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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
COOPER DEVELOPMENT COMPANY
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(Exact name of registrant as specified in its charter)
May 22, 1996
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Date of Report (Date earliest event reported)
Delaware 1-11727 94-2876745
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(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) Identification No.)
16160 Caputo Drive Morgan Hill, California 95037
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(Address of principal executive offices) (Zip Code)
(408) 779-8088
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(Registrant's telephone number, including area code)
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Item 5. Other Events.
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Note and Warrant Purchase Agreement.
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The Company entered into a Note and Warrant Purchase Agreement (the
"Purchase Agreement") dated May 22, 1996 with Parker G. Montgomery, the
Company's President and Chairman of the Board of Directors, and Theodore H.
Kruttschnitt, a member of the Company's Board of Directors. The Purchase
Agreement provides for the establishment of a $2,000,000 line of credit in favor
of the Company. The line of credit can be drawn down by the Company in $500,000
increments. Amounts drawn down will be due on December 31, 2000 and will bear
interest at the rate of 12% per annum, subject to obtaining a permit from the
Commissioner of Corporations of the State of California. As consideration for
the establishment of the line of credit, the Company has issued warrants to each
of the lenders to purchase 285,714 shares of Common Stock of the Company. In
addition, for each $1,000 borrowed by the Company from a lender under the line
of credit, the Company has agreed to issue to such lender warrants to purchase
an additional 286 shares of Common Stock. The exercise price of the warrants is
$1.75 per share. The line of credit is secured by a pledge of all of the issued
and outstanding stock of the Company's wholly owned subsidiary, Cabot
Laboratories, Inc.
The transactions covered by the Purchase Agreement were negotiated and
approved by a Special Committee of the Board of Directors of the Company, with
the assistance of an independent investment banker. The Company plans to use
amounts drawn under the lines of credit to repay existing accounts payable and
for working capital. As of May 22, 1996, the Company had drawn $1,000,000 under
the line of credit and had issued warrants to purchase 428,714 shares of its
Common Stock to each of Mr. Montgomery and Mr. Kruttschnitt.
Amendment to Stockholders Rights Agreement.
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The Company adopted a Sixth Amendment to Rights Agreement dated as of May
22, 1996 to the Rights Agreement dated as of December 15, 1987, as amended as of
July 31, 1991, as of November 27, 1991, as of December 3, 1992, as of November
1, 1993 and as of November 10, 1995 (collectively, the "Rights Agreement"),
between the Company and the First National Bank of Boston, as Rights Agent. The
amendment provides, in effect, that no person shall become an "Acquiring Person"
for purposes of the Rights Agreement as a result of an acquisition of shares of
Common Stock of the Company upon exercise of outstanding warrants issued by the
Company pursuant to the Purchase Agreement.
The foregoing summary of the amendment to the Rights Agreement is qualified
in its entirety by reference to the
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Rights Agreement and the amendments thereto, each of which is attached as an
exhibit hereto and incorporated by reference herein.
Item 7. Financial Statements and Exhibits.
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(a) Exhibits
1. Rights Agreement dated as of December 15, 1987 by and between the
Company and The First National Bank of Boston. Incorporated by reference
to Exhibit 4.1 to the Company's Current Report on Form 8-K dated December
15, 1987.
2. First Amendment to Rights Agreement dated as of July 31, 1991 by
and between the Company and The First National Bank of Boston.
Incorporated by reference to Exhibit 4 to the Company's Current Report on
Form 8-K dated August 1, 1991.
3. Second Amendment to Rights Agreement dated as of November 27, 1991
by and between the Company and The First National Bank of Boston.
Incorporated by reference to Exhibit 3 to the Company's Current Report on
Form 8-K dated November 19, 1991.
4. Third Amendment to Rights Agreement dated as of December 3, 1992 by
and between the Company and The First National Bank of Boston.
Incorporated by reference to Exhibit 4 to the Company's Current Report on
Form 8-K dated December 3, 1992.
5. Forth Amendment to Rights Agreement dated as of November 1, 1993 by
and between the Company and The First National Bank of Boston.
Incorporated by reference to Exhibit 5 to the Company's Current Report on
Form 8-K dated October 15, 1993.
6. Fifth Amendment to Rights Agreement dated as of November 10, 1995
by and between the Company and The First National Bank of Boston.
Incorporated by reference to Exhibit 6 to the Company's Current Report on
Form 8-K dated November 10, 1995.
7. Sixth Amendment to Rights Agreement dated as of May 22, 1996 by and
between the Company and The First National Bank of Boston.
8. Note and Warrant Purchase Agreement dated as of May 22, 1996 by and
between the Company, Theodore H. Kruttschnitt and Parker G. Montgomery.
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9. Security Agreement dated as of May 22, 1996 by and between the
Company, Theodore H. Kruttschnitt and Parker G. Montgomery.
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Signature
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COOPER DEVELOPMENT COMPANY
(Registrant)
Dated: June , 1996 By: MICHAEL J. BRADEN
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Michael J. Braden
Signature Vice President
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Index to Exhibits
Document. Page.
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1. Rights Agreement dated as of December 15, 1987 by and between the
Company and The First National Bank of Boston. *
2. First Amendment to Rights Agreement dated as of July 31, 1991 by
and between the Company and The First National Bank of Boston. *
3. Second Amendment to Rights Agreement dated as of November 27, 1991
by and between the Company and The First National Bank of Boston. *
4. Third Amendment to Rights Agreement dated as of December 3, 1992 by
and between the Company and The First National Bank of Boston. *
5. Forth Amendment to Rights Agreement dated as of November 1, 1993 by
and between the Company and The First National Bank of Boston. *
6. Fifth Amendment to Rights Agreement dated as of November 10, 1995
by and between the Company and The First National Bank of Boston. *
7. Sixth Amendment to Rights Agreement dated as of May 22, 1996 by and
between the Company and The First National Bank of Boston.
8. Note and Warrant Purchase Agreement dated as of May 22, 1996 by and
between the Company, Theodore H. Kruttschnitt and Parker G. Montgomery.
9. Security Agreement dated as of May 22, 1996 by and between the
Company, Theodore H. Kruttschnitt and Parker G. Montgomery.
* Incorporated by reference.
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Exhibit 7
SIXTH AMENDMENT TO RIGHTS AGREEMENT
This Sixth Amendment (the "Amendment") is made effective as of May 22, 1996
to the Rights Agreement dated as of December 15, 1987 and amended as of July 31,
1991, as of November 27, 1991, as of December 3, 1992, as of November 1, 1993
and as of November 10, 1995 (collectively, the "Rights Agreement"), between
Cooper Development Company, a Delaware corporation (the "Company"), and The
First National Bank of Boston (the "Rights Agent").
Pursuant to Section 26 of the Rights Agreement, the Company and the Rights
Agent may from time to time supplement or amend the Rights Agreement in
accordance with the provisions of Section 26 thereof. All acts and things
necessary to make this Amendment a valid agreement according to its terms have
been done and performed, and the execution and delivery of this Amendment by the
Company and the Rights Agent have been in all respects authorized by the Company
and the Rights Agent.
In consideration of the foregoing premises and the mutual agreements set
forth in the Rights Agreement and this Amendment, the parties hereto agree as
follows:
1. Section 1(a) of the Rights Agreement is hereby modified and amended to
read in its entirety as follows:
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(a) "Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
thirty percent (30%) or more of the shares of Common Stock then outstanding, but
shall not include the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such Plan. Notwithstanding the foregoing, no Person shall
become an Acquiring Person as the result of (i) an acquisition of shares of
Common Stock by the Company which, by reducing the number of shares of Common
Stock outstanding, increases the proportionate number of shares of Common Stock
beneficially owned by such Person to thirty percent (30%) or more of the Common
Stock of the Company then outstanding, (ii) an acquisition by any Person of
shares of the Company's Common Stock upon conversion of outstanding promissory
notes originally issued by the Company pursuant to Note Purchase Agreements
dated as of December 11, 1992, as of February 24, 1993, as of May 28, 1993, as
of October 15, 1993 and as of October 29, 1993 into shares of the Company's
Common Stock or (iii) an acquisition by any Person of shares of the Company's
Common Stock upon exercise of warrants to purchase shares of the Company's
Common Stock issued pursuant to those certain Note and Warrant Purchase
Agreements dated as of November 10, 1995 and May 22, 1996, provided, however,
that if a Person shall become the Beneficial Owner of thirty percent (30%) or
more of the Common Stock of the Company then outstanding by
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reason of purchases of shares of Common Stock by the Company, conversion of the
aforesaid promissory notes or exercise of the aforesaid warrants, then the
percentage ownership of the Company's Common Stock which subsequently causes a
person to be deemed an "Acquiring Person" shall be increased to the greatest
percentage ownership outstanding immediately upon consummation of such
purchases, conversion of such promissory notes or exercise of such warrants.
2. Except as expressly amended hereby, the Rights Agreement remains in full
force and effect in accordance with its terms.
3. This Amendment to the Rights Agreement shall be governed and construed in
accordance with the laws of the State of Delaware.
