[Execution Copy]
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INVESTMENT AGREEMENT
by and between
ENDOCARDIAL SOLUTIONS, INC.
and
MEDTRONIC ASSET MANAGEMENT, INC.
Dated as of April 26, 1996
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TABLE OF CONTENTS
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Specific Definitions . . . . . . . . . . . . . . . . . 1
1.2 Definitional Provisions . . . . . . . . . . . . . . . 5
PURCHASE OF COMMON STOCK . . . . . . . . . . . . . . . . . . . . 6
2.1 Purchase and Sale of Shares . . . . . . . . . . . . . 6
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . . 6
FIRST OFFER PURCHASE RIGHTS, BOARD DESIGNEE, AND
DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 First Offer Purchase Rights . . . . . . . . . . . . . 6
3.2 Right to Designate Board Member . . . . . . . . . . . 8
3.3 Distribution Rights . . . . . . . . . . . . . . . . . 8
3.4 Termination . . . . . . . . . . . . . . . . . . . . . 9
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . 10
4.1 Organization, Qualifications and Corporate Power . . . 10
4.2 Authorization of Agreement, Etc . . . . . . . . . . . 10
4.3 Validity . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 Financial Statements . . . . . . . . . . . . . . . . . 11
4.5 Litigation; Compliance with Law . . . . . . . . . . . 11
4.6 Proprietary Information of Third Parties . . . . . . . 12
4.7 Title to Properties . . . . . . . . . . . . . . . . . 12
4.8 Leasehold Interests . . . . . . . . . . . . . . . . . 12
4.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 12
4.10 No Defaults . . . . . . . . . . . . . . . . . . . . . 12
4.11 Patents, Trademarks, Etc . . . . . . . . . . . . . . . 13
4.12 Brokers . . . . . . . . . . . . . . . . . . . . . . . 13
4.13 Transactions With Affiliates . . . . . . . . . . . . . 13
4.14 Disclosure . . . . . . . . . . . . . . . . . . . . . . 13
REPRESENTATIONS AND WARRANTIES OF MEDTRONIC . . . . . . . . . . 14
5.1 Purchase of Shares . . . . . . . . . . . . . . . . . . 14
5.2 Corporate Authority . . . . . . . . . . . . . . . . . 14
COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . 15
6.1 Financial Statements, Reports, Etc . . . . . . . . . . 15
6.2 Inspection, Consultation and Advice . . . . . . . . . 16
6.3 Transactions with Affiliates . . . . . . . . . . . . . 16
6.4 Board Meetings . . . . . . . . . . . . . . . . . . . . 16
6.5 Proprietary Information and Employee Inventions
Agreements . . . . . . . . . . . . . . . . . . . . . . 16
6.6 Compliance with Laws . . . . . . . . . . . . . . . . . 16
6.7 Keeping of Records and Books of Account . . . . . . . 16
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REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . 17
7.1 Restrictions on Transfer . . . . . . . . . . . . . . . 17
7.2 Demand Registration . . . . . . . . . . . . . . . . . 18
7.3 Piggyback Registrations . . . . . . . . . . . . . . . 19
7.4 Form S-3 Registration . . . . . . . . . . . . . . . . 20
7.5 Expenses of Registration . . . . . . . . . . . . . . . 21
7.6 Obligations of the Company . . . . . . . . . . . . . . 22
7.7 Termination of Registration Rights . . . . . . . . . . 23
7.8 Delay of Registration . . . . . . . . . . . . . . . . 23
7.9 Indemnification . . . . . . . . . . . . . . . . . . . 23
7.10 Assignment of Registration Rights . . . . . . . . . . 26
7.11 Amendment of Registration Rights . . . . . . . . . . . 27
7.12 Limitation on Subsequent Registration Rights . . . . . 27
7.13 "Market Stand-Off" Agreement . . . . . . . . . . . . . 27
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1 Indemnification of Medtronic . . . . . . . . . . . . . 28
8.2 Indemnification of the Company . . . . . . . . . . . . 28
8.3 Third-Party Claims . . . . . . . . . . . . . . . . . . 28
8.4 Cooperation as to Indemnified Liability . . . . . . . 29
OTHER PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1 Non-Disclosure . . . . . . . . . . . . . . . . . . . . 29
9.2 Further Assurances . . . . . . . . . . . . . . . . . . 29
9.3 Complete Agreement . . . . . . . . . . . . . . . . . . 29
9.4 Survival of Representations, Warranties and
Agreements . . . . . . . . . . . . . . . . . . . . . . 30
9.5 Waiver, Discharge, Amendment, Etc . . . . . . . . . . 30
9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . 30
9.7 Public Announcement . . . . . . . . . . . . . . . . . 31
9.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . 31
9.9 Governing Law . . . . . . . . . . . . . . . . . . . . 31
9.10 Titles and Headings; Construction . . . . . . . . . . 31
9.11 Benefit . . . . . . . . . . . . . . . . . . . . . . . 31
9.12 Counterparts . . . . . . . . . . . . . . . . . . . . . 31
9.13 Parties in Interest . . . . . . . . . . . . . . . . . 31
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INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT is made and entered into as of April 26, 1996 by
and between ENDOCARDIAL SOLUTIONS, INC. (the "Company"), a Delaware corporation,
and MEDTRONIC ASSET MANAGEMENT, INC. ("Medtronic"), a Minnesota corporation.
RECITALS
WHEREAS, the Company desires to issue and sell to Medtronic, and Medtronic
desires to purchase from the Company, upon the terms and subject to the
conditions set forth in this Agreement, shares of the Company's Series C
Preferred Stock, which, assuming the conversion of such shares of Series C
Preferred Stock and of all other issued and outstanding shares of the Company's
Preferred Stock into shares of the Company's Common Stock, and the exercise of
all issued and outstanding options or warrants to purchase shares of the
Company's Common Stock, shall equal fifteen percent (15%) of the Company's
Capital Stock; and
WHEREAS, as a further condition to Medtronic's investment described above,
the Company is willing to grant to Medtronic certain rights, including: (i) the
right to purchase its pro rata portion of any issuances of additional securities
of the Company, (ii) the right to designate a member or observer of the
Company's Board of Directors, (iii) the right to have the shares of Common Stock
issuable upon conversion of the Series C Preferred Stock registered under the
Securities Act, (iv) the right, under certain circumstances, to acquire the
stock or the assets of the Company, and (v) the right, under certain
circumstances, to obtain exclusive distribution rights for certain of the
Company's products in territories outside North America.
AGREEMENT
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements contained herein, and for other valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
1.
DEFINITIONS
1.1 SPECIFIC DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth or as referenced below:
"AFFILIATE" of a specified person (natural or juridical) means a person
that directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified. "Control"
shall mean ownership of more than 50% of the shares of stock entitled to vote
for the election of directors in the case of a corporation, and more than 50% of
the voting power in the case of a business entity other than a corporation.
"AGREEMENT" means this Agreement and all exhibits and schedules hereto.
"BOARD" means the Company's Board of Directors.
