EXHIBIT 10.10
STOCKHOLDERS' AGREEMENT
DATED AS OF APRIL 8, 1996
BETWEEN
CYBERONICS, INC
AND
ST. JUDE MEDICAL, INC.
TABLE OF CONTENTS
PAGE
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SECTION 1--Definitions...................................................................................... 1
1.1 Certain Definitions.............................................................................. 1
SECTION 2--Restrictions on Transfer; Right of First Refusal................................................. 2
2.1 Restrictions on Transferability.................................................................. 2
2.2 Right of First Refusal........................................................................... 3
2.3 Restrictive Legends.............................................................................. 4
SECTION 3--Registration Rights.............................................................................. 4
3.1 Requested Registration........................................................................... 4
3.2 Piggy-Back Registration.......................................................................... 6
3.3 Registration Procedures.......................................................................... 7
3.4 Indemnification.................................................................................. 7
3.5 Information by Holders........................................................................... 10
3.6 Rule 144 Reporting............................................................................... 10
3.7 Transfer of Registration Rights.................................................................. 10
3.8 Termination of Registration Rights............................................................... 10
SECTION 4--Covenants of St. Jude............................................................................ 10
4.1 Limitation on Ownership of CYBX Common Stock..................................................... 10
4.2 Voting........................................................................................... 11
4.3 Voting Trust, etc................................................................................ 11
4.4 Solicitation of Proxies.......................................................................... 11
4.5 Acts in Concert with Others...................................................................... 12
SECTION 5--Other Agreements................................................................................. 12
5.1 Board Observer Rights............................................................................ 12
5.2 Confidential Information......................................................................... 12
SECTION 6--Miscellaneous.................................................................................... 12
6.1 Termination...................................................................................... 12
6.2 Governing Law.................................................................................... 12
6.3 Successors and Assigns........................................................................... 12
6.4 Entire Agreement; Amendment...................................................................... 12
6.5 Notices and Dates................................................................................ 13
6.6 Severability..................................................................................... 13
6.7 Costs and Expenses............................................................................... 13
6.8 No Third Party Rights............................................................................ 13
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STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (this "Agreement") is made as of this 8th day
of April, 1996, between Cyberonics, Inc, a Delaware corporation ("CYBX"), and
St. Jude Medical, Inc., a Minnesota corporation ("St. Jude").
A. Concurrent with the execution hereof, the parties have executed and
delivered an Agreement and Plan of Merger (the "Merger Agreement") providing for
the acquisition of CYBX by St. Jude under the terms and conditions set forth
therein;
B. Concurrent with the execution hereof, the parties have also executed and
delivered a Common Stock Purchase Agreement (the "Purchase Agreement") pursuant
to which St. Jude may acquire 2,181,818 shares of CYBX Common Stock (the
"Shares");
C. As a condition to the obligation of St. Jude to purchase and CYBX to
sell the Shares, the parties have agreed to the additional rights and
obligations with respect to the Shares and certain other matters as set forth in
this Agreement;
NOW, THEREFORE, The parties hereby agree as follows:
SECTION 1
DEFINITIONS
1.1 CERTAIN DEFINITIONS. As used in this Agreement:
(a) "COMMISSION" shall mean the United States Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
(b) "CONTROLLED CORPORATION" shall mean a corporation of which 100% of
the stock entitled to participate in the election of directors is owned by
St. Jude.
(c) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(d) "GROUP" shall have the meaning comprehended by Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
(e) "HOLDER" shall mean the St. Jude, any Controlled Corporation holding
Restricted Stock and any transferee of Restricted Stock to whom any rights
hereunder have been transferred as provided herein.
(f) "NEGOTIATED PURCHASE" means a transaction between CYBX and any
person or group pursuant to which such person or group acquires from CYBX
(or has the right to acquire from CYBX) CYBX Common Stock or any securities
convertible into or exchangeable for voting stock or any other right to
acquire voting stock. Notwithstanding the foregoing, the term "Negotiated
Purchase" shall not include (i) any agreement between CYBX and any
underwriter(s) in connection with a public offering, (ii) any agreement with
any third party(ies) pursuant to which CYBX shares are being issued to
acquire the third party or its business or assets where the number of shares
of CYBX Common Stock to be issued by CYBX represents no more than the then
effective Ownership Ceiling (if the issuance in an acquisition exceeds the
then effective Ownership Ceiling, such issuance shall constitute a
"Negotiated Purchase"), or (iii) issuances of CYBX Common Stock pursuant to
any present or future compensatory stock or option plan or other
compensatory issuances to employees and/or consultants.
(g) "PERSON" shall mean any person, individual, corporation,
partnership, trust or other nongovernmental entity or any governmental
agency, court, authority or other body (whether foreign, federal, state,
local or otherwise).
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(h) The terms" REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(i) "REGISTRATION EXPENSES" shall mean all expenses, other than Selling
Expenses (as defined below), incurred by CYBX in complying with Section 3
hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of
counsel for CYBX, blue sky fees and expenses, the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of CYBX which shall be paid in any event
by CYBX).
