EXHIBIT 1
COMMON STOCK
PURCHASE AGREEMENT
This Common Stock Purchase Agreement (this "Agreement") is made this 6th day
of June 1999 (the "Effective Date"), by and between Diametrics Medical, Inc.,
a Minnesota corporation, with its principal place of business at 0000 Xxxxxx
Xxxx, Xxxxxxxxx, Xxxxxxxxx 00000 (the "Company"), and Hewlett-Packard Company
(the "Purchaser").
BACKGROUND
A. The Company desires to sell 1,357,143 shares of its common stock ("Common
Stock") and a warrant (in substantially the form of EXHIBIT A hereto) to
purchase 452,381 shares of its Common Stock and the Purchaser desires to
purchase the same, each on the terms and subject to the conditions set forth
herein.
B. The Company and the Purchaser are concurrently executing a Distribution
Agreement (the "Distribution Agreement").
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchaser
hereby agree as follows:
SECTION 1. AUTHORIZATION AND ISSUANCE OF THE SECURITIES. Subject to the terms
and conditions of this Agreement, the Company has authorized the issuance and
delivery to the Purchaser of 1,357,143 shares of its Common Stock (the
"Shares") and a warrant to purchase in the aggregate an additional 452,381
shares of its Common Stock (the "Warrants) in substantially the form of
EXHIBIT A hereto.
SECTION 2. AGREEMENT TO SELL AND PURCHASE THE SECURITIES. At the Closing, the
Company will sell to the Purchaser, and the Purchaser will acquire from the
Company, for a purchase price of $9,500,000 (the "Price"), the Shares and the
Warrants.
SECTION 3. CLOSING AND DELIVERY.
3.1 CLOSING. The closing of the purchase and sale of the Shares and the
Warrants pursuant to this Agreement (the "Closing") shall be held as soon as
practicable after the satisfaction or waiver of all other conditions to Closing
set forth in Sections 8 and 9 hereof, at the offices of Xxxxxx & Whitney LLP,
000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, or on such other date and
place as may be agreed to by the Company and the Purchaser. The date upon which
the Closing occurs is herein referred to as the "Closing Date".
3.2 DELIVERY OF THE SHARES AND THE WARRANTS. At the Closing, the Company
shall deliver to the Purchaser an executed stock certificate registered in
the name of the Purchaser, or in such nominee name as designated by the
Purchaser, representing the Shares purchased by the Purchaser, together with
an executed Warrant registered in the name of the Purchaser, representing the
number of shares of Common Stock issuable upon the exercise of the Warrant.
Also at the Closing, the Purchaser shall pay to the Company the Price.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
on the Schedule of Exceptions attached hereto as EXHIBIT B, the Company
hereby represents and warrants as of the date hereof to the Purchaser as
follows:
4.1 ORGANIZATION AND STANDING. Each of the Company and its Subsidiary (as
hereinafter defined in this Section 4.1) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its organization, has full corporate power and authority to own
or lease its properties and conduct its business as presently conducted, and is
duly qualified as a foreign corporation and is in good standing in all
jurisdictions in which the character of the property owned or leased or the
nature of the business transacted by it makes qualification necessary (except
where the failure to be so qualified would not have a material adverse effect on
the business, properties, financial condition or results or operations of the
Company or its Subsidiary). Other than Diametrics Medical, Ltd., formerly known
as Biomedical Sensors, Ltd., (the "Subsidiary"), the Company has no subsidiaries
or equity interest in any other entity.
4.2 CORPORATE POWER; AUTHORIZATION. The Company has all requisite corporate
power, and has taken all requisite corporate action, to execute and deliver this
Agreement and the Warrants, to sell and issue the Shares and the Warrants, to
issue the shares issuable upon exercise of the Warrants (the "Warrant Shares")
and to carry out and perform all of its obligations hereunder and thereunder.
Each of this Agreement and the Warrants constitutes the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting the enforcement of creditors' rights
generally, (ii) as limited by equitable principles generally, and (iii) as
rights to indemnity or contributions hereunder may be limited by federal or
state securities laws or principles of public policy. The execution and delivery
of this Agreement and the Warrants do not, and the performance of this Agreement
and the Warrants and the compliance with the provisions hereof and thereof and
the issuance, sale and delivery of the Shares, the Warrants and the Warrant
Shares by the Company will not, conflict with, or result in a breach or
violation of the terms, conditions or provisions of, or constitute a default
under, or result in the creation or imposition of any lien pursuant to the terms
of, the Articles of Incorporation or Bylaws of the Company or any statute, law,
rule or regulation applicable to the Company or its Subsidiary, or any state or
federal order, judgment or decree applicable to the Company or its Subsidiary,
or any indenture, mortgage, lease or other agreement or instrument to which the
Company or its Subsidiary or any of the properties of such person is subject,
except such as would not have a material adverse effect on the business,
properties, financial condition or results of operations of the Company or its
Subsidiary.
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4.3 ISSUANCE AND DELIVERY OF THE SHARES AND WARRANT SHARES; GRANT OF THE
WARRANTS. The Shares, when issued and paid for in compliance with the provisions
of this Agreement, will be validly issued, fully paid and nonassessable and
issued in compliance with all applicable federal and state securities laws.
Further, the Shares, when issued and paid for in compliance with the provisions
of this Agreement, will not be subject to preemptive, co-sale, right of first
refusal or any other similar rights of the shareholders of the Company or any
liens or encumbrances. In addition, the Warrant Shares when issued and paid for
in accordance with the terms of the Warrants will be validly issued, fully paid
and nonassessable, and will not be subject to preemptive, co-sale, right of
first refusal or any other similar rights of the shareholders of the Company or
any liens or encumbrances, other than those created by the Purchaser or arising
under federal or state securities laws. The Company has not granted any
registration rights which are still in effect with respect to its securities
other than the registration rights set forth herein. Issuance of the Shares, the
Warrants and the Warrant Shares or any of them does not and will not constitute
a default under or give rise to a right of termination, cancellation,
restriction or acceleration of any right or obligation of the Company or its
Subsidiary or a loss of any benefit to which the Company or its Subsidiary is
entitled under any provision of any agreement, contract or other instrument
binding upon or applicable to the Company or its Subsidiary or any of the
properties, assets, licenses, franchises, permits or other similar
authorizations of either of them.
4.4 SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has filed in a timely
manner all documents that it was required to file with the Securities and
Exchange Commission ("SEC") under Sections 13, 14(a) and 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), during the 36 months
preceding the date of this Agreement. As of their respective filing dates (or,
if amended, when amended), all documents filed by the Company with the SEC,
whether under the Exchange Act or under the Securities Act of 1933, as amended
(the "Securities Act"), during such 36-month period (the "SEC Documents")
complied in all material respects with the requirements of the Exchange Act or
the Securities Act, as the case may be. None of the SEC Documents as of their
respective dates contained any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Company and
its Subsidiary included in the SEC Documents (the "Financial Statements") comply
as to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto. The
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied and fairly present the consolidated
financial position of the Company and its Subsidiary at the dates thereof and
the results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal, recurring adjustments
and the absence of footnotes). There is no material liability or commitment of
the Company or its Subsidiary that is required to be reflected in the Financial
Statements which is not reflected in the most recent Financial Statements except
commitments made since the date of such Financial Statements in the ordinary
course of business. There have not been any changes in the assets, liabilities,
financial condition or operations of the Company or its Subsidiary from those
reflected in the most recent Financial Statements, except changes in the
ordinary course of business that have not had and are not reasonably expected to
have a
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material adverse effect on the business, properties, financial condition
or results of operations of the Company or its Subsidiary.
