1
EXHIBIT 10.3
BUSINESS LOAN AGREEMENT
dated
April 23, 1999
among
GENOMIC SOLUTIONS, INC.
"Parent"
and
GENOMIC SOLUTIONS, LTD.
GENOMIC SOLUTIONS, K.K.
"Subsidiaries"
and
WHITE PINES LIMITED PARTNERSHIP I
PACIFIC CAPITAL, X.X.
XXXXX VENTURE CAPITAL ASSOCIATES, L.P.
AMERICAN HEALTHCARE FUND II
IAN R. N. BUND XXXXX XXXXXX PROTOTYPE
PS PLAN ACCOUNT #000-00000-00000
XXXXX CONSULTING ASSOCIATES, INC.
VOLUNTEER HEALTHCARE ASSOCIATES, L.L.C
MCDONALD INVESTMENTS INC. CUSTODIAN
FBO S. XXXXXXXX XXXXXXXX III XXX
ROLLOVER ACCOUNT #00000000
J. XXXXXXX XXXXXXXXX
XXXXXX X. XXXXXXX
XXXX X. XXXXXXXXX
GROVE INVESTMENT PARTNERS
XXXXXX X. XXXXXX LIVING TRUST U/A/D SEPTEMBER 9, 1997
XXXX X. XXXXXX
MCDONALD INVESTMENTS INC. CUSTODIAN
FBO XXXXXX X. XXXXX XXX ROLLOVER ACCOUNT #00000000
NATIONAL CITY BANK OF MI/IL CUSTODIAN
FBO XXXXXXX X. XXXXXX XXX ROLLOVER
ACCOUNT DATED JUNE 12, 1991 #MI-1491-00-4
XXXXXXX AND ASSOCIATES PROFIT SHARING PLAN
X/X/X XXXXXXX 0, 0000
XXXXXXX X. XXXXXXXX
"Lenders"
2
TABLE OF CONTENTS
Page
1. LOAN AGREEMENT 2
(a) Present Loan 2
(b) Conditions - Present Loan 2
2. EXECUTION OF NOTES 3
3. EQUITY - INITIAL ISSUANCE 3
(a) Warrants - Noncancellable 3
(b) Warrants - Cancellable Upon $5.00
Liquidity Event 3
(c) Warrants - Cancellable Upon Premium
Liquidity Event 4
(d) Modification of Anti-Dilution Provisions 5
4. INTENTIONALLY OMITTED 5
5. SECURITY, ASSURANCES AND INSURANCE 5
(a) Collateral 5
(b) Pledge 6
(c) Subsidiaries' Security 6
(d) Insurance - Property 6
(e) Insurance - Life 6
(f) Further Assurances 6
6. CONDITIONS OF LOAN 7
(a) Approval of Lender's Counsel 7
(b) Representations and Warranties 7
(c) Compliance 7
(d) Evidence of Corporate Action 7
(e) Opinion of Borrower's Counsel 7
(f) SBA Forms 7
(g) Certificates 7
(h) Bylaws 8
(i) Insurance 8
(j) Due Diligence 8
(k) Arrangements with Senior Lender 8
(1) Subordination 8
(m) Receipt of Executed Documents 8
(n) Consents 9
7. REPRESENTATIONS AND WARRANTIES 9
(a) Organization and Standing; Charter
and Bylaws 9
(b) Capitalization 10
(c) Corporate Power; Authorization 11
(d) Validity of Securities 11
(e) Consents and Waivers 12
-i-
3
Page
(f) Litigation 12
(g) Shareholder Lists and Agreements;
Officers and Directors 12
(h) Subsidiaries 12
(i) Financial Statements 13
(j) Absence of Undisclosed Liabilities 13
(k) Absence of Certain Developments 14
(1) Title to Assets 14
(m) Real Property 14
(n) Tax Matters 15
(o) Contracts and Commitments 15
(p) Proprietary Rights; Employee Restriction 15
(q) Effect of Transactions 16
(r) Insurance 17
(s) Securities Act Registration 17
(t) Business; Compliance with Laws 17
(u) Books and Records 17
(v) Employee Benefit Plans 17
(w) Small Business Matters 17
(x) Information Supplied to the Lenders 18
(y) Employees 18
(z) Business Operations 19
(aa) Collectibility of Accounts Receivable 19
(bb) Inventory 19
8. AFFIRMATIVE COVENANTS 19
(a) Financial Statements 19
(b) Payment of Taxes 20
(c) Insurance 20
(d) Notice of Adverse Events 21
(e) Maintenance 21
(f) Board of Directors 21
(g) Environmental Compliance/Notices/Indemnity 21
(h) Maintain Corporate Existence and
Due Qualification 21
(i) Compliance With All Laws 22
(j) Information From Senior Lender 22
(k) Reports 22
(1) Compliance Certificate 22
(m) Use of Proceeds 22
(n) Compliance with ERISA 22
(o) Patent Applications 23
(p) Disclosure 23
(q) Reinstatement of Security Interests 23
9. NEGATIVE COVENANTS 23
(a) Financial Covenants 24
(b) Liens and Indebtedness 24
(c) Dividends, Distributions; Capital Structure 24
-ii-
4
Page
(d) Stock 24
(e) Leases 25
(f) Environmental 25
(g) Transactions with Insiders or Related
Companies 25
(h) Nature of Business 25
(i) Change In Management 25
10. EVENTS OF DEFAULT 25
(a) Failure to Pay Amounts Due 26
(b) Misrepresentation; False Financial
Information 26
(c) Noncompliance with Lender Agreements 26
(d) Other Creditor Events 26
(e) Judgments; Attachments; Tax Liens 26
(f) Indictment 26
(g) Business Suspension, Bankruptcy 26
(h) Material Adverse Change 27
(i) Hazardous Material 27
(j) Use Of Xxxxxxxx 00
00. REMEDIES ON DEFAULT 27
(a) Acceleration 27
(b) Remedies Cumulative 27
(c) No Waiver 27
12. OTHER CONSIDERATION TO LENDERS 28
(a) Closing Fee 28
(b) Expenses 28
(c) Repurchase of Securities Upon
Declination of Sale of Borrower 28
13. REPRESENTATIONS AND WARRANTIES OF LENDER 29
(a) Investment 29
(b) Transfers 29
(c) Accredited Investor 29
(d) Restrictive Legend 29
(e) Sophistication 30
(f) Legal Investment 30
14. MISCELLANEOUS 30
(a) Rights Cumulative; Waivers 30
(b) Notices 30
(c) Reimbursement For Expenses 31
(d) Binding Effect 31
(e) Generally Accepted Accounting Principles 32
(f) No Partnership Or Joint Venture Established 32
-iii-
5
Page
(g) Governing Law; Jurisdiction 32
(h) Further Action 32
(i) Writings Constitute Entire Agreement;
Modifications Only In Writing 32
(j) Survival Of Terms, Representations
and Warranties 33
(k) Jury Trial Waivers 33
(1) Indemnification 33
(m) Lender's Assignment 33
(n) Brokers 34
(o) Counsel for Certain Lenders 34
15. CONSTRUCTION AND INTERPRETATION 34
EXHIBITS
Exhibit Description of First Referred to
No. Exhibit in Section
A Promissory Note 2
B-1 Warrants (Noncancellable) 3(a)
B-2 Warrants (Cancellable @ $5.00) 3(b)
B-3 Warrants (Cancellable > $5.00) 3(c)
C Security Agreement 5(a)
D Subordination Agreement 5(a)
E Opinion of Borrower's Counsel 6(e)
F Registration Rights Agreement 6(m)(iii)
G Amendment to Shareholders Agreement 6(m)(iv)
H Assignment and Pledge Agreement 5(b)
SCHEDULES
Schedule
No. Description of Schedule
7(b) Agreements Relating to Capital Stock
7(g) Shareholders, Officers and Directors
7(h) Subsidiaries
7(i) Financial Statements
7(k) Recent Developments
7(l) Liens and Encumbrances
7(o) Contracts
7(p) Intellectual Property Rights
7(x) Business Plan
7(z) Business Names; Addresses
-iv-
6
BUSINESS LOAN AGREEMENT
Agreement made and entered into this 23rd day of April, 1999, by and among
Genomic Solutions, Inc., a Delaware corporation, 0000 Xxxxxxx Xxxxx, Xxxxx X,
Xxx Xxxxx, Xxxxxxxx 00000 (hereinafter referred to as "Parent"), Genomic
Solutions, Ltd., a United Kingdom corporation, Xxxx 0, Xxxxx Xxxxx, Xxxxxx Xxx
Xxxx, Xxxxx Socon, St. Neots, Cambridgshire, England PE193TP (sometimes
hereinafter referred to as "Genomic UK"), Genomic Solutions, K.K., a Japanese
corporation, Gotanda Chuo Xxxx. 0X, 0-0, Xxxxxxxxxxxxxx 0-xxxxx, Xxxxxxxxx-xx,
Xxxxx 000-0000, Xxxxx (sometimes hereinafter referred to as "Genomic Japan")
(Genomic UK and Genomic Japan each sometimes hereinafter being referred to as a
"Subsidiary" and sometimes hereinafter collectively referred to as the
"Subsidiaries", and each of Parent, Genomic UK and Genomic Japan sometimes
hereinafter referred to as "Borrower", a "Borrower" or the "Borrower" and
collectively sometimes referred to as the "Borrowers"), White Pines Limited
Partnership I, a Michigan limited partnership, 0000 Xxxxxxxx Xxxx, Xxxxx X, Xxx
Xxxxx, Xxxxxxxx 00000 (hereinafter referred to as "WPLP), Pacific Capital, L.P.,
a Delaware limited partnership, 0000 Xxxxxxxx Xxxx, Xxxxx X, Xxx Xxxxx, Xxxxxxxx
00000 (hereinafter referred to as "Pacific"), Chase Venture Capital Associates,
L.P., a California limited partnership, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (hereinafter referred to as "Chase"), American Healthcare
Fund II, a Delaware limited partnership, 0000 Xxxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as "American"), Ian R. N. Bund
Xxxxx Xxxxxx Prototype PS Plan Account #000-00000-00000, X.X. Xxx 0000,
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000 (hereinafter referred to as "Bund"), Xxxxx
Consulting Associates, Inc., an Ohio corporation, 0000 Xxxxxxxx Xxxxx, Xxxxxx,
Xxxx 00000 (hereinafter referred to as "Xxxxx"), Volunteer Healthcare
Associates, L.L.C., a Tennessee limited liability company, 0 Xxxxxxxx Xxxxx,
Xxxxx 000, Xxxxxxxxx, Xxxxxxxxx 00000 (hereinafter referred to as "Volunteer"),
McDonald Investments Inc. Custodian FBO S. Xxxxxxxx XxXxxxxx III XXX Rollover
Account #00000000, 0000 Xxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx, Xxxx 00000
(hereinafter referred to as "XxXxxxxx"), J. Xxxxxxx Xxxxxxxxx, 000 Xxxx Xxxxxx,
Xxxxx 000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 (hereinafter referred to as
"Xxxxxxxxx-CA"), Xxxxxx X. Xxxxxxx, 000 Xxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000 (hereinafter referred to as "Xxxxxxx"), Xxxx X. Xxxxxxxxx, 0000
Xxxxxxxx Xxxx, Xxxxx Xxxxx Xxxxx, Xxxxxxx 00000 (hereinafter referred to as
"Xxxxxxxxx-FL"), Grove Investment Partners, an Illinois partnership, 000 Xxxxx
Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as "Grove") Xxxxxx X.
