Exhibit 10.16
CONVERTIBLE PROMISSORY NOTE
---------------------------
$500,000.00 Dallas, Texas
FOR VALUE RECEIVED, the undersigned, MedSolutions, Inc., a Texas
corporation (the "the Maker"), hereby unconditionally promises to pay to the
order of Xxxx X. and Xxxxx Xxxx, individuals and residents of the State of Ohio
(the "Payee"), at such place as designated by the Payee, or at such other place
or to such other party or parties as may be designated by the Payee from time to
time, in lawful money of the United States of America, the principal amount of
one hundred thousand dollars ($500,000.00) (the "Principal Amount"), with simple
interest at an annual rate of ten per cent (10.0%).
1. This Convertible Promissory Note (the "Note") shall be due and
payable in thirty-six (36) monthly payments of principal and interest on the
seventh (7th) day of each month, commencing on April 7, 2004, and each in the
amount of sixteen thousand one hundred thirty-three dollars fifty-nine cents
($16133.59) (an "Installment"), with the final Installment due on March 7, 2007
(the "Maturity Date"); provided, that each such Installment shall be deposited
directly, by means of an Automated Clearing House (ACH), into the Payee's bank
account, or in the form of a check delivered to an address as may be designated
by the Payee. Each date on which a payment is due, including the Maturity Date,
shall be referred to herein as a "Payment Date"; provided, however, that if a
Payment Date should fall on a Saturday, Sunday, or bank holiday, then the
Payment Date shall be the next business day.
2. Notation of Indebtedness and Payments. The Payee is authorized to
record the date and amount of the indebtedness evidenced by this Note, and the
date and amount of each payment and prepayment of principal hereof on any
schedule annexed hereto and made a part hereof, or on a continuation thereof
which shall be attached thereto and made a part hereof, and any such notation
shall be conclusive and binding for all purposes absent manifest error;
provided, however, that failure by the Payee to make any such notation shall not
affect the obligations of the Maker hereunder.
3. Prepayment. This Note is subject to prepayment in whole or in part
at any time or from time to time, without premium or penalty of any kind
whatsoever. All partial prepayments shall be applied first to accrued but unpaid
interest and then to the outstanding principal amount of this Note.
4. Default.
(a) Each of the following shall constitute an "Event of Default" under
this Note:
(i) The Maker shall fail to pay when due any Installment or
any other amount due hereunder in the manner provided herein, and such
default shall continue unremedied for a period of ten (10) business
days; or
(ii) A substantial part of any of the operations or business
of the Maker is suspended, other than in the ordinary course of
business, which suspension has a material adverse effect on the Maker's
financial condition; or
(iii) The Maker commences any case, proceeding or other action
relating to it in bankruptcy or seeking reorganization, liquidation,
dissolution, winding-up, arrangement, composition, compromise,
readjustment of its debts or any other relief under any bankruptcy,
insolvency, reorganization, liquidation, dissolution, arrangement,
composition, compromise, readjustment of debt or similar act or law of
any jurisdiction, now or hereafter existing, or consents to, approves
of or acquiesces in, any such case, proceeding or other action, or
applies for a receiver, trustee or custodian for itself or for all or a
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substantial part of its properties or assets, or makes an assignment
for the benefit of creditors, or fails generally to pay its debts as
they mature or admits in writing its inability to pay its debts as they
mature, or is adjudicated insolvent or bankrupt; or
(iv) There is commenced against the Maker any case or
proceeding, or any other action is taken against the Maker in
bankruptcy or seeking reorganization, liquidation, dissolution,
winding-up, arrangement, composition, compromise, readjustment of its
debts or any other relief under any bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement, composition,
compromise, readjustment of debt or similar act or law of any
jurisdiction, now or hereafter existing; or there is appointed a
receiver, trustee or custodian for the Maker or for all or a
substantial part of its properties or assets; or there is issued a
warrant of attachment, execution or similar process against any
substantial part of the properties or assets of the Maker, and any such
event continues for 90 days un-dismissed, un-bonded or un-discharged.