4. This Amendment to the Rights Agreement may be executed in any number of
counterparts, and each of such counterparts shall be for all purposes deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
5. Except as expressly set forth herein, this Amendment to the Rights
Agreement shall not by implication or otherwise, alter, modify, amend or in any
way affect any of the terms, conditions, obligations, covenants or agreements
contained in the Rights
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Agreement, all of which are ratified and affirmed in all respects and shall
continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the Rights
Agreement to be duly executed as of the day and year first above written.
COOPER DEVELOPMENT COMPANY
BY:________________________
TITLE:_____________________
THE FIRST NATIONAL BANK OF BOSTON
BY:_________________________
TITLE:______________________
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Exhibit 8
COOPER DEVELOPMENT COMPANY
NOTE AND WARRANT PURCHASE AGREEMENT
This Note and Warrant Purchase Agreement (the "Agreement") is made as of
May 22, 1996 by and among Cooper Development Company, a Delaware corporation
(the "Company"), the principal executive offices of which are located at 16160
Caputo Drive, Morgan Hill, CA 95037, and Theodore H. Kruttschnitt and Parker G.
Montgomery (individually, a "Purchaser" and collectively, the "Purchasers").
SECTION 1
Lines of Credit; Authorization and Sale of Notes and Warrants
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1.1 Lines of Credit. Each of the Purchasers, severally and not
---------------
jointly, agrees to provide to the Company for a period commencing on the Closing
Date (as defined below) and terminating on December 31, 1996 an irrevocable,
non-revolving line of credit under which the Company may draw advances of
$500,000 from each Purchaser from time to time up to an aggregate principal
amount of $1,000,000 from each Purchaser (individually, a "Line" and
collectively, the "Lines") subject to the terms and conditions of (a) this
Agreement and (b) each of the Company's Senior Notes (individually, a "Note" and
collectively, the "Notes") substantially in the form attached hereto as
Exhibit A, which Notes shall evidence the advances made under the respective
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Lines. Allof the terms of the Notes are incorporated herein by reference. At the
Closing (as defined below), the Company shall execute and deliver to each
Purchaser a Note and each Purchaser shall make an advance of $500,000 to the
Company.
1.2 Advances under the Line of Credit; Sale and Issuance of Notes. In
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the event the Company wishes to draw down additional amounts under the Lines, it
shall deliver written notice to each of the Purchasers requesting each of them
to make an advance, and each Purchaser shall comply with such request within
five business days of his receipt of such notice. The Purchasers shall only be
obligated to make advances under the Lines to the extent there is availability
under the Lines for further advances on the date of a request for an advance.
1.3 Issuance of Warrants. In consideration for the provision by the
--------------------
Purchasers of the Lines and subject to the terms and conditions hereof, the
Company will issue to each Purchaser and each Purchaser, severally and not
jointly, shall receive from the Company a warrant in substantially the form
attached hereto as Exhibit B (individually, a "Warrant" and collectively, the
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<PAGE>
"Warrants") to purchase 285,714 shares of the Company's Common Stock at an
exercise price of $1.75 per share. In addition, in consideration for each $1,000
of advances made by each Purchaser under the Lines and subject to the terms and
conditions hereof, the Company will issue to such Purchaser and such Purchaser
shall receive from the Company an additional Warrant to purchase 286 shares of
the Company's Common Stock at an exercise price of $1.75 per share.
SECTION 2
Closing Date; Delivery
----------------------
2.1 Closing Date. The closing of the purchase and sale of the Notes and
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issuance of the Warrants hereunder (the "Closing") shall be held, in the case of
Mr. Kruttschnitt, at 1350 Bayshore Blvd., Suite 850, Burlingame, California
94010 and, in the case of Mr. Montgomery, at the offices of the Company, 16160
Caputo Drive, Morgan Hill, CA 95037, at 3:00 p.m. (Pacific Time) on May 22,
1996, or at such other time and place upon which the Company and the Purchasers
shall agree (the date of the Closing is hereinafter referred to as the "Closing
Date").
2.2 Delivery. At the Closing, the Company shall deliver to each
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Purchaser a Note and a Warrant registered in such Purchaser's name against
delivery by each Purchaser of an executed counterpart to this Agreement and
payment by each Purchaser of $500,000 by check or wire transfer, payable to the
Company. Upon the Closing and upon the draw of each advance under the Lines,
the Company shall deliver (i) an updated Schedule to each Note reflecting the
aggregate outstanding principal amount of each Note and (ii) any additional
Warrants required by Section 1.3 hereof. At the Closing, the Company and the
Purchasers shall simultaneously enter into a Security Agreement and Joint Escrow
Instructions, providing security for the Notes and other items substantially in
the forms attached to this Agreement as Exhibit C and Exhibit D.
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SECTION 3
Representations and Warranties of the Company
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The Company represents and warrants to each of the Purchasers as follows:
3.1 Organization and Standing. The Company is a corporation duly
-------------------------
incorporated, validly existing and in good standing under the laws of the State
of Delaware. The Company has the corporate power to own and operate its
properties and assets and to carry on its business as presently conducted and as
proposed to be conducted. The Company is qualified to do business as a
2
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foreign corporation in all other jurisdictions where such qualification is
required, except where the failure to be so qualified would not have a material
adverse effect on the Company's business.
3.2 Corporate Power. The Company has the corporate power to execute and
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deliver this Agreement, to sell and issue the Notes and Warrants and to carry
out and perform its obligations under the terms of this Agreement, the Notes,
the Warrants, the Security Agreement and the Joint Escrow Instructions.
3.3 Authorization and Execution. All corporate action on the part of the
---------------------------
Company, its directors and stockholders necessary for the authorization, sale,
issuance and delivery of the Notes and the Warrants, and the performance of all
of the Company's obligations hereunder and thereunder has been taken or will be
taken prior to the Closing. This Agreement, when executed and delivered by the
Company, shall constitute a valid and binding obligation of the Company
enforceable in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies. The Notes and
Warrants will be free of any liens or encumbrances other than those created by
or imposed upon the holders thereof through no action of the Company; provided,
--------
however, that the Notes and Warrants may be subject to restrictions on transfer
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under state and/or federal securities laws as set forth herein or as otherwise
provided by law. The Notes and Warrants are not subject to any preemptive
rights or rights of first refusal.
3.4 SEC Filings. The Company has delivered to the Purchasers its report
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on Form 10-Q, for the fiscal quarter ended March 31, 1996, as filed with the
Securities and Exchange Commission and its annual report on Form 10-K for the
fiscal year ended December 31, 1995 as filed with Securities and Exchange
Commission including, in each case, the financial statements contained therein
(the "Financial Statements"). As of their respective dates, such reports did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. Each of the balance sheets included in the Financial Statements
(including any related notes and schedules) fairly presents the financial
position of the Company as of the date of such balance sheet and each of the
other financial statements included in the Financial Statements (including any
related notes and schedules) fairly presents the results of operations or other
information included therein of the Company for the periods or as of the dates
therein set forth, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved (except as otherwise
stated therein).
3
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3.5 Undisclosed Liabilities. The Company does not have any indebtedness
-----------------------
for borrowed money or other liabilities that the Company has directly or
indirectly created, incurred, assumed or guaranteed, or with respect to which
the Company has otherwise become directly or indirectly liable, that are not
fully disclosed in the Financial Statements or that have not otherwise been
disclosed to the Purchasers in writing by the Company on May 22, 1996.
3.6 No Material Adverse Change. Except as disclosed in the reports
--------------------------
referred to in Section 3.4 hereof or as otherwise disclosed to the Purchasers in
writing by the Company as of May 22, 1996, there has been no material adverse
change in the financial condition or results of operations of the Company since
March 31, 1996.
3.7 Compliance With Other Instruments. Neither the execution, delivery
---------------------------------
or performance of this Agreement nor the issuance of the Notes and the Warrants
will violate or conflict with the Company's Certificate of Incorporation or By-
laws, or will conflict with or result in any breach of or default under any term
or provision of any material mortgage, indenture, contract, agreement or
instrument, judgment or decree, order, statute, rule or regulation applicable to
the Company, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company.
3.8 Litigation, etc. Except as disclosed in the reports referred to in
----------------
Section 3.4 hereof or as otherwise disclosed to the Purchasers at past meetings
of the Board of Directors, there are no actions, suits, proceedings or
investigations pending against the Company before any court or governmental
agency or, to the best of the Company's knowledge, threatened against the
Company that, either in any individual case or in the aggregate, would result in
any material adverse change in the business or financial condition of the
Company or that question the validity of this Agreement or any action taken or
to be taken by the Company in connection herewith.
3.9 Governmental Consent, etc. No consent, approval or authorization of
--------------------------
or designation, declaration or filing with any governmental authority or any
other person or entity on the part of the Company is required in connection with
the execution and delivery of this Agreement or the offer, sale or issuance of
the Notes, or the consummation of any other transaction contemplated hereby,
except for the permit and any other filings required by applicable California
securities laws.
