EXHIBIT 10.20
NON-RECOURSE SECURED PROMISSORY NOTE
July 28, 1997
US$1,500,000.00
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FOR VALUE RECEIVED, PRI RESEARCH, INC. a Delaware corporation ("Maker"), hereby
promises to pay to the order of C.T.P. RESEARCH AND DEVELOPMENT (1995) LTD., an
Israeli company or its permitted assignee ("Holder"), the principal sum of ONE
MILLION FIVE HUNDRED THOUSAND United States Dollars (US$1,500,000), together
with interest accrued at the rate of 7% per annum on the unpaid principal
balance hereof from the date hereof. Payments shall be made in lawful money of
the United States of America in immediately available funds and shall be made at
such place as may be designated in writing from time to time by Holder. Payments
of principal and interest shall be made as follows:
(a) The principal amount hereof shall be paid in eight equal installments of
US$187,500. The first installment shall become due and payable on July 5, 1999,
with the remaining seven installments being due and payable on each January 5
and July 5 thereafter through and including January 5, 2003 (the "Maturity
Date").
(b) Accrued interest shall become due and payable on January 5, 1998 and
shall be due and payable on each July 5 and January 5 through and including the
Maturity Date.
Notwithstanding the foregoing, payments of interest on or any installment of
the principal amount of this Note shall be made only on days in which banks in
New York City are not permitted by applicable law to be closed ("Business
Days"). If any interest on or any installment of the principal amount of this
Note becomes due and payable on a day that is not a Business Day, then the
relevant payment obligation shall be extended to the next succeeding Business
Day and interest shall be payable during such extension.
This Note may, at the option of Maker, be prepaid, in whole or in part (but
only in amounts of at least $100,000), at any time and any such prepayment shall
be applied to the installments of principal in reverse order of maturity. Any
such prepayment shall be without premium or penalty but shall include the
payment of accrued interest on the amount prepaid to and including the date of
prepayment.
This Note is the Note referred to in and is being issued in connection with
the purchase by Maker of Holder's limited partnership interest in Clal
Pharmaceutical Resources Limited Partnership ("CPR") and shares of Clal
Pharmaceutical Resources (1995) Ltd. ("CPRC"). This Maker in fulfillment of its
undertaking shall enter into the Mortgage Documents annexed hereto ("Mortgage")
and shall cause CPR and CPRC to pledge their assets to the benefit of the Holder
in accordance with the terms of the Mortgage.
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This note shall be non-recourse as against Maker. Holder shall look solely to
the collateral subject to the Mortgage as Holder's exclusive remedy in the event
of any default in payment or performance hereof. Holder shall not make claim or
institute any action or proceeding against Maker in respect hereof, and
expressly waives any right to a deficiency judgment in the event of foreclosure
or sale of such collateral. Nothing herein shall prevent the Holder from
instituting an action to enforce its rights to the collateral subject to the
Mortgage.
The unpaid principal sum of this Note, together with all accrued interest
thereon, shall, at the option of Holder, by written demand to Maker, become
immediately due and payable, (without presentment for payment, demand, protest
and notice of protest or any further notice or demand of any kind, all of which
are hereby expressly waived), 15 days after written notice of any of the
following events has been given by Holder to Maker, provided however that after
said 15 day cure period Maker shall have additional 5 days in which to pay off
in full all amounts due under this Note, including all accrued interest and
costs, if any of the following events shall occur (15 days written notice shall
apply only to Sections (1), (2); 10 days to pay off shall apply to all
sections).
(1) Maker's failure to pay, when due, any installments of principal or
interest on this Note.
(2) The breach by Maker of any term or provision of this Note.
(3) Any of Maker, CPRC or CPR makes an assignment for the benefit of
creditors or admits in writing its or its inability to pay its debts generally
as they become due;
(4) Any of Maker, CPRC or CPR applies to any tribunal for the appointment
of a custodian of any substantial part of its assets, or commences any
proceedings relating to it under any bankruptcy, insolvency, reorganization or
moratorium law or any other law for the relief of debtors of any jurisdiction
(any of the foregoing being a "Bankruptcy Proceeding");
(5) Any application is filed in respect of a Bankruptcy Proceeding, or any
Bankruptcy Proceeding is commenced, against any of Maker, CPRC or CPR by one or
more persons other than Maker, CPRC or CPR, and Maker, CPRC or CPR, as the case
may be, indicates its consent, approval, acquiescence thereto or the Bankruptcy
Proceeding is not dismissed within 60 days of its institution;
(6) A court of competent jurisdiction enters an order, judgment or decree
appointing a custodian for the whole or to a substantial portion of the property
of Maker, CPRC or CPR, or approving a petition filed against any of them seeking
reorganization or arrangement in any Bankruptcy Proceeding, and such order,
judgment or decree shall not be vacated or set aside or stayed within 90 days
from the date of entry thereof;
(7) Any of Maker, CPRC or CPR shall wind up its affairs, dissolve or
liquidate, or take corporate or partnership action to effect any of the
foregoing;
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(8) Any of Maker, CPRC or CPR shall enter into or be a party to any merger,
consolidation or reorganization with any other entity which may impair in any
respect the rights of Holder under this Note, provided that Maker, CPRC or CPR
may enter into any merger, consolidation or reorganization with any subsidiary
or affiliate of Pharmaceutical Resources, Inc. which does not impair the rights
of the Holder under this Note and its rights to Collateral under the Mortgage.
