EXHIBIT 10.3
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY 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.
CONVERTIBLE PROMISSORY NOTE
$300,000 April 1, 2007
THIS CONVERTIBLE 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"), a wholly-owned subsidiary of AMERICAN TONERSERV
CORP., a Delaware corporation ("ATS"), 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 Three Hundred Thousand Dollars
($300,000).
2. Maturity Date. The term of the Note shall be two (2) years,
beginning with the date of this Note and ending on April 1, 2009 (the
"Maturity Date").
3. Interest Rate. No interest shall accrue on the principal of this
Note during the term of this Note.
4. Conversion.
(a) Automatic Conversion. On the Maturity Date, the principal
balance of this Note shall automatically convert into shares of common stock
(the "Common Stock") of ATS at a conversion price (the "Conversion Price")
that is equal to the quotient obtained by dividing (i) the aggregate
outstanding principal balance due on this Note, by (ii) the greater of (A)
$0.50 per share, or (B) the average of the closing bid and asked prices of
the Common Stock quoted in the over-the-counter market in which the Common
Stock is traded for the five (5) trading days prior to the date of this Note
and the five (5) trading days on and after the date of this Note.
(b) Mechanics and Effect of Conversion. Upon surrender of this
Note to Maker, ATS shall issue and deliver to Payee a certificate or
certificates for the number of shares of Common Stock to which Payee shall be
entitled. No fractional shares of Common Stock shall be issued upon
conversion of this Note. In lieu of Maker issuing any fractional shares to
Payee upon the conversion of this Note, Maker shall pay to Payee the amount
of outstanding principal and accrued interest that is not so converted. Upon
conversion of this Note, with the proper issuance of the number of shares of
Common Stock to which Payee shall be entitled and full payment of any
principal and interest not converted in lieu of issuing fractional shares,
Maker shall be forever released from all its obligations and liabilities
under this Note.
(c) Adjustments to Conversion Price.
(1) In the event ATS should at any time or from time to time
after the date of issuance hereof and prior to the Maturity Date fix a record
date for the effectuation of a split or subdivision of the outstanding shares
of Common Stock or the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in additional shares of
Common Stock or other securities or rights convertible into, or entitling the
holder thereof to receive, directly or indirectly, additional shares of
Common Stock (hereinafter referred to as "Common Stock Equivalents") without
payment of any consideration by such holder for the additional shares of
Common Stock or the Common Stock Equivalents (including the additional shares
of Common Stock issuable upon conversion or exercise thereof), then, as of
such record date (or the date of such dividend distribution, split or
subdivision if no record date is fixed), the Conversion Price of this Note
shall be appropriately decreased so that the number of shares of Common Stock
issuable upon conversion of this Note shall be increased in proportion to
such increase of outstanding shares.
(2) In the event ATS should at any time or from time to time
after the date of issuance hereof and prior to the Maturity Date if the
number of shares of Common Stock outstanding at any time after the date
hereof is decreased by a combination of the outstanding shares of Common
Stock, then, following the effective date of such combination, the Conversion
Price for this Note shall be appropriately increased so that the number of
shares of Common Stock issuable on conversion hereof shall be decreased in
proportion to such decrease in outstanding shares.
(3) Upon the occurrence of each adjustment of the Conversion
Price pursuant to this Section 4, the Company shall promptly compute such
adjustment in accordance with the terms hereof and prepare and furnish to the
Holder a certificate setting forth the facts upon which such adjustment is
based.
(d) No Stockholder Rights. Nothing contained in this Note shall
be construed as conferring upon Payee or any other person any rights
whatsoever as a stockholder of ATS; and no dividends or interest shall be
payable or accrued in respect of this Note or the interest represented hereby
or the Common Stock obtainable hereunder until, and only to the extent that,
this Note shall have been converted.
5. 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
2
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
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.
3
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
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]
4
IN WITNESS WHEREOF, Maker has executed this Convertible 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
Acknowledged and Agreed:
ATS:
AMERICAN TONERSERV CORP.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx, President & CEO
5