"CAPITAL STOCK" means the issued and outstanding shares of the Company,
including shares of Common Stock and Preferred Stock.
"COMMON STOCK" means the Company's common stock, $.01 par value per share.
"CONFIDENTIAL INFORMATION" means know-how, trade secrets, and unpublished
information disclosed (whether before or during the term of this Agreement) by
one of the parties (the "disclosing party") to the other party (the "receiving
party") or generated under this Agreement, excluding information which:
(i) was already in the possession of the receiving party prior to
its receipt from the disclosing party (provided that the receiving party is
able to provide the disclosing party with reasonable documentary proof
thereof);
(ii) is or becomes part of the public domain by reason of acts not
attributable to the receiving party;
(iii) is or becomes available to the receiving party from a source
other than the disclosing party which source, to the best of the receiving
party's knowledge, has rightfully obtained such information and has no
obligation of non-disclosure or confidentiality to the disclosure party
with respect thereto;
(iv) is made available by the disclosing party to a third party
unaffiliated with the disclosing party on an unrestricted basis;
(v) has been independently developed by the receiving party without
breach of this Agreement or use of any Confidential Information of the
other party; or
(vi) has been or must be publicly disclosed by reason of legal,
accounting or regulatory requirements beyond the reasonable control, and
despite the reasonable efforts of the receiving party.
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All Confidential Information disclosed by one party to the other under this
Agreement shall be in writing and bear a legend "Company Proprietary," "Company
Confidential" or words of similar import or, if disclosed in any manner other
than writing, shall be preceded by an oral statement indicating that the
information is proprietary or confidential, and shall be followed by transmittal
of a reasonably detailed written summary of the information provided to the
receiving party with identification as Confidential Information designated as
above within thirty (30) days.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"FORM S-3" means such form under the Securities Act in effect on the date
hereof or any successor registration form under the Securities Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
"HOLDER" means Medtronic or any person owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with Section 7.8 hereof.
"INITIAL OFFERING" means the initial public offering of the Company's
Common Stock registered under the Securities Act.
"INITIATING HOLDERS" means Holders of more than fifty percent (50%) of the
Registrable Securities then outstanding.
"INTELLECTUAL PROPERTY" means letters patent and patent applications;
trademarks, service marks and registrations thereof and applications therefor;
copyrights and copyright registrations and applications therefor; all
discoveries, ideas, technology, know-how, trade secrets, processes, formulas,
drawings and designs, computer programs or software; and all amendments,
modifications, and improvements to any of the foregoing.
"INVESTORS' RIGHTS AGREEMENT" means that certain Amended and Restated
Investors' Rights Agreement, dated as of January 31, 1995, as amended as of the
date hereof, between the Company and the purchasers of the Series A Preferred
Stock and Series B Preferred Stock identified on the signature pages thereto.
"KNOWLEDGE" means actual knowledge of a fact or the knowledge which such
person could reasonably be expected to have based on reasonable inquiry. The
knowledge of an entity shall include the knowledge of such entity's officers.
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"LIENS" means liens, mortgages, charges, security interests, claims, voting
trusts, pledges, encumbrances, options, assessments, restrictions, or
third-party or spousal interests of any nature.
"NORTH AMERICA" means the United States of America and Canada.
"PREFERRED STOCK" means the Company's preferred stock, $.01 par value per
share, in such series or classes as may be designated by the Board from time to
time, including without limitation the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock.
"PURCHASED SHARES" means the shares of Series C Preferred Stock purchased
by Medtronic pursuant to Section 2.1.
"REGISTER," "REGISTER," and "REGISTRATION" means a registration effected by
preparing and filing a registration statement in compliance with the Securities
Act, and the declaration or ordering of effectiveness of such registration
statement.
"REGISTRABLE SECURITIES" means (i) the shares of Common Stock of the
Company issues or issuable upon conversion of the Purchased Shares, the Series A
Preferred Stock and the Series B Preferred Stock, and (ii) any shares of Common
Stock of the Company issued (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 under the Securities Act
or sold in a private transaction in which the transferror's rights under Article
7 of this Agreement or Article III of the Investors' Rights Agreement are not
assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" means the number of shares
determined by calculating the total number of shares of the Company's Common
Stock that are Registrable Securities and either (i) are then issued and
outstanding and (ii) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES means all expenses incurred by the Company in
complying with Section 7.2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements not to exceed Ten
Thousand Dollars ($10,000) of a single special counsel for the holders of
Registrable Securities, blue sky fees and expenses (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company); provided, however, that "Registration Expenses" shall not
include the expense of any special audits incident to or required by such
registration.
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"SEC" means the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SELLING EXPENSES" means all underwriting discounts and commissions
applicable to a sale of Registrable Securities.
"SERIES A PREFERRED STOCK" means the Company's Series A Preferred Stock,
$.01 par value per share.
"SERIES B PREFERRED STOCK" means the Company's Series B Preferred Stock,
$.01 par value per share.
"SERIES C PREFERRED STOCK" means the Company's Series C Preferred Stock,
$.01 par value per share, having the terms set forth in the Certificate of
Designations attached hereto as Exhibit A.
1.2 DEFINITIONAL PROVISIONS.
(a) The words "hereof," "herein," and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement
as a whole and not to any particular provisions of this Agreement.
(b) Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice-versa.
(c) References to an "Exhibit" or to a "Schedule" are, unless
otherwise specified, to one of the Exhibits or Schedules attached to or
referenced in this Agreement, and references to an "Article" or a "Section"
are, unless otherwise specified, to one of the Articles or Sections of this
Agreement.
(d) The term "person" includes any individual, partnership, joint
venture, corporation, trust, unincorporated organization or government or
any department or agency thereof.
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2.
PURCHASE OF COMMON STOCK
2.1 PURCHASE AND SALE OF SHARES. On the date hereof, the Company hereby
agrees to issue and deliver to Medtronic, and Medtronic hereby agrees to
purchase from the Company, 1,953,700 shares of Series C Preferred Stock (the
"Purchased Shares"), which, assuming the conversion of such shares of Series C
Preferred Stock and of all other issued and outstanding shares of the Company's
Preferred Stock into shares of Common Stock and the exercise of all issued and
outstanding options or warrants to purchase shares of Common Stock, represent
fifteen percent (15%) of the Company's Capital Stock as of the date hereof.
2.2 PURCHASE PRICE. The purchase price for the Purchased Shares shall be
Ten Million Dollars ($10,000,000) payable by wire transfer of immediately
available funds to the Company's account designated by the Company to Medtronic.
3.
