CONVERTIBLE SENIOR SUBORDINATED PROMISSORY NOTE
Exhibit 10.2
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE SECURITIES
LAWS. THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
| $[ ] | Promissory Note No. | |
| January 17, 2008 |
FOR VALUE RECEIVED, Goldleaf Financial Solutions, Inc., a Tennessee corporation (the
“Company”), hereby promises to pay to
(herein, together with any assignee or holder hereof,
called the “Holder”), the principal sum of
DOLLARS ($[ ]), together
with interest as provided for herein and all other amounts, fees and expenses which may accrue
under applicable law from the date hereof until the date of payment in full or conversion as
provided herein, in lawful currency of the United States of America.
This Convertible Senior Subordinated Promissory Note (this “Note”) is one of a series
of $7,000,000 in convertible senior subordinated promissory notes (together with the Note, the
“Notes”) issued pursuant to, and is entitled to the benefits of the provisions of, that
certain Agreement and Plan of Merger, dated as of January 17, 2008 (the “Merger
Agreement”), by and among the Company, GLF Sub, Inc. and Alogent Corporation. Capitalized
terms used herein and not otherwise defined herein shall have the meaning ascribed to them in the
Merger Agreement.
SECTION 1
Terms
Section 1.1 Interest Rate. The Company agrees that interest shall accrue on the outstanding
principal amount of this Note from the date hereof until the principal has either been converted in
accordance with the provisions hereof or paid in full, with interest accruing at a fixed simple
rate per annum equal to seven percent (7.0%). Such interest shall be computed on the basis of
actual days elapsed and a year of 365 days.
Section 1.2 Payments. Unless earlier converted in accordance with Section 1.3 hereof, subject
to the Section 4 hereof, the principal amount of this Note shall be immediately due and
payable in full on the earliest to occur of (a) the second anniversary of the date of this Note,
(b) any Event of Default (as defined in Section 2.1 below) under Section 2.1(a)-(d)
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inclusive, and (c) the date of acceleration of this Note pursuant to the second sentence of
Section 2.2(a) as a result of any other Event of Default (the earliest of such dates being the
“Maturity Date”). The interest accrued on this Note from the date of this Note through the
Maturity Date shall be payable to the Holder in arrears on the Maturity Date, when all accrued and
unpaid interest, and all other outstanding amounts, fees and expenses due hereunder, shall be due
and payable. The Company may elect, however, to pay accrued and unpaid interest on this Note in
cash on the 17th day of each April, July, October and January after the date hereof. Payment of
principal on this Note shall be made by wire transfer or ACH to the Holder according to written
instructions provided by the Holder, provided that if the Holder fails to provide such instructions
at least four business days before such payment is due, then payment may be made by check delivered
to the Holder at the address of the Holder reflected on the investor agreement delivered to the
Company pursuant to the Merger Agreement, or at such other place as the Holder may designate and
notify the undersigned in writing, on or before the date due.
Section 1.3 Conversion into Common Stock at Election of Holder. At any time and from time to
time when any principal amount of this Note remains outstanding, whether before or after the
Maturity Date, the Holder may elect to covert the entire outstanding principal amount of this Note,
or any lesser amount of this Note that is convertible into a number of Shares (as defined below)
that is divisible by one hundred (100), into that number of fully paid and nonassessable shares
(the “Shares”) of the Company’s Common Stock, no par value (the “Common Stock”), as
is obtained by dividing (A) the amount to be converted by (B) Four Dollars and Fifty Cents ($4.50)
(the “Conversion Price”). The Holder shall give five (5) days’ written notice to the
Company of such election to convert this Note, and such conversion shall be deemed to have been
made on the fifth (5th) day after such notice is delivered to the Company. On
conversion, all of the accrued but unpaid interest on the Note, together with all outstanding fees
and expenses due under this Note, shall be paid to the Holder in cash as provided in Section 1.2
above (or a pro rata amount of such interest, fees and expenses if less than all of this Note is
converted), and such interest shall not be convertible into Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the conversion of this Note. In lieu of
issuing such fractional shares, the Company shall pay all of the cash value of any fractional
interest to the Holder. Notwithstanding the foregoing, the Company shall not be obligated to pay
accrued and unpaid interest on conversion as provided above if such payment would cause, or in the
Company’s reasonable judgment be likely to cause, a default under the Credit Agreement (as such
term is defined below). In such event, such accrued and unpaid interest shall be payable to the
Holder (or the Holder’s assignee) on the Maturity Date, and the Company’s failure to pay such
interest on conversion shall not be deemed to be an Event of Default as defined below.
Section 1.4 Optional Prepayment with the Consent of the Holder. At the option of the Company
with the prior written consent of the Holder, the Company may, without premium or penalty, prepay
the unpaid principal amount of this Note, in whole or in part, together with interest accrued
thereon and all other outstanding amounts, fees and expenses to the date of prepayment. The
Company shall make the same prepayment offer to the Holders of all outstanding Notes, with such
prepayment to be pro rated among the holders of Notes in accordance with their respective portions
of the outstanding aggregate principal amount of the Notes that are then outstanding, but if the
Holder of this or any other Note grants such consent,
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then the Company may prepay such Note notwithstanding the refusal of the holders of other
Notes to grant such consent. Further, the Company may, subject to the Holder’s conversion rights
under Section 1.3, prepay the Note without the consent of the Holder if the Company proposes,
during the final six months of the term of the Senior Debt (as defined below and as in effect on
the date hereof), to amend, restate, supplement, modify, refinance or replace the Senior Debt under
terms that would violate Section 1.5(a), and the Majority Holders (as defined below) decline to
consent. Any such prepayment shall be applied first to the payment of accrued interest and then to
repayment of principal.
