12% SUBORDINATED NOTE
Due September 9, 2004
U.S. $171,563.00 Dated: September 9, 1997
FOR VALUE RECEIVED, the undersigned, CLONTECH LABORATORIES, INC., a
California corporation (the "Borrower"), HEREBY UNCONDITIONALLY PROMISES TO
PAY to the order of SUMMIT INVESTORS III, L.P., (the "Lender"), the principal
sum of One Hundred Seventy-one Thousand, Five Hundred and Sixty-three UNITED
STATES DOLLARS (U.S. $171,563), on September 9, 2004.
The Borrower further promises to pay interest on the outstanding
principal amount of this Promissory Note (this "Note") from time to time at a
rate per annum equal at all times to 12.00%. At the end of the first annual
accrual period, commencing on the date hereof, and each annual accrual period
thereafter, Borrower shall pay one-half of the accrued interest for that
period to the Lender and the remaining one-half of the accrued interest for
that period shall be added to, and shall thereafter be treated for all
purposes as part of the principal amount of this Note. In the event that any
amount of principal or interest, or any other amount payable hereunder, is
not paid in full when due (whether at stated maturity, by acceleration or
otherwise), the Borrower shall pay interest on such unpaid principal,
interest or other amount, from the date such amount becomes due until the
date such amount is paid in full, payable on demand, at a rate per annum
equal at all times to 14.00%, compounded annually. In the event that, at any
time or from time to time, the Borrower shall incur a net operating loss
greater than 2% of revenue for any two successive fiscal quarters or for any
fiscal year (as reflected in the consolidated financial statements of the
Borrower and its subsidiaries delivered hereunder), then in each such
instance the rate of interest on unpaid principal, interest or other amounts
hereunder shall thereupon be increased by 2.00% per annum until such time as
the Borrower shall have a net operating profit for a full fiscal quarter.
Interest shall compound annually and shall accrue daily on the outstanding
principal amount of this Note and shall be calculated on the basis of a year
of 365 or 366 days, as the case may be, for the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such interest is payable.
All payments hereunder shall be made in lawful money of the United
States of America and in same day or immediately available funds, prior to
10:00 a.m. (Pacific time), to the Lender, at Boston Safe Deposit & Trust Co.,
Xxx Xxxxxx Xxxxx, Xxxxxx, XX 00000, Account Number 05-942-0, ABA Routing
Number 0110-01234, or to such other office and account of the Lender as it
from time to time shall designate in a written notice to the Borrower.
Whenever any payment hereunder shall be stated to be due, or whenever
any interest payment date or any other date specified hereunder would
otherwise occur, on a day other than a Business Day (as defined below), then,
except as otherwise provided herein, such payment shall be made, and such
interest payment date or other date shall occur, on the next succeeding
Business Day, and such extension of time shall in such case be included in
the computation of payment of interest hereunder. As used herein, "Business
Day" means a day (i) other than
1.
Saturday or Sunday, and (ii) on which commercial banks are open for business
in New York, New York, and San Francisco, California.
All payments shall be made hereunder unconditionally in full without
deduction, setoff, counterclaim or other defense. The Borrower represents
and warrants to the Lender that, to the best of the Borrower's knowledge,
there is no claim, defense, counterclaim or set-off which could be asserted
by or is available to the Borrower against the Lender.
Anything herein to the contrary notwithstanding, if during any period
for which interest is computed hereunder, the amount of interest computed on
the basis provided for in this Note, together with all fees, charges and
other payments which are treated as interest under applicable law, as
provided for herein or in any other document executed in connection herewith,
would exceed the amount of such interest computed on the basis of the Highest
Lawful Rate (as defined below), the Borrower shall not be obligated to pay,
and the Lender shall not be entitled to charge, collect, receive, reserve or
take, interest in excess of the Highest Lawful Rate, and during any such
period the interest payable hereunder shall be computed on the basis of the
Highest Lawful Rate. As used herein, "Highest Lawful Rate" means the maximum
non-usurious rate of interest, as in effect from time to time, which may be
charged, contracted for, reserved, received or collected by the Lender in
connection with this Note under applicable law.
The Borrower may, upon at least five (5) Business Days prior written
notice to the Lender, prepay the outstanding amount hereof in whole or in
part, without premium or penalty. Partial prepayments shall be in an
aggregate principal amount of at least $500,000 or a greater amount which is
an integral multiple of $500,000.
Notwithstanding anything herein to the contrary, the Borrower must
prepay all outstanding amounts hereunder upon the occurrence of (i) the
acquisition of the Borrower by another entity by means of any transaction or
series of related transactions (including, without limitation, any
reorganization, merger or consolidation, but excluding any merger effected
exclusively for the purpose of changing the domicile of the Borrower), (ii) a
sale of all or substantially all of the assets of the Borrower, (iii) a
liquidation, dissolution or winding up of the Borrower, or (iv) the
Borrower's sale of its Common Stock in a bona fide firm commitment
underwritten public offering pursuant to a registration statement under the
Securities Act of 1933, as amended.
Together with any prepayment hereunder, the Borrower shall pay accrued
interest to the date of such prepayment on the principal amount prepaid.
By accepting this Note, the Lender agrees that all payments on account
of the indebtedness, liabilities and other obligations of the Borrower to the
Lender and each other holder from time to time of this Note, including,
without limitation, all amounts of principal, all interest accrued hereon,
and all other amounts payable by the Borrower to the Lender under this Note
or in connection herewith (the "Subordinated Indebtedness") shall be
sub-ordinate and subject in right of payment, to the extent and in the manner
set forth herein, to the prior payment in full in cash or cash equivalents of
the Senior Indebtedness. As used herein, "Senior Indebtedness" shall mean
any indebtedness, liabilities and other obligations of the Borrower (whether
as primary obligor or as guarantor) to any Person (each a "Senior Lender")
with respect
2.
to any working capital, revolving credit or other line of credit facility,
any term loan facility, or any other extension of credit by a bank, insurance
company or financial institution engaged in the business of lending money
(whether or not secured), including reimbursement obligations under letters
of credit (or local guaranties, as applicable) and obligations in respect of
bankers' acceptances, interest rate protection agreements and currency
exchange and purchase agreements, and any other indebtedness or other
obligations of the Borrower (i) for borrowed money or evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or
businesses, (ii) under leases which are capitalized under U.S. generally
accepted accounting principles ("GAAP"), (iii) under leases for equipment
used in the ordinary course of the Borrower's business, and (iv) with respect
to indebtedness of others for the payment of which the Borrower is
responsible or liable as co-obligor or guarantor and any renewals,
refundings, refinancings or other extensions thereof, except for any of the
foregoing held by any Affiliate (as defined below) of the Borrower, and
except for indebtedness or other obligations which are specifically
designated not to be Senior Indebtedness for purposes of this Note in the
instruments evidencing such indebtedness or obligations at the time of the
issuance thereof or which by their terms are subordinated to any other
category or class of indebtedness of the Borrower. The terms "indebtedness,"
"liabilities" and "obligations" are used herein in their most comprehensive
sense and include any and all advances, debts, obligations and liabilities,
now existing or hereafter arising, whether voluntary or involuntary and
whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined.
As long as any of the Senior Indebtedness shall remain outstanding and
unpaid, the Lender shall not accept or receive, directly or indirectly, and
the Borrower shall not make, any Subordinated Debt Payment (as defined
below), except that prior to the occurrence of any Senior Lender Default (as
defined below) and receipt of the notice from the Senior Lender described
below, the Lender shall be entitled to accept and receive payments of
principal and interest under this Note,-in accordance with the terms of this
Note. Upon the occurrence of any Senior Lender Default (or if any Senior
Lender Default would exist immediately after the making of a Subordinated
Debt Payment), and upon receipt by the Borrower and the Lender of notice in
writing of such Senior Lender Default, and until such Senior Lender Default
is cured or waived, the Borrower shall not make, and the Lender shall not
accept or receive, any Subordinated Debt Payment. In the event that,
notwithstanding the foregoing provisions, any Subordinated Debt Payments
shall be received in contravention hereof by the Lender before all Senior
Indebtedness shall be paid, such Subordinated Debt Payments shall be held in
trust for the benefit of the Senior Lenders and shall be paid over or
delivered to the Senior Lenders for application to the payment in full in
cash or cash equivalents of all Senior Indebtedness remaining unpaid to the
extent necessary to give effect hereto, after giving effect to any concurrent
payments or distributions to any Senior Lender in respect of the Senior
Indebtedness. As used herein, "Senior Lender Default" means any payment
default in respect of any Senior Indebtedness, or any other default specified
in the agreement or instrument under which any Senior Indebtedness is issued,
continuing beyond the grace period, if any, specified in any such agreement
or instrument; and "Subordinated Debt Payment" means any payment or
distribution by or on behalf of the Borrower, directly or indirectly, of
assets of the Borrower of any kind or character, whether in cash, property or
securities, including on account of the purchase, redemption or other
acquisition of Subordinated Indebtedness, or by setoff, exchange or in any
other manner, for or on account of the Subordinated Indebtedness.
3.
If, while any Subordinated Indebtedness is outstanding, any bankruptcy,
insolvency, reorganization, receivership, arrangement, marshalling of assets
and liabilities or similar proceeding is commenced by or against the Borrower
or its property, (i) the Senior Lenders shall be irrevocably authorized and
empowered (in the name of the Senior Lenders or in the name of the Lender or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution in respect of the Subordinated
Indebtedness and give acquittance therefor and to file claims and proofs of
claim and take such other action (including voting the Subordinated
Indebtedness) as they may deem necessary or advisable for the exercise or
enforcement of any of the rights or interests of the Senior. Xxxxxxx, but
only if the Lender does not do so prior to the date 30 days before the
expiration of the time to file claims or take other action in any such
proceedings; and (ii) the Lender shall promptly take such action as any
Senior Lender may reasonably request (A) to collect the Subordinated
Indebtedness for the account of the Senior Lenders and to file appropriate
claims or proofs of claim in respect of the Subordinated Indebtedness, (B)
to execute and deliver to the Senior Lenders, such powers of attorney,
assignments and other instruments as they may request to enable them to
enforce any and all claims with respect to the Subordinated Indebtedness (to
the extent and in the manner provided herein), and (C) to collect and receive
any and all payments or distributions which may be payable or deliverable
upon or with respect to the Subordinated Indebtedness.