3.10 Brokers or Finders. The Company has not incurred, and will not
------------------
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for brokerage or finders' fees or agents' commissions or any
similar
4
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charges in connection with this Agreement or the sale of the Notes and Warrants.
SECTION 4
Representations and Warranties of Each Purchaser
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Each Purchaser hereby severally and not jointly represents and warrants to
the Company with respect to the purchase of such Purchaser's Note and Warrant(s)
as follows:
4.1 Experience. Such Purchaser has substantial experience in evaluating
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and investing in private placement transactions so that such Purchaser is
capable of evaluating the merits and risks of such Purchaser's investment in the
Company. Such Purchaser, by reason of his business or financial experience or
the business or financial experience of his professional advisors who are
unaffiliated with and who are not compensated by the Company or any affiliate or
selling agent of the Company, directly or indirectly, has the capacity to
protect his own interests in connection with the purchase of such Purchaser's
Note and Warrant(s) hereunder.
4.2 Investment. Such Purchaser is acquiring such Purchaser's Note and
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Warrant(s) for investment for such Purchaser's own account, not as a nominee or
agent, and not with a view to, or for resale in connection with, any
distribution thereof. Such Purchaser understands that such Purchaser's Note and
Warrant(s) have not been and will not be registered under the Securities Act of
1933, as amended (the "Securities Act"), by reason of a specific exemption from
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
such Purchaser's representations as expressed herein. Such Purchaser
acknowledges that such Purchaser's Note and Warrant(s) must be held indefinitely
unless subsequently registered under the Securities Act or an exemption from
such registration is available. Such Purchaser has had access to all
information regarding the Company and his investment in the Notes and the
Warrant(s) that such Purchaser has requested in order to evaluate the merits and
risks associated with such investment.
4.3 Execution. This Agreement, when executed and delivered by such
---------
Purchaser, will constitute a valid and legally binding obligation of such
Purchaser, enforceable in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief and other
equitable remedies.
5
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4.4 Brokers of Finders. Such Purchaser has not incurred, and will not
------------------
incur, directly or indirectly, as a result of any action taken by such
Purchaser, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or the purchase of such
Purchaser's Note and Warrant(s).
SECTION 5
Conditions to Closing of Each Purchaser
---------------------------------------
Each Purchaser's obligation to purchase such Purchaser's Note and Warrant
at the Closing is, at the option of each Purchaser, subject to the fulfillment
as of the Closing Date of the following conditions:
5.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Section 3 hereof shall be true and correct
when made, and shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect as if they had been made on and
as of said date.
5.2 Execution and Delivery of Note. The Company shall have executed and
------------------------------
delivered to each Purchaser a Note to be purchased by such Purchaser.
5.3 Execution and Delivery of Warrant. The Company shall have executed
---------------------------------
and delivered to each Purchaser a Warrant to be purchased by such Purchaser.
5.4 Covenants. All covenants, agreements and conditions contained in
---------
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with in all material
respects.
5.5 Compliance With Laws. At the time of the Closing, neither the
--------------------
purchase and sale of the Notes and the Warrants, nor the consummation of the
other transactions contemplated hereby, shall violate any law, rule or
regulation to which either of the Purchasers or the Company is subject.
5.6 Simultaneous Note Purchases and Advances. Each Purchaser's
----------------------------------------
obligation to purchase his Note from the Company is expressly conditioned upon
the prior or simultaneous purchase by the other Purchaser of his Note. Each
Purchaser's obligation to make advances under his Line is expressly conditioned
upon the prior or simultaneous advance by the other Purchaser under his Line.
6
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SECTION 6
Conditions to Closing of the Company
------------------------------------
The Company's obligation to sell and issue the Notes and Warrants at the
Closing is, at the option of the Company, subject to the fulfillment as of the
Closing Date of the following conditions:
6.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by each Purchaser in Section 4 herein shall be true and correct
when made, and shall be true and correct in all material respects on and as of
the Closing Date with the same force and affect as if they had been made on and
as of said date.
6.2 Compliance with Laws. At the time of the Closing, neither the
--------------------
purchase and sale of the Notes and the Warrants nor the consummation of the
other transactions contemplated hereby shall violate any law, rule or regulation
to which either of the Purchasers or the Company is subject.
6.3 Delivery of Form W-9. If requested by the Company, each Purchaser
--------------------
shall have delivered to the Company a properly completed and signed Internal
Revenue Service Form W-9.
SECTION 7
Covenants of the Company
------------------------
7.1 Merger, Sale of Assets, etc. So long as any Notes remain
----------------------------
outstanding, the Company will not, without the consent in writing of the holders
of all of the principal amount of such Notes, merge with or into or consolidate
with any person, or sell, lease, transfer or assign to any person or otherwise
dispose of (whether in one transaction or a series of transactions) all or any
substantial part of the Company's assets (including the sale, lease, transfer,
assignment or other disposition of any capital stock of the Company or any of
its subsidiaries) whether now owned or hereafter acquired (other than sales of
inventory or obsolete equipment sold in the ordinary course of business or with
respect to employee stock options or other rights to acquire the Company's
capital stock issued pursuant to the stock option plans or other stock benefit
plans of the Company which are currently in effect or pursuant to any offering
to the Company's existing stockholders).
7.2 Indebtedness. So long as any Notes remain outstanding, the Company
------------
will not, without the consent in writing of the holders of all of the principal
amount of such Notes, create, incur, permit to exist or assume any
7
<PAGE>
indebtedness other than indebtedness evidenced by the Notes or any line of
credit or other indebtedness of the Company outstanding as of the date hereof or
any indebtedness of the Company to any of its subsidiaries (whether now existing
or hereafter created).
7.3 Liens. So long as any Notes remain outstanding, the Company will
-----
not, without the consent in writing of the holders of all of the principal
amount of such Notes, incur, create, assume or permit to exist any mortgage,
pledge, security interest, lien, charge or other encumbrance of any nature
whatsoever, including conditional sale or other title retention agreements, on
any of its property or assets or those of a subsidiary, whether owned at the
date hereof or hereafter acquired, or assign or convey any rights to or security
interests in any future revenues, except those incurred in the ordinary course
of business and those existing as of the date hereof as described in the reports
referred to in Section 3.4.
7.4 Dividends and Distributions. So long as any Notes remain
---------------------------
outstanding, the Company will not, without the consent in writing of the holders
of all of the principal amount of such Notes, declare or pay any dividends or
make any distributions on its capital stock, or purchase, redeem or otherwise
acquire or retire for value any of its capital stock, or permit any subsidiary
to, directly or indirectly, purchase, redeem or otherwise acquire or retire for
value any of such subsidiary's capital stock, other than any redemption by the
Company of any rights issued pursuant to that certain Rights Agreement, dated
December 15, 1987, as amended, between the Company and The First National Bank
of Boston.
7.5 Investments. So long as any Notes remain outstanding, the Company
-----------
will not, without the consent in writing of the holders of all of the principal
amount of such Notes, purchase or otherwise acquire any stock, obligations,
assets or securities of, or any interest in, or make any capital contributions
or loans or advances to, any person except for loans and advances made in the
ordinary course of business (including to any subsidiary of the Company), or
make any other investments, except for those that the Company may make for cash
management purposes only.
7.6 Amendment of Constitutive Documents. So long as any of the Notes
-----------------------------------
remain outstanding, the Company will not, without the consent in writing of the
holders of all of the principal amount of such Notes, permit any amendment or
modification to be made to the Certificate of Incorporation or By-laws of the
Company; provided, however, that the Company shall have the right to amend or
-------- -------
modify each such document so long as such amendment or modification shall not
adversely affect the rights or interests of the holders of such Notes.
8
<PAGE>
7.7 Delivery of SEC Information and Other Filings. So long as any of the
---------------------------------------------
Notes remain outstanding, the Company will deliver promptly to the holders of
all of the principal amount of such Notes, by regular first class mail, postage
prepaid, (a) a copy of each filing made by the Company with the Securities and
Exchange Commission; and (b) any other available information which is requested
by any holder in writing to the Company.
7.8 Notice of Defaults Under Notes. So long as any of the Notes remain
------------------------------
outstanding, the Company will promptly notify the holders thereof of any Event
of Default (as defined in the Notes) and of any event which, with notice or
passage of time, or both, would constitute an Event of Default.
7.9 Subordination of Future Junior Indebtedness. So long as any of the
-------------------------------------------
Notes remain outstanding, the Company shall cause each loan agreement, debt
instrument, note or other document or instrument evidencing any debt obligations
incurred by the Company after the date hereof, which debt obligations do not
constitute Senior Indebtedness (as defined in the Notes), to contain
subordination provisions substantially in the form set forth in Section 1 of the
Notes subordinating such indebtedness to all Senior Indebtedness (as defined in
the Notes).
SECTION 8
Payment of the Notes
--------------------
8.1 Payment and Prepayment. The Company shall pay the principal amount
----------------------
of each Note and all accrued interest thereon on or before December 31, 2000
except to the extent that the Company exercises its right to prepay as set forth
below. Notwithstanding the payment provision of the Notes, the Company may at
any time, upon at least two (2) business days' prior written notice to the
holders thereof, prepay in whole or in part the principal amount of the Notes,
plus accrued but unpaid interest to the date of prepayment.