Section 1.5 Restrictive Covenants. From the date of this Note until all amounts outstanding
under this Note, including principal, interests, fees, expenses and other amounts, have been
indefeasibly paid in full or converted as provided herein, the Company hereby covenants and agrees
with the Holder as follows:
(a) Senior Debt. The principal amount of the Company’s and its subsidiaries’ “Senior
Debt” (as defined in the following sentence) shall not exceed $55,000,000 as reduced by the amount
of all commitment reductions on revolving loans (the “Senior Debt Limit”) in the aggregate.
“Senior Debt” means the principal of any indebtedness now existing or hereafter incurred
under that certain Second Amended and Restated Credit Agreement dated as of November 30, 2006 among
the Company, Bank of America, N.A., Wachovia Bank, N.A., The Peoples Bank of Winder and the other
lenders from time to time party thereto, as amended and in effect as of the date hereof (the
“Credit Agreement”), including, without limitation, the loan or loans thereunder and any
debtor-in-possession financing provided by the Senior Lenders. The term Credit Agreement includes
any amendments, restatements, supplements or modifications thereto and any refinancing or
replacement thereof with a credit facility led or provided by a commercial bank; provided that the
terms of such amendment, restatement, supplement, modification, refinancing or replacement are not
prohibited or restricted pursuant to the terms of this Note. The Company shall not agree, nor
shall it permit any subsidiary to agree, to any amendment to the Credit Agreement or the agreements
and documents executed and delivered in connection therewith (the “Senior Credit
Documents”) (including, without limitation, any refinancing of the Senior Debt) which
(i) increases the principal amount of the Senior Debt above the Senior Debt Limit, (ii) increases
the interest rates payable with respect to any amount owed thereunder (other than as a result of an
event of default thereunder) by more than three hundred basis points above the interest rates set
forth in the Credit Agreement as in effect as of the date of this Note, (iii) shortens the maturity
of the Senior Debt (unless the maturity of the Note is shortened by an equal length of time), or
(iv) extends the maturity of the Senior Debt, unless, in each case, the Company obtains the prior
written consent of the Holders of Notes representing at least 66.67% of the principal amount of all
Notes then outstanding (the “Majority Holders”).
(b) No Other Liens. Without the prior written consent of the Majority Holders, the
Company shall not, nor shall it permit any of its subsidiaries to, directly or indirectly, create,
incur, assume or suffer to exist, any “Lien” (as defined in the next sentence) upon any of its
property, assets or revenues, whether now owned or hereafter acquired, other than Liens granted
pursuant to the Credit Agreement and any other Senior Credit Document as in existence on the date
hereof, and Liens permitted without consent or waiver of any other party to
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the Credit Agreement under Section 7.1 of the Credit Agreement as such Section 7.1 (including
any schedule thereto) exists on the date hereof. “Lien” means any mortgage, pledge,
hypothecation, assignment, deposit arrangement intended as security (and expressly excluding the
Company’s and the subsidiaries’ operating and investment bank accounts), encumbrance, lien
(statutory or otherwise), charge, or preference, priority or other security interest or
preferential arrangement of any kind or nature whatsoever (including any conditional sale or other
title retention agreement), and any capital lease having substantially the same economic effect as
any of the foregoing.
(c) No Other Senior Indebtedness. Without the prior written consent of the Majority
Holders, the Company shall not, nor shall it permit any of its subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist, any “Indebtedness” (as defined in the next
sentence) unless such Indebtedness is either (i) expressly permitted under Section 7.3 of the
Credit Agreement (as such Section 7.3 exists as of the date hereof) or without consent or waiver of
any other party thereto, (ii) capital leases not exceeding $500,000 in aggregate amount for each
“Acquisition” (as such term is defined in the Credit Agreement) or (iii) junior and subordinate in
every material respect to the debt evidenced by this Note, including but not limited to the
following: such debt (x) has a maturity that is at least sixty (60) days beyond the Maturity Date,
(y) is unsecured; and (z) has no greater remedies, rights or priorities than the remedies, rights
and priorities granted to the Holder in this Note. “Indebtedness” means all of the
following, whether or not included as indebtedness or liabilities in accordance with GAAP: (1) all
obligations for borrowed money and all obligations evidenced by bonds, debentures, promissory
notes, loan agreements or other similar instruments; (2) all direct or contingent obligations
arising under letters of credit, bankers’ acceptances, bank guaranties, surety bonds and similar
instruments; (3) net obligations under any hedge, forward, derivative, swap or other similar
contract or transaction; (4) all obligations to pay the deferred purchase price of property or
services (other than (x) trade accounts payable in the ordinary course of business and (y) earn-out
arrangements previously entered into by the Company in connection with the acquisitions of certain
assets of Community Banking Systems, Ltd. and DataTrade L.L.C.); (5) indebtedness (excluding
prepaid interest thereon) secured by a Lien on property owned or being purchased (including
indebtedness arising under conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed or is limited in recourse; (6) capital leases; and
(7) all guarantees or other obligations, contingent or otherwise, having the economic effect of
guaranteeing any indebtedness described above or other obligation payable or performable by another
person or entity in any manner, whether direct or indirect.