In the event of any payment or distribution of assets of the Borrower of
any kind or character, whether in cash, property or securities, upon the
dissolution, winding up or total or partial liquidation or reorganization,
readjustment, arrangement or similar proceeding relating to the Borrower or
its property, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership, arrangement or similar proceedings or upon an assignment for
the benefit of creditors, or upon any other marshalling or composition of the
assets and liabilities of the Borrower, or otherwise: (i) all mounts owing on
account of the Senior Indebtedness shall first be paid m full in cash, or
payment provided for in cash or in cash equivalents, before any Subordinated
Debt Payment is made; and (ii) to the extent permitted by applicable law, any
Subordinated Debt Payment to which the Lender would be entitled except for
the provisions hereof, shall be paid or delivered by the trustee in
bankruptcy, receiver, assignee for the benefit of creditors or other
liquidating agent making such payment or distribution directly to the Senior
Lenders for application to the payment of the Senior Indebtedness in
accordance with clause (i) above, after giving effect to any concurrent
payment or distribution or provision therefor to the Senior Lenders in
respect of such Senior Indebtedness.
The Lender shall not (i) accelerate any Subordinated Indebtedness, or
demand or attempt to collect or commence any legal proceedings to collect,
any Subordinated Debt Payment prior to the date such payment becomes due and
payable pursuant to the terms thereof or, if later, prior to the first date
such amount is not prohibited from being paid pursuant to this Note or
institute any other actions or proceedings to enforce its rights or interests
under or in respect of this Note; (ii) exercise any rights under or with
respect to (A) any guaranties of the Subordinated Indebtedness, or (B) any
collateral securing the Subordinated Indebtedness, including causing or
compelling the pledge or delivery of any collateral, any attachment of, levy
upon, execution against, foreclosure upon or the taking of other action
against or institution of other proceedings with respect to any collateral,
notifying any account debtors of the Borrower or asserting any claim or
interest in any insurance with respect to the collateral, or attempt to do
any of the foregoing; (iii) exercise any rights to set-offs and counterclaims
in respect of any indebtedness, liabilities or
4.
obligations of the Lender to the Borrower against any of the Subordinated
Indebtedness; or (iv) commence or maintain any action, suit or any other
legal or equitable proceeding against the Borrower, or join with any creditor
in any such proceeding, under any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar law. Notwithstanding the
foregoing prohibitions, the Lender may take any action available to it under
applicable law and under this Note, including demand or acceleration of this
Note and commencement of or participation in any such proceeding, if any of
the Senior Indebtedness shall have been accelerated or demand made for
payment in full thereof, or any such proceeding shall have been commenced by
a Senior Lender or any other Person other than the Lender.
The subordination provisions of this Note are intended solely for the
purpose of defining the relative rights against the Borrower of the Lender,
on the one hand, and the Senior Lenders, on the other hand. Nothing
contained herein shall (i) impair, as between the Borrower and the Lender,
the obligation of the Borrower to pay the principal of or interest on this
Note and its other obligations with respect to the Subordinated Indebtedness
as and when the same shall become due and payable in accordance with the
terms thereof, or (ii) otherwise affect the relative rights against the
Borrower of the Lender, on the one hand, and the creditors of the Borrower
(other than the Senior Lenders), on the other hand.
Until the payment and performance m full of all Senior Indebtedness, the
Lender shall not have, and shall not directly or indirectly exercise, any
rights that it may acquire by way of subrogation under this Note, by any
payment or distribution to the Senior Lenders hereunder or otherwise. Upon
the payment and performance in full of all Senior Indebtedness, the Lender
shall be subrogated to the rights of the Senior Lenders to receive payments
or distributions applicable to the Senior Indebtedness until the Subordinated
Indebtedness shall be paid in full. For the purposes of the foregoing
subrogation, no payments or distributions to the Senior Lenders of any cash,
property or securities to which the Lender would be entitled except for the
provisions of this Note shall, as among the Borrower, its creditors (other
than the Senior Lenders and the Lender), be deemed to be a payment by the
Borrower to or on account of the Senior Indebtedness.
The Lender by its acceptance hereof agrees to execute and deliver to any
Senior Lender such subordination agreement as may be reasonably requested by
such Senior Lender and as may be consistent with the subordination provisions
contained herein, and to execute, acknowledge, deliver, file, notarize and
register all such further agreements, instruments, certificates, documents
and assurances, and perform such acts as such Senior Lender shall deem
necessary or appropriate to effectuate the purposes of the subordination
provisions contained herein.
The Lender shall not, without the prior written consent of the Senior
Lenders, agree to or permit any amendment, modification or waiver of any of
the subordination provisions of this Note (including any amendment,
modification or waiver pursuant to an exchange of other securities or
instruments for outstanding Subordinated Indebtedness).
5.
So long as any amount payable by the Borrower hereunder shall remain
unpaid, the Borrower shall deliver to the Lender:
(a) as soon as available but in any event within 30 days after the
end of each month in each fiscal year, unaudited consolidating and
consolidated statements of income and cash flows of the Borrower and its
Subsidiaries for such month and from the period from the beginning of the
fiscal year to the end of such month, and unaudited consolidating and
consolidated balance sheets of the Borrower and its Subsidiaries as of the
end of such month, setting forth in each case comparisons to the Borrower's
annual budget and to the corresponding period in the preceding fiscal year,
and all such statements shall be prepared in accordance with GAAP,
consistently applied, except that they may not contain full footnote
disclosures and may be subject to normal year-end adjustments for recurring
accruals, and shall be certified by the chief financial officer of the
Borrower;
(b) as soon as available, but in any event within 90 days after the
end of each fiscal year; consolidating and consolidated statements of income
and cash flows of the Borrower and its Subsidiaries for such fiscal year, and
consolidating and consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such fiscal year-setting forth in each case
comparisons to the Borrower's annual budget and to the preceding fiscal year,
all prepared in accordance with GAAP, consistently applied, and with respect
to the consolidated portions of such statements accompanied by an opinion
containing no exceptions or qualifications (except for qualifications
regarding specified contingent liabilities) of a "Big-Six" accounting firm
selected by the Board of Directors of the Borrower;,
(c) at least 30 days, but not more than 90 days, prior to the
beginning of each fiscal year, an annual budget and operating plan prepared
on a monthly basis for the Borrower and its Subsidiaries for such fiscal year
(displaying anticipated statements of income and cash flows and balance
sheets), and promptly upon preparation thereof any revisions of such annual
or other budgets and operating plans, and within 30 days after any monthly
period in which there is a material adverse deviation from the annual budget,
a certificate of the President and chief financial officer of the Borrower
setting forth in reasonable detail the deviation and what actions the
Borrower has taken and proposes to take with respect thereto;
(d) together with the financial statements pursuant to clauses (a)
and (b) immediately above, a certificate of the President and the chief
financial officer of the Borrower stating that such officers have no
knowledge that any Event of Default (as defined below) or an event or
condition which with notice or lapse of time or both would constitute an
Event of Default (a "Default") has occurred and is continuing, or, if such
Default has occurred and is continuing, indicating the nature thereof and the
action which the Borrower has taken and proposes to take with respect thereto;
(e) promptly (but in any event within five business days) after the
discovery or receipt of notice of any Default or Event of Default or any
other material adverse change, event or circumstance affecting the Borrower
and its Subsidiaries taken as a whole (including, without limitation, the
filing of any material litigation against the Borrower or any Subsidiary), a
certificate of the President and chief financial officer of the Borrower
specifying the nature and
6.
period of existence thereof and what actions the Borrower and its
Subsidiaries have taken and propose to take with respect thereto; and
(f) with reasonable promptness, such other information and
financial data concerning the Borrower and its Subsidiaries as any Person
entitled to receive information under the preceding subsections may
reasonably request.
Each of the financial statements referred to in subsections (a) and (b)
above shall present fairly in all material respects the consolidated
financial condition, results of operations and cash flows of the Borrower and
its Subsidiaries in accordance with GAAP applied on a consistent basis as of
the dates and throughout the periods set forth therein, subject in the case
of the unaudited financial statements to changes resulting from normal
year-end adjustments for recurring accruals (none of which would, alone or in
the aggregate, be materially adverse to the business, operations, assets,
Properties, liabilities, condition (financial or otherwise), results of
operations or prospects of the Borrower and its Subsidiaries taken as a
whole).
The Borrower shall permit the Lender and its representatives, upon
reasonable notice and during normal business hours and at such other times as
any such Person may reasonably request, to (a) visit and inspect any of the
properties of the Borrower and its Subsidiaries, Co) examine the corporate
and financial records of the Borrower and its Subsidiaries and make copies
thereof or extracts therefrom and (c) discuss the affairs, finances and
accounts of any such entities with the directors and officers. The Lender
agrees that it will not make use of, disseminate, or in any way disclose any
information obtained pursuant to this paragraph to any person, firm or
business, except on a confidential basis to the investors in Lender or its
Affiliates. The Lender's obligations under the immediately preceding
sentence with respect to any portion of such information shall terminate if:
(i) it was in the public domain at or subsequent to the time it was
communicated to Lender by Borrower through no fault of Lender, (ii) it was
rightfully in Lender's possession free of any obligation of confidence at or
subsequent to the time it was communicated to Lender by Borrower; or (iii)
the communication was in response to a valid order by a court or other
governmental body, was otherwise required by law, or was necessary to
establish the rights of either party under this agreement.