FIRST OFFER PURCHASE RIGHTS, BOARD DESIGNEE, AND DISTRIBUTION
3.1 FIRST OFFER PURCHASE RIGHTS. In the event that during the four-year
period immediately following the date of this Agreement, the Company receives a
Third Party Offer (as defined below), the Company shall promptly give notice (a
"Notice") to Medtronic of its receipt of such Third Party Offer, but shall be
under no obligation to disclose, in the Notice or otherwise, the terms of the
Third Party Offer. For purposes of this Agreement, "Third Party Offer" means
either (a) a bona fide offer from a third party that is not an Affiliate of the
Company to purchase all or substantially all of the issued and outstanding
Capital Stock of the Company or to license, purchase or otherwise acquire,
directly or indirectly, in one or more related transactions, all or a
substantial portion of the assets (including the Company's Intellectual
Property) then used by the Company, other than the sale of inventory or the
replacement of equipment in the ordinary course of business or (b) a bona fide
offer from a third party that is not an Affiliate of the Company and that is a
competitor of Medtronic to purchase, directly or indirectly, in one or more
related transactions a twenty percent (20%) or greater interest in the Capital
Stock of the Company, assuming the exercise of all issued and outstanding
options and warrants to purchase Common Stock of the Company. For purposes of
this Agreement, "Third Party Offeror" shall mean the person or entity making the
Third Party Offer.
The Company shall, promptly after deliver of the Notice of the Third Party
Offer to Medtronic, prepare and deliver to Medtronic a written proposal (the
"Company Proposal") setting forth the price and material terms pursuant to which
the Company would be prepared to structure a transaction with Medtronic;
provided, however, that such terms need not be identical to the Third Party
Offer
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and the Company shall be under no obligation to disclose the terms of the Third
Party Offer in the Company Proposal.
Any Company Proposal so delivered to Medtronic shall constitute an offer,
subject to the negotiation of definitive agreements, to Medtronic to enter into
the transactions proposed in the Company Proposal on the terms specified
therein. Medtronic shall have the exclusive right for a period of forty-five
(45) days from the date of its receipt of the Company Proposal to enter into
definitive agreements with the Company for the consummation of the transactions
proposed in the Company Proposal on the terms specified therein. During such
forty-five day period the Company agrees to promptly provide Medtronic with all
information regarding the Company that Medtronic may reasonably request for the
purpose of evaluating the Company Proposal; provided, however, that the
Company's delivery of any such information shall be subject to its receipt of a
written confidentiality agreement from Medtronic in form and substance
reasonably satisfactory to the Company. If during such forty-five day period,
the Company and Medtronic are unable to reach definitive agreement with respect
to the transactions proposed in the Company Proposal, the Company shall have 120
days to enter into an agreement with the Third Party Offeror on terms no less
favorable than the most favorable terms, if any, proposed by Medtronic during
such forty-five day period. If the Company and the Third Party Offeror are
unable to reach definitive agreement during such 120-day period with respect to
the Third Party Offer, Medtronic's rights with respect to Third Party Offers
described in the first paragraph of this Section 3.1 shall be reinstated and
apply to any subsequent Third Party Offers.
In the event that during the four-year period immediately following the
date of this Agreement, the Company proposes to sell, assign, transfer or
otherwise dispose of all or a substantial portion of the Company's assets or its
Capital Stock (other than in the case of a public offering), the Company shall,
prior to contacting any other third party with respect to such proposed sale,
assignment, transfer or disposition, give Medtronic the exclusive right for a
period of forty-five (45) days to enter into definitive agreements with the
Company for the purchase of all of the outstanding Capital Stock of the Company
or all or substantially all of the assets of the Company. During such forty-
five day period the Company agrees to promptly provide Medtronic with all
information regarding the Company that Medtronic may reasonably request for the
purpose of evaluating the Company and negotiating definitive agreements;
provided, however, that the Company's delivery of any such information shall be
subject to its receipt of a written confidentiality agreement from Medtronic in
form and substance reasonably satisfactory to the Company. If during such
forty-five day period, the Company and Medtronic are unable to reach definitive
agreement with respect to such a purchase, the Company shall have 180 days to
enter into an agreement with a third party with respect to a sale, assignment,
transfer or disposition of all or a substantial portion of the Company's assets
or its Capital Stock on terms no less favorable than the most favorable terms,
if any,
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proposed by Medtronic during such forty-five day period. If the Company and a
third party are unable to reach definitive agreement during such 180-day period
with respect to such a sale, assignment, transfer or disposition, Medtronic's
rights with respect to any such transactions proposed by the Company and
described in the this paragraph shall be reinstated and apply to any subsequent
such proposed transactions.
3.2 RIGHT TO DESIGNATE BOARD MEMBER.
(a) So long as Medtronic owns at least five percent (5%) of the
issued and outstanding shares of Capital Stock of the Company (subject to
adjustment for any stock splits, stock dividends or other recapitalization
of the Capital Stock), the Company shall permit Medtronic to designate one
representative to be a non-voting, observer of the Company's Board of
Directors (the "Board"). Such designee may be removed or replaced at any
time by Medtronic as deemed reasonably necessary or appropriate by
Medtronic. Medtronic's designee shall receive all notices, documents, and
other information at the same time and in the same manner as such
information is supplied to members of the Board. The Company shall make
reasonable efforts to permit Medtronic's designee to participate or observe
Board meetings by telephone if such designee is unable to attend in person.
(b) At the request of Medtronic, the Company agrees to use its best
efforts, subject to any required shareholder approvals, (i) to expand the
number of members of the Board and appoint Medtronic's designee to the
Board as a director of the Company with full voting privileges, and (ii) in
connection with each meeting, or each written consent in lieu of a meeting,
of the Company's shareholders at which the Board is elected, to nominate
Medtronic's designee for election to the Board and to use its best efforts
to cause Medtronic's designee to be so elected.
3.3 DISTRIBUTION RIGHTS.
(a) The parties agree that, with regard to Company's "Ensite"
catheters and "Focus 2000" workstation and software, and all future models
or replacements thereof (collectively, the "EP Products"), the Company will
retain and maintain exclusive distribution rights for the EP Products in
North America.
(b) In the event that any time after the date of this Agreement the
Company proposes to undertake distribution of EP Products in any territory
outside of North America (a "Distribution Proposal"), the Company shall
provide written notice of such Distribution Proposal to Medtronic. During
the forty-five (45) day period following the Company's delivery of such
notice,
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Medtronic shall have the right to enter into a distribution arrangement
with the Company for exclusive distribution rights for the EP Products in
the territory subject to the Distribution Proposal and on terms specified
in such Distribution Proposal or, if no such terms are specified, on terms
to be mutually agreed between the Company and Medtronic. During such
forty-five day period the Company agrees to promptly provide Medtronic with
all information regarding the Company that Medtronic may reasonably request
for the purpose of evaluating the Company and negotiating definitive
agreements; provided, however, that the Company's delivery of any such
information shall be subject to its receipt of a written confidentiality
agreement from Medtronic in form and substance reasonably satisfactory to
the Company. If during such forty-five day period, the Company and
Medtronic are unable to reach definitive agreement with respect to the
exclusive distribution rights for the EP Products in the territory subject
to the Distribution Proposal, the Company shall have 180 days to enter into
an agreement with a third party with respect to such distribution rights on
terms no more favorable to such third party than terms last offered to
Medtronic during such forty-five day period. If the Company and a third
party are unable to reach definitive agreement during such 180-day period
with respect to such distribution rights, Medtronic's rights with respect
to any distribution of the EP Products in the territory subject to the
Distribution Proposal and described in the this paragraph shall be
reinstated and apply to any subsequent such Distribution Proposal.