Xxxxxx Living Trust u/a/d September 9, 1997, 000 Xxxxx Xxx Xxxxx, #0000, Xxx
Xxxxxxxx, Xxxxxxx 00000 (hereinafter referred to as "Xxxxxx"), Xxxx X. Xxxxxx,
00000 Xxx Xxxxx Xxxxx, Xxxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as
"Xxxxxx"), McDonald Investments Inc. Custodian FBO Xxxxxx X. Xxxxx XXX Rollover
Account #00000000, 0000 Xxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx, Xxxx 00000
(hereinafter referred to as "Xxxxx"), National City Bank of
1
7
MI/IL, Custodian FBO Xxxxxxx X. Xxxxxx XXX Rollover Account dated June 12, 1991
Account #MI-1491-00-4, 101 National City Bank, 000 X. Xxxx Xxxxxx, Xxx Xxxxx,
Xxxxxxxx 00000 (hereinafter referred to as "Xxxxxx"), Xxxxxxx and Associates
Profit Sharing Plan u/a/d January 1, 1991, 000 Xxxx Xxxxxxx Xxxxxx, Xxx Xxxxx,
Xxxxxxxx 00000 (hereinafter referred to as "Xxxxxxx") and Xxxxxxx X. Xxxxxxxx,
00000 Xxxxxxxxx Xxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as
"Xxxxxxxx") (WPLP, Pacific, Chase, American, Bund, Xxxxx, Volunteer, XxXxxxxx,
Xxxxxxxxx-CA, Xxxxxxx, Xxxxxxxxx-FL, Grove, Kalish, Marler, Boyle, Amster,
Xxxxxxx and Xxxxxxxx each being sometimes hereinafter referred to as "Lender", a
"Lender" or the "Lender" and collectively as "Lenders").
1. LOAN AGREEMENT.
(a) Present Loan. Borrowers agree to borrow from each Lender, and each
Lender agrees to lend to the Borrowers on the date hereof, subject to the terms
and conditions set forth in this Agreement and all exhibits attached hereto
(hereinafter collectively "Loan Documents"), the amount set forth below opposite
the name of such Lender:
Lender Amount
WPLP $1,112,000
Pacific 1,738,000
Chase 2,308,495
American 400,000
Bund 38,250
Xxxxx 10,000
Volunteer 15,000
XxXxxxxx 5,000
Xxxxxxxxx-CA 200,000
Xxxxxxx 10,000
Xxxxxxxxx-FL 51,505
Grove 30,000
Xxxxxx 25,000
Xxxxxx 1,000
Xxxxx 10,000
Xxxxxx 26,500
Xxxxxxx 11,750
Xxxxxxxx 7,500
----------
$6,000,000
(each of the above amounts as to each respective Lender is hereinafter referred
to as the "Loan").
(b) Conditions - Present Loan. The obligation of Lender to advance any
sum pursuant to "(a)" is contingent upon, since the date of this Agreement until
the date of any advance; (1) no material adverse change shall have occurred in
the financial condition of Borrowers or in the physical condition of the assets
serving as collateral; (2) no event shall have occurred or condition exist which
constitutes or with the passage
2
8
of time or the giving of notice would constitute, any event of default; and (3)
Lender's receipt of a certificate dated the date of the request for advance, and
signed by the President of Parent stating that: a) the Borrowers have complied
and are then in compliance with all the terms and covenants of this Agreement
which are binding upon them; b) there exists no event of default as defined
herein and no event which, with the giving of notice or the lapse of time, or
both, would constitute such an event of default; and c) the representations and
warranties contained herein are true with the same effect as though such
representations and warranties were made at the time of request for advance.
2. EXECUTION OF NOTES. The obligation to repay the Loan of each Lender
shall be evidenced by Borrowers' Promissory Note in the form set forth in
Exhibit A attached hereto (each Promissory Note executed and delivered to a
Lender hereinafter being referred to as a "Note" and collectively as the
"Notes").
3. EQUITY-INITIAL ISSUANCE.
(a) Warrants-Non-Cancellable. Parent shall issue to each Lender at the
time of closing the Loan, in consideration for the granting of the Loan,
and payment by Lenders concurrently with execution and delivery of this
Agreement of $.0001 per share of common stock, negotiable Warrants to
acquire the following shares of common stock of Parent:
Lender Warrants
------ --------
WPLP 110,273
Pacific 172,351
Chase 228,927
American 39,666
Bund 3,793
Xxxxx 992
Volunteer 1,487
XxXxxxxx 496
Xxxxxxxxx-CA 19,833
Xxxxxxx 992
Xxxxxxxxx-FL 5,108
Grove 2,975
Xxxxxx 2,479
Xxxxxx 99
Xxxxx 992
Xxxxxx 2,628
Xxxxxxx 1,165
Xxxxxxxx 744
-------
595,000
The Warrants issued shall be in the form set forth in Exhibit B-1 attached
hereto.
(b) Warrants-Cancellable Upon $5.00 Liquidity Event. Parent shall
issue to each Lender at the time of closing the Loan, in consideration for the
granting of the Loan, and payment
3
9
by Lenders concurrently with execution and delivery of this Agreement of $.0001
per share of common stock, negotiable Warrants, subject to cancellation and
surrender in accordance with the terms thereof, to acquire the following shares
of common stock of Parent:
Lender Warrants
------ --------
WPLP 129,734
Pacific 202,767
Chase 269,324
American 46,667
Bund 4,463
Xxxxx 1,166
Volunteer 1,750
XxXxxxxx 583
Xxxxxxxxx-CA 23,334
Xxxxxxx 1,166
Xxxxxxxxx-FL 6,009
Grove 3,500
Xxxxxx 2,917
Xxxxxx 116
Xxxxx 1,166
Xxxxxx 3,092
Xxxxxxx 1,371
Xxxxxxxx 875
-------
700,000
The Warrants issued shall be in the form set forth in Exhibit B-2 attached
hereto.
(c) Warrants-Cancellable Upon Premium Liquidity Event. Parent shall
issue to each Lender at the time of closing the Loan, in consideration for the
granting of the Loan, and payment by Lenders concurrently with execution and
delivery of this Agreement of $.0001 per share of common stock, negotiable
Warrants, subject to cancellation and surrender in accordance with the terms
thereof, to acquire the following shares of common stock of Parent:
Lender Warrants
------ --------
WPLP 19,460
Pacific 30,415
Chase 40,399
American 7,000
Bund 669
Xxxxx 175
Volunteer 000
XxXxxxxx 00
Xxxxxxxxx-XX 3,500
Xxxxxxx 175
Xxxxxxxxx-FL 901
Grove 525
Xxxxxx 437
Xxxxxx 18
4
10
Xxxxx 175
Xxxxxx 463
Xxxxxxx 206
Xxxxxxxx 131
-------
105,000
The Warrants issued shall be in the form set forth in Exhibit B-3 attached
hereto.
(d) Modification of Anti-Dilution Provisions. Unless within thirty
days after the date hereof the definition of "Excluded Stock" contained in the
Certificate of Incorporation of Parent as applicable to each of the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and
the Series M Preferred Stock shall be amended to include within such definition
at least the shares of common stock excluded from the definition of "Additional
Shares of Common Stock" by subsection (G)(i) of the Warrants, or the holders of
at least 66-2/3% of the outstanding shares of Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock and Series M Preferred Stock, each
voting as a separate class, shall declare the shares of common stock described
in subsection G(i) of the Warrants to be "Excluded Stock" for purposes of
determining whether any adjustments shall be made to the applicable Conversion
Prices by reason of the issuance of additional securities of Parent, subsection
G(i) of each Warrant issued pursuant to this Agreement shall be deleted, or
shall be amended to exclude from the definition of "Additional Shares of Common
Stock" only that lesser number of shares of common stock subject to the stock
option plans of Parent which may be hereafter included in the definition of
"Excluded Stock" as applicable to each of the Series B Preferred Stock, the
Series C Preferred Stock, the Series D Preferred Stock and the Series M
Preferred Stock. In the event of any such deletion or amendment to subsection
(G)(i) of the Warrants, Parent shall, at its sole expense, execute and deliver
to Lenders new Warrants in exchange for the Warrants initially issued pursuant
to this Agreement.
4. There is no Section 4.
5. SECURITY, ASSURANCES AND INSURANCE. To secure the faithful performance
of this Agreement and the repayment of the indebtedness created hereunder,
Borrowers shall do the following:
(a) Collateral. Parent gives, assigns, and conveys to each Lender, as
collateral, a security interest pursuant to the Security Agreement in the form
set forth in Exhibit C attached hereto in all accounts receivable, inventory,
equipment, furniture, fixtures, notes receivable, and all other tangible and
intangible assets and after-acquired property (all assets) of Parent subject
only to a prior security interest of Comerica Bank and the terms of a
subordination agreement satisfactory to Lender, or of a successor bank which
replaces Comerica Bank under similar credit facilities, provided that any such
successor
5
11
enters into a subordination agreement substantially in the form of the
Subordination Agreement attached hereto as Exhibit D (Comerica Bank and any such
successor bank each being sometimes hereinafter referred to as the "Senior
Lender").
(b) Pledge. Parent shall pledge all of its right, title and interest
in its 100% ownership interest in the Subsidiaries pursuant to the Pledge
Agreement in the form attached hereto as Exhibit H.
(c) Subsidiaries' Security. Each Subsidiary with property located in
any state of the United States gives, assigns, and conveys to each Lender, as
collateral, a security interest pursuant to the Security Agreement in the form
set forth in Exhibit C attached hereto in all accounts receivable, inventory,
equipment, furniture, fixtures, notes receivable, and all other tangible and
intangible assets and after-acquired property (all assets) of such Subsidiary
subject only to a prior security interest of the Senior Lender. Each Subsidiary
with property located outside the United States shall execute such documentation
as may be necessary to grant to Lenders an interest equivalent to a security
interest or chattel mortgage as may be possible under the laws of each
jurisdiction in which any property of such Subsidiary may be located.
(d) Insurance-Property. Each Borrower shall maintain, without expense
to Lenders, a policy or policies of insurance with respect to the collateral, in
an amount which is at least equal to the fair market value thereof, naming the
Lender as an insured party as its interest may appear and said policy shall
contain a provision requiring that the insurer provide at least thirty (30) days
notice to the Lender prior to cancellation of said insurance. The Borrower shall
deliver a certificate of such insurance to the Lender.
(e) Insurance-Life. Borrowers shall maintain, without expense to
Lenders, $2,000,000 term life insurance on the life of each of Xxxxxxx X.
Xxxxxxxx, Xxxxxx X. Xxxxxxxxxx and Xxxxxx X. Xxxxxxxxx with Lenders as
beneficiaries. Any insurance proceeds shall be applied in payment of the Notes
and any other amounts which may be due Lenders under the Loan Documents. If any
insurance proceeds remain after payment of the Notes and any other amounts due
Lenders under the Loan Documents, Lenders shall promptly pay over such remaining
amount of insurance proceeds to Borrower.