So long as any amount payable by the Borrower hereunder shall remain
unpaid, the Borrower shall not (in each case without the prior written
consent of the holders of a majority in interest of the outstanding 12%
Subordinated Notes due September 9, 2004 of the Borrower of like tenor as
this Note):
(a) directly or indirectly declare or pay any dividends or make any
distributions upon any of its capital stock or other equity securities,
except for dividends payable in shares of its Common Stock issued upon the
outstanding shares of Common Stock, or permit any of its Subsidiaries to
directly or indirectly declare or pay any dividends or make any distributions
upon any of its capital stock or other equity securities other than to the
Borrower;
(b) except for repurchases of capital stock or equity securities
from employees for consideration of $250,000 in the aggregate, directly or
indirectly redeem, purchase or otherwise acquire, or permit any of its
Subsidiaries to directly or indirectly redeem, purchase or otherwise acquire,
any of the Borrower's or any of its Subsidiaries' capital stock or other
equity
7.
securities (including, without limitation, warrants, options and other rights
to acquire such capital or other equity securities); or directly or
indirectly redeem, purchase or make any payments with respect to any stock
appreciation rights, phantom stock plans or similar rights or plans;
(c) authorize, issue, incur or enter mm any agreement providing for
the issuance (contingent or otherwise) of, or permit any of its Subsidiaries
to authorize, issue, incur or enter into any agreement providing for any such
issuance of, any notes or debt securities or other evidences of Indebtedness
which are senior to or pari passu with the Notes in redemption or the payment
of principal, interest, premium, penalties or other mounts other than with
respect to the existing Senior Indebtedness of the Company;
(d) make, or permit any Subsidiary to make, any loans or advances
to, guarantees for the benefit of, or investments in, any Person, except for
(i) reasonable advances to employees in the ordinary course of business and
in an amount not to exceed $10,000 individually or $250,000 in the aggregate
in any twelve-month period, (ii) acquisitions permitted pursuant to
subparagraph (h) below, (/ii) investments not exceeding $50,000 in any
twelve-month period and (iv) investments in certificates of deposit of
federally insured banks having a maturity of 90 days or less, investment
grade short-term commercial paper, general cash management as approved by the
Board of Directors of the Company and similar cash equivalents;
(e) merge, consolidate or enter into any other business combination
with any Person or permit any Subsidiary to merge, consolidate or enter into
any other business combination with any Person, other than a merger or
consolidation between or among wholly owned Subsidiaries of the Borrower or a
merger in which the shareholders of the Borrower immediately before the
consummation of the merger will own at least 66-2/3% of the equity securities
of the surviving entity (except for acquisitions permitted pursuant to
paragraph (h) below);
(f) sell, lease or otherwise dispose of, or permit any Subsidiary
to sell, lease or otherwise dispose of, more than 25% of the consolidated
assets (including, without limitation, the capital stock of any Subsidiaries)
of the Borrower and its Subsidiaries (computed on the basis of the greater of
book value, determined in accordance with GAAP consistently applied, or fair
market value, determined by the Borrower's Board of Directors m its
reasonable good faith judgment) in any transaction or series of related
transactions (other than sales of inventory in the ordinary course of
business);
(g) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation, any
reorganization into a limited liability company, a partnership or any other
non-corporate entity which is treated as a partnership for federal income tax
purposes, but excluding any stock split, stock dividend, stock combination or
like event) or permit any Subsidiary of the Borrower to do any of the same;
(h) acquire, or permit any Subsidiary to acquire, any interest in
any company, business or other Person (whether by a purchase of assets,
purchase of stock, merger or otherwise), or enter into any joint venture,
involving an aggregate consideration (including, without limitation, the
assumption of liabilities whether direct or indirect) exceeding $500,000 in
8.
any one transaction or series of related transactions or exceeding $1,000,000
in any twelve-month period;
(i) enter into, or permit any Significant Subsidiary (as such term
is defined in Rule 1-02 of Regulation S-X under the Securities Exchange Act
of 1934, as amended) to enter into, the ownership, active management or
operation of any business other than the business of developing,
manufacturing and selling biotechnology products and services for life
sciences research;
(j) become subject to, or permit any of its Subsidiaries to become
subject to (including, without limitation, by way of amendment to or
modification of) any agreement or instrument (other than Indebtedness under
existing lines of credit and equipment leases outstanding on the date hereof)
which by its terms would under any circumstances restrict (i) the right of
any such Subsidiary to make loans or advances or pay dividends to, transfer
property to, or repay any Indebtedness owed to the Borrower or another
Subsidiary thereof or (ii) the Borrower's right to perform the provisions of
this Note, any other related document or the bylaws of the Borrower;
(k) make any amendment to the certificate of incorporation or
bylaws of the Borrower which adversely affects the interests of holders of
Notes;
(l) establish or acquire (i) any Significant Subsidiaries (provided
the Borrower shall be permitted to establish wholly owned Subsidiaries of the
Borrower) or (b) any Significant Subsidiaries organized outside of the United
States and its territorial possessions;
(m) create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, Indebtedness
exceeding an aggregate principal amount of $250,000 outstanding at any time
on a consolidated basis, other than Indebtedness under existing lines of
credit and equipment leases outstanding on the date hereof;
(n) create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any Liens or
Encumbrances other than (i) tax liens with respect to taxes not yet due and
payable or which are being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established in accordance with
GAAP/consistently applied, (ii) deposits or pledges made in connection with,
or to secure payment of, utilities or similar services, workers'
compensation, unemployment insurance, old age pensions or other social
security obligations, and (iii) mechanics', materialmen's or contractors'
liens or encumbrances or any similar lien or restriction for amounts not yet
due and payable or which are being contested in good faith by appropriate
proceedings and for which appropriate reserves have been established in
accordance with GAAP, consistently applied;
(o) make any capital expenditures (including, without limitation,
payments with respect to capitalized leases, as determined in accordance with
GAAP consistently applied) exceeding (by $100,000 or more), in the aggregate
on a consolidated basis during any twelve-month period, the amount
specifically allocated therefor in any budget and operating plan furnished to
the Lender pursuant to this Note;
9.
(p) enter into any leases or other rental agreements (excluding
capitalized leases, as determined in accordance with GAAP consistently
applied) under which the amount of the aggregate lease payments for all such
agreements exceeds (by $100,000 or more), on a consolidated basis for any
twelve-month period, the amount specifically allocated therefor in any budget
and operating plan furnished to the Lender pursuant to this Note; and
(q) borrow against, pledge, assign, xxxxxx, cancel or surrender the
key-man life insurance policy in force relating to the President of the
Borrower.
So long as any amount payable by the Borrower hereunder shall
remain unpaid, the Borrower shall and shall cause each Subsidiary to (unless
it has received the prior written consent of the holders of a majority in
interest of the outstanding 12% Subordinated Notes due September 9, 2004 of
the Borrower of like tenor as this Note):
(a) at all times cause to be done all things necessary to.
maintain, preserve and renew its corporate existence and all material
licenses, authorizations and permits necessary to the conduct of its
businesses the failure of which to maintain, preserve or renew would have a
Material Adverse Effect;
(b) maintain and keep its material properties in good repair,
working order and condition, and from time to time make all necessary or
desirable repairs, renewals and replacements, so that its businesses may be
properly and advantageously conducted in all material respects at all times;
(c) pay and discharge (within 30 days after becoming due and
payable) all material taxes, assessments and governmental charges imposed
upon its properties or upon the income or profits therefrom (in each case
before the same becomes delinquent and before penalties accrue thereon) and
all material claims for labor, materials or suppliers which if unpaid would
by law become a Lien or Encumbrance upon any of its property, unless and to
the extent that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with GAAP,
consistently applied) have been established on its books with respect thereto;
(d) comply with all applicable laws, rules and regulations of all
governmental authorities, the violation of which would reasonably be expected
to have a material adverse effect upon the business, operations, assets,
Properties, liabilities, condition (financial or otherwise), results of
operations or prospects of the Borrower and its Subsidiaries taken as a whole;
(e) apply for and continue in force with adequate insurance
covering risks of such types and in such amounts as are customary for
corporations of similar size engaged in similar lines of business if
available on commercially reasonable terms;
(f) maintain the key-man life insurance policy of the President of
the Borrower;
10.
(g) possess and maintain all Intellectual Property Rights necessary
to the conduct of their respective businesses, the failure of which to
maintain would have a Material Adverse Effect, and own all right, title and
interest in and to, or have a valid license for, all such Intellectual
Property Rights except to the extent that any challenge to the same is being
contested in good faith and by appropriate means; PROVIDED, HOWEVER, that in
the event that, at any time, the Borrower or any Subsidiary fails to possess
and maintain, or to own all right, title or interest in, or have a valid
license for, any such Intellectual Property Right, the Borrower shall be
entitled to cure its default under this paragraph by (A) identifying to the
reasonable satisfaction of the Lenders, an adequate substitute Intellectual
Property Right within ninety (90) days thereafter and (B) within ninety (90)
days after such identification, acquiring all right, title and interest in
such substitute Intellectual Property Right or entering into a licensing or
similar agreement, in form and substance reasonably satisfactory to the
Lender, providing the Borrower with a valid license therefor; and
(h) maintain proper books of record and account which present
fairly in all material respects its financial condition and results of
operations and make provisions on its financial statements for all such
proper reserves as in each case are required in accordance with GAAP subject
to normal and recurring year-end audit adjustments, consistently applied.
As used herein:
"AFFILIATE" means any Person which, directly or indirectly, controls, is
controlled by or is under common control with another Person ("control,"
"controlled by" and "under common control with" with respect to any Person
meaning for the purposes of the foregoing the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise);
"INDEBTEDNESS" means, for any Person: (i) all indebtedness or other
obligations of such Person for borrowed money or for the deferred purchase
price of property or services and all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or
businesses; (ii) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and. remedies of the seller or lender
under such agreement in the event of default are limited to repossession or
sale of such property); (iii) all obligations under any lease of property
(whether real, personal or mixed) which, in accordance with GAAP, would, at
the time a determination is made, be required to be recorded as a capital
lease in respect of which such Person is liable as lessee; (iv) all
reimbursement or other obligations of such Person under or in respect of
letters of credit, bankers acceptances, interest rate swaps, caps, floors and
collars, currency swaps, or other similar financial products; (v) all
indebtedness of another Person of the types referred to in clause (i), (ii),
(iii) or (iv) above, guaranteed directly or indirectly in any manner by the
Person for whom Indebtedness is being determined, or in effect guaranteed
directly or indirectly by such Person through an agreement (A) to pay or
purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (B) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose
of enabling the debtor to make payment of such Indebtedness or to assure the
holder of such Indebtedness against loss,
11.