(c) The parties agree that any distribution agreement entered into
with respect to the EP Products shall be mutually agreed by the parties and
will include mutually agreeable sales and performance objectives. The
parties further agree that the transfer prices of EP Products under such
agreement shall be negotiated and agreed by the parties taking into account
(i) the average price EP Products are sold to Company's "preferred
customers" (defined as "end users" (not distributors)), and (ii) Company's
"fully allocated manufacturing costs" the definition of which shall be
agreed by the parties in any distribution agreement.
3.4 TERMINATION. Medtronic's rights under Section 3.1 shall terminate on
the earlier occurrence of any of the following events:
(a) the four (4) year anniversary of this Agreement; or
(b) the Company's filing of a registration statement on either Form S-1 or
Form SB-2 under the Securities Act for an Initial Offering with
respect to which the gross proceeds to the Company will be not less
than Twenty Million Dollars ($20,000,000) and such registration
statement is declared effective by the SEC; or
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(c) the Company has complied with the provisions of Section 3.1 and there
has been a change of control of Company such that more than fifty
percent (50%) of the outstanding Capital Stock or assets of the
Company have been purchased by a third party not an Affiliate of the
Company in a single transaction or series of transactions (a "CHANGE
IN CONTROL").
Medtronic's rights under Section 3.2 shall terminate upon the earlier
occurrence of an Initial Offering described in Section 3.4(b) above or a Change
in Control, and Medtronic's rights under Section 3.3 shall terminate upon a
Change in Control.
4.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Medtronic as follows:
4.1 ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Minnesota and is duly licensed or qualified to transact
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of the business transacted by it or the character of the
properties owned or leased by it requires such licensing or qualification and
where the failure to be so licensed or qualified could have material adverse
effect upon the Company or its business. The Company has the corporate power
and authority to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted, to execute, deliver and perform this
Agreement, and to issue, sell and deliver the Purchased Shares. The Company has
no subsidiaries.
4.2 AUTHORIZATION OF AGREEMENT, ETC.
(a) The execution and delivery by the Company of this Agreement, the
performance by the Company of its obligations hereunder, and the issuance,
sale and delivery of the Purchased Shares have been duly authorized by all
requisite corporate action and will not violate any provision of law, any
order of any court or other agency of government, the Certificate of
Incorporation or the By-laws of the Company, in each case as amended, or
any provision of any material indenture, agreement or other instrument to
which the Company or any of its properties or assets is bound, or conflict
with, result in a breach of or constitute (with due notice or lapse of time
or both) a default under any such material indenture, agreement or other
instrument, or result in the creation or imposition of any material Lien
upon any of the properties or assets of the Company.
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(b) The Purchased Shares have been duly authorized and validly
issued, and upon receipt of payment therefor in accordance with Article 2
of this Agreement will be fully paid and nonassessable. The Purchased
Shares are free and clear of all Liens imposed by or through the Company.
4.3 VALIDITY. This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject, as to the enforcement of
remedies, to the discretion of the courts in awarding equitable relief and to
applicable bankruptcy, reorganization, insolvency, moratorium and similar laws
affecting the rights of creditors generally.
4.4 FINANCIAL STATEMENTS. The Company has furnished to Medtronic the
audited balance sheet of the Company as of March 31, 1996 (the "Balance Sheet")
and the related statements of income, stockholders' equity and cash flows of the
Company for the year then ended. All such financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied, and fairly present the financial position of the Company
as of the dates thereof and the results of its operations for the periods then
ended. Since the date of the Balance Sheet, there has been no change in the
assets, liabilities or financial condition of the Company from that reflected in
the Balance Sheet except for changes in the ordinary course of business which in
the aggregate have not been materially adverse.
4.5 LITIGATION; COMPLIANCE WITH LAW. There is no (a) action, suit, claim,
proceeding or investigation pending or, to the best of the Company's knowledge,
threatened against or affecting the Company, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (b) arbitration
proceeding relating to the Company pending under collective bargaining
agreements or otherwise, or (c) governmental inquiry pending or, to the best of
the Company's knowledge, threatened against or affecting the Company (including
without limitation any inquiry as to the qualification of the Company to hold or
receive any license or permit), and there is no basis for any of the foregoing.
The Company has complied with all laws, rules, regulations and orders applicable
to its business, operations, properties, assets, products and services and
possesses all necessary permits, licenses and other authorizations required to
conduct its business as conducted except where the failure so to comply or so to
possess would not have a material adverse affect on the Company.
4.6 PROPRIETARY INFORMATION OF THIRD PARTIES. To the best of the Company's
knowledge, no third party has claimed or has reason to claim that any person
employed by or affiliated with the Company has (a) violated or may be violating
any of the terms or conditions of his employment, non-competition or
nondisclosure
-11-
agreement with such third party, (b) disclosed or may be disclosing or utilized
or may be utilizing any trade secret or proprietary information or documentation
of such third party, or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees.
4.7 TITLE TO PROPERTIES. The Company has good and marketable title to its
properties and assets reflected on the Balance Sheet or acquired by it since the
date of the Balance Sheet (other than properties and assets disposed of in the
ordinary course of business since the date of the Balance Sheet), and all such
properties and assets are free and clear of all Liens, except for liens for or
current taxes not yet due and payable and minor imperfections of title, if any,
not material in nature or amount and not materially detracting from the value or
impairing the use of the property subject thereto or impairing the operations or
proposed operations of the Company.
4.8 LEASEHOLD INTERESTS. Each lease or agreement to which the Company is
a party under which it is a lessee of any property, real or personal, is a valid
agreement in full force and effect.
4.9 TAXES. The Company has filed all tax returns, federal, state, county
and local, required to be filed by it, and the Company has paid all taxes shown
to be due by such returns as well as all other taxes, assessments and
governmental charges which have become due or payable, including without
limitation all taxes which the Company is obligated to withhold from amounts
owing to employees, creditors and third parties. All such taxes with respect to
which the Company has become obligated pursuant to elections made by the Company
in accordance with generally accepted practice have been paid and adequate
reserves have been established for all taxes accrued but not yet payable. The
federal income tax returns of the Company have never been audited by the
Internal Revenue Service. No deficiency assessment with respect to or proposed
adjustment of the Company's federal, state, county or local taxes is pending or,
to the best of the Company's knowledge, threatened.
4.10 NO DEFAULTS. The Company, and to the best of the Company's knowledge,
each other party thereto, has in all material respects performed all the
obligations required to be performed by them to date, have received no notice of
default and are not in default (with due notice or lapse of time or both) under
any lease, agreement or contract now in effect to which the Company is a party
or by which it or its property may be bound except for such defaults that would
not have a material adverse affect on the Company. The Company has no present
expectation or intention of not fully performing all its obligations under each
such lease, contract or other agreement, and the Company has no knowledge of any
breach or anticipated breach by the other party to any contract or commitment to
which the
-12-
Company is a party. The Company is not in violation of its Certificate of
Incorporation and By-laws.