8.2 Pro Rata Payments. The Company shall make all payments of principal
-----------------
of and interest on the Notes ratably among the holders of the Notes.
8.3 Payments and Computations. All payments hereunder by the Company
-------------------------
shall be made in lawful money of the United States of America to each of the
holders on or before 12:00 noon (Pacific Time) on the due date. Such payments
shall be made to each of the holders by wire transfer to such account at such
bank as shall have been furnished in writing by such holder to the Company. All
computations of interest under this Agreement shall be made on the basis of a
year of three hundred sixty-five (365) days for the actual number of days
(including the first day but excluding the last day) elapsed.
9
<PAGE>
8.4 Payment on Non-Business Day. Whenever any payment to be made
---------------------------
hereunder shall be stated to be due on a Saturday, Sunday or a public holiday or
the equivalent for banks generally under the laws of the State of California
(any other day being a "Business Day"), such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest as the case may be.
8.5 Prepayment on Change in Control. Notwithstanding any other provision
-------------------------------
of this Agreement to the contrary, upon a Change in Control (as defined below)
of the Company, the outstanding principal of and accrued interest on all of the
Notes shall become immediately due and payable. For purposes of this Agreement
the term "Change in Control" shall mean a change in control of the outstanding
voting stock of the Company resulting in (i) one person (as determined pursuant
to Rule 13d-3 under the Securities Exchange Act of 1934, as amended, but
excluding the Purchasers collectively being one person or part of a group
constituting one person) owning a majority of such stock or (ii) one of the
Purchasers owning a majority of such stock.
8.6 Prepayment on Disposition of Significant Assets. Notwithstanding any
-----------------------------------------------
other provision of this Agreement to the contrary, upon the sale, transfer,
assignment or other disposition by the Company of all or substantially all of
the assets and/or capital stock of Cabot Laboratories, Inc. to any person, the
Company shall apply one hundred percent (100%) of the cash proceeds from any
such disposition to the prepayment of the Notes (or so much of the cash proceeds
from any such disposition as are necessary to prepay the Notes in full or that
remain after application of such cash proceeds to the prior repayment in full of
the notes described in Section 8.7 hereof).
8.7 Prepayment on Demand for Payment of Certain Other Notes.
-------------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, upon the
demand for payment by any of the holders of any notes issued pursuant to (i)
those certain Note Purchase Agreements dated as of December 11, 1992, February
24, 1993, May 28, 1993, October 15, 1993 and October 29, 1993 between the
Company and one or both of the Purchasers and/or (ii) that certain Note and
Warrant Purchase Agreement dated November 10, 1995 between the Company and the
Purchasers, the outstanding principal of and accrued interest on all of the
Notes shall become immediately due and payable.
8.8 California Securities Law Permit. As soon as practicable after the
--------------------------------
effective date of this Agreement, the Company shall apply for a permit under
Section 25113(b)(i) of the California Corporate Securities Law of 1968 to modify
the Notes to bear interest at 12% and the Company shall amend the Notes as soon
as practicable after receipt of such permit so that they bear interest at 12%
retroactively from the date of each advance.
10
<PAGE>
SECTION 9
Miscellaneous
-------------
9.1 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of California without regard to such State's conflict of
laws principles.
9.2 Survival. The representations, warranties, covenants and agreements
--------
made herein shall survive any investigation made by any Purchaser and the
Closing of the transactions contemplated hereby.
9.3 Successors and Assigns. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto;
provided, however, that the right of a Purchaser to purchase such Purchaser's
- -------- -------
Note from the Company shall not be assignable (except by operation of law)
without the consent of the Company.
9.4 Entire Agreement; Amendment. This Agreement and the other documents
---------------------------
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof or of the Notes and Warrants may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought; provided, however, that any provision hereof
-------- -------
or of the Notes may be waived, modified, amended, discharged or terminated upon
the written consent of the Company and holders of Notes representing all of the
principal amount of all Notes issued hereunder and remaining outstanding (except
that the principal amount of any Note may only be reduced with the consent of
the holder of such Note). Any amendment or waiver effected in accordance with
this Section 9.4 shall be binding upon each holder of Notes purchased under this
Agreement at the time outstanding and each future holder of all such Notes and
the Company.
9.5 Notices, etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be mailed by first class mail,
postage prepaid, or otherwise delivered by hand or by messenger, addressed (a)
if to a Purchaser, at such address as such Purchaser shall have furnished to the
Company in writing, or (b) if to any other holder of Notes issued in connection
with this Agreement, at such address as such holder shall have furnished the
Company in writing, or, until any such holder so furnishes an
11
<PAGE>
address to the Company, then to and at the address of the last holder of such
Note who has so furnished an address to the Company, or (c) if to the Company,
at its address set forth in the initial paragraph of this Agreement and
addressed to the attention of the Corporate Secretary, or at such other address
as the Company shall have furnished to the holders of the Notes. If any party
hereto delivers notice to any other party, such notice shall be delivered to
each other party to this Agreement.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or
seventy-two (72) hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
postage prepaid as aforesaid.
9.6 Delays or Omissions. Except as expressly provided herein, no delay
-------------------
or omission to exercise any right, power or remedy accruing to any holder upon
breach or default of the Company under this Agreement shall impair any such
right, power or remedy of such holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any holder of any breach or default under
this Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
9.7 California Corporate Securities Law. THE SALE OF THE SECURITIES
-----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
9.8 Expenses. The Company and each Purchaser shall bear its own expenses
--------
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby.
12
<PAGE>
9.9 Action To Enforce This Agreement. If any judicial action is required
--------------------------------
to be taken by any holder or the Company in order to enforce the terms and
provisions of this Agreement, the prevailing party in such action shall be
entitled to reimbursement of the expenses incurred by such prevailing party
(including reasonable attorneys' fees) in such action.
9.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which together shall constitute one instrument.
9.11 Severability. The provisions of this Agreement and the Notes are
------------
severable, and if any clause or provision shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision or part thereof in
such jurisdiction and shall not in any manner affect such clause or provision in
any other jurisdiction or any other clause or provision in any jurisdiction.
Without limiting the generality of the foregoing, if the holder of any of the
Notes should ever receive as interest an amount which would exceed the highest
lawful rate, such amount which would be excessive interest shall be applied to
the reduction of the principal balance of such Note and not to the payment of
interest.
9.12 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
13
<PAGE>
The foregoing Agreement is hereby executed as of the date first above
written.
COOPER DEVELOPMENT COMPANY
a Delaware corporation
By:________________________________
Michael J. Braden
Vice President
PURCHASERS
By:________________________________
Theodore H. Kruttschnitt
By:________________________________
Parker G. Montgomery
14
<PAGE>
EXHIBIT A
---------
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. IT MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITY UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
THE SALE OF THIS SECURITY HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITY OR THE
PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SUCH SECURITY IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES HERETO ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
COOPER DEVELOPMENT COMPANY
SECURED SENIOR NOTE
May __, 1996
$1,000,000
COOPER DEVELOPMENT COMPANY, a Delaware corporation (the "Company"), for
value received, promises to pay to the order of ----------------------------, in
lawful money of the United States the principal sum set forth as the outstanding
principal balance on the Schedule attached hereto, plus simple interest thereon
from the date of this Note until paid at the rate of ten percent (10%) per
annum, calculated on the basis of a three hundred sixty-five (365) day year for
the actual number of days (including the first day but excluding the last day)
elapsed. The Company shall pay the principal amount hereof and all accrued
interest hereon on or before December 31, 2000.
This Note and the accrued interest thereon may be prepaid by the Company
as set forth in Section 8 of that certain Note and Warrant Purchase Agreement,
dated as of May __, 1996, among the Company, Theodore H. Kruttschnitt and Parker
G. Montgomery (the "Purchase Agreement").
This Note and all accrued interest hereon may become immediately due and
payable pursuant to Section 8.5, Section 8.6 or Section 8.7 of the Purchase
Agreement.
<PAGE>
In the event that an Event of Default (as hereinafter defined) shall have
occurred, demand for payment of this Note may be made following such Event of
Default. All payments hereunder by the Company shall be made in lawful money of
the United States of America by wire transfer on or before 12:00 noon (Pacific
Time) on the due date as provided in Section 8.3 of the Purchase Agreement.
Advances made by the holder pursuant to the Purchase Agreement, and all
payments and prepayments made on account of the principal balance hereof, shall
be recorded by the holder of this Note on the Schedule attached hereto, provided
that failure to make such a notation shall not affect or diminish the Company's
obligation to repay all amounts due on this Note, as and when due.
The Company has provided security for the repayment of this Note pursuant
to that certain Security Agreement dated May __, 1996 between the Company,
Theodore H. Kruttschnitt and Parker G. Montgomery.
