EXHIBIT 10.2
Execution Copy
DOCTORS HEALTH SYSTEM, INC.
Convertible Subordinated 11% Note
Due January 31, 1999
$5,000,000 January 31, 1997
FOR VALUE RECEIVED, the undersigned, Doctors Health System,
Inc., a Maryland corporation (hereinafter called the "Company"), hereby promises
to pay to Genesis Holdings, Inc. (hereinafter called the "Holder"), at its
offices located at 000 Xxxx Xxxxx Xxxxxx, Xxxxxxx Xxxxxx, XX 00000, or at such
other place as the Holder may from time to time in writing designate, on the
Maturity Date (as defined in the hereinafter described Note Purchase Agreement),
the principal sum of Five Million Dollars ($5,000,000), or so much thereof as
may be advanced or readvanced from time to time and remain outstanding, together
with interest on the principal balance thereof from time to time outstanding
from the date of each such advance or readvance until paid in full at the rate
of eleven per cent (11%) per annum (computed on the basis of a 360-day year,
30-day month).
This Note is the Convertible Subordinated Note referred to in
that certain Note Purchase Agreement, of even date herewith, among the Company,
the Holder, and Genesis Health Ventures, Inc. (the "Note Purchase Agreement"),
and is secured by the collateral described in (i) that certain Security
Agreement, of even date herewith, between the Company and the Holder (the
"Security Agreement"), and (ii) that certain Collateral Assignment of Rights
Under Physicians Services Organization Agreements, of even date herewith, made
by the Company for the benefit of the Holder (the "Assignment"). The Holder is
entitled to the benefits of the Note Purchase Agreement, the Security Agreement
and the Assignment and reference is made thereto for a description of the
collateral and the rights and remedies of the Holder thereunder. Neither the
reference to the Note Purchase Agreement, the Security Agreement or to the
Assignment, nor any provision thereof, shall affect or impair the absolute and
unconditional obligation of the Company to pay the principal amount hereof,
together with interest accrued thereon, when due. All capitalized terms used
herein which are not herein defined shall have the meanings ascribed to them in
the Note Purchase Agreement.
The principal of this Note shall be payable in full, in lawful
money of the United States of America and in immediately available funds (unless
converted
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as provided herein), without offset, on the Maturity Date or such earlier date
as provided herein. Interest shall be payable in full on the Maturity Date,
such payment to be made in the form of the Company's Series C Preferred Stock,
par value $14.00 per share ("Series C Preferred"), in the manner set forth
in Section 2.3 of the Note Purchase Agreement.
Subordination
This Note is subordinated and subject in right of payment to
the payment, in accordance with its terms, of certain indebtedness of the
Company in a principal amount not to exceed $4,000,000 owing to NationsBank,
N.A. pursuant to that certain Loan Agreement, dated as of December 1, 1995,
between the Company and NationsBank, N.A. (together with any successor facility,
the "Senior Debt"); provided, however, that nothing herein shall be construed to
impair the ability of the Company to pay to the registered owner hereof any
installments of principal or interest owing hereunder so long as there shall not
have occurred and be continuing a default under the Senior Debt.
Conversion
The Holder is hereby given the right, on the Maturity Date, to
convert the entire unpaid principal amount of this Note into fully paid and
nonassessable shares of the Series C Preferred, at the price and on the terms
and conditions set forth in the Note Purchase Agreement. The right of the
Company to make payments on the principal amount of this Note shall be subject
at all times to the right of the Holder to convert this Note into Series C
Preferred as provided herein. The Company shall at all times reserve and keep
available a number of its authorized but unissued shares of Series C Preferred
sufficient to permit the exercise in full by the Holder of its conversion rights
hereunder.
Default
In case an Event of Default (as defined in the Note Purchase
Agreement) shall occur and be continuing, this Note may be declared due and
payable in the manner and with the effect provided in the Note Purchase
Agreement.
Miscellaneous
Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction or mutilation of this Note, and (in case of loss,
theft or destruction) of indemnity satisfactory to it, and upon reimbursement to
the Company of all reasonable expenses incidental thereto, and upon surrender
and cancellation of this Note, if mutilated, the Company will make and deliver a
new
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Note of like tenor in the principal amount of this Note then outstanding in lieu
of this Note. Any Note so made and delivered shall be dated as of the date to
which interest shall have been paid on this Note.
The terms of this Note shall be governed by and construed in
accordance with the laws of Maryland (but not including the choice of law rules
thereof).
This Note shall not be valid or obligatory for any purpose
until authenticated by the execution hereof by the President or a Vice President
of the Company.
IN WITNESS WHEREOF, Doctors Health System, Inc., a Maryland
corporation, has caused this Note to be signed in its corporate name by its
President or a Vice President, by authority duly given, all as of the day and
year first above written.
DOCTORS HEALTH SYSTEM, INC.
By: /s/ Xxxxxxx X. Gold
____________________________
Print Name: Xxxxxxx X. Xxxx
Title: President
