Exhibit 4.2
EXHIBIT A
8% CONVERTIBLE SECURED NOTE
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED
EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
No. _______ US $___________
Affinity Technology Group, Inc.
8% CONVERTIBLE SECURED NOTE DUE AUGUST 8, 2008
THIS NOTE is issued by Affinity Technology Group, Inc., a corporation
organized and existing under the laws of the State of Delaware (the "Company"),
and is designated as its 8% Convertible Secured Note Due August 8, 2008.
FOR VALUE RECEIVED, the Company promises to pay to ____________, or its
permitted assigns (the "Holder"), the principal sum of _______________ and
__/100 ($_________) plus interest on the principal sum outstanding from time to
time at the rate of 8% per annum on August 8, 2008 (the "Maturity Date").
Accrual of interest shall commence on the first day after the date of initial
issuance and continue until payment in full of the principal sum has been made
or duly provided for. If the Maturity Date is not a business day in the State of
South Carolina, then such payment shall be made on the next succeeding business
day. The delivery of a check shall constitute payment of principal and interest
hereunder and shall satisfy and discharge the liability for principal and
interest under this Note to the extent of the sum represented by such check plus
any amounts withheld in accordance with paragraph 1 below.
This Note is subject to the following additional provisions:
1. The Company shall be entitled to withhold from all payments of
interest on this Note any amounts required to be withheld under the applicable
provisions of federal and state income tax laws and other applicable laws at the
time of such payments, and the Holder shall execute and deliver all required
documentation in connection therewith.
2. This Note has been issued in reliance upon investment
representations of the original purchaser hereof and may be resold, transferred
and disposed of only in compliance with the Securities Act of 1933, as amended
(the "Act"), and all applicable state and foreign securities laws. The Holder
shall deliver written notice to the Company of any proposed transfer of this
Note. In the event of any proposed transfer of this Note, the Company may
require, prior to issuance of a new Note in the name of the transferee, that it
receive reasonable transfer documentation (including legal opinions) that the
transfer of the Note will not cause a violation of the Act or any applicable
state or foreign securities laws. Prior to due presentment for transfer of this
Note, the Company and any agent of the Company may treat the person in whose
name this Note is duly registered on the Company's Note Register as the owner
hereof for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Note be overdue, and neither the Company nor any
such agent shall be affected by notice to the contrary. This Note has been
executed and delivered pursuant to the Amended and Restated Convertible Note
Purchase Agreement, dated as of August 9, 2006, between the Company and the
Purchasers named therein (the "Purchase Agreement"), and is subject to the terms
and conditions of the Purchase Agreement, which are, by this reference,
incorporated herein and made a part hereof. Capitalized terms used and not
otherwise defined herein shall have the meanings ascribed to them in the
Purchase Agreement.
3. The Holder of this Note is entitled, at its option, to convert, at
any time commencing on the date hereof, the principal amount of this Note or any
portion thereof into shares of Common Stock of the Company (the "Conversion
Shares") at a conversion price for each share of Common Stock (the "Conversion
Price") equal to $___ per share (subject to adjustment, as equitable, for stock
splits, stock dividends, reverse stock splits, recapitalizations and similar
transactions). If the Holder shall elect to convert all or a portion of the
principal amount of this Note, the Company shall, concurrently with such
conversion, pay all accrued and unpaid interest in respect of the principal
amount of this Note being converted. Payment of accrued and unpaid interest
shall be made, at the Company's option, (a) in cash in accordance with the terms
of this Note or (b) by converting such accrued and unpaid interest into
Conversion Shares at the Conversion Price.
4. The rate of interest on this Note shall be eight percent (8%), per
annum, on the outstanding principal until paid or converted. Subject to Section
3, the Company shall pay accrued and unpaid interest in cash.