4.11 PATENTS, TRADEMARKS, ETC. To the best of the Company's knowledge,
the Company owns or possesses licenses or other rights to use all of the
Company's Intellectual Property necessary or desirable to the conduct of its
business as conducted and as proposed to be conducted, and no claim is
pending or threatened to the effect that the operations of the Company
infringe upon or conflict with the asserted rights of any other person under
any such Intellectual Property, and there is no basis for any such claim. No
claim is pending or threatened to the effect that any such Intellectual
Property owned or licensed by the Company, or which the Company otherwise has
the right to use, is invalid or unenforceable by the Company, and there is no
basis for any such claim (whether or not pending or threatened). To the best
of the Company's knowledge, all technical information developed by and
belonging to the Company which has not been patented has been kept
confidential.
4.12 BROKERS. The Company has no contract, arrangement or understanding
with any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
4.13 TRANSACTIONS WITH AFFILIATES. No director, officer, employee or
stockholder of the Company, or member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of the outstanding
Capital Stock thereof, is a party to any transaction with the Company, including
any contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to any such person or firm.
4.14 DISCLOSURE. Neither this Agreement, nor any other statements,
documents, certificates or other items prepared or supplied by the Company with
respect to the transactions contemplated hereby contains an untrue statement of
a material fact or omits a material fact necessary to make the statements
contained therein not misleading.
5.
REPRESENTATIONS AND WARRANTIES OF MEDTRONIC
Medtronic represents and warrants to the Company as follows:
-13-
5.1 PURCHASE OF SHARES. Medtronic is an "accredited investor" within the
meaning of Rule 501 under the Securities Act and was not organized for the
specific purpose of acquiring the Purchased Shares. Medtronic has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company's stage of development so as to be able to evaluate the
risks and merits of Medtronic's investment in the Company and Medtronic is able
financially to bear the risks thereof. Medtronic has had an opportunity to
discuss the Company's business, management and financial affairs with the
Company's management. The Purchased Shares are being acquired for Medtronic's
own account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof. Medtronic understands that (i) the
Purchased Shares have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated
under the Securities Act, (ii) the Purchased Shares must be held indefinitely
unless a subsequent disposition thereof is registered under the Securities Act
or is exempt from such registration, (iii) the Purchased Shares will bear a
legend to such effect and (iv) the Company will make a notation on its transfer
books to such effect.
5.2 CORPORATE AUTHORITY. The execution, delivery and performance by
Medtronic of this Agreement and the transactions contemplated hereby has been
duly and validly authorized and approved by all requisite corporate action on
the part of Medtronic, and the execution and the delivery of this Agreement and
consummation of the transactions contemplated hereby and compliance with and
fulfillment of the terms and provisions hereof will not (i) conflict with or
result in a breach of the terms, conditions or provisions of or constitute a
default under the Articles of Incorporation or Bylaws of Medtronic, or (ii)
require any affirmative approval, consent, authorization or other order or
action of any court, governmental authority, regulatory body, creditor or any
other person. Medtronic has all requisite power and authority to do and perform
all acts and things required to be done by it under this Agreement and the
agreements contemplated hereby. This Agreement constitutes the valid and
binding obligation of Medtronic enforceable in accordance with their terms
except as may be limited by laws affecting creditors' rights generally or by
judicial limitations on the right to specific performance.
6.
COVENANTS OF THE COMPANY
6.1 FINANCIAL STATEMENTS, REPORTS, ETC. So long as (i) Medtronic is the
legal or beneficial owner of at least five percent (5%) of the issued and
outstanding shares of Capital Stock of the Company (adjusted for any stock
splits, stock dividends or
-14-
other recapitalization of the Capital Stock) and (ii) there has been no Initial
Offering or Change in Control, the Company shall furnish to Medtronic:
(a) within ninety (90) days after the end of each fiscal year of the
Company, a balance sheet of the Company as of the end of such fiscal year
and the related consolidated statements of income, stockholders' equity and
cash flows for the fiscal year then ended, prepared in accordance with
generally accepted accounting principles and certified by a firm of
independent public accountants selected by the Board of Directors of the
Company;
(b) within forty-five (45) days after the end of each fiscal quarter
in each fiscal year (other than the last fiscal quarter in each fiscal
year) a balance sheet of the Company and its subsidiaries and the related
consolidated statements of income, stockholders' equity and cash flows,
unaudited but prepared in accordance with generally accepted accounting
principles and certified by the chief financial officer or controller of
the Company, such consolidated balance sheet to be as of the end of such
fiscal quarter and such consolidated statements of income, stockholders'
equity and cash flows to be for such fiscal quarter and for the period from
the beginning of the fiscal year to the end of such fiscal quarter, in each
case with comparative statements for the corresponding period in the prior
fiscal year;
(c) at the time of delivery of each quarterly statement pursuant to
Section 6.1(b), a management narrative report explaining all significant
variances from forecasts and all significant current developments in
staffing, marketing, sales and operations;
(d) within thirty (30) days prior to the start of each fiscal year,
consolidated capital and operating expense budgets, cash flow projections
and income and loss projections for the Company and its subsidiaries in
respect of such fiscal year, all itemized in reasonable detail, and,
promptly after preparation, any significant revisions to any of the
foregoing;
(e) promptly after the commencement thereof, notice of all actions,
suits, claims, proceedings, investigations and inquiries that could
materially adversely affect the Company;
(f) promptly, from time to time, such other information regarding the
business, financial condition, operations, property or affairs of the
Company and any subsidiaries as such Medtronic reasonably may request.
6.2 INSPECTION, CONSULTATION AND ADVICE. The Company shall permit and
cause any Affiliates of the Company to permit Medtronic and such persons as it
may designate, at such Medtronic's expense, to visit and inspect any of the
properties of
-15-
the Company and its Affiliates, examine their books and take copies and extracts
therefrom, discuss the affairs, finances and accounts of the Company and its
Affiliates with their officers, employees and public accountants (and the
Company hereby authorizes said accountants to discuss with Medtronic and such
designees such affairs, finances and accounts), and consult with and advise the
management of the Company and its Affiliates as to their affairs, finances and
accounts, all at reasonable times and upon reasonable notice. All such
information shall be subject to Section 9.1 hereof.
6.3 TRANSACTIONS WITH AFFILIATES. Except for transactions contemplated by
this Agreement or as otherwise approved by the Board, neither the Company nor
any of its subsidiaries shall enter into any transaction with any director,
officer, employee or holder of more than 5% of the outstanding Capital Stock of
the Company, member of the family of any such person, or any corporation,
partnership, trust or other entity in which any such person, or member of the
family of any such person, is a director, officer, trustee, partner or holder of
more than 5% of the outstanding Capital Stock thereof, except for transactions
on customary terms related to such person's employment.
6.4 BOARD MEETINGS. The Company shall use its best efforts to ensure that
meetings of its Board are held at least four (4) times each year and at least
once each quarter.