(f) Further Assurances. On demand of the Lender, the Borrowers shall
furnish further assurances of title, execute any written agreement, or do any
other acts, execute any instrument or statement required by law or otherwise, in
order to perfect and continue the security interest of the Lender in the
collateral, including without limitation, that Parent shall amend the Pledge
Agreement contemplated by Section 5(b) above to subject to the terms and
provisions of such Pledge Agreement any
6
12
interest Parent may hereafter acquire in any corporation, partnership, limited
liability company or other entity, and cause any such corporation, partnership,
limited liability company or other entity in which Parent has a majority
interest to comply with the provisions of Section 5(c) hereof.
6. CONDITIONS OF LOAN. The obligation of each Lender to make the Loan is
subject to the following conditions precedent:
(a) Approval Of Lender's Counsel. All legal matters incident to the
Loan shall be satisfactory to all counsel for the Lender.
(b) Representations And Warranties. All representations and warranties
by the Borrowers which are contained in this Agreement and the statements
contained in the Exhibits, Schedules and Loan Documents or any instrument, list,
certificate or writing delivered to the Lender pursuant to this Agreement shall
be, in all respects, true and correct on and as of the loan closing date as
though such representations and warranties were made at and as of the loan
closing date, and the Lender shall have not discovered any material misstatement
or omission in the representations and warranties made in this Agreement.
(c) Compliance. Borrowers shall have performed and complied in all
material respects with all of their obligations under this Agreement which are
to be performed or complied with by the Borrowers prior to or on the Loan
closing date.
(d) Evidence Of Corporate Action. The Lender shall have received
certified copies of all corporate or other required action taken by each
Borrower to authorize this Agreement, the Loan Documents and the borrowing
hereunder, and such other documents as the Lender may reasonably require
relating to the existence of the Borrowers, the authority for and the validity
of this Agreement, the Note and the Warrants, and any other matters relevant
hereto, all in form and substance satisfactory to Lender's counsel, and
indicating the name and title of the officer or officers of each Borrower
authorized to sign this Agreement and the Loan Documents.
(e) Opinion Of Borrower's Counsel. The Lender shall have received a
favorable written opinion of counsel for the Borrowers, dated the date of the
Loan in the form of Exhibit E which is attached hereto.
(f) SBA Forms. Parent shall have executed and delivered to Lenders SBA
Form 1031, Part A of which shall have been completed by Parent, and SBA Forms
652-D and 480.
(g) Certificates. The Lender shall have received from each Borrower a
certificate of good standing and a certified copy of the Articles or Certificate
of Incorporation for such Borrower (as amended). All shall be certified by the
appropriate
7
13
governmental agency as being true, correct and complete as of the date of such
certification.
(h) Bylaws. The Lender shall have received from each Borrower a copy
of the Bylaws of such Borrower and all amendments thereto, certified by the
Secretary of such Borrower as being true, correct and complete as of the date of
such certification.
(i) Insurance. Evidence satisfactory to the Lender that the Borrowers
have obtained the insurance policies required by the Lender including but not
limited to liability insurance and worker's compensation insurance with limits
and carriers reasonably satisfactory to the Lender, and the life insurance
contemplated by Section 5(e) hereof.
(j) Due Diligence. Lender has reached no adverse findings as a result
of their continued due diligence investigation of each Borrower, its management,
its future financing needs, and its industry, or any environmental review as of
the closing date.
(k) Arrangements With Senior Lender. The Senior Lender shall have
amended the loan agreements with Parent to extend the due date of such
indebtedness to July 1, 2000 and to modify various financial covenants contained
in such loan agreements in a manner reasonably satisfactory to Lenders.
(1) Subordination. Any stock redemption agreements between Parent and
any of its shareholders shall be subordinate to all obligations created pursuant
to this Loan Agreement including, but not limited to the Note and the Warrants
and such subordination shall be consented to by the shareholders of Parent. Any
debt owed by any Borrower to any of its shareholders (other than by Subsidiaries
to Parent), directors, or officers including all future indebtedness shall be
subordinated to all obligations created by the Loan documents including but not
limited to the Note and Warrants, pursuant to a subordination agreement
reasonably satisfactory to Lenders.
(m) Receipt Of Executed Documents. The Lender shall have received each
of the following, in form and substance satisfactory to the Lender and its
respective counsel:
(i) the Note duly executed by the Borrowers and the Warrants duly
executed by Parent;
(ii) the Security Agreement duly executed by Parent, and as
applicable, each Subsidiary, together with:
(a) evidence of the due execution and delivery of, and the
recordation, filing and other action in such jurisdictions as the Lender may
deem necessary or appropriate with respect to the Security Agreement, Financing
Statements and similar documents which the Lender deems necessary or desirable
8
14
to create, preserve or perfect the liens, security interests and other rights
intended to be granted to the Lender thereunder.
(b) a schedule setting forth all real property owned or
leased by any Borrower, together with copies of the related leases, certified as
true and correct as of the effective date by a duly authorized officer of
Borrower.
(iii) the Registration Rights Agreement duly executed by Parent in
the form of Exhibit F which is attached hereto;
(iv) an amendment to the Shareholders Agreement dated
December 24, 1997, as amended May 27, 1998, duly executed by appropriate
shareholders and Parent in the form of Exhibit G which is attached hereto;
(v) Acceptable subordination agreements executed by appropriate
shareholders, directors, officers and Borrowers;
(vi) Satisfactory Uniform Commercial Code search;
(vii) the Pledge Agreement duly executed by Parent;
(viii) Acceptable nondisclosure agreements executed by such key
management, operating and technical personnel as Lenders may reasonably require;
(ix) each Borrower shall execute and deliver such other
instruments and certificates as the Lender may reasonably request to effect the
closing.
(n) Consents. All consents, approvals, permits, licenses,
authorizations, agreements and other items required, or deemed by the Lender to
be required for the carrying out of the transactions contemplated in this
Agreement, shall have been obtained in form and substance reasonably
satisfactory to the Lender.
7. REPRESENTATIONS AND WARRANTIES. Each Borrower, jointly and severally,
represents and warrants to Lender, all of which representations and warranties
shall be continuing and shall survive the execution of this Agreement until all
of the indebtedness is fully paid to Lender and Borrowers' obligations under
this Agreement and the related documents are fully performed as follows:
(a) Organization and Standing; Charter and Bylaws. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and Parent is authorized to exercise all of its
corporate powers, rights and privileges. Genomic UK is a corporation duly
organized, validly existing and in good standing under the laws of the United
Kingdom, and Genomic UK is authorized to exercise all of its
9
15
corporate powers, rights and privileges. Genomic Japan is a corporation duly
organized, validly existing and in good standing under the laws of Japan, and
Genomic Japan is authorized to exercise all of its corporate powers, rights and
privileges. Each Borrower has all required corporate power and authority to own
its property and to carry on its business as presently conducted or
contemplated. True and accurate copies of the Articles or Certificate of
Incorporation and the Bylaws of each Borrower, as in effect on the date hereof,
have been delivered to the Lenders.
(b) Capitalization. The authorized capital stock of Parent on the date
hereof consists of 40,000,000 shares of Common Stock, par value $.001 per share
("Common Stock") and 10,000,000 shares of Preferred Stock, par value $.001 per
share (the "Preferred Stock"). On the date hereof, 2,925,777 shares of Common
Stock are outstanding. Of the authorized Preferred Stock, 1,100,000 shares have
been designated Series D Preferred Stock, 4,070,339 shares have been designated
Series C Preferred Stock, 1,680,880 shares have been designated Series B
Preferred Stock and 50,000 have been designated Series M Preferred Stock. On the
date hereof, 1,100,000 shares of Series D Preferred Stock are outstanding,
4,070,339 shares of Series C Preferred Stock are outstanding, 1,680,880 shares
of Series B Preferred stock are outstanding and 50,000 shares of Series M
Preferred Stock are outstanding. The several classes and series of capital stock
have the rights, preferences and privileges set forth in the Certificate of
Incorporation. Parent has reserved 1,100,000 shares of Common Stock for issuance
upon conversion of the Series D Preferred Stock, 4,070,339 shares of Common
Stock for issuance upon conversion of the Series C Preferred Stock, 5,093,576
shares of Common Stock for issuance upon conversion of the Series B Preferred
Stock, and 270,027 shares of Common Stock for issuance upon conversion of the
Series M Preferred Stock. As of the date of this Agreement, the Conversion Price
of the Series B Preferred Stock is $.33 per share of common stock, the
Conversion Price of the Series C Preferred Stock is $1.75 per share of common
stock, the Conversion Price of the Series D Preferred Stock is $6.00 per share
of common stock and the Conversion Price of the Series M Preferred Stock is
$1.111 per share of common stock, and there has been no event, including the
issuance of any shares of common stock of Parent, or securities convertible into
or exercisable for shares of common stock of Parent, which could result in any
adjustment in any of the foregoing Conversion Prices pursuant to the provisions
of the Certificate of Incorporation of Parent. As a result of Parent's merger
with B.I. Systems Corporation, a Delaware corporation ("BISC"), Parent
assumed the 1994 Omnibus Equity Incentive Plan of BISC (the "BISC Plan") which
was adopted by the Board of Directors and shareholders of BISC in July 1994 and
amended in April 1997. On January 15, 1998, Parent's Board of Directors adopted
the Genomic Solutions Inc. Non-Employee Stock Option Plan (the "Non-Employee
Plan") and the 1998 Genomic Solutions Inc. Stock Option Plan (the "Employee
Plan"). On the date of the Closing, options to acquire 768,770
10
16
shares of Common Stock are outstanding pursuant to the BISC Plan, options to
acquire 1,153,250 shares of Common Stock are outstanding pursuant to the
Employee Plan and options to acquire 240,000 shares of Common Stock are
outstanding pursuant to the Non-Employee Plan. Parent has reserved 2,162,020
shares of Common Stock for issuance upon exercise of these options. Except as
set forth herein and in Schedule 7(b), there are no outstanding rights, options,
warrants, preemptive rights, conversion rights or agreements for the purchase,
acquisition or receipt from Parent of any shares of capital stock or any other
securities of Parent. Parent is not a party to any existing agreement with any
person or entity which requires Parent to purchase from such person or entity
any of its capital stock, any securities convertible into or exchangeable or
exercisable for any of its capital stock, or any right, options or warrants for
its capital stock. All outstanding securities of Parent, including the Notes and
Warrants, have been issued in accordance with all applicable state and Federal
securities laws.
(c) Corporate Power; Authorization. Parent has all requisite legal and
corporate power to enter into this Agreement, to issue and sell the Notes and
Warrants as provided hereunder, and to carry out and perform its obligations
under the terms of the Loan Documents. Each Subsidiary has all requisite legal
and corporate power to enter into this Agreement, to issue and sell the Notes as
provided hereunder, and to carry out and perform its obligations under the terms
of this Agreement. All corporate action on the part of each Borrower and its
officers, directors and shareholders that is necessary for the authorization,
execution and delivery of this Agreement and the Loan Documents by such
Borrower, for the performance of the Borrower's obligations thereunder and for
the issuance and delivery of the Notes, and as to Parent the Warrants, has been
taken; and this Agreement, the Notes, Warrants, Security Agreement, Pledge
Agreement and all other Loan Documents constitute a legal and binding obligation
of each Borrower a party thereto, enforceable against each Borrower in
accordance with its terms subject to: (i) judicial principles respecting or
limiting the availability of specific performance, injunctive relief and other
equitable remedies; and (ii) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect generally relating to or
affecting creditors' rights. No Borrower is in violation of any term of its
Articles or Certificate of Incorporation or Bylaws, or in violation of any term
of any judgment, decree, order, statute, rule or government regulation
applicable to such Borrower or to which the Borrower is a party. No Borrower is
in violation of any term of any agreement or instrument applicable to such
Borrower or to which the Borrower is a party where such violation is likely to
be materially adverse to such Borrower's financial condition, business or
operations.