5. The Company may prepay principal and interest under this Note in
whole or in part at any time. The Company shall pay a prepayment fee of eight
percent (8%) of the principal amount being prepaid for any prepayments made
during the first year following the issuance of this Note, and the Company shall
pay a prepayment fee of four percent (4%) of the principal amount being prepaid
for any prepayments made during the second year following the issuance of this
Note. The Company shall give the Holder at least five (5) days' notice prior to
the date of prepayment of any portion of this Note (the "Prepayment Date") and
shall include in such notice the portion of the outstanding principal amount of
this Note that it intends to prepay pursuant to this Section 5. The Holder shall
have the right to convert the then outstanding principal amount of this Note (or
any portion hereof) into Conversion Shares in accordance with Section 3 of this
Note until the close of business on the business day immediately prior to any
Prepayment Date.
6. On the Maturity Date, the Company will pay the principal of and any
accrued but unpaid interest due upon this Note, less any amounts required by law
to be deducted, to the registered holder of this Note, and such payment shall be
sent to such holder at the last address appearing on the Note Register.
7. Conversion shall be effectuated by surrendering this Note to the
Company together with the form of conversion notice attached hereto as Exhibit A
(the "Notice of Conversion"), executed by the Holder, evidencing such Holder's
intention to convert this Note or a specified portion (as above provided)
hereof, and accompanied, if required by the Company, by proper assignment hereof
in blank. If this Note shall have been converted in part, the Company shall
deliver to the Holder a new Note evidencing the rights of the Holder to convert
the unconverted portion of this Note, which new Note shall in all other respects
be identical to this Note. Interest accrued or accruing from the date of
issuance to the date of conversion shall be paid as set forth above. No fraction
of a share or scrip representing a fraction of a share will be issued on
conversion, but the number of shares issuable shall be rounded to the nearest
whole share. The date on which Notice of Conversion is given (the "Conversion
Date") shall be deemed to be the date on which the Holder faxes the duly
executed Notice of Conversion to the Company. Facsimile delivery of the Notice
of Conversion shall be accepted by the Company at facsimile number (803)
758-2560, Attn: Joseph A. Boyle, President and Chief Executive Officer of the
Company. Certificates representing Common Stock issuable upon conversion will be
delivered to the Holder within five business days from the date the Notice of
Conversion is delivered to the Company. Delivery of shares upon conversion shall
be made to the address specified by the Holder in the Notice of Conversion.
8. No recourse shall be had for the payment of the principal of, or the
interest on, this Note, or for any claim based hereon, or otherwise in respect
hereof, against any stockholder, employee, officer or director, as such, past,
present or future, of the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
9. In case of any (1) merger or consolidation of the Company into
another company, or (2) sale by the Company of all or substantially all the
assets of the Company in one or a series of related transactions, the Holder
shall have the right to (A) deem such an occurrence an Event of Default and
exercise its rights of prepayment pursuant to Section 12 herein, (B) convert its
aggregate principal amount of this Note then outstanding into the shares of
stock and other securities, cash and property receivable upon or deemed to be
held by holders of Common Stock following such merger, consolidation or sale,
and the Holder shall be entitled upon such event or series of related events to
receive such amount of securities, cash and property as the shares of Common
Stock into which such aggregate principal amount of this Note could have been
converted immediately prior to such merger, consolidation or sale would have
been entitled, or (C) in the case of a merger or consolidation, (x) require the
surviving entity to issue convertible Notes in such face amount, as the case may
be, equal to the aggregate principal amount of this Note then held by the
Holder, plus all accrued and unpaid interest and other amounts owing thereon,
which newly issued Notes shall have terms identical (including with respect to
conversion) to the terms of this Note and shall be entitled to all of the rights
and privileges of the Holder of this Note set forth, and (y) simultaneously with
the issuance of such convertible Notes, shall have the right to convert such
instrument only into shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
merger or consolidation. In the case of clause (C), the conversion price
applicable for the newly issued convertible Notes shall be based upon the amount
of securities, cash and property that each share of Common Stock would receive
in such transaction and the Conversion Price in effect immediately prior to the
effectiveness or closing date for such transaction. The terms of any such
merger, sale or consolidation shall include such terms so as to continue to give
the Holder the right to receive the securities, cash and property set forth in
this Section upon any conversion or redemption following such event. This
Section shall similarly apply to successive such events.
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10. The Holder of this Note, by acceptance hereof, agrees that this
Note is being acquired for investment and that such Holder will not offer, sell
or otherwise dispose of this Note or the Conversion Shares issuable upon
conversion thereof except under circumstances which will not result in a
violation of the Act or any applicable state or foreign securities laws or
similar laws relating to the sale of securities.
