EMPLOYMENT AGREEMENT
BETWEEN XXXX X. XXXXXXXX AND
HYPERTENSION DIAGNOSTICS, INC.
THIS AGREEMENT is entered into as of September 8, 1997, by and between
Hypertension Diagnostics, Inc., a Minnesota corporation (the "COMPANY"), and
Xxxx X. Xxxxxxxx ("EXECUTIVE").
WHEREAS, the Company wishes to employ Executive to render services for
the Company on the terms and conditions set forth in this Agreement, and
Executive wishes to be retained and employed by the Company on such terms and
conditions.
NOW, THEREFORE, in consideration of the premises and the respective
undertakings of the Company and Executive set forth below, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the Company and
Executive agree as follows:
1. EMPLOYMENT. Upon the other terms and conditions set forth in this
Agreement, the Company hereby employs Executive, and Executive accepts such
employment, as its President. Except as expressly provided herein,
termination of this Agreement by either party shall also terminate
Executive's employment by the Company.
2. TERM. Executive's employment shall commence as of the date hereof
and continue for a period of one year and shall be automatically extended for
an additional year unless either party gives written notice of nonextension
to the other party no later than July 8, 1998.
3. POSITION AND DUTIES.
3.01 SERVICE WITH COMPANY. During the term of this Agreement,
Executive agrees to perform such reasonable employment duties as the Board of
Directors shall assign to him from time to time.
3.02 PERFORMANCE OF DUTIES. Executive agrees to serve the Company
faithfully and to the best of his ability and to devote his full time,
attention and best efforts to the business and affairs of the Company during
the term of this Agreement. Executive represents to the Company that he has
no contractual commitments inconsistent with his obligations set forth in
this Agreement, and that during the term of this Agreement, he will not
render or perform services for any other corporation, firm, entity,
organization or person which are inconsistent with the provisions of this
Agreement.
4. COMPENSATION.
4.01 BASE SALARY. As compensation for all services to be rendered
by Executive under this Agreement during the full term of this Agreement, the
Company shall pay to Executive a minimum Base Salary ("BASE SALARY") shall
mean regular cash compensation paid on a periodic basis exclusive of
benefits, bonuses or incentive payments) at the annual rate of $126,000,
payable once
monthly, subject to consideration of adjustment by the Board of Directors at
least annually. If the Executive's Base Salary is increased during the term
of this Agreement, the increased amount shall be the new Base Salary until a
future adjustment, if any.
4.02 BONUS AND INCENTIVE. Executive shall be paid a one-time bonus
and incentive compensation, in the form of cash, equal to not less than ten
percent (10%) and not more than twenty-five percent (25%) of Executive's Base
Salary. The Company's payment of the bonus and incentive compensation to
Executive shall be contingent upon Executive's successful completion of his
first year of employment with the Company and shall be payable at the time
Executive commences his second year of employment with the Company. Subject
to the above, the amount and criteria for determination of Executive's bonus
and incentive compensation shall be solely within the discretion of the Board
of Directors. If the Board of Directors adopts a bonus and incentive
compensation plan, the Executive shall be a participant.
4.03 FRINGE BENEFITS. In addition to the compensation payable to
Executive as provided in Sections 4.01 and 4.02 above:
(a) AUTOMOBILE. The Company shall reimburse Executive for all
company-related mileage at the then current rate allowed by the
Internal Revenue Service and the Minnesota Department of Revenue.
Executive shall receive no automobile allowance.
(b) VACATION. Executive shall be entitled to three (3) weeks
paid vacation each calendar year, during the first two (2) years of
employment with the Company, and thereafter, four (4) weeks paid
vacation each calendar year. Vacation time shall accumulate, so that
if the full vacation time is not taken in a particular calendar year,
any unused portion will be carried into the following year, PROVIDED,
HOWEVER, Executive shall not be able to accumulate more than 20 days
of vacation time. Upon termination of employment, Executive shall be
paid for all such accrued but unused vacation days at a daily rate
equivalent to the amount obtained by dividing 260 days into his then
Base Salary.
(c) HEALTH/DENTAL INSURANCE. The Company shall either purchase
a Company paid health/dental plan or reimburse Executive for plan
coverage until a Company paid plan can be implemented.
(d) OTHER BENEFITS. To the extent available or offered,
Executive shall be entitled to participate in all other benefit
programs offered by the Company to its full-time executive employees,
including, but not limited to, life insurance; long-term disability
policies; retirement benefits through the Company's pension and/or
profit sharing plans; sick leave benefits; and accidental death and
dismemberment coverages.
4.04 STOCK OPTIONS. The Company shall grant Executive stock
options for One Hundred Fifty Thousand (150,000) shares of the Company's $.01
par value Common Stock, pursuant to the terms and conditions set forth in the
Incentive Stock Option Agreement, a form of which is attached hereto and
labeled Exhibit A.
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4.05 BUSINESS EXPENSES. The Company will pay or reimburse
Executive for all reasonable and necessary out-of-pocket expenses incurred by
him in the performance of his duties under this Agreement, subject to
compliance by Executive with the Company's policies for expense
reimbursements.