(9) If one or more judgments, decrees or orders is entered against Maker,
CPRC or CPR which, together with judgments, decrees or orders against any one or
more of them, total US$50,000 or more, which judgments or decrees are not
vacated, discharged, stayed or bonded pending appeal within 45 days from the
later of date of entry or the date upon which Maker receives notice of same.
(10) If Maker, directly or indirectly, declares, makes or agrees to make
(or sets apart any assets for) any distribution, dividend or other payment of
any kind to any of its stockholders, affiliates, officers or directors of Maker
including, without limitation, any distribution or application of Maker's assets
through the purchase, redemption or retirement of any loans or advances,
principal or interest payments, other than loan and interest payment as
hereinafter permitted, or unreasonable management consulting or like fees or
compensation.
(11) If any preliminary attachment, lien or additional security interest
which is superior as a matter of law to the security for this Note is placed
upon any of the property which is security for this Note and not set aside
within the earlier of (i) a period of 60 days or (ii) the date on which a
judgment is entered.
(11) If, at any time or from time to time, title to or any interest in the
whole or any part of the property which is security for this Note is acquired by
any person, partnership, corporation, trust, joint venture or other entity other
than the Maker ("Other Entity") unless said Other Entity assumes the terms of
this Note, provided that this shall not prohibit the Sale of assets which do not
constitute a material portion of such entity's assets, in the ordinary course of
such entity's business and for fair consideration;
(12) If any loss, theft, damage or destruction of any material part of the
property which is security for this Note, as set forth in the Mortgage, occurs
which is not covered by insurance;
(13) If CPR or CPRC fail to make any rent or other undisputed payments to
its landlord under the lease agreements when due against Maker, CPR or CPRC and
if in dispute upon conversion to an unstayed judgment.
(14) If CPR or CPRC fail to make any material Israeli tax payments
(withholding tax, social security tax, VAT or any other tax) when due or as
otherwise advised by its outside auditors.
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(15) If CPR or CPRC extends the lease agreements with its Landlord at a
time it is in breach of this Note and the Holder has commenced an action for its
enforcement.
Upon default under this Note, Holder may exercise any and all rights and
remedies available under the lien documents to which this Note is attached.
Time is of the essence with respect to each of Maker's obligations and
agreements evidenced by this Note. If Maker fails to make any payment of
principal or interest as and when due under this Note, then the entire
outstanding principal balance shall accrue interest from the date of such
default until the date of payment at 9% per annum.
The nonexercise or delay in exercise by Holder of any of its rights hereunder
in any particular instance shall not constitute a waiver thereof in that or any
subsequent instance.
Maker shall satisfy and perform each of the following agreements and covenants
for so long as any amounts of principal or interest due under this Note remain
outstanding:
(a) Furnish to Holder within 45 days after the end of each fiscal quarter
of CPR (other than the fourth fiscal quarter), commencing with the quarter
ending June 30, 1997, financial statements of CPR ("Interim Statements"),
prepared by CPR in a form substantially the same as that of the previous quarter
and thereafter United States Dollar denominated Financial Statements consisting
of statements of income and balance sheets of CPR, from the beginning of the
then current fiscal year and from the beginning of such quarter to the end of
such period, and balance sheets of CPR as of the end of such quarter, certified
by the President or Chief Financial Officer of Maker to be true and correct, and
accompanied by a certificate of said officer in such form as Holder may
reasonably require stating whether any event has occurred which constitutes an
event of default or which, with the giving of notice or the lapse of time, or
both, would constitute such an event of default and, if so, stating the facts
with respect thereto.
(b) Furnish to Holder within 90 days after the close of CPR's fiscal year,
commencing with the year ending December 31, 1997, United States Dollar-
denominated audited (reflecting CPR's business) financial statements of CPR
("Annual Statements") prepared by CPR, consisting of a balance sheet of CPR as
of the end of such fiscal year and statements of income, retained earnings,
paid-in capital and surplus and changes in financial position of CPR for such
fiscal year, certified by the President or Chief Financial Officer of Maker to
be true and correct, and accompanied by a certificate stating whether any event
has occurred which constitutes an event of default or which, with the giving of
notice or the lapse of time, or both, would constitute such an event of default
and, if so, stating the facts with respect thereto.
