EXHIBIT 10.2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. IT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL
SATISFACTORY TO MAKER THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
CONTINGENT PROMISSORY NOTE
$1,250,000 April 1, 2007
THIS CONTINGENT PROMISSORY NOTE ("Note") is issued pursuant to the terms
and conditions of that certain Asset Purchase Agreement, dated as of April 1,
2007, by and among OPTIMA TECHNOLOGIES, LLC, a Delaware limited liability
company ("Maker"), OPTIMA TECHNOLOGIES, L.L.C., a Nevada limited liability
company ("Payee"), and certain other parties (the "Purchase Agreement").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed thereto in the Purchase Agreement.
1. Obligation. For value received, Maker hereby promises to pay to
the order of Payee the principal sum of One Million Two Hundred Fifty
Thousand Dollars ($1,250,000), subject to adjustment as provided in Section 6
hereof and to offset as provided in Section 8 hereof, together with interest
(at the rate set forth below) on the unpaid principal balance of this Note.
2. Maturity Date. The term of the Note shall be thirty (30) months,
beginning with the date of this Note and ending on October 1, 2009 (the
"Maturity Date").
3. Interest Rate.
(a) Standard Rate. The interest rate on the unpaid principal
during the term of this Note shall be seven percent (7%).
(b) Default Rate. Notwithstanding Section 3(a) hereof, while an
Event of Default (as defined below) exists or after acceleration, Maker shall
pay interest on the principal amount of all outstanding obligations of Maker
under this Note, at the lower of (i) ten percent (10%) per annum, or (ii) the
highest rate permitted by law.
(c) Computations. All computations of interest shall be made on
the basis of a year of three hundred and sixty-five (365) days. Interest
shall accrue during each period during which interest is computed from the
first day thereof to the last day thereof.
(d) Usury. If performance of or compliance with any provision of
this Note or in any instrument now or hereafter securing or guaranteeing this
Note results in Payee receiving interest in an amount which would exceed the
maximum rate allowed by law, the amount of such interest which exceeds such
lawful limits shall be applied to the reduction of the unpaid principal
balance and not to the payment of interest. In determining whether or not
the interest paid or payable, under any specific contingency, exceeds the
highest rate of interest permitted under applicable law, Payee and Maker
shall, to the maximum extent permitted under applicable law, (i) characterize
any nonprincipal payment as an expense, fee or premium rather than as
interest, (ii) exclude voluntary prepayments and the effects thereof, and
(iii) allocate and "spread" the total amount of interest throughout the
entire term of this Note so that the interest rate is uniform throughout the
entire term hereof.
4. Payment.
(a) Scheduled Monthly Installments. This Note shall be payable
in monthly installments of principal and interest in the amount of Forty-nine
Thousand Five Hundred Three Dollars ($49,503),subject to adjustment as
provided in Section 6 hereof and to offset as provided in Section 8 hereof.
Installment payments shall be due on the first day of each month with the
first such installment payment due and payable on May 1, 2007.
(b) Scheduled Maturity Payment. The unpaid principal balance and
all accrued and unpaid interest on this Note shall be due and payable on the
Maturity Date.
(c) General. All payments due hereunder shall be made in lawful
money of the United States of America to Payee via electronic funds transfer
directly to the account specified by Payee, or such other person or at such
other place as Payee may from time to time designate in writing to Maker.
All payments shall be made no later than 5:00 p.m. (Eastern Time) on the date
specified herein. Any payment received by Payee later than 5:00 p.m.
(Eastern Time) shall be deemed to have been received on the following
business day and any applicable interest or fee shall continue to accrue.
Whenever any payment is due on a day other than a business day, such payment
shall be made on either (i) the previous business day, or (ii) the following
business day, and such extension of time shall in such case be included in
the computation of interest.
(d) Prepayments. There shall be no penalty for prepayment;
provided, however, that any prepayment of less than all of the principal and
accrued interest shall shorten the term of this Note and not reduce the
amount of any installment otherwise becoming due after the prepayment date.
Any payment made shall be applied first to interest and then to principal.
5. Late Charge. If any payment of principal or interest under this
Note shall not be made within ten (10) calendar days after the issuance of
written notice that such payment is due (the "Grace Period"), a late charge
of five percent (5%) of the overdue amount will be charged by Payee. Such
late charge is in addition to the standard interest that shall continue to
accrue during the Grace Period which additional interest shall be paid with
the late charge. The late charge represents a reasonable sum considering all
of the circumstances existing on the date of this Note and represents a fair
and reasonable estimate of the costs sustained and the frustration suffered
by Payee due to the failure of Maker to make timely payments. Maker further
agrees that proof of actual damages would be costly or inconvenient. Such
late charge shall be immediately due and payable and shall be paid without
prejudice to the right of Payee to collect any other amounts to be paid or to
declare a default under this Note, or from exercising any of the other rights
and remedies of Payee.