The following is a statement of the rights of the holder of this Note and
the conditions to which this Note is subject, and to which the holder hereof, by
the acceptance of this Note, agrees:
1. Subordination. The indebtedness evidenced by this Note shall rank
-------------
pari passu with all Senior Indebtedness of the Company, to the extent and in the
manner hereinafter set forth, in right of payment.
"Senior Indebtedness" shall mean the principal of and unpaid interest
on, (i) indebtedness of the Company or with respect to which the Company is a
guarantor, whether outstanding on the date hereof or hereafter created, to
banks, insurance companies, or other lending institutions regularly engaged in
the business of lending money, that is for money borrowed by the Company or a
subsidiary of the Company, whether or not secured, (ii) any amounts owing from
time to time to any equipment lessor of the Company, (iii) any trade payables of
the Company, (iv) this Note and all other Notes issued pursuant to the Purchase
Agreement, (v) all notes issued pursuant to those certain Note Purchase
Agreements dated as of December 11, 1992, February 24, 1993, May 28, 1993,
October 15, 1993 and October 29, 1993 between the Company and Theodore H.
Kruttschnitt and/or Parker G. Montgomery, (vi) all notes issued pursuant to the
Note and Warrant Purchase Agreement dated November 10, 1995 between the Company
and Theodore H. Kruttschnitt and Parker G. Montgomery, and (vii) any deferrals,
renewals or extensions of the aforementioned Senior Indebtedness or any
debentures, notes or other evidence of indebtedness issued in exchange for such
Senior Indebtedness. The notes referred to in the preceding clauses (v) and
(vi) shall be referred to in this Note as the "Other Notes".
2
<PAGE>
Upon any receivership, insolvency, assignment for the benefit of
creditors, bankruptcy, reorganization, or arrangements with creditors (whether
or not pursuant to bankruptcy or other insolvency laws), sale of all or
substantially all of the assets, dissolution, liquidation, or any other
marshalling of the assets and liabilities of the Company or in the event this
Note shall be declared due and payable upon the occurrence of an event of
default with respect to any Senior Indebtedness, (i) no amount shall be paid by
the Company in respect of the principal of or interest on any indebtedness which
by its terms is or by subsequent agreement becomes subordinated and/or junior to
any Senior Indebtedness (collectively, "Junior Indebtedness") at the time
outstanding unless and until the principal of and interest on the Senior
Indebtedness then outstanding shall be paid in full, and (ii) no claim or proof
of claim shall be filed with the Company by or on behalf of the holder of any
Junior Indebtedness which shall assert any right to receive any payments in
respect of the principal of and interest on this Note except subject to the
payment in full of the principal of and interest on all of the Senior
Indebtedness then outstanding. Notwithstanding anything to the contrary
contained herein, no indebtedness of the Company or any subsidiary of the
Company outstanding on the date hereof, whether secured or unsecured, shall
constitute Junior Indebtedness.
In the instance of an event of default that has been declared in
writing with respect to any Senior Indebtedness, or in the instrument under
which it is outstanding, permitting the holder of such Senior Indebtedness to
accelerate the maturity thereof, then, unless and until such event of default
shall have been cured or waived or shall have ceased to exist, or all Senior
Indebtedness shall have been paid in full, no payment shall be made in respect
of the principal of or interest on any Junior Indebtedness unless, within twelve
months after the happening of such event of default, the maturity of such Senior
Indebtedness shall not have been accelerated.
In case cash, securities or other property otherwise payable or
deliverable to the holder of any Junior Indebtedness shall have been applied to
the payment of Senior Indebtedness, then, and in each such case, upon the
payment in full of all Senior Indebtedness, the holder of any Junior
Indebtedness shall be subrogated to the rights of the holders of Senior
Indebtedness to receive all further payments and distributions made on Senior
Indebtedness unless all principal of and interest on all Senior Indebtedness
shall have been paid in full; and no such payments or distributions to the
holder of any Junior Indebtedness by reason of such subrogation of cash,
securities or other property that otherwise would be payable or distributed to
the holders of Senior Indebtedness shall as between the Company and its
creditors (other than the holders of Senior Indebtedness), on the one hand, and
the holder of any Junior Indebtedness, on the other, be deemed to be a payment
by the Company on account of any Junior Indebtedness.
3
<PAGE>
Nothing contained in this Section 1 shall impair, as between the
Company and the holder of this Note, the obligations of the Company, which are
absolute and unconditional, to pay to the holder of this Note the principal
hereof and interest hereon as and when the same become due and payable, or shall
prevent the holder of this Note, upon default hereunder, from exercising all
rights, powers and remedies otherwise provided herein or by applicable law, all
subject to the rights, if any, of the holders of other Senior Indebtedness under
this Section 1 to receive cash, securities or other property otherwise payable
or delivered to the holder of this Note.
2. Defaults.
--------
2.1 Defaults. The holder of this Note may declare the entire unpaid
--------
principal of, and accrued interest on, this Note immediately due and payable, by
a notice in writing to the Company, if any of the following events shall occur
(herein individually referred to as an "Event of Default"):
1. The Company shall fail to pay the principal of this Note
and/or any of the Other Notes and accrued interest thereon when due and such
failure (other than the failure to pay principal on the Repayment Date or when
due) shall continue unremedied for a period of seven (7) business days after the
due date for such payment (including any due date specified in any written
demand for payment); or
2. The Company shall fail to make any payment due on any Senior
Indebtedness that causes or permits the acceleration of such Senior
Indebtedness, or the Company shall fail to perform or observe any other
provision contained in such Senior Indebtedness, or in any agreement securing or
relating to such Senior Indebtedness, if such failure results in the
acceleration of such Senior Indebtedness and such acceleration is not rescinded
or annulled or such Senior Indebtedness is not repaid; or
3. The Company shall institute proceedings to be adjudicated a
bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it under the Bankruptcy Act or any other applicable federal
or state law, or consent to or acquiesce in the filing of any such petition or
the appointment of a receiver, liquidator, trustee or other similar official of
the Company, or of any substantial part of its property, or make an assignment
for the benefit of creditors or admit in writing its inability to pay its debts
generally as they become due; or
4. Within sixty (60) days after the commencement of
proceedings against the Company seeking any bankruptcy, insolvency, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been dismissed or all orders or
proceedings thereunder affecting the operations or the business of the
4
<PAGE>
Company stayed, or the stay of any such order or proceedings shall thereafter be
set aside, or, within sixty (60) days after the appointment without the consent
or acquiescence of the Company of any receiver, liquidator, trustee or other
similar official of the Company or of all or any substantial part of the
property of the Company, such appointment shall not have been vacated; or
5. Any representation or warranty made by the Company in the
Purchase Agreement shall prove to be false or misleading in any material respect
when made or deemed to have been made or;
6. The Company shall default in the due performance of any
covenant contained in the Purchase Agreement and such default shall continue for
a period of ten (10) days following notice thereof to the Company.
2.2 Cure of Defaults. Upon an Event of Default, the Company may
----------------
cure such Event of Default by paying the holder of this Note, within three (3)
business days following such Event of Default, as liquidated damages, the
outstanding principal of and accrued interest on this Note together with a fee
equal to one percent (1%) of the then-outstanding principal amount of this Note.
3 Miscellaneous.
-------------
3.1 Waiver and Amendment. Any provision of this Note may be
--------------------
amended, waived or modified as provided in Section 9.4 of the Purchase
Agreement.
3.2 Reimbursement of Costs of Collection. In case of an Event of
------------------------------------
Default, the Company will reimburse the holder of this Note for all costs of
collection (including reasonable attorneys' fees) incurred by such holder.
3.3 Investment Representation and Restrictions on Transfer. In
------------------------------------------------------
purchasing this Note, the holder, as provided in Section 4.2 of the Purchase
Agreement, represents to the Company that he is purchasing this Note for
investment and not with a view to the resale or distribution thereof. Any
purported transfer of this Note is subject to certain restrictions on sale,
assignment, pledge or transfer of this Note under the Purchase Agreement.
Subject to the restrictions set forth in the foregoing sentence, the rights and
obligations of the Company and the holder of this Note shall be binding upon and
benefit the successors, assigns, heirs, administrators and transferees of the
parties.
3.4 Governing Law. This Note shall be governed by the laws of the
-------------
State of California without regard to such State's conflict of laws
5
<PAGE>
principles. The headings in this Note are for purposes of convenience and
reference only, and shall not be deemed to constitute a part hereof.
3.5 Maximum Rate. All agreements between the Company and the holder
------------
of this Note are hereby expressly limited so that in no contingency or event
whatsoever, by reason of prepayment, redemption, acceleration of maturity of the
indebtedness evidenced hereby or otherwise, shall the amount charged, reserved,
paid or agreed to be paid to the holder of this Note for the use, forbearance or
detention of the indebtedness evidenced hereby and by the Purchase Agreement
exceed the maximum permissible under applicable law. If, from any circumstance
whatsoever, fulfillment of any provision hereof or of the Purchase Agreement at
the time performance of such provision shall be due, shall involve transcending
the limit of validity prescribed by law, then, without any further action on the
part of the Company or the holder of this Note, the obligation to be fulfilled
shall be reduced, ab initio, to the limit of such validity, and if from any
-- ------
circumstance the holder of this Note should ever receive as interest an amount
which would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest.
