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EXHIBIT 10.17
Atlanta, Georgia
$2,461,017 October 24, 1995
SECURED SUBORDINATED NOTE
FOR VALUE RECEIVED, the undersigned, HORIZON ACQUISITION CORP., a Georgia
corporation (hereinafter referred to as "Maker"), hereby promises to pay to the
order of NEOSTAR MEDICAL TECHNOLOGIES, INC., a Delaware corporation (hereinafter
referred to, along with each subsequent holder of this Note, as the "Holder") at
_______________________________________________, or such other address as the
Holder hereof may designate in writing, the principal sum of TWO MILLION FOUR
HUNDRED SIXTY-ONE THOUSAND SEVENTEEN DOLLARS ($2,461,017.00). No interest shall
be payable on the unpaid principal balance hereof or otherwise under this Note.
Except as provided below upon the occurrence of an "Acceleration Event",
the principal amount of this Note shall be payable in the following installment
payments:
(i) $212,235.00 in twelve (12) consecutive monthly installments of
$17,686.25 per month, payable on the last day of each month, commencing
January 31, 1997 and continuing through December 31, 1997;
(ii) $145,240.00 in twelve (12) consecutive monthly installments of
$12,103.33 per month, payable on the last day of each month, commencing
January 31, 1998 and continuing through December 31, 1998;
(iii) $253,200.00 in eighteen (18) consecutive monthly installments
of $14,066.67 per month, payable on the last day of each month, commencing
January 1, 1999 and continuing through June 30, 2000;
(iv) $84,400.00 on July 31, 2000;
(v) $60,753.00 on January 31, 2001;
(vi) $121,506.00 on October 31, 2001;
(vii) $86,841.50 on April 30, 2002;
(viii) $86,841.50 on October 31, 2002;
(ix) $1,160,000.00 on April 30, 2003; and
(x) $250,000.00 on October 31, 2003.
"THE PAYMENT OF THE DEBT EVIDENCED HEREBY IS SUBORDINATED TO ALL DEBTS OF
THE MAKER TO SIRROM CAPITAL CORPORATION AS SET FORTH IN A SUBORDINATION
AGREEMENT DATED OCTOBER 24, 1995."
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In the event any "Acceleration Event" (as defined below) should occur, then
the "Final Payoff Amount" (as defined below) shall be immediately due and
payable in full on the date on which the Acceleration Event occurs. The Final
Payoff Amount, when paid, shall be full and final payment of all sums due and
payable under this Note. The term "Acceleration Event" shall mean: (i) a sale of
Maker or Horizon Medical Products, Inc. ("Horizon") (through merger, sale of
eighty percent (80%) or more of the outstanding stock of Maker or Horizon or
sale of all or substantially all of the assets of Maker or Horizon; provided,
however, that a sale of Maker to Horizon or a merger of Maker into Horizon shall
not be an Acceleration Event), (ii) a sale of stock of Maker or Horizon to the
public in an initial public offering, or (iii) the failure by Maker to pay any
installment payment payable to Holder pursuant to the provisions in the
preceding paragraph after Maker receives written notice of default from Xxxxxx
and fails to pay the amount due within five (5) days after receiving notice of
nonpayment, (iv) the filing of a petition by or against the Maker for relief
under the Bankruptcy Code or under the bankruptcy, insolvency or any similar
statute of the United States or any state thereof that is not dismissed within
thirty (30) days after filing, (v) the making of any general assignment for the
benefit of creditors by the Maker, (vi) the institution by the Maker of any type
of insolvency proceeding or any proceeding for the liquidation or winding up of
its affairs, (vii) the Maker shall apply for or consent to the appointment of a
receiver, trustee or liquidator for the Maker or any of its assets, (viii) the
authorization by the Maker for the dissolution of the Maker; (ix) default shall
occur with respect to any material indebtedness of Maker for borrowed money if
the effect of such default is to accelerate the maturity of such indebtedness or
to permit the holder thereof to cause such indebtedness to become due prior to
its stated maturity, (x) any material indebtedness of Maker for borrowed money
shall not be paid when due subject to any applicable cure period, (xi) any
default by Horizon under the Loan Agreement between Horizon and Sirrom Capital
Corporation ("Sirrom") dated September 25, 1995 as the same may be amended,
supplemented or modified from time to time, or (xii) any default by Horizon
pursuant to the Secured Promissory Note dated September 25, 1995 of Horizon
given to Sirrom which note is guaranteed by the Maker. The term "Final Payoff
Amount" shall mean the remaining outstanding and unpaid amount due and payable
under this Note at any time under the provisions of the preceding paragraph,
with such amount then reduced to its present value as of the date on which the
Acceleration Event occurs using an interest rate of ten percent (10%) in
determining such present value. An illustration of the provisions in this
paragraph is set forth in Schedule A attached hereto and incorporated herein by
reference.
