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EXHIBIT 4.1
CERTIFICATE OF DESIGNATION
OF
RIGHTS AND PREFERENCES
OF
SERIES A PREFERRED STOCK
OF
OPTICAL SENSORS INCORPORATED
The undersigned Chief Financial Officer of Optical Sensors
Incorporated, a corporation organized and existing under the General Corporation
Law of the State of Delaware (the "Corporation"), in accordance with the
provisions of Section 151 thereof, does hereby certify that, pursuant to the
authority conferred upon the Board of Directors of the Corporation (the "Board")
by the Certificate of Incorporation of the Corporation, the Board on August 10,
2000, adopted the following resolution creating a series of Four Million Five
Hundred Thousand (4,500,000) shares of the Corporation's undesignated preferred
stock, par value $.01 per share, to be designated as Series A Preferred Stock:
RESOLVED, that pursuant to the authority granted to and vested in this
Board of Directors in accordance with the Certificate of Incorporation of the
Corporation, a new series of preferred stock is hereby created, and that the
designation and amount thereof and the relative rights and preferences of the
shares of such series, are as follows:
1. Shares and Classes Authorized. Four Million Five Hundred Thousand
(4,500,000) shares of the Corporation's undesignated preferred stock,
par value $.01 per share, that are authorized by Article IV of the
Corporation's Certificate of Incorporation are designated as Series A
Preferred Stock (the "Series A Preferred").
2. Definitions. For purposes of this Certificate of Designation (this
"Certificate") the following definitions shall apply and shall be
equally applicable to both the singular and plural forms of the defined
terms:
2.1 "Affiliate" shall mean any Person which directly or indirectly
controls, is controlled by, or is under common control with,
the indicated Person.
2.2 "Average Original Issue Price" shall mean (i) the aggregate
purchase price that was paid for all shares of Series A
Preferred issued to the Investors 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 Investors prior to
the date of determination (whether or not all such shares are
then outstanding).
2.3 "Board" shall mean the Board of Directors of the Corporation.
2.4 "Common Stock" shall mean common stock of the Corporation, par
value $.01 per share.
2.5 "Conversion Date" shall have the meaning set forth in Section
6.1 below.
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2.6 "Conversion Price", shall have the meaning set forth in
Section 6.1 below
2.7 "Conversion Rights" shall have the meaning set forth in
Section 6 below.
2.8 "Investors" shall have the meaning set forth in the Securities
Purchase Agreement by and between the Company and Circle F
Ventures LLC and Special Situations Fund III, L.P. dated
August 10, 2000.
3. Voting Rights. At all meetings of the stockholders of the Corporation
and in the case of any actions of stockholders in lieu of a meeting,
each holder of Series A Preferred shall have that number of votes on
all matters submitted to the stockholders that is equal to the number
of whole shares of Common Stock into which such holder's shares of
Series A Preferred are then convertible, as provided in Section 6
below, as of the record date for the determination of the stockholders
entitled to vote on such matters or, if no such record date is
established, on the date such vote is taken or any written consent of
such stockholders is effected. Except as may be otherwise provided by
agreement or by law, the holders of the Common Stock and the holders of
the Series A Preferred shall vote together as a single class on all
actions to be taken by the stockholders of the Corporation.
4. Dividends. The holders of Series A Preferred shall not be entitled to
receive dividends in any fixed amount; provided, however, that in the
event that the Corporation shall at any time declare and pay a dividend
or distribution of assets on shares of the Common Stock, it shall, at
the same time, declare and pay to each holder of Series A Preferred a
dividend equal to the dividend that would have been payable to such
holder as if the shares of Series A Preferred held by such holder had
been converted, pursuant to Section 6 below, into Common Stock on the
date of determination of holders of Common Stock entitled to receive
such dividend.