6.5 PROPRIETARY INFORMATION AND EMPLOYEE INVENTIONS AGREEMENTS. The
Company shall use its best efforts to obtain confidentiality and assignment of
inventions agreements from all officers, key employees and other employees,
consultants or independent contractors who will have access to confidential
information of the Company.
6.6 COMPLIANCE WITH LAWS. The Company shall comply, and cause each
Affiliates to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could materially adversely affect its business or
condition, financial or otherwise.
6.7 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall keep, and
cause each Affiliate to keep, adequate records and books of account, in which
complete entries will be made in accordance with generally accepted accounting
principles consistently applied, reflecting all financial transactions of the
Company and such subsidiary, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made.
-16-
7.
REGISTRATION RIGHTS
7.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Purchased Shares (or the Common Stock issuable upon the
conversion thereof) unless and until the transferee has agreed in writing
for the benefit of the Company to be bound by this Article 7, provided and
to the extent this Article is then applicable and:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) Such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, and (B) if requested by the Company, such Holder shall
have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of such shares under the Securities Act. It is agreed
that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(iii) Notwithstanding the provisions of clauses (i) and (ii)
above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its
partners in accordance with partnership interests, or (B) to the
Holder's family member or trust for the benefit of an individual
Holder, provided the transferee will be subject to the terms of this
Section 7.1 to the same extent as if he were an original Holder
hereunder.
(b) Each certificate representing Purchased Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the
Agreement) be stamped or otherwise imprinted with a legend substantially
similar to the following (in addition to any legend required under
applicable state securities laws or as provided elsewhere in the
Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE
-17-
OPINION OF COUNSEL OR BASED ON OTHER WRITTEN EVIDENCE IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER,
SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the
securities proposed to be disposed of may lawfully be so disposed of
without registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
7.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 7.2, if the Company
shall receive at any time after the date hereof, a written request from
Initiating Holders that the Company file a registration statement under the
Securities Act covering the registration of Registrable Securities having
an aggregate offering price to the public in excess of $5,000,000, then the
Company shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Holders, and subject to the limitations of
Section 7.2(b), effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall
so advise the Company as a part of their request made pursuant to this
Section 7.2 and the Company shall include such information in the written
notice referred to in Section 7.2(a). In such event, the right of any
Holder to include his Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders (which underwriter or underwriters shall
be reasonably acceptable to the
-18-
Company). Notwithstanding any other provision of this Section 7.2, if the
underwriter advises the Company in writing that marketing factors require a
limitation of the number of securities to be underwritten (including
Registrable Securities) then the Company shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant
hereto, and the number of shares that may be included in the underwriting
shall be allocated to the Holders of such Registrable Securities on a pro
rata basis based on the number of Registrable Securities held by all
Holders participating in the related registration (including the Initiating
Holders). Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from the registration.
(c) The Company shall not be obligated to effect more than two (2)
registrations pursuant to this Section 7.2.
(d) The Company shall not be required to effect a registration
pursuant to this Section 7.2 during the period starting with the date of
filing of, and ending on the date one hundred eighty (180) days following
the effective date of, the registration statement pertaining to the Initial
Offering, provided that the Company is making reasonable and good faith
efforts to cause such registration statement to become effective. In
addition, the Company shall not be required to effect a registration
pursuant to this Section 7.2 if within thirty (30) days of a receipt of a
written request from Initiating Holders pursuant to Section 7.2(a), the
Company gives notice to the Holders of the Company's intention to file a
registration statement for its Initial Offering within one hundred twenty
(120) days.
7.3 PIGGYBACK REGISTRATIONS.
(a) The Company shall notify all Holders of Registrable Securities in
writing at least thirty (30) days prior to the filing of any registration
statement under the Securities Act for purposes of a public offering of
securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company,
but excluding registration statements relating to employee benefit plans
and corporate reorganizations) and will afford each such Holder an
opportunity to include in such registration statement all or part of such
Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the
Registrable Securities held by it shall, within twenty (20) days after
receipt of the above-described notice from the Company, so notify the
Company in writing. Such notice shall state the intended method of
disposition of the Registrable Securities by such Holder. If a Holder of
Registrable Securities decides not to include all of its Registrable
Securities in any registration statement thereafter filed by the Company,
such Holder shall
-19-
nevertheless continue to have the right to include any Registrable
Securities in any subsequent registration statement or registration
statements as may be filed by the Company with respect to offerings of its
securities, all upon the terms and conditions set forth herein.
(b) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 7.3 is for an underwritten
offering, the Company shall so advise the Holders of Registrable
Securities. In such event, the right of any such Holder to be included in
a registration pursuant to this Section 7.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their Registrable Securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provisions of this Agreement, if
the underwriter determines in good faith that marketing factors require a
limitation of the number of shares to be underwritten, the number of shares
that may be included in the underwriting shall be allocated, first, to the
Company; second, to the Holders on a pro rata basis based on the total
number of Registrable Securities held by such Holders; and third, to any
shareholder of the Company (other than a Holder) on a pro rata basis. No
such reduction shall reduce the securities being offered by the Company for
its own account to be included in the registration and underwriting, except
that in no event shall the amount of securities of the selling Holders
included in he registration be reduced below twenty-five percent (25%) of
the total amount of securities included in such registration, unless such
offering is the Initial Offering and such registration does not include
shares of any other selling shareholders, in which event any or all of the
Registrable Securities of the Holders may be excluded in accordance with
the immediately preceding sentence. In no event will shares of any other
selling shareholder be included in such registration which would reduce the
number of shares which may be included by Holders without the written
consent of such Holders of not less than seventy percent (70%) of the
Registrable Securities proposed to be sold in the offering.
7.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect the registration under the Securities Act, and any related
qualification or compliance with respect to, all or a part of the Registrable
Securities owned by such Holder or Holders by the filing with the SEC of a
registration statement on Form S-3 covering such Registrable Securities, the
Company will:
-20-
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of
Registrable Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within fifteen (15) days after receipt of such
written notice from the Company; provided, however, that the Company shall
not be obligated to effect any such registration, qualification or
compliance pursuant to this Section 7.4: (i) if Form S-3 under the
Securities Act is not available for such offering by the Holders, (ii) if
the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $500,000, (iii) if the Company shall
furnish to the Holders a certificate signed by the Chairman of the Board
stating that in the good faith judgment of the Board, it would be seriously
detrimental to the Company and its shareholders for such registration to be
effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not
more than one hundred twenty (120) days after receipt of the request of the
Holder or Holders under this Section 7.4, (iv) if the Company has already
effected two (2) registrations for the Holders pursuant to this Section
7.4, or (v) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after
receipt of the request or requests of the Holders.
