EXHIBIT 10.17
OPTICAL SENSORS INCORPORATED
CONVERTIBLE PROMISSORY NOTE
$______________ March ___, 2000
Minneapolis, Minnesota
Optical Sensors Incorporated, a Delaware corporation (the "Company"), for
value received, hereby promises to pay to ________________________________, or
any person to whom this Note is subsequently transferred and who becomes a
registered holder of this Note (the "Holder"), at the Holder's office or to any
account designated by the Holder to the Company in writing, the principal sum of
________________________ U.S. Dollars ($____________), or such lesser amount as
may be advanced hereunder from time to time, on the first anniversary date of
this Note (the "Maturity Date"). This Note shall not bear interest; provided,
however, if this Note is not paid in full or converted into Units pursuant to
Section 2 on or before the Maturity Date, any remaining unpaid principal balance
shall bear interest at the rate of ten percent (10%) per year from the Maturity
Date until paid in full.
This Note is one of an authorized issue of Convertible Promissory Notes, of
like tenor and maturity, issued pursuant to the Investment Agreement, dated as
of March ____, 2000, by and among the Company, the Holder and the other
investors named therein (the "Investment Agreement"). This Note is subject to
the terms and condition of the Investment Agreement, which is hereby
incorporated by reference. The Holder shall have registration rights under the
terms of this Note with respect to the shares of common stock issuable upon
conversion of this Note, as provided in the Investment Agreement.
The Company hereby irrevocably authorizes the Holder to enter on the
reverse hereof or on an attachment hereto the date and amount of each advance
made by the Holder to the Company under and in accordance with the Investment
Agreement and the amount of any prepayment of principal of such loan received by
the Holder or the amount of principal of such loan that has been converted
pursuant to Section 2 hereof. The absence or incorrectness of such an entry
shall not affect the rights of the Holder or the Company's obligations to the
Holder in respect of this Note.
The Company waives demand, presentment, protest, notice of dishonor and any
other form of notice, not expressly required by the Investment Agreement, that
may be required to hold the Company liable hereunder.
This Note is subject to the following terms and conditions:
1. Payment. This Note may be prepaid in whole or in part at any time or from
time to time, on ten (10) days' prior written notice to the Holder, without
premium or penalty. All partial payments of the Notes shall be made among the
holders of all Notes issued under the Investment Agreement on a pro rata basis.
For purposes of this Note, "pro rata" shall mean with respect to the Holder the
portion that the maximum principal balance of this Note bears to the aggregate
maximum principal balance of all of the Notes issued under the Investment
Agreement.
2. Conversion.
2.1 Terms of Conversion. This Note is convertible into units ("Units"),
each unit
consisting of 50,000 shares of the Company's common stock, $.01 par value (the
"Common Stock"), and a warrant to purchase 12,500 shares of Common Stock, at a
conversion price equal to Fifty Thousand Dollars ($50,000) per Unit, to the
extent permitted or required by and in accordance with Section 3 of the
Investment Agreement. The conversion price is subject to adjustment pursuant to
Section 2.4 below. In the case of optional conversion pursuant to Section 3(b)
of the Investment Agreement, this Note must be surrendered and accompanied by a
written conversion notice (hereinafter referred to as the "Conversion Notice")
delivered to the Company at its principal office during usual business hours.
2.2 Conversion Securities. The securities issuable upon conversion of this
Note pursuant to this Article 2 are referred to herein as the "Conversion
Securities."
2.3 Issuance of Common Stock. The conversion of this Note will be deemed to
have been made at the close of business on (a) for a conversion pursuant to
Section 3(b) of the Investment Agreement, the date on which this Note has been
surrendered for conversion with the Conversion Notice duly executed, or (b) for
a conversion pursuant to Section 3(c) of the Investment Agreement, the date
specified for automatic conversion in Section 3(c) of the Investment Agreement
(the "Conversion Date"). As of the Conversion Date, the rights of the Holder as
a noteholder with respect to that portion of this Note which is so converted
will cease and the Holder will be treated for all purposes as having become the
record holder or holders of the Conversion Securities as of such Conversion
Date. No fractional shares of Conversion Securities will be issued upon the
conversion of this Note, but, instead of any fraction of a share which would
otherwise be issuable, the Company will deliver an amount of cash equal to such
fraction multiplied by the then applicable conversion price.