5. Liquidation Rights.
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5.1 Preference of Series A Preferred. In the event of any
liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the Series A
Preferred then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to
its stockholders, whether such assets are capital, surplus, or
earnings, before any payment or declaration and setting apart
for payment of any amount shall be made in respect of the
Common Stock or any other class of shares of the Corporation
ranking junior in liquidation or dissolution the Series A
Preferred, an amount for each share of Series A Preferred held
that is equal to the Average Original Issue Price.
5.2 Reorganization; Sale of Assets. The merger, acquisition or
consolidation of the Corporation into or with any other entity
or entities which results in the exchange of outstanding
shares of the Corporation for securities or other
consideration issued or paid or caused to be issued or paid by
any such entity or Affiliate thereof pursuant to which the
shareholders of the Corporation immediately prior to the
transaction do not own a majority of the outstanding shares of
the surviving
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corporation immediately after the transaction, or any sale,
lease, license (on an exclusive basis) or transfer by the
Corporation of all or substantially all its assets, shall be
deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of the provisions of this
Section 5 unless this provision is waived by the affirmative
vote of at least a majority of the shares of the Series A
Preferred Stock outstanding (voting together as a single
class).
5.3 Remaining Assets. If the assets of the Corporation available
for distribution to the Corporation's stockholders exceed the
aggregate amount payable to the holders of the outstanding
Series A Preferred pursuant to Section 5.1 hereof, then after
the payments required by Section 5.1 shall have been made or
irrevocably set apart, such assets shall be distributed
equally among the holders of the Common Stock and the
outstanding Series A Preferred, provided, however, that
holders shall be deemed to hold, in lieu of Series A
Preferred, the number of shares of Common Stock into which
such shares Series A Preferred are then convertible pursuant
to Section 6 below.
5.4 Notice. Written notice of such liquidation, dissolution or
winding up, stating a payment date and the place where said
payments shall be made, shall be given by mail, postage
prepaid, or by telex, facsimile or courier service to non-U.S.
residents, not less than twenty (20) days prior to the payment
date stated therein, to the holders of record of Series A
Preferred, such notice to be addressed to each such holder at
its address as shown on the records of the Corporation.
5.5 Determination of Consideration. To the extent any distribution
pursuant to Section 5.1 or Section 5.3 consists of property
other than cash, the value thereof shall, for purposes of
Section 5.1 or Section 5.3, be the fair value at the time of
such distributions as determined in good faith by the Board.
6. Conversion. The holders of the Series A shall have the following
conversion rights (the "Conversion Rights"):
6.1 Optional Conversion of the Series A Preferred Stock. The
Series A Preferred shall be convertible, without the payment
of any additional consideration by the holder thereof and at
the option of the holder thereof, at any time after the first
issuance of shares of Series A Preferred by the Corporation,
at the office of the Corporation or any transfer agent for the
Common Stock, into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing the
Average Original Issue Price of the shares of Series A
Preferred being converted by the Conversion Price of the
shares of Series A Preferred being converted, determined as
hereinafter provided, in effect at the time of conversion and
then multiplying such quotient by each share of Series A
Preferred to be converted. The Conversion Price at which
shares of Common Stock shall be deliverable upon conversion
without the payment of any additional consideration by the
holder thereof (the "Conversion Price") shall initially be
equal to the Average Original Issue Price of the shares of the
Series A Preferred being converted. Such initial Conversion
Price shall be subject to adjustment, in order
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to adjust the number of shares of Common Stock into which the
Series A Preferred is convertible, as hereinafter provided.
6.2 Fractional Shares. No fractional shares of Common Stock shall
be issued upon conversion of the Series A Preferred . In lieu
of any fractional share to which any holder would otherwise be
entitled upon conversion of some or all of the Series A
Preferred owned by such holder, the Corporation shall pay cash
equal to such fraction multiplied by the then effective
Conversion Price or round up to the nearest whole share.
