EXHIBIT 99.1
ANY AMOUNT PAYABLE UNDER THIS NOTE MAY BE SET-OFF AGAINST AS PROVIDED IN SECTION
3 HEREIN AND AS PROVIDED IN THE ASSET PURCHASE AGREEMENT (AS DEFINED HEREIN).
SUBORDINATED PROMISSORY NOTE
$500,000 August 14, 1998
FOR VALUE RECEIVED, Microfluidics International Corporation, a Delaware
corporation (the "Company"), hereby promises to pay to the order of Epworth
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Manufacturing Company, a Michigan corporation, (the "Payee"), subject to the
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conditions set forth herein, the principal sum of Five Hundred Thousand Dollars
($500,000) in lawful money of the United States, together with interest accruing
from the date hereof on the outstanding principal balance (and on any interest
installment not paid when due) at a rate per annum equal to ten percent (10%).
Principal shall be paid in twenty (20) equal quarterly consecutive installments,
and the first payment shall be due on December 31, 1998, and subsequent payments
shall be due on the last day of each September, December, March, and June
thereafter. Interest shall be payable quarterly and the first payment shall be
due on September 30, 1998, and subsequent payments shall be due on the last day
of each September, December, March, and June thereafter. Interest shall be
calculated on the basis of actual days elapsed over a 365 or 366-day year, as
the case may be. Any payments hereunder will be applied in the following order
of priority: first to any accrued and unpaid interest due and owing by the
Company to the Payee and then to the unpaid principal balance of this Note. The
Company may prepay the principal amount outstanding on this Note (together with
any accrued but unpaid interest) in whole or in part without premium, penalty or
fee at any time.
The Company, Payee and Morehouse-COWLES, Inc., a California corporation
("Morehouse"), have entered into a Asset Purchase Agreement dated June 19,
1998, pursuant to which the Company has purchased substantially all of the
assets and assumed certain of the liabilities of each of the Payee and Morehouse
(the "Asset Purchase Agreement"). Capitalized terms used herein and not
otherwise defined shall having the meaning assigned to them in the Asset
Purchase Agreement.
Payments of principal and interest will be made by check or by wire
transfer of funds, in immediately available United States funds, sent to the
holder at the address furnished to the Company for that purpose.
This Note is one of a limited number of Subordinated Promissory Notes of
like tenor, issued or issuable by the Company pursuant to and entitled to the
benefits of the Asset Purchase Agreement, and each holder of this Note, by his,
her or its acceptance hereof, agrees to be bound by the provisions of the Asset
Purchase Agreement. This Note will be registered on the books of the Company or
its agent as to principal and interest. Any transfer of this Note will be
effected only by surrender of this Note to the Company and reissuance of a new
note to the transferee.
1. Subordination. The Payee's rights to payment of principal and
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interest hereunder shall be subject to the rights of the holders of Senior Debt
pursuant to and as defined in the
Subordination Agreement with Comerica Bank dated the date hereof (the
"Subordination Agreement"), consistent with the provisions of Section 6.09 of
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the Asset Purchase Agreement.
2. Events of Default. The outstanding principal of and accrued interest
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on this Note shall, at the option of the holder hereof, become immediately due
and payable without notice or demand, subject to the terms of the Subordination
Agreement, upon the happening of any one of the following specified events (such
events referred to herein as an "Event of Default"):
(a) failure to pay any amount as herein set forth within fifteen
(15) days following the due date thereof, which failure remains uncured for
thirty (30) days, provided that an Event of Default will not be deemed to
have occurred if, in accordance with the terms of the Subordination
Agreement, the Company is precluded from making any payments when due
hereunder;
(b) the making of a general assignment for the benefit of
creditors;
(c) the filing of any petition or the commencement of any
proceeding by the Company for any relief under any bankruptcy or insolvency
laws, or any laws relating to the relief of debtors, readjustment of
indebtedness, reorganizations, compositions, or extensions; or
(d) the filing of any petition or the commencement of any
proceeding against the Company for any relief under any bankruptcy or
insolvency laws, or any laws relating to the relief of debtors, readjustment
of indebtedness, reorganizations, compositions, or extensions, which
proceeding is not dismissed within sixty (60) days.