(d) Restricted Payments. Without the prior written consent of the Majority Holders
and except as permitted below, the Company shall not, nor shall it permit any of its subsidiaries
to declare or make, directly or indirectly, (i) any dividend or other distribution (whether in
cash, securities or other property) with respect to any of its capital stock or other equity
interest, or (ii) any payment (whether in cash, securities or other property) on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of any such capital
stock or other equity interest or of any option, warrant or other right to acquire any such capital
stock or other equity interest (collectively, “Restricted Payments”), or incur any
obligation (contingent or otherwise) to do so, except that: (x) each subsidiary of the Company may
make Restricted Payments to the Company and to any other subsidiary of the Company; and (y) the
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Company and each of its subsidiaries may declare and make dividend payments or other
distributions payable solely on its common stock or other common equity interests (subject to the
terms of Section 1.7(c) below).
(e) Cessation of Business. Without the prior written consent of the Majority Holders,
the Company shall not, nor shall it permit any of its material subsidiaries (for this purpose
meaning subsidiaries having more than $2,000,000 in revenues in the past 12 months) to, dissolve,
liquidate (unless the successor to the subsidiary’s assets in such dissolution or liquidation is
the Company or another subsidiary), cease to do business or suspend normal business operations,
provided that the sale or other disposition of a subsidiary in a transaction approved by the
Company’s board of directors shall not be deemed to be a cessation of doing business or a
suspension of normal business operations.
(f) Restrictive Agreements. Without the prior written consent of the Majority
Holders, neither Company nor any of its subsidiaries will enter into or become obligated under any
agreement or contract including, without limitation, any loan agreement, promissory note (or other
evidence of indebtedness), mortgage, security agreement or lease, which by its terms prevents or
restricts Company or its subsidiaries from performing its obligations under this Note, other than
the Senior Credit Documents.
Section 1.6 Rights Upon Certain Transactions. In the event the Company proposes to engage in
any reclassification of the Common Stock (other than a change in par value, or as a result of a
subdivision or combination), or in any consolidation or merger of the Company with or into another
corporation (other than a consolidation or merger with another corporation in which the Company is
a continuing corporation and in which the Company’s shareholders immediately preceding such
consolidation or merger own at least 50% of the voting securities of the Company following such
consolidation or merger and that does not result in any reclassification of the Shares issuable
upon conversion of this Note), or in any sale of all or substantially all of the assets of the
Company, or in any “Rule 13e-3 transaction” as defined in SEC Rule 13e-3 (the foregoing
transactions and events being referred to collectively as a “Major Event”), then the Holder
of this Note shall have the option to elect, contingent upon the closing of such Major Event,
either (a) to convert this Note as provided in Section 1.3 above, contingent upon the effectiveness
of the Major Event, and to receive the consideration payable to the holders of Common Stock as a
result of such Major Event; (b) to have the entire outstanding balance hereunder accelerated and to
be paid in full in cash all amounts owed hereunder on or before the closing of such Major Event; or
(c) if and only if the Company so consents, to receive a “New Note” (the Company may grant or
withhold such consent in its sole discretion). “New Note” means a new Note, providing that
the Holder shall have the right to convert such new Note, and procure upon such conversion, in lieu
of the Shares theretofore issuable upon conversion of this Note, the kind and amount of shares of
stock, other securities, money and property receivable upon such Major Event by a holder of an
equivalent number of shares of Common Stock. Such New Note shall provide for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 1.7.
The Holder shall be entitled to receive the same prior notice of any shareholders’ meeting as
provided to the holders of Common Stock in accordance with the Bylaws of the Company with respect
to any Major Event and, in any event, shall receive at least ten (10) days advance written notice
of any Major
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Event, together with such information about the Major Event and the other parties thereto as
is available to the Company and as may be reasonably requested by the Holder to enable the Holder
to evaluate which option above the Holder wants to select.
Section 1.7 Adjustment.
The number of Shares into which this Note is convertible and the Conversion Price are subject
to adjustment from time to time upon the occurrence of certain events, as follows:
(a) If the Company at any time while any amounts remain outstanding under this Note shall
subdivide or combine the Common Stock, the Conversion Price shall be proportionately decreased in
the case of a subdivision or increased in the case of a combination.
(b) If the Company at any time while any amounts remain outstanding under this Note shall pay
a dividend with respect to the shares of Common Stock payable in, or make any other distribution
with respect to, the Common Stock (except any distribution specifically provided for in the
foregoing Section 1.7(a)), then the Conversion Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Conversion Price in effect immediately prior to such date of
determination by a fraction (1) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and (2) the
denominator of which shall be the total number of shares of Common Stock outstanding immediately
after such dividend or distribution.
(c) Notwithstanding anything to the contrary in this Note, under no circumstances shall the
Company be required to make any adjustment to the Conversion Price or the number of equity
securities issuable upon conversion of this Note that would duplicate an adjustment that is
afforded to the Common Stock generally pursuant to the Company’s articles of incorporation.