11. This Note shall be governed by and construed in accordance with the
laws of the State of South Carolina. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of Columbia or the state courts of the State of South Carolina sitting in
the City of Columbia in connection with any dispute arising under this Note and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
12. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or
interest on this Note and same shall continue for a period of
ten (10) business days; or
b. There shall occur an Event of Default under any Note issued
under the Purchase Agreement that is not waived by the holder
thereof; or
c. Any of the material representations or warranties made by the
Company in the Purchase Agreement shall be false or misleading
in any material respect at the time made; or
d. The Company shall fail to perform or observe, in any material
respect, any other material covenant, term, provision,
condition, agreement or obligation of the Company under the
Purchase Agreement, the Security Agreement executed in
connection therewith or this Note and such failure shall
continue uncured for a period of thirty (30) days after
written notice from the Holder of such failure; or
e. The Company shall (1) admit in writing its inability to pay
its debts generally as they mature; (2) make an assignment for
the benefit of creditors or commence proceedings for its
dissolution; or (3) apply for or consent to the appointment of
a trustee, liquidator or receiver for its or for a substantial
part of its property or business; or
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f. A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within one
hundred and twenty days (120) after such appointment; or
g. Any governmental agency or any court of competent
jurisdiction, at the instance of any governmental agency,
shall assume custody or control of the whole or any
substantial portion of the properties or assets of the Company
and such action shall not be dismissed within one hundred and
twenty days (120) days thereafter; or
h. Any money judgment, writ or warrant of attachment, or similar
process in excess of Five Hundred Thousand Dollars ($500,000)
in the aggregate shall be entered against the Company or any
of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of one hundred
and twenty days (120) days; or
i. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Company and, if instituted
against the Company, shall not be dismissed within one hundred
and twenty days (120) days after such institution or the
Company shall by any action or answer approve of, consent to,
or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in,
any such proceeding; or
j. There shall be a Change in Control of the Company. For such
purposes, a Change in Control shall be deemed to occur as of:
(i) the date on which any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Securities Act of
1934, as amended (the "1934 Act") becomes the beneficial owner
(as defined in Rules 13d-3 and 13d-5 under the 1934 Act) of
shares representing more than 25% of the combined voting power
of the then-outstanding securities entitled to vote generally
in elections of directors of the Company ("Voting Stock");
(ii) the date on which the stockholders of the Company approve
a definitive agreement under which the Company will
consolidate with or merge into any other corporation, or
convey, transfer or lease all or substantially all of its
assets to any person, or any other corporation will merge into
the Company, and, in the case of any such transaction, the
outstanding Common Stock of the Company will be converted into
cash, securities or other property, unless the stockholders of
the Company immediately before such transaction own, directly
or indirectly immediately following such transaction, at least
51% of the combined voting power of the outstanding securities
of the corporation resulting from such transaction in
substantially the same proportion as their ownership of the
Voting Stock immediately before such transaction; or (iii) the
date on which there shall have been a change in a majority of
the Board of Directors of the Company within a 12-month period
unless the nomination for election of each new director was
approved by the vote of a majority of the directors then still
in office who were in office at the beginning of the 12-month
period.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Note immediately due and payable, without presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived, anything herein or in any
note or other instruments contained to the contrary notwithstanding, and the
Holder may immediately enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law.
13. Nothing contained in this Note shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a stockholder in respect of any meeting of stockholders or any
rights whatsoever as a stockholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
[THE NEXT PAGE IS THE SIGNATURE PAGE.]
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: August 9, 2006
AFFINITY TECHNOLOGY GROUP, INC.
By:
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Joseph A. Boyle
President and Chief Executive Officer
Attest:
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8
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $ ______________
of the principal amount of the above Note No. _____ into shares of Common Stock
of Affinity Technology Group, Inc. according to the terms hereof, as of the date
written below.
Date of Conversion_____________________________________________________________
Signature______________________________________________________________________
[Name]
Address:_______________________________________________________________________
_______________________________________________________________________________