3. Set-Off. Notwithstanding any of the other terms and provisions of
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this Note regarding payments of principal and interest, in the event (i) that
the Company shall incur any liability, loss, damage, claim, cost or expense by
reason of any unassumed liabilities or other event that would give the Company a
claim for indemnification from the Payee pursuant to terms of the Asset Purchase
Agreement, (ii) of a pre-closing adjustment to the Purchase Price under Section
1.02(b) of the Asset Purchase Agreement, (iii) of a post-closing adjustment to
the Purchase Price under Section 1.02(c) of the Asset Purchase Agreement or (iv)
of a repurchase of any Uncollected Accounts Receivable under Section 4.15 of the
Asset Purchase Agreement, the Company shall have the right in accordance with
the terms of the Asset Purchase Agreement, in addition to any other rights which
the Company may have at law or in equity or under the Asset Purchase Agreement,
to set-off and deduct from the amounts payable to the Payee hereunder an amount
equal to such liability, loss, damage, claim, cost, expense, payment, adjustment
or repurchase. Any amount set-off against this Note hereunder shall be set-off
in the manner provided in the Asset Purchase Agreement.
4. Waiver by Holder. No waiver of any obligation of the Company under
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this Note shall be effective unless it is in a writing signed by the holder. A
waiver by the holder of any right or remedy under this Note on any occasion
shall not be a bar to exercise of the same right or remedy on any subsequent
occasion or of any other right or remedy at any time.
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5. Notice. Any notice required or permitted under this Note shall be in
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writing and shall be deemed to have been given on the date of delivery, if
personally delivered to the party to whom notice is to be given, or on the fifth
business day after mailing, if mailed to the party to whom notice is to be
given, by certified mail, return receipt requested, postage prepaid, and
addressed as follows:
if to the Company, at
Microfluidics International Corporation
30 Ossipee Road
Newton, Massachusetts 02464-9101; or
at such other address which the Company may provide to the Payee in
writing, from time to time; and
if to the holder, at the most recent address provided to the Company
by the holder for such purpose; or, in each case, to the most recent address,
specified by written notice, given to the sender pursuant to this paragraph.
6. Waiver by Company. The Company hereby expressly waives presentment,
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demand, and protest, notice of demand, dishonor and nonpayment of this Note, and
all other notices or demands of any kind in connection with the delivery,
acceptance, performance, default or enforcement hereof, and hereby consents to
any delays, extensions of time, renewals, waivers or modifications that may be
granted or consented to by the holder hereof with respect to the time of payment
or any other provision hereof or of the Asset Purchase Agreement.
7. Severability. In the event any one or more of the provisions of this
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Note shall for any reason be held to be invalid, illegal or unenforceable, in
whole or in part or in any respect, or in the event that any one or more of the
provisions of this Note operate or would prospectively operate to invalidate
this Note, then and in any such event, such provision(s) only shall be deemed
null and void and shall not affect any other provision of this Note and the
remaining provisions of this Note shall remain operative and in full force and
effect and in no way shall be affected, prejudiced, or disturbed thereby.
8. Governing Law. This Note shall be governed by and construed and
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enforced in accordance with the laws of the Commonwealth of Massachusetts.
9. Prohibition on Certain Transfers.
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(a) Company's Consent. This Note may not be sold, assigned, transferred,
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exchanged, gifted, pledged, hypothecated or devised without the consent of the
Company, provided that such consent shall not be unreasonably withheld, and may
not be sold, assigned, transferred, exchanged, gifted or devised where the
ultimate transferee either (i) engages in or has a financial interest in, any
business which is competitive with the business of the Company or any
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of its affiliates, including but not limited to the Business or (ii) is in the
process of making or contemplating making an offer to purchase any outstanding
class of capital stock of the Company or all or substantially all of the assets
of the Company.
(b) Legend. THIS NOTE MAY BE DEEMED A SECURITY AND, AS SUCH, HAS NOT BEEN
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REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. IF THIS NOTE IS DEEMED A SECURITY, IT MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO MICROFLUIDICS INTERNATIONAL
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
MICROFLUIDICS INTERNATIONAL
CORPORATION
By: /s/ Michael A. Lento
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Name: Michael A. Lento
Title: President
Attested:
By: /s/ Jack Swig
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Name: Jack Swig
Title: General Counsel of Microfluidics International Corporation
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