CONSULTING AGREEMENT
BETWEEN XXX X. XXXX, M.D. AND
HYPERTENSION DIAGNOSTICS, INC.
This Agreement is made and entered into this 30th day of October, 1995,
by and between Xxx X. Xxxx, M.D. ("Consultant") and Hypertension Diagnostics,
Inc., a Minnesota corporation ("Company") on the terms and conditions set
forth below.
I. DUTIES OF CONSULTANT. Consultant will serve as clinical liaison and
spokesman for the Company's arterial compliance technology. He will
provide such activities on behalf of the Company as the Company may
reasonably request (with the understanding that Consultant is employed on a
full-time basis and that such consulting activities on behalf of the
Company will not interfere with such full-time employment) and will exert
his best effort to forward the research, clinical penetration and marketing
of the Company's products.
II. COMPENSATION. In full consideration of the covenants contained herein,
Consultant's rendition of services under this Agreement, and subject to the
full performance by Consultant of his obligations hereunder, Company shall
provide and the Consultant shall accept the following:
A. STOCK OPTIONS: Company shall grant Consultant certain stock options
of Company as more fully described in the document entitled
"Non-Qualified Stock Option Agreement Between Xxx X. Xxxx, M.D. and
Hypertension Diagnostics, Inc.," attached hereto as Exhibit A. In
consideration of these stock options, and for other good and valuable
consideration, Consultant hereby forever waives, forfeits, cancels,
surrenders, and divests himself of any rights pursuant to any
outstanding options of Company except those options contained in
Exhibit A.
B. EXPENSE REIMBURSEMENT. Company will reimburse Consultant for those
reasonable actual expenses which meet with the prior approval of the
Chief Executive Officer which are incurred by Consultant incident to
performance of this Agreement.
III. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Consultant shall keep
confidential and shall not disclose to anyone or use, either during or
after the term of this Agreement, any confidential information of Company,
except as is required by Consultant's duties, or as authorized in writing
by Company. "Confidential Information" means any information or
compilation of information which derives independent economic value from
not being generally known to and not being readily ascertainable by proper
means by other persons who can obtain economic value from its disclosure or
use. Examples of Confidential Information not to be disclosed or used
except as permitted by Company, include but are not limited to:
A. Information concerning Company's operations, organizational structure,
methods, technology, procedures, finances, accounting, and legal
matters;
B. Information concerning Company's sales activities and strategies,
marketing activities and strategies, servicing activities and
strategies, and strategic business planning activities;
C. Information concerning Company's past, present, or potential customers
(hereafter referred to as "customers"), including the names, addresses
and telephone numbers of these customers; the identity of the
individuals responsible for buying products and services on behalf of
these customers; the needs and buying tendencies of these customers;
contract negotiations between Company and these customers; the
contents of contracts and agreements between Company and these
customers; financial information concerning these customers' business
operations; credit information regarding these customers; and
identity, quantity, and price of products or services purchased from
Company by these customers;
D. Vendor and supplier information including the names, addresses, and
telephone numbers of Company's vendors and suppliers; information
regarding Company's relationship with its vendors and suppliers;
contract negotiations between Company and its vendors and suppliers;
the contents of contracts and agreements between Company and its
vendors and suppliers; financial information concerning its vendors
and suppliers; and identity, quantity and prices of products purchased
by Company from its vendors and suppliers;
E. Information regarding Company's pricing of its products and services,
including price lists and pricing strategies;
F. Personnel records and data.
IV. BUSINESS RECORDS. Consultant shall not remove any records or documents
from the premises of Company or its clients in either original, duplicate,
or copied form, except as necessary in the ordinary course of conducting
business for Company and subject to the approval of the Company management
person with authority to act on such matters. Consultant shall immediately
deliver to Company, upon termination of this Agreement with Company or at
any other time upon Company's request, any such records or documents in
Consultant's possession or control.
V. TERMINATION OF AGREEMENT.
A. DURATION OF AGREEMENT. Unless properly terminated as provided herein,
this Agreement shall continue in effect for a term of four (4) years,
or until October 30, 1999.
