EXHIBIT 4.3
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO GLOBAL SPORTS & ENTERTAINMENT, INC., THAT SUCH REGISTRATION IS
NOT REQUIRED.
CONVERTIBLE NOTE
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FOR VALUE RECEIVED, GLOBAL SPORTS & ENTERTAINMENT, INC., a Delaware
corporation (hereinafter called the "BORROWER"), hereby promises to pay to
LAURUS MASTER FUND, LTD., c/o Ironshore Corporate Services Ltd., P.O. Box 1234
G.T., Queensgate House, South Church Street, Grand Cayman, Cayman Islands, Fax:
000-000-0000 (the "HOLDER") or its registered assigns or successors in interest,
on order, without demand, the sum of Seven Hundred Fifty Thousand Dollars
($750,000), with any accrued and unpaid interest on December 27, 2003 (the
"Maturity Date"). Capitalized terms used herein without definition shall have
the meanings ascribed to such terms in the Purchase Agreement (as defined in
Section 3.1(a) below).
The following terms shall apply to this Note:
ARTICLE I
DEFAULT RELATED PROVISIONS
1.1 Payment Grace Period. The Borrower shall have a seven (7) day
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grace period to pay any monetary amounts due under this Note, after which grace
period a default interest rate of five percent (5%) per annum above the then
applicable interest rate hereunder shall apply to the amounts owed hereunder.
1.2 Conversion Privileges. The Conversion Privileges set forth in
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Article II shall remain in full force and effect immediately from the date
hereof and until the Note is paid in full.
1.3 Interest Rate. Interest payable on this Note shall accrue at the
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annual rate of thirteen percent (13%) and be payable in arrears commencing one
month from the date hereof and on the first business day of each consecutive
calendar month thereafter, and on the Maturity Date, accelerated or otherwise,
due and payable as described below.
ARTICLE II
PAYMENTS OF PRINCIPAL AND INTEREST
2.1 Monthly Payments. Subject to the terms of this Article II, the
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Borrower shall repay one-fifteenth of the original principal amount of this Note
(to the extent such amount has not been converted pursuant to Article III
below), together with interest accrued to date on such portion of the original
principal amount plus any and all default payments owing under the Purchase
Agreement but not previously paid (collectively the "MONTHLY AMOUNT"), in
accordance with Section 2.2 below, on the first business day of each consecutive
calendar month (each, a "REPAYMENT DATE"), beginning on the first such day which
occurs following ninety (90) days from the date hereof. Notwithstanding the
foregoing, the Holder will have the option to delay the start of the
amortization for up to 120 days from the date hereof and the Monthly Amount will
then become one-fourteenth of the original principal amount of the Note.
2.2 Cash or Common Stock. Subject to the terms hereof, the Borrower
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has the sole option to determine whether to satisfy payment of the Monthly
Amount in full on each Repayment Date either in cash or in shares of Common
Stock, or a combination of both. The Borrower shall deliver to the Holder a
written irrevocable notice in the form of Exhibit B attached hereto electing to
pay such Monthly Amount in full on such Repayment Date in either cash or Common
Stock, or a combination of both ("REPAYMENT ELECTION NOTICE"). Such Repayment
Election Notice shall be delivered to the Holder at least ten (10) days prior to
the applicable Repayment Date (the date of such notice being hereinafter
referred to as the "NOTICE DATE"). If such Repayment Election Notice is not
delivered within the prescribed period set forth in the preceding sentence, then
the repayment shall be made in either cash or shares of Common Stock on the same
terms hereunder at the Holder's sole option. If the Borrower elects or is
required to repay all or a portion of the Monthly Amount in cash on a Repayment
Date, then on such Repayment Date the Borrower shall pay to the Holder an amount
equal to the Monthly Amount in satisfaction of such obligation. If the Borrower
repays all or a portion of the Monthly Amount in shares of Common Stock, the
number of such shares to be issued for such Repayment Date shall be the number
determined by dividing (x) the portion of the Monthly Amount to be paid in
shares of Common Stock, by (y) the Conversion Price (as defined herein) as of
such date.
2.3 No Effective Registration. Notwithstanding anything to the
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contrary herein, the Borrower shall be prohibited from exercising its right to
repay the Monthly Amount in shares of Common Stock (and must deliver cash in
respect thereof) on the applicable Repayment Date if at any time from the Notice
Date until the time at which the Holder receive such shares there fails to exist
an effective registration statement or an Event of Default hereunder exists or
occurs, unless otherwise waived in writing by the Holder in whole or in part at
the Holder's option.