SECTION 2
Events of Default
Section 2.1 Events of Default. The outstanding balance of this Note, including principal,
interest and all other amounts, fees and expenses, shall automatically be and become immediately
due and payable without any action on the part of the Holder upon the happening of any of the
following events (each, an “Event of Default”):
(a) The Company or any of its subsidiaries institutes or consents to the institution of any
proceeding under any federal bankruptcy law, or any other applicable federal or state bankruptcy,
insolvency, liquidation, creditors’ rights or other similar law, as now or hereafter constituted
(“Bankruptcy Law”); or makes an assignment for the benefit of creditors; or applies for or
consents to the appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer for it or for all or any material part of its property; or any
receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is
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appointed and the appointment continues undischarged or unstayed for ninety (90) calendar
days; or any proceeding under any Bankruptcy Law relating to the Company or any of its subsidiaries
or to all or any material part of its or their property is instituted by any person or entity and
continues undismissed or unstayed for ninety (90) calendar days; or an order for relief is entered
in any such proceeding; the Company or any of its subsidiaries becomes unable or admits in writing
its inability or fails generally to pay its debts as they become due, or any writ or warrant of
attachment or execution or similar process is issued or levied against all or any material part of
the property of the Company or any of its subsidiaries and is not released, vacated or fully bonded
within thirty (30) days after its issue or levy; or the Company takes any corporate action in
furtherance of any of the foregoing;
(b) the Company shall fail to pay any amount of principal or interest due under this Note on
the due date;
(c) the Company (i) fails to perform or observe any term, covenant or agreement contained in
Section 1.5(a), (c), or (d) of this Note; (ii) ceases to be a reporting company under the Exchange
Act; or (iii) the Company’s common stock ceases to be listed for trading on one of the Nasdaq
Global Market, Nasdaq Capital Market, Nasdaq Global Select Market or the American Stock Exchange
(or their successors), other than, with respect to clauses (ii) and (iii), in connection with a
Major Event where the provisions of Section 1.6 above have been satisfied;
(d) the Company shall default in the due performance or observance of any other covenant,
agreement or provision of this Note (other than as provided in Sections 2.1(b) and (c) above), and
such default shall have continued uncured for a period of thirty (30) days after written notice
thereof to the Company from the Holder (or if such default relates to the outstanding Notes
generally, from a holder of any Note);
(e) A default or event of default that remains uncured following any applicable cure period
shall have occurred with respect to any Indebtedness of the Company in the amount of $1,000,000 or
more and such Indebtedness shall have been accelerated by its holder;
(f) There is entered against the Company or any of its subsidiaries (i) a final judgment or
order for the payment of money in an aggregate amount exceeding $1,000,000 (to the extent not
covered by (x) independent third party insurance as to which the insurer does not dispute coverage
or (y) a performance bond), or (ii) any one or more non-monetary final judgments that have, or
could reasonably be expected to have or cause, individually or in the aggregate, a material adverse
effect upon the legality, validity, binding effect or enforceability of this Note, or a material
impairment of the Company’s ability to perform its obligations under this Note, and, in either
case, enforcement proceedings are commenced by any creditor upon such judgment or order;
(g) This Note, for any reason other than as expressly permitted hereunder or satisfaction in
full of all obligations under this Note, ceases to be in full force and effect; or the
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Company denies that it has any or further liability or obligation under this Note, or purports
to revoke, terminate or rescind this Note, in whole or in part; or
(h) Any Major Event occurs, unless (i) the provisions of Section 1.6 have been satisfied and,
on or before the date of such Major Event, all payments, New Notes (subject to Company consent) and
other amounts (as applicable) that such Holder elected to receive pursuant to Section 1.6 under
this Note are paid and delivered to the Holder in full, in which event no consent shall be required
under Section 1.4; or (ii) the Company obtains the prior written consent of the Majority
Noteholders.
Section 2.2 Remedies. In addition to any other remedies available to the Holder:
(a) Upon the occurrence and during the continuance of an Event of Default referred to in
Section 2.1(a) and Section 2.1(b), the principal amount then outstanding under this Note, and the
accrued interest thereon, shall become immediately due and payable without presentment, demand,
notice of any kind, protest or other formalities of any kind, all of which are hereby expressly
waived by the Company. Upon the occurrence of an Event of Default other than ones referred to in
Section 2.1(a) and Section 2.1(b), the Holder may, upon written notice to the Company (but without
any other notice of any kind), declare the principal amount then outstanding of, and the accrued
interest thereon, this Note to be due and payable immediately, and upon such declaration the same
shall become due and payable immediately, without presentation, demand, protest, notice (other than
as expressly provided above) or other formalities of any kind, all of which are expressly waived by
the Company. If the Maturity Date is accelerated as provided in this Section 2.2(a), this Note
shall bear interest at the simple interest rate of twelve (12%) per annum, commencing on the date
of such acceleration without further notice and continuing as long as an Event of Default
continues.
(b) Upon the occurrence and during the continuance of an Event of Default, the Holder may
institute such actions or proceedings in law or equity as it shall deem expedient for the
protection of its rights and may prosecute and enforce its claims against all assets of the
Company, and in connection with any such action or proceeding shall be entitled to receive from the
Company payment of the principal amount of this Note plus accrued interest to the date of payment
plus reasonable expenses of collection, including, without limitation, reasonable attorneys’ fees
and expenses actually incurred (rather than calculated in accordance with Georgia Code
Section 13-1-11), whether or not suit is instituted.