THIS NOTE IS SUBJECT TO THE TERMS AND CONDITIONS OF THE PURCHASE AGREEMENT
DEFINED ABOVE, THE TERMS OF WHICH ARE INCORPORATED BY REFERENCE, AND A COPY OF
WHICH MAY BE OBTAINED BY ANY HOLDER HEREOF UPON REQUEST TO THE SECRETARY OF THE
COMPANY.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first above written.
COOPER DEVELOPMENT COMPANY
a Delaware corporation
By:________________________________
Michael J. Braden
Vice President
6
<PAGE>
Schedule
Date Advance Prepayment or Outstanding
Repayment Balance
7
<PAGE>
Exhibit B
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE SHARES
OF COMMON STOCK
Company: Cooper Development Company, a Delaware corporation
(the "Company"), and any corporation that shall succeed to the
obligations of the Company under this Warrant.
Number of Shares: 285,714
-----------------
Class of Stock: Common Stock
-----------------
Initial Exercise Price: $1.75 per share
-----------------
Expiration Date: December 31, 2000
-----------------
Date of Grant: May , 1996
-----------------
THIS CERTIFIES THAT, for value received, ______________________ is
entitled to purchase the above number (as adjusted pursuant to Article 5 hereof)
of fully paid and nonassessable shares of the Common Stock of the Company at the
Initial Exercise Price above (as adjusted pursuant to Article 5 hereof), subject
to the provisions and upon the terms and conditions set forth herein.
Article 1. Definitions.
-----------
As used herein, the following terms, unless the context otherwise
requires, shall have the following meanings:
1.1 "Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations thereunder, as shall
be in effect at the time.
1.2 "Common Stock" shall mean shares of the presently authorized
common stock of the Company and any stock into which such common stock may
hereafter be changed or reclassified.
1.3 "Holder" shall mean any person who shall at the time be the
holder of this Warrant.
<PAGE>
1.4 "Shares" shall mean the shares of Common Stock that the
Holder is entitled to purchase upon exercise of this Warrant, as adjusted
pursuant to Article 5 hereof.
1.5 "Warrant Price" shall mean the Initial Exercise Price at
which this Warrant may be exercised, as adjusted pursuant to Article 5 hereof.
Article 2. Term.
---------- ----
The purchase right represented by this Warrant is exercisable, in
whole or in part, at any time on or after May __, 1996 and on or before the
Expiration Date.
Article 3. Method of Exercise; Payment; Issuance of New Warrant.
----------------------------------------------------
Subject to Article 2 hereof, the purchase right represented by this
Warrant may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant (with the notice of exercise form attached hereto as Appendix A
duly executed) at the principal office of the Company and by the payment to the
Company, by check made payable to the Company drawn on a United States bank and
for United States funds or cancellation of indebtedness of an amount equal to
the then applicable Warrant Price per share multiplied by the number of Shares
then being purchased. In the event of any exercise of the purchase right
represented by this Article 3, certificates for the Shares so purchased shall be
delivered to the Holder within thirty (30) days of receipt of such payment and,
unless this Warrant has been fully exercised or expired, a new Warrant
representing the portion of the Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the Holder
within such thirty (30) day period.
Article 4. Exercise Price.
--------------
The Warrant Price at which this Warrant may be exercised shall be the
Initial Exercise Price, as adjusted from time to time pursuant to Article 5
hereof.
Article 5. Adjustment of Number and Kind of Shares and Adjustment
-------------------------------------------------------
of Warrant Price.
----------------
5.1 Certain Definitions. As used in this Article 5 the following
-------------------
terms shall have the following respective meanings:
5.1.1 Options: rights, options or warrants to subscribe for,
-------
purchase or otherwise acquire either shares of Common Stock or Convertible
Securities; and
2
<PAGE>
5.1.2 Convertible Securities: any evidences of indebtedness,
----------------------
shares of stock or other securities directly or indirectly convertible into or
exchangeable for Common Stock.
5.2 Adjustments. The number and kind of securities purchasable upon
-----------
the exercise of this Warrant and the Warrant Price shall be subject to
adjustment from time to time upon the occurrence of certain events, as follows:
5.2.1 Reclassification, Reorganization, Consolidation or Merger.
---------------------------------------------------------
In the case of any reclassification of the Common Stock, or any reorganization,
consolidation or merger of the Company with or into another corporation (other
than a merger or reorganization with respect to which the Company is the
continuing corporation and which does not result in any reclassification of the
Common Stock), the Company, or such successor corporation, as the case may be,
shall execute a new warrant, providing that the Holder shall have the right to
exercise such new warrant and upon such exercise to receive, in lieu of each
share of the Common Stock theretofore issuable upon exercise of this Warrant,
the number and kind of securities receivable upon such reclassification,
reorganization, consolidation or merger by a holder of shares of the same Common
Stock of the Company for each share of the Common Stock. Such new warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 5 including, without
limitation, adjustments to the Warrant Price and to the number of shares
issuable upon exercise of this Warrant. The provisions of this subsection 5.2.1
shall similarly apply to successive reclassifications, reorganizations,
consolidations or mergers.
5.2.2 Split, Subdivision or Combination or Shares. If the
-------------------------------------------
Company at any time while this Warrant remains outstanding and unexpired shall
split, subdivide or combine the Common Stock for which this Warrant is then
exercisable, the Warrant Price shall be proportionately decreased in the case of
a split or subdivision or proportionately increased in the case of a
combination. Any adjustment under this subsection 5.2.2 shall become effective
when the split, subdivision or combination becomes effective.
5.2.3 Stock Dividends. If the Company at any time while this
---------------
Warrant remains outstanding and unexpired shall pay a dividend with respect to
the Common Stock for which this Warrant is then exercisable, payable in shares
of Common Stock, the Warrant Price shall be adjusted, from and after the date of
determination of the stockholders entitled to receive such dividend, to that
price determined by multiplying the Warrant Price in effect immediately prior to
such date of determination by a fraction (i) the numerator of which shall be the
total number of shares of Common Stock outstanding immediately prior to such
dividend, and (ii) the denominator of which shall be the total number of shares
of the Common Stock outstanding immediately after such dividend (including
shares of the Common Stock issuable upon exercise, conversion or exchange of any
Options or Convertible Securities issued as such dividend). If the Options or
3
<PAGE>
Convertible Securities issued as such dividend by their terms provide, with the
passage of time or otherwise, for any decrease in the consideration payable to
the Company, or any increase in the number of shares issuable upon exercise,
conver sion or exchange thereof (by change of rate or otherwise), the Warrant
Price shall, upon any such decrease or increase becoming effective, be reduced
to reflect such decrease or increase as if such decrease or increase became
effective immediately prior to the issuance of the Options or Convertible
Securities as the dividend. Any adjustment under this subsection 5.2.3 shall
become effective on the record date.
5.2.4 Dilutive Issuances of Common Stock. If the Company at
----------------------------------
any time while this warrant remains outstanding shall issue additional shares of
Common Stock (other than pursuant to an employee benefit plan or as a hiring
incentive), including Convertible Securities and Options, for a consideration
per share less than the greater of the Warrant Price in effect on the date of
such issuance or the closing price of the Common Stock on the business day
immediately preceding the issuance of such Common Stock, the Warrant Price shall
be reduced based on the number of shares issued in such transaction and the
amount the foregoing threshold exceeds the consideration per share received in
such transaction; provided, however, that no such adjustment shall be made for
the issuance of shares of Common Stock issuable upon conversion of any notes
issued pursuant to (i) those certain Note Purchase Agreements dated as of
December 11, 1992, February 24, 1993, May 28, 1993, October 15, 1993 and October
29, 1993 between the Company and Theodore H. Kruttschnitt and/or Parker G.
Montgomery and (ii) that certain Note and Warrant Purchase Agreement dated
November 10, 1995 between the Company and Theodore H. Kruttschnitt and Parker G.
Montgomery (collectively, the "Note Shares"). In addition, if the Company at any
time while this Warrant remains outstanding shall issue additional shares of
Common Stock (other than pursuant to an employee benefit plan, as a hiring
incentive or the Note Shares), then the Company shall issue to each Purchaser an
additional Warrant exercisable for five years from the date of issuance to
purchase such number of shares of Common Stock at an exercise price per share
equal to the issue price per share of such additional shares of Common Stock as
would allow each Purchaser to maintain his pro rata percentage ownership of the
Company's Common Stock. For the purposes of this Section 5.2.4 the "pro rata"
percentage ownership of a Purchaser is calculated by dividing (i) the total
number of shares of Common Stock held by the Purchaser plus the total number of
shares of Common Stock issuable to such Purchaser as Note Shares and upon
exercise of Warrants held by such Purchaser by (ii) the total number of shares
of Common Stock then outstanding, including shares of Common Stock issuable as
Note Shares, upon exercise of the Warrants and upon exercise of outstanding
stock options issued to officers, directors or employees of, or consultants to,
the Company. For the purposes of this Section 5.2.4 the "consideration per
share" with respect to Convertible Securities and Options shall be determined by
dividing (1) the sum of (x) the total amount, if any, received or receivable by
the Company as consideration for the issue of such Options or Convertible
Securities plus (y) the minimum aggregate amount of additional
4
<PAGE>
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration, including any provisions designed to protect against dilution)
payable to the Company upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities by (2) the maximum
number of shares of Common Stock (as set forth in the instruments relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or
exchange of such Convertible Securities.