If the Holder should employ attorneys or incur other expenses for the
collection of amounts payable under this Note, the Maker shall pay the
reasonable attorneys fees and such other expenses so incurred by the Holder of
this Note.
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Time is of the essence of this Note.
This Note is secured by a Security Agreement dated the date hereof
covering certain Collateral (as defined therein).
This Note is subject to prepayment by the Maker in full or in part at any
time and from time to time without payment of penalty or premium. If Maker
elects to prepay this Note in full, then Maker shall pay the Final Payoff
Amount, calculated as of the date of such prepayment under the above
provisions, as full and final payment of all sums due and payable under this
Note.
This Note is executed and delivered in payment of a portion of the
Purchase Price payable under the terms of that certain Asset Purchase
Agreement, dated as of October 24, 1995 (the "Purchase Agreement"), by and
among the Maker, as Purchaser, the Holder, as Seller, and other parties. Under
the terms of Section 3.3(a) of the Purchase Agreement, the amount payable under
this Note is subject to an automatic reduction in the amount described in
Section 3.3(a) and Section 3.3(c), the provisions of which are incorporated
herein by reference. If the amount payable under this Note is reduced pursuant
to the provisions of Section 3.3(a) and Section 3.3(b) of the Purchase
Agreement, then the reduction shall be made in the monthly installment payments
which commence January 31, 1997 and continue on the last day of each month
thereafter until all reductions are made; provided, however, that if any
reduction to the amount owed under this Note described in the next paragraph
below in this Note is made prior to any reduction under this paragraph, then
the reduction under this paragraph shall be made in the most immediate
succeeding payments under this Note (until all such reductions are made) after
such reduction is made under the next paragraph below. Any such reduction in
amount shall not otherwise affect any of the terms and provisions of this Note.
Under the terms of Section 3.3(b) of the Purchase Agreement, the amount
payable under this Note is subject to an automatic reduction in the amounts
described in Section 3.3(b), the provisions of which are incorporated herein by
reference. If the amount payable under this Note is reduced pursuant to the
provisions of Section 3.3(b) and Section 3.3(c) of the Purchase Agreement, then
the reductions shall be made in the monthly installment payments which commence
January 31, 1997 and continue on the last day of each month thereafter until
all reductions are made; provided, however, that if the reduction to the amount
owed under this Note described in the above paragraph is made prior to any
reduction under this paragraph, then the reductions under this sentence shall
be made in the most immediate succeeding payments under this Note (until all
such reductions are made) after such reduction under the above paragraph.
Pursuant to Section 8.4 of the Purchase Agreement, the amount owed under
this Note is subject to offset in the amounts and manner
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described in Section 8.4 and Schedule 8.4 to the Purchase Agreement. Any offset
that is applied against the amount owed under this Note shall be applied
against the payments that are most immediately due and payable under this Note
at the time of the offset, taking into consideration any reductions in the
amounts owed under this Note under the provisions of the two preceding
paragraphs of this Note.
The principal of this Note is payable in lawful money of the United States
of America.
The amount due and payable to Holder under this Note is subordinated to
all indebtedness owed under the Loan Agreement dated September 25, 1995 to
Sirrom Capital Corporation, which indebtedness has been guaranteed by Maker and
is payable by Horizon. Other than such indebtedness, Maker will attempt to
obtain priority for all indebtedness under this Note with respect to other
indebtedness incurred by Maker for borrowed money from time to time until this
Note is paid in full.