(C) to supply funds to or in any other manner invest in the debtor (including
any agreement to pay for property or services irrespective of whether or not
such property is received or such services are rendered) or (D) otherwise to
assure a creditor against loss; and (vi) all indebtedness of another Person
of the types referred to in clause (i), (ii), (iii) or (iv) above secured by
(or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be' secured by) any Lien upon or in property
(including accounts and contract rights) owned by the Person for whom
Indebtedness is being determined, even though such Person has not assumed or
become liable for the payment of such indebtedness of such other Person;
"INTELLECTUAL PROPERTY RIGHTS" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service
marks, trade dress, trade names, logos and corporate names and registrations
and applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registrations
thereof, (iv) mask works and registrations and applications for registration
thereof, (v) computer software, data, data bases and documentation thereof,
(vi) trade secrets and other confidential information (including, without
limitation, ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial and marketing plans and customer and
supplier lists and information), (vii) other intellectual property rights and
(viii) copies and tangible embodiments thereof (in whatever form or medium);
"LIEN OR ENCUMBRANCE" means any lien, pledge, mortgage, security
interest, claim, lease, charge, option, right, easement, servitude, transfer
limit, restriction, title defect or other encumbrance of any kind (including,
without limitation, any conditional sale or other title retention agreement
or lease in the nature thereof, any sale of receivables with recourse
against the Borrower or any Affiliate thereof, any filing or agreement to
file a financing statement as debtor under the Uniform Commercial Code or any
similar statute, or any subordination arrangement in favor of another Person);
"MATERIAL ADVERSE EFFECT" has the meaning set forth in the Securities
Purchase Agreement dated as of September 9, 1997, among the Borrower and the
original purchasers of 12% Subordinated Notes due September 9, 2004 of the
Borrower.
"PERSON" means an individual, corporation, partnership, joint venture,
trust, unincorporated organization or any other entity of whatever nature,
including any governmental agency or authority;
"PROPERTY" means any real, personal or mixed property, whether tangible
or intangible; and
"SUBSIDIARY" means, with respect to any Person, any entity controlled
(as such term is defined in the definition of "Affiliate" above) by such
Person.
12.
Unless otherwise defined or the context otherwise requires, all
accounting terms used herein shall be construed, and all accounting
determinations and computations required hereunder shall be made, in
accordance with GAAP, consistently applied.
Any of the following events which shall occur shall constitute an "Event
of Default":
1. The Borrower shall fail to pay, within 5 business days after becoming
due, any amount of principal or interest hereunder or other amount payable
hereunder.
2. Any representation or warranty by the Borrower under or in connection
with this Note shall prove to have been incorrect in any material respect
when made or deemed made.
3. The Borrower shall fail to perform or observe in any material respect
(within 30 days of the date required) any term, covenant or agreement
contained herein.
4. The Borrower or any of its Significant Subsidiaries shall admit in
writing its inability to, or shall fail generally or be generally unable to,
pay its debts (including its payrolls) as such debts become due, or shall
make a general assignment for the benefit of creditors; or the Borrower or
any such Significant Subsidiary shall file a voluntary petition in bankruptcy
or a petition or answer seeking reorganization, to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform
Act of 1978, as amended or recodified from time to time (the "Bankruptcy
Code") or under any other state or federal law relating to bankruptcy or
reorganization granting relief to debtors, whether now or hereafter in
effect, or shall file an answer admitting the jurisdiction of the court and
the material allegations of any involuntary petition filed against the
Borrower or any such Significant Subsidiary pursuant to the Bankruptcy Code
or any such other state or federal law; or the Borrower or any such
Significant Subsidiary shall be adjudicated a bankrupt, or shall make an
assignment for the benefit of creditors, or shall apply for or consent to the
appointment of any custodian, receiver or trustee for all or any substantial
part of the Borrower's or any such Significant Subsidiary's property, or
shall take any action to authorize any of the actions or events set forth
above in this paragraph; or an involuntary petition seeking any of the relief
specified in this paragraph shall be filed against the Borrower or any such
Significant Subsidiary; or any order for relief shall be entered against the
Borrower or any such Significant Subsidiary in any involuntary proceeding
under the Bankruptcy Code or any such other state or federal law referred to
in this paragraph 4.
5. The Borrower or any of its Significant Subsidiaries shall (i)
liquidate, dissolve or wind up (or suffer any liquidation, dissolution or
winding up), except to the extent expressly permitted by this Note, (ii)
suspend its operations other than in the ordinary course of business, or
(iii) take any corporate action to authorize any of the actions or events set
forth above in this paragraph 5.
6. The Borrower or any Subsidiary shall fail (i) to make any payment of
any principal of, or interest or premium on, any Indebtedness (other than in
respect of this Note) in an aggregate principal amount outstanding of at
least $250,000 when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness as of the date of such failure, or (ii) to
perform or observe any term,
13.
covenant or condition on its part to be performed or observed under any
agreement or instrument relating to any such Indebtedness, when required to
be performed or observed, and such failure shall continue after the
applicable grace period, if any, specified in such agreement or instrument,
if the effect of such failure to perform or observe is to accelerate, or to
permit the acceleration of, the maturity of such Indebtedness; or any such
Indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof.
7. A default or an event of default shall occur under any Senior
Indebtedness which-would permit the acceleration of such Senior Indebtedness
or any portion thereof.
8. A final judgment or order for the payment of money in excess of
$250,000 which is not fully covered by third-party insurance shall be
rendered against the Borrower or any of its Subsidiaries; or any non-monetary
judgment or order shall be rendered against the Borrower or any such
Subsidiary which has or would reasonably be expected to have a material
adverse effect upon the operations, properties, business or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a
whole; and in each case there shall be any period of 20 consecutive days
during which such judgment continues unsatisfied or during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect.
9. The Borrower shall incur a net operating loss greater than 2% of
revenue for (a) any three successive fiscal quarters or (b) for any fiscal
year and for the two consecutive fiscal quarters immediately following such
fiscal year, in each case as reflected in the consolidated financial
statements of the Borrower and its subsidiaries delivered hereunder.
If any Event of Default shall occur, the Lender may, subject to the
subordination provisions hereof and the rights of any Senior Indebtedness,
(i) by notice to the Borrower, declare the entire unpaid principal amount of
this Note, all interest accrued and unpaid hereon and all other amounts
payable hereunder to be forthwith due and payable, whereupon all unpaid
principal under this Note, all such accrued interest and all such other
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived by the Borrower; and (ii) whether or not the actions
referred to in clause (i) have been taken, proceed to enforce all other
rights and remedies available to the Lender under applicable law..
No amendment or waiver of any provision of this Note, nor any consent to
any departure by the Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Lender and then such
amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
All notices and other communications provided for hereunder shall,
unless otherwise stated herein, be in writing (including by facsimile) and
mailed, sent or delivered to the respective parties hereto at or to the
following addresses or facsimile numbers (or at or to such other address or
facsimile number as shall be designated by any party in a written notice to
the other parties hereto):
14.
If to the Lender: c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
Xxxx X. Xxxxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000-0913
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to the Borrower: Clontech Laboratories, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: President
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx Godward LLP
Five Palo Alto Square
0000 X0 Xxxxxx Xxxx
Xxxx Xxxx, XX 00000.0000
Attention: Xxxxx Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (415) $57-0663
All such notices and communications shall be effective (i) if delivered by
hand, upon delivery; (ii) if sent by mail, upon the earlier of the date of
receipt or five Business Days after deposit in the mail, first class (or air
mail, with respect to communications to be sent to or from the United
States), postage prepaid; and (iii) if sent by facsimile, when sent.
No failure on the part of the Lender to exercise, and no delay in
exercising, any right, remedy, power or privilege hereunder shall operate as
a waiver thereof, nor shall any single or Partial exercise of any such right,
remedy, power or privilege preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights and
remedies under this Note are cumulative and not exclusive of any rights,
remedies, powers and privileges that may otherwise be available to the Lender.
15.
Whenever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under all applicable laws and
regulations. If, however, any provision of this Note shall be prohibited by
or invalid under any such law or regulation in any jurisdiction, it shall, as
to such jurisdiction, be deemed modified to conform to the minimum
requirements of such law or regulation, or, if for any reason it is not
deemed so modified, it shall be ineffective and invalid only to the extent of
such prohibition or invalidity without affecting the remaining provisions of
this Note, or the validity or effectiveness of such provision in any other
jurisdiction.
The Borrower agrees to pay on demand all costs and expenses of the
Lender, and the reasonable fees and disbursements of counsel in connection
with (i) any amendments, modifications or waivers of the terms hereof, (ii)
any Default or Event of Default, (iii) the enforcement or attempted
enforcement of, and preservation of any rights under, this Note, and (iv) any
out-of-court workout or other refinancing or restructuring or in any
bankruptcy case, including, without limitation, any and all losses, costs and
expenses sustained by the Lender as a result of any failure by the Borrower
to perform or observe its obligations contained herein. In addition, the
Borrower agrees to indemnify the Lender against and hold it harmless from any
and all present and future stamp, transfer, documentary and other such taxes,
levies, fees, assessments and other charges made by any jurisdiction by
reason of the execution, delivery, performance and enforcement of this Note.
This Note shall be binding upon, inure to the benefit of and be
enforceable by the Borrower, the Lender and their respective successors and
assigns.
The Borrower shall not have the right to assign its rights and
obligations hereunder or any interest herein or therein without the prior
written consent of the Lender. The Lender may sell, assign, transfer or
grant participations in all or any portion of the Lender's rights and
obligations hereunder. In the event of any such assignment, the assignee
shall be deemed the "Lender" for all purposes of this Note and any other
documents and instruments relating hereto with respect to the rights and
obligations assigned to it. The Borrower agrees that in connection with any
such grant or assignment, the Lender may deliver to the prospective
participant or assignee financial statements and other relevant information
relating to the Borrower and its Subsidiaries subject to the confidentiality
provisions herein.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF CALIFORNIA.
The Borrower hereby (i) submits to the non-exclusive jurisdiction of the
courts of the State of California and the Federal courts of the United States
sitting in the State of California for the purpose of any action or
proceeding arising out of or relating to this Note and any other documents
and instruments relating hereto, (ii) agrees that all claims in respect of
any such action or proceeding may be heard and determined in such courts,
(iii) irrevocably waives (to the extent permitted by applicable law) any
objection which it now or hereafter may have to the laying of venue of any
such action or proceeding brought in any of the foregoing courts, and any
objection on the ground that any such action or proceeding in any such court
has been brought in an inconvenient forum and (iv) agrees that a final
judgment in any such action or proceeding
16.
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner permitted by law.
Nothing herein shall limit the right of the Lender to bring any action
or proceeding against the Borrower or its property in the courts of other
jurisdictions.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
17.
IN WITNESS WHEREOF, the Borrower has duly executed this Note, as of the
date first above written.
BORROWER
CLONTECH LABORATORIES, INC.
By: /s/ Xxx Xxxx
----------------------------------
Xxxxxxx Xxxx
President
Accepted and Agreed
LENDER
SUMMIT INVESTORS III, L.P.
By: /s/ Xxxxxxx X. Xxxx
--------------------------
General Partner
18.
