Document:

Exhibit
4.2

 

 

SECURITIES PURCHASE AGREEMENT

 

THIS AGREEMENT is
made as of this           day of
        , 2003 by and among
Hypertension Diagnostics, Inc., a Minnesota corporation (the “Company”) and
                                    
(“Purchaser”).

 

RECITALS

 

WHEREAS, the Company
wishes to raise a minimum of One Million Three Hundred Thousand Dollars
($1,300,000) and a maximum of Two Million Three Hundred Thousand Dollars
($2,300,000) in the aggregate from the offer and sale (the “Offering”) of units
(each, a “Unit”) to accredited investors as described in the Confidential
Private Placement Memorandum dated August 4, 2003 (the “PPM”);

 

WHEREAS, each Unit
has a purchase price of $3.9064 and consists of one (1) share of Series A
Convertible Preferred Stock (the “Series A Preferred Stock”), 15.903 shares of
Common Stock (the “Common Shares”), 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, forms of which
are attached as Exhibit B to this Agreement (the “Warrants”);

 

WHEREAS, the
Warrants are allocated as follows:

 

A.           One nine-month preferred stock purchase
warrant permitting the holder to purchase up to one share of the Series A
Preferred Stock at an exercise price of $2.04 per share (“Warrant A-1”);

 

B.             One nine-month common stock purchase
warrant permitting the holder to purchase up to the number of shares of common
stock initially included in the Unit at an exercise price of $0.17 per share
(“Warrant A-2”);

 

C.             One eighteen-month preferred stock
purchase warrant permitting the holder to purchase up to 80% of one share of
the Series A Preferred Stock at an exercise price of $2.64 per share (“Warrant
B-1”);

 

D.            One eighteen-month common stock purchase
warrant permitting the holder to purchase up to 80% of the number of shares of
common stock initially included in the Unit at an exercise price of $0.22 per
share (“Warrant B-2”);

 

E.              One sixty-month preferred stock purchase
warrant permitting the holder to purchase 70% up to of one share of the Series
A Preferred Stock at an exercise price of $3.60 per share (“Warrant C-1”); and

 

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F.              One sixty-month common stock purchase
warrant permitting the holder to purchase up to 70% of the number of shares of
common stock initially included in the Unit at an exercise price of $0.30 per
share (“Warrant C-2”).

 

WHEREAS, the Company
and Purchaser wish to specify in this Agreement the terms on which Purchaser is
purchasing the Units;

 

WHEREAS, in this
Agreement, the shares of the Company’s common stock issuable upon conversion of
the Series A Preferred Stock are referred to as the “Conversion Shares,” the
shares of common stock issuable upon exercise of the Warrants A-2, B-2 and C-2
are referred to as the “Warrant Shares,” the shares of the Series A Preferred
Stock issuable upon exercise of the Warrants A-1, B-1 and C-1 are referred to
as the “Series A Warrant Shares” (which when properly converted shall result in
additional Conversion Shares) and the Conversion Shares, the Warrant Shares and
the Series A Warrant Shares are collectively referred to as the “Underlying
Shares.”  The Common Shares, Unit, the
Series A Preferred Stock, the Warrant, the Conversion Shares, the Warrant
Shares and the Series A Warrant Shares are collectively referred to herein as
the “Equity Securities.”

 

NOW, THEREFORE, in
consideration of the foregoing and the mutual promises set forth below and for
other good and valuable consideration, the parties agree as follows:

 

1.                                       Sale
and Purchase.  Subject to the terms
and conditions hereof, the Company agrees to sell to Purchaser, and Purchaser
agrees to purchase from the Company at a purchase price of $3.9064 per Unit for
a total for all Units purchased of
$                  
(the “Purchase Price”),
                   
Units (calculated by dividing the Purchase Price by $3.9064) consisting of:

 

	
  A.

  	
   

  	
  shares of
  Series A Preferred Stock**

  
	
   

  	
   

  	
  **(equal to number of
  Units purchased)

  
	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  Common
  Shares**

  
	
   

  	
   

  	
  **(equal to 15.903 x
  shares of Series A Preferred Stock in A above)

  

 

C.                                     Warrants
as follows:

 

Warrant A-1 to
purchase
                               
shares of Series A Preferred Stock**

**(equal to the number of
shares of Series A Preferred Stock indicated in A above)

 

Warrant A-2 to
purchase
                               
shares of common stock**

**(equal to the number of
shares of common shares indicated in B above)

 

 

Warrant B-1 to
purchase
                               
shares of Series A Preferred Stock**

**(equal to 80% of the
number of shares of Series A Preferred Stock indicated in A above)

 