5.3 Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Warrant Price pursuant to this Article 5, other than adjustments made pursuant
to subsection 5.2.4, the number of Shares issuable upon exercise of this Warrant
shall be adjusted to the product obtained by multiplying the number of Shares
issuable immediately prior to such adjustment in the Warrant Price by a fraction
(i) the numerator of which shall be the Warrant Price immediately prior to such
adjustment, and (ii) the denominator of which shall be the Warrant Price
immediately after such adjustment.
Article 6. Notice of Adjustments.
---------------------
Whenever the Warrant Price shall be adjusted pursuant to Article 5
hereof, the Company shall issue a certificate signed by its chief financial
officer setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was calculated
and the Warrant Price after giving effect to such adjustment, and shall cause a
copy of such certificate to be mailed (by first class mail, postage prepaid) to
the Holder.
Article 7. Compliance With Act; Transferability of Warrant;
------------------------------------------------
Disposition of Shares.
---------------------
7.1 Legends. This Warrant and the Shares issued upon exercise
-------
thereof shall be imprinted with a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION
OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
5
<PAGE>
7.2 Transferability and Non-negotiability of Warrant and Shares.
-----------------------------------------------------------
This Warrant and the Shares issued upon exercise thereof may not be transferred
or assigned in whole or in part without compliance with applicable federal and
state securities laws by the transferor and the transferee (including, without
limitation, the delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company, if reasonably requested by the Company).
Subject to the provisions of this Section 7.2, title to this Warrant may be
trans ferred in the same manner as a negotiable instrument transferable by
endorsement and delivery.
Article 8. Miscellaneous.
-------------
No fractional shares of the Shares shall be issued in connection with
any exercise hereunder, but in lieu of such fractional shares the Company shall
make a cash payment therefor upon the basis of the Warrant Price then in effect.
The terms and provisions of this Warrant shall inure to the benefit of, and be
binding upon, the Company and the Holder hereof and their respective successors
and assigns. This Warrant shall be governed by and construed under the laws of
the State of Delaware without regard to such state's conflict of laws
principals. The titles of the articles, sections and subsections of this
Warrant are for convenience only and are not to be considered in construing this
Warrant. All pronouns used in the Warrant shall be deemed to include masculine,
feminine and neuter forms.
COOPER DEVELOPMENT COMPANY
By: ____________________________
Title: _________________________
6
<PAGE>
APPENDIX A
----------
NOTICE OF EXERCISE
------------------
TO: _________________________
1. The undersigned hereby elects to purchase --------------------
shares of the Common Stock of Cooper Development Company, pursuant to terms of
the attached Warrant, and tenders herewith payment of the purchase price of such
shares in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said
shares of the Common Stock in the name of the undersigned or in such other name
as is specified below.
3. The undersigned represents it is acquiring the shares of Com mon
Stock solely for its own account and not as a nominee for any other party and
not with a view toward the resale or distribution thereof.
-----------------------------------
(Name)
-----------------------------------
(Address)
-----------------------------------
-----------------------------------
-----------------------------------
(Taxpayer Identification Number)
__________________________________
[print name of Holder]
By: _______________________________
Title: ____________________________
Date: _____________________________
<PAGE>
Exhibit 9
Exhibit C
SECURITY AGREEMENT
This Security Agreement (the "Security Agreement") is made and entered
into as of May __, 1996 by and between Cooper Development Company ("Pledgor")
and Theodore H. Kruttschnitt and Parker G. Montgomery (individually, a "Pledgee"
and, collectively, the "Pledgees").
In order to induce Pledgees (1) to enter into that certain Note and
Warrant Purchase Agreement dated May __ 1996 (the "Agreement"), by and among
Pledgor and Pledgees, which provides for the provision of a $2,000,000 line of
credit by Pledgees to Pledgor to be secured by a security interest in all of the
issued and outstanding shares of the capital stock of Cabot Laboratories, Inc.,
a New York corporation, (the "Shares"), Pledgor and Pledgee hereby covenant and
agree as follows:
1. Pledge of Stock.
---------------
1.1 Grant of Security Interest. As security for the full and prompt
--------------------------
performance of the Obligations, as defined in Section 1.2, Pledgor hereby
assigns, transfers, pledges and grants to Theodore H. Kruttschnitt and Parker G.
Montgomery, and both of them, a first priority security interest in the Shares,
and delivers to Pledgees for handling pursuant to the Joint Escrow Instructions
the certificates for the Shares, duly endorsed in blank, representing the number
of Shares owned by Pledgor, which is set forth beside Pledgor's name on the
signature page hereof, together with all proceeds thereof, additions thereto and
substitutions therefor, including without limitation any and all new or
substituted or additional shares, other securities, cash or other properties
distributed with respect to the foregoing stock or other securities subject to
this Security Agreement whether as a result of merger, consolidation,
dissolution, reorganization, recapitalization, interest payment, stock split,
stock dividend, reclassification, redemption or any other change declared or
made in the capital structure of Cabot Laboratories, Inc. (the "Company"), or
otherwise (the "Collateral").
1.2 Obligations Secured. The pledge of the Collateral is made by
-------------------
Pledgor to secure performance of each and every obligation of the Company under,
and the payment of all amounts required to be paid to Pledgee by or on behalf of
the Company pursuant to, and when due according to the tenor of, (i) all notes
issued pursuant to those certain Note Purchase Agreements dated as of December
11, 1992, February 24, 1993, May 28, 1993, October 15, 1993 and October 29, 1993
between the Pledgor and Theodore H. Kruttschnitt and/or Parker G. Montgomery,
(ii) all notes issued pursuant to the Note and Warrant Purchase Agreement dated
<PAGE>
November 10, 1995 between the Pledgor and the Pledgees and (iii) all notes
issued pursuant to the Agreement (the "Obligations").
2. Events of Default. Each of the following shall constitute an "Event
-----------------
of Default" under this Security Agreement:
2.1 Non-Payment of Amounts Due under the Obligations. Default, and
------------------------------------------------
continuance thereof for ten days, in the payment when due of any amounts due
under the Obligations and the failure of Pledgor to honor its obligations
thereunder within such period.
2.2 Bankruptcy, Insolvency. Pledgor's or the Company's (i)
----------------------
insolvency; (ii) failure to pay or admission in writing of inability to pay, its
debts as they become due; (iii) application for, consent to, or acquiescence in
the appointment of a trustee, receiver or other custodian for it or any of its
property; (iv) assignment for the benefit of creditors; (v) in the absence of
such application, consent or acquiescence, the appointment of a trustee,
receiver or other custodian for it or for a substantial part of its property
which is not discharged within 30 days; or (vi) any bankruptcy, reorganization,
debt arrangement, or the commencement of any other case or proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation proceeding by,
against or in respect of it and if such case or proceeding is not commenced by
it, Pledgor or the Company consents or acquiesces to such case or it remains for
30 days without dismissal.
2.3 Breach of Security Agreement. Failure by Pledgor to comply with
----------------------------
or to perform any material provision of this Security Agreement (other than
Events of Default enumerated in the preceding provisions of this Section 2) and
continuance of such failure for more than 30 days after notice thereof to
Pledgor from a Pledgee.
2.4 Warranties. Any warranty made by Pledgor herein is breached or
----------
is false or misleading in any material respect, or any schedule, certificate,
financial statement, report, notice, or other writing furnished to Pledgees by
Pledgor is false or misleading in any material respect on the date as of which
the facts therein set forth are stated or certified.