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6. Adjustment.
(a) Adjustment. The principal amount of this Note shall be
adjusted as follows:
(1) In the event that the aggregate Gross Profit (as defined
below) for the Contingent Period (as defined below) equals or exceeds the
Bonus Threshold (as defined below), the principal amount of this Note shall
be adjusted upward by an amount equal to fifty percent (50%) of such excess.
(2) In the event that the aggregate Gross Profit for the
Contingent Period is less than the Trigger Amount (as defined below), the
principal balance of this Note shall be adjusted downward by an amount equal
to such deficiency.
(b) Mechanics of Adjustment. Following the determination of
Gross Profit for the Contingent Period, the principal amount of this Note
shall be adjusted upward or downward, as the case may be; provided, however,
(i) that any upward adjustment shall lengthen the term of this Note and not
increase the amount of any installment otherwise becoming due after the
Contingent Period; and (ii) that any downward adjustment shall shorten the
term of this Note and not reduce the amount of any installment otherwise
becoming due after the Contingent Period.
(c) Definitions. As used in this Note, the following terms shall
have the following meanings:
(1) "Bonus Threshold" shall mean $3,018,750, which amount is
115% of the Target Amount.
(2) "Contingent Period" shall mean the 18 month period
immediately following the date of this Note.
(3) "Gross Profit" shall have the meaning set forth on
Schedule 7(b)(4)(B) attached to the Purchase Agreement.
(4) "Target Amount" shall mean $2,625,000.
(5) "Trigger Amount" shall mean $2,231,250, which amount is
85% of the Target Amount.
(d) Examples. The following examples are designed to be
illustrative of this provision, and shall not be interpreted as a limitation:
(1) If Gross Profit for the Contingent Period is $4,000,000,
then the Contingent Note will be adjusted upward by $490,625 (50% of the
difference between $4,000,000 and the Bonus Threshold of $3,018,750.
(2) If Gross Profit for the Contingent Period is $3,000,000,
then the Contingent Note will not be adjusted upward or downward ($3,000,000
does not exceed the Bonus Threshold nor is it less than the Trigger Amount).
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(3) If Gross Profit for the Contingent Period is $2,000,000,
then the Contingent Note will be adjust downward by $231,250 (the difference
between $2,000,000 and the Trigger Amount of $2,231,250).
7. Security. Maker's obligations hereunder are secured by that
certain Security Agreement of even date herewith by and between Maker and
Payee (the "Security Agreement").
8. Right of Offset. Maker expressly reserves against Payee the right
to offset against any amount due and payable under this Note an amount equal
to the Damages (as defined in Section 13(b) of the Purchase Agreement)
sustained by Maker or ATS for which Maker or ATS is entitled to be
indemnified in accordance with Section 13(b) of the Purchase Agreement.
9. Event of Default. Any of the following shall constitute an "Event
of Default":
(a) Non-Payment. Maker fails to make a payment within the Grace
Period of any payment of any amount payable under this Note.
(b) Cross-Default. Maker has materially breached or an Event of
Default has occurred under the Security Agreement, that certain Management
Agreement of even date herewith by and among Maker, Payee, and certain other
parties, that certain Convertible Promissory Note of even date herewith, or
that certain Secured Promissory Note of even date herewith.
(c) Insolvency; Voluntary Proceedings. Maker (i) ceases or fails
to be solvent, or generally fails to pay, or admits in writing his inability
to pay, his debts as they become due, subject to applicable grace periods, if
any, whether at stated maturity or otherwise; (ii) commences any Insolvency
Proceeding (as defined below) with respect to himself; or (iii) takes any
action to effectuate or authorize any of the foregoing. For the purposes of
this Note, "Insolvency Proceeding" means, with respect to any person, (i) any
case, action or proceeding with respect to such person before any court or
other governmental authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (ii) any general assignment for the benefit of creditors,
composition, marshaling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial portion
of its creditors; undertaken under U.S. Federal, state or foreign law,
including the Bankruptcy Code.
(d) Involuntary Proceedings. (i) Any involuntary insolvency
proceeding is commenced or filed against Maker or any writ, judgment, warrant
of attachment, execution or similar process, is issued or levied against a
substantial part of Maker, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or
similar process shall not be released, vacated or fully bonded within sixty
(60) calendar days after commencement, filing or levy; (ii) Maker admits the
material allegations of a petition against it in any Insolvency Proceeding,
or an order for relief (or similar order under non-U.S. law) is ordered in
any Insolvency Proceeding; or (iii) Maker acquiesces in the appointment of a
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receiver, trustee, custodian, conservator, liquidator, mortgagee in
possession (or agent therefor), or other similar person for itself or a
substantial portion of its property or business.
