Exhibit 10.2
*****Portions of this exhibit have been omitted pursuant to a request made by
the Company for confidential treatment by the Securities and Exchange
Commission. The omitted portions have been filed separately with the
Commission..
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT ("Agreement") is made and entered into
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effective as of August 11, 2000, by and among Optical Sensors Incorporated, a
Delaware corporation (the "Company"), with its principal place of business at
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0000 Xxxxxx Xxxxxxxx Xxxxx, Xxxxx X, Xxxx Xxxxxxx, Xxxxxxxxx 00000, and the
investor listed on Schedule A hereto (the "Investor").
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A. The Company desires to raise up to $1,500,000 of additional capital in
order to fund its operations.
B. The Investor desires to make an investment in the Company on the terms
and conditions set forth in this Agreement.
Accordingly, in consideration of the foregoing, the mutual promises set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Authorization of Securities. The Company proposes to authorize, issue and
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sell the number of shares of Series A Convertible Preferred Stock, $.01 par
value (the "Series A Preferred") as provided herein, which will be entitled
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to the preferences, rights and benefits set forth in the capital stock
provisions of the Company's Certificate of Designation, which has been filed
in the form set forth in Exhibit A attached hereto (the "Certificate of
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Designation"). The Series A Preferred will be convertible into shares of the
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Company's common stock, $.01 par value, as set forth in the Certificate of
Designation.
2. Purchase of Securities.
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(a) Subject to the terms and conditions hereof, the Company agrees to sell
to the Investor, and the Investor agrees to purchase from the Company
in accordance with this Agreement, up to Four Million Thirty Three
Thousand Three Hundred Thirty Four (4,333,334) shares of the Company's
Series A Preferred (the "Shares") in the amounts set forth on Schedule
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A. The purchase price for the first One Million (1,000,000) shares of
Series A Preferred purchased by the Investor (in the aggregate) will
be Fifty Cents ($.50) per share, the purchase price for the next One
Million Three Hundred Thirty Three Thousand Three Hundred Thirty Four
(1,333,334) shares of Series A Preferred purchased by the Investor (in
the aggregate) will be Thirty Seven and One-Half Cents ($.375) per
share and the purchase price for the next Two Million (2,000,000)
purchased shares by the Investor (in the aggregate) of Series A
Preferred will be Twenty-Five Cents ($.25) per share.
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(b) From time to time after the date of this Agreement, the Company will
send a written notice to the Investor indicating the number of shares
of Series A Preferred that the Company wishes to sell to the Investor
(the "Notice") and the applicable per share price in accordance with
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Section 2(b). Within five (5) business days after the receipt of the
Notice, the Investor shall purchase the number of shares of Series A
Preferred specified in the Notice (the "Purchased Shares") by
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delivering to the Company within such five (5) day period a certified
check or wire transfer in an amount equal to the number of Purchased
Shares multiplied by the applicable price, as determined by reference
to Section 2(a) (the "Purchase Price"); provided, however, that the
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Investor (in the aggregate) shall be required to purchase a maximum of
Four Million Thirty Three Thousand Three Hundred Thirty Four
(4,333,334) shares of Series A Preferred (the "Maximum Commitment")
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with an aggregate maximum purchase price of One Million Five Hundred
Thousand Dollars ($1,500,000).
(c) At the time of delivery of the Purchase Price, the Company shall
deliver to the Investor stock certificate(s) for the number of shares
of Series A Preferred being purchased by such Investor, which such
shares will be registered in the Investor's name or as otherwise
designated by the Investor.
(d) Notwithstanding any other provision of this Agreement to the contrary,
the ability of the Company to sell shares of Series A Preferred to the
Investor is subject to the existing contractual right of
Instrumentation Laboratory Company ("ILC") to participate in equity
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financings of the Company. In the event that ILC elects to purchase
any or all of the shares of the Series A Preferred that would
otherwise be offered to the Investor under this Agreement, the number
of shares so purchased will reduce the Maximum Commitment by an equal
number. Any shares of Series A Preferred purchased by ILC will be
deemed to have been purchased by the Investor for purposes of
determining the Purchase Price for any shares of Series A Preferred
sold to the Investor.