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2.4 Deemed Conversions. Any repayment of the Monthly Amount in shares
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of Common Stock pursuant to the terms hereof shall constitute and be deemed a
conversion of such portion of the applicable principal amount of this Note for
all purposes under this Note and the Purchase Agreement (except as otherwise
provided herein).
ARTICLE III
CONVERSION RIGHTS
3.1. Conversion into the Borrower's Common Stock.
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(a) Subject to the provisions set forth above, the Holder shall have
the right, but not the obligation, from and after the date hereof, and then at
any time until this Note is fully paid, to convert the principal portion of this
Note and/or interest due and payable into fully paid and nonassessable shares of
common stock of the Borrower as such stock exists on the date of issuance of
this Note, or any shares of capital stock of the Borrower into which such stock
shall hereafter be changed or reclassified (the "COMMON STOCK") at the fixed
conversion price of $.80 subject to adjustment as provided in Section 3.1(c)
hereof (the "FIXED CONVERSION PRICE").
Upon delivery to the Borrower of a Notice of Conversion as described in
Section 8 of the Securities Purchase Agreement entered into between the Borrower
and the Holder relating to this Note (the "PURCHASE AGREEMENT") of the Holder's
written request for conversion (the date of giving such notice of conversion
being a "CONVERSION DATE"), the Borrower shall issue and deliver to the Holder
within three business days from the Conversion Date that number of shares of
Common Stock for the portion of the Note converted in accordance with the
foregoing. The number of shares of Common Stock to be issued upon each
conversion of this Note shall be determined by dividing that portion of the
principal of the Note to be converted and interest, if any, by the Fixed
Conversion Price as of the Conversion Date. In the event of any conversions of
outstanding principal amount under this Note in part pursuant to this Article
III, such conversions shall be deemed to constitute conversions of outstanding
principal amount applying to Monthly Amounts for the Repayment Dates in
chronological order. By way of example, if the original principal amount of this
Note is $750,000 and the Holder converted $100,000 of such original principal
amount prior to the first Repayment Date, then (1) the principal amount of the
Monthly Amount due on the first Repayment Date would equal $0, (2) the principal
amount of the Monthly Amount due on the second Repayment Date would equal $0 and
(3) the principal amount of the Monthly Amount due on each of the remaining
Repayment Dates would be $50,000.
(b) In the event the Borrower has elected to make any payment of the
Monthly Amount in shares of Common Stock, the conversion price (the "CONVERSION
PRICE") shall be equal to the lesser of (i) the Fixed Conversion Price and (ii)
80% of the average of the three (3) lowest closing prices of the Common Stock on
the Principal Market (as defined herein) for the 30 trading day period
immediately preceding the Repayment Date.
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If an Event of Default has occurred and be continuing hereunder then the
Conversion Price shall be equal to the lower of (i) the Fixed Conversion Price;
or (ii) seventy percent (70%) of the average of the three lowest closing prices
for the Common Stock on the Principal Market, for the thirty (30) trading days
prior to but not including the Conversion Date. The "Principal Market" shall
include the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National
Market System, American Stock Exchange, or New York Stock Exchange (whichever of
the foregoing is at the time the principal trading exchange or market for the
Common Stock, or any securities exchange or other securities market on which the
Common Stock is then being listed or traded.
(c) The Fixed Conversion Price and number and kind of shares or other
securities to be issued upon conversion determined pursuant to Section 3.1(a)
and 3.1(b), shall be subject to adjustment from time to time upon the happening
of certain events while this conversion right remains outstanding, as follows:
X. Xxxxxx, Sale of Assets, etc. If the Borrower at any time shall
consolidate with or merge into or sell or convey all or substantially all its
assets to any other corporation, this Note, as to the unpaid principal portion
thereof and accrued interest thereon, shall thereafter be deemed to evidence the
right to purchase such number and kind of shares or other securities and
property as would have been issuable or distributable on account of such
consolidation, merger, sale or conveyance, upon or with respect to the number of
shares of Common Stock the Holder could have acquired immediately prior to such
consolidation, merger, sale or conveyance based on the Fixed Conversion Price or
the Conversion Price, as the case may be, as of the closing date thereof. The
foregoing provision shall similarly apply to successive transactions of a
similar nature by any such successor or purchaser. Without limiting the
generality of the foregoing, the provisions of this Section shall apply to such
securities of such successor or purchaser after any such consolidation, merger,
sale or conveyance.
