Exhibit 10.5
BRIDGE LOAN AGREEMENT
THIS BRIDGE LOAN AGREEMENT ("Agreement") is made and entered into effective
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as of May 3, 2001, by and among Optical Sensors Incorporated, a Delaware
corporation (the "Company"), with its principal place of business at 7615 Golden
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Xxxxxxxx Xxxxx, Xxxxx X, Xxxx Xxxxxxx, Xxxxxxxxx 00000, and Circle F Ventures
LLC (the "Investor").
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A. The Company currently needs up to $114,000 to fund its operation until
such time as it is able raise additional equity capital.
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. Purchase of Convertible Promissory Note. Upon the terms and subject to the
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conditions set forth in this Agreement, the Company agrees to issue to the
Investor, and the Investor agrees to purchase from the Company, a
convertible promissory note in the form attached hereto as Exhibit A in the
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principal amount of up to One Hundred Fourteen Thousand Dollars ($114,000)
(the "Note"). The Note shall not bear interest and shall be due and payable
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in full one (1) year from the date of issuance (the "Maturity Date") unless
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converted into shares of Common Stock of the Company prior to the Maturity
Date. After May 30, 2001, the Company shall have the right to prepay the
Note, in whole or in part, at any time or from time to time, on ten (10)
days' prior written notice to the Investors, without premium or penalty
pursuant to Section 1 of the Note.
2. Conversion. The Investor shall have the right to convert all or any portion
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of principal balance and accrued interest under the Note, at the option of
the Investor, into shares of Common Stock of the Company at any time, and
from time to time. If the Company completes a private placement of equity
securities (the "Financing") by May 30, 2001, the conversion price of the
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Note shall be equal to the per share price of the securities sold in the
Financing. If the Company does not complete the Financing by May 30, 2001,
the conversion price of the Note shall be $.25 per share. The shares of
Common Stock issuable upon conversion of the Note are referred to as the
"Conversion Securities." Notwithstanding any other provision of this
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Agreement or the Note to the contrary, the maximum number of shares of
Common Stock into which the Note may be converted is the maximum number of
shares that, when added to all of the other shares of Common Stock for
which the Investor is the "beneficial owner (as defined in Rule 13d-3 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
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would result in the Investor becoming the "beneficial owner" of 49.8% of
the Company's common stock.
3. Representations and Warranties of the Company. The Company represents and
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warrants to the Investor as follows:
(a) Organization. The Company is a corporation duly organized, validly existing
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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
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and deliver this Agreement and the Note and to perform its obligations
hereunder and thereunder, including the issuance of the Note and the
Conversion Securities. This Agreement and the Note 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 Conversion Securities has been taken. The Conversion Securities when
issued pursuant to conversion of the Note 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 or the
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Note by the Company, nor the performance by the Company of its obligations
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.
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(d) SEC Reports. The Company has filed all reports, registration statements and
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other filings with the Securities and Exchange Commission (the
"Commission") required to be filed by it pursuant to the Securities Act of
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1933, as amended (the "Securities Act") and the Exchange Act. All such
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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
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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
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the SEC Reports (the "Financial Statements") have been prepared in
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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 December 31, 2000.
(f) No Material Adverse Change. There have not been any changes in the assets,
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properties, liabilities, financial condition, business or operations of the
Company from that reflected in the Financial Statements except for (i)
changes in the ordinary 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
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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 1,824,084 shares of Common
Stock, convertible promissory notes in the aggregate principal amount of
One Million Seven Hundred Thirty Five Thousand Dollars ($1,735,000),
warrants to purchase an aggregate of 1,050,000 shares of Common Stock that
are issuable upon conversion of a portion of the foregoing convertible
promissory notes. Except as set forth in the preceding sentence, 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 Note 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
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securities. Except for Instrumentation Laboratory Company ("IL"), no holder
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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
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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; the Company has not received any notice of, and has no 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
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Investor in Section 4, 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 Note or the Conversion Securities other than 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. Under the circumstances contemplated by this
Agreement, the offer, issuance, sale and delivery of the Note will not,
under current laws and regulations, require compliance with the prospectus
delivery or registration requirements of the Securities Act.
(j) Litigation. There are no actions, suits, proceedings or investigations
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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
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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
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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
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or corporation has or will have, as a result of any act or omission of
the Company, any right, interest or valid claim against the 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.
4. Representations and Warranties of the Investor. The Investor represents and
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warrants to the Company as follows:
(a) The Note is being purchased for investment for the Investor's own
account and not with the view to, or for resale in connection with,
any distribution or public offering thereof. The Investor understands
that neither the Note 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 Investor further understands that the Note 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 the signature page hereto. 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 the 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 3 of this Agreement or the right of such Investor to rely
thereon.
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(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.
5. Registration Rights. The Company shall register the Conversion Securities
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with Securities and Exchange Commission on any registration statement filed
by the Company pursuant to Section 7 of the Securities Purchase Agreement,
dated as of August 11, 2000, between the Company and the Investor.
6. Miscellaneous.
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(a) 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.
(b) 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 the Investor without the prior
written consent of the Company, except that the 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.
(c) 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.
(d) 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.
(e) 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 in the
introductory paragraph to this Agreement and to the Investor at the
addresses set forth on the signature page hereto, 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
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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.
(f) This Agreement shall be construed and enforced in accordance with the
laws of the State of Minnesota.
(g) 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 _______________________________________
Xxxxxxx XxXxxxxx,
President and Chief Executive Officer
CIRCLE F VENTURES LLC
By________________________________________
Its_______________________________________
Address:
00000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
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