(j) "RESTRICTED STOCK" shall mean the Shares, any other shares of CYBX
Common Stock acquired by any Holder, including, without limitation, shares
acquired as the result of a stock split, stock dividend or the like.
(k) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(l) "SELLING EXPENSES" shall mean all underwriting discounts selling
commissions and stock transfer taxes applicable to the St. Jude's securities
registered pursuant to this Agreement.
(m) "CYBX COMMON STOCK" shall mean the Common Stock, $0.01 par value, of
CYBX.
(n) "TOTAL VOTING POWER OF CYBX" means the total number of votes which
may be cast in the election of directors of CYBX at any meeting of
stockholders of CYBX if all securities entitled to vote in the election of
directors of CYBX were present and voted at such meeting (other than votes
that may be cast only upon the happening of a contingency).
SECTION 2
RESTRICTIONS ON TRANSFER; RIGHT OF FIRST REFUSAL
2.1 RESTRICTIONS ON TRANSFERABILITY.
(a) COVENANT OF HOLDERS RE: TRANSFERS. Holders agree that they shall
not sell, transfer, pledge, hypothecate, or otherwise dispose of any
Restricted Stock now owned or hereafter acquired by them except as otherwise
permitted by this Agreement. Transfers by a Holder of Restricted Stock shall
be subject to CYBX's Right of First Refusal as described in Section 2.2
below. In addition, a Holder shall not, without the prior written consent of
CYBX, directly or indirectly, sell or transfer any Restricted Stock except:
(i) to CYBX or any person or group approved by CYBX; or
(ii) to a Controlled Corporation, so long as such Controlled
Corporation agrees to hold such Restricted Stock subject to all the
provisions of this Agreement, including this Section 2.1, and agrees to
transfer such Restricted Stock to St. Jude or another Controlled
Corporation of St. Jude if it ceases to be a Controlled Corporation of
St. Jude; or
(iii) pursuant to a bona fide public offering registered under the
Securities Act, including without limitation a registration pursuant to
Section 3 hereof; or
(iv) pursuant to Rule 144 under the Securities Act; or
(v) in transactions not otherwise described herein so long as such
transactions do not, directly or indirectly, result, to the best
knowledge of a Holder, after reasonable inquiry, in any single person or
group owning or having the right to acquire Restricted Stock with
aggregate Voting Power of 5% or more of the Total Voting Power of CYBX
then in effect; or
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(vi) in response to an offer to purchase or exchange for cash or
other consideration (a) which is made by or on behalf of CYBX, or (b)
which is made by another person or group and is supported or not opposed
by the Board of Directors of CYBX within the time such Board is required,
pursuant to regulations under the Exchange Act, to advise CYBX's
stockholders of such Board's position on such offer; or
(vii) in the event of a merger or consolidation in which the holders
of CYBX Common Stock prior to the merger or consolidation cease to hold,
solely as a result of their ownership of CYBX Common Stock, at least 51%
of the voting stock of the surviving entity, or pursuant to a plan of
liquidation of CYBX.
(b) NOTICES OF PROPOSED TRANSFERS. If a Holder wishes to sell
Restricted Stock (other than in a registered offering pursuant to Section 3
hereof as to which the notice provisions thereof shall apply), it shall give
notice (the "Transfer Notice") to CYBX in writing of such intention
specifying the approximate number of the proposed purchasers or transferees,
the amount of Restricted Stock proposed to be sold or transferred (the
"Transfer Stock"), the proposed price per share therefor (the "Transfer
Price"), which may be stated as "the market" price or a price tied to market
price by a stated formula (e.g., "at a 10% discount from market price") and
the other material terms upon which such disposition is proposed to be made.
In addition, unless there is in effect a registration statement under the
Securities Act covering the proposed transfer, the Holder shall provide
CYBX, at Holder's expense with either (i) a written opinion of legal counsel
who shall be, and whose legal opinion shall be, reasonably satisfactory to
CYBX, addressed to CYBX, to the effect that the proposed transfer of the
Transfer Stock may be effected without registration under the Securities
Act, or (ii) a "no action" letter from the Commission to the effect that the
transfer of the Transfer Stock without registration will not result in a
recommendation by the staff of the Commission that action be taken with
respect thereto.
2.2 RIGHT OF FIRST REFUSAL. In the event of any proposed transfer of
Restricted Stock (other than transfers specified in Section 2.1(a)(i), (ii),
(iii), (iv), (vi) and (vii) above), CYBX shall have the right to purchase the
Transfer Stock on the terms set forth in this Section 2.2.
(a) EXERCISE OF RIGHT OF FIRST REFUSAL. Within 30 calendar days after
receipt of such Transfer Notice, CYBX shall give written notice to the
Holder which gave the Transfer Notice of CYBX's intention to exercise its
right of first refusal. CYBX's notice shall constitute an offer to purchase
all but not part (unless otherwise agreed) of the Transfer Stock for cash
per share equal to the Transfer Price, PROVIDED, that within such 30 day
period CYBX shall also provide such Holder with evidence satisfactory to
such Holder (by written commitment letter subject only to customary
representations, diligence and documentation, letter of credit or otherwise)
of its ability to finance such purchase.