2.4 Adjustment of Conversion Price for Optional Conversion. The conversion
price shall be subject to adjustment from time to time as follows:
(a) In case the Company shall subdivide its outstanding shares of
Common Stock into a greater number of shares at any time, the then
applicable conversion price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding
shares of Common Stock of the Company shall be combined into a smaller
number of shares, the then applicable conversion price in effect
immediately prior to such combination shall be proportionately increased.
(b) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets
to another corporation shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the Holder shall thereafter have
the right to receive upon the basis and upon the terms and conditions
specified herein and in lieu of the Conversion Securities immediately
theretofore receivable upon the conversion of this Note, such shares of
stock, securities or assets as may be issued or payable with respect to or
in exchange for a number of outstanding shares of such Common Stock equal
to the number theretofore receivable upon the conversion of this Note had
such reorganization, reclassification, consolidation, merger or sale not
taken place, and in any such case appropriate provision shall be made with
respect to the rights and interests of the Holder
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to the end that the provisions hereof (including, without limitation,
provisions for adjustments of the then applicable conversion price and of
the number of securities receivable upon the conversion of this Note) shall
thereafter be applicable, as nearly as may be practicable, in relation to
any shares of stock, securities or assets thereafter receivable upon the
conversion of this Note.
(c) In any case in which this Section 2.4 shall require that an
adjustment shall become effective immediately after a record date for an
event, and if the Holder should convert after such record date and before
the occurrence of such event, then the Company may defer until the
occurrence of such event (i) issuing the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required by such
event over and above the shares issuable upon such conversion before giving
effect to such adjustment and (ii) paying to the Holder any amount of cash
in lieu of a fractional share pursuant to Section 2.3 above.
(d) All calculations under this Article 2 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
(e) Upon any adjustment of the conversion price, then and in each such
case, the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the Holder, at the address of the Holder as
shown on the books of the Company, which notice shall state the conversion
price resulting from such adjustment and the increase or decrease, if any,
in the number of Conversion Securities issuable upon conversion of this
Note at such price, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(f) The Company shall give the Holder 20 days' written notice prior to
the effective date of any of the events described in Sections 2.4(a) or
2.4(b) above.
2.5 Adjustment of Number of Shares. Upon each adjustment of the conversion
price pursuant to Section 2.4, the number of Conversion Securities shall be
adjusted by dividing the then unpaid principal amount hereof by the applicable
per share conversion price in effect immediately following such adjustment.
2.6 Covenants of Company. The Company covenants that all of the Conversion
Securities will, upon issuance, be duly authorized and issued, fully paid,
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof. The Company further covenants that during the period within which
this Note may be converted, the Company will at all times have authorized, and
reserved free of preemptive or other rights for the purpose of issue, such
number of shares of Conversion Securities as shall then be issuable upon
conversion of this Note as herein provided.
3. Consolidation, Merger, Sale or Conveyance
3.1 Generally. Nothing contained in this Note will prevent any
consolidation or merger of the Company with or into any other corporation or
corporations or successive consolidations or mergers in which the Company or its
successor or successors is a party or parties, or will prevent any sale or
conveyance of the property of the Company as an entirety or substantially as an
entirety to any other corporation authorized to acquire and operate the same.
However, the Company hereby covenants and agrees that any such consolidation,
merger, sale or
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conveyance will be upon the condition that (a) immediately after such
consolidation, merger, sale or conveyance the corporation (whether the Company
or such other corporation) formed by or surviving any such consolidation or
merger, or to which such sale or conveyance will have been made, will not be in
default in the performance or observance of any of the terms, covenants and
conditions of this Note to be kept or performed by the Company; and (b) the
corporation (whether the Company or such other corporation) formed by or
surviving any such consolidation or merger, or to which such sale or conveyance
will have been made, will expressly assume the due and punctual payment of the
principal of this Note, according to the terms of this Note, and the faithful
performance and observance of all of the covenants, conditions, and requirements
of this Note to be performed by the Company by a supplemental instrument
executed and delivered to the Holder by such corporation.
