Exhibit 4.5


 


 


HYPERTENSION DIAGNOSTICS, INC.


 


SHAREHOLDERS’ AGREEMENT


 


THIS SHAREHOLDERS’ AGREEMENT (this “Agreement”), dated as of
                 ,
2003, is made by and among Hypertension Diagnostics, Inc., a Minnesota
corporation (the “Company”), and the holders of shares of the Company’s Series
A Convertible Preferred Stock, par value $0.01 per share (the “Series A
Preferred Stock”), identified as “Series A Investors” on Schedule A attached
hereto or those persons who hereafter become parties to this Agreement in
accordance with Section 6 (each, an “Investor,” and collectively, the
“Investors”).


 


RECITALS


 


WHEREAS, as part of the transactions contemplated by the Securities
Purchase Agreement, dated as of
                  ,
2003 (the “Securities Purchase Agreement”), by and among the Company and the
Investors, the Investors are participating in the offering by the Company of a
minimum of $1,300,000 and a maximum of $2,300,000 of units, each consisting of
one share of the Company’s Series A Convertible Preferred Stock (the “Series A
Preferred Stock”), 15.903 shares of the Company’s common stock, $0.01 par value
per share (the “Common Stock”) and a series of six (6) Purchase Warrants, three
(3) of which entitle the holder to acquire Series A Preferred Stock and three
(3) of which entitle the holder to acquire Common Stock;


 


WHEREAS, the Company and the Investors desire to enter into this
Agreement for the purpose of governing certain aspects of the Investors’
relationships with each other and the Company; and


 


WHEREAS, it is in the best interests of the Company and the Investors
that such aspects of their relationships be so governed.


 


NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and intending to be legally bound the parties
hereto hereby agree as follows:


 


AGREEMENT


 


Section 1.                                          Definitions.  As used in this Agreement, the following
terms shall have the meanings ascribed to them below.


(a)                          “Acceptance Period” shall
have the meaning ascribed to it in Section 5(a).


 


(b)                         “Accepted Number” shall have
the meaning ascribed to it in Section 5(b).


 

















 


(c)                          “Accepting Investor” shall
have the meaning ascribed to it in Section 5(c).


 


(d)                         “Act” means the Securities Act
of 1933, as amended.


 


(e)                          “Affiliate” of any Person
means any other Person which directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such Person.  The term “control”
(including the terms “controlled by” and “under common control with”) as used
with respect to any Person means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.


 


(f)                            “Articles” means the
Articles of Incorporation of the Company, including any amendments thereto.


 


(g)                         “Board of Directors” means the
board of directors of the Company.


 


(h)                         “Certificate of Designation”
means the Certificate of Designation, Preferences and Rights of Series A
Convertible Preferred Stock.


 


(i)                             “Common Stock” shall have
the meaning ascribed to it in the recitals.


 


(j)                             “Company Offered
Securities” shall have the meaning ascribed to it in Section 4.


 


(k)                          “Competitor” shall mean any
Person, or an Affiliate of any Person, which directly or indirectly engages in
the type of business substantially similar to the type of business in which the
Company is engaged


 


(l)                             “Excluded Stock” means:
(i) any shares of Common Stock issuable upon conversion of shares of Series A
Preferred Stock; (ii) options, warrants, Common Stock or other equity
securities (x) issued or issuable in connection with the acquisition of another
corporation, partnership, limited liability company or other entity or (y)
issued or issuable in connection with a collaboration, co-marketing or similar
agreement which, in the case of either clause (x) or clause (y), has
been approved by the Board of Directors; (iii) Stock outstanding as of the date
hereof; (iv) options, warrants, Common Stock or other equity securities issued
to a financial institution or lessor in connection with a commercial credit
arrangement or an equipment financing, which is approved by the Board of
Directors; (v) shares of Common Stock issued or issuable upon exercise of any
option or warrant issued to any Person under any management compensation, stock
option, stock incentive, equity incentive or employee benefit plan; (vi) shares
of Stock issued to the holders of the Company’s 8% Convertible Notes due March
27, 2005 pursuant to an arrangement approved by the Board of Directors; (vii)
shares of Stock distributed pro rata to holders of any class of Stock as a
class; and (viii) any Stock or any Stock Equivalent issued in an offering
registered under the Act that has


 


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been approved by a majority of the Series A Directors (as hereinafter
defined) in which the cash proceeds to the Company would be at least $5 million
upon completion of such offering.