7.5 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 7.2 or any registration under Section 7.3 or Section 7.4 shall be borne
by the Company. All Selling Expenses incurred in connection with any such
registration shall be borne by the holders of the securities so registered pro
rata on the basis of the number of shares so registered. The Company shall not,
however, be required to pay for expenses of any registration proceeding begun
pursuant to Section 7.2 or Section 7.4, the request of which has been
subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is
based upon material adverse information
-21-
concerning the Company of which the Company was aware but the Initiating Holders
were not aware at the time of such request or (b) the Holders of a majority of
Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 7.2 or Section 7.4 (in which event such right
shall be forfeited by all Holders). If the Holders are required to pay the
Registration Expenses, such expenses shall be borne by the holders of securities
(including Registrable Securities) requesting such registration in proportion to
the number of shares for which registration was requested. If the Company is
required to pay the Registration Expenses of a withdrawn offering pursuant to
Section 7.5, then the Holders shall not forfeit their rights pursuant to Section
7.2 or Section 7.4 to a demand registration.
7.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect on Form S-3 to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for up to
ninety (90) days.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by
them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each
-22-
Holder participating is such underwriting shall also enter into and perform
its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event 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.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities
are being sold through underwriters, or, if such securities are not being
sold through underwriters, on the date that the registration statement with
respect to such securities becomes effective, (i) an opinion, dated as of
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters
in an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration, addressed to
the underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a letter dated as of such date, from the
independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
7.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Article 7 shall terminate and be of no further force and effect five
(5) years after the date following the Company's Initial Offering.
7.8 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Article 7.
7.9 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 7.2; 7.3 or 7.4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each
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Holder and each person, if any, who controls such Holder within the meaning
of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation") by the
Company: (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) 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 (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law in connection with the
offering covered by such registration statement; and the Company will
reimburse each such Holder, partner, officer or director, or controlling
person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement
contained in this Section 7.9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder,
partner, officer, director, or controlling person of such Holder.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers, each person, if any, who controls the Company within the meaning
of the Securities Act, and any other Holder selling securities under such
registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses,
claims, damages or liabilities (joint or several) to which the Company or
any such director, officer, controlling person, or other such Holder, or
partner, director, officer or controlling person of such other Holder may
become subject under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation,
in each case to the extent (and only to the extent) that such Violation
occurs in reliance upon and in conformity with written information
furnished by such Holder and stated to be
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specifically for use in connection with such registration; and each such
Holder will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, controlling person, underwriter
or other Holder, or partner, officer, director or controlling person of
such other Holder in connection with investigating or defending any such
loss, claim, damage, liability or action if it is judicially determined
that there was such a Violation; provided, however, that the indemnity
agreement contained in this Section 7.9(b) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further that in no event shall
any indemnity under this Section 7.9(b) exceed the gross proceeds from the
offering received by such Holder unless the Violation is the result of
fraud on the part of such Holder.
(c) Promptly after receipt by an indemnified party under this Section
7.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to
be made against any indemnifying party under this Section 7.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party provided however,
that if there is more than one indemnified party, the indemnifying party
shall pay for the fees and expenses of one counsel for any and all
indemnified parties to be mutually agreed upon by such indemnified parties,
if representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability
to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 7.9, but the omission
so to deliver written notice to the indemnifying party will not relieve it
of any liability that it may have to any indemnified party otherwise than
under this Section 7.9.
(d) If the indemnification provided for in this Section 7.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred
to herein, the indemnifying party, in lieu of indemnifying such indemnified
party thereunder, shall to the extent permitted by applicable law
contribute to the
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amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability 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 in connection with the Violation(s) that
resulted in such loss, claim, damage or liability, as well as any other
relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by a court of law 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.
(e) The foregoing indemnity agreements of the Company and Holders are
subject to the condition that, insofar as they relate to any Violation made
in a preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the SEC at the time the registration statement in
question becomes effective or the amended prospectus filed with the SEC
pursuant to SEC Rule 424(b) (the "Final Prospectus"), such indemnity
agreement shall not inure to the benefit of any person if a copy of the
Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at
or prior to the time such action is required by the Securities Act.
(f) The obligations of the Company and Holders under this Section 7.9
shall survive the completion of any offering of Registrable Securities in a
registration statement, and otherwise.
7.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Article 7 may be assigned by
a Holder to a transferee or assignee of Registrable Securities; provided,
however, that no such transferee or assignee shall be entitled to registration
rights under this Article 7 hereof unless it acquires at least fifty thousand
(50,000) shares of Registrable Securities (as adjusted for stock splits and
combinations) and the Company shall, within twenty (20) days after such
transfer, be furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; provided, however, that a Holder's
failure to provide such notice to the Company shall not in any way impair a
Holder's right to make an assignment under this Section 7.10, but until such
notice is provided the Company may continue to treat the original Holder (and
not the Holder's assignee) as the Holder of the registration rights.
Notwithstanding the foregoing, rights to cause the Company to register
securities may be assigned to any person or entity who is a subsidiary, parent,
general partner or limited partner of a Holder regardless of the number of
shares transferred to such person or entity.
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7.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Article 7
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least seventy percent (70%)
of the Registrable Securities. Any amendment or waiver effected in accordance
with this Section 7.11 shall be binding upon each Holder and the Company. By
acceptance of any benefits under this Article 7, Holders of Registrable
Securities hereby agree to be bound by the provisions hereunder.
7.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of at least a majority of the outstanding Registrable Securities,
enter into any agreement with any person or persons providing for the granting
to such holder of registration rights pari passu or senior to those granted to
Holders pursuant to this Article 7, or of registration rights which might cause
a reduction in the number of shares includable by the Holders in any offering
pursuant to Section 7.2 or in any offering subject to Section 7.3.
7.13 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, a Holder
holding more than one percent (1%) of the Company's voting securities shall not
sell or otherwise transfer or dispose of any Capital Stock (or other securities)
of the Company held by such Holder (other than those included in the
registration) for a period specified by the underwriters not to exceed one
hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act, provided that:
(a) such agreement shall be for a period not to exceed ninety (90)
days for all public offerings after the Company's Initial Offering; and
(b) all officers and directors of the Company and holders of at least
one percent (1%) of the Company's voting securities enter into similar
agreements.
The obligations described in this Section 7.13 shall not apply to a registration
relating solely to employee benefit plans on Form S-l or Form S-8 or similar
forms that may be promulgated in the future, or a registration on Form S-4 or
similar form that may be available in the future for a transaction falling under
Rule 145 of the Securities Act. The Company may impose stop-transfer
instructions with respect to the shares (or securities) subject to the
restriction set forth in this Section 7.11 until the end of said one hundred
eighty (180) day (or shorter) period.
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8.
INDEMNIFICATION
8.1 INDEMNIFICATION OF MEDTRONIC. The Company shall indemnify, defend and
hold harmless Medtronic and each of its subsidiaries, officers, directors and
stockholders (Medtronic and such other indemnitees referred to in this Article 8
as "Medtronic") from and against and in respect of any and all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities, interest
and penalties, costs and expenses (including, without limitation, reasonable
legal fees and disbursements incurred in connection therewith and in seeking
indemnification therefor, and any amounts or expenses required to be paid or
incurred in connection with any action, suit, proceeding, claim, appeal, demand,
assessment or judgment) ("Indemnifiable Losses"), resulting from, arising out
of, or imposed upon or incurred by any person to be indemnified hereunder by
reason of any breach of any representation, warranty, covenant or agreement of
the Company contained in this Agreement or any agreement, certificate or
document executed and delivered by the Company pursuant hereto or in connection
with any of the transactions contemplated by this Agreement.
