EXHIBIT 10.3
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$5,000,000
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December
21, 2007
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CONVERTIBLE TERM NOTE
This Note and the Common Stock issuable upon conversion hereof
(until such time, if any, as such Common Stock is registered with
the Securities and Exchange Commission pursuant to an effective
registration statement) have not been registered under the
Securities Act of 1933, as amended (the “Act”), or any
state securities laws, and may not be sold, offered for sale of
otherwise transferred unless registered or qualified under the Act
and applicable state securities laws or unless the Maker receives
an opinion, in form and from counsel reasonably acceptable to the
Maker, that registration, qualification or other such actions are
not required under any such laws .
FOR
VALUE RECEIVED, AFTERSOFT GROUP, INC., a Delaware corporation
(the “
Maker ”),
hereby promises to pay to ComVest Capital, LLC, a Delaware limited
liability company (“
ComVest ”),
or registered assigns (collectively with ComVest, the
“
Payee ”),
the sum of Five Million ($5,000,000) Dollars (the “
Principal ”),
with interest thereon, on the terms and conditions set forth herein
and in the Revolving Credit and Term Loan Agreement of even date
herewith by and between ComVest and the Maker (as same may be
amended, modified, supplemented and/or restated from time to time,
the “
Loan Agreement ”).
Terms defined in the Loan Agreement and not otherwise defined
herein shall have the meanings assigned thereto in the Loan
Agreement.
Payments
of principal of, interest on and any other amounts with
respect to this Convertible Promissory Note (this
“
Note ”)
are to be made in lawful money of the United States of
America.
Principal
and accrued interest of this Note may or shall be convertible
into common stock of the Maker as provided in Section 3
below.
1.
Payments .
(a)
Interest .
This Note shall bear interest (“
Interest ”)
on Principal amounts outstanding from time to time from the date
hereof at the rate of eleven (11%) percent per annum;
provided ,
however ,
that during the continuance of any Event of Default, the Interest
rate hereunder shall be increased to sixteen (16%) percent per
annum. All Interest shall be computed on the daily unpaid Principal
balance of this Note based on a three hundred sixty (360) day year,
and shall be payable monthly in arrears on the first day of each
calendar month commencing January 1, 2008 and on the maturity
hereof.
(b)
Principal .
The Principal of this Note shall be payable (i) in twenty-three
(23) equal monthly installments of $208,333.33 each, due and
payable on the first day of each calendar month commencing January
1, 2009 and continuing through and including
November 1, 2010, and (ii) a final installment due and
payable on November 30, 2010 in an amount equal to the entire
remaining principal balance of this Note.
(c)
Non-Business Day .
If any scheduled payment date as aforesaid is not a business day in
the State of New York or the State of Florida, then the payment to
be made on such scheduled payment date shall be due and payable on
the next succeeding business day, with additional interest on any
Principal amount so delayed for the period of such
delay.
2.
Prepayment .
(a)
Optional Prepayment of Principal .
The unpaid Principal balance of this Note may, at the Maker’s
option, be prepaid in whole or in part, at any time or from time to
time upon fifteen (15) days’ prior written notice to the
Payee, provided that the Payee shall retain the right to convert
all or any portion of such Principal amount called for prepayment,
together with any or all Interest accrued thereon, at any time
prior to the date fixed for prepayment, and thereafter until such
prepayment is actually made. Any optional prepayment of Principal
hereunder shall require the simultaneous payment of a prepayment
premium as provided in Section 2.04(c) of the Loan
Agreement.
(b)
Mandatory Prepayment of Principal .
The Principal of this Note may be required to be prepaid, in whole
or in part, at any time and from time to time in accordance with
Section 2.02(b) or Section 2.08 of the Loan Agreement. In addition,
if such mandatory prepayment arises by reason of a Sale, such
prepayment shall be subject to the payment of a prepayment premium
as provided in Section 2.04(c) of the Loan Agreement.
(c)
Interest .
Except to the extent that such Interest is converted as herein
provided, each prepayment of Principal shall be accompanied by all
accrued Interest on the Principal amount prepaid or converted
accrued to the date of prepayment or conversion.
(d)
Application of Payments .
Any and all prepayments hereunder shall be applied first to any
prepayment premium required under Section 2(a) or 2(b) above, then
to unpaid accrued Interest on the Principal amount being prepaid,
and finally to the remaining Principal installments in inverse
order of maturity.
3.
Conversion .
(a)
Optional and Mandatory Conversion .
The Payee may, at its option, upon written notice to the Maker
given at any time and from time to time, convert all or any portion
of the unpaid Principal balance of this Note, and/or any accrued
Interest thereon, into shares of common stock of the Maker
(“
Common Stock ”),
at a price of $1.50 per share of Common Stock (as same may be
adjusted from time to time in accordance herewith, the
“
Conversion Price ”).