B. Reclassification, etc. If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid principal portion thereof and accrued interest thereon, shall thereafter
be deemed to evidence the right to purchase an adjusted number of such
securities and kind of securities as would have been issuable as the result of
such change with respect to the number of shares of Common Stock into which the
Note would have been convertible immediately prior to such reclassification or
other change at the Fixed Conversion Price or the Conversion Price, as the case
may be, as of the effective date for such reclassification or change.
C. Stock Splits, Combinations and Dividends. If the shares of Common Stock
are subdivided or combined into a greater or smaller number of shares of Common
Stock, or if a dividend is paid on the Common Stock in shares of Common Stock,
the Fixed Conversion Price or the Conversion Price, as the case may be, shall be
proportionately reduced in case of subdivision of shares or stock dividend or
proportionately increased in the case of combination of shares, in each such
case by the ratio which the total number of shares of Common Stock outstanding
immediately after such event bears to the total number of shares of Common Stock
outstanding immediately prior to such event.
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D. Share Issuance. Subject to the provisions of this Section, if the
Borrower at any time shall issue any shares of Common Stock prior to the
conversion of the entire principal amount of the Note (otherwise than as: (i)
provided in Sections 3.1(c)A, 3.1(c)B or 3.1(c)C or this subparagraph D; or (ii)
pursuant to warrants or options that may be granted in the future under any
option plan of the Borrower, or any employment agreement, joint venture, credit,
leasing or other financing agreement or any other strategic arrangement or
consulting share issuance, in each case now or hereinafter entered into by the
Borrower or any existing rights, options or warrants referred to on Schedule
4.3(b) to the Purchase Agreement or (iii) pursuant to any agreement entered into
by the Company or any of its subsidiaries for the acquisition of another
business (whether by stock purchase or asset purchase, merger or otherwise);
((i), (ii) and (iii) above, are hereinafter referred to as the "EXISTING OPTION
OBLIGATIONS")) for a consideration less than the Fixed Conversion Price that
would be in effect at the time of such issue, then, and thereafter successively
upon each such issue, the Fixed Conversion Price shall be reduced to the per
share purchase price of such issue of additional shares of Common Stock. Except
for the Existing Option Obligations for purposes of this adjustment, the
issuance of any security of the Borrower carrying the right to convert, on a
basis less than the Fixed Conversion Price, such security into shares of Common
Stock or of any warrant, right or option to purchase Common Stock shall result
in an adjustment to the Fixed Conversion Price upon the issuance of shares of
Common Stock upon exercise of such conversion or purchase rights.
(d) During the period the conversion right exists, the Borrower will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Common Stock upon the full conversion of
this Note. The Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable. The Borrower agrees that its
issuance of this Note shall constitute full authority to its officers, agents,
and transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the conversion of this Note.
3.2 Method of Conversion. This Note may be converted by the Holder in
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whole or in part as described in Section 3.1(a) hereof and the Purchase
Agreement. Upon partial conversion of this Note, a new Note containing the same
date and provisions of this Note shall, at the request of the Holder, be issued
by the Borrower to the Holder for the principal balance of this Note and
interest which shall not have been converted or paid.
ARTICLE IV
EVENT OF DEFAULT
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If an Event of Default occurs and is continuing, the Holder may make all
sums of principal, interest and other fees then remaining unpaid hereon and all
other amounts payable hereunder immediately due and payable, all without demand,
presentment or notice all of which hereby are expressly waived. In the event of
such an acceleration, the amount due and owing to the Holder shall be 130% of
the outstanding principal amount of the Note (plus accrued and unpaid interest
and fees, if any). The occurrence of any of the following events is an Event of
Default ("EVENT OF DEFAULT"):
4.1 Failure to Pay Principal, Interest or other Fees. Subject to the
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Grace Period in Section 1.3, the Borrower fails to pay any installment of
principal, interest or other fees hereon or on any other promissory note issued
pursuant to the Purchase Agreement and this Note, when due and such failure
continues for a period of fifteen (15) days after the last day of the Grace
Period.
4.2 Breach of Covenant. The Borrower breaches any material covenant or
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other term or condition of this Note or the Purchase Agreement in any material
respect and such breach, if subject to cure, continues for a period of fifteen
(15) days after written notice to the Borrower from the Holder.