3. Adjustment of Notes and Warrants.
--------------------------------
(a) Conversion Price of Notes. The conversion price of the convertible
promissory notes (the "Notes") issued to the Investor pursuant to the
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Investment Agreement by and among the Company and the other investors
named therein dated March 10, 2000 (the "Investment Agreement"), as
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specified in Section 2.1 of the Note, is hereby amended so that such
conversion price at any time is equal to Fifty Thousand (50,000)
multiplied by the lowest price at which the Company sells any shares
of its capital stock (other than a sale pursuant to the exercise of an
option, right or warrant to subscribe for shares of Common Stock that
are outstanding on the date hereof or options granted under the
Company's stock option plan) after the first date on which the
Investor purchases shares of Series A Preferred (the "Lowest
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2
Issue Price"). Subject to the foregoing amendment, the foregoing
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conversion price otherwise remains subject to adjustment as provided
in Section 2.4 of the Note.
(b) Exercise Price of Warrants. The Exercise Price (as defined in the
warrant issued to the Investor pursuant to the Investment Agreement
(the "Warrant")) of the Warrant is hereby amended so that the Exercise
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Price at any time is equal to the Lowest Issue Price. Subject to the
foregoing amendment, the foregoing conversion price otherwise remains
subject to adjustment as provided in Section 4 of the Warrant.
4. Representations and Warranties of the Company. The Company represents and
---------------------------------------------
warrants to the Investor as follows:
(a) Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to own, lease or
operate its properties and to carry on its business as it is now being
conducted and as it is proposed to be conducted. The Company has no
subsidiaries or direct or indirect ownership in any firm, corporation
or business which either, individually or in the aggregate, is
material to the business of the Company. The Company is qualified to
do business and is in good standing as a foreign corporation in every
jurisdiction in which its ownership of property or conduct of business
requires it so to be qualified and in which the failure to so qualify
would have a material adverse effect on the financial condition or
business of the Company.
(b) Authorization. The Company has the corporate power and authority to
execute and deliver this Agreement, the Shares and to perform its
obligations hereunder and thereunder, including the issuance of the
Shares and the Conversion Securities (as defined below). This
Agreement and the Shares have been duly authorized by all necessary
corporate action on behalf of the Company, have been duly executed and
delivered by authorized officers of the Company, are valid and binding
agreements on the part of the Company and are enforceable against the
Company in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting the
enforcement of creditors rights generally and to judicial limitations
on the enforcement of the remedy of specific performance and other
equitable remedies. All corporate actions necessary for reservation
and issuance of the shares of Common Stock issuable upon conversion of
the Shares ("Conversion Securities") has been taken. The Conversion
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Securities when issued pursuant to the Certificate of Designation will
be duly authorized, validly issued, fully paid and nonassessable, free
and clear of any and all liens, charges, claims, encumbrances and
preemptive rights.
(c) No Violation. Neither the execution and delivery of this Agreement
nor any of the Shares by the Company, nor the performance by the
Company of its obligations
3
hereunder or thereunder, nor the consummation of the transactions
contemplated hereby or thereby will: (a) conflict with or result in
any breach of any provision of the Certificate of Incorporation or By-
Laws of the Company; (b) result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, lease, mortgage, license,
agreement or other instrument or obligation to which the Company is a
party or by which any of its assets may be bound, except for such
defaults (or rights of termination, cancellation or acceleration) as
to which requisite waivers or consents have been obtained or which, in
the aggregate, would not result in a material adverse effect on the
Company; (c) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or any of its assets,
except for violations which would not result in a material adverse
effect on the Company; or (d) result in the creation or imposition of
any liens, charges or encumbrances upon any assets of the Company.