5. CONFIDENTIAL INFORMATION.
5.01 "CONFIDENTIAL INFORMATION" DEFINED. "Confidential
Information" means information, not generally known, and proprietary to the
Company or to a third party for whom the Company is performing work,
including, without limitation, information concerning any patents or trade
secrets, confidential or secret designs, processes, formulae, source codes,
plans, devices or material (whether or not patented or patentable) directly
or indirectly useful in any aspect of the business of the Company, any
customer or supplier lists of the Company, any confidential secret
development or research work of the Company, or any other confidential
information or secret aspects of the business of the Company. All
information which Executive acquires or becomes acquainted with during the
period of his employment by the Company (including employment by an
affiliated company), whether developed by Executive or by others, which he
has reasonable basis to believe to be Confidential Information, or which is
treated by the Company as being Confidential Information, shall be presumed
to be Confidential Information.
5.02 OBLIGATIONS OF EXECUTIVE. Except as permitted or directed
by the Company, Executive shall not, either during his employment by the
Company or thereafter, divulge, furnish or make accessible to anyone or use
in any way (other than in the ordinary course of the business of the Company)
any Confidential Information. Executive acknowledges that the Confidential
Information constitutes a unique and valuable asset of the Company and
represents a substantial investment of time and expense by the Company and
its predecessors, and that any disclosure or other use of such Confidential
Information other than for the sole benefit of the Company would be wrongful
and would cause irreparable harm to the Company. Both during and after the
term of this Agreement, Executive will refrain from any acts or omissions
that would reduce the value of such knowledge or information to the Company.
5.03 SCOPE OF OBLIGATION. The foregoing obligations of
confidentiality shall not apply to any knowledge or information which is now
published or which subsequently becomes generally publicly known in the form
in which it was obtained from the Company, other than as a direct or indirect
result of the breach of this Agreement by Executive.
6. VENTURES. If, during the term of this Agreement, Executive is
engaged in or associated with the planning or implementing of any project,
program or venture involving the Company and a third party or parties, all
rights in such project, program or venture shall belong to the Company.
Except as formally approved by the Company, Executive shall not be entitled
to any interest in such project, program or venture or to any commission,
finder's fee or other compensation in connection therewith other than the
salary to be paid to Executive as provided in this Agreement.
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7. PATENT AND RELATED MATTERS.
7.01 DISCLOSURE AND ASSIGNMENT. Executive will promptly disclose
in writing to the Company complete information concerning each and every
invention, discovery, improvement, devices, design, apparatus, practice,
process, method or product, whether patentable or not, made, developed,
perfected, devised, conceived or first reduced to practice by Executive,
whether or not during regular working hours, either solely or in
collaboration with others, during the term of this Agreement, or the twelve
months thereafter, relating either directly or indirectly to the business,
products, practices or techniques of the Company (hereinafter referred to as
"DEVELOPMENTS"). Executive, to the extent that he has the legal right to do
so, hereby acknowledges that any and all of said Developments are the
property of the Company and hereby assigns and agrees to assign to the
Company any and all of Executive's right, title and interest in and to any
and all of such Developments.
7.02 FUTURE DEVELOPMENTS. As to any future Developments made by
Executive which relate to the business, products or practices of the Company,
and which are first conceived or reduced to practice during the term of this
Agreement, or within twelve (12) months thereafter, but which are claimed for
any reason to belong to an entity or person other than the Company, Executive
will promptly disclose the same in writing to the Company and shall not
disclose the same to others if the Company, within twenty (20) days
thereafter, shall claim ownership of such Developments under the terms of
this Agreement. If the Company makes no such claim, Executive shall not be
obligated to maintain in confidence any such information disclosed by
Executive.
7.03 LIMITATION ON SECTION 7.01 AND 7.02. The provisions of
Sections 7.01 and 7.02 shall not apply to any Development meeting the
following conditions:
(a) such Development was developed entirely on Executive's own
time; and
(b) such Development was made without the use of any Company
equipment, supplies, facility or trade secret information, and without
use of any Company personnel; and
(c) such Development does not relate (i) directly to the
business of the Company, or (ii) to the Company's actual or
demonstrably anticipated future business, research or development; and
(d) such Development does not result, directly or indirectly,
from any work performed by Executive for the Company.
7.04 ASSISTANCE OF EXECUTIVE. Upon request and without further
compensation therefor, but at no expense to Executive, and whether during the
term of this Agreement or thereafter, Executive will do all lawful acts,
including, but not limited to, the execution of papers and lawful oaths and
the giving of testimony, that in the opinion of the Company, its successors
and assigns, may be necessary or desirable in obtaining, sustaining,
reissuing, extending and enforcing United States and foreign patents,
including, but not limited to, design patents, on any and all of such
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Developments, and for perfecting affirming and recording the Company's
complete ownership and title thereto, and to cooperate otherwise in all
proceedings and matters relating thereto.