(c) In addition to the remedies provided above, if (i) the principal amount then outstanding
of this Note, and the accrued interest thereon, shall become immediately due and payable as
provided in Section 2.2(a) and (ii) all amounts owing under this Note are not paid in full within
thirty (30) days thereafter, then the Company shall take the following actions:
(x) Subject to Section 4 hereof, the Company shall pay a monitoring fee of $300,000 per
month to the holders of the Notes (pro rated among the holders of Notes in accordance with
their respective portions of the outstanding aggregate principal amount of the Notes that
are then outstanding, and with such monitoring fee to be reduced proportionately if and to
the extent that the total principal amount of the Notes
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then outstanding is then less than $8,000,000), beginning with the first payment of
$300,000 on the date that is thirty (30) days after the acceleration of this Note pursuant
to Section 2.2(a). The Company shall pay another such monitoring fee on the date that is
thirty (30) days thereafter and again on the date that is sixty (60) days thereafter,
provided that if the Company pays all amounts owing under this Note during such sixty (60)
day period, the Company shall be required to pay only a proportionate amount of such
monitoring fee(s) based on the number of days elapsed in such period before the payment. In
no event shall the Company be obligated to pay more than $900,000 in monitoring fees.
(y) The Company shall immediately seek approval from the holders of the Senior Debt (or
the required percentage thereof) to grant a security interest in the Company’s assets to
secure the indebtedness owed by the Notes. The Company shall, if such approval is granted,
promptly enter into a security agreement and related documents with a representative of the
holders of Notes designated by the Majority Noteholders as agent for the holders of Notes,
in customary form to grant such a security interest.
(d) No delay or omission on the part of the Holder in exercising any right hereunder shall
operate as a waiver of such right or any other right of the Holder, nor shall any delay, omission
or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any
future occasion.
SECTION 3
Miscellaneous
Section 3.1 Lost, Stolen or Mutilated Notes. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Note, and in case of any such loss,
theft or destruction, upon delivery of any customary indemnity agreement reasonably satisfactory to
the Company, or in any case of any such mutilation, upon surrender and cancellation of this Note,
the Company at its expense will issue and deliver a new Note of like tenor in an amount equal to
the amount of such lost, stolen or mutilated Note and any such lost, stolen or destroyed Note shall
thereupon become void.
Section 3.2 Benefit of Note. This Note shall be binding upon, and shall inure to the benefit
of and be enforceable by, the Holder and the Holder’s successors and assigns. All of the covenants
and the agreements contained in this Note by or on behalf of the Company are binding on the
Company’s successors and assigns, whether by consolidation, merger, transfer or license of all or
substantially all of the assets of the Company.
Section 3.3 Certain Waivers. The Company hereby waives presentment for payment, notice of
dishonor, protest, notice of protest, diligence, demand, and notice of any kind (except for notice
provisions expressly specified in this Note) and assents to the extension of the time of payment,
release, surrender or substitution of security, or forbearance or other indulgence, without notice.
Except as provided in the following sentence, the Company agrees to pay all amounts of principal,
interest and fees under this Note without offset, deduction, claim, counterclaim, defense or
recoupment, all of which, except offsets, recoupments or counterclaims
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which could not, by reason of any applicable federal or state procedural laws, be interposed,
pleaded or alleged in any other action, are hereby waived by the Company. The Company may,
however, cancel Notes in the aggregate face amount of up to $2,800,000 and receive interest thereon
in settlement of indemnification claims under the Merger Agreement as provided in (and up to the
amount of “Escrow Funds” as defined in) that certain Escrow Agreement dated January 17, 2008 by and
among the Company, the Shareholder Representative (as such term is defined in the Merger
Agreement), and Suntrust Bank, a Georgia banking corporation, as escrow agent.
Section 3.4 Notices. All notices required under this Note shall be deemed to have been given
or made for all purposes (i) upon personal delivery, (ii) upon confirmation receipt that the
communication was successfully sent to the applicable number if sent by facsimile; (iii) one day
after being sent, when sent by professional overnight courier service, or (iv) five days after
posting when sent by registered or certified mail. Notices to the Company shall be sent to the
principal office of the Company (or at such other place as the Company shall notify the Holder
hereof in writing). Notices to the Holder shall be sent to the address of the Holder reflected on
the investor agreement delivered to the Company pursuant to the Merger Agreement, or at such other
place as the Holder shall notify the Company in writing.
Section 3.5 Amendment; Waiver. Subject to Section 4.2(c) hereof, any term of this Note may be
amended, changed or modified, and the observance of any term of this Note may be waived (either
generally or in a particular instance and either retroactively or prospectively), with the written
consent of the Company and the Majority Noteholders; provided, however, that no amendment, change,
modification or waiver respecting this Note may be made by the Majority Noteholders without the
consent of the Holder unless a comparable amendment, change, modification or waiver is made
respecting all of the Notes issued pursuant to the Merger Agreement; and, provided further, that no
amendment, change, modification or waiver respecting this Note may be made by the Majority
Noteholders without the consent of the Holder if the effect of such amendment, change, modification
or waiver is to discharge this Note in whole or in part, decrease the principal amount or rate of
interest set forth herein, or to create, cause or increase any liability or obligation of the
Holder. Subject to the foregoing, any amendment, change, modification or waiver to this Note shall
apply equally and be binding upon all of the Notes issued pursuant to the Merger Agreement. Except
as otherwise provided in this Note, this Note may not be discharged, nor shall the principal amount
or interest be amended, changed or modified, without the written consent of the Company and the
Holder of this Note. This Section 3.5 may not be amended, changed or modified, except by a writing
signed by the Company and all of the holders of Notes.