(b) CLOSING OF PURCHASE BY CYBX. If CYBX exercises its right of first
refusal hereunder, the closing of the purchase of the Restricted Stock with
respect to which such right has been exercised shall take place within 45
calendar days after receipt by CYBX of the Transfer Notice, which period of
time shall be extended in order to comply with applicable securities laws
and regulations. Upon exercise of its right of first refusal, CYBX and the
selling Holder shall be legally obligated to consummate the purchase
contemplated thereby and shall use their best efforts to secure any
approvals required in connection therewith.
(c) HOLDER'S RIGHT TO CONSUMMATE TRANSFER. If CYBX does not exercise
its right of first refusal hereunder within the time specified for such
exercise, the Holder shall be free, during the period of 90 calendar days
following the expiration of such time for exercise, to sell the Transfer
Stock on terms no less favorable to Holder than the terms specified in such
Transfer Notice.
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(d) ASSIGNMENT OF RIGHTS. In the event that CYBX elects to exercise a
right of first refusal under this Section 2.2, CYBX may specify prior to
closing such purchase another person as its designee to purchase the
Transfer Stock. The designee selected by CYBX shall be one as to whom the
transfer of the Transfer Stock may be effected without violation of the
Securities Act or any applicable state securities laws; otherwise such
attempted designation shall be void, and CYBX shall effect the purchase. If
CYBX shall designate another person as the purchaser pursuant to this
Section 2.2, the giving of notice of acceptance of the right of first
refusal by CYBX shall constitute a legally binding obligation of CYBX to
complete such purchase if such person shall fail to do so.
2.3 RESTRICTIVE LEGENDS. Each certificate representing Restricted Stock
shall be stamped or otherwise imprinted with legends substantially in the
following form (in addition any legend required under applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY
RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER, INCLUDING ANY SALE, PLEDGE OR OTHER HYPOTHECATION, RIGHTS OF FIRST
REFUSAL AND VOTING OBLIGATIONS SET FORTH IN AN AGREEMENT DATED APRIL , 1996
BETWEEN THE ISSUER AND THE REGISTERED HOLDER OF THIS CERTIFICATE, A COPY OF
WHICH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER AT ISSUER'S
PRINCIPAL EXECUTIVE OFFICES.
Holders consent to CYBX making a notation on its records and giving
instructions to any transfer agent of the Common Stock in order to implement the
restrictions on transfer established in this Agreement.
SECTION 3
REGISTRATION RIGHTS
3.1 REQUESTED REGISTRATION. The Holders shall have the right to request
registration pursuant to this Section 3.1. This shall be in addition to the
Holder's rights under Section 3.2. Any registration requested hereunder shall be
structured to distribute such shares through an underwriter or otherwise in such
a manner as should not result in a sale or sales of CYBX Common Stock with
aggregate Voting Power of 5% or more of the Total Voting Power of CYBX then in
effect being transferred to a single person or group.
(a) REGISTRATION. In case CYBX shall receive from Holder(s) a written
request that CYBX effect any registration, qualification or compliance with
respect to Restricted Stock which represents no less than the lesser of
(A)15% of CYBX Common Stock outstanding as of the date of the request (for
purposes of determining the number of outstanding shares of CYBX Common
Stock, a Holder may rely upon the number disclosed in CYBX's latest report
filed under the Exchange Act), or (B) 80% of the Shares. CYBX will, as soon
as practicable, use its best lawful efforts to effect such registration,
qualification or compliance (including, without limitation, appropriate
qualification under applicable blue sky or other state securities law and
appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) as
may be necessary or appropriate to permit or facilitate the sale and
distribution of all of such Restricted Stock as are specified in such
request; provided, however, that CYBX shall not be
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obligated to take any action to effect any such registration, qualification
or compliance pursuant to this Section 3.1:
(i) Prior to the earlier of (A) February 14, 1997 or (B) the date
CYBX files its Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996;
(ii) In any particular jurisdiction in which CYBX would be required
to execute a general consent to service of process in effecting such
registration, qualification or compliance unless CYBX is already subject
to service in such jurisdiction and except as may be required by the
Securities Act;
(iii) During the period starting with the date sixty (60) days prior
to CYBX's estimated date of filing of, and ending on the date three (3)
months immediately following the effective date of, any registration
statement pertaining to securities of CYBX (other than a registration of
securities in a Rule 145 transaction or with respect to an employee
benefit plan), providing that CYBX is actively employing in good faith
all reasonable efforts to cause such registration statement to become
effective (and provided, further, that CYBX cannot pursuant to this
Section 3.1(a)(iii) delay imple-mentation of a demand for registration
more than once in any 24-month period);or
(iv) If CYBX shall furnish to such Holders a certificate signed by
the President of CYBX stating that in the good faith judgment of the
Board of Directors it would be seriously detrimental to CYBX or its
stockholders for a registration statement to be filed in the near future,
then CYBX's obligation to use its best lawful efforts to register,
qualify or comply under this Section 3.1 shall be deferred once (with
respect to any demand for registration hereunder) for a period not to
exceed ninety (90) days from the date of receipt of written request from
St. Jude.