(b) If any Event of Default shall have occurred and be continuing, the
Payee may, by written notice to the Maker, declare this Note, all interest
hereon and all other amounts, if any, payable hereunder or in respect of this
Note to be forthwith due and payable, whereupon they shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Maker.
Notwithstanding the foregoing, upon the occurrence of any of the events or
conditions described in subsection (iii) or (iv) of Section 4(a) above, this
Note, all interest hereon and all other amounts, if any, payable hereunder or in
respect of this Note shall immediately become due and payable, without any
requirement on the part of the Payee to give notice, or make declaration, of any
kind regarding such Event of Default and without presentment, demand, protest or
any other requirement on the part of the Payee, all of which are hereby
expressly waived by the Maker.
(c) From and after the occurrence of any Event of Default, and for so
long as such Event of Default shall continue, the unpaid principal amount of
this Note shall bear interest at a rate per annum equal to the lesser of (i) ten
percent (10%), or (ii) the Highest Lawful Rate (as defined below), payable on
demand.
5. Waiver of Certain Demands and Notices. Presentment for payment,
demand, notice of dishonor, protest, notice of protest and all other demands and
notices in connection with the delivery, performance and enforcement of this
Note are hereby expressly waived by the Maker.
6. Payment of Court Costs. If this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
the Maker agrees to pay court costs, reasonable attorneys' fees and other costs
of collection of the holder hereof.
7. Usury. It is the intention of the Maker to conform strictly to
applicable usury laws now or hereafter in force, and therefore all agreements
between the Maker and the Payee are expressly limited so that in no contingency
or event whatsoever, whether by reason of advancement of the proceeds hereof,
acceleration of maturity of the unpaid principal balance hereof or otherwise,
shall the amount paid or agreed to be paid to the Payee, for the use,
forbearance or detention of the money to be advanced hereunder exceed the
highest lawful rate permitted by applicable law. Regardless of any provision
contained herein, or in any other documents or instruments executed in
connection herewith, the Payee shall never be entitled to receive, collect or
apply, as interest hereon, any amount in excess of the Highest Lawful Rate
(hereinafter defined) and in the event the Payee ever receives, collects or
applies, as interest, any such excess, such amount which would be excessive
interest shall be deemed a partial prepayment of principal and treated hereunder
as such; and, if the principal hereof is paid in full, any remaining excess
shall be refunded to the Maker. In determining whether or not the interest paid
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or payable, under any specific contingency, exceeds the Highest Lawful Rate, the
Maker and the Payee shall, to the maximum extent permitted under applicable law,
(a) characterize any non-principal payment as an expense, fee or premium rather
than as interest, (b) exclude voluntary prepayments and the effects thereof, and
(c) spread the total amount of interest throughout the entire contemplated term
hereof; provided that if the interest received for the actual period of
existence hereof exceeds the Highest Lawful Rate, the Payee shall either apply
or refund to the Maker the amount of such excess as herein provided, and in such
event the Payee shall not be subject to any penalties provided by any laws for
contracting for, charging or receiving interest in excess of the Highest Lawful
Rate. As used in this Note, the term "Highest Lawful Rate" means, at any given
time during which indebtedness shall be outstanding hereunder, the maximum
non-usurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the indebtedness
evidenced by this Note under the laws of the United States and applicable state
law currently in effect or, to the extent allowed by law, under such applicable
laws of the United States and applicable state law may hereafter be in effect
and which allow a higher maximum non-usurious interest rate than applicable laws
now allow, in any case after taking into account, to the extent required by
applicable law, any and all relevant payments or charges under this Note and any
documents executed in connection herewith.
