Exhibit 10.2
***Portions of this Exhibit have been omitted pending a confidential treatment
request by the Company.
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT ("Agreement") is made and entered into
effective as of August 11, 2000, by and among Optical Sensors Incorporated, a
Delaware corporation (the "Company"), with its principal place of business at
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the
investor listed on Schedule A hereto (the "Investor").
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
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
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
Designation"). The Series A Preferred will be convertible into shares of the
Company's common stock, $.01 par value, as set forth in the Certificate of
Designation.
2. Purchase of Securities.
----------------------
(a) Subject to the terms and conditions hereof, the Company agrees to
sell to the Investor, and the Investor agrees to purchase from the
Company in accordance with this Agreement, up to Four Million
Thirty Three Thousand Three Hundred Thirty Four (4,333,334) shares
of the Company's Series A Preferred (the "Shares") in the amounts
set forth on Schedule A. The purchase price for the first One
Million (1,000,000) shares of Series A Preferred purchased by the
Investor (in the aggregate) will be Fifty Cents ($.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.
1
(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 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 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 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") 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 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 Investment Agreement by and among the Company and the other
investors named therein dated March 10, 2000 (the "Investment
Agreement"), as 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
2
Issue Price"). Subject to the foregoing amendment, the foregoing
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 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 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 the Securities Act of 1933, as amended (the "Securities Act"),
and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). All 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 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
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 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 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
Shares for general corporate purposes, including obtaining regulatory clearance
for the Company's CapnoProbe sublingual CO2 monitor and disposable sensors.
7. Registration Rights.
-------------------
(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
10
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
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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
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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]
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IN WITNESS WHEREOF, the Company and the Investor have executed this Agreement
effective as of the date first written above.
OPTICAL SENSORS INCORPORATED
By____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
President and Chief Executive Officer
CIRCLE F VENTURES LLC
By____________________________________
Its___________________________________
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SCHEDULE A
Investor
Circle F Ventures LLC
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
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SCHEDULE A
BONUS
DESIGNATION
EMPLOYEES
---------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1
▇▇▇ ▇▇▇▇▇▇▇▇ 1
▇▇▇ ▇▇▇▇▇▇▇ 1
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 1
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
Totals
Bonus Breakout:
Tier 1 = 60%
Tier 2 = 30%
Tier 3 = 10%
***Portions of this Exhibit have been omitted pending a confidentiality
treatment request by the Company.
17