7.05 RECORDS. Executive will keep complete, accurate and
authentic accounts, notes, data and records of all Developments in the manner
and form requested by the Company. Such accounts, notes, data and records
shall be the property of the Company, and, upon its request, Executive will
promptly surrender same to it or, if not previously surrendered upon its
request or otherwise, Executive will surrender the same, and all copies
thereof, to the Company upon the conclusion of his employment.
8. TERMINATION.
8.01 GROUNDS FOR TERMINATION. This Agreement shall terminate
prior to the expiration of the initial term set forth in Section 2 or any
extension thereof in the event that any time during such initial term or any
extension thereof:
(a) Executive dies, or
(b) Executive becomes disabled (as defined below), so that he
cannot perform the essential functions of his position, or
(c) The Company elects to terminate this Agreement for "Cause"
and notifies Executive in writing of such election, or
(d) The Company elects to terminate this Agreement without
"Cause" and notifies Executive in writing of such election, or
(e) Executive elects to terminate this Agreement and notifies
the Company in writing of such election.
If this Agreement is terminated pursuant to subsection (a), (b) or (c) of this
Section 8.01, such termination shall be effective immediately; provided,
however, a termination pursuant to subsection 8.01(c) shall include the cure
period referenced, and related to, a termination for Cause described in
subsection 8.02(a). If this Agreement is terminated pursuant to subsection (d)
or (e) of this Section 8.01, such termination shall be effective on the date set
forth in the notice of termination.
8.2 "CAUSE" DEFINED.
(a) Executive has breached the provisions of this Agreement in
any material respect (provided, that the Board of Directors gives
written notice of its intention to terminate Executive's employment
for Cause, and such notice shall state in reasonable detail the
particular act(s) or failure(s) to act that constitute grounds on
which the termination is based, and, provided that Executive shall
have ten (10) business days to cure any such breach), or
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(b) Executive has engaged in material misconduct, including,
without limitation, willful and material failure to perform
Executive's duties as an officer or employee of the Company, or
(c) Executive has committed fraud, misappropriation or
embezzlement in connection with the Company's business, or
(d) Executive has been convicted or has pleaded NOLO CONTENDERE
to criminal misconduct (except for parking violations, minor traffic
violations, and other xxxxx or insignificant misdemeanors, or other
misconduct which does not relate to or involve or adversely affect
Executive's duties for the Company, as reasonably determined by the
Company's Board of Directors).
8.03 "DISABILITY" DEFINED. As used in this Agreement, the term
"disability" means any mental or physical condition which renders Executive
unable to perform the essential functions of his position, with or without
reasonable accommodation, as defined by various state and federal disability
laws. Executive shall be presumed to have such a disability, for the purpose
of this Agreement, in the event Executive qualifies because of illness or
incapacity, to begin receiving disability income insurance payments under any
long term disability income insurance policy that the Company maintains for
the benefit of Executive. If there is no such policy in effect at the date
of Executive's illness or incapacity, Executive shall be presumed to have
such a disability for the purpose of this Agreement if Executive is
substantially incapable of performing his duties for a period of more than
eight (8) weeks, after also including any available "sick leave days," if
any, as may be adopted for employees of the Company (and as referenced in
Section 4.03(d)); provided, however, at least thirty (30) days prior to the
end of such period referenced in this sentence, the Board of Directors shall
notify Executive in writing of their determination that, with the passage of
requisite balance of time remaining, Executive shall be deemed to be
disabled; provided, further, during such thirty (30) day period, Executive
shall be permitted to make a presentation to the Board of Directors, or a
committee of the Board of Directors constituted for such presentation, for
its consideration with respect to a finding of Disability on the part of
Executive.
8.04 EFFECT OF TERMINATION. Notwithstanding any termination of
this Agreement, Executive, in consideration of his employment hereunder to
the date of such termination shall remain bound by the provisions of this
Agreement which specifically relate to periods, activities or obligations
upon or subsequent to the termination of Executive's employment.
8.05 SURRENDER OF RECORDS AND PROPERTY. Upon termination of his
employment with the Company, Executive shall deliver or shall cause to be
delivered promptly to the Company all copies of all records, manuals, books,
blank forms, documents, letters, memoranda, notes, notebooks, reports, data,
tables, calculations or copies thereof, which are the property of the Company
or which relate in any way to the business products, practices or techniques
of the Company, and all other property, trade secrets and confidential
information of the Company, including, but not limited to, all documents
which in whole or in part contain any trade secrets or confidential
information of the Company, which in any of the cases are in his possession
or under his control.
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9. REMEDIES FOR EARLY TERMINATION. In the event of Termination
pursuant to Section 8, Base Salary shall be paid as follows:
9.01 In the event of termination for Cause, Base Salary shall
continue to be paid on a monthly basis prorated through the date of
termination specified in any notice of termination.