(d) Validity of Securities. The Notes and Warrants, when issued, sold
and delivered in accordance with the terms of
11
17
this Agreement, will be duly and validly issued, and will be free and clear of
any liens, encumbrances or restrictions of any kind; provided, however, that the
Notes and Warrants may be subject to restrictions on transfer under state and
federal securities laws and the Warrants are subject to the Shareholders
Agreement dated as of December 24, 1997 (the "Shareholders Agreement"), among
the Parent and the Shareholders (as defined therein). The Common Stock issuable
upon exercise of the Warrants has been duly and validly reserved and, upon
issuance in accordance with the terms of the Warrants, will be duly and validly
issued, fully paid and non-assessable and will be free and clear of any liens,
encumbrances or restrictions of any kind; provided, however, that the Common
Stock may be subject to restrictions on transfer under state and federal
securities laws and the Shareholders Agreement.
(e) Consents and Waivers. Each Borrower has obtained any and all
consents, permits and waivers and made all filings necessary or appropriate for
consummation of the transactions contemplated by this Agreement.
(f) Litigation. There is no action, suit or proceeding pending or, to
the knowledge of any Borrower, threatened against any Borrower or related to the
business conducted by such Borrower. No Borrower is a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit, proceeding or
investigation by any Borrower currently pending or which any Borrower intends to
initiate.
(g) Shareholder Lists and Agreements; Officers and Directors. Set
forth on Schedule 7(g) is a true and complete list of all shareholders of Parent
and persons holding options or warrants to acquire shares of Parent, showing the
number of shares of capital stock held, or acquirable upon exercise of the
option or warrant, by each such person in each case as of the date of this
Agreement. Schedule 7(g) also sets forth the names of the officers and directors
of each Borrower and all indebtedness of the officers, directors, shareholders
and any of their respective close relatives, to the Borrowers. Except as set
forth on Schedule 7(g), none of the officers or directors or significant
employees of any Borrower or their respective close relatives, owns directly or
indirectly, individually or collectively, any interest in any entity which is a
competitor, customer or supplier of (or has any existing contractual
relationship with) any Borrower other than ownership of less than one percent
(1%) of any publicly traded securities of any entity or of an interest in any
entity through ownership of publicly traded shares of any mutual fund.
(h) Subsidiaries. Except as set forth on Schedule 7(h), Parent has
no subsidiaries and does not own, directly or indirectly, any interest in any
corporation, association or business entity. All outstanding shares of capital
stock of each
12
18
class of each Subsidiary is owned beneficially and of record by Parent.
(i) Financial Statements.
(a) Schedule 7(i) attached hereto contains true, correct and
complete copies of:
(i) the audited consolidated and consolidating balance sheet
of the Borrowers, as of December 31, 1998, and the related statements of
operations, stockholders' equity (deficit) and cash flows of the Borrowers for
the period covered thereby, including the footnotes thereto (all of foregoing
being hereinafter collectively called the "Annual Financial Statements"); and
(ii) the interim unaudited consolidated and consolidating
balance sheet of the Borrowers (the "Interim Balance Sheet") as of February 28,
1998 (the "Interim Balance Sheet Date"), and the interim statements of
operations of the Borrowers for the two (2) month period then ended (all of the
foregoing, including the Interim Balance Sheet, being hereinafter collectively
referred to as the "Interim Financial Statements" and together with the Annual
Financial Statements collectively, the "Financial Statements").
(b) The Financial Statements taken as a whole (A) fairly present
in all material respects (subject, in the case of the Interim Financial
Statements, to normal, recurring year-end adjustments which are not material
individually or in the aggregate) the financial position of the Borrowers as of
the dates indicated and the results of operations of the Borrowers for the
periods indicated, (B) (x) have been prepared in accordance with Generally
Accepted Accounting Principles ("GAAP") consistently applied throughout the
periods covered thereby (subject, in the case of the Interim Financial
Statements, to normal, recurring year-end adjustments which are not material
individually or in the aggregate) or (y) to the extent not prepared in
accordance with GAAP, then footnotes to the Financial Statements will be
provided describing in reasonable detail the differences, if any, between the
accounting principles pursuant to which such Financial Statements were in fact
prepared and GAAP and (C) are in accordance with the books and records of the
Borrowers which have been maintained in a manner consistent with historical
practice. All reserves established and set forth in the Interim Balance Sheet
are reasonable and adequate.
(j) Absence of Undisclosed Liabilities. The Borrowers have no
liabilities or obligations of any nature, whether matured or unmatured, known or
unknown, or fixed or contingent, except (a) to the extent expressly reflected or
reserved against on the Interim Balance Sheet or expressly disclosed in the
notes thereto; and (b) liabilities and obligations arising since the Interim
Balance Sheet Date in the ordinary course of business
13
19
consistent with past practice (other than any such liability or obligation
arising from breach of contract, breach of warranty, tort, infringement, or
violation of any legal requirement).
(k) Absence of Certain Developments. Except as reflected in the
Financial Statements or in Schedule 7(k), since the Interim Balance Sheet
Date, there has been (i) no material adverse change in the condition (financial
or otherwise) of the Borrowers or in the assets, liabilities, or properties of
the Borrowers; (ii) no declaration, setting aside or payment of any dividend or
other distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the capital stock of Parent; (iii) no waiver of any
valuable right of the Borrowers or cancellation of any debt or claim held by the
Borrowers; (iv) no loan by any Borrower to any officer, director, employee or
shareholder of a Borrower, or any agreement or commitment therefor; (v) no
increase, direct or indirect, in the compensation paid or payable to any
officer, director, employee or agent of any Borrower; (vi) no material loss,
destruction or damage to any property of a Borrower, whether or not insured;
(vii) no labor disputes involving a Borrower and no material change in the
personnel of a Borrower or the terms and conditions of their employment; and
(viii) no acquisition or disposition of any assets (or any contract or
arrangement therefor), nor any other transaction by a Borrower otherwise than
for fair value in the ordinary course of business.
(1) Title to Assets. Each Borrower has good and marketable title to
all of the assets reflected as being owned by such Borrower on the Interim
Balance Sheet or acquired subsequent thereto (except for inventory sold or
otherwise disposed of in the ordinary course of business for fair value and
accounts and notes receivable paid in full since the date of the Interim Balance
Sheet), free and clear of all encumbrances, except for those encumbrances set
forth on Schedule 7(l) and Permitted Liens. Such assets are in good operating
condition and repair (normal wear and tear excepted), are adequate and suitable
for the uses for which they are used in such Borrower's business, are not
subject to any condition which interferes with the economic value or use
thereof, and constitute all assets necessary to permit each Borrower to carry on
its business after the consummation of the transactions contemplated by this
Agreement as generally conducted by such Borrower prior thereto. The term
"Permitted Liens" means (i) liens arising by operation of law in the ordinary
course of business that, individually and in the aggregate, do not in any
material respect interfere with the use of any of the assets subject thereto;
(ii) minor imperfections of title which do not materially detract from the value
of the property affected or materially impair the operations of any Borrower;
(iii) liens for taxes not yet due and payable; and (iv) landlords liens, if any,
relating to leases.
(m) Real Property. Borrowers do not own directly or indirectly any
real property.
14
20
(n) Tax Matters. Each Borrower has filed all federal, state and local
income, excise or franchise tax returns, real estate and personal property tax
returns, sales and use tax returns and other tax returns required to be filed by
it and has paid all taxes owed by it, except taxes which have not yet accrued or
otherwise become due or for which adequate provision has been made in the
pertinent Financial Statements. The provision for taxes on the Interim Balance
Sheet is sufficient as of its date, for the payment of all accrued and unpaid
federal, state, county and local taxes of any nature of each Borrower whether or
not assessed or disputed. All taxes and other assessments and levies which any
Borrower is required to withhold or collect have been withheld and collected and
have been paid over when due to the proper governmental authorities. With regard
to the income tax returns of the Borrowers, no Borrower has received notice of
any audit or of any proposed deficiencies from any taxing authority and no
controversy with respect to taxes of any type is pending or, to the knowledge of
any Borrower, threatened. There are in effect no waivers of applicable statutes
of limitations with respect to any taxes owed by any Borrower for any year.
(o) Contracts and Commitments. Except as set forth in Schedule 7(o),
no Borrower (i) is a party to any contract, obligation or commitment which
involves a potential commitment in excess of $100,000 or which is otherwise
material and not entered into in the ordinary course of business; and (ii) has
any employment contracts; stock redemption or purchase agreements; financing
agreements; licenses; distributor or sales representative agreements; agreements
with officers, directors, employees or shareholders of such Borrower (other than
between Parent and a Subsidiary) or persons or organizations related to or
affiliated with any such persons; leases; agreements relating to product
development; or pension, profit-sharing, retirement or stock option plans. Each
agreement or understanding set forth on Schedule 7(o) is in full force and
effect and constitutes a valid and binding obligation of the Borrower and to the
best knowledge of such Borrower, the other party thereto. Each Borrower has in
all material respects performed the obligations required to be performed by it
except for obligations not yet due to be performed and each Borrower is and has
not been in default or received notices that it is in default in any material
respect under any such agreement or understanding. There exists no known event
or condition which, after notice or lapse of time, or both, would constitute
such a default. There are no material defaults by any other party to any such
agreement or understanding as to which any notice of default has been given.
Each Borrower has made available to the Lenders correct and complete copies of
all documents set forth on such Schedule.
(p) Proprietary Rights; Employee Restriction. Borrowers have disclosed
on Schedule 7(p), all copyright registrations, trademark registrations and
applications for
15
21
registration, patents and patent applications, trademarks, trade secrets or
other proprietary rights (collectively, "Intellectual Property Rights") used or,
to the best of Borrowers' knowledge, to be used in Borrowers' business as
presently conducted or contemplated and all licenses, assignments and leases
relating to Intellectual Property Rights of others embodied in products of the
Borrowers. Borrowers have exclusive ownership of or license to use, all
Intellectual Property Rights identified in Schedule 7(p) and, to the best
knowledge of Borrowers have obtained any licenses, releases or assignments to
use all third parties' Intellectual Property Rights embodied in products of the
Borrowers. To the best knowledge of the Borrowers, neither the present nor
contemplated business activities or products of the Borrowers infringe any
Intellectual Property Rights of others. No Borrower has received any notice or
other claim from any person asserting that any of such Borrower's present or
contemplated activities infringe or may infringe any Intellectual Property
Rights of such person. Each Borrower has the right to use, free and clear of
claims or rights of others, all trade secrets, customer lists, manufacturing
processes, hardware designs, programming processes, software and other
information required for or incident to its products or its business as
presently conducted or contemplated. Each Borrower has taken all commercially
reasonable steps to establish and preserve its ownership of all copyright, trade
secret and other proprietary rights with respect to its products and technology,
except such rights as such Borrower has reasonably determined are not material
to such Borrower's continuing business operations. No Borrower is aware of any
infringement by others of its copyrights or other Intellectual Property Rights
to which it has exclusive use in any of its products, technology or services, or
any violation of the confidentiality of any of its proprietary information. No
Borrower is making unlawful use of any confidential information or trade secrets
of any past or present employees of such Borrower. Except as set forth in
Schedule 7(p), neither any Borrower nor, to each Borrower's knowledge, any of
the key employees of such Borrower have any agreements or arrangements with
former employers of such employees relating to confidential information or trade
secrets of such employers. The activities of each Borrower's employees on behalf
of such Borrower do not violate any agreements or arrangements known to such
Borrower which any such employees have with former employers.