2
B. TERMINATION BY CONSULTANT. Consultant may give written notice of
termination of this Agreement for any reason sixty (60) days prior to
the proposed date of termination, at which time this Agreement shall
terminate.
C. THIRTY DAY TERMINATION BY COMPANY. Prior to October 30, 1997, Company
may give written notice of termination of this Agreement for
Reasonable Cause thirty (30) days prior to the proposed date of
termination, at which time this Agreement shall terminate. No waiver
by Company of any breach of this Agreement shall be deemed a waiver of
any prior or subsequent breach. For purposes of this Agreement,
"Reasonable Cause" shall mean:
1. Dishonesty, fraud, misrepresentation, diversion of corporate
opportunity, self-dealing, theft or embezzlement of Company
assets, or material intentional violations of law; or
2. Willful or reckless misconduct by Consultant in the performance
of the duties, functions, obligations or responsibilities
delegated to Consultant.
D. SIXTY DAY TERMINATION BY COMPANY. On or after October 30, 1997,
Company may give written notice of termination of this Agreement for
any reason sixty (60) days prior to the proposed date of termination,
at which time this Agreement shall terminate.
E. EFFECT OF DEATH. This Agreement shall terminate immediately upon the
death of Consultant. Upon the date of death of Consultant, any and
all obligations of Company or its successors and assigns hereunder
shall be terminated, relieved and discharged, except as to reasonable
actual reimbursable expenses incurred by Consultant under this
Agreement prior to the date of his death.
F. COOPERATION UPON TERMINATION. Following notice of termination of this
Agreement, Consultant shall fully cooperate with Company in all
matters relating to the winding up of Consultant's pending work on
behalf of Company and the orderly transfer of such pending work to
such other employees as may be designated by Company.
VI. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
Consultant and any employer of Consultant with respect to any claim made
against Consultant, including the reasonable cost of defense thereof, which
is based upon any activities of Consultant under this Agreement, except to
the extent any such claim is the result of any gross negligence on the part
of Consultant. In the event any such claim is made, Consultant shall
promptly notify the Company in writing, and the Company shall assume the
defense of such claim at its own cost. The Company shall have the right to
determine the strategy of such litigation and any settlement, provided that
the Company shall not enter into any settlement that materially
3
adversely affects Consultant without Consultant's prior consent, which
shall not be unreasonably withheld.
VII. USE OF NAME. The Company shall not use the name of Consultant in any
written materials with respect to the marketing of any product without the
prior written approval of the Consultant; PROVIDED, HOWEVER, that the
Company shall have the right, to the extent that it is advised by counsel
that it is required to do so, to use the name of the Consultant in any
prospectus or private offering documents, or in any documents related to
or connected with such a prospectus or private offering documents,
provided that a copy thereof shall have been provided to Consultant at or
about the same time such documents are provided to any prospective
investors.
VIII. NON-TRANSFERABILITY. This Agreement may be assigned or transferred by
Company at its discretion, but shall not be assigned by Consultant to any
other person or entity.
IX. BINDING AGREEMENT. This Agreement shall be binding upon and inure to the
benefit of the legal representatives, executors, administrators,
successors and assigns of each of the parties to this Agreement.
X. GOVERNING LAW.
A. The laws of Minnesota shall govern the validity, interpretation and
performance of the respective duties and obligations of this
Agreement.
B. Consultant consents to venue and jurisdiction in the District Court
of Hennepin County, State of Minnesota, and in the United States
District Court for the District of Minnesota, and to service of
process under Minnesota law, in any action commenced by Company to
enforce this Agreement.
XI. SEVERABILITY. If any provision of this Agreement is adjudged void,
invalid or unenforceable under law, the remainder of this Agreement shall
continue and remain in full force and effect.
XII. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof, and may not be amended,
modified or waived other than by written instrument signed by both
parties.
XIII. SUPREMACY. This Agreement supersedes all prior oral or written agreements
and understandings between Consultant and Company concerning the subject
matter hereof, including any implied or express representations regarding
Consultant's ownership of any interest in Company or its property, and any
prior oral or written agreements conveying stock option rights to
Consultant.
4
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year below written:
CONSULTANT HYPERTENSION DIAGNOSTICS, INC.