Section 3.6 Payment of Interest. In no event whatsoever shall the amount paid or agreed to be
paid to the Holder for the use of the money advanced or to be advanced hereunder exceed the maximum
rate permitted by law (the “Maximum Rate”). If, for any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument now or hereafter
evidencing, securing or in any way relating to the debt evidenced hereby shall involve the payment
of interest in excess of the Maximum Rate, then, ipso facto, the obligation to pay interest
hereunder shall be reduced to the Maximum Rate; and if for any circumstance whatsoever, the Holder
shall ever receive interest, the amount of which would exceed the amount collectible at the Maximum
Rate, such amount as would be excessive interest shall be applied to
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the reduction of the principal balance remaining unpaid hereunder and not to the payment of
interest. This provision shall control every other provision in any and all other agreements and
instruments existing or hereafter arising between the undersigned and the Holder with respect to
the debt evidenced by this Note. It is the express intent hereof that the Company not pay and the
Holder not receive, directly or indirectly in any manner whatsoever, interest in excess of that
which may legally be paid by the Company under applicable laws.
Section 3.7 Transfer of Note and Shares.
(a) Neither this Note nor the Shares have been registered under the Securities Act of 1933, as
amended (the “Securities Act”), or any state securities laws (“Blue Sky Laws”).
This Note has been acquired for investment purposes and not with a view to distribution or resale
and may not be sold or otherwise transferred without (i) an effective registration statement for
such Note under the Securities Act and such applicable Blue Sky Laws, or (ii) an opinion of counsel
reasonably satisfactory to the Company and its counsel, that registration is not required under the
Securities Act or under any applicable Blue Sky Laws. Notwithstanding anything herein to the
contrary, the Company will not require opinions of counsel for transactions made pursuant to Rule
144 unless, after consultation with the Holder, the Company has a reasonable basis for believing
that such disposition may not be made pursuant to Rule 144. Transfer of the Shares shall be
restricted in the same manner as set forth in this Section 3.7(a), and the certificates
representing such Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT AND
SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE
WITH REGARD THERETO, OR (II) IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, REGISTRATION UNDER THE ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH
SUCH PROPOSED TRANSFER.
The Holder hereof and the Company agree to execute such other documents and instruments as
counsel for the Company reasonably deems necessary to effect the compliance of the issuance of this
Note and any shares of Common Stock issued upon conversion hereof with applicable federal and state
securities laws.
(b) The Company covenants and agrees that all Shares that may be issued upon conversion of
this Note will, upon issuance and payment therefor, be legally and validly issued and outstanding,
fully paid and nonassessable, free from all taxes, Liens, charges and preemptive rights, if any,
with respect thereto or to the issuance thereof. The Company shall at all times reserve and keep
available for issuance out of its authorized but unissued shares of
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Common Stock upon the conversion of this Note such number of authorized but unissued shares of
Common Stock as will be sufficient to permit the conversion in full of this Note and if at any time
the number of authorized but unissued shares of Common Stock shall be insufficient to effect the
conversion of all then outstanding Notes, the Company shall take such corporate action as may, in
the opinion of its counsel be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(c) Subject to the foregoing provisions of this Section 3.7, this Note may be transferred, in
whole or in part, (i) to any Affiliate (as defined in Section 3.7(e) below) of the Holder; or
(ii) to any “Person” (meaning an individual, partnership, corporation, joint venture, joint
stock company, land trust, business trust, limited liability company, limited liability partnership
or unincorporated organization), provided, however, that in connection with any transfer under this
clause (ii), (x) the transferee is not a “competitor” of the Company as listed on Schedule A hereto
or an Affiliate of such competitor and (y) the transfer is made only after compliance with the
“first right of refusal” provisions set forth in Section 3.7(f) below. This Note may not be
transferred other than as permitted by this paragraph. This paragraph will apply to any transferee
to the same extent it applies to the original Holder unless such transfer was made in compliance
with Rule 144 or other exemption from registration under the Securities Act and the transferee is
not an Affiliate of the Company.
(d) Such transfer may be made in any case permitted by this Section 3.7 by presentation of the
Note to the Company with written instructions for such transfer. Upon such presentation for
transfer, the Company shall promptly execute and deliver a new Note or Notes in the form hereof in
the name of the assignee or assignees and in the denominations specified in such instructions. The
Company shall pay all expenses incurred by it in connection with the preparation, issuance and
delivery of Notes under this Section 3.7.
(e) The term “Affiliate” means a Person which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control with, the applicable
Person; for purposes hereof, “control” means the possession, directly or indirectly, the
power to direct or cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
(f) If the Holder intends to transfer all or any portion of this Note other than as permitted
under clause (i) of Section 3.7(c) and Section 3.7(g), the Holder shall give ten (10) days’ written
notice to the Company of such intention. The notice, in addition to stating the Holder’s intention
to transfer all or any portion of this Note, shall state: (i) the portion of this Note to be
transferred if less than all of this Note is to be transferred, (ii) the name and address of the
proposed transferee, (iii) the amount of the consideration for the transfer, and (iv) the terms of
the transfer. On the date of the delivery of such notice to the Company, the Company shall become
entitled to acquire this Note or the portion hereof to be transferred, as applicable, for the
consideration and on the other terms described in the notice, and the Company may exercise this
first right of refusal by notifying the Holder in writing of its intention and paying the purchase
price to the Holder within ten (10) days thereafter, upon which payment this Note or the applicable
portion thereof shall be transferred to the Company. If the Company does not exercise the right of
first refusal within the 10-day period, the Holder may, within 90 days
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thereafter, complete the transfer described in the notice. A transfer by (A) a partnership to
its partners or former partners in accordance with partnership interests, (B) a corporation to its
stockholders in accordance with their interest in the corporation, (C) a limited liability company
to its members or former members in accordance with their interest in the limited liability
company, or (D) to an individual Holder’s family member, trust, family limited partnership or other
entity for the benefit of an individual Holder or such Holder’s family member, shall in any such
event not be subject to the right of first refusal in this Section 3.7(f); provided that in each
case, such disposition complies with the other terms of this Note, including the other provisions
of this Section 3.7, and the transferee will be subject to the terms of this Note to the same
extent as if he were an original Holder hereunder.