6.3 Mechanics of Optional Conversion. Before any holder of Series
A Preferred Stock shall be entitled to convert the same into
full shares of Common Stock, such holder shall surrender the
certificate or certificates therefor, endorsed or accompanied
by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the
registered holder or by such holder's attorney duly authorized
in writing, at the office of the Corporation or of any
transfer agent for the Common Stock, and shall give at least
five (5) days' prior written notice to the Corporation at such
office that such holder elects to convert the same and shall
state therein such holder's name or the name of the nominees
in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. The Corporation
shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Series A Preferred Stock, or to
such holder's nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid, together with cash
in lieu of any fraction of a share. Such conversion shall be
deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series
A Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
From and after such date, all rights of the holder with
respect to the Series A Preferred Stock so converted shall
terminate, except only the right of such holder, upon the
surrender of his, her or its certificate or certificates
therefor, to receive certificates for the number of shares of
Common Stock issuable upon conversion thereof and cash for
fractional shares.
6.4 Certain Adjustments for Stock Splits, Dividends, Mergers,
Reorganizations, Etc.
(a) Adjustment for Stock Splits, Stock Dividends and
Combinations of Common Stock. In the event the
outstanding shares of Common Stock shall, after the
sale of any shares of Series A Preferred, be further
subdivided (split), or combined (reverse split), by
reclassification or otherwise, or in the event of any
dividend or other distribution payable on the Common
Stock in shares of Common Stock, the number of shares
of Common Stock into which each share of Series A
Preferred is convertible into and the Conversion
Price in effect immediately prior to such
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subdivision, combination, dividend or other
distribution shall, concurrently with the
effectiveness of such subdivision, combination,
dividend or other distribution, be appropriately
adjusted.
(b) Adjustment for Merger or Reorganization, Etc. In the
event of a reclassification, reorganization or
exchange (other than described in subsection 6.3(a)
above) or any consolidation or merger of the
Corporation with another Corporation (other than a
merger, acquisition or other reorganization as
defined in Section 5.2, which shall be considered a
liquidation pursuant to Section 5 above), each share
of Series A Preferred shall thereafter be convertible
into the number of shares of stock or other
securities or property to which a holder of the
number of shares of Common Stock of the Corporation
deliverable upon conversion of the Series A Preferred
would have been entitled upon such reclassification,
reorganization, exchange, consolidation, merger or
conveyance had the conversion occurred immediately
prior to the event; and, in any such case,
appropriate adjustment (as determined by the Board)
shall be made in the application of the provisions
herein set forth with respect to the rights and
interests thereafter of the holders of the Series A
Preferred, to the end that the provisions set forth
herein (including provisions with respect to changes
in and other adjustments of the applicable Conversion
Price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock
or other property thereafter deliverable upon the
conversion of the Series A Preferred.
(c) Adjustments for Other Dividends and Distributions. In
the event the Corporation, at any time or from time
to time after the filing of this Certificate of
Designation, makes, or fixes a record date for the
determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in
securities of the Corporation other than shares of
Common Stock, then and in each such event, provision
shall be made so that the holders of Series A
Preferred shall receive upon conversion thereof, in
addition to the number of shares of Common Stock
receivable thereupon, the amount of securities of the
Corporation which they would have received had their
Series A Preferred been converted into Common Stock
on the date of such event and had they thereafter,
during the period from the date of such event to and
including the conversion date, retained such
securities receivable by them as aforesaid during
such period, subject to all other adjustments called
for during such period under this Section 6.4(c) with
respect to the rights or the holders of the Series A
Preferred .
6.5 Common Stock Reserved. The Corporation shall reserve and keep available
out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect
conversion of the Series A Preferred.
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7. Status of Preferred Stock Upon Retirement. Shares of Series A Preferred
which are acquired or redeemed by the Corporation or converted pursuant
to Section 6 shall be retired and shall not thereafter be reissued.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designation of Rights and Preferences on behalf of the Corporation this 10 day
of August, 2000.
OPTICAL SENSORS INCORPORATED
By:
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Its:
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