4.5 INTELLECTUAL PROPERTY. (a) Each of the Company and its Subsidiary has
sufficient title and ownership of all material patents, patent rights,
inventions, trademarks, service marks, copyrights, trade secrets, proprietary
rights, processes and know-how (collectively, "Intellectual Property") owned or
used by it or that are necessary for the conduct of its business as presently
conducted and believes it can obtain, on commercially reasonable terms, any
additional rights necessary for its business as proposed to be conducted, and
the Intellectual Property does not, and will not, conflict with or constitute an
infringement of the rights of others;
(b) There are no outstanding options, licenses (whether to or from the
Company) or agreements of any kind relating to the Intellectual Property
described in paragraph (a) of this Section 4.5 or granting rights to any
other person to manufacture, license, produce, assemble, market or sell
products or services derived or derivable from the Intellectual Property of
the Company or its Subsidiary, nor is the Company or its Subsidiary bound by
or a party to any options, licenses or agreements of any kind with respect to
the Intellectual Property of any other person or entity;
(c) Neither the Company nor its Subsidiary has received any
communications alleging that such person or any of its employees has violated
or infringed or, by conducting its business as proposed, would violate or
infringe, any of the Intellectual Property of any other person or entity;
(d) Neither the Company nor its Subsidiary is aware that any of its
employees is obligated under any contract (including licenses, covenants, or
commitments of any nature) or other agreement, or subject to any judgment,
decree, or order of any court or administrative agency, that would interfere
with the use of such employee's best efforts to promote the interests of the
Company or its Subsidiary with respect to the Intellectual Property of the
Company or its Subsidiary or otherwise or that would conflict with the
business of the Company or its Subsidiary as proposed to be conducted; and
(e) Neither the execution nor delivery of this Agreement, nor the
carrying on of the business of the Company or its Subsidiary by the employees
of such person, nor the conduct of the business of the Company or its
Subsidiary as proposed, will, to the Company's knowledge, conflict with or
result in a breach of the terms, conditions, or provisions of, or constitute
a default under, any contract, covenant, or instrument under which any of
such employees is now obligated. The Company does not believe it is or will
be necessary to utilize any inventions of any of the employees of the Company
or its Subsidiary (or people such person currently intends to hire) made
prior to their employment by such person.
4.6 PROPERTIES. The Company and its Subsidiary have good and valid title to all
of the properties and assets reflected as owned by the Company or its Subsidiary
in the Financial Statements, free and clear of all material liens, mortgages
(statutory or otherwise), security interests, pledges, claims or encumbrances
except those, if any, disclosed in the Financial Statements. The Company and its
Subsidiary hold their leased properties under valid and
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binding leases, with such exceptions as are not materially significant in
relation to the business of the Company or its Subsidiary. The Company and
its Subsidiary own or lease all of such properties as are necessary to its
operations as now conducted.
4.7 CAPITALIZATION. The authorized capital stock of the Company consists of
35,000,000 shares of Common Stock and 5,000,000 shares of preferred stock. There
are 24,176,205 shares of Common Stock and no shares of Preferred Stock
outstanding as of the Effective Date, and, excluding the exercise of vested
options and warrants outstanding at the discretion of the holder thereof and
shares purchased through the Company's existing employee stock purchase plan,
immediately prior to the Closing, 24,176,205 shares of Common Stock and no
shares of Preferred Stock will be outstanding. The certificates evidencing the
Shares and the Warrant Shares will be in due and proper legal form and will be
duly authorized for issuance by the Company. All of the issued and outstanding
securities of the Company have been duly authorized and validly issued, are
fully paid and nonassessable, have been issued in compliance with federal, state
and other applicable laws and were issued without violation of any preemptive,
co-sale or other right. Except as otherwise disclosed in the SEC Documents and
in the Financial Statements, there is no outstanding option, warrant, agreement
or other right calling for the issuance or redemption of, and there is no
commitment, plan or arrangement to issue or redeem, any securities of the
Company. The Company does not have any binding agreement with respect to the
acquisition or purchase of the securities of or owned by any person or entity or
the acquisition of the business, assets or liabilities of any person or entity,
and the Company does not have any agreement or understanding with respect to the
disposition or sale of its business, or any of its material assets or property.
4.8 LITIGATION. There is no pending or, to the Company's knowledge, threatened,
action, suit or other proceeding to which the Company or its Subsidiary is a
party or to which the property or assets of the Company or its Subsidiary is
subject which might result in a material adverse effect on the business,
properties, financial condition or results of operations of the Company or its
Subsidiary.
4.9 NO DEFAULTS. Neither the Company nor its Subsidiary is in violation or
default of any provisions of its Articles of Incorporation or Bylaws, or any
organizational documents, or in breach with respect to any provision of any
agreement, judgment, decree, order, mortgage, deed of trust, lease franchise,
license, indenture, permit or other instrument to which it is a party or by
which it or any of its properties are bound which violation, default or breach
would have a material adverse effect on the business, properties, financial
condition or results of operations of the Company or its Subsidiary, and there
does not exist any state of facts which constitutes an event of default on the
part of the Company or its Subsidiary as defined in such documents or which,
with notice or lapse of time or both, would constitute such an event of default.
4.10 MATERIAL AGREEMENTS. Each of the Company and its Subsidiary is a party to
all agreements that are necessary for the conduct of the business of such person
as presently conducted and all such agreements are currently in effect. Neither
the Company nor its Subsidiary is in breach of any provision of any such
agreement where such breach would have a material adverse effect on the
business, properties, financial condition or results of operations of the
Company or its Subsidiary.
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4.11 GOVERNMENTAL CONSENTS; COMPLIANCE WITH LAW. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement except for (i) any filings required by state
securities laws and (ii), if required, the filing of a notification and report
form under the United States Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act"). Each of the Company and its Subsidiary is
conducting business in compliance in all material respects with all applicable
laws, rules and regulations of the jurisdictions in which it is conducting
business, including but not limited to, all applicable local, state and federal
environmental laws and regulations.
4.12 INSURANCE. Each of the Company and its Subsidiary maintains insurance of
the types and in the amounts generally deemed adequate for its business covering
all risks customarily insured against, all of which insurance is in full force
and effect.
4.13 INVESTMENT COMPANY. The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
4.14 TAXES. Each of the Company and its Subsidiary has filed all necessary
federal, state, local, and foreign income and franchise tax returns and has paid
or accrued all taxes shown as due thereon except for such taxes as are being
contested in good faith, and the Company has no knowledge of any tax deficiency
which has been or might be asserted or threatened against the Company or its
Subsidiary which would have a material adverse effect on the business,
properties, financial condition or results of operations of the Company or its
Subsidiary.
4.15 LISTING. The Company's Common Stock is traded on The Nasdaq National
Market.
4.16 BROKER'S FEE. The Company represents that there are no brokers or finders
entitled to compensation by the Company or its Subsidiary in connection with any
of the transactions referred to or contemplated hereby, and shall indemnify the
Purchaser for any such fees for which the Company or its Subsidiary is
responsible.