Warrant B-2 to
purchase
                               
shares of common stock**

**(equal to 80% of the
number of shares of common shares indicated in B above)

 

2

 

Warrant C-1 to
purchase
                               
shares of Series A Preferred Stock**

**(equal to 70% of the
number of shares of Series A Preferred Stock indicated in A above)

 

Warrant C-2 to
purchase
                               
shares of common stock

**(equal to 70% of the
number of shares of common shares indicated in B above)

 

 

2.                                       Closing.  The closing of the sale and purchase of the
Units (the “Closing”) by Purchaser shall occur at the date and time that this
Agreement is executed by the Company and Purchaser, or on such other date and
time as Purchaser and the Company shall agree upon (the “Closing Date”).  At the Closing, the Company shall deliver a
stock certificate representing the Common Shares, the Series A Preferred Stock
and a proportionate number of the Warrants, and Purchaser shall deliver to the
Company a cashier’s check or other immediately available funds for payment of
the Purchase Price.

 

3.                                       Representations
and Warranties by Company.  The
Company represents and warrants to Purchaser that, as of the date hereof:

 

3.1                                 Organization,
Standing, etc.  The Company, and
each of its subsidiaries, if any, is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota, and has
the requisite corporate power and authority (corporate and other) to own and
operate its properties and assets and to carry on its business in all material
respects as it is now being conducted. 
Except as set forth in Section 5, the Company has the requisite
corporate power and authority to issue the Equity Securities and to otherwise
perform its obligations under this Agreement. 
The Company is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which its ownership or use of
property or the nature of the business conducted by it makes such qualification
necessary.

 

3.2                                 Corporate
Acts and Proceedings.  The Company
has all requisite corporate power and authority to (i) file and perform its
obligations under that certain certificate of designation, preferences and
rights of the Series A Preferred Stock (the “Certificate of Designation”), (ii)
enter into and perform its obligations under that certain registration rights
agreement between Purchaser and the Company of even date herewith (the
“Registration Rights Agreement”) and this Agreement, the Registration Rights
Agreement and the Warrants and (iii) consummate the transactions contemplated
hereby and thereby and to issue the Equity Securities, in accordance with the
terms hereof and thereof; provided, however, with respect to the foregoing
representation the Company cannot issue the Common Shares pursuant to (a) the
exercise of the Warrants A-2, B-2 and C-2, or (b) the conversion of the Series
A Preferred Stock, until the Proposal (as defined in Section 5) is approved.
The execution and delivery of this Agreement, the Registration Rights Agreement
and the Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation, the issuance of
the Common Shares, the Series A Preferred Stock and the Warrants and the
issuance and reservation for issuance of the Series A Warrant Shares and the Warrant
Shares) have been duly authorized by the Company’s board of directors (the
“Board”) and no further consent or authorization of the Company (other than the
Proposal with respect to the Warrant Shares), its Board, or its shareholders is
required. This Agreement has been duly 

 

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executed and
delivered by the Company. Upon execution and delivery by the Company of this
Agreement, the Registration Rights Agreement and the Warrants and upon
execution and filing of the Certificate of Designation, each of such agreements
and instruments will constitute a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms except as
the enforceability thereof may be limited by the Company’s lack of authorized
common stock, bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting the enforcement of creditors’ rights generally, and
except for judicial limitations on the enforcement of the remedy of specific
enforcement and other equitable remedies.

 

3.3                                 Issuance
of Shares. The Units are duly authorized and, upon issuance in accordance
with the terms of this Agreement, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Company other than those set forth
in that certain shareholders agreement of even date herewith (the
“Shareholders’ Agreement”) and the Certificate of Designation. The Series A
Warrant Shares are duly authorized and reserved for issuance and, upon proper
exercise of the Warrants therefor, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances and
will not be subject to preemptive rights or other similar rights of
shareholders of the Company other than as set forth in the Shareholders’
Agreement and the Certificate of Designation. 
At such time, if ever, as the Company’s shareholders approve an
amendment to the Company’s Articles of Incorporation to increase the number of
shares of the Company’s common stock authorized for issuance to a number
sufficient to allow for the reservation of all Conversion Shares and the
Warrant Shares, the Conversion Shares and the Warrant Shares shall be duly
authorized and reserved for issuance upon conversion of the Series A Preferred
Stock and/or exercise of the Warrants A-2, B-2, or C-2 in accordance with the
respective terms thereof, and upon issuance upon proper conversion or exercise,
respectively, of the Series A Preferred Stock and the Warrants, the Conversion
Shares and Warrant Shares, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances and
will not be subject to preemptive rights or other similar rights of
shareholders of the Company except as set forth in the Shareholders’ Agreement
and the Certificate of Designation.

