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 da