4.17 BUSINESS COMBINATION ACT. As contemplated by Minnesota Statutes, Section
302A.673, the Company has formed a committee composed of all of the Board's
disinterested directors, which Committee has approved the acquisition of Common
Stock to be made pursuant to this Agreement on the Closing Date and thereafter
in the open market, in private purchases or otherwise, and, accordingly, Section
302A.673 does not impose any limitation of a "business combination" between the
Company and the Purchaser.
4.18 DISCLOSURE. No representation or warranty of the Company contained in this
Agreement or in the schedule of exceptions or in any bring-down certificate
requested to be delivered to the purchaser at closing contains or will contain
any untrue statement of a material fact or omit to state a material fact
required to make the statements therein not misleading.
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants as of the date hereof to the Company as follows:
5.1 INVESTMENT PURPOSES.
(a) The Purchaser acknowledges that the Shares and the Warrants are
being issued in reliance upon the exception from the registration requirements
of the Securities Act provided by Section 4(2) thereof and as such the Shares
and the Warrants will be "restricted securities" within the meaning of Rule 144.
(b) The Purchaser is acquiring the Shares and the Warrants pursuant to
this Agreement in the ordinary course of its business and for its own account
for investment only and with no present intention of distributing any of such
Shares or Warrants or any arrangement or understanding with any other persons
regarding the distribution of such Shares or Warrants except in each case as
conforms with all applicable requirements of the Securities Act, applicable blue
sky laws and all rules and regulations promulgated thereunder.
(c) The Purchaser will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) any of the securities purchased
hereunder except in compliance with the Securities Act, applicable blue sky
laws, and the rules and regulations promulgated thereunder.
(d) The Purchaser has, in connection with its decision to acquire the
Shares and the Warrants, relied with respect to the Company and its affairs
solely upon the SEC Documents and the other information delivered to the
Purchaser by the Company as described in Section 4.4 above and the
representations and warranties of the Company contained herein.
(e) The Purchaser is an "accredited investor" within the meaning of
Rule 501 of Regulation D promulgated under the Securities Act.
(f) The Purchaser has full right, power, authority and capacity to
enter into this Agreement and to consummate the transactions contemplated hereby
and has taken all necessary action to authorize the execution, delivery and
performance of this Agreement. Upon the execution and delivery of this Agreement
by the Purchaser, this Agreement shall constitute a valid and binding obligation
of the Purchaser, enforceable in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting the enforcement of creditors' rights
generally, (ii) as limited by equitable principles generally, including any
specific performance, and (iii) as to those provisions of Section 10 relating to
indemnity or contribution.
5.2 NO ADVICE. The Purchaser understands that nothing in this Agreement or any
other materials presented to the Purchaser in connection with the acquisition of
the Shares and the Warrants constitutes legal, tax or investment advice to the
Purchaser. The Purchaser has consulted such legal, tax and investment advisors
as it, in its sole discretion, has deemed necessary or appropriate in connection
with its purchase of the Shares and the Warrants.
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5.3 RESTRICTION ON TRANSFER. The Purchaser understands that: (a) other than to a
person directly or indirectly controlling, controlled by, or in common control
with, the Purchaser (any such person, an "Affiliate"), neither the Shares nor
the Warrants will be transferable in the absence of a registration under the
Securities Act or an exemption therefrom or in the absence of compliance with
any term of this Agreement; (b) the Company may provide stop transfer
instructions to its transfer agent with respect to the Shares and the Warrants
in order to enforce the restrictions contained in this Section 5.3 and (c) each
certificate representing Shares shall be in the name of the Purchaser and shall
bear substantially the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR REGISTERED OR QUALIFIED UNDER THE SECURITIES
LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY ONLY BE SOLD,
PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF BY PURCHASER IF
SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT AND REGISTERED OR
QUALIFIED UNDER ANY APPLICABLE STATE OR OTHER SECURITIES LAWS, UNLESS
THE COMPANY DETERMINES THAT EXEMPTION FROM SUCH REGISTRATION
REQUIREMENT IS AVAILABLE."
5.4 BROKER'S FEE. The Purchaser represents that there are no brokers or finders
entitled to compensation by the Purchaser in connection with any of the
transactions referred to herein or contemplated hereby, and shall indemnify the
Company for any such fees for which the Purchaser is responsible.
SECTION 6. COVENANTS OF THE PARTIES.
6.1 ACCESS TO INFORMATION. For a period beginning on the Effective Date and
continuing until the Closing, the Company shall afford to the Purchaser and its
agents and representatives full access, at reasonable times and in a reasonable
manner, to all of its premises, facilities, properties, books and records and
shall make its directors, officers, agents reasonably available to confer with
the Purchaser and its agents and representatives. The Purchaser shall have the
right to make copies, extracts and summaries of all such reports, books, records
and information, subject, however, to any obligations of the Company to any
other persons. The Company shall notify the Purchaser of any material change in
the business of the Company or in its operations or properties, or of any
governmental complaints, investigations or hearings (or communications
indicating the same may be contemplated) or of the institution, continuation or
threat of any litigation involving the Company or any affiliate of the Company
or any of its assets, and will keep the Purchaser informed of such events.
6.2 MAINTENANCE OF LISTING. For so long as the Company is obligated to register
Registrable Securities as provided in Section 10, the Company will use its
reasonable best efforts to maintain its listing on The Nasdaq National Market or
a national securities exchange, as defined in the Exchange Act.
6.3 FILINGS. The parties shall consult and fully cooperate with and provide
assistance to each other in preparing and filing as soon as practicable all
consents, approvals and authorizations
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necessary or advisable to be made or obtained from any third party or
governmental agency in order to consummate the transactions contemplated
hereby.
6.4 PURCHASE RIGHT. During the period ending on the date two years after the
Closing Date (the "Two-Year Period"), the Company shall not issue any
additional shares of Common Stock or preferred stock (other than pursuant to
(1) employee/director compensation plan(s), including options, approved by a
majority of the independent directors of the Company, (2) options, warrants
and convertible debt outstanding on the Effective Date, (3) warrants granted
in connection with commercially standard credit/financing arrangements
approved by a majority of the board of directors and exercisable, in
aggregate, into no more than the number of shares representing 5% of the
outstanding Common Stock on the Effective Date and (4) after complying with
the provisions of Sections 6.7 and 6.8, lock-up or option agreements in
connection with a definitive acquisition agreement referred to in Section 6.7
and 6.8) unless (A) the Purchaser has first been offered (subject to the
preemptive rights of the "Purchasers" under the Preferred Stock Purchase
Agreement referred to in Section 9.6 to maintain their pro rata ownership in
the Company) the right to purchase such shares (i) under terms and conditions
at least as favorable to the Purchaser as those proposed to be offered to any
third party or (ii) if such shares are proposed to be sold in an underwritten
public offering, under terms and conditions at least as favorable to the
Purchaser as those proposed to be offered in the public offering and (B) the
Purchaser does not accept such offer within ten-business days after the date
of such offer. In addition, during the Two-Year Period the Company shall not
without the Purchaser's consent issue additional shares of Common Stock or
preferred stock to any person (other than the Purchaser) in an amount which
would, when aggregated with the Common Stock or preferred stock owned by such
person, provide such person with more than 20% of the fully diluted voting
power of the Company. For the purposes of this Agreement, (i) "voting power"
means the ownership of shares of capital stock of the Company entitling the
holder to vote for the election of directors generally, (ii) any calculation
of the percentage of "voting power" shall be based (both in the numerator and
denominator) on the number of shares possessing such voting power actually
outstanding without regard to warrants, options or convertible securities and
(iii) any calculation of the percentage of "fully diluted voting power" shall
be based (both in the numerator and denominator) on the number of shares
possessing such voting power that would be outstanding giving effect to the
exercise or conversion of warrants, options and convertible securities.