 

3.4                                 Acknowledgment
of Dilution. The Company understands and acknowledges the potentially
dilutive effect to the Common Stock upon the issuance of the Series A Preferred
Stock, the Conversion Shares upon conversion of or otherwise pursuant to the
Series A Preferred Stock and upon issuance of the Series A Warrant Shares and
the Warrant Shares upon exercise of or otherwise pursuant to the Warrants. The
Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of or otherwise pursuant to the Series A Preferred Stock and
Series A Warrant Shares and Warrant Shares upon exercise of or otherwise
pursuant to the Warrants in accordance with this Agreement, the Certificate of
Designation and the Warrants, is absolute, subject only to the terms and
conditions set forth in this Agreement, the Warrant and the Certificate of
Designation, regardless of the dilutive effect that such issuance may have on
the ownership interests of other shareholders of the Company.

 

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3.5                                 No
Conflicts; Governmental Consents. The execution, delivery and performance
of this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the filing of the
Certificate of Designation and the issuance and reservation for issuance, as
applicable, of the Common Shares, Series A Preferred Stock, Conversion Shares
(subject to the approval of the Proposal), Series A Warrant Shares and Warrant
Shares (subject to the approval of the Proposal) will not (i) conflict with or
result in a violation of any provision of the Articles of Incorporation or
By-laws, (ii) violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse of time or
both could become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license, trademark, trademark license or instrument
to which the Company, or any of its subsidiaries, if any, is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws) applicable to the Company or any
of its subsidiaries, if any, or by which any property or asset of the Company
or any of its subsidiaries, if any, is bound or affected that if not remedied
would have a material adverse effect on the Company.  Neither the Company nor any of its subsidiaries, if any, is in
violation of its Articles of Incorporation or By-laws. Other than defaults
relating to the Company’s 8% Convertible Notes due March 27, 2005, which
defaults shall be waived upon the Closing of that certain Conversion and Voting
Agreement dated as of August 1, 2003 (as the term “Closing” is defined
therein), neither the Company nor any of its subsidiaries, if any, is in
default (and no event has occurred which with notice or lapse of time or both
could put the Company or any of its subsidiaries in default) under, and neither
the Company nor any of its subsidiaries has taken any action or failed to take
any action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which the Company or any of its subsidiaries is a party or by which any
property or assets of the Company or any of its subsidiaries is bound or
affected. The businesses of the Company and its subsidiaries, if any, are not
and have not been conducted in violation of any law, ordinance or regulation of
any governmental entity that if not remedied would have a material adverse
effect on the Company. Except as specifically contemplated by this Agreement
and as required under the 1933 Act and any applicable state securities laws,
the Company is not required to obtain any consent, approval, qualification,
authorization or order of, or registration, designation, declaration or make
any filing or registration with, any court, governmental agency, regulatory
agency, self regulatory organization or stock market or any third party in
order for it to execute, deliver or perform any of its obligations under this
Agreement, the Registration Rights Agreement or the Warrants in accordance with
the terms hereof or thereof or to issue and sell the Units in accordance with
the terms hereof, except the approval of the holders of the Company’s voting
securities to amend the Company’s Articles of Incorporation to increase the
number of shares of common stock authorized. 
Except as required under the 1933 Act, the 1934 Act and for the approval
of the holders of the Company’s voting securities to amend the Company’s
Articles of Incorporation to increase the number of shares of common stock
authorized and the filing of related amended Articles of Incorporation, all
consents, authorizations, orders, filings and registrations which the Company
is required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company is not in violation of the
listing requirements of the OTC Bulletin Board and does not reasonably
anticipate that the 

 

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Common Stock will be delisted
by the OTC Bulletin Board in the foreseeable future. The Company is unaware of
any facts or circumstances that might give rise to any of the foregoing.

 

3.6                                 Absence
of Certain Changes. Since the date of the PPM and except as set forth in
any report or filing with the U.S. Securities and Exchange Commission (the “SEC
Filings”) or as set forth in the PPM, there has not been:

 

(a)                                  any
material adverse change in the assets, liabilities, financial condition or
operating results of the Company except changes in the ordinary course of
business, that have not been and are not expected to be, individually or in the
aggregate, materially adverse;

 

(b)                                 any
damage, destruction or loss, whether or not covered by insurance, materially
and adversely affecting the business, properties, or financial condition of the
Company (as such business is presently conducted);

 

(c)                                  any
waiver or compromise by the Company of a valuable right or of a material debt
owed to it;

 