8. Conversion.
(a) Subject to and upon compliance with the provisions of this Section
8, the Payee shall have the right (the "Conversion Right"), at its option, at
any time and from time to time, subject to the "Option" (as defined below), to
convert all or any portion of the outstanding principal amount of and accrued
but unpaid interest on this Note into the number of fully paid and
non-assessable shares of common stock of the Maker, par value $.001 (the "Common
Stock"), obtained by dividing (i) the amount of this Note to be so converted, by
(ii) the Conversion Price. For purposes of this Note, the term "Conversion
Price" means seventy-five cents ($0.75), as adjusted from time to time pursuant
to the provisions of this Section 8.
(b) In order to exercise the conversion right provided in subsection
(a) above, the Payee shall notify the Maker in writing (a "Conversion Notice")
that the Payee elects to convert this Note or a specified portion thereof, and
the Payee shall contemporaneously surrender this Note at the office of the Maker
for cancellation. Unless the shares issuable upon conversion are to be issued in
the name of the Payee, the Conversion Notice shall be accompanied by instruments
of transfer, in a form reasonably satisfactory to the Maker, duly executed by
the Payee or its duly authorized attorney and an amount sufficient to pay any
transfer or similar tax (or evidence reasonably satisfactory to the Maker
demonstrating that such taxes have been paid). The Conversion Right is subject
to the option of the Maker (the "Option"), upon receipt of a Conversion Notice,
to pay the then-outstanding principal amount and any accrued but unpaid interest
theron in full to the Payee within 30 days of the date on which the Maker
receives the Conversion Notice, thereby effectively canceling the Payee's
Conversion Right.
Provided that the Maker does not exercise its Option, as promptly as
practicable after the expiration of such 30-day period, and the compliance by
the Payee with any other conditions set forth in this subsection (b), the Maker
shall issue and shall deliver to the Payee, or otherwise in accordance with the
Payee's written instruction, (i) a certificate or certificates for the number of
full shares of Common Stock issuable upon the conversion of this Note in
accordance with the provisions of this Section 8 (and any fractional interest in
respect of a share of Common Stock arising upon such conversion shall be settled
as provided in subsection (c) of this Section 8), and (ii) if applicable, a new
Note of like tenor in the original principal amount equal to the portion of this
Note that has not been so converted.
Each conversion of this Note shall be deemed to have been effected
immediately prior to the close of business on the date on which the Conversion
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Notice is received by the Maker. The person or persons in whose name or names
any certificate or certificates for the shares of Common Stock issuable upon any
conversion of this Note shall be deemed to have become the holder or holders of
record of the shares represented thereby at the time and on the date determined
in accordance with the first sentence of this paragraph, and such conversion
shall be at the Conversion Price in effect at such time on such date. All shares
of Common Stock delivered upon conversion of this Note shall upon delivery be
duly and validly issued and fully paid and non-assessable.
(c) No fractional shares of Common Stock shall be issued upon
conversion of this Note. Instead of any fractional shares of Common Stock that
would otherwise be issuable upon conversion of this Note, the Maker shall pay a
cash adjustment in respect of such fractional share in an amount equal to the
same fraction of the current market price (as defined in subsection (d)(iii)
below) per share of Common Stock at the close of business on the day of
conversion.
(d) The Conversion Price is subject to adjustment from time to time
upon the occurrence of any of the events specified in this subsection (d). For
the purpose of this subsection (d), "Common Stock" means shares now or hereafter
authorized of any class of common stock of the Maker and any other stock of the
Maker, however designated, that has the right (subject to any prior rights of
any class or series of preferred stock) to participate in any distribution of
the assets or earnings of the Maker without limit as to per share amount.
(i) In case the Maker shall (A) pay a dividend or make a
distribution in shares of Common Stock or other securities, (B)
subdivide its outstanding shares of Common Stock into a greater number
of shares, (C) combine its outstanding shares of Common Stock into a
smaller number of shares, or (D) issue by reclassification of its
shares of Common Stock other securities of the Maker, then the
Conversion Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and/or the number and kind of securities issuable on
such date, shall be proportionately adjusted so that the holder of this
Note thereafter converted shall be entitled to receive the aggregate
number and kind of shares of Common Stock (or such other securities
other than Common Stock) of the Maker that, if this Note had been
converted immediately prior to such date, the holder would have owned
upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above shall occur.