6.5 OPEN MARKET PURCHASES. The Purchaser shall have the right to increase its
ownership in the Company through open market transactions or in block
transactions from existing shareholders, subject to applicable provisions of the
Minnesota Business Corporation Act, Minnesota Statutes, Chapter 302A. To the
extent the Company opts out of the provisions of Minnesota Statutes, Section
302A.671 ("Control Share Acquisition Act") with respect to any shareholder or
potential shareholder of the Company, the Company shall similarly and at the
same time opt out with respect to the Purchaser.
6.6 CHANGE OF CONTROL. During the period ending three years after the Closing
Date, and so long as the Purchaser owns at least three percent of the voting
power of the Company, the Company shall not implement any shareholder rights
plan or poison pill.
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6.7 NON-SOLICITATION. During the Two-Year Period, the Company shall not seek or
encourage any Takeover Proposal from any person other than the Purchaser unless
the Company's board of directors in good faith has determined, after receiving
the advice of a nationally recognized investment bank and the Company's outside
legal counsel, that there has been a sustained and substantial deterioration in
the Company's business that requires the Company's board of directors to seek a
sale of the business because the Company lacks any other practical alternative
(a "Required Sale Situation"). For purposes of this Agreement, "Takeover
Proposal" means any proposal for a merger (other than a reincorporation or
reorganization which does not change the outstanding ownership of the Company)
or business combination of the Company or any of its Subsidiaries or any
proposal or offer to acquire in any manner, directly or indirectly, a 33% or
greater equity interest in, a 33% or greater portion of the voting securities
of, or a 33% or greater portion of the assets of the Company and its
Subsidiaries taken as a whole. If a Takeover Proposal (the "First Proposal") is
presented during a Required Sale Situation, the Company shall provide the
Purchaser with the details of the First Proposal (including price, terms and the
identity of the offeror) and ten-business days to respond with a counter
proposal before the Company may accept the First Proposal or enter into any
lock-up/break-up agreement with respect thereto. If the Purchaser agrees to meet
the First Proposal (as to price and terms) within such initial ten-business day
period, then the Company may, for an additional ten-business day period
thereafter, solicit a superior proposal (based on price and terms) (the "Second
Proposal") to the First Proposal. In the event that a Second Proposal is
presented within such second ten-business day period, the Company shall provide
the Purchaser with the details of the Second Proposal (including price, terms
and the identity of the offeror). The Company may not accept such Second
Proposal (or enter into any lock-up/break-up agreement with respect thereto)
during an additional ten-business day period. If the Purchaser offers a superior
proposal (based on price and terms) to the Second Proposal (the "Topping Bid")
within such third ten-business day period, the Company shall enter into a
definitive acquisition agreement with the Purchaser on the basis of such Topping
Bid, which definitive agreement shall not provide for a "superior
offer/fiduciary out" and shall require, at the Purchaser's election, a
shareholder vote even in the face of a subsequent competing offer, unless
otherwise prohibited by law. If the Purchaser fails to offer a Topping Bid
within such third ten-business day period, the Company may accept the Second
Proposal. If the Company is permitted to accept a First Proposal or a Second
Proposal but fails to consummate the transaction contemplated thereby within 180
days after it is permitted to accept such Proposal, the provisions of this
Section 6.7 shall be once again complied with AB INITIO. Any definite
acquisition agreement entered into pursuant to the First Proposal or the Second
Proposal need not provide for a "superior offer/fiduciary out" and may require a
shareholder vote even in the face of a subsequent competing offer, unless
otherwise prohibited by law.
6.8 THIRD-PARTY UNSOLICITED OFFER. If during the Two-Year Period a person other
than the Purchaser presents the Company with any unsolicited Takeover Proposal
(the "First Proposal"), the Company shall provide the Purchaser with the details
of the First Proposal (including price, terms and the identity of the offeror)
and ten-business days to respond with a counter proposal before the Company may
accept the First Proposal or enter into any lock-up/break-up agreement with
respect thereto. If the Purchaser agrees to meet the First Proposal (as to price
and terms) within such initial ten-business day period, then the Company may,
for an additional ten-business day period thereafter, solicit a superior
proposal (based on price and terms) (the
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"Second Proposal") to the First Proposal. In the event that a Second Proposal
is presented within such second ten-business day period, the Company shall
provide the Purchaser with the details of the Second Proposal (including
price, terms and the identity of the offeror). The Company may not accept
such Second Proposal (or enter into any lock-up/break-up agreement) during an
additional ten-business day period. If the Purchaser offers a superior offer
(based on price and terms) to the Second Proposal (the "Topping Bid") within
such third ten-business day period, the Company shall enter into a definitive
acquisition agreement (including appropriate lock-up/break-up agreement) with
the Purchaser on the basis of such Topping Bid and such agreement shall not
provide for a "superior offer/fiduciary out" and shall require, at the
Purchaser's election, a shareholder vote even in the face of a subsequent
competing offer, unless otherwise prohibited by law. If the Purchaser fails
to offer a Topping Bid within such third ten-business day period, the Company
may accept the Second Proposal. If the Company is permitted to accept a First
Proposal or a Second Proposal but fails to consummate the transaction
contemplated thereby within 180 days after it is permitted to accept such
Proposal, the provisions of this Section 6.8 shall be once again complied
with AB INITIO. Any definite acquisition agreement entered into pursuant to
the First Proposal or the Second Proposal need not provide for a "superior
offer/fiduciary out" and may require a shareholder vote even in the face of a
subsequent competing offer, unless otherwise prohibited by law.
6.9 BREAK-UP FEE/TERMINATION. If the Purchaser agrees to meet a First Proposal
under Section 6.7 or 6.8 above (but does not provide a Topping Bid) and the
Company enters into a definitive acquisition agreement with a third party within
180 days of the expiration of the Two-Year Period, the Company shall pay the
Purchaser 3% of the value of the transaction. The provisions of Section 6.7 and
6.8 shall terminate and be of no further force unless the Purchaser owns 14% of
the voting power of the Company by the close of business on November 30, 2000.
6.10 GOVERNANCE. The number of directors comprising the Company Board of
Directors shall be not less than seven and not more than nine. The Purchaser
shall be entitled to nominate one director to the Company's Board of Directors,
except that such right shall be suspended to the extent the Purchaser's
ownership falls below 3% of the voting power of the Company and in that event
the Purchaser shall cause any director so nominated and elected to resign. At
any time the Purchaser obtains 18% of the voting power of the Company, the
Purchaser shall be entitled to nominate one additional director to the Company's
Board of Directors, except such right shall be suspended to the extent the
Purchaser's ownership falls below 18% of the voting power of the Company because
of the sale of Common Stock owned by it or is otherwise falls below 15% of the
voting power of the Company and in that event the Purchaser shall cause one of
its two directors so nominated and elected to resign. As long as the Purchaser
holds Common Stock having at least 18% of the voting power of the Company, the
Purchaser shall be entitled to nominate that number of directors (rounded to the
nearest whole) proportionate to its voting power in the Company. So long as 20%
or more of the Company's voting power is owned by persons who are not affiliates
of the Company or the Purchaser, the Company shall have at least three
independent directors. If the Purchaser is entitled to nominate one or more
directors, the board of directors of the Company shall use its reasonable best
efforts to cause such nominee(s) to be elected to the board of directors.
