed herein and supersedes any prior
agreements among them, whether oral or
written.
5.3 Amendments. Any amendment to this Agreement shall be made
in
writing and signed by all parties
hereto.
5.4 Successors. This Agreement shall be binding upon and inure to
the
benefit of the parties hereto and their
respective successors and assigns,
except that the Galen Funds may not assign
or transfer their rights hereunder or
any interest herein or delegate their
duties hereunder without the prior written
consent of the Company.
5.5 Waivers. A waiver by one party of any breach of or failure
to
comply with any provision of this Agreement
by the other party shall not be
construed as a waiver of any other
provision, or a waiver of a breach of any
other provision, of this Agreement. No
delay or omission by a party in
exercising any right under this Agreement
shall operate as a waiver of that or
any other right.
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<PAGE>
5.6 Notices. All notices and other communications required or
permitted
hereunder shall be in writing and shall be
effective (i) five (5) days after
deposit with the U.S. Postal Service or
other applicable postal service, if
delivered by first class mail, postage
prepaid, (ii) upon delivery, if delivered
by hand, (iii) one business day after the
business day of deposit with Federal
Express or similar overnight courier,
freight prepaid, guaranteeing overnight
delivery, or (iv) upon telephone or further
electronic communication from the
recipient acknowledging receipt (whether
automatic or manual from recipient), if
delivered by facsimile or other electronic
transmission, and shall be addressed
to such party at its address appearing on
the signature page hereto, or at such
other address as may be designated in
writing to the other parties.
5.7 Expenses. The Company will bear its own expenses and legal
fees
incurred on its behalf with respect to this
Agreement, the Amendment and the
transactions contemplated hereby. The
Company agrees to pay the fees, expenses
and disbursements of the Galen Funds,
including those of Ropes & Gray LLP,
counsel for the Galen Funds, with respect
to the services rendered in connection
with the transactions contemplated by this
Agreement, up to a maximum of
$10,000.
5.8 Governing Law. This Agreement shall be governed by and
construed in
accordance with the laws of the State of
New York, without regard to its
principles of conflicts of law. The Company
and each of the Galen Funds hereby
irrevocably agree that any suit, action,
proceeding or claim against it arising
out of or in any way relating to this
Agreement or any of the Convertible Notes
or Warrants, or any judgment entered by any
court in respect thereof, shall be
brought or enforced in the state or federal
courts located in New York, New
York, and the Company and each of the Galen
Funds hereby irrevocably waive, to
the fullest extent permitted by law, any
objection which they may now or
hereafter have to the venue of any
proceeding brought in New York, New York and
further irrevocably waive any claims that
any such proceeding has been brought
in an inconvenient forum. All parties
acknowledge that they participated in the
negotiation and drafting of this Agreement,
the Amendment, the Convertible Notes
and the Warrants and that, accordingly, no
party shall move or petition a court
construing any such document to construe it
more stringently against one party
than against any other.
5.9 Severability. If any provision of this Agreement is adjudicated
to
be invalid under applicable laws or
regulations, such provision shall be
inapplicable to the extent of such
invalidity without affecting the validity or
enforceability of the remainder of this
Agreement which shall be given effect so
far as possible.
5.10 Counterparts. This Agreement may be executed in any number
of
counterparts and by facsimile transmission
(which facsimile signatures shall be
considered original executed counterparts),
each of which shall be deemed to be
an original, and all of which together
shall constitute one and the same
document. Each party to this Agreement
agrees that it will be bound by its own
facsimile signature and that it accepts the
facsimile signature of the other
parties.
(signatures begin next page)
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Purchase
Agreement as of the date set forth in the
first paragraph hereof.
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
By:_______________________________________
Name: Jeffrey M. Soinski
Title: President & CEO
Address: 585 West 500 South
Salt Lake City, Utah 84010
GALEN PARTNERS III, L.P.
GALEN PARTNERS INTERNATIONAL III, L.P.
By: CLAUDIUS, L.L.C.,
its general partner
By: ______________________________________
Name:
Title:
Address: c/o Galen Associates
610 Fifth Avenue
New York, New York 10020
GALEN EMPLOYEE FUND III, L.P.
By: WESSON
ENTERPRISES, INC.,
its general partner
By: ______________________________________
Name:
Title:
Address: c/o Galen Associates
610 Fifth Avenue
New York, New York 10020
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EXHIBIT A
NEITHER THIS NOTE NOR THE SECURITIES INTO
WHICH THIS NOTE IS CONVERTIBLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES
ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS THEREUNDER.
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
CONVERTIBLE PROMISSORY NOTE
$________________
_______________,____
Specialized Health Products International,
Inc., a Delaware corporation (the
"Company"), for value received, promises to
pay to ______________________ or its
permitted assigns (the "Holder") the
principal sum of $______________ plus
simple interest thereon from the date of
this Note until paid at a rate per
annum equal to twelve percent (12.0%).
Interest on this Note will be payable
semiannually on each July 1 and January 1
for so long as this Note remains
outstanding. This Note is being issued and
delivered pursuant to that certain
Purchase Agreement, dated as of March 7,
2005 (the "Purchase Agreement"), by and
among the Company, Galen Partners III,
L.P., Galen Partners International III,
L.P. and Galen Employee Fund III, L.P.