In addition, if (i) there is not then continuing any Default
or Event of Default under and as defined in the Loan Agreement,
(ii) the Common Stock is then traded or listed for trading on
any national securities exchange, the NASDAQ Global Market, the
NASDAQ Select Market or any other NASDAQ market, or the OTC
Bulletin Board, (iii) there is then in effect a valid
registration statement under the Securities Act of 1933, as
amended, in respect of the Common Stock issued and issuable upon
conversion of this Note and upon exercise of the Warrants issued
pursuant to the Loan Agreement, such that all such shares of Common
Stock will be freely tradable immediately upon issuance at such
time, (iv) the Maker is current in all of its required filings with
the Securities and Exchange Commission and all other regulatory
filings, (v) the reported Trading Price (as hereinafter defined) of
the Common Stock for each of the twenty (20) consecutive trading
days immediately prior thereto has been equal to or greater than
150% of the Conversion Price in effect on each such trading day,
and (vi) the average daily trading volume of the Common Stock as
reported by the principal exchange or trading medium on which the
Common Stock is listed or quoted has been equal to or greater than
50,000 shares (such number to be subject to adjustment on a
proportionate basis in the event of each and every stock split,
stock dividend, combination of shares, recapitalization or other
such event respecting the Common Stock which may occur subsequent
to the date hereof) during the three (3) months immediately prior
thereto,
then the
Maker may, upon five (5) business days’ prior written notice
to the Payee, require the Payee to convert all or any portion of
the Principal of this Note into shares of Common Stock at the
Conversion Price then in effect; and in the event of any such
conversion at the option of the Maker, the Maker shall give written
notice thereof to the Payee certifying as to the satisfaction of
the foregoing conditions (including a detailed schedule of Trading
Prices and volumes for purposes of the foregoing clauses (v) and
(vi)), and shall pay to the Payee, simultaneously with the delivery
of stock certificates in accordance with Section 3(c), all unpaid
accrued Interest on the Principal amount so converted. As used
herein, the term “
Trading Price ”
on any relevant date means the closing sale price (or, if no
closing sale price is reported, the last reported sale price) of
the Common Stock (regular way). The effective date of any
conversion hereunder is herein referred to as the “
Conversion Date. ”
To the extent that this Note is converted only in part, then such
conversion shall be treated as a prepayment of the Principal amount
converted in accordance with Section 2(d) above, provided that no
prepayment premium shall be required in respect of any
conversion.
(b)
Mechanics of Conversion .
Upon notice to the Maker of the Payee’s conversion election
as provided in Section 3(a), or upon notice to the Payee of the
Maker’s conversion election as provided in Section 3(a), the
Maker shall, in accordance with Section 3(c), issue to the Payee
(or to the Payee’s designee(s) set forth in the Payee’s
conversion election, or in any direction given to the Maker in
response to the Maker’s conversion election) the number of
shares of Common Stock to which the Payee shall be entitled upon
such conversion, and shall deliver or cause to be delivered to the
Payee or such designee(s) the certificates representing such shares
of Common Stock. All shares of Common Stock issued or delivered
upon any conversion hereunder shall, when issued or delivered, be
duly authorized, validly issued, fully paid and nonassessable. In
lieu of any fractional shares to which the Payee would otherwise be
entitled, the Maker shall pay cash equal to such fraction
multiplied by the per share Conversion Price.
(c)
Issuance of Common Stock Upon Conversion .
Within a reasonable time, not exceeding five (5) Business Days
after the Conversion Date, the Maker shall deliver or cause to be
delivered, to or upon the written order of the Payee of this Note
so converted, certificates representing the number of fully paid
and nonassessable shares of Common Stock into which this Note has
been converted in accordance with the provisions of this Section 3.
If so requested by the Maker, the Payee shall, within a reasonable
time (not exceeding five (5) Business Days after receipt by the
Payee of such certificates), surrender this Note to the Maker for
cancellation, against delivery of a replacement Note representing
the remaining balance (if any) of this Note which has not been
converted. Subject to the following provisions of this Section 3,
such conversion shall be deemed to have occurred on the Conversion
Date, so that the Payee of this Note or such Payee’s
designee(s) shall be treated for all purposes as having become the
record holder of such shares of Common Stock at such
time.
(d)
Taxes on Conversion .
The issuance of certificates for shares for Common Stock upon the
conversion of this Note shall be made without charge by the Maker
to the converting Payee for any tax in respect of the issuance of
such certificates and such certificates shall be issued in the name
of, or in such names as may be directed by, the Payee of this
Note;
provided ,
however ,
that the Maker shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance or
delivery of any such certificate in a name other than that of the
Payee, and the Maker shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Maker the amount of any
such tax or shall have established to the satisfaction of the Maker
that any such tax has been paid;
and
further
provided ,
that the Maker shall not be required to pay any income tax to which
the Payee may be subject in respect of the issuance of this Note or
the shares issued upon conversion hereof.
(e)
Adjustment of Shares .
(i)
Stock Dividends, Distributions or Subdivisions
.
In the event that, at any time and from time to time from and after
the date of this Note, the Maker shall issue additional shares of
Common Stock (or securities convertible into Common Stock) in a
stock dividend, stock distribution or subdivision paid with respect
to Common Stock, or declare any dividend or other distribution
payable in additional shares of Common Stock (or securities
convertible into Common Stock) or effect a split or subdivision of
the outstanding shares of Common Stock, then, concurrently with the
effectiveness of such stock dividend, stock distribution or
subdivision, the then-effective Conversion Price shall be
proportionately decreased, and the number of shares of Common Stock
issuable upon conversion of this Note shall thus be proportionately
increased. The Maker shall not, at any time, take any action which
would cause the Conversion Price to be reduced to an amount less
than the par value per share of the class of stock into which this
Note is convertible.
(ii)
Combinations or Consolidations .
In the event that, at any time and from time to time from and after
the date of this Note, the outstanding shares of Common Stock shall
be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, then, concurrently with
the effectiveness of such combination or consolidation, the
then-effective Conversion Price shall be proportionately increased,
and the number of shares of Common Stock issuable upon conversion
of this Note shall thus be proportionately decreased.
(iii)
Other Dividends or Distributions .
If the Maker, at any time or from time to time after the issuance
of this Note, makes a distribution to the holders of Common Stock
which is payable in securities of the Maker other than Common
Stock, then, in each such event, provision shall be made so that
the Payee shall receive upon conversion of this Note, in addition
to the number of shares of Common Stock, the am
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