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Exhibit 10.2
THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS NOTE HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND
THE ISSUANCE OF SUCH SECURITIES OR THE
PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION
BY SECTION 25100, 25102 OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE
RIGHTS OF ALL PARTIES TO THIS NOTE ARE
EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
THIS NOTE AND THE SECURITIES ISSUABLE UPON
CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER
THE SECURITIES LAWS OF APPLICABLE STATES.
THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL
RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
CONVERTIBLE SECURED PROMISSORY NOTE
OF
DIAMETRICS MEDICAL, INC.
$375,000
Made as of December 6th, 2005
For value
received, Diametrics Medical, Inc., a Minnesota corporation
(the
"COMPANY"), with principal offices at 3050
Centre Pointe Drive, Suite 150,
Roseville, Minnesota, 55113, hereby
promises to pay to Asset Managers
International Limited ("HOLDER"), or its
registered assigns, the principal sum
of THREE-HUNDRED SEVENTY-FIVE THOUSAND
Dollars ($375,000) (the "PRINCIPAL
AMOUNT"), or such lesser amount as shall
then equal the outstanding principal
amount hereunder, together with interest
compounded quarterly on the unpaid
principal balance at a rate equal to ten
percent (10%) per annum, computed on
the basis of the actual number of days
elapsed and a year of 365 days from the
date of this Note until the principal
amount and all interest accrued thereon
are paid (or converted, as provided in
Section 3 hereof).
An amount
equal to the then unpaid Principal Amount together with any
then
unpaid accrued interest on the Principal
Amount (the "MATURITY PAYMENT") shall
be due and payable on the earliest of (i)
November 30, 2008 (the "MATURITY
DATE") or (ii) when such amounts are made
automatically due and payable upon or
after the occurrence of an Event of Default
(as defined below), at the principal
offices of the Company or by mail to the
address of the registered holder of
this Note in lawful money of the United
States, unless this Note shall have been
previously converted pursuant to Section 3
hereof. The Maturity Payment shall be
paid prior to any
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distributions by the Company to holders of
Company equity securities in respect
of such securities.
The
following is a statement of the rights of Holder and the conditions
to
which this Note is subject, and to which
Holder hereof, by the acceptance of
this Note, agrees:
1.
DEFINITIONS. The following definitions shall apply for all purposes
of
this Note:
1.1 "ADVISOR" means Ocean Park Advisors, LLC.
1.2 "COMPANY" means the "COMPANY" as defined above and includes
any
corporation which shall succeed to or
assume the obligations of the Company
under this Note.
1.3
"CONVERSION PRICE", for purposes of the conversion of accrued
interest only, means the higher of 1) $0.01
per share, or 2) the average of the
share prices recorded at the close of the
ten (10) trading days prior to the
date of conversion, subject to adjustment
as provided herein.
1.4 "CONVERSION STOCK" means the Common Stock, par value $0.01
per
share, of the Company. The number and
character of shares of Conversion Stock
are subject to adjustment as provided
herein and the term "CONVERSION STOCK"
shall include stock and other securities
and property at any time receivable or
issuable upon conversion of this Note in
accordance with its terms.
1.5 "ESCROW
AGREEMENT" means the letter agreement dated as of
November 9, 2005, between Monarch Pointe
Fund, Ltd., Asset Managers
International Limited and the Advisor.
1.6 "HOLDER" means any person who shall at the time be the
registered holder of this Note.
1.7 "NOTE" means this Convertible Secured Promissory Note.
1.8 "JUNIOR INDEBTEDNESS" shall mean the principal of and
unpaid
interest on any and all indebtedness of
Company, whether outstanding on the date
hereof or hereafter created, and any
referrals, renewals or extensions of any
such indebtedness or any debentures, notes
or other evidence of indebtedness
issued in exchange for such Junior
Indebtedness, except for any indebtedness
that is senior to or pari passu with the
indebtedness evidenced by this Note
pursuant to applicable law.
1.9
"MAG NOTE" shall mean the Convertible Secured Promissory Note
issued by the Company to Monarch Pointe
Fund, Ltd. of even date herewith.
2.