9.02 In the event of termination pursuant to Section 8.01(e),
compensation shall continue to be paid as follows: if the notice of
termination is given by Executive at any time, Base Salary shall continue to
be paid on a monthly basis prorated through the date of termination specified
in such notice and Executive shall also be entitled to continue to
participate in those benefit programs provided by Sections 4.03(c) and (d)
for 24 months following termination.
9.03 In the event of termination of this Agreement by reason of
Executive's death, the Company shall pay Executive's estate the equivalent of
six (6) month's Base Salary payable, in the Company's discretion, over a
period not to exceed six (6) months.
9.04 In the event of disability, Base Salary shall terminate as of
the end of the sixth (6th) month following the month in which the event
causing the disability occurred.
9.05 In the event of termination without Cause pursuant to Section
8.01(d), compensation shall continue to be paid as follows:
(a) Executive shall be entitled to the balance of Base Salary
due from the date of termination until the end of twelve (12) months
thereafter. Such Base Salary shall, at the election of the Company,
be paid in a lump sum or shall continue to be paid on a monthly basis
prorated through the end of the applicable payment period referenced
immediately above;
(b) The vesting of any unexpired stock options granted Executive
shall accelerate and be fully exercisable, subject to the other terms
of the agreements granting such stock options;
(c) Executive shall be entitled to continue to participate, at
the expense of Executive, in those benefits mandated by the health
care continuation rules commonly referred to as "COBRA" (named after
The Consolidated Omnibus Reconciliation Act of 1985) for twenty-four
(24) months following such termination.
10. CHANGE IN CONTROL.
10.1 "CHANGE IN CONTROL" DEFINED. For purposes of this Section 10,
a "CHANGE IN CONTROL" shall mean:
(a) the merger or consolidation of the Company with any person
or entity not affiliated with the Company as of the date of this
Agreement, or
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(b) the sale of all or substantially all the assets of the
Company to any person or entity not affiliated with the Company as of
the date of this Agreement, or
(c) the ownership of fifty-one percent (51%) or more of the
total voting capital stock of the Company then issued and outstanding
by any person or entity (or affiliated group) not affiliated with the
Company as of the date of this Agreement, provided that this Section
10.01(c) will not apply to the issuance of the Company's capital stock
pursuant to a registration of its shares under the Securities Act of
1933, as amended (the "1933 ACT") or pursuant to a private placement
of the Company's capital stock exempt from the registration
requirements of the 1933 Act.
It is expressly recognized by the parties that a Change in Control would
necessarily result in material alteration or diminishment of Executive's
position and responsibilities. Therefore, if during the term of this
Agreement, there shall occur, with or without the consent of the Company, a
Change in Control, Executive shall have the option to terminate this
Agreement on fourteen (14) days' written notice.
10.02 REMEDIES FOR "CHANGE IN CONTROL". In the event there shall
occur, with or without the consent of the Company, a Change in Control under
this Section 10:
(a) If Executive continues to be employed by the Company (or
such surviving entity) and if following the Change in Control, there
is a reduction in Executive's Base Salary, the Company shall pay
Executive, for a period of 12 months, the difference between
Executive's Base Salary in effect on the date immediately prior to the
Change in Control, and Executive's Base Salary following the Change in
Control.
(b) If Executive continues to be employed by the Company (or
such surviving entity), the vesting of any unexpired stock options
granted Executive shall accelerate; all such unexpired stock options
may be exercised by Executive within twelve (12) months following the
date of termination (but in no event later than the expiration date of
the term of such options.)
(c) If Executive voluntarily continues his employment with the
Company (or such surviving entity) following the Change in Control,
Executive shall not be entitled to any compensation or other remedy
due to a change in the title or position of Executive.
(d) If Executive voluntarily terminates his employment with the
Company in connection with the Change in Control, and prior to the
effective date of the Change in Control, following due notice to the
Company of that fact, then Executive shall be entitled to the payment
of Base Salary from the date of termination and until the end of
twelve (12) months thereafter, and any unexpired stock options granted
Executive shall accelerate and be fully exercisable, subject to the
other terms of the agreements granting such stock options.
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11. COVENANT NOT TO COMPETE.
11.01 Executive expressly acknowledges that he is entering into
this covenant not to compete and so as to protect the business and goodwill
of the Company from competition in the event of a termination of the
employment relationship and Executive further acknowledges the reasonableness
of the restriction imposed herein. Accordingly, in the event that
Executive's employment with the Company is terminated voluntarily by the
Executive or by the Company for Cause as defined in Section 8.02, it is
agreed that:
(a) Executive will inform any new employer, before accepting
employment, of the existence of this Agreement and give such a copy
of this Section 11, Covenant Not to Compete; and
(b) Executive will not, for a period beginning from the date of
this Agreement and for twelve (12) months after Executive's employment
with the Company ends, sell to, solicit, serve, or attempt to sell to,
solicit, or serve any customer, client or account or any prospective
customer, client or account of the Company; PROVIDED, HOWEVER, that
the foregoing limitation shall only apply to sales, solicitations,
services or attempts to do any of the foregoing which involve a
Competing Product. A "customer, client or an account" is any person,
firm or entity to whom or to which the Company furnished any services,
materials, or products at any time during Executive's employment with
the Company. A "prospective customer, client or account" is one
which, during Executive's employment with the Company, is solicited,
successfully or unsuccessfully, to become a customer, client or
account of the Company. As used herein, a "Competing Product" is a
product similar to or in competition with any product, or planned
product, of the Company as of the date Executive's employment is
terminated.