Demand, presentment, dishonor, protest and notice of dishonor are hereby
waived by the Maker. The Holder shall not be deemed to waive any of its rights
or remedies under this Note unless such waiver is express, in writing and
signed by the Holder. No delay or omission by the Holder in exercising any of
its rights or remedies shall operate as a waiver of any such right or remedy.
An express waiver of any right or remedy in writing and signed by the Holder on
any one occasion shall not be, nor be construed as, a waiver of any other right
or remedy then existing or existing on any other occasion.
This Note shall be governed by, construed under and interpreted and
enforced in accordance with the laws of the State of Georgia. Whenever
possible, each provision of this Note shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Note
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Note.
The word "Holder" as used herein shall include all transferees, successor
and assigns of the Holder. This Note shall be freely assignable upon prior
written notice to the Maker, and all rights of the Holder hereunder shall inure
to the benefit of its transferees, successors and assigns. All obligations of
the Maker shall bind its legal representatives, successors and assigns.
IN WITNESS WHEREOF, the Maker has caused this Promissory Note to be
executed in its corporate name and its corporate seal to be
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hereunder affixed, all by its duly authorized officers, the day and year first
written above.
HORIZON ACQUISITION CORP.
By: /s/ [unreadable]
----------------------------
Chief Executive Officer
Attest: /s/ [unreadable]
------------------------
Secretary
[CORPORATE SEAL]
Address:
Seven North Parkway Square
0000 Xxxxxxxxx Xxxxxxx, XX
Xxxxxxx, Xxxxxxx 00000
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SCHEDULE A TO SUBORDINATED NOTE
1. Assume that an Acceleration Event (as defined in the Subordinated Note)
occurs on July 1, 1996 and the Final Payoff Amount becomes payable in full on
July 1, 1996. The Final Payoff Amount on July 1, 1996 will be: $1,449,239.14.
2. Assume that an Acceleration Event occurs on January 1, 2000 and the
Final Payoff Amount becomes payable in full on January 1, 2000. Also, assume
that all monthly payments payable under the Subordinated Note prior to January
1, 2000 have been paid. The Final Payoff Amount on January 1, 2000 will be:
$1,442,695.36.
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AMENDMENT TO SECURED SUBORDINATED NOTE
THIS AMENDMENT, entered into as of July 31, 1997, by and between
HORIZON ACQUISITION CORP., a Georgia corporation ("HAC"), and NEOSTAR HOLDING,
INC., a Delaware corporation and successor in interest through merger to Neostar
Medical Technologies, Inc., a Delaware corporation, ("Neostar");
WHEREAS, HAC has delivered to Neostar that certain Secured Subordinated
Note dated October 24, 1995 in the principal amount of $2,461,017.00 payable by
HAC to Neostar (the "Note");
WHEREAS, Neostar is the holder of the Note;
WHEREAS, HAC is presently unable to make the payments under the Note
according to its terms and as a consequence thereof, HAC and Neostar have agreed
to restructure the 1997 payment schedule in the Note and to make certain other
agreements as hereinafter provided;
NOW, THEREFORE, in consideration for the agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. The payment schedule for the Note, as set forth on the first page of
the Note, is hereby revised, amended, and restated as follows:
Except as provided below upon the occurrence of an "Acceleration
Event", the principal amount of this Note shall be payable in the
following installment payments of principal:
(i) The following payments of principal during
1997: $35,000.00 on July 31, 1997;
$15,000.00 on July 31, 1997; $25,000.00 on
August 31, 1997; $25,000.00 on September 30,
1997; $25,000.00 on October 31, 1997;
$25,000.00 on November 30, 1997; and
$25,000.00 on December 31, 1997;
The payment of the debt evidenced hereby is subordinated to all debts of the
Maker to Sirrom Capital Corporation as set forth in a Subordination Agreement
dated October 24, 1995.
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(ii) $145,240.00 in twelve (12) consecutive monthly
installments of principal of $12,103.33 per
month, payable on the last day of each month,
commencing January 31, 1998 and continuing
through December 31, 1998;
(iii) $253,200.00 in eighteen (18) consecutive
monthly installments of principal of
$14,066.67 per month, payable on the last day
of each month, commencing January 31, 1999 and
continuing through June 30, 2000;
(iv) $84,400.00 of principal on July 31, 2000;
(v) $60,753.00 of principal on January 31, 2001;
(vi) $121,506.00 of principal on October 31, 2001;
(vii) $86,841.50 of principal on April 30, 2002;
(viii) $86,841.50 of principal on October 31, 2002;
(ix) $1,160,000.00 of principal on April 30, 2003;
and
(x) $287,235.00 of principal on October 31, 2003.
