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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE BORROWER THAT SUCH REGISTRATION IS NOT REQUIRED.
SUBORDINATED PROMISSORY NOTE
$___________ June 20, 1997
Boulder, Colorado
FOR VALUE RECEIVED, BioStar, Inc., a Delaware corporation ("BORROWER"),
hereby unconditionally promises to pay to the order of ________________________
("LENDER"), in lawful money of the United States of America and in immediately
available funds, the principal sum of $____________ (the "LOAN") together with
accrued and unpaid interest thereon, payable on the dates and in the manner set
forth below.
This subordinated promissory note (the "NOTE") is non-negotiable and
is executed and delivered in full satisfaction of all amounts due and owing to
the Lender.
1. PRINCIPAL REPAYMENT. The outstanding principal amount of the
Loan shall be payable as follows: on the earlier of (a) February 15, 1998, or
(b) on the closing of a Corporate Event. A "Corporate Event" shall mean either
(i) the Borrower's initial public offering or (ii) the closing of a
consolidation or merger of the Borrower with or into any other corporation or
corporations, or a sale, conveyance or disposition of all or substantially all
of the assets of the Borrower. The Borrower may prepay this Note at any time
without penalty upon the prior written consent of Silicon Valley Bank, Venture
Lending, a division of Cupertino National Bank and Trust ("Venture Lending"),
and Comdisco, Inc.
2. INTEREST RATE. Borrower further promises to pay interest on
the sum of the unpaid principal balance of the Loan outstanding on each day,
from the date of this Note until all such principal amounts shall have been
repaid in full, which interest shall be payable at the prime rate as announced
by the Bank of America for commercial loans plus 2% per annum or the maximum
rate permissible by law (which under the laws of the State of Colorado shall be
deemed to be the laws relating to permissible rates of interest on commercial
loans), whichever is less. Interest shall be payable at maturity and shall be
calculated on the basis of a 365-day year for the actual number of days
elapsed.
3. PLACE OF PAYMENT. All amounts payable hereunder shall be
payable to Lender at the address it specifies to Borrower in writing.
4. APPLICATION OF PAYMENTS. Payment on this Note shall be
applied first to accrued interest, and thereafter to the outstanding principal
balance hereof.
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5. DEFAULT. Borrower's failure to pay timely any of the
principal amount due under this Note on the date the same becomes due and
payable or any accrued interest or other amounts due under this Note on the
date the same becomes due and payable or within ten (10) calendar days after
written receipt of notice of failure to pay shall constitute a default under
this Note. If a default is not cured within 30 days of the receipt of notice
of failure to pay, all unpaid principal, accrued interest and other amounts
owing thereunder shall, at the option of Lender, be immediately collectible by
Lender pursuant to applicable law.
6. NOTE.
(a) AGREEMENT TO SUBORDINATE. The Borrower, for itself,
its successors and assigns, covenants and agrees, and the Lender by acceptance
hereof, likewise covenants and agrees, that the payment of the principal of and
interest on this Note is hereby expressly subordinated to the extent and in the
manner hereinafter set forth in right of payment to the prior payment in full
of certain other obligations of Borrower owed at any time to commercial banks
or other financial institutions (including but not limited to the Borrower's
current obligations to Silicon Valley Bank, Venture Lending and Comdisco, Inc.
(other than the subordinated notes held by Comdisco, Inc.)) (the "Senior
Indebtedness"), and that such subordination is for the benefit of the holders
of Senior Indebtedness. All persons who, in reliance upon such provisions,
become holders of, or continue to hold, Senior Indebtedness, shall be entitled
to rely hereon, and such provisions are made for the benefit of the holders of
Senior Indebtedness, and they or any of them may proceed to enforce such
provisions directly against the Lender.
(b) SUBORDINATION IN THE EVENT OF DEFAULT ON SENIOR
INDEBTEDNESS. No payment shall be made on this Note at such time as any
default exists (or would exist after giving effect to such payment) with
respect to the Senior Indebtedness. If any such payment is made, Lender (or
its assignee) shall remit to the holder of the Senior Indebtedness all such
money so received, which shall be applied to amounts due under the Senior
Indebtedness.