 


(m)                       “Exchange Act” means the
Securities Exchange Act of 1934, as amended.


 


(n)                         “First Offer” shall have the
meaning ascribed to it in Section 5(a).


 


(o)                         “Governmental Entity” means
any national, federal, state, municipal, local, territorial, foreign or other
government or any department, commission, board, bureau, agency, regulatory
authority or instrumentality thereof, or any court, judicial, administrative or
arbitral body or public or private tribunal.


 


(p)                         “Intellectual Property” means
trademarks, service marks, trade names, Internet domain names, designs, logos,
slogans, and general intangibles of like nature, together with all goodwill,
registrations and applications related to the foregoing; patents and industrial
designs (including any continuations, divisionals, continuations-in-part,
renewals, reissues, and applications for any of the foregoing); copyrights
(including any registrations and applications for any of the foregoing) and all
content and information contained on any website; Software; “mask works” (as
defined under 17 U.S.C. § 901) and any registrations and applications for
“mask works;” technology, trade secrets and other confidential information,
know-how, inventions, proprietary processes, formulae, algorithms, models, and
methodologies; rights of publicity and privacy relating to the use of the
names, likenesses, voices, signatures and biographical information of real
persons; in each case used in or necessary for the conduct of the Company’s
business as currently conducted or contemplated to be conducted.


 


(q)                          “Majority Holders” means the
holders of more than fifty percent (50%) of the issued and outstanding shares
of Series A Preferred Stock.


 


(r)                            “Minimum Threshold” shall
mean fifty percent (50%) or more of the Series A Preferred Stock originally
issued to the Investors as of the Closing Date (including shares of Common
Stock issued upon the conversion thereof), as appropriately adjusted for any
stock dividend, stock split, recapitalization or consolidation.


 


(s)                          “Non-Responding Holder” shall
have the meaning ascribed to it in Section 4(b).


 


(t)                            “Offered Shares” shall have
the meaning ascribed to it in Section 5(a).


 


(u)                         “Offeror” shall have the
meaning ascribed to it in Section 5(a).


 


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(v)                         “Person” means any individual,
sole proprietorship, partnership, limited liability company, joint venture,
trust, incorporated organization, association, corporation, institution, public
benefit corporation, government (whether federal, state, county, city,
municipal or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof) or other entity.


 


(w)                       “Preemptive Rights Offer” shall
have the meaning ascribed to it in Section 4(a).


 


(x)                           “Preemptive Rights Offer
Notice” shall have the meaning ascribed to it in Section 4(a).


 


(y)                         “Preemptive Rights
Transaction” shall have the meaning ascribed to it in Section 4(a).


 


(z)                           “Responding Holder” shall
have the meaning ascribed to it in Section 4(b).


 


(aa)                    “Sale Transaction” means a sale, conveyance
or disposition of all or substantially all of the assets of the Company; or the
effectuation by the Company of a transaction or series of related transactions
in which more than fifty percent (50%) of the voting power of the Company is
disposed of or transferred, including without limitation the acquisition by any
person or group (as such term is defined in Section 13(d)(3) of the Exchange
Act) of persons of more than fifty percent (50%) of the voting power of the
Company; or a consolidation or merger of the Company with or into any other
Person following which the shareholders of the Company immediately prior to
such consolidation or merger own less than fifty percent (50%) of the capital
stock of the surviving entity immediately after such consolidation or merger.


 


(bb)                  “Securities Purchase Agreement” shall
have the meaning ascribed to it in the recitals.


 


(cc)                    “Series A Preferred Stock” shall
have the meaning ascribed to it in the recitals.


 


(dd)                  “Software” means any and all (a)
computer programs, including any and all software implementation of algorithms,
models and methodologies, whether in source code or object code form, (b)
computerized databases and compilations, including any and all data and
collections of data, and (c) all documentation, including user manuals and
training materials, relating to any of the foregoing.