/s/ Xxx X. Xxxx By /s/ Xxxxxxx X. Xxxxxxx
------------------------------ ------------------------------
Xxx X. Xxxx, M.D. Its President/CEO
------------------------------
Dated: 12/2/95 Dated: 11/8/95
----------------------- ----------------------------
5
NON-QUALIFIED STOCK OPTION AGREEMENT
BETWEEN XXX X. XXXX, M.D. AND
HYPERTENSION DIAGNOSTICS, INC.
THIS AGREEMENT is made and entered into this 30th day of October, 1995,
between Hypertension Diagnostics, Inc., a Minnesota corporation ("Company"),
and Xxx X. Xxxx, M.D. ("Optionee") on the terms and conditions set forth
below.
WHEREAS, the Board of Directors of the Company has decided to permit
Non-Qualified Stock Options to be granted to certain individuals providing
valuable services to the Company and any subsidiary corporations of the
Company to purchase voting common stock of the Company; and
WHEREAS, the Company desires the Optionee to secure stock ownership in
the Company in order to increase effectiveness and personal interest in the
Company;
NOW THEREFORE, in consideration of the promises and of the covenants and
agreements set forth below, it is mutually agreed as follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee an option to
purchase from the Company all or any part of an aggregate amount of
449,265 shares of the voting common stock of the Company, par value
$.01 per share ("Option Shares"), at an option price of $1.70 per
share. The date of this Agreement is the date of the grant.
2. EXERCISE PERIOD. The Option shall become exercisable with respect to
the Option Shares in three (3) installments. The following table sets
forth the initial dates of exercisability of each installment and the
number of Option Shares as to which this Option shall become
exercisable on such dates, provided that this Option shall become so
exercisable only if the "Consulting Agreement Between
Xxx X. Xxxx, M.D. and Hypertension Diagnostics, Inc." ("Consulting
Agreement"), of which this Agreement is an Exhibit, has not been
terminated by Consultant prior to October 30, 1997:
INITIAL DATE NUMBER OF OPTION SHARES
OF EXERCISABILITY AVAILABLE FOR EXERCISE
October 30, 1995 224,633
October 30, 1996 112,316
October 30, 1997 112,316
The foregoing rights to exercise this Option shall be cumulative with
respect to the Option Shares becoming exercisable on each such date
but in no event shall this Option be exercisable after, and this
Option shall become void and expire as to all
EXHIBIT A
unexercised Option Shares, at 5:00 p.m. (Minneapolis, Minnesota time)
on October 30, 2005.
3. EXERCISE OF OPTION. This option may be exercised only by written
notice of intent to the Company at its xxxxxx xx Xxxx Xxxxx Xxxxx,
Xxxxx Xx. Xxxx, XX 00000-0000. Such notice shall state the number of
shares in respect of which the option is being exercised and shall be
accompanied by payment for such shares in cash, certified or cashier's
check or by personal check, if acceptable to the Board of Directors of
Company. The exercise of the Option shall be deemed effective upon
receipt of such notice and payment. As soon as practicable after the
effective exercise of the Option, the Company shall record on the
stock transfer books of the Company the ownership of the shares
purchased in the name of the Optionee, and the Company shall deliver
to the Optionee one or more duly issued stock certificates evidencing
such ownership.
4. EXERCISE UPON DEATH. Notwithstanding Section 2 hereof, if Optionee
shall die, this option may be exercised with respect to all Option
Shares granted to Optionee by the person or persons to whom Optionee's
rights under this option pass by will or applicable law, or if no such
person has such right, by his executors or administrators.