SECTION 7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS;
INDEMNIFICATION.
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7.1 SURVIVAL. Notwithstanding any investigation made by any party to this
Agreement, all covenants, agreements, representations and warranties made by the
Company and the Purchaser herein and in the certificates for the securities
delivered pursuant hereto shall survive the execution of this Agreement, the
delivery to the Purchaser of the certificates representing the Shares and the
Warrants, and the payment thereof, until the fifth anniversary of the Closing
Date, except for the representations set forth in Section 4.2, 4.7 and 4.16 and
the representations set forth in the first three sentences of Section 4.3, which
shall survive indefinitely, and the representations as to taxes set forth in
Section 4.14, which shall survive for the longer of (i) the fifth anniversary of
the Closing Date and (ii) the period expiring 90 days after the expiration of
the period during which a claim by the applicable taxing authority for a
deficiency or other tax adjustment would not be barred by the statute of
limitations applicable to such taxes (any such period an "Indemnity Period").
7.2 PURCHASER'S RIGHT TO INDEMNIFICATION. Subject to the provisions of this
Section 7, the Company hereby agrees to indemnify and hold harmless the
Purchaser and the employees, agents, directors, officers, equity holders,
successors, predecessors, assigns and affiliates of any of them (collectively,
the "Purchaser Indemnified Parties") from and against (i) any and all losses,
obligations, liabilities, damages, claims, deficiencies, costs and expenses
(including, but not limited to, the amount of any settlement entered into
pursuant hereto and all reasonable legal and other expenses incurred in
connection with the investigation, prosecution or defense of the matter but
excluding consequential damages) (collectively, "Claims"), which may be asserted
against or sustained or incurred by the Purchaser Indemnified Parties in
connection with, arising out of, or relating to (A) any breach or alleged breach
of any of the representations, warranties, agreements and covenants made by the
Company herein or in any certificate or other document delivered to any
Purchaser Indemnified Party by or on behalf of the Company in connection with
this Agreement; or (B) any false, incorrect or misleading representation or
warranty made by or on behalf of the Company herein or in any certificate or
other document delivered to any Purchaser Indemnified Party by or on behalf of
the Company in connection with this Agreement; and (ii) any and all costs and
expenses (including, but not limited to, reasonable legal expenses) incurred by
any Purchaser Indemnified Party in connection with the enforcement of its rights
under this Agreement. No claim for indemnification pursuant to this Section 7
may be commenced after the relevant Indemnity Period; PROVIDED, HOWEVER, that
claims made within such Indemnity Period shall survive to the extent of the
Claim covered thereby until such Claim is finally determined and, if applicable,
paid. The parties to this Agreement acknowledge that such indemnification
provisions apply only with respect to the Shares, the Warrants, the Warrant
Shares and the shares of Common Stock issued or issuable as dividends on, or
other distributions with respect to the Shares, the Warrants and the Warrant
Shares; and any other security issued or issuable in exchange for, or in
replacement of, the Shares, the Warrants and the Warrant Shares.
7.3 PROCEDURE FOR CLAIMS.
(a) Promptly, but in any event within 10 days after obtaining
knowledge of any claim or demand which may give rise to, or could reasonably
give rise to, a claim for indemnification hereunder (an "Indemnification
Claim"), the Purchaser, to the extent it desires to be indemnified for any
claims for any such claim or demand, shall give written notice to the Company
of such
12
Indemnification Claim ("Notice of Claim"). A Notice of Claim shall be given
with respect to all Indemnification Claims; PROVIDED, HOWEVER, that the failure
to give a timely Notice of Claim to the Company shall not relieve the Company
from any liability that it may have to the Purchaser Indemnified Parties
hereunder to the extent that the Company is not prejudiced by such failure. The
Notice of Claim shall set forth the amount (or a reasonable estimate) of the
loss, damage or expense suffered, or which may be suffered, by the Purchaser
Indemnified Party as a result of such Indemnification Claim and the aggregate
amount of all Indemnification Claims to date and a brief description of the
facts giving rise to such Indemnification Claim. The Purchaser shall furnish to
the Company such information (in reasonable detail) as the Purchaser may have
with respect to such Indemnification Claim (including copies of any summons,
complaint or other pleading which may have been served on it and any written
claim, demand, invoice, billing or other document evidencing or asserting the
same).
(b) If the claim or demand set forth in the Notice of Claim is a claim
or demand asserted by a third party (a "Third Party Claim"), the Company shall
have fifteen days (or such shorter period (but not less than ten days) if any
answer or other response or filing with respect to the pleadings served by the
third party is required prior to the fifteenth day) after the date of receipt by
the Company of the Notice of Claim (the "Notice Date") to notify the Purchaser
in writing of the election by the Company to defend the Third Party Claim on
behalf of the Purchaser Indemnified Parties.
(c) If the Company elects to defend a Third Party Claim on behalf of
the Purchaser Indemnified Parties, the Purchaser shall make available to the
Company and its agents and representatives all records and other materials in
the Purchaser's possession which are reasonably required in the defense of the
Third Party Claim and the Company shall pay any expenses payable in connection
with the defense of the Third Party Claim as they are incurred (whether incurred
by the Purchaser or the Company).
(d) If the Company has assumed control of the defense, the Company may
contest or settle the Third Party Claim on such terms as the Company may choose,
PROVIDED, HOWEVER, that the Company will not have the right, without the prior
written consent of the Purchaser, to settle any such claim if such settlement
(i) arises from or is part of any criminal action, suit or proceeding (ii)
contains a stipulation to, confession of judgment with respect to, or admission
or acknowledgment of, any liability or wrongdoing on the part of any Purchaser
Indemnified Party, (iii) relates to any foreign federal, state or local tax
matters, (iv) provides for injunctive relief, or other relief other than
damages, which is binding on any Purchaser Indemnified Party, (v) does not fully
release all Purchaser Indemnified Parties with respect to the relevant Third
Party Claim or (vi) has any res judicata or collateral estoppel effect that
could be adverse to any Purchaser Indemnified Party.
(e) If the Company elects to defend a Third Party Claim, the Purchaser
Indemnified Parties shall have the right to participate in the defense of the
Third Party Claim, at the Purchaser Indemnified Parties' expense (and without
the right to indemnification for such expense under this Agreement); PROVIDED,
HOWEVER, that the reasonable fees and expenses of counsel retained by the
Purchaser Indemnified Parties shall be at the expense of the Company if (A) the
use of the counsel chosen by the Company to represent the Purchaser Indemnified
Parties would present
13
such counsel with a conflict of interest; (B) the parties to such proceeding
include both Purchaser Indemnified Parties and the Company and there may be
legal defenses available to Purchaser Indemnified Parties which are different
from or additional to those available to the Company; (C) within ten days
after being advised by the Company of the identity of counsel to be retained
to represent the Purchaser Indemnified Parties, the Purchaser Indemnified
Party affected by such claim shall have objected to the retention of such
counsel for valid reasons (which shall be stated in a written notice to the
Company), and the Company shall not have retained different counsel
reasonably satisfactory to the Purchaser Indemnified Party; or (iv) the
Company shall authorize the Purchaser Indemnified Parties to retain separate
counsel at the expense of the Company.