 


(ee)                    “Stock” shall mean shares of Common
Stock, preferred stock and any other class of equity securities of the Company
and shall include any shares of Common Stock issuable upon exercise, exchange
or conversion of securities exercisable or exchangeable for or convertible into
shares of Common Stock.  Each share of
Common Stock shall count as one share of Stock, each share of preferred stock
shall count as a number of shares of Stock equal to the number of shares of
Common Stock


 


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into which such share of preferred stock is then convertible and each
share of any other class of equity securities of the Company constituting Stock
shall count as a number of shares of Stock equal to the number of shares of
Common Stock into which such share of Stock is then convertible, exchangeable
or exercisable, as the case may be.


 


(ff)                        “Stock Equivalents” means any
right, warrant, option or security of the Company which is exercisable or
exchangeable for or convertible into, or represents the right to otherwise
acquire, directly or indirectly, Stock, whether at the time of issuance or upon
the passage of time or the occurrence of some future event.  Each Stock Equivalent shall count as a
number of shares of Stock equal to the number of shares of Common Stock into
which such Stock Equivalent is then convertible, exchangeable or exercisable.


 


(gg)                  “Securities Purchase Agreement” shall
have the meaning ascribed to it in the recitals.


 


(hh)                  “Subsidiary” means any corporation,
association, partnership, limited liability company, joint venture or other
business entity at least fifty percent (50%) of the outstanding voting
securities of which are at the time owned or controlled, directly or
indirectly, by the Company.


 


(ii)                          “Third Party” means any
Person (other than the Company or an Investor or an Affiliate of an Investor)
that is a prospective transferee of Stock from an Investor.


 


(jj)                          “Transfer” shall have the
meaning ascribed to it in Section 5(a).


 


(kk)                    “Unsubscribed Securities” shall
have the meaning ascribed to it in Section 4(b).


 


(ll)                          “Vote” shall mean (i) to cast
a ballot, or to otherwise indicate approval or disapproval of any matter at any
meeting of holders of Stock and at any adjournment or postponement thereof and
(ii) to act by written consent in lieu of any meeting of holders of Stock.


 


Section
2.                                          Intentionally Omitted.


 


Section 3.                                          Preferred
Shareholder Approval; Actions by the Company.


 


(a)                          So long as any shares of
Series A Preferred Stock remain outstanding, the Company shall not, and shall
not permit any of its Subsidiaries to, without first obtaining the affirmative
Vote of the Majority Holders:


 


(i)                           alter or adversely change the
powers, preferences or rights given to the Series A Preferred Stock;


 


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(ii)                          alter or amend the
Certificate of Designation in a manner adverse to the holders of the Series A
Preferred Stock;


 


(iii)                     authorize or issue (by
reclassification or otherwise) any class of equity security having any right,
preference or privilege senior to or pari
passu with the Series A Preferred Stock with respect to voting,
dividend, redemption, conversion or liquidation, or any other rights;


 


(iv)                    amend the Articles, bylaws or other
charter documents of the Company in a manner adverse to the Series A Preferred
Stock;


 


(v)                       increase the authorized number of
shares of Series A Preferred Stock;


 


(vi)                    declare or cause any dividend to be
paid to the holders of the Common Stock;


 


(vii)                 consummate a Sale Transaction; or


 


(viii)              authorize or cause the repurchase of any
of the Company’s equity securities.


 


(b)                         From and after the date hereof
until the termination of this Agreement as provided herein, the Company
covenants and agrees to:


 


(i)                             maintain and preserve its
corporate existence and all rights, franchises, licenses, Intellectual Property
and other authority reasonably deemed adequate by the Company for the conduct
of its business; maintain its properties, equipment and facilities in good
order and repair; and conduct its business in an orderly manner without
voluntary interruption;


 


(ii)                          maintain in full force and
effect a policy or policies of insurance, including, without limitation, a
directors and officers liability insurance policy, issued by insurers of
recognized responsibility, insuring it, its directors and officers, its
properties and its business against such losses and risks, and in such amounts,
as are customary in the case of corporations of established reputation engaged
in the same or a similar business;


 


(iv)                      maintain a system of internal
accounting controls administered in accordance with Section 13(b)(2) of the
Exchange Act;


 


(v)                         conduct its business in
material compliance with all applicable provisions of federal, state, local and
foreign law;


 


(vi)                      perform and observe all of its
obligations to the holders of all of its securities set forth in the Articles;


 


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(vii)                   reimburse all directors of the
Company for their reasonable out-of-pocket expenses in connection with
attending meetings of the Company’s Board of Directors and all committees
thereof and all reasonable out-of-pocket expenses otherwise incurred in
fulfilling their duties as directors; and


 


(viii)                promptly provide to the Investors (or
their respective counsel) copies of all filings made by the Company or any
Affiliate with any Governmental Entity in connection with this Agreement, the
Securities Purchase Agreement and the transactions contemplated hereby and
thereby, except those filings which are made with the U.S. Securities and
Exchange Commission via the EDGAR system.


