THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH
RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL FOR THE HOLDER SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION.
CONVERTIBLE PROMISSORY NOTE
$1,000,000 October 25, 2001
For value received, BIO-IMAGING TECHNOLOGIES, INC., a Delaware corporation
(the "COMPANY") promises to pay to Quintiles, Inc., whose address is c/o
Quintiles Transnational Corp., Riverbirch Building, Suite 200, 4709 Creekstone
Drive, Durham, North Carolina 27703, or its assigns (the "HOLDER") the principal
sum of One Million Dollars ($1,000,000) with interest on the outstanding
principal amount at the per annum rate in effect on the business day immediately
prior to the date on which payments are due hereunder equal to the Three-Month
London Interbank Offering Rate as published from time to time in the Wall Street
Journal (the "Three Month LIBOR Rate") plus 300 basis points, compounded
annually based on a 365-day year. Interest shall commence with the date hereof
and shall continue on the outstanding principal until paid in full.
1. This note (the "NOTE") is issued pursuant to the terms of that certain
Asset Purchase Agreement dated as of October 25, 2001 (the "AGREEMENT") by and
between the Company and the Holder. This Note is subordinate in right of payment
to the Factoring Agreement currently in effect between the Company and Silicon
Valley Bank. Capitalized terms used but not defined herein shall have the same
meanings given them in the Agreement.
2. Subject to the earlier conversion of this Note pursuant to Section 3
below, the entire outstanding principal balance and all unpaid accrued interest
shall become fully due and payable on November 1, 2004 (the "MATURITY DATE").
Beginning on February 1, 2002, and on each May 1, August 1, November 1 and
February 1 thereafter until and including the Maturity Date, the Company shall
pay 11 quarterly installments of principal in the amount of $41,667.00 and a
twelfth payment of principal of $41,663.00 with respect to $500,000 of the
principal amount, together with accrued interest thereon at each such payment
date. All payments of interest and principal shall be in lawful money of the
United States of America in immediately available funds. All payments shall be
applied first to accrued interest, and thereafter to principal.
3. The entire principal balance, or any portion thereof, and all accrued
and unpaid interest thereon shall be convertible into shares of the common stock
of the Company (the "COMMON STOCK"), at any time and from time to time prior to
the Maturity Date at the sole election of the Holder (the "Conversion Right").
In the event that the Holder exercises the Conversion Right under this Section
3, this Note shall be canceled on the date on which the Holder delivers a
written notice (the "Conversion Notice") to the Company of its intention to so
convert this Note, or any portion thereof, and the Holder or its assigns shall
be issued: (i) a stock certificate representing (or which includes) that number
of shares of Common Stock equal to the number which is (A) the sum of the
principal balance as to which the Holder has elected to exercise its Conversion
Right and all accrued and unpaid interest thereon, divided by (B) the greater of
(I) 75% of the average daily closing price per share of the Common Stock on the
OTC Bulletin Board (or such successor securities exchange or quotation system on
which the Common Stock is then traded) for the ten consecutive trading days
immediately preceding the date of the Conversion Notice or (II) $0.906; and (ii)
a debt instrument, substantially in the form of this Note, representing the sum
of the principal balance, if any, as to which Holder has not exercised its
Conversion Right under this Section 3, and all accrued and unpaid interest
thereon.
4. If, prior to the Maturity Date, (a) the Company consummates an agreement
for the acquisition of fifty percent (50%) or more of the voting power of the
Company by merger, sale or other form of corporate reorganization or the sale or
other disposition of all or substantially all of its assets, (b) the Company
fails to pay any amount due hereunder within 15 days of the date when due, (c)
the Company becomes unable to pay its debts as they become due, files a
voluntary petition in bankruptcy, is adjudicated as a bankrupt or insolvent,
files any petition or answer seeking for itself any reorganization, liquidation,
dissolution, or similar relief under any present or future statute, law or
regulation, files any answer admitting or not contesting the material
allegations of a petition filed against the Company in any such proceeding, or
if there is the appointment of any custodian, trustee, receiver or liquidator of
the Company or of all or any substantial part of the properties of the Company,
(d) the Company commits a breach of the Master Services Agreement that has a
material and adverse effect on any customer relationship of the Holder and the
Company fails to cure such breach within 30 days of notice from Holder or (e)
the Company incurs new indebtedness after the date hereof with a party (other
than the Holder) outside of the ordinary course of business or in which the
amount of such indebtedness exceeds $150,000 (and the Company fails to obtain
the prior consent of the Holder, which shall not be unreasonably withheld or
delayed, to the incurrence of such indebtedness), then the Holder may, in
addition to all other rights and remedies it has under applicable law, declare
the entire outstanding principal amount hereunder and all accrued and unpaid
interest thereon immediately due and payable. In addition, upon the occurrence
of any of the events under subparagraphs (b) and (c) above, the Company shall
issue, or cause to be issued, the maximum number of shares of Common Stock
issuable to Holder, if any, as Additional Consideration under the Agreement.
5. The Company shall not, by amendment of its Certificate of Incorporation
or Bylaws or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Note, but shall at all times in good faith assist in the carrying out of all
such terms and in taking of all such action as may be necessary or appropriate
in order to protect the rights of the Holder of this Note.
6. Nothing contained in this Note shall be construed as conferring upon the
Holder of any other person the right to vote or to consent or to receive notice
as a shareholder of the Company.
7. In the event of any default hereunder, the Company shall pay all
reasonable attorneys' fees and court costs incurred by the Holder in enforcing
and collecting this Note.
8. Any principal repayment or interest payment on the Note not paid when
due, whether at stated maturity, by acceleration or otherwise, shall bear
interest at ten percent (10%) per annum.
9. The Company hereby waives demand, notice, presentment, protest and
notice of dishonor.
10. The Company may not prepay this Note prior to the Maturity Date without
first obtaining the written consent of Holder, which may be withheld for any
reason.
11. The terms of this Note shall be construed in accordance with the laws
of the State of Delaware, without giving effect to principles of conflicts of
law.
12. The terms and conditions of this Note shall not be amended, waived,
altered, supplemented, modified or terminated in any manner whatsoever except by
a written instrument, duly executed by the Company and the Holders.
13. Any notice required or permitted under this Note shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit with the United States Post Office, or Federal Express, postage prepaid,
addressed to the Company at the address set forth in the Agreement, or at such
other address as the Company may designate by ten days advance written notice to
the Holder.
14. In case any provision of this Note shall be held to be invalid,
illegal, or unenforceable, it shall, to the extent practicable, be modified so
as to make it valid, legal and enforceable and to retain, as nearly as
practicable, the intent of the parties, and the validity, legality and
enforceability of the remaining provisions of this Note shall not in any way be
affected or impaired thereby.
BIO-IMAGING TECHNOLOGIES, INC.
By: /s/ Mark L. Weinstein
-------------------------
Mark L. Weinstein
President & CEO