(q) Effect of Transactions. The execution, delivery and performance by
Borrowers of this Agreement and the documents executed and delivered in
connection therewith will not conflict with or result in any default under any
material contract obligation or commitment of any Borrower, or any charter
provision, bylaw or corporate restriction of any Borrower, or the creation of
any lien, charge or encumbrance of any nature upon any of the properties or
assets of any Borrower, except pursuant to this Agreement. Each Borrower's
execution and delivery of this Agreement and the documents executed and
delivered in
16
22
connection therewith and its performance of the transactions contemplated
thereby will not violate any instrument, agreement, judgment, decree, order,
statute, rule or regulation of any federal, state or local government or agency
applicable to such Borrower.
(r) Insurance. Each Borrower maintains valid and effective insurance
policies, issued by financially sound and reputable insurers, to insure it
against all risks usually insured against by persons or entities conducting
businesses similar to that of such Borrower in the locality in which such
businesses are conducted. Each Borrower has paid all due premiums with respect
to all policies of insurance currently maintained by such Borrower.
(s) Securities Act Registration. Assuming that the representations and
warranties of the Lenders contained herein are true, the offer, sale and
delivery of the Notes and Warrants in the manner contemplated by this Agreement
are each exempt from registration under the Securities Act and are exempt or
will be exempt under applicable state securities or Blue Sky laws regulating the
issuance or sale of securities upon the timely filing of notices with the
appropriate states.
(t) Business; Compliance with Laws. Each Borrower (i) is in compliance
with, in all respects all legal requirements applicable to it and its business
and (ii) has all material federal, state, local and foreign governmental
licenses and permits (collectively, "Permits") used or necessary in the conduct
of its business. Such Permits are in full force and effect, no violations with
respect to any thereof are recorded, no legal proceeding is pending or, to the
best knowledge of each Borrower, threatened to revoke or limit any thereof.
(u) Books and Records. The minute books of each Borrower contain
complete and accurate records of all meetings and other corporate actions of its
shareholders and its board of directors (the board of directors of Parent being
herein referred to as the "Board of Directors") and committees thereof. The
stock ledger of Parent is complete and reflects all issuances, transfers,
repurchases and cancellations of shares of capital stock of Parent.
(v) Employee Benefit Plans. Each employee benefit plan, program,
arrangement, practice or contract, whether formal or informal, maintained or
contributed to by any Borrower providing current or retirement benefits or
compensation to or on behalf of employees or former employees of such Borrower
(the "Benefits Plans"), are in compliance in all material respects with the
presently applicable laws.
(w) Small Business Matters. Parent (including the Subsidiaries) is a
"small business concern" within the meaning of the Small Business Investment Act
of 1958 and the regulations
17
23
thereunder (the "SBIC Act"), including Title 13, Code of Federal Regulations,
ss.121.301. The information set forth in the Small Business Administration Forms
480, 652 and Sections A and B of Form 1031, which have been delivered on or
prior to the date hereof to the Lenders regarding the Borrowers is accurate and
complete. Parent does not presently engage in, and it shall not hereafter engage
in, any activities, nor shall Parent use directly or indirectly the proceeds
from the sale of the Notes and Warrants for any purpose for which a Small
Business Investment Corporation is prohibited from providing funds by the SBIC
Act, including Title 13, Code of Federal Regulations, ss.107.720. Parent
acknowledges that it has been declared by each of WPLP, Pacific and Chase that
each such entity is a federal licensee under the SBIC Act.
(x) Information Supplied to the Lenders.
(i) Neither this Agreement, or the Schedules and Exhibits attached
hereto, nor any written document (including the Business Plan attached hereto as
Schedule 7(x)), certificate, projection or statement furnished to the Lenders by
or on behalf of the Borrowers pursuant to this Agreement contains any untrue
statement of a material fact, and none of this Agreement, the Schedules and
Exhibits attached hereto or such other written documents, projections,
certificates and statements omits to state a material fact necessary in order to
make the statements contained herein or therein not misleading. There is no
material fact relating to the business, prospects, operations, affairs or
conditions of the Borrowers which adversely affects or in the future may, in the
reasonable business judgment of the Borrowers, adversely affect the same which
has not been set forth in this Agreement or in the Schedules or Exhibits
attached hereto or other materials delivered pursuant to this Agreement.
(ii) The projections contained in the Business Plan are based upon
assumptions believed by Borrowers to be reasonable as of the date hereof,
however Borrowers give no assurance that the actual operations of Borrowers will
conform to such projections.
(iii) Any disclosure contained in any of the Schedules delivered
hereunder, which on its face is clearly and unequivocally applicable to another
Schedule to this Agreement, shall be deemed made with respect to such other
Schedule.
(y) Employees. No Borrower has a collective bargaining agreement with
any of its employees. There is no labor union organizing activity pending nor,
to the best knowledge of any Borrower, threatened with respect to such Borrower.
No Borrower is aware that any officer or key employee intends to terminate his
or her relationship with such Borrower, nor does any Borrower have any present
intention of terminating the employment of any officer or key employee.
18
24
(z) Business Operations. Borrowers represent and warrant that
Borrowers design, develop, manufacture, and market integrated, high-throughput
biochip and proteomic systems and services for analyzing and quantifying
biomolecules, such as DNA, RNA, and proteins. Except as set forth on Schedule
7(z) hereto, Borrowers have not, during the five years preceding the date of
this Agreement, been known as or used any other corporate, trade or fictitious
name, nor acquired all or substantially all of the assets, capital stock or
operating units of any person, nor had a business location at any address other
than the addresses set forth in the heading of this Agreement.
(aa) Collectibility of Accounts Receivable. The accounts receivable of
Borrowers which are shown on the February 28, 1999 balance sheet or thereafter
acquired by Borrowers are good and collectible at the aggregate recorded amounts
thereof (subject to no defense, counterclaim or set-off) except to the extent of
the reserves provided for such receivables on such balance sheet and all such
accounts receivable arose in the normal course of the business of Borrowers.
(bb) Inventory. All inventories reflected in the Interim Financial
Statements or acquired thereafter (the "Inventories") of each Borrower are
usable in the ordinary course of its business, have been recorded in amounts not
in excess of the cost for such items and consist solely of inventories of the
kind and quality regularly used in the Borrower's business. On the closing date,
such Inventories shall be in amounts reasonably related to the normal
requirements of the Borrower's business and will be usable and the finished
goods Inventories will be readily saleable all in the ordinary course of the
Borrower's business.
8. AFFIRMATIVE COVENANTS. As of the date of this Agreement and continuing
until Borrowers' obligations under this Agreement, the Notes, the Warrants, and
all Loan Documents are fully performed, including that the Notes are fully paid
to Lender, Borrowers shall at all times:
(a) Financial Statements. Furnish to the Lender the following
consolidated and consolidating balance sheets and statements of income and
retained earnings of the Borrowers prepared on the accrual basis according to
generally accepted accounting principles consistently applied: (1) monthly
financial statements containing at a minimum a balance sheet and income
statement together with analyses of variances from the annual operating Budget
and Business Plan, and such further detail as shall be reasonably requested by
Lender from time to time, no later than thirty (30) days after the end of each
month, certified as true and correct by an officer of Parent; (2) copies of
monthly aging of accounts receivable and/or accounts payable in the form and at
the time furnished to the Senior Lender; (3) audited annual financial statements
containing balance sheet, statement of earnings, statement of cash flows and
notes to
19
25
financial statements within ninety (90) days of the end of Parent's fiscal year
prepared by a big five accounting firm or its successor or an accounting firm
which is satisfactory to the Lender accompanied by (i) an unqualified opinion of
such firm, and (ii) a certificate from such accounting firm, addressed to the
Parent's Board of Directors, stating that in the course of its examination,
nothing came to its attention that caused it to believe that there was any
default by any Borrower in the fulfillment of or compliance with any of the
terms, covenants, provisions or conditions of this Agreement or any other
material agreement to which any Borrower is a party; (4) such additional
information, reports, budgets or statements as the Lender may from time to time
reasonably request in connection with this Agreement; and (5) permit, upon
reasonable notice, a representative of the Lender to inspect the books, records,
budgets, and documents received by the Board of Directors or properties of the
Borrowers at reasonable times and to make copies and abstracts of such books and
records and any documents relating to such properties, and to discuss the
Borrowers' affairs, finances, and accounts with its officers. Borrowers shall
also provide to Lenders within five (5) days of request all such information
required by Lenders to report to the Small Business Administration the economic
impact of Lender's loan to Borrowers. Without Lender's prior written consent,
Borrowers shall not modify or change any accounting policies or procedures in
effect on the date hereof.
(b) Payment Of Taxes. Promptly pay all taxes, levies and assessments,
and governmental charges upon it, its income, and its properties, due to all
local, state and federal agencies. Except to the extent that a Borrower has
established a cash reserve and is actively pursuing a tax dispute or appeal, any
failure by a Borrower to promptly pay any taxes, levies and assessments due,
shall be an event of default.
(c) Insurance. Maintain adequate fire and extended risk coverage,
business interruption, workers disability compensation, public liability,
environmental, flood, and such other insurance coverages as may be required by
law or as is customary and adequate among businesses in Borrowers' industry
engaged in the same or similar activities. All insurance policies shall be in
such amounts, upon such terms, in form, and carried with insurers with a "best
rating" of B or better or such insurers as are acceptable to Lender. Each
Borrower shall provide evidence satisfactory to Lender of all insurance
coverages and that the policies are in full force and effect, and for all
insurance coverages upon any property which is collateral, the insurance policy
shall be endorsed to provide Lender with a standard loss payable clause with not
less than thirty (30) days advance written notice to Lender by the insurer of
any cancellation or modification of coverage. Any failure by a Borrower to
maintain insurance as provided in this Agreement shall be an event of default
and Lender may obtain insurance, without obligation to do so, and all amounts so
expended by
20
26
Lender shall be added to the indebtedness or shall be payable on demand, at
Lender's option.
(d) Notice of Adverse Events. Promptly notify the Lender of any
actions, suits, proceedings or claims before any court, governmental department,
commission, board, bureau, agency or instrumentality, commenced or threatened
against the Borrowers involving Twenty-Five Thousand Dollars ($25,000.00) or
more or which could otherwise affect the conduct of its business.