 


Section 4.                                          Preemptive
Rights.


 


(a)                          Subject to Section 4(c), in
case the Company proposes to issue or sell any Stock or Stock Equivalents of
the Company, other than Excluded Stock (collectively, the “Company Offered
Securities”) and if the Investors hold the Minimum Threshold, the Company
shall, no later than twenty-five (25) days prior to the consummation of such
transaction (a “Preemptive Rights Transaction”), give notice in writing of such
Preemptive Rights Transaction (the “Preemptive Rights Offer Notice”) to each
Investor.  The Preemptive Rights Offer
Notice shall describe the proposed Preemptive Rights Transaction, identify the
proposed purchaser, and contain an offer (the “Preemptive Rights Offer”) to
sell to each Investor, at the same price and for the same consideration to be
paid by the proposed purchaser (provided, that, in the event any of such
consideration is non-cash consideration, at the election of such Investor to
whom the Preemptive Rights Offer is made, such Investor may pay cash equal to
the Fair Market Value of such non-cash consideration as determined in
accordance with the Certificate of Designation), all or any part of such
Investor’s pro rata portion of the Company Offered Securities (which shall be a
fraction of the Company Offered Securities determined by dividing the number of
shares of outstanding Series A Preferred Stock owned by such Investor by the
total number of shares of Series A Preferred Stock issued and outstanding).


 


(b)                         If any Investor to whom a
Preemptive Rights Offer is made fails to accept (a “Non-Responding Holder”) in
writing the Preemptive Rights Offer by the fifteenth (15th) day after the
Company’s delivery of the Preemptive Rights Offer Notice, such Non-Responding
Holders shall have no further rights with respect to the proposed Preemptive
Rights Transaction.  The Company shall
then give notice to each Investor who has accepted the Offer (a “Responding
Holder”) of the number of Company Offered Securities not subscribed for by the
Non-Responding Holders (the “Unsubscribed Securities”) no later than nine (9)
days prior to the consummation of the Preemptive Rights Transaction.  If any Responding Holder wishes to purchase
the Unsubscribed Securities, such Responding Holder may do so on a pro-rata
basis (calculated by dividing the number of shares of outstanding Series A
Preferred Stock owned by the Non-Responding Holders by the total number of
shares of outstanding Series A Preferred Stock owned by each of the Responding
Holders wishing to purchase the Unsubscribed Securities) by indicating in
writing to the Company no later than three (3) days prior to


 


7

















 


the consummation of the Preemptive Rights Transaction, the maximum
number of Unsubscribed Securities they wish to purchase.  Prior to the consummation of the Preemptive
Rights Transaction, the Company will calculate the pro rata portion of the
Unsubscribed Securities each Responding Investor is entitled to and will
provide notice of the result of the calculation to each Responding Investor.


 


(c)                          The rights under this Section
4 shall terminate after the consummation of two (2) Preemptive Rights
Transactions, each resulting in net proceeds to the Company of at least Two
Million Dollars ($2,000,000).


 


Section 5.                                          Right
of First Refusal.


 


(a)                          Subject to the restrictions
set forth in Section 6 hereof, if at any time an Investor (the “Offeror”)
proposes to sell, transfer or otherwise dispose of, whether voluntarily or
involuntarily (a “Transfer”), any shares of Stock to any Third Party, the
Offeror shall, before such Transfer, deliver to the Company (with a copy to each
Investor) an offer (the “First Offer”) to Transfer such shares of Stock to the
Company and the Investors upon the terms set forth in this Section 5.  The First Offer shall state that the Offeror
proposes to Transfer shares of Stock and specify the number of shares of Stock
(the “Offered Shares”) and the terms (including the purchase price, terms of
payment, the identity of the Third Party purchasing such shares and the
identity of any Affiliate of such Third Party) of the proposed Transfer.  The First Offer shall remain open and
irrevocable for a period of thirty-five (35) days (the “Acceptance Period”)
from the date of its receipt by the Company.