Section 3.8 Covenant Regarding Public Information. With a view to making available to the
Holder the benefits of certain rules and regulations of the SEC that may permit the sale of
securities to the public without registration, and certain other benefits, the Company agrees that
it will, until the sooner to occur of (i) the first anniversary of the date hereof (unless the
Holder is an Affiliate, in which event the obligations to the Holder under this Section 3.8 shall
continue until (x) ninety (90) days following the date on which the Holder is no longer an
Affiliate or (y) they are terminated under the following clause (ii)) or (ii) the date that the
Holder no longer holds this Note or any Shares:
(a) at all times make and keep public information available, as those terms are understood and
defined in SEC Rule 144 or any similar or analogous rule promulgated under the Securities Act;
(b) file with the SEC and Nasdaq, in a timely manner, all reports and other documents required
of the Parent under the Securities Act, Exchange Act and Nasdaq rules (including all filings and
other submissions of the kind contemplated or described in Section 3.8(a) above);
(c) promptly furnish to the Holder upon request a written statement by the Company that it is
in compliance with the reporting requirements of Sections 3.8(a) and (b) above and of the Exchange
Act; and
(d) maintain the listing of the Common Stock on one of the Nasdaq Global Market, Nasdaq
Capital Market or Nasdaq Global Select Market (or their successors).
The Company represents and warrants that it has filed all required reports under section 13 or
15(d) of the Exchange Act, as applicable, during the 12 months preceding the date of this Note,
other than Form 8-K reports.
Section 3.9 Time; Costs, Fees and Expenses. Time is of the essence with respect to this Note
and the obligations hereunder. The Company shall reimburse and pay the Holder, upon demand, for
any stamp or documentary taxes, transfer taxes or other taxes, assessments or fees made or charged
against the Holder by any governmental agency or authority in connection with this Note (other than
income taxes).
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Section 3.10 Governing Law and Construction. This Note shall be construed in accordance with
and governed by the laws of the State of Georgia, without regard to the principles of conflicts of
law. This Note shall take effect as an instrument under seal in the State of Georgia. Whenever
possible, each provision of this Note and any other statement, instrument or transaction
contemplated hereby shall be valid under such applicable law, but, if any provision of this Note or
any other statement, instrument or transaction contemplated hereby or relating hereto shall be held
to be prohibited or invalid under such applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Note or any other statement, instrument or transaction
contemplated hereby or relating hereto. In the event of any conflict with, between or among the
provisions of this Note and the Merger Agreement, the Merger Agreement shall govern.
SECTION 4
Subordination
Section 4.1 Subordination. Subject to the provisions of this Section 4 below, the Holder
agrees by accepting this Note that the payment of all principal, interest and other sums
(including, without limitation, the payments under Section 3.2(c) hereof) at any time now or
hereafter owing from the Company to the Holder under or in connection with this Note (the
“Subordinated Debt”), shall be junior and subordinate to the extent and manner set forth
herein to the prior indefeasible payment in full of all Senior Debt.
Section 4.2 Default under Senior Debt.
(a) As long as any amount is outstanding on this Note, and subject to Section 4.5 below,
following the occurrence and during the continuance of a Default (as defined under the Credit
Agreement) on the Senior Debt of which the Holder has received written notice from the lenders
under the Senior Debt, the Holder by accepting this Note agrees that it will not (y) take any
action or initiate any proceedings, judicial or otherwise, to enforce the Holder’s rights or
remedies with respect to this Note, or under any portion of this Note, including, without
limitation, any action to obtain any judgment or prejudgment remedy against the Company or to
otherwise collect any amounts due hereunder or to realize upon any lien, security interest, charge,
claim, right or other arrangement now or in the future existing, including any repossession,
foreclosure, public sale, private sale, collection, obtaining of a receiver or retention of all or
any part of amounts paid pursuant to this Note, or (z) receive any payment of principal, interest
or other sums payable on this Note. The foregoing provisions shall not be deemed to restrict or
prohibit the Holder from accelerating this Note upon any Event of Default under this Note, nor
shall it restrict the Holder, in the event of any proceeding described in Section 2.1(a) of this
Note, from (1) filing a proof of claim, voting and otherwise acting with respect to this Note
(including by exercising the right to vote to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition, or extension), (2) serving on a creditors’
committee or (3) filing any motions or pleadings or taking such other actions as may be necessary
or desirable with respect to any claim in a proceeding, provided that the Holder shall not vote
with respect to any such plan or take any other action in any way so as to contest (A) the validity
of any Senior Debt or any collateral therefor or guaranties thereof, (B) the enforceability
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of the rights and duties of any holders of any Senior Debt established in any instruments or
agreements creating or evidencing any of the Senior Debt with respect to any of such collateral or
guaranties or (C) the priority of the liens, security interests and rights of the holders of the
Senior Debt pursuant to this Note.