5. CHANGE IN CONTROL.
a. DEFINITION. For purposes of this Agreement, the term "Change in
Control" shall mean any transaction or occurrence of events in
which (i) Company merges or consolidates with any other
corporation and is not the surviving corporation after such
merger or consolidation; (ii) Company transfers all or
substantially all of its business and assets to any other person,
individual, corporation, partnership, group, or association; or
(iii) more than 50% of Company's outstanding voting shares are
purchased by any other person, individual, corporation,
partnership, group or association.
b. ACCELERATION. If any events constituting a Change in Control of
the Company shall occur, Optionee shall be entitled to receive
option rights covering shares of the surviving or acquiring
entity in the same proportion, at an equivalent price, and
subject to the same conditions as this Option; provided, however,
that Optionee may, at his sole discretion, accelerate the right
to exercise this Option thirty (30) days prior to the anticipated
effective date of any of the foregoing transactions; provided,
however, that if, with respect to Optionee, acceleration of the
vesting of this Option as provided herein (which acceleration
could be deemed a payment within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended ("Code")) together with any other payments which Optionee
has the right to receive from the Company or any corporation
which is a member of an "affiliated group" (as defined in
Section 1504(a) of the Code
-2-
without regard to Section 1504(b) of the Code) of which Company
is a member, would constitute a "parachute payment" (as defined
in Section 280G(b)(2) of the Code), the payments to Optionee as
set forth herein shall be reduced to the largest amount as will
result in no portion of such payments being subject to the excise
tax imposed by section 4999 of the Code.
6. DILUTION OR OTHER ADJUSTMENTS. If there shall be any change in the
shares of voting common stock of the Company through merger,
consolidation, reorganization, recapitalization, dividend in the form
of stock (of whatever amount), stock split or other change in the
corporate structure, appropriate adjustments in the outstanding
options shall be made by the Company. In the event of any such
changes, adjustments shall include, where appropriate, changes in the
aggregate number of shares subject and the price per share subject to
outstanding and future options in order to prevent dilution or
enlargement of option rights.
7. NO RIGHT TO CONTINUED COMPENSATION. Nothing contained in this
Agreement shall obligate the Company or any subsidiary corporation of
the Company to continue to accept and pay for the services of Optionee
as a consultant, employee or independent contractor for any particular
period or interfere with the right of the Company or any such
subsidiary to terminate any contract or employment relationship with
Optionee.
8. NO SHAREHOLDER RIGHTS. Optionee shall have no rights as a stockholder
with respect to any shares of common stock subject to this option
prior to the date of issuance of a certificate or certificates for
such shares.
9. INVESTMENT REPRESENTATION. Notice of the exercise of this option
shall include a representation that any of the Option Shares purchased
shall be acquired as an investment and not with a view to, or for sale
in connection with, any public distribution.
10. COMPLIANCE WITH LAW AND REGULATIONS. The Optionee acknowledges that
this option may not be exercised until the Company has taken all
actions then required to comply with all applicable federal and state
laws, rules and regulations and any exchange on which the stock may
then be listed. The certificates representing the shares purchased
upon the exercise of this option shall bear a legend in substantially
the following form:
These shares have not been registered either under any applicable
federal law and rules and resale will not be permitted under state law
unless the shares are first registered under the Minnesota Securities
Law. Further, no sale, offer to sell, or transfer of these shares
shall be made unless a registration statement under the federal
Securities Act of 1933, as amended, with respect to such shares is
then in
-3-
effect or an exemption from the registration requirements of such Act
is then in fact applicable to such shares.
11. NON-TRANSFERABILITY. This option shall not be transferable other than
by will or by laws of descent and distribution. During the lifetime
of the Optionee, this option shall be exercisable only by such
Optionee.
12. DISPUTE OR DISAGREEMENT. As a condition of the granting of this
option, the Optionee agrees that any dispute or disagreement which may
arise under or as a result of or pursuant to this Agreement shall be
determined by the Board of Directors in its sole discretion, and that
any interpretation by the Board of Directors of the terms of this
Agreement shall be final, binding and conclusive.
13. OTHER ASSISTANCE. Upon the exercise of this option the Optionee or
other person exercising the option must execute any document or make
any representation or give any commitment which the Board of
Directors, in its discretion, deems necessary or advisable by reason
of the securities laws of the United States or any state, and execute
any document for the purpose of restricting the transfer of stock to
third parties, or pay any sum of money in respect of taxes or
undertake to pay or have paid any such sum which the Board of
Directors, in its discretion, deems necessary by reason of the Code or
any rule or regulation thereunder, or by reason of the tax laws of any
state or any contracts or agreements in effect at such time.