2. The following provision is hereby added to the Note at the end of
the first paragraph on the first page of the Note:
Notwithstanding the preceding sentence, the amount of $37,235.00
(the "Deferred Amount") that was originally payable under this Note
during 1997 has been deferred and is now payable as part of and is
included in the amount of principal of $287,235.00 due and payable
under this Note on October 31, 2003. Interest at the simple per
annum interest rate of "Prime Rate" plus one percent shall be
accrued, commencing on February 1, 1997, on the outstanding balance
of the Deferred Amount, to be calculated as follows:
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AMOUNT AMOUNT OUTSTANDING
PAYABLE PAYABLE BALANCE OF
DATE UNDER UNDER DEFERRED
ORIGINAL REVISED AMOUNT
PAYMENT PAYMENT
SCHEDULE SCHEDULE
January 31, 1997 $17,686.25 $ 0.00 $ 17,686.25
February 28, 1997 $17,686.25 $ 0.00 $ 35,372.50
March 31, 1997 $17,686.25 $ 0.00 $ 53,058.75
April 30, 1997 $17,686.25 $ 0.00 $ 70,745.00
May 31, 1997 $17,686.25 $ 0.00 $ 88,431.25
June 30, 1997 $17,686.25 $ 0.00 $106,117.00
July 31, 1997 $ 0.00 $35,000.00 $ 71,117.50
July 31, 1997 $17,686.25 $15,000.00 $ 73,803.75
August 31, 1997 $17,686.25 $25,000.00 $ 66,490.00
September 30, 1997 $17,686.25 $25,000.00 $ 59,176.25
October 31, 1997 $17,686.25 $25,000.00 $ 51,862.50
November 30, 1997 $17,686.25 $25,000.00 $ 44,548.75
December 31, 1997 $17,686.25 $25,000.00 $ 37,235.00
Such accrued interest shall be payable on December 31, 1997 and in quarterly
payments after December 31, 1997 on each March 31, June 30, September 30, and
December 31 thereafter until the Deferred Amount is paid in full; provided that
in the event an "Acceleration Event" (as defined in this Note) occurs and the
"Final Payoff Amount" (as defined in this Note) is paid, all accrued interest on
the outstanding balance of the Deferred Amount through the date on which the
Final Payoff Amount is paid shall be payable in full on the date of such
payment. In addition, in determining the Final Payoff Amount, the Deferred
Amount shall not be discounted to present value but shall be payable in full.
"Prime Interest" shall mean the prime interest rate as shown daily in The Wall
Street Journal under "Money Rates", which prime rate is presently 8 1/2% and
which prime rate for purposes of this calculation shall change the day after any
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change in the Prime Interest as published in The Wall Street Journal
under "Money Rates" commencing on February 1, 1997 through the date
on which the Deferred Amount is paid in full.
3. Unless expressly amended herein, all other provisions in the Note
are ratified and confirmed in all respects and shall continue in full force and
effect.
4. This Amendment contains the entire agreement and understanding
between the parties respecting the subject matter hereof and supersedes all
prior and collateral agreements and understandings, regardless of form or
nature, between the parties respecting that subject matter. No extension,
amendment, modification, or supplement to this Amendment will be effective
unless made in writing signed by the parties hereto. This Amendment will be
binding on and inure to the benefit to the parties hereto and their respective
successors and assigns. This Amendment may be executed in multiple counterparts,
each of which will constitute an original, but all of which together will
constitute one and the same agreement. The validity, construction, and
enforcement of this Amendment and all matters related thereto or in connection
therewith will be governed by the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first set forth above.
ATTEST: HORIZON ACQUISITION CORP.
/s/ [unreadable] By: /s/ [unreadable]
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Title: Secretary Title: President
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ATTEST: NEOSTAR HOLDING, INC.
/s/ [unreadable] By: /s/ Xxxxxx X. Xxxx
---------------------- -------------------------------
Title: Secretary Title: President
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