EXHIBIT 10.18
THIS INSTRUMENT IS SUBJECT TO THE SUBORDINATION AGREEMENT DATED AS OF JULY 3,
1995, AMONG THE MAKER, THE PAYEE AND THE FIRST NATIONAL BANK OF BOSTON, WHICH
AMONG OTHER THINGS, SUBORDINATES THE MAKER'S OBLIGATIONS HEREUNDER TO THE PRIOR
PAYMENT OF CERTAIN OBLIGATIONS OF THE MAKER TO THE HOLDERS OF SENIOR OBLIGATIONS
AS DEFINED THEREIN.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED, OFFERED FOR SALE OR SOLD
EXCEPT PURSUANT TO A REGISTRATION UNDER SAID ACT OR AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL FOR THE PAYOR, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
12% NON-NEGOTIABLE SUBORDINATED
PROMISSORY NOTE
$1,000,000 July 3, 1995
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned, SUBURBAN OSTOMY SUPPLY CO. INC., a
Massachusetts corporation (the "Payor"), hereby promises to pay to Herbert Gray
(the "Holder"), the principal amount of One Million Dollars ($1,000,000),
payable on the terms specified below. This Promissory Note (the "Note") is
executed and delivered on this date in connection with the purchase by the Payor
of seven thousand nine hundred and fifty-two (7952) shares of common stock of
the Payor held by the Holder, all as is more fully described in a certain Stock
Purchase and Redemption Agreement dated as of July 3, 1995 (the "Purchase
Agreement").
1. Payment of Principal.
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(a) Scheduled Payment. Subject to Sections 1(b) and 6 hereof, the
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principal amount of this Note shall be payable on June 30, 2000.
(b) Mandatory Prepayment. Subject to Section 6 hereof, this Note shall be
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subject to mandatory prepayment immediately upon the occurrence of a Liquidity
Event (as defined in the Subordinated Debenture Purchase Agreement between the
Payor and the Purchasers named
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therein dated as of July 3, 1995 (as amended or modified by such Purchasers or
as the terms thereof may be waived by such Purchasers, the "Debenture Purchase
Agreement")).
2. Interest. Interest shall accrue on the outstanding principal amount
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hereof, commencing on the date hereof and continuing until the date of payment
in full, at the rate of twelve percent (12%) per annum, based on the actual
number of days elapsed over a 360-day year, and shall be payable quarterly in
arrears, on the last days of March, June, September and December of each year,
commencing on September 30, 1995. In addition, in the event the principal
amount of the Note is not paid when due and payable (whether at stated maturity
by acceleration or otherwise), the interest on such principal amount shall
thereafter be increased to fourteen percent (14%). Any interest not paid when
due and payable shall thereafter be paid on demand by the holder of this Note,
together with a late charge of two percent (2%) of the amount of interest past
due.
3. Manner of Payment. All payments shall be made in lawful money of the
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United States of America in immediately available funds and shall be made at the
address of the Holder for receiving notices hereunder or at such other address
as the holder may designate for payments hereunder by notice given to the Payor.
4. Covenants. The Payor hereby covenants and agrees with the Holder to
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observe and comply with all of the covenants of the Payor contained in Articles
III and IV of the Debenture Purchase Agreement and to grant the Holder the
rights of a "Purchaser" for purposes of such Articles III and IV.
5. Default; Remedy. Upon the occurrence of an Event of Default pursuant
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to Section 5(b), 5(c) or 5(d) hereof, the unpaid balance of the principal of
this Note and all accrued interest thereon shall automatically become
immediately due and payable without action on the part of the Holder. Upon the
occurrence of an Event of Default pursuant to Section 5(a) hereof, subject to
Section 6 hereof, the Holder may by written notice to the Payor declare this
Note to be in default, whereupon the unpaid balance of the principal of this
Note and all accrued interest thereon shall immediately become due and payable.
If within five (5) business days following such declaration of default or an
automatic default pursuant to Section 5(b), 5(c) or 5(d) the Payor shall fail to
pay promptly in full the unpaid balance of this Note and all interest accrued
thereon, subject to Section 6 hereof, the Holder shall be entitled to pursue all
such remedies as he may have, at law or in equity, for the enforcement and
collection hereof, and to receive in addition to such principal and interest all
costs of collection (including reasonable attorney's fees). For the purpose of
this Note, an "Event of Default" shall consist only of one or more of the
following:
(a) The Payor shall fail to make any payment of principal when due or
payment of interest within five (5) business days of when due.
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(b) The Payor shall fail to comply with any of the terms and provisions of
this Note and such failure shall continue for a period of five (5) business days
after receipt by the Payor of notice of such failure from the Holder.
(c) The Payor shall default in the performance of any material term of the
Debenture Purchase Agreement and the effect of such default is to cause the
Debentures issued pursuant to such Agreement to become due and payable prior to
their stated maturity.
(d) The Payor shall default in the performance of any material term of the
Debenture Purchase Agreement and the holders of the Debentures thereunder shall
give notice to the Payor of their declaration that the Debentures are
immediately due and payable prior to their stated maturity.
6. Transfer. Neither this Note nor any interest herein may be
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transferred or endorsed to any other party, except that, subject to the right of
set-off, the Holder may transfer this Note by way of gift to any of his lineal
descendants or to a trust for the benefit of his lineal descendants. Neither
this Note nor any interest herein has been registered under the Securities Act
of 1933, as amended, or any applicable state securities laws.
7. Note to Bear Legend. This Note and any subsequent Note issued in
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replacement hereof or any interest therein shall bear the following legend:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED, OFFERED FOR
SALE OR SOLD EXCEPT PURSUANT TO A REGISTRATION UNDER SAID ACT OR AN OPINION
OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE PAYOR, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SAID ACT."
8. Miscellaneous.
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(a) This Note shall be binding upon and inure to the benefit of the Holder
hereof and its permitted successors and assigns. This Note shall be binding
upon the Payor and any successor to the principal business interests of the
Payor, whether by merger or otherwise.
(b) Any notice, request or communication pursuant to this Note shall be
deemed duly given in the case of a delivered notice, when delivered by hand, or
in the case of a mailed notice, when deposited in the mail, postage prepaid, or
in the case of telegraphic notice, when delivered to the telegraph company, or,
in the case of telex notice, when sent, answer back received, addressed to the
parties as follows:
If to the Payor: Suburban Ostomy Supply Co.
c/o Summit Partners III, L.P.
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One Boston Place
Boston, MA 02108
Attn: Joseph F. Trustey
With a copy to: Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attn: James Westra
If to the Holder: Herbert Gray
c/o Suburban Ostomy Supply Co., Inc.
75 October Hill Road
Holliston, MA 01746
With a copy to: Sullivan & Worcester
One Post Office Square
Boston, MA 02109
Attn: Norman Bikales
In the case of either Payor or Holder, to such other address as it may be
designated by a notice to the other party in the manner herein provided.
(c) Except as otherwise provide herein, the Payor hereby waives
presentment, demand, protest, and notice of every kind in connection with the
enforcement and collection of this Note.
(d) The execution, delivery and performance of this Note shall be governed
and construed in accordance with the laws of The Commonwealth of Massachusetts
without giving effect to the conflict of laws provisions thereof.
SUBURBAN OSTOMY SUPPLY CO., INC.
ATTEST: /s/ Melvin Aronson By: /s/ Donald H. Benovitz
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Name:
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