(c) Executive will not, from a period beginning with the date of
this Agreement and for twelve (12) months after Executive's employment
with the Company ends, cause or attempt to cause any customer, client
or account or any prospective customer, client or account, to divert,
terminate, limit or in any manner modify or fail to enter into any
actual or potential business relationship with the Company.
(d) Executive will not, for a period beginning with the date of
this Agreement and for twelve (12) months after Executive's
employment with the Company ends, divert, solicit, or employ, or
attempt to divert, solicit, or employ any employees of the Company.
(e) Executive shall not, directly or indirectly, from a period
beginning from the date of this Agreement and for twelve (12) months
after Executive's employment with the Company ends, engage in
competition with the Company in any manner or capacity (e.g., as an
advisor, principal, agent, partner, officer, director, stockholder,
9
employee, member of any association, or otherwise) for a competitor of
the Company. The obligations of Executive under Section 11.01(e)
shall apply to any geographic area in which the Company: (i) has
engaged in business during the term of this Agreement through
production, promotional, sales or marketing activity, or otherwise,
(ii) has otherwise established the Company's goodwill, business
reputation or any customer or supplier relations, or (iii) has been
directly involved in the expansion of the Company's business and
development of the Company's customer base.
12. SETTLEMENT OF DISPUTES.
12.01 RESOLUTION OF CERTAIN CLAIMS - INJUNCTIVE RELIEF. Executive
agrees that, in addition to, but not to the exclusion of any other available
remedy, the Company shall have the right to enforce the provisions of Section
7 and 11 by applying for and obtaining temporary and permanent restraining
orders or injunctions from a court of competent jurisdiction (the
jurisdiction of which is consented to in Section 11.02) without the necessity
of filing a bond therefor. The prevailing party in any such action shall be
entitled to recover from the other party reasonable attorneys' fees and costs
incurred by the prevailing party in such action.
12.02 VENUE. Any action at law, suit in equity, or judicial
proceeding arising directly, indirectly, or otherwise in connection with, out
of, related to or from this Agreement or any provision hereof, shall be
litigated only in the courts of the state of Minnesota, County of Hennepin,
or the Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx of Minnesota, Fourth Division.
Executive waives any right Executive may have to transfer or change the venue
of any litigation brought against Executive by the Company. Executive also
waives any claim of inconvenient forum.
12.03 SEVERABILITY. To the extent any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom
and the remainder of such provision and of this Agreement shall be unaffected
and shall continue in full force and effect. In furtherance and not in
limitation of the foregoing, should the duration or geographical extent of,
or business activities covered by, any provision of this Agreement be in
excess of that which is valid and enforceable under applicable law, then such
provision shall be construed to cover only that duration, geographical extent
or business activities which may be valid and enforceable under applicable
law. Executive acknowledges the uncertainty of the law in this respect and
expressly stipulates that this Agreement be given the construction which
renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms possible under applicable law.)
13. MISCELLANEOUS.
13.01 GOVERNING LAW. This agreement is made under and shall be
governed by and construed in accordance with the laws of the state of
Minnesota other than its law dealing with conflicts of law.
13.02 PRIOR AGREEMENTS. This agreement contains the entire
agreement of the parties relating to the employment of Executive by the
Company and the ancillary matters discussed herein and supersedes all prior
agreements and understandings with respect to such matters, and the parties
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hereto have made no agreements, representations or warranties relating to
such employment or ancillary matters which are not set forth within.
13.03 WITHHOLDING TAXES. The Company may withhold from any
benefits payable under this Agreement all federal, state, city or other taxes
as shall be required pursuant to any law or governmental regulation or ruling.
13.04 AMENDMENTS. No amendment or modification of this Agreement
shall be deemed effective unless made in writing and signed by the both
Executive and the Company.
13.05 NO WAIVER. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be by any estoppel to enforce any
provision of this Agreement, except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any
written waiver shall not be deemed a continuing waiver unless specifically
stated, shall operate only as to the specific term or condition waived and
shall not constitute a waiver of such term or condition for the future or as
to any act other than that specifically waived.
13.06 ASSIGNMENT. This agreement shall not be assignable, in whole
or in part, by Executive without the written consent of the Company.
13.07 NOTICES. All notices, requests and demands given to or made
pursuant hereto shall, except as otherwise specified herein, be in writing
and be delivered, mailed or faxed to any such party at its address or fax
number which:
In the case of Company shall be:
Hypertension Diagnostics, Inc.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxxxxxxx 00000-0000
FAX NO.: (000) 000-0000
If the case of Executive shall be:
Xxxx X. Xxxxxxxx
0000 Xxxxxxxxx Xxxxxx
Xx. Xxxx, XX 00000
FAX NO.: (000) 000-0000
Either party may, by notice hereunder, designate a changed address.