Subject to the foregoing clauses (i) through (iv), CYBX shall file a
registration statement covering the Restricted Stock so requested to be
registered as soon as practicable, after receipt of the request of the
Holder(s).
(b) UNDERWRITING.
(i) In the event that either CYBX or the selling Holder(s) request
that a registration be effected pursuant to an underwritten offering, the
right of a Holder to registration pursuant to this Section 3.1 shall be
conditioned upon such Holder's participation in the underwriting
arrangements. CYBX shall (together with all Holders and other holders
proposing to distribute their securities through such underwriting) enter
into an underwriting agreement in customary form with a nationally
respected investment banking firm selected by CYBX and reasonably
acceptable to the selling Holder(s).
(ii) If any Holder disapproves of the terms of the underwriting,
such person may elect to withdraw therefrom by written notice to CYBX and
the managing underwriter. The Restricted Stock so withdrawn shall also be
withdrawn from registration, and such Restricted Stock shall not be
transferred in a public distribution prior to 180 days after the
effective date of such registration, or such other shorter period of time
as the underwriters may require.
(c) INCLUSION OF OTHER SHARES OF CYBX COMMON STOCK. In connection with
any registration pursuant to this Section 3.1, CYBX and other holders of
CYBX Common Stock may include shares in such registration; provided,
however, that if, in connection with an underwritten offering, the managing
underwriter determines that marketing conditions require a limitation on the
number of shares to be sold, then shares shall be included in the following
priority and order:
(i) The Restricted Stock requested to be sold by Holder(s) shall
first be included;
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(ii) If marketing conditions permit additional shares to be
included, then capacity shall be allocated among the other holders of
CYBX Common Stock pro rata based upon the number of shares requested to
be included in the registration (to facilitate the allocation of shares
in accordance with the above provisions, CYBX or the underwriters may
round the number of shares allocated to any holder to the nearest 100
shares);
(iii) If marketing conditions permit additional shares to be
included, then such remaining capacity shall be allocated to CYBX.
(d) EXPENSES OF REGISTRATION. Registration Expenses incurred in
connection with the registration pursuant to this Section 3.1 shall be borne
as follows:
(i) If the registration relates solely to Restricted Stock being
registered on behalf of Holder(s), CYBX on the one hand and selling
Holder(s) on the other shall bear all of such expenses on a 50%/50% basis
as to the first such registration pursuant to this Section 3.1(a) and
selling Holder(s) shall bear all of such expenses in connection with any
subsequent registration(s) pursuant to this Section 3.1;
(ii) If the registration includes Restricted Stock being registered
on behalf of Holder(s) and stock being sold for the account of other
holders or the account of CYBX, then such Holder(s) shall bear a pro rata
portion of all of such expenses based upon the total number of shares
included in the registration.
All Selling Expenses relating to securities registered on behalf of
Holder(s) registering securities shall be borne by such Holder(s) pro rata on
the basis of the number of shares so registered regardless of whether any other
shares are included in the registration.
3.2 PIGGY-BACK REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to time CYBX
shall determine to register any of its securities, either for its own
account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans, or (ii) a
registration relating solely to a Commission Rule 145 transaction, CYBX
will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting
involved therein, all the Restricted Stock specified in a written request
or requests, made within 20 days after receipt of such written notice
from CYBX, by any Holder.
(b) UNDERWRITING.
(i) If the registration of which CYBX gives notice is for a
registered public offering involving an underwriting, CYBX shall so
advise the Holders as a part of the written notice given pursuant to
Section 3.2(a). In such event the right of any Holder to registration
pursuant to Section 3.2 shall be conditioned upon such Holder's
participation in such underwriting, and the inclusion of Restricted Stock
in the underwriting shall be limited to the extent provided herein. All
Holders proposing to distribute their securities through such
underwriting shall (together with CYBX and the other holders distributing
their securities through such underwriting) enter into an underwriting
agreement in customary form with the managing underwriter selected for
such underwriting by CYBX. Notwithstanding any other provision of this
Section 3.2, if the managing underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten,
the managing underwriter may exclude some or all Restricted Stock from
such registration. In the event that the number of shares of Restricted
Stock to be included in a registration shall be limited pursuant to the
foregoing, CYBX shall so advise all Holders, and the
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number of shares of Restricted Stock that may be included in the
registration and underwriting shall be allocated among all Holder(s)
thereof (and other holders of CYBX Common Stock who are contractually
entitled to register their shares of CYBX Common Stock) in proportion, as
nearly as practicable, to the respective amounts of securities then held
by Holders and such other holders requesting to have shares included in
such registration. To facilitate the allocation of shares in accordance
with the above provisions, CYBX may round the number of shares allocated
to any Holder to the nearest 100 shares.