(e) Maintenance. Maintain, preserve, and keep its properties and
equipment, whether leased or owned, in good repair and working order and
condition, ordinary wear and tear excepted, and will from time to time make all
needed and proper repairs, renewals, replacements, additions and betterments
thereto so that at all times the efficiency thereof shall be fully preserved and
maintained, and comply with all the federal, state and local laws and
regulations including environmental law.
(f) Board of Directors. Parent shall forward to the Lender copies of
all documents given by Parent to its board of directors and shall allow a
representative of the Lenders, designated by White Pines Management, L.L.C., to
observe the board meetings and provide the Lender with at least seven (7) days
notice (one (1) day for special meetings) prior to each and every board meeting.
Parent's board of directors must approve the Borrowers' annual operating budget
and five year Business Plan and Borrowers shall provide the Lender with a copy
of said annual operating budget and five year Business Plan as soon as available
and in no event less than five (5) days prior to the beginning of each fiscal
year.
(g) Environmental Compliance/Notices/Indemnity. Strictly comply with
all environmental laws applicable to Borrowers' business. Borrowers agree to
notify Lender not later than ten (10) days after Borrower's receipt, of any
summons, notice, lawsuit, citation, letter, or other advice received by a
Borrower from any Federal, State, or local agency or unit of government or other
person, which asserts that a Borrower is in violation of any environmental laws.
Borrowers agree to indemnify and hold Lender harmless from all violations by
Borrowers of any environmental laws, which indemnity shall include all costs and
expenses incurred by Lender, including actual legal fees, which are related to
any violation by Borrowers of any environmental laws, whether or not the Loan
has been paid at the time any such proceeding, claim, or action is instituted
against Lender.
(h) Maintain Corporate Existence and Due Qualification. Parent shall
preserve and maintain its corporate existence and good standing in the State of
Delaware and qualify and remain qualified as a foreign corporation in each
jurisdiction in which such qualification is required. Each Subsidiary shall
preserve and maintain its corporate existence and good standing under the laws
of the jurisdiction of its incorporation.
21
27
(i) Compliance With All Laws. Comply with all laws, rules and
regulations in effect or hereinafter promulgated by any foreign, federal, state
or local government, including without limitation all laws pertaining to
Borrowers' employees, the violation of which could have a material adverse
effect on the business of such Borrower.
(j) Information From Senior Lender. Provide the Lender (i) within
three (3) days of receipt thereof, copies of any or all notices or information
received from the Borrowers' Senior Lender exercising, terminating or
accelerating any rights or obligations of Senior Lender or any Borrower
contained in any agreements between such parties or expressing the intention or
consideration of the Senior Lender to take any such action, and (ii) with the
financial statements furnished pursuant to Section 8(a)(1), a summary of any
written or oral requests made to the Senior Lender for any waivers, and the
response thereto received from the Senior Lender.
(k) Reports.
(i) Provide Lender promptly after the sending or filing thereof,
copies of all reports, proxy statements and financial statements, if any, which
Parent sends to or files with any of its security holders or any securities
exchange or the Securities and Exchange Commission or any successor agency
thereof.
(ii) Provide Lender promptly in any event within ten (10) days
after receipt, a copy of any management letter or comparable analysis in the
event such letter or analysis is prepared by the auditors for the Borrowers.
(1) Compliance Certificate. Provide the Lender with appropriate
certification on an annual basis that the Borrowers are in compliance with all
the terms and conditions of this Agreement and that an Event of Default pursuant
to Section 10 hereof has not occurred.
(m) Use of Proceeds. The Borrowers shall use the proceeds of the Loan
for working capital and expenses of the transactions contemplated by this
Agreement, provided that none of the proceeds of the Loan will be used to repay
any existing indebtedness of Borrowers. Borrowers shall give Lenders access to
their records to confirm that Borrowers have used the proceeds of the Loan
solely for the foregoing purposes. Without limiting the generality of the
foregoing, Borrowers shall permit Lenders to conduct a post-closing review
within 90 days after the date hereof to assure that the proceeds of the Loan
were used for the intended purposes.
(n) Compliance With ERISA. Comply in all material respects with the
Employee Retirement Income Security Act of 1974, as amended and the Internal
Revenue Code of 1986, as
22
28
amended with respect to each of its federally insured pension plans.
(o) Patent Applications. Promptly file with appropriate governmental
authorities all applications for patents and patent rights as each Borrower in
its reasonable discretion, deems necessary or appropriate for the operation of
such Borrower's business as now conducted and proposed to be conducted.
(p) Disclosure. No representation or warranty by Borrowers in any
statement, schedule, or certificate to be furnished to the Lender pursuant to
this Agreement or the other Loan Documents, or in connection with the
transactions contemplated hereby or thereby, will contain any untrue statement
of a material fact or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
(q) Reinstatement of Security Interests. Any secured indebtedness of
any Borrower other than to the Senior Lender shall require the holder of such
indebtedness to subordinate such indebtedness and the rights under any mortgage,
pledge, security interest or other collateral rights securing repayment of such
indebtedness, to the obligations of Parent to Lenders under the terms of the
Warrants immediately upon notice to Parent of the exercise of the Lender's
rights under subsection (K) of the Warrants, including without limitation, such
indebtedness as may be evidenced by Promissory Notes issued in accordance with
the provisions of subsection (L) of the Warrants. If the Security Agreement
and/or the Pledge Agreement have terminated in accordance with their respective
terms prior to notice to Borrower of the exercise of Lender's rights under
subsection (K) of the Warrants, the effectiveness of such Security Agreement and
Pledge Agreement shall automatically continue or be reinstated with respect to
all amounts payable in accordance with the terms of the Warrants immediately
upon notice to Borrower of the exercise of Lender's rights under subsection (K)
of the Warrants. In the event of continuation or reinstatement of such Security
Agreement and Pledge Agreement, Borrowers agree, within three days after demand
by Lenders (i) to execute and deliver to Lenders those documents which Lenders
determine are appropriate to further evidence (in the public records or
otherwise) such continuation or reinstatement (although the failure of Borrowers
to do so shall not affect in any way the reinstatement or continuation), and
(ii) to cause any secured creditor to execute and deliver to Lenders a
subordination agreement reasonably acceptable to Lenders as required by this
Section 8(q). The provisions of this Section 8(q) do not modify in any respect
whatsoever the rights of Lenders contained in Section 9(b) of this Agreement.
9. NEGATIVE COVENANTS. Until the payment in full of the Notes, the
Borrowers shall not, except with the prior written consent of the Lender:
23
29
(a) Financial Covenants.
(i) allow consolidated Tangible Net Worth to be less than negative
$3,600,000 during 1999 or at any time thereafter, to be less than negative
$1,500,000 as of December 31, 2000 or at any time thereafter, to be less than
$4,000,000 as of December 31, 2001 or at any time thereafter, to be less than
$13,200,000, as of December 31, 2002 or at any time thereafter, or to be less
than $24,100,000 as of December 31, 2003 or at any time thereafter. "Tangible
Net Worth" shall mean Net Worth less intangible assets. Intangible assets
include goodwill, patents, copyrights, development expenses, computer software,
mailing lists, trademarks, bond discount and underwriting expenses, organization
expenses, and all other intangibles.
(ii) allow consolidated Long-Term Debt to be greater than
$11,500,000 at any time during 1999, to be greater than $16,000,000 at any time
during 2000 or 2001 or 2002, to be greater than $15,000,000 as of December 31,
2002 or during 2003, or to be greater than $14,000,000 as of December 31, 2003
or at any time thereafter. "Long-Term Debt" shall mean the sum of (x) all bank
debt, (y) all liabilities classified as long-term in accordance with generally
accepted accounting principles, and (z) the current portion of any liabilities
encompassed by "(y)".
(b) Liens and Indebtedness. Pledge, mortgage or otherwise encumber, or
subject to or permit to exist upon or be subjected to any lien, security
interest or charge, any asset or any property of any kind or character at any
time owned by the Borrowers, except: (1) liens for taxes not yet due which are
being contested; (2) purchase money security interests incidental to the conduct
of its business, and (3) liens and encumbrances granted to Borrowers' Senior
Lender.
(c) Dividends, Distributions; Capital Structure. Parent shall not
purchase or retire any of its shares without Lender's prior written consent.
Parent shall not declare any dividends on, or make any other distributions with
respect to, any shares of its capital stock or apply any of its property or
assets to the purchase, redemption, or other retirement of any shares of any
class of its capital stock, or set apart any sum for any such payments.
(d) Stock. Except for (i) the shares issuable upon conversion of
outstanding shares of preferred stock of Parent, and (ii) the shares presently
subject to existing employee and director stock option plans, issue or sell any
additional shares of capital stock, whether common or preferred, either directly
or indirectly to any affiliate, shareholder, director, officer, employee or any
close relative thereof. "Close relative" means parent, child, sibling, spouse,
father-in-law, mother-in-law, son-in-law, brother-in-law, daughter-in-law, or
sister-in-law.
24
30
(e) Leases. Enter into any arrangement providing for the leasing by a
Borrower of any real or personal property previously owned by such Borrower if
any portion of the lease obligation does not constitute "Long-Term Debt" for
purposes of Section 9(a)(ii) hereof.
(f) Environmental. Allow the real property owned or leased by a
Borrower to be used to store, use, or otherwise handle any hazardous or toxic
substance or other contaminants, except in the ordinary course of Borrower's
business, nor shall any Borrower allow any oil or gas tanks to be placed on any
of its real property, whether owned or leased, or any other similar activities
which might result in the raising of environmental issues regarding the
property, nor shall any Borrower handle, arrange for transport, deliver for
disposal or dispose of (directly or indirectly) any hazardous waste or hazardous
substances so as to contaminate any property or give rise to any remediation,
clean-up or damage obligation under any statute, rule, regulation, ordinance or
other common law.
(g) Transactions With Insiders Or Related Companies. Other than
transactions between or among Parent and Subsidiaries, no Borrower shall,
directly or indirectly:
(i) enter into any transaction, agreement or arrangement with any
shareholder, director, employee, officer or affiliate of a Borrower, or any
close relative of any shareholder, director, officer or affiliate of a Borrower,
on terms and conditions any less favorable to such Borrower than those which
could have been obtained from a party which was not such a shareholder,
director, officer or affiliate or close relative; or
(ii) make any advance or loan which exceeds Ten Thousand and
00/100 ($10,000) Dollars or which extends for a period longer than one (1) year,
to any affiliate, or any shareholder, director, officer or employee thereof, or
to any close relative of the foregoing, or to any trust of which any of the
foregoing is a beneficiary, or guaranty any indebtedness for any of the
foregoing, provided that the foregoing shall not preclude the execution and
delivery by employees of their promissory notes for the purchase price of shares
of common stock upon exercise of options under the stock option plans of Parent.
(h) Nature Of Business. Engage in any business other than those which
Borrowers currently conduct or as contemplated by the Business Plan.
(i) Change In Management. Cause or permit Xxxxxxx X. Xxxxxxxx to cease
serving as President and Chief Executive Officer of Parent.
10. EVENTS OF DEFAULT. The occurrence of any of the following events which
shall not be cured by Borrowers within
25
31
fifteen (15) days after notice to Borrowers from Lender of such event shall
constitute an "Event of Default" under this Agreement; provided that no such
notice shall be required with respect to subparagraph "(a)" below, Failure To
Pay Amounts Due.