(d) SEC Reports. The Company has filed all reports, registration
statements and other filings with the Securities and Exchange
Commission (the "Commission") required to be filed by it pursuant to
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the Securities Act of 1933, as amended (the "Securities Act"), and the
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Securities Exchange Act of 1934, as amended (the "Exchange Act"). All
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such reports, registration statements and other filings (including all
notes, exhibits and schedules thereto, all documents incorporated by
reference therein, and any amendments thereto) are collectively
referred to herein as the "SEC Reports." As of their respective dates
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of filing with the Commission, the SEC Reports complied in all
material respects with all of the rules and regulations of the
Commission and did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
(e) Financial Statements. The financial statements of the Company
included in the SEC Reports (the "Financial Statements") have been
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prepared in accordance with United States generally accepted
accounting principles consistently applied and fairly present the
financial position of the Company at the dates thereof and the results
of the Company's operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal adjustments
and the omission of footnotes). The Company has no material
liabilities, known or unknown, absolute, contingent or otherwise,
except for (i) liabilities that are set forth in the Financial
Statements, the notes thereto or the SEC Reports and (ii) liabilities
that have been incurred in the ordinary course of business since June
30, 2000.
(f) No Material Adverse Change. There have not been any changes in the
assets, properties, liabilities, financial condition, business or
operations of the Company from that reflected in the Financial
Statements except for (i) changes in the ordinary
4
course of business which have not been, either individually or in the
aggregate, materially adverse and (ii) the Company's continued
operating losses and negative cash flow.
(g) Authorized Capital Stock. The authorized capital stock of the Company
is as set forth in the SEC Reports. The issued and outstanding shares
of capital stock of the Company have been duly authorized, validly
issued and are fully paid and nonassessable. As of the date hereof,
the Company has outstanding options and warrants to purchase 755,109
shares of Common Stock, and there are no other outstanding warrants,
options or other rights to acquire any shares of capital stock of the
Company, except for the shares issued upon conversion of the Notes,
the Warrants issuable upon conversion of the Notes and as disclosed in
the SEC Reports. All of the above securities of the Company were
issued in compliance with all applicable federal and state securities
laws and were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities.
Except for IL, no holder of any security of the Company is entitled to
any preemptive or similar rights to purchase any securities of the
Company.
(h) Intellectual Property. The Company owns or possesses adequate rights
to use all patents, patent rights, inventions, trademarks, trade
names, copyrights, licenses, domain names, governmental
authorizations, trade secrets and know-how that are used or necessary
for the conduct of its business; neither the Company nor any of its
subsidiaries has received any notice of, or has any knowledge of, any
infringement of or conflict with asserted rights of others with
respect to any patents, patent rights, inventions, trademarks, trade
names, copyrights, licenses, governmental authorizations, trade secret
or know-how that, individually or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would have a material
adverse effect on the condition (financial or otherwise), earnings,
operations or business of the Company and its subsidiaries considered
as a whole.
(i) Securities Laws. Subject to the accuracy of the representations of
the Investor in Section 5, no consent, authorization, approval, permit
or order of or filing with any governmental or regulatory authority is
required under current laws and regulations in connection with the
execution and delivery of this Agreement or the offer, issuance, sale
or delivery to the Investor of the Shares or the Conversion Securities
other than (i) the filing with the Commission of a Form D pursuant to
Regulation D under the Securities Act, and the qualification thereof,
if required, under applicable state securities laws, which
qualification has been or will be effected as a condition of the sale
of the Shares and the issuance of the Conversion Securities, and (ii)
the filing of a registration statement or statements pursuant to
Section 7. Under the circumstances contemplated by this Agreement,
the offer, issuance, sale and delivery of the Shares will not, under
current laws and regulations, require compliance with the prospectus
delivery or registration requirements of the Securities Act.
5
(j) Litigation. Except for the informal investigation by the Commission
regarding recent trading in the Company's Common Stock there are no
actions, suits, proceedings or investigations pending or, to the best
of the Company's knowledge, threatened against the Company or any of
its properties before or by any court or arbitrator or any
governmental body, agency or official in which there is a reasonable
likelihood (in the judgment of the Company) of an adverse decision
that (a) would have a material adverse effect on the Company's
properties or assets or the business of the Company as presently
conducted or proposed to be conducted or (b) would impair the ability
of the Company to perform in any material respect its obligations
under this Agreement. The Company is not in default with respect to
any judgment, order or decree of any court or governmental agency or
instrumentality which, individually or in the aggregate, would have a
material adverse effect on the assets, properties or business of the
Company.