12% SUBORDINATED NOTE
Due September 9, 2004
U.S. $5,828,437.00 Dated: September 9, 1997
FOR VALUE RECEIVED, the undersigned, CLONTECH LABORATORIES, INC., a
California corporation (the "Borrower"), HEREBY UNCONDITIONALLY PROMISES TO
PAY to the order of SUMMIT SUBORDINATED DEBT FUND, L.P., (the "Lender"), the
principal sum of Five Million, Eight Hundred Twenty Eight Thousand, Four
Hundred Thirty Seven UNITED STATES DOLLARS (U.S. $5,828,437), on September 9,
2004.
The Borrower further promises to pay interest on the outstanding
principal amount of this Promissory Note (this "Note") from time to time at a
rate per annum equal at all times to 12.00%. At the end of the first annual
accrual period, commencing on the date hereof, and each annual accrual period
thereafter, Borrower shall pay one-half of the accrued interest for that
period to the Lender and the remaining one-half of the accrued interest for
that period shall be added to, and shall thereafter be treated for all
purposes as part of the principal amount of this Note. In the event that any
amount of principal or interest, or any other amount payable hereunder, is
not paid in full when due (whether at stated maturity, by acceleration or
otherwise), the Borrower shall pay interest on such unpaid principal,
interest or other amount, from the date such amount becomes due until the
date such amount is paid in full, payable on demand, at a rate per annum
equal at all times to 14.00%, compounded annually. In the event that, at any
time or from time to time, the Borrower shall incur a net operating loss
greater than 2% of revenue for any two successive fiscal quarters or for any
fiscal year (as reflected in the consolidated financial statements of the
Borrower and its subsidiaries delivered hereunder), then in each such
instance the rate of interest on unpaid principal, interest or other amounts
hereunder shall thereupon be increased by 2.00% per annum until such time as
the Borrower shall have a net operating profit for a full fiscal quarter.
Interest shall compound annually and shall accrue daily on the outstanding
principal amount of this Note and shall be calculated on the basis of a year
of 365 or 366 days, as the case may be, for the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such interest is payable.
All payments hereunder shall be made in lawful money of the United
States of America and in same day or immediately available funds, prior to
10:00 a.m. (Pacific time), to the Lender, at Boston Safe Deposit & Trust Co.,
Xxx Xxxxxx Xxxxx, Xxxxxx, XX 00000, Account Number 05-942-0, ABA Routing
Number 0110-01234, or to such other office and account of the Lender as it
from time to time shall designate in a written notice to the Borrower.
Whenever any payment hereunder shall be stated to be due, or whenever
any interest payment date or any other date specified hereunder would
otherwise occur, on a day other than a Business Day (as defined below), then,
except as otherwise provided herein, such payment shall be made, and such
interest payment date or other date shall occur, on the next succeeding
Business Day, and such extension of time shall in such case be included in
the computation of payment of interest hereunder. As used herein, "Business
Day" means a day (i) other than
1.
Saturday or Sunday, and (ii) on which commercial banks are open for business
in New York, New York, and San Francisco, California.
All payments shall be made hereunder unconditionally in full without
deduction, setoff, counterclaim or other defense. The Borrower represents
and warrants to the Lender that, to the best of the Borrower's knowledge,
there is no claim, defense, counterclaim or set-off which could be asserted
by or is available to the Borrower against the Lender.
Anything herein to the contrary notwithstanding, if during any period
for which interest is computed hereunder, the amount of interest computed on
the basis provided for in this Note, together with all fees, charges and
other payments which are treated as interest under applicable law, as
provided for herein or in any other document executed in connection herewith,
would exceed the amount of such interest computed on the basis of the Highest
Lawful Rate (as defined below), the Borrower shall not be obligated to pay,
and the Lender shall not be entitled to charge, collect, receive, reserve or
take, interest in excess of the Highest Lawful Rate, and during any such
period the interest payable hereunder shall be computed on the basis of the
Highest Lawful Rate. As used herein, "Highest Lawful Rate" means the maximum
non-usurious rate of interest, as in effect from time to time, which may be
charged, contracted for, reserved, received or collected by the Lender in
connection with this Note under applicable law.
The Borrower may, upon at least five (5) Business Days prior written
notice to the Lender, prepay the outstanding amount hereof in whole or in
part, without premium or penalty. Partial prepayments shall be in an
aggregate principal amount of at least $500,000 or a greater amount which is
an integral multiple of $500,000.
Notwithstanding anything herein to the contrary, the Borrower must
prepay all outstanding amounts hereunder upon the occurrence of (i) the
acquisition of the Borrower by another entity by means of any transaction or
series of related transactions (including, without limitation, any
reorganization, merger or consolidation, but excluding any merger effected
exclusively for the purpose of changing the domicile of the Borrower), (ii) a
sale of all or substantially all of the assets of the Borrower, (iii) a
liquidation, dissolution or winding up of the Borrower, or (iv) the
Borrower's sale of its Common Stock in a bona fide firm commitment
underwritten public offering pursuant to a registration statement under the
Securities Act of 1933, as amended.
Together with any prepayment hereunder, the Borrower shall pay accrued
interest to the date of such prepayment on the principal amount prepaid.
By accepting this Note, the Lender agrees that all payments on account
of the indebtedness, liabilities and other obligations of the Borrower to the
Lender and each other holder from time to time of this Note, including,
without limitation, all amounts of principal, all interest accrued hereon,
and all other amounts payable by the Borrower to the Lender under this Note
or in connection herewith (the "Subordinated Indebtedness") shall be
sub-ordinate and subject in right of payment, to the extent and in the manner
set forth herein, to the prior payment in full in cash or cash equivalents of
the Senior Indebtedness. As used herein, "Senior Indebtedness" shall mean
any indebtedness, liabilities and other obligations of the Borrower (whether
as primary obligor or as guarantor) to any Person (each a "Senior Lender")
with respect
2.
to any working capital, revolving credit or other line of credit facility,
any term loan facility, or any other extension of credit by a bank, insurance
company or financial institution engaged in the business of lending money
(whether or not secured), including reimbursement obligations under letters
of credit (or local guaranties, as applicable) and obligations in respect of
bankers' acceptances, interest rate protection agreements and currency
exchange and purchase agreements, and any other indebtedness or other
obligations of the Borrower (i) for borrowed money or evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or
businesses, (ii) under leases which are capitalized under U.S. generally
accepted accounting principles ("GAAP"), (iii) under leases for equipment
used in the ordinary course of the Borrower's business, and (iv) with respect
to indebtedness of others for the payment of which the Borrower is
responsible or liable as co-obligor or guarantor and any renewals,
refundings, refinancings or other extensions thereof, except for any of the
foregoing held by any Affiliate (as defined below) of the Borrower, and
except for indebtedness or other obligations which are specifically
designated not to be Senior Indebtedness for purposes of this Note in the
instruments evidencing such indebtedness or obligations at the time of the
issuance thereof or which by their terms are subordinated to any other
category or class of indebtedness of the Borrower. The terms "indebtedness,"
"liabilities" and "obligations" are used herein in their most comprehensive
sense and include any and all advances, debts, obligations and liabilities,
now existing or hereafter arising, whether voluntary or involuntary and
whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined.
As long as any of the Senior Indebtedness shall remain outstanding and
unpaid, the Lender shall not accept or receive, directly or indirectly, and
the Borrower shall not make, any Subordinated Debt Payment (as defined
below), except that prior to the occurrence of any Senior Lender Default (as
defined below) and receipt of the notice from the Senior Lender described
below, the Lender shall be entitled to accept and receive payments of
principal and interest under this Note,-in accordance with the terms of this
Note. Upon the occurrence of any Senior Lender Default (or if any Senior
Lender Default would exist immediately after the making of a Subordinated
Debt Payment), and upon receipt by the Borrower and the Lender of notice in
writing of such Senior Lender Default, and until such Senior Lender Default
is cured or waived, the Borrower shall not make, and the Lender shall not
accept or receive, any Subordinated Debt Payment. In the event that,
notwithstanding the foregoing provisions, any Subordinated Debt Payments
shall be received in contravention hereof by the Lender before all Senior
Indebtedness shall be paid, such Subordinated Debt Payments shall be held in
trust for the benefit of the Senior Lenders and shall be paid over or
delivered to the Senior Lenders for application to the payment in full in
cash or cash equivalents of all Senior Indebtedness remaining unpaid to the
extent necessary to give effect hereto, after giving effect to any concurrent
payments or distributions to any Senior Lender in respect of the Senior
Indebtedness. As used herein, "Senior Lender Default" means any payment
default in respect of any Senior Indebtedness, or any other default specified
in the agreement or instrument under which any Senior Indebtedness is issued,
continuing beyond the grace period, if any, specified in any such agreement
or instrument; and "Subordinated Debt Payment" means any payment or
distribution by or on behalf of the Borrower, directly or indirectly, of
assets of the Borrower of any kind or character, whether in cash, property or
securities, including on account of the purchase, redemption or other
acquisition of Subordinated Indebtedness, or by setoff, exchange or in any
other manner, for or on account of the Subordinated Indebtedness.
3.
If, while any Subordinated Indebtedness is outstanding, any bankruptcy,
insolvency, reorganization, receivership, arrangement, marshalling of assets
and liabilities or similar proceeding is commenced by or against the Borrower
or its property, (i) the Senior Lenders shall be irrevocably authorized and
empowered (in the name of the Senior Lenders or in the name of the Lender or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution in respect of the Subordinated
Indebtedness and give acquittance therefor and to file claims and proofs of
claim and take such other action (including voting the Subordinated
Indebtedness) as they may deem necessary or advisable for the exercise or
enforcement of any of the rights or interests of the Senior. Xxxxxxx, but
only if the Lender does not do so prior to the date 30 days before the
expiration of the time to file claims or take other action in any such
proceedings; and (ii) the Lender shall promptly take such action as any
Senior Lender may reasonably request (A) to collect the Subordinated
Indebtedness for the account of the Senior Lenders and to file appropriate
claims or proofs of claim in respect of the Subordinated Indebtedness, (B)
to execute and deliver to the Senior Lenders, such powers of attorney,
assignments and other instruments as they may request to enable them to
enforce any and all claims with respect to the Subordinated Indebtedness (to
the extent and in the manner provided herein), and (C) to collect and receive
any and all payments or distributions which may be payable or deliverable
upon or with respect to the Subordinated Indebtedness.
