EXHIBIT 10.29
THIS INSTRUMENT IS SUBJECT TO THE FIRST AMENDED AND RESTATED SUBORDINATION
AGREEMENT DATED AS OF JANUARY 22, 1996, 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.
10% NON-NEGOTIABLE SUBORDINATED
PROMISSORY NOTE
$1,235,000 January 22, 1996
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned, SUBURBAN OSTOMY SUPPLY CO. INC., a
Massachusetts corporation (the "Payor"), hereby promises to pay to Michael J.
Quinn (the "Holder"), the principal amount of One Million Two Hundred Thirty
Five Thousand Dollars ($1,235,000), 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 hundred fifty (750) shares of
common stock of St. Louis Ostomy held by the Holder, all as is more fully
described in a certain Stock Purchase Agreement relating to the purchase of St.
Louis Ostomy Distributors, Inc. by the Payor, dated as of January 22, 1996 (the
"Purchase Agreement").
1. Payment of Principal. Subject to Sections 5 and 7 hereof, the
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principal amount of this Note shall be payable on: $123,500 shall be payable on
each of January 22, 1997 and January 22, 1998, and $329,333.33 shall be paid on
each of January 22, 1999, January 22, 2000, and January 22, 2001. In the event
of consummation of a sale of securities of the Payor pursuant to a registration
statement filed under the Securities Act of 1933, as amended, the outstanding
principal amount of this Note shall be prepaid in full; provided that in such
event an amount equal to the principal amount so prepaid shall be placed in an
escrow account to be maintained on terms reasonably acceptable to Mr. Quinn and
the Payor until expiration of Mr. Quinn's indemnification obligations under the
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 ten percent (10%) 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 March 31, 1996. In the event of an Event of
Default as herein defined, the interest rate shall increase to twelve percent
(12%) until such Event of Default is cured.
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. Prepayment. The principal indebtedness represented by this
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Subordinated Promissory Note together with all unpaid accrued interest thereon
may be prepaid at any time, and from time to time, without any prepayment
premium or penalty, in whole or in part upon ten (10) days notice to the Holder,
without prior written consent of the Holder.
5. Subordination. Payment of principal and interest under this
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Promissory Note shall in all events be subject to the terms of a First Amended
and Restated Subordination Agreement dated as of January 22, 1996, as the same
may be amended from time to time in accordance with its terms (the
"Subordination Agreement").
6. Default; Remedy. Subject to the terms and conditions of the
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Subordination Agreement, upon the occurrence of an Event of Default pursuant to
Section 6(a) 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.
Subject to the terms and conditions of the Subordination Agreement, upon the
occurrence of an Event of Default described in Section 6(b) or 6(c), the unpaid
balance of the principal amount of this Note and all accrued interest thereon
shall automatically become immediately due and payable without action on the
part of the Holder. If within five (5) business days following such declaration
of default under Section 6(a) or automatic default under Section 6(b), or 6(c)
the Payor shall fail to pay promptly in full the unpaid balance of this Note and
all interest accrued thereon, subject to the Subordination Agreement, 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) days of when due;
(b) The Payor shall file a voluntary petition for an order or relief under
the federal Bankruptcy Code or shall file a petition for relief from creditors
under any applicable state law; or
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(c) There shall be filed against the Payor an involuntary petition for an
order of relief under the federal Bankruptcy Code or under any state law
relating to relief of creditors, and such involuntary petition shall not have
been removed or stayed within 60 days thereafter.
7. Set-off. The Payor, upon written notice to the Holder of a claim for
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indemnification as provided in Section 8.7 of the Purchase Agreement and final
determination of such claim in favor of the Payor, may reduce the principal of
this Subordinated Promissory Note or any interest payments or payment of
principal hereunder, at Payor's election, by the amount to which it is entitled
pursuant to such favorable determination of a claim for indemnification. If such
a claim has been made but not yet finally adjudicated, then payments of
principal otherwise payable hereunder may be withheld pending such adjudication.
8. 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.
9. 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."
10. Miscellaneous.
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(a) This Note shall be binding upon and inure to the benefit of the Holder
hereof and his 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 as provided in the Purchase Agreement.
(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.
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(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.
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SUBURBAN OSTOMY SUPPLY CO., INC.
ATTEST: By: /s/ Herbert P. Gray
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Name:
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