3. Effect of Default. Upon the occurrence of any one or more of the
-----------------
Events of Default, Pledgees, and both of them, shall thereupon and thereafter
have any or all of the rights and remedies to which a secured party is entitled
in the event of and after default under the provisions of the California Uniform
Commercial Code - Secured Transactions, as amended and in effect on the date
hereof. In addition to those rights and remedies, Pledgor agrees that Pledgees
may in their sole discretion do or cause to be done any one or more of the
following:
-2-
<PAGE>
(a) Proceed to realize upon the Collateral in any manner or
priority;
(b) Sell, assign and deliver all or any part of the Collateral in
any manner permitted by law, at any time and from time to time, at public or
private sale, with or without demand and with or without notice or
advertisement; for cash, upon credit or for future delivery, as Pledgees shall
deem appropriate. Pledgees shall be authorized at any such sale (if they deem it
advisable to do so) to restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing the Collateral for their
own account for investment and not with a view to the distribution or sale
thereof, and upon consummation of any such sale Pledgees shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the property
sold absolutely, free from any claim or right on the part of Pledgor, and
Pledgor hereby waives (to the extent permitted by law) all rights of redemption,
stay and/or appraisal which it now has or may at any time in the future have
under any rule or law or statute now existing or hereafter enacted;
(c) If notice to Pledgor is required, give written notice to
Pledgor delivered by certified mail, return receipt requested, ten (10) days
prior to the date of public sale of the Collateral or prior to the date after
which private sale of the Collateral will be made;
(d) At any public sale, bid or become a purchaser of the Collateral
or any part thereof at such price as Pledgees deem proper, and hold the same
thereafter in its own right, free from any claims of Pledgor or any right of
redemption;
(e) Pledgees shall not be obligated to make any sale of Collateral
if they shall determine not to do so, regardless of the fact that notice of sale
of Collateral may have been given. Pledgees may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case sale of all or any part of the Collateral is made on credit
or for future delivery, the Collateral so sold may be retained by Pledgees until
the sale price is paid by the purchaser or purchasers thereof, but Pledgees
shall not incur any liability in case any such purchaser or purchasers shall
fail to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may be sold again upon like notice; and
(f) As an alternative to exercising the power of sale herein
conferred upon it, Pledgees may proceed by a suit or suits at law or in equity
to foreclose this Agreement and to sell the Collateral, or any portion thereof,
pursuant to a judgment or decree of a court or courts of competent jurisdiction.
-3-
<PAGE>
The parties hereto expressly agree that a private sale of the Collateral
conducted in good faith by Pledgees pursuant to the powers created by this
Section 3 shall be "commercially reasonable" within the meaning of Section 9504
of the California Uniform Commercial Code.
4. Application of Proceeds of Sale. The proceeds of sale of
-------------------------------
Collateral sold pursuant to Section 3 hereof shall be applied by Pledgees as
follows:
First: to the payment of the costs and expenses of such sale,
-----
including the out-of-pocket expenses of Pledgees and the reasonable fees
and out-of-pocket expenses of counsel employed in connection therewith, and
to the payment of all advances made by Pledgees for the account of Pledgor
hereunder and the payment of all costs and expenses incurred by Pledgees in
connection with the administration and enforcement of this Agreement ;
Second: to the payment or prepayment in full of all amounts due
------
under the Obligations.
5. Final Release of Collateral. Upon payment in full of the amounts due
---------------------------
under the Obligations secured hereby, all rights and interest in and to the
Collateral shall completely revest in Pledgor and Pledgees will execute and
deliver all documents and instruments necessary to accomplish such revesting.
6. Representations and Warranties. Pledgor hereby represents and
------------------------------
warrants that, when the Collateral is pledged hereunder:
6.1 Ownership of Collateral. Pledgor is the legal and equitable
-----------------------
owner of the Collateral free and clear of all liens, charges, encumbrances and
security interests of every kind and nature other than the lien and security
interest granted to Pledgee hereby.
6.2 No Restrictions. The authorized capital stock of Cabot
---------------
Laboratories, Inc. consists of 2,000 shares, $0.01 par value, of which 1,000
shares representing the Collateral are validly issued and outstanding, fully
paid and non assessable. Pledgor is not and will not become a party to or
otherwise bound by any agreement, other than this Security Agreement, which
restricts in any manner the rights of any present or future holder of any of the
Shares with respect hereto.
6.3 Authority to Pledge. Pledgor has good right and lawful authority
-------------------
to pledge the Collateral in the manner hereby done or contemplated.
-4-
<PAGE>
6.4 Governmental Approval. No consent or approval of any
---------------------
governmental body or regulatory authority, or of any securities exchange, will
be necessary to the validity of the rights created hereunder which will not have
been obtained.
6.5 Right to Transfer. Pledgor hereby represents and warrants that
-----------------
on the date of this Security Agreement it has the absolute right and authority
to enter into this Security Agreement and thereby to create in favor of Pledgee
a valid and binding security interest in the Collateral, subject to no liens,
charges, encumbrances or rights of others.
6.6 No Transfer, Further Encumbering, Etc. Pledgor hereby agrees not
--------------------------------------
to directly or indirectly assign, transfer or convey or further encumber the
Collateral or any part thereof or interest therein without the prior written
consent of Pledgee.
7. Further Assurances. Upon demand, Pledgor will execute and deliver to
------------------
Pledgees such instruments and documents as Pledgees may deem reasonably
necessary or advisable to confirm or perfect the rights of Pledgee under this
Security Agreement and Pledgees' interest in the Collateral. Pledgor will take
all necessary action to preserve and protect the security interest created
hereby as a first lien and encumbrance upon the Collateral.
8. Notice. All notices, requests, demands and other communications
------
called for or contemplated hereunder ("Notices") shall be made in accordance
with Section 9.5 of the Note and Warrant Purchase Agreement dated May __, 1996
between the Company and Pledgees.
9. Binding Effect. This Security Agreement shall be binding upon and
--------------
inure to the benefit of the successors and assigns of each of the parties
hereto.
10. Entire Agreement. This Security Agreement, together with the Note and
----------------
Warrant Purchase Agreement and the other instruments, agreements and documents
contemplated thereby, represent the entire understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements, understandings, discussions and negotiations. This Security
Agreement may not be amended, supplemented or otherwise modified except in a
writing signed by the parties hereto.
11. Counterparts. This Security Agreement may be executed simultaneously,
------------
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
-5-
<PAGE>
12. Headings. The headings in this Security Agreement are for the purpose
--------
of reference only and shall not limit or otherwise affect the terms or
provisions hereof.
13. No Waiver. The rights, powers and remedies given to Pledgees by this
---------
Security Agreement shall be in addition to all the rights, powers and remedies
given to or now or hereafter existing in Pledgees by virtue of the Agreement,
the Obligations and any applicable statute or rule of law; each and every right,
power and remedy, whether herein specifically given or otherwise existing, may
be exercised from time to time and so often and in such order as may be deemed
expedient by Pledgees, and the exercise, or the beginning of the exercise, of
any such right, power or remedy shall not be deemed a waiver of the right to
exercise, at the same time or thereafter any other right, power or remedy. Any
forbearance or failure or delay by Pledgees in exercising any right, power or
remedy hereunder shall not be deemed to be a waiver of such right, power or
remedy, and any single or partial exercise of any right, power or remedy shall
not preclude the further exercise thereof.
14. Power of Attorney. Pledgor hereby irrevocably appoints Pledgees, and
-----------------
both of them, with full power of substitution, its attorneys-in-fact to do any
act which Pledgor is obligated hereby to do, to exercise such rights as Pledgor
might exercise with respect to the Collateral and to execute and file in
Pledgor's name any financing statements and amendments thereto required or
advisable to protect Pledgees' security interest hereunder.
15. Applicable Law. This Security Agreement shall be construed and
--------------
enforced in accordance with the laws of the State of California. If any portion
of this Security Agreement is determined to be unenforceable because it is
contrary to law or for any other reason, such provision shall be deemed to be
severable, and this Security Agreement shall remain in full force and effect as
if such provision were not included herein.
16. Certain Agreements and Warranties of Pledgor.
--------------------------------------------
(a) Continuous Security Interest. Pledgor hereby agrees that, until
----------------------------
payment in full of all amounts due under the Obligations in accordance with the
terms of the Obligations and performance in full of all of the Obligations and
the covenants, conditions and agreements of Pledgor hereunder, all rights,
powers and remedies granted to Pledgees hereunder shall continue to exist and
may be exercised by Pledgee at any time and from time to time, irrespective of
the fact that payment of any amount owing under the Obligations or otherwise may
have become barred by any statute of limitations, Pledgor hereby waiving the
right to plead any statute of limitations to the full extent permitted by law.
-6-
<PAGE>
(b) Waiver of Notice. Pledgor hereby agrees that Pledgees shall be
----------------
under no duty or obligation whatsoever to make or give any presentments, demands
for performance, notice of nonperformance, protests, notice of protest or
notices of dishonor hereunder or in connection with the Collateral or any
obligations, evidences of indebtedness at any time constituting any part of the
Collateral, or in connection with the Obligations or other obligations secured
hereby.
(c) Waiver of Marshalling Rights. Pledgor hereby waives any right to
----------------------------
require Pledgees to proceed against any person, proceed against or exhaust any
Collateral or pursue any other remedy in Pledgees' power, or to pursue any of
such rights, if any, in any particular order or manner, and waive any defenses
arising by reason of any disability or other defense of any other person.
(d) Other Waivers. Pledgor hereby waives all provisions of law
-------------
pertaining to pledges and sales to the extent contrary hereto (excepting those
provisions of law expressly hereby incorporated herein).
The parties have duly executed this Security Agreement as of the date first
written above.
PLEDGOR Number of Shares of Common
Stock of Cabot Laboratories, Inc.: 1,000
By:______________________________
Name:____________________________
Title:____________________________
PLEDGEES
______________________________
Theodore H. Kruttschnitt
______________________________
Parker G. Montgomery
-7-