This Note will automatically mature and the
entire outstanding principal amount,
together with accrued interest, shall
become due and payable on the third
anniversary of the date hereof, unless
prior to such date this Note is converted
into shares of the Company's Common Stock
pursuant to Section 1 hereof. Payments
of both principal and interest are to be
made at the address of the Holder for
the receipt of notices pursuant to Section
8(e), or at such other place as the
Holder shall designate to the Company in
writing, in lawful money of the United
States of America. Interest on this Note
shall be computed on the basis of a
365-day year and actual days elapsed.
The Company may prepay all or any portion
of the outstanding principal amount of
this Note at any time without penalty upon
not less than five (5) business days'
notice to the Holder. The following is a
statement of the rights of the Holder
and the conditions to which this Note is
subject, and to which the Holder, by
the acceptance of this Note, agrees:
1. Optional Conversion of Note. The entire outstanding principal
amount
due on this Note may, at the Holder's
option be converted into fully paid and
nonassessable shares of Common Stock of the
Company. The number of shares of
Common Stock to be issued upon such
conversion (the "Conversion") shall be equal
to the quotient obtained by dividing the
entire outstanding principal amount due
on this Note by the Conversion Price (as
defined below). For purposes of this
Note, the "Conversion Price" shall mean
110% of the Company's average closing
share price for Common Stock as reported on
NASDAQ or the OTC Bulletin Board for
the twenty (20) consecutive trading days
prior to the date of issuance of this
Note (subject to adjustment as provided in
Section 2 below).
2. Mechanics of Conversion.
(a) Notice of Conversion. The Holder shall give written notice to
the
Company of its election to convert this
Note and shall state therein the name or
names in which the certificate or
certificates for shares of Common Stock are to
be issued. The effective date of the
Conversion shall be the date such notice is
received by the Company pursuant to Section
8(e) below.
(b) No Fractional Shares Upon Conversion. No fractional shares
of
Common Stock shall be issued upon
Conversion of this Note. In lieu of any
fractional shares to which the Holder would
otherwise be entitled, the Company
shall pay cash equal to such fraction
multiplied by the Conversion Price.
(c) Stock Certificates. At such time after the Conversion as
Holder
presents this Note to the Company, the
Company shall issue and deliver to the
<PAGE>
Holder at the address listed below for
receipt of notices, or to its nominee or
nominees, a certificate or certificates for
the number of shares of Common Stock
to which it shall be entitled as
aforesaid.
(d) Payment of Interest. Promptly (and in any event within five
days)
following the effective date of the
Conversion, the Company shall pay to the
Holder all interest accrued on the date
through and including the effective date
of the Conversion at the address listed
below for receipt of notices.
(e) Adjustment of Conversion Price. The Conversion Price is subject
to
adjustment from time to time as set forth
in this Section 2(e). Upon each
adjustment pursuant to this Section 2(e),
the Holder shall thereafter be
entitled to acquire upon Conversion the
adjusted number of shares of Common
Stock at such new Conversion Price.
(i) If the Company at any time while this Note or any portion
hereof remains outstanding shall split,
subdivide or combine the Common Stock,
then the Conversion Price shall be
proportionately decreased in the case of a
split or subdivision or proportionately
increased in the case of a combination.
Any adjustment made pursuant to this
subsection shall become effective
immediately after the effective date of a
split, subdivision or combination.
(ii) If while this Note or any portion hereof remains
outstanding, the holders of Common Stock
shall have received, or, on or after
the record date fixed for the determination
of eligible stockholders, shall
become entitled to receive, without payment
therefore, other or additional stock
or other securities or property (other than
cash) of the Company by way of
dividend, then and in each case, this Note
shall represent the right to acquire
upon Conversion, in addition to the number
of shares of Common Stock issuable
upon Conversion and without payment of any
additional consideration therefor,
the amount of such other or additional
stock or other securities or property
(other than cash) of the Company that such
Holder would hold upon Conversion had
it been the holder of record of the Common
Stock issuable upon Conversion on the
date hereof and had thereafter, during the
period from the date hereof to and
including the date of such Conversion,
retained such shares and/or all other
additional stock available by it as
aforesaid during such period, giving effect
to all adjustments called for during such
period by the provisions of this
Section 2(e).
(iii) If the Company, at any time while this Note or any
portion hereof remains outstanding by
reclassification of securities or
otherwise, shall change any of the Common
Stock as to which conversion rights
under this Note exist into the same or a
different number of securities of any
other class or classes, this Note shall
thereafter represent the right to
acquire upon Conversion of this Note such
number and kind of securities as would
have been issuable as the result of such
change with respect to the Common Stock
that is subject to the conversion rights
under this Note immediately prior to
such reclassification or other change and
the Conversion Price therefore shall
be appropriately adjusted, all subject to
further adjustment as provided in this
Section 2(e).
(iv) If at any time while this Note or any portion hereof is
outstanding there shall be in one or a
series of transactions (A) a
reorganization (other than a combination,
reclassification, exchange or
subdivision of shares otherwise provided
for herein), (B) a merger or
consolidation of the Company with or into
another corporation in which the
Company is not the surviving entity, or a
reverse triangular merger in which the
Company is the surviving entity but the
shares of the Company's capital stock
outstanding immediately prior to the merger
are converted by