(ii) In the event that the Maker shall fix a record date for
the making of a distribution to all holders of Common Stock (including
any such distribution made in connection with a consolidation or merger
in which the Maker is the surviving corporation) of cash, evidences of
indebtedness or assets, or subscription rights or warrants, the
Conversion Price to be in effect after such record date shall be
determined by multiplying the Conversion Price in effect immediately
prior to such record date by a fraction, the numerator of which shall
be the current market price per share of Common Stock on such record
date, less the amount of cash so to be distributed or the fair market
value (as determined in good faith by, and reflected in a formal
resolution of, the Board of Directors of the Maker) of the portion of
the assets or evidences of indebtedness so to be distributed, or of
such subscription rights or warrants, applicable to one share of Common
Stock, and the denominator of which shall be such current market price
per share of Common Stock. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such
distribution is not so made, the Conversion Price shall again be
adjusted to be the Conversion Price that would then be in effect if
such record date had not been fixed.
(iii) For the purpose of any computation under any paragraph
of this subsection (d), the "current market price" per share of Common
Stock on any date shall be the per share price of the Common Stock on
the trading day immediately prior to the event requiring an adjustment
hereunder and shall be: (A) if the principal trading market for such
securities is a national or regional securities exchange, the closing
price on such exchange on such day; or (B) if sales prices for shares
of Common Stock are reported by the NASDAQ National Market System (or a
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similar system then in use), the last reported sales price so reported
on such day; or (C) if neither (A) nor (B) above are applicable, and if
bid and ask prices for shares of Common Stock are reported in the
over-the-counter market by NASDAQ (or, if not so reported, by the
National Quotation Bureau), the average of the high bid and low ask
prices so reported on such day. Notwithstanding the foregoing, if there
is no reported closing price, last reported sales price, or bid and ask
prices, as the case may be, for the day in question, then the current
market price shall be determined as of the latest date prior to such
day for which such closing price, last reported sales price, or bid and
ask prices, as the case may be, are available, unless such securities
have not been traded on an exchange or in the over-the-counter market
for 30 or more days immediately prior to the day in question, in which
case the current market price shall be determined in good faith by, and
reflected in a formal resolution of, the Board of Directors of the
Maker.
(iv) Notwithstanding any provision herein to the contrary, no
adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Conversion Price; provided, however, that any adjustments which by
reason of this subsection (v) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this subsection (d) shall be made to the nearest
cent or the nearest one-hundredth of a share, as the case may be.
(v) In the event that at any time, as a result of an
adjustment made pursuant to subsection (d)(i), the holder of this Note
thereafter converted shall become entitled to receive any shares of
capital stock of the Maker other than shares of Common Stock,
thereafter the number of such other shares so receivable upon
conversion of this Note shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the shares of Common Stock contained in
this subsection (d), and the other provisions of this Note shall apply
on like terms to any such other shares.
(vi) If the Maker merges or consolidates into or with another
corporation or entity, or if another corporation or entity merges into
or with the Maker (excluding such a merger in which the Maker is the
surviving or continuing corporation and which does not result in any
reclassification, conversion, exchange, or cancellation of the
outstanding shares of Common Stock), or if all or substantially all of
the assets or business of the Maker are sold or transferred to another
corporation, entity, or person, then, as a condition to such
consolidation, merger, or sale (a "Transaction"), lawful and adequate
provision shall be made whereby the holder of this Note shall have the
right from and after the Transaction to receive, upon conversion of
this Note and upon the terms and conditions specified herein and in
lieu of the shares of the Common Stock that would have been issuable if
this Note had been fully converted immediately before the Transaction,
such shares of stock, securities, or assets as such holder would have
owned immediately after the Transaction if such holder had converted
this Note immediately before the effective date of the Transaction. The
Maker shall not effect any Transaction unless prior to or
simultaneously with the consummation thereof the successor corporation,
entity, or person (if other than the Maker) resulting from the
Transaction or purchasing assets or the business of the Maker in the
Transaction shall assume by written instrument the obligation to
deliver to the holder of this Note such shares of stock, securities, or
assets as, in accordance with the foregoing provisions, such holder may
be entitled to receive.