(k) Properties. The Company has good and marketable title to all the
properties and assets reflected as owned in the Financial Statements,
subject to no lien, mortgage, pledge, charge or encumbrance of any
kind except (i) those, if any, reflected in such Financial Statements,
or (ii) those which are not material in amount and do not adversely
affect the use made and promised to be made of such property by the
Company. The Company holds its leased properties under valid and
binding leases, with such exceptions as are not materially significant
in relation to the business of the Company. The Company owns or leases
all such properties as are necessary to its operations as now
conducted or as proposed to be conducted.
(l) Brokers or Finders. To the knowledge of the Company, no person, firm
or corporation has or will have, as a result of any act or omission of
the Company, any right, interest or valid claim against any Investor
for any commission, fee or other compensation as a finder or broker in
connection with the transactions contemplated by this Agreement. The
Company shall indemnify and hold the Investor harmless for any claims
made for any commission, fee or other compensation concerning the
transactions contemplated by this Agreement.
5. Representations and Warranties of the Investor. The Investor represents
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and warrants to the Company as follows:
(a) The Shares are being purchased for investment for such Investor's own
account and not with the view to, or for resale in connection with,
any distribution or public offering thereof. Each Investor
understands that neither the Shares nor the Conversion Securities have
been registered under the Securities Act or any state securities laws
by reason of their contemplated issuance in transactions exempt from
the registration requirements of the Securities Act and applicable
state securities laws and that the reliance of the Company and others
upon these exemptions is predicated in part upon this representation
by the Investor. The
6
Investor further understands that its shares of Series A Preferred and
the Conversion Securities may not be transferred or resold without
registration under the Securities Act and any applicable state
securities laws, or pursuant to an exemption from the requirements of
the Securities Act and applicable state securities laws.
(b) The Investor's principal place of business is located at the address
set forth on Schedule A. The Investor qualifies as an "accredited
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investor," as defined in Rule 501 of Regulation D under the Securities
Act. The Investor acknowledges that the Company has made available to
such Investor at a reasonable time prior to the execution of this
Agreement the opportunity to ask questions and receive answers
concerning the business, operations and financial condition of the
Company and the terms and conditions of the sale of securities
contemplated by this Agreement and to obtain any additional
information requested by such Investor. The Investor is able to bear
the loss of its entire investment in the Shares and the Conversion
Securities and has such knowledge and experience of financial and
business matters that he is capable of evaluating the merits and risks
of the investment to be made pursuant to this Agreement. However,
neither the foregoing nor any other due diligence investigation
conducted by such Investor or on its behalf shall limit, modify or
affect the representations and warranties of the Company set forth in
Section 4 of this Agreement or the right of such Investor to rely
thereon.
(c) This Agreement has been duly authorized by all necessary action on the
part of the Investor, has been duly executed and delivered by such
Investor and is a valid and binding agreement of such Investor.
6. Use of Proceeds. The Company will use the proceeds from the sale of the
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Shares for general corporate purposes, including obtaining regulatory clearance
for the Company's CapnoProbe sublingual CO2 monitor and disposable sensors.
7. Registration Rights.
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(a) Filing of Registration Statement. Within one hundred twenty (120)
days of the issuance of at least Two Million Five Hundred Thousand
shares of Series A Preferred, the Company will file a registration
statement with the Commission under the Securities Act covering the
Conversion Securities issuable upon conversion of all of the Shares.
The Company may, on not more than one occasion, delay the filing of
any registration statement required hereunder for a period of not more
than 90 days in the event that the Company has furnished the Investor
with a certificate executed by the Company's President or Chief
Executive Officer stating that such delay is necessary in order to (i)
not significantly adversely affect financing efforts then underway at
the Company or (ii) avoid disclosure of material non-public
information. Any registration of Conversion Securities hereunder
shall
7
cover any additional Conversion Securities issued or issuable pursuant
to anti-dilution or other similar rights.