(d)                                 any
satisfaction or discharge of any lien, claim, or encumbrance or payment of any
obligation by the Company, except in the ordinary course of business and that
is not material to the business, properties, or financial condition of the
Company (as such business is presently conducted);

 

(e)                                  any
material change to a material contract or arrangement by which the Company or
any of its assets is bound or subject;

 

(f)                                    
any sale, assignment or transfer of any material patents, trademarks,
copyrights, trade secrets or other intangible assets;

 

(g)                                 receipt
of notice that there has been a loss of, or material order cancellation by, any
major customer of the Company;

 

(h)                                 any
mortgage, pledge, transfer of a security interest in, or lien, created by the
Company, with respect to any of its material properties or assets, except liens
for taxes not yet due or payable;

 

(i)                                     any
material loans or guarantees made by the Company to or for the benefit of its
employees, holders of Common Stock, officers, or directors, or any members of
their immediate families;

 

(j)                                     any
declaration, setting aside, or payment of any dividend or other distribution of
the Company’s assets in respect of the Company’s Common Stock, or any direct or
indirect redemption, purchase, or other acquisition of any Common Stock by the
Company;

 

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(k)                                  to
the best of the Company’s knowledge, any other event or condition of any
character that is reasonably likely to materially and adversely affect the
business, properties, prospects, or financial condition of the Company (as such
business is presently conducted and as it is proposed to be conducted),
excluding events or conditions having general effect on businesses in the
general economy; or

 

(l)                                     any
arrangement or commitment by the Company to do any of the things described in
this subsection 3.6.

 

4.                                       Representations
and Warranties of Purchaser. 
Purchaser represents and warrants that:

 

4.1                                 Lack
of Authorized Shares.  Purchaser
acknowledges and understands that as a result of the sale and issuance of the
Units in the Offering, the Company may not have sufficient authorized shares of
common stock to issue the Warrant Shares and Conversion Shares.  Purchaser further acknowledges and
understands that the Company will not reserve for issuance or issue the
Conversion Shares or the Warrant Shares until such time, if ever, as the
Company’s shareholders approve an amendment to the Company’s Articles of
Incorporation to increase the number of shares of the Company’s common stock
authorized for issuance.  Purchaser
hereby waives any claim it may have against the Company that the Units, or any
security component thereof, was not validly issued as a result of the Company
having insufficient authorized shares of common stock to allow for the issuance
of the Warrant Shares and Conversion Shares.

 

4.2                                 Investment
Intent.  The Units being acquired by
Purchaser hereunder are being purchased for Purchaser’s own account and not
with the view to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Securities Act of 1933, as amended
(the “Securities Act”).  Purchaser
understands that the Equity Securities have not been registered under the
Securities Act or any applicable state laws by reason of their issuance or
contemplated issuance in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act and such laws, and that
the reliance of the Company and others upon this exemption is predicated in
part upon these representations and warranties.  Purchaser further understands that none of the Equity Securities
may be transferred or resold without (a) registration under the Securities Act
and any applicable state securities laws, or (b) an exemption from the
requirements of the Securities Act and applicable state securities laws.

 

4.3                                 Access
to Information; Suitability.

 

(a)                                 Purchaser
has received, has fully reviewed, and is familiar with the PPM, and all
exhibits attached thereto;

 

(b)                                Purchaser
has been provided access by the U.S. Securities and Exchange Commission EDGAR
system or by request to the Company for copies of each document incorporated by
reference in the PPM and that Purchaser has obtained such documents or
requested such copies to the extent such Purchaser desired;

 

7

 

(c)                                 Purchaser
is in a financial position to hold the Units for an indefinite period of time
and is able to bear the economic risk and withstand a complete loss of
Purchaser ‘s investment in the Units;

 

(d)                                Purchaser,
either alone or with the assistance of Purchaser’s own professional advisors,
has such knowledge and experience in financial and business matters that
Purchaser is capable of reading and interpreting financial statements and
evaluating the merits and risks of the prospective investment in the Units;

 

(e)                                 Purchaser
has obtained, to the extent Purchaser deems necessary, professional investment
advice with respect to the risks inherent in an investment in the Units, and
the suitability of an investment in the Units in light of Purchaser’s financial
condition and investment needs;

 

(f)                                   Purchaser
believes that the investment in the Units is suitable for Purchaser based upon
Purchaser’s investment objectives and financial needs, and Purchaser has
adequate means for providing for his or her or its current financial needs and
personal contingencies and has no need for liquidity of the investment with
respect to the Units;

 

(g)                                Purchaser
recognizes that: the Company does not have any material revenues; its
securities are traded on the OTC Bulletin Board and are subject to the rules relating
to “penny stocks”; that the Company has inadequate shares of common stock
authorized to allow for the reservation and issuance of the Warrant Shares and
Conversion Shares; and that an investment in the Units is not secured by any
assets or property of the Company;