ADVANCES. Upon the satisfaction of the conditions set forth in
paragraph A of the Escrow Agreement, the
Company may make an initial draw
hereunder of up to $225,000 (the "Initial
Draw"), as determined by the Company
in its sole discretion. Upon the
satisfaction of the conditions set forth in
paragraph B of the Escrow Agreement, the
Company may make a
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second draw hereunder of up to $150,000
(the "Second Draw"), when, if and in the
amount determined by the Company, in its
sole discretion. Unless and until the
Second Draw is made, the principal amount
of this note for all purposes,
including sections 3 and 4 hereof, shall be
equal to the amount of the Initial
Draw, plus accrued and capitalized
interest, if any. If and when the Second Draw
is advanced to the Company, then the amount
of such Second Draw shall be added
to the principal amount of this Note for
all purposes hereunder, and interest
shall accrue on the amount of the Second
Draw from the date it is advanced.
Notwithstanding the foregoing, the Company
shall not make any draw hereunder
unless it simultaneously makes an equal
draw under the MAG Note.
3.
INTEREST. On or before the fifteenth (15th) day of each
calendar
quarter, the Company shall pay to the
Holder an amount equal to the interest
accrued for the previous calendar quarter;
provided, however, that the Company
may elect, in its sole discretion, not to
pay interest due in any quarter, in
which case the amount of such interest
accrued interest shall be added to the
principal amount of this Note for all
purposes hereunder. The Company may make
such an election by delivery of written
notice to the Holder at least five (5)
business days prior to any interest payment
due date. Such an election (or lack
thereof) in any quarter shall not affect
the Company's ability to make a similar
or different election in any succeeding
quarter. Notwithstanding the foregoing,
the Company shall not make any such
election unless it makes the same election
under the MAG Note.
4.
CONVERSION.
4.1 ELECTION. The Holder may elect to convert all or part of
the
outstanding principal amount of this Note,
into up to 80,670,000 shares of
Conversion Stock. The amount of Conversion
Stock issuable upon conversion hereof
shall equal 80,670,000 multiplied by a
fraction, the numerator of which is the
actual principal amount being converted and
the denominator of which is 375,000.
Any accrued but unpaid interest may be
converted into shares of Conversion Stock
at the Conversion Price then in effect. The
Holder may make such an election by
delivery of a notice to the Company in
accordance with Section 18 (a "Conversion
Notice"), together with this Note.
4.2 ISSUANCE OF CONVERSION STOCK. As soon as practicable after
conversion of this Note, the Company at its
expense will cause to be issued in
the name of and delivered to the Holder, a
certificate or certificates for the
number of shares of Conversion Stock to
which the Holder shall be entitled upon
such conversion (bearing such legends as
may be required by applicable state and
federal securities laws in the opinion of
legal counsel of the Company, by the
Company's Certificate of Incorporation or
Bylaws, or by any agreement between
the Company and the Holder), together with
any other securities and property to
which the Holder is entitled upon such
conversion under the terms of this Note.
Such conversion shall be deemed to have
been made on the date of delivery of the
Conversion Notice, together with this Note.
No fractional shares will be issued
upon conversion of this Note. If upon any
conversion of this Note, a fraction of
a share would otherwise result, then in
lieu of such fractional share the
Company will pay the cash value of that
fractional share, calculated on the
basis of the then current market price of
the Company's common stock, as
determined in good faith by the Board of
Directors of the Company.
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4.3 Certain Conversion Restrictions. The Holder may not convert
the
Note, if and to the extent such issuance of
Conversion Stock would result in the
Holder, together with any affiliate
thereof, beneficially owning (as determined
in accordance with Section 13(d) of the
Exchange Act and the rules promulgated
thereunder) in excess of 9.9910% of the
then-issued and outstanding shares of
Common Stock, including shares issuable
upon conversion of the Note held by such
Holder after application of this Section
4.3. Unless the conversion at issue
would result in the issuance of shares of
Common Stock in excess of 9.9910% of
the then-outstanding shares of Common Stock
without regard to any other shares
of Common Stock that may be beneficially
owned by the Holder or an affiliate
thereof, the Holder shall have the
authority and obligation to determine whether
the restriction contained in this Section
4.3 will limit any particular
conversion hereunder, and to the extent
that the Holder determines that the
limitation contained in this Section 4.3
applies, the determination of which
portion of the principal amount of the Note
is convertible shall be the
responsibility and obligation of the
Holder. If the Holder has delivered a
Conversion Notice for a principal amount of
the Note that, without regard to any
other shares that the Holder or its
affiliates may beneficially own, would
result in an issuance in excess of the
amount permitted hereunder, the Company
shall notify the Holder of this fact and
shall honor the conversion for the
maximum principal amount permitted to be
converted on such date and, at the
option of the Holder, either retain any
principal amount tendered for conversion
in excess of the amount permitted hereunder
for future conversions or return
such excess principal amount to the Holder.
