EXHIBIT 10.8
NON-NEGOTIABLE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. THIS NOTE MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION, OR AN EXEMPTION FROM
REGISTRATION, UNDER SUCH LAWS
PSS INVESTMENT, INC.
8% Subordinated Note
due 2003
$5,500,000 August 12, 1993
For value received, PSS Investment, Inc., a Delaware corporation (the
"Company"), promises to pay to the order of Spring Investment Limited Liability
Company, a Wyoming corporation ("SILLC"), and the X. Xxxxx Xxxxxx Living Trust
(the "Trust") (SILLC and the Trust being referred to herein as the "Payee"), the
aggregate principal sum of $5,500,000, subject to the terms of, and payable as
set forth in, Section 1 hereof, and to pay interest from the date hereof as
provided herein. Interest shall be calculated on the basis of a 365-day year and
shall be payable in arrears on the first business day of each February and
August of each year, commencing February 1, 1994, on the unpaid balance of the
principal amount of this Note, at the rate of 8% per annum, except as otherwise
herein provided. Unless sooner paid, all principal of and interest on this Note
shall be due and payable on August 12, 2003.
This Note is issued and delivered by the Company pursuant to the Stock
Purchase Agreement, dated August 5, 1993, (the "Purchase Agreement") between the
Company and the shareholders of Spring Anesthesia Group, Inc. The indebtedness
evidenced by this Note is subject to a Subordination Agreement of even date
herewith (the "Subordination Agreement") between the company and Payee.
Capitalized terms used and not otherwise defined herein have the meaning set
forth in the Purchase Agreement.
1. Payments of Principal and Interest.
Subject to the Company's right to prepay this Note, the Company shall
pay to Payee the principal amount of this Note on August 12, 2003.
Upon payment in full of all outstanding principal of and interest on
this Note, the Company's obligations in respect of payment of this Note shall
terminate and Payee shall return this Note to the Company for cancellation.
Payments of principal of and interest on this Note shall be made to
Payee in lawful money of the United States of America by check payable to the
order of SILLC at Spring Investment Limited Liability Company, c/o Xxxxx
Xxxxxxxxxx, President, 00000 Xxxxxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxx Xxxxx,
Xxxxxxxxxx 00000, or such other place or places within the United States as may
be specified by Payee in written notice to the Company at least 15 business days
before any payment date.
The Company shall have the right at any time and from time to time to
prepay this Note in whole or in part, together with interest on the amount
prepaid to the date of prepayment, without penalty or premium. Upon prepayment
of part of the principal amount of this Note, the Company may require Payee to
present this Note for notation of such payment.
Subject to the provisions of the Subordination Agreement, if any
principal of or interest on this Note remains unpaid at August 12, 2003, such
unpaid principal and interest amount shall become immediately due and payable on
August 12, 2003, and interest shall continue to accrue on the unpaid principal
amount hereof and, to the extent permitted by law, on the unpaid interest, at a
rate of 8% per annum from such date until paid in full and, subject to the
Subordination Agreement and Section 2 hereof, shall be immediately due and
payable.
Notwithstanding anything to the contrary contained herein, the
principal amount of this Note shall be reduced if any direct or indirect
beneficiary of either Payee (as determined as of the Closing Date) or any of
such beneficiary's immediate family members (i) Does Business with any Customer
of the Company or any subsidiary of the Company or (ii) affiliate with (as an
employer, officer, director, owner, employee, partner, agent, participant or
otherwise) any person, corporation, partnership or other entity that Does
Business with a then existing or former Customer of the Company or any
subsidiary of the Company; provided that no such reduction
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shall be made if such affiliation or affiliations, in the aggregate, do not
involve more than five physician Customers of the Company and its subsidiaries,
taken together. The amount of such reduction shall be an amount equal to the
average of the Company's and its subsidiaries' revenues attributable to such
Customer for the two fiscal years immediately preceding the commencement of
business by such beneficiary or family member or by such affiliate with such
Customer; provided that the amount of such reduction shall not exceed 25% of the
then outstanding principal amount of this Note. As used in this paragraph 1, (a)
"Does Business" means providing medical billing services or accounting services
to a Customer or otherwise engaging in a type of business with a Customer which
is substantially similar to the type of business engaged in by the Company or
any subsidiary of the Company with such Customer and (b) "Customer" means any
person, corporation, partnership or other entity that was a Customer of the
Company or any subsidiary of the Company immediately before the Closing Date or
at any time during the term of this Note.
2. Events of Default. (a) The following shall constitute an "Event of
Default" under this Note:
(i) default shall be made in the payment of the principal of or
interest on this Note, when and as the same shall become due and payable,
whether at the due date thereof or at a date fixed for prepayment thereof or by
acceleration or otherwise, and such default shall continue unremedied for 45
days;
(ii) the Company shall have filed a petition in bankruptcy or for
reorganization or for an arrangement or any composition, readjustment,
liquidation, dissolution or similar relief pursuant to Title 11 of the United
States Code or under any similar present or future federal law or the law of any
other jurisdiction or consented to the appointment of or taking position by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Company or for all or any substantial part of its
property;
(iii) the Company shall have made a general assignment for the benefit
of its creditors or shall admit in writing its inability to pay its debts
generally as they become due;
(iv) the Company shall have filed against it a petition or answer
proposing the adjudication of the Company as a bankrupt or its reorganization or
arrangement, or any composition, readjustment, liquidation, dissolution or
similar relief with respect to it pursuant to
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Title 11 of the United States Code or under any similar present or future
federal law or the law of any other jurisdiction, and the Company shall have
consented to or acquiesced in the filing thereof, or such petition or answer
shall not have been discharged or denied within 90 days after the filing
thereof;
(v) a decree or order shall have been rendered by a court having
jurisdiction (A) for the appointment of a receiver or custodian or liquidator or
trustee or sequestrator or assignee (or similar official) in bankruptcy or
insolvency of the Company, or of all or a substantial part of the property of
the Company, or for the winding up or liquidation of its affairs, and such
decree or order shall have remained in force undischarged and unstayed for a
period of 90 days, or (B) for the sequestration or attachment of any property of
the Company without its return to the possession of the Company or its release
from such sequestration or attachment within 60 days thereafter, then subject to
the rights of the holders of Senior Indebtedness;
(vi) Spring Anesthesia Group, Inc. ceases to operate under the name
"Spring Anesthesia Group, Inc.", "Spring Anesthesia" or "Spring Group"; or
(vii) the Company shall have permanently ceased to conduct all of its
operations and this Note shall not have been transferred in accordance with the
terms hereof on or before the date of such cessation of business.
