Exhibit 10.2

 

 

 

 

 

 

FOR VALUE RECEIVED, SPAN-AMERICA MEDICAL SYSTEMS, INC., A SOUTH CAROLINA CORPORATION (“Borrower”), PROMISES TO PAY TO THE ORDER OF CAROLINA FIRST BANK, ITS SUCCESSORS AND/OR ASSIGNS (hereinafter called the “Lender”), at the office of the Lender at 104 South Main Street, Greenville, South Carolina 29601, or at such other place as the holder may designate in writing, on the Maturity Date (as defined in the Loan Agreement between Borrower and Lender, dated of even date herewith (the “Loan Agreement”) in immediately available funds the principal sum of Ten Million and no/100 Dollars ($10,000,000.00), or so much thereof as may be advanced from time to time. Lender is hereby irrevocably authorized by Borrower to record the amount outstanding from time to time of the Loan (as defined in the Loan Agreement) together with the applicable interest, and notations of payments of interest and/or principal received by Lender in respect thereof, which recordation shall, in the absence of manifest error, be rebuttably presumed accurate. All advances from Lender to Borrower hereunder may be repaid and readvanced and shall be made in accordance with and pursuant to the terms of the Loan Agreement. Any Event of Default under the Loan Agreement is an event of default under the terms of this Note (the “Note”). Except as expressly provided herein, all capitalized terms used in this Note shall have the same meaning as used in the Loan Agreement.

 

The purpose of the Loan evidenced by this Note is for: (a) a one time cash dividend not to exceed $5.00 per share plus a single regular quarterly dividend of $0.08 per share; (b) working capital; (c) capital expenditures; and (d) other general corporate purposes.

 

Interest. The principal amount hereof from time to time outstanding and unpaid shall bear interest from and including the date hereof until payment thereof in full. From the date hereof through the Maturity Date, and subject to the provisions set forth herein for the increase in the applicable interest rate upon the occurrence of an Event of Default (as defined in the Loan Agreement), interest due hereunder shall accrue at the LIBOR Rate plus the applicable margin (the LIBOR Rate plus the applicable margin, the “Interest Rate”) as indicated in the following pricing matrix, as determined by the Leverage Ratio (as defined in the Loan Agreement). The applicable margin for the initial period shall be .85% or 85 basis points.

 

 

Testing shall be made as of the end of each Interest Period based upon the Leverage Ratio for such Interest Period. Changes in the applicable margin shall become effective as of the Rate Set Date based upon the Leverage Ratio of the previous Interest Period.

 

“Interest Period” means the date hereof through June 30, 2007, and each fiscal quarter thereafter.

 

“LIBOR Rate” means the thirty (30) day LIBOR as reported by the British Banker’s Association (for the purpose of displaying London Interbank Offered Rates for United States Dollar deposits) determined as of 11:00 a.m. (London time) (rounded upward to the next higher of 1/100 of 1%), two (2) Business Days prior to the first Business Day of each calendar month.

 

“Rate Set Date” shall be the date hereof, and on the first (1^st) day of each Interest Period thereafter.

 

Interest shall accrue and be computed on the basis of a year of 360 days.

 

Repayment of Principal and Interest. Principal, interest, and prepayment premiums, if any, are payable in United States dollars, without offset or deduction of any kind for taxes or otherwise. Commencing on the first (1^st) business day of the first month following the date of the initial advance under this Note and continuing on the first (1^st) business day of each consecutive month thereafter as long as any principal amounts are due hereunder, Borrower shall make payments to Lender of accrued interest on all outstanding principal amounts. All outstanding principal and accrued but unpaid interest shall be paid in full by the Maturity Date.

 

Advances. Lender has agreed, on the terms and subject to the conditions set forth in the Loan Agreement, to make advances to Borrower from time to time prior to the Maturity Date, upon the request of Borrower. Each advance shall be made in accordance with the terms and conditions set forth in the Loan Agreement and each of Borrower’s requests shall specify the date of the requested advance and the amount thereof. Upon Borrower’s fulfillment of all applicable conditions for making an advance, Lender shall make the requested advance in the manner or manners designated in the Loan Agreement, or make the advance in such other manner as Lender and Borrower from time to time may agree. Lender may rely on any verbal request for an advance as fully as if such request were in writing.

 

 

This Note is issued pursuant to the Loan Agreement and is entitled to the benefits thereof. The holder of this Note may enforce the agreements of Borrower contained in the Loan Agreement and, upon the occurrence of an Event of Default, may exercise the remedies provided for therein or otherwise available at law or in equity.

Borrower, at its option, subject to the terms of the Loan Agreement and the payment of accrued interest to the date of prepayment, may prepay, and upon the occurrence of certain events shall prepay, all or part of the principal outstanding under this Note, without prepayment premium or penalty of any kind.

 

Upon the occurrence of an Event of Default, any outstanding principal amounts advanced under this Note and any interest then accrued thereon may be declared to be immediately due and payable as provided in the Loan Agreement. Following the occurrence of any such Event of Default, the outstanding principal shall bear interest thereafter until cured at the interest rate stated herein plus four percent (4%).

 

If Borrower shall fail to make any installment of principal or interest within twenty (20) days from the due date thereof, whether by acceleration or otherwise, Borrower agrees to pay to Lender a late charge equal to one percent (1.0%) of the overdue installment.

 

This Note shall be subject to arbitration as provided in the Loan Agreement. Borrower shall pay to the holder hereof such amounts in United States dollars as shall be sufficient to pay the enforcement costs and expenses of such holder, including without limitation, attorney’s fees and expenses, including, but not limited to, fees and expenses incurred on appeal in each case only in the event Lender prevails in such actions or in the event the holder takes actions to protect its interests hereunder in proceedings in bankruptcy.

 

 

No reference herein to the Loan Agreement and no provision of this Note or the Loan Agreement shall alter or impair the obligation of Borrower, which is absolute and unconditional, to pay the principal of (and any default rate, late charge, or other charges, if any) and interest on this Note as provided herein.

 

Borrower hereby waives presentment, demand, protest and notice of any kind whatsoever. The non-exercise by the holder of any of its rights hereunder in any particular instance shall not constitute a waiver hereof in that or any subsequent instance.

 

This Note, and all future advances, are secured as provided in the Loan Agreement.

 

This Note is the Note referred to in the Loan Agreement. This Note, except as governed by applicable federal law, shall be construed in accordance with and governed by the laws of the State of South Carolina.

 

Agreed to this 5^th day of June, 2007 and given under the hand and seal of the undersigned.

 

	SPAN AMERICA MEDICAL SYSTEMS, INC.
	By:	/s/ Richard C. Coggins
		Its: Chief Financial Officer
		[Corporate Seal]