(a) Failure To Pay Amounts Due. Any fees or any principal or interest
on any indebtedness to Lender is not paid within two business days of when due;
(b) Misrepresentation; False Financial Information. Any warranty or
representation of Borrowers in connection with or contained in this Agreement,
the Loan Documents, any certificate, document or financial or other statement
now or hereafter furnished to the Lender by or on behalf of the Borrowers, is
false or misleading in any material respect.
(c) Noncompliance With Lender Agreements. Borrowers shall fail to
perform in any material respect any of their obligations, covenants, and
agreements under this Agreement, or any other agreement with Lender, including
but not limited to the Loan Documents attached hereto as Exhibits.
(d) Other Creditor Events. Any non-Lender indebtedness of Borrower is
declared to be due and payable prior to the stated maturity thereof or the
Senior Lender shall give a default notice or effect a standstill period under
the terms of any subordination agreement.
(e) Judgments; Attachments; Tax Liens. There shall be entered against
a Borrower or any guarantor, any judgment which materially affects such
Borrower's or any guarantor's business, property or financial condition, or if
any tax lien, levy, attachment, forfeiture, seizure, garnishment, execution or
similar writ or process shall be issued against the Collateral or which
materially affects such Borrower's business, property or financial condition,
and which remains unpaid, unstayed on appeal, undischarged, unbonded, or
undismissed for a period of thirty (30) days after the date thereof.
(f) Indictment. The institution of any criminal proceeding wherein
forfeiture of a material amount of the Borrower's property is a potential
penalty.
(g) Business Suspension, Bankruptcy. Any Borrower or any other obligor
shall voluntarily suspend transaction of its business; shall generally not pay
debts as they mature; shall make a general assignment for the benefit of
creditors; shall file or have filed against such Borrower any reorganization or
liquidation under the Bankruptcy Code or under any other State or Federal law
for the relief of debtors, or a receiver, trustee or custodian shall be
appointed for a Borrower or any other obligor or guarantor for any portion of
such Borrower's or other obligor's or guarantor's property, which is not
discharged within thirty (30) days after filing.
26
32
(h) Material Adverse Change. Any material adverse change in Borrowers,
business, property or financial condition has occurred or is imminent, or if the
Collateral value or Lender's rights therein are materially impaired in any way.
(i) Hazardous Material. Any Borrower handles, uses, stores, delivers
for disposal, disposes of, transports or arranges for the transportation of any
waste, whether hazardous or not, in any manner which is not in compliance with
applicable laws, rules, regulations, ordinances or the common law, or which
contaminates any property or gives rise to any remediation or clean-up
obligation under any law, rule, regulation, ordinance or the common law; or a
Borrower contaminates any real property owned by it or any other property, or
its real property is used to handle, treat or store, or become contaminated
(including without limitation contamination of soil, ground water and service
water located on, in or under the real property) with, pollutants or any other
substances which handling, treatment, storage or contamination may give rise to
remediation or clean-up obligation with respect to its real property or the
property of others under any law, rule, regulation, ordinance or the common law;
or its real property or any property to which a Borrower delivers for disposal,
disposes of, transports or arranges for transport (directly or indirectly) any
waste is listed on the National Priority List or any state listing which
identifies sites for remedial cleanup or investigatory action.
(j) Use Of Proceeds. Any diversion by Borrowers of the proceeds of
Lenders' Loan from the uses specified in Section 8(m) without Lenders' prior
written consent.
11. REMEDIES ON DEFAULT.
(a) Acceleration. Upon the occurrence of any Event of Default, the
Loan (with accrued interest thereon), and all other amounts owing to the Lender
under this Agreement and the Note, and all other indebtedness to Lender may, at
the option of Lender, and without demand or notice of any kind, be declared to
be immediately due and payable.
(b) Remedies Cumulative. The remedies provided for in this Agreement
are cumulative and not exclusive, and Lender may exercise any remedies available
to it at law or in equity, and as are provided in this Agreement, the Loan
Documents, and any other agreement between any Borrower and Lender.
(c) No Waiver. No delay or failure of Lender in exercising any right,
remedy, power or privilege hereunder shall affect that right, remedy, power or
privilege, nor shall any single or partial exercise thereof preclude the
exercise of any other right, remedy, power or privilege. No delay or failure of
Lender to demand strict adherence to the terms of this Agreement shall be deemed
to constitute a course of conduct inconsistent
27
33
with the Lender's right to at any time, before or after any Event of Default,
demand strict adherence to the terms of this Agreement and the related
documents.
12. OTHER CONSIDERATION TO LENDERS.
(a) Closing Fee. Upon closing of the Loan, Borrowers shall pay to
Lenders a closing fee in the amount of $105,000.
(b) Expenses. Borrowers agree to pay on demand all out-of-pocket
expenses of the Lenders incurred in connection with making the Loan, including
the actual reasonable fees and expenses of its counsel, expenses incurred in due
diligence activities, lien searches and credit reviews, in connection with the
preparation of this Agreement and the supporting documentation, provided that
the amount of such expenses which Borrowers shall be required to reimburse shall
not exceed (i) $5,000 of expenses of Lenders, and (ii) $50,000 of fees and
expenses payable to third parties by Lenders.
(c) Repurchase of Securities Upon Declination of Sale of Borrower. If
at any time following the fifth anniversary date of this Agreement, Borrowers or
any of the shareholders, officers, directors, employees, or agents of Parent
receive a bona-fide offer from any third party for (i) the purchase of all or
substantially all of the assets and properties of Parent, (ii) the purchase of
50% or more of the outstanding common stock of Parent, or (iii) the merger or
consolidation of Parent with another person or persons (collectively, the
"Offer"), Borrowers shall give Lenders prompt written notice of the offer and
its terms and the identity of the person making such Offer. Borrowers shall also
advise the Lenders whether Parent, or shareholders owning a majority of the
outstanding common stock of Parent, as the case may be, intend to accept such
Offer. Within 30 days after receipt of such notice, each Lender may notify
Parent that it is requesting that Parent, or shareholders owning a majority of
the outstanding common stock of Parent, as the case may be, accept, or cause
Parent to accept, such offer. If Parent, or shareholders owning a majority of
the outstanding common stock of Parent, as the case may be, does not accept the
Offer and close the transaction contemplated thereby, each Lender may, within
180 days after such offer shall have terminated or been revoked, or the
transaction contemplated thereby terminated or abandoned, give Parent written
notice of demand by such Lenders that Borrowers promptly purchase all of the
Warrants or shares of common stock issued upon exercise of the Warrants, and
any other securities of Parent acquired by Lenders pursuant to this Agreement,
held by such Lender, and Borrowers shall purchase such securities within 30 days
after the date of such demand. The consideration that the Borrowers shall pay to
the Lender for the repurchased securities shall be each Lender's prorata part of
the total consideration presented as part of the Offer, provided, however, that
if the Offer included consideration other than cash or promissory notes payable
in cash, Borrowers shall pay each
28
34
Lender in cash the fair market value of each Lender's prorata part of such
non-cash consideration, with such fair market value to be determined by an
appraiser selected by Parent and acceptable, in their sole discretion, to a
majority of the Lenders who made such demand. Borrowers shall pay the costs and
fees of the appraiser.
13. REPRESENTATIONS AND WARRANTIES OF LENDER. Each Lender represents and
warrants to Parent, only as to itself, as follows:
(a) Investment. The Lender is acquiring the Note and Warrants for its
own account, for investment purposes, without a view to or for resale in
connection with, any distribution thereof.
(b) Transfers. The Lender understands that since the Note, Warrants
and shares of common stock purchaseable upon exercise of the Warrants have not
been registered under the Securities Act of 1933 (the "Securities Act") or
applicable state securities laws, the Lender must bear the economic risk of an
investment in such securities for an indefinite period of time unless they are
subsequently registered under the Securities Act and applicable state securities
laws or an exemption from such registration is available. In that regard, the
Lender has been advised that:
(i) Parent's obligations to register such securities under the
Securities Act or any Blue Sky Laws are limited as set forth in the Registration
Rights Agreement attached hereto as Exhibit F.
(ii) Parent is not subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended, and Rule 144 is not presently
available for public release of the securities. It acknowledges that the
securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available. It
has been advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of securities purchased in a
private placement subject to the satisfaction of certain conditions.
(c) Accredited Investor. Lender is an "Accredited Investor", as that
term is defined in Rule 501 of Regulation D promulgated under the Securities
Act.
(d) Restrictive Legend. The Lender agrees that the documents
representing the securities will bear the following restrictive legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE
29
35
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAW OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED TO EFFECTUATE SUCH TRANSACTION.
(e) Sophistication. By reason of the Lender's or the Lender's offeree
representative's knowledge and experience in financial and business matters in
general, and investments of this type in particular, the Lender is capable of
evaluating the merits and risks of any investment in the Notes and Warrants.
(f) Legal Investment. Subject to the accuracy of the representations
and warranties of Borrowers set forth in this Agreement, each Lender's purchase
of the Note and Warrants hereunder will, at the time of the Closing, be legally
permitted by all laws and regulations to which such Lender is subject.
14. MISCELLANEOUS. The following miscellaneous provisions shall apply:
(a) Rights Cumulative; Waivers. This Agreement and all of the
covenants, warranties, and representations of the Borrowers and all of the
powers and rights of the Lender hereunder shall be in addition to and cumulative
of all other covenants, representations, and warranties of the Borrowers, and
all other rights and powers of the Lender contained in, or provided for in, any
other instrument or document now or hereafter executed and delivered by the
Borrowers to or in favor of the Lender. No waiver or consent shall be effective
as against the Lenders unless the same is in writing and signed by Lenders
owning not less than two-thirds of the Warrants (or shares of common stock of
Parent issued upon exercise of the warrants) issued pursuant to this Agreement.
Any waiver or consent effected in accordance with this Section 14(a), including
any waiver of an Event of Default, shall be binding upon each Lender. No such
waiver or consent shall extend to or affect any obligation or right except to
the extent expressly provided for therein.
(b) Notices. Any and all notices provided for in this Agreement shall
be given in writing by registered or certified mail, return receipt requested
and shall be deemed to have been given when mailed, and shall be addressed as
follows:
As to WPLP: As to Borrowers:
White Pines Limited Partnership I Genomic Solutions, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx X 0000 Xxxxxxx Xxxxx, Xxxxx X
Xxx Xxxxx, XX 00000 Xxx Xxxxx, XX 00000
30
36
As to Chase:
As to Pacific: Chase Venture Capital
Pacific Capital, L.P. Associates, L.P.
0000 Xxxxxxxx Xxxx, Xxxxx X 380 Madison Avenue, 00xx Xxxxx
Xxx Xxxxx, XX 00000 Xxx Xxxx, XX 00000
As to American:
As to Bund, Xxxxx, Volunteer, American Healthcare Fund II
McMillan, Kalish, Marler, Boyle, 0000 Xxxxxxxx Xxxxxx, Xxx. 000
Xxxxxx, Xxxxxxx and Xxxxxxxx: Xxxxxxx, XX 00000
White Pines Management, L.L.C.