10. Remedies. Upon the occurrence and during the continuance of an
Event of Default, Payee shall exercise on behalf of itself all rights and
remedies available to it under the Security Agreement and applicable law,
shall retain all amounts previously paid by Maker as liquidated damages, and
shall have no further rights or remedies against Maker with respect to the
unpaid principal amount and accrued interest under the Note.
11. Miscellaneous.
(a) Notice. Any notice required or permitted under this Note
shall be given in writing and delivered as described herein. A notice shall
be deemed effectively given as follows: (i) upon personal delivery; (ii) one
(1) business day after transmission by electronic means, provided such
transmission is electronically confirmed as having been successfully
transmitted and a copy of such notice is deposited within 24 hours for either
overnight delivery or for registered or certified mail, in accordance with
clause (iii) or (iv) below, respectively; (iii) one (1) business day after
deposit with a reputable overnight courier service, prepaid for overnight
delivery; or (iv) three (3) business days after deposit with the United
States Postal Service, postage prepaid, registered or certified with return
receipt requested. Addresses for notice shall be as follows, or at such
other address as such party may designate by ten (10) days' advance written
notice to the other parties:
If to Maker:
Optima Technologies, LLC
c/o American TonerServ Corp.
000 Xxxxxxxx Xxxx., Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, President and CEO
With a copy, which shall not constitute notice, to:
Xxxxxxxxx XxXxxxxxxx & Xxxxxx LLP
00 Xxxxx X Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxxx X. XxXxxxxxxx or Xxxxxxx X. (DJ) Xxxxxxx
If to Payee:
Optima Technologies, L.L.C.
0000 Xxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
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With a copy, which shall not constitute notice, to:
Johnson, Pope, Xxxxx, Xxxxxx and Xxxxx, LLP
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
(b) Time of Essence. Time is of the essence with respect to the
terms, covenants, and conditions contained herein.
(c) Entire Agreement. This Note constitutes and embodies the
entire understanding and agreement of the parties hereto relating to the
subject matter hereof and supersedes all prior agreements or understandings
of the parties hereto, whether written or oral.
(d) Amendments and Waivers. Any term of this Note may be amended
and the observance of any term of this Note may be waived (either generally
or in a particular instance and either retroactively or prospectively), but
only with the written consent of the party or parties to be bound thereby.
No delay in the exercise of any right or remedy under this Note shall
constitute a waiver thereof and the waiver by any party of any right or
remedy under this Note on any one occasion shall not be deemed a waiver of
such right or remedy on any subsequent occasion.
(e) Assignment. This Note shall not be transferred or assigned,
whether by operation of law or otherwise, without the prior written consent
of the other party.
(f) No Third Party Beneficiaries. Except as expressly provided
herein, nothing in this Note, express or implied, is intended to confer upon
any party other than the parties hereto, or their respective successors and
assigns, any rights, remedies, obligations, or liabilities under or by reason
of this Note.
(g) Headings. The titles and subtitles used in this Note are
used for convenience only and shall not be considered in construing or
interpreting this Note.
(h) Governing Law. This Note shall be governed by and construed
under the laws of the State of Delaware without regard to the conflict of
laws rules of such state.
(i) Venue. Jurisdiction and venue shall exclusively lie in the
Sixth Judicial Circuit of the State of Florida, in and for Pinellas County,
Florida, or in the United States District Court for the Middle District of
Florida (Tampa Division), with respect to any legal proceedings arising from
this Note.
(j) Severability. Whenever possible, each provision of this Note
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Note shall be or become
prohibited or invalid under applicable law, such provision shall be
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ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Note.
(k) Specific Performance. Each party's obligation under this
Note is unique. If any party should default in such party's obligations
under this Note, each party acknowledges that it would be extremely
impracticable to measure the resulting damages; accordingly, the
nondefaulting party or parties, in addition to damages and any other
available rights or remedies, may xxx in equity for specific performance, and
the parties hereby expressly waive the defense that a remedy in damages shall
be adequate. The parties also hereby expressly waive any requirement that
the nondefaulting party or parties post a bond or similar security prior to
obtaining and enforcing any specific performance.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Maker has executed this Contingent Promissory Note
as of the date first set forth above.
MAKER:
OPTIMA TECHNOLOGIES, LLC,
a Delaware limited liability company
By: AMERICAN TONERSERV CORP.,
a Delaware corporation
Its: Managing Member
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx, President & CEO
FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged,
AMERICAN TONERSERV CORP., a Delaware corporation, hereby guarantees the
payment and performance of the indebtedness evidenced by the foregoing
Secured Promissory Note in accordance with its terms, including any and all
extensions, renewals, or modifications of said note and the indebtedness
evidenced thereby.
Acknowledged and Agreed:
AMERICAN TONERSERV CORP.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx, President & CEO
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