(ii) If any Holder disapproves of the terms of the underwriting,
such person may elect to withdraw therefrom by written notice to CYBX and
the managing underwriter. The Restricted Stock so withdrawn shall also be
withdrawn from registration, and such Restricted Stock shall not be
transferred in a public distribution prior to 180 days (or such shorter
period of time as the underwriters may require) after the effective date
of such registration; provided, however, that the restriction provided
herein shall not exceed the duration of any similar restrictions required
of other CYBX stockholders.
(c) RIGHT TO TERMINATE REGISTRATION. CYBX shall have the right to
terminate or withdraw any registration initiated by it under this Section
3.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
(d) EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with a registration pursuant to this Section 3.2 shall be borne
by CYBX. All Selling Expenses relating to securities registered on behalf of
the Holders or other holders registering securities shall be borne by the
Holders or holders of such securities pro rata on the basis of the number of
shares so registered.
3.3 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by CYBX pursuant to this Agreement, CYBX
agrees as follows:
(a) INFORM HOLDER(S). CYBX will keep each Holder advised in writing as
to the initiation of each registration, qualification and compliance and as
to the completion thereof.
(b) PREPARE AND FILE REGISTRATION STATEMENT. CYBX will prepare and
file with the Commission a registration statement with respect to such
securities and use its best lawful efforts to cause such registration
statement to become and remain effective for one hundred and twenty (120)
days or, if earlier, until the distribution described in the Registration
Statement has been completed;
(c) FURNISH PROSPECTUSES. CYBX will furnish to each underwriter such
number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as such underwriter may reasonably request in order to facilitate
the public sale of the shares by such underwriter, and promptly furnish to
each underwriter and Holder notice of any stop-order or similar notice
issued by the Commission or any state agency charged with the regulation of
securities, and notice of any NASDAQ listing;
(d) COMFORT LETTER. CYBX will furnish to each prospective seller a
signed "comfort" letters signed by the independent public accountants who
have certified CYBX's financial statements included in the registration
statement, covering substantially the same matters with respect to the
registration statement (and the prospectus included therein) and (in the
case of the "comfort" letter) with respect to events subsequent to the date
of the financial statements, as are customarily covered (at the time of such
registration) in opinions of issuers' counsel and in "comfort" letters
delivered to the underwriters in underwritten public offerings of
securities.
3.4 INDEMNIFICATION.
(a) INDEMNIFICATION BY CYBX. To the extent permitted by law, CYBX will
indemnify each Holder participating in a registration pursuant to this
Agreement, each of its officers and directors and partners, and each person
controlling such Holder within the meaning of Section 15 of the
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Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by CYBX of the Securities Act
or any rule or regulation promulgated under the Securities Act applicable to
CYBX in connection with any such registration, qualification or compliance, and
CYBX will reimburse each such Holder, each of its officers and directors, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that CYBX will not be liable
in any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
written information furnished to CYBX by such Holder, controlling person or
underwriter specifically for use therein. Notwithstanding the foregoing, insofar
as the foregoing indemnity relates to any such untrue statement (or alleged
untrue statement) or omission (or alleged omission) made in the preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
Commission at the time the registration statement becomes effective or in the
final prospectus filed with the Commission pursuant to Rule 424(b) of the
Commission, the indemnity agreement herein shall not inure to the benefit of any
underwriter or (if there is no underwriter) any Holder if a copy of the final
prospectus filed pursuant to Rule 424(b) was not furnished to the person or
entity asserting the loss, liability, claim or damage at or prior to the time
such furnishing is required by the Securities Act.
(b) INDEMNIFICATION BY HOLDERS. To the extent permitted by law, each
Holder will, if Restricted Stock held by such Holder is included in the
securities as to which such registration, qualification or compliance is
being effected, indemnify CYBX, each of its directors and officers, each
underwriter, if any, of CYBX's securities covered by such a registration
statement, each person who controls CYBX or such underwriter within the
meaning of Section 15 of the Securities Act, and each other such Holder or
holder, each of its officers and directors and each person controlling such
other Holder or holder within the meaning of Section 15 of the Securities
Act, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse CYBX, such Holders or holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to CYBX by such Holder
specifically for use therein. Notwithstanding the foregoing, the liability
of each Holder under this subsection (b) shall be limited in an amount equal
to the net proceeds from the sale of the shares sold by such Holder, unless
such liability arises out of or is based on willful conduct by such Holder.
In addition, insofar as the foregoing indemnity relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged omission)
made in the preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the Commission at the time the registration
statement becomes effective or in the final prospectus filed pursuant to
Rule 424(b) of the Commission, the indemnity agreement herein shall not
inure to the benefit of CYBX, any underwriter or (if there is no
underwriter) any Holder if a
8
copy of the final prospectus filed pursuant to Rule 424(b) was not furnished
to the person or entity asserting the loss, liability, claim or damage at or
prior to the time such furnishing is required by the Securities Act.