 


(b)                         The Company may accept the
First Offer by delivering to the Offeror and all Investors written notice within
fifteen (15) days of receipt of the First Offer, which notice shall state the
number (the “Accepted Number”) of Offered Shares the Company desires to
purchase.  The Company may exercise its
right to purchase any or all of the Offered Shares pursuant to the First Offer.


 


(c)                          If the Company does not
accept the First Offer or does not exercise its right to purchase all of the
Offered Shares pursuant to the First Offer, then (i) the Company shall within
fifteen (15) days provide written notice to each Investor specifying the number
of shares of Offered Stock that were not subscribed for by the Company
exercising its right of first refusal (the “Company Notice”), and (ii) the
Investors may on a pro rata basis exercise their rights to purchase any or all
of the Offered Shares not purchased by the Company (which shall be a fraction
of the Offered Shares determined by dividing the number of shares of
outstanding Series A Preferred Stock owned by such Investor by the total number
of shares of issued and outstanding Series A Preferred Stock).  Each Investor may accept the First Offer by
delivering to the Offeror, the Company and all the other Investors written
notice within ten (10) days of receipt of the Company Notice, which notice
shall state the maximum number of Offered Shares the Investor desires to
purchase (the “Accepting Investor”).  If
any Investor to whom a First Offer is made fails to accept in writing the First
Offer within ten (10) days of receipt of the Company Notice, the Company shall
then give notice to each Accepting Investor of the number of Offered Shares not
subscribed for no later than seven (7) days


 


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prior to the end of the Acceptance Period.  If any Accepting Investor wishes to purchase such unsubscribed
Offered Shares, such Accepting Investor may do so on a pro-rata basis
(calculated by dividing the number of shares of outstanding Stock owned by such
Investor by the total number of shares of Stock issued and outstanding Stock
owned by each of the Accepting Investors wishing to purchase the unsubscribed
Offered Shares) by indicating in writing to the Company no later than three (3)
days prior to the end of the Acceptance Period the maximum number of
unsubscribed Offered Shares it wishes to purchase. Prior to the end of the
Acceptance Period, the Company will calculate the pro rata portion of the
Offered Shares each Accepting Investor is entitled to and will provide notice
of the result of the calculation to each Accepting Investor.


 


(d)                         The Transfer of Offered Shares
to the Company and or the Accepting Investor(s), to the extent the Company and
or the Accepting Investor(s) have exercised their rights under this Section 5,
shall be made on a business day, as designated by the Offeror, not less than
thirty (30) days nor more than sixty (60) days after expiration of the
Acceptance Period on the terms and conditions specified in the First Offer,
which terms and conditions shall be identical to the terms of the proposed
Transfer to the Third Party, provided that if the First Offer provides for the
payment of non-cash consideration, the Company or an Investor, as the case may
be, at its option may pay the consideration in cash equal to the Board of
Directors’ good faith estimate of the present fair market value of the non-cash
consideration offered.


 


(e)                          If the number of Offered
Shares exceeds the Offered Shares with respect to which the Company and or
Accepting Investor(s) exercised their rights under this Section 5, the First
Offer shall be deemed to be withdrawn with respect to such excess and the
Offeror may Transfer such excess Offered Shares on the terms, conditions and
purchase price specified in the First Offer (which shall be the same terms,
conditions and purchase price available to the Company and or Accepting
Investor(s) exercising rights pursuant to this Section 5) to any Third Party
within ninety (90) days after expiration of the Acceptance Period, so long as
such Third Party agrees in writing to become a party to this Agreement and be
bound hereby.  If such Transfer is not
made within such 90-day period, the restrictions provided for in this Section 5
shall again become effective.


 


(f)                            In the event an Offeror or
such Third Party, as the case maybe, shall modify the terms of the proposed
Transfer of Offered Shares in any way, the Offeror shall send an amended First
Offer to the Company (with a copy to each Investor) and the Acceptance Period
shall be extended fifteen (15) days.