(b) Registration Procedures. If and whenever the Company is required by
the provisions of Section 7(a) to effect the registration of any
Conversion Securities under the Securities Act, the Company will:
(i) prepare and file with the Commission a registration statement
(on any available form to effect registration) with respect to
such securities, and use its best efforts to cause such
registration statement to become and remain effective until
such securities are sold pursuant to such registration
statement or are eligible to be sold pursuant to Rule 144(k);
(ii) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus
contained therein as may be necessary to keep such registration
statement effective until such securities are sold pursuant to
such registration statement or are eligible to be sold pursuant
to Rule 144(k);
(iii) furnish to the Investor and to any underwriters of the
securities being registered such reasonable number of copies of
the registration statement, preliminary prospectus, final
prospectus and such other documents as the Investor and
underwriters may reasonably request in order to facilitate the
public offering of such securities;
(iv) use its best efforts to register or qualify the securities
covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as the
Investor may reasonably request, except that the Company shall
not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(v) prepare and promptly file with the Commission and promptly
notify the Investor of the filing of such amendment or
supplement to such registration statement or prospectus as may
be necessary to correct any statements or omissions if, at the
time when a prospectus relating to such securities is required
to be delivered under the Securities Act, any event shall have
occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and
(vi) use its best efforts to cause all securities covered by such
registration statement to be listed on any securities exchange,
quotation system, market
8
or over-the-counter bulletin board, if any, on which the Common
Stock shall then be listed and trading.
(c) Expenses. Except as set forth in the last sentence of this Section
7(c), with respect to any registration of securities pursuant to
Section 7(a), the Company shall bear all fees, costs and expenses,
including, without limitation: all registration, filing and NASD fees,
printing expenses, fees and disbursements of counsel and accountants
for the Company, all internal Company expenses, the premiums and other
costs of policies of insurance against liability arising out of the
public offering, and all legal fees and disbursements and other
expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be
registered or qualified. Fees and disbursements of counsel and
accountants for the Investor, underwriting discounts and commissions
and transfer taxes for the Investor and any other expenses incurred by
the Investor not expressly included above shall be borne by the
Investor.
(d) Indemnification. In the event that any Conversion Securities owned by
the Investor are included in a registration statement under Section
7(a):
(i) The Company will indemnify and hold harmless the Investor
(including for this purpose its directors, officers and
partners) and any underwriter (as defined in the Securities
Act) from and against any and all loss, damage, liability, cost
and expense (including, subject to Section 7(d)(iii),
reasonable fees and expenses of counsel) to which any such
Investor or any such underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus
contained therein or any amendment or supplement thereto, or
arise out of or are based upon the 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;
provided, however, that the Company will not be liable in any
such case to the extent that any such loss, damage, liability,
cost or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission so made in conformity with written information
furnished by such Investor or such underwriter.
(ii) The Investor will indemnify and hold harmless the Company and
any underwriter from and against any and all loss, damage,
liability, cost or expense (including, subject to Section
7(d)(iii), reasonable fees and expenses of counsel) to which
the Company or any underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue or
alleged
9
untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based
upon the omission or the 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, in each case to the
extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was so
made in reliance upon and in strict conformity with written
information furnished by such Investor. Notwithstanding the
provisions of this clause (ii), no Investor shall be required
to indemnify any person pursuant to this Section 7 in an amount
in excess of the amount of the aggregate net proceeds received
by such Investor in connection with any such registration under
the Securities Act.
(iii) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (i) or (ii) of this Section 7(d) of
notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions, such indemnified
party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said paragraph
(i) or (ii), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the
indemnifying party will not relieve the indemnifying party from
any liability which it may have to any indemnified party
otherwise than hereunder nor of its obligations or liabilities
pursuant to this Agreement, except to the extent that the
failure to so notify materially prejudices the indemnifying
party. In case such action is brought against any indemnified
party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the
right to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to
such indemnified party; provided, however, if the defendants in
any action include both the indemnified party and the
indemnifying party and there is a conflict of interest which
would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or
parties shall have the right to select one separate counsel to
participate in the defense of such action on behalf of such
indemnified party or parties, which counsel shall be reasonably
satisfactory to the indemnifying party. After notice from the
indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party pursuant to the provisions
of said paragraph (i) or (ii) for any legal or other expense
subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of
investigation, unless (x) the indemnified party shall have
employed counsel in accordance with the proviso of the
preceding sentence, (y) the indemnifying party shall not
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have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after
the notice of the commencement of the action, or (z) the
indemnifying party has authorized the employment of counsel for
the indemnified party at the expense of the indemnifying party.