 

(h)                                Purchaser
recognizes that an investment in the Units is highly speculative, illiquid and
involves a high degree of risk, including, but not limited to, the risk of
inability to successfully market the Company’s product, and the risk of
economic losses from operations of the Company, any of which risk could result
in the loss of Purchaser’s investment in the Company; and

 

(i)                                    Purchaser
certifies, under penalties of perjury, that the undersigned is NOT subject to the backup withholding provisions
of Section 3406(a)(i)(C) of the Internal Revenue Code of 1986, as
amended.  (Note: You are subject to backup withholding if: (i) you fail to
furnish your Social Security Number or taxpayer identification number herein;
(ii) the Internal Revenue Service notifies the Company that you furnished an
incorrect Social Security Number or taxpayer identification number; (iii) you
are notified that you are subject to backup withholding; or (iv) you fail to
certify that you are not subject to backup withholding or you fail to certify
your Social Security Number or taxpayer identification number).

 

4.4                                 Location
of Principal Office and Qualification as Accredited Investor.  The state in which Purchaser’s principal
office (or domicile, if Purchaser is an individual) is located is as set forth
below Purchaser’s name at the end of this Agreement.  Purchaser qualifies 

 

8

 

as an accredited investor
within the meaning of Rule 501 under the Securities Act and has completed Exhibit
A attached hereto evidencing such status as an accredited investor.  Purchaser has sufficient knowledge and
experience in financial and business matters such that Purchaser is capable of
evaluating the merits and risks of the investment to be made hereunder by
Purchaser.  Purchaser has and has had
access to all of the Company’s material books and records, and access to the
Company’s executive officers has been provided to Purchaser or to Purchaser’s
qualified agents. Further, Purchaser has had an opportunity to ask questions
of, and receive answers from, the Company or an agent of the Company concerning
the terms and conditions of the purchase of the Units and the business and
affairs of the Company, and to obtain any additional information necessary to
verify such information as Purchaser considers necessary or advisable in order
to form a decision concerning an investment in the Company.

 

4.5                                 Acts
and Proceedings.  This Agreement has
been duly authorized by all necessary action on the part of Purchaser, has been
duly executed and delivered by Purchaser, and is a valid and binding agreement
of Purchaser.

 

4.6                                 No
Brokers or Finders.  No person, firm
or corporation has or will have, as a result of any act or omission by
Purchaser, any right, interest or valid claim against the Company for any
commission, fee or other compensation as a finder or broker, or in any similar
capacity, in connection with the transactions contemplated by this
Agreement.  Purchaser will indemnify and
hold the Company harmless against any and all liability with respect to any
such commission, fee or other compensation which may be payable or determined
to be payable as a result of the actions of Purchaser in connection with the
transactions contemplated by this Agreement.

 

5.                                       Authorized
Common Stock; Meeting of Security Holders. 
The Company hereby covenants and agrees to hold a meeting of the holders
of its voting securities (the “Meeting”) and solicit proxies for the use at the
Meeting for the purpose of allowing the holders of the Company’s voting
securities to approve an amendment to the Company’s Articles of Incorporation
to increase the number of shares of common stock, $.01 par value, authorized to
at least 150,000,000 shares (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) (the “Proposal”).  The
Company may put forth any other proposal at the Meeting as it deems advisable,
provided that such other proposal is not incompatible with the Proposal.  The Company and its Board shall recommend
approval of the Proposal to the holders of those securities entitled to vote thereon.  The Company shall use its commercially
reasonable best efforts to cause the Proposal to be duly and properly approved
no later than one hundred and twenty (120) days after the Series A
Closing.  Upon approval of the Proposal,
the Company shall take all corporate action as is necessary for the due
reservation of the Warrant Shares and Conversion Shares.  The Company hereby agrees that if any shares
of its authorized common stock remain unsold in the Offering, such shares of
authorized common stock shall be reserved for issuance as Conversion
Shares.  To the extent the number of
shares of authorized common stock unsold are insufficient to allow for the
reservation for issuance of all Conversion Shares, the shares of authorized
common stock remaining unsold shall be allocated as Conversion Shares pro-rata
among the holders of the Series A Preferred Stock in proportion to the full
amounts to which the Company would otherwise be required to reserve and then,
if any 

 

9

 

shares of authorized common stock
remain unallocated, to the holders of the Series A Warrant Shares in proportion
to the full amounts to which the Company would otherwise be required to
reserve.