(f) If the Company elects to defend a Third Party Claim, and does not
defend a Third Party Claim in good faith, the Purchaser Indemnified Parties
shall have the right, in addition to any other right or remedy it may have
hereunder, at the sole and exclusive expense of the Company, to defend such
Third Party Claim; PROVIDED, HOWEVER, that such expenses shall be payable by the
Company only if and when such Third Party Claim becomes payable.
(g) The Purchaser shall cooperate with the Company in the defense of
Third Party Claims. Subject to the foregoing, (i) the Purchaser Indemnified
Parties shall not have any obligation to participate in the defense of or to
defend any Third Party Claim and (ii) the Purchaser Indemnified Parties' defense
of or participation in the defense of any Third Party Claim shall not in any way
diminish or lessen the right to indemnification as provided in this Section 7.
SECTION 8. CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING. The Company's
obligation to complete the transactions contemplated by this Agreement shall
be subject to the following conditions to the extent not waived by the
Company:
8.1 RECEIPT OF PAYMENT. The Company shall have received payment from the
Purchaser, by check or wire transfer, of immediately available funds in the full
amount of $9,500,000.
8.2 CONSENTS AND APPROVALS. Any consents, waivers, clearances, approvals and
authorizations of regulatory or governmental bodies (including, without
limitation, the expiration or termination of the waiting period under the HSR
Act) and other persons that are necessary in connection with the consummation of
the transactions contemplated by this Agreement shall have been obtained.
8.3 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and warranties
made by the Purchaser in Section 5 shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the Closing Date.
SECTION 9. CONDITIONS TO THE PURCHASER'S OBLIGATION AT THE CLOSING. The
Purchaser's obligation to complete the transactions contemplated at Closing by
this Agreement shall be subject to the following conditions to the extent not
waived by the Purchaser:
9.1 DELIVERY OF SHARES. The Company shall have delivered to the
Purchaser stock certificates representing the Shares in
accordance with the terms of Section 3.2.
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9.2 WARRANTS. The Company shall have executed and delivered Warrants to the
Purchaser in accordance with the terms of Section 3.2.
9.3 CONSENTS AND APPROVALS. Any consents, waivers, clearances, approvals and
authorizations of regulatory or governmental bodies and other persons that are
necessary in connection with the consummation of the transactions contemplated
by this Agreement shall have been obtained.
9.4 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and warranties
made by the Company in Section 4 shall be true and correct in all material
respects (except with respect to representations and warranties that are
qualified as to materiality or material adverse effect, which representations
and warranties shall be true and correct in all respects) when made and as of
the Closing Date or any other date, if a representation or warranty specifically
refers to such other date, and the Purchaser shall have received a certificate
signed by the chief executive officer and chief financial officer of the
Company, or such other officers of the Company as agreed upon by the parties
hereto, that each of such representations and warranties is true and correct in
all material respects (except with respect to representations and warranties
that are qualified as to materiality or material adverse effect, which
representations and warranties shall be true and correct in all respects) on and
as of the Closing Date with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date, and that such
party has performed and complied with all of its obligations under this
Agreement which are to be performed or complied with on or prior to the Closing
Date.
9.5 CERTIFICATE AS TO ABSENCE OF MATERIAL ADVERSE EFFECT. The Purchaser shall
have received a certificate signed by a duly authorized officer of the Company
certifying that, since the date of the Company's most recent filing with the
SEC, there have not been any changes in the assets, liabilities, financial
condition or operations of the Company or its Subsidiary, except changes in the
ordinary course of business that have not had and are not expected to have a
material adverse effect on the business, properties, financial condition or
results of operations of the Company or its Subsidiary.
9.6 WAIVER OF RIGHT OF INVESTMENT. The Purchaser shall have received evidence
that the Company has received written waivers pursuant to the Preferred Stock
Purchase Agreement dated January 30, 1997, between the Company and the
"Purchasers" listed on Schedule A thereto sufficient to waive all rights to
invest under Section 7.5 thereof with respect to the transactions contemplated
by this Agreement (including without limitation the issuance of the Shares, the
Warrants and the Warrant Shares).
9.7 OPINION OF COUNSEL. Purchaser shall receive an opinion of Xxxxxx & Xxxxxxx
LLP as to the matters set forth on Exhibit D.
9.8 CLOSING PAPERS. The Purchaser shall have received the following, addressed
to it and in form and substance reasonably satisfactory to it:
15
(a) certified copies of the resolutions adopted by the Board of
Directors of the Company authorizing the execution, delivery and performance of
this Agreement, the issuance of the Shares, the Warrants and each of the other
agreements, instruments and transactions contemplated hereby, together with
certified copies of the resolutions adopted by a committee of disinterested
members of the Board of Directors approving the same and dated prior to the
Effective Date;
(b) certified copies of the Articles of Incorporation and By-laws of
each of the Company and its Subsidiary as in effect on the Closing Date; and
(c) a certificate of the Secretary of the Company dated the Closing
Date, as to the incumbency and signatures of the officers executing this
Agreement and all instruments executed pursuant hereto.
9.9 CERTAIN AGREEMENTS. The shareholders of the Company listed on Exhibit C
shall have entered into letter agreements with the Purchaser substantially in
the form of Exhibit C-1, which letters shall provide that such shareholders
shall enter into agreements with Purchaser that provide that when Purchaser
owns shares representing 12% or more of the voting power of the Company, they
will not transfer "in block" any shares, warrants, options or convertible
securities in the Company (except to their majority controlled financial
investor affiliates) unless they have first offered the Purchaser the right
to purchase such shares, warrants, options or convertible securities under
terms and conditions no less favorable to the Purchaser than as proposed to
be offered to any third party. For purposes of the preceding sentence, "in
block" shall mean (1) shares, warrants, options or convertible securities
representing 5% or more of the fully diluted voting power of the Company and
(2) with respect to transferees who (prior to the proposed transfer) are 5%
shareholders, shares, warrants, options or convertible securities
representing the lower of 3% of the fully diluted voting power of the Company
or that amount which would cause such transferee to hold more than 9% of the
fully diluted voting power of the Company. The agreements shall also provide
that if Purchaser sells or otherwise transfers shares of the Company such
that its voting power represents less than 12% of the voting power of the
Company or if the Purchaser is diluted such that its voting power represents
less than 10% of the voting power of the Company, then such transfer
restrictions shall be suspended. Fully diluted voting power shall have the
meaning provided in Section 6.4.
SECTION 10. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT.
10.1 DEFINITIONS. As used in this Section 10, the following terms shall have the
following meanings:
(a) "Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
(b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
16
(c) "Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement, and compliance with applicable
state securities laws.
(d) "Registrable Securities" shall mean (i) the Shares, (ii) the
Warrant Shares, (iii) other shares of the Company purchased by Purchaser so
long as Purchaser is deemed an affiliate of the Company and provided that
such shares shall only be deemed Registrable Securities if they are included
in a registration statement together with at least 33-1/3% of the Shares, and
(iv) stock issued in respect of the stock referred to in (i), (ii) or (iii)
as a result of a stock split, stock dividend, recapitalization or
combination. Notwithstanding the foregoing, Registrable Securities shall not
include otherwise Registrable Securities (i) sold to or through a broker or
dealer or underwriter in a public distribution or a public securities
transaction, (ii) sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof or (iii) the registration rights associated with such securities have
been terminated pursuant to Section 10.9 of this Agreement.