 


(g)                         Notwithstanding this Section
5, an Investor may transfer Stock to an Affiliate, provided that all Stock
owned by the transferring Investor is transferred to such Affiliate and that
such Affiliate agrees in writing to be bound by all of the terms and conditions
of this Agreement.


 


(h)                         Notwithstanding anything to
the contrary contained in this Section 5, the right of first refusal contained
in this Section 5 shall not apply to any Stock which is registered under the
Act and is otherwise freely tradable.


 


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Section
6.                                          Transfer Restrictions.  Notwithstanding
any provision of this Agreement, no Stock shall or may be sold, exchanged,
delivered, assigned, bequeathed or gifted, pledged, mortgaged, hypothecated or
otherwise encumbered, transferred or permitted to be transferred, or otherwise
disposed of, whether voluntarily, involuntarily or by operation of law
(including, without limitation, the laws of bankruptcy, intestacy, descent and
distribution and succession) (“Transferred”) (a) to a Competitor or (b) unless
the Third Party or other person agrees to be bound to the provisions of this
Agreement.  In the event that any party
hereto should Transfer any Stock in contravention of this Section, such
Transfer shall be void, and the Company shall not effect such a Transfer nor
shall it treat any alleged Competitor as the holder of any such shares.  Notwithstanding anything to the contrary
contained in this Section 6, the transfer restrictions contained in this
Section 6 shall not apply to any Stock which is registered under the Act and
are otherwise freely tradable.


 


Section
7.                                          Legend.  Each certificate representing shares of
Stock now or hereafter owned by the Investors or any other person who
subsequently becomes a party to this Agreement shall be endorsed with the
following legend:


 


“THE
SECURITIES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, PLEDGED, ENCUMBERED,
OR OTHERWISE TRANSFERRED EXCEPT IN CONFORMITY WITH THE TERMS OF A SHAREHOLDERS’
AGREEMENT AMONG THE HOLDER (OR THE PREDECESSOR IN INTEREST TO THE HOLDER), THE
COMPANY AND CERTAIN OTHER SHAREHOLDERS OF THE COMPANY.  THE COMPANY WILL UPON WRITTEN REQUEST
FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.”


 


The legend required under this Section 7 shall be removed upon
termination of this Agreement in accordance with the provisions of
Section 10.


 


Section
8.                                          Company to Reserve Common Stock.  If and only at such time as the Company’s shareholder approve an
amendment to the Company’s Articles of Incorporation to increase the number of
shares of common stock authorized to at least 150,000,000 (or such other number
as may be sufficient to allow for the reservation for issuance of all shares of
Common Stock underlying each outstanding security convertible or exercisable
for, or exchangeable into, Common Stock): (a) the Company will at all times
reserve and keep available out of its authorized and unissued Common Stock
solely for the purpose of issuance upon conversion of the Series A Preferred
Stock, free from preemptive rights or any other actual or contingent purchase
rights of persons other than the holders of the Series A Preferred Stock, not
less than such number of shares of Common Stock as shall be issuable upon the
conversion of all outstanding shares of the Series A Preferred Stock; and (b)
all shares of Common Stock that shall be so issuable shall, upon issue, be duly
authorized, validly issued and fully paid and nonassessable.


 


Section 9.                                          Amendments.  The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given without the prior written consent of the Majority Holders;
provided, however,


 


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that without an Investor’s written consent, no such amendment or waiver
shall affect adversely such Investor’s rights hereunder in a discriminatory
manner inconsistent with its adverse effects on rights of other Investors
hereunder (other than as reflected by the different number of shares held by
such Investor); provided, further, that the consent or agreement
of the Company shall be required with regard to any termination, amendment,
modification or supplement of, or waivers or consents to departures from, the
terms hereof, which affect the Company’s obligations hereunder.


 


Section
10.                                   Termination.  This Agreement shall terminate upon the
first to occur of any of the following events:


 


(a)          the consummation of a Sale Transaction;


 


(b)         the execution by the Company of a general
assignment for the benefit of creditors or the appointment of a receiver or
trustee to take possession of the property and assets of the Company;


 


(c)          the written agreement of the Company and the
Majority Holders; or


 


(d)         two (2) years from the date of this Agreement.


 


Section 11.                                   No
Inconsistent Agreement.  Neither
the Company nor any Investor shall enter into any agreement with respect to the
Stock or Stock Equivalents beneficially owned or held of record by it which is
inconsistent with the rights granted to the Investors in this Agreement or
otherwise conflicts with the provisions hereof.