In the event of any payment or distribution of assets of the Borrower of
any kind or character, whether in cash, property or securities, upon the
dissolution, winding up or total or partial liquidation or reorganization,
readjustment, arrangement or similar proceeding relating to the Borrower or
its property, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership, arrangement or similar proceedings or upon an assignment for
the benefit of creditors, or upon any other marshalling or composition of the
assets and liabilities of the Borrower, or otherwise: (i) all mounts owing on
account of the Senior Indebtedness shall first be paid m full in cash, or
payment provided for in cash or in cash equivalents, before any Subordinated
Debt Payment is made; and (ii) to the extent permitted by applicable law, any
Subordinated Debt Payment to which the Lender would be entitled except for
the provisions hereof, shall be paid or delivered by the trustee in
bankruptcy, receiver, assignee for the benefit of creditors or other
liquidating agent making such payment or distribution directly to the Senior
Lenders for application to the payment of the Senior Indebtedness in
accordance with clause (i) above, after giving effect to any concurrent
payment or distribution or provision therefor to the Senior Lenders in
respect of such Senior Indebtedness.
The Lender shall not (i) accelerate any Subordinated Indebtedness, or
demand or attempt to collect or commence any legal proceedings to collect,
any Subordinated Debt Payment prior to the date such payment becomes due and
payable pursuant to the terms thereof or, if later, prior to the first date
such amount is not prohibited from being paid pursuant to this Note or
institute any other actions or proceedings to enforce its rights or interests
under or in respect of this Note; (ii) exercise any rights under or with
respect to (A) any guaranties of the Subordinated Indebtedness, or (B) any
collateral securing the Subordinated Indebtedness, including causing or
compelling the pledge or delivery of any collateral, any attachment of, levy
upon, execution against, foreclosure upon or the taking of other action
against or institution of other proceedings with respect to any collateral,
notifying any account debtors of the Borrower or asserting any claim or
interest in any insurance with respect to the collateral, or attempt to do
any of the foregoing; (iii) exercise any rights to set-offs and counterclaims
in respect of any indebtedness, liabilities or
4.
obligations of the Lender to the Borrower against any of the Subordinated
Indebtedness; or (iv) commence or maintain any action, suit or any other
legal or equitable proceeding against the Borrower, or join with any creditor
in any such proceeding, under any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar law. Notwithstanding the
foregoing prohibitions, the Lender may take any action available to it under
applicable law and under this Note, including demand or acceleration of this
Note and commencement of or participation in any such proceeding, if any of
the Senior Indebtedness shall have been accelerated or demand made for
payment in full thereof, or any such proceeding shall have been commenced by
a Senior Lender or any other Person other than the Lender.
The subordination provisions of this Note are intended solely for the
purpose of defining the relative rights against the Borrower of the Lender,
on the one hand, and the Senior Lenders, on the other hand. Nothing
contained herein shall (i) impair, as between the Borrower and the Lender,
the obligation of the Borrower to pay the principal of or interest on this
Note and its other obligations with respect to the Subordinated Indebtedness
as and when the same shall become due and payable in accordance with the
terms thereof, or (ii) otherwise affect the relative rights against the
Borrower of the Lender, on the one hand, and the creditors of the Borrower
(other than the Senior Lenders), on the other hand.
Until the payment and performance m full of all Senior Indebtedness, the
Lender shall not have, and shall not directly or indirectly exercise, any
rights that it may acquire by way of subrogation under this Note, by any
payment or distribution to the Senior Lenders hereunder or otherwise. Upon
the payment and performance in full of all Senior Indebtedness, the Lender
shall be subrogated to the rights of the Senior Lenders to receive payments
or distributions applicable to the Senior Indebtedness until the Subordinated
Indebtedness shall be paid in full. For the purposes of the foregoing
subrogation, no payments or distributions to the Senior Lenders of any cash,
property or securities to which the Lender would be entitled except for the
provisions of this Note shall, as among the Borrower, its creditors (other
than the Senior Lenders and the Lender), be deemed to be a payment by the
Borrower to or on account of the Senior Indebtedness.
The Lender by its acceptance hereof agrees to execute and deliver to any
Senior Lender such subordination agreement as may be reasonably requested by
such Senior Lender and as may be consistent with the subordination provisions
contained herein, and to execute, acknowledge, deliver, file, notarize and
register all such further agreements, instruments, certificates, documents
and assurances, and perform such acts as such Senior Lender shall deem
necessary or appropriate to effectuate the purposes of the subordination
provisions contained herein.
The Lender shall not, without the prior written consent of the Senior
Lenders, agree to or permit any amendment, modification or waiver of any of
the subordination provisions of this Note (including any amendment,
modification or waiver pursuant to an exchange of other securities or
instruments for outstanding Subordinated Indebtedness).
5.
So long as any amount payable by the Borrower hereunder shall remain
unpaid, the Borrower shall deliver to the Lender:
(a) as soon as available but in any event within 30 days after the
end of each month in each fiscal year, unaudited consolidating and
consolidated statements of income and cash flows of the Borrower and its
Subsidiaries for such month and from the period from the beginning of the
fiscal year to the end of such month, and unaudited consolidating and
consolidated balance sheets of the Borrower and its Subsidiaries as of the
end of such month, setting forth in each case comparisons to the Borrower's
annual budget and to the corresponding period in the preceding fiscal year,
and all such statements shall be prepared in accordance with GAAP,
consistently applied, except that they may not contain full footnote
disclosures and may be subject to normal year-end adjustments for recurring
accruals, and shall be certified by the chief financial officer of the
Borrower;
(b) as soon as available, but in any event within 90 days after the
end of each fiscal year; consolidating and consolidated statements of income
and cash flows of the Borrower and its Subsidiaries for such fiscal year, and
consolidating and consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such fiscal year-setting forth in each case
comparisons to the Borrower's annual budget and to the preceding fiscal year,
all prepared in accordance with GAAP, consistently applied, and with respect
to the consolidated portions of such statements accompanied by an opinion
containing no exceptions or qualifications (except for qualifications
regarding specified contingent liabilities) of a "Big-Six" accounting firm
selected by the Board of Directors of the Borrower;,
(c) at least 30 days, but not more than 90 days, prior to the
beginning of each fiscal year, an annual budget and operating plan prepared
on a monthly basis for the Borrower and its Subsidiaries for such fiscal year
(displaying anticipated statements of income and cash flows and balance
sheets), and promptly upon preparation thereof any revisions of such annual
or other budgets and operating plans, and within 30 days after any monthly
period in which there is a material adverse deviation from the annual budget,
a certificate of the President and chief financial officer of the Borrower
setting forth in reasonable detail the deviation and what actions the
Borrower has taken and proposes to take with respect thereto;
(d) together with the financial statements pursuant to clauses (a)
and (b) immediately above, a certificate of the President and the chief
financial officer of the Borrower stating that such officers have no
knowledge that any Event of Default (as defined below) or an event or
condition which with notice or lapse of time or both would constitute an
Event of Default (a "Default") has occurred and is continuing, or, if such
Default has occurred and is continuing, indicating the nature thereof and the
action which the Borrower has taken and proposes to take with respect thereto;
(e) promptly (but in any event within five business days) after the
discovery or receipt of notice of any Default or Event of Default or any
other material adverse change, event or circumstance affecting the Borrower
and its Subsidiaries taken as a whole (including, without limitation, the
filing of any material litigation against the Borrower or any Subsidiary), a
certificate of the President and chief financial officer of the Borrower
specifying the nature and
6.
period of existence thereof and what actions the Borrower and its
Subsidiaries have taken and propose to take with respect thereto; and
(f) with reasonable promptness, such other information and
financial data concerning the Borrower and its Subsidiaries as any Person
entitled to receive information under the preceding subsections may
reasonably request.
Each of the financial statements referred to in subsections (a) and (b)
above shall present fairly in all material respects the consolidated
financial condition, results of operations and cash flows of the Borrower and
its Subsidiaries in accordance with GAAP applied on a consistent basis as of
the dates and throughout the periods set forth therein, subject in the case
of the unaudited financial statements to changes resulting from normal
year-end adjustments for recurring accruals (none of which would, alone or in
the aggregate, be materially adverse to the business, operations, assets,
Properties, liabilities, condition (financial or otherwise), results of
operations or prospects of the Borrower and its Subsidiaries taken as a
whole).
The Borrower shall permit the Lender and its representatives, upon
reasonable notice and during normal business hours and at such other times as
any such Person may reasonably request, to (a) visit and inspect any of the
properties of the Borrower and its Subsidiaries, Co) examine the corporate
and financial records of the Borrower and its Subsidiaries and make copies
thereof or extracts therefrom and (c) discuss the affairs, finances and
accounts of any such entities with the directors and officers. The Lender
agrees that it will not make use of, disseminate, or in any way disclose any
information obtained pursuant to this paragraph to any person, firm or
business, except on a confidential basis to the investors in Lender or its
Affiliates. The Lender's obligations under the immediately preceding
sentence with respect to any portion of such information shall terminate if:
(i) it was in the public domain at or subsequent to the time it was
communicated to Lender by Borrower through no fault of Lender, (ii) it was
rightfully in Lender's possession free of any obligation of confidence at or
subsequent to the time it was communicated to Lender by Borrower; or (iii)
the communication was in response to a valid order by a court or other
governmental body, was otherwise required by law, or was necessary to
establish the rights of either party under this agreement.