(c) NOTICE OF INDEMNIFICATION CLAIMS. Each party entitled to
indemnification under this Section 3.4 (the "Indemnified Party") shall give
notice to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the Indemnifying
Party to assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and
the Indemnified Party may participate in such defense at such party's
expense, and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice
is materially prejudicial to an Indemnifying Party's ability to defend such
action and provided further, that the Indemnifying Party shall not assume
the defense for matters as to which there is a conflict of interest or
separate or different defenses in which event the Indemnified Party/Parties
shall be entitled to engage a single separate counsel to represent them in
such matter and the Indemnifying Party shall reimburse the Indemnified
Party/Parties for the reasonable attorneys fees and expenses incurred in
connection with such defense. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. No Indemnified Party shall consent to
entry of any judgment or enter into any settlement without the consent of
each Indemnifying Party.
(d) CONTRIBUTION. If the indemnification provided for in this Section
3.4 is unavailable to an indemnified party in respect of any losses, claims,
damages or liabilities referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by CYBX on the one hand and all
stockholders offering securities in the offering (the "Selling
Stockholders") on the other from the offering of CYBX securities, or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of CYBX
on the one hand and the Selling Stockholders on the other in connection with
the statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative benefits received by CYBX on the one hand and the Selling
Stockholders on the other shall be the net proceeds from the offering
(before deducting expenses) received by CYBX on the one hand and the Selling
Stockholders on the other. The relative fault of CYBX on the one hand and
the Selling Stockholders on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of
material fact or the omission or alleged omission to state a material fact
relates to information supplied by CYBX or by the Selling Stockholders and
the parties' relevant intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. CYBX and the
Selling Stockholders agree that it would not be just and equitable if
contribution pursuant to this Section 3.4(d) were based solely upon the
number of entities from whom contribution was requested or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section 3.4(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages
and liabilities referred to above in this Section 3.4(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim, subject to the provisions of Section 3.4(c) hereof. Notwithstanding
the provisions of this Section 3.4(d), no Selling Stockholder shall be
required to contribute any amount or make any other payments under
9
this Agreement which in the aggregate exceed the proceeds received by such
Selling Stockholder. No person guilty of fraudulent misrepresentation shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
3.5 INFORMATION BY HOLDERS. The Holder(s) of Restricted Stock included in
any registration shall furnish to CYBX such information regarding such
Holder(s), the Restricted Stock and the distribution proposed by such Holder(s)
as CYBX may request and as shall be required in connection with any
registration, qualification or compliance referred to in Section 3. In the event
that a Holder fails to provide the information required by this Section,
Restricted Stock held by such Holder shall be excluded from such registration
and such Holder shall be deemed to have forever waived and terminated its rights
to registration under this Agreement.
3.6 RULE 144 REPORTING. So long as a Holder owns any Restricted Stock,
CYBX agrees to furnish to such Holder forthwith upon request a written statement
by CYBX as to its compliance with the reporting requirements of said Rule 144
and of the Securities Act and the Securities Exchange Act of 1934, a copy of the
most recent annual or quarterly report of CYBX, and such other reports and
documents of CYBX and other information in the possession of or reasonably
obtainable by CYBX as a Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing such Holder to sell any such
securities without registration.
3.7 TRANSFER OF REGISTRATION RIGHTS. The rights granted to St. Jude under
Section 3 may be assigned to a Controlled Corporation or to any other transferee
acquiring shares of Restricted Stock in a transaction which has been effected in
compliance with Section 2 hereof in connection with any transfer or assignment
of Restricted Stock provided that transferee agrees in writing to be bound by
the provisions of this Agreement. Notwithstanding the foregoing, no registration
rights will transfer in connection with a transfer of Restricted Stock pursuant
to Rule 144 or pursuant to an effective registration statement under the
Securities Act.
3.8 TERMINATION OF REGISTRATION RIGHTS. The registration rights granted in
this Section 3 shall terminate as to any shares of Restricted Stock at the
earlier of (i) the time such shares are transferred in a registered offering or
pursuant to Rule 144, (ii) at such time as the Holder thereof may legally sell
all Restricted Stock held by it in any single three month period or (iii) five
years from the date St. Jude first acquired the Shares.
SECTION 4
COVENANTS OF ST. JUDE
4.1 LIMITATION ON OWNERSHIP OF CYBX COMMON STOCK.
(a) Unless CYBX otherwise agrees in writing, Holder(s) shall not (and
shall not permit any subsidiary to directly or indirectly) acquire
beneficial ownership of any CYBX Common Stock, any securities convertible
into or exchangeable for CYBX Common Stock, or any other right to acquire
CYBX Common Stock or authorize or make a tender, exchange or other offer,
except (i) by way of stock dividends or other distributions or offerings
made available to holders of any CYBX Common Stock generally or (ii)
pursuant to the Merger Agreement, if the effect of such acquisition would be
to increase the Voting Power of all CYBX Common Stock then owned by Holders
or which they have a right to acquire to more than the percentage of the
Total Voting Power of CYBX which Holders, in the aggregate, are entitled to
hold at such time as provided in this Section 4.1 (the "Ownership Ceiling").