(e) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
10.2 REQUESTED REGISTRATION.
(a) If the Company shall receive from the Purchaser a written request
that the Company effect any registration with respect to not less than 33-1/3%
of the issued and outstanding Registrable Securities held by the Purchaser, the
Company shall as soon as practicable use its reasonable best efforts to register
(including, without limitation, the execution of an undertaking to file
post-effective amendments and any other governmental requirements) all
Registrable Securities which the Purchaser requests to be registered; PROVIDED,
that the Company shall not be obligated to file a registration statement
pursuant to this Section 10.2 (i) prior to two years from the Closing Date; (ii)
within 12 months of a prior request under this Section 10.2; (iii) within 120
days following the effective date of any registered offering of the Company's
securities to the general public in which the Purchaser shall have been able
effectively to register all Registrable Securities as to which registration
shall have been requested by the Purchaser; (iv) in any registration having an
aggregate offering price (before deduction of underwriting discounts and
expenses of sale) of less than $7,500,000; or (v) after the Company has effected
three such registrations pursuant to this Section 10.2; PROVIDED, HOWEVER, that
the Company shall be required to effect only one such registration to a
transferee (other than an affiliated entity), after permitted transfer of this
Agreement, pursuant to Section 12.6.
The Company shall file a registration statement covering the
Registrable Securities so requested to be registered as soon as practical, but
in any event within 90 days after receipt of the request of the Purchaser, and
shall use reasonable best efforts to have such registration statement promptly
declared effective by the Commission whether or not all Registrable Securities
requested to be registered can be included; PROVIDED, HOWEVER, that if the
Company shall furnish
17
to the Purchaser a certificate signed by the President of the Company stating
that in the good-faith judgment of the Board of Directors it would be
seriously detrimental to the Company and its shareholders for such
registration statement to be filed within such 90-day period and it is
therefore essential to defer the filing of such registration statement, the
Company shall have an additional period of not more than 90 days after the
expiration of the initial 90-day period within which to file such
registration statement; PROVIDED, that during such time the Company may not
file a registration statement for securities to be issued and sold for its
own account.
(b) If the Purchaser intends to distribute the Registrable Securities
covered by its request by means of an underwriting, it shall so advise the
Company as a part of its request. In that event, if so requested in writing by
the Company, the Purchaser shall negotiate with an underwriter selected by the
Company with regard to the underwriting of such requested registration. The
Company and the Purchaser shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this Section 10.2, if the
managing underwriter advises the Purchaser in writing that marketing factors
require a limitation of the number of shares to be underwritten, the Company
shall so advise the Purchaser, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
reduced accordingly; PROVIDED, HOWEVER, that securities to be included in such
registration statement as a result of piggyback registration rights as well as
any securities to be offered by the Company shall be excluded from the
registration statement prior to the exclusion of any Registrable Securities held
by the Purchaser.
10.3 PIGGYBACK REGISTRATION.
(a) If at any time or from time to time the Company shall determine
to register any of its securities, for its own account or the account of any
of its shareholders, other than a registration relating solely to employee
benefit plans, or a registration relating solely to an SEC Rule 145
transaction, a transaction relating solely to the sale of debt or convertible
debt instruments or a registration on any form (other than Form X-0, X-0 or
S-3, or their successor forms) 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) give to the
Purchaser written notice thereof as soon as practicable prior to filing the
registration statement and (ii) include in such registration and in any
underwriting involved therein all the Registrable Securities (except that
only Shares and Warrant Shares may be included during the two years following
the Closing) specified in a written request, made within 15 days after
receipt of such written notice from the Company by the Purchaser, except as
set forth in subsection 10.3(b).
(b) If the registration is for a registered public offering
involving an underwriting, the Company shall so advise the Purchaser as a
part of the written notice given pursuant to Section 10.3(a). In such event,
the right of the Purchaser to registration pursuant to this Section 10.3
shall be conditioned upon the Purchaser's participation in such underwriting
and the inclusion of the Purchaser's Registrable Securities in the
underwriting. The Purchaser and the Company shall enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by the Company. Notwithstanding any other provision of this
18
Section 10.3, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the number of Registrable Securities to be included in
the registration and underwriting.
10.4 EXPENSES OF REGISTRATION. All expenses incurred in connection with
the registrations pursuant to Sections 10.2 and 10.3, including without
limitation all registration, filing and qualification fees, printing expenses,
fees and disbursements of counsel for the Company and expenses of any special
audits of the Company's financial statements incidental to or required by such
registration, shall be borne by the Company, except that the Company shall not
be required to pay underwriters' fees, discounts or commissions relating to
Registrable Securities or fees of a separate legal counsel of the Purchaser.
10.5 REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to this Agreement, the Company will keep the Purchaser
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense the Company will:
(a) keep such registration pursuant to Sections 10.2 and 10.3
continuously effective for a period of 120 days, or, in each case, such
reasonable period necessary to permit the Purchaser to complete the distribution
described in the registration statement relating thereto, whichever first
occurs;
(b) promptly prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to comply with the provisions
of the Securities Act, and to keep such registration statement effective for
that period of time specified in Section 10.5(a);
(c) furnish such number of prospectuses and other documents
incident thereto as the Purchaser from time to time may reasonably request;
(d) use reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of a registration statement, or the
lifting of any suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction, at the earliest possible moment;
(e) register or qualify such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as the Purchaser
or underwriter reasonably requires (except that the Company shall not be
required to go register or qualify in any jurisdiction in which it would be
required to execute a general consent to service of process), and keep such
registration or qualification effective during the period set forth in
Section 10.5(a);
(f) cause all Registrable Securities covered by such registrations to be
listed on each securities exchange, including NASDAQ, on which similar
securities issued by the Company are then listed;
(g) cause its accountants to issue to the underwriter, if any, comfort
letters and updates thereof, in customary form and covering matters of the
type customarily covered in such letters with respect to underwritten
offerings;
19
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
Purchaser reasonably requests in order to expedite or facilitate the
disposition of such Registrable Securities;
(i) make available for inspection by Purchaser, any underwriter
participating in any disposition pursuant to such registration statement, and
any attorney, accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's officers, directors,
employees and independent accountants to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement;
(j) if the offering is underwritten, at the request of the Purchaser
furnish (i) an opinion of counsel representing the Company for the purposes
of such registration, addressed to the underwriters, stating that such
registration statement has become effective under the Securities Act and that
(A) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated under the Securities Act,
(B) the registration statement, the related prospectus and each amendment or
supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements or other financial data contained
therein) and (C) to such other effects as reasonably may be requested by
counsel for the underwriters and (ii) a letter from the independent public
accountants retained by the Company, addressed to the underwriters and to
such seller, stating that they are independent public accountants within the
meaning of the Securities Act and that, in the opinion of such accountants,
the financial statements of the Company included in the registration
statement or the prospectus, or any amendment or supplement thereof, comply
as to form in all material respects with the applicable accounting
requirements of the Securities Act, and such letter shall additionally cover
such other financial matters (including information as to the period ending
no more than five business days prior to the date of such letter) with
respect to such registration as such underwriters reasonably may request; and
(k) notify the Purchaser at any time a prospectus covered by such
registration statement is required to be delivered under the Securities Act,
of the happening of any event of which it has knowledge as a result of which
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
Notwithstanding any other provision of this Section 10, (i) the Company shall
not be required to file a registration statement during any period that such
filing is not permitted and (ii) the Purchaser shall suspend any sale of
Registrable Securities at the request of the Company for a period not exceeding
90 days.