So long as any amount payable by the Borrower hereunder shall remain
unpaid, the Borrower shall not (in each case without the prior written
consent of the holders of a majority in interest of the outstanding 12%
Subordinated Notes due September 9, 2004 of the Borrower of like tenor as
this Note):
(a) directly or indirectly declare or pay any dividends or make any
distributions upon any of its capital stock or other equity securities,
except for dividends payable in shares of its Common Stock issued upon the
outstanding shares of Common Stock, or permit any of its Subsidiaries to
directly or indirectly declare or pay any dividends or make any distributions
upon any of its capital stock or other equity securities other than to the
Borrower;
(b) except for repurchases of capital stock or equity securities
from employees for consideration of $250,000 in the aggregate, directly or
indirectly redeem, purchase or otherwise acquire, or permit any of its
Subsidiaries to directly or indirectly redeem, purchase or otherwise acquire,
any of the Borrower's or any of its Subsidiaries' capital stock or other
equity
7.
securities (including, without limitation, warrants, options and other rights
to acquire such capital or other equity securities); or directly or
indirectly redeem, purchase or make any payments with respect to any stock
appreciation rights, phantom stock plans or similar rights or plans;
(c) authorize, issue, incur or enter mm any agreement providing for
the issuance (contingent or otherwise) of, or permit any of its Subsidiaries
to authorize, issue, incur or enter into any agreement providing for any such
issuance of, any notes or debt securities or other evidences of Indebtedness
which are senior to or pari passu with the Notes in redemption or the payment
of principal, interest, premium, penalties or other mounts other than with
respect to the existing Senior Indebtedness of the Company;
(d) make, or permit any Subsidiary to make, any loans or advances
to, guarantees for the benefit of, or investments in, any Person, except for
(i) reasonable advances to employees in the ordinary course of business and
in an amount not to exceed $10,000 individually or $250,000 in the aggregate
in any twelve-month period, (ii) acquisitions permitted pursuant to
subparagraph (h) below, (/ii) investments not exceeding $50,000 in any
twelve-month period and (iv) investments in certificates of deposit of
federally insured banks having a maturity of 90 days or less, investment
grade short-term commercial paper, general cash management as approved by the
Board of Directors of the Company and similar cash equivalents;
(e) merge, consolidate or enter into any other business combination
with any Person or permit any Subsidiary to merge, consolidate or enter into
any other business combination with any Person, other than a merger or
consolidation between or among wholly owned Subsidiaries of the Borrower or a
merger in which the shareholders of the Borrower immediately before the
consummation of the merger will own at least 66-2/3% of the equity securities
of the surviving entity (except for acquisitions permitted pursuant to
paragraph (h) below);
(f) sell, lease or otherwise dispose of, or permit any Subsidiary
to sell, lease or otherwise dispose of, more than 25% of the consolidated
assets (including, without limitation, the capital stock of any Subsidiaries)
of the Borrower and its Subsidiaries (computed on the basis of the greater of
book value, determined in accordance with GAAP consistently applied, or fair
market value, determined by the Borrower's Board of Directors m its
reasonable good faith judgment) in any transaction or series of related
transactions (other than sales of inventory in the ordinary course of
business);
(g) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation, any
reorganization into a limited liability company, a partnership or any other
non-corporate entity which is treated as a partnership for federal income tax
purposes, but excluding any stock split, stock dividend, stock combination or
like event) or permit any Subsidiary of the Borrower to do any of the same;
(h) acquire, or permit any Subsidiary to acquire, any interest in
any company, business or other Person (whether by a purchase of assets,
purchase of stock, merger or otherwise), or enter into any joint venture,
involving an aggregate consideration (including, without limitation, the
assumption of liabilities whether direct or indirect) exceeding $500,000 in
8.
any one transaction or series of related transactions or exceeding $1,000,000
in any twelve-month period;
(i) enter into, or permit any Significant Subsidiary (as such term
is defined in Rule 1-02 of Regulation S-X under the Securities Exchange Act
of 1934, as amended) to enter into, the ownership, active management or
operation of any business other than the business of developing,
manufacturing and selling biotechnology products and services for life
sciences research;
(j) become subject to, or permit any of its Subsidiaries to become
subject to (including, without limitation, by way of amendment to or
modification of) any agreement or instrument (other than Indebtedness under
existing lines of credit and equipment leases outstanding on the date hereof)
which by its terms would under any circumstances restrict (i) the right of
any such Subsidiary to make loans or advances or pay dividends to, transfer
property to, or repay any Indebtedness owed to the Borrower or another
Subsidiary thereof or (ii) the Borrower's right to perform the provisions of
this Note, any other related document or the bylaws of the Borrower;
(k) make any amendment to the certificate of incorporation or
bylaws of the Borrower which adversely affects the interests of holders of
Notes;
(l) establish or acquire (i) any Significant Subsidiaries (provided
the Borrower shall be permitted to establish wholly owned Subsidiaries of the
Borrower) or (b) any Significant Subsidiaries organized outside of the United
States and its territorial possessions;
(m) create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, Indebtedness
exceeding an aggregate principal amount of $250,000 outstanding at any time
on a consolidated basis, other than Indebtedness under existing lines of
credit and equipment leases outstanding on the date hereof;
(n) create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any Liens or
Encumbrances other than (i) tax liens with respect to taxes not yet due and
payable or which are being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established in accordance with
GAAP/consistently applied, (ii) deposits or pledges made in connection with,
or to secure payment of, utilities or similar services, workers'
compensation, unemployment insurance, old age pensions or other social
security obligations, and (iii) mechanics', materialmen's or contractors'
liens or encumbrances or any similar lien or restriction for amounts not yet
due and payable or which are being contested in good faith by appropriate
proceedings and for which appropriate reserves have been established in
accordance with GAAP, consistently applied;
(o) make any capital expenditures (including, without limitation,
payments with respect to capitalized leases, as determined in accordance with
GAAP consistently applied) exceeding (by $100,000 or more), in the aggregate
on a consolidated basis during any twelve-month period, the amount
specifically allocated therefor in any budget and operating plan furnished to
the Lender pursuant to this Note;
9.
(p) enter into any leases or other rental agreements (excluding
capitalized leases, as determined in accordance with GAAP consistently
applied) under which the amount of the aggregate lease payments for all such
agreements exceeds (by $100,000 or more), on a consolidated basis for any
twelve-month period, the amount specifically allocated therefor in any budget
and operating plan furnished to the Lender pursuant to this Note; and
(q) borrow against, pledge, assign, xxxxxx, cancel or surrender the
key-man life insurance policy in force relating to the President of the
Borrower.
So long as any amount payable by the Borrower hereunder shall
remain unpaid, the Borrower shall and shall cause each Subsidiary to (unless
it has received the prior written consent of the holders of a majority in
interest of the outstanding 12% Subordinated Notes due September 9, 2004 of
the Borrower of like tenor as this Note):
(a) at all times cause to be done all things necessary to.
maintain, preserve and renew its corporate existence and all material
licenses, authorizations and permits necessary to the conduct of its
businesses the failure of which to maintain, preserve or renew would have a
Material Adverse Effect;
(b) maintain and keep its material properties in good repair,
working order and condition, and from time to time make all necessary or
desirable repairs, renewals and replacements, so that its businesses may be
properly and advantageously conducted in all material respects at all times;
(c) pay and discharge (within 30 days after becoming due and
payable) all material taxes, assessments and governmental charges imposed
upon its properties or upon the income or profits therefrom (in each case
before the same becomes delinquent and before penalties accrue thereon) and
all material claims for labor, materials or suppliers which if unpaid would
by law become a Lien or Encumbrance upon any of its property, unless and to
the extent that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with GAAP,
consistently applied) have been established on its books with respect thereto;
(d) comply with all applicable laws, rules and regulations of all
governmental authorities, the violation of which would reasonably be expected
to have a material adverse effect upon the business, operations, assets,
Properties, liabilities, condition (financial or otherwise), results of
operations or prospects of the Borrower and its Subsidiaries taken as a whole;
(e) apply for and continue in force with adequate insurance
covering risks of such types and in such amounts as are customary for
corporations of similar size engaged in similar lines of business if
available on commercially reasonable terms;
(f) maintain the key-man life insurance policy of the President of
the Borrower;
10.
(g) possess and maintain all Intellectual Property Rights necessary
to the conduct of their respective businesses, the failure of which to
maintain would have a Material Adverse Effect, and own all right, title and
interest in and to, or have a valid license for, all such Intellectual
Property Rights except to the extent that any challenge to the same is being
contested in good faith and by appropriate means; PROVIDED, HOWEVER, that in
the event that, at any time, the Borrower or any Subsidiary fails to possess
and maintain, or to own all right, title or interest in, or have a valid
license for, any such Intellectual Property Right, the Borrower shall be
entitled to cure its default under this paragraph by (A) identifying to the
reasonable satisfaction of the Lenders, an adequate substitute Intellectual
Property Right within ninety (90) days thereafter and (B) within ninety (90)
days after such identification, acquiring all right, title and interest in
such substitute Intellectual Property Right or entering into a licensing or
similar agreement, in form and substance reasonably satisfactory to the
Lender, providing the Borrower with a valid license therefor; and
(h) maintain proper books of record and account which present
fairly in all material respects its financial condition and results of
operations and make provisions on its financial statements for all such
proper reserves as in each case are required in accordance with GAAP subject
to normal and recurring year-end audit adjustments, consistently applied.
As used herein:
"AFFILIATE" means any Person which, directly or indirectly, controls, is
controlled by or is under common control with another Person ("control,"
"controlled by" and "under common control with" with respect to any Person
meaning for the purposes of the foregoing the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise);
"INDEBTEDNESS" means, for any Person: (i) all indebtedness or other
obligations of such Person for borrowed money or for the deferred purchase
price of property or services and all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or
businesses; (ii) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and. remedies of the seller or lender
under such agreement in the event of default are limited to repossession or
sale of such property); (iii) all obligations under any lease of property
(whether real, personal or mixed) which, in accordance with GAAP, would, at
the time a determination is made, be required to be recorded as a capital
lease in respect of which such Person is liable as lessee; (iv) all
reimbursement or other obligations of such Person under or in respect of
letters of credit, bankers acceptances, interest rate swaps, caps, floors and
collars, currency swaps, or other similar financial products; (v) all
indebtedness of another Person of the types referred to in clause (i), (ii),
(iii) or (iv) above, guaranteed directly or indirectly in any manner by the
Person for whom Indebtedness is being determined, or in effect guaranteed
directly or indirectly by such Person through an agreement (A) to pay or
purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (B) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose
of enabling the debtor to make payment of such Indebtedness or to assure the
holder of such Indebtedness against loss,
11.