No indemnifying party shall, without the prior written consent
of the 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 the
plaintiff to such indemnified party of a release from all
liability in respect of such action, and no indemnified party
shall consent to entry of any judgment or settle such action
without the prior written consent of the indemnifying party.
(e) SEC Reports. The Company will file with the Commission, on a timely
basis, all SEC Reports required to be filed under the Exchange Act and
any other documents required to meet the public information
requirements of Rule 144(c) under the Securities Act.
(f) Bonus. Upon a Change in Control, as defined below, the Company's
employees, in the aggregate, will be paid a bonus (the "Bonus") equal
to (A) One Hundred Percent (100%) of the proceeds to the Company or
its shareholders from the Change in Control transaction between
Fifteen Million Dollars ($15,000,000) and Sixteen Million Dollars
($16,000,000) plus (B) Ten Percent (10%) of the proceeds to the
Company or its shareholders from the Change in Control transaction
between Sixteen Million Dollars ($16,000,000) and Twenty Million
Dollars ($20,000,000). The allocation of the Bonus among the
individual employees of the Company shall be as set forth in Schedule
A, as amended from time to time by the President and Chief Executive
Officer of the Company as necessary to reflect changes in personnel.
For purposes of this Agreement, Change in Control shall mean the
occurrence of any of the following on or after the date hereof:
(i) the sale, lease, exchange or other transfer, directly or
indirectly, of all or substantially all of the assets of the
Company, in one transaction or in a series of related
transactions, to any Person;
(ii) the approval by the shareholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company;
(iii) any Person is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
(a) 20 percent or more, but not more than 50 percent, of the
combined voting power of the Company's outstanding securities
ordinarily having the right to vote at elections of directors,
unless the transaction resulting in such ownership has been
approved in advance by the "continuity directors," as defined
at Subsection (b), or (b) more than 50 percent of the combined
voting power
11
of the Company's outstanding securities ordinarily having the
right to vote at elections of directors (regardless of any
approval by the continuity directors);
(iv) a merger or consolidation to which the Company is a party if
the shareholders of the Company immediately prior to the
effective date of such merger or consolidation have, solely on
account of ownership of securities of the Company at such time,
"beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act) immediately following the effective date of such
merger or consolidation of securities of the surviving company
representing (a) 50 percent or more, but not more than 80
percent, of the combined voting power of the surviving
corporation's then outstanding securities ordinarily having the
right to vote at elections of directors, unless such merger or
consolidation has been approved in advance by the continuity
directors, or (b) less than 50 percent of the combined voting
power of the surviving corporation's then outstanding
securities ordinarily having the right to vote at elections of
directors (regardless of any approval by the continuity
directors);
(v) the continuity directors cease for any reason to constitute at
least a majority the Board; or
(vi) a change in control of a nature that is determined by outside
legal counsel to the Company, in a written opinion specifically
referencing this provision of the Plan, to be required to be
reported (assuming such event has not been "previously
reported") pursuant to section 13 or 15(d) of the Exchange Act,
whether or not the Company is then subject to such reporting
requirement, as of the effective date of such change in
control.
The sale, lease, exchange or other transfer, directly or indirectly, of the
assets comprising the Company's CapnoProbe Product Line, in one transaction
or in a series of related transactions, to any Person shall constituted a
Change in Control under Subsection (a)(i).
For purposes of this section: "continuity director" means any individual
who is a member of the Board on the date hereof, while he or she is a
member of the Board, and any individual who subsequently becomes a member
of the Board whose election or nomination for election by the Company's
shareholders was approved by a vote of at least a majority of the directors
who are continuity directors (either by a specific vote or by approval of
the proxy statement of the Company in which such individual is named as a
nominee for director without objection to such nomination). For example,
if a majority of the four individuals constituting the Board on the date
hereof, approved a proxy statement in which two different individuals were
nominated to replace two of the individuals who were members of the Board
on the date hereof, upon their election by the Company's shareholders, the
two newly elected directors would join the two remaining directors who
12
were members of the Board on date hereof as continuity directors.