Any notice, if mailed properly addressed, postage prepaid, registered or
certified mail, shall be deemed dispatched on the registered date or that
stamped on the certified mail receipt, and shall be deemed received within
the second business day thereafter or when it is actually received, whichever
is sooner. Any notice which is delivered via telefax shall be deemed
dispatched when it is actually sent, and shall be deemed received when it is
actually received.
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13.08 COUNTERPARTS. This agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
13.09 TIME OF THE ESSENCE. Time is of the essence in the
performance of the obligations hereunder.
13.10 CAPTIONS AND HEADINGS. The captions and paragraph headings
used in this Agreement are for convenience of reference only, and shall not
affect the construction or interpretation of this Agreement or any of the
provisions hereof.
IN WITNESS WHEREOF, Executive and the Company have executed this
Agreement as of the date set forth in the first paragraph.
HYPERTENSION DIAGNOSTICS, INC.
By /s/ Xxxxxxxx X. Xxxx
-----------------------------------------
Its Chairman
------------------------------------
"COMPANY"
/s/ Xxxx X. Xxxxxxxx
---------------------------------------------
Xxxx X. Xxxxxxxx
"EXECUTIVE"
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EXHIBIT A
(FORM OF) INCENTIVE STOCK OPTION AGREEMENT
HYPERTENSION DIAGNOSTICS, INC.
1995 LONG TERM INCENTIVE AND STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
Optionee's Name and Address:
Xxxx X. Xxxxxxxx
0000 Xxxxxxxxx Xxxxxx
Xxxxx Xxxx, XX 00000
You have been granted an option to purchase Common Stock of Hypertension
Diagnostics, Inc. (the "Company") as follows:
GRANT NUMBER: 5
----
OPTION PRICE PER SHARE: $2.00
TOTAL NUMBER OF SHARES GRANTED: 150,000 Shares
DATE OF GRANT: September 8, 1997
TYPE OF OPTION: X Incentive Stock Option
-----
Nonstatutory Stock Option
-----
TERM/EXPIRATION DATE: 09/07/2007
VESTING SCHEDULE:
A total of 90,000 shares subject to the Option shall vest on the
following dates, as follows:
18,000 shares on September 8, 1997 (the "Commencement Date").
18,000 shares on the 1st annual anniversary of the Commencement Date.
18,000 shares on the 2nd annual anniversary of the Commencement Date.
18,000 shares on the 3rd annual anniversary of the Commencement Date.
18,000 shares on the 4th annual anniversary of the Commencement Date.
A total of 60,000 shares subject to the Option shall vest on each of the
following dates, as follows:
30,000 shares on the 5th annual anniversary of the Commencement Date.
30,000 shares on the 6th annual anniversary of the Commencement Date.
TERMINATION PERIOD: Subject to the terms of (i) this option grant; (ii)
that certain Employment Agreement dated September 8,
1997; and (iii) the 1995 Long Term Incentive and Stock
Option Plan (the "Plan"), this option grant and all the
rights hereunder, to the extent such rights have not
been exercised, shall terminate on September 7, 2007.
See page 3 for restriction on transfer of this security.
GENERAL TERMS: This option grant is subject to the terms, definitions
and provisions of the 1995 Long Term Incentive and
Stock Option Plan adopted by the Company, which are
incorporated herein by reference.
By your signature and the signature of the Company's
representative below, you and the Company agree that this
option grant is granted under and governed by the terms and
conditions of the 1995 Long Term Incentive and Stock Option
Plan and the Stock Option Agreement, all of which are
attached and made a part of this document.
OPTIONEE: HYPERTENSION DIAGNOSTICS, INC.
By:
-------------------------------- -------------------------------------
Signature Xxxxxxxx X. Xxxx
Xxxx X. Xxxxxxxx Title: President
--------------------------------
Print Name
See page 3 for restriction on transfer of this security.
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HYPERTENSION DIAGNOSTICS, INC.
1995 LONG TERM INCENTIVE AND STOCK OPTION PLAN
STOCK OPTION AGREEMENT
1. GRANT OF OPTION. Hypertension Diagnostics, Inc., a Minnesota
corporation (the "COMPANY"), hereby grants to Xxxx X. Xxxxxxxx (the
"OPTIONEE") named in the Notice of Stock Option Grant, an option (the
"OPTION") to purchase a total number of shares of Common Stock (the "SHARES")
set forth in the Notice of Stock Option Grant (the "NOTICE OF GRANT"), at the
exercise price per share set forth in the Notice of Stock Option Grant (the
"EXERCISE PRICE") subject to the terms, definitions and provisions of the
1995 Long Term Incentive and Stock Option Plan (the "PLAN") adopted by the
Company, which is incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Option.
If designated an Incentive Stock Option, this option is intended to
qualify as an Incentive Stock Option as defined in Section 422 of the Code.