(vii) In case any event shall occur as to which the other
provisions of this subsection (d) are not strictly applicable but the
failure to make any adjustment would not fairly protect the conversion
rights set forth in this subsection (d) in accordance with the
essential intent and principles hereof, then, in each such case, the
Maker shall effect such adjustment, on a basis consistent with the
essential intent and principles established in this subsection (d), as
may be necessary to preserve, without dilution, the conversion rights
represented hereby.
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(e) The Maker agrees at all times to reserve and hold available out of
the aggregate of its authorized but unissued Common Stock the number of shares
of its Common Stock issuable upon the full conversion of this Note. The Maker
further covenants and agrees that all shares of Common Stock that may be
delivered upon the conversion of this Note will, upon delivery, be fully paid
and non-assessable and free from all taxes and mortgages, pledges, security
interests, encumbrances, liens or charges of any kind with respect to the
issuance thereof hereunder.
(f) Upon any adjustment of the Conversion Price pursuant to subsection
(d) of Section 8, the Maker shall promptly thereafter cause to be given to the
holder of this Note written notice of such adjustment. Such notice shall include
the Conversion Price after such adjustment, and shall set forth in reasonable
detail the Maker's method of calculation and the facts upon which such
calculations were based. Where appropriate, such notice shall be given in
advance and included as a part of any notice required to be given under the
other provisions of this subsection (f).
In the event of (i) any fixing by the Maker of a record date with
respect to the holders of any class of securities of the Maker for the purpose
of determining which of such holders are entitled to dividends or other
distributions, or any rights to subscribe for, purchase or otherwise acquire any
shares of capital stock of any class or any other securities or property, or to
receive any other right, or (ii) any capital reorganization of the Maker, or
reclassification or recapitalization of the capital stock of the Maker or any
transfer of all or substantially all of the assets or business of the Maker to,
or consolidation or merger of the Maker with or into, any other entity or
person, or (iii) any voluntary or involuntary dissolution or winding up of the
Maker, then and in each such event the Maker shall give the holder of this Note
a written notice specifying, as the case may be, (A) the record date for the
purpose of such dividend, distribution, or right, and stating the amount and
character of such dividend, distribution, or right, or (B) the date on which any
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, conveyance, dissolution, liquidation, or winding up is to
take place and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or such other capital stock or securities receivable
upon the conversion of this Note) shall be entitled to exchange their shares of
Common Stock (or such other stock securities) for securities or other property
deliverable upon such event. Any such notice shall be given at least 40 days
prior to the earliest date therein specified.
(g) This Note does not entitle the holder hereof to any voting rights
or other rights as a shareholder of the Maker, nor to any other rights
whatsoever except the rights herein set forth.
9. Additional Covenants of the Maker.
(a) The Maker shall comply with the reporting requirements of Sections
13 and 15(d) of the Securities Exchange Act of 1934, as amended, for so long as
and to the extent that such requirements apply to the Maker.
(b) The Maker shall not, by amendment of its Articles of Incorporation
or Bylaws or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Note. Without limiting the generality of the foregoing, the Maker (i) will at
all times reserve and keep available, solely for issuance and delivery upon
conversion of this Note, shares of Common Stock issuable from time to time upon
conversion of this Note, (ii) will not increase the par value of any shares of
capital stock receivable upon conversion of this Note above the amount payable
therefore upon such conversion, and (iii) will take all such actions as may be
necessary or appropriate in order that the Maker may validly and legally issue
fully paid and non-assessable stock upon conversion of this Note.