Similarly if a majority of those four directors approved a proxy
statement in which two different individuals were nominated to replace
the two other directors who were members of the Board on date hereof,
upon their election by the Company's shareholders, the two newly elected
directors would also become, along with the two other directors,
continuity directors. Individuals subsequently joining the Board could
become continuity directors under the principles reflected in this
example.
8. Repricing of Options. As soon as practicable after each sale of any of the
--------------------
Shares to the Investor, the exercise price of all option agreements held by
current employees and current directors of the Company will be changed to the
figure equal to (i) the aggregate purchase price that was paid for all shares of
Series A Preferred issued to the Investor prior to the date of determination
(whether or not all such shares are then outstanding) divided by (ii) the
aggregate number of shares of Series A Preferred that were issued to the
Investor prior to the date of determination (whether or not all such shares are
then outstanding).
9. Miscellaneous.
-------------
(a) This Agreement and the rights and obligations of the parties
hereunder shall not be assignable, in whole or in part, by the
Company without the prior written consent of the Investor. This
Agreement and the rights and obligations of the parties hereunder
shall not be assignable, in whole or in part, by an Investor without
the prior written consent of the Company, except that any Investor
may assign its rights under this Agreement to any affiliate without
the prior written consent of the Company. This Agreement shall inure
to the benefit of and be binding upon and be enforceable by the
successors and permitted assigns of the parties hereto. Neither this
Agreement nor any provision hereof may be amended, modified, waived
or discharged without the written consent of the parties hereto.
(b) This Agreement, including the exhibits attached hereto, constitutes
the entire agreement of the parties relative to the subject matter
hereof and supersedes any and all other agreements and
understanding, whether written or oral, relative to the matters
discussed herein.
(c) All representations and warranties contained herein shall survive
after the execution and delivery of this Agreement for a period of
two (2) years from the date hereof. All covenants and agreements
which by their terms are to be performed after the date hereof will
survive indefinitely, unless such covenants and agreements by their
terms expire at an earlier date, in which case they will expire on
such earlier date.
(d) All notices, requests, consents and other communications required or
permitted hereunder shall be in writing and shall be given in
writing by personal delivery, facsimile, commercial air delivery
service or by registered or certified mail, postage prepaid, return
receipt requested, addressed to the Company at the address set forth
13
in the introductory paragraph to this Agreement and to the Investor at
the addresses set forth on Schedule A, or at such other address as the
----------
respective parties may designate by like notice from time to time.
Notices so given shall be effective upon the earlier of: (a) receipt
by the party to which notice is given (which, in the instance of a
facsimile, shall be deemed to have occurred at the time that the
machine transmitting the facsimile verifies a successful transmission
of the facsimile); (b) on the fifth business day following the date
such notice was deposited in the mail; or (c) on the second business
day following the date such notice was delivered to a commercial air
delivery service.
(e) This Agreement shall be construed and enforced in accordance with the
laws of the State of Minnesota.
(f) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument. This Agreement may be
executed by facsimile.
[NEXT PAGE IS SIGNATURE PAGE]
14
IN WITNESS WHEREOF, the Company and the Investor have executed this Agreement
effective as of the date first written above.
OPTICAL SENSORS INCORPORATED
By______________________________________
Xxxxxxx XxXxxxxx,
President and Chief Executive Officer
CIRCLE F VENTURES LLC
By______________________________________
Its_____________________________________
15
SCHEDULE A
Investor
Circle F Ventures LLC
00000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
16
SCHEDULE A
BONUS
DESIGNATION
EMPLOYEES
---------
Xxxxxxx XxXxxxxx 1
Xxx Xxxxxxxx 1
Xxx Xxxxxxx 1
Xxxxxx Xxxxxxx 1
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
Totals
Bonus Breakout:
Tier 1 = 60%
Tier 2 = 30%
Tier 3 = 10%
***Portions of this exhibit have been omitted pursuant to a request made by the
Company for confidential treatment by the Securities and Exchange Commission.
The omitted portions have been filed separately with the Commission.
17