2. EXERCISE OF OPTION. This Option shall be exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant
and with the provisions of Section 7 of the Plan as follows:
(i) RIGHT TO EXERCISE.
(a) This Option may not be exercised for a fraction of a
share.
(b) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Section 6 below and Section 7 of the Plan, subject to the limitation
contained in subsection 2(i)(c).
(c) In no event may this Option be exercised after the date
of expiration of the term of this Option as set forth in the Notice of Grant.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by
written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as
to the holder's investment intent with respect to such shares of Common Stock
as may be required by the Company pursuant to the provisions of the Plan.
Such written notice shall be signed by the Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of
law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall
be considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his Investment
Representation Statement in the form attached hereto as Exhibit B.
4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any
of the following, or a combination thereof, at the election of the Optionee:
i. cash; or
ii. check; or
iii. surrender of other shares of Common Stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a fair market value on the date of surrender
equal to the Exercise Price of the Shares as to which the option is being
exercised; or
iv. delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company
of the sale or loan proceeds required to pay the exercise price.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule
under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G")
as promulgated by the Federal Reserve Board. As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any
applicable law or regulation.
6. TERMINATION OF RELATIONSHIP. In the event of termination of
Optionee's consulting relationship or Continuous Status as an Employee,
Optionee may, to the extent otherwise so entitled pursuant hereto or under
the terms set forth in the Notice of Stock Option Grant, exercise this Option
during the Termination Period set out in the Notice of Stock Option Grant.
To the extent that Optionee was not entitled to exercise this Option at the
date of such termination, or if Optionee does not exercise this Option within
the time specified herein, the Option shall terminate.
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7. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
him. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
8. TERM OF OPTION. This Option may be exercised only within the terms
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan, Optionee's employment agreement with the Company
and the terms of this Option.
9. TAX CONSEQUENCES. The exercise of this Option, and the subsequent
sale or disposition of Shares thus acquired, shall have income tax
consequences for the Optionee, and it is Optionee's responsibility to
determine any such income tax liability.
HYPERTENSION DIAGNOSTICS, INC.
a Minnesota corporation
By:__________________________________
Xxxxxxxx X. Xxxx, President
OPTIONEE ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE PROVIDED IN
OPTIONEE'S EMPLOYMENT AGREEMENT OR NOTICE OF STOCK OPTION GRANT, THE VESTING
OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING
EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S
STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER
UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR
CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH HIS RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE HIS EMPLOYMENT OR CONSULTANCY AT ANY
TIME, WITH OR WITHOUT CAUSE.
RESTRICTION ON TRANSFER
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, OFFERED, PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE UNLESS THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR LAWS COVERING SUCH
SECURITY OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THIS
SECURITY (CONCURRED IN BY COUNSEL FOR THE COMPANY) STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT, PLEDGE OR DISTRIBUTION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND ALL
APPLICABLE STATE SECURITIES LAWS.
3
Optionee acknowledges receipt of a copy of the Plan and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept
as binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated: __________ ___________________________________________
Optionee
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration
of the Company's granting his or her spouse the right to purchase Shares as
set forth in the Plan and this Option Agreement, the undersigned hereby
agrees to be irrevocably bound by the terms and conditions of the Plan and
this Option Agreement and further agrees that any community property interest
shall be similarly bound. The undersigned hereby appoints the undersigned's
spouse as attorney-in-fact for the undersigned with respect to any amendment
or exercise of rights under the Plan or this Option Agreement.
_________________________________
Spouse of Optionee
4
EXHIBIT A
1995 LONG TERM INCENTIVE AND STOCK OPTION PLAN
EXERCISE NOTICE
_______________
_______________
_______________
1. EXERCISE OF OPTION. Effective as of today,__________________, 19__,
the undersigned ("OPTIONEE") hereby elects to exercise Optionee's
option to purchase _______ shares of the Common Stock (the "SHARES") of
Hypertension Diagnostics, Inc. (the "COMPANY") under and pursuant to the
Company's 1995 Long Term Incentive and Stock Option Plan (the "PLAN") and the
[ ] Incentive [ ] Nonstatutory Stock Option Agreement dated ____________, 1996
(the "OPTION AGREEMENT").
2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee
has received, read and understood the Plan and the Option Agreement and
agrees to abide by and be bound by their terms and conditions. Optionee
represents that Optionee is purchasing the Shares for Optionee's own account
for investment and not with a view to, or for sale in connection with, a
distribution of any of such Shares.
3. RIGHTS AS SHAREHOLDER. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a shareholder shall exist
with respect to the optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock
certificate promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued.
Optionee shall enjoy rights as a shareholder until such time as Optionee
disposes of the Shares or the Company and/or its assignee(s) exercises the
Right of First Refusal hereunder. Upon such exercise, Optionee shall have no
further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions
of this Agreement, and Optionee shall forthwith cause the certificate(s)
evidencing the Shares so purchased to be surrendered to the Company for
transfer or cancellation.