(C) to supply funds to or in any other manner invest in the debtor (including
any agreement to pay for property or services irrespective of whether or not
such property is received or such services are rendered) or (D) otherwise to
assure a creditor against loss; and (vi) all indebtedness of another Person
of the types referred to in clause (i), (ii), (iii) or (iv) above secured by
(or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be' secured by) any Lien upon or in property
(including accounts and contract rights) owned by the Person for whom
Indebtedness is being determined, even though such Person has not assumed or
become liable for the payment of such indebtedness of such other Person;
"INTELLECTUAL PROPERTY RIGHTS" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service
marks, trade dress, trade names, logos and corporate names and registrations
and applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registrations
thereof, (iv) mask works and registrations and applications for registration
thereof, (v) computer software, data, data bases and documentation thereof,
(vi) trade secrets and other confidential information (including, without
limitation, ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial and marketing plans and customer and
supplier lists and information), (vii) other intellectual property rights and
(viii) copies and tangible embodiments thereof (in whatever form or medium);
"LIEN OR ENCUMBRANCE" means any lien, pledge, mortgage, security
interest, claim, lease, charge, option, right, easement, servitude, transfer
limit, restriction, title defect or other encumbrance of any kind (including,
without limitation, any conditional sale or other title retention agreement
or lease in the nature thereof, any sale of receivables with recourse
against the Borrower or any Affiliate thereof, any filing or agreement to
file a financing statement as debtor under the Uniform Commercial Code or any
similar statute, or any subordination arrangement in favor of another Person);
"MATERIAL ADVERSE EFFECT" has the meaning set forth in the Securities
Purchase Agreement dated as of September 9, 1997, among the Borrower and the
original purchasers of 12% Subordinated Notes due September 9, 2004 of the
Borrower.
"PERSON" means an individual, corporation, partnership, joint venture,
trust, unincorporated organization or any other entity of whatever nature,
including any governmental agency or authority;
"PROPERTY" means any real, personal or mixed property, whether tangible
or intangible; and
"SUBSIDIARY" means, with respect to any Person, any entity controlled
(as such term is defined in the definition of "Affiliate" above) by such
Person.
12.
Unless otherwise defined or the context otherwise requires, all
accounting terms used herein shall be construed, and all accounting
determinations and computations required hereunder shall be made, in
accordance with GAAP, consistently applied.
Any of the following events which shall occur shall constitute an "Event
of Default":
1. The Borrower shall fail to pay, within 5 business days after becoming
due, any amount of principal or interest hereunder or other amount payable
hereunder.
2. Any representation or warranty by the Borrower under or in connection
with this Note shall prove to have been incorrect in any material respect
when made or deemed made.
3. The Borrower shall fail to perform or observe in any material respect
(within 30 days of the date required) any term, covenant or agreement
contained herein.
4. The Borrower or any of its Significant Subsidiaries shall admit in
writing its inability to, or shall fail generally or be generally unable to,
pay its debts (including its payrolls) as such debts become due, or shall
make a general assignment for the benefit of creditors; or the Borrower or
any such Significant Subsidiary shall file a voluntary petition in bankruptcy
or a petition or answer seeking reorganization, to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform
Act of 1978, as amended or recodified from time to time (the "Bankruptcy
Code") or under any other state or federal law relating to bankruptcy or
reorganization granting relief to debtors, whether now or hereafter in
effect, or shall file an answer admitting the jurisdiction of the court and
the material allegations of any involuntary petition filed against the
Borrower or any such Significant Subsidiary pursuant to the Bankruptcy Code
or any such other state or federal law; or the Borrower or any such
Significant Subsidiary shall be adjudicated a bankrupt, or shall make an
assignment for the benefit of creditors, or shall apply for or consent to the
appointment of any custodian, receiver or trustee for all or any substantial
part of the Borrower's or any such Significant Subsidiary's property, or
shall take any action to authorize any of the actions or events set forth
above in this paragraph; or an involuntary petition seeking any of the relief
specified in this paragraph shall be filed against the Borrower or any such
Significant Subsidiary; or any order for relief shall be entered against the
Borrower or any such Significant Subsidiary in any involuntary proceeding
under the Bankruptcy Code or any such other state or federal law referred to
in this paragraph 4.
5. The Borrower or any of its Significant Subsidiaries shall (i)
liquidate, dissolve or wind up (or suffer any liquidation, dissolution or
winding up), except to the extent expressly permitted by this Note, (ii)
suspend its operations other than in the ordinary course of business, or
(iii) take any corporate action to authorize any of the actions or events set
forth above in this paragraph 5.
6. The Borrower or any Subsidiary shall fail (i) to make any payment of
any principal of, or interest or premium on, any Indebtedness (other than in
respect of this Note) in an aggregate principal amount outstanding of at
least $250,000 when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness as of the date of such failure, or (ii) to
perform or observe any term,
13.
covenant or condition on its part to be performed or observed under any
agreement or instrument relating to any such Indebtedness, when required to
be performed or observed, and such failure shall continue after the
applicable grace period, if any, specified in such agreement or instrument,
if the effect of such failure to perform or observe is to accelerate, or to
permit the acceleration of, the maturity of such Indebtedness; or any such
Indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof.
7. A default or an event of default shall occur under any Senior
Indebtedness which-would permit the acceleration of such Senior Indebtedness
or any portion thereof.
8. A final judgment or order for the payment of money in excess of
$250,000 which is not fully covered by third-party insurance shall be
rendered against the Borrower or any of its Subsidiaries; or any non-monetary
judgment or order shall be rendered against the Borrower or any such
Subsidiary which has or would reasonably be expected to have a material
adverse effect upon the operations, properties, business or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a
whole; and in each case there shall be any period of 20 consecutive days
during which such judgment continues unsatisfied or during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect.
9. The Borrower shall incur a net operating loss greater than 2% of
revenue for (a) any three successive fiscal quarters or (b) for any fiscal
year and for the two consecutive fiscal quarters immediately following such
fiscal year, in each case as reflected in the consolidated financial
statements of the Borrower and its subsidiaries delivered hereunder.
If any Event of Default shall occur, the Lender may, subject to the
subordination provisions hereof and the rights of any Senior Indebtedness,
(i) by notice to the Borrower, declare the entire unpaid principal amount of
this Note, all interest accrued and unpaid hereon and all other amounts
payable hereunder to be forthwith due and payable, whereupon all unpaid
principal under this Note, all such accrued interest and all such other
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived by the Borrower; and (ii) whether or not the actions
referred to in clause (i) have been taken, proceed to enforce all other
rights and remedies available to the Lender under applicable law..
No amendment or waiver of any provision of this Note, nor any consent to
any departure by the Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Lender and then such
amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
All notices and other communications provided for hereunder shall,
unless otherwise stated herein, be in writing (including by facsimile) and
mailed, sent or delivered to the respective parties hereto at or to the
following addresses or facsimile numbers (or at or to such other address or
facsimile number as shall be designated by any party in a written notice to
the other parties hereto):
14.
If to the Lender: c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
Xxxx X. Xxxxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000-0913
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to the Borrower: Clontech Laboratories, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: President
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx Godward LLP
Five Palo Alto Square
0000 X0 Xxxxxx Xxxx
Xxxx Xxxx, XX 00000.0000
Attention: Xxxxx Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (415) $57-0663
All such notices and communications shall be effective (i) if delivered by
hand, upon delivery; (ii) if sent by mail, upon the earlier of the date of
receipt or five Business Days after deposit in the mail, first class (or air
mail, with respect to communications to be sent to or from the United
States), postage prepaid; and (iii) if sent by facsimile, when sent.
No failure on the part of the Lender to exercise, and no delay in
exercising, any right, remedy, power or privilege hereunder shall operate as
a waiver thereof, nor shall any single or Partial exercise of any such right,
remedy, power or privilege preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights and
remedies under this Note are cumulative and not exclusive of any rights,
remedies, powers and privileges that may otherwise be available to the Lender.
15.
Whenever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under all applicable laws and
regulations. If, however, any provision of this Note shall be prohibited by
or invalid under any such law or regulation in any jurisdiction, it shall, as
to such jurisdiction, be deemed modified to conform to the minimum
requirements of such law or regulation, or, if for any reason it is not
deemed so modified, it shall be ineffective and invalid only to the extent of
such prohibition or invalidity without affecting the remaining provisions of
this Note, or the validity or effectiveness of such provision in any other
jurisdiction.
The Borrower agrees to pay on demand all costs and expenses of the
Lender, and the reasonable fees and disbursements of counsel in connection
with (i) any amendments, modifications or waivers of the terms hereof, (ii)
any Default or Event of Default, (iii) the enforcement or attempted
enforcement of, and preservation of any rights under, this Note, and (iv) any
out-of-court workout or other refinancing or restructuring or in any
bankruptcy case, including, without limitation, any and all losses, costs and
expenses sustained by the Lender as a result of any failure by the Borrower
to perform or observe its obligations contained herein. In addition, the
Borrower agrees to indemnify the Lender against and hold it harmless from any
and all present and future stamp, transfer, documentary and other such taxes,
levies, fees, assessments and other charges made by any jurisdiction by
reason of the execution, delivery, performance and enforcement of this Note.
This Note shall be binding upon, inure to the benefit of and be
enforceable by the Borrower, the Lender and their respective successors and
assigns.
The Borrower shall not have the right to assign its rights and
obligations hereunder or any interest herein or therein without the prior
written consent of the Lender. The Lender may sell, assign, transfer or
grant participations in all or any portion of the Lender's rights and
obligations hereunder. In the event of any such assignment, the assignee
shall be deemed the "Lender" for all purposes of this Note and any other
documents and instruments relating hereto with respect to the rights and
obligations assigned to it. The Borrower agrees that in connection with any
such grant or assignment, the Lender may deliver to the prospective
participant or assignee financial statements and other relevant information
relating to the Borrower and its Subsidiaries subject to the confidentiality
provisions herein.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF CALIFORNIA.
The Borrower hereby (i) submits to the non-exclusive jurisdiction of the
courts of the State of California and the Federal courts of the United States
sitting in the State of California for the purpose of any action or
proceeding arising out of or relating to this Note and any other documents
and instruments relating hereto, (ii) agrees that all claims in respect of
any such action or proceeding may be heard and determined in such courts,
(iii) irrevocably waives (to the extent permitted by applicable law) any
objection which it now or hereafter may have to the laying of venue of any
such action or proceeding brought in any of the foregoing courts, and any
objection on the ground that any such action or proceeding in any such court
has been brought in an inconvenient forum and (iv) agrees that a final
judgment in any such action or proceeding
16.
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner permitted by law.
Nothing herein shall limit the right of the Lender to bring any action
or proceeding against the Borrower or its property in the courts of other
jurisdictions.
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17.
IN WITNESS WHEREOF, the Borrower has duly executed this Note, as of the
date first above written.
BORROWER
CLONTECH LABORATORIES, INC.
By: /s/ Xxx Xxxx
----------------------------------
Xxxxxxx Xxxx
President
Accepted and Agreed
LENDER
SUMMIT INVESTORS III, L.P.
By: /s/ Xxxxxxx X. Xxxx
--------------------------
General Partner
18.