0000 Xxxxxxxx Xxxx, Xxxxx X As to Xxxxxxxxx-CA
Xxx Xxxxx, XX 00000 J. Xxxxxxx Xxxxxxxxx
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
and with a copy to:
As to Xxxxxxx:
Xxxxxx X. Xxxxxxx
Xx. Xxxxx X. Xxxxxxx 000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx and Associates Xxx Xxxxxxxxx, XX 00000
000 Xxxx Xxxxxxx Xxxxxx
Xxx Xxxxx, XX 00000 As to Xxxxxxxxx-FL
Xxxx X. Xxxxxxxxx
0000 Xxxxxxxx Xxxx
Xxxxx Xxxxx Xxxxx, XX 00000
As to Grove:
Grove Investment Partners
000 Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
(c) Reimbursement For Expenses. Borrowers agree to pay and reimburse
the Lender upon demand for all expenses and costs paid or incurred by the Lender
of any nature, whether incurred in or out of court, and whether incurred before
or after all sums due pursuant to this Agreement shall become due, at their
maturity date or otherwise, including but not limited to reasonable actual
attorneys fees and costs, which Lender may deem necessary or proper in
connection with the administration or satisfaction of the indebtedness,
including the amending of this Agreement or the Loan Documents or providing any
consent, or waiving any provision contained herein or therein, or the
supervision, preservation, protection of (including but not limited to, the
maintenance of adequate insurance) or the realization upon the Collateral,
or incurred in any bankruptcy, arrangement, or reorganization proceeding
involving any Borrower. Any and all indebtedness owing by the Lender to the
Borrowers may at any time without notice or demand be offset and applied to any
indebtedness or liability of the Borrowers to the Lender, whether or not then
due.
(d) Binding Effect. This Agreement shall be binding upon the Borrowers
and their respective successors, and legal representatives, provided however,
that Borrowers cannot assign
31
37
or transfer their rights or obligations under this Agreement without Lender's
prior written consent. This Agreement shall inure to the benefit of the Lenders
and to the benefit of their respective heirs, legal representatives, successors
and assigns including any subsequent holder or holders of the Note, the Warrants
or any interest therein.
(e) Generally Accepted Accounting Principles. All computations and
determinations of the income, assets and liabilities of the Borrowers for the
purpose of this Agreement shall be made in accordance with United States
generally accepted principles of accounting consistently applied, except as may
be otherwise specifically provided herein.
(f) No Partnership Or Joint Venture Established. Nothing contained in
this Agreement or any other Loan Document, and no action taken by the Lender
pursuant hereto or thereto shall be deemed to create a partnership, joint
venture or other entity or business relationship between the Lender and the
Borrowers except that created in a conventional commercial loan transaction. It
is acknowledged by the Borrowers that the Lender asserts no dominion or control
over the business operations of the Borrowers other than for purposes of
monitoring its business operations to protect their interest in the Collateral
as a secured creditor of the Borrowers.
(g) Governing Law; Jurisdiction. This Agreement and the related
documents shall be interpreted and the rights of the parties determined under
the laws of the State of Michigan without regard to its conflict of law
principles. Each Borrower expressly submits to the jurisdiction and venue in the
Federal or state courts of the State of Michigan by process served by mail on
such Borrower at the address set forth above. Should any part, term or provision
of this Agreement be judged illegal or conflict with any applicable law, the
validity of the remaining portion or provisions of this Agreement shall not be
affected.
(h) Further Action. Each Borrower agrees, from time to time, upon
Lender's request, to make, execute, acknowledge, and deliver to Lender such
further and additional instruments, documents and agreements, to take such
further action as reasonably may be required to carry out the intent and purpose
of this Agreement and repayment of the loans.
(i) Writings Constitute Entire Agreement; Modifications Only In
Writing. This Agreement, the related documents and all other written agreements
between Borrowers and Lender, constitute the entire Agreement of the parties,
and there are no other agreements, express or implied. This Agreement supersedes
any and all commitment letters or term sheets heretofore issued in connection
with this Loan. None of the parties shall be bound by anything not expressed in
writing, and neither this Agreement, the related documents, nor any other
agreement can be modified except by a writing executed by
32
38
Borrowers and by Lenders owning not less than two-thirds of the Warrants (or
shares of common stock of Parent issued upon exercise of the Warrants) issued
pursuant to this Agreement. Any modification effected in accordance with this
Section 14(i) shall be binding upon each Lender.
(j) Survival Of Terms, Representations And Warranties. The terms and
conditions of this Agreement as well as the Representations and Warranties
contained herein shall survive the closing of this financing transaction.
(k) Jury Trial Waivers. Each Borrower does knowingly, voluntarily and
intelligently waive its constitutional right to a trial by jury with respect to
any claim, dispute, conflict, or contention, if any, as may arise under this
Agreement or under the related documents, and agree that any litigation between
the parties concerning this Agreement and the related documents shall be heard
by a court of competent jurisdiction sitting without a jury. Each Borrower does
hereby confirm to Lender that it has reviewed the effect of this waiver of jury
trial with competent legal counsel of its choice, or been afforded the
opportunity to do so, prior to signing this Agreement and the related documents,
and each acknowledge and agree that Lender is relying upon this waiver in
extending the Loans to Borrowers.
(1) Indemnification. Each Borrower hereby agrees to indemnify and hold
harmless the Lenders and their affiliates and their respective partners,
officers, directors, employees, agents and representatives against any loss,
liability, demand, claim, action, cause of action, cost, damage, deficiency,
tax, penalty, fine or expense (including reasonable legal and accounting fees
and expenses related thereto or incurred in enforcing this Section 14(l), but
excluding punitive damages) arising from the untruth, inaccuracy or breach of
any of the representations, warranties, covenants or agreements of the Borrowers
contained in this Agreement or any Loan Documents or any facts or circumstances
constituting any such untruth, inaccuracy or breach, or any such breach
resulting from the Borrowers' operation of its business.
(m) Lender's Assignment. The rights of Lender and its assigns
hereunder shall not be impaired by Lender's sale, hypothecation or
rehypothecation of any Note of the Borrowers or any item of the collateral or by
any indulgence, including but not limited to (a) any renewal, extension, or
modification which Lender may grant with respect to the indebtedness or any part
thereof or (b) any surrender, compromise, release, renewal, extension, exchange
or substitution which Lender may grant in respect to the collateral, or (c) any
indulgence granted in respect of any endorser, guarantor, or surety. The
purchaser assignee, transferee or pledgee of this Agreement, the Note, the
Warrants, the Security Agreement, Subordination Agreements, Financing
Statements, Collateral, and any other document (or any of them), sold, assigned,
transferred, pledged or repledged,
33
39
shall forthwith become vested with and entitled to exercise all the powers and
rights given by this Agreement as if said purchaser, assignee, transferee, or
pledgee were originally named as Lender in said documents.
(n) Brokers. No Borrower has made any commitment or otherwise incurred
any obligation to pay any commission to any broker or finder in connection with
the transaction provided for in this Agreement.
(o) Counsel for Certain Lenders. Each of Chase, American,
Xxxxxxxxx-CA, Xxxxxxx, Xxxxxxxxx-FL and Grove hereby confirms that it has
reviewed this Agreement and the Loan Documents with competent legal counsel of
its choice, or been afforded the opportunity to do so, prior to signing this
Agreement and the related documents, and each acknowledge and agree that such
Lender is not relying upon Xxxxxxx and Associates as its counsel in connection
with this Agreement.
15. CONSTRUCTION AND INTERPRETATION. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Lenders, Borrowers and their respective agents have participated in the
preparation hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
LENDERS: BORROWERS:
WHITE PINES LIMITED PARTNERSHIP I GENOMIC SOLUTIONS, INC.
By: White Pines G.P., L.L.C.,
its general partner
By: /s/ Xxxxxxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------- ---------------------------
Xxxxxxxxx X. Xxxxx, Chairman Xxxxxxx X. Xxxxxxxx
President
PACIFIC CAPITAL, L.P. GENOMIC SOLUTIONS, LTD.
By: Pacific Capital Corporation,
its general partner
By: /s/ Xxxxxxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------- ---------------------------
Xxxxxxxxx X. Xxxxx, Vice-Chairman
34
40
IAN R. N. BUND XXXXX XXXXXX GENOMIC SOLUTIONS, K.K.
PROTOTYPE PS PLAN ACCOUNT
#000-00000-00000
XXXXX CONSULTING ASSOCIATES, INC.
VOLUNTEER HEALTHCARE ASSOCIATES, L.L.C
MCDONALD INVESTMENTS INC. CUSTODIAN
FBO S. XXXXXXXX XXXXXXXX III XXX By: /s/ Xxxxxxx X. Xxxxxxxx
ROLLOVER ACCOUNT #00000000 ---------------------------
XXXXXX X. XXXXXX LIVING TRUST U/A/D
SEPTEMBER 9, 1997
XXXX X. XXXXXX
MCDONALD INVESTMENTS INC. CUSTODIAN
FBO XXXXXX X. XXXXX XXX
ROLLOVER ACCOUNT #00000000
NATIONAL CITY BANK OF MI/IL CUSTODIAN
FBO XXXXXXX X. XXXXXX XXX
ROLLOVER ACCOUNT DATED JUNE 12, 1991
#MI-1491-00-4
XXXXXXX AND ASSOCIATES PROFIT SHARING
PLAN X/X/X XXXXXXX 0, 0000
XXXXXXX X. XXXXXXXX
By: White Pines Management, L.L.C.,
a Michigan limited liability
company, attorney in-fact
By: /s/ Xxxxxxxxx X. Xxxxx
-----------------------------------
Xxxxxxxxx X. Xxxxx, Chairman
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By:
-----------------------------------
AMERICAN HEALTHCARE FUND II
By:
-----------------------------------
---------------------------------------
J. XXXXXXX XXXXXXXXX
---------------------------------------
XXXXXX X. XXXXXXX
---------------------------------------
XXXX X. XXXXXXXXX
GROVE INVESTMENT PARTNERS
By:
-----------------------------------
35
41
XXXX X. XXXXXX
MCDONALD INVESTMENTS INC. CUSTODIAN
FBO XXXXXX X. XXXXX XXX
ROLLOVER ACCOUNT #00000000
NATIONAL CITY BANK OF MI/IL CUSTODIAN
FBO XXXXXXX X. XXXXXX XXX
ROLLOVER ACCOUNT DATED JUNE 12, 1991
#MI-1491-00-4
XXXXXXX AND ASSOCIATES PROFIT SHARING
PLAN X/X/X XXXXXXX 0, 0000
XXXXXXX X. XXXXXXXX
By: White Pines Management, L.L.C.,
a Michigan limited liability
company, attorney-in-fact
By: /s/ Xxxxxxxxx X. Xxxxx
-----------------------------------
Xxxxxxxxx X. Xxxxx, Chairman
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: /s/ Xxxxxx Xxxxxx
-----------------------------------
AMERICAN HEALTHCARE FUND II
Capital Health Venture Partners, its General Partner, by
By: /s/ Xxx Xxxxxxxx
-----------------------------------
/s/ J. Xxxxxxx Xxxxxxxxx
---------------------------------------
J. XXXXXXX XXXXXXXXX
/s/ Xxxxxx X. Xxxxxxx
---------------------------------------
XXXXXX X. XXXXXXX
/s/ Xxxx X. Xxxxxxxxx
---------------------------------------
XXXX X. XXXXXXXXX
GROVE INVESTMENT PARTNERS
By: /s/ Xxxx Xxxx
-----------------------------------
XXXX XXXX
35