 


Section 12.                                   Notices.  All notices, requests, consents and
other communications required or permitted hereunder shall be in writing and
shall be hand delivered or mailed postage prepaid by registered or certified
mail or transmitted by facsimile transmission (with immediate telephonic
confirmation thereafter),


 


(a)                         If to the Investor, to the
addresses or the facsimile set forth on the counterpart signature pages of this
Agreement signed by such Investor:


 


with a copy to:


 


Liner Yankelevitz Sunshine & Regenstreif


1100 Glendon Avenue, 14th Floor


Los Angeles, California  90024


Attn:  
Joshua Grode, Esq.


Facsimile No.: (310) 500-3501


 


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or                              (b)                      If to the Company:


 


Hypertension Diagnostics, Inc.


2915 Waters Road, Suite 108


Eagan, Minnesota 55121-1562


Attn:   
President


Facsimile No.: (651) 687-0485


 


With a copy to:


 


Lindquist & Vennum P.L.L.P.


4200 IDS Center


80 South Eighth Street


Minneapolis, Minnesota 55402


Attn:   
Girard P. Miller


Facsimile No.: (612) 371-3207


 


 


or at such other address as the Company or the Investors each may
specify by written notice to the others, and each such notice, request, consent
and other communication shall for all purposes of this Agreement be treated as
being effective or having been given when delivered if delivered personally,
upon receipt of facsimile confirmation if transmitted by facsimile, or, if sent
by mail, at the earlier of its receipt or seventy-two (72) hours after the same
has been deposited in a regularly maintained receptacle for the deposit of
United States mail, addressed and postage prepaid as aforesaid.


 


Section 13.                                   Ownership
of Stock.   The Company may
treat the Person in whose name any of the Stock is registered on such register
as the owner thereof and the Company shall not be affected by any notice to the
contrary.  All references in this
Agreement to a “holder” of Stock shall mean the Person in whose name such
shares are at the time registered on such register.


 


Section 14.                                   Replacement
of Certificates.  Upon receipt
of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any certificate representing Stock and, in the
case of any such loss, theft or destruction, upon delivery of indemnity
reasonably satisfactory to the Company in form and amount or, in the case of
any such mutilation, upon surrender of such certificate for cancellation at the
office of the Company, the Company at its expense will execute and deliver, in
lieu thereof, a new certificate representing Stock of like tenor.


 


Section
15.                                   Successors and Assigns.   All
the terms and provisions of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective parties hereto, the
successors and permitted assigns of each party hereto and the respective
successors of the Company, whether so expressed or not.


 


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Section 16.                                   Counterparts;
Effectiveness.  This Agreement
may be executed in any number of counterparts and by different parties hereto
in separate counterparts, with the same effect as if all parties had signed the
same document.  All such counterparts
shall be deemed an original, shall be construed together and shall constitute
one and the same instrument.


 


Section 17.                                   Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.


 


Section
18.                                   Governing Law.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of Minnesota, without regard to principles of conflicts of law. Any and
all actions brought by one party against any other party concerning the terms
and provisions of this Agreement shall be solely venued in State Court in
Hennepin County, Minnesota or Federal Court located in Minneapolis, Minnesota
and all parties agree to submit to the jurisdiction of such courts and waive
any claim or defense that such forums are inconvenient.


 


Section 19.                                   Severability.
 If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party.  Upon such a determination, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby be consummated as originally
contemplated to the fullest extent possible.


 


Section 20.                                   Entire
Agreement.  This Agreement is
intended by the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.  This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.


 


Section 21.                                   Specific
Performance.  Each party hereto,
in addition to being entitled to exercise all rights provided herein or granted
by law, including recovery of damages, will be entitled to specific performance
of its rights under this Agreement. 
Each party hereto hereby agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.


 


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Section 22.                                   Waiver
of Jury Trial.  EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.


 


 


IN WITNESS WHEREOF, this Shareholders’ Agreement has been duly executed
by each of the parties hereto as of the date first written above.


 


 


	
   

  	
  HYPERTENSION DIAGNOSTICS, INC.:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Greg H. Guettler

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INVESTORS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
						



 


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