3.2 Release; Liability of Successor Corporation. In case of any such
consolidation, merger, sale or conveyance, and upon the assumption by any
successor corporation pursuant to Section 3.1 above, such successor corporation
will succeed to and be substituted for the Company, with the same effect as if
it had been named in this Note in the Company's place, and the Company
(including any intervening successor to the Company which has become obligated
under this Note) will be relieved of any further obligation under this Note. All
of the covenants, stipulations, promises, and agreements contained in this Note
by or on behalf of the Company will bind its successors and assigns, whether so
expressed or not.
4. Default
4.1 Events of Default. An "Event of Default" will be deemed to occur upon
the happening of any of the following: (a) the failure to pay when due any
amount of principal or interest payable hereunder, (b) the filing against the
Company which is not dismissed within 60 days thereafter, or by the Company, of
a petition in bankruptcy or for an arrangement or reorganization, (c) the making
by the Company of a general assignment for the benefit of creditors, (d) the
appointment of a receiver or trustee for the Company, (e) the institution of
liquidation or dissolution or reorganization proceedings with respect to the
Company, (f) the Company becoming unable or admitting in writing an inability to
pay its debts generally as they become due, or (g) the occurrence of any breach
by the Company of any representation, warranty or covenant of the Company under
the Investment Agreement (including, without limitation, a breach by the Company
of any of its obligations under Section 7 of the Investment Agreement), which is
not cured within thirty (30) days of written notice from the Holder.
4.2 Rights on Default. If an Event of Default occurs and is continuing, the
Holder may declare the principal of this Note, together with any accrued and
unpaid interest, if not already due, to be due and payable immediately, by
written notice to the Company; provided, however, that all amounts due under
this Note shall be automatically due and payable, without any action of the
Holder, upon an Event of Default pursuant to Sections 4.1(b) - 4.1(f) above.
Upon any such declaration, such principal and interest will become due and
payable immediately, anything contained in this Note to the contrary
notwithstanding.
4.3 Enforcement. If the principal of this Note, together with all accrued
and unpaid interest on this Note, becomes due and payable immediately, whether
by declaration of the Holder or automatically, the Holder may proceed to protect
and enforce its rights by an action at law, suit in equity, or other appropriate
proceeding. The Company shall pay all costs and expenses of collection,
including, without limitation, attorneys' fees and disbursements in the
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event that any action, suit or proceeding shall be brought by the Holder hereof
to collect this Note.
5. Miscellaneous.
5.1 Headings. The headings in this Note are inserted for convenience only
and will not affect the meaning or interpretation of all or any part of this
Note.
5.2 Governing Law. This Note will be deemed to be a contract made under the
laws of the State of New York, and for all purposes will be construed in
accordance with the laws of the State of New York.
5.3 Construction. Wherever possible, each provision of this Note will be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Note is prohibited by or invalid under applicable
law, such provision will be ineffective only to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or the
remaining provisions of this Note.
5.4 Amendments. This Note may not be and will not be deemed or construed to
have been modified, amended, rescinded, canceled or waived, in whole or in part,
except by a written instrument signed by the Company and the Holder.
5.5 Payment Date. In case the Maturity Date or the date fixed for
prepayment of this Note is not a business day, then payment of principal and
interest to the Holder need not be made on such date, but may be made on the
next succeeding business day with the same force and effect as if made on the
Maturity Date or the date fixed for prepayment and no interest will accrue for
the period after such date.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as
of the date set forth above.
OPTICAL SENSORS INCORPORATED
By
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Xxxxxxx XxXxxxxx
President and Chief Executive Officer
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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OFFERED,
PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH LAWS COVERING THIS NOTE OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT, OFFER, PLEDGE OR OTHER DISTRIBUTION FOR VALUE
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT
AND SUCH LAWS.
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