 

6.                                       Notices.  All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
personally delivered, mailed first-class postage prepaid, registered or
certified mail, or delivered by a nationally recognized overnight courier:

 

if to the Company:

 

Hypertension
Diagnostics, Inc.

2915 Waters
Road, Suite 108

Eagan, MN  55121-1562

Attn:  President

 

with a copy to:

 

Lindquist
& Vennum P.L.L.P.

4200 IDS
Center

80 South
Eighth Street

Minneapolis,
MN 55402

Attn:  Girard P. Miller

 

if to
Purchaser, to the address set forth under Purchaser’s signature to this
Agreement; or to such other address as the Company or Purchaser may specify to
the other by written notice, and such notices and other communications shall be
treated as being effective or having been given when delivered, if personally
delivered, or when received, if sent by mail or courier.

 

7.                                       Further
Agreements of the Parties.   The
Company and Purchaser agree to execute and deliver such other documents and
take such other acts, as the other party may reasonably request, for the
purpose of carrying out the intent of this Agreement.

 

8.                                       Counterparts.   This Agreement may be executed
simultaneously in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.

 

9.                                       Invalidity of
Particular Provisions.   The Company
and Purchaser agree that the unenforceability or invalidity of any provision or
provisions of this Agreement shall not render any other provision or provisions
herein contained unenforceable or invalid.

 

10.                                 Entire Agreement.   This Agreement, including the Exhibits
attached hereto and the exhibits to the PPM referenced herein, constitutes the
entire agreement of the parties relative to the subject matter hereof and
supersedes any and all other agreements and understandings, whether written or
oral, relative to the matters discussed herein.

 

10

 

11.                                 Conflicts.   In the event that there are any
inconsistencies between the terms of this

Agreement and the Certificate of Designation,
Preferences and Rights of the Series A Preferred Stock or the Warrants, the
terms contained in the Certificate of Designation or the Warrants, as the case
may be, will control.

 

12.                                 Miscellaneous.   No provision of this Agreement shall be
modified or waived other than by a written instrument that refers to this
Agreement and is signed by the party against whom enforcement of the
modification or waiver is charged.

 

13.                                 Representations
to Survive Delivery.   The
representations, warranties and agreements of the Company and of Purchaser
contained in this Agreement will remain operative and in full force and effect
and will survive the closing.

 

14.                                 Governing
Law.   This Agreement shall be
governed by the internal laws of the State of Minnesota without giving
application to the choice of law provisions of that jurisdiction.  Any and all actions brought by one party
against any another party concerning the terms and provisions of this Agreement
shall be 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.

 

[Signature Page to Securities Purchase Agreement to Follow]

 

11

 

[Signature Page to Securities Purchase Agreement]

 

IN WITNESS WHEREOF,
the parties have executed this Agreement as of the date first written above.

 

	
   

  	
  HYPERTENSION DIAGNOSTICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Greg H. Guettler, President

  
	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name [typed
  or printed]

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  State of
  Domicile or Principal office

  
	
   

  	
  (if
  different than above)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone
  Number

  
	
   

  	
   

  
	
   

  	
  SSN or TIN:

  	
   

  	
   

  
	
   

  	
   

  
										

 

12

 

EXHIBIT
A

 

STATUS AS AN ACCREDITED INVESTOR

 

 

Status as an “Accredited Investor”.  Purchaser is (check ALL that apply):

 

o                                   (i)                                       A
natural person whose individual net worth (assets less liabilities), or joint
net worth with his or her spouse, exceeds $1,000,000.

 

o                                   (ii)                                    A
natural person whose individual income was in excess of $200,000, or whose
joint income with his or her spouse was in excess of $300,000, in each of the
two most recent years, and who has a reasonable expectation of reaching the
same income level for the current year.

 

o                                   (iii)                                 A
director or an executive officer of the Company.

 

o                                   (iv)                                A
bank, insurance company, registered investment business development company,
small business investment company or employee benefit plan.

 

o                                   (v)                                   A
savings and loan association, credit union, or similar financial institution,
or a registered broker or dealer.

 

o                                   (vi)                                A
private business development company.

 

o                                   (vii)                             An
organization described in Section 501(c)(3) of the Internal Revenue Code with
assets in excess of $5,000,000.

 

o                                   (viii)                          A
corporation, Massachusetts or similar business trust, or partnership with
assets in excess of $5,000,000.

 

o                                   (ix)                                  A
trust with assets in excess of $5,000,000.

 

o                                   (x)                                     An
entity in which all of the equity owners are accredited investors.  Also check the item(s) [(i)-(ix)] that apply
to the equity owners.  [This item is not available  to an irrevocable trust.]