The Ownership Ceiling shall initially be nineteen percent (19%), subject to
adjustment as provided in Section 4.1(b).
(b) Holders may acquire CYBX Common Stock without regard to the
limitations in this Section 4.1 if: (i) a tender offer is made (as evidenced
by the filing with the Commission of a Schedule 14D-1 (or any successor
schedule or form promulgated or adopted for such purpose by the
10
Commission) and the actual dissemination of tender offer materials to
security holders) by another person or group to purchase or exchange for
cash or other consideration any CYBX Common Stock which, if successful,
would result in such person or group owning or having the right to acquire
shares of CYBX Common Stock with aggregate Voting Power of at least a
majority of the Total Voting Power of CYBX then in effect; PROVIDED, this
clause (i) shall not be effective until such time as St. Jude, in the
exercise of the reasonable judgment of its Board of Directors shall
reasonably conclude that such tender offeror can finance such tender offer;
or (ii) another entity or group (other than an entity or group not required
to file a Schedule 13D pursuant to Rule 13d-1(b)(1) under the Securities
Exchange Act of 1934) acquires CYBX Common Stock with aggregate Voting Power
of at least 25% of the then Total Voting Power of CYBX, other than pursuant
to a Negotiated Purchase.
(c) If Holder(s) sell any CYBX Common Stock (other than a sale or other
transfer to a Controlled Corporation), the percentage ownership in the Total
Voting Power of CYBX which Holders are entitled to own as provided in this
Section 4.1 shall be reduced by the percentage amount of such sale; and
(d) Holders will not be obligated to dispose of any shares of CYBX
Common Stock if the aggregate percentage ownership of Holders is increased
as a result of a recapitalization of CYBX or a repurchase of securities by
CYBX or any other action taken by CYBX or its affiliates, but Holders shall
not acquire any additional CYBX Common Stock unless such acquisition would
otherwise be permitted under this Agreement. If, after Holders have acquired
CYBX Common Stock in response to the acquisition of CYBX Common Stock by
another person or group, as permitted by Section 4.1(b), then Holders shall
not be obligated to dispose of any shares of CYBX Common Stock, but will
continue to be bound by the restrictions on acquiring additional shares of
CYBX Common Stock.
4.2 VOTING.
(a) Holders shall take such action as may be required so that all shares
of CYBX Common Stock owned by Holders are voted for nominees to the Board of
Directors of CYBX in accordance with the recommendation of the Board of
Directors. The provisions of this Section 4.2(a) shall terminate on July 1,
1998; provided, however, that the provisions of Section 4.4 shall remain in
effect for so long as any Holder continues to hold CYBX Common Stock.
(b) Unless CYBX otherwise consents in writing, Holders shall take such
action as may be required so that all shares of CYBX Common Stock owned by
Holders are voted in accordance with the recommendations of the Board of
Directors on all other matters to be voted on by holders of CYBX Common
Stock, or, if a Holder objects to the recommendation of CYBX's Board of
Directors, then such Holder shall vote its shares of CYBX Common Stock in
the same proportion as the stockholders (other than the other objecting
Holders) have voted on the matter. The provisions of this Section 4.2(b)
shall remain in effect for so long as any Holder continues to hold CYBX
Common Stock.
(c) Holders, as the holders of shares of CYBX Common Stock, shall be
present, in person or by proxy, at all meetings of stockholders of CYBX so
that all shares of CYBX Common Stock beneficially owned by them may be
counted for the purposes of determining the presence of a quorum at such
meetings and to vote such CYBX Common Stock as provided herein.
4.3 VOTING TRUST, ETC. Holders shall not deposit any shares of CYBX Common
Stock in a voting trust or, except as otherwise provided herein, subject any
CYBX Common Stock to any proxy, arrangement or agreement with respect to the
voting of such CYBX Common Stock other than a proxy granted to the proxy
holder(s) designated by CYBX's Board of Directors.
4.4 SOLICITATION OF PROXIES. Without CYBX's prior written consent, Holders
shall not solicit proxies with respect to any CYBX Common Stock, nor shall it
become a "participant" in any "election contest" (as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act) relating to the election of
directors of CYBX).
11
4.5 ACTS IN CONCERT WITH OTHERS. Except as contemplated herein with regard
to the assignment of rights to Controlled Corporations, Holders shall not join a
partnership, limited partnership, syndicate or other group, or otherwise act in
concert with any third person, for the purpose of acquiring, holding, or
disposing of CYBX Common Stock.