The provisions of this Section may
be waived by a Holder (but only as to
itself and not to any other Holder) upon
not less than 65 days prior notice to the
Company. Other Holders shall be
unaffected by any such waiver.
5.
ADJUSTMENT PROVISIONS. The number and character of shares of
Conversion
Stock issuable upon conversion of this Note
(or any shares of stock or other
securities or property at the time
receivable or issuable upon conversion of
this Note) and the Conversion Price
therefor, are subject to adjustment upon
occurrence of the following events between
the date this Note is issued and the
date it is converted:
5.1 ADJUSTMENT FOR STOCK SPLITS, STOCK DIVIDENDS,
RECAPITALIZATIONS,
ETC. The Conversion Price of this Note and
the number of shares of Conversion
Stock issuable upon conversion of this Note
(or any shares of stock or other
securities at the time issuable upon
conversion of this Note) shall each be
proportionally adjusted to reflect any
stock dividend, stock split, reverse
stock split, reclassification,
recapitalization or other similar event affecting
the number of outstanding shares of
Conversion Stock (or such other stock or
securities) unless the conversion ratio of
such Conversion Stock already
reflects such event.
5.2 ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In case
the
Company shall make or issue, or shall fix a
record date for the determination of
eligible holders entitled to receive, a
dividend or other distribution payable
with respect to the capital stock that is
payable in (a) securities of the
Company (other than issuances with respect
to which adjustment is made under
Section 5.1), or (b) assets (other than
cash dividends paid or payable solely
out of retained earnings), then, and in
each such case, the Holder, upon
conversion of this Note at any time after
the consummation, effective date or
record date of such event, shall receive,
in addition to the shares of
Conversion Stock issuable upon such
exercise prior to such date, the securities
or such other assets of the Company to
which the Holder would have been
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entitled upon such date if the Holder had
converted this Note immediately prior
thereto (all subject to further adjustment
as provided in this Note).
5.3 CONVERSION OR EXCHANGE OF STOCK. In case all the authorized
Conversion Stock of the Company is
converted, pursuant to the Company's
Certificate of Incorporation, into other
securities or property, or the
Conversion Stock otherwise ceases to exist,
then, in such case, the Holder, upon
conversion of this Note at any time after
the date on which the Conversion Stock
is so converted or ceases to exist (the
"TERMINATION DATE"), shall receive, in
lieu of the number of shares of Conversion
Stock that would have been issuable
upon such exercise immediately prior to the
Termination Date (the "FORMER NUMBER
OF SHARES OF CONVERSION STOCK"), the stock
and other securities and property
which the Holder would have been entitled
to receive upon the Termination Date
if the Holder had converted this Note with
respect to the Former Number of
Shares of Conversion Stock immediately
prior to the Termination Date (all
subject to further adjustment as provided
in this Note).
5.4 NOTICE OF ADJUSTMENTS. The Company shall promptly give
written
notice of each adjustment or readjustment
of the Conversion Price or the number
of shares of Conversion Stock or other
securities issuable upon conversion of
this Note. The notice shall describe the
adjustment or readjustment and show in
reasonable detail the facts on which the
adjustment or readjustment is based.
5.5 NO CHANGE NECESSARY. The form of this Note need not be
changed
because of any adjustment in the Conversion
Price or in the number of shares of
Conversion Stock issuable upon its
conversion.
5.6 RESERVATION OF STOCK. If at any time the authorized number
of
shares of Conversion Stock or other
securities issuable upon conversion of this
Note shall not be sufficient to effect the
conversion of this Note, the Company
will use its best efforts to take such
corporate action as may, i