8.2 INDEMNIFICATION OF THE COMPANY. Medtronic shall indemnify, defend and
hold harmless the Company and each of its subsidiaries, officers, directors and
stockholders (the Company and such other indemnitees referred to in this Article
8 as the "Company") from and against and in respect of any and all demands,
claims, actions or causes of action, assessments, losses, damages, liabilities,
interest and penalties, costs and expenses (including, without limitation,
reasonable legal fees and disbursements incurred in connection therewith and in
seeking indemnification therefor, and any amounts or expenses required to be
paid or incurred in connection with any action, suit, proceeding, claim, appeal,
demand, assessment or judgment), resulting from, arising out of, or imposed upon
or incurred by any person to be indemnified hereunder by reason of any breach of
any representation, warranty, covenant or agreement of Medtronic contained in
this Agreement or any agreement, certificate or document executed and delivered
by Medtronic pursuant hereto or in connection with the transactions contemplated
by this Agreement.
8.3 THIRD-PARTY CLAIMS. If a claim by a third party is made against an
indemnified party and if the indemnified party intends to seek indemnity with
respect thereto under this Article 8, such indemnified party shall promptly
notify the indemnifying party of such claim; provided, however, that failure to
give timely notice shall not affect the rights of the indemnified party so long
as the failure to give timely notice does not adversely affect the indemnifying
party's ability to defend such claim against a third party. The indemnified
party shall not settle such claim without the consent of the indemnifying party,
which consent shall not be
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unreasonably withheld or delayed. If the indemnifying party acknowledges in
writing its indemnity obligations for Indemnifiable Losses resulting therefrom,
the indemnifying party may participate at its own cost and expense in the
settlement or defense of any claim for which indemnification is sought; PROVIDED
THAT such settlement or defense shall be controlled by the indemnified party.
8.4 COOPERATION AS TO INDEMNIFIED LIABILITY. Each party hereto shall
cooperate fully with the other parties with respect to access to books, records,
or other documentation within such party's control, if deemed reasonably
necessary or appropriate by any party in the defense of any claim which may give
rise to indemnification hereunder.
9.
OTHER PROVISIONS
9.1 NON-DISCLOSURE. Each party agrees not to disclose or use (except as
permitted or required for performance by the party receiving such Confidential
Information of its rights or duties hereunder) any Confidential Information of
the other party obtained during the during the term of this Agreement until the
expiration of three (3) years after the date of this Agreement. Each party
further agrees to take appropriate measures to prevent any such prohibited
disclosure by its present and future employees, officers, agents, subsidiaries,
or consultants during such period.
9.2 FURTHER ASSURANCES. At such time and from time to time on and after
the date hereof upon request by Medtronic, the Company will execute, acknowledge
and deliver, or will cause to be done, executed, acknowledged and delivered, all
such further acts, certificates and assurances that may be required for the
better conveying, transferring, assigning, delivering, assuring and confirming
to Medtronic, or to its respective successors and assigns, all of the Purchased
Shares or to otherwise carry out the purposes of this Agreement.
9.3 COMPLETE AGREEMENT. The schedules and exhibits to this Agreement
shall be construed as an integral part of this Agreement to the same extent as
if they had been set forth verbatim herein. This Agreement and the schedules
and exhibits hereto constitute the entire agreement between the parties hereto
with respect to the subject matter hereof and supersede all prior agreements
whether written or oral relating hereto.
9.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties, covenants and agreements contained herein shall
survive the purchase of the Purchased Shares and remain in full force and
effect. No independent investigation of the Company by Medtronic, its counsel,
or any of
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its agents or employees shall in any way limit or restrict the scope of the
representations and warranties made by the Company in this Agreement.
9.5 WAIVER, DISCHARGE, AMENDMENT, ETC. The failure of any party hereto to
enforce at any time any of the provisions of this Agreement shall not, absent an
express written waiver signed by the party making such waiver specifying the
provision being waived, be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or any part thereof or the
right of the party thereafter to enforce each and every such provision. No
waiver of any breach of this Agreement shall be held to be a waiver of any other
or subsequent breach. This Agreement may be amended by the Company and
Medtronic, by mutual action approved by their respective Boards of Directors or
their respective officers authorized by such Board of Directors, at any time
prior to the Closing Date. Any amendment to this Agreement shall be in writing
and signed by the Company and Medtronic.
9.6 NOTICES. All notices or other communications to a party required or
permitted hereunder shall be in writing and shall be delivered personally or by
telecopy (receipt confirmed) to such party (or, in the case of an entity, to an
executive officer of such party) or shall be sent by a reputable express
delivery service or by certified mail, postage prepaid with return receipt
requested, addressed as follows:
if to Medtronic to:
Medtronic Asset Management, Inc.
Corporate Center
0000 Xxxxxxx Xxxxxx X.X.
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx,
Vice President Corporate Development
and Associate General Counsel
FAX (000) 000-0000
if to the Company to:
Endocardial Solutions, Inc.
0000 Xxxxxx Xxxx, Xxxxx 000
Xx. Xxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, President and
Chief Executive Officer
FAX (000) 000-0000
Any party may change the above-specified recipient and/or mailing
address by notice to all other parties given in the manner herein prescribed.
All notices shall be deemed given on the day when actually delivered as provided
above (if
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delivered personally or by telecopy) or on the day shown on the return receipt
(if delivered by mail or delivery service).
9.7 PUBLIC ANNOUNCEMENT. In the event any party proposes to issue
any press release or public announcement concerning any provisions of this
Agreement or the transactions contemplated hereby, such party shall so advise
the other parties hereto, and the parties shall thereafter use their best
efforts to cause a mutually agreeable release or announcement to be issued.
Neither party will publicly disclose or divulge any provisions of this Agreement
or the transactions contemplated hereby without the other parties' written
consent, except as may be required by applicable law or stock exchange
regulation, and except for communications to employees.
9.8 EXPENSES. The Company and Medtronic shall each pay their own
expenses incident to this Agreement and the preparation for, and consummation
of, the transactions provided for herein.
9.9 GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Minnesota, including all
matters of construction, validity, performance and enforcement, without giving
effect to principles of conflict of laws.
9.10 TITLES AND HEADINGS; CONSTRUCTION. The titles and headings to
the Articles and Sections herein are inserted for the convenience of reference
only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement. This Agreement shall be construed without
regard to any presumption or other rule requiring construction hereof against
the party causing this Agreement to be drafted.
9.11 BENEFIT. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed as original and all of which
together shall constitute one instrument.
9.13 PARTIES IN INTEREST. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not.
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IN WITNESS WHEREOF, each of the parties has caused this Investment
Agreement to be executed as of the date first written above.
ENDOCARDIAL SOLUTIONS, INC.
By /s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
Title: President and Chief
Executive Officer
MEDTRONIC ASSET MANAGMENT, INC.
By
--------------------------------
Name:
Title:
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