(c) Furnish to Holder such other information as Holder may reasonably
request regarding the non-confidential business, or the assets, financial
condition or income of Maker, CPRC and/or CPR;
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(d) Permit Holder and any of its representatives or agents, upon reasonable
notice and during normal business hours, to examine the books, records and
tangible assets of Maker, CPRC and/ CPR, to make copies and notes therefrom, and
to speak with the officers and management of each of them for the purposes of
ascertaining compliance with the terms hereof or obtaining enforcement;
(e) Maintain CPR's equipment and leasehold improvements in operating
condition and in a good state of repair, wear and tear excepted, and make any
and all replacements, additions and improvements thereto as are necessary for
the operation of CPR's business; and maintain and cause CPR to comply at all
times with all franchises, licenses, permits and leases held by CPR or to which
it is a party and not remove the equipment outside the jurisdiction of the State
of Israel except subject to sufficient notice to Holder and execution of the
required documents to allow a security interest on the equipment in the
jurisdiction to which it is removed;
(f) Maintain insurance coverage for Maker, CPRC and CPR from financially
sound and reputable insurers approved by Holder, naming Holder as an additional
insured, in at least such amounts, with no more than such deductibles and
relating to at least such losses and liabilities, including without limitation,
business interruption, property damage from theft, fraud, fire and explosions,
and liability arising from "errors and omissions", as are currently in effect,
and, in addition, maintain the insurance coverage required under the lease
agreements;
(g) Invest, either by cash, contribution or by reinvestment of CPR's net
profits, after tax at least US$1,500,000 during each calendar year for use by
CPR as working capital;
In addition, for so long as any amounts of principal or interest due under this
Note remain outstanding, Maker shall not, and shall not permit CPRC or CPR to:
(a) Transfer, sell, pledge or encumber in any way any material tangible
assets without prior notice to Holder and Holder's consent or transfer, sell,
pledge or encumber in any way any intangible assets (including know-how) other
than in the ordinary course and provided that such transfer, sale or encumbrance
shall not be fraudulent as to the Holder in any way;
(b) Enter into any material agreements which shall constitute an obligation
having financial consequences or incurring any liability (other than under (c)
below) other than in the ordinary course (it is herein stipulated that
development agreements for reasonable duration and under reasonable terms shall
be deemed to be in the ordinary course unless shown otherwise) and provided such
agreements are not fraudulently made as to the Holder.
(c) Borrow any funds from banks or other third parties (other than
Permitted Subordinated Debt as defined below, which shall be subordinate to the
obligations to Holder under the Note, provided that payments of principal of and
interest on such loans may be made as and when due thereunder so long as no
event of default under
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this Note shall have occurred and be continuing, and canceled in the event
Holder exercise on the interests in CPR and CPRC provided as collateral) other
than with prior notice to Holder and Holder's written consent (if such loans do
not materially affect the "asset base"/"equity" of CPR they shall have Holder's
consent and be deemed to be reasonable unless Holder shall demonstrate
otherwise) or provide any security or guaranty for any obligation of any other
person, firm or entity; or
(d) Place liens, pledges or security interests ("Encumbrances") on any of
its assets, or permit or suffer any Encumbrances to be placed on any assets of
CPRC or CPR, except: (i) Encumbrances created under the Mortgage; (ii)
Encumbrances on assets acquired or leased subject to purchase money security
interests, title retention or conditional sales agreements, financial or other
leases or similar financing arrangements; (iii) material men's liens, mechanics'
liens and other similar liens arising by operation of law in respect of amounts
owed to persons or entities that are not Affiliates.
The term "Permitted Subordinated Debt" means loans made to (i) CPR by any
partner thereof, (ii) CPRC by any shareholder thereof and (iii) Maker by any
shareholder thereof, in each case pursuant to written agreements which shall
provide that such loans are expressly subordinated in right of payment to
Maker's obligations and Holder's rights hereunder, provided that the intent of
such Note is not to violate any of the terms of this Note including Clause (g)
herein.
This Note and the rights and obligations of the parties hereunder shall be
construed and interpreted in accordance with the internal laws of the State of
Israel without any suit, action or proceeding in connection with, or enforcement
of, this Note, Maker submits to the non-exclusive jurisdiction of the courts of
the State of Israel, expressly waives all objections it may have as to venue in
any of such courts or any claim of inconvenient forum and agrees that nothing
herein shall affect the right of Holder to effect service of process in any
other manner permitted by law. In the event of any action to enforce this Note
Holder may collect costs and attorney's fees against the collateral subject to
this Note or the Mortgage.
The obligations of Maker hereunder shall not be subject to any defense,
setoff, counterclaim, recoupment or termination whatsoever based upon the
invalidity, illegality or unenforceability of any other agreements between Maker
and Holder.
This Note shall be binding upon Maker and its successors or assigns provided
that Maker shall not assign its obligations under this Note without the express
written consent of Holder, which may be withheld or denied in its sole
discretion.
The invalidity or unenforceability of any provision of this Note shall not
affect the other provisions hereof and the remaining provisions of this Note
shall remain operative and in full force and effect.
This Note may not be assigned by the Holder to any entity or person other to
an affiliate of Clal Industries, Ltd.
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IN WITNESS WHEREOF, the undersigned has cause this Note to be executed and
delivered as of the date and year first above written.
PRI RESEARCH, INC.
By: /s/Kenneth I. Sawyer
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, President
Attest: /s/Dennis S. O'Connor (SEAL)
-----------------------------
, Secretary
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