(b) In case of the happening of an Event of Default, Payee may,
subject to the provisions hereof and the rights of the holders of Senior
Indebtedness under the Subordination Agreement, then or at any time thereafter
while such demand remains unsatisfied, by written notice to the Company, declare
due and payable this Note, whereupon the same shall be due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. In the case of the happening of an Event of Default
under Section 3(a)(ii), (iii), (iv), (v) or (vi), this Note shall automatically
become due and payable without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived. A consolidation or merger of the
Company with or into any other corporation or corporations shall not be deemed
to be a liquidation or dissolution within the meaning of this Section.
3. Investment Representation.
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By its acceptance of this Note, Xxxxx acknowledges that (a) this Note
is not being registered under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state on the basis that the
issuance of this Note is exempt from registration under, among other possible
exemptions from registration, Section 4(2) of the Securities Act, as not
involving any public offering and (b) the company's reliance on such exemption
is predicated in part on the representation made to the company by Xxxxx in the
Purchase Agreement that Payee is acquiring the Note for Payee's own account, for
investment purposes, with no present intention of dividing Payee's participation
with others or reselling or otherwise distributing the same.
4. Transfers.
Xxxxx agrees, by its acceptance of this Note, that Payee shall sell,
transfer or pledge all or any part of this Note acquired by payee only to any
person other than a member of Xxxxx's immediate family with the consent of the
Company, which consent shall not be unreasonably withheld. All such sales,
transfers or pledges shall be subject to any conditions imposed by the Company,
including, without limitation, for the purposes of insuring that such transfer
may be made without registration under federal or state securities laws. In
addition, any transferee of this Note May be required to enter into a
confidentiality agreement, substantially in the form attached hereto. Upon the
transfer of all or any part of this Note in accordance with this Agreement, the
term "Payee" shall thereafter mean such transferee and, if SILLC or the Trust
has not transferred all of its interest hereunder, SILLC or the Trust, as the
case may be.
The Company shall at any time, at Xxxxx's request and expense, and
upon surrender of this Note for such purpose, issue a new Note in exchange
hereof, payable to the order of the holder or, upon compliance with this
Section, such person or persons as may be designated by such holder, dated the
last date to which interest has been paid on the surrendered Note, or, if such
exchange shall take place prior to the due date of the first interest payment,
the date of initial issuance hereof, in such denominations as may be requested,
in an aggregate principal amount equal to the face value so surrendered and
which shall be substantially in the form hereof. Payee shall pay all cost
associated with the change of holder of the note, including in legal or other
fees and taxes incurred by or resulting from such transfer.
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The Company may refuse to recognize a transfer of this Note on its
books should either Payee attempt to transfer this Note otherwise than in
compliance with the terms hereof and such transfer shall be null and void.
The Company proposes to merge into Spring Anesthesia Group, Inc.
("Spring"), with Spring being the surviving entity and succeeding by law to all
of the rights and obligations of the Company. Following such merger, Spring, as
the entity surviving such merger, shall for all purposes of this Note be the
"Company" hereunder.
The Company and, by its acceptance of this Note, the Payee agree that
all of the Company's obligations hereunder shall be transferred with and upon,
and (unless otherwise approved by Payee) may not be transferred other than with
and upon, any bona fide sale, disposition or other transfer by the Company of
all or substantially all of the assets or customer accounts of Spring.
5. Miscellaneous.
Upon (a) receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Note and of a letter of
indemnity reasonably satisfactory to the Company, (b) reimbursement to the
Company of all reasonable expenses incident thereto and (c) surrender or
cancellation of the Note, if mutilated, the Company shall make and deliver a new
Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note.
If a suit is brought under this Note to enforce the rights or
obligations of the Payee or the Company, the party prevailing in a final
adjudication of such suit shall be entitled to recover from the other party all
reasonable fees and expenses incurred in connection with such suit.
The amount payable hereunder is subject to set off as set forth in
the Purchase Agreement. The Company shall be entitled to withhold from the
amount otherwise payable hereunder any amount due with respect to withholding
or similar taxes, except that the Company may make payments hereunder without
any deduction or withholding for or on account of any tax if the Payee
represents and warrants to the Company that the Payee is exempt from such
deduction or withholding and the Payee, in form and substance satisfactory
to the Company,
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indemnifies and agrees to hold the Company harmless from and against any claim,
loss, damage or other cost or expense incurred arising out of or in connection
with such payment by the Company.
By its acceptance of this Note, the Payee acknowledges and agrees that
Physician Support Systems, Inc. has no obligations under this Note and that the
Payee has no claim whatsoever against said company for any amount due hereunder.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE COMPANY AND PAYEE
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA.
IN WITNESS WHEREOF, the Company has executed this Note as of the day
and year first above written.
PSS INVESTMENT, INC.
By: /s/ Xxxxxxxx X. Xxxxxx III
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President
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