 

o                                   (xi)                                  A
self-directed IRA, Keogh, or similar plan of which the individual directing the
investments qualifies as an “accredited investor” in one or more of items
(i)-(x) above.  Also check the item(s)
[(i)-(x)] that apply to the individual.

 

13

 

EXHIBIT B

 

 

Form of Common Stock Purchase Warrants and
Form of Preferred Stock Purchase Warrant

 

14Exhibit 4.3

 

VOTING AGREEMENT

 

 

THIS VOTING AGREEMENT (this “Agreement”),
dated as of August     , 2003, is entered into by and among
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, and or those persons who
hereafter become parties to this Agreement in accordance with Section 3 (each,
an “Investor, and collectively, the “Investors”), with respect to the Series A
Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred
Stock”) and common stock, par value $0.01 per share (the “Common Stock”) of
Hypertension Diagnostics, Inc., a Minnesota corporation (the “Company”).

 

 

RECITALS

 

 

WHEREAS, as part of the transactions
contemplated by the Securities Purchase Agreement, dated as of August
     , 2003 (the “Securities Purchase Agreement”), by
and among the Company and the Investors, the Investors are purchasing an aggregate
of 588,773 shares of Series A Preferred Stock and 9,363,297 shares of Common
Stock;

 

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

 

WHEREAS, it is in the best interests of 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

 

 

1.             Voting Agreement.

 

(a)           Number
of Directors.  Whenever the holders
of any class of Stock shall be entitled to Vote, each Investor shall Vote all
shares of Stock held by such Investor to cause and maintain a board of
directors (the “Board”) composed of seven (7) members. For purposes of this
Agreement, “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. “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 

 

1

 

of
Common Stock 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.

 

(b)           Composition
of Board.  Whenever the holders of
any class of Stock shall be entitled to Vote or will Vote shares of Stock for
the election of directors, each Investor shall Vote all shares of Stock held by such
Investor to cause and maintain the election to the Board the four (4) directors
nominated by Mark N. Schwartz (the “Series A Directors”), one (1) of whom shall
be designated by Mr. Schwartz as the Chairman of the Board of the Company.  The initial Series A Directors shall be Mark
N. Schwartz, Larry Leitner, Alan Stern and Dr. Steven Gerber.  Mr. Schwartz initially shall be Chairman of
the Board.  In addition, each Investor
shall Vote all shares of Stock held by such Investor, at the meeting of
shareholders at which the Capital Stock Proposal (as hereinafter defined) is
first presented, to cause the election of Greg H. Guettler (“Guettler”) to the
Board and shall continue to Vote such shares to cause Guettler to remain a
member of the Board for the duration of his term. Furthermore, each Investor
shall Vote all shares of Stock held by such Investor at such meeting at which
Jay N. Cohn (“Cohn”) is nominated to the Board to cause the election of Cohn to
the Board and shall continue to Vote such shares to cause Cohn to remain a
member of the Board for the duration of his term.  Each Investor shall further Vote all shares of Stock held by such
Investor to maintain the presence of Guettler, Cohn and Kenneth W. Brimmer
(“Brimmer”) on the Board through the balance existing as of the date hereof of
their respective terms.  Notwithstanding
the foregoing, the Investors’ obligation to Vote their shares of Stock in favor
of Guettler, Brimmer or Cohn as aforesaid shall terminate with respect to such
person, if such person is convicted of any felony, any violation of any federal
or state securities law, engages in intentional or grossly negligent conduct in
the performance of his duties, or breaches his fiduciary duty to the Company as
determined by seventy-five percent (75%) of the Board.

 

(c)           Removal.  Each director designated pursuant to this
Section 1 may at any time be removed, with or without cause, by the party or
parties that designated such director and shall be replaced by some other
person designated by such party or parties. 
Additionally, in the event a director resigns or otherwise vacates his
or her seat on the Board, the party which designated such director may
designate a new person to fill such vacancy.

 

(d)           Replacement.  If any incumbent director dies, becomes
incapacitated from serving on the Board, or retires, resigns or is removed from
the Board, each of the parties hereto agrees to vote his, her or its Stock and
to take all necessary corporate and other action within his, her or its control
to ensure that as soon as reasonably practical and, if necessary to give effect
to this Section 1, prior to the next regularly scheduled meeting date of the
Company’s shareholders, the number of members of the Board which the Investors
have designated at all times corresponds to this Section 1.  Such corporate and other action may include,
without limitation, either the removal of one (1) or more incumbent directors
or the election of one or more additional directors.

 

2

 

(e)           Increase
in Authorized Capital Stock. 
Whenever the holders of any class of Stock shall be entitled to Vote or
will Vote shares of Stock for the 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 (the “Capital Stock Proposal”), each
Investor shall Vote all shares of Stock held by such Investor for the approval
of the Capital Stock Proposal.