4. TAX CONSULTATION. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificates) evidencing ownership of the
Shares together with any other legends that may be required by state or
federal securities laws:
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 OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.
(b) STOP-TRANSFER NOTICES. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
6. MARKET STANDOFF AGREEMENT. Optionee hereby agrees that if so
requested by the Company or any representative of the underwriters in
connection with any registration of the offering of any securities of the
Company under the 1933 Act, Optionee shall not sell or otherwise transfer any
Shares or other securities of the Company during the 180-day period following
the effective date of a registration statement of the Company filed under the
1933 Act; provided, however, that such restriction shall only apply to the
first two registration statements of the Company become effective under the
1933 Act which include securities be sold on behalf of the Company to the
public in an underwritten public offering under the 1933 Act. The Company
may impose stop-transfer instructions with respect to securities subject t
trial foregoing restrictions until the end of such 180-day period.
7. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement
shall be binding upon Optionee and his or her heirs, executors,
administrators, successors and assigns.
2
8. INTERPRETATION. Any dispute regarding the interpretation of
this Agreement shall, be submitted by Optionee or by the Company forthwith to
the Company's Board of Directors or the committee thereof that administers
the Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or committee shall be final and
binding on the Company and on Optionee.
9. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed
by and construed in accordance with the laws of the State of Minnesota
excluding that body of law pertaining to conflicts of law. Should any
provision of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
10. DELIVERY OF PAYMENT. Optionee herewith delivers to the
Company the full Exercise Price for the Shares.
11. ENTIRE AGREEMENT. The Plan and Notice of Grant/Option
Agreement are incorporated herein by reference. This Agreement, the Plan and
the Notice of Grant/Option Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements
of the Company and Optionee with respect to the subject matter hereof, and is
governed by Minnesota law except for that body of law pertaining to conflict
of laws.
Submitted by: Accepted by:
OPTIONEE: Hypertension Diagnostics, Inc.
By:___________________________________
_____________________________ Its:__________________________________
(Signature)
ADDRESS: ADDRESS:
_____________________________ ______________________________________
_____________________________ ______________________________________
3
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : Hypertension Diagnostics, Inc.
SECURITY : Common Stock
AMOUNT :
DATE:
In connection with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the securities.
Optionee is acquiring these securities for investment for Optionee's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(b) Optionee acknowledges and understands that the securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this
connection, Optionee understands that, in the view of the Securities and
Exchange Commission, the statutory basis for such exemption may be
unavailable if Optionee's representation was predicated solely upon a present
intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase
or decrease in the market price of the Securities, or for a period of one
year or any other fixed period in the future. Optionee further understands
that the Securities must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Optionee further acknowledges and understands that the Company is
under no obligation to register the securities. Optionee understands that
the certificate evidencing the securities will be imprinted with a legend
which prohibits the transfer of the Securities unless they are registered or
such registration is not required in the opinion of counsel satisfactory to
the Company, and any other legend required under applicable state securities
laws.
(c) Optionee is familiar with the provisions of Rule 701 and
Rule 144, each promulgated under the Securities Act, which, in substance,
permit limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a nonpublic offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of exercise of the Option by the
Optionee, such exercise will be exempt from registration under the Securities
Act. In the event the Company later becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule
144, including among other things: (1) the
sale being made through a broker in an unsolicited "broker's transaction" or
in transactions directly with a market maker (as said term is defined under
the Securities Exchange Act of 1934); and, in the case of an affiliate, (2)
the availability of certain public information about the company, and the
amount of securities being sold during any three month period not exceeding
the limitations specified in Rule 144(e), if applicable.
In the event that the Company does not qualify under Rule 701 at
the time of exercise of the Option, then the securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires among other things: (1) the resale occurring not less than two years
after the party has purchased, and made full payment for, within the meaning
of Rule 144, the securities to be sold; and, in the case of an affiliate, or
of a non-affiliate who has held the securities less than three years, (2) the
availability of certain public information about the Company, (3) the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934), and (4) the amount of securities being sold
during any three month period not exceeding the specified limitations stated
therein, if applicable.
(d) Optionee agrees, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell,
make short sale of, loan, grant any options for the purchase of, or otherwise
dispose of any shares of Common Stock of the Company held by Optionee (other
than those shares included in the registration) without the prior written
consent of the Company or the underwriters managing such initial underwritten
public offering of the Company's securities for one hundred eighty (180) days
from the effective date of such registration, and (2) further agrees to
execute any agreement reflecting (1) above as may be requested by the
underwriters at the time of the public offering; PROVIDED HOWEVER that the
officers and directors of the Company who own the stock of the Company also
agree to such restrictions.
(e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the fact
that Rules 144 and 701 are not exclusive, the Staff of the Securities and
Exchange Commission has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and
otherwise than pursuant to Rules 144 or 701 will have a substantial burden of
proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk. Optionee
understands that no assurances can be given that any such other registration
exemption will be available in such event.
Signature of Optionee:
_______________________________________
Date:_____________________________ 19__
2