10.6 INDEMNIFICATION.
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(a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Sections 10.2 or 10.3, the
Company will indemnify and hold harmless the Purchaser, each underwriter of such
Registrable Securities thereunder and each other person, if any, who controls
the Purchaser or underwriter within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which the
Purchaser, underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act or any state securities law
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, and will reimburse the
Purchaser, each of its officers, directors and partners, and each person
controlling the Purchaser, each such underwriter and each person who controls
any such underwriter, for any reasonable legal and any other expenses incurred
in connection with investigating, defending or settling any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage or liability arises
out of or is based on any untrue statement or omission based upon written
information furnished to the Company by an instrument duly executed by the
Purchaser or underwriter specifically for use therein.
(b) The Purchaser will indemnify and hold harmless the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company and each underwriter within the meaning of the Securities Act,
against all claims, losses, expenses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company, such directors, officers, partners, persons or
underwriters for any reasonable legal or any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed
by the Purchaser specifically for use therein; PROVIDED, HOWEVER, the total
amount for which the Purchaser, its officers, directors and partners, and any
person controlling the Purchaser, shall be liable under this Section 10.6(b)
shall not in any event exceed the aggregate proceeds received by the
Purchaser from the sale of Registrable Securities in such registration.
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(c) Each party entitled to indemnification under this Section 10.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claims as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not relieve
the Indemnifying Party of its obligations hereunder, unless such failure
resulted in actual detriment to the Indemnifying Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect of such claim or litigation.
(d) Notwithstanding the foregoing, to the extent that the provisions on
indemnification contained in the underwriting agreement entered into among
the Purchaser, the Company and the underwriters in connection with the
underwritten public offering are in conflict with the foregoing provisions,
the provisions in the underwriting agreement shall be controlling as to the
Registrable Securities included in the public offering.
(e) If the indemnification provided for in this Section 10.6 is held by
a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, claim, damage
or expense in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on the
other hand in connection with the statements or omissions which resulted in
such loss, liability, claim, damage or expense as well as any other relevant
equitable considerations. The relevant fault of the indemnifying party and
the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. Notwithstanding the foregoing, the amount
the Purchaser shall be obligated to contribute pursuant to this Section
10.6(e) shall be limited to an amount equal to the proceeds to the Purchaser
of the Restricted Securities sold pursuant to the registration statement
which gives rise to such obligation to contribute (less the aggregate amount
of any damages which the Purchaser has otherwise been required to pay in
respect of such loss, claim, damage, liability or action or any substantially
similar loss, claim, damage, liability or action arising from the sale of
such Restricted Securities).
(f) The indemnification provided by this Section 10.6 shall be a
continuing right to indemnification and shall survive the registration and
sale of any securities by any Person entitled to indemnification hereunder
and the expiration or termination of this Agreement.
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10.7 LOCKUP AGREEMENT. The Purchaser agrees in connection with any
registration of the Company's securities (whether or not the Purchaser is
participating in such registration), upon the request of the Company and the
underwriters managing any underwritten offering of the Company's securities,
not to sell, make any short sale of, loan, grant any option for the purchase
of, or otherwise dispose of any Registrable Securities (other than those
included in the registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time
from the effective date of such registration as the Company and the
underwriters may reasonably specify.
10.8 INFORMATION BY THE PURCHASER. The Purchaser included in any registration
shall promptly furnish to the Company such information regarding the
Purchaser and the distribution proposed by the Purchaser as the Company may
request in writing and as shall be required in connection with any
registration referred to herein.
10.9 TERMINATION OF RIGHTS.
(a) The rights of the Purchaser to cause the Company to register
securities under Sections 10.2 or 10.3 shall terminate at such time as the
Purchaser is able to dispose of all of its Registrable Securities in one
three-month period pursuant to the provisions of Rule 144.
(b) Notwithstanding the provisions of Section 10.9(a), all rights of the
Purchaser under this Agreement shall terminate at 5:00 P.M. Central time on
the date five years after the Closing Date.
10.10 COVENANTS RELATING TO RULE 144. The Company will file reports in
compliance with the Securities Exchange Act of 1934, as amended, and comply with
all rules and regulations of the Commission applicable to the use of Rule 144.
SECTION 11. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing, shall be sent by confirmed facsimile or mailed by
first-class registered or certified airmail, or nationally recognized overnight
express courier, postage prepaid, and shall be deemed given when so sent in the
case of facsimile transmission, or when so received in the case of mail or
courier, and addressed as follows:
if to the Company, to:
Diametrics Medical, Inc.
0000 Xxxxxx Xxxx
Xx. Xxxx Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Chairman, CEO and
President
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
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Xxxxxx & Whitney LLP
000 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
if to the Purchaser, to:
Hewlett-Packard Company
0000 Xxxxxxx Xxxxxx
Mail Stop 20 BT
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Director, Corporate Development
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Hewlett-Packard Company
0000 Xxxxxxx Xxxxxx
Mail Stop BQ
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Phone: (000) 000-0000
Fax: (000) 000-0000
Any change of an address set forth in this Section 11 may be accomplished by
means of a notice sent in accordance with the terms of this Section 11.
SECTION 12. MISCELLANEOUS.
12.1 WAIVERS AND AMENDMENTS. Neither this Agreement nor any provision
hereof may be changed, waived, discharged, terminated, modified or amended
except upon the written consent of the Company and the Purchaser.
12.2 SECTIONS; HEADINGS; DOLLAR AMOUNTS. Unless otherwise specified,
all references in this Agreement to "Sections" shall be to Sections of this
Agreement. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement. All currency referred to herein shall be in U.S. dollars.
12.3 SEVERABILITY. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
12.4 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Minnesota as applied to contracts
entered into and performed entirely in Minnesota by Minnesota residents, without
regard to conflicts of law principles.
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12.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties. Delivery of an executed counterpart by
facsimile shall be the same as delivery of an original counterpart.
12.6 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties
hereto; PROVIDED, that only the rights with respect to Section 10 may be
assigned as an entirety only to the transferee of the Shares, the Warrants
and the Warrant Shares. Without limiting the foregoing, the Purchaser shall
have the right to assign prior to Closing the right to purchase the Shares
and Warrants to an affiliated entity.
12.7 ENTIRE AGREEMENT. This Agreement and other documents delivered pursuant
hereto, including the exhibits, constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof.
12.8 PAYMENT OF FEES AND EXPENSES. Each of the Company and the Purchaser
shall bear its own expenses and legal fees incurred on its behalf with
respect to this Agreement and the transactions contemplated hereby. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year
first above written.
DIAMETRICS MEDICAL, INC.
By /s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Chairman, President and Chief
Executive Officer
HEWLETT-PACKARD COMPANY
By /s/ Xxxx X. Xxxxxx
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: Business Development Manager
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