SECTION 5
OTHER AGREEMENTS
5.1 BOARD OBSERVER RIGHTS. For so long as Holders hold Common Stock
representing at least 10% of the Total Voting Power of CYBX, St. Jude shall have
the right to have one representative observe all meetings of CYBX's Board of
Directors. St. Jude shall designate its representative who shall be reasonably
acceptable to CYBX. Except where the designated representative has left the
employ of St. Jude, St. Jude may not change its representative more than once in
any 12 month period. CYBX shall provide to the representative notice of meetings
of the Board, and copies of such materials as are provided to directors, at the
same time as given to directors. Notwithstanding the foregoing, if, in the
reasonable judgment of CYBX, a conflict may exist between CYBX and St. Jude with
respect to a matter to be considered by CYBX Board of Directors, CYBX may (i)
exclude St. Jude's representative from the portion(s) of any meeting at which
such matter(s) are to be discussed and (ii) omit from materials sent to the
representative any materials relating to such matter(s). St. Jude acknowledges
that, as a result of its participation in board meetings and receipt of board
materials, it will regularly have material nonpublic information about CYBX, and
thereby agrees that it will, and will cause any St. Jude personnel who have
access to such information, to adhere to CYBX's βββββββ βββββββ Policy, copies
of which have been provided to St. Jude and to comply with all applicable state
and federal securities laws relating to βββββββ βββββββ.
5.2 CONFIDENTIAL INFORMATION. CYBX may from time to time pursuant to this
Agreement disclose to St. Jude certain confidential information. St. Jude agrees
that the provisions of those certain confidentiality agreements between CYBX and
St. Jude dated as of June 6, 1995 and October 17, 1995 shall govern the use and
disclosure of confidential information received hereunder; PROVIDED, HOWEVER,
that, notwithstanding the terms of such agreements, such agreements shall be
deemed to remain in effect for so long as St. Jude shall have a right to receive
information hereunder. St. Jude's obligation to hold confidential information in
confidence expires on the seventh anniversary of the date of disclosure.
SECTION 6
MISCELLANEOUS
6.1 TERMINATION. This Agreement shall automatically terminate upon that
date which is one year after the later of: (i) termination of the Merger
Agreement; (ii) termination of the Purchase Agreement; or (iii) assuming that
St. Jude has purchased shares of CYBX Common Stock pursuant to the Purchase
Agreement, the date on which all Holders may sell all shares of Restricted Stock
held by them in a single three month period. The restrictions in this Agreement
shall not apply to any purchaser of Restricted Stock (other than a Controlled
Corporation or other affiliate of St. Jude or of any Controlled Corporation) to
whom none of the rights of a Holder are transferred as provided herein.
6.2 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS BY THE
LAWS OF THE STATE OF DELAWARE AS APPLIED TO CONTRACTS ENTERED INTO SOLELY
BETWEEN RESIDENTS OF, AND TO BE PERFORMED ENTIRELY WITHIN, SUCH STATE.
6.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns. This Agreement may not be assigned by a party without the prior written
consent of the other party PROVIDED, without the consent of CYBX, St. Jude may
assign this Agreement as provided herein to any Controlled Corporation.
6.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the
12
subject matter hereof and thereof and supersedes all prior agreements and
understandings among the parties relating to the subject matter hereof. Neither
this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against which
enforcement of any such amendment, waiver, discharge or termination is sought.
6.5 NOTICES AND DATES. Any notice or other communication given under this
Agreement shall be sufficient if in writing and sent by registered or certified
mail, return receipt requested, postage prepaid, to a party at its address set
forth below (or at such other address as shall be designated for such purpose by
such party in a written notice to the other party hereto):
(a) if to CYBX, to it at:
Cyberonics, Inc.
βββββ βββββββ β, βββββ βββ
βββββββ, ββ βββββ-ββββ
Attention: President
with a copy to:
βββββββ β. ββββββ
Wilson, Sonsini, ββββββββ & ββββββ
βββ ββββ ββββ ββββ
ββββ ββββ, ββ βββββ
(b) if to St. Jude, to it at:
St. Jude Medical, Inc.
βββ ββββββββ βββββ
ββ. ββββ, ββ βββββ
Attention: President
with a copy addressed as set forth above but to the attention of: General
Counsel.
All such notices and communications shall be effective when received by the
addressee. In the event that any date provided for in this Agreement falls on a
Saturday, Sunday or legal holiday, such date shall be deemed extended to the
next business day.
6.6 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and restriction
of this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
6.7 COSTS AND EXPENSES. Except as provided with respect to Registration
Expenses, each party hereto shall pay its own costs and expenses incurred in
connection herewith, including the fees of its counsel, auditors and other
representatives, whether or not the transactions contemplated herein are
consummated.
6.8 NO THIRD PARTY RIGHTS. Nothing in this Agreement shall create or be
deemed to create any rights in any person or entity not a party to this
Agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date aforesaid.
CYBERONICS, INC.
By: /s/ ββββββ β. βββββββ
-----------------------------------
ββββββ β. βββββββ
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
ST. JUDE MEDICAL, INC.
By: /s/ ββββββ β. MATRICARIA
-----------------------------------
Name: ββββββ β. Matricaria
---------------------------------
Title: President and Chief Executive
Officer
---------------------------------
14