(b) In addition, notwithstanding anything to the contrary contained in this Section 4 or
elsewhere in this Note, the Holder shall be entitled to receive and retain (x) securities of the
Company as reorganized or readjusted, or securities of the Company or any other entity provided for
by a plan of reorganization or readjustment, the payment of which is subordinated, at least to the
extent provided in this Note, to the payment of the Senior Debt, and (y) any payment or
distribution authorized by an order or decree giving effect, and stating in such order or decree
that effect is given, to the subordination of this Note to the Senior Debt, and made by a court of
competent jurisdiction in a reorganization proceeding under any applicable bankruptcy law.
(c) Notwithstanding anything herein to the contrary, and in addition to the foregoing
limitations, in no event prior to the payment in full of all Senior Debt (and termination of all
commitments to lend additional Senior Debt) shall the Holder amend the provisions hereof to
increase the interest payable hereunder, increase the principal amount hereof, provide for an
amortization or other payments other than those set forth herein on the date hereof, or change the
Maturity Date, in each case, without the express written consent of the “Majority Lenders” as
defined in the Credit Agreement. Any payment received by Holder in violation of the terms hereof
shall be paid over by Holder to the lenders under the Senior Debt for application to the Senior
Debt, but such application shall not entitle Holder to any rights of subrogation until all of the
Senior Debt has been paid in full and all obligations of lenders under the Credit Agreement to make
loans or other extensions of credit have terminated.
Section 4.3 Dissolution, Liquidation or Reorganization of the Company. In the event of any
insolvency, bankruptcy or receivership case or proceeding, or any dissolution, winding up,
liquidation, reorganization or other similar proceeding, relative to the Company, its property or
its operations (whether voluntary or involuntary and whether in bankruptcy, insolvency or
receivership proceedings or otherwise) or upon an assignment for the benefit of creditors, or any
other marshalling of the assets of the Company, then all Senior Debt shall first be paid in full in
cash or cash equivalents, before the Holder shall be entitled to receive or retain any payment or
distribution of assets with respect to this Note.
Section 4.4 Deferral of Payments. If the payment of any amount otherwise required pursuant to
this Note prior to the stated maturity of the Note would result in the Company being in default
under any Senior Debt, the Company shall defer payment of the amounts which would have such result.
Amounts, the payment of which are so deferred, together with interest thereon from the date
payment would have been due but for the operation of this Section until paid, will be due and
payable immediately when such amounts may be paid by the Company without causing such result or at
the stated maturity of this Note, whichever occurs first.
Section 4.5 Holder Rights. Notwithstanding the foregoing provisions of this Section 4, so
long as (a) (i) (A) a default is continuing with respect to the covenants set forth in
Sections 1.5(a), 1.5(c) and 1.5(d) or (B) any Event of Default specified in Sections 2.1(c) or
15
2.1(h) is continuing, and (ii) the Senior Lenders have either (A) consented to the action
giving rise to such default or Event of Default or (B) waived any similar or corresponding default
under the Credit Agreement, then the Holder shall be entitled to receive payments and take actions
to collect on this Note, or (b) (i) an Event of Default specified in Section 2.1(b) is continuing
and (ii) no notice of default under the Senior Debt has been received by the Holder pursuant to
Section 4.2 above prior to such Event of Default, then the Holder shall be entitled to receive
payments and take actions to collect on this Note.
Section 4.6 Third Party Beneficiaries. By issuing this Note, the Company acknowledges and
agrees, and by accepting this Note, Xxxxxx acknowledges and agrees that the holders of the Senior
Debt are intended to be third party beneficiaries of the provisions of this Section 4 and are
entitled to rely on these provisions and to enforce these provisions as if they were a direct party
to this Note. In addition, and in furtherance of the foregoing, the Holder, by acceptance of this
Note, agrees that the provisions of this Section 4 may not be amended or modified without the
written consent of the Majority Lenders (as defined in the Credit Agreement).
Section 4.7 Other Rights. The provisions of this Section 4 are solely for the purpose of
defining the relative rights of the holders of Senior Debt, on the one hand, and the Holder on the
other, against the Company and its assets, and nothing herein is intended to or shall impair, as
between the Company and the Holder, the obligations of the Company, which are absolute and
unconditional, to pay to the Holder the principal and interest on this Note as and when they become
due and payable in accordance with their terms, or is intended to or will affect the relative
rights of the Holder and creditors of the Company other than the holders of Senior Debt, nor will
anything herein or therein prevent the Holder from exercising all remedies otherwise permitted by
applicable law upon default under this Note, subject to the rights, if any, of the holders of
Senior Debt under this Section 4.
[Signature page follows.]
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IN WITNESS WHEREOF, the Company has executed this Note as of the date first above written.
| Goldleaf Financial Solutions, Inc. | ||||||
| By: | ||||||
| Name: | ||||||
| Its: | ||||||
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SCHEDULE A
Company Competitors
Company Competitors
Fiserv, FIS, Metavante, Xxxx Xxxxx, Xxxxxxx Financial Solutions, Open Solutions, CSI, Wausau, RDM,
NetDeposit, ACI Worldwide, Xxxx, Moneygram International, Intuit, Bankserv, BottomLine
Technologies, NCR, ORCC, First Data, SONE, and Unisys