 

2.             Termination. 
Notwithstanding anything herein to the contrary, this Agreement shall
terminate upon the earlier of (i) the date the Investors no longer own any
shares of Stock, or (ii) forty-eight (48) months from the date hereof.

 

3.             Transfers of Stock, Legends.  No Investor shall sell, convey, dispose,
transfer or encumber any shares of Series A Preferred Stock or Common Stock
unless the transferees thereof agree in writing to be bound by the terms of
this Agreement.  Any attempted transfer in
violation of this Section 3 shall be void ab
initio, and shall be of no force or effect.  All certificates representing any shares of
Common Stock and Series A Preferred Stock subject to the provisions of this
Agreement shall have endorsed thereon a legend to substantially the following
effect:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO, AND MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH, AN AGREEMENT
DATED AS OF AUGUST     , 2003 AMONG THE HOLDER OF THESE
SECURITIES AND CERTAIN OTHER HOLDERS OF THE COMPANY’S STOCK, WHICH INCLUDES
RESTRICTIONS ON THE VOTING THEREOF, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY.”

 

 

4.             Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns.

 

5.             Governing Law. This Agreement shall be governed
by the laws of the State of California, without reference to conflict of laws
principles.

 

6.             Notices. All notices, demands or other communications
given hereunder shall be in writing and shall be deemed to have been delivered
as of actual personal delivery or as of the third business day (excluding
Saturdays) after mailing by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows (until otherwise
changed pursuant to this Section 6):

 

If to the
Investors, to:

 

See the Exhibits attached
hereto for individual information pertaining to each Investor.

 

3

 

with copies
to:

 

Liner
Yankelevitz Sunshine & Regenstreif

1100 Glendon
Avenue

14th
Floor

Los Angeles,
California  90024

Attn: Joshua
Grode, Esq.

 

7.             Ownership. 
Each of the Investors represents and warrants that (a) such
Investor now owns the shares of Stock, as set forth on Schedule B, free and
clear of liens or encumbrances, and has not, prior to or on the date of this
Agreement, executed or delivered any proxy or entered into any other voting
agreement or similar arrangement other than one which has expired or terminated
prior to the date hereof, and (b) such Investor has full power and
capacity to execute, deliver and perform this Agreement, which has been duly
executed and delivered by, and evidences the valid and binding obligation of,
such Investor enforceable in accordance with its terms.

 

8.             Further Action.  If and whenever any of the shares of Stock
held by Investors are sold, the selling Investor or the personal representative
of such Investor shall do all things and execute and deliver all documents and
make all transfers, and cause any transferee of such Investor’s Stock to do all
things and execute and deliver all documents, as may be necessary to consummate
such sale consistent with this Agreement.

 

9.             Severability.  In the event that one or more of the
provisions of this Agreement should, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.

 

10.           Successors.  This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, successors,
assigns, administrators, executors and other legal representatives.

 

11.           Additional Shares.  In the event that subsequent to the date of
this Agreement any shares or other securities are issued on, or in exchange
for, any of the Investor’s Stock by reason of any stock dividend, stock split,
combination of shares, reclassification or the like, such shares or securities
shall be deemed to be governed by this Agreement.

 

12.           Counterparts.  This Agreement may be executed in one or
more counterparts, each of which will be deemed an original but all of which
together shall constitute one and the same agreement.

 

13.           Waiver.  No waivers of any breach of this Agreement
extended by any party hereto to any other party shall be construed as a waiver
of any rights or remedies of any other party hereto or with respect to any
subsequent breach.

 

4

 

14.           Specific Performance.  It is agreed and understood that monetary
damages would not adequately compensate an injured party for the breach of this
Agreement by any other party, that this Agreement shall be specifically
enforceable, and that any breach or threatened breach of this Agreement shall
be the proper subject of a temporary or permanent injunction or restraining
order.  Further, each party hereto
waives any claim or defense that there is an adequate remedy at law for such
breach or threatened breach.

 

15.           Attorney’s Fees.  In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.

 

16.           Entire Agreement.  This Agreement constitutes the full and
entire understanding and agreement between the parties regarding the matters set
forth herein, and supersedes any and all other written or oral agreements
existing between the parties hereto, which agreements are expressly canceled.

 

 

IN WITNESS WHEREOF, and
intending to be bound thereby, the parties hereto have executed this Agreement
as of the date first written above.

 

 

 

	
   

  	
  INVESTORS:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  

 

5

 

Schedule A

 

Investors

 

6

 

Schedule B

 

Stock

 

7

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