Exhibit 10.2
THE SECURITY REPRESENTED BY THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. ANY
TRANSFER OF SUCH SECURITY WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER
THE ACT AND AS REQUIRED BY BLUE SKY LAWS IS IN EFFECT AS TO SUCH TRANSFER OR AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
PHS Group Inc.
Secured Promissory Note
Note No.2007-03
$3,945,833.34 April 5, 2007
FOR VALUE RECEIVED, subject to the terms and conditions of this Secured
Promissory Note (the "Secured Note"), PHS GROUP INC., a Pennsylvania corporation
with its principal offices located at 223 Underhill Blvd, Syosset, New York,
11971 (the "Borrower"), hereby promises to pay to the order of LLOYD I. MILLER,
III (the "Holder") with his principal office located at 4550 Gordon Drive,
Naples, Florida, 34102, the principal sum of $3,945,833.34 on January 15, 2012
or, if such day is not a regular Business Day, on the next Business Day
thereafter, with all accrued but unpaid interest (as provided below) to such
date (the "Maturity Date"). Subject to the terms and conditions of this Secured
Note, the Borrower also promises to pay to the Holder interest accrued on the
outstanding unpaid principal amount hereof until such principal amount is paid
at the rate of 11.75% per annum, from the date hereof. Said interest shall
become due quarterly in arrears and shall be payable on the last day of each
calendar quarter (each, an "Interest Payment Date") in respect of the
immediately preceding completed calendar quarter. The first Interest Payment
Date will be June 30, 2007. Principal will be amortized over ten years and
payable, as set forth on Schedule A, in equal monthly installments on the last
day of each month beginning on April 30, 2007, with the balance to be paid in
full on the Maturity Date. In the event any payment is not timely paid when due,
interest shall accrue on such late payment at a per annum rate of eighteen
percent (18%) from and including the date of such late payment to (but
excluding) the date such late payment is paid in full. All payments due
hereunder (whether of principal or interest) shall be payable in lawful money of
the United States in immediately available funds.
This Secured Note is one of the Secured Notes issued pursuant to that certain
Securities Purchase Agreement, originally dated as of January 19, 2007, by and
among the Borrower, the Parent Company and the purchasers named therein, as
amended by that certain First Amendment to the Securities Purchase Agreement, as
of the date hereof, by and among the Borrower, the Parent Company and the
purchasers named therein, and as may be further amended, supplemented or
otherwise modified from time to time (the "Securities Purchase Agreement") and
shall be entitled to the benefits thereof. The Holder has been granted a
security interest in certain assets of the Borrower, the Parent Company, and its
Subsidiaries as more fully described in that certain Security, Pledge and
Guaranty Agreement originally dated as of January 19, 2007, and as amended by
the parties thereto on the date hereof, and as may be further amended,
supplemented or otherwise modified from time to time (the "Security Agreement").
The obligations of the Borrower under this Secured Note have also been
guaranteed by certain Subsidiaries of the Parent Company pursuant to and as set
forth in the Security Agreement. The Holder of this Secured Note is also
entitled to the rights and benefits granted pursuant to that certain
Subordination and Intercreditor Agreement, originally dated as of January 19,
2007, by and among the Borrower, the Parent Company, certain Subsidiaries
thereto, Laurus Master Fund, Ltd., the Holder and Milfam I L.P., and as modified
by the parties thereto on the date hereof, and as may be further amended,
supplemented or otherwise modified from time to time (the "Subordination
Agreement").
1. Definitions. Unless the context otherwise requires, the following terms shall
have the following
respective meanings:
"Borrower" has the meaning ascribed to such term in the first paragraph of
this Secured Note.
"Business Day" means any day of the week other than Saturday, Sunday or any
other day of the week on which commercial banks in New York, New York are
authorized or required by law to close.
"Event of Default" has the meaning ascribed to such term in Section 4(a) of
this Secured Note.
"Holder" has the meaning ascribed to such term in the first paragraph of
this Secured Note.
"Maturity Date" has the meaning ascribed to such term in the first
paragraph of this Secured Note.
"Secured Note" has the meaning ascribed to such term in the first paragraph
of this instrument.
"Security Agreement" has the meaning ascribed to such term in the second
paragraph of this Secured Note.
"Securities Purchase Agreement" has the meaning ascribed to such term in
the second paragraph of this Secured Note.
"Subsidiaries" has the meaning ascribed to such term in the Securities
Purchase Agreement.
2. Accounting Terms. All accounting terms not specifically defined in this
Secured Note shall be construed in accordance with United States generally
accepted accounting principles and, if applicable, consistent with those applied
in the preparation of the financial statements of the Borrower.
3. Prepayment. The Secured Note may be paid prior to the Maturity Date provided
that prior to such repayment the Borrower provides the Holder with five (5)
Business Days' advance written notice.