14. BINDING AGREEMENT. This Agreement shall be binding upon and inure to
the benefit of the legal representatives, executors, administrators,
successors and assigns of each of the parties to this Agreement.
15. GOVERNING LAW.
A. The laws of Minnesota shall govern the validity, interpretation
and performance of the respective duties and obligations of this
Agreement.
B. Employee consents to venue and jurisdiction in the District Court
of Hennepin County, State of Minnesota, and in the United States
District Court for the District of Minnesota, and to service of
process under Minnesota law, in any action commenced by Company
to enforce this Agreement.
16. SEVERABILITY. If any provision of this Agreement is adjudged void,
invalid or unenforceable under law, the remainder of this Agreement
shall continue and remain in full force and effect.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof, and may not be
amended,
-4-
changed, modified, terminated, or waived other than by written
instrument signed by both parties.
18. SUPREMACY. This Agreement supersedes all prior oral or written
agreements and understandings between Employee and Company concerning
the subject matter hereof, including any implied or express
representations regarding Employee's ownership of any interest in
Company or its property, and any prior oral or written agreements
conveying stock option rights to Employee.
19. REGISTRATION RIGHTS. If, at any time prior to October 31, 2005, the
Company shall propose to file any Registration Statement (other than
any registration on Form S-4, or any other similarly inappropriate
form or Registration Statement with respect to any initial public
offering in which there are no selling shareholders) under the
Securities Act of 1933, as amended, covering a public offering of the
Company's Common Stock, it will notify Optionee at least forty-five
(45) days prior to each such filing and will include in the
Registration Statement (to the extent permitted by applicable
regulation) the Common Stock purchased by Optionee or purchasable by
Optionee upon the exercise of the Option to the extent requested by
Optionee. Notwithstanding the foregoing, the number of shares of the
holder of this Option proposed to be registered thereby shall be
reduced pro rata with any other selling shareholder (other than the
Company) upon the request of the managing underwriter of such
offering. If the Registration Statement or Offering Statement filed
pursuant to such forty-five (45) day notice has not become effective
within six months following the date such notice is given to Optionee,
the Company must again notify Optionee in the manner provided above.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year below written:
OPTIONEE HYPERTENSION DIAGNOSTICS, INC.
___________________________________ By ______________________________________
Xxx X. Xxxx, M.D.
Its _____________________________________
Dated: ____________________________ Dated: __________________________________
-5-
NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTIONS
Hypertension Diagnostics, Inc.
Five Xxxxx Xxxxx
Xxxxx Xx. Xxxx, XX 00000-0000
Gentlemen:
The undersigned is the holder of a non-qualified stock option (the
"Option") to purchase shares of voting common stock ("Stock") of Hypertension
Diagnostics, Inc. (the "Company"), pursuant to the Non-Qualified Stock Option
Agreement between Xxx X. Xxxx and Hypertension Diagnostics, Inc. dated
October 30, 1995. The undersigned hereby irrevocably elects to exercise the
Option to purchase ____________ shares of Stock ("Option Shares"). Enclosed
herewith is payment for the Option Shares as required under the Agreement.
The undersigned requests that the certificate representing the Option Shares
be issued in the name of the undersigned and delivered to the address set
forth below.
In connection with the issuance of the Option Shares to the undersigned,
the undersigned hereby certifies and represents to the Company that the
undersigned is acquiring such shares for the purpose of investment and not
with a view toward distribution. The undersigned understands that these
securities have not been registered either under any applicable federal law
and rules or applicable state law and rules and that resale will not be
permitted under state law unless the securities are first registered or the
sale is a transaction exempt from registration under the applicable state
securities law.
The undersigned further understands that no sale, offer to sell, or
transfer of the Option Shares shall be made unless a registration statement
under the federal Securities Act of 1933, as amended (the "Act"), with
respect to the Option Shares is then in effect or an exemption from the
registration requirements of the Act is then in fact applicable to the Option
Shares. The undersigned understands that a legend reciting this investment
restriction shall be placed on any stock certificate that may be issued to
the undersigned.
___________________________________
Xxx X. Xxxx, M.D. (Optionee)
___________________________________
Address
___________________________________
Social Security No.
Dated: ____________________________
-6-