4.3 Breach of Representations and Warranties. Any material
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representation or warranty of the Borrower made herein, in the Purchase
Agreement, or in any agreement, statement or certificate given in writing
pursuant hereto or in connection therewith shall be false or misleading and
shall not be cured for a period of twenty (20) days after written notice thereof
is received by the Borrower from the Holder.
4.4 Receiver or Trustee. The Borrower shall make an assignment for the
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benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business; or such
a receiver or trustee shall otherwise be appointed.
4.5 Judgments. Any money judgment, writ or similar final process shall
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be entered or filed against the Borrower or any of its property or other assets
for more than $250,000, and shall remain unvacated, unbonded or unstayed for a
period of ninety (90) days.
4.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
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proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower.
4.7 Stop Trade. An SEC stop trade order or Principal Market trading
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suspension of the Common Stock for 5 consecutive days or 5 days during a period
of 10 consecutive days, excluding in all cases a suspension of all trading on
the Principal Market, provided that the Borrower shall not have been able to
cure such trading suspension within 30 days of the notice thereof or list the
Common Stock on another Principal Market within 60 days of such notice.
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4.8 Failure to Deliver Common Stock or Replacement Note. The Borrower's
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failure to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note and Section 8 of the Purchase Agreement, or if required a
replacement Note.
ARTICLE V
MISCELLANEOUS
5.1 Failure or Indulgence Not Waiver. No failure or delay on the part
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of the Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
5.2 Notices. Any notice herein required or permitted to be given shall
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be in writing and shall be deemed effectively given: (a) upon personal delivery
to the party notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Borrower at the address as set forth on the signature page to the Purchase
Agreement executed in connection herewith, and to the Holder at the address set
forth on the signature page to the Purchase Agreement for such Holder, with a
copy to Xxxxxx X. Xxxxxx, Esq., 000 Xxxx 00xx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000, facsimile number (000) 000-0000, or at such other address as the
Borrower or the Holder may designate by ten days advance written notice to the
other parties hereto. A Notice of Conversion shall be deemed given when made to
the Borrower pursuant to the Purchase Agreement.
5.3 Amendment Provision. The term "Note" and all reference thereto, as
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used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.
5.4 Assignability. This Note shall be binding upon the Borrower and
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its successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder.
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5.5 Governing Law. This Note shall be governed by and construed in
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accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties and the individual signing this Note on behalf of the
Borrower agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or unenforceability of any other provision of this
Note.
5.6 Maximum Payments. Nothing contained herein shall be deemed to establish
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or require the payment of a rate of interest or other charges in excess of
the maximum permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Borrower to the Holder and thus refunded to the Borrower.
5.7 Security Interest. The holder of this Note has been granted a security
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interest in certain assets of the Borrower more fully described in a Security
Agreement.
5.8 Construction. Each party acknowledges that its legal counsel
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participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
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IN WITNESS WHEREOF, each Borrower has caused this Note to be signed in its name
effective as of this ___ day of June, 2002.
GLOBAL SPORTS & ENTERTAINMENT, INC.
By:________________________________
WITNESS:
_______________________________
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NOTICE OF CONVERSION
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(To be executed by the Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Note issued by GLOBAL SPORTS &
ENTERTAINMENT, INC. on June 27, 2002 into Shares of Common Stock of GLOBAL
SPORTS & ENTERTAINMENT, INC. (the "Company") according to the conditions set
forth in such Note, as of the date written below.
Date of
Conversion:____________________________________________________________________
Conversion
Price:_________________________________________________________________________
Shares To Be
Delivered:_____________________________________________________________________
Signatures
_______________________________________________________________________________
Print
Name:__________________________________________________________________________
Address
_______________________________________________________________________________
_______________________________________________________________________________
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EXHIBIT B
FORM OF REPAYMENT ELECTION NOTICE
To: [HOLDER AT HOLDER'S ADDRESS]
Pursuant to Section 2.2 of the Note of Global Sports & Entertainment, Inc.
issued on June __, 2002, we hereby notify you that we are irrevocably electing
to repay the outstanding Monthly Amount (as defined in the Note) due on the
Repayment Date (as defined in the Note) which occurs on ______, 20__ (CHECK
ONE):
_____ In full in cash on such Repayment Date.
_____ In full in shares of the Company's Common Stock within three
(3) trading days following such Repayment Date.
_____ In part in cash in the amount of $______ on such Repayment Date,
and in part in shares of the Company's Common Stock (in the amount of ______
shares) within three (3) trading days following such Repayment Date.
Global Sports & Entertainment, Inc.
By:
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Name:
Title:
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