4. Events of Default.
(a) Events Constituting An Event of Default. Any of the events set forth in
Section 1.11 of the Security Purchase Agreement, which section is incorporated
herein by reference, shall constitute an "Event of Default" under this Secured
Note.
(b) Consequences of an Event of Default. Upon the occurrence of an Event of
Default or at any time thereafter, the Holder may, by notice to the Borrower,
declare the entire unpaid principal amount of the Secured Note, all interest
accrued and unpaid thereon and all other amounts payable under this Secured Note
to be forthwith due and payable, whereupon the Secured Note, all such accrued
interest and all such amounts will become and be forthwith due and payable
(unless there will have occurred an Event of Default under Section 1.11(i) of
the Securities Purchase Agreement, in which case all such amounts will
automatically become due and payable) without offset or counterclaim of any kind
and without presentment, demand, protest or further notice of any kind, and
without regard to the running of the statute of limitations, all of which are by
this Secured Note expressly waived by the Borrower.
5. General Matters.
(a) Applicable Law. This Secured Note shall be governed by the internal
laws (and not the law of conflicts) of the State of New York.
(b) Fees and Expenses. In the event that any suit or action is instituted
to enforce any provision under this Secured Note, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect
to this Secured Note, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals. Notwithstanding the foregoing, the
Borrower agrees to pay and hold Holder harmless against liability for the
payment of the reasonable fees and expenses of Holder (including, without
limitation, reasonable attorneys' fees and expenses and out of pocket expenses
of Holder and its representatives, including, without limitation, fees and
expenses for travel, background investigations and outside consultants) arising
in connection with any refinancing or restructuring of the credit arrangements
provided under this Secured Note in the nature of a "work-out' or pursuant to
any insolvency or bankruptcy proceedings. If default is made in the payment of
this Secured Note, the Borrower shall pay to Holder's costs of collection,
including reasonable attorney's fees.
(c) Amendment or Waiver. Any term of this Secured Note may be amended, and
the observance of any term of this Secured Note may be waived (either generally
or in a particular instance and either retroactively or prospectively) only by
the written consent of the Holder.
(d) Headings. The headings in this Secured Note are for purposes of
convenience of reference only, and shall not be deemed to constitute a part of
this Secured Note.
(e) Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing (including telecopy or
similar writing) and shall be sent to the address of the party set forth in the
Securities Purchase Agreement. Any notice, request, consent or other
communication hereunder shall be deemed to have been given and received on the
day on which it is delivered (by any means including personal delivery,
overnight air courier, United States mail) or telecopied (or, if such day is not
a Business Day or if the notice, request, consent or communication is not
telecopied during business hours of the intended recipient, at the place of
receipt, on the next following Business Day). Any of the parties hereto may, by
notice given hereunder, designate any further or different address and/or number
to which subsequent notices or other communications shall be sent. Unless and
until such written notice is received, the addresses and numbers as provided
herein shall be deemed to continue in effect for all purposes hereunder.
(f) Failure or Indulgence Not Waiver. No failure or delay on the part of
the Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
(g) Amendment Provision. The term "Secured Note" and all reference thereto,
as used throughout this instrument, shall mean this instrument as originally
executed, or if later amended, supplemented or modified, then as so amended,
supplemented or modified.
(h) Assignability. This Secured Note shall be binding upon the Borrower and
its successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Securities Purchase Agreement. This Secured Note shall not
be assigned and none of the obligations related hereunder shall be delegated by
the Borrower without the prior written consent of the Holder.
(i) Usury Limitation. In no event shall the amount paid or agreed to be
paid to the Holder for the use or forbearance of money to be advanced hereunder
exceed the highest lawful rate permissible under the then applicable usury laws.
If it is hereafter determined by a court of competent jurisdiction that the
interest payable hereunder is in excess of the amount which the Holder may
legally collect under the then applicable usury laws, such amount which would be
excessive interest shall be applied to the payment of the unpaid principal
balance due hereunder and not to the payment of interest or, if all principal
shall previously have been paid, promptly repaid by the Holder to the Borrower.
(j) Severability. Every provision of this Secured Note is intended to be
severable. If any term or provision hereof is declared by a court of competent
jurisdiction to be illegal or invalid, such illegal or invalid term or provision
shall not affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable.
(k) Certain Borrower Waivers. The Borrower and any endorsers of this
Secured Note hereby waive diligence, presentment, protest, demand and notice of
every kind and, to the fullest extent permitted by law, the right to plead any
statute of limitations as a defense to any demand hereunder.
[Remainder of Page Intentionally Left Blank]
Signature page
IN WITNESS WHEREOF, the Borrower has caused this Secured Note to be
executed as of the day and year first above written.
PHS GROUP INC.,
a Pennsylvania corporation
By:
---------------------------
Name:
---------------------------
Title:
---------------------------