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(c) Until the entire Principal Amount of and all accrued but unpaid
interest on this Note is paid in full, the Maker shall not take any of the
following actions without the prior written consent of the Payee (which consent
shall not be unreasonably withheld):
(i) sell all or a significant portion of the Maker's assets,
or merge or enter into any combination or consolidation with another
person or entity, in which it is not the surviving entity or
(ii) directly or indirectly make or pay any cash dividends or
make any distributions on any of its equity securities.
10. Governing Law. This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Texas. Venue for any
action arising out of this Note shall lie exclusively in Dallas County, Texas.
11. Permitted Transfer or Assignment by Holder. The holder of this Note
may not transfer or assign to any person or entity all or any portion of this
Note unless, prior to any transfer or assignment, the holder of this Note gives
written notice to the Maker of such holder's proposal to effect such transfer or
assignment, together with such information and other written assurances as the
Maker may reasonably request with respect to the proposed transfer or assignment
and the proposed transferee or assignee. The Maker and the holder of this Note
acknowledge that the foregoing condition is intended only to ensure compliance
with the provisions of the Securities Act of 1933, as amended, and any
applicable state securities laws in respect of the transfer or assignment of
this Note.
12. Successors and Assigns. This Note shall be binding upon the Maker
and its successors, and shall inure to the benefit of the Payee and its
successors and permitted assigns. The Maker shall not assign its obligations
hereunder without the prior written consent of the Payee.
13. Notices. Any notice, request, demand or other communication
permitted or required to be given pursuant to this Note shall be in writing,
shall be sent by one of the following means to the addressee at the address set
forth below (or at such other address as shall be designated hereunder by notice
to the other parties receiving copies, effective upon actual receipt) and shall
be deemed conclusively to have been given: (a) on the first business day
following the day timely deposited with Federal Express (or other equivalent
national overnight courier) or United States Express Mail, with the cost of
delivery prepaid; (b) on the fifth business day following the day duly sent by
certified or registered United States mail, postage prepaid and return receipt
requested; or (c) when otherwise actually delivered to the addressee. If a
written notice or signed item is expressly required by another provision of this
Note, a manually signed original must be delivered by the party giving it. Any
other notice, request, demand or other communication also may be sent by
telegram or facsimile, with the cost of transmission prepaid, and shall be
deemed inclusively to have been given on the day duly sent. Copies may be sent
by regular first-class mail, postage prepaid, to the parties set forth below,
but any failure or delay in sending copies shall not affect the validity of any
such notice, request, demand or other communication so given to a party. The
addresses of the parties are as follows:
(i) If to the Maker:
MedSolutions, Inc. 00000
Xxxxx Xxxxx Xxxx Xxxxxxx XXX, Xxxxx 000
Xxxxxx, Xxxxx 00000 Attention: Xxxxxxx X.
Xxxxxxx Fax: (000) 000-0000
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(ii) If to the Payee:
Ajit S & Xxxxx Xxxx
00000 Xxx Xxxxx Xxxx
Xxxxxx Xxxx, XX 00000
000-000-0000
14. Severability. In case any provision of this Note shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
15. Amendments and Waivers. This Note may be amended only with the
mutual consent of the Payee and the Maker. No amendment or waiver or
modification of this Note shall be effective unless in writing and signed by
both the Maker and the Payee.
16. WAIVER OF JURY TRIAL. THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES (TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS
NOTE AND AGREES THAT ANY SUCH DISPUTE SHALL, AT THE OPTION OF THE PAYEE, BE
TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
MEDSOLUTIONS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
Agreed to and Accepted this Date: March 7, 2004
By: /s/ Xxxx X. Xxxx
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Xxxx X. Xxxx
/s/ Xxxxx Xxxx
-----------------
Xxxxx Xxxx