(c) DISTRIBUTION ON DISSOLUTION, LIQUIDATION AND
REORGANIZATION; SUBROGATION OF NOTE. Upon any distribution of assets of
Borrower (or Borrower's assignee), upon any dissolution, winding up,
liquidation or reorganization of Borrower (or Borrower's assignee), whether in
bankruptcy, insolvency, reorganization or receivership proceedings or upon an
assignment for the benefit of creditors or any other marshalling of the assets
and liabilities of Borrower (or Borrower's assignee) or otherwise:
(1) the holder of all Senior Indebtedness shall
first be entitled to receive payment in full thereof before Lender is entitled
to receive any payment upon the principal of and premium, if any, or interest
on indebtedness evidenced by this Note;
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(2) any payment or distribution of assets of
Borrower (or Borrower's assignee) of any kind or character, whether in cash,
property or securities, to which Lender would be entitled except for the
provisions of this Section 6 shall be paid or delivered by Borrower (or
Borrower's assignee) or any liquidating trustee, trustee in bankruptcy,
receiver, agent or other person making such payment or distribution directly to
the holders of Senior Indebtedness or their representative or representatives
or to the trustee or trustees under any indenture under which any instruments
evidencing any of such Senior Indebtedness may have been issued, as their
interests appear, to the extent necessary to make payment in full of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness; and
(3) in the event that, notwithstanding the
foregoing, any payment or distribution of assets of Borrower (or Borrower's
assignee) of any kind or character, whether in cash, property or securities,
shall be received by Lender before all Senior Indebtedness is paid in full,
such payment or distribution shall be paid over or delivered to the holder of
such Senior Indebtedness or their representative or representatives or to the
trustee or trustees under any indenture under which any instruments evidencing
any of such Senior Indebtedness may have been issued, as their interests
appear, for application to the payment of all Senior Indebtedness remaining
unpaid until all such Senior Indebtedness shall have been paid in full, after
giving effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness.
Subject to the prior payment in full of all Senior Indebtedness, Lender shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of cash, property, or securities of Borrower (or
Borrower's assignee) applicable to the Senior Indebtedness until the principal
of, premium, if any, and interest on this Note shall be paid in full and no
such payments or distributions to Lender of cash, property or securities
otherwise distributable to the Senior Indebtedness shall, as between Borrower
(or Borrower's assignee), its creditors other than the holders of Senior
Indebtedness, and Lender, be deemed to be a payment by Borrower (or Borrower's
assignee) to or on account of this Note. It is understood that the provisions
of this Section 6 are and are intended solely for the purpose of defining the
relative rights of the Lender, on the one hand, and the holder of Senior
Indebtedness, on the other hand. Nothing contained in this Section 6 or
elsewhere in this Note is intended to or shall impair, as between Borrower (or
Borrower's assignee), its creditors other than the holders of Senior
Indebtedness, and Lender, the obligation of Borrower (or Borrower's assignee),
which is unconditional and absolute, to pay to Lender the principal of,
premium, if any, and interest on this Note as and when the same shall become
due and payable in accordance with its terms or to affect the relative rights
of Lender and creditors of Borrower (or Borrower's assignee) other than the
holders of Senior Indebtedness, nor shall anything herein or in this Note
prevent Lender from exercising all remedies otherwise permitted by applicable
law upon default hereunder, subject to the rights, if any, under this Section 6
of the holders of Senior Indebtedness in respect of cash, property or
securities of Borrower (or Borrower's assignee) received upon the exercise of
any such remedy. Upon any payment or distribution of assets of Borrower (or
Borrower's assignee) referred to in this Section 6, Lender shall be entitled to
rely upon any order or decree of a court or competent jurisdiction in which any
proceedings of the nature referred to in this Section are pending or upon a
certificate of the liquidating trustee, trustee in bankruptcy, receiver, agent
or other person making any distribution to Lender, for the purpose of
ascertaining the persons
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entitled to participate in such payment or distribution, the holders of Senior
Indebtedness and other indebtedness of Borrower (or Borrower's assignee), the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Section 6.
(d) AGREEMENT TO EFFECT SUBORDINATION. Lender by
acceptance of this Note agrees to take such action and execute such documents
as may be necessary or appropriate to effectuate the subordination as provided
in this Section 6.
7. WAIVER. Borrower waives presentment and demand for payment,
notice of dishonor, protest and notice of protest of this Note, and shall pay
all costs of collection when incurred, including, without limitation,
reasonable attorneys' fees, costs and other expenses.
The right to plead any and all statutes of limitations as a defense to any
demands hereunder is hereby waived to the fullest extent permitted by law.
8. ATTORNEY'S FEES. In the event of default by the Borrower (or
its assignee) in the payment of principal or interest due on this Note, Lender
shall be entitled to receive and Borrower (or its assignee) agrees to pay all
costs of collection incurred by Lender, including, without limitation,
reasonable attorneys' fees for consultation and suit.
9. GOVERNING LAW. This Note shall be governed by, and construed
and enforced in accordance with, the laws of the State of Colorado, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
10. SUCCESSORS AND ASSIGNS. The provisions of this Note shall
inure to the benefit of and be binding on any successor to Borrower and shall
extend to any holder hereof.
BORROWER:
BIOSTAR, INC.
By:
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Teresa W. Ayers
President/Chief Executive Officer
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